PEPSICO INC — Proxy Solicitation & Information Statement 2017

Mar 17, 2017

DEF 14A 1 pepsico3177381-def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐

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PepsiCo, Inc.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Performance with Purpose Performance with Purpose is our vision to deliver top-tier financial performance over the long term by integrating sustainability into our business strategy, leaving a positive imprint on society and the environment.

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Dear Fellow PepsiCo Shareholders:

“Our approach is rooted in a few simple beliefs: We don’t just want to change the way we spend money. We want to change the way we make it. We don’t just want to be a great company. We want to be a good company. We don’t just want to succeed over the short term. We also want to succeed over the long term.”

Indra K. Nooyi Chairman of the Board of Directors and Chief Executive Officer

I am pleased to invite you to attend our 2017 Annual Meeting of Shareholders on Wednesday, May 3, 2017 at 9:00 a.m. Eastern Daylight Time. The Meeting will be held at the North Carolina History Center in New Bern, North Carolina, the “birthplace” of Pepsi. We hope you will attend, but for those who cannot, we will offer a live webcast of our Annual Meeting on our website at www.pepsico.com under “Investors” — “Events and Presentations.” PepsiCo delivered another year of strong operating performance in 2016 Despite a challenging macroeconomic and geopolitical climate, PepsiCo delivered strong operating performance in 2016 and made significant progress against key strategic initiatives, including: ● Meeting or exceeding each of our financial goals; ● Returning $7.2 billion in cash to shareholders in the form of dividends and share repurchases and increasing our annualized dividend per share for the 45 th consecutive year beginning with our June 2017 payment; ● Delivering over $1 billion in productivity savings; and ● Redoubling our efforts on marketplace execution, with PepsiCo ranking as the number-one, best-in-class manufacturer in the latest Kantar Retail annual U.S. PoweRanking ® study. Our strategy continues to be guided by Performance with Purpose Our performance demonstrates what is possible when a company does well by striving to do good. A decade ago we launched Performance with Purpose – PepsiCo’s vision to deliver top-tier financial performance over the long-term by integrating sustainability into our business strategy. This approach has served us well in transforming the way we do business in a way that is responsible and responsive to the needs of the world around us, in the face of new and increasing opportunities, challenges and uncertainties. While we are proud of the progress we have made over the last ten years, our transformation journey is ongoing. We recently announced new Performance with Purpose goals for the next ten years that are designed to build on our progress and broaden our efforts in a way that responds to changing consumer and societal needs. These goals focus on building a healthier future for all of our stakeholders, including by: ● Making healthier foods and beverages for our consumers; ● Generating healthy growth for our retail and foodservice partners; ● Contributing to a healthier planet while boosting our bottom line; ● Creating a healthy workplace and culture for our associates; and ● Promoting healthier communities wherever we operate.

PEPSICO 2017 PROXY STATEMENT | 1

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Our Board is actively engaged in Company strategy As stewards of our Company, our Board plays an essential role in determining PepsiCo’s strategic priorities and provided important strategic direction for the new Performance with Purpose goals. The full Board considers sustainability issues an integral part of its business oversight, as sustainability topics are integrated into, and not separate from, our business strategy. To align with our new Performance with Purpose agenda, earlier this year, our Board refined the roles of its Committees by creating a new Public Policy and Sustainability Committee. The new Committee (which is comprised entirely of independent directors) will assist the Board in providing more focused oversight over the Company’s policies, programs and related risks that concern key public policy and sustainability matters. In addition to sustainability matters, our Board is actively engaged in Company strategy, regularly discussing strategic priorities and, on an annual basis, dedicating a multi-day meeting to an extensive review of the Company’s strategic plans. PepsiCo’s Board is comprised of diverse and independent directors with the skills and experience to support our strategy and to position us for long-term success As our Company’s strategy evolves, so do the skills and experiences that the Board seeks in its director nominees. The Board has a robust Board succession planning process designed to identify individuals whose skills and experiences will enable them to meaningfully contribute to the shaping of our business strategy. At the same time, the Board believes it is equally important to benefit from the valuable experience and continuity that longer-serving directors bring to the Board and strives to maintain an appropriate balance of tenure, diversity, skills and experience on the Board. One of our long-serving directors, Lloyd Trotter, will retire from the Board effective as of the 2017 Annual Meeting. We thank Lloyd for his many years of service and are grateful for his valuable contributions to our Board. We are extremely proud of the ongoing evolution of our Board and its track record on refreshment. Our Board has added seven new directors since 2014. Last year, our Board welcomed two new directors, Cesar Conde and Darren Walker, who each bring new perspectives and ideas to the Board. Overall, the average tenure of our independent director nominees is approximately five years. Fifty percent of our director nominees are women or ethnically diverse individuals and five are citizens of countries other than the United States, providing management with a broad array of opinions and perspectives that are representative of our global businesses. Underpinning our performance is our steadfast commitment to ethical business practices and strong corporate governance At PepsiCo, we believe acting ethically and responsibly is not only the right thing to do, but also the right thing for our business. We have adopted comprehensive corporate standards and policies to govern our operations and facilitate accountability for our actions. We believe strong corporate governance is the foundation for financial integrity, investor confidence and sustainable performance, and we are focused on advancing our vision with honesty, fairness and integrity. PepsiCo is honored to have been named among Ethisphere’s World’s Most Ethical Companies for the eleventh consecutive year. The feedback we receive from our shareholders and other stakeholders is a cornerstone of our corporate governance practices We regularly receive input from our shareholders and other stakeholders – such as customers, consumers, suppliers, associates, advocacy groups, governments and communities – on all aspects of our business, and these important external viewpoints inform our decisions and our strategy. We also recognize that we are stewards of a great Company with the opportunity not only to make a profit, but to do so in a way that makes a difference in the world. As we continue our Performance with Purpose journey and deliver solutions to shared challenges, we will need to work together with governments, non-governmental organizations, scholars and other stakeholders and use our collective strengths in ways that benefit everyone. Together, we’re part of a growing movement that is redefining what it means to be a successful corporation by broadening our perspective in a way that responds to changing consumer and societal needs and focuses on building a healthier future for all our stakeholders. Your vote is important Whether or not you plan to attend the Annual Meeting in person, we encourage you to vote promptly. You may vote by telephone or over the Internet, or by completing, signing, dating and returning the enclosed proxy card or voting instruction form if you requested to receive printed proxy materials. On behalf of our Board of Directors and all of our PepsiCo associates, thank you for being a PepsiCo shareholder and for your continued support of PepsiCo. Sincerely, Indra K. Nooyi Chairman of the Board of Directors and Chief Executive Officer March 17, 2017

2 | PEPSICO 2017 PROXY STATEMENT

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Notice of 2017 Annual Meeting of Shareholders

Date and Time

Wednesday, May 3, 2017 9:00 a.m. Eastern Daylight Time

Place

The North Carolina History Center at Tryon Palace 529 South Front Street New Bern, North Carolina 28562

Items to be Voted On

| 1 | Elect as directors the 14 nominees
named in the attached Proxy Statement. |
| --- | --- |
| 2 | Ratify the appointment of KPMG LLP
as our independent registered public accounting firm for fiscal year
2017. |
| 3 | Provide advisory approval of
executive compensation. |
| 4 | Provide advisory vote on frequency
of future shareholder advisory approval of executive
compensation. |
| 5-6 | Act upon two shareholder proposals
described in the attached Proxy Statement, if properly
presented. |

Record Date

Holders of record of our Common Stock and Convertible Preferred Stock as of the close of business on March 1, 2017 will be entitled to notice of, and to vote at, the Annual Meeting.

By Order of the Board of Directors,

Tony West Corporate Secretary March 17, 2017

| Live Webcast The Annual Meeting will be webcast
live on our website at www.pepsico.com under “Investors”—“Events and
Presentations” beginning at 9:00 a.m.
Eastern Daylight Time on May 3, 2017. | |
| --- | --- |
| Proxy Voting Your vote is very important. Whether
or not you plan to attend the Annual Meeting in person, please promptly
vote by telephone or over the Internet, or by completing, signing, dating
and returning your proxy card or voting instruction form so that your
shares will be represented at the Annual Meeting. | |
| Advance Voting
Methods | |
| ● | Telephone |
| ● | Internet |
| ● | Mail |
| Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders to
be Held on May 3, 2017 Our Notice of Annual Meeting, Proxy
Statement and Annual Report for the fiscal year ended December 31, 2016
are available at www.pepsico.com/proxy17 . We are making the Proxy Statement
and the form of proxy first available on or about March 17,
2017. | |

PEPSICO 2017 PROXY STATEMENT | 3

PART 02

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PROXY STATEMENT SUMMARY

Proxy Statement Summary We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and 2016 Annual Report before you vote.

| Proposal
1 Election of 14
Director Nominees | The
Board recommends a vote FOR all Director Nominees |
| --- | --- |
| | Our Nominating and Corporate
Governance Committee and our Board have determined that each of the
nominees possess the right skills, qualifications and experience to
effectively oversee PepsiCo’s long-term business strategy |
| ● | See “Election of Directors (Proxy
Item No. 1)” beginning on page 11 of this Proxy
Statement |

Director Nominees

| Name and Primary Occupation | Director Since | Age* | Independent | Committee
Membership — Audit | Compensation | Nominating and
Corporate Governance | Public
Policy and Sustainability |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Shona L.
Brown Former Senior Advisor, Google
Inc. | 2009 | 51 | ● | | ● | ** | ● |
| George W.
Buckley Former Chairman, President
and Chief Executive Officer, 3M Company | 2012 | 70 | ● | ● | | | |
| Cesar
Conde Chairman, NBCUniversal International
Group and NBCUniversal Telemundo Enterprises | 2016 | 43 | ● | ● | | | |
| Ian M.
Cook (PRESIDING DIRECTOR) Chairman,
President and Chief Executive Officer, Colgate-Palmolive
Company | 2008 | 64 | ● | | | ● | |
| Dina
Dublon Former Executive Vice President
and Chief Financial Officer, JPMorgan Chase & Co. | 2005 | 63 | ● | | | | ● |
| Rona A.
Fairhead Chairman, BBC Trust | 2014 | 55 | ● | | ● | ● | |
| Richard W.
Fisher Former President and Chief Executive
Officer, Federal Reserve Bank of Dallas | 2015 | 67 | ● | ● | | | |
| William R.
Johnson Operating Partner, Global Retail
and Consumer, Advent International Corporation; Former Chairman,
President and Chief Executive Officer, H.J. Heinz
Company | 2015 | 68 | ● | ● | | | |
| Indra K.
Nooyi Chairman of the Board and Chief
Executive Officer, PepsiCo | 2001 | 61 | | | | | |
| David C. Page, MD Director and President, Whitehead Institute for
Biomedical Research; Professor, Massachusetts Institute of
Technology | 2014 | 60 | ● | | ● | | ● |
| Robert C.
Pohlad President, Dakota Holdings,
LLC | 2015 | 62 | ● | | | ● | |
| Daniel
Vasella, MD Former Chairman and Chief
Executive Officer, Novartis AG | 2002 | 63 | ● | | ● | ● | |
| Darren
Walker President, Ford
Foundation | 2016 | 57 | ● | | | | ● |
| Alberto Weisser Former Chairman and Chief Executive Officer, Bunge
Limited | 2011 | 61 | ● | ● | | | |

Committee Chair Financial Expert

| * | Ages are as of
March 17, 2017. |
| --- | --- |
| ** | Lloyd G. Trotter currently serves as
the Chair of the Compensation Committee. Mr. Trotter will not stand for
re-election and upon his retirement effective as of the 2017 Annual
Meeting of Shareholders, Shona L. Brown will become Chair of the
Compensation Committee. |

4 | PEPSICO 2017 PROXY STATEMENT

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PROXY STATEMENT SUMMARY

Director Nominee Facts

We believe our director nominees bring a well-rounded variety of diversity, skills, qualifications and experience, and represent an effective mix of deep company knowledge and fresh perspectives.

Diversity

50% are women or ethnically diverse 4 are women (including our CEO) 5 are citizens of countries other than the United States

Expertise and Independence

| 4 of 5 Audit Committee member nominees are financial
experts |
| --- |
| 13 of 14 director nominees are
independent |

| Director Age | Independent Director Tenure (years of
service) |
| --- | --- |
| ● | ● |
| Average Age: 60.4 > 78% younger
than 65 | Average Tenure of
Independent Directors: 5.1
years |

Skills and Qualifications

Director succession planning is a robust, ongoing process at PepsiCo. Our Board regularly evaluates desired attributes in light of the Company’s strategy and needs. Our director nominees bring to the Board a balance of the following relevant skills, qualifications and experience:**

| * | Average age and tenure are
as of March 17, 2017. |
| --- | --- |
| ** | The numbers in parentheses
represent the number of our 14 total director nominees who possess each of
the skills, qualifications and
experience. |

PEPSICO 2017 PROXY STATEMENT | 5

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PROXY STATEMENT SUMMARY

Corporate Governance Highlights

Our Corporate Governance Policies Reflect Best Practices

| ● | Annual
election of all directors |
| --- | --- |
| ● | Proxy access right for
shareholders |
| ● | Majority-vote and director resignation policy for directors in
uncontested elections |
| ● | Comprehensive, ongoing Board
succession planning process |
| ● | Regular Board refreshment and mix of
tenure of directors |
| ● | Annual Board and Committee
self-evaluations |
| ● | Independent Presiding Director with
clearly defined and robust responsibilities |
| ● | 13 independent directors out of 14
director nominees |

| ● | 100%
independent Board Committees |
| --- | --- |
| ● | Regular
executive sessions of independent directors at Board and Committee
meetings |
| ● | Prohibition on hedging or pledging
Company stock |
| ● | Rigorous director and executive
stock ownership requirements |
| ● | 99% average attendance of incumbent
directors at Board and Committee meetings |
| ● | Active shareholder
engagement |
| ● | Global Code of Conduct applicable to
directors and all employees |

| Proposal
2 Ratify the appointment of KPMG LLP
as our independent registered public accounting firm for fiscal year
2017 | The
Board recommends a vote FOR this proposal |
| --- | --- |
| | Our Board of Directors recommends
that shareholders vote “FOR” the ratification of the appointment of KPMG
as PepsiCo’s independent registered public accounting firm for fiscal year
2017 |
| ● | See “Ratification of Appointment of
Independent Registered Public Accounting Firm (Proxy Item No. 2)”
beginning on page 36 of this Proxy
Statement |

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PROXY STATEMENT SUMMARY

| Proposal
3 Advisory Approval of Executive Compensation | The
Board recommends a vote FOR this proposal |
| --- | --- |
| | Our Board recommends that
shareholders vote “FOR” the advisory approval of the compensation of our
named executive officers (“ NEOs ” or “ Named
Executive Officers ”) for the 2016 performance
year |
| ● | See “Advisory Approval of Executive
Compensation (Proxy Item No. 3)” on page 39 of this Proxy Statement and
“Compensation Discussion and Analysis” beginning on page 40 of this Proxy
Statement |

2016 PepsiCo Performance Highlights

PepsiCo continued to deliver strong results in 2016, while achieving a good balance between revenue performance and productivity. In a challenging operating environment, we met or exceeded every financial goal we set for 2016, including the following non-GAAP measures used in our incentive pay programs. 1

Organic Revenue Growth 1 Core Constant Currency Earnings Per Share (EPS) Growth 1 Free Cash Flow Excluding Certain Items 1 Core Net Return on Invested Capital (ROIC) 1

PepsiCo’s strong 2016 financial results reflect the progress we made in advancing our most important strategic priorities:

| ● | Innovation: We continued to advance our
portfolio transformation through our investment in R&D, which has
increased by 45% since 2011. In 2016, PepsiCo accounted for over 17% of
innovation sales at retail in the U.S., as measured by IRI 2 , -
more innovation than the next four innovation contributors
combined. |
| --- | --- |
| ● | Brand Building: We increased our spending on
advertising and marketing as a percentage of net revenue by 40 basis
points in 2016 to 6.7%. Our brand investments yielded market share
improvements in the U.S. and other key markets. |
| ● | Execution: We maintained our focus on
marketplace execution. This enabled PepsiCo to once again be the largest
driver of growth for our food and beverage retail partners in the U.S., as
we contributed 18% of the total retail sales growth of food and beverage
categories. 2 |
| ● | Productivity: We delivered over $1 billion
of productivity savings during 2016. Our productivity agenda, focused on
driving both efficiency and effectiveness, has resulted in approximately
$1 billion in annual savings since 2012. |
| ● | Performance with Purpose: Continuing
PepsiCo’s decade-long commitment to delivering Performance with Purpose,
we launched an ambitious global sustainability agenda in 2016. The agenda
includes specific 2025 goals designed to continue transforming PepsiCo’s
product portfolio, contribute to a more sustainable global food system and
help make local communities more prosperous. |
| ● | Cash Return to Shareholders: We again increased our
annualized dividend and met our goal of returning $7 billion in cash to
shareholders through dividends and share
repurchases. |

Our total shareholder return (“TSR”) reflects our strong 2016 results. We delivered 8% TSR, outpacing the median of our proxy peer group.

---

| 1 | For further information on these
financial measures, which are used as compensation performance measures
and are not in accordance with U.S. Generally Accepted Accounting
Principles (“ GAAP ”), please refer to the “2016 PepsiCo Performance”
section of the Compensation Discussion and Analysis on page 40 of this
Proxy Statement and Exhibit A to this Proxy Statement. For 2016, Core
Constant Currency EPS Growth excludes the impact of the Venezuela
deconsolidation that occurred in 2015. |
| --- | --- |
| 2 | Source: Information Resources,
Inc. Consulting Analysis for Total U.S. Multi-Outlet Plus Convenience for
the 52 weeks ending December 25, 2016. |

PEPSICO 2017 PROXY STATEMENT | 7

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PROXY STATEMENT SUMMARY

Compensation Highlights

Reflecting our pay-for-performance compensation program, the strong results delivered for shareholders translated into the payouts highlighted in the following table. We encourage you to also review the full Compensation Discussion and Analysis beginning on page 40 of this Proxy Statement for additional details.

| ● | Component — 2016 Annual Cash
Incentive | Performance Against Incentive Metrics — PepsiCo met or exceeded
every financial goal for 2016 while making significant progress against
key strategic initiatives | Average
for all NEOs +16% |
| --- | --- | --- | --- |
| ● | 2014 Long-Term Incentives | | +34% |
| | PepsiCo
Equity Performance Units | 8.9% stock price compound annual growth rate over
the three-year performance period | 61st %ile TSR relative to S&P
500 (2014-2016) |
| | | | +75% |
| | Long-Term Cash
Awards | 10.4% average core constant currency EPS
growth 3 (2014-2016) | 21.5% core net ROIC 3 for 2016, a 510 basis
point increase (2014-2016) |

Compensation Governance

The Compensation Committee oversees the design and administration of PepsiCo’s executive compensation programs and evaluates these programs against competitive practices, legal and regulatory developments and corporate governance trends. The Compensation Committee has incorporated the following market-leading governance features into our programs:

What We Do ✓ Double-trigger change-in-control vesting of long-term incentive awards ✓ Responsible use of shares under our long-term incentive program, with share utilization below our peer group median ✓ Comprehensive clawback policy that applies to annual incentive, long-term incentive and deferral programs ✓ Rigorous stock ownership requirements that continue for 12 months beyond employment ✓ Balanced mix of top-line and bottom-line metrics set against rigorous measurable goals within our incentive programs ✓ Targets for performance metrics aligned to financial goals communicated to shareholders

What We Don’t Do ✗ No employment agreements ✗ No supplemental executive retirement plans ✗ No resetting of financial targets for performance awards ✗ No hedging and pledging of Company stock ✗ No tax gross-ups ✗ No backdating or repricing of stock option awards

---

3 For further information on these non-GAAP financial measures, which are used as compensation performance measures, please refer to the “2016 PepsiCo Performance” section of the Compensation Discussion and Analysis on page 40 of this Proxy Statement and Exhibit A to this Proxy Statement. For 2016, Core Constant Currency EPS Growth excludes the impact of the Venezuela deconsolidation that occurred in 2015.

8 | PEPSICO 2017 PROXY STATEMENT

PART 03

Table of Contents

PROXY STATEMENT SUMMARY

| Proposal
4 Advisory Vote on Frequency of
Future Shareholder Advisory Approval of Executive Compensation | The
Board recommends a vote of every ONE YEAR with respect to this
proposal |
| --- | --- |
| | Our Board recommends that shareholders vote for every “ONE YEAR” with respect to how
frequently a shareholder advisory approval of the compensation of our Named Executive
Officers should occur |
| ● | See “Advisory Vote on the Frequency of Future Shareholder Advisory Approval of Executive
Compensation (Proxy Item No. 4)” on page 67 of this Proxy Statement |

| Proposals
5-6 Shareholder
proposals | The
Board recommends a vote AGAINST each of these
proposals |
| --- | --- |
| ● | See the Board’s statements in
opposition of each shareholder proposal beginning on page 68 of this Proxy
Statement |

PEPSICO 2017 PROXY STATEMENT | 9

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Table of Contents

Election of Directors (Proxy Item No. 1)	11
Director Nominees	11
Skills, Qualifications and Experience
of	19
Our Director Nominees
Corporate Governance at
PepsiCo	20
Our Governance Philosophy	20
Our Global Code of Conduct	20
Shareholder Engagement	21
Our Commitment to Sustainable Business
Practices	22
Our Board of Directors	22
Board Leadership Structure	23
Director Independence	24
Related Person Transactions	24
Committees of the Board of
Directors	26
Board Composition and
Refreshment	29
Board and Committee
Self-Assessments	30
The Board’s Oversight of Risk
Management	31
The Board’s Role in Strategy
Oversight	31
The Board’s Role in Talent
Development	32
Political Contributions Policy	32
Communications with the Board	32
2016 Director
Compensation	33
Annual Compensation	33
Initial Share Grant	33
Governance Features	33
2016 Non-Employee Director
Compensation	35
Ratification of
Appointment of Independent Registered	36
Public Accounting Firm
(Proxy Item No. 2)
Audit Committee Report	36
Audit and Other Fees	38
Advisory Approval of
Executive Compensation	39
(Proxy Item No.
3)

| Executive
Compensation | 40 |
| --- | --- |
| Compensation Discussion and
Analysis | 40 |
| 2016 Summary Compensation Table | 55 |
| 2016 Grants of Plan-Based Awards | 57 |
| 2016 Outstanding Equity Awards at Fiscal
Year-End | 58 |
| 2016 Option Exercises and Stock
Vested | 60 |
| 2016 Pension Benefits | 61 |
| 2016 Non-Qualified Deferred
Compensation | 63 |
| Potential Payments on Termination
or | 64 |
| Change in Control | |
| Compensation Committee Report | 65 |
| Securities Authorized for Issuance under
Equity | 66 |
| Compensation Plans | |
| Advisory Vote on the
Frequency of Future Shareholder | 67 |
| Advisory Approval of
Executive Compensation | |
| (Proxy Item No.
4) | |
| Shareholder Proposals
(Proxy Items Nos. 5-6) | 68 |
| Shareholder Proposal Regarding Pesticide
Pollution | 68 |
| (Proxy Item No. 5) | |
| Shareholder Proposal Regarding
Implementation of | 70 |
| Holy
Land Principles (Proxy Item No. 6) | |
| Ownership of PepsiCo
Common Stock | 73 |
| Stock Ownership of Officers and
Directors | 73 |
| Stock Ownership of Certain Beneficial
Owners | 74 |
| Section 16(a) Beneficial Ownership
Reporting | 74 |
| Compliance | |
| Information About the
Annual Meeting | 75 |
| Voting Procedures | 75 |
| Attending the Annual Meeting | 77 |
| 2017 Proxy Materials | 77 |
| Other Matters | 78 |
| 2018 Shareholder Proposals and | 78 |
| Director Nominations | |
| Exhibit A—Reconciliation
of GAAP and | A-1 |
| Non-GAAP
Information | |

This Proxy Statement of PepsiCo, Inc. (“PepsiCo,” the “Company,” “we,” “us” or “our” ) contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. Forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo’s products, as a result of changes in consumer preferences or otherwise; changes in or failure to comply with, applicable laws and regulations; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of labeling or warning requirements on PepsiCo’s products; changes in laws related to packaging and disposal of PepsiCo’s products; PepsiCo’s ability to compete effectively; political conditions, civil unrest or other developments and risks in the markets where PepsiCo’s products are made, manufactured, distributed or sold; the ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; damage to PepsiCo’s reputation or brand image; and the other factors discussed in the risk factors section of PepsiCo’s most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

10 | PEPSICO 2017 PROXY STATEMENT

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Election of Directors (Proxy Item No. 1)

Upon the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors has nominated the 14 directors identified on the following pages for election at the 2017 Annual Meeting. The directors will hold office from election until the next Annual Meeting of Shareholders and until their successors are elected and qualified or until their death, resignation or removal.

All of the nominees are currently PepsiCo directors who were elected by shareholders at the 2016 Annual Meeting, except Darren Walker, who was elected to the Board effective September 21, 2016. Mr. Walker was recommended for consideration to the Nominating and Corporate Governance Committee by a non-management director. Lloyd G. Trotter has reached the age of 72 and, pursuant to our policy, will not stand for re-election and will retire from the Board of Directors effective as of the 2017 Annual Meeting. As a result, the Board will be reduced to 14 directors effective as of the 2017 Annual Meeting. Our Board thanks Mr. Trotter for his many years of exemplary service.

Our Board has a comprehensive, ongoing director succession planning process designed to provide for a highly independent, well-qualified Board, with the diversity, experience and background to be effective and to provide strong oversight. Our Board constantly evaluates the needs of the Company and adds new skills and qualifications to the Board as necessary to best position the Company to navigate through a constantly changing global landscape.

The Board looks for its current and potential directors to have a broad range of skills, education, experiences and qualifications that can be leveraged in order to benefit PepsiCo and its shareholders. The Board is particularly interested in maintaining a mix of skills, qualifications and experience that include the following:

Directors’ Skills, Qualifications and Experience:

| ● | Public Company
CEO | ● | Science/Medical/Research/Innovation |
| --- | --- | --- | --- |
| ● | Financial Expertise/Financial
Community | ● | Information
Technology/Cybersecurity |
| ● | Consumer
Products | ● | Digital Marketing/New
Media/E-Commerce |
| ● | Risk
Management | ● | Diversity |
| ● | Public Policy | ● | Developing and Emerging
Markets/International Residence |

Additionally, directors are expected to possess personal traits such as candor, integrity and professionalism and must be able to commit significant time to the Company’s oversight. For additional information on the Board selection process, including the Board’s consideration of diversity, see “Board Composition and Refreshment” on pages 29-30 of this Proxy Statement.

Director Nominees

Our Nominating and Corporate Governance Committee and our Board have determined that each of the nominees possesses the right skills, qualifications and experience to effectively oversee PepsiCo’s long-term business strategy. Biographical information about each nominee, as well as highlights of certain notable skills, qualifications and experience that contributed to the nominee’s selection as a member of our Board of Directors and nomination for re-election at our 2017 Annual Meeting, are included on the following pages. We have also included a chart immediately after the biographies to highlight the skills, qualifications and experience of the Board as a whole.

Although our Board does not anticipate that any of the nominees will be unable to stand for election as a director at our Annual Meeting, if this occurs, proxies will be voted in favor of such other person or persons as may be designated by our Nominating and Corporate Governance Committee and our Board.

