PepsiCo finds governance success through evolution

Dec 18, 2020
Why PepsiCo was named Governance team of the year (large cap) at the Corporate Governance Awards

‘Leadership across the board’ is how one of the Corporate Secretary judges describes PepsiCo’s governance team, which has looked to move the ball forward in a variety of areas over the past year or so.

One of those areas is improving the proxy statement. When putting together the 2020 version, the governance team drew on investor feedback to focus on six areas: (1) board composition, diversity and refreshment, and leadership structure; (2) long-term strategy, corporate purpose and sustainability issues; (3) good governance practices and ethical corporate culture; (4) human capital management; (5) compensation discussion and analysis (CD&A); (6) shareholder and stakeholder engagement.

For example, the 2020 proxy statement features enhanced aggregate diversity statistics on directors’ gender, race and ethnicity, and highlights board members’ global perspectives and experiences that are in line with PepsiCo’s businesses. The board is described in greater detail using a matrix of attributes and experiences, diversity, age and tenure statistics, as well as a narrative discussion in the directors’ biographies.

The proxy also features a side-by-side graphic showing the balance of the current leadership structure in having a combined chair and CEO together with a strong independent presiding director, CD&A disclosure on the link between the company’s new ‘Winning with purpose’ vision and changes to its executive compensation programs, and discussions of the company’s engagement activities with shareholders and other stakeholders.

The proxy statement is not PepsiCo’s only area of evolving disclosure. The company also wins this year’s best ESG reporting award for, among other things, publishing its sustainability report in a new, all-digital format embedded for the first time on its website. The format is intended to promote interactive storytelling and includes a tool enabling readers to build their own reports.

The sustainability report summarizes the company’s progress against its sustainability goals and includes a more detailed look at year-on-year progress against those goals, including data from 2016-2019, and aligns PepsiCo’s goals with the United Nations’ Sustainable Development Goals.

The company also updated its online, interactive ESG directory to include detailed information on PepsiCo’s governance, management, programs, progress and next steps on sustainability issues. The company’s 2019 annual report consistently discusses sustainability topics – for example, in a new highlights page that describes the progress the company has made toward its sustainability goals in six priority areas.

The company also updated its online, interactive ESG directory to include detailed information on PepsiCo’s governance, management, programs, progress and next steps on sustainability issues. The company’s 2019 annual report consistently discusses sustainability topics – for example, in a new highlights page that describes the progress the company has made toward its sustainability goals in six priority areas.

Another priority for the governance team is continuing to improve training on PepsiCo’s global code of conduct, which outlines how to do business ethically and in compliance with all laws when dealing with employees, customers, suppliers, shareholders, consumers and competitors. ‘We view [ethics] as a competitive advantage for the company,’ says Cynthia Nastanski, senior vice president for corporate law and deputy corporate secretary at PepsiCo.

In 2019 more than 68,000 eligible employees completed a web-based training course available in 22 languages and certified their compliance with the code. More than 180,000 frontline staff in PepsiCo’s plants and warehouses also received training on the code, mainly in person. In addition to training on anti-bribery, the team introduced an online ethical leadership training course in 2019 that was completed by more than 61,000 employees.

The team also plays an important role in PepsiCo’s shareholder engagement activities, generating useful feedback from shareholders and other stakeholders.

‘PepsiCo’s governance team has played a critical role in setting the tone, developing the policies and exhibiting the ethical business behavior required to ensure that all PepsiCo directors, executives and employees understand, accept and actively execute on their individual responsibility for contributing to performance that is both ethical and sustainable,’ an outside submission states.

You can see more details of this and the other awards in the Corporate Secretary Yearbook

 

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