Conagra shareholders revolt over pay, again

Boardroom Alpha · Executive Brief

At Conagra Brands (CAG), executive pay won just 50.8% support in the September 23 shareholder vote, according to the company’s 8-K. It was the third time in four years that support fell below 70%, the level at which proxy advisors expect a board to respond. After support slipped to 69.8% in 2023 and the vote failed outright in 2024, the board met with investors, dropped special grants and won back 88.7% last year. This year’s result erased that recovery. This time both major proxy advisors had recommended voting against, the company said in supplemental proxy material filed on September 14 to defend its pay program.

The vote covered pay for fiscal 2026, which ended May 31 and was the last year for Sean Connolly, CEO since 2015. In April the board said it had determined that Connolly would step down when the fiscal year ended, and John Brase, formerly president and chief operating officer of J.M. Smucker, succeeded him on June 1. Board chair Richard Lenny said the choice “follows our thoughtful approach to succession planning, including discussions with Sean.”

Connolly’s reported pay rose 4.3%, to $13.7 million, mainly because of a larger bonus, while adjusted earnings per share fell to $1.72 from $2.30, within the range the company gave in July 2025. The company also took $2.93 billion of impairments (non-cash writedowns of goodwill and brand values), which the pay plan’s adjusted measures exclude. After the fiscal year ended, Conagra left the S&P 500 in late June and halved its dividend in July.

Five questions shareholders will be asking:

1. How will the pay committee set next year’s bonus targets? The 2026 targets were below 2025 results, and free cash flow lifted the payout above target.
2. How does the board explain the CEO transition pay? Connolly’s separation includes a $7.9 million cash lump sum, and Brase received $6.0 million of sign-on stock. The company’s rebuttal addressed neither.
3. Who voted against, and how will the board engage them? Pension funds, asset managers and Norway’s sovereign fund have published votes against. The full record of fund votes arrives in August 2027.
4. What will the new pay committee chair change? Ruth Ann Marshall chaired the committee for 10 years, including the 2023 and 2024 votes. John Mulligan took over in June.
5. How will the board respond to the blank-check preferred vote? Shareholders approved, with 61.7% support, a proposal the board opposed.

Questions for the board

1. How will the pay committee set next year’s bonus targets?

The pay committee, which Conagra calls its Human Resources Committee, set each fiscal 2026 bonus target below the prior year’s result:

• adjusted operating profit: $1,307 million, against $1,636 million in fiscal 2025;
• adjusted net sales: $11,414 million, against $11,650 million;
• adjusted free cash flow: $620 million, against $1,159 million.

Operating profit ($1,279 million) and net sales ($11,282 million) still missed those targets. But free cash flow of $849 million paid the maximum 200% on its 20% weight, lifting the formula to 118.6% of target, which the committee cut to 111%. Connolly’s bonus was $2.83 million, up 50% from $1.88 million, according to the 2026 proxy. His salary and bonus target were unchanged, but the committee raised his annual stock award target to $10.0 million from $9.4 million.

In its September 14 rebuttal, the company acknowledged the targets were lower but argued that did not make them easier: “While true, lower targets are not necessarily less rigorous.” It said the targets followed the board’s operating plan, which expected divestitures, inflation and tariffs to lower results. For fiscal 2027 the company will cap free cash flow’s credit in the bonus at 150% whenever operating profit misses its target; applied to 2026, that rule would have produced about 108.5% (our arithmetic).

Some investors that publish their votes cited the targets, and four of them, KLP, Sparinvest, Legal & General Investment Management and Desjardins, used near-identical wording. KLP’s explanation opens by crediting the plan: “There are positive pay program features, including that the STIP and LTIP are based predominantly on objective goals and the company utilized discretion to reduce annual incentive payouts.” Then it turns: “However, during a year when CEO pay increased amidst declining financial performance, goal rigor and grant practice concerns were identified. Specifically, the STIP target goals were set well below the prior year’s achievement levels, with no clear rationale disclosed in the proxy for the target setting.” (STIP is the annual bonus.) The company’s rebuttal gave its reasons for each target. Shareholders may ask the board whether the fiscal 2027 targets sit above fiscal 2026 results, and whether the 2027 proxy will explain how they were set.

2. How does the board explain the CEO transition pay?

Connolly’s 2018 letter agreement treats his exit as a termination without cause, and the 2026 proxy values his separation benefits at $19.9 million:

• a $7.9 million cash lump sum, twice his salary plus target bonus;
• his $2.83 million fiscal 2026 bonus, which is also in the pay table;
• $9.1 million of restricted stock and performance shares that keep vesting, all granted, and reported, in earlier years.