Our Board of Directors recommends that shareholders vote “FOR” the election of each of the following directors:

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| Shona L. Brown Director Since: 2009 Age: 51 Independent Committee Memberships: ● Compensation (Chair effective as of the 2017 Annual Meeting of
Shareholders) ● Public
Policy and Sustainability |
| --- |
| Skills and Qualifications Dr. Brown brings to our Board of
Directors broad knowledge of information technology and social media and a
critical perspective regarding the rapidly changing digital landscape
gained from her extensive experience at a world-recognized global
technology leader, Google. Dr. Brown also provides PepsiCo with the unique
perspective of building innovation into business and people operations
(including sustainability operations) at Google. In addition, through her
business experience at Google and McKinsey & Company, she brings a
deep expertise in building organizations optimized for adaptability,
growth and innovation, which benefits PepsiCo as we address similar issues
in an environment of evolving consumer preferences and regulatory
initiatives. Her perspective on public policy and sustainability-related
matters and the role of business in society gained from her experience
working with non-profit organizations are valuable as the Company
continues to focus on its Performance with Performance goals and pursue
strategies to drive sustainable long-term growth. |

| George W. Buckley Director Since: 2012 Age: 70 Independent Committee Memberships: ● Audit |
| --- |
| Skills and Qualifications Through his leadership of 3M, Dr.
Buckley brings to our Board of Directors his expertise in integrating
research and development into business operations to create incremental
value through both line extensions and breakthrough innovation. In
addition to contributing great insight to PepsiCo’s innovation strategy
through his experience as a chief executive officer of public companies as
well as his public and private director experience, Dr. Buckley also
brings to the Board experience managing large global corporations across
multiple industries and markets; skills in operations, strategic planning,
information technology and financial matters; and valuable consumer
products insights. |

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| Cesar Conde Director Since: 2016 Age: 43 Independent Committee Memberships: ● Audit |
| --- |
| Skills and Qualifications Mr. Conde is an experienced global
executive with a strong track record in business, finance and media. He
provides the Board with diverse and actionable perspectives on today’s
consumer and media landscapes, and his unique insights are particularly
valuable as PepsiCo continues to build new digital marketing capabilities
and adapt to changing demographics around the world. Mr. Conde also brings
his market and consumer insights developed through his experience at
national and global media companies and his leadership of social and
corporate responsibility initiatives
worldwide. |

| Ian M. Cook PRESIDING DIRECTOR Director Since: 2008 Age: 64 Independent Committee Memberships: ● Nominating and Corporate Governance |
| --- |
| Skills and Qualifications Mr. Cook brings to our Board of
Directors deep knowledge of the consumer products industry gained through
his many years leading a global consumer products company,
Colgate-Palmolive. He also contributes a broad understanding of industry
trends and his extensive global leadership experience gained from holding
a variety of senior management roles at Colgate-Palmolive in numerous
countries throughout the world. Mr. Cook’s qualifications also include
expertise in finance, brand-building, talent development and succession
planning. |

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| Dina Dublon Director Since: 2005 Age: 63 Independent Committee Memberships: ● Public Policy and
Sustainability (Chair) |
| --- |
| Skills and Qualifications Ms. Dublon brings to our Board of
Directors deep expertise in financial, accounting, strategic and banking
matters and capital markets operations gained from her distinguished
career in the financial services industry, particularly through her role
as Executive Vice President and Chief Financial Officer of JPMorgan Chase
& Co. She also contributes valuable risk management insights obtained
through her experience at JPMorgan Chase & Co., as well as from her
service on the boards of several other public companies, including as the
Chair of Deutsche Bank AG’s risk committee of the supervisory board. In
addition, Ms. Dublon offers unique perspectives on emerging markets,
public policy and sustainability-related matters gained while working with
global non-profit organizations focusing on women’s issues and
initiatives. |

| Rona A. Fairhead Director Since: 2014 Age: 55 Independent Committee Memberships: ● Compensation ● Nominating and Corporate Governance |
| --- |
| Skills and Qualifications Mrs. Fairhead brings to our Board
of Directors business leadership, finance, succession planning and general
management experience gained from her leadership roles at the BBC Trust,
the Financial Times Group, Pearson and other global companies. She
contributes significant expertise in media and publishing from her
experience as Chairman of the BBC Trust and her former role at the
Financial Times Group. Mrs. Fairhead also offers her valuable perspectives
on risk management resulting from her experiences serving as chair of the
risk committee and financial system vulnerabilities committee of HSBC
Holdings plc and as chair of the United Kingdom Government’s Cabinet
Office Risk Committee. In addition, Mrs. Fairhead brings global
marketplace insights developed through her leadership at global companies
across multiple industries. |

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ELECTION OF DIRECTORS (PROXY ITEM NO. 1)

| Richard W. Fisher Director Since: 2015 Age: 67 Independent Committee Memberships: ● Audit |
| --- |
| Skills and Qualifications Mr. Fisher brings to our Board of
Directors deep knowledge of financial matters and financial expertise
gained from extensive experience that includes serving as President and
Chief Executive Officer of the Federal Reserve Bank of Dallas, Managing
Partner of Fisher Capital Management and Senior Manager of Brown Brothers
Harriman. Mr. Fisher also contributes his strategy, leadership and
management skills, and experience gained from chairing for five years a
Federal Reserve committee on information technology architecture and
cybersecurity risks. In addition, his global experience and expertise in
international trade and regulatory matters, including from his roles as
Deputy U.S. Trade Representative and Vice Chairman of Kissinger McLarty
Associates, are particularly valuable to PepsiCo. |

| William R. Johnson Director Since: 2015 Age: 68 Independent Committee Memberships: ● Audit |
| --- |
| Skills and Qualifications Mr. Johnson brings to our Board of
Directors extensive leadership skills and consumer packaged goods
expertise gained from serving as the Chairman, President and Chief
Executive Officer of Heinz. Through his leadership of Heinz and his public
company director experience, he offers deep experience in strategic
planning, operations, marketing, brand development, logistics and
financial expertise. Mr. Johnson’s experience leading a global business
with a large, labor-intensive workforce is of particular value to the
Board. |

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| Indra K. Nooyi Director Since: 2001 Age: 61 |
| --- |
| Skills and Qualifications Ms. Nooyi brings to our Board of
Directors strong leadership skills, extensive strategic planning, business
and financial experience and broad strategic vision for our Company. Her
more than 20 years with PepsiCo have provided her with extensive knowledge
of the global food and beverage industry. Ms. Nooyi also contributes
invaluable perspectives on the global marketplace gained from her senior
management positions at PepsiCo and her memberships on global business
councils and forums. Her role as Chairman and CEO of PepsiCo creates a
critical link between management and the Board of Directors, enabling the
Board to perform its oversight function with the benefits of management’s
perspectives on the business. |

| David C. Page,
MD Director Since: 2014 Age: 60 Independent Committee Memberships: ● Compensation ● Public
Policy and Sustainability |
| --- |
| Skills and Qualifications Dr. Page brings to our Board of
Directors his scientific and medical expertise, gained from over 30 years
of experience in those fields, and unique perspective on the intersection
of academic and commercial scientific research of interest to companies in
the food and beverage industry. His perspectives are particularly valuable
in light of the Company’s strategic focus on the areas of health and
wellness and nutrition. Dr. Page’s experience with producing significant
scientific discoveries and innovative breakthroughs is highly relevant to
the Company’s research and development initiatives, innovation pipeline
and sustainability goals in an environment of evolving consumer
preferences and regulatory initiatives. |

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| Robert C. Pohlad Director Since: 2015 Age: 62 Independent Committee Memberships: ● Nominating and Corporate Governance |
| --- |
| Skills and Qualifications Mr. Pohlad brings to our Board of
Directors extensive beverage and finance experience gained from the
20-plus years he spent in a variety of senior operational and executive
roles at PepsiAmericas, Inc. and its predecessors. Mr. Pohlad has a deep
understanding of leveraging large-scale distribution systems and global
brands, specifically with respect to beverage and bottling operations,
which is invaluable to PepsiCo. In addition, through his experience
operating businesses and investments in myriad fields, Mr. Pohlad has
gained expertise leading and developing strong management teams, creating
and implementing effective strategic plans, addressing succession planning
needs and brand-building. |

| Daniel Vasella,
MD Director Since: 2002 Age: 63 Independent Committee Memberships: ● Compensation ● Nominating and Corporate Governance (Chair) |
| --- |
| Skills and Qualifications Dr. Vasella brings to our Board of
Directors his expertise in the areas of health and wellness and nutrition,
topics of critical importance to PepsiCo, as well as his leadership
experience and global perspectives, which he obtained through his former
role as Chairman and Chief Executive Officer of Novartis. Through his
leadership of Novartis and his public company director experience, he also
offers to PepsiCo extensive business, operations, management and marketing
skills and experience developing corporate strategy, talent and succession
planning. In addition, he contributes his knowledge of and experience with
regulatory matters developed through his role leading a highly regulated,
global business in rapidly changing markets. |

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| Darren Walker Director Since: 2016 Age: 57 Independent Committee Memberships: ● Public
Policy and Sustainability |
| --- |
| Skills and Qualifications Mr. Walker brings to our Board of
Directors his insight into the role of business in society gained through
his role as President of the Ford Foundation and his leadership at other
non-profit and philanthropic organizations. His experience with social and
community initiatives, perspectives on public policy and
sustainability-related matters and financial expertise are particularly
valuable as the Company continues to focus on its Performance with Purpose
goals and pursue strategies to drive sustainable long-term growth. In
addition, he offers a unique understanding of emerging markets and
communities gained through his experience and oversight of the Ford
Foundation’s operations. |

| Alberto Weisser Director Since: 2011 Age: 61 Independent Committee Memberships: ● Audit
(Chair) |
| --- |
| Skills and Qualifications Mr. Weisser brings to our Board of
Directors his extensive experience with and keen understanding of
commodities, gained from his role as Chairman and Chief Executive Officer
of Bunge Limited. These skills are particularly valuable to PepsiCo in
today’s volatile economic environment. Mr. Weisser has deep knowledge of
the strategic, financial, risk and compliance issues facing a large,
diversified, publicly traded company, and significant global experience,
particularly with respect to emerging markets. Mr. Weisser also
contributes strong financial acumen and expertise resulting from his six
years of experience serving as Bunge Limited’s Chief Financial
Officer. |

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Skills, Qualifications and Experience of Our Director Nominees

The table below includes some of the skills, qualifications and experience of each director nominee that led our Board of Directors to conclude that he or she is qualified to serve on our Board. This high-level summary is not intended to be an exhaustive list of each director nominee’s skills or contributions to the Board.

Skill/Qualification	●	●	●	●	●	●	●	●	●	●	●	●	●
Public Company
CEO		●		●				●	●	●	●		●
Financial Expertise/ Financial
Community		●		●	●	●	●	●	●	●		●	●
Consumer Products		●		●				●	●	●	●
Risk Management					●	●	●						●
Public Policy						●	●		●			●
Science/Medical Research/Innovation	●	●							●		●
Information Technology/ Cybersecurity	●						●
Digital Marketing/ New
Media/ E-Commerce	●		●
Diversity	●		●		●	●			●			●	●
Developing and Emerging
Markets/ International Residence	●	●	●	●	●	●	●	●	●	●	●	●	●

PEPSICO 2017 PROXY STATEMENT | 19

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Corporate Governance at PepsiCo

Our Governance Philosophy

We believe strong corporate governance is the foundation for financial integrity, investor confidence and sustainable performance.

Strong corporate governance is and has been a long-standing priority at PepsiCo. In 2002, the Board of Directors adopted Corporate Governance Guidelines for the Company that established a common set of expectations to assist the Board and its Committees in performing their duties. The Board reviews these Guidelines at least annually, and updates the Guidelines as necessary to reflect changing regulatory requirements, evolving best practices and input from our shareholders and other stakeholders.

Key Corporate Governance Documents

The following documents are available at www.pepsico.com 4 under “Who We Are” and are available in print upon written request to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577: Corporate Governance Guidelines; Charters of our Audit, Compensation, Nominating and Corporate Governance, and Public Policy and Sustainability Committees of the Board and the Global Code of Conduct.

Our Global Code of Conduct

PepsiCo is proud of its commitment to deliver sustained growth through empowered people acting with responsibility and building trust.

This commitment is evidenced in part by our robust Global Code of Conduct, which is designed to provide our directors and employees with guidance on how to act legally and ethically while performing work for PepsiCo. PepsiCo works hard to communicate its values clearly and regularly throughout its operations, including by conducting an annual Global Code of Conduct training program for employees. Annually, all of PepsiCo’s directors and executives, including all of our executive officers, certify their compliance with our Global Code of Conduct.

---

4 The information on our website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated herein or into any of our other filings with the Securities and Exchange Commission (the “ SEC ”).

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CORPORATE GOVERNANCE AT PEPSICO

Shareholder Engagement

We believe that regular, transparent communication with our shareholders and other stakeholders is essential to PepsiCo’s long-term success.

We value the views of our shareholders and other stakeholders, and the input that we receive from them is a cornerstone of our corporate governance practices. Through these engagements, we seek to ensure that corporate governance at PepsiCo is not a formulaic exercise, but rather a dynamic framework that can accommodate the demands of a rapidly changing business environment while remaining responsive to the priorities of our shareholders and other stakeholders.

Throughout 2016, members of our management team met with a significant number of our shareholders to discuss our portfolio strategy, financial and operating performance, capital allocation, sustainability and corporate social responsibility initiatives, corporate governance and executive compensation practices and to solicit feedback on these and a variety of other topics. At least quarterly, the Board receives a report on shareholder engagement and is provided with the opportunity to discuss and ask questions about investor feedback. PepsiCo’s Corporate Governance Guidelines require that our Presiding Director ensure that he or she is available for consultation and direct communication, if requested by major shareholders.

We also engaged with other key stakeholders through our active participation in prestigious corporate governance organizations such as the Harvard Law School Program on Corporate Governance, the Stanford University Rock Center for Corporate Governance and the Council of Institutional Investors.

Our engagement activities have resulted in our receiving valuable feedback from our shareholders and other stakeholders who have provided important external viewpoints that inform our decisions and our strategy. For example, as a result of collaboration with our shareholders and other stakeholders in recent years:

| ● | The Board
amended our Corporate Governance Guidelines to specify the Board’s
oversight role with respect to sustainability, an integral part of the
Company’s business strategy, and refined the roles of its Committees by
establishing a new Public Policy and Sustainability Committee in early
2017, which will assist the Board in providing more focused oversight over
PepsiCo’s policies, programs and related risks that concern key public
policy and sustainability matters. |
| --- | --- |
| ● | We announced
in 2016 our new Performance with Purpose sustainability goals for the next
ten years that are designed to build on our progress and broaden our
efforts in a way that responds to changing consumer and societal needs. We
also enhanced our disclosure of the Company’s sustainability progress by
issuing an updated Sustainability Report and Global Reporting Initiative
(“ GRI ”) Report. |
| ● | The Board
implemented a proxy access right for shareholders. |
| ● | Taking into
account the strong support demonstrated by our shareholders and feedback
during individual meetings with shareholders, the Compensation Committee
implemented several changes to the long-term incentive program in 2016,
while determining to maintain the core structure of our overall executive
compensation program. |
| ● | PepsiCo was a
Founding Partner of and is an active participant at the Berkeley Sustainable
Business and Investment Forum, a finance innovation forum focused on the
evolving concepts of risk management, capital allocation and sustainable
business practices with a focus on long-term value creation. |

In addition, we have had an ongoing dialogue with various shareholders and other stakeholders on the important topics of Board oversight of risk and strategy; management and Board succession planning; capital allocation; corporate governance; PepsiCo’s Performance with Purpose sustainability goals; water scarcity; nutrition; the impact of PepsiCo’s supply chain on human rights and environmental matters; and various other issues. In the two-month period prior to our 2016 Annual Meeting of Shareholders, we contacted our 75 largest shareholders, representing over 43% of our outstanding shares of Common Stock, to discuss a broad range of topics. Of this group, shareholders representing nearly 23% of our outstanding shares of Common Stock spoke with us prior to the 2016 Annual Meeting. Subsequent to the 2016 Annual Meeting, we continued our outreach efforts to develop a better understanding of the feedback received from shareholders.

PepsiCo regularly meets with stakeholders, often in collaboration with groups such as Ceres, a prominent nonprofit organization that brings together investors, non-governmental organizations and businesses in support of sustainability. During these meetings, our shareholders and other stakeholders engage on such topics as climate change, water scarcity, public health, human rights, sustainable agriculture, environmental impact and sustainability reporting.

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Our Commitment to Sustainable Business Practices

PepsiCo is guided by Performance with Purpose – our vision to deliver top-tier financial performance over the long term by integrating sustainability into our business strategy.

We believe that continuously improving the products we sell, operating responsibly to protect our planet and empowering people around the world is what will enable PepsiCo to run a successful global company that creates long-term value for society and our shareholders. Since PepsiCo first articulated the concept in 2006, Performance with Purpose has been woven into all aspects of our business.

PepsiCo is pleased to share the progress we are making in our Performance with Purpose journey, and in October 2016 we announced our new Performance with Purpose goals for the next ten years. These goals broaden our efforts in a way that responds to changing consumer and societal needs and focus on building a healthier future for all of our stakeholders. The following are available on the Company’s website at www.pepsico.com under “What We Believe”—“Sustainability Reporting:"

| ● | Sustainability
Report , which presents our
sustainability goals and provides data, as well as examples of our efforts
to achieve those goals; and |
| --- | --- |
| ● | GRI Report , which offers greater detail on PepsiCo’s activities in
a widely accepted format. |

To assist our Board in its oversight and to align with our new Performance with Purpose agenda, the Board also refined the roles of its Committees by establishing a new Public Policy and Sustainability Committee in early 2017. The new Committee (which is comprised entirely of independent directors) will assist the Board in providing more focused oversight over the Company’s policies, programs and related risks that concern key public policy and sustainability matters.

Our Board of Directors

Our business and affairs are overseen by our Board of Directors pursuant to the North Carolina Business Corporation Act and our By-Laws. Members of the Board of Directors oversee the Company’s business by participating in Board and Committee meetings, by reviewing materials provided to them and through discussions with the Chairman and CEO and with key members of management.

Director Election Requirements and Majority-Vote Policy

All members of the Board are elected annually by our shareholders by a majority of the votes cast in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to be elected), meaning that the number of votes cast “for” a director must exceed the number of votes cast “against” that director in order to elect the director to the Board. In a contested election, where the number of director nominees exceeds the number of directors to be elected, directors will be elected by a plurality vote. Under our Director Resignation Policy set forth in our Corporate Governance Guidelines, if a director nominee in an uncontested election receives more votes “against” than votes “for” his or her election, he or she must offer to resign from the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on the resignation offer. Within 90 days following certification of the shareholder vote, the independent directors will determine, considering the best interests of the Company and its shareholders, whether to accept the director’s resignation, and the Company will promptly publicly disclose such determination. A director who offers to resign pursuant to this Policy may not be present during the deliberations or voting by the Nominating and Corporate Governance Committee or the Board as to whether to accept the resignation offer.

Outstanding Board Attendance

Regular attendance at Board meetings and the Annual Meeting is expected of each director. In fiscal year 2016, our Board of Directors held six meetings and our Committees held 19 meetings in the aggregate. In fiscal year 2016, no incumbent director attended fewer than 75% of the total number of Board and applicable Committee meetings (held during the period that such director served) and average attendance of our incumbent directors at Board and applicable Committee meetings (held during the period that such director served) was 99%. Thirteen of the 14 directors then serving attended the 2016 Annual Meeting of Shareholders.

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Board Leadership Structure

PepsiCo’s governing documents allow the roles of Chairman of the Board and CEO to be filled by the same or different individuals. This approach allows the Board flexibility to determine whether the two roles should be separate or combined based upon the Company’s needs and the Board’s assessment of the Company’s leadership from time to time. Although our Board regularly considers and is open to different structures as circumstances may warrant, the Board believes that the current arrangement of having a strong independent Presiding Director combined with the leadership of our Chairman and CEO is in the best interests of PepsiCo and its shareholders at this time. As part of its most recent Board leadership assessment, the Board gave thorough consideration to the strategic goals of the Company, the unique opportunities and challenges PepsiCo is facing, the various capabilities of our directors, the dynamics of our Board, best practices in the market, the current industry environment and the status of PepsiCo’s progress with respect to key strategic initiatives, among other factors, in determining that this leadership structure continues to strike the right balance between effective independent oversight of PepsiCo’s business and Board activities and consistent corporate leadership.

The independent directors believe that our current Chairman of the Board and CEO, Indra K. Nooyi, as an experienced leader with extensive knowledge of the Company and the food and beverage industry, serves as a highly effective bridge between the Board and management and provides the vision and leadership to execute on the Company’s strategy and create shareholder value. As the Company continues to implement its ongoing business transformation, the independent directors believe that the Company is best served by having the architect and leader of that strategy as Chairman of the Board.

Our Corporate Governance Guidelines provide that if the Chairman of the Board is not an independent director, an independent director shall be designated as the Presiding Director by the independent members of the Board based on the recommendation of the Nominating and Corporate Governance Committee. The independent director who is designated as the Presiding Director is expected to serve in that role for a three-year term. The Board evaluates the Presiding Director’s performance annually under the guidance of the Nominating and Corporate Governance Committee. The duties of our Presiding Director are consistent with the responsibilities generally held by “lead directors” at other public companies.

| Presiding Director
Duties: | |
| --- | --- |
| ● | Presides at
all meetings of the Board at which the Chairman of the Board is not
present, including executive sessions of the independent directors |
| ● | Serves as a
liaison between the Chairman of the Board and the independent directors |
| ● | Has
authority to approve information sent to the Board |
| ● | Approves
meeting agendas for the Board |
| ● | Approves
meeting schedules to assure that there is sufficient time for discussion
of all agenda items |
| ● | Has the
authority to call meetings of the independent directors |
| ● | If requested
by major shareholders, ensures that he or she is available for
consultation and direct communication |

In recognition of his skills in overseeing the Company’s strong governance policies and practices and his overall leadership and communication abilities, the independent members of the Board of Directors re-elected Ian M. Cook as the Presiding Director of the Board in February 2016 for another three-year term. Mr. Cook is an engaged and active director who, as a current chief executive officer of a multinational consumer products company, is uniquely positioned to work collaboratively with our Chairman and CEO, while providing strong independent oversight. In addition to the above responsibilities and assisting the Board of Directors in the fulfillment of its responsibilities in general, Mr. Cook, as the Presiding Director, has over the past few years performed additional duties including:

| ● | meeting with the Chairman and CEO
after the executive sessions of independent directors held at each
regularly scheduled Board meeting to provide feedback on the independent
directors’ deliberations; |
| --- | --- |
| ● | regularly speaking with the Chairman
and CEO between Board meetings to discuss matters of concern, often
following consultation with the other independent directors; |
| ● | meeting regularly with members of
senior management other than the Chairman and CEO; and |
| ● | meeting with
shareholders. |

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Director Independence

Independence Determination

The Company’s Corporate Governance Guidelines provide that an independent director is a director who meets the New York Stock Exchange definition of independence, as determined by the Board. This definition is included in the Corporate Governance Guidelines, which are available at www.pepsico.com under “Who We Are”—“Corporate Governance.” In making a determination of whether a director is independent, the Board of Directors considers all relevant facts and circumstances, including but not limited to the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships.

Consistent with these considerations, the Board of Directors has affirmatively determined that all of our non-management director nominees, who are listed below, are independent within the meaning of the rules of the New York Stock Exchange. The Board also determined that Lloyd G. Trotter, who will retire from the Board of Directors effective as of the 2017 Annual Meeting, is independent. The Board had previously determined that Alberto Ibargüen, who served on the Board during a portion of 2016, was independent.

| Independent Director
Nominees — Shona L. Brown | Dina Dublon | William R.
Johnson | Daniel
Vasella |
| --- | --- | --- | --- |
| George W.
Buckley | Rona A. Fairhead | David C. Page | Darren Walker |
| Cesar Conde | Richard W.
Fisher | Robert C. Pohlad | Alberto
Weisser |
| Ian M. Cook | | | |

In arriving at the foregoing independence determination, the Board of Directors thoroughly considered the relationships described under “Transactions with Related Persons” on page 25 of this Proxy Statement and determined that they do not impair Mr. Pohlad’s independence or his ability to exercise independent judgment in carrying out the responsibilities of a director.

Executive Sessions of Independent Directors

The independent directors hold regularly scheduled executive sessions of the Board and its Committees without Company management present. These executive sessions are chaired by the Presiding Director (at Board meetings) or by the Committee Chairs (at Committee meetings). The independent directors met in executive session at all of the regularly scheduled Board and Committee meetings held in 2016.

Related Person Transactions

The Board of Directors has adopted written Related Person Transaction Policies and Procedures that generally apply to any transaction or series of transactions:

| ● | in which the Company or a subsidiary
was or is a participant; |
| --- | --- |
| ● | where the amount involved exceeds or
is expected to exceed $120,000 since the beginning of the Company’s last
completed fiscal year; and |
| ● | the related person (i.e., a
director, director nominee, executive officer, greater than five percent
beneficial owner of the Company’s Common Stock, or any immediate family
member of any of the foregoing) has or will have a direct or indirect
material interest. |

The transactions described above are submitted to the Audit Committee for review and approval or ratification.

Review and Approval of Transactions with Related Persons

In determining whether to approve, ratify or disapprove of the entry into a related person transaction, the Audit Committee considers all relevant facts and circumstances and takes into account, among other factors:

| ● | whether the transaction is on terms
no less favorable than terms generally available to an unaffiliated third
party under the same or similar circumstances; |
| --- | --- |
| ● | whether the transaction would impair
the independence of an outside director; and |
| ● | whether the transaction would
present an improper conflict of interest for any director or executive
officer of the Company. |

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The Audit Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. The Company’s General Counsel maintains a list of transactions deemed pre-approved under the policy for review by any Board member.

Transactions with Related Persons

Robert C. Pohlad, a director of the Company, indirectly owns one-third of the voting interests in the Minnesota Twins, a Major League Baseball team, and the remaining voting interests are indirectly owned by his brothers, William Pohlad and James Pohlad. The majority of the non-voting interests in the Minnesota Twins are owned indirectly by Mr. Pohlad and members of his immediate family and through trusts for the benefit of Mr. Pohlad’s descendants and descendants of members of his immediate family. Members of Mr. Pohlad’s immediate family are employed by the Minnesota Twins, including James Pohlad, who serves as Executive Chair and Chairman of the Board. In fiscal year 2016, PepsiCo made payments to the Minnesota Twins of approximately $730,000 in connection with a sponsorship agreement, and PepsiCo received payments of approximately $670,000 from the Minnesota Twins and an independent third party in connection with the sale of PepsiCo products at the Minnesota Twins’ stadium. Transactions between the Minnesota Twins and PepsiCo, individually and in the aggregate, represented less than 1% of the annual revenues of the Minnesota Twins and PepsiCo in each of 2016, 2015 and 2014. The sponsorship agreement and sale of PepsiCo products are ongoing, and Mr. Pohlad is not involved in negotiating these arms-length transactions.

In addition, Mr. Pohlad’s wife, Rebecca Pohlad, and their children are beneficiaries of irrevocable trusts that own Christen Group, LLC (“ Christen Group ”) and Mr. Pohlad’s father-in-law, Paul Christen, is an executive officer of Christen Group. In fiscal year 2016, PepsiCo made payments of approximately $170,000 to Christen Group in connection with the leasing of a distribution center owned by Christen Group. PepsiCo entered into the lease in August 2013, prior to Christen Group’s acquisition of the distribution center in December 2013. The lease expires in October 2023 and the terms of this leasing transaction remain unchanged from prior years. Transactions between Christen Group and PepsiCo, individually and in the aggregate, are not material to PepsiCo, Mr. Pohlad, any of Mr. Pohlad’s family members, or Christen Group.

The Board thoroughly considered these relationships and determined that they do not impair Mr. Pohlad’s independence or his ability to exercise independent judgment in carrying out the responsibilities of a director.

In addition, Jennifer Carey, daughter-in-law of Albert P. Carey, PepsiCo’s CEO, North America, is a Director of Retail Sales at PepsiCo and received total compensation of approximately $145,000 in 2016. She also participates in the general welfare and benefit plans of PepsiCo. Ms. Carey’s compensation was established in accordance with PepsiCo’s employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. Mr. Carey does not have a material interest in his daughter-in-law’s employment, nor does he share a household with her.

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Committees of the Board of Directors

The Board of Directors has four Committees: Audit, Compensation, Nominating and Corporate Governance, and Public Policy and Sustainability. The table below indicates the members of each Board committee:

| | Audit | Nominating and
Corporate Governance |
| --- | --- | --- |
| Shona L. Brown | ● | ● |
| George W. Buckley | ● | |
| Cesar
Conde | ● | |
| Ian M. Cook (Presiding
Director) | | ● |
| Dina Dublon | | ● |
| Rona A. Fairhead | ● | ● |
| Richard W.
Fisher | ● | |
| William R. Johnson | ● | |
| Indra K. Nooyi | | |
| David C. Page | ● | ● |
| Robert C. Pohlad | | ● |
| Lloyd G.
Trotter | ● | ● |
| Daniel Vasella | ● | ● |
| Darren Walker | | ● |
| Alberto
Weisser | ● | |

Committee Chair Financial Expert

• Effective as of the 2017 Annual Meeting, Lloyd G. Trotter will not stand for re-election and will retire from the Board and its Committees, and Shona L. Brown will become Chair of the Compensation Committee.

