UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Corn Products International, Inc.

(Name of Registrant as Specified In Its Charter)

 

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5 Westbrook Corporate Center, Westchester, Illinois 60154

 

March 29, 2007

 

Dear Stockholder:

 

Enclosed are the notice of annual meeting of stockholders, proxy statement and proxy card for this year’s annual meeting of stockholders of Corn Products International, Inc. The annual meeting will be held solely to vote on each of the matters described in the proxy statement. We do not expect any other business will be transacted.

 

Please note that you can vote by the Internet, by telephone or by completing the enclosed proxy card. Instructions for voting by either the Internet or telephone are given on the enclosed proxy card. Note also that if you hold your shares through a bank, broker or other holder of record, you may vote your shares in accordance with your voting instruction form.

 

Your vote is important to the company, whether or not you plan to attend. If you plan to attend the annual meeting, please so indicate and bring the admission ticket that is attached to the enclosed proxy card.

 

Sincerely,

 

Samuel C. Scott III
Chairman, President and
Chief Executive Officer

 

Printed on Recycled Paper

Corn Products International, Inc.
5 Westbrook Corporate Center
Westchester, Illinois 60154

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The 2007 annual meeting of stockholders of Corn Products International, Inc. will be held at the Westbrook Corporate Center Meeting Facility, which is located on the ground floor of the annex between Towers 2 and 5 of the Westbrook Corporate Center (near the southwesterly corner of the intersection of Cermak Avenue and Wolf Road), in Westchester, Illinois, on Wednesday, May 16, 2007, at 9:00 a.m., local time, for the following purposes:

 

 

Stockholders of record at the close of business on March 20, 2007 will be entitled to vote at the meeting and at any adjournment of the meeting.

 

Attendance at the meeting will be limited to stockholders, those holding proxies from stockholders, and invited guests from the media and financial community. For 10 days before the meeting, a list of stockholders will be available for inspection during ordinary business hours at the company’s offices at 5 Westbrook Corporate Center, Westchester, Illinois 60154.

 

This proxy statement and our annual report to stockholders and the proxy are being mailed on or about March 29, 2007.

 

Your vote is important. Whether or not you expect to attend the annual meeting, please ensure that your vote will be counted by voting over the Internet, by telephone or by signing, dating and returning your proxy card or voting instruction form promptly in the prepaid envelope provided.

 

By order of the Board of Directors,

 

Mary Ann Hynes
Vice President, General Counsel
and Corporate Secretary

 

March 29, 2007

 

TABLE OF CONTENTS

 

Corn Products International, Inc.
5 Westbrook Corporate Center
Westchester, Illinois 60154

 

PROXY STATEMENT

 

General Information

 

Why did I receive this proxy statement?

 

The Board of Directors of Corn Products International, Inc. is soliciting proxies to be voted at the annual meeting of stockholders (the annual meeting) to be held on Wednesday, May 16, 2007, and at any adjournment of the annual meeting. When the company asks you for your proxy, we must provide you with a proxy statement that contains certain information specified by law. In this proxy statement we refer to Corn Products International, Inc. as “Corn Products,” the “company,” “we” or “us.”

 

What will the stockholders vote on at the annual meeting?

 

Two items:

 

 

Will there be any other items of business on the agenda?

 

We do not expect any other items on the agenda because the deadlines for stockholder proposals and nominations have already passed. Nonetheless, in case there is any unforeseen need, the accompanying proxy gives discretionary authority to the persons named in the proxy with respect to other matters that might be brought before the meeting. Those persons intend to vote that proxy in accordance with their best judgment.

 

Who is entitled to vote?

 

Stockholders as of the close of business on March 20, 2007 (the record date) may vote at the annual meeting. You have one vote for each share of common stock you held on the record date, including shares:

 

 

What constitutes a quorum?

 

A majority of the outstanding shares, present or represented by proxy, constitutes a quorum for the annual meeting. As of the record date, 74,344,005 shares of our common stock were issued and outstanding.

 

How many votes are required for the approval of each item?

 

 

Broker nonvotes.  If your shares are held by a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, your shares will be voted as you direct. If you do not give instructions, one of two things can happen, depending on the type of proposal. For the election of directors and the ratification of auditors, the broker may vote your shares in its discretion. For all other proposals, the broker may not vote your shares at all. When that happens, it is called a “broker nonvote.”

 

How do I vote by proxy?

 

If you are a stockholder, you may vote your proxy by any of the following methods.

 

By mail.  Sign and date each proxy card you receive and return it to us in the prepaid envelope provided. Sign your name exactly as it appears on the proxy. If you are signing in a representative capacity (for example, as an attorney-in-fact, executor, administrator, guardian, trustee, or the officer or agent of a corporation or partnership), please indicate your name and your title or capacity. If the stock is held in custody for a minor (for example, under the Uniform Transfers to Minors Act), the custodian should sign, not the minor. If you return your signed proxy but do not indicate your voting preferences, the persons named in the proxy will vote on your behalf for the election of the nominees for director listed below and for the ratification of the appointment of auditors.

 

If you previously elected to receive these materials electronically, you did not receive a proxy card. If you wish to vote by mail, rather than by telephone or the Internet as discussed below, you may request paper copies of these materials, including a proxy card, by calling 708-551-2600. Please make sure you give us the control number from the e-mail message that you received notifying you of the electronic availability of these materials, along with your name and mailing address.

 

By telephone.  You may vote by telephone by following the instructions on the enclosed proxy card or, if you received these materials electronically, by following the instructions in the e-mail message that notified you of their availability. Voting by telephone has the same effect as voting by mail. If you vote by telephone, please do not return your proxy card. Telephone voting will be available until 11:59 p.m. Eastern Time on May 15, 2007.

 

By the Internet.  You may vote online at www.proxyvote.com. Follow the instructions on the enclosed proxy card or, if you received these materials electronically, follow the instructions in the e-mail message that notified you of their availability. Voting on the Internet has the same effect as voting by mail. If you vote on the Internet, please do not return your proxy card. Internet voting will be available until 11:59 p.m. Eastern Time on May 15, 2007.

 

You may revoke your proxy at any time before the meeting by (1) notifying the company’s Corporate Secretary in writing or (2) delivering a later-dated proxy by telephone or the Internet or in writing. If you are a stockholder of record, you may also revoke your proxy by voting in person at the meeting. Attendance at the annual meeting without voting will not revoke your previously submitted proxy. Any written notice revoking a proxy should be sent to Mary Ann Hynes, Corporate Secretary, Corn Products International, Inc., 5 Westbrook Corporate Center, Westchester, Illinois 60154.

 

How do I vote shares that are held by my broker?

 

If you have shares held by a broker or other nominee, you may instruct your broker or other nominee to vote your shares by following instructions that the broker or nominee provides for you. Most brokers offer voting by mail, telephone and on the Internet.

 

How do I vote in person?

 

If you are a stockholder of record, you may vote your shares in person at the meeting. However, we encourage you to vote by proxy card, by telephone, or on the Internet even if you plan to attend the meeting.

 

How do I vote my shares in the Corn Products International Stock Fund of the company’s Retirement Savings Plans?

 

You may instruct the plan trustee on how to vote your shares in the Corn Products International Stock Fund by mail, by telephone, or on the Internet as described above.

