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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. )
Filed by the Registrant | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material |
FLUOR 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): | ||||||||
No fee required. | ||||||||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||||||
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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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(4) | Date Filed: |
Fluor Corporation
6700 Las Colinas Boulevard
Irving, Texas 75039
March 14, 200815, 2011
Dear Shareholder:
You are cordially invited to attend the 20082011 annual meeting of shareholders. The meeting will be held on Wednesday,Thursday, May 7, 2008,5, 2011, beginning at 9:00 a.m. Central Daylight Time, at Four Seasons Resort and Club, 4150 North MacArthurFluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75038.75039. A map showing the meeting location is included for your convenience on the back page of this booklet.
Information about the meeting is presented on the following pages. In addition to the formal items of business to be brought before the meeting, members of management will report on the company's operations and respond to shareholder questions.
It is importantWe are pleased to be using the U.S. Securities and Exchange Commission rule that your shares be represented atallows companies to furnish proxy materials to their shareholders primarily over the meeting.Internet. We believe that this process expedites shareholders' receipt of proxy materials, lowers the costs of the annual meeting and helps to conserve natural resources. On or about March 15, 2011, we will begin mailing our shareholders a Notice of Internet Availability of Proxy Materials (the "Notice") containing instructions on how to access our 2011 Proxy Statement and 2010 Annual Report and how to vote online. The Notice will also include instructions on how to request a paper copy of the proxy materials, including the notice of annual meeting, proxy statement, annual report and proxy card.
Whether or not you plan to attend the meeting, your vote is important and we urgeencourage you to read thisreview our proxy statementmaterials and promptly cast your vote using the instructions provided in the Notice. You may vote your shares as soon as possible. A return envelope for your proxy card or voting instruction card is enclosed for your convenience. Shareholders of record also have the option of voting over the Internet or by usingvia a toll-free telephone number. IfAlternatively, if you hold your shares through an account withrequest or receive a brokerage firm, bankpaper copy of the proxy materials by mail, you may vote over the Internet, you may vote by telephone, or other nominee, please followyou may sign, date and mail the instructions you receive from them to vote your shares.proxy card in the envelope provided. Instructions regarding the three methods of voting are contained in the Notice or proxy card.
Thank you for your continued support of Fluor. WeFluor Corporation. I look forward to seeing you on May 7th.5th, when I will welcome you for the first time as Fluor's Chief Executive Officer and a member of the Board of Directors.
Sincerely, | ||
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 7, 20085, 2011
The annual meeting of shareholders of Fluor Corporation will be held at Four Seasons Resort and Club, 4150 North MacArthurFluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039, on Wednesday,Thursday, May 7, 2008,5, 2011, at 9:00 a.m. Central Daylight Time. At the meeting, our shareholders will consider and vote on the following matters:
3. The amendment of our Certificate of Incorporation to increase the number of authorized shares of our common stock from 150,000,000 to 400,000,000.
4. The approval of our 2008 Executive Performance Incentive Plan.
5. 2011.
All shareholders of record at the close of business on March 10, 20082011 are entitled to receive notice of and to vote at the meeting. Shareholders are cordially invited to attend the meeting in person; however, regardless of whether you plan to attend the meeting in person, please cast your vote as instructed in the Notice of Internet Availability of Proxy Materials (the "Notice") as promptly as possible. Alternatively, if you wish to receive paper copies of your proxy materials, including the proxy card, please follow the instructions in the Notice. Once you receive paper copies of your proxy materials, please complete, sign, date and promptly return the enclosed proxy card or voting instruction card in the postage-prepaid return envelope we have provided. You may alsoprovided, or follow the instructions set forth on the proxy card to authorize the voting of your shares over the Internet or by telephone as provided in the instructions set forth on the proxy card or voting instruction card.telephone. Your prompt response is necessary to ensure that your shares are represented at the meeting.
By Order of the Board of Directors | ||
Carlos M. Hernandez Senior Vice President, Chief Legal Officer and Secretary | ||
March Irving, Texas |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 7, 2008:5, 2011: This proxy statement and the company's 20072010 Annual Report to Shareholders are available at www.fluor.com/2007annualreport.www.proxyvote.com.
TABLE OF CONTENTS
Page | |||||
---|---|---|---|---|---|
Notice of Annual Meeting of Shareholders | |||||
Election of Directors—Proposal 1 | |||||
Biographical Information, Including Experience, Qualifications, Attributes and Skills | 3 | ||||
Corporate Governance | 9 | ||||
General | 9 | ||||
Determination of Independence of Directors | 9 | ||||
Board Leadership | 11 | ||||
Lead Independent Director | 11 | ||||
Consideration of Director Nominees | 12 | ||||
Communications with the Board | 13 | ||||
Board of Directors Meetings and Committees | 13 | ||||
Certain Relationships and Related Transactions | 16 | ||||
Review and Approval of Transactions with Related Persons | 16 | ||||
Risk Management Oversight | 17 | ||||
Compensation Committee Interlocks and Insider Participation | 18 | ||||
Advisory Vote on Executive Compensation—Proposal 2 | 19 | ||||
Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation—Proposal 3 | 20 | ||||
Executive Compensation—Compensation Discussion and Analysis | 21 | ||||
Organization and Compensation Committee Report | 34 | ||||
Summary Compensation Table | 35 | ||||
Non-Equity Incentive Plan Compensation | 37 | ||||
All Other Compensation | 38 | ||||
Grants of Plan-Based Awards in 2010 | 39 | ||||
New Hire and Retention Agreements | 40 | ||||
Outstanding Equity Awards at 2010 Fiscal Year End | 41 | ||||
Option Exercises and Stock Vested in 2010 | 43 | ||||
Pension Benefits | 43 | ||||
Nonqualified Deferred Compensation | 45 | ||||
Potential Payments Upon Termination or Change in Control | 47 | ||||
Director Compensation | 53 | ||||
Amendment of Certificate of Incorporation to Declassify the Board of Directors—Proposal 4 | 57 | ||||
Amendment of Certificate of Incorporation to Remove and Replace Supermajority Voting Provisions—Proposal 5 | 59 | ||||
Ratification of Appointment of Independent Registered Public Accounting Firm—Proposal 6 | 61 | ||||
Report of the Audit Committee | 63 | ||||
Stock Ownership and Stock-Based Holdings of Executive Officers and Directors | 65 | ||||
Stock Ownership of Certain Beneficial Owners | 67 | ||||
Section 16(a) Beneficial Ownership Reporting Compliance | 67 | ||||
Other Business | 68 | ||||
Additional Information | 68 | ||||
Directions to the Fluor Corporation 2011 Annual Shareholders Meeting |
FLUOR CORPORATION
March 14, 2008
15, 2011
This proxy statement is furnished in connection with the solicitation by the Board of Directors of Fluor Corporation (the "company" or "Fluor") of your proxy for use at the annual meeting of shareholders to be held at Four Seasons Resort and Club, 4150 North MacArthurFluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039, on Wednesday,Thursday, May 7, 2008,5, 2011, at 9:00 a.m. Central Daylight Time, or at any adjournment or postponement thereof (the "Annual Meeting"). This proxy statement and the accompanying proxy/voting instruction card are being mailed to all shareholders on or about March 17, 2008. The expense of the solicitation will be paid by the company. Some officers and employees may solicit proxies personally, by telephone or electronically, without additional compensation. Georgeson & Company Inc. has been engaged to assist in the solicitation for which it will receive approximately $16,000 from the company. The company also expects to reimburse banks, brokers and other persons for their reasonable out-of-pocket expenses in handling proxy materials for beneficial owners of the company's common stock. Except with respect to shares held in the company retirement plans, your proxy is revocable by written notice to the Secretary of the company at any time prior to 24 hours before the commencement of the Annual Meeting, and it shall be suspended if you are a record shareholder or valid proxyholder who attends the meeting and votes in person.
The current mailing address of the principal executive offices of Fluor Corporation is 6700 Las Colinas Boulevard, Irving, Texas 75039. Please direct allany communications to thatthis mailing address.
Internet Availability of Proxy Materials
As permitted by U.S. Securities and Exchange Commission rules, we are making this proxy statement and our annual report available to our shareholders primarily via the Internet, rather than mailing printed copies of these materials to each shareholder. We believe that this process will expedite shareholders' receipt of proxy materials, lower the costs of the Annual Meeting and help to conserve natural resources. On February 26, 2008,or about March 15, 2011, we will begin mailing to each shareholder (other than those who previously requested electronic delivery of all materials or previously elected to receive delivery of a paper copy of the proxy materials) a Notice of Internet Availability of Proxy Materials (the "Notice") containing instructions on how to access and review the proxy materials, including our proxy statement and our annual report, on the Internet and how to access an electronic proxy card to vote on the Internet or by telephone. The Notice also contains instructions on how to receive a paper copy of the proxy materials. If you receive a Notice by mail, you will not receive a printed copy of the proxy materials unless you request one. If you receive a Notice by mail and would like to receive a printed copy of our proxy materials, please follow the instructions included in the Notice.
Voting Instructions
If you own your shares of common stock of record or you hold shares in a Fluor or Fluor subsidiary's retirement plan participant account, you may authorize the voting of your shares over the Internet atwww.proxyvote.com or telephonically by calling 1-800-690-6903 and by following the instructions in the Notice. If you requested a paper copy of the proxy materials, you may also authorize the voting of your shares by following the instructions on the enclosed proxy card. Authorizations submitted over the Internet or by telephone must be received by 11:59 p.m. Eastern Daylight Time on May 4, 2011, except with respect to shares held in company retirement plans, which, as discussed below, must be received by 5:59 p.m. Eastern Daylight Time on May 3, 2011 to be voted by the trustee.
If the shares you own are held in "street name" by a bank or brokerage firm, your bank or brokerage firm may provide you with a Notice. Follow the instructions on the Notice to access our proxy materials and vote online, or to request a paper or email copy of our proxy materials. If you receive these materials in paper form, the materials include a voting instruction card so you can instruct your broker, bank or other holder of record how to vote your shares.
On March 1, 2011, the company had 88,593,022176,562,954 shares of common stock outstanding. The presence at the meeting, in person or by proxy, of a majority of the outstanding shares of Fluor common stock on the record date will constitute a quorum at the Annual Meeting. Abstentions and broker non-votes (broker-held shares for which the brokers have not received voting instructions from clients and with respect to which the brokers do not have discretionary authority to vote on a matter) are counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting.
Shareholders have one vote for each share of Fluor common stock owned by them as of the close of business on March 10, 2008,2011, the record date, with respect to all business of the meeting. AnyEach director nominee receiving the majority of votes cast (number of shares voted "for" a director nominee must exceed the number of votes cast "against" that director)director nominee) will be elected as a director, provided that if the number of nominees exceeds the number of directors to be elected (a situation we do not anticipate), the directors shall be elected by a plurality of the shares presentvotes cast. Abstentions and broker non-votes are not counted in person or by proxy at any such meetingthe determination of votes cast, and entitledthus do not have an effect on the outcome of voting for directors.The New York Stock Exchange rules no longer grant brokers discretionary authority to vote onin the election of directors. Therefore, if you hold your shares of company common stock in street name and do not provide voting instructions to your broker, your shares will not be voted in the election of directors. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted in the election of directors. Please follow the instructions set forth in the Notice.
With respect to the other proposals,advisory vote on executive compensation, the advisory vote on the frequency of advisory votes on executive compensation and the ratification of the independent auditors, the affirmative vote of the majority of shares represented in person or by proxy at the Annual Meeting and entitled to vote is required for approval. On proposals besides the election of directors, abstentions are counted in tabulations of the votes cast and thusrequired. Abstentions have the same effect as a vote against a proposal, whereasthese proposals, and broker non-votes are not counted for purposeswill have no effect on the outcome of determining whetherthe proposals. Each of these votes is advisory, and the Board will give consideration to the voting results.
With respect to the amendments to the Amended and Restated Certificate of Incorporation to declassify the Board and to remove and replace the supermajority voting provisions, the affirmative vote of the holders of 80% of the total voting power of all outstanding shares of voting stock is required. Abstentions and broker non-votes have the same effect as a proposal has been approved.vote against these proposals.
For shares other than shares held in the Fluor retirement plans, unless otherwise directed in the accompanyingif you properly submit a proxy card,without giving specific voting instructions, the proxyholders named therein will vote in accordance with the recommendation of the Board of Directors (1) FOR the election of the fourthree director nominees listed below, (2) FOR the approval of the advisory resolution on executive compensation, (3) FOR the amendment of our Amended and Restated Certificate of Incorporation to declassify the Board, (4) FOR the amendment of our Amended and Restated Certificate of Incorporation to remove and replace the supermajority voting provisions and (5) FOR the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for the year ending December 31, 2008, (3) FOR2011. If no voting instructions are given with respect to the amendmentadvisory vote on the frequency of our Certificate of Incorporation to increaseshareholder advisory votes on the number of authorizedcompany's executive compensation, your shares and (4) FOR the approval of our 2008 Executive Performance Incentive Plan.will not be voted on that matter. As to any other business that may properly come before the meeting, the proxyholders will vote in accordance with their best judgment, although the company does not presently know of any other business. For shares held of record, you may revoke your proxy by submitting a later-dated vote in person at the annual meeting, via the Internet, by telephone or by delivering written notice to the Secretary of the company at any time prior to 24 hours before the commencement of the Annual Meeting. If the shares you own are held in "street name" by a bank or brokerage firm, you should contact your bank or brokerage firm if you wish to revoke previously given voting instructions.
For shares held in the company retirement plans, voting instructions (and any revocation of voting instructions) must be received by 5:59 p.m. Eastern Daylight Time on May 5, 2008,3, 2011, in order for the trustee to vote your shares in accordance with your instructions. If your voting instructions are not received by 5:59 p.m. Eastern Daylight Time on May 5, 2008,3, 2011, or if you do not provide properly completed and executed voting instructions, any shares you hold in the company retirement plans will be voted by the trustee in favor of the fourthree nominees for director, and in proportion to the manner in which the other company retirement plan participants vote their shares with respect to the other proposals presented here as well as any other proposals.
Proposal 1
In accordance with the company'sAmended and Restated Certificate of Incorporation andAmended and Restated Bylaws,, which currently provide for a "classified" board, the fourthree Class III directors, Ilesanmi Adesida, Peter J. Fluor, Joseph W. Prueher and Suzanne H. Woolsey, have been nominated for election at the Annual Meeting to serve a three-year term expiring at the annual meeting in 20112014 and until their respective successors are elected and qualified.
Each of the fourthree nominees listed belowabove has agreed to serve as a director of the company if elected. The company knows of no reason why the nominees would not be available for election or, if elected, would not be able to serve. If any of the nominees decline or are unable to serve as a nominee at the time of the Annual Meeting, the persons named as proxies may vote either (1) for a substitute nominee designated by the present Board to fill the vacancy or (2) for the balance of the nominees, leaving a vacancy. Alternatively, the Board may reduce the size of the Board.
Under the majority standard now applicable to the company's director elections, a director must receive the affirmative vote of a majority of the sharesvotes cast; except that directors shall be elected by a plurality of the votes cast if as of the record date for such meeting the number of director nominees exceeds the number of directors to be elected (a situation we do not anticipate). A majority of the votes cast means that the number of shares voted "for" a director nominee must exceed the number of shares voted "against" that director nominee. If an incumbent director is not re-elected, under procedures established by our Governance Committee the director is to tender his or her resignation for consideration by the Board. The Governance Committee will consider his or her contingent resignation given prior to the resignationmeeting and make a recommendation to the Board on whether to accept or reject the resignation. The Board will then publicly announce its decision regarding whether to accept the resignation and, if not, the reasons why.
Biographical Information, including Experience, Qualifications, Attributes and Skills
The following biographical information is furnished with respect to each of the fourthree nominees for election at the Annual Meeting and each of the Class I and Class II directors whose terms will continue after the Annual Meeting. The information presented includes information each director has given us about his or her age, all positions he or she holds with us,the company, his or her principal occupation and business experience for at least the past five years, and the names of other public companies of which he or she currently serves or has served as a director.director in the last five years. Directors are shown as serving from the dates of their original elections to the Board of Directors of Fluor prior to its reverse spin-off transaction in November 30, 2000 wherein Fluor's coal segment was separated from Fluor's other businesses and became Massey Energy Company.
As discussed further below under "Corporate Governance—Consideration of Director Nominees," the Governance Committee is responsible for reviewing with the Board on an annual basis the appropriate skills and characteristics required of members of the Board in the context of the current make-up of the Board. The company's directors have experience with businesses that operate in industries in which the company operates, such as oil and gas and government contracting, or have particular skills that are beneficial to the company's business, such as knowledge of financial matters, risk oversight, compliance and familiarity with non-U.S. markets. The following information highlights the specific experience, qualifications, attributes and skills that our individual directors possess which have led the Governance Committee to conclude that each such individual should continue to serve on the company's Board.
Prior to re-nominating Admiral Prueher, the Governance Committee considered his membership on the board of directors of Merrill Lynch prior to and at the time of its acquisition by Bank of America. We note that Admiral Prueher was not a member of Merrill Lynch's finance committee, which was the committee delegated with risk oversight. In addition, Admiral Prueher has been a
distinguished member of our Board since 2003. The Governance Committee affirmed the benefits to our Board of his membership and chose to re-nominate him as a director.
Class III Director Nominees
PETER J. FLUOR, Director since 1984; Lead Independent Director since February 2003; Chair of the Organization and Compensation Committee and member of the Executive and Governance Committees. Chairman and Chief Executive Officer of Texas Crude Energy, Inc., an international oil and gas exploration and production company, since 2001; Mr. Fluor is also a director of Anadarko Petroleum Corporation Mr. Fluor has more than 39 years of executive experience in the energy industry, most recently as Chairman and Chief Executive Officer of Texas Crude Energy, Inc. His vast knowledge of the global oil and gas industry and his experience managing international businesses, together with his unique heritage and understanding of our company's legacy, make him an invaluable asset to our Board. Mr. Fluor is our longest serving board member, providing 26 consecutive years of board experience, with extensive knowledge of our business operations, clients and executives. | ||
JOSEPH W. PRUEHER, Director since 2003; member of the Governance and Organization and Compensation Committees. Schlesinger Professor, University of Virginia, since 2009; Consulting Professor and Senior Advisor, Stanford University, since 2001; Admiral Prueher has more than 40 years of experience in dealing with military, security, foreign policy and global business matters. He brings to the Board an international, informed and seasoned set of perspectives, a well-developed engineering background, and extensive expertise and insights on Asia and the Pacific and business dealings with the U.S. government. Admiral Prueher strengthens our Board's ability to provide meaningful oversight and strategic guidance with regard to global operations, especially in relation to our Government business. |
SUZANNE H. WOOLSEY, Director since 2004; member of the Audit and Governance Committees. Formerly Chief Communications Officer (from 2000 to 2003) and Chief Operating Officer (from 1993 to 2000) of The National Academies, an independent, federally chartered policy institution that acts as an advisor to the nation on science, engineering and Dr. Woolsey is also a director of Invesco Van Kampen closed-end funds and a former trustee of the mutual funds distributed by Van Kampen Funds, Inc. (Oakbrook Terrace, Illinois). Dr. Woolsey's broad range of experience in public policy, corporate and not-for-profit governance, operations and communications brings an informed perspective to the Board. Her years of working in the U.S. government (where, among other things, as a senior staff member of the Office of Management and Budget, she oversaw a significant portion of the Federal budget), |
Class I Directors—Term Expires 2012
PETER K. BARKER, Director since 2007; member of the Audit and Mr. Barker is also a director of Avery Dennison Corporation Mr. Barker's vast experience in international financial and banking matters at JPMorgan Chase & Co. and Goldman Sachs make him a valued member of our Board and Audit Committee. His almost 40 years of experience allow him to share insights with the Board on matters such as capital structure, mergers, acquisitions, financings and strategic planning as well as with regard to general business trends, accounting and financial matters. |
ALAN L. BOECKMANN, Director since 2001; Non-executive Chairman of the Board and Chair of the Executive Committee. Mr. Boeckmann is also a director of | ||
Mr. Boeckmann's experience as former Chief Executive Officer of Fluor Corporation and his 36 years of experience with the company give him a deep knowledge of the company's challenges, opportunities and operations. Additionally, his service as a director of other global public companies allows him to bring a diverse knowledge of strategy, finance and operations to our Board. | ||
DEAN R. O'HARE, Director since 1997; Chair of the Mr. O'Hare is also a director of H.J. Heinz Company Mr. O'Hare's experience as the Chief Executive Officer of The Chubb Corporation, a global insurance company in the Fortune 500, contributes significantly to our Board's discussions of risk oversight, financial matters and international operations. His 40 years of experience with products that assist clients in managing exposure and minimizing risks allow him to provide insight to the Board on risk management, strategy and global operations. Additionally, his role as a director of other global companies brings diverse knowledge to our Board. | ||
DAVID T. SEATON, age 68. Director since February 2011. Chief Executive Officer of Fluor since February 2011; Chief Operating Officer from November 2009 to February 2011; Senior Group President, Energy and Chemicals, Power and Government from March 2009 to November 2009; Group President, Energy & Chemicals from March 2007 to March 2009; Group Executive from September 2005 to March 2007; joined Fluor in 1985. Mr. Seaton is also a director of The Mosaic Company (Plymouth, Minnesota). Mr. Seaton, the company's Chief Executive Officer, brings to the Board extensive leadership experience with, and knowledge of, the company's business and strategy, particularly in the energy and chemicals markets. He has worked (and lived) in many Fluor locations, including the Middle East, and provides insight to the Board on the company's global operations. Additionally, his 26 years of service with the company provide the Board with a historical perspective on the company's growth and operations. |
Class II Directors—Term Expires 2013
ROSEMARY T. BERKERY, age 57. Director Vice Chairman of UBS Wealth Management Americas and Chairman of UBS Bank USA, a wealth management banking business, since March 2010. Former Vice Chairman, Executive Vice President and General Counsel of Merrill Lynch & Co., Inc., an international securities and banking business, from October 2001 to December 2008; joined Merrill Lynch & Co., Inc. in 1983. Ms. Berkery's broad range of experience in legal, financial and business matters make her a valued addition to the company's Board. Her 30+ years in the legal field, both in private practice and in-house, with prior experience managing more than 900 members of a legal and compliance team for a global operation, make her an excellent resource to the Board and the Governance Committee on legal and compliance matters. | ||
JAMES T. HACKETT, Director since 2001; member of the Chairman (since January 2006) Mr. Hackett is also a director of Halliburton Company (Houston, Texas) and Anadarko Petroleum Corporation (The Woodlands, Texas). He has also served as a director of Temple-Inland, Inc. (Austin, Texas) in the last five years. Mr. Hackett has extensive knowledge of the global oil and gas industry based on his experience as Chairman and Chief Executive Officer of Anadarko Petroleum Corporation, former Chairman and Chief Executive Officer of Ocean Energy and former President and Chief Operating Officer of Devon |
KENT KRESA, Director since 2003; Chairman of the Audit Committee and member of the Chairman Emeritus of Northrop Grumman Corporation, a global defense company, since September 2003; formerly Mr. Kresa is also a director of MannKind Corporation (Valencia, California). He has also served as a director of Avery Dennison Corporation | ||
(Detroit, Michigan) in the last five years. |
NADER H. SULTAN, age 62. Director since 2009; member of the Audit and Governance Committees. Senior Partner in F&N Consultancy, a firm specializing in high level strategic Mr. Sultan is also the Mr. Sultan brings great insight and high-level strategic contributions to the Board as a result of his more than 40 years of experience in the international energy business, most recently as a chief executive officer running a national oil company in the Middle East. He provides a valued global perspective with regard to national oil companies and the Middle East in terms of business operations, politics and culture. His opinions and understanding of the |
Board Recommendation
The Board of Directors recommends a vote FOR the election of Ilesanmi Adesida, Peter J. Fluor, Joseph W. Prueher and Suzanne H. Woolsey.
STOCK OWNERSHIP AND STOCK-BASED HOLDINGS OFEXECUTIVE OFFICERS AND DIRECTORS
The following table contains information regarding the beneficial ownershipTable of our common stock as of February 26, 2008 by:
Except as otherwise noted, the individual or his or her family members had sole voting and investment power with respect to such shares.
Both directors and executive officers are encouraged to hold Fluor common stock to align their financial interests with those of the shareholders. The company has established ownership guidelines for both of these groups. The Chairman and Chief Executive Officer is expected to own and retain a minimum number of shares or share units totaling in value six times his base salary. Other actively employed named executives are expected to own and retain a minimum number of shares or share units totaling in value no less than two times, and up to three times each executive's base salary depending on position. Executives are expected to meet or exceed the applicable guideline by position within three to five years of entering such position. Named executives are expected to retain 100% of the net shares acquired from the exercise of stock options or the vesting of restricted stock to the extent the guidelines are not met. As of the date of this report, all named executives are in compliance with these stock ownership guidelines.
Name of Beneficial Owner | Shares Beneficially Owned(1) | Fluor Stock-Based Holdings(2) | Percent of Shares Beneficially Owned(3) | |||||
---|---|---|---|---|---|---|---|---|
Class I Directors: | ||||||||
Alan L. Boeckmann(4) | 352,378 | 352,378 | * | |||||
Peter K. Barker | 3,500 | 4,533 | * | |||||
Vilma S. Martinez | 7,855 | 15,337 | * | |||||
Dean R. O'Hare | 11,960 | 27,942 | * | |||||
Class II Directors: | ||||||||
James T. Hackett | 6,684 | 15,825 | * | |||||
Kent Kresa | 5,184 | 15,003 | * | |||||
Lord Robin W. Renwick | 6,234 | 14,143 | * | |||||
Peter S. Watson | 3,339 | 4,687 | * | |||||
Class III Nominees: | ||||||||
Ilesanmi Adesida | 1,500 | 2,836 | * | |||||
Peter J. Fluor | 37,543 | 124,132 | * | |||||
Joseph W. Prueher | 4,032 | 7,512 | * | |||||
Suzanne H. Woolsey | 4,434 | 5,674 | * | |||||
Other Named Executives: | ||||||||
Jeffery L. Faulk | 17,588 | 17,588 | * | |||||
Lawrence N. Fisher | 65,606 | 65,606 | * | |||||
H. Steven Gilbert | 31,882 | 31,882 | * | |||||
John L. Hopkins | 31,164 | 31,164 | * | |||||
D. Michael Steuert | 53,891 | 53,891 | * | |||||
All directors and executive officers as a group (26 persons) | 749,727 | 895,086 | 0.85 | % |
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table contains information regarding the beneficial ownership of our common stock as of February 26, 2008 by the shareholders our management knows to beneficially own more than 5% of our outstanding common stock. The percentage of ownership is calculated using the number of outstanding shares on February 26, 2008.
Name of Beneficial Owner | Shares Beneficially Owned | Percent of Class | |||
---|---|---|---|---|---|
AXA Financial, Inc. and related entities | 8,868,372 | (1) | 10.0 | % | |
FMR LLC and related entities | 7,532,897 | (2) | 8.5 | % | |
Barclays Global Investors, NA. and related entities | 7,452,063 | (3) | 8.4 | % | |
Capital Group International, Inc. and related entities | 5,326,270 | (4) | 6.0 | % |
5,339,320 shares, shared voting power relative to 1,304,699 shares and sole dispositive power relative to 8,854,991 shares. The AXA Mutelles, as a group, act as a holding company for AXA, AXA Financial and their subsidiaries, which entities act as investment advisors and insurance companies. The address of AXA Assurances I.A.R.D., AXA Assurances Vie and AXA Courtage is 26, rue Drouot, Paris, France 75009. The address of AXA is 25, avenue Matignon, Paris, France 75008. The address of AXA Financial is 1290 Avenue of the Americas, New York, New York 10104.
Sydney, Australia NSW 1220. The address of BGI Deutschland is Apianstrasse 6, Unterfohring, Germany D-85774.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and holders of more than 10% of Fluor common stock to file with the Securities and Exchange Commission reports regarding their ownership and changes in ownership of our securities. Based solely upon a review of filings with the Securities and Exchange Commission, a review of company records and written representations by our directors and executive officers, the company believes that each of Messrs. O'Hare and Prueher made one late filing on Form 4 during 2007.
The company has long believed and continues to believe, that good corporate governance practices promote the principles of fairness, transparency, accountability and responsibility and will ensure that Fluorthe company is managed for the long termlong-term benefit of its shareholders. During the past year, we continued to review our corporate governance policies and practices and to compare them to those suggested by various authorities incommentators on corporate governance and the practices of other public companies.
