def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant þ |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Kimberly-Clark
Corporation
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
March 20, 2009
Thomas J. Falk
Chairman of the Board and Chief
Executive Officer
FELLOW STOCKHOLDERS:
It is my pleasure to invite you to the Annual Meeting of
Stockholders of
Kimberly-Clark
Corporation. The meeting will be held on Thursday,
April 30, 2009, at 11:00 a.m. at the Four Seasons
Resort and Club, which is located at 4150 North MacArthur
Boulevard, Irving, Texas.
At the Annual Meeting, stockholders will be asked to elect nine
directors for a one-year term, ratify the selection of the
Corporations independent auditors, approve a proposal to
amend the Corporations Certificate of Incorporation
regarding the right of holders of at least 25 percent of
the Corporations shares to call a special meeting of
stockholders, reapprove the performance goals under the
Corporations 2001 Equity Participation Plan, and vote on
one stockholder proposal. These matters are fully described in
the accompanying Notice of Annual Meeting and proxy statement.
Your vote is important. Regardless of whether you plan to
attend the meeting, I urge you to vote your shares as soon as
possible. You can vote by marking and dating the enclosed proxy
card, by using the Internet or by telephone. Instructions
regarding all three methods of voting are contained on the proxy
card.
Also enclosed is a copy of our Annual Report for 2008. I
encourage you to read the Annual Report for information about
your companys performance and accomplishments in 2008.
Sincerely,
Thomas J. Falk
KIMBERLY-CLARK
CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 2009
The Annual Meeting of Stockholders of Kimberly-Clark Corporation
will be held at the Four Seasons Resort and Club, 4150 North
MacArthur Boulevard, Irving, Texas, on Thursday, April 30,
2009, at 11:00 a.m. for the following purposes:
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To elect as directors the nine nominees named in the
accompanying proxy statement;
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To ratify the selection of Deloitte & Touche LLP as
our independent auditors for 2009;
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3.
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To approve a proposal by the Board of Directors to amend the
Amended and Restated Certificate of Incorporation to allow the
holders of not less than 25 percent of the
Corporations issued and outstanding shares of capital
stock to request that a special meeting of stockholders be
called;
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To reapprove the performance goals under the Corporations
2001 Equity Participation Plan;
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To vote on one stockholder proposal that may be presented at the
meeting; and
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To take action upon any other business that may properly come
before the meeting or any adjournments of the meeting.
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Stockholders of record at the close of business on March 2,
2009 are entitled to notice of and to vote at the meeting or any
adjournments.
It is important that your shares be represented at the meeting.
I urge you to sign, date and promptly return the enclosed proxy
card in the enclosed business reply envelope, or vote using the
Internet or telephone.
The accompanying proxy statement also is being used to solicit
voting instructions for shares of Kimberly-Clark common stock
that are held by the trustees of our employee benefit and stock
purchase plans for the benefit of the participants in the plans.
It is important that each participant in the plans signs, dates
and returns the voting instruction card, which is enclosed with
the proxy statement, in the business reply envelope provided, or
indicates his or her preferences using the Internet or telephone.
By Order of the Board of Directors.
Timothy C. Everett
Vice President and Secretary
P.O. Box 619100
Dallas, Texas
75261-9100
March 20, 2009
TABLE OF
CONTENTS
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A-1
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ii
March 20, 2009
PROXY
STATEMENT
VOTING
INFORMATION
The accompanying proxy is solicited on behalf of the Board of
Directors of Kimberly-Clark Corporation for use at the Annual
Meeting of Stockholders to be held on April 30, 2009 and at
any adjournment of the Annual Meeting. We are first mailing this
proxy statement and the accompanying proxy to holders of
Kimberly-Clark common stock on or about March 20, 2009.
Who May
Vote
Each stockholder of record at the close of business on
March 2, 2009 will be entitled to one vote for each share
registered in the stockholders name. On that date,
413,997,443 shares of our common stock were outstanding.
How You May
Vote
You may vote in person by attending the meeting, by completing
and returning a proxy by mail, or by using the Internet or
telephone. To vote your proxy by mail, mark your vote on the
enclosed proxy card, then follow the instructions on the card.
To vote your proxy using the Internet or telephone, see the
instructions on the proxy form and have the proxy form available
when you access the Internet website or place your telephone
call.
The named proxies will vote your shares according to your
directions. If you sign and return your proxy but do not make
any of the selections, the named proxies will vote your shares
for the election of directors, for ratification of the selection
of our independent auditors, for approval of the proposal to
amend the Corporations Amended and Restated Certificate of
Incorporation regarding the right of holders of at least
25 percent of the Corporations issued and outstanding
shares of capital stock to call a special meeting of
stockholders, for reapproval of the performance goals under the
2001 Equity Participation Plan, and against approval of the
stockholder proposal.
How You May
Revoke or Change Your Vote
You may revoke your proxy before the time of voting at the
meeting in any of the following ways:
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by mailing a revised proxy to the Secretary of the Corporation
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by changing your vote on the Internet website
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by using the telephone voting procedures
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by voting in person at the meeting
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Confidential
Voting
Proxy cards are received by our independent proxy processing
agent, and the vote is certified by independent Inspectors of
Election. Proxy cards and ballots that identify the vote of
stockholders and plan participants will be kept confidential,
except as necessary to meet legal requirements, in cases where
stockholders and participants request disclosure or write
comments on their cards, or in a contested matter involving an
opposing proxy solicitation. During the proxy solicitation
period, we will receive daily tabulation reports from the
independent proxy processing agent, but these reports provide
only aggregate data. In addition, the agent may identify
stockholders who fail to vote so that we may contact them and
request they do so.
Costs of
Solicitation
Kimberly-Clark will bear the cost of preparing, printing and
delivering materials in connection with this solicitation of
proxies, including the cost of the proxy solicitation and the
expenses of brokers, fiduciaries and other nominees in
forwarding proxy materials to beneficial owners. In addition to
the use of mail and electronic delivery, solicitation may be
made by telephone or otherwise by our employees. We have
retained D. F. King & Co., Inc. to aid in the
solicitation at a cost of approximately $16,000 plus
reimbursement of out-of-pocket expenses.
Votes
Required/Voting Procedures
A majority of the shares of our common stock, present in person
or represented by proxy, will constitute a quorum for purposes
of the Annual Meeting. The nine nominees for director receiving
a majority of the votes cast at the meeting in person or by
proxy will be elected. If a nominee does not receive a majority
of the votes cast, then the nominee will be subject to the
Boards existing policy regarding resignations by directors
who do not receive a majority of for votes. The
proposed amendment to the Corporations Amended and
Restated Certificate of Incorporation described in
Proposal 3 requires for approval the favorable vote of a
majority of shares outstanding as of the record date. All other
matters require for approval the favorable vote of a majority of
votes cast on the applicable matter at the meeting in person or
by proxy.
Abstentions are treated as votes against a proposal, and broker
non-votes will not be considered present and entitled to vote.
Generally, a broker non-vote occurs on a matter when a broker is
not permitted to vote on that matter without instructions from
the beneficial owner of the shares, and instructions are not
given.
Dividend
Reinvestment and Stock Purchase Plan
If a stockholder is a participant in our Automatic Dividend
Reinvestment and Stock Purchase Plan, the proxy card represents
the number of full shares in the stockholders account in
the plan, as well as shares registered in the stockholders
name.
Employee Benefit
Plans
We also are sending this proxy statement and voting materials to
participants in various
Kimberly-Clark
employee benefit and stock purchase plans. The trustee of each
plan, as the stockholder of record of the shares of our common
stock held in the plans, will vote whole shares of stock
attributable to each participants interest in the plans in
accordance with the directions the participant gives or, if no
directions are given by the participant, in accordance with the
directions of the respective plan committee.
Attending the
Meeting
Stockholders as of the record date, March 2, 2009, or their
duly appointed proxies, may attend the meeting. If you plan to
attend the meeting, please check your proxy card in the space
provided or so indicate electronically or by telephone. This
will assist us with meeting preparations and will help us to
expedite your admittance. If your shares are not registered in
your own name and you would like to attend the meeting, please
ask the broker, trust, bank or other nominee that holds your
shares to provide you with evidence of your share ownership,
which will enable you to gain admission to the meeting.
To obtain directions to attend the meeting and vote in person,
please contact Stockholder Services by telephone at
(972) 281-1522
or by e-mail
at stockholders@kcc.com.
Electronic
Delivery of Proxy Materials and Annual Report
The Notice of Annual Meeting and proxy statement and our 2008
Annual Report are available in the Investors section of our
website at www.kimberly-clark.com. Instead of receiving copies
of the proxy
2
statement and annual report in the mail, stockholders may elect
to receive an
e-mail with
a link to these documents on the Internet. Receiving your proxy
materials online saves us the cost of producing and mailing
documents to your home or business and gives you an automatic
link to the proxy voting site. Stockholders may enroll to
receive proxy materials online as follows:
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Stockholders of Record. If your shares are
registered in your own name, go directly to our transfer
agents website at www.computershare.com/us/ecomms any time
and follow the instructions.
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Beneficial Stockholders. If your shares are
not registered in your name, check the information provided to
you by your bank or broker, or contact your bank or broker for
information on electronic delivery service.
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Plan Participants. If you are a participant in
one or more of our employee benefit or stock purchase plans, go
directly to our transfer agents website at
www.computershare.com/econsent any time and follow the
instructions.
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Delivery of One
Proxy Statement and Annual Report to a Single Household to
Reduce Duplicate Mailings
Each year in connection with our Annual Meeting, we are required
to provide each stockholder of record a copy of the proxy
statement and annual report and to arrange for a proxy statement
and an annual report to be provided to each beneficial
stockholder whose shares are held by or in the name of a broker,
bank, trust or other nominee. Because many stockholders hold
shares of our common stock in multiple accounts or share an
address with other stockholders, this process results in
duplicate mailings of proxy statements and annual reports.
Stockholders may avoid receiving duplicate mailings and save us
the cost of producing and mailing duplicate documents as follows:
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Stockholders of Record. If your shares are
registered in your own name and you are interested in consenting
to the delivery of a single proxy statement or annual report,
you may contact Stockholder Services by mail at
P.O. Box 612606, Dallas, Texas
75261-2606,
by telephone at
(972) 281-1522
or by e-mail
at stockholders@kcc.com.
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Beneficial Stockholders. If your shares are
not registered in your own name, your broker, bank, trust or
other nominee that holds your shares may have asked you to
consent to the delivery of a single proxy statement or annual
report if there are other Kimberly-Clark stockholders who share
an address with you. If you currently receive more than one
proxy statement or annual report at your household and would
like to receive only one copy of each in the future, you should
contact your nominee.
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Right to Request Separate Copies. If you
consent to the delivery of a single proxy statement and annual
report but later decide that you would prefer to receive a
separate copy of the proxy statement or annual report, as
applicable, for each stockholder sharing your address, then
please notify us or your nominee, as applicable, and we or they
will promptly deliver the additional proxy statements or annual
reports. If you wish to receive a separate copy of the proxy
statement or annual report for each stockholder sharing your
address in the future, you may also contact Stockholder Services
by mail at P.O. Box 612606, Dallas, Texas
75261-2606,
by telephone at
(972) 281-1522
or by e-mail
at stockholders@kcc.com.
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Important Notice Regarding the Availability of Proxy
Materials for
the Stockholder Meeting to Be Held on April 30, 2009.
This Proxy
Statement and the 2008 Annual Report to security holders are
available at
investor.kimberly-clark.com/proxy.cfm
and
www.kimberly-clark.com/investors/annual_reports.aspx
3
PART TWO
CORPORATE GOVERNANCE INFORMATION
Board of
Directors and Board Committees
The Board of Directors met seven times in 2008. All of the
directors attended in excess of 75 percent of the total
number of meetings of the Board and committees of the Board on
which they served.
Although we do not have a formal policy with respect to director
attendance at Annual Meetings, since 1997 all nominees and
continuing directors have attended the Annual Meetings. All
nominees and continuing directors attended the 2008 Annual
Meeting.
The standing committees of the Board include the Audit
Committee, Management Development and Compensation Committee,
Nominating and Corporate Governance Committee and Executive
Committee. In compliance with applicable New York Stock Exchange
(NYSE) corporate governance listing standards, the
Board has adopted charters for the Audit, Management Development
and Compensation, and Nominating and Corporate Governance
Committees. These charters are available in the Investors
section of our website at www.kimberly-clark.com. Stockholders
may also contact Stockholder Services,
P.O. Box 612606, Dallas, Texas
75261-2606
or call
(972) 281-1522
to obtain paper copies of the charters without charge.
Audit
Committee
Dennis R. Beresford is the Chairman of our Audit Committee. The
other members of this Committee are John R. Alm, John F.
Bergstrom, Robert W. Decherd, and Ian C. Read. The Committee met
eight times in 2008. In addition, Mr. Beresford
participated in four additional conference calls as Chairman of
the Committee to preview earnings press releases during 2008.
Each member of the Audit Committee is an Independent Director
under the independence standards set forth in our Corporate
Governance Policies. See Director Independence for
additional information on Independent Directors.
Each member of the Audit Committee satisfies the financial
literacy requirements of the NYSE, and the Board has determined
that Mr. Beresford is an audit committee financial
expert under the rules and regulations of the Securities
and Exchange Commission (SEC).
The principal functions of the Audit Committee, as specified in
its charter, include the following:
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the quality and integrity of the financial statements,
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our compliance programs,
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the independence, qualification and performance of our
independent auditors, and
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the performance of our internal auditors.
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Subject to stockholder ratification, selecting and engaging our
independent auditors.
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Reviewing the scope of the audits and audit findings, including
any comments or recommendations of our independent auditors.
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Establishing policy in connection with internal audit programs.
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Pre-approving all audit and non-audit services provided by our
independent auditors.
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Reviewing risk assessment and management policies.
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For additional information about the Audit Committees
oversight activities in 2008, see
Part Three Proposals to be Voted on at
the 2009 Annual Meeting Ratification of
Auditors Audit Committee Report.
4
Management
Development and Compensation Committee
James M. Jenness is the Chairman of our Management Development
and Compensation Committee. In addition to Mr. Jenness, the
current members of this Committee are Abelardo E. Bru,
Mae C. Jemison, M.D., and G. Craig Sullivan. The
Committee met eight times in 2008. Each member of this Committee
is an Independent Director.
The principal functions of the Management Development and
Compensation Committee, as specified in its charter, include the
following:
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Establishing and administering the policies governing annual
compensation and long-term compensation, including stock option
awards, restricted stock awards and restricted share unit awards.
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Overseeing:
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leadership development for senior management and future senior
management candidates, and
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key organizational effectiveness and engagement policies.
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Reviewing diversity programs and key metrics.
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Compensation
Processes and Procedures
On an annual basis, the Committee reviews and sets the
compensation of our elected officers, including all of our
executive officers. The Committees charter does not permit
the Committee to delegate to anyone the authority to establish
any compensation policies or programs for elected officers,
including our executive officers. Our Chief Executive Officer
has the authority to establish compensation programs for
non-elected officers. Additionally, as discussed in
Part Four Other Important
Information Executive Compensation
Compensation Discussion and Analysis, the Committee has
delegated limited authority to our Chief Executive Officer to
grant stock options, restricted stock, and restricted share
units to non-executive officers for recruiting or retention
purposes.
Our Chief Executive Officer makes a recommendation to the
Committee each year on the appropriate target direct annual
compensation to be paid to our executive officers, excluding
himself. The Committee makes the final determination of the
target direct annual compensation to be awarded to each
executive officer, including our Chief Executive Officer. While
our Chief Executive Officer and Chief Human Resources Officer
typically attend Committee meetings, none of the other executive
officers is present during the portion of the Committees
meetings when compensation for executive officers is set. In
addition, our Chief Executive Officer is not present during the
portion of the Committees meetings when his compensation
is set.
For additional information on the Committees processes and
procedures for determining executive compensation, and for a
detailed discussion of our compensation policies, see
Part Four Other Important
Information Executive Compensation
Compensation Discussion and Analysis.
Use of
Compensation Consultants
The Committees charter provides that the Committee has the
authority to retain advisors, including compensation
consultants, to assist the Committee in its work. The Committee
believes that compensation consultants can provide important
market information and perspectives that can help the Committee
determine compensation programs that best meet the objectives of
our compensation policies.
Corporation Consultant. To assist management
and the Committee in assessing and determining appropriate,
competitive compensation for our executive officers, we annually
engage an outside compensation consultant. In 2008, Mercer Human
Resource Consulting (Mercer) was retained for this
purpose. Mercer has provided consulting services to the
Corporation on a wide variety of human
5
resources and compensation matters, both at the officer and
non-officer levels. In 2008, Mercer was retained by the
Corporation to provide advice and counsel regarding executive
remuneration matters on an ongoing basis, including the
following services in connection with our executive compensation
program:
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Assessing market compensation levels for executive officer
positions and other selected positions, within the
Corporations peer groups.
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Reviewing historic and projected performance for peer group
companies for metrics used by the Corporation in its annual and
long-term incentive plans.
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Assisting in incentive plan design and modifications, as
requested.
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Providing market research on various issues as requested by
management.
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Preparing and participating in Committee meetings, as requested.
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Reviewing the Compensation Discussion and Analysis and other
disclosures, as requested.
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Analyzing outside director compensation.
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Consulting with management on compensation matters.
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Independent Committee Consultant. The
Committee has also retained The Delves Group as its independent
executive compensation consultant. In February 2008, the
Committee adopted a written policy to formalize its
understanding that the independent Committee consultant may
provide services only to the Committee and not to the
Corporation. The Delves Group has no other business relationship
with the Corporation and receives no payments from us other than
fees for services to the Committee. The Delves Group reports
directly to the Committee, and the Committee may replace The
Delves Group or hire additional consultants at any time. The
Delves Group attends Committee meetings and communicates with
the Chairman of the Committee between meetings from time to time.
The Committee instructed The Delves Group to provide an
independent review of the data and recommendations provided by
management and Mercer. The scope of The Delves Groups
engagement in 2008 included:
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Conducting a review of the competitive market data (including
base salary, annual incentive targets, and long-term incentive
targets) for our Chief Executive Officer and his direct reports.
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Reviewing and commenting on recommendations by management and
Mercer concerning executive pay programs, including program
changes and redesign, special awards, change in control
provisions, executive contract provisions, promotions,
retirement and related items, as desired by the Committee.
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Reviewing and commenting on the Committees report for the
proxy statement.
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Attending Committee meetings.
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Periodically consulting with the Chairman of the Committee.
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During 2008, Don Delves, the President of The Delves Group,
attended all of the in-person Committee meetings, as well as two
of the four teleconference Committee meetings, at the request of
the Committee.
Committee
Report
The Committee has reviewed the Compensation Discussion and
Analysis section of this proxy statement and has
recommended that it be included in this proxy statement. The
Committees report is located at
Part Four Other Important
Information Executive Compensation
Management Development and Compensation Committee Report.
6
Nominating and
Corporate Governance Committee
Linda Johnson Rice is the Chairman of our Nominating and
Corporate Governance Committee. In addition to Mrs. Johnson
Rice, the current members of this Committee are Abelardo E. Bru,
Mae C. Jemison, M.D., and G. Craig Sullivan. The
Committee met four times in 2008. Each member of this Committee
is an Independent Director.
The principal functions of the Nominating and Corporate
Governance Committee, as specified in its charter, include the
following:
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Overseeing the process by which individuals are nominated to
become Board members.
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Overseeing matters of corporate governance, including developing
and recommending to the Board changes to our Corporate
Governance Policies.
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Advising the Board on:
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Board organization, membership, function, performance and
compensation,
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committee structure and membership, and
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policies and positions regarding significant stockholder
relations issues.
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Reviewing director independence standards and making
recommendations to the Board with respect to the determination
of the independence of directors.
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Monitoring and recommending improvements to the practices and
procedures of the Board.
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Reviewing stockholder proposals and considering responses or
actions regarding these proposals.
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The Nominating and Corporate Governance Committee, in accordance
with its charter and our Amended and Restated Certificate of
Incorporation, has established criteria and processes for
director nominees, including nominations proposed by
stockholders. Those criteria and processes are described in
Director Nominee Criteria and Process and
Stockholder Nominations for Directors.
Executive
Committee
Marc J. Shapiro is the Chairman of our Executive Committee. In
addition to Mr. Shapiro, the current members of this
Committee are Dennis R. Beresford, Thomas J. Falk, James M.
Jenness, and Linda Johnson Rice. The Committee met one time in
2008.
The principal function of the Executive Committee is to exercise
the powers of the Board to direct our business and affairs
between meetings of the Board.
Compensation
Committee Interlocks and Insider Participation
None of the members of the Management Development and
Compensation Committee are current or former officers or
employees of the Corporation. No interlocking relationship
exists between the members of our Board of Directors or the
Management Development and Compensation Committee and the board
of directors or compensation committee of any other company.
Director
Independence
Since 1996, our By-Laws have provided that a majority of our
directors be independent directors (Independent
Directors). In addition, our Corporate Governance Policies
adopted by the Board provide independence standards consistent
with the rules and regulations of the SEC and the listing
standards of the NYSE. Our Corporate Governance Policies are
available in the Investors section of our website at
www.kimberly-clark.com, and the independence standards are set
forth in Section 17 of the Corporate Governance Policies.
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The nominees for director are such that immediately after the
election of the nominees to the Board, a majority of all
directors holding office will be Independent Directors. Our
independent Board helps ensure good corporate governance and
strong internal controls. We are in compliance with all
corporate governance requirements of the NYSE, the SEC and the
Sarbanes-Oxley Act of 2002.
The Board has determined that all directors and nominees, except
for Thomas J. Falk, are Independent Directors and meet the
independence standards set forth in our Corporate Governance
Policies. When making these determinations, the Board considered
the following:
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We made charitable contributions of $275,000 in 2006, $375,000
in 2007 and $65,000 in 2008 to the Fox Cities Performing Arts
Center in Appleton, Wisconsin, where Mr. Bergstrom is a
director. These donations constituted less than five percent of
the Fox Cities Performing Arts Centers gross revenues for
the years in which the donations were made. We have significant
operations and a significant number of employees in the Fox
Cities area of Wisconsin.
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We made a charitable contribution of $1,000 in 2008 to the Theda
Clark Hospital Foundation, where Mr. Bergstrom is a
director.
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Companies majority-owned by Mr. Bergstrom paid us
approximately (i) $58,000 in each of 2006, 2007 and 2008 to
lease excess hangar space at an airport near Appleton,
Wisconsin, and (ii) $133,000 in 2006, $150,000 in 2007 and
$172,000 in 2008 for pilot services pursuant to a pilot sharing
contract for incremental costs related to using our pilots for
their corporate aircraft.
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We paid approximately $8,000 in 2006, $3,000 in 2007 and $65,000
in 2008 for automobiles and related services to car dealerships
in the Neenah, Wisconsin area that are majority-owned by
Mr. Bergstrom.
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We made a charitable contribution of $50,000 in each of 2007 and
2008 to the Education is Freedom Foundation, where Mr. Bru
is a director.
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We paid approximately $53,000 in 2006, $19,000 in 2007 and
$109,000 in 2008 for advertising to entities owned directly or
indirectly by Belo Corp., where Mr. Decherd was Chairman,
President and Chief Executive Officer until February 2008. This
advertising was placed in accordance with our advertising
agencies independent recommendations.
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We paid approximately $18,000 in 2008 for a newspaper
advertisement to an entity owned directly or indirectly by A. H.
Belo Corporation, where Mr. Decherd is Chairman of the
Board, President and Chief Executive Officer.
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We paid $15,000 to jointly sponsor with a customer an event for,
and made a charitable contribution of $10,000 to, the Mercy Home
for Boys and Girls, where Mr. Jenness is a director.
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We paid approximately $343,000 in 2006, $507,000 in 2007 and
$395,000 in 2008 for advertising to entities owned directly or
indirectly by Johnson Publishing Company, where
Mrs. Johnson Rice is President and Chief Executive Officer.
These payments constituted less than five percent of the gross
revenues of Johnson Publishing Company for the years in which
the payments were made. This advertising was placed in
accordance with our advertising agencies independent
recommendations.
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We made charitable contributions of $25,000 in 2006, $50,000 in
2007 and $25,000 in 2008 to the United Negro College Fund, where
Mrs. Johnson Rice is a director.
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We paid approximately $1,133,000 in 2006, $734,000 in 2007, and
$697,000 in 2008 to JPMorgan Chase & Co.
(JPMC) for investment banking services.
Mr. Shapiro serves as a consultant to JPMC and as
non-executive Chairman of its Texas operations. We do not
believe his relationship with JPMC gives him a direct or
indirect material interest in our transactions with JPMC.
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The amount involved in each of these items is less than the
amounts established by the NYSE and our Corporate Governance
Policies as potentially affecting a directors independence.
Director Nominee
Criteria and Process
The Board of Directors is responsible for approving candidates
for Board membership. The Board has delegated the screening and
recruitment process to the Nominating and Corporate Governance
Committee, in consultation with the Chairman of the Board and
Chief Executive Officer. The Nominating and Corporate Governance
Committee believes that the criteria for director nominees
should ensure effective corporate governance, support our
strategies and businesses, account for individual director
attributes and the effect of the overall mix of those attributes
on the Boards effectiveness, and support the successful
recruitment of qualified candidates for the Board.
Qualified candidates for director are those who, in the judgment
of the Nominating and Corporate Governance Committee, possess
all of the personal attributes and a sufficient mix of the
experience attributes listed below to ensure effective service
on the Board.
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Personal Attributes
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Experience Attributes
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leadership: lead in personal and professional lives
ethical character: possess high standards for ethical behavior
collaborative: actively participate in Board and committee matters
independence: for non-management directors, are independent of management and the Corporation
ability to communicate: possess good interpersonal skills
effectiveness: bring a proactive and solution-oriented approach
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financial acumen: have good knowledge of business finance and financial statements
general business experience: possess experience that will aid in judgments concerning business issues
industry knowledge: possess a reasonable knowledge about the Corporations industries
diversity of background and viewpoint: bring to the Board an appropriate level of diversity
special business experience: possess global management experience and experience with branded consumer packaged goods
expertise: provide special expertise identified as needed or as may be required
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The Nominating and Corporate Governance Committee may receive
recommendations for Board candidates from various sources,
including our directors, management and stockholders. In
addition, the Nominating and Corporate Governance Committee has
retained a search firm to assist it in identifying and
recruiting director candidates meeting the criteria specified by
the Committee.
The Nominating and Corporate Governance Committee recommends to
the Board nominees to fill any vacancies. As provided in the
Corporations Amended and Restated Certificate of
Incorporation, the Board elects a new director when a vacancy
occurs between annual meetings of stockholders. The Nominating
and Corporate Governance Committee also recommends to the Board
nominees for election as directors at our annual meeting of
stockholders, as well as assesses the performance of each
director at least once every three years in accordance with our
Corporate Governance Policies.