 

How many shares in the Corn Products International Stock Fund of the company’s Retirement Savings Plans can I vote?

 

You may vote all the shares allocated to your account on the record date.

 

What happens if I do not vote my Retirement Savings Plan shares?

 

Your shares will not be voted. The Trustee will not vote shares held in the Retirement Savings Plans as to which it does not receive timely directions.

 

What does it mean if I receive more than one proxy card?

 

It means that you hold shares in more than one account. To ensure that all your shares are voted, sign and return each card. Alternatively, if you vote by telephone or on the Internet, you will need to vote once for each proxy card and voting instruction card you receive.

 

Who tabulates the votes?

 

The votes are tabulated by an independent inspector of election, ADP Investor Communication Services.

 

What should I do if I want to attend the annual meeting?

 

All stockholders as of the record date may attend by presenting the admission ticket that appears as a portion of the proxy card. Please fill it out and bring it with you to the meeting. The meeting will be held at the Westbrook Corporate Center Meeting Facility, which is located on the ground floor of the annex between Towers 2 and 5 of the Westbrook Corporate Center (near the southwesterly corner of the intersection of Cermak Avenue and Wolf Road), in Westchester, Illinois. Please present your ticket to the usher at the meeting. You may also be asked to present valid picture identification before being admitted.

 

How do I contact the Board of Directors?

 

Interested parties may communicate directly with any member of the Board of Directors, including the Lead Director, or the non-management directors, as a group, by writing in care of:

 

Corporate Secretary

Corn Products International, Inc.

5 Westbrook Corporate Center

Westchester, Illinois 60154

 

The Corporate Secretary will collect all such communications and organize them by subject matter. All such communications will be promptly forwarded to the appropriate board committee chairperson according to the subject matter of the communication, except for solicitations or other matters unrelated to the company. Communications addressed directly to the Lead Director, the non-management directors, as a group, or any individual director will be forwarded to the Lead Director, each non-management member of the board or the individual director, as the case may be.

 

How do I submit a stockholder proposal for the 2008 annual meeting?

 

Our 2008 annual meeting is scheduled for Wednesday, May 14, 2008. If a stockholder wishes to have a proposal considered for inclusion in next year’s proxy statement, he or she must submit the proposal in writing so that we receive it by December 1, 2007. Proposals should be addressed to our Corporate Secretary,

5 Westbrook Corporate Center, Westchester, Illinois 60154. In addition, our By-laws provide that any stockholder wishing to propose any other business at the annual meeting must give the company written notice not earlier than December 1, 2007 and not later than December 31, 2007. That notice must provide certain other information as described in the By-laws. Copies of the By-laws are available online in the “Governance” section of our web site at http://www.cornproducts.com. There are other procedural requirements in our By-laws pertaining to stockholder nominations and proposals. Any stockholder may receive a current copy of our By-laws, without charge, by writing to our Corporate Secretary.

 

Does the company offer an opportunity to receive future proxy materials electronically?

 

Yes. If you are a stockholder of record or a participant in a retirement savings plan, you may, if you wish, receive future proxy statements and annual reports online. If you elect this feature, you will receive an e-mail message notifying you when the materials are available along with a web address for viewing the materials and instructions for voting by telephone or on the Internet. If you have more than one account, you may receive separate e-mail notifications for each account.

 

You may sign up for electronic delivery in two ways:

 

 

If you received these materials electronically, you do not need to do anything to continue receiving materials electronically in the future.

 

If you hold your shares in a brokerage account, you may also have the opportunity to receive proxy materials electronically. Please follow the instructions of your broker.

 

What are the benefits of electronic delivery?

 

Electronic delivery reduces the company’s printing and mailing costs. It is also a convenient way for you to receive your proxy materials and makes it easy to vote your shares online. If you have shares in more than one account, it is an easy way to avoid receiving duplicate copies of proxy materials.

 

What are the costs of electronic delivery?

 

The company charges nothing for electronic delivery. You may, of course, incur the usual expenses associated with Internet access, such as telephone charges or charges from your Internet service provider.

 

May I change my mind later?

 

Yes. You may discontinue electronic delivery at any time. For more information, call 708-551-2600.

 

What is “householding”?

 

We have adopted “householding,” a procedure under which stockholders of record who have the same address and last name and do not receive proxy materials electronically will receive only one copy of our annual report and proxy statement unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure saves printing and postage costs by reducing duplicative mailings.

 

Stockholders who participate in householding will continue to receive separate proxy cards. Householding will not affect dividend check mailings.

 

Beneficial stockholders can request information about householding from their banks, brokers, or other holders of record.

 

What if I want to receive a separate copy of the annual report and proxy statement?

 

If you participate in householding and wish to receive a separate copy of the 2006 annual report and 2007 proxy statement, or if you wish to receive separate copies of future annual reports and proxy statements, please call us at 708-551-2600. We will deliver the requested documents to you promptly upon your request. You can have these materials delivered to you electronically by following the enrollment instructions available at http://www.cornproducts.com. Please also keep in mind that this proxy statement and the accompanying 2006 annual report to stockholders will be published and available for viewing and copying in the “Investors” section of the company’s web site at http://www.cornproducts.com.

 

The terms of four Class I directors are expiring at the annual meeting. Each of these four directors is nominated for election, with each nominee to hold office for a three-year term expiring in 2010. These directors and our other seven directors are listed on pages 5 to 9, with brief biographies. The Board of Directors has determined that the following 9 directors satisfy the New York Stock Exchange’s definition of independent director: R.J. Almeida, G.E. Greiner, P. Hanrahan, K.L. Hendricks, B.H. Kastory, G.B. Kenny, B.A. Klein, W.S. Norman and J.M. Ringler.

 

All of the nominees for election have consented to being named in this proxy statement and to serve if elected. If, for any reason, any of the nominees cannot be a candidate for election at the annual meeting, the proxies will be voted for substitute nominees designated by the board unless it has reduced its membership prior to the annual meeting. The board does not anticipate that any of the nominees will be unavailable to serve if elected. The nominees and the directors continuing in office will normally hold office until the annual meeting of stockholders in the year indicated on this and the following pages and until their successors have been elected and have qualified.

 

Class I nominees for three year terms expiring in 2010

 

KAREN L. HENDRICKS

 

Age — 58

Director since 2000

Chairman of the Finance Committee and member of the Corporate Governance and

Nominating Committee

 

Former Chairman, President and Chief Executive Officer of Baldwin Piano & Organ Company

 

Ms. Hendricks served from 2003 until 2005 as a Leadership Development Consultant at Lee Hecht Harrison, a global career management services organization. From 1994 to April 2001, she served as Chairman, President and Chief Executive Officer of Baldwin Piano & Organ Company, a maker of fine musical instruments. Ms. Hendricks is a Trustee of KCP Income Trust and a board member of KIK Custom Products; Vice Chair of the Board of Trustees of The Ohio State University, on the Executive Committee of the Board of Directors of the Cincinnati Chapter of the American Red Cross, on the Board of Trustees of the Association of Governing Boards of Universities & Colleges, and Chairman of the Board of the James Cancer Hospital and Richard Solove Research Center.