Based on this review, Specifically, in 2007,2010, our Governance CommitteeBoard reviewed its current structure as well as voting standards for approval of certain matters by our shareholders. In early 2010, the Board amended the company's director evaluation process. In November 2007,Amended and Restated Bylaws to eliminate the Governance Committee recommended andpresumption that the Board agreed to amend ourCorporate Governance Guidelines to provide for annual evaluations of board members who are one year away from reelection. Each such memberChairman of the Board of Directors is evaluated by the Chairs of the committees upon which the member serves. The committee Chairs submit their evaluations to the lead independent director, who consults with each such member ofand Chief Executive Officer positions are always combined. In December 2010, the Board voted to submit for shareholder approval two sets of Directorsamendments to our Amended and provides feedback regarding his or her individual performance onRestated Certificate of Incorporation—one declassifying the Board and another removing and replacing the supermajority voting requirements in our Certificate of Directors as well asIncorporation. The Board believes that these changes promote good corporate governance and are consistent with the Committees upon which he or she serves.interests of our shareholders.
In addition, in November 2007,late 2010, our Board reviewed all committee charters and amended the charters for our Audit, CommitteeGovernance and Organization and Compensation Committees as well as the company's Corporate Governance Committee.Guidelines and also approved an updated Code of Business Conduct and Ethics for Fluor employees. You can access our current committee charters,Corporate Governance Guidelines, Code of Business Conduct and Ethics for Members of the Board of Directors, andCode of Business Conduct and Ethics for Fluor employees, as well as other information regarding our corporate governance practices, in the investor relationsgovernance section of our website atwww.fluor.com. All under "Sustainability." Our Code of this information is also availableBusiness Conduct and Ethics for Fluor employees can be found in print to any shareholder who requests it fromthe ethics and compliance section of our Chief Legal Officer and Secretary at Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039.website under "Sustainability."
Determination of Independence of Directors
Under New York Stock Exchange rules and ourCorporate Governance Guidelines,, a director of Fluorthe company qualifies as "independent" only if the Board of Directors affirmatively determines that the director has no material relationship with Fluorthe company (either directly, or as a partner, shareholder or officer
of an organization that has a relationship with Fluor)the company). A relationship is "material" if, in the judgment of the Board, the relationship would interfere with the director's independent judgment. In making independence determinations,
Under standards adopted by the Board, will consider each relationship not only from the standpoint of thea director but also from the standpoint of persons and organizations with which the director has a relationship.
A director, however, is not independent if:if any of the following relationships exist:
firm and who participates in the firm's audit, assurance or tax compliance (but not tax planning) practice;personally works on Fluor's audit; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on Fluor's audit within that time.
Pursuant to theCorporate Governance Guidelines,, the Board of Directors undertook its annual review of director independence in January 2008.February 2011. During this review, the Board of Directors considered transactions and relationships between each director (including any member of his or her immediate family) and the company and its subsidiaries and affiliates, including those reported under "Certain Relationships and Related Transactions" below. In making independence determinations, the Board considered each relationship not only from the standpoint of the director, but also from the standpoint of persons and organizations with which the director has a relationship. As provided in ourCorporate Governance Guidelines, the purpose of this review is to determine whether any such relationships or transactions would interfere with the director's independent judgment, and therefore be inconsistent with a determination that the director is independent.
The Board determined that Mr. Seaton is not independent under the New York Stock Exchange listing standards and our Corporate Governance Guidelines because of his employment as the Chief Executive Officer of the company. Similarly, the Board determined that Mr. Boeckmann is not independent because of his former employment as Chief Executive Officer of the company.
When assessing the independence of the other directors, the Board reviewed all payments made to or received by any entity, within the last three fiscal years, for which a Fluorthose Board member or an immediate family member of a Board membermembers serves as either an employee or board member.member or an immediate family member serves as an executive officer. Specifically, the Board considered that Mr. Barker is an employee of JP Morgan Chase & Co., and Ms. Berkery is an employee of UBS Wealth Management Americas and UBS Bank USA, and the company did business with both entities or their affiliates during the last three years. Neither Mr. Barker nor Ms. Berkery is an executive officer of the entity for which they work. The Board also considered payments to a law firm at which Mr. Barker's brother is a partner, and payments to a tax consulting firm at which Ms. Berkery's brother is a partner. Neither Mr. Barker's brother nor Ms. Berkery's brother personally provide services to the company. Finally, the Board considered that certain directors (Mr. Barker, Mr. Fluor, Mr. Kresa, Ms. Martinez, Mr. O'Hare, Admiral Prueher Lord Renwick and Mr. Boeckmann)Dr. Woolsey) are affiliated, either personally or through an immediate family member, withboard members of entities that dodid business with the company and that the company made or received payments for property or services to or from one of these entities in years 2007, 20062010, 2009 and/or 2005. However, in2008. In each case eithernoted above, the payments to or from any of the foregoing entities did not exceed the greater of $1 million or 2% of such other entity's consolidated gross revenues for any one of the last three fiscal years, and therefore fell below the thresholds of the company's independence standards disclosed above, or the immediate family member employed by such entity was not an executive officer of the entity.above.
In addition, the Board reviewed charitable contributions made to non-profit organizations for which anythose Board membermembers (or their respective spouse) servesspouses) serve as an employee or on the Boardboard of Directors.
directors. Specifically, the Board considered that certain directors and/or their family members (Mr.(Dr. Adesida, Mr. Barker, Mr. Fluor, Mr. Hackett, Mr. Kresa, Mr. O'Hare, Admiral Prueher Mr. Watson and Ms.Dr. Woolsey) are affiliated with non-profit organizations that received contributions from the company in years 2007, 20062010, 2009 and/or 2005.2008. No organization received contributions in a single year which exceeded the greater of 2% of such charitable organization's consolidated gross revenues or $100,000 (excluding any matching gifts made by the Fluor Foundation in connection with donations by Fluor employees or directors)$100,000; and therefore these contributions fell below the thresholds of the company's independence standards disclosed on page 11discussed above. In fact, no organization received a contribution in excess of this proxy statement.$30,000 in any one year.
Finally, the Board reviewed the employment of J. Robert Fluor, II, the brother of Mr. Peter Fluor. Mr. J. Robert Fluor II has nois employed by a subsidiary of the company to provide community relations support. He does not have policy-making authority and is, therefore, was not an executive officer for purposes of the independence standards disclosed on page 11 of this proxy statement.discussed above.
As a result of this review, the Board of Directors affirmatively determined that the following directors, including each of those directors standing for election at the Annual Meeting, are independent of the company and its management under New York Stock Exchange listing standards and the standards set forth in theCorporate Governance Guidelines: Ilesanmi Dr. Adesida, Peter K.Mr. Barker, Peter J.Ms. Berkery, Mr. Fluor, James T.Mr. Hackett, KentMr. Kresa, Vilma S. Martinez, Dean R.Mr. O'Hare, Joseph W.Admiral Prueher, Lord Robin W. Renwick, Peter S. WatsonMr. Sultan and Suzanne H.Dr. Woolsey. The Board of Directors determined, however, that Alan L. Boeckmann was not independent under the standards because of his employment as the Chief Executive Officer of the company. The Board of Directors also determined that each of the members of the Audit, Governance and Organization and Compensation Committees has no material relationship with Fluor and is independent within the meaning of Fluor's director independence standards and New York Stock Exchange listing standards.standards for such committee.
The Chairman of the company's Board is elected by the Board on an annual basis. Currently, the positions of Chairman of the Board and Chief Executive Officer of the company are held by separate individuals, with Mr. Seaton serving as Chief Executive Officer and Mr. Boeckmann, the company's former Chief Executive Officer, serving as non-executive Chairman of the Board. The Board believes that at the current time this structure is best for the company, as it allows Mr. Seaton to focus on the company's strategy, business and operations, while enabling Mr. Boeckmann to assist with Board matters and serve as a liason between the Board and the company's senior management, headed by Mr. Seaton. This structure also allows the Board to benefit from Mr. Boeckmann's prior experience and knowledge of the company's business and affairs.
In his role as Chairman of the Board, Mr. Boeckmann presides over Board meetings, provides input on the agenda for each Board meeting, meets with the Chief Executive Officer to receive reports on the operation of the company and performs such other duties as the Board may request from time to time. Even though the roles of Chairman and Chief Executive Officer are currently held by different individuals, the Board does not believe that a formal policy separating the two positions is necessary or desirable and the two positions might be held by the same individual in the future if circumstances were to make combining the two roles desirable. However, the company has also established a lead independent director position, as it believes that the role of Lead Independent Director is a useful one in promoting good Board governance when the company has a non-independent Chairman. As discussed below, the Lead Independent Director is elected every three years, and his or her duties are closely aligned with the role of an independent, non-executive chairman.
To provide for independent leadership, in 2003, the Board created the position of lead independent director,Lead Independent Director, whose primary responsibility is to preside over and set the agenda for all executive sessions of the Board of Directors in which management directors and other members of management do not participate. The lead independent directorLead Independent Director also coordinates withapproves agendas and schedules for meetings of the ChairmanBoard and Chief Executive Officer with respectinformation sent to agendas,the Board, chairs Board meetings in the Chairman's absence, acts as
a liaison between the independent directors and management,the Chairman, provides guidance on the director orientation process for new Board members, provides consultationconsults and communications tocommunicates with shareholders, as appropriate, and monitors communications to the Board from shareholders and other interested parties. TheIn 2009, the independent members of the Board of Directors designated Mr. Peter J. Fluor to serve in this position for a three-year term that expires in February 2009.2012.
Consideration of Director Nominees
Shareholder Recommendations
The policy of the Governance Committee is to consider properly submitted shareholder recommendations for candidates for membership on the Board as described below under "—Identifying and Evaluating Nominees for Director." In evaluating those recommendations, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth under "—Director Qualifications"Qualifications and Diversity" below. Any shareholder wishing to recommend a candidate for consideration by the Governance Committee should submit a recommendation in writing indicating the candidate's qualifications and other relevant biographical information and provide confirmation of the candidate's consent to serve as director. This information should be addressed to theCarlos M. Hernandez, Chief Legal Officer and Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. In addition, ourAmended and Restated Bylaws permit shareholders to nominate directors for consideration at an annual shareholder meeting. See "Additional Information—Advance Notice Procedures" on page 60pages 68-69 of this proxy statement, and Section 2.04 of ourAmended and Restated Bylaws, which are included in the investor relations portiongovernance section of our website atwww.fluor.com.www.fluor.com under "Sustainability."
Director Qualifications and Diversity
OurCorporate Governance Guidelines contain The Board membership criteriaof Directors believes that apply to current directors as well as nominees for director. The Governance Committee reviews the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board, at least annually. This review takes into consideration issues of diversity, experience and skills. OurCorporate Governance Guidelines provide, as a whole, the Board of Directors should include individuals with a diverse range of background and experience to give the Board both depth and breadth in the mix of skills represented for the benefit of our shareholders. WhileAs provided in our Corporate Governance Guidelines, while all directors should possess business acumen and must exercise sound judgment in their oversight of our operations, the Board endeavors to include in its overall composition an array of targeted skills and experience in its overall compositionthat complement one another rather than requiring aeach director to possess the same skills, perspective and interests. CriteriaAccordingly, the Board and Governance Committee consider the qualifications of directors and director nominees both individually and in the broader context of the Board's overall composition and the company's current and future needs.
Our Corporate Governance Guidelines contain Board membership criteria that apply to current directors as well as nominees for director. The Governance Committee is responsible for reviewing with the Board on an annual basis (and as needed) the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. This annual review takes into consideration issues of diversity of background (including gender, race, ethnicity and age), experience, qualifications, attributes and skills. Certain criteria that our Board looks for in a candidate include, among other things, an individual's business experience and skills, judgment, independence, integrity, reputation and international background, the individual's understanding of such areas as finance, marketing, regulation and public policy, whether the individual has the ability to commit sufficient time and attention to the activities of the Board and the absence of any potential conflicts with the company's interests. The Board assesses its effectiveness in achieving these goals in the course of assessing director candidates, which is an ongoing process.
Identifying and Evaluating Nominees for Director
The Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Governance Committee regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Governance Committee through various means, including current Board members, professional search firms, shareholders or other persons. Candidates are evaluated at meetings of the Governance Committee, and may be considered at any point during the year. As described above, the Governance Committee considers properly submitted shareholder recommendations for candidates for the Board. If a shareholder properly recommends an individual to the Governance Committee to serve as a director, to the Governance Committee, all recommendations are aggregated and considered by the Governance Committee at a meeting prior to the issuance of the proxy statement for our Annual Meeting. Any materials provided by a shareholder in connection with the recommendation of a director candidate are forwarded to the Governance Committee, whowhich will consider the recommended candidate in light of the director qualifications discussed above.above and the Board's existing composition. The Governance Committee also reviews materials provided by professional search firms, if applicable, or
other parties in connection with a candidate who is not proposed by a shareholder. In evaluating such recommendations, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board.
In 2010, the company continued to employ Spencer Stuart, a professional search firm that researched and evaluated potential candidates for the Board. In 2010, Ms. Berkery was recommended for nomination as a board member by one of the Board's non-management directors.
Individuals may communicate with the Board and individual directors by writing directly to the Board of Directors c/o Carlos M. Hernandez, Chief Legal Officer and Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. Shareholders and other parties interested in communicating directly with the lead independent directorLead Independent Director or with the independent directors as a group may do so by writing directly to the Lead Independent Director c/o the Chief Legal Officer and Secretary at the above address. The lead independent directorLead Independent Director will, with the assistance of Fluor's internal legal counsel, be primarily responsible for monitoring any such communication from shareholders and other interested parties to the Board, individual directors, the lead independent directorLead Independent Director or the independent directors as a group, and provide copies or summaries of such communications to the other directors as he or she considers appropriate.
Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the lead independent directorLead Independent Director considers to be important for the directors to know. The Board will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond if and as appropriate.
Board of Directors Meetings and Committees
During 2007,2010, the Board held eightten meetings, one of which was an extensive two-day strategic planning session, and three of which were teleconferences. The Board took action by unanimous written consent once during 2007.session. Each of the directors other than Mr. Kresa, attended at least 75% of the aggregate number of meetings of the Board and of the Board Committeescommittees on which he or she served.
As discussed earlier, the lead independent directorLead Independent Director presides over all "executive sessions"executive sessions of the independent directors. Executive sessions of independent directors must take place at least quarterly according to ourCorporate Governance Guidelines. During 2007, four2010, five executive sessions of independent directors were held.
A Board meeting immediately follows our annual meeting of shareholders.the Annual Meeting. The Board has a policy that directors attend the annual meeting of shareholders.shareholders each year. All directors attended the 20072010 annual meeting of shareholders.
The standing committees of the Board consist of an Audit Committee, Executive Committee, Governance Committee and Organization and Compensation Committee. Each committee has a charter that has been approved by the Board. With the exception of the Executive Committee, each committee must review the appropriateness of its charter and perform a self-evaluation at least annually. Any recommended changes to the charters are then submitted to the Board for approval.
Audit Committee
The current members of the Audit Committee are Kent Kresa (Chair), Ilesanmi Adesida, Peter K. Barker, Dean R. O'Hare, (Chair), Peter K. Barker, James T. Hackett, Kent Kresa, Vilma S. Martinez, Lord Robin W. RenwickNader H. Sultan and Suzanne H. Woolsey. All current members qualify, and all members during 20072010 qualified, as "independent" within the meaning of SECSecurities and Exchange Commission regulations, the listing standards of the New York Stock Exchange and the company'sCorporate Governance Guidelines. The Board has determined that each of Mr. Kresa, Mr. Barker and Mr. O'Hare qualifiesqualify as an "audit committee financial expert" under the rules of the Securities and Exchange Commission. None of the members of the Audit Committee serve on the audit committeecommittees of more than two other public companies.
The Audit Committee held six meetings during 2007,2010, one of which was to review and approve the company's 20062009 Annual Report, Form 10-K and proxy materials for the 20072010 annual meeting. At the end of each of the four regular meetings of the Committee, the members of the Audit Committee met privately with the company's independent registered public accounting firm, and with the company's head of internal audit and other members of management, without the presence of any other company officers or personnel and at additional times as necessary. In addition, at the endpersonnel.
The charter of every regular meeting, the Audit Committee met in executive session with members of management and the company's compliance officer.
The Audit Committee acts pursuant to the Audit Committee Charter, which was amended in November 2007. A copy of this charter, as amended,2010 and is available on the company's website atwww.fluor.com under "Investor Relations""Sustainability"—"Governance"—"Corporate Governance.Governance Documents." The charter is also available in print for any shareholder who requests it from our Chief Legal Officer and Secretary at Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. The functions of the Audit Committee and its activities during 20072010 are described in the "Report of the Audit Committee" section of this proxy statement.
Executive Committee
When the Board is not in session, the Executive Committee has all of the power and authority of the Board, subject to applicable laws, rules, regulations and listing standards.standards of the New York Stock Exchange. The current members of the Executive Committee are Alan L. Boeckmann (Chair), Peter J. Fluor, Lord Robin W. RenwickKent Kresa and Dean R. O'Hare. In 2007, the Executive Committee took action by unanimous written consent on five occasions.
Governance Committee
The current members of the Governance Committee are Lord Robin W. RenwickDean R. O'Hare (Chair), Ilesanmi Adesida,Peter K. Barker, Rosemary T. Berkery, Peter J. Fluor, Vilma S. Martinez, Dean R. O'Hare,James T. Hackett, Joseph W. Prueher, Peter S. WatsonNader H. Sultan and Suzanne H. Woolsey. All current members qualify, and all members during 20072010 qualified, as "independent" within the meaning of the listing standards of the New York Stock Exchange and the company'sCorporate Governance Guidelines. During 2007,2010, the Governance Committee held four meetings.
The Governance Committee's primary responsibilities, which are discussed in detail within its charter, are to:
Table of the directors;
Contents
The Governance Committee has the ability, under its charter, to engage, retain and terminate the services of outside legal counsel, search firms and other advisors for advice.advisors. In 2007, our two new Board members were first identified and recommended by2010, a third party search firm, Russell Reynolds
Associates. In addition, in connection with its review of director compensation, the Governance Committee considers compensation dataSpencer Stuart, researched and provided by Towers Perrin or such other compensation consultants as may be retained from time to time.recommendations regarding potential new directors.
The charter of the Governance Committee was amended in November 2007,2010 and February 2011 and is available on the company's website atwww.fluor.com under "Investor Relations""Sustainability"—"Governance"—"Corporate Governance.Governance Documents." The charter is also available in print for any shareholder who requests it from our Chief Legal Officer and Secretary at Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039.
Organization and Compensation Committee
The current members of the Organization and Compensation Committee are Peter J. Fluor (Chair), Ilesanmi Adesida, Peter K. Barker, James T. Hackett, Kent Kresa and Joseph W. Prueher and Peter S. Watson.Prueher. All current members qualify, and all members during 20072010 qualified, as "independent" within the meaning of the listing standards of the New York Stock Exchange and the company'sCorporate Governance Guidelines. The Organization and Compensation Committee held sevensix meetings during 2007. Five2010. Four of the sevensix meetings included an executive session attended by the Committeecommittee members and itsthe committee's independent compensation advisor. The two meetings that did not have an executive session were brief teleconferences. In 2007, the
The Organization and Compensation Committee took action by unanimous written consent on two occasions.
Frederic W. Cook & Co., Inc. serves as the Committee's independent compensation advisor, and works directly on behalf of the Committee and in cooperation with management under the direction of the Committee. Frederick W. Cook & Co., Inc. does not perform any other services for the company. The Committee has the ability under its charter to engage, retain and terminate the services of outside legal counsel, compensation consultants and other advisorsadvisors. In 2010, the Organization and Compensation Committee again engaged Frederic W. Cook & Co., Inc. to serve as its independent compensation consultant and to advise the committee on all matters related to executive compensation. The compensation consultant conducts an annual review of the total compensation program for advice.the Chief Executive Officer and other senior management reporting to him and, in doing so, completes a report benchmarking the senior executives against other executives with similar responsibilities in order to assist the Organization and Compensation Committee in making compensation decisions. The 2010 compensation review provided the committee with relevant market data and alternatives to consider when making compensation decisions in 2010 for the Chief Executive Officer and other senior management reporting to him. In addition, in 2010, the compensation consultant conducted a review of non-management director compensation and provided recommendations to the committee which were subsequently recommended to the Board for approval.
In early 2011, the compensation consultant conducted a broad-based review of the company's compensation programs and policies and discussed its findings with the committee, indicating that the company's compensation programs do not encourage behaviors that would create material risk for the company. Frederic W. Cook & Co., Inc. also provided verbal advice to the Organization and Compensation Committee at the meetings, attended executive sessions of the committee to respond to questions, and had individual calls and meetings with the Chair of the committee to provide advice and perspective on executive compensation issues. Frederic W. Cook & Co., Inc. was engaged by, and reports directly to, the committee and does not perform any other services for the company.
The Organization and Compensation Committee's primary responsibilities, which are discussed in detail within its charter, are to:
Non-employee director compensation is reviewedThe Organization and Compensation Committee has the authority under its charter to delegate any portion of its responsibilities to a subcommittee denominated by the Governance Committee.it when appropriate, but did not do so in 2010.
The charter of the Organization and Compensation Committee was amended in November 2010 and February 2011 and is available on the company's website atwww.fluor.com under "Investor Relations""Sustainability"—"Governance"—"Corporate Governance.Governance Documents." The charter is also available in print for any shareholder who requests it from our Chief Legal Officer and Secretary at Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039.
The responsibilities of our Organization and Compensation Committee and its activities during 20072010 are further described in the "Compensation Discussion and Analysis" section of this proxy statement.
Certain Relationships and Related Transactions
Peter J. Fluor, a member of our Board, is the brother of J. Robert Fluor, II, who is our Vice President—Global Public Affairs.employed by a Fluor subsidiary to assist with ongoing community relations efforts. J. Robert Fluor, II has been employed by the company since 1967 and does not perform a policy-making function.function and is, therefore, not an executive officer. During 2007, he2010, J. Robert Fluor, II earned total compensation of approximately $611,516. This figure was determined by applying$335,400 from the same principles used to calculate total compensation for the named executives in the Summary Compensation Table below. Peter J. Fluor joined our Board in 1984.company. The Organization and Compensation Committee, of which Peter J. Fluor is the Chair, doesdid not individually review or approve J. Robert Fluor, II's compensation.
In February 2011, we agreed to sell one of our country club memberships to our non-executive Chairman, Alan Boeckmann. The membership was sold to Mr. Boeckmann for $250,000, the same price at which it could be purchased from the club.
Review and Approval of Transactions with Related Persons
The company has adopted a written policy for approval of transactions betweento which the company is a party and its directors,the aggregate amount involved in the transaction will or may be expected to exceed $100,000 in any calendar year if any director, nominees,director nominee, executive officers,officer, greater-than-5% beneficial owners andowner or their respective immediate family members where the amount involved in the transaction exceedshave or is expected to exceed $100,000 inwill have a single calendar year. The related person transaction described in this proxy statement is subject to, and has been approveddirect or ratified under, this policy.indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).
The policy provides that the Governance Committee reviews certain transactions subject to the policy and determines whether or not to approve or ratify those transactions. In doing so, the Committee takes into account, among other factors it deems appropriate, whether the transaction is on terms that are no less favorable to the company than terms generally available to an unaffiliated third-partythird party under the same or similar circumstances and the extent of the related person's interest in the
transaction. In addition, the Board has delegated authority to the Chair of the Governance Committee to pre-approve or ratify transactions where the aggregate amount involved is expected to be less than $1 million. A summary of any new transactions pre-approved by the Chair is provided to the full Governance Committee for its review in connection with each regularly scheduled Governance Committee meeting.
The Governance Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include:include, but are not limited to:
At least annually, a summary of new transactions covered by the standing pre-approvals described above is provided to the Governance Committee for its review. In 2011, the transaction between the company and Mr. Boeckmann mentioned above under "Certain Relationships and Related Transactions" was pre-approved by the Chair of the Governance Committee; and a summary of the transaction was provided to the Governance Committee.
As part of its oversight function, the Board monitors how management operates the company. When granting authority to management, approving strategies and receiving management reports, the Board considers, among other things, the risks and vulnerabilities the company faces. In addition, the Board discusses risks related to the company's business strategy at the annual strategic planning meeting every June. The Board also delegates responsibility for the oversight of certain risks to the Board's committees.
Under the Audit Committee charter, the Audit Committee is responsible for reviewing and discussing with management the company's most significant risks, methods of risk assessment, risk mitigation strategies, and the overall effectiveness of the company's guidelines, policies and systems with respect to risk assessment and management. In particular, the Audit Committee considers risk issues associated with our overall financial reporting, disclosure process and legal compliance, as well as accounting risk exposure. The Audit Committee is provided quarterly reports on enterprise risk management, including the economic, geographic, operational and market risks facing our company. In carrying out its responsibilities related to risk oversight, the Audit Committee meets with the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer, the Chief Compliance Officer, the head of internal audit and the independent registered public accounting firm in executive sessions at least quarterly, and with the Chief Legal Officer as determined from time to time by the Audit Committee, to discuss particular risks facing the company.
The Organization and Compensation Committee is also tasked with certain elements of risk oversight. The Organization and Compensation Committee annually reviews the company's compensation policies and programs, as well as the mix of short-term and long-term compensation, to confirm that our compensation programs do not encourage unnecessary and excessive risk taking. Finally, the Governance Committee is responsible for overseeing governance issues that may create governance risks, such as board composition, director selection and the other governance policies and
practices that are critical to the success of the business. Each of the Audit Committee, Governance Committee and Organization and Compensation Committee report quarterly to the Board regarding the areas of risk they oversee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2010, Peter J. Fluor, Ilesanmi Adesida, Peter K. Barker, H. Paulett Eberhart, James T. Hackett, Kent Kresa, Joseph W. Prueher and Peter S. Watson served on the Organization and Compensation Committee. As discussed above under "Certain Relationships and Related Transactions," Peter Fluor's brother is an employee of a subsidiary of the company. There are no compensation committee interlocks between the company and other entities involving the company's executive officers and directors.
REPORT OF THE AUDIT COMMITTEEADVISORY VOTE ON EXECUTIVE COMPENSATION
The Audit Committee assists the Board in fulfilling its oversight responsibility for the:
In carrying out these responsibilities, the Audit Committee, among other things, supervises the relationship between the company and its independent registered public accounting firm, including making decisions with respect to its appointment or removal, reviewing the scope of its audit services, pre-approving audit engagement fees and non-audit services and evaluating its independence. The Audit Committee oversees and evaluates the adequacy and effectiveness of the company's systems of internal and disclosure controls and internal audit function. The Audit Committee has the authority to investigate any matter brought to its attention and may engage outside counsel for such purpose.Proposal 2
The company's management is responsible, among other things, for preparing the financial statements and for the overall financial reporting process, including the company's system of internal controls. The independent registered public accounting firm's responsibilities include auditing the financial statements and expressingWe are asking shareholders to approve an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles.
As part of its oversight of the company's financial statements, the Audit Committee reviewed and discussed with management and Ernst & Young LLP, the company's independent registered public accounting firm, the audited financial statements of the company for the fiscal year ended December 31, 2007. The Audit Committee discussed with Ernst & Young LLP, who is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States and an opinionadvisory resolution on the company's internal control over financial reporting, such mattersexecutive compensation as are required to be discussed byStatement on Auditing Standards No. 61, as amended (Communication with Audit Committees), relating to the conduct of the audit. The Audit Committee also has discussed with Ernst & Young LLP, the registered public accounting firm's independence from the company and its management, including the mattersreported in this proxy statement. As described below in the written disclosures and the letter the Audit Committee received from the independent registered public accounting firm as required byIndependence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and considered the compatibility of non-audit services with the registered public accounting firm's independence.
Based on its review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, for filing with the Securities and Exchange Commission. The Audit Committee has also selected Ernst & Young LLP as the company's independent registered public accounting firm for 2008.
The Audit CommitteeDean R. O'HarePeter K. BarkerJames T. HackettKent KresaVilma S. MartinezLord Robin W. RenwickSuzanne H. Woolsey
EXECUTIVE COMPENSATIONCompensation"Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis is designed to provide shareholders with an understandingAnalysis" section of how our compensation programs are designed and operate in practice with respect to named executives. Our named executives are those individuals who served as our Chairman and Chief Executive Officer and Chief Financial Officer during 2007, as well asthis proxy statement, the other individuals included in the Summary Compensation Table on page 29.
The Organization and Compensation Committee ofhas structured our executive compensation program to achieve the Board of Directors (the "Committee") has responsibility for establishing and implementingfollowing key objectives that contribute to the company's executive compensation philosophy. The Committee reviews and determines all components of named executives' compensation, including making individual compensation decisions, and reviewing and revising the company's compensation plans, programs and other arrangements.
Compensation Philosophy and Objectives
The Committee has established the following compensation philosophy and objectives for the company's named executives:long-term success:
We urge shareholders to read the "Compensation Discussion and Analysis" beginning on page 21 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative appearing on pages 35 through 52, which provide detailed information on the compensation of our named executives. The Organization and Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the "Compensation Discussion and Analysis" are effective in achieving our goals and that the compensation of our named executives reported in this proxy statement has supported and contributed to the company's success.