Stockholder
Nominations for Directors
The Nominating and Corporate Governance Committee considers
nominees recommended by stockholders as candidates for election
to the Board of Directors. A stockholder wishing to nominate a
candidate for election to the Board at an annual
stockholders meeting is required to give written notice to
the Secretary of the Corporation of his or her intention to make
a nomination in accordance with the Corporations Amended
and Restated Certificate of Incorporation and By-Laws. The
notice of nomination
9
must be received by us not less than 75 days nor more than
100 days prior to the stockholders meeting, or if we
give less than 75 days notice of the meeting date, the
notice of nomination must be received within 10 days after
the meeting date is announced. The notice of nomination is
required to contain information, as set forth in the Amended and
Restated Certificate of Incorporation and By-Laws, about both
the nominee and the stockholder making the nomination, including
information sufficient to allow the Nominating and Corporate
Governance Committee to determine if the candidate meets the
director nominee criteria described above. The notice must also
contain information about certain stock holdings of the nominee
and the stockholder making the nomination, including derivative
holdings, dividend rights that are separated from or separable
from the underlying shares and certain performance-related fees,
as well as information that would be required to be disclosed in
connection with a proxy solicitation (and whether a proxy
solicitation will be conducted). The notice is also required to
contain information about certain related person transactions,
contact and related information regarding the nominee,
understandings regarding the nomination of the nominee, and the
nominees consent to be nominated. We may require that the
proposed nominee furnish other information to determine that
persons eligibility to serve as a director. A nomination
that does not comply with the requirements set forth in the
Amended and Restated Certificate of Incorporation and By-Laws
will not be considered for presentation at the annual meeting,
but will be considered by the Nominating and Corporate
Governance Committee for any vacancies arising on the Board
between annual meetings in accordance with the process described
in Director Nominee Criteria and Process.
On November 12, 2008, the Board of Directors adopted
amendments to the By-Laws that require any stockholder that
nominates a director or submits another proposal to disclose
certain information about the stockholder and any additional
interests that the stockholder may have, including any
derivative positions in the Corporations stock held by the
stockholder. The amendments provide that these notice
requirements will be deemed satisfied by a stockholder with
respect to business other than the nomination or election of
directors if the stockholder has notified the Corporation of his
or her intention to present a proposal at an annual meeting in
compliance with the applicable rules and regulations of the
Securities Exchange Act of 1934, as amended (Exchange
Act), and the proposal has been included in the
Corporations proxy statement. The amendments do not
affect, among other things, the rights of stockholders to
request inclusion of proposals in the Corporations proxy
statement pursuant to the applicable rules and regulations under
the Exchange Act. The amendments did not change the time periods
in which a stockholder may bring business before an annual
meeting or to nominate a candidate for election as a director.
Communications to
Directors
The Board has established a process by which stockholders and
other interested parties may communicate with the Board. That
process can be found in the Investors section of our website at
www.kimberly-clark.com.
Stockholders and other interested parties may send written
correspondence to the Board in care of our Lead Director:
Lead Director
Kimberly-Clark Corporation
P.O. Box 619100
Dallas, Texas
75261-9100
Other Corporate
Governance Matters
Corporate Governance Policies. The Board of
Directors adopted Corporate Governance Policies in 1994, which
have been amended from time to time in accordance with changes
in rules and regulations and developing governance practices.
These policies guide the Corporation and the Board on matters of
corporate governance, including director responsibilities, Board
committees and their charters, director independence, director
compensation and performance assessments, director orientation
and education,
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director access to management, Board access to outside
financial, business and legal advisors, and management
development and succession planning. These policies, which
include our director independence standards, are available in
the Investors section of our website at
www.kimberly-clark.com.
Stockholders also may contact Stockholder Services,
P.O. Box 612606, Dallas, Texas
75261-2606
or call
(972) 281-1522
to obtain a copy of the Corporate Governance Policies without
charge.
Code of Conduct. Kimberly-Clark has a Code of
Conduct that applies to all of our directors, executive officers
and employees, including the chief executive officer, chief
financial officer, and the principal accounting officer and
controller. The Code of Conduct is available in the Investors
section of our website at www.kimberly-clark.com. Stockholders
also may contact Stockholder Services,
P.O. Box 612606, Dallas, Texas
75261-2606
or call
(972) 281-1522
to obtain a copy of the Code of Conduct without charge.
Lead Director. The non-management directors
elected Mr. Shapiro as Lead Director effective
March 1, 2008. Mr. Decherd previously served as Lead
Director through the end of his Lead Director term on
February 29, 2008. The Lead Director chairs executive
session meetings of non-management directors and serves as
Chairman of the Executive Committee, among other
responsibilities outlined in the Corporate Governance Policies.
The non-management directors are scheduled to meet in executive
session without the presence of management at least quarterly.
Committee Authority to Retain Independent
Advisors. Each of the Audit, Management
Development and Compensation, and Nominating and Corporate
Governance Committees has the authority to retain independent
advisors and consultants, with all fees and expenses to be paid
by the Corporation.
Whistleblower Procedures. The Audit Committee
has established procedures for (1) the receipt, retention
and treatment of complaints we receive regarding accounting,
internal accounting controls or auditing matters, and
(2) the confidential and anonymous submission by our
employees and others of concerns regarding questionable
accounting or auditing matters. We also maintain a toll-free,
around-the-clock Code of Conduct telephone hotline that allows
our employees and others to voice their concerns anonymously.
The whistleblower procedures and information on how to access
the hotline are available in the Investors section of our
website at www.kimberly-clark.com.
Chief Compliance Officer. Thomas J. Mielke is
the Senior Vice President Law and Government Affairs
and Chief Compliance Officer, overseeing our compliance
programs. He reports to the Audit Committee on the
programs effectiveness, provides periodic reports to the
Board, and works closely with various compliance functions to
provide coordination and sharing of best practices across the
compliance groups.
Disclosure Committee. We have established a
disclosure committee composed of members of management to assist
in fulfilling our obligations to maintain disclosure controls
and procedures and to coordinate and oversee the process of
preparing our periodic securities filings with the SEC.
No Executive Loans. We do not extend loans to
our executive officers or directors and do not have any of these
loans outstanding.
Stockholder Rights Plan. The Board has adopted
the following policy statement on stockholder rights plans:
Kimberly-Clark does not have a poison pill or
stockholder rights plan. If Kimberly-Clark were to adopt a
stockholder rights plan, the Board would seek prior stockholder
approval of the plan unless, due to timing constraints or other
reasons, a majority of independent directors of the Board
determines that it would be in the best interests of
stockholders to adopt a plan before obtaining stockholder
approval. If a stockholder rights plan is adopted without prior
stockholder approval, the plan must either be ratified by
stockholders or must expire, without being renewed or replaced,
within one year. The Nominating and Corporate Governance
Committee shall review this policy statement periodically and
report to the Board on any recommendations it may have
concerning the policy.
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Annual Election of Directors. In 2007,
stockholders approved an amendment to our Restated Certificate
of Incorporation to provide that directors will be elected on an
annual basis instead of for staggered terms of three years each.
Our Amended and Restated Certificate of Incorporation is
available in the Investors section of our website at
www.kimberly-clark.com.
Majority Voting for Election of Directors. The
Corporations By-Laws provide that, in uncontested
elections, directors will be elected by a majority vote rather
than by a plurality. If an incumbent director does not receive a
majority of votes, the director is required to tender his or her
resignation for consideration by the Board. Our By-Laws are
available in the Investors section of our website at
www.kimberly-clark.com.
Simple Majority Voting Provisions. In 2008,
stockholders approved an amendment to our Amended and Restated
Certificate of Incorporation to eliminate supermajority voting
provisions.
Special Stockholder Meetings. The Board has
recommended to stockholders that our Amended and Restated
Certificate of Incorporation be amended to allow the holders of
not less than 25 percent of the Corporations issued
and outstanding shares of capital stock to request that a
special meeting of stockholders be called. To effect this
change, a majority of the shares outstanding must vote in favor
of this proposal. See Proposal 3 in Part Three of this
proxy statement.
Charitable Contributions. The Nominating and
Corporate Governance Committee has adopted guidelines for review
and approval of charitable contributions by us and any
foundation we control to organizations or entities with which a
member of the Board of Directors or an executive officer is or
may be affiliated.
General
Information
The Board of Directors currently is divided into two classes. As
of the date of this proxy statement, the Board of Directors
consists of twelve members. Nine of the directors have terms
that expire at this years Annual Meeting and three have
terms that expire at the 2010 Annual Meeting.
In 2007, stockholders approved an amendment to our Restated
Certificate of Incorporation to declassify the Board. Under the
amendment, directors continue to serve the remainder of their
elected terms and, beginning with the 2008 Annual Meeting,
directors were elected annually so that by the 2010 Annual
Meeting of Stockholders all directors will be elected annually.
The nine nominees for director set forth on the following pages
are proposed to be elected at this years Annual Meeting to
serve for a term to expire at the 2010 Annual Meeting of
Stockholders and until their successors are elected and have
qualified. Should any nominee become unable to serve, proxies
may be voted for another person designated by the Board. All
nominees have advised us that they will serve if elected. The
term of the remaining three directors will expire at the 2010
Annual Meeting, in accordance with their previous election.
Certain
Information Regarding Directors and Nominees
The names of the nominees and of the other directors continuing
in office, their ages as of the date of the Annual Meeting, the
year each first became a director, their principal occupations
during at least the past five years, other public company
directorships held by each as of February 27, 2009 and
certain other biographical information are set forth on the
following pages by the two classes, with directors standing for
election in 2009 listed first.
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NOMINEES FOR
ELECTION TO THE BOARD OF DIRECTORS
For a One-Year
Term Expiring at the
2010 Annual Meeting of Stockholders
John R. Alm,
63,
Director since 2006
Retired President
and Chief Executive Officer,
Coca-Cola
Enterprises Inc.
Mr. Alm retired as President and Chief Executive Officer of
Coca-Cola
Enterprises Inc., a beverage company, in 2005. He had been Chief
Executive Officer since 2004 and President and Chief Operating
Officer since 2000. Mr. Alm joined
Coca-Cola
Enterprises Inc. in 1992 and held numerous other senior
management positions until his retirement.
Dennis R.
Beresford,
70,
Director since 2002
Ernst &
Young Executive Professor of Accounting, University of
Georgia
Mr. Beresford has served as Ernst & Young
Executive Professor of Accounting at the J.M. Tull School of
Accounting, Terry College of Business, University of Georgia
since 1997. From 1987 to 1997, he served as the Chairman of the
Financial Accounting Standards Board. Prior to that,
Mr. Beresford held various positions at the accounting firm
of Ernst & Young. He serves on the board of directors
and audit committees of Legg Mason, Inc. and the Federal
National Mortgage Association (Fannie Mae).
John F.
Bergstrom,
62,
Director since 1987
Chairman and
Chief Executive Officer, Bergstrom Corporation
Mr. Bergstrom has served as Chairman and Chief Executive
Officer of Bergstrom Corporation, Neenah, Wisconsin, for more
than the past five years. Bergstrom Corporation owns and
operates automobile sales and leasing businesses and a credit
life insurance company based in Wisconsin. Mr. Bergstrom is
a director of the Wisconsin Energy Corporation and its
wholly-owned subsidiary Wisconsin Electric Power Company. He
serves on the board of directors of Advance Auto Parts, Inc. He
also is a member of the board of directors and chairman of the
Theda Clark Hospital Foundation, and a member of the board of
directors and executive committee of Green Bay Packers, Inc.
Abelardo E. Bru,
60,
Director since 2005
Retired Vice
Chairman, PepsiCo, Inc.
Mr. Bru retired as Vice Chairman of PepsiCo, a food and
beverage company, in 2005. He joined PepsiCo in 1976.
Mr. Bru served from 1999 to 2003 as President and Chief
Executive Officer and in 2003 to 2004 as Chief Executive Officer
and Chairman of Frito-Lay Inc., a division of PepsiCo. Prior to
leading Frito-Lay, Mr. Bru led PepsiCos largest
international business, Sabritas Mexico, as President and
General Manager from 1992 to 1999. Mr. Bru is a member of
the board of directors of S. C. Johnson & Son, Inc.
and the Education is Freedom Foundation.
Robert W.
Decherd,
58,
Director since 1996
Chairman of the
Board, President and Chief Executive Officer, A. H. Belo
Corporation
Mr. Decherd has served as Chairman of the Board, President
and Chief Executive Officer of A. H. Belo Corporation, a
newspaper publishing and Internet company, since it was spun off
from Belo Corp. in February 2008. Prior to February 2008,
Mr. Decherd was Chief Executive Officer of Belo Corp., a
broadcasting and publishing company, for 21 years. He is a
director of both A. H. Belo Corporation and Belo Corp., where he
is non-executive chairman. Mr. Decherd is a member of the
Advisory Council for
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the Harvard University Center for Ethics and the Board of
Visitors of the Columbia Graduate School of Journalism. During
the past decade, he has held appointments to Presidential and
Federal Communications Commission commissions concerned with
public policy matters related to the television industry.
Thomas J. Falk,
50,
Director since 1999
Chairman of the
Board and Chief Executive Officer
Mr. Falk was elected Chairman of the Board and Chief
Executive Officer of the Corporation in 2003 and President and
Chief Executive Officer in 2002. Prior to that, he served as
President and Chief Operating Officer since 1999. Mr. Falk
previously had been elected Group President Global
Tissue, Pulp and Paper in 1998, where he was responsible for the
Corporations global tissue businesses. Earlier in his
career, Mr. Falk had responsibility for the
Corporations North American Infant Care, Child Care and
Wet Wipes businesses. Mr. Falk joined the Corporation in
1983 and has held other senior management positions in the
Corporation. He also serves on the board of directors of
Catalyst Inc., Centex Corporation and the University of
Wisconsin Foundation, and serves as a governor of the
Boys & Girls Clubs of America.
Mae C.
Jemison, M.D.,
52,
Director since 2002
President,
BioSentient Corporation
Dr. Jemison is founder and President of The Jemison Group,
Inc., a technology consulting company, and BioSentient
Corporation, a medical devices company. She chairs The Earth We
Share international science camp. Dr. Jemison served as a
professor of Environmental Studies at Dartmouth College from
1995 to 2002. From 1987 to 1993, she served as a National
Aeronautics and Space Administration (NASA) astronaut.
Dr. Jemison serves on the board of directors of Scholastic
Corporation, Valspar Corporation and The Dorothy Jemison
Foundation for Excellence and is a member of the National
Academy of Sciences Institute of Medicine. She is also the
Chairman of the State of Texas Product Development and Small
Business Incubator Board, and she is a member of the National
Advisory Council for Biomedical Imaging and Bioengineering and
the Greater Houston Partnership Executive Committee.
Ian C. Read,
55,
Director since 2007
Senior Vice
President, Pfizer, Inc.
Mr. Read is a Senior Vice President of Pfizer, Inc., a drug
manufacturer, and President of its Worldwide Pharmaceutical
Operations. Mr. Read joined Pfizer in 1978 in its financial
organization. He worked in Latin America through 1995, holding
positions of increasing responsibility, and was appointed
President of the Pfizer International Pharmaceuticals Group,
Latin America/Canada in 1996. In 2000, Mr. Read was named
Executive Vice President of Europe/Canada and was named a
corporate Vice President in 2001.
G. Craig
Sullivan,
69,
Director since 2004
Retired Chairman
and Chief Executive Officer, The Clorox Company
Mr. Sullivan retired as Chairman and Chief Executive
Officer of The Clorox Company, a consumer products company, in
2003. He joined The Clorox Company in 1971 and held a number of
senior sales and management positions during his career,
culminating in his election as Chief Executive Officer and
Chairman of the Board in 1992. Mr. Sullivan also serves as
a director of Mattel, Inc., The Goodyear
Tire & Rubber Company and The American Ireland
Fund. He also serves on the capital campaign committee for St.
Anthonys Foundation in San Francisco.
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MEMBERS OF THE
BOARD OF DIRECTORS CONTINUING IN OFFICE
Term Expiring at
the
2010 Annual
Meeting of Stockholders
James M. Jenness,
62,
Director since 2007
Chairman of the
Board, Kellogg Company
Mr. Jenness was elected Chairman of the Board of Kellogg
Company, a producer of cereal and convenience foods, in 2005. He
also served as Chief Executive Officer of Kellogg from 2004
through 2006. Mr. Jenness was Chief Executive Officer of
Integrated Merchandising Systems LLC, a market leader in
outsource management for retail promotion and branded
merchandising, from 1997 to 2004. He served in various positions
of increasing responsibility at Leo Burnett Company,
Kelloggs major advertising agency partner, from 1974 to
1997, including as Vice Chairman, Chief Operating Officer and
Director. He is a senior director of the board of directors of
Childrens Memorial Hospital and a director of Mercy Home
for Boys and Girls. He also serves on the DePaul University
College of Commerce Advisory Council, is Vice Chairman of
DePauls Board of Trustees and is co-trustee of the W. K.
Kellogg Foundation Trust.
Linda Johnson
Rice,
51,
Director since 1995
President and
Chief Executive Officer, Johnson Publishing Company,
Inc.
Mrs. Johnson Rice has been President and Chief Executive
Officer of Johnson Publishing Company, Inc., a multi-media
company, since 2002. She joined that company in 1980, became
Vice President in 1985 and was elected President and Chief
Operating Officer in 1987. Mrs. Johnson Rice is a director
of MoneyGram International, Inc. and Omnicom Group, Inc.
Marc J. Shapiro,
61,
Director since 2001
Retired Vice
Chairman, JPMorgan Chase & Co.
Mr. Shapiro retired in 2003 as Vice Chairman of JPMorgan
Chase & Co., a financial services company. Before
becoming Vice Chairman of JPMorgan Chase & Co. in
1997, Mr. Shapiro was Chairman, President and Chief
Executive Officer of Chase Bank of Texas, a wholly-owned
subsidiary of JPMorgan Chase & Co., from 1989 until
1997. He now serves as a consultant to JPMorgan
Chase & Co. as a non-executive Chairman of its Texas
operations. Mr. Shapiro is a member of the board of
directors of Burlington Northern Santa Fe Corporation and
The Mexico Fund, and a trustee of Weingarten Realty Investors.
He also serves on the boards of M.D. Anderson Cancer Center,
Baylor College of Medicine, Rice University and BioHouston.
Compensation of
Directors
Directors who are not officers or employees of the Corporation
or any of its subsidiaries, affiliates or equity companies are
Outside Directors for compensation purposes. Outside
Directors are compensated for their services under our Outside
Directors Compensation Plan, which we adopted in 2001. Our
objectives for Outside Director compensation are to remain
competitive with the compensation paid to outside directors of
comparable companies, to keep pace with changes in practices in
director compensation, to attract qualified candidates for Board
service, and to reinforce our practice of encouraging stock
ownership by our directors. In 2006, to assist the Nominating
and Corporate Governance Committee in assessing and determining
appropriate, competitive Outside Director compensation, the
Committee engaged Mercer, an outside compensation consultant.
Based on that assessment, in 2006 the Committee recommended to
the Board, and the Board approved, the Outside Director
compensation for 2007 and 2008.
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2008
Compensation. In
2008, each Outside Director received:
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An annual cash retainer of $80,000 payable quarterly in
advance; and
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An annual grant of restricted share units with a value of
$130,000, effective the first business day of the year.
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Outside Directors who join the Board during a calendar year
receive the full quarterly amount of the annual retainer for the
quarter in which they join the Board and each quarter
thereafter, and a pro-rated grant of restricted share units.
Outside Directors who were also chairmen of the Audit,
Management Development and Compensation and Nominating and
Corporate Governance Committees each received an additional
grant of restricted share units with a value of $20,000, and the
Lead Director received an additional grant of restricted share
units with a value of $30,000. In addition, we reimbursed
Outside Directors for expenses incurred as a result of attending
Board or committee meetings.
Restricted share units are not shares of our common stock.
Rather, restricted share units represent the right to receive an
amount, payable in shares of our common stock, equal to the
value of a specified number of shares of our common stock within
90 days following the restricted period. The restricted
period for the restricted share units begins on the date of
grant and expires on the date the Outside Director retires from
or otherwise terminates service on the Board. During the
restricted period, restricted share units may not be sold,
assigned, transferred or otherwise disposed of, or mortgaged,
pledged or otherwise encumbered. Outside Directors also receive
additional restricted share units equivalent in value to the
dividends that would have been paid to them if the restricted
share units granted to them were shares of our common stock.
2008 Outside
Director Compensation
The following table sets forth the compensation paid to each
Outside Director in 2008 for his or her service as a director:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
Earned
|
|
|
Stock
|
|
|
Compen-
|
|
|
|
|
|
|
or Paid in
|
|
|
Awards
|
|
|
sation
|
|
|
|
|
Name
|
|
Cash($)
|
|
|
($)(1)(2)(3)
|
|
|
($)(4)
|
|
|
Total($)(5)
|
|
|
John R. Alm
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
0
|
|
|
|
210,000
|
|
Dennis R. Beresford
|
|
|
80,000
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
230,000
|
|
John F. Bergstrom
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
10,000
|
|
|
|
220,000
|
|
Abelardo E. Bru
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
5,000
|
|
|
|
215,000
|
|
Robert W. Decherd
|
|
|
80,000
|
|
|
|
160,000
|
|
|
|
20,000
|
|
|
|
260,000
|
|
Mae C. Jemison
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
0
|
|
|
|
210,000
|
|
James M. Jenness
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
10,000
|
|
|
|
220,000
|
|
Ian C. Read
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
0
|
|
|
|
210,000
|
|
Linda Johnson Rice
|
|
|
80,000
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
230,000
|
|
Marc J. Shapiro
|
|
|
80,000
|
|
|
|
150,000
|
|
|
|
10,000
|
|
|
|
240,000
|
|
G. Craig Sullivan
|
|
|
80,000
|
|
|
|
130,000
|
|
|
|
10,000
|
|
|
|
220,000
|
|
|
|
|
(1) |
|
Amounts shown reflect what the Corporation recognized as
share-based compensation expense in 2008 for financial reporting
purposes in accordance with Statement of Financial Accounting
Standards, No. 123 (Revised 2004), Share-Based Payment
(FAS 123R) for restricted share unit awards
granted pursuant to our Outside Directors Compensation
Plan. See Notes 8, 6, and 7 to our |
16
|
|
|
|
|
audited financial statements included in our Annual Reports on
Form 10-K
for 2008, 2007, and 2006, respectively, for the assumptions used
in valuing and expensing these restricted share units. |
|
(2) |
|
Restricted share unit awards were granted on January 2,
2008. The number of restricted share units granted on this date
and the grant date fair value of those grants, determined in
accordance with FAS 123R, are set forth below. |
|
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|
|
|
|
|
|
|
|
|
Restricted Share
|
|
|
|
|
|
|
Units
|
|
|
Grant Date
|
|
Name
|
|
Granted in 2008(#)
|
|
|
Fair Value($)
|
|
|
John R. Alm
|
|
|
1,889
|
|
|
|
130,000
|
|
Dennis R. Beresford
|
|
|
2,180
|
|
|
|
150,000
|
|
John F. Bergstrom
|
|
|
1,889
|
|
|
|
130,000
|
|
Abelardo E. Bru
|
|
|
1,889
|
|
|
|
130,000
|
|
Robert W. Decherd
|
|
|
2,325
|
|
|
|
160,000
|
|
Mae C. Jemison
|
|
|
1,889
|
|
|
|
130,000
|
|
James M. Jenness
|
|
|
1,889
|
|
|
|
130,000
|
|
Ian C. Read
|
|
|
1,889
|
|
|
|
130,000
|
|
Linda Johnson Rice
|
|
|
2,180
|
|
|
|
150,000
|
|
Marc J. Shapiro
|
|
|
2,180
|
|
|
|
150,000
|
|
G. Craig Sullivan
|
|
|
1,889
|
|
|
|
130,000
|
|
|
|
|
(3) |
|
As of December 31, 2008, Outside Directors had the
following stock awards outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Restricted
|
|
|
Stock
|
|
Name
|
|
Stock(#)
|
|
|
Share Units(#)
|
|
|
Options(#)
|
|
|
John R. Alm
|
|
|
0
|
|
|
|
5,971
|
|
|
|
0
|
|
Dennis R. Beresford
|
|
|
0
|
|
|
|
13,204
|
|
|
|
5,084
|
|
John F. Bergstrom
|
|
|
3,000
|
|
|
|
11,928
|
|
|
|
8,032
|
|
Abelardo E. Bru
|
|
|
0
|
|
|
|
6,893
|
|
|
|
0
|
|
Robert W. Decherd
|
|
|
3,000
|
|
|
|
14,305
|
|
|
|
8,236
|
|
Mae C. Jemison
|
|
|
0
|
|
|
|
11,928
|
|
|
|
5,084
|
|
James M. Jenness
|
|
|
0
|
|
|
|
3,758
|
|
|
|
0
|
|
Ian C. Read
|
|
|
0
|
|
|
|
2,682
|
|
|
|
0
|
|
Linda Johnson Rice
|
|
|
3,000
|
|
|
|
12,867
|
|
|
|
7,626
|
|
Marc J. Shapiro
|
|
|
0
|
|
|
|
13,204
|
|
|
|
17,924
|
|
G. Craig Sullivan
|
|
|
0
|
|
|
|
8,404
|
|
|
|
0
|
|
|
|
|
(4) |
|
All Other Compensation consists of charitable matching gifts
paid in 2008 under the Kimberly-Clark Foundations Matching
Gifts Program to a charity designated by the director. This
program is available to all employees and directors of the
Corporation. Under this program, the Kimberly-Clark Foundation
matches employees and directors financial
contributions to qualified educational and charitable
organizations in the United States on a dollar-for-dollar basis,
up to $10,000 per person per calendar year. Amounts paid in 2008
in connection with matching gifts for Mr. Decherd reflect
donations made in 2007 and 2008. |
|
(5) |
|
During 2008, Outside Directors received credit for cash
dividends on restricted stock held by them. These dividends are
credited to interest bearing accounts maintained by us on behalf
of those Outside Directors with restricted stock. Earnings on
those accounts are not included in the Outside Director
Compensation Table because the earnings were not above market or
preferential. Also in 2008, Outside Directors received
additional restricted share units with a value equal to the
dividends paid during the year on our common stock on the
restricted share units held by them. Because we factor the value
of the right to receive dividends into the grant date fair value
of the restricted stock and restricted share units awards, the
dividends and dividend equivalents received by Outside Directors
are not |
17
|
|
|
|
|
included in the Outside Director Compensation table. The
dividends credited on restricted stock and additional restricted
share units credited in 2008 were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Grant Date
|
|
|
|
Dividends
|
|
|
Share Units
|
|
|
Fair Value of
|
|
|
|
Credited on
|
|
|
Credited for
|
|
|
Restricted Share
|
|
Name
|
|
Restricted Stock($)
|
|
|
Dividends in 2008(#)
|
|
|
Units Credited($)
|
|
|
John R. Alm
|
|
|
0
|
|
|
|
190.67
|
|
|
|
12,266
|
|
Dennis R. Beresford
|
|
|
0
|
|
|
|
436.81
|
|
|
|
28,174
|
|
John F. Bergstrom
|
|
|
6,810
|
|
|
|
395.20
|
|
|
|
25,494
|
|
Abelardo E. Bru
|
|
|
0
|
|
|
|
222.34
|
|
|
|
14,314
|
|
Robert W. Decherd
|
|
|
6,810
|
|
|
|
473.50
|
|
|
|
30,541
|
|
Mae C. Jemison
|
|
|
0
|
|
|
|
395.20
|
|
|
|
22,494
|
|
James M. Jenness
|
|
|
0
|
|
|
|
114.68
|
|
|
|
7,352
|
|
Ian C. Read
|
|
|
0
|
|
|
|
77.73
|
|
|
|
4,962
|
|
Linda Johnson Rice
|
|
|
6,810
|
|
|
|
425.21
|
|
|
|
27,424
|
|
Marc J. Shapiro
|
|
|
0
|
|
|
|
436.80
|
|
|
|
28,174
|
|
G. Craig Sullivan
|
|
|
0
|
|
|
|
274.19
|
|
|
|
17,667
|
|
Other than the cash retainer, grants of restricted share units
and the other compensation previously described, no Outside
Director received any compensation or perquisites from us for
services as a director in 2008.