BERNARD H. KASTORY

 

Age — 61

Director since 1997

Member of the Audit Committee

 

Professor in the Department of Management and Business at Skidmore College

 

Mr. Kastory was appointed to his present teaching position in 2001 following his retirement from Bestfoods, formerly known as CPC International, a global producer of consumer food products that was acquired by Unilever in 2000. Previously, he served as Senior Vice President — Asia, Latin America and Baking Operations of Bestfoods, and prior thereto he served as Senior Vice President — Finance and Administration from 1997 until 1999, as Chairman and Chief Executive Officer of Bestfoods’ Baking Business from 1995 until 1997 and as President of its Corn Refining Business and Vice President of CPC International since 1992.

 

BARBARA A. KLEIN

 

Age — 52

Director since 2004

Member of the Audit Committee

 

Senior Vice President and Chief Financial Officer of CDW Corporation

 

Ms. Klein is the Senior Vice President and Chief Financial Officer of CDW Corporation, a direct marketer of multi-brand information technology products, since 2002. Previously, she served as the Vice President and Chief Financial Officer of Dean Foods Company, a food and beverage company, from 2000 to 2002 and was the Vice President and Corporate Controller of Ameritech Corporation, a telecommunications company, from 1996 to 2000. Ms. Klein belongs to the Financial Executives Institute, the Chicago Finance Exchange and the Chicago Network. She also serves on the board of the Tax Assistance Program, a not-for-profit entity.

 

SAMUEL C. SCOTT III

 

Age — 62

Director since 1997

 

Chairman, President and Chief Executive Officer of the Company

 

Mr. Scott has served as Chairman and Chief Executive Officer of the company since February 2001 and President since 1997. Mr. Scott also served as Chief Operating Officer from 1997 through January 2001. Prior thereto, he served as President of the worldwide Corn Refining Business of CPC International, Inc; now Unilever Bestfoods, from 1995 to 1997 and was President of CPC International’s North American Corn Refining Business from 1989 to 1997. He was elected a Vice President of CPC International in 1991. Mr. Scott is a director of Motorola, Inc., The Bank of New York, ACCION International, The Executives’ Club of Chicago, Inroads Chicago and The Chicago Council on Global Affairs. He is also a Trustee of the Conference Board. Mr. Scott is Lead Director of Motorola and Chairman of Motorola’s Compensation and Leadership Committee.

 

The Board recommends that you vote FOR the nominees for Class I directors.

Class II directors continuing in office until 2008

 

RICHARD J. ALMEIDA

 

Age — 64

Director since 2001

Chairman of the Compensation Committee and member of the Corporate Governance

and Nominating Committee

 

Former Chairman and Chief Executive Officer of Heller Financial, Inc.

 

Mr. Almeida retired in 2001 as Chairman and Chief Executive Officer of Heller Financial, Inc., a commercial finance and investment company, a position he had held since 1995. He served as Executive Vice President and Chief Financial Officer of Heller Financial from 1987 until 1995. Before that service, he was an executive with Citicorp/Citibank, a full service bank, serving in various capacities. Mr. Almeida is a director of UAL Corporation, The Marmon Group, E-Funds Corporation, CARE(USA) and High Jump.

 

GUENTHER E. GREINER

 

Age — 68

Director since 1998

Member of the Finance Committee

 

President of International Corporate Consultancy LLC

 

Mr. Greiner formed International Corporate Consultancy LLC, a global finance-consulting firm for which he serves as President, upon his retirement from Citicorp/Citibank, N.A., a full service bank, in April 1998. He joined Citibank Germany in 1965 and was appointed a vice president in 1974. After successive assignments in Europe, North America, Africa and the Middle East, he became an executive vice president of the World Corporate Group in 1989 and senior group executive and executive vice president of Citibank’s Global Relationship Bank in 1995. He is also a director of Ermenegildo Zegna Corp. USA, EZ Holditalia SpA, AICGS — The Johns Hopkins University, and Alan Real Estate S.A. He is also a Director Emeritus of the New York Philharmonic and a member of the Cornell Council of the Weill Cornell Medical College and New York-Presbyterian Hospital. Mr. Greiner is a member of the International Advisory Council of The International Center in New York.

 

GREGORY B. KENNY

 

Age — 54

Director since 2005

Member of the Audit Committee

 

President and Chief Executive Officer of General Cable Corporation

 

Mr. Kenny is President and Chief Executive Officer of General Cable Corporation (since 2001), a manufacturer of aluminum, copper, and fiber-optic wire and cable products. From 1999 to 2001 he served as President and Chief Operating Officer of General Cable Corporation; from 1997 to 1999 he served as Executive Vice President and Chief Operating Officer; from 1994 to 1997 he served as Executive Vice President, Sales and Marketing; and from 1992 to 1994 he served as President, Consumer Products Group. He is also a director of IDEX Corporation and a member of the Board of Governors for NEMA (National Electrical Manufacturers Association). In addition, Mr. Kenny serves on the boards of the Cincinnati Museum Center and Big Brothers/Big Sisters of Greater Cincinnati.

JAMES M. RINGLER

 

Age — 61

Director since 2001

Chairman of the Audit Committee and member of the Corporate Governance and

Nominating Committee

 

Chairman of the Board of NCR Corporation and Former Vice Chairman of Illinois Tool Works Inc.

 

Mr. Ringler is the Chairman of the Board of NCR Corporation, an information technology company. He served as the interim Chief Executive Officer of NCR from March 2005 until September 2005. Mr. Ringler retired in 2004 as Vice Chairman of Illinois Tool Works Inc. where he had worked since 1999. Illinois Tool Works Inc. is a multinational manufacturer of highly engineered products and specialty systems. From October 1997 to December 1999, he was Chairman of the Board, President and Chief Executive Officer of Premark International, Inc., a multinational manufacturer and marketer of food equipment, decorative products and consumer products. From 1996 to September 1997, he served as President and Chief Executive Officer of Premark International, Inc. and as President and Chief Operating Officer from 1992 until 1996. Mr. Ringler is also a director of The Dow Chemical Company, FMC Technologies, Inc. and Autoliv, Inc. Mr. Ringler is also a National Trustee of the Boys and Girls Clubs of North America, Midwest Region and a Director of the Lyric Opera of Chicago.

Class III directors continuing in office until 2009

 

LUIS ARANGUREN-TRELLEZ

 

Age — 45

Director since 2003

Member of the Finance Committee

 

Executive President of Arancia Industrial, S.A. de C.V.

 

Mr. Aranguren-Trellez has been the Executive President of Arancia Industrial, S.A. de C.V., a holding company with interests in the food industry and manufacture of food preparations and pharmaceuticals, since 2000. Arancia Industrial is a Mexican company that is controlled by Mr. Aranguren-Trellez’s father, Mr. Ignacio Aranguren Castiello, and his family, and was the former joint venture partner with the company in corn wet milling and refining operations in Mexico. Previously, Mr. Aranguren-Trellez served as Operations Director of CPIngredientes, S.A. de C.V., the company’s Mexican subsidiary, from 1996 until 2000, and had served in various other management positions with that company and its predecessors since 1989. He was also a director of Sistemas Pecuarious, S.A. de C.V. from 1998 to 2004, a joint venture between private Mexican and Great Britain companies, and he is at present a Chairman of Pacific Star Holding, S.A. de C.V. (PSH) a private Mexican company. Mr. Aranguren-Trellez is also a member of the Regional Consulting Board of Telefonos de Mexico, S.A. de C.V., as well as of Banco Nacional de Mexico, S.A., the Citicorp Mexican bank subsidiary.

