Form 4: PepsiCo Executive Ramkumar Krishnan Reports Changes in Beneficial Ownership

Ramkumar Krishnan, CEO of PBNA, reports acquisition and disposal of PepsiCo stock and derivative securities related to performance-based restricted stock units and dividend equivalents.

Summary

• Ramkumar Krishnan, CEO of PepsiCo Beverages North America (PBNA), filed a Form 4 detailing changes in his beneficial ownership of PepsiCo stock.
• On March 1, 2024, Krishnan acquired 14,064 shares of PepsiCo common stock as performance-based restricted stock units (PSUs) that will vest on March 1, 2027, contingent upon performance targets and committee approval.
• He also acquired 15,086 shares upon vesting of PSUs granted in March 2021 due to exceeding performance targets.
• 14,014 shares were disposed of to cover tax withholding obligations related to the vesting of PSUs at a price of $164.125 per share.
• Krishnan also reports holding 1,320 shares indirectly through a family trust.
• Additionally, Krishnan acquired 71.3986 units of phantom stock under the PepsiCo Executive Income Deferral Program (EID) due to dividends credited to his account between March 2, 2023, and March 1, 2024.
• The prices for the dividend equivalents ranged from $168.94 to $185.22.
• Following these transactions, Krishnan directly owns 64,136 shares of PepsiCo common stock and indirectly owns 1,320 shares through a family trust.
• He also holds 2,528.8725 units of phantom stock.

Sentiment

Score: 7

Explanation: The document reflects standard executive compensation practices and performance-based incentives, suggesting a neutral to slightly positive outlook. The vesting of PSUs due to exceeding performance targets is a positive indicator.

Positives

• The acquisition of shares upon vesting of PSUs due to exceeding performance targets suggests strong performance by Krishnan and potentially the PBNA division.
• The granting of additional PSUs indicates continued confidence in Krishnan's leadership and future performance.

Negatives

• The disposal of shares to cover tax obligations reduces Krishnan's direct ownership, although this is a common practice.

Risks

• The vesting of PSUs is contingent upon achieving pre-established performance targets, which introduces uncertainty regarding the actual number of shares that will ultimately be received.
• Changes in tax laws could impact the tax obligations associated with vesting of PSUs, potentially affecting the number of shares disposed of in the future.

Future Outlook

The reporting person may receive a number of shares of PepsiCo Common Stock from 0% to 200% of the PSUs granted, depending on the performance level achieved.

Industry Context

Executive compensation in the form of stock options and restricted stock units is a common practice among publicly traded companies to align management's interests with those of shareholders. The vesting of PSUs based on performance targets is intended to incentivize executives to achieve specific goals that benefit the company.

Comparison to Industry Standards

• Stock-based compensation is a standard practice among large, publicly traded companies like Coca-Cola (KO), Nestle (NSRGY), and Unilever (UL).
• Performance-based vesting schedules are also common, aligning executive compensation with company performance metrics such as revenue growth, profitability, and return on invested capital.
• The specific terms of PepsiCo's PSU program, such as the performance targets and vesting schedule, would need to be compared to those of its peers to determine its relative competitiveness.

Stakeholder Impact

• The alignment of executive compensation with company performance through PSUs is intended to benefit shareholders by incentivizing management to achieve goals that increase shareholder value.
• Employees may be indirectly impacted by the performance targets associated with the PSUs, as these targets may influence company strategy and operations.

Next Steps

• The PSUs granted on March 1, 2024, will vest on March 1, 2027, contingent upon the achievement of pre-established performance targets and Compensation Committee approval.
• The reporting person's phantom stock account will continue to accrue dividend equivalents under the EID program.

Key Dates