Dean Foods Tweaks Executive Pay Plan After Cutting Profit Forecast

(Bloomberg) -- Dean Foods Co., the largest U.S. milk bottler, cut its profit forecast last week. A day later, it amended an incentive compensation plan for senior executives, severing a link between earnings and some of their potential bonus payments.

Dean’s compensation committee on Aug. 8 ended a requirement that the company reach a certain minimum level of adjusted operating profit before it pays out annual awards related to individual performance, according to a filing two days after the decision.

Individual performance accounts for 25 percent of the plan’s overall potential payout, according to the filing. The other 75 percent is still linked to the operating income target.

Dallas-based Dean dropped to a six-year low on Aug. 7 after it cut its 2018 earnings outlook, citing delays to a cost-savings plan and competition from retailers selling their own milk. The company is shuttering some plants this year as part of a bid to cut $150 million in annual expenses by 2020.

“Given that 2018 is an important year of transition and transformation for Dean Foods, the company wants to ensure continued employee engagement and focus on executing the company’s commercial agenda, cost productivity initiatives and enterprise-wide productivity plan through the balance of the year,” the company said in the filing.

The change to the incentive plan applies to Chief Executive Officer Ralph Scozzafava and 13 other senior executives, the filing shows.

Dean Foods’s top executives have lost out on several million dollars in bonuses in the past two years after the firm missed goals for adjusted operating income. Last year, the board scrapped bonuses entirely for the five most-senior managers, including payouts that were linked to their individual performance, saying the decision reflected the firm’s policy of linking pay with performance.

The company doesn’t have additional comment beyond what’s in the filing, spokeswoman Suzanne Rosenberg said by telephone.

--With assistance from Anders Melin.

To contact the reporter on this story: Megan Durisin in Chicago at mdurisin1@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi

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