PAUL HANRAHAN

 

Age — 49

Director since 2006

Member of the Compensation Committee

 

President and Chief Executive Officer of The AES Corporation

 

Mr. Hanrahan is the President and Chief Executive Officer of The AES Corporation, one of the world’s leading independent power producers. He was Executive Vice President and Chief Operating Officer and President and Chief Executive Officer of AES China Generating Co., Ltd. from 1993 until 2002, and Managing Director of AES Transpower from 1990 until 1993. He joined AES in 1986 as a Project Director. Mr. Hanrahan serves as a director of The AES Corporation.

 

WILLIAM S. NORMAN

 

Age — 68

Director since 1997

Lead Director, Chairman of the Corporate Governance and Nominating Committee

and member of the Compensation Committee

 

Former President and Chief Executive Officer of the Travel Industry Association of America

 

Mr. Norman retired in 2005 from the Travel Industry Association of America, a trade association for the travel industry, where he had been President and Chief Executive Officer since 1994. Previously, he served as Executive Vice President of the National Railroad Passenger Corporation (AMTRAK), a rail transportation company, from 1987 to 1994. He is the Chairman of the Board of the Logistics Management Institute, a nonprofit consulting organization dedicated to improving management of the US public sector, and a director of Travel Industry Association of America and the International Consortium for Research on the Health Effects of Radiation. He is also a Vice Chairman of the Board of Trustees of West Virginia Wesleyan College and a member of the Board of Overseers of the Hospitality Hall of Honor and Archives.

 

 

The business and affairs of the company are conducted under the direction of its Board of Directors.

 

The board held 7 meetings in 2006. Each director attended at least 75 percent of the meetings of the board and the committees of the board on which he or she served during 2006. As a group, the directors’ meeting attendance averaged 96 percent for the year.

 

The company encourages, but does not require, its directors to attend the annual meeting of stockholders. Last year, 10 of our 11 directors attended the annual meeting of stockholders.

 

Non-management directors meet regularly in executive sessions without management. Executive sessions are held in conjunction with each regularly scheduled meeting of the board. “Non-management” directors are all those who are not company officers and may include directors who are not “independent” by virtue of the existence of a material relationship with the company.

 

Board policy requires outside directors to retire no later than the annual meeting following their 72nd birthday. Employee directors, including the CEO, are required to retire from the board upon retirement as an employee, unless the board determines otherwise in unusual circumstances.

 

The company’s Governance Principles and Policies on Business Conduct are available in the “Governance” section of the company’s web site at http://www.cornproducts.com.

 

Lead Director.  The Chairperson of the Corporate Governance and Nominating Committee serves as Lead Director. The responsibilities of the Lead Director include attending and presiding at meetings of the Board of Directors in the absence of the Chairperson and presiding at executive sessions conducted without

management, except for meetings where executive performance and compensation are discussed, which are presided over by the Chairperson of the Compensation Committee.

 

Committees of the Board.  The board currently has four standing committees, the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the Finance Committee. Each of these committees operates pursuant to a written charter adopted by the board. These charters are available in the “Governance” section of our web site at http://www.cornproducts.com.

 

Audit Committee

 

Our Audit Committee is composed entirely of independent directors as “independent” is defined under the rules of the New York Stock Exchange. Each of the members of the Audit Committee is “financially literate” as required by the rules of the New York Stock Exchange. The board has determined that the company has more than one member of the Audit Committee who meets the legal requirements of an audit committee financial expert, one of whom is Mr. James M. Ringler.

 

This committee assists the board in fulfilling its oversight responsibilities in the areas related to the financial reporting process and the systems of financial control. The Audit Committee also acts as a separately-designated standing audit committee established in accordance with the Exchange Act. The company’s independent auditors are accountable to and meet privately with this committee on a regular basis.

 

Members of the Audit Committee are J. M. Ringler (Chairman), B. H. Kastory, G. B. Kenny and B. A. Klein. This committee held 9 meetings during 2006 and has furnished the report appearing on page 40.

 

Compensation Committee

 

Our Compensation Committee is composed entirely of independent directors as “independent” is defined under the rules of the New York Stock Exchange. Each of the members of the Compensation Committee is also a “non-employee director” as that term is defined under Exchange Act Rule 16b-3 and an “outside director” as that term is defined in Treasury Regulation § 1.162-27(3).

 

This committee:

 

 

Our Compensation Committee, together with our other independent directors, reviews and approves corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluates our Chief Executive Officer’s performance in light of those goals and objectives and, together with our other independent directors establishes our Chief Executive Officer’s compensation, based on the Committee’s evaluation of the Chief Executive Officer’s performance. The corporate goals and objectives are developed by our management and approved by the board. Management recommends base salaries and short- and long-term incentive awards for our executive officers other than our Chief Executive Officer, based on external market information and internal equity. Our Compensation Committee reviews these recommendations and approves the base salaries

and short- and long-term incentive awards for the executive officers of the company other than our Chief Executive Officer. The Compensation Committee also reviews and approves compensation under equity-based plans for our executives other than our Chief Executive Officer. Our Compensation Committee has an independent consultant, Hewitt Associates, LLC to advise it with respect to incentive plan design, external market information and other compensation matters. The consultant generally attends meetings of the Committee and also communicates with the Committee outside of meetings.

 

Our Compensation Committee has told Hewitt Associates that:

 

 

Our Compensation Committee meets with our Chief Executive Officer annually to review the performance of our executive officers. This meeting includes an in-depth review of our executive officers’ performance and our succession plans. The same review is presented to the full board each year. Similarly, the Compensation Committee reviews the Chief Executive Officer’s performance and meets independently of the Chief Executive Officer to discuss his compensation. This review is also presented to the full board each year.

 

The members of the Compensation Committee are R. J. Almeida (Chairman), W. S. Norman and P. Hanrahan. This Committee held 4 meetings during 2006.

 

Corporate Governance and Nominating Committee

 

Our Corporate Governance and Nominating Committee is composed entirely of independent directors as “independent” is defined under the rules of the New York Stock Exchange.

 

This committee oversees the general areas of corporate governance and selected company policies as well as the selection of directors.

 

The company retains a professional third-party search firm to help identify and facilitate the screening and interview process for director nominees. The Corporate Governance and Nominating Committee maintains, with the approval of the board, formal criteria for selecting director nominees. The criteria used for selecting director nominees are included as Appendix A to this proxy statement. In addition to these minimum requirements, the Corporate Governance and Nominating Committee will also evaluate whether the candidates’ skills and experience are complementary to the existing board members’ skills and experience as well as the board’s need for operational, management, financial, international, technological or other expertise. The search firm identifies and screens the candidates, performs reference checks, prepares a biography for each candidate for the Corporate Governance and Nominating Committee to review and assists in setting up interviews. The Corporate Governance and Nominating Committee members interview candidates that meet the criteria and select those that it will recommend to the board for nomination. The board considers the nominees and selects those who best suit the needs of the board for nomination or election to the board.

 

The Corporate Governance and Nominating Committee will consider qualified candidates for director nominees suggested by our stockholders. Stockholders can suggest qualified candidates for director nominees by writing to the Corporate Governance and Nominating Committee, c/o the Corporate Secretary at 5 Westbrook Corporate Center, Westchester, Illinois 60154. The Corporate Governance and Nominating Committee intends to evaluate candidates proposed by stockholders in the same manner as other candidates.