A director who is not an Outside Director does not receive any
compensation for services as a member of the Board or any
committee, but is reimbursed for expenses incurred as a result
of the services.
2009 Compensation. In 2008, the Nominating and
Corporate Governance Committee, with the assistance of Mercer,
evaluated Outside Director compensation to assess whether it
still met our objectives for Outside Director compensation as
described above. In its assessment, the Committee compared
aggregate Outside Director cash and equity compensation to the
median compensation of the outside directors of our peer groups,
as well as the structure of the compensation programs of our
peer groups. For information regarding our peer groups, see
Part Four Other Important
Information Executive Compensation
Compensation Discussion and Analysis below. The Committee
then recommended to the Board, and the Board approved, changes
in compensation for Outside Directors with aggregate cash and
equity compensation at or near the median of these peer groups.
Beginning in 2009:
|
|
|
|
|
The annual cash retainer was increased from $80,000 to
$85,000; and
|
|
|
|
The value of the annual grant of restricted share units was
increased from $130,000 to $140,000.
|
There was no change to the amount of the additional annual
retainer paid to committee chairs or to the Lead Director.
The Board of Directors unanimously recommends a vote FOR the
election of the nine nominees for director.
18
PROPOSAL 2. RATIFICATION
OF AUDITORS
The Audit Committee of the Board of Directors has selected
Deloitte & Touche LLP as the independent registered
public accounting firm to audit the financial statements of the
Corporation for 2009, subject to ratification by the
stockholders. If the stockholders do not ratify the selection of
Deloitte & Touche LLP, the selection of other
independent auditors will be considered by the Audit Committee.
Deloitte & Touche LLP have been our independent
auditors since 1928.
Representatives of Deloitte & Touche LLP are expected
to be present at the Annual Meeting with the opportunity to make
a statement if they desire to do so and will be available to
respond to appropriate questions.
Principal
Accounting Firm Fees
The aggregate fees (excluding value added taxes) billed to the
Corporation and its subsidiaries for the fiscal years ended
December 31, 2008 and 2007 by the Corporations
principal accounting firm, Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu and their respective
affiliates (collectively, Deloitte), were:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit Fees(1)
|
|
$
|
9,959,000
|
|
|
$
|
10,947,000
|
|
Audit-Related Fees(2)
|
|
|
686,000
|
|
|
|
790,000
|
|
Tax Fees(3)
|
|
|
1,530,000
|
|
|
|
1,468,000
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
Includes fees for consolidated financial audits, statutory
audits, comfort letters, attest services, consents, assistance
with and review of SEC filings and other related matters. These
fees include an audit of internal control over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act
of 2002. |
|
(2) |
|
2008 and 2007 fees include work with respect to employee benefit
plans, due diligence assistance and other matters. |
|
(3) |
|
Tax fees consist of services related to tax compliance, tax
audit assistance, and consultation and advice on business tax
matters. |
Audit Committee
Approval of Audit and Non-Audit Services
All audit and non-audit services provided by Deloitte to the
Corporation require pre-approval by the Audit Committee. The
Audit Committee utilizes the following procedures in
pre-approving all audit and non-audit services provided by
Deloitte. At or before the first meeting of the Audit Committee
each year, our Vice President and Controller prepares a detailed
memorandum outlining the audit services to be provided by
Deloitte together with the related fees. In addition, our
business and staff units prepare individual requests for
non-audit services to be provided by Deloitte during the year.
These requests describe the services to be provided, the
estimated cost of these services, why the requested service is
not inconsistent with the independence rules of the SEC, and why
it is appropriate to have Deloitte provide such services. Our
Vice President and Controller reviews and summarizes the
individual non-audit service requests and fees (separately
describing audit-related services, tax services and other
services) to be provided by Deloitte. Before each subsequent
meeting of the Committee, our Vice President and Controller
prepares an additional memorandum that includes updated
information regarding approved services and highlights any new
audit and non-audit services to be provided by Deloitte. All new
non-audit services to be provided are described in individual
requests for services. The Audit Committee reviews these
memoranda and the individual requests for non-audit services and
approves the services if acceptable to the Committee.
To ensure prompt handling of unexpected matters, the Committee
delegates to the Chairman of the Audit Committee the authority
to amend or modify the list of audit and non-audit services and
fees, as long
19
as the additional or amended services do not affect
Deloittes independence under applicable SEC rules. The
Chairman reports action taken to the Audit Committee at its next
Committee meeting.
All Deloitte services and fees in 2008 and 2007 were
pre-approved by the Audit Committee.
The Board of Directors unanimously recommends a vote FOR
ratification of this selection.
Audit Committee
Report
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling
its responsibility for oversight of the quality and integrity of
the accounting, auditing and financial reporting practices of
the Corporation.
In discharging its oversight responsibility as to the audit
process, the Audit Committee obtained from the independent
registered public accounting firm (the auditors) a
formal written statement describing all relationships between
the auditors and the Corporation that might bear on the
auditors independence, as required by Public Company
Accounting Oversight Board (PCAOB) Rule 3526,
Communication with Audit Committees Concerning
Independence, discussed with the auditors any relationships
that may impact their objectivity and independence and satisfied
itself as to the auditors independence. The Audit
Committee also discussed with management, the internal auditors,
and the auditors the quality and adequacy of the
Corporations internal controls and the internal audit
functions organization, responsibilities, and budget and
staffing. The Audit Committee reviewed with both the auditors
and the internal auditors their audit plans, audit scope and
identification of audit risks.
The Audit Committee discussed and reviewed with the auditors all
communications required by the auditing standards of the PCAOB,
including those required by PCAOB AU 380, Communications
with Audit Committees, and, with and without management
present, discussed and reviewed the results of the
auditors examination of the financial statements and the
Corporations internal control over financial reporting.
The Committee also discussed the results of the internal audit
examinations.
The Audit Committee discussed and reviewed the audited financial
statements of the Corporation as of and for the fiscal year
ended December 31, 2008, with management and the auditors.
The Audit Committee also reviewed managements assessment
of the effectiveness of internal controls as of
December 31, 2008 and discussed the auditors
examination of the effectiveness of the Corporations
internal control over financial reporting. Management has the
responsibility for preparing the Corporations financial
statements in accordance with accounting principles generally
accepted in the United States of America (GAAP) and for
establishing and maintaining the Corporations internal
control over financial reporting. The auditors have the
responsibility for performing an independent audit of the
Corporations financial statements and internal control
over financial reporting, and expressing opinions on the
conformity of the Corporations financial statements with
GAAP and the effectiveness of internal control over financial
reporting.
Based on the above-mentioned review and discussions with
management and the auditors, the Audit Committee recommended to
the Board that the Corporations audited financial
statements be included in its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, for filing
with the Securities and Exchange Commission. The Audit Committee
also has selected and recommended to stockholders for
ratification the reappointment of Deloitte & Touche
LLP as the independent registered public accounting firm for
2009.
AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
Dennis R. Beresford, Chairman
John R. Alm
John F. Bergstrom
Robert W. Decherd
Ian C. Read
20
PROPOSAL 3. APPROVAL
OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION REGARDING RIGHT OF HOLDERS OF AT LEAST
TWENTY-FIVE
PERCENT OF SHARES TO CALL A SPECIAL MEETING OF
STOCKHOLDERS
The Board of Directors is proposing, for approval by our
stockholders, an Amended and Restated Certificate of
Incorporation (the Proposed Certificate) that
incorporates a proposed amendment to provisions of our existing
Amended and Restated Certificate of Incorporation (the
Existing Certificate). A stockholder proposal
requesting that the holders of 10 percent to
25 percent of outstanding common stock be granted the power
to call special meetings of stockholders was included in the
2008 proxy statement and received favorable votes from a
majority of the votes cast on the proposal. The Nominating and
Corporate Governance Committee of the Board of Directors and the
full Board have carefully considered the implications of this
proposal.
Based on this review, the Board, upon the recommendation of the
Nominating and Corporate Governance Committee, has unanimously
adopted a resolution approving, subject to stockholder approval,
and declaring the advisability of, an amendment to the Existing
Certificate to allow holders of not less than 25 percent of
the Corporations issued and outstanding shares of capital
stock entitled to vote to request that a special meeting of
stockholders be called, subject to By-Law procedures described
below.
The Board believes that establishing an ownership threshold of
25 percent in order to request a special meeting strikes a
reasonable balance between enhancing stockholder rights and
protecting against the risk that a small minority of
stockholders could trigger a special meeting and the resulting
extraordinary financial and administrative expense of holding a
special meeting. We will continue to maintain our existing
governance mechanisms that afford management and the Board the
ability to respond to proposals and concerns of all
stockholders, regardless of the level of share ownership.
The Proposed Certificate would amend Article VI,
Section (3) of the Existing Certificate as follows (with
additions indicated by underlining and deletions indicated by
strikeout):
(3) Meetings of stockholders of the Corporation may be
called only by (i) the Board of Directors pursuant
to a resolution adopted by the affirmative vote of a majority of
the entire Board of Directors,by(ii)
the Chairman of the Board, or
by(iii) the Chief Executive
Officer, or (iv) the Chairman of the Board or the
Secretary of the Corporation at the written request of the
holders of not less than twenty-five percent (25%) of the issued
and outstanding shares of capital stock entitled to vote on any
business proposed to be considered at such special meeting that
complies with the procedures for calling a special meeting of
stockholders as may be set forth in the By-Laws of the
Corporation, as may be amended from time to time.
The Proposed Certificate would not amend any other provisions of
the Existing Certificate.
In addition, if the Proposed Certificate is approved, our
By-Laws are anticipated to be amended to, among other things,
describe how the record date is to be set to determine the
stockholders entitled to request the special meeting, specify
information requirements for the request that are similar to
those in place for stockholders to bring business or a nominee
for director before an annual meeting, and describe how a
stockholder may revoke a request.
The By-Laws would also be amended to specify when a special
meeting requested by stockholders will not be held, including if
(1) the request to call a special meeting relates to an
item of business that is not a proper subject for stockholder
action under applicable law; (2) the Board has called or
calls for a meeting of stockholders and the purpose or purposes
of such meeting include (among any other matters properly
brought before the meeting) the purpose or purposes specified in
the request; (3) the request is received by the Corporation
during the period commencing 90 days prior to the first
anniversary of the date of the immediately preceding annual
meeting and ending on the date of the next annual meeting;
(4) an identical or substantially similar item was
presented at any meeting of stockholders held within
120 days prior to receipt by the Corporation of such
request; or (5) an annual or special meeting was held not
more than
21
12 months before the request to call the special meeting
was received by the Corporation which included the purpose or
purposes specified in the request.
A copy of the amendments to the By-Laws that are intended to
take effect on the approval of the Proposed Certificate has been
provided as an exhibit to a Current Report on
Form 8-K,
filed by the Corporation with the SEC on November 17, 2008.
Following the approval of the Proposed Certificate, the amended
By-Laws will also be posted on our website.
To be approved, the proposed amendment requires an affirmative
vote by the holders of a majority of our common stock
outstanding and entitled to vote on the amendment. If approved,
this amendment will become effective upon the filing of the
Proposed Certificate with the Secretary of State for the State
of Delaware, which we would do promptly after the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR
approval of this proposal.
PROPOSAL 4. REAPPROVAL
OF PERFORMANCE GOALS
UNDER THE 2001 EQUITY PARTICIPATION PLAN
We are asking stockholders to reapprove the performance goals
for our 2001 Equity Participation Plan (as amended, the
2001 Plan) set forth below, as previously approved
by stockholders in 2001 and again when it was amended in 2004.
No amendments to the 2001 Plan are being requested. Stockholder
approval is necessary for the Corporation to meet one of the
requirements for performance-based compensation under
Section 162(m) of the Internal Revenue Code.
The material terms of the 2001 Plan are summarized below. This
summary is qualified by the specific language of the 2001 Plan,
which is included as Appendix A to this proxy statement.
Overview
The purpose of the 2001 Plan is to encourage ownership in the
Corporation by those employees who have contributed, or are
determined to be in a position to contribute, materially to the
success of the Corporation by managerial, scientific or other
innovative means, thereby increasing their interest in the
Corporations long-term success. Equity participation plans
are significant factors in attracting and retaining management
talent, causing key employees to identify more closely with the
interests of the stockholders, and providing incentive and
reward for long-term growth and performance. The 2001 Plan will
expire on April 25, 2011, unless earlier terminated or
extended by the Management Development and Compensation
Committee (the Committee).
Under the 2001 Plan, the Committee can grant awards consisting
of restricted stock and restricted share units (see
Restricted Stock and Restricted Share Units below),
options to acquire the Corporations common stock (see
Stock Options below), or a combination of stock
options, restricted stock and restricted share units. The 2001
Plan also provides the Committee with discretion to require
performance-based standards to be met before awards will vest.
Restricted Stock
and Restricted Share Units
The Committee may determine the number of shares of restricted
stock or restricted share units to be granted to participants
and the periods during which the shares or units may not be
transferred. Unless otherwise determined by the Committee, the
transferability restrictions will last for a period of three to
ten years from the date of grant. During this restricted period,
the restricted stock or restricted share units may not be sold
or transferred by the participant except in the case of death.
Upon expiration of the restricted period, the restricted stock
will be delivered to the participant free of restrictions. A
participant who is awarded restricted stock will be entitled to
vote these shares and to receive dividends declared on these
shares during the restricted period. Upon expiration of the
restricted period, payment of restricted share units will be
made in cash or shares of common stock as determined by the
Committee at the time of grant.
22
During the restricted period, a participant who is awarded
restricted share units will not be entitled to vote these units
but will receive either cash or a credit equal to dividends
declared on the Corporations common stock which will be
reinvested in restricted share units at the then fair market
value of the Corporations common stock on the date
dividends are paid. The Committee determined that dividend
equivalents will not be paid on unvested performance-based
restricted share units granted to the named executive officers
in February 2009 and thereafter; instead, dividend equivalents
on these units will be accumulated and paid after the
performance-based restricted share units vest, based on the
actual number of shares that vest.
Stock
Options
The 2001 Plan employs market value as a basis for rewarding
performance through the use of incentive stock options under
Section 422 of the Internal Revenue Code (Incentive
Stock Options) and stock options which are not Incentive
Stock Options (Nonqualified Stock Options) to
acquire the Corporations common stock. The option price
per share will be no less than 100 percent of the market
value per share of the Corporations common stock at the
date of grant. The term of these options will be no more than
10 years from the date of grant. Options will only become
exercisable (1) after specified periods of employment after
grant (generally, 30 percent after the first year,
30 percent after the second and the remaining
40 percent after the third), (2) if earlier, upon a
qualified termination of employment of the employee (see
Part Four Other Important
Information Executive Compensation
Compensation Discussion and Analysis 2001 Plan
below), or (3) as otherwise determined by the Committee.
The option price, and any withholding tax, is payable in full in
cash at the time of exercise, or at the discretion of the
Committee in shares of common stock of the Corporation
transferable to the Corporation and having a fair market value
on the transfer date equal to the amount payable to the
Corporation.
If the participant terminates employment for any reason other
than death, disability, retirement or a qualified termination of
employment, however, the then-exercisable portion of the option
will only be exercisable for three months following such
termination. The entire unexercised portion of the option is
exercisable within three years from the date of death or
disability of a participant, within five years of the date of
retirement of a participant, or within the remaining period of
the option, whichever is earlier. The option is not transferable
except in the case of death or, in limited circumstances, by
gift. Under no circumstances, however, will an option be
exercisable beyond 10 years from the date of the grant
thereof.
Under the 2001 Plan, the Committee, by written notice to a
participant, may limit the period in which an Incentive Stock
Option may be exercised to a period ending at least three months
following the date of such notice,
and/or limit
or eliminate the number of shares subject to an incentive stock
option after a period ending at least three months following the
date of such notice.
The 2001 Plan provides the Committee with discretion to allow a
participant to convert an unexercised stock option to a cash
payment equal to the difference between the participants
option price and the fair market value of the Corporations
common stock on the date of conversion. Any such conversion will
reduce the number of outstanding unexercised stock options by a
number of shares of the Corporations common stock equal to
the options that were converted to a cash payment.
Performance
Goals
The 2001 Plan provides that specific performance goals may be
established by the Committee, which, if achieved, will result in
the amount of payment, or the early payment, of an award under
the 2001 Plan. The performance goals may consist of one or more
or any combination of the following criteria: return on invested
capital, stock price, market share, sales revenue, cash flow,
earnings per share, return on equity, total shareholder return,
gross margin,
and/or
costs. The performance goals may be described in terms that are
related to the individual participant, to the Corporation as a
whole, or to a subsidiary, division, department, region,
function or business unit of the Corporation in which the
participant is employed. The Committee, in its discretion, may
change or modify these criteria; however, at all times the
criteria must
23
meet the requirements of Section 162(m) of the Internal
Revenue Code, or any successor section, to the extent applicable.
Shares Subject to
the 2001 Plan/Individual Limits
Under the 2001 Plan, the equivalent of 50,000,000 shares
(which may be adjusted for stock dividends, stock splits or
other corporate changes) of the Corporations common stock
will be available, of which not more than 18,000,000 shares
may be used for grants of restricted stock and restricted share
units. Shares subject to stock options that become ineligible
for purchase for any reason other than exercise of the option,
restricted share units which are retired through forfeiture or
maturity other than those which are retired through the payment
of common stock, and shares of restricted stock that are
forfeited during the restricted period due to any applicable
transferability restrictions will again become available under
the 2001 Plan.
The maximum number of shares of common stock pursuant to all
awards under the 2001 Plan that can be granted to any
participant within any two consecutive calendar years shall not
exceed 1,500,000 in the aggregate, and all awards to executive
officers under the 2001 Plan must be approved by the Committee,
which consists entirely of Independent Directors. This limit may
be adjusted for stock dividends, stock splits or other corporate
changes.
Eligibility and
Award Estimates
Eligibility to participate in the 2001 Plan is limited to
employees (including officers and directors who also are
employees) of the Corporation and its affiliated companies.
Because the granting of options, restricted stock and restricted
share unit awards under the 2001 Plan is at the discretion of
the Committee, it is not possible to indicate which persons
(including the persons identified in the Summary Compensation
Table, all current executive officers as a group, all current
directors who are not executive officers as a group, and all
employees, including current officers who are not executive
officers, as a group) may be granted awards. Also, it is not
possible to estimate the number of shares which may be awarded.
Administration of
the 2001 Plan
The 2001 Plan is administered by the Committee. The Committee
will from time to time select participants, determine the extent
of participation and make all other necessary decisions and
interpretations under the 2001 Plan. The Committee has the
authority to delegate to the Chief Executive Officer the limited
authority to grant awards under the 2001 Plan as determined to
be reasonable and appropriate by the Chief Executive Officer in
connection with recruiting and special employee recognition and
retention matters, provided that such limited grants will not
exceed 200,000 stock options, shares of restricted stock or
restricted share units, in the aggregate, in any calendar year.
Amendment of the
2001 Plan
The 2001 Plan provides that the Committee may amend, suspend, or
discontinue the 2001 Plan or amend any or all awards under the
2001 Plan to the extent permitted by law and the rules of any
stock exchange on which the Corporations common stock is
listed, provided that no action may be taken if it would
materially increase any benefits under the 2001 Plan, materially
increase the number of securities which may be issued,
materially modify the requirements for eligibility, result in a
failure to comply with applicable provisions of the federal
securities or income tax laws or constitute a repricing or
reloading of the award. However, in the event of relevant
changes in the Exchange Act, the Committee, in its discretion,
may amend, suspend, or discontinue the 2001 Plan or amend any or
all awards under the 2001 Plan to the extent permitted by the
Exchange Act or the rules and regulations under the Exchange
Act. Except as provided in the 2001 Plan, no amendment,
suspension or termination of the 2001 Plan shall adversely alter
any rights granted a participant under the 2001 Plan. However,
if an amendment must be approved by the stockholders pursuant to
law or the rules of any stock exchange on which the
Corporations common stock is listed, any such proposed
amendment will be submitted to the stockholders for approval.
24
United States
Federal Income Tax Consequences of Restricted Stock and
Restricted Share Units
Under current federal tax law, the grant of a restricted stock
award has no federal income tax consequences for the participant
or the Corporation. Upon the vesting of the restricted stock,
the full value of the shares will be taxable to the participant
as ordinary income subject to applicable withholding taxes. The
participant may accelerate the taxation of the grant by electing
to include the value of the shares, at the time of the grant, in
gross income for the year in which the grant is made. The
Corporation will generally be allowed a tax deduction equal to
any ordinary income taxable to the participant upon grant or
vesting of the restricted stock.
Dividends on restricted stock awards are taxable to the
participant as ordinary income and are subject to applicable
withholding taxes. Once the restricted stock vests, or if the
participant elects to accelerate the taxation of the grant, the
dividends are treated as any other dividends. The holding period
for purposes of determining whether gain or loss is short or
long term on the sale of restricted stock commences on the date
the restricted stock vests, unless the participant has elected
to accelerate the taxation of the award, in which case the
holding period commences on the day after the grant date of the
restricted stock.
Neither the grant of a restricted share unit award nor the
crediting of the dividend shares with respect thereto will
subject the participant to any immediate tax or have any federal
income tax consequences for the Corporation. However, when the
award is paid, or the dividend equivalent is paid in cash, the
full amount of the payment will be taxable to the participant as
ordinary income subject to withholding taxes, and the
Corporation will be allowed a tax deduction equal to that amount.
United States
Federal Income Tax Consequences of Stock Options
Under current federal tax law, no taxable income will be
realized by a participant in the 2001 Plan and the Corporation
will not be entitled to any deduction upon the grant of a
Nonqualified Stock Option. Upon exercise of a Nonqualified Stock
Option, a participant will realize ordinary taxable income on
the date of exercise. Such taxable income will equal the
difference between the option price and the fair market value of
the Corporations common stock on the date of exercise. The
Corporation will be entitled to a corresponding deduction.
Upon the grant of an Incentive Stock Option, no taxable income
will be realized by a participant and the Corporation will not
be entitled to any deduction. If a participant exercises the
option, either while an employee of the Corporation or any of
its affiliated companies or at any time during the period three
months after the participant terminates employment, then
generally, no taxable income will result at the time of the
exercise of such option. If a participant holds the shares of
common stock transferred to him or her upon exercise of the
option for at least the longer of one year after the exercise of
the stock option or two years after the grant of the option, any
profit (or loss) realized by a participant from a sale or
exchange of such stock will be treated as long-term capital gain
(or capital loss), and no deduction will be allowable to the
Corporation with respect thereto. If a participant fails to hold
shares for such period of time, then the disposition generally
will result in ordinary income at the time of the disposition in
an amount equal to the lesser of (1) the gain on the sale
or (2) the difference between the option price and the fair
market value of the Corporations common stock on the date
of exercise. If the gain exceeds the difference between the
option price and the fair market value of the Corporations
common stock on the date of exercise, the excess is a short-term
or long-term capital gain depending upon how long the shares are
held prior to the sale. If the stock is sold for less than the
exercise price, failure to meet the holding period requirement
generally will result in a short-term or long-term capital loss,
again depending upon how long the shares are held prior to the
sale, equal to the difference between the exercise price and the
sale price. When a participant exercises an Incentive Stock
Option, he or she will realize an item of tax
preference for purposes of the alternative minimum
tax equal to the amount by which the fair market value of
the stock at the time of exercise exceeds the option price.
At the Committees discretion, both Incentive Stock Options
and Nonqualified Stock Options may be exercised by a participant
using shares of the Corporations common stock which he or
she previously owned; in addition, any resulting withholding tax
may be paid with common stock acquired pursuant to the
25
exercise of the options. The use of previously owned common
stock has no tax consequences to the Corporation.
The foregoing discussion on tax consequences of stock options,
restricted stock and restricted share units is not intended to
cover all tax consequences of participation in the 2001 Plan.
The tax consequences outlined above apply only with respect to
an employee whose income is subject to United States federal
income tax. Different or additional rules may apply to
individuals who are subject to income tax in a foreign
jurisdiction
and/or are
subject to state or local income tax in the United States.
Closing
Quotation
The closing quotation of the common stock of the Corporation on
February 27, 2009 was $47.11 per share.
The Board of Directors unanimously recommends a vote FOR
approval of this proposal.
Equity
Compensation Plan Information
The following table gives information about the
Corporations common stock that may be issued upon the
exercise of options, warrants, and rights under all of the
Corporations equity compensation plans as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Equity Compensation Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding
|
|
|
|
Outstanding Options,
|
|
|
Outstanding
|
|
|
Securities Reflected in
|
|
|
|
Warrants, and Rights
|
|
|
Options, Warrants,
|
|
|
Column (a))
|
|
|
|
(In millions)
|
|
|
and Rights
|
|
|
(In millions)
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by stockholders(1)
|
|
|
26.8
|
(2)
|
|
$
|
61.50
|
|
|
|
16.9
|
(3)
|
Equity compensation plans not approved by stockholders(4)
|
|
|
0.1
|
(5)(6)
|
|
$
|
58.40
|
(6)
|
|
|
0.8
|
|
Total
|
|
|
26.9
|
|
|
$
|
61.49
|
|
|
|
17.6
|
|
|
|
|
(1) |
|
Includes the 1992 Equity Participation Plan, as amended (the
1992 Plan), and the 2001 Plan. |
|
(2) |
|
Does not include 2.1 million restricted share units granted
under the 2001 Plan. Upon vesting, a share of the
Corporations common stock is issued for each restricted
share unit. |
|
(3) |
|
Includes 14.1 million shares that may be granted as
restricted stock or restricted share units under the 2001 Plan. |
|
(4) |
|
Includes the Outside Directors Compensation Plan and
certain acquired equity compensation plans. See below for
description of the Outside Directors Compensation Plan. |
|
(5) |
|
Does not include 0.1 million restricted share units granted
under the Outside Directors Compensation Plan. Upon
vesting, a share of the Corporations common stock is
issued for each restricted share unit. |
|
(6) |
|
Includes less than 9,000 options at a weighted-average exercise
price of $87.85 granted under equity compensation plans assumed
by the Corporation in connection with acquisitions to honor
existing obligations of acquired entities. The Corporation will
not make any additional grants or awards under these plans,
although the terms of one acquired deferred compensation plan
provide for issuance of a de minimis number of shares of the
Corporations common stock for reinvested dividends on
deferred amounts. |
26
Outside Directors Compensation Plan
In 2001, the Corporations Board of Directors approved the
Outside Directors Compensation Plan. A maximum of
1,000,000 shares of the Corporations common stock is
available for grant under this plan. The Board may grant awards
in the form of stock options, stock appreciation rights,
restricted stock, restricted share units, or any combination of
cash, stock options, stock appreciation rights, restricted stock
or restricted share units under this plan.
PROPOSAL 5. STOCKHOLDER
PROPOSAL REGARDING CUMULATIVE VOTING
Mr. Chris Rossi, P.O. Box 249, Boonville,
California 95415, owning 3,120 shares of our common stock,
has given notice that he or his designee intends to present for
action at the Annual Meeting the resolution set forth below. The
Board of Directors opposes this stockholder proposal for the
reasons set forth below the proposal.
Proxies solicited by management will be voted against the
stockholder proposal below unless stockholders specify a
contrary choice in their proxies.
Stockholder
Proposal
In accordance with applicable rules of the SEC, we have set
forth Mr. Rossis proposal below:
5
Cumulative Voting
RESOLVED: Cumulative Voting. Shareholders recommend that our
Board take steps necessary to adopt cumulative voting.