In accordance with recently adopted Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a matter of good corporate governance, we are asking shareholders to approve the following advisory resolution at the 2011 Annual Meeting of Shareholders:
RESOLVED, that the shareholders of Fluor expects superior performance. OurCorporation (the "Company") approve, on an advisory basis, the compensation of the Company's named executives as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company's 2011 Annual Meeting of Shareholders.
This advisory resolution, commonly referred to as a "say-on-pay" resolution, is non-binding on the Board. Although non-binding, the Board and the Organization and Compensation Committee will review and consider the voting results when evaluating our executive compensation program.
Board Recommendation
The Board of Directors recommends a vote FOR the approval of the advisory resolution on executive compensation.
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES
ON EXECUTIVE COMPENSATION
Proposal 3
In Proposal 2 above, we are asking shareholders to vote on an advisory resolution on executive compensation. Pursuant to recently adopted Section 14A of the Exchange Act, in this Proposal 3 we are asking shareholders to vote on whether future advisory votes on executive compensation should occur every year, every two years or every three years.
The Board believes that a triennial vote on executive compensation is appropriate for a number of reasons. Most significantly, our compensation programs are designed to reward long-term performance, and a triennial vote corresponds with the payout and vesting periods under our long-term incentive awards. In addition, we believe that a triennial advisory vote on executive compensation reflects the appropriate time frame for the Organization and Compensation Committee and the Board to evaluate the results of the most recent advisory vote on executive compensation, to discuss the implications of that vote with shareholders to the extent needed, to develop and implement any adjustments to our executive compensation programs that may be appropriate in light of a past advisory vote on executive compensation, and for shareholders to see and evaluate the Organization and Compensation Committee's actions in context. In this regard, because the advisory vote on executive compensation occurs after we have already implemented our executive compensation programs for the current year, and because the different elements of compensation are designed to operate in a integrated manner and to complement one another, we expect that in many cases it may not be appropriate or feasible to fully address and respond to any one year's advisory vote on executive compensation by the time of the following year's annual meeting of shareholders.
The Board is also aware of views that some have expressed in support of conducting an annual advisory vote on executive compensation. We are aware that some shareholders believe that annual advisory votes will enhance or reinforce accountability. However, we have in the past and will in the future continue to be engaged with our shareholders on a number of topics and in a number of forums. Thus, we view the advisory vote on executive compensation as an additional, but not exclusive, means for our shareholders to communicate with us regarding their views on the company's executive compensation programs. We believe that the many avenues that have and will continue to exist for shareholder engagement differentiate the company's situation from that of companies in some countries where an annual advisory vote on executive compensation is prevalent. Also, because our executive compensation programs are designed to operate over the long-term and to enhance long-term performance, we are concerned that an annual advisory vote on executive compensation could lead to a near-term perspective inappropriately bearing on our executive compensation programs.
We understand that our shareholders may have different views as to what is an appropriate frequency for advisory votes on executive compensation, and we will carefully review the voting results. Shareholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on the Board.
Board Recommendation
The Board acknowledges that there are a number of points of view regarding the relative benefits of triennial and more frequent say-on-pay votes. Accordingly, the Board is not recommending that shareholders support any specific view. The Board will carefully consider and expects to be guided by the alternative that receives the most shareholder support in determining the frequency of future say-on-pay votes. Notwithstanding the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to compensation programs.
Compensation Discussion and Analysis
Executive Summary
We seek to closely align the interests of our named executives with the interests of our shareholders and to reward our named executives whenfor achievement of short-term and long-term strategic and operational goals that contribute to the long-term success of the company. We also strive to provide compensation that will attract and retain highly qualified executives to lead our company. We believe our executive compensation programs fulfill these key objectives.
In this Executive Summary we highlight (1) the relationship between our named executives' compensation and the company's 2010 financial performance and (2) key compensation policies adopted by our Organization and Compensation Committee (the "Committee") as they relate to governance, risk mitigation and best practices.
Financial Overview
In 2010, the company faced another year of slow global recovery and continued economic uncertainty. In the face of these challenges, solid progress was made in growing our project backlog, which was $34.9 billion at year end, nearly matching 2008's record. Bolstered by an improving global economic climate, new project awards reached an all-time record of $27.4 billion for the year. Also, at December 31, 2010, one-, three- and five-year total shareholder returns exceeded those of the S&P 500 and our peer group. However, the year was not without its disappointments. Earnings performance was significantly impacted by charges relating to certain projects, including $343 million in charges on one project for a variety of execution challenges, including material and equipment delivery issues, productivity issues, weather-related delays and the bankruptcy of a major subcontractor, with net earnings at $357.5 million at year end. In addition, revenue of $20.8 billion in 2010 fell slightly from $22.0 billion in 2009.
The chart below summarizes some of the key company financial results for fiscal 2010 compared to fiscal 2009.
Financial Measure | Fiscal Year Ending December 31, 2010 | Fiscal Year Ending December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
| ($ in millions) | ||||||
Net Earnings | $ | 357.5 | $ | 684.9 | |||
Corporate Return on Operating Assets Employed | 11.9 | % | 25.3 | % | |||
New Awards | $ | 27,363 | $ | 18,455 | |||
Backlog | $ | 34,909 | $ | 26,779 |
Pay for Performance
While the company made great progress in 2010, with growth in project backlog and new awards, and shareholder returns that outpaced market comparisons, a substantial percentage of each named executive's cash compensation was tied to financial results that were lower than both the target achievement outlined in our 2010 plans as well as our 2009 financial performance. As a result, cash payments to named executives in 2010 under both our annual and long term incentive programs were
significantly lower than 2009. Each of the cash payments under our incentive plans, relative to 2009 payments, is set forth below for those named executives who were also named executives in 2009.
Name | Year | Annual Incentive Paid | Value Driver Incentive Paid | Total Paid | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Alan L. Boeckmann | 2010 | $ | 406,000 | $ | 1,131,020 | $ | 1,537,020 | ||||||
2009 | $ | 1,700,000 | $ | 2,881,640 | $ | 4,581,640 | |||||||
David T. Seaton | 2010 | $ | 301,000 | $ | 144,280 | $ | 445,280 | ||||||
2009 | $ | 769,500 | $ | 357,280 | $ | 1,126,780 | |||||||
D. Michael Steuert | 2010 | $ | 316,800 | $ | 353,510 | $ | 670,310 | ||||||
2009 | $ | 696,900 | $ | 973,820 | $ | 1,670,720 |
An explanation of the impact of the company's performance on the payment of the annual and long-term cash-based incentives is set forth below:
Additional Compensation
In addition, several other Committee decisions affected compensation in 2010, as summarized below:
Table only in the last year of the performance period, based on the amount actually earned. Although 2010 awards were only marginally increased, this change in the mix of long term incentive awards (from1/3 cash and2/3 stock in prior periods to 100% equity-based compensation in 2010), and the SEC reporting standards for equity and cash awards discussed above, results in higher amounts being reflected in the Summary Compensation Table on page 35. Specifically, if one third of the value shown in the "stock awards" and "option awards" columns of the Summary Compensation Table for 2010 were removed from those columns and a corresponding change were made to overall compensation, the table would provide a more consistent year-over-year comparison of annual compensation.
Governance Practices
The Committee has endeavored to maintain good governance standards in our compensation practices. The following policies were in effect in 2010 and remain in effect in 2011:
Components of 2010 Named Executive Compensation
Base Salary
The company provides named executives with base salaries that provide a competitive, stable level of income, since most other elements of their compensation are at risk based on company performance. In determining base salaries for positions held by named executives, the Committee generally targets the 50th percentile for similar types of executives within the Compensation Peer Group. Base salaries may deviate from the 50th percentile for named executives with more experience or specialized duties or skill sets. The individual named executives' base salaries for 2010 were at approximately the 50th percentile of the Compensation Peer Group, with the exception of Mr. Oosterveer and Mr. Steuert. Mr. Oosterveer's base salary currently falls within the first quartile of similarly situated executives because he is fairly new to his position. Mr. Steuert's base salary falls within the top quartile of chief financial officers within the Compensation Peer Group because his salary reflects his years of experience and the level of duties he has at the company. Base salaries for named executives are reviewed annually and upon a change in responsibilities. In evaluating the Chief Executive Officer's base salary and his recommendations for the base salaries of the other named executives, the Committee considered the following factors during its 2010 annual review:
Increases up to 6% from December 31, 2009 are reflected in the base salaries for 2010 reported in column (c) of the Summary Compensation Table on page 35.
Annual Incentive Program
The annual incentive program is administered by the Committee pursuant to the shareholder-approved Fluor Corporation 2008 Executive Performance Incentive Plan. Cash-based annual incentives are provided to reward named executives for performance during the year. Each named executive participates in this program and is provided with a target annual incentive amount, based on a percentage of his annual base salary. This percentage reflects the executive's respective organizational level, position and responsibility for achievement of the company's strategic goals. For 2010, all named executives were provided an annual incentive target percentage of base salary that approximated the 50th percentile of target award percentages for executives with similar job responsibilities within the Compensation Peer Group.
The named executives' target annual incentives for 2010 were as follows:
Named Executive | Percentage of Base Salary | Target Annual Incentive Amount | |||||
---|---|---|---|---|---|---|---|
Alan L. Boeckmann | 125 | % | $ | 1,560,000 | |||
David T. Seaton | 100 | % | $ | 700,000 | |||
D. Michael Steuert | 80 | % | $ | 633,500 | |||
Carlos M. Hernandez | 75 | % | $ | 378,800 | |||
Peter W. Oosterveer | 75 | % | $ | 306,100 |
A named executive may receive more or less than the target annual incentive amount, depending on whether he meets, fails to meet or exceeds certain performance measures relating to overall
company performance and the individual's own performance or the performance of his group or function during the year. The types of measures and relative weight of those measures are determined by the Committee each year and are tailored to the named executive's position and organizational responsibility. The measures have remained fairly consistent over the past five years, but their relative weightings have changed slightly. When making its determination, the Committee considers the company's annual operating plan and strategic priorities, as well as the company's performance in the previous year. The discretionary individual and team performance measures are subjective; and no targets are set for these measures. The other measures for each named executive are objective. For 2010, the Committee selected both corporate financial and strategic measures. The use of multiple financial goals prevents an over-emphasis on any one financial metric; and the other metrics assist in focusing executives on key areas of importance to the company, including safety. The measures, along with their respective weightings, for each named executive were as follows:
2010 Measure | Alan L. Boeckmann | David T. Seaton | D. Michael Steuert | Carlos M. Hernandez | Peter W. Oosterveer | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings | 50 | % | 45 | % | 45 | % | 45 | % | 35 | % | |||||||
Corporate Return on Operating Assets Employed (ROAE) | 30 | % | 30 | % | 30 | % | 30 | % | 20 | % | |||||||
Corporate Safety | |||||||||||||||||
Days Away from Work Incidence Rate | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||||
Total Recordable Case Incidence Rate | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||||
Oil and Gas Group Segment Profit | — | — | — | — | 20 | % | |||||||||||
Discretionary Individual and Team Performance | 10 | % | 15 | % | 15 | % | 15 | % | 15 | % |
Corporate net earnings ties to the amount set forth in our financial statements but may be adjusted at the discretion of the Committee for extraordinary non-operating events. Corporate ROAE is calculated by dividing full year corporate net earnings by net assets. Net assets is defined as total assets (excluding excess cash) minus current liabilities (excluding non-recourse debt). No adjustments were made to these measures for purposes of 2010 compensation decisions.
Corporate safety includes two distinct measures: Fluor's days away from work incidence rate and Fluor's total recordable case incidence rate. Fluor's days away from work incidence rate is defined as a work-related injury or illness that involves days away from work beyond the day of injury or onset of the illness. Fluor's total recordable case incidence rate is defined as work-related injury or illness that results in one or more of the following: death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, loss of consciousness, or a significant injury or illness diagnosed by a physician or other licensed health care professional. Incidence rates for both measures represent the number of recordable cases per 100 full-time workers (working 40 hours per week, 50 weeks per year), and are calculated using the following equation:
Oil and Gas group segment profit is reported in our financial statements on page F-42 of our annual report on Form 10-K as filed with the Securities and Exchange Commission on February 23, 2011. Segment profit is calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding: corporate administrative and general expense; interest expense; interest income; domestic and foreign income taxes; and other non-operating income and expense items. The Oil and Gas group's segment profit measure can be adjusted at the discretion of the Committee for extraordinary non-operating events. No adjustments were made to this measure in 2010 for purposes of compensation decisions. In addition, discretionary individual and team functional
measures are given a rating based on subjective evaluations and recommendations by the Chief Executive Officer.
The 2010 performance ranges for each of the measures applicable to our named executives, together with the actual achievement amounts for such measures, are presented below. With respect to corporate net earnings and corporate ROAE, actual achievement must be between 95% and 105% of the target amount for the target to be met. The company's performance for 2010 varied with respect to each corporate measure: corporate net earnings and ROAE were both below the minimum. The company's performance with respect to the corporate safety measures exceeded the maximum; while the Oil and Gas group segment profit measure was just above stated objectives.minimum. The overall level of achievement of the targets in 2010 was lower than the last ten years.
Measure | 2010 Actual Achievement | Minimum | Target | Upper Target | Maximum | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings (in millions) | $ | 357.5 | $ | 411.7 | $ | 588.2 | $ | 641.1 | $ | 676.4 | |||||||
Corporate ROAE | 11.9 | % | 13.0 | % | 18.6 | % | 20.3 | % | 21.4 | % | |||||||
Corporate Safety | |||||||||||||||||
Days Away from Work Incidence Rate | .03 | �� | .08 | .06 | .05 | .04 | |||||||||||
Total Recordable Case Incidence Rate | .28 | .60 | .50 | .40 | .30 | ||||||||||||
Oil and Gas Group Segment Profit (in millions) | $ | 344.0 | $ | 343.7 | $ | 491.0 | $ | 535.2 | $ | 564.7 |
Achievement of the discretionary individual and team performance measure varied among the named executives because of the difference in responsibilities and the accomplishments of each individual. The Committee determined the achievement of the discretionary individual and team performance measure for the Chief Executive Officer and also the other named executives, after taking into account the Chief Executive Officer's recommendations with regard to other named executives. Subjective evaluations made by the Chief Executive Officer were based on each named executive's leadership and group accomplishments. Individual performance was not a significant factor in determining compensation, and no named executive's compensation was materially affected by his level of achievement of this measure.
Once the achievement amounts are determined and compared to the various targets, each named executive's overall performance rating is calculated by multiplying each measure's rating (which can range from 0% to 200% achievement) by its relative weighting, and then aggregating those amounts. The aggregate amount (the overall performance rating) is then multiplied by the individual's target annual incentive amount to determine the annual incentive payment for each named executive.
The annual incentive amounts for each named executive were determined as follows.
Named Executive | Target Annual Incentive Amount | Overall Rating | Annual Incentive Amount | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Alan L. Boeckmann | $ | 1,560,000 | 0.26 | $ | 406,000 | |||||
David T. Seaton | $ | 700,000 | 0.43 | $ | 301,000 | |||||
D. Michael Steuert | $ | 633,500 | 0.50 | $ | 316,800 | |||||
Carlos M. Hernandez | $ | 378,800 | 0.50 | $ | 189,400 | |||||
Peter W. Oosterveer | $ | 306,100 | 0.60 | $ | 183,700 |
For 2010, the average annual incentive payment for all named executives was between minimum and target achievement based on company, group and individual performance. The annual incentive payment for each named executive was significantly lower than his 2009 payment, due to the failure to achieve minimum performance for the Corporate Net Earnings and ROAE measures. With the exception of 2007 and 2008, historically, annual incentive payments have been close to target levels, and not at or above the upper target level. Payments for 2010 were below this historical trend.
Long Term Incentive Program
In 2010, the company's long term incentives were awarded by the Committee under the shareholder-approved Fluor Corporation 2008 Executive Performance Incentive Plan. The plan was designed to allow for awards that create increased value for our shareholders, reward the achievement of superior operating results, facilitate the retention of key management personnel and align the interests of management and shareholders through equity ownership.
In 2010, the long term incentive awards for named executives included two components:
As disclosed last year, the Committee did not grant awards under the cash-based Value Driver Incentive (VDI) program for 2010, in order to re-evaluate and refine the program for 2011, as further described below. The total dollar award value for the restricted stock unit and option grants made in 2010 was targeted and granted at approximately the same total dollar award value as the aggregate long-term awards granted in 2009, which were at approximately the 50th percentile of the Compensation Peer Group. Long term incentive grants made to Mr. Seaton were greater than prior years due to his promotion to Chief Operating Officer near the end of 2009.
Under SEC reporting rules, equity awards such as stock options and restricted stock units are reported in the Summary Compensation Table on page 35 for the year in which they are granted, based upon their grant date value, whereas long term cash incentive arrangements such as the VDI program are reported in the Summary Compensation Table only in the last year of the performance period, based on the amount actually earned. The Committee's decision to suspend the VDI program and award long term incentive compensation in only stock options and restricted stock units in 2010 results in higher amounts of stock awards and option awards being reflected in the Summary Compensation Table for long term compensation in 2010.
Equity Awards
The Committee determines the dollar value of annual equity awards for named executives at the first regularly scheduled meeting of the Committee each year, which is typically held in February. The determinations are made at that time because it coincides with the annual performance review and compensation adjustment cycle, which are addressed at that same meeting. The equity awards are granted after the meeting on the third business day following the publication of our annual results, based on the closing price on that date. Stock options provide actual economic value to the holder if the price of Fluor stock has increased from the grant date at the time the option is exercised. Restricted stock units have economic value when they vest, so they incentivize holders to create shareholder value but also have some retention value even if the stock price declines or stays flat. Stock options motivate executive officers by providing more potential upside, while restricted stock units align named executives with shareholders and balance our compensation program design, as they take into account both upside and downside risk in our stock price. Both stock options and restricted stock units, which vest over time, encourage retention. The combination of the two components aligns the interests of named executives with those of shareholders without overemphasizing any one type of grant, and reflects a structure similar to many of our peers in granting more than one form of award.
Value Driver Incentive Program
In January 2010, the Committee suspended the company's cash-based VDI program for future grants due to uncertainties from evolving compensation legislation or regulation and for other corporate reasons. However, portions of two prior awards under the 2008-2009 VDI program and the
2009-2010 VDI program were earned in 2010. The prior awards were based upon the achievement of the following weightings and objectives and were measured over a two-year performance period:
New awards gross margin dollars measures the total amount of project gross margin that the company expects to receive as a result of projects awarded within the performance period. New awards gross margin percentage is the total amount of gross margin the company expects to receive as a result of projects awarded within the performance period as a percentage of expected revenue from these projects. The Committee selected these performance criteria because, although measured over a relatively short period, they relate to contracts that typically will extend a number of years into the future and thus, will generate, and position the company for, increased future earnings. The Committee believes the inclusion of the two different measures is appropriate given the diversified nature of our business. These measures are not reported in our financial statements and the disclosure of the new awards gross margin targets would result in competitive harm to the company.
Each of the VDI plans for 2008-2009 and 2009-2010 had payouts as of December 31, 2010. For the 2008-2009 VDI plan, the final half of the total award was paid at an achievement of 92% of the target payout level based on 2008-2009 performance achievement for each named executive. For the 2009-2010 VDI plan, the first half of the award was paid to named executives in 2011 at an achievement of 14% of the target payout level based on cumulative performance over the two-year performance period. The final half of the 2009-2010 award will be paid at the same level in March 2012. The VDI payouts are detailed in the Non-Equity Incentive Plan Compensation table on page 37. In the past five years, VDI payouts have ranged from just above minimum through maximum and have averaged between target and upper target.
Revised Value Driver Incentive Program
During 2010, with the assistance of the Committee's independent compensation consultant, the Committee reviewed the long term incentive program, re-establishing the VDI program for stock-based VDI grants in 2011 and beyond. The Committee believes that compensation paidthe VDI program provides an incentive for named executives to executives shouldgrow the business and create shareholder value, as the awards are denominated in company shares, as described below. The vesting requirements of the program also enhance retention.
In 2011, VDI awards will constitute one third of the long term incentive grant, with stock options and restricted stock units each comprising an additional third. Performance goals under the new program will continue to be closely aligned withbased on the new awards gross margin dollars and new awards gross margin percentage objectives; but the performance measurement period will be one year (i.e., January 1st to December 31st). Generally, in the first quarter of a year, the Committee will set threshold (paid at 50% of target), target (paid at 100%), upper target (paid at 150% of target) and maximum (paid at 200% of target) levels for both objectives of the company.VDI plan for the performance period. When setting these performance goals, the Committee will consider the company's past performance, current business outlook and other corporate financial measures. When determining whether the performance goals have been met, the Committee will take into account any scope changes or project cancellations that occurred during the year with respect to new awards obtained during the performance period.
During the first quarter of each year, the Committee will grant performance units based on a target value of the grant. The number of units granted will be calculated using the closing trading value of our common stock on the date of grant. On the first anniversary of the grant date, the Committee will determine the actual achievement of the performance measures and the number of performance units will be adjusted by multiplying the number of performance units by the performance rating
(ranging from 0.0 to 2.0). The performance units, as adjusted on the first anniversary for performance, will vest 100% on the date two years following the adjustment date and will be settled in cash or stock, as elected by the named executive, provided that any award for a named executive not meeting company stock ownership guidelines will be settled in stock.
However, to address the cash incentive compensation gap that will occur in 2011 and 2012 as a result of the change in the payout schedule under the revised VDI program to three years from the grant date and the fact that no VDI awards were made in 2010 while the program was suspended:
Payments under the award will be subject to risk of forfeiture if, prior to payment, the participant's employment with the company is terminated for any reason other than retirement, death, disability or a qualifying termination within two years after a change-in-control of the company.
Provide competitive compensation.Other Compensation Decisions
In 2009, Mr. Seaton was promoted to Chief Operating Officer. The increase in his compensation for 2010 reflected the increased responsibilities of his new role. Effective February 3, 2011, Mr. Seaton was promoted to Chief Executive Officer, and the Committee adjusted his compensation accordingly. His base salary was increased to $1,025,000; and his target annual incentive was increased to 125% of his base salary, or $1,281,300. In addition, his target long term incentive award was increased to $6,250,000.
Other Elements of Named Executive Compensation
Perquisites
The company's executiveCommittee evaluates perquisites based on their cost efficiency, motivational value and benefits to the company. Perquisites, which are relatively small in relation to total direct compensation, programs are designedtargeted at the 50th percentile of the Compensation Peer Group. In 2010, named executives were paid a taxable monthly allowance as a substitute for the company reimbursing or paying for the following perquisites: an automobile allowance, tax and financial planning, and company-owned country club membership dues. In addition, named executives are required to attract, retain and motivate highly qualifiedhave a physical examination each year that is paid for by the company. Named executives critical to achieving Fluor's strategic objectives and building shareholder value.
may have spousal travel paid for by the company only when it is for an approved business purpose, in which case a related tax gross-up is provided. The Committee reviewsdoes not provide any other tax gross-ups. Named executives can make personal use of charter aircraft in conjunction with a business purpose, but the company's compensation philosophy and objectives each yearnamed executive is required to determine if revisions are necessary in light of market conditions,reimburse the company's strategic goals or other relevant factors. In eachcompany for the incremental operational cost. None of the last three years, the Committee determinednamed executives used charter aircraft in 2010 for personal reasons. Executive perquisites and benefits are provided so that no revisions to the executive compensation philosophy and objectives were necessary.
Overview of 2007 Compensation
Our named executives' compensation for 2007 reflected improved earnings under performance-based arrangements, and the company's strong financial, operational and stock price performance over the past year and over multi-year performance periods.
For 2007, the principal components ofoverall compensation for named executives were:is competitive.
Executive Deferred Compensation Program
The named executives are eligible to participate in Fluor's Executive Deferred Compensation Program. The company offers this program to provide individuals retirement and tax planning flexibility and to remain competitive with other companies within our Compensation Peer Group and general industry. Please refer to the discussion in the Nonqualified Deferred Compensation table on page 45 for performancea more detailed discussion of these arrangements.
Severance and Change-in-Control Benefits
The company provides each of the named executives with cash severance in prior years;
The employment letter extended to Mr. Steuert also provides certain severance benefits. However, a severance payment will not be paid to Mr. Steuert under the employment letter if he receives the payments and other benefits including modest post-retirementunder his change in control agreement. Please refer to the discussion under "Potential Payments Upon Termination or Change in Control" below for a more detailed discussion of these arrangements. Severance and severance benefit arrangements.
Establishing Executive Compensation
Since 2003, The company provides named executives with base salaries that provide a competitive, stable level of income, since most other elements of their compensation are at risk based on company performance. In determining base salaries for positions held by named executives, the Committee has engaged the services of George Paulin, Chief Executive Officer of Frederic W. Cook & Co., Inc., as independent outside compensation consultant to advise the Committee on all matters related to executive compensation. Frederic W. Cook & Co., Inc. was engaged by and reports directly to the Committee, and works directly on behalf of the Committee and with management and human resources functional management under the direction of the Committee. Frederick W. Cook & Co., Inc. does not perform any other services for the company.
The company, on behalf of the Committee, also engages Frederic W. Cook & Co., Inc. to conduct an annual review of its total compensation program for the Chairman and Chief Executive Officer and other named executives. Specifically, the Committee engages Frederic W. Cook & Co., Inc. to complete a report benchmarking the named executives against other executives with similar titles in order to assist the Committee in making compensation decisions. The 2007 compensation review provided the Committee with relevant market data and alternatives to consider when making compensation decisions for the named executives in 2007.
Frederic W. Cook & Co., Inc. also provided verbal advice to the Committee in the meetings, attended executive sessions of the Committee to respond to questions, and had individual calls or meetings with the Chair of the Committee to provide counsel on general and specific issues.
In making compensation decisions, the Committee compares each element of total compensation, as well as total compensation, against the company's peer group of publicly-traded general industry, energy and engineering and construction companies (collectively representing the company's "Compensation Peer Group"). The Compensation Peer Group consists of companies with similar business and financial characteristics, as well as companies with which Fluor competes for business, talent or shareholder investments.
The company's Compensation Peer Group was established in 2003 based on a recommendation by the Committee's compensation consultant at that time. The Committee annually reviews recommendations from its compensation consultant and the company's human resources function to modify the composition of the Compensation Peer Group as a result of any public offerings, mergers, acquisitions and other market events. In 2007, one company was removed from our Compensation Peer Group as a result of its acquisition by another company, decreasing the Compensation Peer Group from forty-one companies to forty companies. The companies comprising Fluor's Compensation Peer Group for purposes of determining 2007 compensation were:
For comparison purposes, Fluor's annual revenues are slightly above the median revenues of those of the Compensation Peer Group. However, the Committee believes that the Compensation Peer Group is an appropriate benchmarking comparison because of the similarity in business and financial characteristics between Fluor and the companies comprising the Compensation Peer Group. The Committee reviews benchmarking comparisons based on a job title comparison among the Compensation Peer Group. All job titles that appear to contain similar responsibilities are included in the benchmarking comparisons for each of the named executives.
The Committee setsgenerally targets for the named executives as follows:
Increases up to 6% from December 31, 2009 are reflected in the base salaries for 2010 reported in column (c) of the Summary Compensation Table on page 35.
Annual Incentive Program
The annual incentive program. Annualprogram is administered by the Committee pursuant to the shareholder-approved Fluor Corporation 2008 Executive Performance Incentive Plan. Cash-based annual incentives are provided to reward named executives for performance during the year. Each named executive participates in this program and is provided with a target annual incentive payments may be made aboveamount, based on a percentage of his annual base salary. This percentage reflects the executive's respective organizational level, position and responsibility for achievement of the company's strategic goals. For 2010, all named executives were provided an annual incentive target percentage of base salary that approximated the 50th percentile if above-target of target award percentages for executives with similar job responsibilities within the Compensation Peer Group.
The named executives' target annual incentives for 2010 were as follows:
Named Executive | Percentage of Base Salary | Target Annual Incentive Amount | |||||
---|---|---|---|---|---|---|---|
Alan L. Boeckmann | 125 | % | $ | 1,560,000 | |||
David T. Seaton | 100 | % | $ | 700,000 | |||
D. Michael Steuert | 80 | % | $ | 633,500 | |||
Carlos M. Hernandez | 75 | % | $ | 378,800 | |||
Peter W. Oosterveer | 75 | % | $ | 306,100 |
A named executive may receive more or less than the target annual incentive amount, depending on whether he meets, fails to meet or exceeds certain performance measures relating to overall
company performance and the individual's own performance or the performance of his group or function during the year. The types of measures and relative weight of those measures are determined by the Committee each year and are tailored to the named executive's position and organizational responsibility. The measures have remained fairly consistent over the past five years, but their relative weightings have changed slightly. When making its determination, the Committee considers the company's annual operating plan and strategic priorities, as well as the company's performance in the previous year. The discretionary individual and team performance measures are subjective; and no targets are set for these measures. The other measures for each named executive are objective. For 2010, the Committee selected both corporate financial and strategic measures. The use of multiple financial goals prevents an over-emphasis on any one financial metric; and the other metrics assist in focusing executives on key areas of importance to the company, including safety. The measures, along with their respective weightings, for each named executive were as follows:
2010 Measure | Alan L. Boeckmann | David T. Seaton | D. Michael Steuert | Carlos M. Hernandez | Peter W. Oosterveer | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings | 50 | % | 45 | % | 45 | % | 45 | % | 35 | % | |||||||
Corporate Return on Operating Assets Employed (ROAE) | 30 | % | 30 | % | 30 | % | 30 | % | 20 | % | |||||||
Corporate Safety | |||||||||||||||||
Days Away from Work Incidence Rate | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||||
Total Recordable Case Incidence Rate | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||||
Oil and Gas Group Segment Profit | — | — | — | — | 20 | % | |||||||||||
Discretionary Individual and Team Performance | 10 | % | 15 | % | 15 | % | 15 | % | 15 | % |
Corporate net earnings ties to the amount set forth in our financial statements but may be adjusted at the discretion of the Committee for extraordinary non-operating events. Corporate ROAE is calculated by dividing full year corporate net earnings by net assets. Net assets is defined as total assets (excluding excess cash) minus current liabilities (excluding non-recourse debt). No adjustments were made to these measures for purposes of 2010 compensation decisions.