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| Audit
Committee |
| --- |
| Met nine times in 2016 Current Committee Members Alberto
Weisser (Chair) George W. Buckley Cesar Conde Richard W.
Fisher William R.
Johnson |

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| Compensation Committee |
| --- |
| Met five times in 2016 Current Committee Members Lloyd
G. Trotter (Chair) Shona L. Brown Rona A. Fairhead David C.
Page Daniel
Vasella |

Compensation Advisor

The Compensation Committee has engaged Frederic W. Cook & Co., Inc. (“ FW Cook ”) as its independent external advisor. The Compensation Committee reviewed its relationship with FW Cook, considered FW Cook’s independence and the existence of potential conflicts of interest, and determined that the engagement of FW Cook did not raise any conflict of interest or other issues that would adversely impact FW Cook’s independence. In reaching this conclusion, the Compensation Committee considered various factors, including the six factors set forth in the SEC and New York Stock Exchange corporate governance listing standards regarding compensation advisor conflicts of interest and independence.

Compensation Committee Interlocks and Insider Participation

Shona L. Brown, Rona A. Fairhead, Alberto Ibargüen, David C. Page, Lloyd G. Trotter and Daniel Vasella served on the Company’s Compensation Committee during all or a portion of the 2016 fiscal year. No member of the Compensation Committee is now, or was during 2016, an officer or employee of the Company. No member of the Compensation Committee had any relationship with the Company or any of its subsidiaries during 2016 pursuant to which disclosure would be required under applicable SEC rules pertaining to the disclosure of transactions with related persons. None of the executive officers of the Company currently serves or served during 2016 on the board of directors or compensation committee of another company at any time during which an executive officer of such other company served on PepsiCo’s Board of Directors or Compensation Committee.

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| Nominating
and Corporate Governance Committee |
| --- |
| Met five times in 2016 Current Committee Members Daniel Vasella (Chair) Ian M. Cook Rona A.
Fairhead Robert C. Pohlad Lloyd G. Trotter |

| Public Policy
and Sustainability Committee |
| --- |
| Established in 2017 Current Committee Members Dina Dublon (Chair) Shona L. Brown David C.
Page Darren Walker |

Board Composition and Refreshment

We believe the Board benefits from a mix of new directors who bring fresh perspectives and longer-serving directors who bring valuable experience, continuity and a deep understanding of the Company. The Board strives to maintain an appropriate balance of tenure, turnover, diversity, skills and experience. To promote thoughtful Board refreshment, we have:

| ● | adopted a policy in
which no director may stand for election to the Board after reaching the
age of 72; |
| --- | --- |
| ● | developed a
comprehensive, ongoing Board succession planning process; and |
| ● | implemented an annual
Board and Committee self-assessment process. |

Since the beginning of 2014, seven directors have joined the Board. The average age of our director nominees is 60.4 years. The average tenure of our independent director nominees and all our director nominees is 5.1 years and 5.9 years, respectively.

Comprehensive, Ongoing Process for Board Succession Planning and Selection and Nomination of Directors

The Board regularly reviews potential vacancies on the Board and maintains an “evergreen” compilation of potential candidates that it regularly reviews at Board meetings. The Nominating and Corporate Governance Committee assists this process by considering prospective candidates and identifying appropriate individuals for the Board’s further consideration.

In fulfilling its responsibility to identify qualified candidates for membership on the Board, the Nominating and Corporate Governance Committee considers the following attributes of candidates: (i) relevant knowledge, diversity

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of background and experience in areas including business, finance, accounting, technology, marketing, international business and government; (ii) personal qualities of leadership, character, judgment and whether the candidate possesses a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards; (iii) roles and contributions valuable to the business community; and (iv) whether the candidate is free of conflicts and has the time required for preparation, participation and attendance at meetings. Throughout the director selection and nomination process, the Board adheres to the Company’s philosophy of maintaining an environment free from discrimination on the basis of race, color, religion, sex, sexual orientation, gender identity, age, national origin, disability, veteran status or any other protected category under applicable law.

From time to time, the Nominating and Corporate Governance Committee engages consulting firms to perform searches for director candidates who meet the current needs of the Board. If a consulting firm is retained to assist in the search process for a director, a fee is paid to such firm.

The Nominating and Corporate Governance Committee also assists the Board in considering succession planning for Board positions such as the Presiding Director and chairs of the committees. The Board elected a new chair of our Nominating and Corporate Governance Committee in 2015, a new chair of our Audit Committee in 2016 and a new chair of our Compensation Committee in 2017 (effective as of the 2017 Annual Meeting of Shareholders).

Consideration of Board Diversity

The Nominating and Corporate Governance Committee and the Board are keenly focused on ensuring that a wide range of backgrounds and experiences are represented on our Board. Fifty percent of our director nominees are women or ethnically diverse individuals.

The Nominating and Corporate Governance Committee seeks a Board with diverse opinions and perspectives that is representative of our global business. While not a formal policy, PepsiCo’s director nomination processes call for the consideration of a range of types of diversity, including race, gender, ethnicity, culture, nationality and geography. In fact, diversity is one of the enumerated criteria that the Board has identified as critical in maintaining among its current and potential directors. The Board annually assesses the diversity of its members as part of its self-assessment process.

Shareholder Recommendations and Nominations of Director Candidates

The Nominating and Corporate Governance Committee will consider recommendations for director nominees made by shareholders and evaluate them using the same criteria as for other candidates. Recommendations received from shareholders are reviewed by the Chair of the Nominating and Corporate Governance Committee to determine whether each candidate meets the minimum criteria set forth in the Corporate Governance Guidelines, and if so, whether the candidate’s expertise and particular set of skills and background fit the current needs of the Board. Any shareholder recommendation must be sent to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577 and must include detailed background information regarding the suggested candidate that demonstrates how the individual meets the Board membership criteria.

We amended our By-Laws to permit proxy access for shareholders. Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-Laws should see “2018 Shareholder Proposals and Director Nominations” on pages 78-79 of this Proxy Statement for further information.

Board and Committee Self-Assessments

Our Board continually seeks to improve its performance. Pursuant to New York Stock Exchange requirements, PepsiCo’s Corporate Governance Guidelines and the Charters of each of the Board’s Committees, the Board and each of its Committees are required to conduct a self-evaluation at least annually. Our processes enable directors to provide anonymous and confidential feedback on topics including:

●	Board/Committee information and materials;
●	Board/Committee meeting mechanics
and structure;
●	Board/Committee
composition;

| ● | Board/Committee responsibilities and
accountability; |
| --- | --- |
| ● | Board meeting content and conduct;
and |
| ● | overall performance of Board
members. |

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To promote effectiveness of the Board and each Committee, the self-assessment results are reviewed and addressed by the Nominating and Corporate Governance Committee, the members of each Committee and the independent directors both alone in an executive session led by the Presiding Director and with members of management.

This process helps identify opportunities to continue to enhance the performance of the Board and the Committees and consider implementing practices and procedures as appropriate. The Nominating and Corporate Governance Committee annually reviews the format of the evaluation process and periodically considers whether individual director interviews and/or third-party assessments should be conducted to supplement the Board and Committee self-assessment process. The Board also reviews the Nominating and Corporate Governance Committee’s periodic recommendations concerning the performance of the Board, each of its Committees and the Presiding Director. While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback and suggestions year-round.

The Board’s Oversight of Risk Management

The Board recognizes that the achievement of our strategic and operating objectives involves taking risks. The Board has oversight responsibility for PepsiCo’s integrated risk management framework, which is designed to identify, assess, prioritize, address, manage, monitor and communicate these risks across the Company’s operations, and foster a corporate culture of integrity and risk awareness. Consistent with this approach, one of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks.

In addition, the Board has tasked designated Committees of the Board to assist with the oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.

| ● | The Audit
Committee reviews and assesses the guidelines and policies governing the
Company’s risk management and oversight processes and assists with the
Board’s oversight of financial, compliance and employee safety risks
facing the Company; |
| --- | --- |
| ● | The Compensation Committee reviews
the Company’s employee compensation policies and practices to assess
whether such policies and practices could lead to unnecessary risk-taking
behavior; and |
| ● | In 2017, the Board established a
Public Policy and Sustainability Committee to assist the Board in its
oversight of the Company’s policies, programs and related risks that
concern key public policy and sustainability
matters. |

In addition, throughout the year, the Board and the relevant Committees receive updates from management with respect to various enterprise risk management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail.

The Company’s integrated risk management framework also includes both division-level and key country risk committees that are comprised of cross-functional senior management teams and that work together to identify, assess, prioritize and address division- and country-specific business risks. The Company’s senior management engages with and reports to PepsiCo’s Board of Directors and the relevant Committees on a regular basis to address high-priority risks.

At its February 2017 meeting, the Compensation Committee reviewed the results of the 2016 annual compensation risk assessment and concluded that the risks arising from the Company’s overall compensation programs are not reasonably likely to have a material adverse effect on the Company.

The Company believes that the Board’s leadership structure, discussed in detail under “Board Leadership Structure” on page 23 of this Proxy Statement, supports the risk oversight function of the Board by providing for open communication between management and the Board. In addition, strong independent directors chair the various Committees involved in assisting with risk oversight, and all directors are involved in the risk oversight function.

The Board’s Role in Strategy Oversight

The Board has deep experience and expertise in the areas of strategy development and governance. Setting the strategic course of the Company involves a high level of constructive engagement between management and the Board. Our entire Board acts as a strategy committee and regularly discusses the strategic priorities of our Company, taking into consideration global economic, consumer and other significant trends, as well as changes in the food and beverage industries and regulatory initiatives. In addition to dedicating a multi-day meeting to an extensive review of the Company’s strategic plans annually, the Board receives information and updates from management with respect to strategy throughout the year and discusses strategy at almost every Board meeting. PepsiCo’s independent directors also hold regularly scheduled executive sessions without Company management present, at which strategy is discussed. In addition, the Board regularly discusses and reviews feedback on strategy from our shareholders and stakeholders.

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The Board’s Role in Talent Development

The Board believes that talent development is vital to PepsiCo’s continued success. Our Board’s involvement in leadership development and succession planning is systematic and ongoing, and the Board provides input on important decisions in each of these areas. The Board has primary responsibility for succession planning for the CEO and oversight of other executive officer positions, and the Nominating and Corporate Governance Committee oversees the development of the process and protocols regarding succession plans for the CEO. To assist the Board, the CEO annually provides the Board with an assessment of senior managers and their potential to succeed to the position of CEO, developed in consultation with the Presiding Director and the Chair of the Nominating and Corporate Governance Committee. The Board meets regularly with high-potential executives, both in small group and one-on-one settings.

Political Contributions Policy

In 2005, the Board of Directors adopted a Political Contributions Policy for the Company, which is amended from time to time. The Political Contributions Policy, together with other policies and procedures of the Company, guide PepsiCo’s approach to political contributions. As specified in its Charter, the Public Policy and Sustainability Committee oversees this policy and is responsible for reviewing the Company’s key public policy trends, issues and regulatory matters, its engagement in the public policy process and the Company’s political activities and expenditures, responsibilities previously held by our Nominating and Corporate Governance Committee. PepsiCo’s Board receives information regarding the Company’s public policy initiatives and developments at every regularly scheduled Board meeting.

In keeping with our goal of transparency, our Political Contributions Policy and our annual U.S. political contributions are posted at www.pepsico.com under “What We Believe”—“Policies.” Additionally, over the years, we have significantly enhanced our website disclosure of political spending and lobbying activities by including the following information:

| ● | a link to
PepsiCo’s quarterly federal lobbying reports; |
| --- | --- |
| ● | the total annual amount of PepsiCo’s
federal lobbying-related expenditures in the United
States; |
| ● | information about our key lobbying
priorities and our Board’s oversight of political spending and lobbying
activities; |
| ● | a list of U.S. trade associations
and policy groups that lobby on behalf of PepsiCo to which PepsiCo
contributes over $25,000 annually; and |
| ● | the names of the lobbyists with
which we directly contract. |

Communications with the Board

The PepsiCo Corporate Law Department reviews all communications sent to the Board of Directors and regularly provides to the Board a summary of communications that relate to the functions of the Board or a Board Committee or that otherwise warrant Board attention. Copies of such communications are also made available to the Board. Directors may at any time discuss the Board communications received by the Company. In addition, the Corporate Law Department may forward certain communications only to the Presiding Director, the Chair of the relevant Committee or the individual Board member to whom a communication is directed. Concerns relating to PepsiCo’s accounting, internal accounting controls or auditing matters will be referred directly to members of the Audit Committee. Those items that are unrelated to the duties and responsibilities of the Board or its Committees may not be provided to the Board by the Corporate Law Department, including, without limitation, business solicitations, advertisements and surveys; requests for donations and sponsorships; job referral materials such as resumes; product-related communications; unsolicited ideas and business proposals; and material that is determined to be illegal or otherwise inappropriate.

Shareholders and other interested parties may send communications directed to the Board, a Committee of the Board, Presiding Director, independent directors as a group or an individual director by any of the following means:

| By
Phone — ● | 1-866-626-0633 | By
Mail — ● | PepsiCo Board of
Directors ATTN: Corporate Secretary PepsiCo, Inc. 700 Anderson Hill Road Purchase, New York
10577 | Online — ● | Submit a communication
through our website www.pepsico.com under “Who We Are”—“Corporate
Governance”—“Contact the Board” |
| --- | --- | --- | --- | --- | --- |

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2016 Director Compensation

Non-employee directors are compensated for their service on the Board as described below. Directors who are employees of the Company receive no additional compensation for serving as directors.

Annual Compensation

Each non-employee director receives annual compensation of $110,000 in the form of an annual cash retainer and $165,000 in the form of an annual equity retainer.

| Annual Director
Compensation | Additional
Compensation |
| --- | --- |
| ● | An additional $30,000 cash retainer ● Nominating and Corporate Governance Committee
Chair ● Public Policy and Sustainability Committee
Chair An additional $40,000 cash retainer ● Audit Committee Chair ● Compensation Committee Chair An additional $50,000 cash retainer ● Presiding Director |

The $165,000 annual equity retainer is provided in phantom units of PepsiCo Common Stock that are immediately vested and are payable on the first day of the calendar quarter following the first anniversary of the director’s retirement or resignation from PepsiCo’s Board of Directors. The number of phantom units of PepsiCo Common Stock granted to each director on October 1, 2016 was determined by dividing the $165,000 equity retainer value by the closing price of PepsiCo Common Stock on the next business day following the grant date, which was $108.25. As such, each director was granted 1,524 phantom units, each representing the right to receive one share of PepsiCo Common Stock and dividend equivalents. Dividend equivalents are reinvested in additional phantom units. Directors may also elect to defer their cash compensation into phantom units payable at the end of the deferral period selected by the directors.

Directors are reimbursed for expenses incurred to attend Board and Committee meetings and receive business travel and accident insurance coverage. Directors do not receive any meeting fees. Directors do not have a retirement plan or receive any benefits such as life or medical insurance. Directors are eligible for matching of charitable contributions through the PepsiCo Foundation, which is generally available to all PepsiCo employees.

Initial Share Grant

Each newly appointed non-employee director receives a one-time grant of 1,000 shares of PepsiCo Common Stock when he or she joins the Board. These shares are immediately vested but must be held until the director leaves the Board.

Governance Features

Our compensation program for non-employee directors operates with the following governance features which are similar to programs for our executive officers:

Stock Ownership Requirements. To reinforce our ownership philosophy, non-employee directors are required to own shares of PepsiCo Common Stock equal to at least $550,000 (five times the annual cash retainer). Shares or phantom units of PepsiCo Common Stock held either directly by the non-employee director (or immediate family members), in the director’s deferred compensation account, or in a trust for the benefit of immediate family members, count towards satisfying the requirement.

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Non-employee directors have five years from their appointment to meet their stock ownership requirement. All of our non-employee directors have met or are on track to meet their objectives within the five-year time requirement.

Clawback Provision. Under the terms of our long-term incentive plans, non-employee directors who violate PepsiCo’s Global Code of Conduct, who violate applicable non-compete provisions, or who engage in gross misconduct may be subject to financial consequences. Our long-term incentive plans permit PepsiCo to cancel a non-employee director’s outstanding equity awards if PepsiCo determines that the non-employee director has committed any such violation. The long-term incentive plans also permit PepsiCo to claw back all gains from exercised stock options received within the 12 months preceding the violation.

Prohibition on Hedging and Pledging. Our insider trading policy prohibits all directors (including non-employee directors) from using any strategies or products (such as derivative securities or short-selling techniques) to hedge against the potential changes in the value of PepsiCo Common Stock. In addition, directors may not hold PepsiCo securities in a margin account or pledge PepsiCo stock or PepsiCo stock options as collateral for a loan.

Limited Trading Windows. Our directors (including non-employee directors) can only transact in PepsiCo securities during approved trading windows after satisfying mandatory clearance requirements.

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2016 DIRECTOR COMPENSATION

2016 Non-Employee Director Compensation

The following table summarizes the compensation of the non-employee directors for the fiscal year ended December 31, 2016.

| Name | Fees
Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | All
Other Compensation ($) (3) | Total ($) |
| --- | --- | --- | --- | --- |
| Shona L. Brown | 110,000 | 165,000 | — | 275,000 |
| George W. Buckley | 110,000 | 165,000 | — | 275,000 |
| Cesar Conde (4) | 82,500 | 360,535 | — | 443,035 |
| Ian
M. Cook | 160,000 | 165,000 | — | 325,000 |
| Dina
Dublon (5) | 126,667 | 165,000 | 10,000 | 301,667 |
| Rona
A. Fairhead | 110,000 | 165,000 | — | 275,000 |
| Richard W. Fisher | 110,000 | 165,000 | — | 275,000 |
| Alberto Ibargüen (6) | 45,833 | — | — | 45,833 |
| William R. Johnson | 110,000 | 165,000 | — | 275,000 |
| David C. Page | 110,000 | 165,000 | 20,000 | 295,000 |
| Robert C. Pohlad | 110,000 | 165,000 | — | 275,000 |
| Lloyd G. Trotter | 150,000 | 165,000 | 10,000 | 325,000 |
| Daniel Vasella | 140,000 | 165,000 | 10,000 | 315,000 |
| Darren Walker (7) | 18,333 | 271,625 | — | 289,958 |
| Alberto
Weisser (8) | 133,333 | 165,000 | — | 298,333 |

| (1) | The retainer fee reflects a
payment of $55,000 made in arrears in June 2016 for service during the
period December 1, 2015 through May 31, 2016 and a payment of $55,000 made
in arrears in December 2016 for service during the period June 1, 2016
through November 30, 2016. The following directors elected to defer their
2015-2016 cash compensation into PepsiCo’s director deferral program: Dr.
Buckley deferred his $110,000 retainer fees into 1,097 phantom stock
units; Mr. Trotter deferred his $150,000 retainer fees into 1,496 phantom
stock units; Dr. Vasella deferred his $140,000 retainer fees into 1,396
phantom stock units. The number of phantom units of PepsiCo Common Stock
each director deferred on June 1, 2016 and December 1, 2016 was determined
by dividing their deferred cash compensation by the closing price of
PepsiCo Common Stock on the grant date, which was $101.57 and $99.03,
respectively. |
| --- | --- |
| (2) | The amounts reported for stock
awards represent the full grant date fair value of the phantom stock units
granted in 2016 calculated in accordance with the accounting guidance on
share-based payments. |
| (3) | The amounts reported in this
column include PepsiCo Foundation matching gift and other charitable
contributions or commitments. PepsiCo Foundation matching gift
contributions are available to all PepsiCo employees and PepsiCo
non-employee directors. Under the matching gift program, the PepsiCo
Foundation matches cash or stock donations to recognized tax-exempt
organizations, with PepsiCo Foundation annual contributions capped at
$10,000. If an eligible individual is a member of a qualified board of a
tax-exempt organization and makes a financial contribution to such
organization, such individual is eligible for a double-match, increasing
the annual cap to $20,000. |
| (4) | Upon joining the Board on March
4, 2016, Mr. Conde received the one-time grant of 1,000 shares of PepsiCo
Common Stock granted to all new directors. He also received a pro-rated
annual cash retainer of $27,500 for service from March 4, 2016 through May
31, 2016 and a pro-rated annual equity retainer of $96,250 for service
from March 4, 2016 through September 30, 2016. He also received the
$55,000 annual cash retainer for service from June 1, 2016 through
November 30, 2016 and $165,000 annual equity retainer on October 1, 2016
to compensate him for the period October 1, 2016 through September 30,
2017. |
| (5) | Ms. Dublon rotated from her role
as Chair of the Audit Committee effective May 4, 2016; therefore her
retainer fee includes a pro-rata amount of $16,667 for service from
December 1, 2015 to May 4, 2016. |
| (6) | Mr. Ibargüen retired from the
Board effective May 4, 2016; therefore, his retainer fee includes a
pro-rata amount of $45,833 for service from December 1, 2015 to May 4,
2016. |
| (7) | Upon joining the Board on
September 21, 2016, Mr. Walker received the one-time grant of 1,000 shares
of PepsiCo Common Stock granted to all new directors. He also received a
pro-rated annual cash retainer of $18,333 for service from September 21,
2016 through November 30, 2016 and the $165,000 annual equity retainer on
October 1, 2016 to compensate him for the period October 1, 2016 through
September 30, 2017. |
| (8) | Mr. Weisser became Chair of the
Audit Committee effective May 4, 2016; therefore, his retainer fee
includes a pro-rata amount of $23,333 for service from May 4, 2016 to
November 30, 2016. |

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| Ratification of Appointment
of Independent Registered |
| --- |
| Public Accounting Firm (Proxy Item No.
2) |

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm (taking into account the vote on shareholder ratification). The Audit Committee has appointed KPMG LLP (“ KPMG ”) as PepsiCo’s independent registered public accounting firm for fiscal year 2017. KPMG has served as PepsiCo’s independent registered public accounting firm since 1990. While we are not required by our By-Laws or otherwise to seek shareholder ratification of the appointment of KPMG as our independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will take the vote into consideration when determining whether or not to retain KPMG. The Audit Committee believes that the continued retention of KPMG as our independent registered public accounting firm is in the best interests of our shareholders.

Representatives of KPMG are expected to be present and available to answer appropriate questions at the 2017 Annual Meeting and will have an opportunity to make statements during the meeting if they desire to do so.

Our Board of Directors recommends that shareholders vote “FOR” the ratification of the appointment of KPMG as PepsiCo’s independent registered public accounting firm for fiscal year 2017.

Audit Committee Report

PepsiCo’s Audit Committee reports to, and acts on behalf of, the Board. The Audit Committee is comprised solely of directors who satisfy applicable independence, financial literacy and other requirements of the New York Stock Exchange and applicable securities laws. A majority of the members of the Audit Committee are “audit committee financial experts” as defined by SEC rules and regulations.

The Audit Committee’s purpose and responsibilities are set forth in its charter, which is approved and adopted by the Board and is available on PepsiCo’s website at www.pepsico.com under “ Who We Are ”—“ Corporate Governance. ” The Audit Committee’s Charter is reviewed at least annually and updated, as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback.

During 2016, the Audit Committee met nine times and fulfilled each of its duties and responsibilities as outlined in its charter, including reviewing and assessing the guidelines and policies governing PepsiCo’s risk management and oversight processes, receiving an update on PepsiCo’s Law Department’s compliance with Part 205 of Section 307 of the Sarbanes-Oxley Act of 2002 regarding standards of professional conduct for attorneys and regularly meeting separately with PepsiCo’s General Counsel, Chief Compliance & Ethics Officer, General Auditor and Chief Financial Officer (see page 27 of this Proxy Statement for additional information regarding the Audit Committee’s responsibilities).

Selection and Oversight of the Independent Registered Public Accounting Firm . The Audit Committee assists the Board with its oversight of PepsiCo’s independent registered public accounting firm’s qualifications and independence. The Audit Committee is responsible for appointing, compensating, retaining and overseeing the work of PepsiCo’s independent registered public accounting firm, including reviewing and evaluating the performance of the lead audit partner as well as overseeing the required rotation and selection of the lead audit partner, and, through the Audit Committee Chair as its representative, reviewing and considering the selection of the lead audit partner. KPMG has served as PepsiCo’s independent registered public accounting firm since 1990, and KPMG’s current lead audit partner was selected in 2013.

The Audit Committee recognizes the importance of maintaining the independence of PepsiCo’s auditor, both in fact and in appearance. In 2016, the Audit Committee received and reviewed the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board (“ PCAOB ”) regarding KPMG’s communications with the Audit Committee concerning independence, and discussed with KPMG the firm’s independence from PepsiCo and management. These discussions included, among other things, a review of the nature of, and fees paid to KPMG for, non-audit services and the compatibility of such services with maintaining KPMG’s independence (see page 38 of this Proxy Statement for additional information). The Audit Committee concurred with KPMG’s conclusion that they are independent from PepsiCo and its management.

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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO. 2)

The Audit Committee also periodically considers whether there should be a rotation of PepsiCo’s independent registered public accounting firm. In addition to KPMG’s independence from PepsiCo and management, the Audit Committee also considers several other factors in deciding whether to re-engage KPMG, including: the quality of KPMG’s staff, work and quality control; KPMG’s policies related to independence; KPMG’s global reach; and KPMG’s capability and expertise to perform an audit of PepsiCo’s financial statements and internal control over financial reporting, given the breadth and complexity of PepsiCo’s business and global footprint. The Audit Committee also reviewed with KPMG the most recent report of the PCAOB on its inspection of KPMG.

Based on the foregoing, the Audit Committee has retained KPMG as PepsiCo’s independent registered public accounting firm for the fiscal year 2017 and recommends that shareholders ratify this appointment (see page 36 of this Proxy Statement for additional information regarding the shareholder vote).

Review and Recommendation Regarding Financial Statements . Management has primary responsibility for PepsiCo’s financial statements and the financial reporting process, including establishing effective internal control over financial reporting. KPMG is responsible for auditing those financial statements and internal control over financial reporting and expressing an opinion on the conformity of PepsiCo’s audited financial statements with generally accepted accounting principles and on the effectiveness of PepsiCo’s internal control over financial reporting. The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of PepsiCo’s financial statements.

In the performance of its oversight function, the Audit Committee met with management and KPMG to review and discuss PepsiCo’s audited financial statements and internal control over financial reporting, asked management and KPMG questions relating to such matters and discussed with KPMG the matters required to be discussed by applicable PCAOB auditing standards. These meetings and discussions included a review of the critical accounting policies applied by PepsiCo in the preparation of its financial statements and the quality (and not just the acceptability) of the accounting principles utilized, the reasonableness of significant accounting estimates and judgments, and the disclosures in PepsiCo’s consolidated financial statements. Based on the reviews and discussions described in this report, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for filing with the SEC.

The Audit Committee

| Alberto Weisser,
Chair | William R.
Johnson |
| --- | --- |
| George W.
Buckley | Robert C.
Pohlad |
| Cesar Conde | Darren Walker |
| Richard W.
Fisher | |

The information contained in the above report will not be deemed to be “soliciting material” or “filed” with the SEC, nor will this information be incorporated into any future filing under the Securities Act of 1933, as amended (the “ Securities Act ”), or the Exchange Act except to the extent the Company specifically incorporates such report by reference.

PEPSICO 2017 PROXY STATEMENT | 37

Table of Contents

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO. 2)

Audit and Other Fees

The following table presents fees incurred for professional audit services rendered by KPMG, the Company’s independent registered public accounting firm, for the audit of the Company’s annual consolidated financial statements for fiscal 2016 and fiscal 2015, and fees billed for other services rendered by KPMG in fiscal 2016 and fiscal 2015. The Audit Committee has pre-approved all fees paid to KPMG in accordance with the Policy for Pre-Approval of Audit, Audit-Related and Non-Audit Services, as discussed below.

