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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Dr Pepper Snapple Group, Inc.

 

(Name of Registrant as Specified In Its Charter)

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

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March 25, 2011

 

To our Stockholders:

 

We are pleased to invite you to attend the annual meeting of stockholders of Dr Pepper Snapple Group, Inc. to be held on Thursday, May 19, 2011 at 10:00 a.m., Central Daylight Time, at the Dallas/Plano Marriott at Legacy Town Center, 7120 Dallas Parkway, Plano, Texas 75024.

 

Details regarding the business to be conducted, information you should consider in casting your vote and how you may vote are more fully described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.

 

In accordance with rules approved by the Securities and Exchange Commission, this year we are again furnishing proxy materials to our stockholders primarily over the Internet. As a result, we are mailing to many of our stockholders a notice instead of a paper copy of our Proxy Statement and our 2010 Annual Report. The notice contains instructions on how to access those documents over the Internet. The notice also contains instructions on how each of those stockholders can receive a paper copy of our proxy materials, including our Proxy Statement, our 2010 Annual Report and a proxy card or voting instruction form. Stockholders who do not receive a notice will receive a paper copy of the proxy materials by mail.

 

Your vote is important. Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible.

 

Thank you for your ongoing support of Dr Pepper Snapple Group.

 

Sincerely,

 

 

Wayne R. Sanders

Chairman of the Board

 

 

Larry D. Young

President and Chief Executive Officer

DR PEPPER SNAPPLE GROUP, INC.

5301 Legacy Drive

Plano, Texas 75024

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

 

This Notice of Annual Meeting of Stockholders and Proxy Statement and form of proxy are being distributed on or about March 25, 2011.

 

By Order of the Board of Directors

 

 

James L. Baldwin
Corporate Secretary

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL STOCKHOLDERS’ MEETING TO BE HELD ON MAY 19, 2011

 

The Company’s Proxy Statement and Annual Report to Stockholders for the fiscal
year ended December 31, 2010 are available at www.proxyvote.com.

 

DR PEPPER SNAPPLE GROUP, INC.

5301 Legacy Drive
Plano, Texas 75024

 

TABLE OF CONTENTS

 

DR PEPPER SNAPPLE GROUP, INC.
5301 Legacy Drive
Plano, Texas 75024

 

PROXY STATEMENT

for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 19, 2011

 

GENERAL INFORMATION

 

QUESTIONS AND ANSWERS

 

Why did I receive this Proxy Statement?

 

This Proxy Statement is being made available to you over the Internet or paper copies of these materials are being delivered to you by mail as a stockholder of record, as of March 21, 2011, of Dr Pepper Snapple Group, Inc., a Delaware corporation (referred to in this Proxy Statement as the “Company,” “we,” “us” and “our”), in connection with the solicitation by our Board of Directors (referred to in this Proxy Statement as the “Board”) of proxies to be voted at the Annual Meeting of Stockholders (referred to in this Proxy Statement as the “Annual Meeting”). As a stockholder, you are invited to attend the Annual Meeting and are entitled to and are requested to vote on the items of business described in this Proxy Statement.

 

When and where is the Annual Meeting to be held?

 

The Annual Meeting will be held at Dallas/Plano Marriott at Legacy Town Center, 7120 Dallas Parkway, Plano, Texas 75024, on May 19, 2011, at 10:00 a.m., Central Daylight Time, or at any adjournments thereof, for the purposes stated in the Notice of Annual Meeting of Stockholders.

 

Do I need a ticket to attend the Annual Meeting?

 

You will need an admission ticket or proof of ownership of our common stock to enter the Annual Meeting. If you hold shares directly in your name as a stockholder of record and have received a copy of our proxy materials, an admission ticket is attached to your printed proxy card. If you plan to attend the Annual Meeting, please vote your proxy prior to the Annual Meeting but keep the admission ticket and bring it with you to the Annual Meeting.

 

If your shares are held beneficially in the name of a broker, trustee or other nominee and you wish to be admitted to the Annual Meeting, you will have to bring either a copy of the voting instruction form provided by your broker, trustee or other nominee, or a copy of a brokerage statement showing your ownership of our common stock as of March 21, 2011.

 

If you are representing an entity holding shares, then you must present a proxy signed by that entity evidencing that you are authorized to attend the Annual Meeting and vote the shares or are otherwise representing the entity at the Annual Meeting. If you are representing an entity whose shares are held beneficially in the name of a broker, trustee or other nominee you will have to bring either a copy of the voting instruction form provided by such entity’s broker, trustee or other nominee, or a copy of a brokerage statement showing the entity’s ownership of our common stock as of March 21, 2011, in addition to the proxy signed by the entity you are representing.

 

All stockholders must also present a form of photo identification, such as a valid driver’s license or passport, in order to be admitted to the Annual Meeting.

 

Are Proxy Materials available via the Internet?

 

Under rules adopted by the Securities and Exchange Commission (“SEC”), we primarily furnish proxy materials to our stockholders on the Internet, rather than mailing paper copies of the materials (including our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed on February 22, 2011 (our “2010 Form 10-K”)) to each stockholder. If you received a notice regarding the availability of proxy materials (the

“Notice”) by mail or electronic mail, you will not receive a paper copy of these proxy materials unless you request one. Instead, the Notice will instruct you as to how you may vote your shares. The Notice will also instruct you as to how you may access your proxy card to vote over the Internet. If you received a Notice by mail or electronic mail and would like to receive a paper copy of our proxy materials, free of charge, please follow the instructions included in the Notice.

 

The Notice was mailed on or about March 25, 2011 to our stockholders of record on the record date.

 

What information is contained in this Proxy Statement?

 

This Proxy Statement lets our stockholders know when and where we will hold the Annual Meeting. Additionally, this Proxy Statement:

 

 

What should I do if I receive more than one Notice about the Internet availability of the proxy materials or more than one paper copy of the proxy materials?

 

You may receive more than one Notice (either by mail or electronic mail) or more than one paper or electronic copy of the proxy materials, including multiple paper copies of this Proxy Statement and multiple proxy cards or voting instruction forms. For example, if you hold your shares in more than one brokerage account, you may receive a separate Notice or a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one Notice or more than one proxy card. If you hold your shares through a broker, bank, trustee or another nominee, rather than owning shares registered directly in their name, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are entitled to direct the voting of your shares by your intermediary. Your intermediary will forward the proxy materials to you with a voting instruction form or provide electronic access to the materials and to voting facilities. To vote all of your shares by proxy, you must complete, sign, date and return each proxy card and voting instruction form that you receive and vote over the Internet the shares represented by each Notice that you receive (unless you have requested and received a proxy card or voting instruction form for the shares represented by one or more of those Notices).

 

How may I obtain a copy of the Company’s 2010 Form 10-K and other financial information?

 

Stockholders may request a free copy of our 2010 Annual Report, which includes our 2010 Form 10-K, from:

 

Dr Pepper Snapple Group, Inc.
Attn: Investor Relations
5301 Legacy Drive
Plano, Texas 75024

 

Alternatively, stockholders can access the 2010 Annual Report, which includes our 2010 Form 10-K and other financial information, on the Investor Center section of our website at:

 

www.drpeppersnapplegroup.com

 

The Company also will furnish any exhibit to the 2010 Form 10-K if specifically requested.

 

What items of business will be voted on at the Annual Meeting?

 

The items of business scheduled to be voted on at the Annual Meeting are:

 

 

 

We also will consider any other business that properly comes before the Annual Meeting.

 

How does the Board recommend that I vote?

 

The Board unanimously recommends a vote:

 

 

What shares can I vote at the Annual Meeting?

 

The Board has fixed the close of business on March 21, 2011 as the record date for the Annual Meeting. Only holders of record of the outstanding shares of our common stock at the close of business on the record date are entitled to vote at the Annual Meeting or any adjournments thereof.

 

As of the close of business on the record date, we had 221,321,125 shares of common stock, $0.01 par value per share, issued and outstanding. A holder of shares of our common stock is entitled to one vote for each share of our common stock, in person or by proxy, on all matters properly brought before the Annual Meeting.

 

How can I vote my shares at the Annual Meeting?

 

Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting. Shares for which you are the beneficial owner but not the stockholder of record may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. Voting in person will replace any previous votes that you submitted by proxy.

 

How can I vote my shares without attending the Annual Meeting?

