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(PEP) - Get PepsiCo, Inc. Report

took a page out of rival


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playbook Tuesday, saying it would tie pay for top executives more closely to performance and slash its use of stock options in compensation.

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The soft-drink and snack-food giant also said it will cut about 750 jobs to eliminate "redundancies" in several business lines, and reaffirmed earnings estimates for this year and next.

Pepsi stopped short of eliminating options, although it will start expensing their cost on earnings statements. The new system will use a "balance" of options and restricted stock, the latter being the compensation vehicle of choice among corporate governance reformers because it gives recipients a share in a company's downside -- not just its appreciation.

To incentivize managers more efficiently, Pepsi said there will be a "greater differentiation in the amount of grants, bonus and compensation, based on performance." Moreover, options will now be expensed starting in the fourth quarter, and predicted its options expense will come to 20 cents a share for all of 2003.

Pepsi also will restructure a number of business segments at a cost of about 6 cents a share to fourth-quarter earnings. But the company also expects to record a tax benefit of 7 cents to 8 cents a share following a recently completed audit and discussions with the Internal Revenue Service.

"Because tax benefits are expected to exceed restructuring costs in the fourth quarter, PepsiCo believes full year 2003 EPS will be 1 to 2 cents a share higher than prior 2003 guidance of $2.19 (which included an estimated 2 cents a share of merger costs)," the company said. "Reflecting the combined impact of the tax benefit, restructuring charges, and option expense, the company has adjusted its full year 2003 earnings per share guidance to a range of $2 to $2.01 a share."

PepsiCo shares closed Monday at $48.71, slightly below their 52-week high of $48.88.