Cumulative voting means that each shareholder may cast as many
votes as equal to number of shares held, multiplied by the
number of directors to be elected. A shareholder may cast all
such cumulated votes for a single candidate or split votes
between multiple candidates. Under cumulative voting
shareholders can withhold votes from certain poor-performing
nominees in order to cast multiple votes for others.
Statement of
Chris Rossi
Cumulative voting won 54%-support at Aetna and greater than
51%-support at Alaska Air in 2005 and 2008. It also received
greater than 53%-support at General Motors (GM) in 2006 and
2008. The Council of Institutional Investors www.cii.org
recommended adoption of this proposal topic. CalPERS also
recommend a yes-vote for proposals on this topic.
Cumulative voting allows a significant group of shareholders to
elect a director of its choice safeguarding minority
shareholder interests and bringing independent perspectives to
Board decisions. Cumulative voting also encourages management to
maximize shareholder value by making it easier for a would-be
acquirer to gain board representation. It is not necessarily
intended that a would-be acquirer materialize, however that very
possibility represents a powerful incentive for improved
management of our company.
The merits of this Cumulative Voting proposal should also be
considered in the context of the need for improvements in our
companys corporate governance and in individual director
performance. For instance in 2008 the following governance and
performance issues were identified:
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|
The Corporate Library (TCL) www.thecorporatelibrary.com,
an independent research firm, rated our company High
Concern in executive pay.
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|
|
|
John Bergstrom served on our audit committee yet he and Mae
Jemison were designated as Accelerated Vesting
directors by The Corporate Library due to their involvement with
accelerating stock option vesting to avoid recognizing the
related expense.
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|
|
|
John Bergstrom had
21-years
director tenure Independence concern.
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27
|
|
|
|
|
Our directors held 8 board seats on boards rated D
by The Corporate Library:
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Dennis Beresford
|
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Fannie Mae (FNM)
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Dennis Beresford
|
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Legg Mason (LM)
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Craig Sullivan
|
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Mattel (MAT)
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Craig Sullivan
|
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Goodyear (GT)
|
|
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Abelardo Bru
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Office Depot (ODP)
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Thomas Falk
|
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Centex (CTX)
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Mae Jemison
|
|
Scholastic Corp. (SCHL)
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|
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Linda Johnson Rice
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Omnicom Group (OMC)
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|
|
|
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|
|
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Directors who served on D-rated boards held 6 of the
13 seats on our key board committees: Directors Beresford,
Bru, Jemison and Sullivan.
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There was no shareholder right to:
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Cumulative voting.
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|
To act by written consent.
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To call a special meeting.
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|
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An Independent Board Chairman.
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The above concerns shows there is need for improvement. Please
encourage our board to respond positively to this proposal:
Cumulative
Voting
Yes on 5
Response of the
Corporation to Stockholder Proposal
The Board of Directors unanimously recommends a vote AGAINST
this proposal for the reasons set forth below.
As with most other large companies, directors at the Corporation
are elected by giving stockholders one vote per share for each
Board seat. The Board believes this method of voting promotes
the election of a balanced and effective Board, in which each
director represents the interests of all stockholders.
The Corporation has adopted a true majority vote standard in the
election of directors in uncontested elections. A nominee in an
uncontested election who does not receive a majority of votes
cast will not be elected, and any incumbent director who is not
re-elected by a majority of votes cast must tender his or her
resignation for consideration by the Board. Majority voting for
directors in uncontested elections is broadly recognized as
providing a voice for minority stockholders in the election of
directors, while promoting the democratic election of directors
for, and corresponding accountability to, all stockholders.
Majority voting for directors has received high stockholder
support when presented in the form of a stockholder proposal.
Many supporters of majority voting do not, however, support
cumulative voting in combination with majority voting because of
the risk that the combination could be destabilizing and
imprudent. Because of these risks, the Board would consider
stockholder approval of cumulative voting to be a strong
indication of stockholders corresponding disapproval of
majority voting.
Instead of the traditional one-share, one-vote
approach currently used by the Corporation, cumulative voting
allows stockholders to pool all of their votes and vote them in
whatever proportions they choose among the director nominees. As
a result, cumulative voting creates the possibility of allowing
relatively small constituencies of stockholders to stack their
votes in favor of special interest directors,
granting these groups a voice in director elections that may be
disproportionate to their economic investment in the Corporation.
For example, if cumulative voting were implemented, a dissident
stockholder group owning approximately eight percent of the
Corporations stock could launch a proxy contest to elect a
28
nominee designated by this group. This group, with ownership of
less than ten percent, could use cumulative voting to install
its nominee on the Board, even if the nominee failed to receive
a majority of the outstanding votes. This nominee would be
elected in lieu of the candidate nominated by the Board in the
exercise of its fiduciary duties to all of the stockholders.
Directors elected by these special interests may feel obligated
to represent the groups narrow interests, rather than the
interests of all stockholders. Ultimately, this support by
directors of the special interests of the constituencies that
elected them could create partisanship and divisiveness and
impair the Boards ability to operate effectively as a
governing body, to the detriment of all stockholders.
Furthermore, the Board believes cumulative voting may interfere
with the continuing efforts of the Corporations Nominating
and Corporate Governance Committee to develop and maintain a
diverse Board comprised of individuals with the wide range of
knowledge, experience and expertise necessary to best serve the
Corporation.
In addition, the Board believes that cumulative voting is
unnecessary because the Corporation has strong corporate
governance provisions and practices in place that are responsive
to stockholder concerns:
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The Corporation has adopted a true majority voting standard in
uncontested elections of directors, as described above.
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The Board was declassified in 2007.
|
|
|
|
The Board consists of Independent Directors, other than our
Chairman and Chief Executive Officer.
|
|
|
|
The Nominating and Corporate Governance Committee, the Audit
Committee and the Management Development and Compensation
Committee consist solely of Independent Directors.
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|
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|
The Corporation maintains a confidential voting policy.
|
|
|
|
The Board has recommended that stockholders approve an amendment
to our Amended and Restated Certificate of Incorporation to
allow the holders of not less than 25 percent of the
Corporations issued and outstanding shares of capital
stock to request that a special meeting of stockholders be
called.
|
|
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|
The Corporation does not maintain superior voting rights for one
or more classes of stock.
|
|
|
|
The Corporation eliminated the supermajority voting provisions
contained in our Certificate of Incorporation in 2008.
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|
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|
Stockholders have the right to recommend nominees for
consideration by the Nominating and Corporate Governance
Committee for election to the Board, and there is consideration
of stockholder input into the nomination process through
interaction at the Corporations regularly scheduled annual
stockholder meetings.
|
Stockholders may be interested to know that stockholders did not
approve a similar cumulative voting proposal that was submitted
to them for a vote last year.
For the reasons outlined above, the Board believes that
cumulative voting is not in the best interests of the
Corporation or its stockholders.
The Board unanimously recommends that the stockholders vote
AGAINST the adoption of this proposal.
29
PART FOUR
OTHER IMPORTANT INFORMATION
SECURITY
OWNERSHIP OF MANAGEMENT
The following table sets forth information as of
December 31, 2008 regarding the number of shares of our
common stock beneficially owned by each director and nominee, by
each executive officer named in Executive
Compensation (collectively, the named executive
officers), and by all directors, nominees and executive
officers as a group.
|
|
|
|
|
|
|
Amount and Nature of
|
|
Name
|
|
Beneficial Ownership(1)(2)(3)(4)(5)
|
|
|
Robert E. Abernathy
|
|
|
698,788
|
(6)
|
John R. Alm
|
|
|
9,471
|
(7)
|
Dennis R. Beresford
|
|
|
19,787
|
(6)
|
John F. Bergstrom
|
|
|
35,960
|
(6)(8)
|
Robert W. Black
|
|
|
67,301
|
(6)
|
Abelardo E. Bru
|
|
|
6,893
|
|
Mark A. Buthman
|
|
|
400,002
|
(6)
|
Robert W. Decherd
|
|
|
51,791
|
(6)(9)
|
Thomas J. Falk
|
|
|
2,173,708
|
(6)(10)
|
Mae C. Jemison, M.D.
|
|
|
17,142
|
(6)
|
James M. Jenness
|
|
|
3,758
|
|
Anthony J. Palmer
|
|
|
39,929
|
(6)
|
Ian C. Read
|
|
|
3,382
|
|
Linda Johnson Rice
|
|
|
25,793
|
(6)(11)
|
Marc J. Shapiro
|
|
|
41,128
|
(6)
|
G. Craig Sullivan
|
|
|
10,403
|
(12)
|
All directors, nominees and executive officers as a group
(21 persons)
|
|
|
4,147,836
|
(6)(13)
|
|
|
|
(1) |
|
Except as otherwise noted, the directors, nominees and named
executive officers, and the directors, nominees and executive
officers as a group, have sole voting and investment power with
respect to the shares listed. |
|
(2) |
|
Each director, nominee and named executive officer, and all
directors, nominees and executive officers as a group own less
than one percent of the outstanding shares of our common stock. |
|
(3) |
|
A portion of the shares owned by certain executive officers and
directors may be held in margin accounts at brokerage firms.
Under the terms of the margin account agreements, stocks and
other assets held in the account may be pledged to secure margin
obligations under the account. As of the date of this proxy
statement, none of the executive officers or directors has any
outstanding margin obligations under any of these accounts. |
|
(4) |
|
For each named executive officer, share amounts include
restricted share units granted under the 2001 Plan as indicated
below. Amounts representing performance-based restricted share
units in the table below represent target levels for these
awards. See Part Four Other Important
Information Executive Compensation
Outstanding Equity Awards for additional information
regarding these grants. |
|
|
|
|
|
|
|
|
|
|
|
Time-Vested
|
|
|
Performance-Based
|
|
|
|
Restricted Share
|
|
|
Restricted Share
|
|
Name of Individual
|
|
Units(#)
|
|
|
Units(#)
|
|
|
Robert E. Abernathy
|
|
|
29,576
|
|
|
|
44,124
|
|
Robert W. Black
|
|
|
14,003
|
|
|
|
25,940
|
|
Mark A. Buthman
|
|
|
25,887
|
|
|
|
36,864
|
|
Thomas J. Falk
|
|
|
121,224
|
|
|
|
163,273
|
|
Anthony J. Palmer
|
|
|
14,810
|
|
|
|
16,097
|
|
30
|
|
|
(5) |
|
For each director who is not an officer or employee of the
Corporation or any of its subsidiaries or equity companies,
share amounts include restricted share units and shares of
restricted stock granted under our Outside Directors
Compensation Plan. These awards are restricted and may not be
transferred or sold until the Outside Director retires from or
otherwise terminates service on the Board. See footnote
(3) to the 2008 Outside Director Compensation table for the
number of shares of restricted stock and restricted share units
that the Outside Directors had outstanding as of
December 31, 2008. |
|
(6) |
|
Includes shares of common stock held by the trustee of the
Incentive Investment Plan for the benefit of, and that are
attributable to, the accounts in the plan of, the named
executive officers. Also includes the following shares which
could be acquired within 60 days of December 31, 2008
by: |
|
|
|
|
|
|
|
Number of Shares That Could be Acquired
|
|
Name of Individual
|
|
Within 60 Days of December 31, 2008
|
|
|
Robert E. Abernathy
|
|
|
500,771
|
|
Dennis R. Beresford
|
|
|
5,084
|
|
John F. Bergstrom
|
|
|
8,032
|
|
Robert W. Black
|
|
|
27,358
|
|
Mark A. Buthman
|
|
|
284,906
|
|
Robert W. Decherd
|
|
|
8,236
|
|
Thomas J. Falk
|
|
|
1,582,539
|
|
Mae C. Jemison, M.D.
|
|
|
5,084
|
|
Anthony J. Palmer
|
|
|
9,022
|
|
Linda Johnson Rice
|
|
|
7,626
|
|
Marc J. Shapiro
|
|
|
17,924
|
|
All directors, nominees and executive officers as a group
(21 persons)
|
|
|
2,823,426
|
|
|
|
|
(7) |
|
Includes 3,500 shares held by the trustee of the
supplemental 401(k) plan maintained by Mr. Alms
former employer. |
|
(8) |
|
Includes 5,000 shares held by Bergstrom Investments L.P., a
partnership of which Mr. Bergstrom and his brother are
general partners and their respective children are limited
partners, and of which Mr. Bergstrom shares voting control. |
|
(9) |
|
Voting and investment power with respect to 25,000 of the shares
is shared with Mr. Decherds spouse. |
|
(10) |
|
Includes 39,207 shares held by TKM, Ltd. and
256,145 shares held by TKM II, Ltd. TKM, Ltd. is a family
limited partnership which is owned by (i) an entity owned
by a trust, controlled by Mr. Falk and his spouse as
general partner, (ii) a trust controlled by Mr. Falk
and his spouse as limited partners, and (iii) two family
trusts previously established for the benefit of
Mr. Falks child as limited partners. TKM II, Ltd. is
a family limited partnership which is owned by (i) an
entity owned by a trust, controlled by Mr. Falk and his
spouse as general partner, and (ii) a trust controlled by
Mr. Falk and his spouse as limited partners. Mr. Falk
shares voting control over the shares held by TKM, Ltd. and TKM
II, Ltd. |
TKM, Ltd. also has the right to acquire 94,790 shares
within 60 days of December 31, 2008. These
94,790 shares are included in the 1,582,539 shares
listed for Mr. Falk in footnote (6) above
|
|
|
(11) |
|
Includes 300 shares held by a trust for the benefit of
Mrs. Johnson Rices daughter and for which
Mrs. Johnson Rice serves as a co-trustee and shares voting
and investment power. |
|
(12) |
|
Includes 2,000 shares held by a trust for the benefit of
Mr. Sullivans children and for which
Mr. Sullivan serves as the sole trustee. |
|
(13) |
|
Voting and investment power with respect to 432,934 of the
shares is shared. |
31
To further align managements financial interests with
those of the stockholders, the Corporation maintains stock
ownership guidelines for key managers, including the named
executive officers. See Part Four Other
Important Information Executive
Compensation Compensation Discussion and
Analysis Additional Compensation
Information Target Stock Ownership Guidelines.
In addition, our Corporate Governance Policies provide that,
within three years of joining the Board, all Outside Directors
should own an amount of the Corporations stock or stock
units at least equal in value to three times the annual Board
cash compensation. For the purpose of these stock ownership
guidelines, a director is deemed to own beneficially-owned
shares, as well as restricted stock and restricted share units
(whether or not any applicable restrictions have lapsed), but
not stock options (whether vested or unvested). As of
December 31, 2008, the stock ownership levels specified by
these guidelines had been met or exceeded by each of the Outside
Directors, other than Messrs. Jenness and Read, who became
directors in
2007.
32
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis is intended to provide
investors with an understanding of our compensation policies and
decisions regarding our named executive officers for 2008. Our
named executive officers are our Chief Executive Officer, Chief
Financial Officer and our three other most highly compensated
executive officers.
We will discuss and analyze the following topics in this
Compensation Discussion and Analysis:
|
|
|
|
|
|
|
|
|
Executive Summary
|
|
|
33
|
|
|
|
|
|
Executive Compensation Objectives and Policies
|
|
|
34
|
|
|
|
|
|
Elements of Executive Compensation Program
|
|
|
35
|
|
|
|
|
|
Peer Groups for Executive Compensation Purposes
|
|
|
36
|
|
|
|
|
|
Direct Annual Compensation
|
|
|
37
|
|
|
|
|
|
Process for Setting Direct Annual Compensation
|
|
|
38
|
|
|
|
|
|
Chief Executive Officer Direct Annual Compensation
|
|
|
39
|
|
|
|
|
|
Annual Cash Compensation
|
|
|
39
|
|
|
|
|
|
Base Salary
|
|
|
39
|
|
|
|
|
|
Annual Cash Incentives
|
|
|
40
|
|
|
|
|
|
Committee Assessment of 2008 Performance
|
|
|
42
|
|
|
|
|
|
Payouts for 2008
|
|
|
43
|
|
|
|
|
|
Long-Term Equity Incentive Compensation
|
|
|
43
|
|
|
|
|
|
Performance-Based Restricted Share Unit Awards
|
|
|
43
|
|
|
|
|
|
Stock Option Awards
|
|
|
44
|
|
|
|
|
|
Retirement Benefits
|
|
|
45
|
|
|
|
|
|
Other Compensation
|
|
|
45
|
|
|
|
|
|
Post-Termination Benefits
|
|
|
46
|
|
|
|
|
|
Severance Pay Plan
|
|
|
46
|
|
|
|
|
|
Executive Severance Plan
|
|
|
46
|
|
|
|
|
|
Agreement with Mr. Kalmanson
|
|
|
46
|
|
|
|
|
|
Executive Compensation for 2009
|
|
|
47
|
|
|
|
|
|
Base Salary
|
|
|
47
|
|
|
|
|
|
Annual Cash Incentives
|
|
|
47
|
|
|
|
|
|
Long-Term Equity Incentive Compensation
|
|
|
48
|
|
|
|
|
|
Additional Compensation Information
|
|
|
48
|
|
|
|
|
|
Use of Independent Compensation Consultant
|
|
|
48
|
|
|
|
|
|
Role of the Chief Executive Officer in Compensation
Decisions
|
|
|
48
|
|
|
|
|
|
Timing of Long-Term Equity Grants
|
|
|
48
|
|
|
|
|
|
Policy on Incentive Compensation Claw-back
|
|
|
49
|
|
|
|
|
|
Target Stock Ownership Guidelines
|
|
|
49
|
|
|
|
|
|
Tax Deduction for Executive Compensation
|
|
|
50
|
|
|
|
|
|
Executive Summary
The Management Development and Compensation Committee (the
Committee) authorized an executive compensation
program in 2008 that is designed to achieve our executive
compensation objectives described below. Consistent with our
pay-for-performance objective, a significant portion of the 2008
direct annual compensation targets for the named executive
officers consisted of performance-based compensation in the form
of annual cash incentives and long-term equity incentive
compensation.
In February 2008, base salaries for the named executive officers
were set based on market levels, individual performance and
experience and our salary guidelines. The Committee did not
increase Mr. Falks base salary in 2008. Base salaries
for the other named executive officers increased an average of
9.7 percent from 2007, and this increase considers some
changes in senior management duties in addition to the factors
described above.
33
In 2008, we were able to deliver continued progress in our
top-line growth strategies, while continuing to operate our
business efficiently. These advances, however, were not enough
to offset a rapid
run-up in
our commodity costs during the first half of the year, as well
as general economic weakness. As a result, adjusted earnings per
share and adjusted return on invested capital (ROIC)
were lower than planned. Consistent with our pay-for-performance
philosophy described below, the Committee determined that the
corporate performance component of the annual cash incentives
for 2008 should be below target, at 55 percent. As a
result, Mr. Falks annual incentive payout for 2008
was 55 percent of target, and after applying business unit
or staff function performance, payouts for the other named
executive officers ranged from 66 to 119 percent of target.
The annual cash incentive for Mr. Falk decreased
62 percent from 2007 and for the other named executive
officers decreased on average 38 percent from 2007. See
Committee Assessment of 2008 Performance for more
information regarding target levels and our 2008 performance.
In 2008, the Committee did not award time-vested restricted
share units to our named executive officers in order to further
emphasize the pay-for-performance aspect of this element of
direct compensation. Long-term equity incentive compensation
awards for named executive officers consisted of
performance-based restricted share units and stock options.
As part of its ongoing review of our executive compensation
program in comparison to developing trends, as well as in
response to challenging economic conditions, the Committee has
implemented several changes to our executive compensation
program in late 2008 and in 2009, including:
|
|
|
|
|
our named executive officers base salaries were not
increased for 2009,
|
|
|
|
dividend equivalents will not be paid on unvested
performance-based restricted share units granted to the named
executive officers in February 2009 and thereafter; instead,
dividend equivalents on these units will be accumulated and paid
after the performance-based restricted share units vest, based
on the actual number of shares that vest,
|
|
|
|
the adoption of a policy by the Committee in February 2009
providing that executive officers will no longer receive tax
reimbursement and a related
gross-up for
perquisites (including personal use of corporate aircraft),
except for certain relocation benefits,
|
|
|
|
the adoption of a policy by the Committee in February 2009 that
limits the personal use of corporate aircraft by the Chief
Executive Officer to an aggregate annual incremental cost to the
Corporation of $100,000, and generally prohibits the personal
use of corporate aircraft by other executive officers unless
there is no incremental cost to the Corporation for the use,
|
|
|
|
the value of the long-term incentive grants made to our named
executive officers in February 2009 was lower than in 2008 as a
result of a lower share price,
|
|
|
|
in late 2008, salary, bonus and certain other benefits payable
under our Executive Severance Plan (which provides severance
benefits to eligible employees, including our named executive
officers, in the event of a qualified termination of employment
in connection with a change in control) were reduced from three
years to two years, and
|
|
|
|
also in late 2008, the Committee amended our Severance Pay Plan,
which provides severance benefits to most of our hourly and
salaried employees (including our named executive officers), to
reflect the expiration of our Global Business Plan Severance Pay
Plan on December 31, 2008, as well as to bring the terms of
the Severance Pay Plan in line with competitive practices at our
peer group companies.
|
The Committee believes these measures to be appropriate in light
of the current economic environment while still providing a
competitive compensation package to our executive officers.
Executive Compensation Objectives and Policies
The Committee is responsible for establishing and administering
our policies governing the compensation of our elected officers,
including our named executive officers. In accordance with its
charter, the Committee has adopted executive compensation
policies that are designed to achieve the following four
objectives:
|
|
|
|
|
Pay-for-Performance. Support a
performance-oriented environment that rewards achievement of our
financial and non-financial goals and recognizes company
performance compared to the performance of our peer groups.
|
34
|
|
|
|
|
Retention. Attract and retain executives whose
abilities are considered essential to our long-term success and
competitiveness.
|
|
|
|
Focus on Long-Term Success and Stockholder
Alignment. Reward executives for long-term
strategic management and enhancement of stockholder value. Align
the long-term financial interest of our executives with those of
stockholders.
|
These compensation objectives and policies seek to align the
compensation of our elected officers, including our named
executive officers, with the objectives of our Global Business
Plan. Our Global Business Plan, which was established by our
senior management and the Board, is designed to make the
Corporation a stronger and more competitive company.
Elements of Executive Compensation Program
For 2008, the Committee authorized an executive compensation
program to effect these objectives. The following table provides
additional information regarding how the program is designed to
achieve these objectives:
|
|
|
|
|
|
|
Element
|
|
Objectives Achieved
|
|
Purpose
|
|
Target Competitive Position
|
|
Base salary
|
|
Pay-for-performance
Retention
|
|
Provide annual cash income based on:
level of responsibility, performance and experience
comparison to market pay information
|
|
Compared to median of peer groups
Actual base salary will vary based on the individuals performance and experience in the position
|
|
|
|
|
|
|
|
Annual cash incentive
|
|
Pay-for-performance
|
|
Motivate and reward achievement of the following annual performance goals:
corporate key financial goals
other corporate financial and strategic performance goals
performance of the business unit or staff function of the individual, as applicable
|
|
Target compared to median of peer groups
Actual payout will vary based on actual corporate and business unit or staff function performance
|
|
|
|
|
|
|
|
Long-term equity incentive
|
|
Stockholder alignment
Focus on long-term success
Pay-for-performance
Retention
|
|
Provide an incentive to deliver stockholder value and to achieve our long-term objectives, through awards of:
performance-based restricted share units
stock option grants
|
|
Target compared to median of peer groups
Actual payout will vary based on actual stock performance
Actual payout of performance-based restricted share units will also vary based on actual corporate performance
|
|
|
|
|
|
|
|
Retirement benefits
|
|
Retention
|
|
Provide competitive retirement plan benefits through pension
plans,
401(k) plan and other defined contribution plans
|
|
Benefits comparable to those of peer groups
|
|
|
|
|
|
|
|
Perquisites
|
|
Retention
|
|
Provide competitive benefits
|
|
Subject to review and approval by the Committee on a
case-by-case basis
|
|
|
|
|
|
|
|
Post-termination compensation (severance and change in control)
|
|
Retention
|
|
Encourage attraction and retention of executives critical to our long-term success and competitiveness:
Severance Pay Plan, which provides eligible employees with payments and benefits in the event of certain involuntary terminations
Executive Severance Plan, which provides executives payments in the event of a qualified separation of service following a change in control
|
|
Subject to review and approval by the Committee on a
case-by-case basis
|
35
When setting compensation for our executive officers, the
Committee considers direct annual compensation, which consists
of the base salary, annual cash incentive, and long-term equity
incentive compensation elements described above. While the
Committee reviews each of these compensation elements, the
Committees decisions regarding a particular element are
not necessarily impacted by other elements, other than to the
extent that they affect direct annual compensation. See
Direct Annual Compensation.
Peer Groups for Executive Compensation Purposes
To ensure that our compensation programs are reasonable and
competitive in the marketplace, the Committee compared our
programs to those at other companies. To facilitate this
comparison, in 2008 the Committee used two peer groups, the
Consumer Goods Peer Group and the General Industry Peer Group:
Consumer Goods
Peer Group
|
|
|
|
|
Anheuser-Busch Companies, Inc.
Avon Products, Inc.
Bristol-Myers Squibb Company
Campbell Soup Company
The Clorox Company
The Coca-Cola Company
Colgate-Palmolive Company
|
|
ConAgra Foods, Inc.
General Mills, Inc.
The Hershey Company
H.J. Heinz Company
Johnson & Johnson
Kellogg Company
Kraft Foods, Inc.
|
|
Newell Rubbermaid Inc.
Novartis AG
PepsiCo, Inc.
Pfizer Inc.
The Procter & Gamble Company
Sara Lee Corporation
|
General
Industry Peer Group
|
|
|
|
|
3M Company
Aetna Inc.
Alcoa Inc.
Amerada Hess Corporation
American Electric Power
Anheuser-Busch Companies, Inc.
CIGNA Corporation
Colgate-Palmolive Company
Deere & Company
E. I. du Pont de Nemours and Company
Eastman Kodak Company
Eli Lilly and Company
Emerson Electric Co.
Fluor Corporation
|
|
FedEx Corporation
General Dynamics Corporation
General Mills, Inc.
Halliburton Company
The Hartford Financial Services Group, Inc.
Honeywell International Inc.
Illinois Tool Works Inc.
International Paper Company
Johnson Controls, Inc.
Marriott International, Inc.
Masco Corporation
McDonalds Corporation
Medtronic, Inc.
|
|
NIKE, Inc.
Qwest Communications
Raytheon Company
Sara Lee Corporation
Staples, Inc.
Texas Instruments Incorporated
Textron Inc.
The Travelers Companies, Inc.
U.S. Bancorp
Union Pacific Railroad Co.
Washington Mutual, Inc.
Wyeth
Xerox Corporation
|
36
The Consumer Goods Peer Group represents companies in our
industry, while the General Industry Peer Group consists of
companies that are similar in size to us and against which we
believe we compete for executive talent. We average the results
of the two peer groups together for the purposes of establishing
comparative data. We believe that combining these groups
provides a useful view of other compensation programs, in light
of the broad range of companies with which we compete for
executive talent.
The peer groups are developed without consideration of
individual company compensation practices, and no company has
been included or excluded from our peer groups because they are
known to pay above-average or below-average compensation. We,
the Committee and compensation consultants retained by us and
the Committee also periodically review the peer groups, and the
peer groups are revised as appropriate to ensure that they
continue to represent similar global organizations with which we
compete for executive talent in the marketplace. In 2008, we
removed five companies from the Consumer Goods Peer Group as a
result of mergers and acquisitions involving these companies.