 

Whether you hold shares directly as the stockholder of record or through a broker, trustee or other nominee as the beneficial owner, you may direct how your shares are voted without attending the Annual Meeting. There are three ways to vote by proxy:

 

By Internet — Stockholders who have received a Notice by mail may submit proxies over the Internet by following the instructions on the Notice. Stockholders who have received a Notice by e-mail may submit proxies over the Internet by following the instructions included in the e-mail. Stockholders who have received a paper copy of a proxy card or voting instruction form by mail may submit proxies over the Internet by following the instructions on the proxy card or voting instruction form.

 

By Telephone — Stockholders of record who live in the United States or Canada may submit proxies by telephone by calling (800) 690-6903 and following the instructions. Stockholders of record who have received

a Notice by mail must have the control number that appears on their Notice available when voting. Stockholders of record who received Notice by e-mail must have the control number included in the e-mail available when voting. Stockholders of record who have received a proxy card by mail must have the control number that appears on their proxy card available when voting. Most stockholders who are beneficial owners of their shares living in the United States or Canada and who have received a voting instruction form by mail may vote by phone by calling the number specified on voting instruction form provided by their broker, trustee or nominee. Those stockholders should check the voting instruction form for telephone voting availability.

 

By Mail — Stockholders who have received a paper copy of a proxy card or voting instruction form by mail may submit proxies by completing, signing and dating their proxy card or voting instruction form and mailing it in the accompanying pre-addressed envelope.

 

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (EDT) on May 18, 2011. Votes cast by mail must be received in sufficient time to allow processing. Votes received by mail prior to the day of the Annual Meeting will be processed, but votes received the day of the Annual Meeting may not be processed depending on the time received. Shares represented by duly executed proxies in the accompanying proxy card or voting instruction form will be voted in accordance with the instructions indicated on such proxies or voting instruction forms, and, if no such instructions are indicated thereon, will be voted (i) FOR each of the nominees for election to the Board, (ii) FOR ratification of Deloitte & Touche as our independent registered public accounting firm for fiscal year 2011, (iii) FOR the approval, on an advisory basis, of the compensation of our Named Executive Officers as disclosed in these materials and (iv) FOR the approval, on an advisory basis, that future advisory votes on the compensation of our Named Executive Officers be held each year.

 

How many shares must be present or represented to conduct business at the Annual Meeting?

 

The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of our common stock entitled to vote at the Annual Meeting or any adjournment thereof is necessary to constitute a quorum to transact business.

 

Abstentions and broker nonvotes (shares held by brokers, trustees or other nominees as to which they have no discretionary power to vote on a particular matter and have received no instructions from the beneficial owners of such shares or persons entitled to vote on the matter) will be counted for the purpose of determining whether a quorum is present. If your shares are held by a broker, trustee or other nominee on your behalf and you do not instruct the broker, trustee or other nominee as to how to vote these shares on Proposal 1 (the election of directors), Proposal 3 (the approval of the resolution regarding the compensation of our Named Executive Officers) or Proposal 4 (the vote regarding frequency of advisory votes on executive compensation of our Named Executive Officers), the broker, trustee or other nominee may not exercise discretion to vote for or against those proposals. This would be a “broker non-vote” and these shares will not be counted as having been voted on the applicable proposal. With respect to Proposal 2 (ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm for fiscal year 2011), the broker, trustee or other nominee may exercise its discretion to vote for or against that proposal in the absence of your instruction. Please instruct your broker, trustee or other nominee so your vote can be counted.

 

What is the voting requirement to approve each of the proposals?

 

The following voting requirements will be in effect for each proposal described in this Proxy Statement:

 

Proposal 1.  To be elected, a director must receive the affirmative vote of the holders of a majority of our common stock which has voting power present in person or represented by proxy and which has actually voted (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee).

 

Proposal 2.  Ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm requires the affirmative vote of the holders of a majority of our common stock which has

voting power present in person or represented by proxy and which has actually voted (the number of shares voted “for” ratification must exceed the number of votes cast “against” ratification).

 

Proposal 3.  The advisory (non-binding) resolution to approve the compensation of our Named Executive Officers as disclosed in this Proxy Statement requires the affirmative vote of the holders of a majority of our common stock which has voting power present in person or represented by proxy and which has actually voted (the number of shares voted “for” the resolution must exceed the number of votes cast “against” the resolution).

 

Proposal 4.  The advisory (non-binding) proposal regarding how frequently advisory votes regarding the compensation of our Named Executive Officers will occur requires a plurality of the votes cast for the three options presented at the Annual Meeting. The frequency option that receives the most affirmative votes of all the votes cast on Proposal 4 in person or by proxy at the Annual Meeting is the option that will be deemed the recommendation of the stockholders.

 

What if I want to change my vote?

 

If the enclosed proxy card or voting instruction form is signed and returned, you may, nevertheless, revoke it at any time prior to the Annual Meeting either by (i) your filing a written notice of revocation received by the person or persons named therein, (ii) your attendance at the Annual Meeting and voting the shares covered thereby in person, or (iii) your delivery of another duly executed proxy card or voting instruction form dated subsequent to the date thereof to the addressee named in the enclosed proxy card or voting instruction form.

 

Who will pay for this solicitation?

 

The cost of preparing, assembling, printing and mailing this Proxy Statement and the enclosed proxy card and the cost of soliciting proxies related to the Annual Meeting will be borne by us. We will request brokers, trustees or other nominees to solicit their customers who are beneficial owners of shares of common stock listed of record in name of the broker, trustee or other nominee, and will reimburse such brokers, trustees or other nominees for the reasonable out-of-pocket expenses for such solicitation.

 

Who will serve as inspector of elections?

 

The inspector of elections will be a representative from Broadridge Financial Solutions, Inc.

 

What happens if additional matters are presented at the Annual Meeting?

 

Other than the four items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, James L. Baldwin, Martin M. Ellen and Larry D. Young, will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. If for any reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.

 

The Board is divided into three classes, each serving three-year terms. This year’s nominees for re-election to the Board for a three-year term as Class III directors are {ages are as of the date of the Annual Meeting}:

 

Joyce M. Roché

 

Ms. Roché, age 63, has served as our director since February 2011. Ms. Roché served as President and Chief Executive Officer of Girls Inc., a national non-profit research, education and advocacy organization, from 2000 until her retirement in 2010. From 1998 to 2000, Ms. Roché was an independent marketing consultant. She served as President and Chief Operating Officer of Carson Products Company from 1996 to 1998 and also held senior marketing positions with Carson Products Company, Revlon, Inc. and Avon, Inc. Ms. Roché served on the board of directors of Anheuser-Busch Companies, Inc. from 1998 to 2008 and The May Department Stores Company from 2003 to 2006. She is currently also a member of the boards of directors of AT&T, Inc., Macy’s, Inc., Tupperware Brands Corporation and The Association of Governing Boards of Universities and Colleges and serves as chair of the Board of Trustees for Dillard University.

 

Wayne R. Sanders

 

Mr. Sanders, age 63, has served as the Chairman of the Board and chairman of the Corporate Governance and Nominating Committee since May 2008. Mr. Sanders served as the Chairman and the Chief Executive Officer of Kimberly-Clark Corporation from 1992 until his retirement in 2003. Mr. Sanders has served on the board of directors of Texas Instruments Incorporated since 1997 and Belo Corp. since 2003. He previously served on the board of directors of Adolph Coors Company. Mr. Sanders is also a National Trustee and Governor of the Boys & Girls Club of America and was a member of the Marquette University Board of Trustees from 1992 to 2007, serving as Chairman from 2001 to 2003.

 

Jack L. Stahl

 

Mr. Stahl, age 58, has served as our director and chairman of the Compensation Committee since May 2008. Mr. Stahl served as Chief Executive Officer and President of Revlon, Inc. from February 2002 until his retirement in September 2006. From February 2000 to March 2001, he served as President and Chief Operating Officer of The Coca-Cola Company and previously served as Group President of The Coca-Cola Company’s Americas Group and as Chief Financial Officer of The Coca-Cola Company. Mr. Stahl served on the board of directors of Schering-Plough Corporation from 2007 to 2009 and has served on the board of directors of Delhaize Group since 2008.