Corporate safety includes two distinct measures: Fluor's days away from work incidence rate and Fluor's total recordable case incidence rate. Fluor's days away from work incidence rate is defined as a work-related injury or illness that involves days away from work beyond the day of injury or onset of the illness. Fluor's total recordable case incidence rate is defined as work-related injury or illness that results in one or more of the following: death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, loss of consciousness, or a significant injury or illness diagnosed by a physician or other licensed health care professional. Incidence rates for both measures represent the number of recordable cases per 100 full-time workers (working 40 hours per week, 50 weeks per year), and are calculated using the following equation:
Oil and Gas group segment profit is reported in our financial statements on page F-42 of our annual report on Form 10-K as filed with the Securities and Exchange Commission on February 23, 2011. Segment profit is calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding: corporate administrative and general expense; interest expense; interest income; domestic and foreign income taxes; and other non-operating income and expense items. The Oil and Gas group's segment profit measure can be adjusted at the discretion of the Committee for extraordinary non-operating events. No adjustments were made to this measure in 2010 for purposes of compensation decisions. In addition, discretionary individual and team functional
measures are given a rating based on subjective evaluations and recommendations by the Chief Executive Officer.
The 2010 performance ranges for each of the measures applicable to our named executives, together with the actual achievement amounts for such measures, are presented below. With respect to corporate net earnings and corporate ROAE, actual achievement must be between 95% and 105% of the target amount for the target to be met. The company's performance for 2010 varied with respect to each corporate measure: corporate net earnings and ROAE were both below the minimum. The company's performance with respect to the corporate safety measures exceeded the maximum; while the Oil and Gas group segment profit measure was just above minimum. The overall level of achievement of the targets in 2010 was lower than the last ten years.
Measure | 2010 Actual Achievement | Minimum | Target | Upper Target | Maximum | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings (in millions) | $ | 357.5 | $ | 411.7 | $ | 588.2 | $ | 641.1 | $ | 676.4 | |||||||
Corporate ROAE | 11.9 | % | 13.0 | % | 18.6 | % | 20.3 | % | 21.4 | % | |||||||
Corporate Safety | |||||||||||||||||
Days Away from Work Incidence Rate | .03 | �� | .08 | .06 | .05 | .04 | |||||||||||
Total Recordable Case Incidence Rate | .28 | .60 | .50 | .40 | .30 | ||||||||||||
Oil and Gas Group Segment Profit (in millions) | $ | 344.0 | $ | 343.7 | $ | 491.0 | $ | 535.2 | $ | 564.7 |
Achievement of the discretionary individual and team performance measure varied among the named executives because of the difference in responsibilities and the accomplishments of each individual. The Committee determined the achievement of the discretionary individual and team performance measure for the Chief Executive Officer and also the other named executives, after taking into account the Chief Executive Officer's recommendations with regard to other named executives. Subjective evaluations made by the Chief Executive Officer were based on each named executive's leadership and group accomplishments. Individual performance was not a significant factor in determining compensation, and no named executive's compensation was materially affected by his level of achievement of this measure.
Once the achievement amounts are determined and compared to the various targets, each named executive's overall performance rating is calculated by multiplying each measure's rating (which can range from 0% to 200% achievement) by its relative weighting, and then aggregating those amounts. The aggregate amount (the overall performance rating) is then multiplied by the individual's target annual incentive amount to determine the annual incentive payment for each named executive.
The annual incentive amounts for each named executive were determined as follows.
Named Executive | Target Annual Incentive Amount | Overall Rating | Annual Incentive Amount | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Alan L. Boeckmann | $ | 1,560,000 | 0.26 | $ | 406,000 | |||||
David T. Seaton | $ | 700,000 | 0.43 | $ | 301,000 | |||||
D. Michael Steuert | $ | 633,500 | 0.50 | $ | 316,800 | |||||
Carlos M. Hernandez | $ | 378,800 | 0.50 | $ | 189,400 | |||||
Peter W. Oosterveer | $ | 306,100 | 0.60 | $ | 183,700 |
For 2010, the average annual incentive payment for all named executives was between minimum and target achievement based on company, group and individual performance is attained. If company and individual objectives are not met,performance. The annual incentive compensation may bepayment for each named executive was significantly lower than his 2009 payment, due to the failure to achieve minimum performance for the Corporate Net Earnings and ROAE measures. With the exception of 2007 and 2008, historically, annual incentive payments have been close to target levels, and not at or above the upper target level. Payments for 2010 were below this historical trend.
Long Term Incentive Program
In 2010, the 50th percentile or not paid at all.company's long term incentives were awarded by the Committee under the shareholder-approved Fluor Corporation 2008 Executive Performance Incentive Plan. The plan was designed to allow for awards that create increased value for our shareholders, reward the achievement of superior operating results, facilitate the retention of key management personnel and align the interests of management and shareholders through equity ownership.
In 2010, the long term incentive awards for named executives included two components:
Total direct compensation, or base salary plus annual As disclosed last year, the Committee did not grant awards under the cash-based Value Driver Incentive (VDI) program for 2010, in order to re-evaluate and long term incentiverefine the program for 2011, as further described below. The total dollar award value for the restricted stock unit and option grants (cash-basedmade in 2010 was targeted and equity-based), is also targetedgranted at approximately the same total dollar award value as the aggregate long-term awards granted in 2009, which were at approximately the 50th percentile of the Compensation Peer GroupGroup. Long term incentive grants made to Mr. Seaton were greater than prior years due to his promotion to Chief Operating Officer near the end of 2009.
Under SEC reporting rules, equity awards such as stock options and restricted stock units are reported in the Summary Compensation Table on page 35 for target-level company performance. Achievementthe year in which they are granted, based upon their grant date value, whereas long term cash incentive arrangements such as the VDI program are reported in the Summary Compensation Table only in the last year of superior companythe performance period, based on the amount actually earned. The Committee's decision to suspend the VDI program and continuedaward long term incentive compensation in only stock options and restricted stock units in 2010 results in higher amounts of stock awards and option awards being reflected in the Summary Compensation Table for long term compensation in 2010.
Equity Awards
The Committee determines the dollar value of annual equity awards for named executives at the first regularly scheduled meeting of the Committee each year, which is typically held in February. The determinations are made at that time because it coincides with the annual performance review and compensation adjustment cycle, which are addressed at that same meeting. The equity awards are granted after the meeting on the third business day following the publication of our annual results, based on the closing price on that date. Stock options provide actual economic value to the holder if the price of Fluor stock has increased from the grant date at the time the option is exercised. Restricted stock units have economic value when they vest, so they incentivize holders to create shareholder value but also have some retention value even if the stock price appreciation will resultdeclines or stays flat. Stock options motivate executive officers by providing more potential upside, while restricted stock units align named executives with shareholders and balance our compensation program design, as they take into account both upside and downside risk in growthour stock price. Both stock options and restricted stock units, which vest over time, encourage retention. The combination of actualthe two components aligns the interests of named executives with those of shareholders without overemphasizing any one type of grant, and reflects a structure similar to many of our peers in granting more than one form of award.
Value Driver Incentive Program
In January 2010, the Committee suspended the company's cash-based VDI program for future grants due to uncertainties from evolving compensation legislation or regulation and for other corporate reasons. However, portions of two prior awards under the 2008-2009 VDI program and the
2009-2010 VDI program were earned in 2010. The prior awards were based upon the achievement of the following weightings and objectives and were measured over a two-year performance period:
New awards gross margin dollars measures the total amount of project gross margin that the company expects to receive as a result of projects awarded within the performance period. New awards gross margin percentage is the total amount of gross margin the company expects to receive as a result of projects awarded within the performance period as a percentage of expected revenue from these projects. The Committee selected these performance criteria because, although measured over a relatively short period, they relate to contracts that typically will extend a number of years into the future and thus, will generate, and position the company for, increased future earnings. The Committee believes the inclusion of the two different measures is appropriate given the diversified nature of our business. These measures are not reported in our financial statements and the disclosure of the new awards gross margin targets would result in competitive harm to the company.
Each of the VDI plans for 2008-2009 and 2009-2010 had payouts as of December 31, 2010. For the 2008-2009 VDI plan, the final half of the total award was paid at an achievement of 92% of the target payout level based on 2008-2009 performance achievement for each named executive. For the 2009-2010 VDI plan, the first half of the award was paid to named executives in 2011 at an achievement of 14% of the target payout level based on cumulative performance over the two-year performance period. The final half of the 2009-2010 award will be paid at the same level in March 2012. The VDI payouts are detailed in the Non-Equity Incentive Plan Compensation table on page 37. In the past five years, VDI payouts have ranged from just above minimum through maximum and have averaged between target and upper target.
Perquisite valuesRevised Value Driver Incentive Program
During 2010, with the assistance of the Committee's independent compensation consultant, the Committee reviewed the long term incentive program, re-establishing the VDI program for stock-based VDI grants in 2011 and beyond. The Committee believes that the VDI program provides an incentive for named executives to grow the business and create shareholder value, as the awards are denominated in company shares, as described below. The vesting requirements of the program also enhance retention.
In 2011, VDI awards will constitute one third of the long term incentive grant, with stock options and restricted stock units each comprising an additional third. Performance goals under the new program will continue to be based on the new awards gross margin dollars and new awards gross margin percentage objectives; but the performance measurement period will be one year (i.e., January 1st to December 31st). Generally, in the first quarter of a year, the Committee will set threshold (paid at 50% of target), target (paid at 100%), upper target (paid at 150% of target) and maximum (paid at 200% of target) levels for both objectives of the VDI plan for the performance period. When setting these performance goals, the Committee will consider the company's past performance, current business outlook and other corporate financial measures. When determining whether the performance goals have been met, the Committee will take into account any scope changes or project cancellations that occurred during the year with respect to new awards obtained during the performance period.
During the first quarter of each year, the Committee will grant performance units based on a target value of the grant. The number of units granted will be calculated using the closing trading value of our common stock on the date of grant. On the first anniversary of the grant date, the Committee will determine the actual achievement of the performance measures and the number of performance units will be adjusted by multiplying the number of performance units by the performance rating
(ranging from 0.0 to 2.0). The performance units, as adjusted on the first anniversary for performance, will vest 100% on the date two years following the adjustment date and will be settled in cash or stock, as elected by the named executive, provided that any award for a named executive not meeting company stock ownership guidelines will be settled in stock.
However, to address the cash incentive compensation gap that will occur in 2011 and 2012 as a result of the change in the payout schedule under the revised VDI program to three years from the grant date and the fact that no VDI awards were made in 2010 while the program was suspended:
Payments under the award will be subject to risk of forfeiture if, prior to payment, the participant's employment with the company is terminated for any reason other than retirement, death, disability or a qualifying termination within two years after a change-in-control of the company.
Other Compensation Decisions
In 2009, Mr. Seaton was promoted to Chief Operating Officer. The increase in his compensation for 2010 reflected the increased responsibilities of his new role. Effective February 3, 2011, Mr. Seaton was promoted to Chief Executive Officer, and the Committee adjusted his compensation accordingly. His base salary was increased to $1,025,000; and his target annual incentive was increased to 125% of his base salary, or $1,281,300. In addition, his target long term incentive award was increased to $6,250,000.
Other Elements of Named Executive Compensation
Perquisites
The Committee evaluates perquisites based on their cost efficiency, motivational value and benefits to the company. Perquisites, which are relatively small in relation to total direct compensation, are targeted at the 50th percentile of the Compensation Peer Group, but less emphasis is placed on this element as part of total compensation offered toGroup. In 2010, named executives.
A significant portion of total direct compensation is allocated to annual and long term incentivesexecutives were paid a taxable monthly allowance as a resultsubstitute for the company reimbursing or paying for the following perquisites: an automobile allowance, tax and financial planning, and company-owned country club membership dues. In addition, named executives are required to have a physical examination each year that is paid for by the company. Named executives may have spousal travel paid for by the company only when it is for an approved business purpose, in which case a related tax gross-up is provided. The Committee does not provide any other tax gross-ups. Named executives can make personal use of charter aircraft in conjunction with a business purpose, but the named executive is required to reimburse the company for the incremental operational cost. None of the company'snamed executives used charter aircraft in 2010 for personal reasons. Executive perquisites and benefits are provided so that overall compensation philosophy.for named executives is competitive.
Executive Deferred Compensation Program
The Committee reviewsnamed executives are eligible to participate in Fluor's Executive Deferred Compensation Program. The company offers this program to provide individuals retirement and tax planning flexibility and to remain competitive with other companies within our Compensation Peer Group and general industry. Please refer to the discussion in the Nonqualified Deferred Compensation table on page 45 for a more detailed discussion of these arrangements.
Severance and Change-in-Control Benefits
The company provides each of the named executives with cash severance in the event of a termination of employment by the company without cause through a company severance policy that the company believes assists in attracting and retaining qualified candidates, including during any potential change in control. The level of any cash severance payment is based upon base salary plus years of service. In addition, each named executive has a change in control agreement that provides additional payments and other benefits if we terminate his employment without cause or if the named executive terminates employment for good reason within two years following a change in control of the company. The change in control agreements are designed to reinforce and encourage the continued attention and dedication of the executives without distraction in the face of potentially disturbing circumstances arising from the possibility of the change in control and to serve as an incentive to their continued employment with the company. No gross up for excise taxes, if any, is payable under the change in control agreements. The company will, however, automatically reduce any payments under the agreement to the extent necessary to prevent payments being subject to the excise tax, but only if by reason of the reduction, the after-tax benefit of the reduced payments exceeds the after-tax benefit if such reduction were not made.
The employment letter extended to Mr. Steuert also provides certain severance benefits. However, a severance payment will not be paid to Mr. Steuert under the employment letter if he receives the payments and other benefits under his change in control agreement. Please refer to the discussion under "Potential Payments Upon Termination or Change in Control" below for a more detailed discussion of these arrangements. Severance and change-in-control benefits are provided to be competitive within the Compensation Peer Group data each year to determine the appropriate level and mix of incentive compensation including cash-based and equity-based incentives. For 2007, the target allocation between base salary and all other types of incentive compensation (cash-based and equity-based) as a percentage of the total compensation for the Chairman and Chief Executive Officer was approximately 14% in base salary and 86% in annual and long term incentive compensation. The target allocation mix shifts slightly for all other named executives to approximately 19% to 33% in base salary and 67% to 81% in annual and long term incentive compensation. There are no material differences between the other named executives. This reflects the Committee's policy of providing greater at-risk compensation for executives with the highest level and amount of responsibility and the practices found in our peer group benchmarking.Group.
Role of Company Management in Compensation Decisions
Before the Committee makes decisions on base salary or annual and long term incentives, the Chairman and Chief Executive Officer annually reviews compensation for the other named executives and makes recommendations to the Committee based on individual and group performance. He proposes base salary adjustments for the current year, annual incentive award payments for the previous year and current year long term incentive award grants for each of the other named executives to the Committee. The Committee reviews and approves the compensation actually paid to the named executives after consideration of the recommendations made by the Chairman and Chief Executive
Officer. The Committee may exercise discretion to modify named executives' compensation from that recommended by the Chairman and Chief Executive Officer, but did not exercise that discretion for the named executives in 2007. The Committee makes decisions regarding the compensation of the Chairman and Chief Executive Officer.
Components of 2007 Named Executive Compensation
Base Salary
The company provides named executives with base salaries that provide a competitive, sourcestable level of disposable income, since most other elements of their compensation are at risk. Base salary rangesrisk based on company performance. In determining base salaries for positions held by named executives, are determined by setting the midpoint of the base salary range atCommittee generally targets the 50th percentile and the minimum and maximum of the base salary range approximates the 40th and 60th percentiles for similar types of executives within the Compensation Peer Group. Base salary rangessalaries may deviate from the 50th percentile for named executives are designed to provide for different individualwith more experience and performance within a specific position.or specialized duties or skill sets. The individual named executives' base salaries for 2010 were all within eachat approximately the 50th percentile of their competitivethe Compensation Peer Group, with the exception of Mr. Oosterveer and Mr. Steuert. Mr. Oosterveer's base salary ranges.
currently falls within the first quartile of similarly situated executives because he is fairly new to his position. Mr. Steuert's base salary falls within the top quartile of chief financial officers within the Compensation Peer Group because his salary reflects his years of experience and the level of duties he has at the company. Base salaries for named executives are reviewed annually orand upon changesa change in responsibilities. In evaluating the Chairman and Chief Executive Officer's base salary and his recommendations for the base salaries of the other named executives, other than himself, the Committee considered the following factors during its 2010 annual review:
Increases of 5up to 13 percent6% from December 31, 2009 are reflected in the base salaries for 2010 reported in column (c) of the Summary Compensation Table on page 29. Each of the base salary increases was based on the merit of the named executives' performance for 2007. A portion of Mr. Faulk's base salary increase was awarded based on his promotion to a new position.35.
Annual Incentive Program
Annual incentive awards provide named executives the opportunity to earn compensation for the achievement of objectives for the overall company and, in the case of named executives other than the Chairman and Chief Executive Officer, for the achievement of measures relating to the individual's own performance or the performance of his group or function during the year. The Chairman and Chief Executive Officer's annual incentive objectives are based solely on overall company performance objectives, while the other named executives have annual incentive objectives that incorporate group and individual performance. The Committee feels the company's performance is reflective of the Chairman and Chief Executive Officer's performance and therefore considers only company performance in determining his compensation. The types of measures and relative weight of those measures used in determining annual incentive awards are tailored to the named executive's position and organizational responsibility.
The annual incentive program is administered by the Committee pursuant to the shareholder-approved Fluor Corporation 20032008 Executive Performance Incentive Plan. Cash-based annual incentives are provided to reward named executives for performance during the year. Each named executive who participates in this program and is provided with a target annual incentive amount, based on a percentage of theirhis annual base salary. This percentage reflects the executive's respective organizational level, position and responsibility for achievement of the company's strategic goals. The Chairman and Chief Executive Officer's target annual incentive amount for 2007 was 120% of base salary, and other named executives' target annual incentive amounts ranged from 70% to 75% of base salary. For 2007,2010, all named executives were provided an annual incentive target percentage of base salary that was atapproximated the 50th percentile of target award percentages for executives with similar job titlesresponsibilities within the Compensation Peer Group.
Each yearThe named executives' target annual incentives for 2010 were as follows:
Named Executive | Percentage of Base Salary | Target Annual Incentive Amount | |||||
---|---|---|---|---|---|---|---|
Alan L. Boeckmann | 125 | % | $ | 1,560,000 | |||
David T. Seaton | 100 | % | $ | 700,000 | |||
D. Michael Steuert | 80 | % | $ | 633,500 | |||
Carlos M. Hernandez | 75 | % | $ | 378,800 | |||
Peter W. Oosterveer | 75 | % | $ | 306,100 |
A named executive may receive more or less than the target annual incentive amount, depending on whether he meets, fails to meet or exceeds certain performance measures relating to overall
company performance and the individual's own performance or the performance of his group or function during the year. The types of measures and relative weight of those measures are determined by the Committee determines what measures will be used foreach year and are tailored to the annual incentive plan.named executive's position and organizational responsibility. The measures have remained relatively constantfairly consistent over the past five years, but their relative weightings have changed slightly. The Committee selected both corporate financial and strategic measures for the 2007 annual incentive plan. When making its determination, the Committee considers both the company's annual operating plan and strategic priorities, as well as the company's performance in the previous year. The corporate diversity, corporate safety, government safety and discretionary individual and team performance measures are subjective.subjective; and no targets are set for these measures. The other measures for each named executive are objective. For 2007,2010, the Committee selected both corporate financial and strategic measures. The use of multiple financial goals prevents an over-emphasis on any one financial metric; and the other metrics assist in focusing executives on key areas of importance to the company, including safety. The measures, andalong with their respective weightings, applicable to allfor each named executivesexecutive were as follows:
2007 Measures | Alan L. Boeckmann | D. Michael Steuert | H. Steven Gilbert | Jeffery L. Faulk | John L. Hopkins | Lawrence N. Fisher | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings | 50 | % | 40 | % | 40 | % | 50 | % | 30 | % | 40 | % | |
Corporate Return on Operating Assets Employed (ROAE) | 30 | % | 20 | % | 10 | % | 20 | % | 15 | % | 10 | % | |
Corporate Diversity | 10 | % | 10 | % | 20 | % | 10 | % | 10 | % | 10 | % | |
Corporate Safety | 10 | % | 10 | % | 10 | % | 10 | % | 10 | % | 10 | % | |
Government Group Earnings Before Interest and Taxes (EBIT) | — | — | — | — | 20 | % | — | ||||||
Government Group Safety | — | — | — | — | 5 | % | — | ||||||
Discretionary Individual and Team Performance | — | 20 | % | 20 | % | 10 | % | 10 | % | 30 | % |
2010 Measure | Alan L. Boeckmann | David T. Seaton | D. Michael Steuert | Carlos M. Hernandez | Peter W. Oosterveer | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings | 50 | % | 45 | % | 45 | % | 45 | % | 35 | % | |||||||
Corporate Return on Operating Assets Employed (ROAE) | 30 | % | 30 | % | 30 | % | 30 | % | 20 | % | |||||||
Corporate Safety | |||||||||||||||||
Days Away from Work Incidence Rate | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||||
Total Recordable Case Incidence Rate | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||||
Oil and Gas Group Segment Profit | — | — | — | — | 20 | % | |||||||||||
Discretionary Individual and Team Performance | 10 | % | 15 | % | 15 | % | 15 | % | 15 | % |
Following are the 2007 actual achievement and target amounts for corporateCorporate net earnings and corporate return on operating assets employed forties to the named executives. We have also presentedamount set forth in our financial statements but may be adjusted at the minimum, upper target and maximum for eachdiscretion of the corporate financial measures. Later we describe how our payments correspond to each of the achievement levels. Corporate safety and diversity measures are subjective measures and receive less weight within the annual incentive. They are intended to focus our named executives on some items that are strategically important to the company, and although they are subjectively set, they measure year-over-year improvement for corporate diversity and year-over-year improvement with sustained performance for corporate safety.
The actual overall achievement for the 2007 annual incentive reflects maximum achievement or superior performance, which has not been achieved by the company within the last five years.
Measure | Actual Achievement | Minimum | Target | Upper Target | Maximum | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings (in millions) | $ | 410.3 | $ | 275.9 | $ | 324.6 | $ | 353.8 | $ | 373.3 | ||||||
Corporate Return on Assets Employed (ROAE) | 25.1 | % | 14.5 | % | 15.5 | % | 16.5 | % | 17.5 | % |
Corporate Net Earnings for purposes of calculating the actual achievement for the annual incentive is adjustedCommittee for extraordinary non-operating events. Actual achievement of Corporate ROAE is adjustedcalculated by dividing full year corporate net earnings by net assets. Net assets is defined as total assets (excluding excess cash) minus current liabilities (excluding non-recourse debt). No adjustments were made to these measures for non-recourse debtpurposes of 2010 compensation decisions.
Corporate safety includes two distinct measures: Fluor's days away from work incidence rate and excess cash. For competitive reasons,Fluor's total recordable case incidence rate. Fluor's days away from work incidence rate is defined as a work-related injury or illness that involves days away from work beyond the company does not disclose anyday of its businessinjury or onset of the illness. Fluor's total recordable case incidence rate is defined as work-related injury or illness that results in one or more of the following: death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, loss of consciousness, or a significant injury or illness diagnosed by a physician or other licensed health care professional. Incidence rates for both measures represent the number of recordable cases per 100 full-time workers (working 40 hours per week, 50 weeks per year), and are calculated using the following equation:
Oil and Gas group earnings before interest and taxes (EBIT)segment profit is reported in itsour financial statements on page F-42 of our annual report on Form 10-K oras filed with the Securities and Exchange Commission on February 23, 2011. Segment profit is calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding: corporate administrative and general expense; interest expense; interest income; domestic and foreign income taxes; and other non-operating income and expense items. The Oil and Gas group's segment profit measure can be adjusted at the discretion of the Committee for extraordinary non-operating events. No adjustments were made to this measure in any other
publicly disclosed filings. Mr. Hopkins leads our Government group and his annual incentive includes measures from both the Government group and the overall company.
2010 for purposes of compensation decisions. In addition, discretionary individual and team functional
measures are given a rating based on subjective evaluations and recommendations by the Chairman and Chief Executive Officer.
The weighted2010 performance ranges for each of the measures applicable to our named executives, together with the actual achievement amounts for such measures, are presented below. With respect to corporate net earnings and corporate ROAE, actual achievement must be between 95% and 105% of the target amount for the target to be met. The company's performance for 2010 varied with respect to each corporate measure: corporate net earnings and ROAE were both below the minimum. The company's performance with respect to the corporate safety measures exceeded the maximum; while the Oil and Gas group segment profit measure was just above minimum. The overall level of achievement of the targets in 2010 was lower than the last ten years.
Measure | 2010 Actual Achievement | Minimum | Target | Upper Target | Maximum | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate Net Earnings (in millions) | $ | 357.5 | $ | 411.7 | $ | 588.2 | $ | 641.1 | $ | 676.4 | |||||||
Corporate ROAE | 11.9 | % | 13.0 | % | 18.6 | % | 20.3 | % | 21.4 | % | |||||||
Corporate Safety | |||||||||||||||||
Days Away from Work Incidence Rate | .03 | �� | .08 | .06 | .05 | .04 | |||||||||||
Total Recordable Case Incidence Rate | .28 | .60 | .50 | .40 | .30 | ||||||||||||
Oil and Gas Group Segment Profit (in millions) | $ | 344.0 | $ | 343.7 | $ | 491.0 | $ | 535.2 | $ | 564.7 |
Achievement of the discretionary individual and team performance measure varied among the named executives because of the difference in responsibilities and the accomplishments of each individual. The Committee determined the achievement of the discretionary individual and team performance measure for the Chief Executive Officer and also the other named executives, after taking into account the Chief Executive Officer's recommendations with regard to other named executives. Subjective evaluations made by the Chief Executive Officer were based on each named executive's leadership and group accomplishments. Individual performance was not a significant factor in determining compensation, and no named executive's compensation was materially affected by his level of achievement of this measure.
Once the achievement amounts are determined and compared to the various targets, each named executive's overall performance rating is calculated by multiplying each measure's rating (which can range from 0% to 200% achievement) for each measureby its relative weighting, and then aggregating those amounts. The aggregate amount (the overall performance rating) is aggregated and then multiplied by the individual's target annual incentive amount to determine the annual incentive payment for each named executive.
The annual incentive amounts for each named executive were determined as follows.
Named Executive | Target Annual Incentive Amount | Overall Rating | Annual Incentive Amount | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Alan L. Boeckmann | $ | 1,560,000 | 0.26 | $ | 406,000 | |||||
David T. Seaton | $ | 700,000 | 0.43 | $ | 301,000 | |||||
D. Michael Steuert | $ | 633,500 | 0.50 | $ | 316,800 | |||||
Carlos M. Hernandez | $ | 378,800 | 0.50 | $ | 189,400 | |||||
Peter W. Oosterveer | $ | 306,100 | 0.60 | $ | 183,700 |
For 2007, both Corporate Net Earnings and ROAE achievement was at maximum. Achievement for the Corporate Safety measure was at maximum achievement and the Corporate Diversity measure was between target and upper target. Achievement of the subjective measures varied among the named executives because of the difference in responsibilities and the accomplishments of each individual, based on the subjective evaluations made by the Chairman and Chief Executive Officer, which formed the basis for his recommendations to the Committee. Thus, as shown in column (g) of the Summary Compensation Table on page 29 and the footnote to that column, for 2007,2010, the average annual incentive payment for all named executives was between upperminimum and target and maximum achievement based on company, group and individual performance. The 2007 annual incentive plan payments were atpayment for each named executive was significantly lower than his 2009 payment, due to the highest level of achievementfailure to achieve minimum performance for the company inCorporate Net Earnings and ROAE measures. With the last ten years as a resultexception of the company's strong financial, operational2007 and stock price performance over the past several years. Annual2008, historically, annual incentive payments in the last ten years have been closerclose to target levels, and nevernot at or above the upper target level. Payments for 2010 were below this historical trend.