Audit fees (1)	$ 21,209,000	$ 22,641,000
Audit-related fees (2)	$ 2,390,000	$ 2,545,000
Tax
fees (3)	$ 910,000	$ 1,018,000
All other
fees (4)	$ 0	$ 80,000

| (1) | Audit fees for fiscal 2016 and
fiscal 2015 consisted of fees for the audits of the Company’s annual
consolidated financial statements, the audit of the effectiveness of the
Company’s internal control over financial reporting, the reviews of the
financial statements included in the Company’s Quarterly Reports on Form
10-Q and services related to statutory audit filings or
engagements. |
| --- | --- |
| (2) | Audit-related fees for fiscal
2016 and fiscal 2015 consisted primarily of audits of certain employee
benefit plans, due diligence reviews and other procedures performed in
connection with business transactions, agreed upon procedures reports,
attestation reports and the issuance of comfort letters. |
| (3) | Tax fees for fiscal 2016 and
fiscal 2015 consisted primarily of international tax compliance
services. |
| (4) | All other fees for fiscal 2015
consisted of fees for services/assistance with operational process
assessments. |

Pre-Approval Policy and Procedures

We understand the need for the independent registered public accounting firm to maintain its objectivity and independence, both in appearance and in fact, in its audit of PepsiCo’s consolidated financial statements. Accordingly, the Audit Committee has adopted the PepsiCo Policy for Pre-Approval of Audit, Audit-Related and Non-Audit Services. The policy provides that the Audit Committee will engage the independent registered public accounting firm for the audit of PepsiCo’s consolidated financial statements and audit-related, tax and other non-audit services in accordance with the terms of the policy. The policy provides that on an annual basis the independent registered public accounting firm’s global lead audit partner will review with the Audit Committee the services the independent registered public accounting firm expects to provide in the coming year and the related fee estimates, and that the Audit Committee will consider for pre-approval a schedule of such services. The policy further provides that the Audit Committee will specifically pre-approve engagements of the independent registered public accounting firm for services that are not pre-approved through the annual process. The Audit Committee Chair is authorized under the policy to pre-approve any audit, audit-related, tax or other non-audit services between Audit Committee meetings, provided such interim pre-approvals are reviewed with the full Audit Committee at its next meeting. In addition, PepsiCo provides the Audit Committee with a status report at each of its regularly scheduled meetings regarding audit, audit-related, tax and other non-audit services that the independent registered public accounting firm has been pre-approved to perform, has been asked to provide or may be expected to provide during the balance of the year.

38 | PEPSICO 2017 PROXY STATEMENT

PART 08

Table of Contents

Advisory Approval of Executive Compensation
(Proxy Item
No. 3)

Pursuant to Section 14A of the Exchange Act, the Company asks shareholders to cast an advisory vote to approve the compensation of our Named Executive Officers disclosed in the “Executive Compensation” section beginning on page 40 of this Proxy Statement. While this vote is non-binding, PepsiCo values the opinions of its shareholders and, consistent with our record of shareholder engagement, will consider the outcome of the vote when making future compensation decisions.

In considering your vote, we invite you to review the Compensation Discussion and Analysis beginning on page 40 of this Proxy Statement. As described in the Compensation Discussion and Analysis, we believe that PepsiCo’s executive compensation programs effectively align the interests of our executive officers with those of our shareholders by tying a significant portion of their compensation to PepsiCo’s performance and by providing a competitive level of compensation needed to recruit, retain and motivate talented executives critical to PepsiCo’s long-term success.

We are asking our shareholders to vote FOR, in an advisory vote, the following resolution:

“Resolved, the shareholders of PepsiCo approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the 2016 Summary Compensation Table, the other compensation tables and the related notes and narratives on pages 40-65 of this Proxy Statement for the 2017 Annual Meeting of Shareholders.”

The Board has adopted a policy of providing annual advisory approvals of the compensation of our NEOs. The next advisory approval of executive compensation will occur at the 2018 Annual Meeting of Shareholders, unless the Board of Directors modifies its policy on the frequency of holding such advisory approvals based on the outcome of Proxy Item No. 4 on page 67 of this Proxy Statement to be voted on by the shareholders.

Our Board of Directors recommends that shareholders vote “FOR” the compensation of our Named Executive Officers.

PEPSICO 2017 PROXY STATEMENT | 39

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Executive Compensation

Compensation Discussion and Analysis

PepsiCo’s executive compensation programs are designed to align the interests of PepsiCo’s executive officers with those of our shareholders:

| ● | We provide market-competitive programs that enable PepsiCo to
attract and retain highly talented individuals with pay directly linked to
the achievement of performance goals designed to foster the creation of
sustainable long-term shareholder value. |
| --- | --- |
| ● | Our pay-for-performance
principles dictate that our executive officers should only receive target
payouts when PepsiCo achieves its financial goals. For this reason, our
Compensation Committee sets financial targets for incentive pay that align
with the external guidance communicated to
shareholders. |

2016 PepsiCo Performance

PepsiCo continued to deliver strong results in 2016, while achieving a good balance between revenue performance and productivity. In a challenging operating environment, we met or exceeded every financial goal we set for 2016, including the following non-GAAP measures used in our incentive pay programs. 5

Organic Revenue Growth 5 Core Constant Currency EPS Growth 5 Free Cash Flow Excluding Certain Items 5 Core Net ROIC 5

PepsiCo’s strong 2016 financial results reflect the progress we made in advancing our most important strategic priorities:

| ● | Innovation: We continued to advance our
portfolio transformation through our investment in R&D, which has
increased by 45% since 2011. In 2016, PepsiCo accounted for over 17% of
innovation sales at retail in the U.S., as measured by IRI 6 , -
more innovation than the next four innovation contributors combined. |
| --- | --- |
| ● | Brand Building: We increased our spending on
advertising and marketing as a percentage of net revenue by 40 basis
points in 2016 to 6.7%. Our brand investments yielded market share
improvements in the U.S. and other key markets. |
| ● | Execution: We maintained our focus on
marketplace execution. This enabled PepsiCo to once again be the largest
driver of growth for our food and beverage retail partners in the U.S., as
we contributed 18% of the total retail sales growth of food and beverage
categories. 6 |
| ● | Productivity: We delivered over $1 billion of
productivity savings during 2016. Our productivity agenda, focused on
driving both efficiency and effectiveness, has resulted in approximately
$1 billion in annual savings since 2012. |
| ● | Performance with Purpose: Continuing
PepsiCo’s decade-long commitment to delivering Performance with Purpose,
we launched an ambitious global sustainability agenda in 2016. The agenda
includes specific 2025 goals designed to continue transforming PepsiCo’s
product portfolio, contribute to a more sustainable global food system and
help make local communities more prosperous. |
| ● | Cash Return to Shareholders: We again increased our annualized dividend and met our goal of returning
$7 billion in cash to shareholders through dividends and share
repurchases. |

Our TSR reflects our strong 2016 results. We delivered 8% TSR, outpacing the median of our proxy peer group.

---

| 5 | To evaluate performance in a manner consistent with how management
evaluates our operating results and trends, the Compensation Committee
applies certain business performance metrics that are measured on a
non-GAAP basis to both long-term and annual incentive awards. Please refer
to Exhibit A to this Proxy Statement for a description and reconciliation
of these non-GAAP financial measures relative to reported GAAP financial
measures, and to pages 57-61 and 73-75 of PepsiCo’s 2016 Annual Report on
Form 10-K for the fiscal year ended December 31, 2016 for a more detailed
description of the items excluded from these measures. For 2016, Core
Constant Currency EPS Growth excludes the impact of the Venezuela
deconsolidation that occurred in 2015. |
| --- | --- |
| 6 | Source: Information Resources,
Inc. Consulting Analysis for Total U.S. Multi-Outlet Plus Convenience for
the 52 weeks ending December 25, 2016. |

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EXECUTIVE COMPENSATION

Impact of 2016 PepsiCo Performance on CEO Pay

Chairman and CEO Pay Decisions

The Board of Directors evaluates Ms. Nooyi’s performance and makes incentive pay decisions through a holistic assessment of her delivery of PepsiCo’s financial goals and her progress against PepsiCo’s strategic priorities to sustain long-term shareholder value. In 2016, Ms. Nooyi provided extraordinary strategic leadership in a volatile macroeconomic environment. She drove PepsiCo to achieve strong financial performance that met or exceeded each of the financial goals we set for 2016. At the same time, she made significant progress in strengthening PepsiCo for long-term success through her focus on brand-building, innovation, productivity and marketplace execution, as well as her continued commitment to delivering Performance with Purpose.

The Board recognized Ms. Nooyi’s 2016 performance by awarding her an annual cash incentive award of $5.25 million and a 2017 Long-Term Incentive (“ LTI ”) award with a grant date value of $14.0 million. The actual payout Ms. Nooyi realizes on her 2017 LTI award will depend upon achievement of critical operating and relative stock performance targets established by the Compensation Committee for the 2017-2019 performance period. After reviewing market data and other factors, the Board maintained Ms. Nooyi’s annual salary at $1.7 million for 2017.

CEO Pay-For-Performance Alignment

The PepsiCo TSR shown in the table above illustrates the year-to-year return, including stock price appreciation and reinvested dividends, on PepsiCo’s Common Stock on a calendar year basis, indexed to a 2013 base year. The table also illustrates the year-to-year growth of PepsiCo’s Core Constant Currency EPS Growth (2) on a fiscal year basis, indexed to a 2013 base year.

| (1) | The above chart is different than the 2016 Summary Compensation
Table on page 55 of this Proxy Statement. SEC rules require disclosure of
stock-settled awards in the year granted and disclosure of cash-settled
awards in the year in which the relevant performance criteria are
satisfied, whether or not payment is actually made in that year.
Consistent with these rules, Ms. Nooyi’s 2016 compensation reflected in
the 2016 Summary Compensation Table includes the Performance Stock Units
(“ PSUs ”) granted in 2016 and her Long-Term Cash (“ LTC ”) Award granted
in 2014, which is based on performance over the 2014-2016 performance
period and paid out in March 2017. |
| --- | --- |
| (2) | Please refer to Exhibit A to this Proxy Statement for a description
and reconciliation of this non-GAAP financial measure relative to the
reported GAAP financial measure, and to pages 57-61 and 73-75 of PepsiCo’s
2016 Annual Report on Form 10-K for the fiscal year ended December 31,
2016 for a more detailed description of the items excluded from this
measure. For 2016, Core Constant Currency EPS Growth excludes the impact
of the Venezuela deconsolidation that occurred in 2015. |
| (3) | LTI awards for the 2016
performance year consist of PSUs (66%) and LTC Awards (34%) under our
current LTI program design (further described in the “2016 & 2017
Long-Term Incentive Award Design” section on page 49 of this Proxy
Statement) and differ from the value reported in the 2016 Summary
Compensation Table under SEC disclosure rules. PSU and LTC Award values
for each performance year are approved by the Board and granted the
following year. For example, the PSU and LTC Award values for the 2016
performance year were approved by the Board and granted in
2017. |

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EXECUTIVE COMPENSATION

Strong Compensation Governance

The Compensation Committee oversees the design and administration of PepsiCo’s executive compensation programs and evaluates these programs against competitive practices, legal and regulatory developments and corporate governance trends. The Compensation Committee has incorporated the following market-leading governance features into our programs:

| What We Do | ✓ Double-trigger change-in-control vesting of long-term incentive
awards ✓ Responsible use of shares
under our long-term incentive program, with share utilization below our
peer group median ✓ Comprehensive clawback
policy that applies to annual incentive, long-term incentive and deferral
programs ✓ Rigorous stock ownership requirements that continue for 12 months
beyond employment ✓ Balanced mix of top-line
and bottom-line metrics set against rigorous measurable goals within our
incentive programs ✓ Targets for performance metrics aligned to financial goals
communicated to shareholders |
| --- | --- |
| What We Don’t Do | ✗ No employment
agreements ✗ No supplemental executive
retirement plans ✗ No resetting of financial
targets for performance awards ✗ No hedging and pledging of
Company stock ✗ No tax
gross-ups ✗ No backdating or repricing
of stock option awards |

Engagement with Our Shareholders

PepsiCo has a longstanding practice of engaging with shareholders on executive compensation matters. In the two-month period before the 2016 Annual Meeting of Shareholders, we contacted our 75 largest shareholders, representing over 43% of our outstanding shares of Common Stock, to discuss a broad range of topics, including executive compensation. Of this group, shareholders representing nearly 23% of our outstanding shares of Common Stock spoke with us prior to the 2016 Annual Meeting. Subsequent to the 2016 Annual Meeting, we continued our outreach efforts to develop a better understanding of the feedback received from shareholders. Our Compensation Committee considered shareholder feedback in its annual review of program components, targets and payouts to maintain awareness of emerging executive compensation practices, ensure the continued strength of our pay-for-performance alignment and maintain strong shareholder support.

At our 2016 Annual Meeting, shareholders again showed strong support for our executive compensation programs with 95% of the votes cast approving our advisory resolution.

The Compensation Committee determined to maintain the core structure of our overall executive compensation program for 2017, taking into account:

| ● | the strong support
demonstrated by our shareholders on our advisory resolution on executive
compensation, |
| --- | --- |
| ● | feedback during individual meetings with shareholders;
and |
| ● | the significant changes made
to our LTI program in 2016, as described in the “2016 & 2017 Long-Term
Incentive Award Design” section on page 49 of this Proxy
Statement. |

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EXECUTIVE COMPENSATION

Our Named Executive Officers

This Compensation Discussion and Analysis describes the compensation of the following NEOs:

Name and Title
Indra K. Nooyi	Chairman of the Board and
CEO, PepsiCo
Hugh F. Johnston	Vice Chairman, Executive Vice President
( “EVP” ) and Chief Financial Officer ( “CFO” ), PepsiCo
Albert P. Carey	CEO, North
America
Sanjeev Chadha	CEO, Asia, Middle East and North Africa
( “AMENA” )
Mehmood
Khan	Vice Chairman, EVP and Chief Scientific Officer
( “CSO” ), Global Research &
Development

2016 Target Pay Mix for Named Executive Officers

To align pay levels for NEOs with the Company’s performance, our pay mix places the greatest emphasis on performance-based incentives.

| Chairman and CEO Target Pay Mix | NEO Average Target
Pay Mix (Excluding Chairman and CEO) |
| --- | --- |
| Performance-Based Compensation 91% | Performance-Based Compensation 85% |
| ● | ● |

Components of Our Executive Compensation Program

The primary components of our executive compensation programs, summarized in the following table, ensure that pay is directly linked to the creation of sustainable long-term shareholder value.

Type	Component	Objective
Fixed Compensation	Base
Salary	● Provide
market-competitive fixed pay reflective of an executive’s role,
responsibilities and individual performance in order to attract and retain
top talent
Performance-Based Compensation	Annual Incentive	● Drive Company and
business unit performance, including growth in revenue and profitability, free cash flow and share of retail
sales ● Deliver individual
performance against specific business imperatives, such as improving operating efficiencies,
driving sustainable innovation, increasing
customer satisfaction and managing and
developing a diverse and talented
workforce
	Long-Term Incentive	● Align executive
officers’ rewards with returns delivered to PepsiCo’s shareholders ● Incentivize
achievement of long-term value creation through stock performance objectives and critical operating
performance objectives over a three-year
period

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EXECUTIVE COMPENSATION

Base Salary

The Compensation Committee annually reviews our NEOs’ salaries, and annual salary increases are not automatic or guaranteed. When considering any adjustments, the Compensation Committee takes into account market data, internal pay equity, job responsibilities and individual performance. The base salaries paid to our NEOs in fiscal year 2016 are presented in the 2016 Summary Compensation Table on page 55 of this Proxy Statement. The Summary Compensation Table reflects the adjustments set forth below to annual base salaries effective February 2016, except for Mr. Carey, whose annual base salary was increased from $900,000 to $1,000,000 upon his April 2016 promotion to CEO, North America. There were no changes to the NEOs’ annual base salaries for 2017.

Name	2015 Annual Base Salary ($000)	2016 Annual Base Salary ($000)	Percentage Increase
Indra K. Nooyi	1,650	1,700	3%
Hugh
F. Johnston	900	950	6%
Albert P. Carey	860	1,000	16%
Sanjeev Chadha	750	750	0%
Mehmood Khan	700	750	7%

2016 Annual Incentive Award

We provide annual cash incentive opportunities to our NEOs under the PepsiCo, Inc. Executive Incentive Compensation Plan (“ EICP ”). Awards granted under the EICP are designed to drive Company, business unit and individual performance.

When determining the actual annual incentive award payable to each executive officer, the Compensation Committee considers both business and individual performance. The graphic below illustrates the weighting of performance metrics for each NEO, with the exception of the Chairman and CEO, whose annual cash award is determined by the Compensation Committee and the independent members of the Board based on their assessment of the Company’s performance and her leadership.

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PART 09

Table of Contents

EXECUTIVE COMPENSATION

Business Performance Metrics. Our annual incentive program applies metrics that executives directly influence to ensure a link between annual performance and actual incentive payments. The performance measures used in the annual incentive program relate to Company-wide performance or business-unit performance depending on the NEO’s position and scope of responsibility. The 2016 performance metrics used by the Compensation Committee for each NEO are listed in the table below:

| Name | Business
Performance Metrics — Business | Organic Revenue 7 | Core Constant Currency EPS 7 | Free
Cash Flow Excluding Certain Items 7 | Core
Net ROIC 7 | Core Constant Currency Net
Income 7 | Core Constant Currency Operating Profit 7 | Share
of Retail Sales (1) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | PepsiCo | ● | ● | ● | ● | | | ● |
| Hugh
F. Johnston | PepsiCo | ● | | ● | | ● | | ● |
| Albert P. Carey | North
America (2) | ● | | ● | | | ● | ● |
| Sanjeev Chadha | AMENA | ● | | ● | | | ● | ● |
| Mehmood Khan | PepsiCo | ● | | ● | | ● | | ● |

| (1) | “Share of Retail Sales”
represents food and beverage share of retail sales in certain categories
and markets in which PepsiCo operates. |
| --- | --- |
| (2) | Effective in April of 2016, Mr.
Carey was promoted to CEO, North America, which includes North America
Beverages (“ NAB ”), Frito-Lay North America (“ FLNA ”) and Quaker Foods North
America (“ QFNA ”). Therefore, the business performance for Mr. Carey’s
2016 bonus was evaluated against NAB through March and North America for
the remainder of the year. |

Business Results. In determining annual incentive awards for 2016, the Compensation Committee considered actual Company performance against the pre-established performance targets noted in the table below. Our executive officers’ performance targets were set at levels necessary to meet or exceed the financial goals we set for 2016. This ensures that our executive officers are motivated to deliver on our financial goals communicated to shareholders.

| Performance
Metrics 7 | Financial
Goals | Performance
Targets | Actual
Results |
| --- | --- | --- | --- |
| Organic Revenue
Growth | Approximately 4% | 3.7% | 3.7% |
| Core Constant Currency EPS Growth | 8% | 8% | 11.8% |
| Free Cash Flow Excluding
Certain Items | >$7B | $7.8B | $7.8B |
| Core Net ROIC Improvement | +50bps | +50bps | +190bps |
| Core Constant Currency Net Income Growth | * | 5.7% | 9.3% |

• PepsiCo does not publicly disclose net income goals.

PepsiCo’s business unit performance targets and share of retail sales targets, which were intended to be challenging, are not disclosed because such disclosure would result in competitive harm to PepsiCo. The business unit targets for revenue, cash flow and operating profit were set at levels necessary to deliver our financial goals communicated to shareholders.

Individual Performance Metrics. The Compensation Committee evaluates individual performance based on metrics related to an individual’s contribution to PepsiCo’s strategic business imperatives, such as improving operating efficiencies, driving sustainable innovation, increasing customer satisfaction and managing and developing a diverse and talented workforce. The strategic business imperatives are intended to be challenging. They can be both qualitative and quantitative and vary for each executive officer.

---

7 Please refer to Exhibit A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 57-61 and 73-75 of PepsiCo’s 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a more detailed description of the items excluded from these measures. For 2016, Core Constant Currency Net Income Growth and Core Constant Currency EPS Growth exclude the impact of the Venezuela deconsolidation that occurred in 2015.

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EXECUTIVE COMPENSATION

Individual Results. In determining annual incentive awards for 2016, the Compensation Committee considered the following individual accomplishments by the NEOs, other than the Chairman and CEO.

| Hugh F.
Johnston Vice Chairman, EVP and CFO,
PepsiCo |
| --- |
| During 2016, Mr. Johnston’s
leadership was critical to PepsiCo’s strong financial returns. Mr.
Johnston drove strong financial and cash flow management, reflected in
PepsiCo meeting or exceeding its financial goals announced to
shareholders. Mr. Johnston remained focused on generating cash flow
through more efficient working capital management and continued tight
controls over capital spending. This led to attractive shareholder returns
with PepsiCo returning $7.2 billion to shareholders through dividends and
share repurchases in 2016. |
| Albert P.
Carey CEO, North America |
| Mr. Carey led PepsiCo’s North
America businesses to deliver strong results in 2016. With Mr. Carey’s
attention to innovation, execution and brand investment, FLNA and NAB each
had strong, well-balanced performance, with volume gains and
high-single-digit core constant currency operating profit
growth. 8 At the same time, QFNA continued to transform in 2016.
Under Mr. Carey’s leadership focused on “better together” across beverages
and snacks, PepsiCo was ranked as the number-one, best-in-class
manufacturer in the latest Kantar Retail annual U.S. PoweRanking ® study. |
| Sanjeev
Chadha CEO, AMENA |
| Mr. Chadha navigated AMENA through
political and macroeconomic volatility in many parts of the region to
deliver solid performance. While operating profit was challenged, AMENA
grew organic revenue 8 with particularly strong performance in
China and Egypt, which grew organic revenue 8 in double digits.
This growth was driven by Mr. Chadha’s focus on innovation and increasing
marketing effectiveness. Under Mr. Chadha’s leadership, AMENA delivered
strong productivity savings to reinvest in developing new capabilities
that we believe will enable future performance. |
| Mehmood
Khan Vice Chairman, EVP and CSO, Global Research &
Development |
| In his role as CSO, Dr. Khan is
instrumental in leading PepsiCo’s innovation efforts from ideation to
commercialization. Under Dr. Khan’s leadership, PepsiCo continued to
extend our innovation advantage by growing new platforms and focusing on
more efficient allocation of development resources. Under PepsiCo’s
innovation agenda, net revenue from new products, defined as products
introduced within the past three years, has averaged more than $5 billion
since 2013. In 2016, Dr. Khan also led the development of PepsiCo’s new
global sustainability agenda that sets new Performance with Purpose goals
designed to continue transforming PepsiCo’s portfolio, contribute to a
more sustainable global food system and help make local communities more
prosperous. |

Overall Results. The following table summarizes the actual annual incentive awards paid to the NEOs in March 2017. The Chairman and CEO’s annual incentive award is determined by the Compensation Committee based on its assessment of the Company’s performance and her leadership. Awards for the other NEOs are based on 2016 business and individual performance in the context of the target annual incentive opportunity and the potential range of payouts.

| Name | Target Annual Incentive (%
of Base Salary) | Range of Potential Payouts
Based on Business & Individual Results
($000) | Actual Annual Incentive Award
($000) | Actual Annual Incentive as
a % of Target Annual Incentive |
| --- | --- | --- | --- | --- |
| Indra K. Nooyi | 225% | 0 – 7,650 | 5,250 | 137% |
| Hugh
F. Johnston | 150% | 0 – 2,886 | 1,696 | 119% |
| Albert P. Carey | 150% | 0 – 2,962 | 1,720 | 118% |
| Sanjeev Chadha | 150% | 0 – 2,278 | 1,001 | 89% |
| Mehmood Khan | 130% | 0 – 1,974 | 1,160 | 119% |

---

8 Please refer to Exhibit A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 57-61 and 73-75 of PepsiCo’s 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a more detailed description of the items excluded from these measures.

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EXECUTIVE COMPENSATION

Long-Term Incentive Awards

2014 & 2015 Long-Term Incentive Award Design

PepsiCo’s LTI program is 100% performance-based. Awards granted to executive officers in 2014 and 2015 included two distinct components, PepsiCo Equity Performance Units (“ PEPunits ”) and LTC Awards. Each executive’s target grant value is based on his or her role. Actual awards can range from 0% to 125% of target grant value based on individual performance. Awards vest after three years if the executive is still employed with us.

PEPunits

PEPunits strengthen the alignment with long-term shareholder value creation. They provide our executive officers with an opportunity to earn shares of PepsiCo Common Stock with a value that adjusts based on absolute changes in PepsiCo’s stock price, as well as PepsiCo’s TSR relative to the S&P 500 over a three-year performance period.

| | Absolute
Stock Price Performance | |
| --- | --- | --- |
| | PEP stock price growth over a
3-year performance period | |
| 0 -
150% | PepsiCo stock price at end of performance period | * Stock price is based on
average share price for the 90 calendar days prior to the grant date or
vesting date, as applicable |
| | PepsiCo stock price at beginning of
performance period | |
| | The adjustment will be 0% if we
do not deliver positive 3-year TSR. Also, adjustment of 100% requires a 5%
compound annual growth rate (“ CAGR ”) in stock price
over the performance period. | |
| ● | | |
| | Relative TSR
Performance | |
| | TSR performance relative to other
S&P 500 companies over a 3-year performance
period | |
| + / -
25% | ● | |
| | Linear interpolation is used when
ranking falls between percentages shown. | |
| ● | | |
| Payout | 0 - 175% of
Target | |

Long-Term Cash Award

The LTC Award complements the PEPunits by incentivizing our executive officers to focus on critical operating performance objectives that we believe will translate to sustainable shareholder returns over the long-term. The LTC Award is denominated and paid in cash, reflecting PepsiCo’s responsible use of shares under our LTI program.

| 50% weighting | Earnings Per
Share |
| --- | --- |
| | 3-year average of annual core
constant currency EPS growth rates |
| | A metric followed by shareholders
that incorporates key elements of financial success, including top-line
growth in revenue, expense control, the effectiveness of investments made
in the business over time, and bottom-line profitability. |
| ● | |
| 50% weighting | Return on Invested Capital |
| | 3-year cumulative increase in
core net ROIC |
| | A key metric that aligns with our
financial goals communicated to shareholders to improve both capital
spending and working capital management, enabling us to continue to
improve the efficiency of our asset base. |
| ● | |
| Payout | 0 - 175% of
Target |

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EXECUTIVE COMPENSATION

Long-Term Incentive Award Payouts

2014 PEPunit Payout

The 2014 PEPunits paid out at 34% above target in light of the strong absolute and relative stock price performance over the three-year performance period.

| 3-Year Absolute Stock Price
Performance | 3-Year Relative TSR Percentile vs.
S&P 500 |
| --- | --- |
| ● | ● |
| ● The absolute stock
price adjustment is +23% based on PepsiCo’s stock price CAGR of 8.9% over
the three-year performance period (March 1, 2014 through March 1,
2017). | ● The relative TSR adjustment is +11% based on PepsiCo’s
TSR of 37% for the three-year performance period ending on December 31,
2016, ranking in the 61st percentile relative to the S&P 500. |

| Name | PEPunits
Granted | PEPunits
Earned | Payout Above
Target |
| --- | --- | --- | --- |
| Indra K. Nooyi | 108,673 | 145,622 | + 34% |
| Hugh
F. Johnston | 31,870 | 42,706 | + 34% |
| Albert P. Carey | 31,243 | 41,866 | + 34% |
| Sanjeev Chadha | 24,075 | 32,261 | + 34% |
| Mehmood Khan | 18,809 | 25,204 | + 34% |

2014 Long-Term Cash Award Payout

As a result of exceptional three-year operating performance, the 2014 LTC Award paid out 75% above target.

| 3-Year Avg. Core Constant Currency
EPS Growth 9 | 3-Year Core Net ROIC
Improvement 9 |
| --- | --- |
| ● | ● |
| ● PepsiCo’s actual
three-year (2014-2016) average core constant currency EPS
growth 9 of 10.4% exceeded the target of 7.0% set by the
Compensation Committee in March 2014. The impact on EPS from actual share
buybacks versus planned buybacks did not result in a change to the final
payout. | ● PepsiCo’s actual three-year (2014-2016) core net
ROIC 9 improved from 16.4% to 21.5% over the three-year
performance period, a 510bps increase that exceeded the 150bps target set
by the Compensation Committee in March
2014. |

| Name | LTC Granted
($000) | LTC Earned
($000) | Payout Above
Target |
| --- | --- | --- | --- |
| Indra K. Nooyi | 5,200 | 9,100 | + 75% |
| Hugh
F. Johnston | 1,525 | 2,669 | + 75% |
| Albert P. Carey | 1,495 | 2,616 | + 75% |
| Sanjeev Chadha | 1,152 | 2,016 | + 75% |
| Mehmood Khan | 900 | 1,575 | + 75% |

---

9 Please refer to Exhibit A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 57-61 and 73-75 of PepsiCo’s 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a more detailed description of the items excluded from these measures. For 2016, Core Constant Currency EPS Growth excludes the impact of the Venezuela deconsolidation that occurred in 2015.