 

Larry D. Young

 

Mr. Young, age 56, has served as our director since the Company’s formation in October 2007. Mr. Young has served as our President and Chief Executive Officer (Mr. Young is also referred to in this Proxy Statement as our “CEO”) since October 2007. From October 2007 to May 2008, Mr. Young also served as President and Chief Executive Officer of CSAB (as hereinafter defined). Mr. Young joined CSAB as President and Chief Operating Officer of the Bottling Group segment and Head of Supply Chain in 2006 after the acquisition of Dr Pepper/ Seven Up Bottling Group, Inc. (“DPSUBG”). He had been President and Chief Executive Officer of DPSUBG since May 2005. From 1997 to 2005, Mr. Young served as President and Chief Operating Officer of Pepsi-Cola General Bottlers, Inc. and Executive Vice President of Corporate Affairs at PepsiAmericas, Inc.

 

For a discussion of specific experience, qualifications, attributes or skills that qualify each of the above members to serve as one of our directors, see “Selection, Qualifications and Experience of Directors” beginning on page 12.

 

THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.

 

Deloitte & Touche has been selected by the Audit Committee as our independent registered public accounting firm for fiscal year 2011, subject to ratification by the stockholders. Deloitte & Touche was also our independent registered public accounting firm for fiscal years 2008, 2009 and 2010. A representative of Deloitte & Touche is expected to be present at the Annual Meeting. That representative will have an opportunity to make a statement, if desired, and will be available to respond to appropriate questions.

 

We are asking our stockholders to ratify the appointment of Deloitte & Touche as our registered independent public accounting firm as a matter of good corporate governance even though ratification is not required by our By-laws, other governing documents or otherwise. If our stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain Deloitte & Touche as our independent registered public accounting firm for fiscal year 2011. Even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during fiscal year 2011 if it is determined that such a change would be in the best interests of the Company and its stockholders.

 

The affirmative vote of the holders of shares of our common stock having a majority of the voting power eligible to vote and voting, either in person or by proxy, at the Annual Meeting will be required to ratify the appointment of Deloitte & Touche.

 

Independent Registered Public Accounting Firm’s Fees

 

Fees for professional services provided by our independent registered public accounting firm in each of the last two fiscal years, in each of the following categories, were as follows:

 

 

 

 

The Audit Committee has approved all of our independent registered public accounting firm’s engagements and fiscal year 2010 fees presented above. All audit and non-audit services provided to us by our independent registered public accounting firm are required to be pre-approved by the Audit Committee in accordance with the policies and procedures set forth in the current Audit Committee Charter available on our website at www.drpeppersnapplegroup.com.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2011.

 

In accordance with recent legislation and rules adopted by the SEC, we are providing stockholders with the opportunity to cast an advisory (non-binding) vote on compensation programs for our Named Executive Officers. Our overall executive compensation policies and procedures are described in the “Compensation Discussion and Analysis” section and the tabular disclosures regarding compensation of our Named Executive Officers (together with the accompanying narrative disclosure) in this Proxy Statement. Our compensation policies and procedures are centered on a pay-for-performance culture and are strongly aligned with the long-term interests of our stockholders, as described in the Compensation Discussion and Analysis. The Compensation Committee, which is comprised entirely of independent directors, in consultation with Mercer, a leading human resources consulting firm, oversees our executive compensation program and monitors our policies to ensure they continue to emphasize programs that reward executives for results that are consistent with stockholder interests.

 

The Compensation Committee bases its executive compensation decisions on certain objectives, including the following:

 

 

The past year was one of significant strategic and financial accomplishments. Among our key accomplishments were the following:

 

 

In 2010, we also adopted Stock Ownership Guidelines for our directors and officers to further align the interests of our directors and executive officers with those of our stockholders. In 2011, we are further enhancing the pay-for-performance culture by including performance based equity awards as a part of our long-term equity incentive program. Also, in 2011, our Compensation Committee discontinued the gross-up payments to our CEO to cover tax costs associated with his personal use of a corporate jet.

 

Actions like those described above evidence our philosophy of aligning executive compensation with company performance and increasing long-term stockholder value. We will continue to design and implement our executive compensation programs and policies in line with this philosophy to promote superior performance results and

generate greater value for our stockholders. For the reasons discussed above, the Board recommends that stockholders vote in favor of the following resolution:

 

“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules and regulations of the SEC, including the Compensation Discussion and Analysis, compensation tables and the narrative discussion is hereby APPROVED.”

 

Because your vote on this proposal is advisory, it will not be binding on the Board. However, the Compensation Committee and the Board will consider the outcome of the vote when making future compensation decisions.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE EXECUTIVE COMPENSATION DISCLOSED IN THIS PROXY STATEMENT.

 

Under recent legislation and rules adopted by the SEC, our stockholders may approve, on an advisory (non-binding) basis, the frequency of the advisory vote on the compensation of our Named Executive Officers. Stockholders may choose to approve holding an advisory vote on the compensation of our Named Executive Officers every year, once every two years or once every three years.

 

After considering the benefits and consequences of each option for the frequency of submitting the advisory vote on the compensation of our Named Executive Officers to stockholders, the Board recommends submitting the advisory vote on the compensation of our Named Executive Officers at the Annual Meeting of our stockholders every year.

 

We believe an annual advisory vote on the compensation of our Named Executive Officers will allow us to obtain information on stockholders’ views of the compensation of our Named Executive Officers on a more consistent basis. In addition, we believe an annual advisory vote on the compensation of our Named Executive Officers will provide the Board and the Compensation Committee with frequent input from stockholders on our compensation programs for our Named Executive Officers. Finally, we believe an annual advisory vote on the compensation of our Named Executive Officers is a good corporate governance practice and is in the best interests of our stockholders.

 

For the reasons discussed above, the Board recommends that stockholders vote in favor of holding an advisory vote on the compensation of our Named Executive Officers at the Annual Meeting of our stockholders every year. In voting on this proposal on the frequency of the advisory vote on the compensation of our Named Executive Officers, stockholders should be aware that they are not voting “for” or “against” the Board’s recommendation. Rather, stockholders will be casting votes to recommend an advisory vote on the compensation of our Named Executive Officers every year, once every two years or once every three years, or they may abstain entirely from voting on the proposal.

 

The option that receives a plurality of the votes cast by the holders of shares of our common stock eligible to vote and voting, either in person or by proxy, at the Annual Meeting will be considered by the Board and the Compensation Committee as the stockholders’ recommendation as to the frequency of future advisory votes on the compensation of our Named Executive Officers. However, the outcome of this advisory vote on the frequency of the advisory vote on the compensation of our Named Executive Officers is not binding on us or the Board. Nevertheless, the Board will review and consider the outcome of this vote when making determinations as to when the advisory vote on the compensation of our Named Executive Officers will again be submitted to stockholders. A scheduling vote similar to this will occur at least once every six years.

 

THE BOARD OF DIRECTORS RECOMMENDS AN ANNUAL VOTE FOR FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION.

 

Biographical Information

 

In addition to the persons who are standing for re-election as Class III directors (whose biographical information is included in Proposal 1 above), the following is a biographical summary of our other directors {ages are as of the date of the Annual Meeting}:

 

John L. Adams, age 66, has served as our director since April 2008. Mr. Adams served as Executive Vice President of Trinity Industries, Inc. from January 1999 to June 2005 and held the position of Vice Chairman from July 2005 to March 2007. Prior to joining Trinity Industries, Mr. Adams spent 25 years in various positions with Texas Commerce Bank, N.A. and its successor, Chase Bank of Texas, National Association. From 1997 to 1998, he served as Chairman and Chief Executive Officer of Chase Bank of Texas. Mr. Adams has served on the board of directors of Trinity Industries, Inc. since 2007 and Group 1 Automotive, Inc., since 1999, where he has served as non-executive chairman since April 2005. He previously served on the boards of directors of American Express Bank Ltd. and Phillips Gas Company.

 

Terence D. Martin, age 68, has served as our director and chairman of the Audit Committee since April 2008. Mr. Martin served as Senior Vice President and Chief Financial Officer of Quaker Oats Company from 1998 until his retirement in 2001. From 1995 to 1998, he was Executive Vice President and Chief Financial Officer of General Signal Corporation. Mr. Martin was Chief Financial Officer and Member of the Executive Committee of American Cyanamid Company from 1991 to 1995 and served as Treasurer from 1988 to 1991. From 2002 through March 2011, Mr. Martin served on the board of directors of Del Monte Foods Company.