Also in 2008, we removed six companies from and added seven
companies to the General Industry Peer Group. These changes were
made to ensure that the companies in this peer group remain in a
range that is comparable with our size.
The following table sets forth comparative data regarding the
peer groups, at the time our 2008 compensation and performance
objectives were determined:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Individual
|
|
|
|
Median Annual Revenue
|
|
|
Company Revenues
|
|
|
Consumer Goods Peer Group
|
|
$
|
12.4 billion
|
|
|
$
|
4.8 billion to $76.5 billion
|
|
General Industry Peer Group
|
|
$
|
18.6 billion
|
|
|
$
|
11.5 billion to $35.2 billion
|
|
Our net sales for 2007 were $18.3 billion.
Direct Annual Compensation
In setting 2008 compensation for our executive officers,
including our Chief Executive Officer, the Committee focused on
direct annual compensation, which consists of annual cash
compensation (base salary and annual cash incentive) and
long-term equity incentive compensation (performance-based
restricted share units and stock options). The Committee
considers annual cash and long-term equity incentive
compensation both separately and as a package to help ensure
that our executive compensation objectives are met.
Consistent with its approach to direct annual compensation, the
Committee established 2008 direct annual compensation targets
for each of our named executive officers. These target amounts
formed the basis for the Committees compensation decisions
in 2008, and the Committee believes that the 2008 target amounts
it established were appropriate and consistent with our
executive compensation objectives. For 2008, the direct annual
compensation targets for our named executive officers were as
follows:
|
|
|
|
|
|
|
2008 Direct Annual
|
|
Name
|
|
Compensation Target
|
|
|
Thomas J. Falk
|
|
$
|
10,940,000
|
|
Mark A. Buthman
|
|
$
|
3,121,000
|
|
Robert E. Abernathy
|
|
$
|
3,456,300
|
|
Robert W. Black
|
|
$
|
2,536,000
|
|
Anthony J. Palmer
|
|
$
|
2,025,000
|
|
As described in more detail below, there is a significant
performance-based compensation component included in these
direct annual compensation targets. Therefore, our results and
our stock price performance have a significant impact on the
value realized. For example, although we expect our results and
stock price to improve in future years, the value of this direct
compensation package as of December 31, 2008 for
Mr. Falk was 74 percent less than the above direct
annual compensation target and
37
for the other named executive officers was, on average,
60 percent less than these targets. These percentages are
based on the base salary set for 2008, the actual annual cash
incentive payment made for 2008, the value of stock options
granted in 2008 (based on the closing price of our common stock
on December 31, 2008) and the value of
performance-based restricted share units granted in 2008 (based
on the closing price of our common stock on December 31,
2008 and a 15 percent vesting rate as described in
Long-Term Equity Incentive Compensation
Performance-Based Restricted Share Units).
The 2008 direct annual compensation target amounts differ from
the amounts set forth in the Summary Compensation Table because:
|
|
|
|
|
Base salaries are adjusted on April 1 of each year while the
Summary Compensation Table includes salaries for the calendar
year.
|
|
|
|
Annual cash incentive compensation is included at the target
level, while the Summary Compensation Table reflects the actual
amount earned for 2008.
|
|
|
|
Annual stock awards are valued at full grant date value instead
of the amount required to be included in the Summary
Compensation Table.
|
|
|
|
As described under Long-Term Equity Incentive
Compensation Stock Option Awards, for
compensation purposes the Committee values stock options
differently than the way they are required to be reflected in
the Summary Compensation Table.
|
|
|
|
In setting direct annual compensation targets, the Committee
does not include increases in pension or deferred compensation
earnings or other compensation, while those amounts are required
to be included in the Summary Compensation Table.
|
As shown in the following charts, performance-based compensation
(annual cash incentive, performance-based restricted share units
and stock options) constituted a significant portion of our
named executive officers direct annual compensation
targets. Similarly, a large percentage of the direct
compensation targets was in the form of equity
(performance-based restricted share units and stock options).
|
|
|
|
|
|
|
|
|
|
Process for Setting Direct Annual
Compensation. In setting the direct annual
compensation of our executive officers, the Committee evaluates
both market data provided by the compensation consultants and
information on the performance of each executive officer for
prior years. In order to remain competitive in the marketplace
for executive talent, the target levels for the executive
officers compensation elements, including our Chief
Executive Officer, are compared to the median of the peer groups
described above. In order to reinforce a
pay-for-performance culture, targets for individual
executive officers may be set
38
above or below this median depending on the individuals
performance in prior years and experience in the position, as
well as any applicable retention concerns. The Committee
believes that comparing target levels to the median, setting
targets as described above, and providing incentive compensation
opportunities that will enable executives to earn above target
compensation if they deliver above-target performance on these
goals, are consistent with the objectives of our compensation
policies. In particular, the Committee believes that this
approach enables us to attract and retain skilled and talented
executives to guide and lead our businesses and supports a
pay-for-performance culture.
In setting compensation for executive officers who join us from
other companies, the Committee evaluates both market data for
the position to be filled as well as the officer
candidates compensation history at other companies. The
Committee recognizes that, in order to successfully recruit
candidates to leave their current position and to join us, the
candidates compensation package will likely have to exceed
their current compensation and may put an executives
compensation above the median of the peer groups.
Chief Executive Officer Direct Annual
Compensation. Mr. Falks direct annual
compensation is determined by the Committee in the same manner
as the direct annual compensation of the other named executive
officers, based on the policies and process described above.
Mr. Falks direct annual compensation is at or near
the median of direct compensation for chief executive officers
of companies included in the peer group comparison with
comparable levels of responsibilities.
The difference between Mr. Falks compensation and
that of the other named executive officers reflects the
significant difference in their relative responsibilities.
Mr. Falks responsibilities for management and
oversight of a global enterprise are significantly higher than
those of the other executive officers. A contributing factor in
the disparity of responsibilities is that the Corporations
organizational structure does not include a Chief Operating
Officer. As a result, the market pay level for Mr. Falk is
substantially higher than the market pay for other officer
positions.
Annual Cash Compensation
In order to attract and retain high caliber executives, we pay
our executives an annual cash amount that is considered by the
Committee to be competitive in the marketplace. The cash
compensation is divided between base salary and an annual cash
incentive payment.
Base Salary. Salary ranges and individual
salaries for executive officers are reviewed annually, and
salary adjustments are generally effective on April 1 of each
year. In determining individual salaries, the Committee
considers the market levels of similar positions at our peer
group companies, the individual executives performance and
experience in the position, and our salary increase guidelines.
These guidelines permitted annual salary increases from zero to
ten percent, depending on the executives individual
performance during the prior year against results-based
objectives established at the beginning of each year, and the
executives leadership performance as measured against the
following six leadership attributes:
|
|
|
|
|
visionary
|
|
|
|
inspirational
|
|
|
|
innovative
|
|
|
|
decisive
|
|
|
|
collaborative
|
|
|
|
building talent
|
In addition, executives and other employees may receive an
additional increase if warranted because of promotion, retention
concerns, or market conditions. In general, an experienced
executive who is performing at a satisfactory level will receive
a base salary at or around the median of our peer group
companies. Executives may be paid above or below the median
depending on their experience and performance.
39
In 2008, the Committee did not increase Mr. Falks
base salary, based on the Committees determination that
Mr. Falks base salary was at or near the median of
our peer group companies.
As a result of Steven R. Kalmansons retirement in 2008,
Mr. Abernathy was appointed Group President
North Atlantic Consumer Products, and Mr. Black replaced
Mr. Abernathy as Group President Developing and
Emerging Markets. The Committee considered these changes in
duties, as well as the other factors described above, when
approving the base salaries for Messrs. Abernathy and
Black. The Committee approved base salary increases for the
remaining named executive officers as a result of the process
described above.
The base salaries paid to our named executive officers in 2008
can be found in the Summary Compensation Table.
Annual Cash Incentives. Consistent with our
compensation objective to support a performance-oriented
environment, our executive compensation program includes an
annual cash incentive program to motivate and reward executives
in achieving our annual financial performance objectives.
The target level for these annual payments is a percentage of
the executives base salary, and that percentage is
compared to the median of the peer group comparison described
above and is set as described under Direct Annual
Compensation. In 2008, to enhance the alignment of the
target level of the annual cash incentive payments with our peer
groups, this target payment percentage was increased from
120 percent to 140 percent of base salary for
Mr. Falk and from 80 percent to 85 percent of
base salary for the other named executive officers. The range of
possible payouts is expressed as a percentage of the target
level and was determined based on competitive factors and the
goal of encouraging a performance-oriented environment. The
target payment amounts and range of possible payouts for 2008
were as follows:
|
|
|
|
|
|
|
Target Payment Amount
|
|
Possible Payout
|
|
Chief Executive Officer
|
|
140% of base salary
|
|
0% - 228% of
target payment amount
|
Other Named Executive Officers
|
|
85% of base salary
|
|
0% - 228% of
target payment amount
|
Under the program, a significant percentage of the annual cash
incentive is dependent on performance measured against corporate
goals and business unit or staff function goals established by
the Committee at the beginning of each year. These performance
goals, which are communicated to our executives at the beginning
of each year, are derived from the financial and strategic goals
stated in our Global Business Plan. These performance goals and
target levels represent an exercise of discretion by the
Committee under this program to limit the amount of the
incentive payments. Under the program, in the absence of this
exercise of discretion, each of the executives would be entitled
to an award equal to 0.3 percent of the Corporations
adjusted earnings.
For 2008, the Committee established the following performance
goals and relative weights for our named executive officers:
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J.
|
|
|
Mark A.
|
|
|
Robert E.
|
|
|
Robert W.
|
|
|
Anthony J.
|
|
|
|
Falk
|
|
|
Buthman
|
|
|
Abernathy
|
|
|
Black
|
|
|
Palmer
|
|
|
Corporate performance
|
|
|
100
|
%
|
|
|
70
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
70
|
%
|
Performance of business unit or staff function
|
|
|
|
|
|
|
30
|
|
|
|
50
|
|
|
|
50
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Corporate performance consists of (i) corporate key
financial goals and (ii) other corporate financial and
strategic performance goals, with these components weighted
70 percent and 30 percent, respectively.
40
The Committee has established these allocations to strike an
appropriate balance between aligning the executives with our
overall corporate objectives and with individual performance
accountability for each executives area of responsibility.
Each year, the Committee determines the appropriate split
between corporate and business unit or staff function
performance goals based on its assessment of the appropriate
balance.
|
|
|
|
|
Corporate key financial goals
|
|
|
|
|
|
Adjusted EPS. Adjusted EPS consists of diluted
net income per share that is then adjusted to eliminate the
effect of items or events that the Committee determines in its
discretion should be excluded for compensation purposes. In
2008, the following adjustments were made to diluted net income
per share to determine adjusted EPS:
|
|
|
|
|
|
Diluted Net Income Per Share
|
|
$
|
4.04
|
|
Adjustments for:
|
|
|
|
|
Add Charges for Strategic Cost Reduction Plan
|
|
|
0.09
|
|
Add Extraordinary loss related to consolidation of
financing entities
|
|
|
0.02
|
|
Subtract Rounding
|
|
|
(0.01
|
)
|
|
|
|
|
|
Adjusted EPS
|
|
$
|
4.14
|
|
|
|
|
|
|
Net Sales. Net sales are a key indicator of
our overall growth and creates an incentive to seek an
increasing role in the markets in which we compete.
|
|
|
|
Adjusted ROIC. After adjusted EPS and net
sales are determined as described above, a multiplier based on
adjusted return on invested capital is applied to the result to
determine the payout percentage. ROIC is a measure of the return
we earn on the capital invested in our businesses. Adjusted ROIC
measures our efficiency in allocating our capital and creates an
incentive to maximize returns on our capital. For purposes of
determining annual cash incentive amounts, we calculate adjusted
ROIC using our reported financial results, adjusted for the same
items described above in determining adjusted EPS. In addition,
certain notes receivable related to financing entities that were
required to be consolidated in 2008 as a result of a required
accounting change are excluded when determining adjusted ROIC.
The formula we use to calculate ROIC can be accessed under the
Investors section of our website at www.kimberly-clark.com.
|
|
|
|
|
|
Other corporate financial and strategic performance
goals. The Committee also established other corporate
financial and non-financial strategic performance goals that are
intended to challenge our executives and to incentivize them to
stretch to exceed our long-term objectives. These goals,
intended to further align compensation with achieving the goals
of our Global Business Plan, included:
|
|
|
|
|
|
Net sales growth in certain consumer products markets and
businesses.
|
|
|
|
Net sales growth in certain consumer products markets outside
the United States.
|
|
|
|
Net sales growth in certain markets of our healthcare business.
|
|
|
|
Sales growth in our professional-workplace businesses.
|
|
|
|
Achieving benefits anticipated from competitive improvement
initiatives and cost savings and productivity programs.
|
|
|
|
Improvement in primary working capital.
|
|
|
|
Margin-enhancing innovation measured by gross margin improvement
in certain replacement products and incremental net sales growth.
|
|
|
|
Brand equity improvement in certain brands.
|
41
Actual performance in these areas is reviewed following the end
of the year, and the Committee determines a payout percentage
based on its assessment of the degree to which these goals are
achieved.
|
|
|
|
|
Performance of business unit or staff
function. Our Chief Executive Officer establishes
individual business unit or staff function performance goals
that are intended to challenge the executives to exceed the
objectives for that business unit or staff function. Following
the end of the year, the executives performance is
analyzed to determine whether performance for the goals was
above target, on target or below target. Following a
recommendation from our Chief Executive Officer, the Committee
then determines a payout percentage for the executive based on
this performance assessment.
|
From 2004 through 2008, the average payout for corporate goals
(the combination of corporate key financial goals and other
corporate financial and strategic performance goals) has been
119 percent. During this period, we achieved performance in
excess of the target level twice and below the target level
three times, and did not achieve the maximum performance level
in any of these years. From 2005 through 2008 (the period for
which business unit or staff function performance has been
included in the determination of annual cash incentive
payments), total payout percentages (including business unit or
staff function performance) for the current named executive
officers ranged from 55 percent to 187 percent of the
participants target award opportunity, with an average
approximate payout percentage over the past four years of
110 percent of the target award opportunity. Generally, the
Committee seeks to set the minimum, target, and maximum levels
such that the relative difficulty of achieving the target level
is consistent from year to year.
Committee
Assessment of 2008 Performance.
|
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|
|
|
Corporate key financial goals. In 2008, the
key financial goals at the corporate level, the potential
payouts for achieving these goals, and the actual 2008 results
as determined by the Committee were as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Payout as a Percentage of Target
|
|
|
|
|
|
0%
|
|
|
100%
|
|
|
200%
|
|
|
Actual
|
|
Adjusted EPS
|
|
$
|
4.25
|
|
|
$
|
4.50
|
|
|
$
|
4.75
|
|
|
$ 4.14
|
Net Sales (billions)
|
|
$
|
18.30
|
|
|
$
|
19.30
|
|
|
$
|
20.30
|
|
|
$ 19.42
|
|
|
|
0.8 x
|
|
|
|
1.0 x
|
|
|
|
1.2 x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted ROIC multiplier (basis point (bps) improvement)
|
|
|
0 bps
|
|
|
|
10 bps
|
|
|
|
40 bps
|
|
|
(110) bps
|
Based on these results, the Committee determined that the payout
percentage for achieving the key financial goals should be
44 percent of target.
|
|
|
|
|
Other corporate financial and strategic performance
goals. The Committee also assessed performance
against the other financial and strategic performance goals
established at the beginning of 2008. Regarding these goals, the
Committee determined that many were successfully achieved, and
that some progress was made on the remaining goals. On balance,
the Committee determined that the payout percentage for
achieving these other financial and strategic goals should be
80 percent of target.
|
|
|
|
Performance of business unit or staff
function. Our Chief Executive Officer provides
the Committee with an assessment of each individual business
units or staff functions performance against the
objectives for that business unit or staff function. Based on
performance of the business unit or staff function, the
Committee determined payout percentages for business unit or
staff function performance that, for our named executive
officers, ranged from 77 percent to 183 percent of
target.
|
42
Payouts for 2008. The following table
summarizes the payout opportunities and shows the actual payout
of annual cash incentives for 2008 for our named executive
officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
Annual
|
|
|
2008 Annual
|
|
|
|
Incentive Target
|
|
|
Incentive Maximum
|
|
|
Incentive Payout
|
|
|
|
% of Base
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Salary
|
|
|
Amount($)
|
|
|
Target
|
|
|
Amount($)
|
|
|
Target
|
|
|
Amount($)
|
|
|
Thomas J. Falk
|
|
|
140
|
%
|
|
|
1,714,994
|
|
|
|
228.0
|
%
|
|
|
3,910,187
|
|
|
|
55
|
%
|
|
|
943,247
|
|
Mark A. Buthman
|
|
|
85
|
%
|
|
|
561,000
|
|
|
|
219.6
|
%
|
|
|
1,231,956
|
|
|
|
66
|
%
|
|
|
370,260
|
|
Robert E. Abernathy
|
|
|
85
|
%
|
|
|
531,250
|
|
|
|
228.0
|
%
|
|
|
1,211,250
|
|
|
|
66
|
%
|
|
|
349,745
|
|
Robert W. Black
|
|
|
85
|
%
|
|
|
476,000
|
|
|
|
228.0
|
%
|
|
|
1,085,280
|
|
|
|
119
|
%
|
|
|
565,581
|
|
Anthony J. Palmer
|
|
|
85
|
%
|
|
|
425,000
|
|
|
|
219.6
|
%
|
|
|
933,300
|
|
|
|
67
|
%
|
|
|
284,750
|
|
Due to the change in his duties in March 2008, the payout of the
annual cash incentive for 2008 for Mr. Abernathy was
pro-rated to take into account the change in business unit
responsibilities.
The cash incentive payments were paid to the executives in
February 2009 and are included in the Summary Compensation Table.
Long-Term Equity
Incentive Compensation
The Committee awards long-term equity incentive grants to
executive officers as part of their overall compensation
package. These awards are consistent with the Committees
objectives of aligning our senior leaders with the financial
interests of our stockholders, focusing on our long-term
success, supporting our performance-oriented environment, and
offering competitive compensation packages. When determining the
amount of long-term equity incentive plan awards to be granted
to executives, the Committee considered the following factors,
among others: the specific responsibilities and performance of
the executive, our business performance, our stock price
performance and other market factors. The 2008 long-term equity
incentive awards were granted in April 2008 based on an
assessment of those factors at that time. Because these awards
are part of our annual compensation program that compares direct
annual compensation to the median of our peer group comparison,
adjusted as described under Direct Annual
Compensation, grants from prior years were not considered
when setting 2008 targets or granting awards.
For 2008, the Committee set the long-term equity incentive
compensation grant value for each executive based on the goal of
first comparing direct annual compensation to the median of the
peer groups, adjusted as described under Direct Annual
Compensation and to reflect the performance of the
executive officer. This grant value was then divided into
grants, described in more detail below, consisting of:
|
|
|
|
|
Performance-based restricted share units, and
|
|
|
|
Stock options.
|
In previous years, named executive officers also received grants
of time-vested restricted share units as part of their long-term
equity incentive compensation grant. In order to further
emphasize the pay-for-performance aspect of this element of
direct compensation, time-vested restricted share units were not
awarded in 2008.
Performance-Based Restricted Share Unit
Awards. In 2008, executives received awards of
performance-based restricted share units with a value equal to
two-thirds of the target grant date value for long-term equity
incentive compensation. For this purpose, performance-based
restricted share units are valued on the basis that one unit has
the same value as one share of our common stock on the date of
grant.
For the performance-based restricted share unit awards granted
in 2008, the actual number of shares to be received by the
executives will range from zero to 150 percent of the
target levels established by the Committee for each executive,
depending on the degree to which the performance objectives are
met. The
43
performance objectives for the 2008 awards are based on average
net sales growth and the average adjusted ROIC for the period
January 1, 2008 through December 31, 2010, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relative
|
|
|
Potential Payout as a Percentage of Target
|
|
Goal
|
|
Weight
|
|
|
0%
|
|
|
50%
|
|
|
100%
|
|
|
150%
|
|
|
Net Sales Growth
|
|
|
50
|
%
|
|
|
1.00
|
%
|
|
|
3.00
|
%
|
|
|
5.00
|
%
|
|
|
7.00
|
%
|
Adjusted ROIC
|
|
|
50
|
%
|
|
|
15.20
|
%
|
|
|
15.35
|
%
|
|
|
15.50
|
%
|
|
|
15.65
|
%
|
For the 2008 awards, adjusted ROIC is calculated in the same
manner as described above for purposes of determining annual
cash incentive amounts.
The performance objectives attempt to balance our Global
Business Plan objectives, including annual net sales growth of
three to five percent and average adjusted ROIC improvement of
40 to 50 basis points per year during this period, peer
group performance and our past and future performance.
Information regarding restricted share unit awards granted to
our named executive officers can be found under Summary
Compensation Table, Grants of Plan-Based
Awards, and Discussion of Summary Compensation and
Plan-Based Awards Tables.
In April 2008, the Committee reviewed the results of the 2005
through 2007 performance period for the performance-based
restricted share units granted in 2005. Based on this review,
the Committee determined that the Corporations adjusted
ROIC for this period had exceeded the target and approached the
maximum, resulting in a payout percentage of 140 percent.
The following chart includes information about the opportunities
and payouts regarding this grant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 - 2007 Performance-Based
|
|
|
|
|
|
|
|
|
|
Restricted Share Unit Award
|
|
|
|
|
|
|
Maximum
|
|
|
(Paid in April 2008)
|
|
|
|
Target Amount
|
|
|
Amount of
|
|
|
% of
|
|
|
Amount of
|
|
|
|
of Shares(#)
|
|
|
Shares(#)
|
|
|
Target
|
|
|
Shares(#)
|
|
|
Thomas J. Falk
|
|
|
41,944
|
|
|
|
62,916
|
|
|
|
140
|
%
|
|
|
58,722
|
|
Mark A. Buthman
|
|
|
9,201
|
|
|
|
13,802
|
|
|
|
140
|
%
|
|
|
12,881
|
|
Robert E. Abernathy
|
|
|
9,471
|
|
|
|
14,207
|
|
|
|
140
|
%
|
|
|
13,259
|
|
Robert W. Black
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony J. Palmer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
When these grants were made in 2005, Messrs. Black and
Palmer were not employed by the Corporation. The shares
underlying this performance-based restricted share unit award
were distributed to the executives in April 2008 and are
included in the Option Exercises and Stock Vested in 2008 table.
As of February 10, 2009, the performance-based restricted
share units granted in 2008, 2007 and 2006 were on pace to vest
at the following levels: 15 percent for the 2008 award,
10 percent for the 2007 award, and 30 percent for the
2006 award.
Stock Option Awards. In 2008, executive
officers also received awards of stock options with a value
equal to one-third of the target grant date value for long-term
equity incentive compensation. For this purpose, stock options
are valued on the basis that one option has the same value as
20 percent of the price of one share of the
Corporations common stock on the date of grant. The value
we use for this purpose differs from, and in 2008 was higher
than, the value we use for financial statement purposes. The
Committee believes that this value is an appropriate way to
determine the number of options to be granted under the 2001
Plan because it provides more consistent application and is not
subject to the volatility inherent in the Black-Scholes-Merton
valuation method used for financial statement purposes. This
value was reduced from 25 percent to 20 percent in
2008, as a result of reduced volatility in the
Corporations stock price. Information regarding stock
options granted to our named executive officers can be found
under Summary Compensation Table, Grants of
Plan-Based Awards, and Discussion of Summary
Compensation and Plan-Based Awards Tables.
44
Retirement
Benefits
In addition to cash and long-term equity incentive compensation,
we maintain a funded, tax-qualified, non-contributing defined
benefit pension plan for employees, including named executive
officers, who joined the Corporation before January 1,
1997. We also maintain supplemental pension plans that provide
benefits to the participants in the pension plan as are
necessary to fulfill the intent of our pension plan without
regard to the limitations imposed by the Internal Revenue Code
on qualified pension plans. For a more detailed explanation of
our pension plans, and the present value of the accumulated
benefits of our named executive officers, see Pension
Benefits.
For employees who joined the Corporation on or after
January 1, 1997, or for those employees who elected to opt
out of continuing service accruals in our pension plans, we
maintain an additional tax-qualified defined contribution plan
(the Retirement Contribution Plan). In addition, we maintain the
Retirement Contribution Excess Benefit Program (the
supplemental Retirement Contribution Program), which
is a nonqualified defined contribution plan that is intended to
provide benefits to the extent necessary to fulfill the intent
of the Retirement Contribution Plan without regard to the
limitations imposed by the Internal Revenue Code. For a more
detailed explanation of the Retirement Contribution Plan and
supplemental Retirement Contribution Program, and the current
balance of amounts contributed on behalf of our named executive
officers who participate in these plans, see Nonqualified
Deferred Compensation.
We also maintain a tax-qualified defined contribution plan (the
Incentive Investment Plan), which is a 401(k) plan that covers
eligible employees, including our named executive officers. For
more information, see Nonqualified Deferred
Compensation Overview of Qualified and Non-Qualified
Plans.
The Committee believes that the retirement benefit and
contribution plans described above are important parts of our
compensation program. These plans are consistent with those
maintained by our peer group companies and are therefore
necessary in order to remain competitive with them for
recruiting and retaining executive talent. Additionally, these
plans help encourage retention of our senior executives because
their retirement benefits under these plans generally increase
for each year they remain employed by us.
Other
Compensation
We provide our executive officers with perquisites, including
personal financial planning services provided by an independent
firm, an executive health screening program where executives may
receive comprehensive physical examinations from an independent
health care provider, and personal use of corporate aircraft.
The personal financial planning program is designed to provide
executives with access to knowledgeable resources that
understand our compensation and benefit plans and can assist our
executives in efficiently and effectively managing their
financial and tax planning issues. Our Chief Executive Officer
no longer receives personal financial planning services pursuant
to this program. The executive health screening program provides
executives with additional services that help maintain their
overall health. We encourage our executives to take advantage of
this service.
The Board of Directors has approved an executive security
program for our Chief Executive Officer. Under this program, our
Chief Executive Officer is required to use our corporate
aircraft for all business and personal travel, and security
services are provided for him at all times, including at his
office, other company locations and his residences.
Periodically, a security assessment is conducted by an
independent security consultant, and the program is reviewed by
the Board, to ensure that security measures provided by us are
appropriate. The Board considers these security arrangements to
be appropriate and reasonable in light of the security risks
identified in the independent security assessment. In addition,
if a corporate aircraft is already scheduled for business
purposes and can accommodate additional passengers, executive
officers and their guests may, under certain circumstances, join
flights for personal travel. The incremental cost to us of
providing security services at Mr. Falks residences,
personal travel for our named executive officers and their
guests on our corporate aircraft, and any related tax
reimbursements and
gross-ups is
included in All Other Compensation in the Summary
Compensation
45
Table. In February 2009, the Committee adopted a policy that
limits the personal use of corporate aircraft by the Chief
Executive Officer to an aggregate annual incremental cost to the
Corporation of $100,000, and generally prohibits the personal
use of corporate aircraft by other executive officers unless
there is no incremental cost to the Corporation for the use. In
addition, the Committee adopted a policy in February 2009
providing that executive officers will no longer receive tax
reimbursement and a related
gross-up for
perquisites (including personal use of corporate aircraft),
except for certain relocation benefits.
