Compensation up less than 2 percent for Smithfield CEO

By Philip Walzer

The Virginian-Pilot

July 26, 2008

Smithfield Foods Inc.'s top executive received a compensation increase of less than 2 percent in the last fiscal year, but it netted him an extra $78,000.

C. Larry Pope, Smithfield's president and chief executive officer, took in $4.89 million during the year ended April 27, up from $4.81 million in fiscal 2007, the company reported in its annual proxy statement Friday.

Two other Smithfield officials did him better.

Topping the list was George Richter, president and chief operating officer of the Smithfield Pork Group, at $5.58 million, up from $3.34 million last year. Before he assumed his current post in April, Richter was president of Farmland Foods, which Smithfield acquired in 2003.

Joseph W. Luter III, Smithfield's chairman and Pope's predecessor as CEO, received $5.33 million in compensation as a director. That was significantly less than his $7.43 million in compensation in fiscal 2007, which began in April 2006. Luter served as CEO until August 2006.

The company, based in Smithfield, is the world's largest pork producer and processor. For most of its executives, bonuses and changes in pension and 401(k) value accounted for the lion's share of compensation.

Nearly half of Pope's compensation - $2.43 million - and 80 percent of Richter's - $4.45 million - came as cash bonuses based on company profits, according to the proxy.

Pope receives the equivalent of 1.5 to 2 percent of Smithfield's net profit exceeding $100 million, the statement said. Richter gets 2 to 3 percent of Farmland's net profit exceeding $20 million.

Of Luter's compensation, $4.2 million - or roughly 80 percent - came from his consulting agreement with Smithfield. He received $2.2 million "for his contribution to the successful completion of acquisitions and his advice to the chief executive officer" and an additional $2 million for his "consulting services in the execution of our hedging strategy."

Smithfield has been slammed by declining hog prices and soaring corn costs. The company reported last month that fourth-quarter income fell 94 percent, or nearly $35 million, driven down by a $129 million loss in hog production.

On July 3, Smithfield's stock sank to its lowest level on the New York Stock Exchange in more than five years - $16.88 a share. The stock price has since rebounded and closed at $20.93 Friday.

The proxy statement also:

- Identified the company's five largest shareholders, as of July 11, led by Paul J. Fribourg and ContiGroup Cos., at 7.6 percent, and Tradewinds Global Investors LLC, at 7.5 percent. Fribourg is a Smithfield director and president, chairman and CEO of ContiGroup, which had controlled about 40 percent of the stock of Premium Standard Farms before Premium was acquired by Smithfield in 2007.

- Listed three items on the agenda for Smithfield's annual meeting next month: approving a new "incentive compensation plan," endorsing Ernst & Young LLP as Smithfield's independent auditor and electing five directors. The directors include Gaoning Ning, chairman of COFCO Ltd., China's largest national agricultural trading and processing company. Smithfield announced earlier this month that it would sell nearly 5 percent of its common stock to COFCO.

Smithfield's annual meeting will be held Aug. 27 at the Williamsburg Lodge.

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