 

Pamela H. Patsley, age 54, has served as our director since April 2008. Ms. Patsley served as Executive Chairman of MoneyGram International from January 2009 to September 2009 and has served as Chairman and Chief Executive Officer from September 2009 to present. Previously, Ms. Patsley served as Senior Executive Vice President of First Data Corporation from March 2000 to October 2007 and President of First Data International from May 2002 to October 2007. She retired from those positions in October 2007. From 1991 to 2000, she served as President and Chief Executive Officer of Paymentech, Inc., prior to its acquisition by First Data. Ms. Patsley also previously served as Chief Financial Officer of First USA, Inc. Ms. Patsley served on the board of directors of Molson Coors Brewing Company from 1996 to 2009; Pegasus Solutions, Inc. from 2002 to 2006; and Paymentech, Inc. from 1995 to 1999. In addition to her Chairman’s role at MoneyGram International, Ms. Patsley has served on the board of Texas Instruments Incorporated since 2004.

 

Ronald G. Rogers, age 62, has served as our director since May 2008. Mr. Rogers served in various positions with Bank of Montreal between 1972 and 2005. From 2002 until his retirement in 2005, he served as Deputy Chair, Enterprise Risk & Portfolio Management, BMO Financial Group, and from 1994 to 2002, he served as Vice Chairman, Personal & Commercial Client Group.

 

M. Anne Szostak, age 60, has served as our director since May 2008. Since June 2004, Ms. Szostak has served as President and Chief Executive Officer of Szostak Partners LLC, a consulting firm that advises executive officers on strategic and human resource issues. From 1998 until her retirement in 2004, she served as Corporate Executive Vice President and Director — Human Resources and Diversity of FleetBoston Financial Corporation (now Bank of America). She also served as Chairman and Chief Executive Officer of Fleet Bank — Rhode Island from 2001 to 2003. Ms. Szostak served on the board of directors of ChoicePoint Corporation from 2006 to 2008. Ms. Szostak has served as a director of Belo Corp. since 2004, Tupperware Brands Corporation since 2000 and Spherion Corporation since 2005.

 

Michael F. Weinstein, age 62, has served as our director since February 2009. Mr. Weinstein co-founded and has served as Chairman of INOV8 Beverage Company LLC (“INOV8”) from January 2005 to present. Previously, Mr. Weinstein served as President of Liquid Logic Consulting from January 2004 to December 2004; and as President, Global Innovation and Business Development, for Cadbury Schweppes plc from January 2003 to December 2003. Mr. Weinstein has served on the board of directors of H.J. Heinz Company since 2006.

For a discussion of specific experience, qualifications, attributes or skills that led to the conclusion that each of the above members should serve as one of our directors, see “Selection, Qualifications and Experience of Directors” beginning on page 12.

 

Director’s Compensation

 

Non-employee directors receive compensation from us for their services on the Board or its committees. Mr. Young, our only executive director, does not receive compensation for his services as a director. In fiscal year 2010, we compensated our non-employee directors as follows: an annual cash retainer of $100,000 and an annual equity grant of restricted stock units (“RSUs”) with a value of $100,000. In addition, the chairperson of the Audit Committee and the Compensation Committee received an annual equity grant of RSUs with a value of $30,000 and $25,000, respectively. All of the RSUs vest three years from the date of grant.

 

Mr. Sanders, as the Chairman of the Board, was entitled to an annual cash retainer of $100,000. Mr. Sanders also received an annual equity grant of RSUs with a value of $200,000 which vests three years from the date of grant.

 

Director compensation paid in fiscal year 2010 was as follows:

 

Director Compensation in Fiscal Year 2010

 

 

 

 

 

 

 

Based on a study performed by an independent consultant, the Compensation Committee has recommended and the Board has approved the same levels of compensation for our non-employee directors in fiscal year 2011.

 

Stock Ownership Guidelines — The Board believes that the directors should have a meaningful ownership interest in the Company. Effective November 1, 2015, or, if a director is elected after November 1, 2010, within five years after the date of such election, the Stock Ownership Guidelines require non-executive directors to own shares of the Company’s common stock having a value equal to a minimum of three times their respective annual retainer. Though not yet required, all of the directors met these guidelines as of December 31, 2010. For a more complete discussion of the Stock Ownership Guidelines, see “Compensation Discussion and Analysis — Stock Ownership Guidelines” on page 32.

 

Classification of the Board — At the annual meeting of stockholders to be held in 2012, the Board intends to submit a proposal to the stockholders to amend the Company’s corporate documents to phase-in the elimination of the classification of the Board so that all directors to be elected at or after the annual meeting of stockholders to be held in 2013 will be elected for one-year terms, provided that the unexpired term of any director shall not be effected.

 

Communications with the Board

 

Any interested party may communicate with the Board, the Chairman of the Board (who is the presiding director of executive sessions) or the non-employee directors as a group by submitting an e-mail through the Company’s website at www.drpeppersnapplegroup.com under the Investor Center and Contact the Board captions or by sending a written communication to: Corporate Secretary, Dr Pepper Snapple Group, Inc., 5301 Legacy Drive, Plano, Texas 75024.

 

Selection of Directors

 

Process

 

The Board is responsible for approving candidates for the Board. As discussed in the section “Corporate Governance — Board Committees and Meetings — Corporate Governance and Nominating Committee” on page 17, the Corporate Governance and Nominating Committee is responsible for the identification of candidates for the Board and making recommendations to the Board. The Corporate Governance and Nominating Committee will also consider nominations by a stockholder pursuant to the provisions of our By-laws relating to stockholder nominations and as described under “Stockholders Proposals for 2011 Annual Meeting” at the end of this Proxy Statement.

 

Qualifications

 

The Corporate Governance and Nominating Committee seeks director candidates (including any candidate who may be recommended by a stockholder) who have certain personal and professional attributes including:

 

 

 

In addition, a director candidate must have, when considered with the collective experience of other Board members, appropriate qualifications and skills that have been developed through extensive business experience, including the following:

 

 

Diversity

 

In accordance with our Corporate Governance Guidelines, diversity of viewpoints is one of the characteristics considered by the Corporate Governance and Nominating Committee in making recommendations for nominations. The Board has not adopted any policy on diversity with respect to our directors, but it seeks a balance of experience among the directors so that the Board as a whole has experience and training from different disciplines (including operations, accounting, finance, risk management, marketing and human resources) and different industries (including the beverage industry, consumer products and banking) which creates the balance sought.

 

Experience of our Directors

 

The Corporate Governance and Nominating Committee has reviewed the background of all of our directors, including those who are being proposed for election to the Board, and determined that they individually possess the personal and professional attributes to be a director. Further, the Corporate Governance and Nominating Committee has reviewed the experience of the members of the Board and determined that they collectively possess the qualifications and skills necessary for the Board. Detailed biographical information for each of the directors is set forth in “Proposals — Proposal 1: Election of Directors” on page 6 and “Board of Directors — Biographical Information” on page 10.

 

The following is a summary of the qualifications and skills demonstrated by the individual director’s experience.

 

 

 

Corporate Governance

 

Corporate Governance Guidelines

 

On May 19, 2010, the Board adopted revised Corporate Governance Guidelines. The Corporate Governance Guidelines include, among other things:

 

 

Our Corporate Governance Guidelines are available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions.

 

Director Independence

 

In connection with the adoption of the Corporate Governance Guidelines, the Board adopted our Categorical Standards of Director Independence, which are attached as Annex A to our Corporate Governance Guidelines. The Categorical Standards of Director Independence are consistent with the independence standards set forth in Section 303A.02 of the NYSE listing standards. The Board has made an affirmative determination that Mr. Sanders, Mr. Adams, Mr. Martin, Ms. Patsley, Ms. Roché, Mr. Rogers, Mr. Stahl and Ms. Szostak are independent and have no material relationship with the Company.

 

Board Committees and Meetings

 

We have five standing committees of the Board — the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, the Special Award Committee and the Capital Transaction Committee. The charters for each of the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee are available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions.

 

Audit Committee

 

In 2010, the Audit Committee consisted of three independent directors — Mr. Martin (Chairman), Mr. Adams and Ms. Patsley. Mr. Martin has served as Chairman since formation of the Audit Committee in 2008. All of such Audit Committee members are independent in accordance with applicable laws and regulations and as defined in the current NYSE listing standards. Upon consideration of the attributes of an audit committee financial expert as set forth in Item 401(h) of Regulation S-K promulgated by the SEC, the Board determined that Mr. Martin, Ms. Patsley and Mr. Adams possess those attributes through their experience, and each was designated as an Audit Committee Financial Expert. As of March 1, 2011, the Board approved a change in the Audit Committee and as of that date, the Audit Committee consists of four independent directors — Mr. Martin (Chairman), Mr. Adams, Ms. Roché and Mr. Rogers.