In general, these perquisites made up less than three percent of
total compensation for our named executive officers in 2008.
Post-Termination
Benefits
We maintain several severance plans for our executive officers,
depending on the circumstances that resulted in their
termination. Benefits under these plans are payable only if the
executives employment terminates as specified in the
applicable severance plan. An executive officer may not receive
severance under more than one severance plan. We believe that
our severance plans are consistent with those maintained by our
peer group companies and that they are therefore important for
attracting and retaining executives who are critical to our
long-term success and competitiveness. For more information
about these severance plans and their terms, see Potential
Payments on Termination or Change in Control
Severance Benefits.
Severance Pay Plan. Our Severance Pay Plan
provides severance benefits to most of our hourly and salaried
employees, including our named executive officers, who are
involuntarily terminated under the circumstances described in
the plan. The objective of this plan is to facilitate the
employees transition to his or her next position, and it
is not intended to serve as a reward for the employees
past service. Following a review of benchmarking of competitive
practices at peer group companies, the Committee approved an
amendment to this plan, effective January 1, 2009, to
reflect the expiration of the Global Business Plan Severance Pay
Plan on December 31, 2008 and to bring the terms of the
Severance Pay Plan in line with competitive practices at our
peer group companies. See Potential Payments on
Termination or Change in Control Severance
Benefits.
Executive Severance Plan. Our Executive
Severance Plan provides severance benefits to eligible
employees, including our named executive officers, in the event
of a qualified termination of employment (as defined in the
plan) in connection with a change in control. For an eligible
employee to receive a payment under this plan, both a change in
control must occur and the employees employment must be
terminated (often referred to as a double trigger).
In 2008, the Committee benchmarked practices at peer group
companies. Following this review, the Committee revised the plan
in November 2008 to reduce the severance benefits payable in
connection with a change in control. In particular, the amounts
of salary, bonus and certain other benefits payable to the named
executive officers have been reduced from three years to two
years under the amended plan, as follows:
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the multiple of annual base salary and the target bonus award
was reduced to two times these amounts from three times;
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the value of additional benefit accruals or contributions under
the pension plan, Retirement Contribution Plan and their related
supplemental plans was reduced to two years from three
years; and
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the amount of COBRA premiums for medical and dental coverage was
reduced to two years from three years.
|
Each of the named executive officers entered into new agreements
under the revised plan that expire on December 31, 2011.
Agreement with Mr. Kalmanson. On
March 17, 2008, we entered into an agreement with Steven R.
Kalmanson, formerly Group President North Atlantic
Consumer Products, under which he agreed to
46
serve as an Executive Vice President from April 1, 2008
until December 31, 2008. In this new role, he worked full
time through June 30, 2008 and received a reduced salary
from July 1, 2008 through December 31, 2008. On
July 1, 2008, his base salary was reduced by
50 percent to reflect his reduced responsibilities at that
time. In addition, he was eligible for a pro-rated portion of
any 2008 annual cash incentive award he would otherwise have
been provided under the terms of that program.
Upon his retirement, Mr. Kalmanson became eligible for
severance benefits under our Global Business Plan Severance Pay
Plan. In accordance with the terms of this plan, he elected to
receive an unreduced pension benefit plus $10,000 in lieu of the
other severance benefits provided in that plan. In addition, we
will pay for the first six months of medical benefits under
COBRA. For more information regarding the Global Business Plan
Severance Pay Plan, see Potential Payments on Termination
or Change in Control Severance Benefits.
Mr. Kalmanson has agreed to remain available to consult
with us for two years following his retirement and will be paid
a total fee of $400,000 over this consulting period. During this
time, he is prohibited from competing against us or soliciting
our employees to work for a competitor. He has also agreed that
he will not disclose our confidential information or disparage
us. In addition, the agreement provides for his release of us
from legal claims.
Executive
Compensation for 2009
Base Salary. In February 2009, the Committee
approved the following base salaries for our named executive
officers, effective on April 1, 2009:
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|
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Name
|
|
Base Salary($)
|
|
Thomas J. Falk
|
|
|
1,225,000
|
|
Mark A. Buthman
|
|
|
660,000
|
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Robert E. Abernathy
|
|
|
625,000
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Robert W. Black
|
|
|
560,000
|
|
Anthony J. Palmer
|
|
|
500,000
|
|
For Mr. Falk, this base salary has not changed since
April 1, 2007. For the remaining named executive officers,
these base salaries are unchanged from April 1, 2008.
Annual Cash Incentives. In February 2009, the
Committee also established objectives for 2009 annual cash
incentives payable in 2010 to our executive officers. Depending
on actual performance in 2009 against the financial and
non-financial goals, 2009 incentive payments could range from
zero to 200 percent of the named executive officers
target payments.
As discussed in Annual Cash Compensation
Annual Cash Incentives above, the Committee sets the
appropriate split among corporate key financial goals, other
corporate financial and strategic performance goals, and
business unit or staff function objectives each year.
Incentive payments for 2009 will be based on the
Committees judgment regarding our corporate and the
executive officers performance in 2009 against those
objectives. The corporate key financial goals for 2009 are
designed to permit a continued focus on executing our long-term
Global Business Plan objectives and include achieving adjusted
earnings per share, net sales and adjusted ROIC goals.
The Committee also established other corporate financial and
non-financial goals for 2009. These goals, intended to further
align compensation with achieving our Global Business Plan,
include:
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Consolidated cash provided by operations.
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Consolidated gross margin improvement.
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Cost savings efforts and working capital improvement.
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Driving margin-enhancing innovation.
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Brand equity attribute improvement in key categories and markets.
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Diversity and inclusion efforts.
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47
In addition, goals have been established for each named
executive officer, other than our Chief Executive Officer,
relating to his or her specific staff function or business unit.
Long-Term Equity Incentive Compensation. The
Committee granted performance-based restricted share units to
our named executive officers in February 2009. The performance
objectives for the performance-based restricted share unit
awards granted in 2009 are based on average net sales growth and
the average adjusted ROIC for the period January 1, 2009
through December 31, 2011. The actual number of shares to
be received by the executives will range from zero to
200 percent of the target levels established by the
Committee for each executive, depending on the degree to which
the performance objectives are met. See Summary
Compensation Table, Grants of Plan-Based
Awards and Discussion of Summary Compensation and
Plan-Based Awards Tables.
Dividend equivalents will not be paid on unvested
performance-based restricted share units granted to the named
executive officers in February 2009 and thereafter; instead,
dividend equivalents on these units will be accumulated and paid
after the performance-based restricted share units vest, based
on the actual number of shares that vest.
Information regarding the performance-based restricted share
unit awards granted on February 26, 2009 to our named
executive officers is set forth below.
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Performance-Based
|
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|
|
Restricted Share Units
|
|
|
|
Target Amount
|
|
|
Maximum Amount
|
|
|
|
of Shares (#)
|
|
|
of Shares (#)
|
|
|
Thomas J. Falk
|
|
|
85,727
|
|
|
|
171,454
|
|
Mark A. Buthman
|
|
|
20,360
|
|
|
|
40,720
|
|
Robert E. Abernathy
|
|
|
27,147
|
|
|
|
54,294
|
|
Robert W. Black
|
|
|
16,074
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|
|
|
32,148
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|
Anthony J. Palmer
|
|
|
11,787
|
|
|
|
23,574
|
|
Additional
Compensation Information
Use of Independent Compensation Consultant. As
previously discussed, the Committee engaged The Delves Group as
its independent consultant to assist it in determining the
appropriate executive officer compensation in 2008 pursuant to
our compensation policies described above. The Delves Group had
no other business relationship with the Corporation and received
no payments from us other than fees for services to the
Committee. See Part Two Corporate
Governance Information Management Development and
Compensation Committee for information about the use of
compensation consultants.
Role of the Chief Executive Officer in Compensation
Decisions. Our Chief Executive Officer makes a
recommendation to the Committee each year on the appropriate
target direct annual compensation to be paid to our executive
officers, excluding himself. The Committee makes the final
determination of the target direct annual compensation to be
awarded to each executive officer, including our Chief Executive
Officer, based on the Committees determination of how that
compensation will aid in achieving the objectives of our
compensation policies. While our Chief Executive Officer and
Chief Human Resources Officer typically attend Committee
meetings, none of the other executive officers is present during
the portion of the Committees meetings when compensation
for executive officers is set. In addition, our Chief Executive
Officer is not present during the portion of the
Committees meetings when his compensation is set.
Timing of Long-Term Equity Grants. Our
policies and stock option plans require options to be granted at
no less than the closing price of our common stock on the date
of grant. The Committees practice is to award options at
its April Committee meeting. Committee meeting dates are set by
the Committee at least one year in advance. We do not have any
process or practice to time the grant of equity awards in
advance of our release of earnings or other material non-public
information.
Through 2008, the Committee has awarded executive officers
restricted share units at the same time it has granted stock
options. In 2009, the Committee awarded performance-based
restricted share units to
48
executive officers at its February Committee meeting, and it
intends to continue this practice. We believe this practice is
consistent with award practices at other large public companies.
Prior to 2004, restricted stock was awarded at various meetings
of the Committee for retention purposes. Our executives are not
permitted to choose the grant date for their individual
restricted stock or restricted share unit awards.
The Committee administers our equity plans, which were approved
by our stockholders in 1992 and 2001. Two categories of stock
grants have been made under our equity plans: annual grants and
recruiting or retention grants. Annual grants are made each year
at a meeting of the Committee, as described above. Annual grants
have accounted for approximately 99.5 percent of all
options granted under these plans since 1993. Our executives are
not permitted to choose the grant date for their individual
stock option grants.
Our Chief Executive Officer has limited authority to grant
employee stock options, restricted stock and restricted share
units in connection with recruiting and special employee
recognition and retention matters. Any recruiting and retention
grants may not exceed 200,000 stock options, shares of
restricted stock or restricted share units, in the aggregate, in
any calendar year. These recruiting and retention grants are
made on a pre-determined date following the release of our
earnings during each quarter. Our Chief Executive Officer is not
permitted to make any recruiting and retention grants to any of
our executive officers.
Policy on Incentive Compensation Claw-back. As
described above, a significant percentage of our executive
officer compensation is incentive-based. The determination of
the extent to which the incentive objectives are achieved is
based in part on the Committees discretion and in part on
our published financial results. The Committee has the right to
reassess its determination of the performance awards if the
financial statements on which it relied are restated. The
Committee has the right to direct the Corporation to seek to
recover from any executive officer any amounts determined to
have been inappropriately received by the individual executive
officer. In addition, the Sarbanes-Oxley Act of 2002 mandates
that the chief executive officer and the chief financial officer
reimburse us for any bonus or other incentive-based or
equity-based compensation paid to them in a year following the
issuance of financial statements that are later required to be
restated as a result of misconduct.
Target Stock Ownership Guidelines. We strongly
believe that the financial interests of our executives should be
aligned with those of our stockholders. Accordingly, the
Committee has established stock ownership guidelines for our
corporate officers, including our named executive officers.
All executive officers are expected to own our common stock in
an amount equivalent to three times their annual base salary.
The Chief Executive Officer is expected to own an amount of our
common stock which is six times his annual base salary. Failure
to attain targeted stock ownership levels within five years can
result in a reduction in future long-term equity incentive
awards granted to the executive. In determining whether our
stock ownership guidelines have been met, restricted stock and
time-vested restricted share units are considered as being owned
and performance-based restricted share units are excluded until
they vest. Executive officer stock ownership levels were
reviewed in mid- to late-2008 for compliance with these
guidelines, based on our stock price as of August 15, 2008.
This review date permitted executive officers not in compliance
with the guidelines sufficient time to acquire additional shares
prior to the end of the year and the determination of long-term
equity incentive award grants in 2009. Based on our stock price
on this review date of August 15, 2008, as well as on
December 31, 2008, the stock ownership levels specified by
the guidelines have been met or exceeded by each of our named
executive officers, other than Messrs. Black and Palmer,
who joined the Corporation in 2006.
We have a policy that mandates that all executive officers must
review transactions involving our common stock or other
securities related to our common stock with our legal department
prior to entering into the transactions.
Although we do not have a formal policy prohibiting transactions
that hedge an executive officers economic risk of owning
shares of our common stock, an executive officer must obtain
prior clearance from our legal department prior to engaging in
any hedging transaction in order to ensure compliance with
49
applicable laws. Any shares that an employee may own subject to
a market put or call option are excluded for purposes of
determining compliance with our stock ownership guidelines. None
of our executive officers engaged in any hedging transactions in
2008.
Tax Deduction for Executive Compensation. The
United States income tax laws generally limit the deductibility
of compensation paid to the chief executive officer and each of
the three highest-paid executive officers (not including the
chief financial officer) to $1,000,000 per annum. An exception
to this general rule exists for performance-based compensation
that meets certain regulatory requirements. Several classes of
executive compensation including the option awards to executive
officers are designed to meet the requirements for
deductibility. Other classes of executive compensation including
the long-term equity grants as described above may be subject to
the $1,000,000 deductibility limit.
Although deductibility of compensation is preferred, tax
deductibility is not a primary objective of our compensation
programs. In our view and the view of the Committee, meeting the
compensation objectives set forth above is more important than
the benefit of being able to deduct the compensation for tax
purposes.
Management
Development and Compensation Committee Report
In accordance with its written charter adopted by the Board, the
Management Development and Compensation Committee has oversight
of compensation policies designed to align compensation with our
overall business strategy, values and management initiatives. In
discharging its oversight responsibility, the Committee has
retained an independent compensation consultant to advise the
Committee regarding market and general compensation trends.
The Committee has reviewed and discussed the Compensation
Discussion and Analysis with our management, which has the
responsibility for preparing the Compensation Discussion and
Analysis. Based upon this review and discussion, the Committee
recommended to the Board that the Compensation Discussion and
Analysis be included in this proxy statement and incorporated by
reference in our Annual Report on
Form 10-K
filed with the Securities and Exchange Commission for the fiscal
year ended December 31, 2008.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
James M. Jenness, Chairman
Abelardo E. Bru
Mae C. Jemison, M.D.
G. Craig Sullivan
50
Summary
Compensation Table
The following table contains information concerning compensation
awarded to, earned by, or paid to our named executive officers
in the last three years. Our named executive officers include
our Chief Executive Officer, Chief Financial Officer and our
three other most highly compensated executive officers serving
as of December 31, 2008. Additional information regarding
the items reflected in each column follows the table.
Summary
Compensation Table
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Name and
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Stock
|
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Option
|
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Incentive Plan
|
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Compensation
|
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All Other
|
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Principal Position
|
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Year
|
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Salary($)
|
|
Awards($)
|
|
Awards($)
|
|
Compensation($)
|
|
Earnings($)
|
|
Compensation($)
|
|
Total($)
|
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Thomas J. Falk
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|
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2008
|
|
|
|
1,224,996
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|
|
|
2,208,418
|
|
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1,479,661
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943,247
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1,276,613
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103,896
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|
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7,236,831
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Chairman of the
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2007
|
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|
1,212,497
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|
|
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4,744,250
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|
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1,343,165
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|
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2,498,992
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|
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1,195,872
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|
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143,406
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|
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11,138,182
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Board and Chief
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2006
|
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1,175,000
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|
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5,695,857
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|
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1,477,498
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1,367,700
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|
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1,057,314
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118,565
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10,891,934
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Executive Officer
|
|
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|
|
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|
|
|
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Mark A. Buthman
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2008
|
|
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645,000
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|
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492,700
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|
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323,032
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|
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370,260
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|
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252,410
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|
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114,775
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|
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2,198,177
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Senior Vice President
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2007
|
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578,756
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963,722
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288,786
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734,400
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221,778
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88,087
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2,875,529
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and Chief Financial
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2006
|
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507,517
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1,139,698
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318,604
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405,425
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192,137
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78,881
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2,642,262
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Officer
|
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Robert E. Abernathy
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2008
|
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606,249
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788,743
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494,612
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349,745
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433,139
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100,337
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2,772,825
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Group President
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2007
|
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545,009
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|
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1,212,724
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348,264
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822,794
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529,655
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11,250
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3,469,696
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North Atlantic
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2006
|
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521,285
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1,290,421
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349,006
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437,394
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404,905
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14,608
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3,017,619
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Consumer Products
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Robert W. Black(1)
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2008
|
|
|
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549,999
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|
|
|
166,108
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|
|
|
247,791
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|
|
|
565,581
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|
0
|
|
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|
99,897
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|
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1,629,376
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Group President
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2007
|
|
|
|
514,997
|
|
|
|
256,957
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|
|
|
170,450
|
|
|
|
616,715
|
|
|
|
0
|
|
|
|
81,581
|
|
|
|
1,640,700
|
|
Developing and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony J. Palmer(2)
|
|
|
2008
|
|
|
|
491,250
|
|
|
|
741,656
|
|
|
|
153,919
|
|
|
|
284,750
|
|
|
|
0
|
|
|
|
93,459
|
|
|
|
1,765,034
|
|
Senior Vice President and Chief Marketing Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Because Mr. Black became one of our three other most highly
compensated executive officers in 2007, his 2006 compensation is
not included in this table. |
|
(2) |
|
Because Mr. Palmer became one of our three other most
highly compensated executive officers in 2008, his 2007 and 2006
compensation is not included in this table. |
Salary. The amounts in this column represent
base salary earned during the year.
Stock Awards and Option Awards. The amounts in
these columns reflect the dollar value of restricted share unit
awards and stock options, respectively, granted under our
stockholder-approved 2001 Plan.
The restricted share unit awards either vest over time or based
on the achievement of performance-based standards.
The amounts for each year represent the portion of the grants,
including those made in prior years, that is expensed in that
year under FAS 123R; however, the amounts exclude any
forfeiture assumptions related to service-based vesting
conditions, as required by the SECs rules. Compensation
expense for the stock awards is calculated under FAS 123R
using the closing price of our common stock on the date of grant
and spread over the vesting period of the restricted share unit.
We have accelerated recognition of compensation expense for
option awards held by Mr. Abernathy because he shortly will
be retirement eligible. See Notes 8, 6, and 7 to our
audited financial statements included in our Annual Reports on
Form 10-K
for 2008, 2007, and 2006, respectively, for the assumptions we
used in valuing and expensing these restricted share units and
option awards in accordance with FAS 123R.
51
The grant date value, determined in accordance with
FAS 123R, for the 2008 grants is reflected in the Grants of
Plan-Based Awards table. See Discussion of Summary
Compensation and Plan-Based Awards Tables for information
regarding the terms and conditions of these awards.
Non-Equity Incentive Plan Compensation. The
amounts in this column are the annual cash incentive payments
described in Compensation Discussion and Analysis.
These amounts were earned during the years indicated and were
paid to the named executive officers in February of the
following year.
Change In Pension Value and Nonqualified Deferred
Compensation Earnings. The amounts in this column
reflect the aggregate change during the year in actuarial
present value of accumulated benefit under all defined benefit
and actuarial plans (including supplemental pension plans). With
respect to the supplemental pension plans, amounts have been
calculated to reflect an approximate
30-year
Treasury Bond rate to determine the amount of the earlier
retirement age lump sum benefit in a manner consistent with our
financial statements. For purposes of this proxy statement, our
actuary has provided revised amounts for 2006 and 2007 to
reflect this rate. We describe the assumptions we used in
determining the amounts and provide additional information about
these plans in Pension Benefits. There were no
changes to the benefits payable under the pension plans in 2006,
2007 or 2008.
Messrs. Falk and Abernathy have deferred compensation in
prior years pursuant to the Deferred Compensation Plan. Earnings
on that deferred compensation are not included in the Summary
Compensation Table because the earnings were not above-market or
preferential. Messrs. Buthman, Black and Palmer participate
in the supplemental Retirement Contribution Program, a
non-qualified defined contribution plan. Earnings on that plan
are not included in the Summary Compensation Table because the
earnings were not above-market or preferential. See
Nonqualified Deferred Compensation for a discussion
of these plans and Messrs. Falks, Buthmans,
Abernathys, Blacks, and Palmers earnings under
those plans in 2008.
All Other Compensation. All other compensation
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
|
|
|
|
|
|
|
|
|
|
|
Contribution
|
|
Tax
|
|
|
|
|
|
|
Perquisites
|
|
Plan Payments
|
|
Gross-Ups
|
|
Total
|
Name
|
|
Year
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
Thomas J. Falk
|
|
|
2008
|
|
|
|
88,841
|
|
|
|
6,900
|
|
|
|
8,155
|
|
|
|
103,896
|
|
|
|
|
2007
|
|
|
|
114,960
|
|
|
|
6,750
|
|
|
|
21,696
|
|
|
|
143,406
|
|
|
|
|
2006
|
|
|
|
102,491
|
|
|
|
6,600
|
|
|
|
9,474
|
|
|
|
118,565
|
|
Mark A. Buthman
|
|
|
2008
|
|
|
|
5,950
|
|
|
|
108,825
|
|
|
|
0
|
|
|
|
114,775
|
|
|
|
|
2007
|
|
|
|
7,777
|
|
|
|
79,101
|
|
|
|
1,209
|
|
|
|
88,087
|
|
|
|
|
2006
|
|
|
|
7,694
|
|
|
|
71,187
|
|
|
|
0
|
|
|
|
78,881
|
|
Robert E. Abernathy
|
|
|
2008
|
|
|
|
56,420
|
|
|
|
6,900
|
|
|
|
37,017
|
|
|
|
100,337
|
|
|
|
|
2007
|
|
|
|
4,500
|
|
|
|
6,750
|
|
|
|
0
|
|
|
|
11,250
|
|
|
|
|
2006
|
|
|
|
5,500
|
|
|
|
6,600
|
|
|
|
2,508
|
|
|
|
14,608
|
|
Robert W. Black
|
|
|
2008
|
|
|
|
7,023
|
|
|
|
92,874
|
|
|
|
0
|
|
|
|
99,897
|
|
|
|
|
2007
|
|
|
|
10,294
|
|
|
|
71,287
|
|
|
|
0
|
|
|
|
81,581
|
|
Anthony J. Palmer
|
|
|
2008
|
|
|
|
8,000
|
|
|
|
85,459
|
|
|
|
0
|
|
|
|
93,459
|
|
|
|
|
(1) |
|
Perquisites. For a description of the perquisites we
provide executive officers, and the reasons why, see
Compensation Discussion and Analysis Other
Compensation.
Except with respect to Messrs. Falk and Abernathy, amounts
shown as perquisites consist solely of amounts paid pursuant to
our Executive Financial Counseling Program and our executive
health screening program. Amounts shown as perquisites for
Mr. Abernathy in 2008 consist of $48,670 for reimbursement
of |
52
|
|
|
|
|
moving and related expenses, as well as $7,750 paid pursuant to
our Executive Financial Counseling Program. Perquisites for
Mr. Falk included the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
Financial
|
|
|
Personal Use
|
|
|
|
|
|
Health
|
|
|
Travel to
|
|
|
|
|
|
|
Counseling
|
|
|
of Corporate
|
|
|
Security
|
|
|
Screening
|
|
|
Board
|
|
|
|
|
|
|
Program($)(a)
|
|
|
Aircraft($)(b)
|
|
|
Services($)(c)
|
|
|
Program($)
|
|
|
Events($)(d)
|
|
|
Total($)
|
|
|
2008
|
|
|
0
|
|
|
|
54,395
|
|
|
|
34,446
|
|
|
|
0
|
|
|
|
0
|
|
|
|
88,841
|
|
2007
|
|
|
0
|
|
|
|
45,320
|
|
|
|
56,120
|
|
|
|
0
|
|
|
|
13,520
|
|
|
|
114,960
|
|
2006
|
|
|
12,000
|
|
|
|
40,416
|
|
|
|
48,345
|
|
|
|
1,730
|
|
|
|
0
|
|
|
|
102,491
|
|
|
|
|
(a) |
|
As of 2007, our Chief Executive Officer no longer receives
personal financial counseling under this program. |
|
(b) |
|
Our Chief Executive Officer is required to use our corporate
aircraft for personal travel pursuant to an executive security
program established by the Board. The amount shown for personal
use of our aircraft is our incremental cost of operating the
aircraft. The incremental cost of personal travel on our
corporate aircraft is based on our variable cost per hour of
operating the aircraft multiplied by the number of hours of
personal travel. Items included in calculating this variable
cost are crew travel costs, crew meals, fuel, catering,
supplies, landing and parking fees, and any increases in parts
and maintenance costs that directly resulted from this personal
travel. Non-variable costs that would have been incurred
regardless of whether there was any personal use of the aircraft
are excluded. In February 2009, the Committee adopted a policy
that limits the personal use of corporate aircraft by the Chief
Executive Officer to an aggregate annual incremental cost to the
Corporation of $100,000, and generally prohibits the personal
use of corporate aircraft by other executive officers unless
there is no incremental cost to the Corporation for the use. |
|
(c) |
|
Personal security services provided as required by our chief
executive officer security program. |
|
(d) |
|
Incremental travel and related costs, including for
Mr. Falks spouse and child who accompanied him, in
connection with Board meetings and customer site visits in
Turkey and Russia in 2007. These meetings and visits continued a
long-standing practice of the Board to periodically visit our
important international markets and to be accompanied by
spouses/guests on these visits. |
|
|
|
(2) |
|
Defined Contribution Plan Payments. Matching
contributions were made under the Incentive Investment Plan for
all named executive officers. The value for Messrs. Black,
Buthman and Palmer also includes amounts contributed or
allocated to the Retirement Contribution Plan and supplemental
Retirement Contribution Program. Messrs. Buthman, Black and
Palmer are the only named executive officers who participate in
the Retirement Contribution Plan and supplemental Retirement
Contribution Program, which are described under
Compensation Discussion and Analysis
Retirement Benefits. |
|
|
|
(3) |
|
Tax
Gross-Ups.
The amount shown in 2008 for Mr. Abernathy reflects tax
reimbursement for moving and related expenses incurred for a
relocation in connection with his change in duties. For the
remaining named executive officers, and for Mr. Abernathy
in 2006, amounts reflect tax reimbursement and related
gross-ups
with respect to certain business and personal use of our
corporate aircraft. In addition, for Mr. Falk, the amounts
in 2007 reflect tax reimbursement and related
gross-up
with respect to (i) travel for Mr. Falks spouse
and child for the Board meetings and customer site visits in
Turkey and Russia described above, and (ii) tour of
historical sites in Turkey for Mr. Falk, his spouse and
child. The Committee adopted a policy in February 2009 providing
that executive officers will no longer receive tax reimbursement
and a related
gross-up for
perquisites (including personal use of corporate aircraft),
except for certain relocation benefits. |
|
(4) |
|
Certain Dividends. The named executive officers also
receive dividends on restricted stock and dividend equivalents
on restricted share units held by them at the same rate and on
the same dates as dividends are paid to our stockholders.