The 10-K records an $8.1 million charge for the separation. Connolly’s 2023 retention award, granted “to incent his continued leadership for a period of at least three years,” had two parts. The $2.0 million restricted-stock part vests pro rata, because his employment ended seven weeks before its July 2026 vesting date; the $8.0 million performance-share part paid 35.7% of target.

Brase’s regular package is smaller than Connolly’s: a $1.15 million salary, a bonus target of 150% of salary and a $7.3 million annual stock award. The April 2026 offer letter also gave him:

• $6.0 million of sign-on stock, of which $4.0 million vests only if the stock’s 30-day average reaches $20, $25 and $30, against $13.28 at fiscal year-end;
• $200,000 of sign-on cash;
• a $500,000 relocation stipend.

Conagra has not said whether the sign-on stock replaces awards he gave up at Smucker. The September 14 rebuttal defends the bonus, the performance shares and pay over five years. It does not mention Connolly’s separation or Brase’s awards. One investor, Desjardins, cited severance: “Non-CIC estimated severance exceeds three times CEO base salary + bonus.” (“Non-CIC” means severance paid outside a change of control.) Shareholders may ask how the committee sized both packages, and whether the 2027 proxy will explain them.

3. Who voted against, and how will the board engage them?

US funds won’t report their votes until they file Form N-PX at the end of August 2027. But some investors, mostly pensions and non-US managers, post their votes on their own websites, which gives an early read. So far 15 have disclosed votes against, including:

• US public pensions: CalPERS, CalSTRS and Florida’s State Board of Administration;
• Norway’s sovereign wealth fund (NBIM) and CPP Investments;
• asset managers: Legal & General Investment Management, DWS and Allianz Global Investors.

Pennsylvania’s PSERS voted for, and the Teacher Retirement System of Texas split its vote. The largest holders, BlackRock (13.4%) and Vanguard (11.4%), have not published their votes.

Fund records from earlier years show where opposition has come from. At the failed 2024 vote, most of BlackRock’s and Vanguard’s US funds voted for, and State Street’s funds voted against. At the 2025 meeting, US mutual funds and ETFs that still held the stock in June 2026 cast 2.9% of their votes against, vs 11.3% of all votes cast, which suggests most of that year’s opposition came from other holders, such as pensions and non-US managers.

Fewer shares voted this year:

• Shares represented at the meeting fell to 80.1% of those outstanding, from 87% to 89% in 2023 through 2025.
• Broker non-votes, shares held through brokers that cast no vote on the item, rose to 92.4 million from 54.5 million.

After the 2024 failure, the company invited more than 30 holders with over half the shares and met with 11 of them, holding about 17%, according to the 2025 proxy. The 2026 proxy gives no figures for outreach on pay.

Among the 2,114 Russell 3000 companies with 2026 results in our database through Sept. 30, Conagra’s is the 25th-lowest; 101 got less than 70% support and 18 failed. Shareholders may ask the board whom it will meet this time, and what it will report back.

4. What will the new pay committee chair change?

Ruth Ann Marshall chaired the pay committee for 10 years, including the 2023 and 2024 votes. John Mulligan, who joined the board in February, has chaired the committee since June, so he was chair at this year’s vote. The other members are Anil Arora, board chair Richard Lenny, Melissa Lora and Marshall.

The fiscal 2026 targets and stock awards were set before Mulligan took over, in July 2025 with Marshall as chair, and Brase’s offer letter is dated April 8, 2026. Every director was re-elected with at least 93% support. Marshall drew the most votes against of any nominee, 20.1 million, for 93.1% support; Lenny had 94.6% and Lora 95.2%.

Lenny also chairs the compensation committee at Illinois Tool Works, and Lora chaired KB Home’s from 2021 to 2024. FW Cook advises the committee. Shareholders may ask the board what Mulligan will do differently, and whether it plans further changes to the committee’s membership.

5. How will the board respond to the blank-check preferred vote?

A shareholder proposal from The Accountability Board passed with 61.7% support, over the board’s opposition. The proposal, which is advisory, asks for a policy requiring shareholder approval before the board issues blank-check preferred, meaning preferred stock whose terms the board sets itself. Ordinary capital-raising, and acquisitions made without the intent to change voting power, would be exempt. In opposing it, the board cited flexibility against coercive bids and said it has never issued preferred stock to block a takeover.

Conagra has adopted earlier shareholder proposals that won majorities:

• Written consent, backed by 85% in 2021, came through a 2022 charter amendment.
• A right for shareholders to call special meetings, backed by 78.8% in 2023, was adopted at a 20% threshold in 2024.