 

The Audit Committee of the Board is responsible for:

 

 

The Audit Committee has selected Deloitte & Touche as our independent registered public accounting firm for fiscal year 2011, subject to ratification by our stockholders. On May 19, 2010, the Board approved the restated Audit Committee Charter, a copy of which is available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions. The Report of the Audit Committee for fiscal year 2010 is included in this Proxy Statement on page 50.

 

Compensation Committee

 

In 2010, the Compensation Committee consisted of three independent directors — Mr. Stahl (Chairman), Mr. Rogers and Ms. Szostak. Mr. Stahl has served as the Chairman of the Compensation Committee since its formation in 2008. All of such Compensation Committee members are independent as defined in the current NYSE listing standards. As of March 1, 2011, the Board approved a change in the Compensation Committee and as of that date the Compensation Committee consists of Mr. Stahl (Chairman), Ms. Patsley and Ms. Szostak.

The Compensation Committee is responsible for:

 

 

Information regarding the processes and procedures followed by the Compensation Committee in considering and determining executive compensation is provided below under the heading “Compensation Discussion and Analysis.”

 

On May 19, 2010, the Board approved the restated Compensation Committee Charter, a copy of which is available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions. The Report of the Compensation Committee on Executive Compensation for fiscal year 2010 is included in this Proxy Statement on page 34.

 

The Compensation Committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. The Compensation Committee has retained Mercer, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc., to assist the Compensation Committee with its responsibilities related to the Company’s executive officer and board of director compensation programs. For more information on the Compensation Committee’s relationship with Mercer, see “Role of Compensation Consultant” in the Compensation Discussion and Analysis section of this Proxy Statement. Mercer’s fees for executive compensation consulting to the Compensation Committee in fiscal year 2010 were approximately $261,000.

 

During 2010, the Compensation Committee requested that Mercer:

 

 

During 2010, the Company retained Mercer and other affiliates of Marsh & McLennan Companies to provide services, unrelated to executive compensation, which have been approved by the Compensation Committee. The aggregate fees paid for these other services were approximately $845,000, consisting of $600,000 for pension administration, $220,000 for administrative services related to employee benefit communications and $25,000 for a computer software solution for tracking market data research. Management decided to retain Mercer to provide these other services. The Compensation Committee reviewed these other services provided by Mercer, prior to

engagement. In 2011, the pension administration services are being performed by another provider not affiliated with Mercer.

 

Because of the policies and procedures Mercer and the Compensation Committee have in place, the Compensation Committee is confident that the advice it receives from the executive compensation consultant is objective and not influenced by Mercer’s or its affiliates’ relationships with the Company. These policies and procedures include:

 

 

While it is necessary for the consultant to interact with management to gather information, the Compensation Committee has adopted protocols governing if and when the consultant’s advice and recommendations can be shared with management. These protocols are included in the consultant’s engagement letter. This approach protects the Compensation Committee’s ability to receive objective advice from the consultant so that the Compensation Committee may make independent decisions about executive pay at the Company.

 

Corporate Governance and Nominating Committee

 

Since its formation in 2008, the Corporate Governance and Nominating Committee has consisted of three independent directors — Mr. Sanders (Chairman), Mr. Martin and Mr. Stahl. Mr. Sanders has served as the Chairman of the Corporate Governance and Nominating Committee since its formation. The Corporate Governance and Nominating Committee is responsible for:

 

 

On May 19, 2010, the Board approved the restated Corporate Governance and Nominating Committee Charter, a copy of which is available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions.

 

In 2010, the Corporate Governance and Nominating Committee considered our current directors and other candidates to fill the slate of nominees for election to the Board. Based on an evaluation of the background, skills and areas of expertise represented by the various candidates against the qualifications for directors as set forth in our

Corporate Governance Guidelines and as discussed in the section “Selection, Qualifications and Experience of Directors” on page 12, the Corporate Governance and Nominating Committee determined that the following persons possess the appropriate skill level, expertise and qualifications and recommended that Joyce M. Roché, Wayne R. Sanders, Jack L. Stahl, and Larry D. Young be re-elected to the Board as Class III directors.

 

Special Award Committee

 

On February 10, 2009, the Board formed a Special Award Committee with the Chief Executive Officer named as the sole member, so long as the Chief Executive Officer is a member of the Board. The Special Award Committee has the authority to make equity awards to employees (other than members of our executive leadership team) under our Omnibus Stock Incentive Plan of 2009 in accordance with limitations as may, from time to time, be established by the Compensation Committee. The Compensation Committee has set forth the following limitations for the Special Award Committee: (i) awards may be made to employees, other than members of the executive leadership team, (ii) awards may be made to new hires, for retention purposes, promotions, in connection with employee relationship issues, or in the discretion of the Special Award Committee for exceptional performance, (iii) awards are limited to the aggregate of $2 million each calendar year, (iv) awards shall not exceed $100,000 to any one individual, and (v) awards must be granted at the closing market price on the effective date of the award. The Special Award Committee reports to the Compensation Committee at each regularly scheduled meeting on the awards it has made under this limited authority since its last report. For a description of the equity award procedures that apply to the Special Award Committee, see “Compensation Discussion and Analysis — Long-Term Incentive Awards — Equity Award Procedures” on page 31.

 

Capital Transaction Committee

 

On November 20, 2009, the Board formed a Capital Transaction Committee, consisting of the Chairman of the Board and the Chief Executive Officer, so long as the Chief Executive Officer is a member of the Board. The Board granted general authority to the Capital Transaction Committee to approve note issuances, commercial paper transactions and interest rate swaps, but excluding any transaction which includes the issuance of the Company’s common stock or preferred stock or a feature to convert debt to common stock or preferred stock, provided that (i) the aggregate amount of such transactions does not exceed $750 million initial aggregate principal or notional amount in any calendar year and (ii) our debt to EBITDA ratio immediately prior to a contemplated transaction is at or below 2.25x and the consummation of such transaction will not result in our adjusted debt to EBITDA ratio exceeding 2.25x. From time to time, the Board has approved certain capital transactions and granted additional authority to the Capital Transaction Committee to implement such capital transactions. The Capital Transaction Committee reports to the Board on the transactions it approves under the authority granted by the Board.

 

2010 Meetings

 

During 2010, there were nine (9) meetings of the Board. During 2010, there were ten (10) meetings held by the Audit Committee and four (4) executive sessions of the Audit Committee to meet with our independent registered public accounting firm, our chief financial officer, our senior vice president-controller and the vice president of corporate audit; six (6) meetings held by the Compensation Committee; three (3) meetings held by the Corporate Governance and Nominating Committee; seven (7) meetings held by the Special Award Committee; and three (3) meetings held by the Capital Transaction Committee. Each incumbent director attended at least 75% of the meetings of the Board and the Board committees of which each was a member during his or her respective tenures.

 

Executive Sessions and Lead Independent Director

 

In compliance with the requirements of the NYSE, our Corporate Governance Guidelines require the non-employee directors to meet at least twice annually in regularly scheduled executive sessions. Mr. Sanders, as lead independent director, presides over non-employee director executive sessions. Five (5) executive sessions were held in 2010.

Attendance at Annual Meeting

 

It is our policy that all directors attend the Annual Meeting. We anticipate that all members of the Board will be present at the Annual Meeting. In 2010, each director attended the annual meeting of stockholders held on May 20, 2010.

 

Board Leadership Structure and Role in Risk Oversight

 

The Chairman of the Board and the Chief Executive Officer titles are held by different persons. Mr. Sanders, as the Chairman of the Board, is also the lead independent director. Mr. Young is our CEO. In May 2008, the Company became a stand-alone company as the result of a spin-off by Cadbury, plc (“Cadbury”) which held the Cadbury Schweppes Americas Beverages business group of entities (“CSAB”). At that time, it was decided to separate the Chairman of the Board and the Chief Executive Officer positions. Most important among the considerations was that separation of the Chairman of the Board and the Chief Executive Officer positions allowed our CEO to direct his energy towards operational issues and the Chairman of the Board could focus on governance and other related issues of our new publicly-held company. At this time, the Company believes that separating the Chairman of the Board and the Chief Executive Officer positions enhances the independence of the Board, provides independent business counsel for the Chief Executive Officer, and facilitates the discussion among Board members.