 

Members of the Corporate Governance and Nominating Committee are W. S. Norman (Chairman), R. J. Almeida, K. L. Hendricks and J. M. Ringler. This committee held 5 meetings during 2006.

 

Finance Committee

 

Our Finance Committee is composed of four directors. This committee assists the board in fulfilling its oversight responsibilities in the specific areas of capital structure, leverage and tax implications thereof; risk management and the preservation of assets, investments, and employee pension plans.

 

Members of the Finance Committee are K. L. Hendricks (Chairperson), L. Aranguren and G. E. Greiner. This committee held 3 meetings during 2006.

 

The following displays the individual components of our outside director compensation. Mr. Scott, whose compensation is included in the Summary Compensation Table below, received no additional compensation for serving as a director.

 

 

One half of each retainer is required to be paid to the directors in the form of restricted stock units that are deferred until retirement under our Stock Incentive Plan. Directors may choose to receive the balance of their retainers in cash or to defer all or a portion of the balance into restricted stock units. All directors are reimbursed for board and committee meeting expenses but no meeting attendance fees are paid in addition to the annual retainers.

 

The following table summarizes the compensation earned by our directors other than Mr. Scott for service during 2006.

 

 

 

 

The following table contains information relating to stock options held by directors at December 31, 2006.

 

 

These options were granted in October 2001, May 2002 and April 2003. This program was then discontinued. All of the options became exercisable one half on the first anniversary of the date of grant and the balance became exercisable on the second anniversary of the date of grant.

 

Mr. Greiner exercised 12,000 options in 2006 and the value realized upon such exercise, defined as the number of options exercised multiplied by the difference between the closing price on the date of exercise and the exercise price was $154,760.

 

The following table shows, as of December 31, 2006, all persons or entities that the company knows are beneficial owners of more than five percent of the company’s issued and outstanding common stock.

 

 

 

 

The following table shows the ownership of company common stock as of March 1, 2007, of each director, each named executive officer and all directors and executive officers as a group.

 

 

 

 

 

This section provides information concerning our compensation programs in which our principal executive officer, principal financial officer and our three most highly-compensated executive officers other than our principal executive officer and principal financial officer (“named executive officers”) participated in 2006. The named executive officers are based in the U.S., other than Mr. Jorge Fiamenghi who is an employee of our Brazilian subsidiary. This discussion includes information concerning, among other things, the overall objectives of our compensation program and each element of compensation that we provide.

 

Overview of Compensation Philosophy and Programs

 

Our executive compensation programs are designed and administered by the company. Through the execution of its charter, our Compensation Committee maintains approval authority over all forms of compensation for our named executive officers, including base salary, short- and long-term incentive compensation and plan design, goal approval and approval of our compensation philosophy. Our Compensation Committee acts with the advice of nationally-known compensation consulting firm, Hewitt Associates LLC.

 

We are committed to maximizing stockholder value, and we are dedicated to attracting and retaining the necessary talent to accomplish this objective. Our compensation philosophy is designed to directly align the interests of stockholders and employees through compensation programs that will reward employees for performance that builds long-term stockholder value.

 

The objectives of our compensation programs are to:

 

 

We use a variety of compensation elements to achieve these objectives, including base salary, annual incentives, equity-based awards, employee benefits, and a modest amount of perquisites, all of which we discuss in detail below.

 

To meet our objectives, elements of compensation are based on three fundamental principles.

 

The Named Executive Officers’ Compensation Will be Performance-Based.  Our executive compensation programs are designed to motivate our executive officers to maximize stockholder returns by achieving growth and value generation goals. This has been our philosophy since we became an independent public company. Our programs provide this motivation in a number of ways. In terms of cash compensation, target award opportunities provided to our named executive officers under our Annual Incentive Plan (which pays bonuses on the basis of performance over a one-year period) range from 75% to 105% of the named executive officer’s salary. Whether and to what extent payments are made under the Annual Incentive Plan depends entirely on the extent to which company-wide, business unit and individual goals approved by the Compensation Committee, based on financial goals for the company approved by the Board of Directors, are achieved. Equity-based compensation is, as discussed below, delivered in the form of performance shares which are earned if, and only to the extent that, specific performance goals approved by the Compensation Committee, based on financial goals for the company approved by the Board of Directors, are met, and stock options, which only have value if our common stock appreciates in value after the date the stock options are granted.

 

A Substantial Portion of Named Executive Officer Compensation Will be Delivered in the Form of Equity Awards.  The Compensation Committee believes that a substantial portion of total compensation should be delivered in the form of equity in order to align the interests of our named executive officers with the interests of our stockholders. This has also been our philosophy since we became an independent public company. In 2006, approximately half of the equity compensation provided to our named executive officers was delivered in the form of performance shares. The balance of the equity compensation delivered to our named executive officers in 2006 was in the form of stock options that vest based on the passage of time, focusing executives on the creation of stockholder value over the long term and encouraging equity ownership.

 

Our Compensation Program for Named Executive Officers is Designed to Enable Us to Attract and Retain First-Rate Executive Talent.  Stockholders are best served when we can attract and retain talented executives with compensation packages that are competitive and performance driven. Therefore, we target base pay for the named executive officers at the 50th percentile relative to officers of a compensation survey group of companies and short- and long-term incentive compensation at the 60th percentile of officers in that group of companies. Targeting incentive compensation at the 60th percentile places more emphasis on variable compensation and motivates and rewards exceptional goal achievement. To assist in making the comparison to the survey group, the Compensation Committee engages Hewitt Associates to provide information regarding compensation practices of the compensation survey group. This market data is also shared with management. In 2006, the compensation survey group consisted of the following 24 companies:

 

 

The survey group data generally reflects size and industry appropriate comparables. These companies have business operations that are similar to ours, including similar type industries, sales volumes, market capitalizations and international operations.

 

We use this compensation survey group because we believe it is representative of industries from which we may attract management talent. We are the 19th largest of the 25 companies including us and the compensation survey group in terms of annual sales. Hewitt Associates adjusts the compensation market data related to the compensation survey group to reflect our size. We also periodically obtain publicly-available competitive compensation data reflecting companies whose size is similar to ours representing general industries to provide a broader view of compensation levels and trends. For purposes of measuring comparative investment returns we utilize a different group of 30 companies (the “performance plan peer group”) who, based on their standard industrial classification codes, are engaged in businesses similar to ours. We use this group, which consists of companies that were included in the former S&P Basic Materials Index, as we were, because we believe investors are more likely to consider the stocks of these companies as alternatives to an investment in our stock than the companies in the compensation survey group in part because their business operations are more similar to ours. We believe the use of two separate groups of companies is not uncommon given the different purposes for comparison.

 

We determine all elements of compensation annually at the same time in order to consider the relationships between all of the compensation elements as well as assess the appropriateness of the total compensation package for each named executive officer. To accomplish this, we review the strength of our financial performance, the executive officers’ positions and levels of responsibility, internal comparisons, performance, and historical grant levels, as well as the competitive market data of the compensation survey group.

