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Sonoco Products Company
One North Second Street
Post Office Box 160
Hartsville, South Carolina 29551-0160
September 11, 2007
Mr. Jay E. Ingram, Esquire
Attorney Advisor
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Sonoco Products Company
Definitive 14A Filed March 16, 2007
File No. 000-00516
Dear Mr. Ingram:
This letter is in response to your August 21, 2007 comment letter
addressed to Harris E. DeLoach, Jr., President and Chief Executive Officer,
Sonoco Products Company regarding the filing referenced above.
Management Compensation. page 27
Compensation Discussion and Analysis. page 27:
COMMENT:
1. To the extent you correlate incentive programs with the achievement of
certain annual individual objectives, please discuss the specific items of
individual performance used to determine bonus payments and how you
structure your incentive bonuses around such individual objectives. Also
disclose whether any discretion can be or has been exercised with respect
to meeting such goals and objectives and, if so, to whom such discretion is
applicable. Please see Items 402(b)(2)(vi)-(vii) of Regulation S-K and
Instruction 4 to Item 402(b). To the extent the committee's consideration
of individual performance resulted in a payout for the last fiscal year,
please provide appropriate qualitative and quantitative disclosure.
Mr. Jay E. Ingram, Esquire
September 11, 2007
Page 2
RESPONSE:
The Annual Cash Incentive Awards discussed on pages 31 and 38-40 of the
Proxy Statement do not have an individual objective component. Payouts, if
any, under these awards are based solely on the extent to which the Company
achieves base earnings per share, revenue growth and working capital
improvement threshold, target or maximum levels. As stated in the third
sentence at the top of page 31: "If actual performance is less than
threshold, no incentive compensation is earned at the end of the
performance period."
As further stated in the last sentence of the fourth paragraph on page 40:
"No additional discretionary bonus awards were made to any of the NEOs in
2006." The term "bonus" was used in the context of annual bonus awards that
would be reported in column (d) of the Summary Compensation Table.
The 2006 Long-Term Incentive Program awards discussed on pages 40-42 of the
Proxy Statement do have a discretionary individual performance component
with regard to the size of each executive officer's individual award
opportunity. As stated in the last sentence of the carry-over paragraph at
the top of page 41, "The actual number of SSARs granted to the NEOs was
based on the Committee's assessment of each person's relative performance
in meeting the expectations of his or her position." The elements of
individual performance considered by the Committee are set forth in the
first, second and third full paragraphs at the top of page 41. Actual
compensation earned as a result of the grant is solely dependent on stock
price performance above the grant price.
As stated in the third sentence under the caption "Performance Contingent
Restricted Stock Units" on page 41, "The number of PCSUs granted to each
individual was based on his target award as described on page 31, and
adjusted upward or downward from target based on the Committee's judgment
of the individual's performance." As noted in the last sentence of the
first paragraph under this caption, "The size of these awards was based on
the same achievements as cited above for the SSAR awards." Once the PCSU
award is granted, the actual number of PCSUs that will vest, if any, after
three years depends on the extent to which the Company achieves specified
performance levels of cumulative base earnings per share and average return
on net assets employed, as discussed at the bottom of page 41.
As stated in the second paragraph of page 42, "The [2006 Long-Term
Incentive Program] does not permit the use of discretion if performance
targets are not met."
Mr. Jay E. Ingram, Esquire
September 11, 2007
Page 3
COMMENT:
2. With respect to the disclosure relating to competitive benchmarks, please
specify where actual payments fall within targeted parameters.
RESPONSE:
The Committee attempts to position the target compensation opportunity for
incentive compensation for its executive officers between the 50th and 75th
percentile of the surveyed peer group. The Committee then sets performance
goals at a level deemed to be commensurately difficult to justify the
payouts in the annual incentive and the long-term incentive program based
on performance contingent restricted stock units at the threshold, target
and maximum payout levels. The performance goals are set based on a variety
of factors, including prior year results, the Board-approved business plan,
comparisons of peer company performance levels, and stock analyst and
investor expectations. In your letter you request detail on where the
"actual payments fall within targeted parameters". Payouts for performance
cycles ending with Fiscal Year 2006 were 179.6% of target and 123.3% of
target in the annual incentive and performance contingent restricted stock
unit plans, respectively. It is not possible to determine how actual
payments made by the Company compare on a percentile basis to those made by
peer companies due to differences in payout schedules and target grant
levels among companies.