Shareholders may ask whether the board will adopt this policy, and by when.

Our view

A 50.8% result is a failure in all but name. Nearly half the votes cast opposed the pay a year after support had recovered. In three of the last four years, support has fallen below the 70% level at which proxy advisors expect a board to respond. The message is about performance as much as pay: over five years the stock’s total return is −43%, against +89% for the S&P 500.

That message has not reached the directors: every nominee won at least 93%. The board has been changing: six of its 11 directors joined in 2022 or later, the pay committee has a new chair, and a new CEO started in June.

But the pay committee still includes:

• Ruth Ann Marshall, a director since 2007, who chaired it for 10 years;
• Richard Lenny, a director since 2009 and board chair since 2018.

Neither would have been eligible for renomination this year under the board’s old retirement age of 72, which it had raised to 75 by 2023. In our view, when pay and performance diverge for years, votes against the directors responsible for pay are the more direct way for shareholders to register it.

Conagra has been pushed before. JANA Partners took a stake in 2015 and won board seats through agreements that ran to 2018, a period in which the company sold its private-label business and spun off Lamb Weston. A JANA partner, Scott Ostfeld, sat on the board until April 2022. JANA no longer reports a stake, and we know of no campaign today.

That could change. Boardroom Alpha’s Activist Risk Score for Conagra is 97 / 100, and it has been 91 or higher every month for a year.

Activists have been busy elsewhere in packaged food:

• JANA and Continental Grain won two board seats at Lamb Weston in June 2025, in an agreement that added six directors in all.
• JANA won two board seats at Freshpet in 2023.
• J.M. Smucker added two directors in February 2026 after engaging with Elliott.

If Conagra’s board does not do more to refresh itself and its pay committee before the 2027 meeting, an activist may step in to push for it.

Counterpoints

• Results met the original guidance. Fiscal 2026 organic sales, adjusted operating margin and adjusted earnings per share each came in within the ranges given in July 2025. Earnings per share was near the bottom, at $1.72 against $1.70 to $1.85, and that range included about $0.05 from a 53rd week.
• The committee cut the bonus and held the base pay. It reduced the formula result to 111% from 118.6% and left Connolly’s salary and bonus target unchanged; the fiscal 2024–26 performance shares paid 35.7% of target.
• Realized pay has fallen with the stock. Over five years, Connolly’s “compensation actually paid” (the SEC’s measure of realized pay) was $40.7 million, 50% less than the $81.5 million reported, while total shareholder return was −55%. (The proxy’s text says “58 %”; its table gives 50%.)
• Packaged food has lagged. Over one year, Conagra’s −13% total return is close to the −12% median of the five peers used in its performance shares, though it trails them over five years.
• An earlier pledge was kept. In its 2024 proxy, responding to the 2023 vote, the company promised no more special grants to Connolly during his tenure. It reaffirmed the pledge in 2025 and made no such grants, and support recovered to 88.7% that year.
• The new CEO’s pay depends on the stock. Brase’s annual target pay is below Connolly’s. Two-thirds of his sign-on stock pays only if the share price rises by 51% to 126% from its fiscal year-end level.
• Directors and the new CEO bought after the CEO change. Brase bought 35,000 shares, about $511,000, on July 17. Lenny and Mulligan bought 25,000 and 17,500 shares on April 14, the day after the change was announced. Over three years, directors and the CEO bought about $1.6 million on the open market; officers sold about $1.9 million, mostly in 2024.
• Net debt has fallen. Free cash flow beat its target, and net debt fell by about $2.1 billion from fiscal 2023 to fiscal 2026. Because earnings also fell, net debt was still 3.83 times adjusted earnings before interest, taxes, depreciation and amortization.

What to watch

• Ongoing
  Any 8-K on pay changes or on the blank-check preferred policy; Form 4 filings (insider trade reports) for Brase’s performance-based sign-on units and any further purchases.
• Mid-December
  Second-quarter results, if the company follows last year’s timing.
• August 2027
  The 2027 proxy: fiscal 2027 bonus targets against fiscal 2026 results, how the committee considered this vote, and whom it met.
• Aug. 31, 2027
  Form N-PX filings show how each US fund voted at this meeting.
• September 2027
  Annual meeting, if prior years’ timing holds, with say-on-pay and all 11 directors on the ballot.

Sources: Conagra’s SEC filings as linked, investors’ published votes, Form N-PX and Boardroom Alpha data. Support is votes for divided by votes for plus against. Returns are total returns through Sept. 22, 2026, compared with the S&P 500. Boardroom Alpha is an independent research and analytics company and does not invest. This brief is for information only and is not investment advice or a proxy solicitation.