 

Elements of Compensation

 

This diagram depicts the elements of compensation we provide, and the shaded boxes under the Annual Incentive Box and those under the Performance Shares Box identify the metrics we used in 2006 to measure performance and earn those two components of compensation.

 

 

Since we became an independent public company, our compensation program has had five components: base salary, annual incentives, long-term incentive compensation, benefit programs broadly available to employees

and a modest amount of perquisites. Each element is addressed in the context of competitive conditions and internal comparisons. The annual and long-term incentive plans’ designs, including objectives, metrics, thresholds and other elements are reviewed annually for alignment to business objectives and competitiveness. Accordingly, there may be changes from year to year in the metrics or other plan design elements we use to measure performance and earn those two components of compensation.

 

Base Salary:  We target base salaries at the 50th percentile of the compensation survey group in an effort to be competitive with median compensation levels for the positions we fill. The specific named executive officer’s salary varies based on the level of his or her responsibility, experience, time in position, internal equity considerations and individual performance. Salaries are reviewed annually. All salary actions with respect to named executive officers other than the Chief Executive Officer are recommended by our Chief Executive Officer and reviewed and approved by the Compensation Committee.

 

Annual Incentive Plan:  In December 1997, our Board of Directors adopted our short-term incentive cash compensation program, which has been designated the Annual Incentive Plan, for officers and other key domestic and international employees, including the named executive officers. The Annual Incentive Plan was approved by our stockholders in 2000. This plan was amended and the amendments were approved by our stockholders in 2005.

 

Since its implementation in 1998, the Annual Incentive Plan has fostered and supported our pay-for-performance philosophy by providing executive officers and other employees with direct incentives to achieve specific financial goals that are recommended by management and reviewed and approved by the Compensation Committee based upon financial goals for the company approved at the beginning of the year by our Board of Directors. These plan goals are intended to align performance with our stockholders’ interests. We target bonus levels for our executive officers to place them at the 60th percentile of bonus levels for executive officers in their positions in the compensation survey group in order to place more emphasis on variable compensation and to motivate and reward exceptional goal achievement. Actual payments relative to target bonus levels are based on performance. The variable annual incentive compensation closely links total cash compensation to annual financial results, delivering lower than market total cash compensation in times of poor financial performance and higher total cash compensation in times of excellent performance.

 

The Compensation Committee approves an annual incentive target for each named executive officer expressed as a percentage of base salary as recommended by management. For 2006, the target awards for the named executive officers ranged from 75% to 105% of base salary depending on the officer’s position, as shown in the table below.

 

Executive Annual Incentives — 2006

 

 

 

 

Annual incentives paid for 2006 were determined based upon achievement of goals set for corporate and business units’ financial results, achievement of cash flow from operations goals and the achievement of individual strategic objectives. Financial objectives for 2006 were weighted at 60% for the achievement of earnings per share and operating income goals and 20% for the achievement of cash flow from operations goals. The remaining 20% was based on the accomplishment of individual strategic objectives tied to our strategy, execution of divisional goals and cost savings. Management recommended and the Compensation

Committee approved this weighting because they viewed earnings per share and operating income as the foundation for our growth and, as a result stockholder value, cash flow from operations as another key financial metric, and individual strategic objectives as a means to incent named executive officers to achieve results in a segment of our strategy. A scale developed for each metric permits participants in our Annual Incentive Plan to earn from 0% up to 200% of their annual incentive targets. The Compensation Committee can further adjust the total amount earned and calculated by the formula to anywhere from no amount earned to 150% of the calculated amount based on the relative strength or weakness of the individual’s performance, provided that adjustments to the calculated amount for named executive officers intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code are only permitted to the extent such adjustments would not cause any portion of the payment to be nondeductible pursuant to Section 162(m) of the Code.

 

Weightings Assigned in 2006 to Each Performance Objective under the

Annual Incentive Plan for the Named Executive Officers

 

 

For 2006, the performance objectives for each of the named executive officers included earnings per share of $1.46 and cash flow from operations of $199 million to achieve target award levels. Our 2006 earnings per share and cash flow from operations were $1.63 per share and $230 million. Each of the named executive officers also had a strategic objective. Those goals included cost saving initiatives and/or specific divisional financial and/or growth measures.

 

The individual strategic objectives for the named executive officers included goals specific to their areas of responsibility. These objectives included cost reduction, business integration and financial growth goals. Our Chief Executive Officer reviewed the performance with regard to individual strategic objectives for the other named executive officers and made a judgment regarding the extent to which each objective was achieved. In Mr. Scott’s judgment, all of the individual strategic objectives were achieved and the Compensation Committee agreed with Mr. Scott’s judgment. We believe that all of the individual strategic objectives were difficult to achieve. Further, for two of the named executive officers our Chief Executive Officer recommended and the Committee approved increases to the incentives earned based on the quality of their individual accomplishments and the strength of the company’s performance.

 

Mr. Scott’s individual objectives for 2006 established by the Committee were to:

 

 

The Committee determined that Mr. Scott surpassed the goals he was given. In addition to the amount due to Mr. Scott under the Annual Incentive Plan, the Committee approved a bonus of $184,866 based on the quality of Mr. Scott’s leadership, his excellent performance in 2006 and the strength of the company’s performance in 2006.

 

In order to be eligible to receive an incentive payment for a performance period, a named executive officer must (i) be an employee of the company on the last day of the performance period, or have terminated

employment during the performance period due to retirement, disability or death, and (ii) have been employed by the company during at least six months of the performance period. A named executive officer who is eligible to receive an incentive payment for a performance period, but who was not actively employed during the entire performance period, will receive a prorated payment determined in accordance with rules approved by the Compensation Committee. Annual incentive awards for each performance period are to be paid within two and one-half months after the end of the one-year performance period.

 

Long-term Incentive Compensation:  The principal purpose of our long-term incentive compensation program is to promote our long-term financial success through achievement of long-range performance goals that will enhance our value, and, as a result, should enhance the price of our stock and our stockholders’ returns on their investments. For our named executive officers, long-term incentive compensation comprises approximately half of the total of their base, annual incentive and long-term compensation, which we feel is an appropriate balance of annual and longer-term compensation. We award long-term incentives to our executive officers in the form of non-qualified stock options and performance shares, granted pursuant to our Stock Incentive Plan. Our goal is to provide awards such that approximately 50% of the value of the long-term incentive award is delivered in the form of non-qualified stock options and the remaining 50% in the form of performance shares. We use these allocations to provide a balance of the key drivers of stockholder value creation, with stock options providing compensation based solely upon increases in our share price, and performance shares providing compensation based both upon relative share price appreciation and the achievement of specific corporate performance goals that are not subject to market fluctuations but ultimately tend to be closely correlated with increasing stockholder value. We continue to evaluate the appropriate mix of long-term incentive compensation vehicles in comparison to the market to best support our long-term business strategy.

 

Long-term incentive award amounts are established based on position level using competitive market data of the compensation survey group. Stock option awards to executive officers may be adjusted upwards or downwards based upon individual performance. The Compensation Committee approves recommended stock option and performance share awards for each named executive officer. The Compensation Committee considers any performance-related adjustments and approves these awards. The Compensation Committee has delegated jointly to James Hirchak, our Vice President of Human Resources, and Samuel Scott, Chairman, President and Chief Executive Officer, the ability to grant equity-based awards (stock options and restricted stock units) from an annual pool of 50,000 shares to employees who are not executive officers for the purpose of retention, in connection with initial employment offers, and to reward exceptional performance.