Dividend equivalents will not be paid on unvested |
53
|
|
|
|
|
performance-based restricted share units granted to the named
executive officers in February 2009 and thereafter; instead,
dividend equivalents on these units will be accumulated and paid
after the performance-based restricted share units vest, based
on the actual number of shares that vest. Because we factor the
value of the right to receive dividends into the grant date fair
value of the restricted stock and restricted share units awards,
the dividends and dividend equivalents received by our named
executive officers are not included in the Summary Compensation
Table. Under the terms of their letter agreements,
Mr. Blacks and Mr. Palmers dividend
equivalents on their respective restricted share unit awards
granted as part of their signing bonuses are reinvested in
additional restricted share units. The grant date fair value of
these reinvested dividend equivalents is reflected in the
following table. The named executive officers received the
following dividends and dividend equivalents on the restricted
stock and restricted share units held by them: |
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
|
Dividends Received($)
|
|
|
Thomas J. Falk
|
|
|
2008
|
|
|
|
630,171
|
|
|
|
|
2007
|
|
|
|
699,533
|
|
|
|
|
2006
|
|
|
|
544,879
|
|
Mark A. Buthman
|
|
|
2008
|
|
|
|
142,368
|
|
|
|
|
2007
|
|
|
|
137,057
|
|
|
|
|
2006
|
|
|
|
110,116
|
|
Robert E. Abernathy
|
|
|
2008
|
|
|
|
161,869
|
|
|
|
|
2007
|
|
|
|
145,403
|
|
|
|
|
2006
|
|
|
|
119,289
|
|
Robert W. Black
|
|
|
2008
|
|
|
|
73,162
|
|
|
|
|
2007
|
|
|
|
40,754
|
|
Anthony J. Palmer
|
|
|
2008
|
|
|
|
67,500
|
|
Grants of
Plan-Based Awards
The following table sets forth plan-based awards granted to the
named executive officers during 2008 on a
grant-by-grant
basis.
Grants of
Plan-Based Awards in 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Exercise
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards(1)
|
|
Under Equity Incentive Plan Awards(2)
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Grant Type
|
|
Date(3)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(4)
|
|
($/Sh)
|
|
($)(5)
|
|
Thomas J. Falk
|
|
Annual cash incentive award
|
|
|
|
0
|
|
|
1,714,994
|
|
|
3,910,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-based RSU
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
0
|
|
|
83,346
|
|
|
125,019
|
|
|
|
|
|
|
|
|
5,333,311
|
|
|
|
Time-vested stock option
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,366
|
|
|
63.99
|
|
|
1,293,953
|
|
Mark A. Buthman
|
|
Annual cash incentive award
|
|
|
|
0
|
|
|
561,000
|
|
|
1,231,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-based RSU
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
0
|
|
|
19,795
|
|
|
29,693
|
|
|
|
|
|
|
|
|
1,266,682
|
|
|
|
Time-vested stock option
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,487
|
|
|
63.99
|
|
|
307,314
|
|
Robert E. Abernathy
|
|
Annual cash incentive award
|
|
|
|
0
|
|
|
531,250
|
|
|
1,211,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-based RSU
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
0
|
|
|
23,962
|
|
|
35,943
|
|
|
|
|
|
|
|
|
1,533,328
|
|
|
|
Time-vested stock option
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,905
|
|
|
63.99
|
|
|
372,010
|
|
Robert W. Black
|
|
Annual cash incentive award
|
|
|
|
0
|
|
|
476,000
|
|
|
1,085,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-based RSU
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
0
|
|
|
15,627
|
|
|
23,441
|
|
|
|
|
|
|
|
|
999,972
|
|
|
|
Time-vested stock option
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,069
|
|
|
63.99
|
|
|
242,618
|
|
Anthony J. Palmer
|
|
Annual cash incentive award
|
|
|
|
0
|
|
|
425,000
|
|
|
933,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-based RSU
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
0
|
|
|
11,460
|
|
|
17,190
|
|
|
|
|
|
|
|
|
733,325
|
|
|
|
Time-vested stock option
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,650
|
|
|
63.99
|
|
|
177,917
|
|
|
|
|
(1) |
|
Represents the potential annual performance-based incentive cash
payments each executive could earn in 2008. These awards were
granted under our Executive Officer Achievement Award Plan
approved by stockholders in 2002. Actual amounts earned in 2008
were based on the 2008 objectives |
54
|
|
|
|
|
established by the Management Development and Compensation
Committee at its February 20, 2008 meeting. See
Compensation Discussion and Analysis Annual
Cash Compensation Annual Cash Incentives. At
the time of the grant, the incentive payment could range from
the threshold amount to the maximum amount depending on whether
the 2008 objectives were met or exceeded. The actual amounts
paid in 2009 based on the 2008 objectives are set forth in the
Summary Compensation Table under the column entitled
Non-Equity Incentive Plan Compensation. |
|
(2) |
|
Performance-based restricted share units granted under the 2001
Plan to the named executive officers on April 23, 2008. The
number of performance-based restricted share units granted in
2008 that will ultimately vest on April 23, 2011 could
range from the threshold number to the maximum number depending
on whether the net sales growth and adjusted ROIC performance
objectives for those awards are met or exceeded. See
Compensation Discussion and Analysis Long-Term
Equity Incentive Compensation Performance-Based
Restricted Share Unit Awards. |
|
(3) |
|
The grant date for each award is the same date that the
Committee took action to grant the awards. |
|
(4) |
|
Time-vested stock options granted under the 2001 Plan to the
named executive officers on April 23, 2008. |
|
(5) |
|
Grant date fair value is determined in accordance with
FAS 123R. This grant date fair value is expensed over the
vesting period of the awards under FAS 123R, and is
reflected in the Summary Compensation Table in the year it is
expensed. See Notes 8, 6, and 7 to our audited financial
statements included in our Annual Reports on
Form 10-K
for 2008, 2007, and 2006, respectively, for the assumptions used
in valuing and expensing these restricted share unit and stock
option awards in accordance with FAS 123R. |
Discussion of
Summary Compensation and Plan-Based Awards Tables
Our executive compensation policies and practices, pursuant to
which the compensation set forth in the Summary Compensation
Table and the Grants of Plan-Based Awards in 2008 table was paid
or awarded, are described under Compensation Discussion
and Analysis.
In 2006, the Corporation and Mr. Black entered into a
letter agreement in connection with his hiring. Among other
things, the letter agreement provided for an initial grant of
options and restricted share units, as well as additional
severance protection for Mr. Black. See Potential
Payments on Termination or Change in Control
Severance Benefits Letter Agreement with
Mr. Black. Also in 2006, the Corporation and
Mr. Palmer entered into a letter agreement in connection
with his hiring. Among other things, the letter agreement
provided for an initial grant of options and restricted share
units, as well as additional severance protection for
Mr. Palmer. See Potential Payments on Termination or
Change in Control Severance Benefits
Letter Agreement with Mr. Palmer. Other than these
letter agreements and the executive severance plans described
below, none of our named executive officers has any employment
agreement with us. See Potential Payments on Termination
or Change in Control.
Executive officers may receive long-term equity incentive awards
of stock options, restricted stock or restricted share units, or
a combination of stock options, restricted stock and restricted
share units under the 2001 Plan, which was approved by
stockholders in 2001. The 2001 Plan provides the Committee with
discretion to require performance-based standards to be met
before awards vest. From 2004 through 2007, the Committee used a
combination of time-vested restricted share units,
performance-based restricted share units, and stock options. In
2008, the Committee did not award time-vested restricted share
units in order to further emphasize our pay-for-performance
culture. Each named executive officer received grants of stock
options and performance-based restricted share units under the
2001 Plan in 2008.
For grants of stock options, the 2001 Plan provides that the
option price per share shall be no less than the closing price
per share of our common stock at the grant date. The term of any
option is no more than ten years from the grant date. Options
granted in 2008 become exercisable in three annual installments
of 30 percent, 30 percent and 40 percent,
beginning April 23, 2009; provided, however, that all of
the options
55
become exercisable for three years upon death or total or
permanent disability, and for five years upon the retirement of
the officer. In addition, options generally become exercisable
upon a termination of employment following a change in control,
and options granted to the named executive officers are subject
to our Executive Severance Plan. See Potential Payments on
Termination or Change in Control. The options may be
transferred by the officers to family members or certain
entities in which family members have interests.
Performance-based restricted share unit awards granted in 2008
vest three years following grant in a range from zero to
150 percent of the target levels based on our average net
sales growth and average adjusted ROIC performance during the
three years. As of February 10, 2009, the performance-based
restricted share units granted in 2008, 2007 and 2006 were on
pace to vest at the following levels: 15 percent for the
2008 award, 10 percent for the 2007 award, and
30 percent for the 2006 award.
For restricted share units, during the restricted period an
executive who is awarded restricted share units is not entitled
to vote the units but receives cash equal to dividends paid on
our common stock (other than Mr. Blacks and
Mr. Palmers dividend equivalents on their respective
restricted share unit awards granted as part of their signing
bonuses, which are reinvested in additional restricted share
units). Dividend equivalents will not be paid on unvested
performance-based restricted share units granted to the named
executive officers in February 2009 and thereafter; instead,
dividend equivalents on these units will be accumulated and paid
after the performance-based restricted share units vest, based
on the actual number of shares that vest.
56
Outstanding
Equity Awards
The following table sets forth information concerning
outstanding equity awards for our named executive officers at
December 31, 2008. Option awards were granted for ten-year
terms, ending on the option expiration date set forth in the
table. Stock awards were granted as indicated in the footnotes
to the table.
Outstanding
Equity Awards as of December 31, 2008(1)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(2)(3)
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Market or
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
Plan Awards:
|
|
|
Payout Value of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares
|
|
|
Number of
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Units of
|
|
|
or Units of
|
|
|
Unearned Shares,
|
|
|
Units or Other
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Units or Other
|
|
|
Rights That
|
|
|
|
Grant
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Rights That Have
|
|
|
Have Not
|
|
Name
|
|
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)(4)
|
|
|
Date
|
|
|
Vested(#)(5)
|
|
|
Vested($)(6)
|
|
|
Not Vested(#)(7)
|
|
|
Vested($)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J. Falk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
0
|
|
|
|
208,366
|
|
|
|
63.99
|
|
|
|
4/23/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,346
|
|
|
|
4,395,668
|
|
|
|
|
4/25/07
|
|
|
|
43,127
|
|
|
|
100,631
|
|
|
|
71.88
|
|
|
|
4/25/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,940
|
|
|
|
1,895,476
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,940
|
|
|
|
1,895,476
|
|
|
|
|
4/26/06
|
|
|
|
105,567
|
|
|
|
70,379
|
|
|
|
58.73
|
|
|
|
4/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,987
|
|
|
|
2,319,874
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,987
|
|
|
|
2,319,874
|
|
|
|
|
4/28/05
|
|
|
|
167,776
|
|
|
|
0
|
|
|
|
61.59
|
|
|
|
4/28/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,963
|
|
|
|
1,474,769
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/04
|
|
|
|
122,031
|
|
|
|
0
|
|
|
|
63.14
|
|
|
|
4/28/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,334
|
|
|
|
703,235
|
|
|
|
|
|
|
|
|
|
|
|
|
2/17/03
|
|
|
|
406,770
|
|
|
|
0
|
|
|
|
43.80
|
|
|
|
2/16/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/02
|
|
|
|
305,077
|
|
|
|
0
|
|
|
|
59.97
|
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/01
|
|
|
|
228,807
|
(9)
|
|
|
0
|
|
|
|
68.59
|
|
|
|
2/21/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/00
|
|
|
|
203,384
|
(10)
|
|
|
0
|
|
|
|
52.00
|
|
|
|
2/20/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Buthman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
0
|
|
|
|
49,487
|
|
|
|
63.99
|
|
|
|
4/23/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,795
|
|
|
|
1,043,988
|
|
|
|
|
4/25/07
|
|
|
|
8,903
|
|
|
|
20,776
|
|
|
|
71.88
|
|
|
|
4/25/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,420
|
|
|
|
391,331
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,420
|
|
|
|
391,331
|
|
|
|
|
4/26/06
|
|
|
|
23,157
|
|
|
|
15,438
|
|
|
|
58.73
|
|
|
|
4/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,649
|
|
|
|
508,888
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,649
|
|
|
|
508,888
|
|
|
|
|
4/28/05
|
|
|
|
36,803
|
|
|
|
0
|
|
|
|
61.59
|
|
|
|
4/28/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,134
|
|
|
|
323,507
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/04
|
|
|
|
24,558
|
|
|
|
0
|
|
|
|
63.14
|
|
|
|
4/28/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,684
|
|
|
|
141,554
|
|
|
|
|
|
|
|
|
|
|
|
|
2/17/03
|
|
|
|
81,523
|
|
|
|
0
|
|
|
|
43.80
|
|
|
|
2/16/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/02
|
|
|
|
40,677
|
|
|
|
0
|
|
|
|
59.97
|
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/01
|
|
|
|
30,507
|
|
|
|
0
|
|
|
|
68.59
|
|
|
|
2/21/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/00
|
|
|
|
22,372
|
|
|
|
0
|
|
|
|
52.00
|
|
|
|
2/20/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/99
|
|
|
|
16,406
|
|
|
|
0
|
|
|
|
47.51
|
|
|
|
2/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert E. Abernathy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
0
|
|
|
|
59,905
|
|
|
|
63.99
|
|
|
|
4/23/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,962
|
|
|
|
1,263,756
|
|
|
|
|
4/25/07
|
|
|
|
10,573
|
|
|
|
24,671
|
|
|
|
71.88
|
|
|
|
4/25/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,811
|
|
|
|
464,692
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,811
|
|
|
|
464,692
|
|
|
|
|
4/26/06
|
|
|
|
27,243
|
|
|
|
18,163
|
|
|
|
58.73
|
|
|
|
4/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,351
|
|
|
|
598,652
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,351
|
|
|
|
598,652
|
|
|
|
|
4/28/05
|
|
|
|
37,885
|
|
|
|
0
|
|
|
|
61.59
|
|
|
|
4/28/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,314
|
|
|
|
333,000
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/04
|
|
|
|
28,473
|
|
|
|
0
|
|
|
|
63.14
|
|
|
|
4/28/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,100
|
|
|
|
163,494
|
|
|
|
|
|
|
|
|
|
|
|
|
2/17/03
|
|
|
|
91,523
|
|
|
|
0
|
|
|
|
43.80
|
|
|
|
2/16/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/02
|
|
|
|
101,692
|
|
|
|
0
|
|
|
|
59.97
|
|
|
|
2/17/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/01
|
|
|
|
61,014
|
|
|
|
0
|
|
|
|
68.59
|
|
|
|
2/21/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/21/00
|
|
|
|
71,184
|
|
|
|
0
|
|
|
|
52.00
|
|
|
|
2/20/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/99
|
|
|
|
71,184
|
|
|
|
0
|
|
|
|
47.51
|
|
|
|
2/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(2)(3)
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Market or
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
Plan Awards:
|
|
|
Payout Value of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares
|
|
|
Number of
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Units of
|
|
|
or Units of
|
|
|
Unearned Shares,
|
|
|
Units or Other
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Units or Other
|
|
|
Rights That
|
|
|
|
Grant
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Rights That Have
|
|
|
Have Not
|
|
Name
|
|
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)(4)
|
|
|
Date
|
|
|
Vested(#)(5)
|
|
|
Vested($)(6)
|
|
|
Not Vested(#)(7)
|
|
|
Vested($)(8)
|
|
Robert W. Black
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/02/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
7/02/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
1,846
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
0
|
|
|
|
39,069
|
|
|
|
63.99
|
|
|
|
4/23/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,627
|
|
|
|
824,168
|
|
|
|
|
4/02/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
1/03/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
10/02/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
7/03/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
5,564
|
|
|
|
12,985
|
|
|
|
71.88
|
|
|
|
4/25/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,637
|
|
|
|
244,555
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,637
|
|
|
|
244,555
|
|
|
|
|
4/03/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
1/03/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
1,319
|
|
|
|
|
|
|
|
|
|
|
|
|
10/03/06
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
1,319
|
|
|
|
|
|
|
|
|
|
|
|
|
7/05/06
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
13,621
|
|
|
|
9,082
|
|
|
|
58.73
|
|
|
|
4/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
8,173
|
|
|
|
5,449
|
|
|
|
58.73
|
|
|
|
4/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,405
|
|
|
|
179,580
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,676
|
|
|
|
299,352
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,676
|
|
|
|
299,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony J. Palmer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/02/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
4,747
|
|
|
|
|
|
|
|
|
|
|
|
|
7/02/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
|
|
|
|
5,116
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
0
|
|
|
|
28,650
|
|
|
|
63.99
|
|
|
|
4/23/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,460
|
|
|
|
604,400
|
|
|
|
|
4/02/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
4,588
|
|
|
|
|
|
|
|
|
|
|
|
|
1/03/08
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228
|
|
|
|
12,025
|
|
|
|
|
|
|
|
|
|
|
|
|
10/02/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220
|
|
|
|
11,603
|
|
|
|
|
|
|
|
|
|
|
|
|
7/03/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229
|
|
|
|
12,077
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
5,564
|
|
|
|
12,985
|
|
|
|
71.88
|
|
|
|
4/25/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,637
|
|
|
|
244,555
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,637
|
|
|
|
244,555
|
|
|
|
|
4/03/07
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
11,708
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/07
|
|
|
|
3,458
|
|
|
|
8,069
|
|
|
|
69.40
|
|
|
|
1/31/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/07
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
474,660
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown reflect outstanding equity awards granted
under the 1992 Plan or the 2001 Plan (together, the Equity
Plans). Under the Equity Plans, an executive officer may
receive awards of stock options, restricted stock or restricted
share units, or a combination of stock options, restricted
stock, and restricted share units. Only stock option awards are
currently outstanding under the 1992 Plan. Stock options,
time-vested restricted share unit and performance-based
restricted share unit awards are currently outstanding for the
named executive officers under the 2001 Plan. |
|
(2) |
|
Number and exercise price of stock options granted prior to
December 1, 2004 include mandatory adjustments to reflect
the change in capitalization due to the Neenah Paper, Inc.
spin-off. |
|
(3) |
|
Stock options granted under the Equity Plans become exercisable
in three annual installments of 30 percent, 30 percent
and 40 percent, beginning the first anniversary of the
grant date; provided that all of the options become exercisable
for three years upon death or total and permanent disability,
and for five years upon the retirement of the officer. In
addition, options generally become exercisable upon a
termination of employment following a change in control, and
options granted to the named executive officers are subject to
our Executive Severance Plan. See Potential Payments on
Termination or Change in Control. The options may be
transferred by the officers to family members or certain
entities in which family members have interests. |
|
(4) |
|
The Equity Plans provide that the option price per share shall
be no less than 100 percent of the closing price per share
of our common stock on the date of grant. |
58
|
|
|
(5) |
|
The amounts shown represent awards of time-vested restricted
share units granted to the named executive officers in April
2004, 2005, 2006, and 2007. Subject to accelerated vesting as
described in Potential Payments on Termination or Change
in Control, time-vested restricted share unit awards vest
in one-third increments, beginning on the third anniversary of
the grant date (except as provided in footnotes (12) and
(13) below). Dividend equivalents are paid in cash on the
number of restricted share units at the same rate and on the
same day as dividends are paid to all our stockholders (except
as provided in footnote (11) below). |
|
(6) |
|
The values shown in this column are based on the closing price
of our common stock on December 31, 2008 of $52.74 per
share. |
|
(7) |
|
The amounts shown represent awards of performance-based
restricted share units granted to the named executive officers
in April 2006, 2007, and 2008. Subject to accelerated vesting as
described in Potential Payments on Termination or Change
in Control, performance-based restricted share unit awards
granted in 2006, 2007, and 2008 vest on April 26, 2009,
April 25, 2010, and April 23, 2011, respectively, in a
range from zero to 150 percent of the target levels
indicated based on the achievement of specific performance
goals. Amounts shown represent target levels for these awards.
See Discussion of Summary Compensation and Plan-Based
Awards Tables. Dividend equivalents are paid in cash on
the target number of restricted share units at the same rate
paid and on the same day as dividends are paid to all our
stockholders. |
|
(8) |
|
The values shown in this column are based on the target level of
performance-based restricted share units and the closing price
of our common stock on December 31, 2008 of $52.74 per
share. |
|
(9) |
|
Includes 33,775 options transferred to TKM, Ltd., a family
partnership established by Mr. Falk and his spouse. |
|
(10) |
|
Includes 61,015 options transferred to TKM, Ltd. |
|
(11) |
|
Dividend equivalents on restricted share units granted as part
of Mr. Blacks or Mr. Palmers signing
bonus, as applicable, that are reinvested in additional
restricted share units. |
|
(12) |
|
Under the terms of Mr. Blacks letter agreement, these
restricted share units, granted as part of his signing bonus,
vest on April 26, 2011. |
|
(13) |
|
Under the terms of Mr. Palmers letter agreement, of
these restricted share units, granted as part of his signing
bonus, 5,000 vested on January 31, 2009 and 4,000 will vest
on January 31, 2010. |
59
Option Exercises
and Stock Vested
The following table sets forth information concerning stock
awards vested during 2008 for our named executive officers.
There were no options exercised by the named executive officers
in 2008.
Option Exercises
and Stock Vested in 2008
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
Vesting(#)
|
|
|
Vesting($)(1)
|
|
|
Thomas J. Falk
|
|
|
86,036
|
|
|
|
5,498,561
|
|
Mark A. Buthman
|
|
|
28,631
|
|
|
|
1,835,007
|
|
Robert E. Abernathy
|
|
|
26,516
|
|
|
|
1,698,278
|
|
Robert W. Black
|
|
|
0
|
|
|
|
0
|
|
Anthony J. Palmer
|
|
|
20,000
|
|
|
|
1,312,600
|
|
|
|
|
(1) |
|
The dollar amount reflects the final pre-tax value received by
the officers upon the vesting of restricted stock, time-vested
restricted share units or performance-based restricted share
units (number of shares vested times the closing price of our
common stock on the vesting date). It is not the grant date fair
value or recognized compensation expense disclosed in other
locations in this proxy statement. |
Pension
Benefits
The following table sets forth information as of
December 31, 2008 concerning potential payments to our
named executive officers under our pension plan and supplemental
pension plans. Information about these plans follows the table.
2008 Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of
|
|
|
|
|
|
Number of Years
|
|
|
Accumulated
|
|
Name(1)
|
|
Plan Name
|
|
Credited Service(#)
|
|
|
Benefit($)
|
|
|
Thomas J. Falk
|
|
Pension Plan
|
|
|
25.5
|
|
|
|
490,470
|
|
|
|
Supplemental Pension Plans
|
|
|
25.5
|
|
|
|
8,188,218
|
|
Mark A. Buthman
|
|
Pension Plan
|
|
|
15.2
|
(2)
|
|
|
252,441
|
|
|
|
Supplemental Pension Plans
|
|
|
15.2
|
|
|
|
1,284,427
|
|
Robert E. Abernathy
|
|
Pension Plan
|
|
|
27.0
|
|
|
|
651,281
|
|
|
|
Supplemental Pension Plans
|
|
|
27.0
|
|
|
|
3,396,049
|
|
|
|
|
(1) |
|
Because Messrs. Black and Palmer joined the Corporation
after January 1, 1997, they are not eligible to participate
in our defined benefit pension plans. |
|
(2) |
|
Mr. Buthman has 26.6 years of actual service. As
described under Nonqualified Deferred Compensation,
in 1997 he elected to participate in our defined contribution
plans instead of accruing additional years of service under our
defined benefit pension plans. This election reduces his
benefits under our defined benefit pension plans and increases
his benefits under our defined contribution plans, in accordance
with the terms of those plans. |
Employees who joined the Corporation prior to January 1,
1997 (and who have not elected to participate in our Retirement
Contribution Plan), including Messrs. Falk and Abernathy,
are eligible to participate in our pension plans, which provide
benefits based on years of service and pay (annual cash
compensation), integrated with social security benefits. Our
pension plans are comprised of the
Kimberly-Clark
Pension Plan and the Supplemental Benefit Plans.
60
The following is an overview of these plans, which are
applicable to our executives and active employees based in the
United States who joined the Corporation prior to
January 1, 1997 (and who have not opted out of the plans).
|
|
|
|
|
|
|
Pension Plan
|
|
Supplemental Pension Plans
|
|
Reason for Plan
|
|
Provide eligible participants with a competitive level of
retirement benefits based on pay and years of service
|
|
Provide eligible participants with benefits as are necessary to
fulfill the intent of the pension plan without regard to
limitations imposed by the Internal Revenue Code
|
|
|
|
|
|
Eligible Participants
|
|
Salaried employees who joined the Corporation prior to January
1, 1997
|
|
Salaried employees impacted by limitations by the Internal
Revenue Code on payments under the pension plan
|
|
|
|
|
|
Payment Form
|
|
Normal benefit:
|
|
Accrued benefits prior to 2005:
|
|
|
Single-life annuity payable
monthly
|
|
Monthly payments or a lump sum
upon retirement after age 55
|
|
|
|
|
|
|
|
Other optional forms of benefit are available, including a joint
and survivor benefit
|
|
Accrued benefits for 2005 and after:
Lump sum six months after
termination of employment
|
|
|
|
|
|
Retirement Eligibility
|
|
Full unreduced benefit:
Normal retirement age of 65
Age 62 with 10 years of
service
Age 60 with 30 years of
service
Certain involuntary terminations
related to our Global Business Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduced benefit:
|
|
|
|
|
Age 55 with five years of service.
The amount of the benefit is reduced according to the number of
years the participant retires before the age he or she is
eligible for a full, unreduced benefit. The amount of the
reduction is based on age and years of vesting service
|
|
|
|
|
|
Benefits Payable
|
|
Depends on the participants years of service under our
plan and monthly average earnings over the last 60 months
of service or, if higher, the monthly average earnings for the
five calendar years in their last fifteen years of service for
which earnings were the highest
|
|
|
|
|
|
Pensionable Earnings
|
|
Annual cash compensation. Long-term equity compensation is not
included
|
|
|
|
|
|
Change in control or reduction in our
long-term
credit rating (below investment grade)
|
|
Not applicable
|
|
Participants have the option of receiving the present value of
their accrued benefits prior to 2005 in the supplemental pension
plans in a lump sum, reduced by 10 percent and
5 percent for active and former employees, respectively
|
The estimated actuarial present value of the retirement benefits
accrued through December 31, 2008 appears in the 2008
Pension Benefits table. For purposes of determining the present
value of accumulated benefits, we have used the potential
earlier retirement ages as described above rather than the
normal retirement age under the plans, which is 65. For a
discussion of how we value these obligations and the assumptions
we use in that valuation, see Note 9 to our audited
financial statements included in our 2008 Annual Report on
Form 10-K.
The calculation of actuarial present value is generally
consistent with the methodology and assumptions outlined in our
audited financial statements, except that benefits are reflected
as payable as of the date the executive is first entitled to
full unreduced benefits (as opposed to the assumed retirement
date) and without consideration of pre-retirement mortality.
Present values were calculated using projected mortality. With
respect to the supplemental pension plans, the amount of the
earlier retirement age lump sum benefit was determined using an
approximate
30-year
Treasury Bond rate of 4.22%, consistent with the methodology
used for purposes of our financial statements; any actual lump
sum benefit would be calculated using the
30-year
Treasury Bond rate in effect as of the beginning of the month
prior to termination. Present value amounts were determined
based on the financial accounting discount rate for United
States pension plans of 6.47% as of December 31, 2008.
61
The actuarial increase in 2008 of the projected retirement
benefits can be found in the Summary Compensation Table under
the heading Change in Pension Value and Nonqualified
Deferred Compensation Earnings (all amounts reported under
that heading represent actuarial increases in our pension
plans). No payments were made to the named executive officers
listed above under our pension plans during 2008. For
participants in the pension plans, the number of years of
credited service disclosed in the table equals an
executives length of service with Kimberly-Clark, except
for Mr. Buthman as described in footnote (2) to the
table above.
While the supplemental pension plans remain unfunded, in 1994
the Board approved the establishment of a trust and authorized
us to make contributions to this trust in order to provide a
source of funds to assist us in meeting our liabilities under
our supplemental defined benefit plans. For additional
information regarding these plans, see Compensation
Discussion and Analysis Retirement Benefits.