Review of Overall Compensation Components and Aggregate Awards. page 34
COMMENT:
3. Please provide appropriate disclosure addressing the committee's analysis
of the information contained in the tally sheets and how the evaluation of
this information resulted in specific awards or modifications to the manner
in which you implement your compensation program. Please ensure that your
disclosure explains and places in context how and why determinations with
respect to one element may or may not have influenced the committee's
decisions with respect to other allocated or contemplated awards. See Item
402(b)(1)(vi) of Regulation S-K.
RESPONSE:
The Committee uses tally sheets to assess total executive compensation, to
determine where total executive compensation falls in relation to peer
companies, and to assess how the Company's overall compensation programs
operate. The Committee did not make any adjustments to the Company's
Mr. Jay E. Ingram, Esquire
September 11, 2007
Page 4
compensation programs as a result of review of tally sheets for 2006, and
did not make any specific awards or modifications to awards for any
individuals with respect to 2007 compensation. Furthermore, as noted at the
bottom of page 34 and top of page 35 of the Proxy Statement, the Committee
does not adjust one element of compensation to take account of performance,
be it good or bad, with respect to another element of compensation.
Role of Executive Officers in Determining Executive Compensation. page 37
COMMENT:
4. Please provide a complete description of the committee's processes and
procedures for the consideration and determination of executive
compensation. See Item 407(e)(3) of Regulation S-K and Section V.D. of
Commission Release 33-8732A. In doing so, discuss the extent to which Mr.
DeLoach attends committee meetings or meets with the consultants used by
the committee.
RESPONSE:
The Company believes it has discussed its processes and procedures for
consideration and determination of executive compensation as required by
Item 407(e)(3) of Regulation S-K. The scope of authority of the Committee
is set forth in the description of the Committee's purpose on page 18.
(407(e)(3)(i)(A)). The last sentence under the caption "Role of the
Executive Compensation Committee" on page 27 of the Proxy Statement states
that the Committee does not delegate its decision-making authority relating
to executive compensation. (407(e)(3)(i)(B)). The role of executive
officers in determining or recommending the amount or form of executive
compensation is discussed on page 37 under the caption "Role of Executive
Officers in Determining Executive Compensation." (407(e)(3)(ii)).
The Executive Compensation Committee's compensation consultant is
identified and the consultant's role is discussed on page 36 under the
caption "Relationship with Executive Compensation Consultant." As noted in
the first sentence of the first paragraph of that section, the consultant
is hired by the Committee, and as noted in the last sentence of that
paragraph, the Committee has sole authority to dismiss the consultant. The
consultant has no other economic relationships with the Company other than
its role in providing advisory services in relation to executive
compensation. The consultant is expected to assist the Committee and work
on its behalf on matters related to the Committee's purposes and
responsibilities as set forth in the Committee Charter.
Mr. DeLoach attends Committee meetings, but is not present when his own
compensation is discussed. As noted on page 36 of the Proxy Statement under
the caption "Relationship with Executive Compensation Consultant," Mr.
DeLoach may have "incidental contact" with the Committee's compensation
consultant. In practice, this means that Mr. DeLoach may from time to time
Mr. Jay E. Ingram, Esquire
September 11, 2007
Page 5
attend meetings at which the Committee's consultant is present or at
which the consultant makes a presentation, and Mr. DeLoach may from
time to time participate in group conference calls with the
Committee's consultant. Mr. DeLoach does not, however, engage in
one-on-one communications with the consultant and does not attempt to
exercise any influence over the consultant's recommendations to the
Committee.
In its 2008 proxy statement, the Company intends to provide all of the
Item 407(e)(3) information together in one section.
The Company acknowledges that:
o the Company is responsible for the adequacy and accuracy of the
disclosure in the filing;
o staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filing; and
o the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Sincerely,
/s/Harris E. DeLoach, Jr.
Harris E. DeLoach, Jr.
President and Chief Executive Officer