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2016 & 2017 Long-Term Incentive Award Design

Beginning with the 2016 LTI award, we made significant changes to our LTI program, which were intended to simplify the program and better balance our mix of cash- and equity-based incentives. The new design, outlined below, ensures an appropriate level of focus on successfully attaining critical operating goals and sustained appreciation in shareholder value.

PepsiCo’s current LTI program for awards granted to executive officers consists of PSUs and LTC Awards. Our LTI design continues to be 100% performance-based, with payouts based on performance against operating and market-focused metrics. Awards vest after three years if the executive is still employed with us.

Performance Stock Units

The PSUs maintain the operating metrics from the prior LTC Award. The PSUs will pay out in PepsiCo shares, plus dividends accrued over the vesting period on earned shares.

| 50% weighting | Earnings Per
Share |
| --- | --- |
| | 3-year average of annual core
constant currency EPS growth rates |
| ● | |
| 50% weighting | Return on Invested Capital |
| | 3-year cumulative increase in
core net ROIC |
| ● | |
| Payout | 0 - 175% of
Target |

Long-Term Cash Award

The LTC Award focuses on relative TSR performance. The LTC Award is denominated and will pay out in cash.

| 0 -
200% | Relative TSR Performance |
| --- | --- |
| | TSR performance relative to our
proxy peer group over a 3-year performance period |
| | ● |
| | Target payout requires us to
deliver positive 3-year TSR. Linear interpolation is used when ranking
falls between percentages shown. |
| ● | |
| Payout | 0 - 200% of
Target |

Special Award Payout

In September 2016, the Compensation Committee also certified the achievement of the three-year performance goals applicable to the special performance-based award granted to Dr. Khan in July 2013. Based on PepsiCo’s TSR performance relative to the S&P 500 over the three-year performance period, Dr. Khan’s PSUs paid out at 108% of target and 37,457 shares were delivered to him in September 2016.

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EXECUTIVE COMPENSATION

Retirement Programs

Our NEOs participate in the same retirement programs as other similarly situated employees and receive no enhancements in determining their benefits versus other employees. The Company’s retirement programs are designed to facilitate the retirement of employees who have performed at PepsiCo over the long term. The Company maintains defined benefit pension plans for the majority of U.S. salaried employees hired before January 1, 2011 and defined contribution pension plans for U.S. employees hired in 2011 and later. A separate retirement plan is also maintained for certain employees working outside the U.S. who are unable to participate in their home country retirement plans. The terms of the Company’s retirement plans are substantially the same for all participating employees and are described in the introduction to the 2016 Pension Benefits Table beginning on page 61 of this Proxy Statement.

Our NEOs are also eligible for retiree medical coverage on the same terms as other similarly situated employees. PepsiCo does not provide executive officers any special benefit plans such as executive life insurance, and the Company does not provide any enhanced retirement benefit formulas to our NEOs.

Benefits and Perquisites

Benefits. Executive officers receive the same healthcare benefits as other similarly situated employees. U.S.-based medical benefits are the same for all participants in the Company’s healthcare program. However, our executive officers are required to pay two to three times as much as non-executive employees for their coverage. International medical benefit plans vary, but executives typically receive the benefits offered in the relevant broad-based plan.

PepsiCo’s global mobility program facilitates the assignment of employees to positions in other countries by minimizing any financial detriment or gain to the employee from the international assignment. As CEO of AMENA, Mr. Chadha participates in the global mobility program on an international assignment in Dubai, United Arab Emirates. Under the program, Mr. Chadha’s compensation package is linked to the U.S. compensation structure as a result of being considered global talent with continued PepsiCo assignments outside his home country. Mr. Chadha economically pays taxes at a U.S. income tax rate on compensation and receives housing and other allowances to reflect the incremental cost of living in his work location, as compared to the U.S.

In addition, executive officers who relocate at PepsiCo’s request are supported under the relocation program available to all PepsiCo salaried employees. The program covers relocation expenses, such as household goods shipment, and applicable reimbursement of taxes associated with moving.

Perquisites. Consistent with our pay-for-performance philosophy, we limit executive perquisites to a Company car allowance, an annual physical and limited personal use of Company aircraft and ground transportation.

Based on an independent security study, the Compensation Committee generally requires Ms. Nooyi to use company aircraft and ground transportation for all travel (personal and business) to enhance her personal safety and to increase her time available for business purposes. However, Ms. Nooyi is permitted to use commercial aviation provided that the PepsiCo Global Security Team has assessed the trip itinerary in advance, determined whether the risk of using commercial aviation is acceptable and established a travel security protocol commensurate with the identified risk.

Executives are fully responsible for personal income tax liability associated with personal use of Company ground transportation and Company aircraft. Business Unit CEOs must reimburse PepsiCo for the full variable operating cost of personal flights in excess of a limited number of hours per year as established by the Compensation Committee. Personal use of Company ground transportation and Company aircraft for executive officers other than the Chairman and CEO must be approved by the Chairman and CEO on a case-by-case basis.

Executive Deferral

Under the PepsiCo Executive Income Deferral Program (the “ EIDP ”), most U.S.-based executives can elect to defer up to 75% of their base salary and up to 100% of their annual cash incentive awards into phantom investment funds on a tax-deferred basis. Executives may elect to have their deferral accounts notionally invested in market-based funds, including the PepsiCo Common Stock Fund. The EIDP does not guarantee a rate of return, and none of the funds provide “above market” earnings. PepsiCo does not match any executive’s deferrals.

The PepsiCo EIDP is a non-qualified and unfunded program in which account balances are unsecured and at risk. This means that the participants’ balances are subject to the claims of PepsiCo’s creditors and may be forfeited in the event of the Company’s bankruptcy. The narrative accompanying the 2016 Non-Qualified Deferred Compensation Table beginning on page 63 of this Proxy Statement describes the material features of the EIDP.

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Table of Contents

EXECUTIVE COMPENSATION

Peer Group

The Compensation Committee utilizes a peer group to evaluate whether executive officer pay levels are aligned with Company performance on a relative basis. The Compensation Committee primarily identifies companies that are of comparable size (based on revenue and market capitalization), maintain strong consumer brands, have an innovative culture, compete with PepsiCo for executive talent and/or possess significant international operations.

| PepsiCo vs. Peer
Group | |
| --- | --- |
| ● | |
| * | Based on the four fiscal quarters
ended prior to December 31, 2016 and publicly available as of March 1,
2017 |
| ** | Based on 2016
year-end |

There were no changes to the peer group with respect to the 2016 performance year. Effective for the 2017 performance year, the Compensation Committee made updates to ensure that the peer group continues to remain appropriate in light of changes in business profile and relative size. Abbott Laboratories, Hewlett-Packard Company, and Kellogg Company were removed and Pfizer Inc., Microsoft Corporation and Starbucks Corporation were added to the peer group.

Governance Features of Our Executive Compensation Programs

We believe that PepsiCo’s compensation programs should ensure that our executives remain accountable for business results and take responsibility for the assets of the business and its employees. Consistent with this objective, our Board of Directors has incorporated strong governance features into our executive compensation programs.

Risk Mitigation

PepsiCo’s executive compensation programs include features intended to discourage employees from taking unnecessary and excessive risks that could threaten the financial health and viability of the Company, including:

| ● | Balanced Performance
Metrics: The annual cash incentive
program utilizes balanced financial metrics consisting of top-line metrics
(such as organic revenue), bottom-line metrics (such as operating profit),
market-based metrics (such as share of retail sales), and metrics designed
to enhance capital management (such as cash flow). |
| --- | --- |
| ● | Accountability for Prior Business
Unit Results: Half of the annual
incentive award for any executive officer who assumes a new leadership
position in a different business unit is determined based on the prior
business unit’s results. This encourages the executive officer to remain
accountable for the results of the long-term strategies he or she
established in the prior business unit. |
| ● | Emphasis on Long-Term Shareholder
Value Creation: LTI awards are the most
significant element of executive officer pay and focus executives on
creating long-term shareholder value, measured in terms of absolute stock
price growth, stock price changes relative to a comparator group, and
delivering exceptional long-term operating results. |
| ● | Clawback
Provisions: Under PepsiCo’s annual
incentive, LTI and executive deferral programs, the Company has the right
to cancel and recoup awards and gains from an executive in certain
circumstances, such as if he or she engages in gross misconduct, violates
applicable non-compete provisions, or causes or contributes to the need
for an adjustment to the Company’s financial results through gross
negligence or misconduct. |

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EXECUTIVE COMPENSATION

Stock Ownership Requirements

Under PepsiCo’s stock ownership guidelines, executive officers are required to own shares of PepsiCo Common Stock equal in value to a specified multiple of their annual base salary, as set forth below:

| Stock Ownership
Requirements — CEO | ● |
| --- | --- |
| CFO, Business Unit
CEOs | ● |
| All Other Executive
Officers | ● |

Shares of PepsiCo Common Stock or equivalents held by the executive officer (or immediate family members) in the 401(k) plan, in a deferred compensation account, or in a trust for the benefit of immediate family members count towards satisfying the requirement. Unexercised stock options and unvested PSUs, Restricted Stock Units (“ RSUs ”) and PEPunits do not count towards satisfying the applicable stock ownership requirement.

Executive officers have five years from the date they first become subject to a particular level of stock ownership to meet the stock ownership requirement. All of our executive officers have met or are on track to meet their ownership requirements within the five-year period.

Executive officers who terminate or retire from PepsiCo are required to continue to hold 100% of the shares needed to meet the applicable level of stock ownership until at least six months after termination or retirement and to continue to hold at least 50% of the shares needed to meet the applicable level of stock ownership until at least twelve months after termination or retirement.

Share Retention Policy

To ensure that our executive officers exhibit a strong commitment to PepsiCo stock ownership, the Board adopted a Share Retention Policy in 2002. The policy limits the proceeds that an executive officer may receive in cash upon exercise of stock options during each calendar year to 20% of the aggregate value of all of the executive officer’s in-the-money vested stock options. Any proceeds in excess of this 20% limit must be held in shares of PepsiCo Common Stock for at least one year after the date of exercise. In addition, executive officers are required to hold at least 50% of the shares, net of applicable tax withholding, received upon the vesting and payout of PEPunits and PSUs in furtherance of PepsiCo’s stock ownership guidelines.

Executive officers who maintain the required level of stock ownership are exempt from the Share Retention Policy.

No Employment Contracts

None of our NEOs have an employment contract or separation agreement, and we do not maintain formal programs or policies that guarantee cash severance or continued access to health and welfare benefits in the event of an involuntary termination of employment. Consistent with our approach of rewarding performance, employment is not guaranteed, and either the Company or the NEO may terminate the employment relationship at any time. In some cases, the Compensation Committee or the Board may agree to provide separation payments and benefits to departing executives upon their termination. Such terminations are addressed on a case-by-case basis, taking into consideration the nature of the termination and a variety of other factors.

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EXECUTIVE COMPENSATION

Change in Control Provisions

NEOs are not eligible to receive any cash severance, continued health and welfare benefits, pension service credit, tax gross-ups or any other change-in-control benefits other than change-in-control protections under the shareholder-approved PepsiCo, Inc. Long-Term Incentive Plan.

The PepsiCo, Inc. Long-Term Incentive Plan provides non-employee directors and all employees, including executive officers, change-in-control protection for their LTI awards. Outstanding unvested awards vest, and performance-based awards are paid at target, even if results are above target, in the event that the participant is terminated without cause or resigns for good reason within two years following a change-in-control of PepsiCo (i.e., “double trigger” vesting) or if the acquiring entity fails to assume the awards. We utilize “double trigger” vesting to ensure management talent will be available to assist in the successful integration following a change-in-control and to align with prevailing governance practices.

Prohibition on Hedging and Pledging

Our insider trading policy prohibits employees, including executive officers, from using any strategies or products (such as derivative securities or short-selling techniques) to hedge against the potential changes in the value of PepsiCo Common Stock. In addition, employees, including executive officers, may not hold PepsiCo securities in a margin account or pledge PepsiCo stock or PepsiCo stock options as collateral for a loan.

Limited Trading Windows

Executive officers can only transact in PepsiCo securities during approved trading windows after satisfying mandatory clearance requirements.

Responsible Equity Grant Practices

PepsiCo’s equity grant practices ensure all grants are made on fixed grant dates and at exercise prices or grant prices equal to the “fair market value” of PepsiCo Common Stock on such dates.

| ● | Stock option, PSU and RSU grants are
awarded under our shareholder-approved LTI plan at “fair market value,”
defined as the average of the high and low stock prices rounded up to the
nearest quarter on the date of grant. Further, PEPunit payouts are
determined based on the average share price for the 90 days prior to the
grant and vesting date. These formulas mitigate the impact of our stock
price’s intra-day volatility when setting the grant price of equity
awards. |
| --- | --- |
| ● | PepsiCo does not backdate, reprice
or grant stock options retroactively. Our shareholder-approved LTI plan
prohibits repricing of awards or exchanges of underwater options for cash
or other securities without shareholder approval. |
| ● | Under our shareholder-approved LTI
plan, stock options, RSUs, PSUs, PEPunits and LTC Awards generally require
a three-year minimum vesting period. |
| ● | PepsiCo is responsible in the use of
shares under our LTI program, with share utilization below our peer group
median. |

Tax Considerations

In establishing total compensation for the executive officers, the Compensation Committee considers the effect of Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows a tax deduction for compensation over $1 million paid for any fiscal year to the CEO and the three other highest paid executive officers other than the CFO, unless the compensation qualifies as performance-based. While the Compensation Committee generally seeks to preserve the deductibility of most compensation paid to executive officers, the primary objective of the compensation program is to support the Company’s business strategy. Thus, the Compensation Committee believes it should have flexibility in awarding compensation, even though some compensation awards may result in non-deductible compensation expenses.

PEPunits, PSUs and LTC Awards were granted under the shareholder-approved PepsiCo, Inc. Long-Term Incentive Plan and are intended to qualify as performance-based compensation deductible under Section 162(m). The Compensation Committee set payouts for the 2014-2016 award cycle based on maximum achievement of a core constant currency net income target of $10 billion. Annual incentive awards are paid based on achievement of performance measures under the shareholder-approved EICP. Because the annual incentive awards are intended to be deductible as performance-based compensation under Section 162(m), the Compensation Committee set the payout for 2016 based on maximum achievement of a core constant currency net income target of $7 billion. There can be no guarantee that the LTI or annual incentive awards will be treated as qualified performance-based compensation under Section 162(m).

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EXECUTIVE COMPENSATION

Our Decision Making Process

| Compensation Committee |
| --- |
| The Compensation
Committee oversees the design and administration of PepsiCo’s executive
compensation programs and evaluates these programs against competitive
practices, legal and regulatory developments and corporate governance
trends. |

| ● | Approves performance goals and other objectives
of the Chairman and CEO |
| --- | --- |
| ● | Based on the Committee’s assessment of
performance, recommends CEO compensation to the independent members of the
Board without input from management |
| ● | Approves executive officer compensation based
on Company performance, market pay data, responsibilities and other
factors |
| ● | Sets the specific performance targets for
executive officer incentive awards |
| ● | Establishes the peer group companies used to
benchmark Company performance and executive officer compensation |
| ● | Confirms that total compensation paid to each
executive officer is appropriate based on the Company’s financial
performance relative to the peer group |
| ● | Reports to the Board regarding director
compensation and stock ownership guidelines |
| ● | References tally sheets, which provide the
total value that executive officers would receive upon a variety of
termination scenarios |

| Independent Advisor |
| --- |
| The Compensation
Committee has engaged FW Cook as its independent external advisor. The
Compensation Committee considers analysis and advice from FW Cook when
making compensation decisions. |

| ● | Provides recommendations on Chairman and CEO
compensation directly to the Compensation Committee, without consulting
management |
| --- | --- |
| ● | Attends Compensation Committee meetings, and
has direct access to Compensation Committee members without management
involvement |
| ● | The services performed by FW Cook have been
limited to executive and director compensation consulting; FW Cook is
prohibited from undertaking any other work with PepsiCo management or
employees |

| PepsiCo Management |
| --- |
| PepsiCo’s
Management team is responsible for providing input to the Compensation
Committee with respect to compensation decisions for PepsiCo’s executive
officers (other than the Chairman and CEO) based on market conditions,
Company performance, and individual executive officer
performance. |

| ● | Provides input regarding PepsiCo’s business
strategy and performance |
| --- | --- |
| ● | The Chairman and CEO provides the Compensation
Committee with a self-assessment based on achievement of the agreed-upon
objectives and other leadership accomplishments |
| ● | The Chairman and CEO provides the Compensation
Committee with her performance evaluations and pay recommendations for other executive
officers |

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2016 Summary Compensation Table

The following table summarizes the compensation of the NEOs for the fiscal year ended December 31, 2016 in accordance with SEC rules. We encourage you to also review page 41 for a description of how Chairman and CEO compensation is viewed by PepsiCo’s Board.

| Name and Principal Position (1) | Year | Salary ($) (2) | Stock Awards ($) (3) | Non-Equity Incentive
Plan Compensation ($) — Subtotal for Annual Payouts
($) (4) | Subtotal for Long-Term Payouts
($) (5) | Total for Annual
and Long-Term Payouts ($) (6) | Change in Pension Value
and Non-Qualified Deferred Compensation Earnings
($) (7) | All Other Compensation ($) (8) | Total ($) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | | | | | | | | | |
| Chairman of the Board and CEO | 2016 | 1,725,000 | 8,910,015 | 5,250,000 | 9,100,000 | 14,350,000 | 4,614,819 | 183,582 | 29,783,416 |
| | 2015 | 1,642,308 | 6,251,479 | 5,250,000 | 8,675,000 | 13,925,000 | 4,255,683 | 370,520 | 26,444,990 |
| | 2014 | 1,600,000 | 5,497,767 | 5,000,000 | 6,835,000 | 11,835,000 | 3,397,742 | 155,065 | 22,485,574 |
| Hugh
F. Johnston | | | | | | | | | |
| Vice
Chairman, EVP and CFO | 2016 | 960,577 | 3,465,039 | 1,695,800 | 2,668,750 | 4,364,550 | 1,480,835 | 35,834 | 10,306,835 |
| | 2015 | 900,000 | 2,222,763 | 1,653,800 | 2,429,000 | 4,082,800 | 1,329,932 | 25,350 | 8,560,845 |
| | 2014 | 845,000 | 1,612,303 | 1,483,300 | 1,667,740 | 3,151,040 | 1,567,834 | 25,350 | 7,201,527 |
| Albert P. Carey | | | | | | | | | |
| CEO,
North America | 2016 | 984,615 | 3,326,394 | 1,719,900 | 2,616,250 | 4,336,150 | 1,372,511 | 51,629 | 10,071,299 |
| | 2015 | 860,000 | 2,236,620 | 1,896,300 | 2,255,500 | 4,151,800 | 414,680 | 81,288 | 7,744,388 |
| | 2014 | 860,000 | 3,580,567 | 1,790,500 | 1,421,680 | 3,212,180 | — | 59,402 | 7,712,149 |
| Sanjeev Chadha | | | | | | | | | |
| CEO,
AMENA | 2016 | 764,423 | 2,268,781 | 1,001,300 | 2,016,000 | 3,017,300 | 1,336,704 | 155,848 | 7,543,056 |
| | 2015 | 738,461 | 1,519,438 | 1,119,400 | — | 1,119,400 | 687,539 | 213,094 | 4,277,932 |
| | 2014 | 675,000 | 4,217,998 | 961,900 | — | 961,900 | 832,560 | 152,083 | 6,839,541 |
| Mehmood Khan | | | | | | | | | |
| Vice Chairman, EVP and
CSO | 2016 | 756,731 | 1,980,036 | 1,160,300 | 1,575,000 | 2,735,300 | 875,254 | 75,725 | 6,423,046 |

| (1) | Dr. Khan was not an NEO for 2014 or 2015, and as a
result, only his 2016 compensation information is included. |
| --- | --- |
| (2) | In 2016, the salary amounts reflect the actual base
salary payments made to the NEOs during the fiscal year, which included a
53 rd week. |
| (3) | The amounts reported for stock awards represent the
aggregate grant date fair value of stock awards calculated in accordance
with the accounting guidance on share-based payments. For a discussion of
the assumptions and methodologies used in calculating the grant date fair
value of these awards, please see Note 6 to the Company’s consolidated
financial statements in the Company’s Annual Report on Form 10-K for the
applicable fiscal year. |
| | For 2016, the amounts reported in this column represent
the grant date fair value of PSU awards. If PepsiCo were to exceed its
performance targets, grant recipients may earn up to 175% of the target
number of PSUs granted. The following table reflects the grant date fair
value of the PSU awards at below-threshold, target and maximum performance
earn-out levels. |

| Name | Value of 2016 PSU
Awards — Below Threshold | At Target Level ($) | At Maximum 175% Level ($) |
| --- | --- | --- | --- |
| Indra K. Nooyi | — | 8,910,015 | 15,592,526 |
| Hugh
F. Johnston | — | 3,465,039 | 6,063,818 |
| Albert P. Carey | — | 3,326,394 | 5,821,189 |
| Sanjeev Chadha | — | 2,268,781 | 3,970,367 |
| Mehmood Khan | — | 1,980,036 | 3,465,063 |

(4) As described in the “2016 Annual Incentive Award” section of the Compensation Discussion and Analysis on pages 44-46 of this Proxy Statement, the amounts reported reflect compensation earned for performance under the annual incentive compensation program for that year, paid in March of the subsequent year.

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| (5) | As described in the “2014 &
2015 Long-Term Incentive Award Design” section of the Compensation
Discussion and Analysis on page 47 of this Proxy Statement, the Long-Term
Payout amounts reported for 2016 reflect compensation earned for
performance over a three-year (2014-2016) period under the LTC Award
granted in 2014 and paid in March 2017. Mr. Chadha did not receive a LTC
Award in 2012 and 2013. |
| --- | --- |
| (6) | Represents the total of the
Annual Payouts and Long-Term Payouts of Non-Equity Incentive Plan
compensation. |
| (7) | The amounts reported reflect the
aggregate change in the actuarial present value of each NEO’s accumulated
benefit under the defined benefit pension plans in which they participate.
The change in pension value reflects changes in age, service and earnings
during 2016. During the years presented,
PepsiCo did not pay above-market or preferential rates on any
non-qualified deferred compensation. |
| (8) | The following table provides the
details for the amounts reported for 2016 for each
NEO: |

| Name | Personal Use of Company Aircraft (A) ($) | Personal Use of
Ground Transportation (A) ($) | Car Allowance ($) | Global Mobility (B) ($) | Tax Reimbursement (C) ($) | Total All
Other Compensation (D) ($) |
| --- | --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | 149,882 | 33,700 | — | — | — | 183,582 |
| Hugh
F. Johnston | 4,561 | — | 25,350 | — | — | 35,834 |
| Albert P. Carey | 26,279 | — | 25,350 | — | — | 51,629 |
| Sanjeev Chadha (E) | 31,277 | — | 29,949 | 94,622 | — | 155,848 |
| Mehmood Khan | 45,897 | — | 25,350 | — | — | 75,725 |

| (A) | Personal use of Company aircraft
and ground transportation is valued based on the aggregate incremental
cost to the Company. The aggregate incremental cost is calculated based on
the variable operating costs that were incurred as a result of personal
use of the aircraft (such as fuel, maintenance, landing fees, crew
expenses, catering and en-route charges) or ground transportation (such as
fuel and the driver’s compensation). Infrequently, an executive’s spouse
or other family member may fly on the Company aircraft or share ground
transportation as an additional passenger. There is no incremental cost
associated with such usage. The NEOs are fully responsible for all
personal income taxes associated with any personal use of Company aircraft
and ground transportation. |
| --- | --- |
| (B) | The amount reported reflects the
expense for benefits provided pursuant to PepsiCo’s standard global
mobility program as a result of Mr. Chadha’s international assignment in
Dubai, United Arab Emirates. These benefits include housing,
cost-of-living and home-leave allowances, and household goods storage.
The global mobility program facilitates the assignment of employees to
positions outside their home country by minimizing any financial detriment
or gain to the employee from the international assignment. |
| (C) | For Mr. Chadha, this reflects the
total net amount of tax equalization designed to cover taxes on his
compensation in excess of the taxes he would have incurred in the United
States. The total net tax equalization amount is a negative amount and is
therefore disclosed as zero. |
| (D) | The total also includes the cost
of an annual physical exam for Mr. Johnston and Dr. Khan. |
| (E) | Mr. Chadha’s car allowance and
global mobility program benefits were paid in United Arab Emirates Dirham
and converted into U.S. dollars based on an average exchange rate of 1.00
AED = 0.272 USD for 2016. |

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EXECUTIVE COMPENSATION

2016 Grants of Plan-Based Awards

The following table summarizes grants of annual incentive awards, LTC Awards and PSUs provided to NEOs in 2016. LTC Awards and PSUs granted in 2016 recognized 2015 performance. The material terms of PepsiCo’s annual and LTI programs are described in the Compensation Discussion and Analysis beginning on page 40 of this Proxy Statement.

| Name | Grant Date (1) | Grant
Type | | Estimated Future Payouts Under Non-Equity Incentive Plan
Awards — Threshold ($) | Target ($) | Maximum ($) | Estimated Future
Payouts Under Equity Incentive Plan Awards — Threshold (#) | Target (#) | Maximum (#) | Grant Date Fair Value of
Stock and Option Awards (2) ($) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | — | Annual Incentive | (3) | — | 3,825,000 | 7,650,000 | | | | |
| | 3/1/2016 | Long-Term Cash | (4) | — | 4,590,000 | 9,180,000 | | | | |
| | 3/1/2016 | PSUs | (5) | | | | — | 90,228 | 157,899 | 8,910,015 |
| Hugh
F. Johnston | — | Annual Incentive | (3) | — | 1,425,000 | 2,885,625 | | | | |
| | 3/1/2016 | Long-Term Cash | (4) | — | 1,785,000 | 3,570,000 | | | | |
| | 3/1/2016 | PSUs | (5) | | | | — | 35,089 | 61,406 | 3,465,039 |
| Albert P. Carey | — | Annual Incentive | (3)(6) | — | 1,462,500 | 2,961,563 | | | | |
| | 3/1/2016 | Long-Term Cash | (4) | — | 1,713,600 | 3,427,200 | | | | |
| | 3/1/2016 | PSUs | (5) | | | | — | 33,685 | 58,949 | 3,326,394 |
| Sanjeev Chadha | — | Annual Incentive | (3) | — | 1,125,000 | 2,278,125 | | | | |
| | 3/1/2016 | Long-Term Cash | (4) | — | 1,168,750 | 2,337,500 | | | | |
| | 3/1/2016 | PSUs | (5) | | | | — | 22,975 | 40,206 | 2,268,781 |
| Mehmood Khan | — | Annual Incentive | (3) | — | 975,000 | 1,974,375 | | | | |
| | 3/1/2016 | Long-Term Cash | (4) | — | 1,020,000 | 2,040,000 | | | | |
| | 3/1/2016 | PSUs | (5) | | | | — | 20,051 | 35,089 | 1,980,036 |

| (1) | Consistent with prior years, 2016
PSUs and LTC Awards were approved by the Compensation Committee at its
regularly scheduled meeting in February. The approval date for the awards
was February 4, 2016 and the grant date was March 1, 2016. |
| --- | --- |
| (2) | The amounts reported represent
the aggregate grant date fair value of all PSUs granted to NEOs in 2016
calculated in accordance with the accounting guidance on share-based
payments. For a discussion of the assumptions and methodologies used in
calculating the grant date fair value of the PSUs reported, please see
Note 6 to the Company’s consolidated financial statements in the Company’s
2016 Annual Report on Form 10-K for the fiscal year ended December 31,
2016. |
| (3) | The amounts reported reflect the
potential range of 2016 annual cash incentive awards under the
shareholder-approved EICP, as described under “2016 Annual Incentive
Award” section in the Compensation Discussion and Analysis beginning on
page 44 of this Proxy Statement. |
| (4) | The amounts reported reflect the
potential range of 2016 LTC Award payouts under the shareholder-approved
PepsiCo, Inc. Long-Term Incentive Plan. The actual LTC Award earned is
determined based on the level of achievement attained with respect to the
pre-established performance targets based on PepsiCo’s TSR relative to
the proxy peer group over the three-year performance period and will be
paid out on the third anniversary of the grant date. |
| (5) | The actual number of shares of
PepsiCo Common Stock that are earned for the 2016 PSUs is determined based
on the level of achievement attained with respect to core constant
currency EPS growth and cumulative core net ROIC improvement consistent
with the pre-established payout scale determined for the three-year
performance period. If PepsiCo performs below the pre-established
performance targets, the number of PSUs earned will be reduced below the
target number. The amounts reported in the “target” column reflect the
number of PSUs that may be paid out if the performance targets are
achieved at 100%, and the amounts reported in the “maximum” column reflect
the maximum number of PSUs that will be paid out if the performance
targets are exceeded. |
| | The PSUs earned by NEOs will vest
and be paid out in shares of PepsiCo Common Stock on the third anniversary
of the grant date subject to pro-rata vesting upon retirement between ages
55 and 61, inclusive, with at least 10 years of service, and full vesting
upon retirement at age 62 and older with at least 10 years of service, in
each case subject to achievement of the applicable performance targets
over the full three-year performance period. As of 2016 fiscal year-end,
Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata vesting
and Mr. Carey is eligible for full vesting. Notwithstanding the level of
performance achieved, the Compensation Committee retains the discretion to
reduce the number of shares issued in settlement of the 2016 PSU
awards. |
| (6) | Mr. Carey’s target and maximum
bonus reflect a pro-rated increase based on his promotion to CEO, North
America, effective April 2016. |