For 2008, the Committee approved one design change to the annual incentive program in order to continue to position the company's named executives at the 50th percentileTable of the Compensation Peer Group. Based on market data, the Committee increased the annual incentive targets for the Chairman and Chief Executive Officer to 125%, the Chief Financial Officer to 80% of base salary and other named executives all increased to 75% of base salary.Contents
Long Term Incentive Program
In 2007,2010, the company's long term incentives were awarded by the Committee under the shareholder-approved Fluor Corporation 20032008 Executive Performance Incentive Plan. The program isplan was designed to encourage creation ofallow for awards that create increased value for our shareholders, reward the achievement of superior operating results, facilitate the retention of key management personnel and align the interests of management and shareholders through equity ownership.
In 2007,2010, the long term incentive awards for named executives included three basictwo components:
As disclosed last year, the Committee did not grant awards under the cash-based Value Driver Incentive Under SEC reporting rules, equity awards such as stock options and Equity Awards The Committee determines the dollar value of annual equity awards for named executives at the first regularly scheduled meeting of the Committee each year, which is typically held in February. The determinations are made at that ("VDI")(VDI) program (a cash-based long term incentive award);•Restricted stock grants;for 2010, in order to re-evaluate and•Non-qualified stock option grants. In refine the program for 2011, as further described below. The total the dollar award value for these three components isthe restricted stock unit and option grants made in 2010 was targeted and was granted at approximately the same total dollar award value as the aggregate long-term awards granted in 2009, which were at approximately the 50th percentile of the Compensation Peer Group. However, two named executives, Messrs. SteuertLong term incentive grants made to Mr. Seaton were greater than prior years due to his promotion to Chief Operating Officer near the end of 2009.Fisher, receivedrestricted stock units are reported in the Summary Compensation Table on page 35 for the year in which they are granted, based upon their grant date value, whereas long term cash incentive arrangements such as the VDI program are reported in the Summary Compensation Table only in the last year of the performance period, based on the amount actually earned. The Committee's decision to suspend the VDI program and award long term incentive grantscompensation in only stock options and restricted stock units in 2010 results in higher amounts of stock awards and option awards being reflected in the Summary Compensation Table for long term compensation in 2010.were abovetime because it coincides with the market 50th percentileannual performance review and compensation adjustment cycle, which are addressed at that same meeting. The equity awards are granted after the meeting on the third business day following the publication of our annual results, based on their experience and accomplishments over their years of service with the company as well as their positions' strategic importanceclosing price on that date. Stock options provide actual economic value to the company.
As partholder if the price of Fluor stock has increased from the grant date at the time the option is exercised. Restricted stock units have economic value when they vest, so they incentivize holders to create shareholder value but also have some retention value even if the stock price declines or stays flat. Stock options motivate executive officers by providing more potential upside, while restricted stock units align named executives with shareholders and balance our compensation program design, as they take into account both upside and downside risk in our stock price. Both stock options and restricted stock units, which vest over time, encourage retention. The combination of the long term incentive grant for 2007, VDI, restricted stock and stock option grants were allocated in equal thirds to the named executives. These allocations were made to provide more weight to stock-based incentives, aligningtwo components aligns the interests of named executives with shareholder interests. Allocations were determined based on the overall target dollar value for eachthose of shareholders without overemphasizing any one type of grant, on the dateand reflects a structure similar to many of grant. VDI grants were valued at the target dollar value, restricted stock was valued at the fair
market value (closing stock price) on the dateour peers in granting more than one form of grant, and stock options were valued using the Black-Scholes option pricing model.award.
Value Driver Incentive Program
TheIn January 2010, the Committee suspended the company's cash-based VDI program has been offered at Fluor since 2004 with some slight design modifications. The 2007-2008for future grants due to uncertainties from evolving compensation legislation or regulation and for other corporate reasons. However, portions of two prior awards under the 2008-2009 VDI program has a two-year performance period.and the
2009-2010 VDI program were earned in 2010. The two-year performance period started on January 1, 2007 and ends on December 31, 2008. The 2007-2008 VDIprior awards for named executives were based upon the achievement of the following weightings and objectives:objectives and were measured over a two-year performance period:
New Awards Gross Margin Dollarsawards gross margin dollars measures the total amount of project gross margin that the company expects to receive as a result of projects awarded within the two-year performance period, andperiod. New Awards Gross Margin Percentageawards gross margin percentage is the total amount of gross margin the company expects to receive as a result of projects awarded within the two-year performance period as a percentage of expected revenue from projects awarded during the same timeframe.these projects. The Committee selected these performance criteria because, although measured over a two yearrelatively short period, they relate to contracts that typically will extend a number of years into the future and thus, will generate, and position the company for, increased future earnings. The Committee believes the inclusion of the two different measures is appropriate given the diversified nature of our business. These measures are not reported in our financial statements and the disclosure of the new awards gross margin targets would result in competitive harm to the company. Previous years'
Each of the VDI plans for 2008-2009 and 2009-2010 had payouts as of December 31, 2010. For the 2008-2009 VDI plan, the final half of the total award was paid at an achievement of 92% of the target payout level based on 2008-2009 performance achievement for each named executive. For the 2009-2010 VDI plan, the first half of the award was paid to named executives in 2011 at an achievement of 14% of the target payout level based on cumulative performance over the two-year performance period. The final half of the 2009-2010 award will be paid at the same level in March 2012. The VDI payouts are detailed in the Non-Equity Incentive Plan Compensation table on page 37. In the past five years, VDI payouts have ranged from just above minimum through maximum and have averaged between target and upper target.
Revised Value Driver Incentive Program
During 2010, with the assistance of the Committee's independent compensation consultant, the Committee reviewed the long term incentive program, re-establishing the VDI program for stock-based VDI grants in 2011 and beyond. The Committee believes that the VDI program provides an incentive for named executives to grow the business and create shareholder value, as the awards are denominated in company shares, as described below. The vesting requirements of the program also enhance retention.
In 2011, VDI awards will constitute one third of the long term incentive grant, with stock options and restricted stock units each comprising an additional third. Performance goals under the new program will continue to be based on the new awards gross margin measure has typically been betweendollars and new awards gross margin percentage objectives; but the target and upper target levels. Thisperformance measurement period will be one year (i.e., January 1st to December 31st). Generally, in the company's continued strong performance across these metrics resulted in exceeding target level.
In Junefirst quarter of eacha year, the Committee sets minimum (50%will set threshold (paid at 50% of target), target (100%(paid at 100%), upper target (150%(paid at 150% of target) and maximum (200%(paid at 200% of target) levels for both objectives of the VDI plan for the two year performance period. InWhen setting these performance goals, the past five years, VDI payouts have ranged from target through upper target averaging slightly lower than upper target. The Committee considerswill consider the company's past performance, current business outlook and other corporate financial measures in assisting themmeasures. When determining whether the performance goals have been met, the Committee will take into account any scope changes or project cancellations that occurred during the year with respect to setnew awards obtained during the minimum,performance period.
During the first quarter of each year, the Committee will grant performance units based on a target upper target and maximum for eachvalue of the VDI measures.
Aftergrant. The number of units granted will be calculated using the closing trading value of our common stock on the date of grant. On the first anniversary of the grant date, the Committee will determine the actual achievement of the performance period concludes,measures and the earnednumber of performance units will be adjusted by multiplying the number of performance units by the performance rating
(ranging from 0.0 to 2.0). The performance units, as adjusted on the first anniversary for performance, will vest 100% on the date two years following the adjustment date and will be settled in cash or stock, as elected by the named executive, provided that any award is paidfor a named executive not meeting company stock ownership guidelines will be settled in two equal installments. The first installment (50%stock.
However, to address the cash incentive compensation gap that will occur in 2011 and 2012 as a result of the total earned award)change in the payout schedule under the revised VDI program to three years from the grant date and the fact that no VDI awards were made in 2010 while the program was suspended:
Payments under the following year. The payment schedule is intended to facilitate retention of the participating executives. Each installment of the participant's award iswill be subject to risk of forfeiture if, prior to payment, the participant's employment with the company is terminated for any reason other than retirement, death, disability or a qualifying termination within two years after a change-in-control of the company.
Restricted Stock and Non-Qualified Stock OptionsOther Compensation Decisions
In 2009, Mr. Seaton was promoted to Chief Operating Officer. The sizeincrease in his compensation for 2010 reflected the increased responsibilities of restricted stockhis new role. Effective February 3, 2011, Mr. Seaton was promoted to Chief Executive Officer, and stock option awards were set as each being one-thirdthe Committee adjusted his compensation accordingly. His base salary was increased to $1,025,000; and his target annual incentive was increased to 125% of the overallhis base salary, or $1,281,300. In addition, his target long term incentive award value discussed above. Restricted stock was granted as partincreased to $6,250,000.
Other Elements of the long term incentive program to help build equity ownership for executives, and stock options were granted to reward creation of shareholder value. Together, these awards further align our named executives' interests with our shareholders' and help reinforce our stock ownership guidelines.Named Executive Compensation
Perquisites
The Committee uses the Black-Scholes option pricing modelevaluates perquisites based on their cost efficiency, motivational value and benefits to value the stock options provided to named executives.
The restricted stock granted by the Committee in 2007 vests at a rate of 20% per year over five years, and stock options granted by the Committee in 2007 vest at a rate of 20% per year over the first five years of the ten-year term of the stock option. Vesting and exercise rights cease upon termination of employment except for death, disability, retirement or a termination within two years after a
change-in-control of the company. PriorPerquisites, which are relatively small in relation to total direct compensation, are targeted at the vesting of the restricted stock, the holder receives dividends and has voting rights.
The Committee did not grant stock options in 2004 and 2005. The Committee granted stock options in 2006 and thereafter as part of the long term incentive program.
Long Term Incentive Payouts for 2007
VDI plans for 2005-2007 and 2006-2007 have payouts earned as of December 31, 2007. For the 2005-2007 VDI plan, the final 50% of the total award was paid at an achievement of 138% of the target payout level based on 2005 performance achievement for each named executive. The 2006-2007 VDI plan had its first 50% payout of the total award at an achievement of 200% of the target or maximum payout level based on cumulative performance over the two year performance period. The final 50% will be paid in March 2009. The VDI payouts are detailed in the Summary Compensation Table on page 29.
In 2005, the company granted the 2005-2007 Relative Performance Program (RPP) to the named executives as part of its Long Term Incentive Program. This program measured the company's total shareholder return over a three-year performance period based on a percentile ranking against the Standard & Poor's Midcap 400 Index from December 31, 2004 through December 31, 2007. The Chairman and Chief Executive Officer received a target grant of $825,000, and each of the other named executives received target grants ranging from $90,000 to $300,000 depending on the individual's position. Based on performance, the payout opportunity could range from 0% to 200% of the target grant level. The company achieved a 9250ndth percentile ranking among the Standard & Poor's Midcap 400 Index as of December 31, 2007. This percentile achievement yielded a maximum RPP payout of 200% of target for each named executive. Based on achievement, actual payouts for named executives ranged from $180,000 to $600,000, as shown in column (g) of the Summary Compensation Table on page 29. The Chairman and Chief Executive Officer earned a $1,650,000 payout. In 2006, the Committee decided to grant stock options rather than make additional grants under the RPP to better link executive compensation to company stock performance.
Changes to the Long Term Incentive Program for 2008
In 2008, the company is changing the vesting schedule for its 2008 equity long term incentive awards from five years to three years to remain competitive with the Compensation Peer Group, and will grant restricted stock units (RSUs) with corresponding dividend equivalents instead of restricted stock. Fluor will continue to review competitive practices as well as compensation levels to ensure it remains positioned well among its peers.
Perquisites and Other Executive Benefits including Retirement and Post-Termination Benefits
Group. In 2007,2010, named executives were offeredpaid a taxable monthly allowance as a substitute for the company reimbursing or paying for the following perquisites and executive benefits:perquisites: an automobile allowance, tax and financial planning, allowance, executive physical examination,and company-owned country club memberships,membership dues. In addition, named executives are required to have a physical examination each year that is paid for by the company. Named executives may have spousal travel and personal use of charter aircraft in conjunction with a business purpose reimbursed at the operational cost by the executive. All named executives were offered these executive perquisites and benefits, but the value and use of the benefits can vary by named executive. Executive perquisites and benefits are provided to ensure overall compensation for named executives is competitive. Spousal travel is paid for by the company only when it is for an approved business purpose, andin which case a related tax gross upgross-up is provided. The Committee does not provide any other tax gross ups. There was nogross-ups. Named executives can make personal use of charter aircraft in 2007. There was minimal spousal travelconjunction with a business purpose, but the named executive is required to reimburse the company for business purposes that resulted in a non-material reduction to the overall amount associated withincremental operational cost. None of the named executives used charter aircraft corporate tax deduction. The Committee reviewed this amount from a cost/benefit perspectivein 2010 for personal reasons. Executive perquisites and concludedbenefits are provided so that it was acceptable.
The company has a Supplemental Benefit Plan. Itoverall compensation for named executives is provided to the following named executives: the Chairman and Chief Executive Officer, the Chief Financial Officer, the Group President, Government and the former Chief Legal Officer. The Supplemental Benefit Plan provides a pre-retirement death benefit through a split dollar life insurance policy. Upon retirement, the participant has a choice of a post-retirement death benefit, a lump sum cash payment or salary continuation payments for 120 months. In addition, any time prior to retirement, the participant has the option of irrevocably opting out of the Supplemental Benefit Plan and instead receiving a benefit under a Joint and Survivor Split Dollar Life Insurance Plan. This benefit was implemented when these types of plans were prevalent in the company's industry. The Committee does not take the supplemental benefit plan into account when making compensation decisions because the last participant was added over five years ago and the Committee does not intend to add other participants to this plan.competitive.
Executive Deferred Compensation Program
The named executives are eligible to participate in Fluor's Executive Deferred Compensation Program (the "EDCP").Program. The company offers this program to provide individuals retirement and tax planning flexibility and to remain competitive with other companies within its industryour Compensation Peer Group and generally. Named executives can defer upgeneral industry. Please refer to 100% of base salary, annual incentives paid, and the VDI paid, subject to certain Internal Revenue Code limits. In addition they can defer up to 20% of base salary in excess of the prescribed Internal Revenue Code limitsdiscussion in the Excess 401(k) segmentNonqualified Deferred Compensation table on page 45 for a more detailed discussion of the EDCP. The Excess 401(k) segment of the EDCP enables participants to continue the company match of 5% from the 401(k) plan after the prescribed Internal Revenue Code limits have been met. In addition, the company contributes to the EDCP (i) any amounts that would have been contributed by the company to the 401(k) plan as matching or discretionary contributions and (ii) amounts that would have been credited to the pension plan as an accrual, in each case that are in excess of the Internal Revenue Service compensation limit on contributions or were lessened by an election to defer base salary. Earnings or losses on amounts deferred are based on the investment performance of publicly available mutual funds and investment alternatives; thus, earnings are neither above-market nor guaranteed. Participants in this program may defer payments until termination of their employment or expiration of any deferral period (of at least two years) that they specify in advance, whichever event occurs first. The participants may receive a hardship withdrawal under very limited circumstances.
Employment Contracts
Fluor has extended an employment letter to the Chief Financial Officer. The company agreed to provide him with one year's pay at his current base salary if he is terminated by the company for any reason other than for cause. If he retires from the company, he will receive one year's pay, at his then current base salary, as a supplemental retirement benefit. No other named executive has an employment contract.
In March 2006, the company entered into a retention agreement with Mr. Hopkins, the company's Group President, Government to ensure his services were retained for the continued development and growth of the Government group. If Mr. Hopkins satisfies the terms and conditions of the retention agreement including, without limitation, continuous employment with the company, Mr. Hopkins will receive an award consisting of two components. First, if Mr. Hopkins maintains continuous employment with the company through March 31, 2010, 8,845 shares of restricted stock granted to him under the retention agreement will vest. Second, Mr. Hopkins received on March 31, 2007, and will continue to receive on each anniversary thereafter through and including March 31, 2010, the sum of $187,500, which will be credited to his deferred compensation program account.these arrangements.
Severance and Change-in-Control Benefits
The company provides each of the named executives with cash severance in the event of a termination of employment by the company without cause through a company severance policy that the company believes assists in attracting and retaining qualified candidates, including during any potential change in control. The level of any cash severance payment is based upon base salary plus years of service. In addition, each named executive has a change in control agreement that provides additional payments and other benefits inif we terminate his employment without cause or if the event of a terminationnamed executive terminates employment for good reason within two years following a change-in-controlchange in control of the company. The change in control agreements are designed to reinforce and encourage the continued attention and dedication of the executives without distraction in the face of potentially disturbing circumstances arising from the possibility of the change in control and to serve as an incentive to their continued employment with the company. No gross up for excise taxes, if any, is payable under the change in control agreements. The company will, however, automatically reduce any payments under the agreement to the extent necessary to prevent payments being subject to the excise tax, but only if by reason of the reduction, the after-tax benefit of the reduced payments exceeds the after-tax benefit if such reduction were not made.
The employment letter extended to Mr. Steuert also provides certain severance benefits. However, a severance payment will not be paid to Mr. Steuert under the employment letter if he receives the payments and other benefits under his change in control agreement. Please refer to the discussion under "Compensation under Various"Potential Payments Upon Termination Scenariosor Change in Fiscal Year 2007"Control" below for a more detailed discussion of these arrangements. Severance and change in controlchange-in-control benefits are provided to be competitive within the Compensation Peer Group.
Establishing Executive Compensation
Compensation Philosophy and Objectives and Risk Assessment
The Committee has responsibility for establishing and implementing the company's executive compensation philosophy. The Committee reviews and determines all components of named executives' compensation (other than with respect to our Chief Executive Officer's compensation, which the Committee reviews and recommends for approval by our independent directors), including making individual compensation decisions, and reviewing and revising the company's compensation plans, programs and other arrangements.
The Committee has established the following compensation philosophy and objectives for the company's named executives:
The Committee reviews the company's compensation philosophy and objectives each year to determine if revisions are necessary in light of market conditions, the company's strategic goals or other relevant factors. In each of the last three years, the Committee determined that no revisions to the executive compensation philosophy and objectives were necessary.
In addition, the Committee reviewed the incentive compensation we provide to our named executives, including evaluating the mix of programs and performance criteria, the Committee's ability to exercise discretion over certain components of compensation and our risk management practices generally. Based on this review, the Committee believes that our executive compensation programs are designed to appropriately align compensation with our business strategy and not to encourage behaviors that could create material adverse risks to our business.
Peer Group Comparisons
In making compensation decisions, the Committee looks at the practices of a group of publicly-traded peer companies (the "Compensation Peer Group"). The Committee annually reviews the composition of the Compensation Peer Group and makes refinements based on input from the Committee's consultant and human resources staff.
In May 2009, the Committee requested that the compensation consultant conduct a holistic review of the Compensation Peer Group. Potential peer companies were identified by applying the following objective selection criteria:
After identifying all potentially relevant peers, the Compensation Peer Group was narrowed by removing non-engineering and constructions peers to generally position Fluor at the median on all three key size measures.
As a result of this review, twenty-one companies were removed from the Compensation Peer Group and twelve new companies were added. These changes decreased our Compensation Peer Group from forty companies to thirty-one companies. For comparison purposes, Fluor's trailing four quarter revenues, earnings, number of employees and market capitalization approximated the medians of both the prior and current peer group, but the resulting size range of the new peer group is more tightly
bound. The companies comprising Fluor's Compensation Peer Group for purposes of determining 2010 compensation were:
• AECOM Technology Corporation | • Jacobs Engineering Group Inc. | |
• Cameron International Corporation | • KBR, Inc. | |
• Caterpillar Inc. | • L-3 Communications Corporation | |
• Cummins Inc. | • Lockheed Martin Corporation | |
• Deere & Company | • Marathon Oil Corporation | |
• Dover Corporation | • McDermott International, Inc. | |
• Eaton Corporation | • Navistar International Corporation | |
• Emcor Group, Inc. | • Northrop Grumman Corporation | |
• Emerson Electric Co. | • PACCAR Inc. | |
• Foster Wheeler AG | • Parker-Hannifin Corporation | |
• General Dynamics Corporation | • Quanta Services, Inc. | |
• Halliburton Company | • Raytheon Company | |
• Hess Corporation | • Shaw Group Inc. | |
• Honeywell International Inc. | • Sunoco Inc. | |
• Illinois Tool Works Inc. | • URS Corporation | |
• Ingersoll-Rand Company Ltd. |
The Committee reviews benchmarking comparisons for each named executive based on a job title comparison among the Compensation Peer Group. All job titles that appear to contain similar responsibilities are included in the benchmarking comparisons for each of the named executives.
The Committee sets target compensation levels for the named executives as follows:
A significant portion of total direct compensation is allocated to annual and long term incentives in accordance with the company's compensation philosophy. The Committee reviews the Compensation Peer Group data each year to determine the appropriate level and mix of incentive compensation including cash-based and equity-based incentives. For 2010, the target allocation between base salary and all other types of incentive compensation (cash-based and equity-based) as a percentage of the total compensation for the Chief Executive Officer was approximately 13% in base salary and 87% in
target annual incentive compensation and long term incentive award value. The target allocation mix for the Chief Financial Officer was approximately 23% in base salary and 77% in target annual incentive compensation and long term incentive award value. The target allocation mix was slightly different for all other named executives ranging from approximately 17% to 27% in base salary and 83% to 73% in target annual incentive compensation and long term incentive award value. The differences in the proportion of compensation that is at-risk among the named executives reflects the Committee's policy of providing greater at-risk compensation for executives with the highest amount of responsibility and impact on company results.
In 2010, the Chief Executive Officer participated in the same compensation programs with similar metrics as other named executives. His compensation is higher than other named executives because the incentive targets reflect his additional responsibilities and the median target compensation of the peer group, therefore yielding higher payment opportunities.
Role of Company Management in Compensation Decisions
Before the Committee makes decisions on base salary and annual and long term incentives, the Chief Executive Officer annually reviews compensation for the named executives other than himself and makes recommendations to the Committee based on individual and group performance. At the beginning of the year, he proposes to the Committee base salary adjustments for the current year, annual incentive award payments for the previous year and current-year long term incentive grants for each of the other named executives. The Committee reviews and approves the compensation actually paid to the named executives after consideration of the recommendations made by the Chief Executive Officer. The Committee may exercise discretion to modify named executives' compensation from that recommended by the Chief Executive Officer, but did not exercise that discretion for the named executives in 2010.
Other Aspects of Our Executive Compensation Programs
Clawback Policy
Pursuant to the company's clawback policy, if the Board determines that any key executive or employee, including any named executive, has engaged in fraud or willful misconduct that caused or otherwise contributed to a need for a material restatement of the company's financial results, the Board will review all performance-based compensation earned by that employee during the fiscal periods materially affected by the restatement. If the Board determines that any performance-based compensation would have been lower if it had been based on the restated results, the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation as it deems appropriate.
Stock Ownership Guidelines
Both directors and executive officers are encouraged to hold Fluor common stock to align their financial interests with those of the shareholders. The company has established ownership guidelines for both of these groups. The Chief Executive Officer is expected to own and retain a minimum number of shares or share units totaling in value six times his base salary. Other actively employed named executives are expected to own and retain a minimum number of shares or share units totaling in value no less than two times, and up to five times, each executive's base salary depending on position. Executives are expected to meet or exceed the applicable guideline by position within three to five years of service.entering such position. Named executives are expected to retain 100% of the net shares acquired from the exercise of stock options or the vesting of restricted stock to the extent the guidelines are not met. As of the date of this report, all named executives and directors were in compliance with these stock ownership guidelines.
Restrictions on Certain Trading Activities
Our insider trading policy for executive officers and non-employee directors prohibits transactions involving short term or speculative trading in, or any hedging or monetization transactions involving, company securities. In addition, our policy prohibits the holding of company securities in a margin account or pledging company securities unless the company's Chief Legal Officer approves such transaction after the executive clearly demonstrates that he or she may repay the loan without resort to the pledged securities.
Employment Contracts
The company does not generally enter into employment agreements. The company did extend an employment letter to Mr. Steuert when he was hired. In addition, from time to time, the company may make multi-year retention awards to promote the continued service of key executives. These arrangements are discussed in more detail in the compensation tables below.
Tax Implications
The Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which states that agenerally prohibits the company may not deductfrom deducting compensation in excess of $1,000,000 that is paid to certain individuals.named executives other than the Chief Financial Officer. In February of each year, the Committee sets and approves a net earnings performance hurdle to allow anynamed executives' annual incentive award payments, restricted stock unit awards and Value Driver IncentiveVDI awards to the named executives to qualify as "performance based compensation" as defined inunder Section 162(m) of the Internal Revenue Code. For 2007, over 90%Stock options are deductible under the provisions of the Chairmanstock plans and the structure of the related grant agreements. For 2010, approximately 97% of the Chief Executive Officer's taxable income qualified as deductible for federal income tax purposes. The compensation of all other named executives was fully deductible.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
Management of the company has prepared the Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K, and the Committee has reviewed and discussed it with management. Based on this review and discussion, the Committee recommended that the Compensation Discussion and Analysis be included in the proxy statement for the company's 20082011 annual meeting of shareholders.
The Organization and Compensation CommitteePeter J. Fluor, ChairmanIlesanmi AdesidaPeter K. BarkerJames T. HackettKent KresaJoseph W. PrueherPeter S. Watson
The Organization and Compensation Committee | ||
Peter J. Fluor, Chairman Ilesanmi Adesida James T. Hackett Kent Kresa Joseph W. Prueher |
The table below summarizes the total compensation earned by each of the named executives in 2007.2010.
The 20072010 named executives include the principal executive officer, the principal financial officer and the three other highest paid executives. In addition,The positions listed below reflect the former Chief Legal Officer, who was no longer acting in the capacity of an executive officer of the company as of October 15, 2007, is included because his total compensation for 2007 would have placed him among the top three most highly compensated had he still been an executive officer of the companypositions held as of December 31, 2007.2010. Effective February 2, 2011, Mr. Boeckmann retired from his position as Chief Executive Officer and Mr. Seaton was appointed to the position.
The amounts in column (g), "Non-Equity Incentive Plan Compensation," for 2007 represent awards earnedAs discussed in the non-equityCompensation Discussion and Analysis on page 27, the grant date fair value of stock awards and option awards granted in 2010 increased over the grant date fair value of those awards in 2009 due in part to our suspension of our cash (non-equity) long term 2006-2007 Value Driver Incentive (VDI) programincentive program. Under Securities and Exchange Commission reporting rules, the non-equity long term 2005-2007 Relative Performance Program (RPP), forfull grant date fair value of equity awards is reported in the year restricted stock unit or stock option awards are granted, whereas long-term incentive cash awards are reported based only on the actual amounts paid out, and are reported in the year in which the performance periods concluded as of December 31, 2007, plus awards earnedgoals are satisfied and the amounts are earned. Correspondingly, the change in the non-equity 2007 Annual Incentive Program. Awards earnedlong term mix increased the size of the 2010 equity awards in 2007 were determined by the Committee at its January 30, 2008 meeting and,comparison to the extent not deferred by the executive, were payable on March 7, 2008. The amounts included in column (g) for the 2006-2007 VDI awards represent 100% of the calculated potential payout of the award; however, only 50% of the award was payable on March 7, 2008, with the remaining 50% payable in the first quarter of 2009. The amounts included in column (g) for the 2005-2007 RPP awards represent 100% of the calculated payout and were payable 100% on March 7, 2008.2009 equity awards.
The amounts in column (g), "Non-Equity Incentive Plan Compensation," for 2006 represent only the awards earned in the non-equity 2006 Annual Incentive Program. No long term incentive programs were reported in 2006 because none had a performance period ending in 2006.