 

The Board has overall responsibility for oversight of risk and has delegated the responsibility for the risk oversight process to the Audit Committee. The Company is responsible for management of risk and has formed an Enterprise Risk Management Committee, which reports to the Audit Committee at each regularly scheduled meeting. The Audit Committee reports on risk to the Board.

 

Other than Mr. Young, who is a director and whose business experience is summarized under “Proposals — Proposal 1: Election of Directors” beginning on page 6, the following is a summary of the business experience of our executive leadership team {ages are as of the date of the Annual Meeting}:

 

James L. Baldwin, Executive Vice President, General Counsel, age 50, has served as our Executive Vice President, General Counsel and Secretary since the Company’s spin-off in May 2008. From July 2003 to May 2008, he served as Executive Vice President and General Counsel of CSAB. From June 2002 to July 2003, he served as Senior Vice President and General Counsel of Dr Pepper/Seven Up, Inc., from August 1998 to June 2002 as General Counsel of Mott’s LLP and from March 1997 to August 1998 as Vice President and Assistant General Counsel of Dr Pepper/Seven Up, Inc.

 

Tina S. Barry, Executive Vice President, Corporate Affairs, age 54, has served as our Executive Vice President since December 2010. Prior to that, Ms. Barry served as our Senior Vice President, Corporate Affairs from September 2008 until December 2010. She served as our Vice President, Corporate Communications from May 2008 until September 2008. Prior to joining the Company in May 2008 she was Vice President of Corporate Communications for Kimberly-Clark Corporation, where she served for 23 years in various management positions.

 

Rodger L. Collins, President, Packaged Beverages, age 53, has served as our President, Packaged Beverages since February 2009. Prior to that, Mr. Collins served in various executive capacities with us and CSAB, including President of Bottling Group Sales and Finished Goods Sales (September 2008 — February 2009); President of Sales for the Bottling Group (October 2007 — September 2008); Midwest Division President for the Bottling Group (January 2005 — October 2007); and Regional Vice President (October 2001 — December 2004).

 

Martin M. Ellen, Executive Vice President, Chief Financial Officer, age 57, joined the Company in April 2010 as our Executive Vice President, Finance and transitioned into the role of Executive Vice President, Chief Financial Officer in May 2010. Prior to joining the Company, Mr. Ellen served as Senior Vice President — Finance and Chief Financial Officer at Snap-on Incorporated since 2002, where he had responsibility for all of the financial operations at this global publicly-traded company.

 

Derry L. Hobson, Executive Vice President, Supply Chain, age 60, has served as our Executive Vice President of Supply Chain since the Company’s spin-off in May 2008. From October 2007 to May 2008 Mr. Hobson also served as the Executive Vice President of Supply Chain of CSAB. Mr. Hobson joined CSAB as Senior Vice President of Manufacturing in 2006 through the acquisition of DPSUBG, where he had been Executive Vice President since 1999.

 

James J. Johnston, Jr., President, Beverage Concentrates and Latin America Beverages, age 54, has served as our President, Beverage Concentrates and Latin America Beverages since September 2009. Prior to that, Mr. Johnston served in various executive capacities with us and CSAB, including President, Beverage Concentrates (November 2008 — September 2009); President of Concentrate Sales (September 2008 — November 2008); President of Finished Goods and Concentrate Sales (October 2007 — September 2008); Executive Vice President of Sales (January 2005 — October 2007); Executive Vice President of Strategy (December 2003 — January 2005); and Senior Vice President of Licensing (October 1997 — December 2003).

 

Lawrence N. Solomon, Executive Vice President, Human Resources, age 56, has served as our Executive Vice President of Human Resources since the Company’s spin-off in May 2008. From March 2004 to May 2008, he served as the Executive Vice President of Human Resources of CSAB. From May 1999 to March 2004, he served as Senior Vice President of Human Resources for Dr Pepper/Seven Up, Inc., prior to which he served on Cadbury Schweppes, plc global human resources team.

 

David J. Thomas, Ph.D., Executive Vice President, Research & Development, age 49, has served as our Executive Vice President, Research and Development since December 2010. From spin-off in May 2008 until December 2010, Dr. Thomas served as our Senior Vice President, Research & Development. From November

2006 to May 2008, Dr. Thomas served as the Senior Vice President, Research & Development for CSAB. Dr. Thomas served as Vice President — Global Product Development for Gerber Products from July 2005 until October 2006. Dr. Thomas holds a Ph.D. Degree in Food Science, with an emphasis in Flavor Biochemistry from the University of Wisconsin-Madison.

 

James R. Trebilcock, Executive Vice President, Marketing, age 53, has served as our Executive Vice President, Marketing since September 2008. From spin-off in May 2008 to September 2008, Mr. Trebilcock served as our Senior Vice President — Marketing. From February 2003 to May 2008, Mr. Trebilcock served as the Senior Vice President — Consumer Marketing of CSAB. Mr. Trebilcock has held various positions in CSAB and its predecessor businesses since July 1987.

 

The following table sets forth, as of March 21, 2011, the record date, certain information with respect to the shares of our common stock beneficially owned by (i) stockholders known to us to own more than 5% of the outstanding shares of such classes, (ii) each of our directors and Named Executive Officers, and (iii) all of our executive officers and directors as a group.

 

 

 

 

 

 

 

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors, certain officers and persons who beneficially own more than 10% of our outstanding common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock held by such persons. These persons are also required to furnish us with copies of all forms they file under this regulation. To our knowledge, based solely on a review of the copies of such reports furnished to us and without further inquiry, during 2010 all required forms for our current filing persons were filed on time.

 

Code of Conduct

 

We are dedicated to earning the trust of our clients and investors and our actions are guided by the principles of honesty, trustworthiness, integrity, dependability and respect. The Board has adopted a Code of Business Conduct and Ethics that applies to all employees and directors. This Code of Business Conduct and Ethics is posted on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics for our senior financial officers, including the Chief Executive Officer, if any, either by posting such information on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions or by filing a Form 8-K.

 

Executive Summary

 

We are a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the United States, Canada and Mexico, with a diverse portfolio of flavored carbonated soft drinks (“CSDs”) and non-carbonated beverages (“NCBs”), including ready-to-drink teas, juices, juice drinks and mixers. Our brand portfolio includes popular CSD brands such as Dr Pepper, Sunkist soda, 7UP, A&W, Canada Dry, Crush, Squirt, Peñafiel, Schweppes and Venom Energy, and NCB brands such as Snapple, Mott’s, Hawaiian Punch, Clamato, Rose’s and Mr & Mrs T mixers. Our largest brand, Dr Pepper, is a leading flavored CSD in the United States according to The Nielsen Company. We have some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.

 

We were formed in 2008, when Cadbury separated its beverage business in the United States, Canada, Mexico and the Caribbean (the “Americas Beverages business”) from its global confectionery business by contributing the subsidiaries that operated its Americas Beverages business to us. After the separation, we became an independent publicly-traded company listed on the NYSE under the symbol “DPS”.

 

Maintaining our industry leading brand positions requires a talented and motivated executive team. Our overall executive compensation program is, therefore, designed to be competitive with other leading companies in our industry, considering our size and scale, and also to be competitive with other leading beverage and consumer packaged goods companies of similar size and scale.

 

Following the spin-off from Cadbury and in an effort to recruit and retain a talented and motivated executive team, we undertook a significant review of our entire compensation program to ensure that its design was compatible with our new position as an independent, NYSE-listed company, which is included in the S&P 500. As a result of this review, the following objectives were established as the basis for our program design and these objectives continue to guide our executive compensation programs:

 

 

To accomplish these objectives, our executive officers’ total compensation is comprised of a mix of base salary, management incentive plan awards (our annual cash incentive program) and long-term incentive awards (equity awards of options and RSUs).

 

The past year was one of significant strategic and financial accomplishments. Among our key accomplishments were the following:

 

 

In addition to the above events and in spite of a difficult economic environment, the Company increased net sales in fiscal year 2010 compared to fiscal year 2009 by almost 2%. Net income and diluted earnings per share were approximately the same in fiscal year 2010 compared to fiscal year 2009, even though we recorded a $100 million loss in fiscal year 2010 for the early extinguishment of debt in connection with the repurchase of approximately $476 million of the Company’s senior unsecured notes due in 2018.