Nonqualified
Deferred Compensation
The following table sets forth information concerning
nonqualified defined contribution and deferred compensation
plans for our named executive officers during 2008.
2008 Nonqualified
Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Company
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
December 31,
|
|
Name
|
|
in 2008($)(1)
|
|
|
2008($)(2)
|
|
|
2008($)(3)
|
|
|
Thomas J. Falk
|
|
|
0
|
|
|
|
(324,093
|
)
|
|
|
1,574,595
|
|
Mark A. Buthman
|
|
|
86,205
|
|
|
|
(72,979
|
)
|
|
|
296,598
|
|
Robert E. Abernathy
|
|
|
0
|
|
|
|
(6,367
|
)
|
|
|
9,750
|
|
Robert W. Black
|
|
|
70,254
|
|
|
|
(32,197
|
)
|
|
|
101,621
|
|
Anthony J. Palmer
|
|
|
62,839
|
|
|
|
(4,446
|
)
|
|
|
110,307
|
|
|
|
|
(1) |
|
Consist solely of contributions by the Corporation under the
supplemental Retirement Contribution Program. These amounts are
included in the Summary Compensation Table and represent a
portion of the Defined Contribution Plan Payments included in
All Other Compensation. |
|
(2) |
|
The amounts in this column show the changes in the aggregate
account balance for our named executive officers during 2008
that are not attributable to company contributions; negative
amounts indicate a decrease in the account balance during the
year. There were no withdrawals by or distributions to our named
executive officers during 2008. Aggregate earnings are not
included in the Summary Compensation Table because the earnings
are not above-market or preferential. |
|
(3) |
|
Balance for Mr. Buthman includes contributions by the
Corporation under the supplemental Retirement Contribution
Program of $56,939 in 2007 and $49,500 in 2006 that are reported
in the Summary Compensation Table as a portion of All Other
Compensation for those years. Balance for Mr. Black
includes contributions by the Corporation under the supplemental
Retirement Contribution Program of $51,750 in 2007 that are
reported in the Summary Compensation Table as a portion of All
Other Compensation for that year. |
Amounts shown for Messrs. Falk and Abernathy represent
compensation deferred in prior years under our Deferred
Compensation Plan and accumulated earnings. Effective in 2005,
no further amounts may be deferred under this plan. Participants
in the Deferred Compensation Plan may elect to have deferrals
credited with yields equal to those earned on any of a subset of
funds available in the Incentive Investment Plan. Generally,
benefits are payable under the Deferred Compensation Plan in
accordance with the participants election in a lump sum or
in quarterly installments over a period between two and
20 years. If a participant ceases his or her employment
(other than as a result of a total and permanent
62
disability or death or on or after age 55 with five or more
years of service), the account balance is paid in a lump sum. In
the event of a change in control or a reduction in our long-term
credit rating (below investment grade), currently-employed
participants have the option to elect an immediate lump-sum
payment of their account balance, less a 10 percent penalty.
The amounts shown for Messrs. Buthman, Black and Palmer
reflect 2008 contributions by the Corporation, earnings and
year-end balance for their respective accounts under the
supplemental Retirement Contribution Program. In 1997, pursuant
to a broad-based election offered to certain employees,
Mr. Buthman elected to no longer accrue any additional
years of benefit service under our defined benefit pension plans
and instead to participate in the Retirement Contribution Plan.
Overview of Qualified and Non-Qualified
Plans. The following is an overview of our
qualified and non-qualified plans that we currently offer to our
named executive officers:
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
Supplemental Retirement
|
|
|
Incentive Investment Plan
|
|
Contribution Plan
|
|
Contribution Program
|
|
Purpose
|
|
To assist employees in saving for retirement
(401(k) plan)
|
|
To assist employees in saving for retirement
|
|
To provide benefits to the extent necessary to fulfill the
intent of the Retirement Contribution Plan without regard to the
limitations imposed by the Internal Revenue Code on qualified
defined contribution plans
|
|
|
|
|
|
|
|
Eligible participants
|
|
Most employees
|
|
Most employees
|
|
Salaried employees impacted by limitations by the Internal
Revenue Code on the Retirement Contribution Plan
|
|
|
|
|
|
|
|
Is the plan qualified under the Internal Revenue Code?
|
|
Yes
|
|
Yes
|
|
No
|
|
|
|
|
|
|
|
Can employees make contributions?
|
|
Yes
|
|
No
|
|
No
|
|
|
|
|
|
|
|
Do we make contributions or match employee contributions?
|
|
We match the first 2% of employee contributions at 75% and the
next 3% of employee contributions at 50%. Our maximum
contribution was $6,900 in 2008
|
|
We contribute from 3.5% to 8.75% of the employees salary,
depending on compensation level and age. See the Retirement
Contribution Schedule below
|
|
We provide credit to the extent contributions to the Retirement
Contribution Plan are limited by the Internal Revenue Code
|
|
|
|
|
|
|
|
When do our contributions vest?
|
|
Our contributions under these plans generally will vest once the
participant has completed at least three years of service
|
|
|
|
|
|
|
|
How are contributions invested?
|
|
Contributions are invested in certain designated investment
options selected by the participant
|
|
|
|
|
|
|
|
When are account balances distributed?
|
|
Distributions of the participants vested account balance
are only available after termination of employment. Loans,
hardship and certain other withdrawals are allowed prior to
termination of employment for certain vested amounts under the
Incentive Investment Plan
|
63
Under the Retirement Contribution Plan, we provide monthly
contributions to a retirement contribution account based on the
participants age and eligible earnings, as shown in the
following schedule:
Retirement
Contribution Schedule
|
|
|
|
|
|
|
|
|
Age
|
|
|
|
|
|
|
(At Plan
|
|
Percent of Base
|
|
|
Percent of Excess
|
|
Year End)
|
|
Earnings(a)
|
|
|
Earnings(b)
|
|
|
Under 25
|
|
|
3.50%
|
|
|
|
5.75%
|
|
25 - 29
|
|
|
3.75%
|
|
|
|
6.00%
|
|
30 - 34
|
|
|
4.00%
|
|
|
|
6.25%
|
|
35 - 39
|
|
|
4.25%
|
|
|
|
6.50%
|
|
40 - 44
|
|
|
4.50%
|
|
|
|
6.75%
|
|
45 - 49
|
|
|
5.25%
|
|
|
|
7.50%
|
|
50 - 54
|
|
|
6.00%
|
|
|
|
8.25%
|
|
55 and over
|
|
|
6.50%
|
|
|
|
8.75%
|
|
|
|
|
(a) |
|
Under the Retirement Contribution Plan, Base
Earnings are the amount of eligible earnings, up to
two-thirds of the taxable wages of an employee used for purposes
of calculating the non-Medicare portion of FICA taxes. Eligible
earnings include salary, bonus, and incentive compensation. |
|
(b) |
|
Under the Retirement Contribution Plan, Excess
Earnings are the amount of eligible earnings above Base
Earnings. |
Potential
Payments on Termination or Change in Control
Our named executive officers are eligible to receive certain
benefits in the event of termination of employment, including
following a change in control. This section describes various
termination scenarios as well as the payments and benefits
payable under those scenarios.
Severance
Benefits
We maintain several severance plans for our executive officers,
depending on the circumstances that result in their termination.
Those plans include the Executive Severance Plan, which is
applicable when an executive officer is terminated following a
change in control, and the Severance Pay Plan, which is
applicable in the event of certain other involuntary
terminations. The Global Business Plan Severance Pay Plan
expired December 31, 2008, as described below. An executive
officer may not receive severance benefits under more than one
of the plans described below.
Executive Severance Plan. We have agreements
under our Executive Severance Plan with each named executive
officer. The agreements provide that, in the event of a
Qualified Termination of Employment (as described
below), the participant will receive a cash payment in an amount
equal to the sum of:
|
|
|
|
|
Two times the sum of annual base salary and the target incentive
award for that fiscal year,
|
|
|
|
The value of any forfeited awards, based on the closing price of
our common stock at the date of the participants
separation from service, of restricted stock, time-vested
restricted share units, performance-based restricted share units
(at the greater of target or the attainment of the performance
goal as of the end of the prior year) and certain unvested
incentive stock options,
|
|
|
|
The value of any forfeited benefits under the Incentive
Investment Plan, the Retirement Contribution Plan, and the
supplemental Retirement Contribution Program,
|
|
|
|
The value of any additional benefit accruals or contributions
the named executive officer would have received if he or she had
remained employed an additional two years under the pension
|
64
|
|
|
|
|
plan, the supplemental pension plans, the Retirement
Contribution Plan, and the supplemental Retirement Contribution
Program, and
|
|
|
|
|
|
Two years of COBRA premiums for medical and dental coverage.
|
In addition, nonqualified stock options, and certain incentive
stock options, will vest and be exercisable within the earlier
of five years from the participants termination or the
remaining term of the option.
Under the terms of the agreements, in certain circumstances, if
the named executive officer incurs excise tax due to the
application of Section 280G of the Internal Revenue Code,
the named executive officer would be entitled to an additional
cash payment so that the participant will be in the same
position as if the excise tax were not applicable.
A Qualified Termination of Employment is a
separation of service within two years following a change of
control of the Corporation (as defined in this Plan) either
involuntarily without cause or by the participant with good
reason. In addition, any involuntary separation of service
without cause within one year before a change of control will
also be determined to be a Qualified Termination of Employment
if it is in connection with, or in anticipation of, a change of
control.
The Board has determined the eligibility criteria for
participation in this Plan. The Committee revised the Executive
Severance Plan and the underlying agreements in November 2008.
See Compensation Discussion and Analysis Post
Termination Benefits Executive Severance Plan.
The current agreements with each of our named executive officers
expire on December 31, 2011, unless extended by the Board.
Each named executive officers agreement under the
Executive Severance Plan provides that the executive will retain
in confidence any confidential information known to the
executive concerning the Corporation and its business so long as
such information is not publicly disclosed.
Severance Pay Plans. We previously maintained
two severance plans: the Global Business Plan Severance Pay
Plan, which addressed terminations related to our Global
Business Plan, and our Severance Pay Plan, which covers certain
other terminations. The Global Business Plan Severance Pay Plan
expired on December 31, 2008, and effective January 1,
2009, the Severance Pay Plan was amended as discussed below.
These severance pay plans generally provide eligible employees
(including the named executive officers) severance payments and
benefits in the event of certain involuntary terminations.
If a termination occurred on or before December 31, 2008
and was related to our Global Business Plan, the named executive
officer would have received either:
|
|
|
|
|
If the named executive officer was not retirement
eligible:
|
|
|
|
|
|
a lump sum severance payment of two weeks pay for each
year of employment with a minimum severance payment of
26 weeks pay,
|
|
|
|
if the termination occurred on or after April 1, the target
incentive payment that would be payable as if the performance
goals established at the beginning of each year were met under
the Executive Officer Achievement Award Program,
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six months of COBRA medical coverage, and
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six months of outplacement services and three months of
participation in the employee assistance program.
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If the named executive officer was retirement eligible:
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he or she could have elected an unreduced pension plan benefit
and a severance payment of $10,000 in lieu of other severance
benefits under the plans and
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a pro-rated portion of his or her annual cash incentive award
for the year.
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65
In the event the named executive officers termination
occurred on or before December 31, 2008 and was not related
to our Global Business Plan, the Severance Pay Plan provided
that the named executive officer would have received a lump sum
severance payment of one weeks pay for each year of
employment with a minimum severance payment of six weeks
pay and a maximum of 26 weeks pay.
Effective January 1, 2009, the Severance Pay Plan was
amended to provide that a named executive officer (employed for
at least one year) whose employment is involuntarily terminated
would receive:
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Two times the sum of annual base salary and the target incentive
award for that fiscal year,
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If the termination occurs after March 31, the pro-rated
current year annual incentive award based on actual performance,
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Six months of COBRA premiums for medical and dental
coverage, and
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Six months of outplacement services and three months of
participation in the employee assistance program.
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If the named executive officers employment is
involuntarily terminated within the first 12 months of
employment, the Severance Pay Plan provides that the named
executive officer would receive three months base salary.
Severance pay under the Severance Pay Plan will not be paid to
any participant who is terminated for cause (as defined under
the plan), is terminated during a period in which the
participant is not actively at work for more than 25 weeks
(except to the extent otherwise required by law), voluntarily
quits or retires, dies or is offered a comparable position (as
defined under the plan).
A named executive officer must execute a full and final release
of claims against us within a specified period of time following
termination to receive severance benefits under our severance
pay plans. Under the amended Severance Pay Plan, if the release
has been timely executed, severance benefits are payable as a
lump sum cash payment no later than 60 days following the
participants termination date. Any current year annual
inventive award that is payable under the amended Severance Pay
Plan will be paid at the same time as it was payable under the
Executive Officer Achievement Award Program, but no later than
60 days following the calendar year of the separation from
service.
Letter Agreement with Mr. Black. In its
offer letter to Mr. Black, the Corporation has agreed to
provide additional severance protection for him. If his
employment is involuntarily terminated by the Corporation for
any reason other than for cause (as described
below), or by him for good reason (as described
below), during the first five years of his employment, he will
be entitled to receive a lump sum severance amount equal to:
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One years base salary plus target annual incentive,
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The current value of unvested restricted share units and
unvested stock options granted as a signing bonus (including
unvested restricted share units accrued due to dividend
reinvestment),
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Pro-rata portion of the target annual incentive, and
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Any accrued but unpaid prior year annual incentive bonus (if the
termination is after the end of the calendar year but before
payment of the annual incentive bonus).
|
In the letter agreement, cause, means
(1) habitual neglect of duty or misconduct in discharging
Mr. Blacks duties, (2) excessive, unexcused and
statutorily unprotected absenteeism, (3) failure or refusal
to comply with any lawful Corporation rule or policy, including
those rules set forth in the Corporations Code of Conduct,
provided the rule or policy is meaningful and substantive or the
failure or refusal to comply detrimentally harms the
Corporations business, (4) engaging in disloyal,
dishonest or illegal conduct relating to the Corporations
business, (5) engaging in theft, fraud, embezzlement or
other criminal activity involving the parties employment
relationship or (6) otherwise engaging in improper conduct
that the Corporation reasonably determines to be meaningfully
detrimental to its business.
66
In the letter agreement, good reason means
(1) a material reduction in Mr. Blacks title or
responsibilities that would ordinarily result in a reduction in
pay, or (2) a failure by the Corporation to make a payment
or grant to him as provided for in the letter agreement, unless
the Corporation cures either of these items within 30 days
after he provides notice.
To receive this severance benefit, Mr. Black must execute
the Corporations standard release agreement. This benefit
is in lieu of any benefit he would be entitled to under our
severance pay plans. If the benefit under these plans is greater
than the benefit under the letter agreement, he may elect to
receive the other benefit in lieu of the benefit under the
letter agreement.
Letter Agreement with Mr. Palmer. In its
offer letter to Mr. Palmer, the Corporation has agreed to
provide additional severance protection for him. If his
employment is involuntarily terminated by the Corporation for
any reason other than for cause (as described
below), or by him for good reason (as described
below), during the first five years of his employment:
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He will be entitled to receive a lump sum severance amount equal
to one years base salary plus target annual incentive,
payable on the first day of the seventh month following the date
of his separation from service, and
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His unvested restricted share units granted as his signing bonus
will vest and be paid, in stock, payable in conjunction with his
severance benefit.
|
In addition, if his termination is after the end of the calendar
year but before payment of the annual incentive bonus, he will
also receive any accrued but unpaid prior year annual incentive
bonus.
In the letter agreement, cause, means
(1) habitual neglect of duty or misconduct in discharging
Mr. Palmers duties, (2) excessive, unexcused and
statutorily unprotected absenteeism, (3) failure or refusal
to comply with any lawful Corporation rule or policy, including
those rules set forth in the Corporations Code of Conduct,
provided the rule or policy is meaningful and substantive or the
failure or refusal to comply detrimentally harms the
Corporations business, (4) engaging in disloyal,
dishonest or illegal conduct relating to the Corporations
business, (5) engaging in theft, fraud, embezzlement or
other criminal activity involving the parties employment
relationship or (6) otherwise engaging in improper conduct
that the Corporation reasonably determines to be meaningfully
detrimental to its business.
In the letter agreement, good reason means
(1) a material reduction in Mr. Palmers title or
responsibilities that would ordinarily result in a reduction in
pay, or (2) a failure by the Corporation to make a payment
or grant to Mr. Palmer as provided for in the letter
agreement, provided that he provides the Corporation
30 days notice of the reduction or failure by the
Corporation and the Corporation has not cured the reduction or
failure within 30 days after he provides notice.
To receive this severance benefit, Mr. Palmer must execute
the Corporations standard release agreement. This benefit
is in lieu of any benefit he would be entitled to under our
severance pay plans. If the benefit under these plans is greater
than the benefit under the letter agreement, he may elect to
receive the other benefit in lieu of the benefit under the
letter agreement.
2001 Plan. In the event of a Qualified
Termination of Employment (as described below) of a
participant in the 2001 Plan in connection with a change of
control, all of the participants options, restricted stock
and restricted share units would become fully vested (with any
restricted stock or performance-based restricted share units
vesting at the greater of the target level established or the
number of shares that would have vested based on the attainment
of the applicable performance goal as of the end of the prior
calendar year). Options in this event would be exercisable for
the lesser of three months or the remaining term of the option.
If any amounts payable under the 2001 Plan constitute a
parachute payment under Section 280G of the Internal
Revenue Code, the 2001 Plan provides that the amounts will be
reduced to the extent necessary to provide the participant with
the greatest aggregate net after tax receipt. A Qualified
Termination of Employment is a termination of the
participants employment within two years following a
change of control of the Corporation (as defined in the 2001
67
Plan), unless the termination is by reason of death or
disability or unless the termination is by the Corporation for
cause or by the participant without good reason.
In 2008, the Committee amended the 2001 Plan to provide that, if
pending a change of control, the Committee determines that the
Corporations common stock will cease to exist without an
adequate replacement security that preserves the economic rights
and positions of the participants in the 2001 Plan, then all
stock options (other than incentive stock options) will become
exercisable, and the restrictions on all restricted stock will
lapse and the restricted share units will vest. Each of these
events would be deemed to occur immediately prior to the
consummation of the change of control, in a manner deemed fair
and equitable by the Committee.
In the event of a termination of employment of a participant in
the 2001 Plan, other than a qualified termination of employment,
the death, total and permanent disability or the retirement of
the participant, the participant will forfeit all unvested
restricted stock and restricted share units, and any stock
options held by the participant will be exercisable for the
lesser of three months or the remaining term of the option.
Retirement, Death
and Disability
Retirement. In the event of retirement
(separation from service after age 55), the named executive
officers are entitled to receive:
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Benefits payable under our pension plans for eligible
participants (if the participant has at least five years of
vesting service) (see Pension Benefits for
additional information),
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Their account balance under the Retirement Contribution Plan and
supplemental Retirement Contribution Program (if the participant
has at least three years of vesting service),
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Immediate vesting of unvested employer contributions to the
Investment Incentive Plan,
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|
Their account balance under the Deferred Compensation Plan,
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Accelerated vesting of unvested stock options, and the options
will be exercisable until the earlier of five years or the
remaining term of the options,
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For units granted before 2008 and outstanding more than six
months after the date of grant, time-vested restricted share
units will be payable in full at the end of the restricted
period,
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|
For units outstanding more than six months after the date of
grant, performance-based restricted share units will be payable
based on attainment of the performance goal at the end of the
restricted period,
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Annual incentive award payment under the Executive Officer
Achievement Award Program as determined by the Committee in its
discretion,
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For participants with at least fifteen years of vesting service
and who joined the Corporation before January 1, 2004,
retiree medical credits based on number of years of vesting
service (up to a maximum of $104,500 in credits), and
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|
For participants with at least fifteen years of vesting service,
continuing group life coverage.
|
Death. In the event of death while an active
employee, the following benefits are payable:
|
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|
50 percent of the benefits under our pension plans for
eligible participants, not reduced for early payment (if the
participant has at least five years of vesting service) (see
Pension Benefits for additional information),
payable under the terms of the plans to the participants
spouse or minor children,
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Their account balance under the Retirement Contribution Plan and
supplemental Retirement Contribution Program,
|
68
|
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Immediate vesting of unvested employer contributions to the
Investment Incentive Plan,
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|
Their account balance under the Deferred Compensation Plan,
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Accelerated vesting of unvested stock options, and the options
will be exercisable until the earlier of three years or the
remaining term of the options,
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|
For units outstanding more than six months after the date of
grant, time-vested restricted share units will be vested pro
rata, based on the number of full months of employment during
the restricted period prior to the participants
termination of employment, payable within 90 days following
the end of the restricted period,
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|
For units outstanding more than six months after the date of
grant, performance-based restricted share units will be vested
pro rata, based on attainment of the performance goal at the end
of the restricted period, payable within 70 days following
the end of the restricted period,
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Annual incentive award payment under the Executive Officer
Achievement Award Program as determined by the Committee in its
discretion, and
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Payment of benefits under the Corporations group life
insurance plan (which is available to all salaried employees in
the United States) equal to the participants annual pay,
up to $1 million (plus any additional coverage of two,
three or four times the participants annual pay, up to
$1 million, purchased by the participant at group rates).
|
Disability. In the event of a separation of
service due to a total and permanent disability, as defined in
the applicable plan, the named executive officers are entitled
to receive:
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|
Benefits payable under our pension plans for eligible
participants, not reduced for early payment, if the participant
has at least five years of vesting service (see Pension
Benefits for additional information),
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Up to an additional 12 months of vesting service (but not
contributions) from the date of separation of service under the
Incentive Investment Plan, the Retirement Contribution Plan, and
the supplemental Retirement Contribution Program,
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Their account balance under the Deferred Compensation Plan,
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Accelerated vesting of unvested stock options, and the options
will be exercisable until the earlier of three years or the
remaining term of the options,
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For units outstanding more than six months after the date of
grant, time-vested restricted share units will be vested pro
rata, based on the number of full months of employment during
the restricted period prior to the participants
termination of employment, payable within 90 days following
the end of the restricted period,
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For units outstanding more than six months after the date of
grant, performance-based restricted share units will be vested
pro rata, based on attainment of the performance goal at the end
of the restricted period, payable within 70 days following
the end of the restricted period,
|
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|
Annual incentive award payment under the Executive Officer
Achievement Award Program as determined by the Committee in its
discretion,
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For participants with at least fifteen years of vesting service
and who joined the Corporation before January 1, 2004,
medical credits based on number of years of vesting service (up
to a maximum of $104,500 in credits),
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Continuing coverage under the Corporations group life
insurance plan (available to all United States salaried
employees), with no requirement to make monthly contributions
toward coverage during disability, and
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69
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|
Payment of benefits under the Corporations Long-Term
Disability Plan (available to all United States salaried
employees). Long-term disability under the plan would provide
income protection of monthly base pay, ranging from a minimum
monthly benefit of $50 to a maximum monthly benefit of $10,000.
Benefits are reduced by the amount of any other Corporation- or
government-provided income benefits received (but will not be
lower than the minimum monthly benefit).
|
Potential
Payments on Termination or Change in Control Table
The following table presents the approximate value of
(i) the severance benefits for the named executive officers
under the Executive Severance Plan had a Qualified Termination
of Employment under the plan occurred on December 31, 2008;
(ii) the severance benefits for the named executive
officers, other than Messrs. Black and Palmer, under our
Global Business Plan Severance Pay Plan if an involuntary
termination related to our Global Business Plan had occurred on
December 31, 2008; (iii) the severance benefits for
the named executive officers, other than Messrs. Black and
Palmer, under our Severance Pay Plan if an involuntary
termination not related to our Global Business Plan had occurred
on December 31, 2008; (iv) the severance benefits for
Messrs. Black and Palmer under their respective letter
agreements, had an involuntary termination other than for cause
or a termination for good reason occurred on December 31,
2008; (v) the benefits that would have been payable on the
death of the named executive officers on December 31, 2008;
and (vi) the benefits that would have been payable on the
total and permanent disability of the named executive officers
on December 31, 2008. If applicable, amounts in the table
were calculated using the closing price of our common stock on
December 31, 2008 of $52.74 per share.
The termination benefits provided to our executive officers upon
their voluntary termination of employment do not discriminate in
scope, terms or operation in favor of our executive officers
compared to the benefits offered to all salaried employees, so
those benefits are not included in the table below. Because none
of the named executive officers was eligible to retire as of
December 31, 2008, no potential payments are stated
assuming retirement on that date.
The amounts presented in the table are in addition to amounts
each named executive officer earned or accrued prior to
termination, such as the officers balances under our
Deferred Compensation Plan, accrued retirement benefits
(including accrued pension plan benefits), previously vested
benefits under our qualified and non-qualified plans, previously
vested options, restricted stock and restricted share units and
accrued salary and vacation. For information about these
previously earned and accrued amounts, see the Summary
Compensation Table, Outstanding Equity Awards,
Option Exercises and Stock Vested, Pension
Benefits, and Nonqualified Deferred
Compensation.
70
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Equity with
|
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Additional
|
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Continued Benefits
|
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|
|
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Cash
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Accelerated
|
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Retirement
|
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|
and Other
|
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|
Name
|
|
Payment($)
|
|
|
Vesting($)
|
|
|
Benefits($)
|
|
|
Amounts($)
|
|
|
Total($)
|
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|
Thomas J. Falk
|
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Qualified Termination of Employment
|
|
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6,823,228
|
(1)
|
|
|
15,004,372(2
|
)
|
|
|
1,028,939
|
(3)
|
|
|
27,600
|
(4)
|
|
|
22,884,139
|
|
Involuntary termination related to Global Business Plan(5)
|
|
|
2,168,243
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,900
|
(6)
|
|
|
2,185,143
|
|
Involuntary termination not related to Global Business Plan(7)
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|
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612,498
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|
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|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,498
|
|
Death
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|
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1,943,247
|
(8)
|
|
|
8,405,194
|
|
|
|
2,688,685
|
(9)
|
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|
0
|
|
|
|
13,037,126
|
|
Disability
|
|
|
943,247
|
(8)
|
|
|
8,405,194
|
|
|
|
13,129,842
|
(10)
|
|
|
87,300
|
(11)
|
|
|
22,565,583
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Mark A. Buthman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
Qualified Termination of Employment
|
|
|
2,812,260
|
(1)
|
|
|
3,309,488
|
(2)
|
|
|
393,943
|
(3)
|
|
|
1,985,727
|
(4)
|
|
|
8,501,418
|
|
Involuntary termination related to Global Business Plan(5)
|
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|
1,055,645
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,900
|
(6)
|
|
|
1,072,545
|
|
Involuntary termination not related to Global Business Plan(7)
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|
330,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
330,000
|
|
Death
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|
|
1,030,260
|
(8)
|
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|
1,825,384
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|
|
|
826,586
|
(9)
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|
0
|
|
|
|
3,682,230
|
|
Disability
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|
370,260
|
(8)
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|
|
1,825,384
|
|
|
|
2,889,487
|
(10)
|
|
|
91,600
|
(11)
|
|
|
5,176,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Robert E. Abernathy
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|
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|
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|
|
|
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Qualified Termination of Employment
|
|
|
2,662,245
|
(1)
|
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|
3,886,938
|
(2)
|
|
|
582,590
|
(3)
|
|
|
27,600
|
(4)
|
|
|
7,159,373
|
|
Involuntary termination related to Global Business Plan(5)
|
|
|
|