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($)(6) | |||||||||||||||||
Alan L. Boeckmann Chairman and Chief Executive Officer | 2007 2006 | $ $ | 1,153,335 1,088,009 | — — | $ $ | 3,189,832 5,914,557 | $ $ | 1,750,216 1,603,685 | $ $ | 5,220,000 1,485,000 | (7) | $ $ | 228,701 180,640 | $ $ | 214,136 474,407 | $ $ | 11,756,220 10,746,298 | |||||||||
D. Michael Steuert Senior Vice President and Chief Financial Officer | 2007 2006 | $ $ | 732,598 677,278 | — — | $ $ | 1,312,830 900,873 | $ $ | 626,695 161,369 | $ $ | 2,265,600 702,200 | (8) | $ $ | 106,948 89,918 | $ $ | 121,574 728,269 | $ $ | 5,166,245 3,259,907 | |||||||||
Lawrence N. Fisher Former Chief Legal Officer | 2007 2006 | $ $ | 591,658 561,432 | — — | $ $ | 812,501 1,114,470 | $ $ | 442,698 272,311 | $ $ | 1,649,800 440,700 | (9) | $ $ | 134,094 108,659 | $ $ | 99,153 325,857 | $ $ | 3,729,904 2,823,429 | |||||||||
H. Steven Gilbert Senior Vice President, Human Resources and Administration | 2007 2006 | $ $ | 455,361 420,198 | — — | $ $ | 488,813 678,099 | $ $ | 260,784 122,599 | $ $ | 1,203,300 374,000 | (10) | $ $ | 20,270 17,047 | $ $ | 70,273 236,180 | $ $ | 2,498,801 1,848,123 | |||||||||
Jeffery L. Faulk Senior Group President | 2007 2006 | $ $ | 525,018 462,938 | — — | $ $ | 409,491 476,074 | $ $ | 255,891 81,693 | $ $ | 1,109,100 440,500 | (11) | $ $ | 17,810 14,958 | $ $ | 98,751 76,459 | $ $ | 2,416,061 1,552,622 | |||||||||
John L. Hopkins Group President, Government | 2007 | $ | 509,268 | $ | 187,500 | (12) | $ | 538,098 | $ | 140,520 | $ | 900,600 | (13) | $ | 38,487 | $ | 77,378 | $ | 2,391,851 |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($)(7) | ||||||||||||||||||||
Alan L. Boeckmann | 2010 | $ | 1,248,042 | — | $ | 3,550,088 | $ | 3,550,004 | $ | 704,760 | $ | 524,738 | $ | 292,939 | $ | 9,870,571 | |||||||||||||
Chairman & Chief | 2009 | $ | 1,248,042 | — | $ | 2,133,083 | $ | 2,133,020 | $ | 3,663,280 | $ | 563,261 | $ | 265,933 | $ | 10,006,619 | |||||||||||||
Executive Officer | 2008 | $ | 1,232,270 | — | $ | 2,133,242 | $ | 2,133,094 | $ | 6,873,200 | $ | 185,536 | $ | 280,762 | $ | 12,838,103 | |||||||||||||
David T. Seaton | 2010 | $ | 695,216 | — | $ | 1,350,088 | $ | 1,350,001 | $ | 343,000 | $ | 13,563 | $ | 147,889 | $ | 3,899,757 | |||||||||||||
Chief Operating Officer | 2009 | $ | 512,520 | — | $ | 300,001 | $ | 300,029 | $ | 1,016,060 | $ | 11,538 | $ | 102,111 | $ | 2,242,260 | |||||||||||||
2008 | $ | 448,477 | $ | 50,000 | (8) | $ | 2,266,405 | (9) | $ | 266,091 | $ | 1,158,000 | $ | 10,373 | $ | 109,682 | $ | 4,309,028 | |||||||||||
D. Michael Steuert | 2010 | $ | 791,835 | — | $ | 1,375,101 | $ | 1,000,041 | $ | 410,180 | $ | 131,965 | $ | 147,882 | $ | 3,857,004 | |||||||||||||
Senior Vice President & | 2009 | $ | 791,835 | — | $ | 667,074 | $ | 666,012 | $ | 1,310,540 | $ | 137,764 | $ | 146,502 | $ | 3,719,727 | |||||||||||||
Chief Financial Officer | 2008 | $ | 781,871 | — | $ | 667,330 | $ | 666,087 | $ | 2,563,000 | $ | 0 | $ | 144,840 | $ | 4,823,129 | |||||||||||||
Carlos M. Hernandez | 2010 | $ | 502,236 | $ | 1,021,738 | (10) | $ | 600,082 | $ | 600,025 | $ | 231,400 | $ | 8,809 | $ | 78,021 | $ | 3,042,311 | |||||||||||
Senior Vice President & | |||||||||||||||||||||||||||||
Chief Legal Officer | |||||||||||||||||||||||||||||
Peter W. Oosterveer | 2010 | $ | 403,673 | $ | 693,001 | (11) | $ | 400,012 | $ | 400,016 | $ | 204,700 | $ | 38,153 | $ | 120,313 | $ | 2,259,868 | |||||||||||
Group President, | |||||||||||||||||||||||||||||
Energy & Chemicals |
Reports on Form 10-K filed with the Securities and Exchange Commission on February 29, 2008.23, 2011, February 25, 2010, and February 25, 2009 respectively.
NON-EQUITY INCENTIVE PLAN COMPENSATION
The following table and related footnotes describe each component of the Non-Equity Incentive awardPlan Compensation column (g) of $510,600, a 2005-2007 RPPthe Summary Compensation Table on page 35.
(a) | (b) | (c) | (d) | (e) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Year | Annual Incentive | Value Driver Incentive | Total | |||||||||
Alan L. Boeckmann | 2010 | $ | 406,000 | $ | 298,760 | (1) | $ | 704,760 | |||||
2009 | $ | 1,700,000 | $ | 1,963,280 | (2) | $ | 3,663,280 | ||||||
2008 | $ | 3,073,200 | $ | 3,800,000 | (3) | $ | 6,873,200 | ||||||
David T. Seaton | 2010 | $ | 301,000 | $ | 42,000 | (1) | $ | 343,000 | |||||
2009 | $ | 769,500 | $ | 246,560 | (2) | $ | 1,016,060 | ||||||
2008 | $ | 690,000 | $ | 468,000 | (3) | $ | 1,158,000 | ||||||
D. Michael Steuert | 2010 | $ | 316,800 | $ | 93,380 | (1) | $ | 410,180 | |||||
2009 | $ | 696,900 | $ | 613,640 | (2) | $ | 1,310,540 | ||||||
2008 | $ | 1,229,000 | $ | 1,334,000 | (3) | $ | 2,563,000 | ||||||
Carlos M. Hernandez | 2010 | $ | 189,400 | $ | 42,000 | (1) | $ | 231,400 | |||||
Peter W. Oosterveer | 2010 | $ | 183,700 | $ | 21,000 | (1) | $ | 204,700 |
The following table and related footnotes describe each component of the All Other Compensation column (i) of the Summary Compensation Table.Table for 2010.
(a) | (b) | (c) | (d) | (e) | (f) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Company Contributions to Qualified and Nonqualified Defined Contribution Plans ($)(1) | Relocation ($)(2) | Split Dollar Life Insurance Premiums ($)(3) | Perquisites ($) | Total All Other Compensation ($)(4) | ||||||||||
Alan L. Boeckmann | $ | 137,778 | — | $ | 17,110 | $ | 57,506 | (5) | $ | 214,136 | |||||
D. Michael Steuert | $ | 73,170 | — | $ | 12,120 | $ | 34,542 | (6) | $ | 121,574 | |||||
Lawrence N. Fisher | $ | 64,987 | — | $ | 3,405 | $ | 29,019 | (7) | $ | 99,153 | |||||
H. Steven Gilbert | $ | 46,358 | — | — | $ | 21,953 | (8) | $ | 70,273 | ||||||
Jeffery L. Faulk | $ | 54,321 | $ | 15,000 | — | $ | 25,703 | (9) | $ | 98,751 | |||||
John L. Hopkins | $ | 50,439 | — | $ | 1,628 | $ | 23,569 | (10) | $ | 77,378 |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Company Contributions to Qualified and Nonqualified Defined Contribution Plans ($)(1) | Split-Dollar Life Insurance Premiums ($)(2) | Tax Gross-ups ($)(3) | Perquisite Allowances ($)(4) | Other Perquisites ($) | Total All Other Compensation ($)(5) | |||||||||||||
Alan L. Boeckmann | $ | 154,266 | $ | 22,160 | $ | 9,651 | $ | 71,100 | $ | 35,762 | (6) | $ | 292,939 | ||||||
David T. Seaton | $ | 68,107 | — | $ | 8,455 | $ | 54,000 | $ | 17,327 | (7) | $ | 147,889 | |||||||
D. Michael Steuert | $ | 82,387 | $ | 15,920 | — | $ | 49,500 | $ | 75 | (8) | $ | 147,882 | |||||||
Carlos M. Hernandez | $ | 45,546 | — | — | $ | 32,400 | $ | 75 | (8) | $ | 78,021 | ||||||||
Peter W. Oosterveer | $ | 10,571 | — | $ | 8,335 | $ | 35,100 | $ | 66,307 | (9) | $ | 120,313 |
GRANTS OF PLAN-BASED AWARDS IN 2010
The table below provides information about equity and non-equity awards granted to the named executives in 2007.2010.
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | | | ||||||||||||||||||
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Exercise or Base Price of Option Awards Per Share ($/sh)(4) | Grant Date Fair Value of Stock and Option Awards ($) | ||||||||||||||||||||||
Name | Type of Award | Grant Date(1) | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||
Alan L. Boeckmann | Restricted Stock Units | 3/2/2010 | — | — | — | 83,043 | — | — | $ | 3,550,088 | (5) | ||||||||||||||||
Stock Options | 3/2/2010 | — | — | — | — | 244,887 | $ | 42.75 | $ | 3,550,004 | (6) | ||||||||||||||||
Annual Incentive | N/A(7) | $ | 0 | $ | 1,560,000 | $ | 3,120,000 | — | — | — | — | ||||||||||||||||
David T. Seaton | Restricted Stock Units | 3/2/2010 | — | — | — | 31,581 | — | — | $ | 1,350,088 | (5) | ||||||||||||||||
Stock Options | 3/2/2010 | — | — | — | — | 93,126 | $ | 42.75 | $ | 1,350,001 | (6) | ||||||||||||||||
Annual Incentive | N/A(7) | $ | 0 | $ | 700,000 | $ | 1,400,000 | — | — | — | — | ||||||||||||||||
D. Michael Steuert | Restricted Stock Units | 3/2/2010 | — | — | — | 23,394 | — | — | $ | 1,000,094 | (5) | ||||||||||||||||
Restricted Stock Units | 8/4/2010 | — | — | — | 7,619 | — | — | $ | 375,007 | (8) | |||||||||||||||||
Stock Options | 3/2/2010 | — | — | — | — | 68,985 | $ | 42.75 | $ | 1,000,041 | (6) | ||||||||||||||||
Annual Incentive | N/A(7) | $ | 0 | $ | 633,500 | $ | 1,267,000 | — | — | — | — | ||||||||||||||||
Carlos M. Hernandez | Restricted Stock Units | 3/2/2010 | — | — | — | 14,037 | — | — | $ | 600,082 | (5) | ||||||||||||||||
Stock Options | 3/2/2010 | — | — | — | — | 41,391 | $ | 42.75 | $ | 600,025 | (6) | ||||||||||||||||
Annual Incentive | N/A(7) | $ | 0 | $ | 378,800 | $ | 757,600 | — | — | — | — | ||||||||||||||||
Peter W. Oosterveer | Restricted Stock Units | 3/2/2010 | — | — | — | 9,357 | — | — | $ | 400,012 | (5) | ||||||||||||||||
Stock Options | 3/2/2010 | — | — | — | — | 27,594 | $ | 42.75 | $ | 400,016 | (6) | ||||||||||||||||
Annual Incentive | N/A(7) | $ | 0 | $ | 306,100 | $ | 612,200 | — | — | — | — |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The exercise/base price of nonqualified stock options has been determined by reference to the fair market value on the date of grant,share, which was the closing trading valueprice of the company's common stock on the New York Stock Exchange on the date of grant.
NEW HIRE AND RETENTION AGREEMENTS
The company extended an employment letter to Mr. Steuert in 2001 in conjunction with him joining the company. The company agreed to provide him with one year's pay at his current base salary if he is terminated by the company for any reason other than for cause or Change in Control. If he retires from the company, he will receive one year's pay, at his then-current base salary, as a supplemental retirement benefit. No other named executive has an employment contract.
In August 2010, the company granted a retention award to Mr. Steuert to ensure his services and expertise were retained. If Mr. Steuert satisfies the terms and conditions of the retention agreement including without limitation, continuous employment with the company through June 1, 2012, 7,619 restricted stock units granted under the retention agreement will vest on June 1, 2012.
In November 2007, the company entered into a retention agreement with Mr. Oosterveer to ensure his continued service and management of his business unit. If Mr. Oosterveer satisfied the terms and conditions of the retention agreement, including without limitation, continuous employment with the company, he would receive a cash payment of €250,000, which would vest 100% three (3) years from date of grant on November 18, 2010. Mr. Oosterveer satisfied the terms and conditions of this retention agreement and received a cash payment of €250,000, converted to U.S. dollars ($339,951), on November 18, 2010.
In December 2009, the company entered into an additional retention agreement with Mr. Oosterveer to ensure his continued service. If Mr. Oosterveer satisfies the terms and conditions of the retention agreement, including without limitation, continuous employment with the company at each vesting date, he will receive a cash payment of $600,000, which vests in equal thirds (or $200,000 each) on each of March 30, 2010, March 30, 2011 and March 30, 2012. Mr. Oosterveer has already satisfied the first third of the agreement and received a cash payment of $200,000 on March 30, 2010.
In January 2008, the company entered into a retention agreement with Mr. Seaton to ensure his services were retained for continued growth of the company. If Mr. Seaton satisfies the terms and conditions of the retention agreement including, without limitation, continuous employment with the company, he will receive an award consisting of two components. First, assuming continuous employment at each vesting date, the 32,928 restricted stock units granted under the retention agreement will vest in equal thirds (or 10,976 restricted stock units each) on January 31, 2011, January 31, 2012 and January 31, 2013. Second, Mr. Seaton received on January 31, 2008 a sum of $1,000,000 credited to his special deferred compensation program accounts that will vest, together with any accrued gains or losses, on March 31, 2013 if he is employed by the company through that date.
OUTSTANDING EQUITY AWARDS AT 2010 FISCAL YEAR END
All nonqualified stock options have a ten year term. Options granted in 2006 and 2007 have a vesting schedule of 20% per year over five years. The options granted in 2006 and earlier have a first vesting date of the fifth of February in the year following grant, with subsequent vestings occurring on each fifth of February for the following four years. BeginningIn 2007, the annual grant date and subsequent vesting dates were changed to March to follow the year end earnings release. Options granted in 2007 options have a first vesting date of the sixth of March in the year following grant, with subsequent vestings occurring on each sixth of March for the following four years. In 2007, the annual grant date and subsequent vest dates were changed to March to reflect shareholder reaction to the year end earnings release. Beginning in 2008, optionsoption grants will vest one third (1/3) per year over three years on the sixth of MarchMarch.
Outstanding restricted stock shares granted prior to align vestings from multiple years.
2006 vest in full on the tenth anniversary of grant. Restricted stock shares granted in 2006 and 2007 generally have a vesting schedule of 20% per year over five years. The restricted stock shares granted in 2006 have a first vesting date of the fifth of February in the year following grant, with subsequent vestings occurring on each fifth of February for the following four years. BeginningIn 2007, the annual grant date and subsequent vesting dates were changed to March to follow the year end earnings release. Restricted stock shares granted in 2007 restricted stock shares have a first vesting date of the sixth of March in the year following grant, with subsequent vestings occurring on each sixth of March for the following four years. In 2007, the annual grant date and subsequent vesting dates were changed to March to reflect shareholder reaction to the year end earnings release. InBeginning in 2008, restricted stock units will bewere granted in placeinstead of restricted stock shares. The restrictedRestricted stock units will vest one third (1/3)one-third per year over three years on the sixth of March beginning one year after grant. Upon vesting, named executives will receive a cash payment equal to align vestingsthe amount of dividends that would have otherwise been paid from multiple years.the date of grant on an equivalent number of shares.
The market value in column (g), "Marketthe Market Value of Shares or Units of Stock That Have Not Vested" column (g) is determined by multiplying the number of shares by the closing trading valueprice ($145.72)66.26) of the company's common stock on the New York Stock Exchange on December 31, 2007,2010, the last trading day of the fiscal year.
The following table provides information on the current holdings of stock options and restricted stock shares and units by the named executives:executives as of December 31, 2010.
(a) | (b) | (c) | (d) | (e) | (f) | (g) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Option Awards | Stock Awards | |||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | |||||||||||||
Alan L. Boeckmann | 54,416 | 27,208 | $ | 42.11 | 2/5/2016 | 250,217 | $ | 16,579,378 | |||||||||||
— | 56,860 | $ | 44.71 | 3/6/2017 | — | — | |||||||||||||
64,484 | 32,242 | $ | 68.36 | 3/6/2018 | — | — | |||||||||||||
— | 106,854 | $ | 30.46 | 3/6/2019 | |||||||||||||||
— | 244,887 | $ | 42.75 | 3/2/2020 | — | — | |||||||||||||
David T. Seaton | 1,386 | 1,386 | $ | 42.11 | 2/5/2016 | 78,267 | $ | 5,185,971 | |||||||||||
3,488 | 6,976 | $ | 44.71 | 3/6/2017 | — | — | |||||||||||||
8,044 | 4,022 | $ | 68.36 | 3/6/2018 | |||||||||||||||
— | 15,030 | $ | 30.46 | 3/6/2019 | — | — | |||||||||||||
— | 93,126 | $ | 42.75 | 3/2/2020 | — | — | |||||||||||||
D. Michael Steuert | 24,640 | 6,160 | $ | 42.11 | 2/5/2016 | 83,955 | $ | 5,562,858 | |||||||||||
29,898 | 19,932 | $ | 44.71 | 3/6/2017 | — | — | |||||||||||||
20,136 | 10,068 | $ | 68.36 | 3/6/2018 | — | — | |||||||||||||
— | 33,364 | $ | 30.46 | 3/6/2019 | |||||||||||||||
— | 68,985 | $ | 42.75 | 3/2/2020 | — | — | |||||||||||||
Carlos M. Hernandez | 9,072 | 4,536 | $ | 68.36 | 3/6/2018 | 22,067 | $ | 1,462,159 | |||||||||||
7,515 | 15,030 | $ | 30.46 | 3/6/2019 | — | — | |||||||||||||
— | 41,391 | $ | 42.75 | 3/2/2020 | — | — | |||||||||||||
Peter W. Oosterveer | 906 | (2) | 302 | (2) | $ | 42.11 | 2/5/2016 | 10,759 | $ | 712,891 | |||||||||
— | 27,594 | $ | 42.75 | 3/2/2020 | — | — |
The following table provides information onthe number of unvested restricted stock shares or units by vesting date for each named executive:executive as of December 31, 2010.
Vesting Date | Alan L. Boeckmann | D. Michael Steuert | Lawrence N. Fisher | H. Steven Gilbert | Jeffery L. Faulk | John L. Hopkins | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
February 5, 2008 | 61,553 | 20,000 | 14,994 | 9,011 | 6,030 | 6,046 | ||||||
March 6, 2008 | 4,251 | 1,493 | 1,119 | 672 | 672 | 522 | ||||||
September 10, 2008 | 639 | — | 538 | 364 | 106 | — | ||||||
February 5, 2009 | 11,447 | 4,650 | 3,494 | 2,111 | 1,430 | 1,446 | ||||||
March 6, 2009 | 4,251 | 1,493 | 1,119 | 672 | 672 | 522 | ||||||
February 5, 2010 | 5,385 | 2,495 | 1,878 | 1,141 | 783 | 799 | ||||||
March 6, 2010 | 4,251 | 1,493 | 1,119 | 672 | 672 | 522 | ||||||
March 31, 2010 | — | — | — | — | — | 8,845 | ||||||
February 5, 2011 | 5,385 | 2,495 | 1,878 | 1,141 | 783 | 799 | ||||||
March 6, 2011 | 4,251 | 1,493 | 1,119 | 672 | 672 | 522 | ||||||
March 6, 2012 | 4,251 | 1,493 | 1,119 | 672 | 672 | 522 | ||||||
February 4, 2013 | 10,620 | 1,880 | 1,620 | 1,120 | 1,120 | 1,120 | ||||||
February 5, 2014 | 11,400 | 3,600 | 2,750 | 1,650 | 1,100 | 1,100 | ||||||
February 5, 2015 | 19,136 | 6,583 | 4,941 | 2,965 | 1,977 | 1,977 | ||||||
Upon Retirement | — | — | 1,684 | 296 | — | — |
Vesting Date | Alan L. Boeckmann | David T. Seaton | D. Michael Steuert | Carlos M. Hernandez | Peter W. Oosterveer | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January 31, 2011 | —- | 10,974 | — | — | — | |||||||||||
February 5, 2011 | 10,770 | 1,524 | 4,990 | — | 218 | |||||||||||
March 6, 2011 | 69,928 | 16,152 | 21,338 | 9,426 | 3,119 | |||||||||||
January 31, 2012 | — | 10,974 | — | — | — | |||||||||||
March 6, 2012 | 59,526 | 14,854 | 18,084 | 7,962 | 3,119 | |||||||||||
June 1, 2012 | — | — | 7,619 | — | — | |||||||||||
January 31, 2013 | — | 10,980 | — | — | — | |||||||||||
February 4, 2013 | 21,240 | 520 | 3,760 | — | 320 | |||||||||||
March 6, 2013 | 27,681 | 10,527 | 7,798 | 4,679 | 3,119 | |||||||||||
February 5, 2014 | 22,800 | 1,000 | 7,200 | — | 490 | |||||||||||
February 5, 2015 | 38,272 | 762 | 13,166 | — | 374 | |||||||||||
Total | 250,217 | 78,267 | 83,955 | 22,067 | 10,759 |
OPTION EXERCISES AND STOCK VESTED IN 2010
The following table provides information on the option exercises by and restricted stock share and unit vestings byfor the named executives in 2007.2010.
| Option Awards | Stock Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise | Value Realized | Number of Shares | Value Realized | |||||||||
Alan L. Boeckmann | 110,287 | $ | 1,795,571 | 65,943 | $ | 2,927,231 | |||||||
David T. Seaton | 7,515 | $ | 187,018 | 7,149 | $ | 316,780 | |||||||
D. Michael Steuert | 16,682 | $ | 412,339 | 18,530 | $ | 819,430 | |||||||
Carlos M. Hernandez | — | — | 4,747 | $ | 211,954 | ||||||||
Peter W. Oosterveer | — | — | 218 | $ | 9,387 | ||||||||
A portion of the shares in column (d), "Numberreported under Number of Shares Acquired on Exercise and Number of Shares Acquired on Vesting" are withheld or sold on behalf of the named executive atupon exercise or vesting to satisfy exercise costs and tax withholding obligations.obligations, and are included in the Value Realized on Exercise and Value Realized on Vesting columns.
(a) | (b) | (c) | (d) | (e) | ||||||
---|---|---|---|---|---|---|---|---|---|---|
| Option Awards | Stock Awards | ||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
Alan L. Boeckmann | 73,604 | $ | 4,840,546 | 60,289 | $ | 5,226,679 | ||||
D. Michael Steuert | 0 | $ | — | 10,155 | $ | 871,959 | ||||
Lawrence N. Fisher | 0 | $ | — | 8,843 | $ | 800,783 | ||||
H. Steven Gilbert | 1,040 | $ | 33,426 | 5,494 | $ | 494,671 | ||||
Jeffery L. Faulk | 693 | $ | 22,273 | 4,094 | $ | 361,190 | ||||
John L. Hopkins | 693 | $ | 24,802 | 3,896 | $ | 334,530 |
The company provides a pension plan, which is a cash balance qualified defined benefit plan, to most salaried employees employed prior to December 31, 2009, including all named executives. In addition to the pension plan, a select group of officers are participants in a supplemental benefit plan, granted on a discretionary basis by the Committee as a supplemental retirement plan.
The amounts in the Present Value of Accumulated Benefit column (d) represent the present value of accumulated benefits as of the fiscal year ended December 31, 2010. The actuarial values were calculated using a discount rate of 5.65% for the pension plan and a discount rate of 4.20% for the supplemental benefit plan, a future annual interest credit rate of 3.00%, assumed benefit commencement age of 65, and a lump sum form of payment for the pension plan and 120 monthly salary continuation payments for the supplemental benefit plan, with the exception of Mr. Steuert, who has elected a lump sum form of payment for the supplemental benefit plan.
(a) | (b) | (c) | (d) | ||||||
---|---|---|---|---|---|---|---|---|---|
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | ||||||
Alan L. Boeckmann | Pension Plan | 34 | $ | 169,671 | |||||
Supplemental Benefit Plan | — | $ | 2,566,535 | ||||||
David T. Seaton | Pension Plan | 24 | $ | 83,601 | |||||
D. Michael Steuert | Pension Plan | 8 | $ | 92,899 | |||||
Supplemental Benefit Plan | — | $ | 655,552 | ||||||
Carlos M. Hernandez | Pension Plan | 2 | $ | 16,596 | |||||
Peter W. Oosterveer | Pension Plan | 20 | $ | 7,319 | |||||
Netherlands Pension Plan | 20 | $ | 638,744 |
Participants' accounts under the pension plan are credited at each month-end based on age, years of service and eligible pay. On the first day of each calendar year, age at the participant's last birthday and the whole number of the participant's years of service are calculated, and then used throughout the year in determining monthly contributions. Eligible pay is defined as base pay plus before-tax contributions to the 401(k) Plan and the company's flexible benefits plan, but excluding commissions, bonuses, overtime and other irregular, infrequent or non-recurring payments. The calculation utilizing age, service and eligible pay to determine the monthlyannual amount credited to a participant's pension plan
account is illustrated below. The amount credited each month is determined by dividing the annual pension benefit credit by 12.
Eligible pay for pension plan purposes is also limited by the Internal Revenue Code compensation limits ($225,000245,000 for 2007)2010). The company credited to each named executive's nonqualified deferred compensation account the amount that would have been credited to their pension plan account if their pay had not exceededbut for this limit.limit, which is discussed in more detail under Nonqualified Deferred Compensation on page 45.
No amounts were credited to the pension plan accounts of any of the named executives until after the pension plan became effective on January 1, 1999.
The normal form of payment from the pension plan is a 50% Joint & Survivor Annuity for married participants and a Single Life Annuity for unmarried participants. A lump sum payment option is also available. Payments are permitted upon retirement at age (65)65 or upon retirement with the service and age combination as defined in the chart below.
Age | Years of Accumulated Service Immediately Preceding Retirement | |
---|---|---|
60 - 64 | 5 | |
59 | 8 | |
58 | 11 | |
57 | 13 | |
56 | 14 | |
55 | 15 | |
Any Age | 30 |
Age | Years of Accumulated Service Immediately Preceding Retirement | |
---|---|---|
60 - 64 | 5 | |
59 | 8 | |
58 | 11 | |
57 | 13 | |
56 | 14 | |
55 | 15 | |
Any Age | 30 |
In addition to the U.S. pension plan a select group of officers are participantsdescribed above, Mr. Oosterveer, who transferred to the U.S. in 2009, holds an accumulated benefit in a Supplemental Benefit Plan.defined benefit plan for employees in the Netherlands. Payments from this plan begin upon retirement and reaching age 65. The Supplemental Benefit Planplan additionally offers accrual of a "Partner Pension," which pays to the participant's partner 70% of the participant's accrued benefit upon death of the participant during active service. The present value of this plan as of December 31, 2010, as detailed in the chart above, was $638,744. Upon transfer to the U.S., this plan was frozen for Mr. Oosterveer, and he is no longer accruing benefits under this plan. Mr. Oosterveer has been eligible for and accruing benefits under the U.S. pension plan since his transfer to the U.S. in 2009.
The supplemental benefit plan provides a pre-retirement death benefit through a split dollarsplit-dollar life insurance policy and then upon retirement provides a choice of a post-retirement death benefit, a lump sum cash payment or 120 monthly salary continuation payments. In addition, any time prior to retirement, the participant has the option of irrevocably opting out of the Supplemental Benefit Plansupplemental benefit plan and instead receiving a benefit under a joint and survivor split dollarsplit-dollar life insurance plan. The death benefit for each participant is as follows: Mr. Boeckmann, $5,000,000; and Mr. Steuert, $2,000,000.
(a) | (b) | (c) | (d) | ||||
---|---|---|---|---|---|---|---|
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | ||||
Alan L. Boeckmann | Pension Plan Supplemental Benefit Plan | 31 — | $ $ | 103,088 1,359,583 | |||
D. Michael Steuert | Pension Plan Supplemental Benefit Plan | 5 — | $ $ | 49,109 480,069 | |||
Lawrence N. Fisher | Pension Plan Supplemental Benefit Plan | 32 — | $ $ | 119,882 799,059 | |||
H. Steven Gilbert | Pension Plan | 36 | $ | 107,733 | |||
Jeffery L. Faulk | Pension Plan | 33 | $ | 94,047 | |||
John L. Hopkins | Pension Plan Supplemental Benefit Plan | 22 — | $ $ | 70,366 201,902 |
NONQUALIFIED DEFERRED COMPENSATION
All U.S. executives, including named executives, are eligible to defer compensation into the Fluor Executive Deferred Compensation Program ("EDCP"), which has a number of components. Executives may defer up to 100% of base salary, annual incentive awards and any VDI payments. The plan also allows executives to contribute to the Excess 401(k) portion of the plan (between 1% and 20% of base salary) in excess of the Internal Revenue Code maximum annual before-tax contribution for qualified retirement plans.