 

Stock Options.  In determining the January 2006 grant of non-qualified stock options, 50% of the targeted long-term incentive compensation value was converted to a number of stock options using an estimated Black-Scholes option value. Stock options were granted to eligible management employees and the exercise price of such options was established on January 24, 2006 (the day of the Committee approval). These were non-qualified stock options with ten-year terms that vested 50% upon the first year anniversary of the grant, and the remaining 50% upon the second year anniversary of the grant.

 

In recent years we have made option grants annually in January. We make the grants at the same time other elements of compensation are determined so that we can consider all elements of compensation in making the grants. We have always set the exercise price as the average of the high and low prices of our common stock on the date of grant and have historically granted non-qualified options. Beginning in 2008, the exercise price will be the closing price on the date an option is granted.

 

Performance Shares.  Performance share awards are granted for overlapping three-year performance periods beginning with the year of the grant. Fifty percent of the performance shares are earned based on the achievement of relative cumulative total stockholder returns (the TSR percentile ranking discussed below) and 50% of such payments are based on achievement of return on capital employed goals (the ROCE goal discussed below). For the 2006 performance share awards, a named executive officer can earn up to 200% of his or her performance share award based on our cumulative performance over the entire three-year performance period as measured against total stockholder return and our results in achieving our return on capital employed goal.

The performance shares are earned and payable only after the third year in the performance cycle, based on the performance targets detailed in the TSR and ROCE charts below. No dividends are earned on any performance shares during the cycle.

 

The total stockholder return (“TSR”) goal for the 2006-2008 cycle is based on the percentile ranking with respect to the performance plan peer group with performance shares earned in accordance with the following chart (with interpolation between levels stated in the chart):

 

 

Unless otherwise determined by the Compensation Committee, a minimum of a positive TSR must be achieved at the end of the three-year cycle for this portion of the performance share award to be earned.

 

TSR is determined for this purpose as follows:

TSR = (Change in Stock Price + Dividends Paid)/ Beginning Stock Price

 

Change in Stock Price is the difference between the Beginning Stock Price and the Ending Stock Price. Beginning Stock Price is the average of the daily average prices for each of the 20 trading days immediately prior to the first day of the performance period. Ending Stock Price is the average of daily average prices for each of the last 20 trading days of the performance period. The daily average prices are the average of the high and low price on the New York Stock Exchange for one share of common stock on the date of determination. Dividends Paid are the total of all dividends paid on one share of common stock during the applicable calendar quarter(s) during the performance period with dividends treated as though they are reinvested at the end of each calendar quarter based on the stock price at the end of each calendar quarter.

 

The Beginning Stock Price for the 2006-2008 cycle is $23.433.

 

The performance plan peer group is the 30 companies listed below who, based on their standard industrial classification codes, are similar to us. If two companies in the group merge, or one is acquired, the new company will be included in the group. If a company merges with a company not in the group or if a company declares bankruptcy, the company will be removed and its TSR will not be included as part of the performance plan peer group.

 

 

 

These companies were recommended by management and approved by our Compensation Committee on the basis of their Standard Industrial Classification codes and their inclusion in the former S&P Basic Material Index in which we were also included. The performance plan peer group is utilized for this purpose rather than the compensation survey group because we believe investors are more likely to consider the stocks of these companies as alternatives to an investment in our stock than the companies in the compensation survey group in part because their business operations are more similar to ours. We would rank 15th in terms of annual sales if we were included with the performance plan peer group. We believe that the compensation survey group is more representative of industries from which we may attract talent. Therefore, we use it to determine competitive compensation levels.

 

The remaining 50% of the performance shares can be earned based on achievement, at the end of the three-year cycle, of a return on capital employed (ROCE) goal that was established at the commencement of the three-year cycle for the 2006 performance plan.

 

The target return on capital employed that we must achieve for our named executive officers to earn 100% of the remaining 50% of the performance shares is 8.1% for the 2006-2008 performance plan cycle. The calculation is determined by dividing our net operating profit after tax for the third year of the performance cycle by the amount of our capital employed based on the opening balance sheet of the third year of the three-year performance cycle. Capital employed is defined for this purpose as the sum of our total shareholders equity plus cumulative translation adjustment, minority interest in subsidiaries, redeemable common stock and total debt less our cash and cash equivalents. Half of the performance shares award target will be earned according to the following table.

 

 

The Compensation Committee may change the goal if it determines that an extraordinary event has occurred. The Compensation Committee had never made such a determination. Once the number of performance shares to be awarded based on the company’s performance measures results are known, the Compensation Committee may decrease or eliminate entirely the number of performance shares to be earned based on whether the participant’s individual performance during the performance period was unacceptable. The Compensation

Committee relies upon management recommendations to determine whether performance by named executive officers other than the Chief Executive Officer was unacceptable.

 

The number of shares of common stock, if any, that recipients of performance share awards in 2006 will receive in relation to such awards will be based upon the extent to which the company attains the total stockholder return and return on capital employed goals approved by the Compensation Committee for the three-year cycle beginning on January 1, 2006 and ending on December 31, 2008. Amounts will be paid in shares of company common stock.

 

Retirement and Other Benefits.  We also provide benefits such as medical, dental and life insurance and disability coverage to each U.S.-based named executive officer. These benefits are also provided to all eligible U.S.-based employees. Eligible employees, including the named executive officers, can purchase additional life, dependent life and accidental death and dismemberment coverage as part of their active employee benefits. In addition, all salaried employees in the United States are eligible to participate in our Cash Balance Plan, our Retirement Savings Plan, and our Retiree Health Care Spending Accounts (RHCSA). Select employees are provided with Executive Life Insurance, a benefit that was established prior to our becoming an independent public company and this benefit is now frozen.

 

Cash Balance Plan.  Our Cash Balance Plan is a defined benefit qualified pension plan which is available to all U.S. salaried employees, including the named executive officers other than Mr. Fiamenghi. Accounts of participants in the Cash Balance Plan accrue pay credits based on years of service and monthly interest credits using a rate equal to a specified amount above the interest rate on short-term Treasury notes. Pay credits are calculated as a percentage (3% to 10%) of a salaried employee’s eligible compensation (defined as base salary, overtime, and earned Annual Incentive Plan award). The pay credit percentage is determined by the employee’s years of service and reaches and remains at 10% after 35 years of service. The value of a participant’s account at retirement is paid out either as a life or a joint and survivor annuity or in an optional form, such as a lump sum if certain funding conditions are met. The Cash Balance Plan provides for a 5-year vesting period.

 

To the extent that an employee’s, including any named executive officer other than Mr. Fiamenghi, annual retirement income benefit under the Cash Balance Plan exceeds the limitations imposed by the Internal Revenue Code, such additional benefits may be provided by our nonqualified Supplemental Executive Retirement Plan through a Cash Balance Make-up Account. All of the named executive officers other than Mr. Fiamenghi participate in the Cash Balance Make-up Account.