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2016 Outstanding Equity Awards at Fiscal Year-End

The following table lists all outstanding stock option, PEPunit and PSU awards as of December 31, 2016 for the NEOs. The material terms and conditions of the equity awards reported in this table are described in the “Long-Term Incentive Awards” section of the Compensation Discussion and Analysis beginning on page 47 of this Proxy Statement. No LTI award granted to an NEO has been transferred to any other person, trust or entity.

| Name | Option
Awards — Number
of Securities Underlying Unexercised Options
(#) Exercisable | Option Exercise Price ($) | Option Grant Date | Option Vesting Date | Option Expiration Date | Stock Awards (1)(2) — Grant
Date | Vesting Date | Number of Shares or
Units of
Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (3) (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | | | | | | | | | | | | | |
| | 392,157 | 63.75 | 3/1/2011 | 3/1/2014 | 2/28/2021 | 3/1/2016 | 3/1/2019 | — | | — | 90,228 | | 9,440,556 |
| | 360,902 | 66.50 | 4/12/2010 | 4/12/2013 | 4/11/2020 | 3/1/2015 | 3/1/2018 | — | | — | 90,680 | | 9,487,848 |
| | 452,830 | 53.00 | 2/6/2009 | 2/1/2012 | 1/31/2019 | 3/1/2014 | 3/1/2017 | — | | — | 108,673 | | 11,370,456 |
| | 374,899 | 68.75 | 2/1/2008 | 2/1/2011 | 1/31/2018 | | | | | | | | |
| Hugh F. Johnston | | | | | | | | | | | | | |
| | 70,275 | 63.75 | 3/1/2011 | 3/1/2014 | 2/28/2021 | 3/1/2016 | 3/1/2019 | — | | — | 35,089 | | 3,671,362 |
| | 43,856 | 66.50 | 4/12/2010 | 4/12/2013 | 4/11/2020 | 3/1/2015 | 3/1/2018 | — | | — | 32,242 | | 3,373,480 |
| | | | | | | 3/1/2014 | 3/1/2017 | — | | — | 31,870 | | 3,334,558 |
| | | | | | | 7/19/2013 | 7/19/2018 | 62,427 | (4) | 6,531,737 | — | | — |
| Albert P. Carey | | | | | | | | | | | | | |
| | 44,863 | 63.75 | 3/1/2011 | 3/1/2014 | 2/28/2021 | 3/1/2016 | 3/1/2019 | — | | — | 33,685 | | 3,524,462 |
| | 50,827 | 66.50 | 4/12/2010 | 4/12/2013 | 4/11/2020 | 3/1/2015 | 3/1/2018 | — | | — | 32,443 | | 3,394,511 |
| | | | | | | 11/21/2014 | 3/1/2017 | — | | — | 20,253 | (5) | 2,119,071 |
| | | | | | | 3/1/2014 | 3/1/2017 | — | | — | 31,243 | | 3,268,955 |
| Sanjeev Chadha | | | | | | | | | | | | | |
| | | | | | | 3/1/2016 | 3/1/2019 | — | | — | 22,975 | | 2,403,874 |
| | | | | | | 3/1/2015 | 3/1/2018 | — | | — | 22,040 | | 2,306,045 |
| | | | | | | 11/21/2014 | 3/1/2018 | — | | — | 31,480 | (6) | 3,293,752 |
| | | | | | | 3/1/2014 | 3/1/2017 | — | | — | 24,075 | | 2,518,967 |
| Mehmood Khan | | | | | | | | | | | | | |
| | 70,588 | 63.75 | 3/1/2011 | 3/1/2014 | 2/28/2021 | 3/1/2016 | 3/1/2019 | — | | — | 20,051 | | 2,097,936 |
| | 50,526 | 66.50 | 4/12/2010 | 4/12/2013 | 4/11/2020 | 3/1/2015 | 3/1/2018 | — | | — | 19,264 | | 2,015,592 |
| | 63,396 | 53.00 | 2/6/2009 | 2/1/2012 | 1/31/2019 | 3/1/2014 | 3/1/2017 | — | | — | 18,809 | | 1,967,986 |

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| (1) | With the exception of the special
awards discussed in footnotes (4), (5) and (6) below, each of the PEPunit
and PSU awards listed in the table vests three years after the grant date,
subject to continued service with PepsiCo through the vesting date and
achievement of applicable performance targets during a three-year
performance period. Each of the awards that are not special awards will
vest on a pro-rata basis upon retirement between ages 55 and 61,
inclusive, with at least 10 years of service, and will vest in full upon
retirement at age 62 or older with at least 10 years of service, subject
to achievement of applicable performance targets. As of 2016 fiscal
year-end, Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata
vesting and Mr. Carey is eligible for full vesting. |
| --- | --- |
| (2) | The market value of unvested
PEPunits and PSUs reflected in the table has been calculated by
multiplying the number of unvested PEPunits and PSUs by $104.63, PepsiCo’s
closing stock price on December 30, 2016, the last trading day of the 2016
fiscal year. |
| (3) | The numbers displayed in this
column reflect the target number of PEPunits and PSUs awarded.
Notwithstanding the level of performance achieved, the Compensation
Committee retains the discretion to reduce the number of shares issued in
settlement of these awards. |
| (4) | The reported award reflects a
special PSU award granted to Mr. Johnston. In September 2016, the
Compensation Committee certified the level of performance achieved with
respect to the three-year performance goals for this award. Based on
PepsiCo’s TSR performance relative to the S&P 500 over the three-year
performance period, Mr. Johnston may receive 108% of target for this
award. The award remains subject to time-based vesting and is scheduled to
vest on July 19, 2018, subject to continued employment through the vesting
date. In addition, notwithstanding the level of performance achieved, the
Compensation Committee retains the discretion to reduce the number of
shares issued in settlement of this award. |
| (5) | The reported award reflects a
special PSU award granted to Mr. Carey. This award vested on March 1, 2017
and remains subject to the achievement of pre-established performance
targets over a three-year performance period ending fiscal year-end 2017.
Mr. Carey may receive 0% to 125% of the PSUs granted depending on the
performance level achieved. Notwithstanding the level of performance
achieved, the Compensation Committee retains the discretion to reduce the
number of shares issued in settlement of these awards. |
| (6) | The reported award reflects a
special PSU award granted to Mr. Chadha. This award is scheduled to vest
on March 1, 2018, subject to the achievement of pre-established
performance targets over a three-year performance period, and subject to
continued employment through the vesting date. Mr. Chadha may receive 0%
to 125% of the PSUs granted depending on the performance level achieved.
Notwithstanding the level of performance achieved, the Compensation
Committee retains the discretion to reduce the number of shares issued in
settlement of these awards. |

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2016 Option Exercises and Stock Vested

| Name | Option
Awards (1) — Number of Shares Acquired
on Exercise (#) | Value Realized on
Exercise ($) (3) | Stock
Awards (2) — Number of Shares Acquired
on Vesting (#) | Value Realized on
Vesting ($) (3) |
| --- | --- | --- | --- | --- |
| Indra K. Nooyi | 304,220 | 11,655,578 | 157,921 | 15,570,221 |
| Hugh
F. Johnston | 118,125 | 4,455,773 | 44,218 | 4,359,674 |
| Albert P. Carey | 170,003 | 8,087,133 | 41,060 | 4,048,311 |
| Sanjeev Chadha | — | — | 8,364 | 824,649 |
| Mehmood Khan | 30,137 | 1,160,047 | 63,609 | 6,572,290 |

| (1) | All stock option exercises during
2016 were executed within the final three years of the option’s term and
in a manner consistent with PepsiCo’s Share Retention Policy, which is
described in the “Governance Features of Our Executive Compensation
Programs” section of the Compensation Discussion and Analysis beginning on
page 51 of this Proxy Statement. |
| --- | --- |
| (2) | The following table lists
PEPunit, RSU and PSU awards that vested in 2016 for the NEOs. The PEPunits
vested on March 1, 2016 based upon the level of achievement attained with
respect to the pre-established absolute and relative stock price
performance for the three-year performance period. The PSUs granted on
March 1, 2013 vested on March 1, 2016 based upon the level of achievement
attained with respect to the pre-established Company performance for the
three-year performance period. |

| Name | Type | Grant Date | Payout
Date | Number of Shares Granted
(#) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Dividend Equivalents Paid ($) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | PEPunit | 3/1/2013 | 3/1/2016 | 108,911 | 157,921 | 15,570,221 | — |
| Hugh
F. Johnston | PEPunit | 3/1/2013 | 3/1/2016 | 30,495 | 44,218 | 4,359,674 | — |
| Albert P. Carey | PEPunit | 3/1/2013 | 3/1/2016 | 28,317 | 41,060 | 4,048,311 | — |
| Sanjeev Chadha (A) | PSU | 3/1/2013 | 3/1/2016 | 3,036 | 5,267 | 519,300 | 39,687 |
| Sanjeev Chadha (A) | RSU (B) | 3/1/2013 | 3/1/2016 | 9,109 | 3,097 | 305,349 | 23,336 |
| Mehmood Khan | PSU (C) | 7/19/2013 | 9/21/2016 | 34,682 | 37,457 | 3,993,834 | 323,535 |
| Mehmood Khan | PEPunit | 3/1/2013 | 3/1/2016 | 18,036 | 26,152 | 2,578,456 | — |

| (A) | Mr. Chadha did not participate in
the LTI program for executive officers in 2013. In 2013, his annual grant
consisted of 75% time-based RSUs and 25% PSUs that paid out at 173.5% of
target, based on achievement of pre-established targets. |
| --- | --- |
| (B) | Mr. Chadha reached early
retirement eligibility in 2015, and therefore 6,012 shares of his 2013 RSU
award were paid out in 2015. The remaining 3,097 shares were paid out upon
vesting in 2016. |
| (C) | This award was a special award
granted to Dr. Khan in 2013. The award vested on July 19, 2016 and paid
out based on the Company’s relative TSR performance over the three-year
performance period, as described under the “Special Award Payout” section
in the Compensation Discussion and Analysis on page 49 of this Proxy
Statement. |

(3) The value realized on exercise of stock options is equal to the amount per share at which the NEO sold shares acquired on exercise (all of which occurred on the date of exercise), minus the exercise price of the stock options, times the number of shares acquired on exercise of the options. The value realized on vesting of stock awards is equal to the average of the high and low market prices of PepsiCo Common Stock on the date of vesting, times the number of shares acquired upon vesting. The number of shares and value realized on vesting includes shares that were withheld at the time of vesting to satisfy tax withholding requirements.

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2016 Pension Benefits

A summary of the pension benefit plans sponsored by PepsiCo that our NEOs participated in during 2016 are described in the table below. Benefits for the NEOs who participate in these plans are determined using the same formula as for other eligible employees. NEOs receive no additional years of credited service or other enhancements in determining their benefits that are not available to other eligible employees in each plan.

| | PepsiCo
Salaried Employees Retirement Plan (“Salaried Plan”) (1) | Pension
Equalization Plan (“PEP”) | PepsiCo
International Retirement Plan - Defined Benefit
Program (“PIRP-DB”) |
| --- | --- | --- | --- |
| Eligible NEOs | ● Indra K. Nooyi (early retirement eligible) ● Hugh F. Johnston (early retirement eligible) ● Albert P. Carey (retirement eligible) ● Mehmood Khan | | Sanjeev Chadha (early retirement
eligible) |
| Type of Plan | Qualified defined benefit pension
plan | Non-qualified defined benefit
pension plan | Non-qualified defined benefit
pension plan |
| Eligibility | U.S. salaried employees hired prior
to January 1, 2011 | Employees eligible to participate in
the Salaried Plan whose benefits under the Salaried Plan are affected by
limitations imposed by the Internal Revenue Code on qualified plan
compensation or benefits | Generally covers non-U.S. citizens
hired prior to January 1, 2011 who were an active participant in a defined
benefit retirement plan sponsored by their home country and were unable to
remain in that plan during their assignment outside their home country,
designated for participation by PepsiCo |
| Form of Payment Upon
Retirement | Benefits payable as a single life
annuity, a single lump sum distribution, a joint and survivor annuity, a
10-year certain annuity or a combination of a partial lump sum and an
annuity | ● Benefits accrued and vested prior to December 31, 2004
are generally paid in the same form and at the same time the Salaried Plan
benefits are commenced ● Benefits accrued or vested after December 31, 2004 are
paid at termination (subject to a six-month delay under Section 409A of
the Internal Revenue Code), in the form of a lump sum | Benefits payable as a single life
annuity, a single lump sum distribution, a joint and survivor annuity, a
10-year certain annuity or a combination of a partial lump sum and an
annuity |
| Benefit Timing | ● Normal retirement benefits payable at age 65 with 5
years of service ● Unreduced early retirement benefits payable as early as
age 62 with 10 years of service ● Reduced early retirement benefit payable at age 55 with
10 years of service, determined by reducing the normal retirement benefit
by 4% for each year benefits begin prior to age 62 | | |
| Retirement Benefit
Formula | A single life annuity beginning at
normal retirement age determined as follows: ● 3% for each year of service up to 10 years, plus 1% for
each year of service in excess of 10, multiplied by the executive’s
highest consecutive five-year average monthly earnings (base salary and
annual incentive compensation) ● Reduced by 0.43% of the executive’s highest consecutive
five-year average monthly earnings up to his or her monthly Social
Security covered compensation, multiplied by the executive’s years of
service up to 35 | ● Same terms and conditions as the Salaried Plan as
determined without regard to the Internal Revenue Code limitations on
compensation and benefits ● Offset by the actual benefit payable under the Salaried
Plan | ● Substantially the same as the formula under the Salaried
Plan and the PEP, without the Social Security offset ● Offset by retirement benefits paid under any Company
plan or government mandated retirement
program |

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| | PepsiCo
Salaried Employees Retirement Plan (“Salaried Plan”) (1) | PepsiCo
International Retirement Plan - Defined Benefit
Program (“PIRP-DB”) |
| --- | --- | --- |
| Disability/Death Benefits | ● All participants who become disabled after 10 years of
service and remain disabled until retirement receive continued service for
the length of their disability ● If the participant becomes deceased, the spouse of an
employee who is retirement eligible is entitled to a pension equal to the
survivor benefit under the 50% joint and survivor option. The surviving
spouse or estate of an active participant is also entitled to a one-time
payment equal to the lump sum benefit accrued at death, offset by the lump
sum value of any surviving spouse’s benefit that might be payable. This
special death benefit is paid by the Company and not from the plan | If the participant becomes deceased,
the spouse of an employee is entitled to a pension equal to the survivor
benefit under the 50% joint and survivor option |
| Deferred Vested Benefits | ● For a participant with five or more years of service who
terminates employment prior to attaining either age 55 with 10 years of
service or age 65 with 5 years of service ● Benefit is equal to the retirement benefit formula
amount calculated using the potential years of credited service had the
participant remained employed to age 65 pro-rated by a fraction, the
numerator of which is the participant’s credited years of service at
termination and the denominator of which is the participant’s potential
years of credited service had the participant remained employed to age 65 ● Deferred vested benefits under the Salaried Plan and
PIRP-DB are payable in an annuity commencing at age 65, however, a
participant may elect to commence benefits as early as age 55 on an
actuarially reduced basis to reflect the longer payment period. A
participant who terminates from the Salaried Plan is eligible for a
one-time lump sum benefit within 365 days of termination, provided that
the participant does not have a PEP benefit that vested prior to 2005. A
participant who terminates from the PIRP-DB is also eligible for a
one-time lump sum benefit within 365 days of termination. Deferred vested
benefits under PEP are payable in an annuity at the later of age 55 or
termination (subject to a six month delay under Section 409A of the
Internal Revenue Code) | |

(1) In 2016, the Salaried Plan was amended as part of a reorganization of our U.S. qualified defined benefit plans, which became effective on January 1, 2017. The benefits offered to the plan’s participants, as described above, were unchanged. The result of the reorganization was the creation of one plan including primarily active participants and another plan including primarily inactive participants.

The Present Value of Accumulated Benefit reported in the 2016 Pension Benefits Table below represents the accumulated benefit obligation for benefits earned to date, based on age, service and earnings through the plan’s measurement date of December 31, 2016.

Name	Plan Name	Number of Years Credited Service (#)	Present Value of Accumulated Benefit ($) (1)	Payments During Last Fiscal Year ($)
Indra K. Nooyi	PepsiCo Salaried Employees
Retirement Plan	22.8	1,180,809	—
	PepsiCo Pension
Equalization Plan		26,749,140	—
Hugh
F. Johnston	PepsiCo Salaried Employees Retirement
Plan	26.8	923,910	—
	PepsiCo Pension Equalization Plan		7,777,080	—
Albert P. Carey	PepsiCo Salaried Employees
Retirement Plan	35.6	1,510,409	—
	PepsiCo Pension
Equalization Plan		13,204,064	—
Sanjeev Chadha	PepsiCo International Retirement
Plan	23.1	5,088,329	—
Mehmood Khan	PepsiCo Salaried Employees
Retirement Plan	9.0	617,790	—
	PepsiCo Pension Equalization Plan		3,857,179	—

(1) These amounts have been calculated using actuarial methods and assumptions shown below in the fiscal year-end valuation under the guidance on employers’ accounting for pensions with the assumption, required by SEC disclosure rules, that each NEO remains in service until retirement at the earliest date when unreduced retirement benefits would be available (i.e., age 62 or older):

| ● | Discount rate of 4.36% for the
PepsiCo Salaried Employees Retirement Plan, 4.17% for the PepsiCo Pension
Equalization Plan, and 4.39% for the PepsiCo International Retirement
Plan; and |
| --- | --- |
| ● | Benefits were converted to lump sums
based on a 5.75% lump sum conversion rate at
retirement. |

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Table of Contents

EXECUTIVE COMPENSATION

2016 Non-Qualified Deferred Compensation

Executive Income Deferral Program

Eligible NEOs	● Indra K. Nooyi ● Hugh F. Johnston ● Albert P. Carey ● Mehmood Khan
Description	Non-qualified and unfunded program
that allows certain U.S.-based eligible employees to defer a portion of
their annual compensation to a later date
Deferral Limits	Eligible PepsiCo executives may
defer up to 75% of base salary and 100% of annual incentive cash
compensation. The Company does not provide a matching contribution on any
deferrals
Return on Plan Balance	Executives earn a return on their
notional accounts based on investments in the phantom funds selected by
the executives (listed in footnote (3) below) from a list of phantom funds
made available by the Company. The EIDP does not guarantee a rate of
return and none of the funds provide above market
earnings
Distributions	● At the time of election to defer, executives are
required to choose to receive future payments on either a specific date or
upon separation from service ● Notwithstanding a participant’s payment election,
deferrals made after 2000 are paid in a lump sum at the time of separation
from service in cases in which separation (other than retirement) occurs
prior to the elected payment date ● Payments of deferrals made after 2004 to executives who
are specified employees under Section 409A of the Internal Revenue Code
that are triggered by a separation from service are delayed six months
following separation
Form of
Payment	Made in cash and received as a lump sum or in
installments (quarterly, semi-annually or annually) over a period of up to
20 years

For additional detail on PepsiCo’s EIDP, refer to the “Executive Deferral” section of the Compensation Discussion and Analysis on page 50 of this Proxy Statement.

| Name | Executive Contributions in Last Fiscal
Year ($) | Registrant Contributions in
Last Fiscal Year ($) | Aggregate Earnings in
Last Fiscal Year ($) (1) | Aggregate Withdrawals/ Distributions ($) (2) | Aggregate Balance at Last
Fiscal Year End ($) (3) |
| --- | --- | --- | --- | --- | --- |
| Indra K. Nooyi | — | — | 544,415 | — | 12,101,206 |
| Hugh
F. Johnston | — | — | 161,430 | 336,404 | 2,236,187 |
| Albert P. Carey | — | — | — | — | — |
| Mehmood Khan | — | — | — | — | — |

| (1) | PepsiCo does not provide
above-market or preferential rates and, as a result, the notional earnings
are not included in the 2016 Summary Compensation Table. |
| --- | --- |
| (2) | The amount reported for Mr.
Johnston represents the final distribution of a portion of his previously
deferred 2002 and 2003 annual incentive compensation. |
| (3) | None of the amounts reported in
this column are reflected in the 2016 Summary Compensation Table. Deferral
balances of NEOs under the EIDP were notionally invested in the following
phantom funds and earned the following rates of return in 2016: (i)
PepsiCo Common Stock: 6.93% and (ii) Defined Applicable Federal Rate (AFR)
Fund: 2.68%. |

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EXECUTIVE COMPENSATION

Potential Payments on Termination or Change in Control

Termination of Employment/Retirement

None of our NEOs have any arrangement that provides for severance payments or severance benefits.

In the event an NEO retires, terminates or resigns from PepsiCo for any reason as of fiscal year-end, he or she would be entitled to:

| ● | the pension value disclosed in the 2016 Pension
Benefits table on page 62 of this Proxy Statement; and |
| --- | --- |
| ● | the outstanding balance disclosed in the 2016
Non-Qualified Deferred Compensation table on page 63 of this Proxy
Statement. |

Our NEOs’ unvested annual LTI awards vest on a pro-rata basis upon retirement between ages 55 and 61, inclusive, and fully vest upon death, disability or retirement on or after age 62. In order to be retirement eligible, an executive must be at least age 55 with 10 or more years of service. For special awards, no accelerated vesting occurs upon retirement. In the event of death or long-term disability, special awards fully vest. Even after vesting, PEPunits, PSUs and LTC Awards remain subject to achievement of pre-established performance targets.

The following table sets forth, for each NEO, the value of the unvested PEPunits, PSUs, RSUs and LTC Awards and accrued dividend equivalents on PSUs and RSUs that would vest or be forfeited if the NEO’s employment terminated on December 31, 2016, the last day of the 2016 fiscal year, due to termination without cause, retirement, death or long-term disability:

| Name | Termination/Retirement ($ in millions) (1) — Vest | Forfeit | Death/Long-Term
Disability ($ in millions) (1) — Vest | Forfeit |
| --- | --- | --- | --- | --- |
| Indra K. Nooyi | 28.8 | 17.0 | 17.0 | — |
| Hugh
F. Johnston | 9.4 | 13.4 | 13.4 | — |
| Albert P. Carey | 15.4 | 2.2 | 2.2 | — |
| Sanjeev Chadha | 6.7 | 7.7 | 7.7 | — |
| Mehmood Khan | — | 9.2 | 9.2 | — |

(1) The PEPunits, PSUs and RSUs were valued at a price of $104.63, PepsiCo’s closing stock price on December 30, 2016, the last trading day of the 2016 fiscal year. Death and Long-Term Disability vesting amounts do not include the value of vested stock options that have already been earned or unvested PEPunits, PSUs, RSUs and LTC Awards that an executive may have earned due to fulfilling the retirement eligibility criteria. As of 2016 fiscal year-end, Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata vesting and Mr. Carey is eligible for full vesting of annual LTI awards. For a list of earned vested stock options, see the 2016 Outstanding Equity Awards at Fiscal Year-End table beginning on page 58 of this Proxy Statement.

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EXECUTIVE COMPENSATION

Change in Control

PepsiCo has a long history of maintaining a “double trigger” vesting policy. This means that unvested stock options, PEPunits, PSUs, RSUs and LTC Awards only vest if the participant is terminated without cause or resigns for good reason within two years following a change in control of PepsiCo or if the acquirer fails to assume or replace the outstanding awards.

For each NEO, the following table illustrates:

| ● | the value of PEPunits, PSUs, RSUs,
LTC Awards and accrued dividend equivalents on PSUs and RSUs that would
vest upon a change in control of PepsiCo without termination of
employment; and |
| --- | --- |
| ● | the value of the PEPunits, PSUs,
RSUs, LTC Awards and accrued dividend equivalents on PSUs and RSUs that
would vest upon an NEO’s termination without cause or resignation for good
reason if the acquirer does not assume or replace the outstanding awards
at the time of the change in control. |

| Name | Change in Control ($ in
millions) — Total Benefit: Change
in Control Only | Total
Benefit: Qualifying Termination upon Change in
Control (1) |
| --- | --- | --- |
| Indra K. Nooyi | — | 17.0 |
| Hugh
F. Johnston | — | 13.4 |
| Albert P. Carey | — | 2.2 |
| Sanjeev Chadha | — | 7.7 |
| Mehmood Khan | — | 9.2 |

(1) The amounts reported in this column assume that both the change in control and termination occurred on December 31, 2016, the last day of the 2016 fiscal year. The PEPunits, PSUs and RSUs were valued based on PepsiCo’s $104.63 closing stock price on December 30, 2016, the last trading day of 2016. Amounts do not include vested options that have already been earned due to continued service or unvested PEPunits, PSUs, RSUs and LTC Awards that an executive may have earned due to fulfilling the retirement eligibility criteria. As of 2016 fiscal year-end, Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata vesting and Mr. Carey is eligible for full vesting of annual LTI awards. For a list of earned vested stock options, please see the 2016 Outstanding Equity Awards at Fiscal Year-End table beginning on page 58 of this Proxy Statement.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

The Compensation Committee

| Lloyd G. Trotter,
Chair | David C. Page |
| --- | --- |
| Shona L. Brown | Daniel
Vasella |
| Rona A. Fairhead | |

The information contained in the above report will not be deemed to be “soliciting material” or “filed” with the SEC, nor will this information be incorporated into any future filing under the Securities Act or the Exchange Act except to the extent the Company specifically incorporates such report by reference.