In addition, the company contributes to the EDCP any amounts that would have been contributed by the company to the 401(k) plan as matching or discretionary retirement contributions or credited to the pension plan as an accrual, that are in excess of the Internal Revenue Code compensation limit on contributions or were lessened by an election to defer base salary. In 2007,2010, the company matched the first 5% of salary deferred to the 401(k) Plan or Excess 401(k) Plan and made a discretionary contribution of 2% of base salary. Most salaried employees were eligible for the 5% match and most received the 2% discretionary retirement contribution in 2007.2010. Annual enrollment for the EDCP is in December, and elections are made with respect to compensation to be earned in the following year.
The table below shows the deemed investment choices available to the executives in the EDCP and their annual rate of return for the calendar year ended December 31, 2007,2010, as reported by the administrator of the EDCP. The company does not guarantee the rates of return. The executives are provided the opportunity to make changes to their deemed investments on a daily basis.
Fund | Rate of Return | Fund | Rate of Return | ||||
---|---|---|---|---|---|---|---|
Fidelity Spartan Money Market | 5.01 | % | Mutual Shares—Class C | 2.30 | % | ||
Morgan Stanley Instl Core Plus Fixed Income | 5.13 | % | Hartford Capital Appreciation—Class A | 16.18 | % | ||
American Funds Balanced—Class A | 6.60 | % | Vanguard Small-Cap Index—Investor Shares | 1.16 | % | ||
Janus Balanced | 10.15 | % | MFS New Discovery—A Shares | 1.92 | % | ||
DWS Equity 500 Index—Investment Class | 5.39 | % | American Funds EuroPacific Growth—Class A | 18.96 | % | ||
MFS Core Equities—A Shares | 8.50 | % | Vanguard International Growth—Investor Shares | 15.98 | % | ||
American Funds Growth Fund of America—Class A | 10.95 | % | American Funds New Perspective—Class A | 16.04 | % |
Fund | Rate of Return | Fund | Rate of Return | |||
---|---|---|---|---|---|---|
Fidelity Spartan Money Market | 0.03% | Hartford Mid-Cap Value HLS—IA Shares | 24.61% | |||
Federated U.S. Treasury Cash Reserves—Instl Service Shares | 0.00% | Vanguard Mid-Cap Index—Investor Shares | 25.46% | |||
Hartford Total Return Bond HLS—IA Shares | 7.52% | JPMorgan U.S. Small Company—Select Shares | 26.88% | |||
MFS High Income—A Shares | 15.50% | Northern Small Cap Index | 26.41% | |||
American Funds Balanced—Class A | 13.02% | MFS New Discovery—I Shares | 36.16% | |||
Hartford Value Opportunities HLS—IA Shares | 14.70% | American Funds New Perspective—Class A | 12.76% | |||
Hartford Capital Appreciation HLS—IA Shares | 16.49% | Vanguard International Growth—Admiral Shares | 15.81% | |||
Vanguard 500 Index—Admiral Shares | 15.05% | Morgan Stanley Instl Emerging Markets Equity—Class P | 18.20% | |||
American Funds Growth Fund of America—Class A | 12.28% |
DistributionFor amounts deferred on or after January 1, 2005, distribution elections are made in conjunction with the plan year deferral elections. Distributions can be elected as a lump sum payment or in up to ten annual installments. Executives can elect to have their distributions commence eitherDistribution payments are made in the year of theirmonth following retirement or termination orwith the January following their retirement or termination. Forexception of officers of the company, for whom no distributions will be made prior to six months after retirement or termination. In addition, executives can elect to receive a scheduled in-service distribution as a lump sum or in up to ten annual installments, with the payments commencing no sooner than one year following the end of the plan year.
Distributions related to amounts deferred prior to January 1, 2005 are made at the time of retirement or termination and can be elected as a lump sum payment or in up to twenty annual installments. Executives can elect to have their distributions commence either in the year of their retirement or termination or the January following their retirement or termination.
The table below shows executive and company contributions made to the EDCP for each named executive as well as the aggregate earnings and aggregate balance at fiscal year end in the EDCP.
(a) | (b) | (c) | (d) | (e) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Balance at Last FYE ($)(4) | ||||||||
Alan L. Boeckmann | $ | 46,398 | $ | 122,278 | $ | 418,549 | $ | 6,126,618 | ||||
D. Michael Steuert | $ | 101,651 | $ | 64,196 | $ | 165,763 | $ | 2,410,506 | ||||
Lawrence N. Fisher | $ | 1,214,735 | $ | 49,337 | $ | 210,764 | $ | 3,617,925 | ||||
H. Steven Gilbert | $ | 16,375 | $ | 30,708 | $ | 170,099 | $ | 2,504,900 | ||||
Jeffery L. Faulk | $ | 21,251 | $ | 38,748 | $ | 123,355 | $ | 1,836,181 | ||||
John L. Hopkins | $ | 199,010 | $ | 36,269 | $ | 25,132 | $ | 598,601 |
(a) | (b) | (c) | (d) | (e) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(2) | Aggregate Earnings in Last Fiscal Year ($)(3) | Aggregate Balance at December 31, 2010 ($)(4) | |||||||||
Alan L. Boeckmann | $ | 52,802 | $ | 133,978 | $ | 734,010 | $ | 6,919,915 | |||||
David T. Seaton | $ | 88,705 | $ | 56,989 | $ | 76,310 | $ | 1,617,934 | |||||
D. Michael Steuert | $ | 42,637 | $ | 61,290 | $ | 178,875 | $ | 2,781,978 | |||||
Carlos M. Hernandez | $ | 1,168,193 | $ | 30,950 | $ | 56,271 | $ | 1,721,419 | |||||
Peter W. Oosterveer | $ | 0 | $ | 1,295 | $ | 0 | $ | 1,295 |
COMPENSATION UNDER VARIOUSPOTENTIAL PAYMENTS UPON TERMINATION SCENARIOSOR CHANGE IN CONTROL
The tables below reflect the amount of compensation that would become payable to each of the named executives under existing plans and arrangements if the named executive's employment had terminated on December 31, 2007,2010, given their compensation and service levels as of such date and, if applicable, based on the company's closing stock price on that date. These benefits are in addition to benefits available prioramounts previously earned and to which they are entitled, regardless of the occurrence of any termination of employment, including then-exercisable stock options, and vested amounts contributed or credited under the Executive Deferred Compensation Program, as well as benefits generally available to all salaried employees, such as amounts accrued and vested through the company's retirement plans and payout of any accrued time off with pay (collectively, the "Pre-Termination Benefits"). Named executives are entitled to receive the Pre-Termination Benefits regardless of the manner in which histheir employment is terminated. AdditionalAs described under the scenarios set forth below, additional amounts may be received upon termination, underwith the scenarios set forth below.exception of termination for cause, in which case, no additional amounts would be received.
The actual amounts that would be paid upon a named executive's termination of employment can only be determined at the time of such executive's separation from the company. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be higher or lower than reported below. Factors that could affect these amounts include the timing during the year of any such event, the company's stock price and the executive's age. In addition, in connection with any actual termination of employment, the company may determine to enter into an agreement or to establish an arrangement providing additional benefits or amounts, or alteringto alter the terms of benefits described below, as the Committee determines appropriate.
Payments Made Upon Voluntary Termination/Retirement
Currently, allAs of December 31, 2010, Mr. Boeckmann and Mr. Steuert are the named executives with the exception of Messrs. Steuert and Hopkins, are eligible for retirement as defined in the Pension Benefits in Fiscal Year 2007 table on page 35.44. For those who are eligible for retirement, it is assumed that in the case of voluntary termination, they would elect retirement from the company. Messrs. Steuert and HopkinsNamed executives not eligible for retirement would receive no additional compensation upon voluntary termination, other than their Pre-Termination Benefits because they are not currently eligible for retirement.Benefits.
In the event of the voluntary termination of a named executive who is eligible for retirement as defined in the Pension Benefits in Fiscal Year 2007 table on page 3544, in addition to the Pre-Termination Benefits:
Amounts reported in the tables below assume that the above approvals have been obtained and requirements met.
In addition, for Mr. Steuert, in the event of voluntary retirement, he receives a payment of one year's base salary, as guaranteed in his employment letter.
Payments Made Upon Not for Cause Termination
In the event of the termination without cause of a named executive, in addition to the Pre-Termination Benefits and, for retirement eligible named executives, the items identified above under the heading "Payments Made Upon Voluntary Termination/Retirement," the named executive will receive a cash severance benefit calculated as two weeks of base pay per year of service, with a minimum severance benefit of eight weeks and a maximum severance benefit of fifty-two weeks. In addition,addition:
Amounts reported in the VDItables below assume that the Committee has approved the annual incentive payment, that would have been due based on continued employment throughalthough the year of termination.
Payments Made Upon a Termination in Connection with a Change in Control
In the event of thea qualifying termination of employment within twenty-four (24) months of, or Committee approval upon, a change in control of a named executive within two (2) years following a Change in Control, in addition to the Pre-Termination Benefits and the items identified above under the heading "Payments Made Upon Voluntary Termination/Retirement":Benefits;
In addition, any benefits under the Supplemental Benefit Plansupplemental benefit plan will vest upon a decision fromif the Committee determines that the named executive hadhas experienced an adverse change in employment condition within thirty-six (36) months ofafter the change in control and such benefits will be paid in accordance with the named executive's distribution election.
A qualifying termination, generally, is a termination of the named executive without cause or a resignation by the named executive for good reason. "Cause" means the named executive's (i) fraud, (ii) conviction of a felony, (iii) material failure or refusal to perform his job duties in accordance with company policies or (iv) a material violation of company policy that causes substantial harm to the company or its subsidiaries. "Good reason" includes a material diminution of the named executive's aggregate compensation or his authority, duties or responsibilities (including as a result of a material diminution of the budget over which he retains authority) but may also be triggered by a material
breach of any agreement (including the change in control agreement) under which he provides services to the company.
Payments below assume Committee approval regarding payment of the supplemental benefit plan.
No gross up for excise taxes, if any, is payable under the change in control agreements. The company will, however, automatically reduce any payments under the agreement to the extent necessary to prevent payments being subject to the excise tax, but only if by reason of the reduction, the after-tax benefit of the reduced payments exceeds the after-tax benefit if such reduction were not made.
Payments Made Upon Death or Termination in Connection with Disability
In the event of death of a named executive or termination of employment of a named executive as a result of total and permanent disability, the payments would be the same as the Payments Made Upon a Termination in Connection with a Change in Control, with the exception of the lump sum cash payment outlined in the first bullet above. In addition, the supplemental benefit plan would pay out:
The following tables show the potential payments that would be due each named executive upon a voluntary termination,termination; a termination without cause andcause; a termination in connection with a change in control.control; and death or termination in connection with disability.
Alan L. Boeckmann Eligible for retirement | Voluntary Termination of Employment/Retirement(1) | Not for Cause Termination of Employment(1) | Termination of Employment in Connection with a Change in Control(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (3) | $ | 1,166,000 | (4) | $ | 0 | (5) | ||
Annual Incentive Awards | $ | 0 | (6) | $ | 1,399,200 | (7) | $ | 1,399,200 | (8) | ||
Supplemental Benefit Plan | $ | 2,300,820 | (9) | $ | 2,300,820 | (9) | $ | 2,300,820 | (10) | ||
Long Term Incentive Awards | |||||||||||
Stock Options | $ | 7,349,361 | (11) | $ | 7,349,361 | (11) | $ | 7,349,361 | (12) | ||
Restricted Stock Shares | $ | 21,394,610 | (13) | $ | 21,394,610 | (13) | $ | 21,394,610 | (14) | ||
Relative Performance Program (RPP) | $ | 0 | (15) | $ | 1,650,000 | (16) | $ | 1,650,000 | (17) | ||
Value Driver Incentive (VDI) | $ | 0 | (15) | $ | 1,639,750 | (16) | $ | 4,423,250 | (17) | ||
Total Value of Payments | $ | 31,044,792 | $ | 36,899,742 | $ | 38,517,242 | |||||
D. Michael Steuert Not Eligible for retirement | Voluntary Termination of Employment/Retirement(1) | Not for Cause Termination of Employment(1) | Termination of Employment in Connection with a Change in Control(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (3) | $ | 910,769 | (18) | $ | 740,000 | (19) | ||
Annual Incentive Awards | $ | 0 | (6) | $ | 555,000 | (7) | $ | 555,000 | (8) | ||
Supplemental Benefit Plan | $ | 0 | (20) | $ | 920,328 | (9) | $ | 920,328 | (10) | ||
Long Term Incentive Awards | |||||||||||
Stock Options | $ | 0 | (21) | $ | 0 | (21) | $ | 2,160,767 | (12) | ||
Restricted Stock Shares | $ | 0 | (22) | $ | 0 | (22) | $ | 7,164,761 | (14) | ||
Relative Performance Program (RPP) | $ | 0 | (15) | $ | 600,000 | (16) | $ | 600,000 | (17) | ||
Value Driver Incentive (VDI) | $ | 0 | (15) | $ | 1,221,000 | (16) | $ | 2,488,000 | (17) | ||
Total Value of Payments | $ | 0 | $ | 3,467,097 | $ | 13,888,856 | |||||
Alan L. Boeckmann Eligible for retirement | Voluntary Termination of Employment/Retirement | Not for Cause Termination of Employment | Termination of Employment in Connection with a Change in Control | Death or Termination due to Disability | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (1) | $ | 1,248,000 | (2) | $ | 8,424,000 | (3) | $ | 0 | (1) | ||
Retention Award | — | — | — | — | ||||||||||
Annual Incentive Award | $ | 0 | (4) | $ | 1,560,000 | (5) | $ | 1,560,000 | (6) | $ | 1,560,000 | (6) | ||
Supplemental Benefit Plan | $ | 2,566,535 | (7) | $ | 2,566,535 | (7) | $ | 2,566,535 | (7) | $ | 5,000,000 | (8) | ||
Long Term Incentive Awards | ||||||||||||||
Stock Options | $ | 11,465,493 | (9) | $ | 11,465,493 | (9) | $ | 11,465,493 | (10) | $ | 11,465,493 | (10) | ||
Restricted Stock Shares/Units | $ | 16,579,378 | (9) | $ | 16,579,378 | (9) | $ | 16,579,378 | (10) | $ | 16,579,378 | (10) | ||
Value Driver Incentive (VDI) | $ | 0 | (11) | $ | 0 | (11) | $ | 149,380 | (12) | $ | 149,380 | (12) | ||
Total Value of Payments | $ | 30,611,406 | $ | 33,419,406 | $ | 40,744,786 | $ | 34,754,251 | (8) | |||||
Lawrence N. Fisher Eligible for retirement | Voluntary Termination of Employment/Retirement(1) | Not for Cause Termination of Employment(1) | Termination of Employment in Connection with a Change in Control(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (3) | $ | 595,000 | (4) | $ | 0 | (5) | ||
Annual Incentive Awards | $ | 0 | (6) | $ | 446,300 | (7) | $ | 446,300 | (8) | ||
Supplemental Benefit Plan | $ | 690,246 | (9) | $ | 690,246 | (9) | $ | 690,246 | (10) | ||
Long Term Incentive Awards | |||||||||||
Stock Options | $ | 1,621,631 | (11) | $ | 1,621,631 | (11) | $ | 1,621,631 | (12) | ||
Restricted Stock Shares | $ | 5,737,288 | (13) | $ | 5,737,288 | (13) | $ | 5,737,288 | (14) | ||
Relative Performance Program (RPP) | $ | 0 | (15) | $ | 450,000 | (16) | $ | 450,000 | (17) | ||
Value Driver Incentive (VDI) | $ | 0 | (15) | $ | 915,750 | (16) | $ | 1,865,750 | (17) | ||
Total Value of Payments | $ | 8,049,165 | $ | 10,456,115 | $ | 10,811,115 | |||||
H. Steven Gilbert Eligible for retirement | Voluntary Termination of Employment/Retirement(1) | Not for Cause Termination of Employment(1) | Termination of Employment in Connection with a Change in Control(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (3) | $ | 460,000 | (4) | $ | 0 | (5) | ||
Annual Incentive Awards | $ | 0 | (6) | $ | 322,000 | (7) | $ | 322,000 | (8) | ||
Supplemental Benefit Plan | $ | 0 | $ | 0 | $ | 0 | |||||
Long Term Incentive Awards | |||||||||||
Stock Options | $ | 887,961 | (11) | $ | 887,961 | (11) | $ | 887,961 | (12) | ||
Restricted Stock Shares | $ | 3,374,729 | (13) | $ | 3,374,729 | (13) | $ | 3,374,729 | (14) | ||
Relative Performance Program (RPP) | $ | 0 | (15) | $ | 270,000 | (16) | $ | 270,000 | (17) | ||
Value Driver Incentive (VDI) | $ | 0 | (15) | $ | 594,450 | (16) | $ | 1,209,450 | (17) | ||
Total Value of Payments | $ | 4,262,691 | $ | 5,909,141 | $ | 6,064,141 | |||||
Jeffery L. Faulk Eligible for retirement | Voluntary Termination of Employment/Retirement(1) | Not for Cause Termination of Employment(1) | Termination of Employment in Connection with a Change in Control(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (3) | $ | 535,000 | (4) | $ | 0 | (5) | ||
Annual Incentive Awards | $ | 0 | (6) | $ | 374,500 | (7) | $ | 374,500 | (8) | ||
Supplemental Benefit Plan | $ | 0 | $ | 0 | $ | 0 | |||||
Long Term Incentive Awards | |||||||||||
Stock Options | $ | 802,585 | (11) | $ | 802,585 | (11) | $ | 802,585 | (12) | ||
Restricted Stock Shares | $ | 2,431,921 | (13) | $ | 2,431,921 | (13) | $ | 2,431,921 | (14) | ||
Relative Performance Program (RPP) | $ | 0 | (15) | $ | 180,000 | (16) | $ | 180,000 | (17) | ||
Value Driver Incentive (VDI) | $ | 0 | (15) | $ | 396,300 | (16) | $ | 906,300 | (17) | ||
Total Value of Payments | $ | 3,234,507 | $ | 4,720,307 | $ | 4,695,307 | |||||
David T. Seaton Not eligible for retirement | Voluntary Termination of Employment/Retirement | Not for Cause Termination of Employment | Termination of Employment in Connection with a Change in Control | Death or Termination due to Disability | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (1) | $ | 673,077 | (5) | $ | 2,800,000 | (3) | $ | 0 | (1) | ||
Retention Award | $ | 0 | $ | 3,215,469 | (13) | $ | 3,215,469 | (13) | $ | 3,215,469 | (13) | |||
Annual Incentive Award | $ | 0 | (4) | $ | 700,000 | (8) | $ | 700,000 | (6) | $ | 700,000 | (6) | ||
Supplemental Benefit Plan | — | — | — | — | ||||||||||
Long Term Incentive Awards | ||||||||||||||
Stock Options | $ | 0 | (9) | $ | 0 | (9) | $ | 2,911,313 | (10) | $ | 2,911,313 | (10) | ||
Restricted Stock Shares/Units | $ | 0 | (9) | $ | 0 | (9) | $ | 3,004,162 | (10) | $ | 3,004,162 | (10) | ||
Value Driver Incentive (VDI) | $ | 0 | (11) | $ | 0 | (11) | $ | 21,000 | (12) | $ | 21,000 | (12) | ||
Total Value of Payments | $ | 0 | $ | 4,588,546 | $ | 12,651,944 | $ | 9,851,944 | ||||||
D. Michael Steuert Eligible for retirement | Voluntary Termination of Employment/Retirement | Not for Cause Termination of Employment | Termination of Employment in Connection with a Change in Control | Death or Termination due to Disability | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 791,800 | (1) | $ | 1,065,885 | (2) | $ | 2,850,600 | (3) | $ | 0 | (1) | ||
Retention Award | $ | 0 | $ | 504,835 | (13) | $ | 504,835 | (13) | $ | 504,835 | (13) | |||
Annual Incentive Award | $ | 0 | (4) | $ | 633,500 | (5) | $ | 633,500 | (6) | $ | 633,500 | (6) | ||
Supplemental Benefit Plan | $ | 655,552 | (77) | $ | 655,552 | (7) | $ | 655,552 | (7) | $ | 2,000,000 | (8) | ||
Long Term Incentive Awards | ||||||||||||||
Stock Options | $ | 3,394,698 | (9) | $ | 3,394,698 | (9) | $ | 3,394,698 | (10) | $ | 3,394,698 | (10) | ||
Restricted Stock Shares/Units | $ | 5,058,023 | (9) | $ | 5,058,023 | (9) | $ | 5,058,023 | (10) | $ | 5,058,023 | (10) | ||
Value Driver Incentive (VDI) | $ | 0 | (11) | $ | 0 | (11) | $ | 46,690 | (12) | $ | 46,690 | (12) | ||
Total Value of Payments | $ | 9,900,073 | $ | 11,312,493 | $ | 13,143,898 | $ | 11,637,746 | (8) | |||||
Carlos M. Hernandez Not eligible for retirement | Voluntary Termination of Employment/Retirement | Not for Cause Termination of Employment | Termination of Employment in Connection with a Change in Control | Death or Termination due to Disability | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (1) | $ | 77,692 | (2) | $ | 1,767,600 | (3) | $ | 0 | (1) | ||
Retention Award | — | — | — | — | ||||||||||
Annual Incentive Award | $ | 0 | (4) | $ | 378,800 | (5) | $ | 378,800 | (6) | $ | 378,800 | (6) | ||
Supplemental Benefit Plan | — | — | — | — | ||||||||||
Long Term Incentive Awards | ||||||||||||||
Stock Options | $ | 0 | (9) | $ | 0 | (9) | $ | 1,511,176 | (10) | $ | 1,511,176 | (10) | ||
Restricted Stock Shares/Units | $ | 0 | (9) | $ | 0 | (9) | $ | 1,462,159 | (10) | $ | 1,462,159 | (10) | ||
Value Driver Incentive (VDI) | $ | 0 | (11) | $ | 0 | (11) | $ | 21,000 | (12) | $ | 21,000 | (12) | ||
Total Value of Payments | $ | 0 | $ | 456,492 | $ | 5,140,735 | $ | 3,373,135 | ||||||
John L. Hopkins Not Eligible for retirement | Voluntary Termination of Employment/Retirement(1) | Not for Cause Termination of Employment(1) | Termination of Employment in Connection with a Change in Control(2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (3) | $ | 451,154 | (4) | $ | 0 | (5) | ||
Retention Award | $ | 0 | $ | 1,910,426 | (23) | $ | 1,910,426 | (23) | |||
Annual Incentive Awards | $ | 0 | (6) | $ | 357,000 | (7) | $ | 357,000 | (8) | ||
Supplemental Benefit Plan | $ | 0 | (20) | $ | 690,246 | (9) | $ | 690,246 | (10) | ||
Long Term Incentive Awards | |||||||||||
Stock Options | $ | 0 | (21) | $ | 0 | (21) | $ | 661,529 | (12) | ||
Restricted Stock Shares | $ | 0 | (22) | $ | 0 | (22) | $ | 3,605,404 | (14) | ||
Relative Performance Program (RPP) | $ | 0 | (15) | $ | 180,000 | (16) | $ | 180,000 | (17) | ||
Value Driver Incentive (VDI) | $ | 0 | (15) | $ | 396,300 | (16) | $ | 840,300 | (17) | ||
Total Value of Payments | $ | 0 | $ | 3,985,126 | $ | 8,244,905 | |||||
Peter W. Oosterveer Not eligible for retirement | Voluntary Termination of Employment/Retirement | Not for Cause Termination of Employment | Termination of Employment in Connection with a Change in Control | Death or Termination due to Disability | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance Benefit | $ | 0 | (1) | $ | 329,619 | (2) | $ | 1,428,400 | (3) | $ | 0 | (1) | ||
Retention Award | $ | 0 | $ | 400,000 | (13) | $ | 400,000 | (13) | $ | 400,000 | (13) | |||
Annual Incentive Award | $ | 0 | (4) | $ | 306,100 | (5) | $ | 306,100 | (6) | $ | 306,100 | (6) | ||
Supplemental Benefit Plan | — | — | — | — | ||||||||||
Long Term Incentive Awards | ||||||||||||||
Stock Options | $ | 0 | (9) | $ | 0 | (9) | $ | 656,030 | (10) | $ | 656,030 | (10) | ||
Restricted Stock Shares/Units | $ | 0 | (9) | $ | 0 | (9) | $ | 712,891 | (10) | $ | 712,891 | (10) | ||
Value Driver Incentive (VDI) | $ | 0 | (11) | $ | 0 | (11) | $ | 10,500 | (12) | $ | 10,500 | (12) | ||
Total Value of Payments | $ | 0 | $ | 1,035,719 | $ | 3,513,921 | $ | 2,085,521 | ||||||
due to an adverse change in employment condition within thirty-six months of the change in control.
The company'sOur compensation philosophy for non-employeenon-management directors is consistent with the philosophy established for the company's named executives. The compensation program is designed to attract and retain directors with the necessary experience to represent the company's shareholders and to advise the company's executive management. The compensation program is also designed to align the Board of DirectorsDirectors' interests with the interests of shareholders over the long term. The company uses a combination of cash and stock-based awards to compensate non-management directors and targets the 50th percentile of compensation survey data from the companies included in the Compensation Peer Group as well as companies from similar industry segments and general industry. Directors who are employees of the company receive no compensation for their service as directors. In addition to the compensation described below, the non-executive Chairman of the Board will be provided office space and a dedicated assistant.
Cash Compensation Paid to Board Members
A change was approved in 2007 to the compensation package for members of the Board who are not employees of the company. Starting in 2007, non-employeeNon-management directors receive an annual cash retainer of $90,000,$105,000, paid quarterly. This represents an increase of $15,000 above the 2009 annual cash retainer. In addition, the non-executive Chairman of the Board receives an annual cash retainer in the amount of $200,000; Chairs of the Organization and Compensation Committee and Governance Committee receive an annual cash retainer in the amount of $10,000,$10,000; the Chair of the Audit Committee receives an annual cash retainer in the amount of $15,000,$15,000; and the lead independent directorLead Independent Director receives an annual cash retainer in the amount of $30,000. Directors who are employees of the company receive no compensation for their service as directors.
Stock-Based Compensation Paid to Board Members
When a non-employee director joins the Board, the individual receives Non-management directors receive an initial grant of up to 2,500 restricted stock shares plus related restricted stock units in an amount determined by the Organization and Compensation Committee. For directors who joined the Board in 2007, the grants consisted of 1,500 restricted stock shares and 1,000 restricted stock units. Restricted units are payable in cash to assist in satisfying related income tax liabilities. Awards are made after appointment to the Board, on a date determined by the Committee. Restrictions lapse and units become immediately earned and payable with respect to 20% of the award on the date of grant and then subsequently vests at a rate of 20% per year on each anniversary of that date.
An annual grant of restricted stock shares and restricted stock units with a total market value (based on the fair market value of the company's common stock on the New York Stock Exchange on the date of grant) of $90,000 (an increase from $75,000 in 2006) is made$105,000 as of the date of the annual meeting of shareholdersshareholders. This also represents an increase of $15,000 above the value of the 2009 stock grant which was approved in conjunction with the increase in annual cash retainer in order to each non-employee director.better align director pay with the 50th percentile of market. Restrictions on the 20072010 awards lapse at a rate of 20% per year over five years.after one year. If a director leaves the Board prior to the vesting, the portion of any award remaining subject to restrictions is forfeited. Restrictions immediately lapse and the stock vests, however, if an award has been held for at least six (6) months and a director attains the age for mandatory retirement (currently 72 years of age), obtains approval for early retirement, dies, becomes permanently and totally disabled or is terminatedceases to serve due to a change in control. Non-management directors are required to own shares or share units in an amount equivalent to five times the annual retainer for Board service within five years of joining the Board.
Deferred Compensation Program for Non-EmployeeNon-Management Directors
Directors have the option of deferring receipt of directors' fees until their retirement or other termination of status as a director, pursuant to the Fluor Corporation Deferred Directors' Fees Program. Directors may elect to have deferred amounts valued as if invested either wholly or partially in company stock or one or more of 14 investment funds. The company does not guarantee the rate of return. Directors electing the company stock valuation fundFluor Stock Valuation Fund for deferrals and maintaining that election continuously for five years earn a 25% premium on the deferred amount deemed invested in company stock via the Fluor Stock Valuation Fund. All of the directors who deferred fees in 2007 elected the Fluor Stock Valuation Fund for at least half of their deferral. All amounts in the deferral accounts are paid in cash.cash based on their distribution elections.
Former Retirement Plan
In March 2003, a committee of disinterested directors determined that non-employeenon-management directors who received restricted stock shares on March 11, 1997 in consideration of the cancellation of the Fluor Corporation Retirement Plan for Outside Directors could make an irrevocable election to surrender such shares upon their retirement, death or disability. The five directors,only remaining director who were eligible at the time, made such an election.this election is Mr. Fluor. In lieu of these shares, these directorsMr. Fluor will receive the amount of their respectivehis accrued retirement benefits at the time of the cancellation of the retirement plan upon theirhis retirement, death or disability. These benefits equal the retainer fees at the time of cancellation multiplied by the number of years such directorhe had served prior to the cancellation of the plan. This amount will be paid in a lump sum (reduced to present value based on the 10-year Treasury rate) at retirement. Two of the five directors who made the irrevocable election in 2003 have since retired, have surrendered their shares and have been cashed out.
