Plenty of crackle, pop as Kellogg changes guard …

December 6, 2010

Pfizer (PFE) isn’t the only major company to announce the imminent departure of its chief executive: Today, Kellogg (K) said CEO David Mackay is retiring after four years, at the ripe age of 55, to be replaced by the company’s 45-year-old chief financial officer, John Bryant, on January 2.

Mackay isn’t leaving empty-handed, but his consulting contract is a surprisingly stingy one for a company of Kellogg’s heft and executive largesse: He’s getting $50,000 a month (or the equivalent of $600,000 a year), but only through March 31. Moreover, this morning’s 8-K tells us,

“He will not participate in any future bonus plans, receive any additional long term incentives, or be eligible to participate in the Company’s change of control or severance policies.”

He will get to hang on to the $11.4 million pension he’s accumulated over his total of 19 years with Kellogg, as well as a deferred-compensation account valued at $3.6 million as of the company’s last proxy. But it’s a far cry from the $7.5 million in cash and $17 million in equity, options acceleration and benefits that the proxy said he would be eligible for if dismissed without cause. The terse 996-word letter agreement filed with this morning’s 8-K offers little insight into the timing; nor does the company’s press release, aside from the perennial desire of hard-charging senior executives to spend more time with their families.

Of course, Mackay’s tenure at Kellogg has hardly offered shareholders a lot of crunch: Since he took the top job on December 31, 2006, the company’s stock performance has essentially been flat, though it has outperformed the S&P 500. On a total return basis, however — counting dividends –the last three years have been bleaker, with Kellogg clocking a -0.2% return, trailing the S&P 500 by 3.8 points and packaged-foods companies by 1.2 points. And then there’s the matter of those settlements with the Federal Trade Commission over allegedly misleading health claims for its cereals…

Whatever role Bryant, the incoming chief, might have had in setting company strategy is apparently of little concern for Kellogg’s board: It’s starting him out at a salary of $1 million a year, or nearly the same as Mackay had after four years, and his target bonus is $1.35 million. (Mackay’s target bonus was $1.73 million, but he actually received $2.8 million last year, along with $1.2 million in stock awards and $2.3 million in options.) His 2011 long-term incentive payment target, meantime, “will be established by the independent members of the Company’s Board at approximately $5.2 million.”

For Bryant, as Tony the Tiger might say, this is all pretty grrrrreat! We’ll see how it pans out for Kellogg shareholders.

Image source: Kellogg Co. website

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