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EXECUTIVE COMPENSATION

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of December 31, 2016 with respect to the shares of PepsiCo Common Stock that may be issued under our equity compensation plans.

| Plan
Category — Equity compensation plans approved | Number of securities to be
issued upon exercise of outstanding options, warrants and
rights(a) — 33,254,186 | Weighted-average exercise
price of outstanding options, warrants and
rights(b) — $71.03 | (3) | Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column(a))(c) — 81,858,403 |
| --- | --- | --- | --- | --- |
| by
security holders (1) | | | | |
| Equity compensation plans not approved | — | — | | — |
| by
security holders (5) | | | | |
| Total | 33,254,186 | $71.03 | (3) | 81,858,403 |

| (1) | Includes the PepsiCo, Inc. Long-Term
Incentive Plan (the “Long-Term Incentive
Plan” ) and the 2003 Long-Term Incentive
Plan (the “2003 Plan” ). |
| --- | --- |
| (2) | This amount includes 532,701
PEPunits and 8,236,804 PSUs and RSUs that, if and when vested, will be
settled in shares of PepsiCo Common Stock. This amount also includes
253,943 phantom units under the PepsiCo Director Deferral Program that
will be settled in shares of Common Stock pursuant to the Long-Term
Incentive Plan at the end of the applicable deferral period. For PSUs for
which the performance period has ended as of December 31, 2016, the
amounts reported in the table reflect the actual number of PSUs earned
above and below target levels based on actual performance measured at the
end of the performance period. The amounts reported in the table assume
target level performance for PEPunits and PSUs for which the performance
period has not ended as of December 31, 2016. If maximum earn-out levels
are assumed for such PEPunits and PSUs, the total number of shares of
PepsiCo Common Stock to be issued upon exercise and/or settlement of
outstanding awards as of December 31, 2016 is 34,091,649. |
| (3) | Weighted-average exercise
price of outstanding options only. |
| (4) | The shareholder-approved Long-Term
Incentive Plan is the only equity compensation plan under which PepsiCo
currently issues equity awards. The Long-Term Incentive Plan, as amended
and restated, was approved by the Board on March 3, 2016 and by the
Company’s shareholders on May 4, 2016. As of May 2, 2007, the Long-Term
Incentive Plan superseded the Company’s prior plan, the
shareholder-approved 2003 Plan, and no further awards were made under the
2003 Plan. The Long-Term Incentive Plan permits the award of stock
options, stock appreciation rights, restricted and unrestricted shares,
restricted stock units and performance shares and units. The Long-Term
Incentive Plan authorizes a number of shares for issuance equal to
195,000,000 plus the number of shares underlying awards under the
Company’s prior equity compensation plans that are canceled or expired
after May 2, 2007 without delivery of shares. Under the Long-Term
Incentive Plan, any stock option granted reduces the available number of
shares on a one-to-one basis, any RSU or other full value award granted
before May 5, 2010 reduces the available number of shares on a one-to-one
basis and any RSU or other full value award granted on or after May 5,
2010 reduces the available number of shares on a one-to-three
basis. |
| (5) | The table does not include
information for equity compensation plans assumed by PepsiCo in connection
with PepsiCo’s acquisition of The Pepsi Bottling Group, Inc.
( “PBG” ) in 2010. As of December 31, 2016, 959,283 shares of PepsiCo
Common Stock were issuable upon the exercise of outstanding options
granted under the PBG plans prior to the acquisition of PBG at a
weighted-average exercise price of $40.81. No additional stock options or
other awards may be granted under the PBG
plans. |

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Advisory Vote on the Frequency of Future Shareholder Advisory Approval of Executive Compensation
(Proxy Item No.
4)

Pursuant to Section 14A of the Exchange Act, we are asking shareholders to recommend, in an advisory vote, whether future shareholder advisory approval of the compensation of our NEOs should occur every one, two or three years. While this vote is non-binding, PepsiCo values the opinions of its shareholders and will consider the outcome of the vote when determining the frequency of future shareholder advisory approvals of executive compensation.

At PepsiCo’s 2011 Annual Meeting, a majority of PepsiCo’s shareholders expressed a preference for annual shareholder advisory votes on executive compensation and PepsiCo’s Board adopted this practice.

Consistent with our current practice and based on shareholder preference and current prevailing market practice, the Board recommends an annual frequency for the shareholder advisory vote on executive compensation.

Our Board of Directors recommends that shareholders vote for every “ONE YEAR” with respect to how frequently a shareholder advisory approval of the compensation of our Named Executive Officers should occur.

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Shareholder Proposals (Proxy Item Nos. 5-6)

Shareholders have submitted the following proposals for the reasons stated. The shareholder proposals will be voted on at our 2017 Annual Meeting if properly presented by the shareholder proponent or by a qualified representative on behalf of the shareholder proponent. Some of the shareholder proposals contain assertions about PepsiCo that we believe are incorrect. We have not attempted to refute all of these inaccuracies. However, our Board of Directors has recommended a vote against each of these proposals for the reasons set forth following each proposal.

Shareholder Proposal Regarding Pesticide Pollution (Proxy Item No. 5)

Trillium Asset Management, LLC, on behalf of Susan Meade, c/o Trillium Asset Management, LLC, Two Financial Center, 60 South Street, Suite 1100, Boston, MA 02111, who owns 400 shares of PepsiCo Common Stock; The Sustainability Group, on behalf of the William B. Perkins Trust, c/o The Sustainability Group, 230 Congress Street, Boston, MA 02110, which owns at least $2,000 in market value of PepsiCo Common Stock; Domini Social Investments LLC, on behalf of Domini Social Equity Fund, 532 Broadway, 9 th Floor, New York, NY 10012, which owns more than 239,000 shares of PepsiCo Common Stock; the School Sisters of Notre Dame Cooperative Investment Fund, 345 Belden Hill Road, Wilton, CT 06897, which owns 16 shares of PepsiCo Common Stock; the Benedictine Sisters of Baltimore, Emmanuel Monastery, 2229 West Joppa Road, Lutherville, MD 21093, which owns 200 shares of PepsiCo Common Stock; and the Benedictine Sisters of Mount St. Scholastica, Inc., 801 South 8th Street, Atchison, KS 66002, which owns 445 shares of PepsiCo Common Stock, have submitted the following proposal:

“Pesticide Pollution

Numerous studies document the correlation between pesticide exposure and increased cancer risk. According to the U.S. President’s Cancer Panel, approximately forty chemicals found in EPA-registered pesticides are classified as “known, probable, or possible” carcinogens. In July 2016, scientists and health providers released a scientific Consensus Statement as a national call to action to reduce exposures to chemicals including pesticides.

Practices such as applying glyphosate to crops before harvesting - a protocol that makes harvesting easier but may result in increased pesticide residues on crops - are raising concerns. In 2016, the Food and Drug Administration announced that it planned to begin testing for glyphosate residues on some foods.

Neonicotinoids have been implicated as a contributor to the decline in pollinators. With crops reliant on pollinators valued between $235-$577 billion, chronic declines in these populations pose a threat to our economy and global food system.

Consumer interest in knowing how food is grown and its impacts on health and the environment is increasing. According to a Consumers Reports survey, 86 percent of people believe it is critical to reduce pesticide exposure.

Given these concerns, regulatory actions are increasing:

| ● | In 2013, the EU banned three
neonicotinoids; |
| --- | --- |
| ● | In 2016, Minnesota enacted
restrictions on neonicotinoids, and is seeking legislative authority to
regulate seeds treated with pesticides before they’re
planted; |
| ● | In 2015, the EPA proposed a ban on
the insectide chlorpyrifos for agricultural
use; |
| ● | In 2016, California regulators
proposed rules banning farmers from spraying pesticides within a quarter
mile of schools or daycare facilities. |

Further, several companies are tracking and reducing pesticides use:

| ● | Unilever discloses amounts of
pesticides avoided by farmers using Integrated Pest Management (IPM)
practices; |
| --- | --- |
| ● | Whole Foods has committed to reduce
pesticide use and its “Responsibly Grown Pesticide Policy targets
pesticides which pose the greatest risk to consumers [and]
pollinators;” |
| ● | Sysco’s IPM Program reduced
pesticide use by nearly 900,000 pounds over three years. Sysco also tracks
pesticides avoided that affect
pollinators. |

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SHAREHOLDER PROPOSALS

PepsiCo’s disclosures, in contrast, do not provide sufficient information to determine how it is effectively managing pesticide risks. PepsiCo’s Sustainable Farming Initiative, which addresses only a portion of the total supply chain, guides growers to “optimize” the use of pesticides. However, it does not disclose metrics, detailed goals, or progress. Further, PepsiCo’s Performance with Purpose 2025 Agenda, which provides specific details on a range of sustainability-related issues, is notably silent on pesticides.

Resolved: Shareholders request that the Board publicly report on company strategies and policy options to protect public health and pollinators through reduced pesticide usage in PepsiCo’s supply chain.

Supporting Statement: While the company has the discretion to determine its precise content, proponents recommend that the requested report include:

| ● | Quantitative metrics tracking the
amount of pesticides used and avoided, along with the class of pesticides
used, reported annually, |
| --- | --- |
| ● | Overall goals to reduce pesticide
use and/or toxicity; and |
| ● | Measures including technical
assistance and incentives provided to growers, to avoid or minimize the
use of pesticides.” |

Our Board of Directors recommends that the shareholders vote “AGAINST” this proposal for the following reasons:

The Board believes that the report requested by this proposal is unnecessary in light of the Company’s current policies and programs promoting sustainable agriculture, including the responsible use of agrochemicals. Moreover, PepsiCo’s shareholders rejected similar proposals in 2015 and 2016, which received support from less than 8% and 9%, respectively, of votes cast.

We recognize the contribution of pesticides, among other environmental stressors, and their potential impact on beneficial pollinators, such as bees, as an important issue within PepsiCo’s supply chain, and we have been and continue to implement procedures and policies to address the use of pesticides in our supply chain and minimize their unintended impacts.

Despite such potential unintended impacts, pesticides provide benefits to the food chain, such as improved crop yield, food quality and safety and cost. Positive environmental benefits have been realized over time from pesticide use, such as a smaller land use footprint for the same production. In addition, pesticide use is regulated by agencies responsible for ensuring public safety and we require that our suppliers comply with all laws and regulations applicable to their operations. Pesticide application technology and best management practices also continue to improve to reduce environmental and worker impact.

PepsiCo continues to support sustainable agriculture by expanding best practices with our growers and suppliers, including through our Sustainable Agriculture Policy and our Sustainable Farming Initiative (“SFI”).

PepsiCo sources agricultural materials within a complex, global supply chain involving independent farmers, large agribusinesses, intermediaries and company-owned farms. We require that our suppliers comply with all laws and regulations applicable to their operations. Given the importance of agricultural materials to our business, we are also focused on incorporating the best thinking, practices and technology to support sustainable agriculture within PepsiCo’s global and diverse farming supply chain, including through our Performance with Purpose goals, Sustainable Agriculture Policy and our SFI.

Through our policies and initiatives, we aim to optimize the use of pesticides, nutrients and other agrochemicals and support sustainable practices that substitute natural controls for some agrochemicals, foster ecosystem balance, reduce greenhouse gas emissions and mitigate crop losses. Sustainable protection of plants against pests includes prevention and monitoring of pest problems, using control methods only when necessary, and targeting only the pests that cause crop production problems.

Our Performance with Purpose goals include a goal, through our SFI or equivalent industry programs, to strive to sustainably source our direct agricultural raw materials by 2020 and to seek to sustainably source our non-direct major agricultural raw material ingredients by 2025. To achieve this goal, we are, among other things, extending our SFI across additional key crops and investing to close compliance gaps so that more growers can meet the minimum SFI standards.

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SHAREHOLDER PROPOSALS

Our Sustainable Agriculture Policy sets standards of performance and expectations for growers across our diverse, global supply chain, including compliance with governmental laws, regulations and industry standards, as well as a broad-based objective specifically addressing optimization of agrochemical and nutrient management. The policy also recognizes the need to responsibly manage water runoff and the risks of pollution or contamination of ground or surface water with pesticides.

Working with farmers and non-governmental organizations, PepsiCo has developed the SFI to be a comprehensive framework to gauge environmental, social and economic impacts associated with our agricultural supply chain and help us meet the goals of our Sustainable Agricultural Policy. The SFI has been successfully implemented across a wide variety of farms – from smallholder farms to large agribusinesses. In 2015, the SFI continued to expand its coverage globally and was implemented across 15 countries, with active programs representing 28,000 growers in our supply chain (up from 600 in 2014) and over 800,000 acres of direct cropping land, doubling the acres represented in 2014. Going forward, we intend to work with growers and suppliers to source sustainably and with increasing traceability. The SFI framework is a holistic framework containing nine environmental, four social and three economic sustainability indicators, with detailed criteria and global standards completed for each. Agrochemicals is one of these indicators and provides a platform through which PepsiCo gathers additional information on pesticide management and application, including measures to enable safe, legal and responsible use while minimizing agrochemical application through practices such as Integrated Pest Management.

Please also refer to our website at www.pepsico.com under “ What We Believe”—“Sustainability Reporting ” for more information on PepsiCo’s focus on sustainable agriculture.

PepsiCo is proud of its consistent public disclosure on issues of sustainability.

PepsiCo reports on a wide range of critical environmental, social and governance issues impacting our business. PepsiCo’s corporate sustainability report, which is available on our website at www.pepsico.com under “What We Believe”—“Sustainability Reporting,” describes our substantial efforts to address the environmental impacts of our operations. Our 2015 GRI Report, which is publicly available at the same location, offers greater detail on PepsiCo sustainability activities in a widely accepted format.

While we are sensitive to the concerns raised by this proposal, we do not believe that preparing the report requested by the proposal would be a good use of the Company’s resources.

Our disclosures on sustainability are designed to be interconnected to ensure PepsiCo manages against the unintended consequences of focusing on just one issue, and we therefore do not believe it makes sense to segregate the issue of pesticide pollution for a single-issue report. We believe our resources would be better used in the continuation of our current policies and practices regarding our supply chain impact, which we believe address the concerns raised in the proposal.

While we remain focused on working with our partners and external organizations to continue to support sustainable agriculture across our supply chain and to consistently provide public disclosure on sustainability, we do not believe the detailed report requested by the proposal on this single issue is in the best interests of the Company or its shareholders.

Our Board of Directors recommends that shareholders vote “AGAINST” this proposal.

Shareholder Proposal Regarding Implementation of Holy Land Principles (Proxy Item No. 6)

Holy Land Principles, Inc., P.O. Box 15128, Capitol Hill, Washington, D.C. 20003, which owns 55 shares of PepsiCo Common Stock, has submitted the following proposal:

“HOLY LAND PRINCIPLES PEPSICO RESOLUTION

WHEREAS, PepsiCo has operations in Palestine-Israel;

WHEREAS, achieving a lasting peace in the Holy Land -- with security for Israel and justice for Palestinians -- encourages us to promote a means for establishing justice and equality;

WHEREAS, fair employment should be the hallmark of any American company at home or abroad and is a requisite for any just society;

WHEREAS, Holy Land Principles Inc., a non-profit organization, has proposed a set of equal opportunity employment principles to serve as guidelines for corporations in Palestine-Israel.

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SHAREHOLDER PROPOSALS

These are:

| 1. | Adhere to equal and fair
employment practices in hiring, compensation, training, professional
education, advancement and governance without discrimination based on
national, racial, ethnic or religious identity. |
| --- | --- |
| 2. | Identify underrepresented
employee groups and initiate active recruitment efforts to increase the
number of underrepresented employees. |
| 3. | Develop training programs that
will prepare substantial numbers of current minority employees for skilled
jobs, including the expansion of existing programs and the creation of new
programs to train, upgrade, and improve the skills of minority
employees. |
| 4. | Maintain a work environment that
is respectful of all national, racial, ethnic and religious
groups. |
| 5. | Ensure that layoff, recall and
termination procedures do not favor a particular national, racial, ethnic
or religious group. |
| 6. | Not make military service a
precondition or qualification for employment for any position, other than
those positions that specifically require such experience, for the
fulfillment of an employee’s particular responsibilities. |
| 7. | Not accept subsidies, tax
incentives or other benefits that lead to the direct advantage of one
national, racial, ethnic or religious group over another. |
| 8. | Appoint staff to monitor,
oversee, set timetables, and publicly report on their progress in
implementing the Holy Land Principles. |

RESOLVED: Shareholders request the Board of Directors to:

Make all possible lawful efforts to implement and/or increase activity on each of the eight Holy Land Principles.

SUPPORTING STATEMENT

The proponent believes that PepsiCo benefits by hiring from the widest available talent pool. An employee’s ability to do the job should be the primary consideration in hiring and promotion decisions.

Implementation of the Holy Land Principles -- which are pro-Jewish, pro-Palestinian and pro-company -- will demonstrate concern for human rights and equality of opportunity in its international operations.

Please vote your proxy FOR these concerns.”

Our Board of Directors recommends that the shareholders vote “AGAINST” this proposal for the following reasons:

PepsiCo already has in place robust and comprehensive policies and procedures that promote equal and fair employment practices, diversity and inclusion, and respect in the workplace. We believe a policy limited to a specific geographic area such as the one described in the proposal is not necessary or useful. Moreover, PepsiCo’s shareholders rejected a similar proposal in 2016, which received support from less than 4% of votes cast.

PepsiCo’s Values, Global Code of Conduct and other existing policies and procedures already address the concerns of this proposal and demonstrate the Company’s focus on fair employment practices, diversity and inclusion, and respect in the workplace that we apply globally.

PepsiCo’s Global Anti-Harassment/Anti-Discrimination Policy sets forth a zero-tolerance policy towards any type of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, age, national origin, disability or veteran status, or any other protected category under applicable law.

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SHAREHOLDER PROPOSALS

PepsiCo’s Values, which require that we must always strive to “respect others and succeed together” and “win with diversity and inclusion,” and Global Code of Conduct reinforce this policy. The Global Code prohibits discrimination or unfair treatment in matters that involve recruiting, hiring, training, promoting, compensation or any other term or condition of employment, and provides that employment decisions must always be based on merit, qualifications and job-related performance, without regard to non-job-related characteristics. The Global Code further provides that PepsiCo associates should never discriminate or deny equal opportunity and should give qualified individuals the chance to develop their abilities and advance within our Company. The Global Code also prohibits harassment, or conduct of any kind that creates an intimidating, offensive or hostile work environment. Our Global Code is available on the Company’s website at www.pepsico.com under “ Who We Are”—“Global Code of Conduct .” Our Human Rights Workplace Policy, Global Code of Conduct and Supplier Code of Conduct articulate our standards for our employees and people who do business with us.

Respecting human rights is fundamental to PepsiCo’s values, policies and business strategy.

Our respect for human rights is guided by the United Nations (“ UN ”) Universal Declaration of Human Rights and the International Labor Organization Declaration of Fundamental Principles and Rights at Work. As a signatory to the UN Global Compact, our policies, operations and strategies support universally accepted principles, including those for human rights and labor standards. For example, our Human Rights Workplace Policy emphasizes that PepsiCo respects the dignity of our workers in the workplace, deals fairly and honestly with our associates regarding wages, benefits and other conditions of employment, does not tolerate discrimination and works to ensure equal opportunity for all associates.

As part of our Performance with Purpose 2025 goals, we recently announced our goal to significantly broaden our focus on respecting human rights across our supply chain, by continuing to advance respect for human rights in our operations and with third-party suppliers consistent with the UN Guiding Principles on Business and Human Rights and by extending the principles of our Supplier Code of Conduct to all franchisees and joint venture partners. Please refer to our latest GRI report, which is publicly available along with our latest corporate sustainability report on our website at www.pepsico.com under “ What We Believe”—“Sustainability Reporting ,” for more information on PepsiCo’s goal on advancing respect for human rights.

At PepsiCo, we believe acting ethically and responsibly is not only the right thing to do, but also the right thing for our business.

We believe PepsiCo’s robust global policies and practices in the areas of equal opportunity, human rights and diversity already address the goal of the proposal for PepsiCo to “demonstrate concern for human rights and equality of opportunity in [our] international operations.” We believe these policies work best when they are applied in a consistent manner across each of the markets in which PepsiCo operates around the world, including Israel and Palestine, and that implementing a unique policy for a specific geographical area would neither be necessary nor useful. These principles may also require additional reporting and metrics beyond our current practice, which impose an unnecessary administrative burden and expense of little added value to our business or to our employees. It is therefore our belief that implementing the proposal is not in the best interests of PepsiCo, our employees or our shareholders.

Our Board of Directors recommends that shareholders vote “AGAINST” this proposal.

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Ownership of PepsiCo Common Stock

Stock Ownership of Officers and Directors

The following table shows, as of March 1, 2017, the number of shares of our Common Stock beneficially owned and the number of phantom units of our Common Stock held in the Company’s income deferral programs by each director (including each nominee), by each of the NEOs identified in the 2016 Summary Compensation Table on page 55 of this Proxy Statement, and by all directors and executive officers as a group. Each phantom unit represents the economic equivalent of one share of our Common Stock. Except as otherwise noted, the directors and executive officers exercise sole voting and investment power over their shares shown in the table. None of the shares are subject to pledge.

As of March 1, 2017, the directors and executive officers as a group beneficially owned less than 1% of our outstanding Common Stock, and none of the directors or executive officers owned any shares of our outstanding Convertible Preferred Stock.

| Name of Individual or
Group | Number of Shares of PepsiCo
Common Stock Beneficially Owned (1) | Number of Phantom Units of
PepsiCo Common Stock Held in PepsiCo’s
Deferral Programs (2) | Total |
| --- | --- | --- | --- |
| Shona L. Brown | 1,000 | 25,261 | 26,261 |
| George W. Buckley | 1,000 | 14,406 | 15,406 |
| Albert P. Carey | 254,353 | — | 254,353 |
| Sanjeev Chadha | 38,743 | — | 38,743 |
| Cesar Conde | 1,000 | 2,525 | 3,525 |
| Ian
M. Cook | 3,569 | 23,237 | 26,806 |
| Dina
Dublon | 2,455 | 24,378 | 26,833 |
| Rona
A. Fairhead | 700 | 6,411 | 7,111 |
| Richard W. Fisher | 1,000 | 4,261 | 5,261 |
| William R. Johnson (3) | 3,765 | 4,261 | 8,026 |
| Hugh
F. Johnston | 21,160 | 21,516 | 42,676 |
| Mehmood Khan | 237,473 | — | 237,473 |
| Indra K. Nooyi | 1,791,956 | 52,427 | 1,844,383 |
| David C. Page | 1,000 | 4,851 | 5,851 |
| Robert C. Pohlad (4) | 1,144,659 | 4,261 | 1,148,920 |
| Lloyd G. Trotter | 1,000 | 39,397 | 40,397 |
| Daniel Vasella | 14,011 | 40,841 | 54,852 |
| Darren Walker | 1,000 | 1,535 | 2,535 |
| Alberto Weisser | 1,000 | 13,309 | 14,309 |
| All directors and executive officers as a group
(26 persons) | 3,755,320 | 297,988 | 4,053,308 |

| (1) | The shares shown include the
following shares that directors and executive officers have the right to
acquire within 60 days after March 1, 2017: (1) through the exercise of
vested stock options: Albert P. Carey, 95,690 shares; Mehmood Khan,
184,510 shares; Indra K. Nooyi, 1,205,889 shares; and all directors and
executive officers as a group, 1,592,249 shares; and (2) pursuant to other
equity awards: Mr. Carey, 22,126 shares; Mr. Chadha 19,485 shares; Dr.
Khan, 13,763 shares; Mr. Johnston, 20,907 shares; Ms. Nooyi, 71,750
shares; and all directors and executive officers as a group, 201,736
shares. In addition, the amounts reported include Common Stock equivalent
amounts attributed to the following executive officers based on their
respective holdings in the PepsiCo Savings Plan: Mr. Carey, 106 shares;
Mr. Johnston, 253 shares; Dr. Khan, 194 shares; Ms. Nooyi, 8,300 shares;
and all executive officers as a group, 11,522 shares. |
| --- | --- |
| (2) | Reflects phantom units of our
Common Stock held in the PepsiCo Executive Income Deferral Program and the
PepsiCo Director Deferral Program. |
| (3) | The shares shown for William R.
Johnson include (i) 2,102 shares held jointly with his spouse over which
Mr. Johnson has shared voting and investment power, (ii) 187 shares held
in a trust with his spouse over which Mr. Johnson has shared voting and
investment power, and (iii) 476 shares held in trusts over which Mr.
Johnson has sole voting and investment power. |
| (4) | The shares shown for Robert C.
Pohlad include 900,000 shares held in a limited liability company over
which Mr. Pohlad has shared voting and investment power and 27 shares held
indirectly by his spouse. |

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OWNERSHIP OF PEPSICO COMMON STOCK

Stock Ownership of Certain Beneficial Owners

The following table sets forth information regarding persons or groups known to the Company to be beneficial owners of more than 5% of our outstanding Common Stock or Convertible Preferred Stock.

| Name and Address of Beneficial
Owner | Number of Shares of Common
Stock Beneficially Owned | | Percent of
Class Outstanding (1) |
| --- | --- | --- | --- |
| BlackRock, Inc. | | | |
| 55
East 52nd Street | 84,771,044 | (2) | 5.9 % |
| New
York, NY 10055 | | | |
| The
Vanguard Group | | | |
| 100
Vanguard Blvd. | 106,089,173 | (3) | 7.4 % |
| Malvern, PA 19355 | | | |

| (1) | Based on the number of shares of
Common Stock outstanding and entitled to vote at the 2017 Annual Meeting
as of our record date, March 1, 2017. |
| --- | --- |
| (2) | Based solely on the Schedule
13G/A filed by BlackRock, Inc. with the SEC on January 25, 2017 regarding
its holdings as of December 31, 2016. BlackRock, Inc. also reported that,
as of December 31, 2016, it had sole voting power for 71,482,447 shares of
our Common Stock, sole dispositive power for 84,771,044 shares of our
Common Stock and shared voting power for and shared dispositive power for
0 shares of our Common Stock. |
| (3) | Based solely on the Schedule
13G/A filed by the Vanguard Group with the SEC on February 10, 2017
regarding its holdings as of December 31, 2016. The Vanguard Group also
reported that, as of December 31, 2016, it had sole voting power for
2,246,975 shares of our Common Stock, sole dispositive power for
103,558,684 shares of our Common Stock, shared voting power for 300,494
shares of our Common Stock and shared dispositive power for 2,530,489
shares of our Common Stock. |

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Exchange Act requires our directors and executive officers and the beneficial owners of more than 10% of our Common Stock to file reports of ownership and changes in ownership of our Common Stock and Convertible Preferred Stock. We received written representations from each director and executive officer who did not file an annual statement with the SEC on Form 5 that no Form 5 was due. To the best of our knowledge, based on a review of those reports and written representations, we believe that all required reports were filed on time with the SEC for fiscal 2016.

74 | PEPSICO 2017 PROXY STATEMENT

PART 14

Table of Contents

Information About the Annual Meeting

Voting Procedures

Who may vote at the Annual Meeting?

Only shareholders of record of our Common Stock and Convertible Preferred Stock as of the close of business on our record date, March 1, 2017, are entitled to receive notice of and to vote at the Annual Meeting and at any postponement or adjournment of the meeting. As of the record date, there were 1,428,242,663 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting and each share of our Common Stock is entitled to one vote. In addition, as of the record date there were 121,853 shares of Convertible Preferred Stock outstanding and entitled to 604,696 votes at the Annual Meeting (which number is equal to the number of shares of Common Stock into which such shares of Convertible Preferred Stock could be converted on the record date, rounded to the nearest share).

How do I vote?

Whether you are a shareholder of record (that is, if your shares are registered in your own name with our transfer agent) or a beneficial owner of shares held in street name (that is, if you hold your shares through a broker, bank or other holder of record ), you can vote any one of four ways:

| ● | Via the
Internet. You may vote by
visiting the website and entering the control number found in the Notice
of Internet Availability of Proxy Materials (the “ Notice of Internet Availability ”), proxy card or voting instruction form. |
| --- | --- |
| ● | By
Telephone. You may vote by
calling the toll-free number found in the proxy card or voting instruction
form or provided on the website listed on the Notice of Internet
Availability. |
| ● | By Mail. If you received or requested printed copies of the
proxy materials by mail, you may vote by proxy by filling out the proxy
card (if you are a shareholder of record) or voting instruction form (if
you are a beneficial owner) and sending it back in the envelope
provided. |
| ● | In Person. If you are a shareholder of record and you plan to attend the
Annual Meeting, you are encouraged to vote beforehand by Internet,
telephone or mail. You also may vote in person at the Annual Meeting.
Bring your printed proxy card if you received one by mail. Otherwise, the
Company will give shareholders of record a ballot at the Annual Meeting.
If you are a beneficial owner, you must obtain a legal proxy from the
organization that holds your shares if you wish to attend the Annual
Meeting and vote in person. |

What happens if I do not give specific voting instructions when I deliver my proxy?

| ● | Shareholder of
Record. The persons named as
proxies will vote your shares in accordance with your instructions. Except
as noted below with respect to shares held in the PepsiCo Savings
Plan/PepsiCo Hourly 401(k) Plan, if your properly executed proxy does not
contain voting instructions, the persons named as proxies will vote your
shares in accordance with the voting recommendations of the
Board. |
| --- | --- |
| ● | Beneficial Owner of Shares Held in Street Name. If you are the beneficial
owner of shares held in street name, you have the right to direct your
bank or broker how to vote your shares, and it is required to vote your
shares in accordance with your instructions. If you do not give
instructions to your bank or brokerage firm, under New York Stock Exchange
rules, it will nevertheless be entitled to vote your shares with respect
to “routine” matters, but it will not be permitted to vote your shares
with respect to “non-routine” matters. In the case of a non-routine
matter, your shares will be considered “broker non-votes” on that
proposal. |

Proposal No. 2 (ratification of the appointment of the independent registered public accounting firm) is a matter the Company believes will be considered “routine.”