 

In 2010, we also adopted Stock Ownership Guidelines for our directors and officers to further align the interests of our directors and executive officers with those of our stockholders.

 

In 2011, the Compensation Committee discontinued the gross-up payments to our CEO to cover tax costs associated with his personal use of a corporate jet. Additionally, the Compensation Committee is further enhancing our pay-for-performance culture by including performance based equity awards as a part of our long-term equity incentive program.

 

We believe that the executive compensation decisions made in 2010, as are reflected in the section of this Proxy Statement entitled “Historical Executive Compensation Information”, were necessary to attract and retain our executive management team and that our executive management team was a key factor in our performance.

 

Role of the Compensation Committee

 

The Compensation Committee administers our executive compensation program. The Compensation Committee establishes and monitors our overall compensation strategy to ensure that executive compensation supports our business objectives. In carrying out its responsibilities, the Compensation Committee is responsible for setting the compensation of the Chief Executive Officer and all of our other executive officers. As part of this compensation setting process, the Compensation Committee, with assistance from its executive compensation consultant, Mercer, reviews the compensation (including salary, annual incentives, long-term incentives and other benefits) of similarly situated executive officers in our peer group. The Compensation Committee also consults with the other independent directors on the Board before setting annual compensation for the executives. The committee chair regularly reports on committee actions at Board meetings.

 

For a more complete description of the responsibilities of the Compensation Committee, see “Corporate Governance — Board Committees and Meetings — Compensation Committee” beginning on page 15 and the charter for the Compensation Committee posted on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions.

 

Role of Compensation Consultant

 

The Compensation Committee has retained Mercer as its outside executive compensation consultant to advise the Compensation Committee on executive compensation matters. Mercer regularly attends Compensation Committee meetings and reports directly to the Compensation Committee on matters relating to compensation for our executive officers, including the Chief Executive Officer. Please see “Corporate Governance — Board Committees and Meetings — Compensation Committee” beginning on page 15 for a list of Mercer’s duties in 2010. As discussed in that section, the Company uses Mercer for other services that are unrelated to executive compensation. If the Company decides to use Mercer on a significant project, then management will review the decision with the Compensation Committee prior to Mercer’s engagement by the Company.

 

Role of Company Management

 

The Chief Executive Officer develops preliminary recommendations regarding compensation matters with respect to all key executives (other than the Chief Executive Officer) and provides these recommendations to the Compensation Committee. The management team is responsible for the administration of the compensation programs once Compensation Committee decisions are finalized.

The Compensation Program

 

The key components of our current compensation program for our key executives are:

 

 

In 2010, the Compensation Committee reviewed our executive compensation program to determine how well actual compensation targets met our overall philosophy and the compensation in our targeted markets. Overall, the Compensation Committee believes the program remains aligned with our key objectives.

 

Peer Group

 

In the second half of 2009, our Compensation Committee, with the assistance of Mercer, reviewed potential peers in light of our new publicly-traded status. As a result, a set of peer companies was identified that were used to calibrate our executive compensation program for 2010. These companies represented leading beverage and consumer packaged goods companies of similar size and scale to us, and include:

 

 

 

 

Base Salary

 

Base salary is designed to compensate our key executives in part for their roles and responsibilities and also to provide a stable level of compensation that serves as a retention tool throughout the executive’s career. Salaries are targeted at the median of the market for similar positions in the peer companies. Adjustments are made annually based on individual performance.

 

In general, base salary is the smallest component of the overall compensation package, assuming that we are achieving or exceeding targeted performance levels for our incentive programs. On average, base salary currently represents approximately 15% to 30% of the total compensation package for the Chief Executive Officer and key executive officers. This is consistent with our philosophy to have low fixed and high “at risk” compensation.

 

Salary increases for our NEOs (as defined in the first paragraph of “Historical Executive Compensation Information” on page 35) in 2010 were made by the Compensation Committee, considering the challenging economic environment, the level of base salary relative to key comparators and the performance of the given executive. As a result of these actions, the base salaries for our CEO and three other NEOs are near the market median. The salary for Mr. Hobson is above the median, recognizing his outstanding performance in 2009 and the complexity and importance of our Supply Chain function.

 

Management Incentive Compensation

 

The Management Incentive Plan (“MIP”), our annual cash incentive program, is designed to reward the achievement of specific pre-set financial results typically measured over the fiscal year. Each participant is assigned an annual incentive target expressed as a percentage of base salary. For the NEOs, these targets ranged from 70% to

125% of base salary. The actual awards are calculated based on year-end salary. For any NEO promoted during the year, the calculation is pro-rated and is based upon the NEO’s actual time in each position, the NEO’s previous base salary and MIP target percentage and new base salary and MIP target percentage.

 

Specific Plan for 2010

 

Awards under the MIP for 2010 were based on a series of key financial metrics that reflected the Company’s key objectives for the year. The metrics vary based on the roles and responsibilities of each executive. In addition, a portion of the incentive plan was focused on our drive to improve our Cash Conversion Cycle metric, since this was targeted as a company-wide area of focus for 2010.

 

In addition to overall financial performance, the Company established a series of key operating metrics to focus various plan participants, including some of our NEOs, on operational excellence in 2010. These operating metrics included the following areas: all channel volume distribution, new route penetration, case fill rate, overall equipment effectiveness and market share. The phrase “operating metrics” is used to capture this portion of the annual incentive plan described below.

 

The key metrics and weights for our NEOs and other senior executives were as follows:

 

 

Results for Fiscal Year 2010

 

Financial Metrics

 

In fiscal year 2010, the targeted financial goals at the corporate level, the potential payouts for achieving these goals, and the fiscal year 2010 results (against which the targets are measured and as determined by the Compensation Committee) were as follows:

 

 

 

 

 

 

Operating Metrics

 

The performance measures for operating metrics for fiscal year 2010 were set at levels that are challenging, but achievable. Since 2010 was the second full year the Company operated as an independent company and used operating metrics as a performance measure for determining incentive compensation, it was difficult to predict achievability. However, the Compensation Committee set such measures at levels that they reasonably believed would contribute to the success of the Company in fiscal year 2010 and expected operations to meet based on the achievable, but challenging standard. For fiscal year 2010, our Compensation Committee determined that results based on various operating metrics were 61.7% of target for the President, Packaged Beverages, 45.2% of target for the President, Beverage Concentrates and Latin America Beverages, and 114.7% of target for the Executive Vice President, Supply Chain. The performance against targets in fiscal year 2010 reflects that operating metrics are being set at challenging levels.

 

Operating metrics were first used as a performance metric in fiscal year 2009. In that year, the results based on various operating metrics were 112.6% of target for the President, Packaged Beverages, 100.6% of target for the President, Beverage Concentrates and Latin America Beverages, and 107.7% of target for the Executive Vice President, Supply Chain.

Cash Conversion Cycle

 

The cash conversion cycle metric used by the Company is a standard financial measure that is the arithmetic sum of days of sales outstanding plus the number of days product is in inventory less the number of days payables that are outstanding. In 2010, our first year of using this measure, the Company set a target to improve the cash conversion cycle by 1.3 days. The actual improvement in the cash conversion cycle was 8.5 days bringing the cash conversion cycle to 38.0 days. As a result of this improvement, the performance under this metric was 200% of target for each of our NEOs.

 

Long-Term Incentive Awards

 

Overview

 

Our long-term incentive awards are used to link our performance and increases in stockholder value to the total compensation for our key executives. These awards are also key components of our ability to attract and retain our key executives. The annualized value of the awards to our key executives is intended to be the largest component of our overall compensation package. On average, and assuming performance is on target, these awards currently represent over 50% of the total compensation package for our NEOs, consistent with our emphasis on linking executive pay to stockholder value.

 

Specific Programs for 2010

 

Our incentive plans allow for the granting of stock options, restricted stock and RSUs, each linked to our stock price. For 2010, the Compensation Committee believed it was important to continue using equity vehicles to provide alignment with stockholder interests, consistent with our emphasis following our spin-off from Cadbury in 2008. To provide an emphasis on performance through the use of stock options and on retention through the use of time-based RSUs, the Compensation Committee made grants and awards in 2010 to our key executives consisting of 30% stock options and 70% time-based RSUs (weighted by value). The higher weighting in both 2009 and 2010 on RSUs was done primarily to provide additional emphasis on retention in the uncertain economic environment. The Compensation Committee believes that these awards to our key executives will focus attention on building stockholder value over the long-term, reinforce the importance of their roles as stewards of the business, and help to retain the executives.