 

Supplemental Executive Retirement Plan (SERP).   The named executive officers, other than Mr. Fiamenghi, in addition to certain other U.S.-based eligible employees are entitled to participate in our Supplemental Executive Retirement Plan. The purpose of this nonqualified, unfunded plan is to (a) permit certain key executives to defer receipt of a portion of current compensation, including short- and long-term incentive payments, until a later year, (b) provide participants and their beneficiaries with the amount of retirement income that is not provided under the Cash Balance Plan or the Retirement Savings Plan by reason of Internal Revenue Service limits on eligible compensation and (c) preserve the opportunity for executives to continue to defer compensation that was deferred under previously maintained plans.

 

SERP participants are general unsecured creditors of the company. Our SERP is a combination of plans that mirror plans operated by our prior parent before we became an independent public company.

 

Retirement Savings Plan.  The Retirement Savings Plan is a tax-qualified 401(k) savings plan that offers U.S. salaried employees the opportunity to contribute up to 25% of their eligible compensation on either a before-tax or after-tax basis. The company matches 100% of employee contributions up to the first 6% of eligible compensation contributed. Employee contributions are fully vested upon contribution. Company contributions are vested after three years of qualified employment with the company.

 

In addition to the Retirement Savings Plan, named executive officers, other than Mr. Fiamenghi, and other eligible employees may participate in the Savings Plan Make-up Account under the nonqualified SERP. Any benefits that are limited under the Retirement Savings Plan due to Internal Revenue Service limits on compensation and deferral limits will be credited to the Savings Plan Make-up Account. The 2006 and 2007

limits on maximum recognizable compensation are $220,000 and $225,000. The limits on pretax elective deferrals in 2006 were $15,000 for persons under 50 and $15,500 for persons aged 50 or more. Those limits for 2007 are $20,000 and $20,500. The company’s matching contributions mirror company contributions to the Retirement Savings Plan. A participant is vested in his or her Savings Plan Make-up Account to the extent that he or she is vested in the Retirement Savings Plan employer matching contributions.

 

Mr. Fiamenghi participates in our Brazilian subsidiary’s defined contribution plan. Accounts of participants in this plan accrue monthly interest credits according to the actual investment return gained and company and participants’ contributions. The value of a participant’s account at retirement is paid out either as a joint and survivor annuity or as a partial lump sum. There is also a death and disability benefit that is provided based on a formula that takes into account the amount of time between the triggering event and the participant’s normal retirement date. The Brazilian defined contribution plan was modified effective January 2007 so that the value of a participant’s account for all benefits is paid out as an annuity over a specified time period or as a percentage of the outstanding balance.

 

Retiree Health Care Spending Account (RHCSA).  RHCSA accounts are provided to all eligible U.S.-based employees and provide employees who terminate from the company at or after age 55 with 10 years of service with assistance in purchasing retiree medical and dental care from the company. At termination, qualified employees have access to a RHCSA for themselves and a RHCSA in an equal amount for their then qualified dependents. The balances in these accounts may be used by the retiree and dependents to purchase from the company, at the company’s full cost, the medical and dental benefits provided by the company to active employees.

 

The balances in these notational accounts are forfeited if the employee terminates employment prior to age 55 with 10 years of service or upon the death of the employee or qualified dependents, respectively.

 

Executive Life Insurance Plan.  We provide certain U.S. salaried employees with the opportunity to participate in our legacy Executive Life Insurance Plan. This plan was established before we became an independent public company and the plan and plan benefits are frozen. This is a split dollar life insurance plan which provides the participant with a greater death benefit than provided under the company’s basic life insurance plan. Additionally, after the later of age 65 or 15 years of participation in the Plan, participants are given full ownership of the life insurance policies. Participant annual premiums are calculated to pay for the cost of the life insurance being provided. All of the named executive officers except Mr. Fiamenghi participate in this plan.

 

Perquisites and Other Personal Benefits.  We provide our named executive officers with perquisites and other personal benefits that we believe are reasonable and appropriate because they are competitive with perquisites offered by other employers and better enable the company to attract and retain executives for key positions.

 

We provide payments to the named executive officers other than Mr. Fiamenghi to assist in payment of premiums on life insurance policies in the Executive Life Insurance Plan. We also reimburse those four named executive officers to assist them in the payment of taxes due as a result of such payments. We also provide each of those officers a car. We lease and pay all the costs of operating those cars, including insurance. Mr. Fiamenghi is provided exclusive use of a company-owned and company maintained car. Each of the named executive officers other than Mr. Fiamenghi also receives financial planning and tax preparation services. We also provide annual physical examinations to our named executive officers and other eligible employees. The values of these perquisites are included in the Summary Compensation Table in the column headed “All Other Compensation.” We believe these perquisites are appropriate because they are competitive with perquisites offered by other employers and not excessive.

 

Change in Control Agreements.  We have a severance agreement with each of the named executive officers that requires us or a successor company to make certain payments and provide certain benefits if the officer’s employment is terminated by us or the successor company other than because of death, “Disability” or ‘‘Cause” or is terminated by the officer for “Good Reason” within two years after a change in control of the company. Disability, Cause and Good Reason are defined in the severance agreements. These agreements are intended to permit our senior executives to focus on our success in the event of a change in control and to

encourage them to remain in our employ in the event of a possible change in control. Information regarding potential payments under these agreements for the named executive officers is provided under the heading “Estimated Potential Payments Upon Change in Control” on page 35.

 

Executive Stock Ownership Targets

 

We establish stock ownership targets for our named executive officers. The ownership target for the Chief Executive Officer is ownership of our stock with a value equal to five times his current annual base salary. We count direct and indirect ownership of our common stock, including phantom shares, but not including stock options, as ownership for purposes of our stock ownership targets. The target for each of our other named executive officers is three times his or her current annual base salary. Named executive officers are expected to attain their ownership targets within three to five years from the time the targets become applicable. As of December 31, 2006, Mr. Scott attained an actual ownership level of approximately 11 times his current salary. The other named executive officers have either exceeded their stock ownership targets or are within the three to five year time period from the most recent promotion to achieve the stock ownership target.

 

Timing of Option Grants

 

Our Compensation Committee approves management’s recommendations for option grants annually. This has occurred in January in recent years. The Committee approves grants of options to named executive officers at the same time they are granted to all other eligible employees. We do not time such grants in coordination with the company’s possession or release of material, non-public or other information. Meetings of the Compensation Committee are generally scheduled at least a year in advance.

 

Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company’s Chief Executive Officer or any of the company’s four other most highly compensated executive officers who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria approved by stockholders). For 2006, the grants of stock options, and the payments under the Annual Incentive Plan and the long-term incentive plan awards were designed to satisfy the requirements for deductible compensation. As a result of his excellent performance and the company’s excellent performance in 2006, our Chief Executive Officer received a bonus of approximately $185,000 in January 2007 which will not be deductible to the extent his compensation other than qualifying performance-based compensation received in 2007 exceeds $1 million.

 

 

 

 

 

 

 

The following table contains information relating to grants of awards during 2006 under our Annual Incentive Plan, performance shares under our performance plan and options under our Stock Incentive Plan to the named executive officers.

 

 

 

 

 

 

The following table contains information relating to stock options, performance shares and restricted shares held by our named executive officers at December 31, 2006.

 

 

 

 

There were two grants of options in 2001 when we changed the grant date from January to October and no annual grants in 2005 when we changed the grant date back to January.

 

 

 

The following table contains information concerning the exercise of stock options by our named executive officers and vesting of restricted shares held by them during 2006.