Proposal No. 1 (election of directors), Proposal No. 3 (advisory approval of executive compensation), Proposal No. 4 (advisory vote on frequency of future shareholder advisory approval of executive compensation) and Shareholder Proposal Nos. 5-6 are matters the Company believes will be considered “non-routine.”

If you are a beneficial owner and do not give voting instructions to your bank or brokerage firm on certain matters, your bank or broker may vote your shares with respect to Proposal No. 2, but not Proposal Nos. 1, 3 or 4 or Shareholder Proposal Nos. 5-6.

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INFORMATION ABOUT THE ANNUAL MEETING

Can employees who participate in PepsiCo’s Savings Plan/PepsiCo Hourly 401(k) Plan vote?

Yes. If you are an employee who participates in the PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan (a portion of which constitutes an Employee Stock Ownership Plan), you can vote the shares (if any) that are deemed to be in your account in the PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan as of the close of business on March 1, 2017.

To do so, you must sign and return the proxy card or vote by the Internet or telephone, as instructed in the proxy materials you received in connection with these shares in the PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan. Voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on April 30, 2017, so that the trustee (who votes the shares on behalf of the participants of the PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan) has adequate time to tabulate the voting instructions. The trustee will vote those shares you instruct. If you do not provide voting instructions, the trustee will vote your PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan shares in the same proportion as the PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan shares of other participants for which the trustee has received proper voting instructions.

What constitutes a quorum in order to hold and transact business at the Annual Meeting?

The presence in person or by proxy of the holders of record of a majority of the votes entitled to be cast on a matter constitutes a quorum for action on that matter. Votes “for” and “against,” “abstentions” and “broker non-votes” will all be counted as present to determine whether a quorum has been established. Once a share of the Company’s Common Stock or Convertible Preferred Stock is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and any adjournments of the meeting unless a new record date is or must be set for the adjourned meeting. If a quorum is not present at the opening of the meeting, the meeting may be adjourned from time to time by the vote of a majority of the votes cast on the motion to adjourn.

What is the voting requirement to approve each of the proposals?

Assuming the existence of a quorum at the Annual Meeting:

| ● | Each director nominated pursuant to Proposal No. 1 must
receive a vote “for” their election from a majority of the votes
cast; |
| --- | --- |
| ● | For Proposal No. 4 regarding the advisory vote on the frequency
of future advisory approvals of executive compensation, the frequency
option (i.e., every one year, two years or three years) that receives the
most votes cast will be considered to be the frequency that has been
selected by shareholders; and |
| ● | For all other matters, the
affirmative vote of a majority of the votes cast is required to approve
each proposal. |

Abstentions and broker non-votes are not treated as cast either for or against a matter, and therefore will not affect the outcome of the vote.

Can I revoke my proxy or change my vote after I have voted?

You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting by voting again via the Internet or by telephone, by completing, signing, dating and returning a new proxy card or voting instruction form with a later date, or by attending the Annual Meeting and voting in person. Only your latest dated proxy we receive at or prior to the Annual Meeting will be counted. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting and specifically request that your prior proxy be revoked by delivering to PepsiCo’s Corporate Secretary at 700 Anderson Hill Road, Purchase, New York 10577 a written notice of revocation prior to the Annual Meeting.

Who will serve as the inspectors of election?

Representatives from Broadridge Investor Communication Solutions, Inc. will serve as the inspectors of election.

Where can I find the voting results of the Annual Meeting?

We expect to announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Form 8-K filed with the SEC within the time period prescribed by SEC rules.

How are proxies solicited and what is the cost?

We are providing these proxy materials in connection with the solicitation by our Board of Directors of proxies to be voted at our Annual Meeting. We bear all expenses incurred in connection with the solicitations of proxies. We have engaged Innisfree M&A Incorporated to solicit proxies for an estimated fee of $18,500, plus expenses.

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INFORMATION ABOUT THE ANNUAL MEETING

In addition to the solicitation of proxies by mail and electronically, PepsiCo intends to ask brokers and bank nominees to solicit proxies from their principals and will pay the brokers and bank nominees their expenses for the solicitation. Our directors, officers and employees also may solicit proxies by mail, telephone, electronic or facsimile transmission or in person. They will not receive any additional compensation for these activities.

Attending the Annual Meeting

How can I attend the Annual Meeting in Person?

Attendance at the Annual Meeting is limited to shareholders as of the close of business on the record date, March 1, 2017. Each shareholder may appoint only one representative to attend the Annual Meeting on his, her or its behalf. Admission to the Annual Meeting will be on a first-come, first-served basis and will require an admission ticket. Each shareholder will be asked to present valid government-issued picture identification such as a driver’s license or passport. The use of cell phones, PDAs, tablets, pagers, recording and photographic equipment and/or computers is not permitted in the meeting rooms at the Annual Meeting. The North Carolina History Center at Tryon Palace is accessible to disabled persons. Upon advance request, we will provide wireless headsets for hearing amplification.

How do I receive an admission ticket?

If you received your proxy materials by mail, your admission ticket will be your Notice of Internet Availability, proxy card (shareholders of record only) or voting instruction form (beneficial owners only). If you received your proxy materials by email, you will be given an opportunity to print an admission ticket after you vote online.

We encourage shareholders to pre-register in advance of the Annual Meeting by visiting www.proxyvote.com . You will need your 16-digit control number to access www.proxyvote.com , which you can find in the Notice of Internet Availability, proxy card or voting instruction form. You may also pre-register by contacting PepsiCo’s Manager of Shareholder Relations at (914) 253-3055 or investor@pepsico.com . If you are a beneficial owner of shares, you must show proof of ownership, such as a recent bank or brokerage account statement reflecting your ownership of Common Stock or Convertible Preferred Stock as of March 1, 2017, in addition to valid government-issued picture identification. On May 3, 2017, registration will begin at 8:30 a.m. Eastern Daylight Time.

Can I listen to the Annual Meeting on the Internet?

Yes, our Annual Meeting will be webcast live on May 3, 2017 at 9:00 a.m. Eastern Daylight Time. You are invited to visit www.pepsico.com under “Investors”—“Events and Presentations ” to listen to the live webcast of the Annual Meeting.

2017 Proxy Materials

Why am I receiving these proxy materials?

Our Board of Directors has made these materials available to you on the Internet or has delivered printed versions of these materials to you by mail in connection with the Board of Directors’ solicitation of proxies for use at our Annual Meeting of Shareholders. As a shareholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this Proxy Statement.

What is included in these materials?

These proxy materials include:

| ● | this Proxy Statement for the Annual Meeting;
and |
| --- | --- |
| ● | our Annual Report for the fiscal year
ended December 31, 2016. |

If you received printed versions of these materials by mail, these materials also include the proxy card or voting instruction form for the Annual Meeting.

Why did I receive a Notice of Internet Availability in the mail instead of printed proxy materials?

In accordance with SEC rules, instead of mailing a printed copy of our proxy materials to all of our shareholders, we have elected to furnish such materials to selected shareholders by providing access to these documents over the Internet. Accordingly, on or about March 17, 2017, we sent a Notice of Internet Availability to most of our shareholders.

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INFORMATION ABOUT THE ANNUAL MEETING

These shareholders have the ability to access the proxy materials on a website referred to in the Notice of Internet Availability or request to receive a printed set of the proxy materials by calling the toll-free number found on the Notice of Internet Availability. We encourage you to take advantage of the availability of the proxy materials on the Internet in order to help save natural resources and reduce the cost to print and distribute the proxy materials.

How can I get electronic access to the proxy materials?

The Notice of Internet Availability provides you with instructions regarding how to:

| ● | view our proxy materials for the Annual Meeting on the
Internet; |
| --- | --- |
| ● | vote your shares after you have viewed our proxy
materials; |
| ● | request a printed copy of the proxy
materials; and |
| ● | instruct
us to send our future proxy materials to you electronically by
email. |

PepsiCo will plant a tree for every shareholder that signs up for electronic delivery. Choosing to receive your future proxy materials by email will lower our costs of delivery and will help reduce the environmental impact of our Annual Meeting. In 2016, approximately 13,185 trees were planted on behalf of Company shareholders.

Copies of the proxy materials are available for viewing at www.pepsico.com/proxy17 .

You may have received proxy materials by email. Even if you received a printed copy of our proxy materials, you may choose to receive future proxy materials by email. If you do so, you will receive an email next year with instructions containing a link to view those proxy materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it or for so long as the email address provided by you is valid.

What is “householding”?

If you are a beneficial owner, your bank or broker may deliver a single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices of Internet Availability to any household at which two or more shareholders reside unless contrary instructions have been received from you. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive and reduces mailing expenses. Shareholders may revoke their consent to future householding mailings or enroll in householding by contacting Broadridge at 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Alternatively, if you wish to receive a separate set of proxy materials for this year’s Annual Meeting, we will deliver them promptly upon request to PepsiCo’s Manager of Shareholder Relations at PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577 or (914) 253-3055 or investor@pepsico.com .

Where can I find the Annual Report?

The 2016 Annual Report to Shareholders, including financial statements, was delivered or made available with this Proxy Statement.

A copy of PepsiCo’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (including the financial statements, schedules and a list of exhibits) will be sent without charge upon the request of any shareholder to PepsiCo’s Manager of Shareholder Relations at PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577 or investor@pepsico.com . You also may obtain our Annual Report on Form 10-K over the Internet on the SEC’s website at www.sec.gov , or on our website at www.pepsico.com under “Investors” — “SEC Filings.”

Other Matters

The Board of Directors knows of no other matters to be brought before the Annual Meeting. If any other business should properly come before the Annual Meeting or any postponement or adjournment thereof, the persons named in the proxy will vote on such matters according to their best judgment.

2018 Shareholder Proposals and Director Nominations

Shareholder Proposals for Inclusion in the Proxy Statement for the 2018 Annual Meeting

PepsiCo welcomes comments or suggestions from its shareholders. If a shareholder wishes to have a proposal formally considered at the 2018 Annual Meeting of Shareholders and included in the Company’s Proxy Statement for that meeting, we must receive the proposal in writing on or before the close of business on November 17, 2017 and the proposal must otherwise comply with Rule 14a-8 under the Exchange Act.

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INFORMATION ABOUT THE ANNUAL MEETING

Director Nominations for Inclusion in the Proxy Statement for the 2018 Annual Meeting

The Board has implemented a proxy access provision in our By-Laws, which allows a shareholder or group of up to 20 shareholders owning in aggregate three percent or more of our outstanding Common Stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to 20% of the number of directors in office or two nominees, whichever is greater, provided the shareholder(s) and nominee(s) satisfy the requirements in the By-Laws. If a shareholder or group of shareholders wishes to nominate one or more director candidates to be included in the Company’s Proxy Statement for the 2018 Annual Meeting of Shareholders pursuant to these proxy access provisions in Section 2.9 of our By-Laws, we must receive proper written notice of any such nomination no earlier than the close of business on October 18, 2017 and no later than the close of business on November 17, 2017, and the nomination must otherwise comply with our By-Laws. If, however, the 2018 Annual Meeting is not within 30 days before or 60 days after the anniversary of this year’s Annual Meeting, we must receive such notice no earlier than the close of business on the 150th day prior to such meeting and no later than the close of business on the later of the 120th day prior to such meeting or the 10th day following the public announcement of the meeting date.

Other Proposals or Director Nominations for Presentation at the 2018 Annual Meeting

Under our By-Laws, if a shareholder wishes to present other business or nominate a director candidate at the 2018 Annual Meeting of Shareholders, we must receive proper written notice of any such business or nomination no earlier than the close of business on January 3, 2018 and no later than the close of business on February 2, 2018. If, however, the 2018 Annual Meeting is not within 30 days before or 60 days after the anniversary of this year’s Annual Meeting, we must receive such notice no earlier than the close of business on the 120th day prior to such meeting and not later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the public announcement of the meeting date. Any such notice must include the information specified in the By-Laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting.

All notices of proposals or nominations, as applicable, must be addressed to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577.

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Exhibit A—Reconciliation of GAAP and
Non-GAAP Information

($ in millions, except per share amounts; unaudited)

Organic revenue, core constant currency EPS (with 2016 growth excluding the impact of the Venezuela deconsolidation), free cash flow excluding certain items, core net ROIC, core constant currency net income (refers to core constant currency net income attributable to PepsiCo, with 2016 growth excluding the impact of the Venezuela deconsolidation), and core constant currency operating profit are non-GAAP financial measures. In addition to using these measures as compensation performance measures, we use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan and evaluation of our overall business performance. We believe presenting non-GAAP financial measures provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results, and provides additional transparency on how we evaluate our business. We also believe presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.

We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends.

See pages 57-61 and 73-75 of PepsiCo’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a detailed description of items excluded from these non-GAAP financial measures. Additionally, free cash flow excluding certain items is a measure management uses to monitor cash flow performance. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. We also consider certain other items (included in the Net Cash Provided by Operating Activities Reconciliation table below) in evaluating free cash flow that we believe investors should consider in evaluating our free cash flow results. Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.

Net Revenue Growth Reconciliation

| | Year
Ended | |
| --- | --- | --- |
| | 12/31/2016 | |
| Reported Net Revenue Growth | (0.4 | )% |
| Impact of Acquisitions and
Divestitures | — | |
| Impact of Foreign Exchange
Translation | 3.3 | |
| Impact of Venezuela
Deconsolidation (a) | 1.8 | |
| Impact of 53 rd Reporting Week | (1.1 | ) |
| Organic Revenue Growth | 3.7 | % |

(a) Represents the impact of the exclusion of the 2015 results of our Venezuelan businesses, which were deconsolidated effective as of the end of the third quarter of 2015.

Note - Certain amounts above may not sum due to rounding.

A-1 | PEPSICO 2017 PROXY STATEMENT

PART 15

Table of Contents

EXHIBIT A—RECONCILIATION OF GAAP AND NON-GAAP INFORMATION

Diluted EPS Growth Reconciliation

	Year Ended — 12/31/2016	12/26/2015		12/27/2014		12/28/2013	2016	2015		2014
Reported Diluted EPS	$ 4.36	$	3.67	$	4.27	$ 4.32	19 %	(14	)%	(1	)%
Commodity Mark-to-Market Net Impact	(0.08	)	—		0.03	0.03
Restructuring and Impairment Charges	0.09		0.12		0.21	0.08
Charges Related to the Transaction with
Tingyi	0.26		0.05		—	—
Charge Related to Debt Redemption	0.11		—		—	—
Pension-Related Settlement
Charges/(Benefits)	0.11		(0.03	)	0.06	—
Venezuela Impairment Charges	—		0.91		—	—
Tax
Benefits	—		(0.15	)	—	(0.13	)
Venezuela Remeasurement Charges	—		—		0.07	0.07
Merger and Integration Charges	—		—		—	0.01
Core
Diluted EPS	$ 4.85	$	4.57	$	4.63	$ 4.37	6	(1	)	6
Impact of Foreign Exchange
Translation							3	11		3
Core
Constant Currency Diluted EPS Growth							9	10		9
Impact of Excluding Venezuela from							2.5	n/a		n/a
2015
Base (a)
Core
Constant Currency Diluted EPS Growth
Excluding
the Impact of Venezuela from							12 %	10	%	9	%
2015
Base
Three-Year Growth Average										10	%

n/a - Adjustment was not applicable for purposes of calculating this target.

(a) Represents the impact of the exclusion of the 2015 results of our Venezuelan businesses, which were deconsolidated effective as of the end of the third quarter of 2015.

Net Cash Provided by Operating Activities Reconciliation

| | Year
Ended | |
| --- | --- | --- |
| | 12/31/2016 | |
| Net
Cash Provided by Operating Activities | $ 10,404 | |
| Capital Spending | (3,040 | ) |
| Sales of Property, Plant and
Equipment | 99 | |
| Free
Cash Flow | 7,463 | |
| Payments Related to Restructuring
Charges | 125 | |
| Discretionary Pension Contributions | 459 | |
| Net
Cash Received Related to Interest Rate Swaps | (5 | ) |
| Net
Cash Tax Benefit Related to Discretionary Pension Contributions | (151 | ) |
| Net
Cash Tax Benefit Related to Restructuring Charges | (22 | ) |
| Net
Cash Tax Benefit Related to Debt Redemption Charge | (83 | ) |
| Free
Cash Flow Excluding Above Items | $ 7,786 | |

Note - Certain amounts above may not sum due to rounding.

PEPSICO 2017 PROXY STATEMENT | A-2

Table of Contents

EXHIBIT A—RECONCILIATION OF GAAP AND NON-GAAP INFORMATION

ROIC

	Year Ended — 12/31/2016	12/26/2015		12/28/2013
Net
Income Attributable to PepsiCo	$ 6,329	$	5,452	$	6,740
Interest Expense	1,342		970		911
Tax
on Interest Expense	(483	)	(349	)	(328	)
	$ 7,188	$	6,073	$	7,323
Average Debt Obligations	$ 35,308	$	31,169	$	29,291
Average Common Shareholders’ Equity	11,943		15,147		22,900
Average Invested Capital	$ 47,251	$	46,316	$	52,191
ROIC	15.2	%	13.1	%	14.0	%

ROIC Growth Reconciliation

| | Year
Ended | |
| --- | --- | --- |
| | 12/31/2016 | |
| ROIC
Growth | 210 | bps |
| Impact of: | | |
| Average Cash, Cash Equivalents and Short-Term Investments | 188 | |
| Interest Income | (10 | ) |
| Tax on Interest Income | 4 | |
| Commodity Mark-to-Market Net Impact | (19 | ) |
| Restructuring and Impairment Charges | (10 | ) |
| Charges Related to the Transaction with Tingyi | 50 | |
| Pension-Related Settlement Charge/(Benefits) | 42 | |
| Venezuela Impairment Charges | (316 | ) |
| Tax Benefits | 49 | |
| Core
Net ROIC | 190 | bps |

Note - Certain amounts above may not sum due to rounding.

A-3 | PEPSICO 2017 PROXY STATEMENT

Table of Contents

EXHIBIT A—RECONCILIATION OF GAAP AND NON-GAAP INFORMATION

3-Year ROIC Growth Reconciliation

	Year Ended — 12/31/2016		12/28/2013		Growth
ROIC	15.2	%	14.0	%	117	bps
Impact
of:
Average Cash, Cash Equivalents and Short-Term Investments	6.0		2.5		345
Interest Income	(0.2	)	(0.2	)	(4	)
Tax on Interest Income	0.1		0.1		1
Commodity Mark-to-Market Net Impact	(0.2	)	0.1		(29	)
Restructuring and Impairment Charges	0.1		0.1		2
Charges Related to the Transaction with Tingyi	0.6		—		69
Pension-Related Settlement Charge/(Benefits)	0.3		—		33
Venezuela Impairment Charges	(0.5	)	—		(45	)
Tax Benefits	0.1		(0.3	)	40
Venezuela Remeasurement Charge	—		0.2		(21	)
Merger and Integration Charges	—		—		3
Core
Net ROIC	21.5	%	16.4	%	511	bps

Net Income Attributable to PepsiCo Reconciliation

	Year Ended — 12/31/2016	12/26/2015		Growth
Reported Net Income Attributable to
PepsiCo	$ 6,329	$	5,452	16.1 %
Commodity Mark-to-Market Net Impact	(111	)	(8	)
Restructuring and Impairment Charges	131		184
Charges Related to the Transaction with
Tingyi	373		73
Charge Related to Debt Redemption	156		—
Pension-Related Settlement
Charge/(Benefits)	162		(42	)
Venezuela Impairment Charges	—		1,359
Tax
Benefit	—		(230	)
Core
Net Income Attributable to PepsiCo	$ 7,040	$	6,788	3.7 %
Impact of Foreign Exchange
Translation				3.1
Core
Constant Currency Net Income Attributable to PepsiCo Growth				6.8
Impact of Excluding Venezuela from 2015
Base (a)				2.4
Core
Constant Currency Net Income Attributable to PepsiCo Growth
Excluding
the Impact of Venezuela from 2015 Base				9.3 %

(a) Represents the impact of the exclusion of the 2015 results of our Venezuelan businesses, which were deconsolidated effective as of the end of the third quarter of 2015.

Note - Certain amounts above may not sum due to rounding.

PEPSICO 2017 PROXY STATEMENT | A-4

Table of Contents

EXHIBIT A—RECONCILIATION OF GAAP AND NON-GAAP INFORMATION

FLNA and NAB Operating Profit Growth Reconciliation

| | Year
Ended | |
| --- | --- | --- |
| | 12/31/2016 | |
| | FLNA | NAB |
| Reported Operating Profit Growth | HSD % | MSD % |
| Restructuring and Impairment Charges | — | — |
| Pension-Related Settlements | — | LSD |
| Core
Operating Profit Growth | HSD | HSD |
| Impact of Foreign Exchange
Translation | — | — |
| Core
Constant Currency Operating Profit Growth | HSD % | HSD % |

AMENA Net Revenue Growth Reconciliation

| | Year
Ended | |
| --- | --- | --- |
| | 12/31/2016 | |
| Reported Net Revenue Growth | (1 | )% |
| Impact of Acquisitions and
Divestitures | — | |
| Impact of Foreign Exchange
Translation | 5 | |
| Organic Revenue Growth | 5 | % |

China and Egypt Net Revenue Growth Reconciliation

| | Year
Ended | |
| --- | --- | --- |
| | 12/31/2016 | |
| | China | Egypt |
| Reported Net Revenue Growth | HSD % | (LSD) % |
| Impact of Foreign Exchange
Translation | MSD | DD |
| Organic Revenue Growth | DD % | DD % |

Note - Certain amounts above may not sum due to rounding.

A-5 | PEPSICO 2017 PROXY STATEMENT

Table of Contents

| | GLOBAL CODE OF
CONDUCT |
| --- | --- |
| PepsiCo Values | Our
Commitment To
deliver sustained growth through empowered people acting with
responsibility and building trust |
| | Guiding
Principles We must always strive to: ● Care for our customers, consumers and
the world we live in ● Sell only products we can be proud
of ● Speak with truth and
candor ● Balance short term and long
term ● Win with diversity and
inclusion ● Respect others and succeed
together |

Table of Contents

PART PROXY CARD

Table of Contents

700 ANDERSON HILL ROAD PURCHASE, NY 10577-1444

YOUR VOTE IS IMPORTANT VOTE BY INTERNET/TELEPHONE 24 HOURS A DAY, 7 DAYS A WEEK

VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time on May 2, 2017 (other than PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan participants). Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.

VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time on May 2, 2017 (other than PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan participants). Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to PepsiCo, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

SHAREHOLDER MEETING REGISTRATION: To attend the meeting, go to the "Register for Meeting" link at www.proxyvote.com . An admission ticket and valid government-issued photo identification, such as a driver's license or passport, will be required to enter the meeting. Please bring the admission ticket to the meeting.

PEPSICO SAVINGS PLAN / PEPSICO HOURLY 401(K) PLAN PARTICIPANTS

All votes by participants in the PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan submitted over the Internet, by phone or mail must be received by 11:59 p.m. Eastern Daylight Time on April 30, 2017.

| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: | |
| --- | --- |
| E20178-P87156-Z69437 | KEEP THIS PORTION FOR YOUR RECORDS |
| | DETACH AND RETURN THIS PORTION
ONLY |
| THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED. | |

PEPSICO, INC.
Company Proposals
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF
THE NOMINEES LISTED IN ITEM NO. 1.
Vote on Directors
1.	Election of Directors		For	Against	Abstain
	Nominees:
	1a.	Shona L.
Brown	☐	☐	☐
	1b.	George W.
Buckley	☐	☐	☐
	1c.	Cesar
Conde	☐	☐	☐
	1d.	Ian M.
Cook	☐	☐	☐
	1e.	Dina
Dublon	☐	☐	☐
	1f.	Rona A.
Fairhead	☐	☐	☐
	1g.	Richard W.
Fisher	☐	☐	☐
	1h.	William R.
Johnson	☐	☐	☐
	1i.	Indra K.
Nooyi	☐	☐	☐
	1j.	David C.
Page	☐	☐	☐
	1k.	Robert C.
Pohlad	☐	☐	☐
	1l.	Daniel
Vasella	☐	☐	☐
	IF VOTING BY MAIL, YOU MUST SIGN, DATE AND RETURN THIS CARD
IN ORDER FOR THE SHARES TO BE VOTED. Please sign exactly as your
name(s) appear hereon. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian or custodian, please give full
title.

Nominees (continued):			For	Against	Abstain
	1m.	Darren
Walker	☐	☐	☐
	1n.	Alberto
Weisser	☐	☐	☐
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NO. 2 AND
3.			For	Against	Abstain
2.	Ratification of
the appointment of KPMG LLP as the Company’s independent registered public
accounting firm for fiscal year 2017.		☐	☐	☐
3.	Advisory approval of the Company’s executive
compensation.		☐	☐	☐
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF EVERY "ONE YEAR" ON
ITEM NO. 4.		One Year	Two Years	Three Years	Abstain
4.	Advisory vote on
frequency of future shareholder advisory approval of the Company’s
executive compensation.	☐	☐	☐	☐
Shareholder Proposals
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS NO. 5 AND
6.			For	Against	Abstain
5.	Report regarding
pesticide pollution.		☐	☐	☐
6.	Implementation of
Holy Land Principles.		☐	☐	☐

Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date

Table of Contents

Directions to The North Carolina History Center at Tryon Palace

The North Carolina History Center at Tryon Palace 529 South Front Street New Bern, North Carolina 28562

FROM COASTAL CAROLINA REGIONAL AIRPORT (EWN): Head east on Terminal Drive. Turn left on Airport Road. Take the second left onto US 70 West. Take exit #417A toward New Bern. Merge onto US 70 Bus. Turn left onto South Front Street. The North Carolina History Center will be immediately on your left.

FROM THE SOUTH (Wilmington, Jacksonville): Take Highway 17 North into New Bern. Stay on same road (also called ML King Blvd.) and pass Twin Rivers Mall. Go under Route 70 overpass (Hwy 17 becomes Business 17) - stay in middle lane. Road will veer right at Palace Motel and name will change to Neuse Blvd. Shortly after fire station, name will change again to Broad Street. Continue on Broad Street to Hancock Street. Turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left.

FROM THE SOUTHWEST (Fayetteville): Take I-95 North to Highway 70 East to New Bern. Take the Trent Road/Pembroke exit and turn left at the light. Turn right at the third light (Broad Street), and then turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left.

FROM THE NORTHWEST (Raleigh, Goldsboro): Take Highway 70 East to New Bern. Take the Trent Road/Pembroke exit and turn left at the light. Turn right at the third light (Broad Street), and then turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left.

FROM THE NORTH (Greenville): Take Highway 17 South from Washington, NC. Cross the Neuse River Bridge, take the ramp straight to US 70 and cross the Freedom Memorial Bridge. Take the Trent Road/Pembroke exit and turn right at the light. Turn right at the third light (Broad Street) then turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 3, 2017: The Notice and Proxy Statement and Annual Report are available at www.pepsico.com/proxy17.

E20179-P87156-Z69437

PEPSICO, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PEPSICO, INC. FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 3, 2017.

The undersigned hereby appoints Indra K. Nooyi, Tony West and Cynthia Nastanski, and each of them, proxies for the undersigned, with full power of substitution, to vote all shares of Common Stock and/or Convertible Preferred Stock of PepsiCo, Inc., which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of PepsiCo, Inc. in New Bern, North Carolina, on Wednesday, May 3, 2017 at 9:00 a.m., Eastern Daylight Time, or at any adjournment or postponement thereof, upon the matters set forth on the reverse side and described in the accompanying Proxy Statement and any other matter that may properly come before the meeting.

Please mark this proxy as indicated on the reverse side to vote on any item. Shares represented by this proxy will be voted in accordance with your specifications, and, in the discretion of the proxies, upon any other matter that may properly come before the meeting or any adjournment or postponement thereof. For holders of Common Stock and/or Convertible Preferred Stock of PepsiCo, if you do not provide specific instructions, shares represented by this proxy will be voted in accordance with the Board of Directors' recommendations. For participants in the PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan, if you do not provide voting instructions, the trustee will vote the shares that are deemed to be in the account in the PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan in the same proportion as the PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan shares of other participants for which the trustee has received proper voting instructions. The votes by PepsiCo Savings Plan / PepsiCo Hourly 401(k) Plan participants must be received no later than 11:59 p.m. Eastern Daylight Time on April 30, 2017.

If you submit your proxy by telephone or the Internet, there is no need for you to mail back your proxy.

Continued and to be signed on reverse side