 

The following provides more detail about the various award programs:

 

 

Changes for 2011

 

In 2011, the Compensation Committee approved a performance share unit (“PSU”) plan. Each PSU is equivalent in value to one share of our common stock. PSUs will vest three years from the beginning date of a pre-determined performance period to the extent the Company has met two performance criteria during the performance period, which criteria are based on: (i) the percentage growth in net income and (ii) the percentage yield from cash flow from operations.

Equity Award Procedures

 

We have established equity award procedures to develop a consistent practice with respect to the granting of equity-based awards. Under these procedures, the Board, with respect to equity awards to non-executive directors, and the Compensation Committee, with respect to employee awards, may grant equity awards at its first regularly-scheduled meeting in each calendar year (or at any special meeting, so long as this special meeting occurs on or before March 2 of each calendar year), and the effective date of these equity awards will be March 2 (or if not a NYSE trading day, the first NYSE trading day after March 2). The Compensation Committee may also make equity awards to new hires, employees receiving promotions, employees receiving retention grants and persons becoming employees as a result of an acquisition at any regularly scheduled meeting or at any special meeting called for that purpose. The Board may also make equity awards to persons who become new directors at any regularly scheduled meeting or at any special meeting called for that purpose. The Special Award Committee may make awards to employees at any time, but the effective date of such awards is the first business day of the next succeeding month after the Special Award Committee selects employees for awards. Awards by the Special Award Committee are also governed by the limitations established by the Compensation Committee. For a more complete description of the authority and limitations of the Special Award Committee, see “Corporate Governance — Board Committees and Meetings — Special Award Committee” on page 18.

 

Our equity award procedures require that the exercise or grant price of an equity award equal the closing price of our common stock on the effective date of the award. Our procedures also set forth the procedural and control requirements for granting equity awards.

 

Benefits

 

Our benefit programs are established based upon an assessment of competitive market factors and a determination of what is needed to attract and retain high caliber executives. Our primary benefits for executives include participation in our broad-based plans: retirement plans, savings plans, health and dental plans and various insurance plans, including disability and life insurance.

 

We also provide certain executives, including the NEOs, the following benefits:

 

 

Changes for 2011

 

In 2011, the Compensation Committee discontinued the gross up of Mr. Young’s base salary to cover the taxes accruing to Mr. Young as a result of his personal use of a corporate jet.

 

Stock Ownership Guidelines

 

In 2010, the Company adopted stock ownership guidelines, which provide that (1) the Chief Executive Officer is required to own shares of the Company’s common stock having a value equal to a minimum of five times his or her annual base salary, (2) the Chief Financial Officer, President — Packaged Beverages, and President — Beverage Concentrates and Latin America Beverages, are each required to own shares of the Company’s common stock having a value equal to a minimum of four times their respective annual base salary and (3) all executive vice presidents are required to own shares of the Company’s common stock having a value equal to a minimum of three times their respective annual base salary. There are varying requirements of ownership for other officers of the Company. Non-Executive directors serving on the Board are required to own shares of the Company’s common stock having a value equal to a minimum of three times their respective annual retainer. All unvested time based RSUs shall be included as shares owned for purposes of determining compliance with the guidelines, but unvested performance based RSUs and stock options are excluded from the determination of shares owned for purposes of determining compliance with the guidelines. The officers and directors shall meet such minimum guidelines five years after November 1, 2010 or, if elected or appointed after November 1, 2010, then five years after the date of such election or appointment. Though not yet required, all of the NEOs and all of our non-executive directors met these guidelines as of December 31, 2010. In addition to the Stock Ownership Guidelines, our Insider Trading Policy prohibits directors, officers and employees from entering into hedge transactions which would normally be entered into if an investor thought the market price for the shares was going to decline.

 

Tax Treatment

 

Under Section 162(m) of the Code, we generally receive an annual federal income tax deduction for compensation paid to the Chief Executive Officer and the other three most highly paid executives (excluding the chief financial officer) only if the compensation is less than $1 million or is performance-based. The applicable awards granted under the MIP, the Omnibus Stock Incentive Plan of 2008 and the Omnibus Stock Incentive Plan of 2009 are fully tax-deductible for us. RSUs granted under the Omnibus Stock Incentive Plan of 2008 and the Omnibus Stock Incentive Plan of 2009 that vest solely over time are not performance-based compensation and are subject to the limitation of tax deductibility under Section 162(m) of the Code. The Compensation Committee intends to continue seeking a tax deduction to the extent possible for all executive compensation, as long as it is in the best interest of the Company and our stockholders.

 

Compensation Programs and Risk Taking

 

At the request of our Compensation Committee, Mercer undertook a detailed review of the Company’s compensation programs in connection with the preparation of this Proxy Statement to determine if disclosure was required under Item 402(s) of Regulation S-K. The risk assessment by Mercer of the Company’s compensation programs focused on areas such as overall program design, balance of short-term and long-term compensation, incentive plan design (type of metrics used, award opportunity and incentive plan leverage) and administrative provisions.

 

With respect to the overall program design and balance of short-term and long-term compensation, Mercer found that:

 

 

 

 

With respect to incentive plan risk management, Mercer noted the following:

 

 

With respect to our stock ownership guidelines, Mercer noted that:

 

 

Based on these findings, Mercer concluded that (i) the design and balance of short-term and long-term compensation effectively align risk and reward, appropriately balance short-term and long-term incentives and pay mix, the amount of pay at risk is appropriately set for the industry and caps are in place on incentive programs, (ii) incentive plan designs motivate a high degree of business performance through alignment with the Company’s business strategy and contain prudent risk management design through the use of multiple metrics, capped award opportunities, and a process that requires Compensation Committee approval of key elements and (iii) the stock ownership guidelines approved in 2010 further align executives’ interests with stockholders over the long term by requiring executives to keep a significant portion of wealth tied to the Company’s future.

 

As the result of this risk assessment, Mercer reported to the Compensation Committee and to management that overall the Company’s program is aligned to the interests of its stockholders, appropriately rewards pay for performance and does not promote unnecessary and excessive risk. Based on the review and report of Mercer, the Compensation Committee believes that the Company’s compensation programs do not provide incentives for excessive risk-taking and, therefore, do not encourage Company management or employees to take unreasonable risks relating to the Company’s business.

 

In 2010, the Compensation Committee was comprised of Mr. Stahl, Mr. Rogers and Ms. Szostak. The Compensation Committee oversees our compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement.

 

In reliance on the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (through incorporation by reference to this Proxy Statement).

 

Submitted by the
Compensation Committee of the Board

 

Jack L. Stahl, Chairman
Ronald G. Rogers
M. Anne Szostak

 

The executive compensation disclosure contained in this section reflects compensation information for 2010. The following disclosure tables provide information for (1) Mr. Young, our President and CEO; (2) Mr. Ellen, our Chief Financial Officer; (3) Mr. Johnston, our President, Beverage Concentrates and Latin America Beverages; (4) Mr. Collins, our President, Packaged Beverages; (5) Mr. Hobson, our Executive Vice President, Supply Chain; and (6) Mr. Stewart, our former Chief Financial Officer. These persons are sometimes herein collectively referred to as “Named Executive Officers” or “NEOs” and individually as “NEO”.

 

Summary Compensation Table

 

The following table sets forth information regarding the compensation earned by NEOs in fiscal years 2008, 2009 and 2010.

 

Summary Compensation Table

 

 

 

 

 

 

 

 

 

 

Grants of Plan-Based Awards

 

The following table sets forth information regarding equity plan awards and non-equity incentive plan awards by us to our NEOs in fiscal year 2010. For a discussion of the material terms of these awards, see “Compensation Discussion and Analysis — The Compensation Program” and “Historical Executive Compensation Information — Summary Compensation Table.”

 

Grants of Plan-Based Awards

 

 

 

 

 

Outstanding Equity Awards

 

The following table sets forth information regarding exercisable and unexercisable stock options and vested and unvested equity awards held by each NEO as of December 31, 2010. All such awards relate to shares of our common stock.

 

Outstanding Equity Awards at Fiscal Year End