DIRECTOR SUMMARY COMPENSATION TABLE
(a) | (b) | (c) | (d) | (e) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($)(4) | ||||||||
Ilesanmi Adesida | $ | 45,000 | $ | 82,953 | $ | 7,934 | $ | 135,887 | ||||
Peter K. Barker | $ | 45,000 | $ | 82,953 | $ | 5,059 | $ | 133,012 | ||||
Peter J. Fluor | $ | 130,000 | $ | 112,922 | $ | 32,617 | $ | 275,539 | ||||
James T. Hackett | $ | 90,000 | $ | 112,922 | $ | 22,617 | $ | 225,539 | ||||
Kent Kresa | $ | 90,000 | $ | 118,736 | $ | 27,617 | $ | 236,353 | ||||
Vilma S. Martinez | $ | 90,000 | $ | 112,922 | $ | 3,117 | $ | 206,039 | ||||
Dean R. O'Hare | $ | 105,000 | $ | 112,922 | $ | 21,867 | $ | 239,789 | ||||
Joseph W. Prueher | $ | 90,000 | $ | 113,959 | $ | 27,617 | $ | 231,576 | ||||
Robin W. Renwick | $ | 100,000 | $ | 123,510 | $ | 106,230 | $ | 329,740 | ||||
Peter S. Watson | $ | 90,000 | $ | 107,594 | $ | 2,617 | $ | 200,211 | ||||
Suzanne H. Woolsey | $ | 90,000 | $ | 119,307 | $ | 5,117 | $ | 214,424 |
The table below summarizes the total compensation earned by each of the non-management directors in 2010.
(a) | (b) | (c) | (d) | (e) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($)(4) | |||||||||
Ilesanmi Adesida | $ | 97,500 | $ | 90,029 | $ | 27,388 | $ | 214,917 | |||||
Peter K. Barker | $ | 97,500 | $ | 90,029 | $ | 29,488 | $ | 217,017 | |||||
Rosemary T. Berkery | $ | 75,000 | $ | 112,700 | $ | 66 | $ | 187,766 | |||||
H. Paulett Eberhart | $ | 75,000 | $ | 112,700 | $ | 18,816 | $ | 206,516 | |||||
Peter J. Fluor | $ | 137,500 | $ | 90,029 | $ | 35,488 | $ | 263,017 | |||||
James T. Hackett | $ | 97,500 | $ | 90,029 | $ | 29,488 | $ | 217,017 | |||||
Kent Kresa | $ | 112,500 | $ | 90,029 | $ | 26,188 | $ | 228,717 | |||||
Dean R. O'Hare | $ | 107,500 | $ | 90,029 | $ | 26,613 | $ | 224,142 | |||||
Joseph W. Prueher | $ | 97,500 | $ | 90,029 | $ | 29,488 | $ | 217,017 | |||||
Nader H. Sultan | $ | 97,500 | $ | 90,029 | $ | 24,488 | $ | 212,017 | |||||
Peter S. Watson | $ | 22,500 | — | $ | 19 | $ | 22,519 | ||||||
Suzanne H. Woolsey | $ | 97,500 | $ | 90,029 | $ | 113 | $ | 187,642 |
As of December 31, 2007,2010, the directors held unvested restricted stock shares (RSS) and unvested restricted stock units (RSU) as follows: Dr. Adesida, 1,200 RSS and 800 RSU; Mr. Barker, 1,200 RSS and 800 RSU; Mr. Fluor, 7,513 RSS and 1,350 RSU; Mr. Hackett, 2,754 RSS and 1,350 RSU; Mr. Kresa, 2,004 RSS and 1,350 RSU; Ms. Martinez, 6,852 RSS and 1,350 RSU; Mr. O'Hare, 6,234 RSS and 1,350 RSU; Mr. Prueher, 1,854 RSS and 1,240 RSU; Lord Renwick, 6,234 RSS and 1,350 RSU; Dr. Watson, 2,016 RSS and 1,348 RSU; and Dr. Woolsey, 2,154 RSS and 1,440 RSU.
Name | Restricted Stock Shares | Restricted Stock Units | |||||
---|---|---|---|---|---|---|---|
Ilesanmi Adesida | 1,697 | 1,131 | |||||
Peter K. Barker | 1,697 | 1,131 | |||||
Rosemary T. Berkery | 1,200 | 800 | |||||
H. Paulett Eberhart | 1,200 | 800 | |||||
Peter J. Fluor | 12,677 | 1,107 | |||||
James T. Hackett | 3,159 | 1,107 | |||||
Kent Kresa | 1,659 | 1,107 | |||||
Dean R. O'Hare | 10,119 | 1,107 | |||||
Joseph W. Prueher | 1,659 | 1,107 | |||||
Nader H. Sultan | 1,997 | 1,331 | |||||
Peter S. Watson | — | — | |||||
Suzanne H. Woolsey | 1,659 | 1,107 |
DIRECTOR ALL OTHER COMPENSATION
(a) | (b) | (c) | (d) | (e) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Other Director Fees ($) | Charitable Gift Match ($)(1) | Company Contributions to Nonqualified Deferred Compensation ($)(2) | Total ($)(3) | ||||||||
Ilesanmi Adesida | $ | 0 | $ | 0 | $ | 7,875 | $ | 7,934 | ||||
Peter K. Barker | $ | 0 | $ | 5,000 | $ | 0 | $ | 5,059 | ||||
Peter J. Fluor | $ | 0 | $ | 0 | $ | 32,500 | $ | 32,617 | ||||
James T. Hackett | $ | 0 | $ | 0 | $ | 22,500 | $ | 22,617 | ||||
Kent Kresa | $ | 0 | $ | 5,000 | $ | 22,500 | $ | 27,617 | ||||
Vilma S. Martinez | $ | 0 | $ | 3,000 | $ | 0 | $ | 3,117 | ||||
Dean R. O'Hare | $ | 0 | $ | 0 | $ | 21,750 | $ | 21,867 | ||||
Joseph W. Prueher | $ | 0 | $ | 5,000 | $ | 22,500 | $ | 27,617 | ||||
Robin W. Renwick | $ | 84,238 | (4) | $ | 0 | $ | 21,875 | $ | 106,230 | |||
Peter S. Watson | $ | 0 | $ | 2,500 | $ | 0 | $ | 2,617 | ||||
Suzanne H. Woolsey | $ | 0 | $ | 5,000 | $ | 0 | $ | 5,117 |
The following table and related footnotes describe each component of the All Other Compensation column (d) of the Director Summary Compensation Table for 2010.
(a) | (b) | (c) | (d) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Name | Charitable Gift Match ($)(1) | Company Contributions to Nonqualified Deferred Compensation ($)(2) | Total ($)(3) | |||||||
Ilesanmi Adesida | $ | 2,900 | $ | 24,375 | $ | 27,388 | ||||
Peter K. Barker | $ | 5,000 | $ | 24,375 | $ | 29,488 | ||||
Rosemary T. Berkery | — | — | $ | 66 | ||||||
H. Paulett Eberhart | — | $ | 18,750 | $ | 18,816 | |||||
Peter J. Fluor | $ | 1,000 | $ | 34,375 | $ | 35,488 | ||||
James T. Hackett | $ | 5,000 | $ | 24,375 | $ | 29,488 | ||||
Kent Kresa | $ | 5,000 | $ | 21,075 | $ | 26,188 | ||||
Dean R. O'Hare | $ | 5,000 | $ | 21,500 | $ | 26,613 | ||||
Joseph W. Prueher | $ | 5,000 | $ | 24,375 | $ | 29,488 | ||||
Nader H. Sultan | — | $ | 24,375 | $ | 24,488 | |||||
Peter S. Watson | — | — | $ | 19 | ||||||
Suzanne H. Woolsey | — | — | $ | 113 |
Proposal 4
Our Board of Directors has unanimously adopted a resolution for approval by our shareholders proposing amendments to our Amended and Restated Certificate of Incorporation (as amended to date, the "Certificate") to phase out the classification of the Board and to provide instead for the annual election of directors, as well as to revise a related provision of the Certificate. The Board's proposal is a result of its ongoing review of our corporate governance principles and also in response to a shareholder proposal.
If approved by our shareholders, the amendments would first apply to directors standing for election beginning with the 2012 annual meeting. The amendments, even if approved, would not affect directors elected to three-year terms either at this Annual Meeting or previously, each of whom will be entitled to complete the term to which he or she was elected. In addition, Delaware law provides that directors serving on classified boards of directors may be removed only with cause, and the amendments would preserve this standard until a director is elected for an annual term.
Article Seventh of the Certificate currently provides that the Board of Directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as possible, with the term of office of one class expiring each year and directors in each class being elected to three-year terms. If the proposed amendments are approved by our shareholders, those directors previously elected to three-year terms of office by our shareholders, including those directors elected at this Annual Meeting, will complete their three-year terms, and thereafter they or their successors would be elected to one-year terms at each annual meeting. Beginning at the 2014 annual meeting, the declassification of the Board would be complete, and all directors would be subject to annual election to one-year terms.
In developing this proposal, the Board (including all members of the Governance Committee) considered the growing sentiment, particularly in the institutional investor community, in favor of annual elections and believes that the Board would continue to be effective in protecting shareholder interests under an annual election system. In this regard, the Board recognizes that many investors and commentators believe that the election of directors is the amountprimary means for shareholders to influence corporate governance policies and hold management accountable for implementing those policies.
The Board also considered the benefits of classified boards, which foster stability and continuity on the Board, with respect to long-term planning and in the overall business of a company, since a majority of directors would always have prior experience as directors of the payments madecompany. Moreover, classified boards provide non-management directors with a longer term of office that enhances their independence from management.
Classified boards also provide a measure of protection against hostile acquisitions and proxy contests because they increase the time necessary to Lord Renwick solelyelect directors who constitute a majority of the board, thereby providing the board the time and flexibility necessary to evaluate the adequacy and fairness of any takeover proposal, negotiate on behalf of all shareholders and weigh alternative methods of maximizing shareholder value for all shareholders, without the threat of imminent removal of a majority of Board members. Correspondingly, when boards are not classified, the entire board of directors can be replaced in his capacitya single year. As a result, if this proposal is approved and implemented, it would be easier for one or more shareholders holding a large number of shares, whether an existing or long-term shareholder or one that accumulates a large position in or for a short period of time, to replace the entire Board at once.
While the Board believes it is important to maintain appropriate defenses to inadequate takeover bids, it also is important to retain shareholder confidence by demonstrating that it is accountable to
shareholders. The Board also considered that even without a classified board (and without the supermajority voting requirements, which the Board also recommends eliminating), the company has defenses that work together to discourage a would-be acquirer from proceeding with a proposal that undervalues the company and to assist the Board in responding to such proposals. These defenses include other provisions of the company's Certificate and Amended and Restated Bylaws, as well as certain provisions of Delaware corporation law.
As a result, the Non-Executive ChairmanBoard has considered the matter, adopted resolutions setting forth the proposed amendment to the Certificate, declared such amendment advisable and unanimously resolved to submit such amendment to our shareholders for consideration.
The Declassification Amendment and Related Changes
If the amendments are approved, Article Seventh of Fluor Limited,the Certificate would be amended to provide that, commencing with the 2012 annual meeting, the directors will be elected annually for terms expiring at the next succeeding annual meeting.
In addition, the Board has voted to amend Section 3.05 of our Amended and Restated Bylaws, relating to filling director vacancies, to remove references to the classified board, contingent upon shareholder approval and implementation of the declassification amendment.
The general description of the proposed amendments to the Certificate set forth above is qualified in its entirety by reference to the text of the proposed amendments, which are attached asAnnex A to these proxy materials. Additions to the Certificate are indicated by underlining and deletions to the Certificate are indicated by strike-outs.
Pursuant to Article Thirteenth of the Certificate, the amendments to the Certificate proposed under this Proposal 4 require the affirmative vote of the holders of at least 80% of all outstanding shares of stock entitled to vote thereon.
If the proposed amendments are approved, they will become effective upon the filing of a wholly-owned subsidiaryCertificate of Amendment to our Certificate with the Delaware Secretary of State. However, if our shareholders approve these proposed amendments, the Board retains discretion under Delaware law not to implement the proposed amendments. If the Board exercises such discretion, it will publicly disclose that fact and the reason for its determination.
Board Recommendation
The Board of Directors recommends a vote FOR the amendment of our Certificate of Incorporation to declassify the Board of Directors.
AMENDMENT OF CERTIFICATE OF INCORPORATION TO REMOVE AND REPLACE SUPERMAJORITY VOTING PROVISIONS
Proposal 5
Our Board of Directors has unanimously adopted a resolution for approval by our shareholders proposing amendments to our Certificate to remove and replace the supermajority voting requirements.
Our Certificate currently contains the following supermajority provisions requiring approval of 80% of the outstanding shares of voting stock:
Our Amended and Restated Bylaws contain a provision corresponding to Article Sixth requiring an 80% vote for shareholders to rescind, alter, amend or repeal the bylaws.
The Board's proposal is a result of our ongoing review of our corporate governance principles. After receiving shareholder input including a shareholder proposal and the advice of management and outside advisors, the Board considered the relative weight of the arguments in favor and opposed to supermajority voting requirements.
The Board recognizes that supermajority voting requirements are intended to protect against self-interested action by large shareholders by requiring broad shareholder support for certain types of transactions or governance changes. The Board also recognizes that corporate governance standards have evolved. Some shareholders and commentators argue that supermajority provisions should be eliminated because they could limit the Board's accountability to shareholders or shareholder participation in corporate governance. The Board notes that while it is important to protect against self-interested action by large shareholders, it is also important to respond to shareholder corporate governance concerns.
The Board also considered that even without the supermajority voting requirements (and without a classified board, which the Board also recommends eliminating), the company has defenses that work together to discourage a would-be acquirer from proceeding with a proposal that undervalues the company and to assist the Board in responding to such proposals. These defenses include other provisions of the company's Certificate and Amended and Restated Bylaws, as well as certain provisions of Delaware corporation law, including the "fair price" provisions under section 203 of Delaware's General Corporation Law, which requires a 662/3% vote to approve certain mergers or business combination transactions with an "interested stockholder," defined as a 15% or greater shareholder. The Board therefore has determined that it is in the best interests of the company locatedand its shareholders to remove and replace the supermajority voting requirements in our Certificate.
As a result, the United Kingdom. In 2007, Lord Renwick was paid director fees of £42,452, which convertsBoard has considered the matter, adopted resolutions setting forth the proposed amendment to $84,238 based on the exchange rate as of December 31, 2007.
The Amendments and Related Changes
If the amendments are approved, Article Twelfth and Thirteenth would be deleted, as would the reference to Article Thirteenth appearing in Article Fourteenth. As a result, the provisions addressed in those articles thereafter could be amended by shareholders, if approved and recommended by the Board, upon the vote of a majority of the total voting power of all outstanding shares of stock of the company entitled to vote on the matter, which is the default voting standard for such actions under Delaware law. The remaining Articles of the Certificate would be renumbered. In addition, if the amendments are approved, Article Sixth would be amended to provide that the Amended and Restated Bylaws could be amended by a vote of a majority of the total voting power of all outstanding shares of stock of the company entitled to vote.
In addition, the Board has voted to amend Section 7.04 of our Amended and Restated Bylaws, relating to the standard for amending the bylaws, to conform to the voting standard proposed under Article Sixth of the Certificate, contingent upon shareholder approval of the supermajority voting amendments.
The general description of the proposed amendments to the Certificate set forth above is qualified in its entirety by reference to the text of the proposed amendments, which are attached asAnnex B to these proxy materials. Additions to the Certificate are indicated by underlining and deletions to the Certificate are indicated by strike-outs.
Pursuant to the currently effective standard under Article Thirteenth of the Certificate, the amendments to the Certificate proposed under this Proposal 5 require the affirmative vote of the holders of at least 80% of all outstanding shares of stock entitled to vote thereon.
If the proposed amendments are approved, they will become effective upon the filing of a Certificate of Amendment to our Certificate with the Delaware Secretary of State. However, if our shareholders approve these proposed amendments, the Board retains discretion under Delaware law not to implement the proposed amendments. If the Board exercises such discretion, it will publicly disclose that fact and the reason for its determination.
Board Recommendation
The Board of Directors recommends a vote FOR the amendment of our Amended and Restated Certificate of Incorporation to remove and replace the supermajority voting provisions.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Proposal 26
Consistent with our commitment to good corporate governance, our Audit Committee is asking shareholders to ratify its appointment of Ernst & Young LLP as our independent registered public accounting firm to audit the financial statements of the company for the fiscal year ending on December 31, 2008.2011. In the event the shareholders fail to ratify the appointment of Ernst & Young LLP, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of Fluor and its shareholders.
A representative of Ernst & Young LLP is expected to be present at the meeting and available to respond to appropriate questions and, although that firm has indicated that no statement will be made, an opportunity for a statement will be provided.
Audit and Other Fees
The following table presents aggregate fees for professional audit services rendered by Ernst & Young LLP for the audit of the company's annual financial statements for fiscal years 20072010 and 2006,2009, and fees billed for other services provided by Ernst & Young LLP for fiscal years 20072010 and 2006.2009.
| Fiscal Year Ended (in millions) | ||||||
---|---|---|---|---|---|---|---|
| 2007 | 2006 | |||||
Audit Fees | $ | 6.9 | $ | 7.0 | |||
Audit-Related Fees(1) | 0.8 | 1.4 | |||||
Tax Fees | — | — | |||||
All Other Fees | — | — | |||||
Total Fees Paid | $ | 7.7 | $ | 8.4 | |||
| Fiscal Year Ended (in millions) | |||||||
---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | ||||||
Audit Fees | $ | 6.7 | $ | 6.6 | ||||
Audit-Related Fees(1) | 1.1 | 0.7 | ||||||
Tax Fees(2) | 1.4 | 0.4 | ||||||
All Other Fees | — | — | ||||||
Total Fees Paid | $ | 9.2 | $ | 7.7 | ||||
Audit Committee's Pre-Approval Policy
The Audit Committee of our Board of Directors has policies and procedures for the pre-approval of all audit and non-audit services to be provided by our independent registered public accounting firm and for the prohibition of certain services from being provided by theour independent registered public accounting firm. The company may not engage its independent registered public accounting firm to render any audit or non-audit service unless the service is approved in advance by the Audit Committee pursuant to its pre-approval policies and procedures. On an annual basis, the Audit Committee may pre-approve services that are expected to be provided to Fluor by the independent registered public accounting firm during the fiscal year. At the time such pre-approval is granted, monetary limits are established for the specified pre-approved services, which limits may not be exceeded without obtaining further pre-approval under the policy. For any pre-approval, the Audit Committee confirms that such services are consistent with the rules of the Securities and Exchange Commission on auditor independence.
On an annual basis, the Audit Committee may pre-approve services that are expected to be provided to Fluor by our independent registered public accounting firm during the fiscal year. Management provides the Audit Committee a quarterly report listing services performed by and fees
paid to the independent registered public accounting firm during the current fiscal year.
The Audit Committee has delegated authority to the Chair of the Audit Committee to pre-approve any audit or non-audit services to be provided to Fluor by the independent registered public accounting
firm for which the cost is less than $500,000. The Chair must report any pre-approval pursuant to the delegation of authority to the Audit Committee at its next scheduled meeting, and the Audit Committee approves and ratifies the pre-approved service.
Board Recommendation
The Board of Directors recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ending December 31, 2008.2011.
The Audit Committee assists the Board in fulfilling its oversight responsibility for the:
In carrying out these responsibilities, the Audit Committee, among other things, supervises the relationship between the company and its independent registered public accounting firm, including making decisions with respect to its appointment or removal, reviewing the scope of its audit services, pre-approving audit engagement fees and non-audit services and evaluating its independence. The Audit Committee oversees and evaluates the adequacy and effectiveness of the company's systems of internal and disclosure controls and internal audit function. The Audit Committee has the authority to investigate any matter brought to its attention and may engage outside counsel for such purpose.
The company's management is responsible, among other things, for preparing the financial statements and for the overall financial reporting process, including the company's system of internal controls. The independent registered public accounting firm's responsibilities include auditing the financial statements and expressing an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles.
As part of its oversight of the company's financial statements, the Audit Committee reviewed and discussed with management and Ernst & Young LLP, the company's independent registered public accounting firm, the audited financial statements of the company for the fiscal year ended December 31, 2010. The Audit Committee discussed with Ernst & Young LLP, who is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States and an opinion on the company's internal control over financial reporting, such matters as are required to be discussed under the rules adopted by the Public Company Accounting Oversight Board, relating to the conduct of the audit. The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP, the independent registered public accounting firm, required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence. The Audit Committee has discussed with Ernst & Young LLP the registered public accounting firm's independence from the company and its management, and considered the compatibility of non-audit services with the registered public accounting firm's independence.
Based on its review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, for filing with the Securities and Exchange Commission. The Audit Committee has also appointed Ernst & Young LLP as the company's independent registered public accounting firm for 2011.
The Audit Committee | ||
Kent Kresa, Chairman Ilesanmi Adesida Peter K. Barker Dean R. O'Hare Nader H. Sultan Suzanne H. Woolsey |
APPROVALSTOCK OWNERSHIP AND STOCK-BASED HOLDINGS OF AMENDMENT TO CERTIFICATE OF INCORPORATIONTO INCREASE AUTHORIZED SHARESEXECUTIVE OFFICERS AND DIRECTORS
Proposal 3
Our Board of Directors has unanimously adopted a resolution for approval by our shareholders proposing an amendment to Article Fourth The following table contains information regarding the beneficial ownership of our Amendedcommon stock as of March 1, 2011 by:
Except as otherwise noted, the individual or his or her family members had sole voting and investment power with respect to date,such shares.
Name of Beneficial Owner | Shares Beneficially Owned(1) | Fluor Stock-Based Holdings(2) | Percent of Shares Beneficially Owned(3) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Class III Directors: | |||||||||||
Ilesanmi Adesida | 6,064 | 15,102 | * | ||||||||
Peter J. Fluor | 77,674 | 263,246 | * | ||||||||
Joseph W. Prueher | 10,751 | 23,442 | * | ||||||||
Suzanne H. Woolsey | 10,082 | 11,189 | * | ||||||||
Class I Directors: | |||||||||||
Peter K. Barker | 10,064 | 18,672 | * | ||||||||
Alan L. Boeckmann(4) | 554,321 | 633,026 | * | ||||||||
Dean R. O'Hare | 26,984 | 64,368 | * | ||||||||
David T. Seaton(5) | 98,031 | 173,470 | * | ||||||||
Class II Directors: | |||||||||||
Rosemary T. Berkery | 1,706 | 2,952 | * | ||||||||
James T. Hackett | 16,432 | 27,124 | * | ||||||||
Kent Kresa | 13,432 | 37,226 | * | ||||||||
Nader H. Sultan | 2,617 | 7,563 | * | ||||||||
Other Named Executives: | |||||||||||
Carlos M. Hernandez | 48,912 | 67,202 | * | ||||||||
Peter W. Oosterveer | 19,894 | 30,605 | * | ||||||||
D. Michael Steuert | 138,127 | 178,056 | * | ||||||||
All directors and executive officers as a group (22 persons) | 1,328,476 | 1,951,509 | .75 | % |
Under applicable Delaware law, the company may only issueoutstanding on March 1, 2011) plus any shares of common stock to the extent it has shares authorized for issuance under the Certificate. As of February 26, 2008, of the 150,000,000 shares of common stock our Certificate has authorized for issuance, 88,593,022 shares of common stock were issued and outstanding (of which none were held in treasury), 6,324,887 shares were reserved for issuance onacquirable (including upon exercise of stock options settlement of stock appreciation rights or vesting of restricted stock units) by that person within 60 days after March 1, 2011.
Article Fourth of the Certificate is proposed to be amended and restated in its entirety. This article currently provides that:
The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, Preferred Stock and Common Stock; the total number of shares which the Corporation shall have authority to issue is 170,000,000; the total number of shares of Preferred Stock shall be 20,000,000 and each such share shall have a par value of $.01; the total number of shares of Common Stock shall be 150,000,000 and each such share shall have a par value of $.01. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to fix the voting powers, designations, powers, preferences and the relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, of any wholly unissued series of Preferred Stock; and to fix the number of shares constituting such series, and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding).
As amended and restated, Article Fourth of the Certificate is proposed to read as follows:
The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, Preferred Stock and Common Stock; the total number of shares which the Corporation shall have authority to issue is 420,000,000; the total number of shares of Preferred Stock shall be 20,000,000 and each such share shall have a par value of $.01; the total number of shares of Common Stock shall be 400,000,000 and each such share shall have a par value of $.01. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to fix the voting powers, designations, powers, preferences and the relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, of any wholly unissued series of Preferred Stock; and to fix the number of shares constituting such series, and to
increase or decrease the numberTable of shares of any such series (but not below the number of shares thereof then outstanding).
Currently, our authorized shares are sufficient to meet all known needs. However, our Board of Directors considers it desirable that it have the flexibility to have additional shares of common stock available for issuance in connection with possible stock splits, stock dividends, acquisitions, financings, employee incentive plans and other corporate purposes, should our Board deem any of those actions to be in the best interests of our company and its shareholders. The Board believes that the proposed increase in authorized common stock will make sufficient shares available for use pursuant to the purposes described herein. Other than as permitted or required under the company's employee benefit plans and under outstanding options, warrants and other securities convertible into common stock, the Board of Directors has no agreements or commitments to issue additional common stock for any purposes. However, once approved, the shares of common stock may be issued from time to time by action of our Board of Directors on such terms and for such purposes as our Board of Directors may consider appropriate from time to time. No additional action or authorization by the company's shareholders would be necessary prior to the issuance of such additional shares, unless required by applicable law or the rules of any stock exchange or national securities association trading system on which the common stock is then listed or quoted.
The company reserves the right to seek a further increase in authorized shares from time to time in the future as considered appropriate by the Board of Directors. Under the Certificate, the company's shareholders do not have preemptive rights with respect to common stock. Thus, should the Board of Directors elect to issue additional shares of common stock, existing shareholders would not have any preferential rights to purchase such shares. In addition, if the Board of Directors elects to issue additional shares of common stock, such issuance could have a dilutive effect on the earnings per share, voting power and shareholdings of current shareholders. The proposed amendment to increase the authorized number of shares of common stock could, under certain circumstances, have an anti-takeover effect, although this is not the intention of this proposal. For example, in the event of a hostile attempt to take over control of the company, it may be possible for the company to endeavor to impede the attempt by issuing shares of common stock, thereby diluting the voting power of the other outstanding shares and increasing the potential cost to acquire control of the company. The amendment therefore may have the effect of discouraging unsolicited takeover attempts, thereby potentially limiting the opportunity for the company's shareholders to dispose of their shares at the higher price generally available in takeover attempts or that may be available under a merger proposal. The proposed amendment may have the effect of permitting the company's current management, including the current Board of Directors, to retain its position, and place it in a better position to resist changes that shareholders may wish to make if they are dissatisfied with the conduct of the company's business. However, the Board of Directors is not aware of any attempt to take control of the company, and the Board of Directors has not presented this proposal with the intent that it be utilized as a type of anti-takeover device.
If the proposed amendment is adopted, it will become effective upon filing of a certificate of amendment to the Certificate with the Delaware Secretary of State, which we anticipate doing as soon as practicable following this year's Annual Meeting. However, if the company's shareholders approve the proposed amendment to the company's Certificate, the Board retains discretion under Delaware law not to implement the proposed amendment. If the Board exercised such discretion, the number of authorized shares would remain at current levels.
Board RecommendationContents
The Board of Directors recommends a vote FOR the approval of the amendment of Fluor's Certificate of Incorporation to increase the number of authorized shares.
APPROVALSTOCK OWNERSHIP OF THE FLUOR 2008 EXECUTIVE PERFORMANCE INCENTIVE PLANCERTAIN BENEFICIAL OWNERS
Proposal 4
Description The following table contains information regarding the beneficial ownership of New Fluor Stock Plan
In January 2008, the Boardour common stock as of Directors approved the Fluor 2008 Executive Performance Incentive Plan, referred to as the 2008 plan, subject to shareholder approval. The Board is askingMarch 1, 2011 by the shareholders our management knows to approve the 2008 plan so the company may use it to assist in achieving the company's goalsbeneficially own more than 5% of increasing profitability and shareholder value, while also receiving a federal income tax deduction for certain compensation paid under the 2008 plan under Section 162(m)our outstanding common stock. The percentage of the Internal Revenue Code. If the shareholders approve the 2008 plan, it will replace the Fluor Corporation 2003 Executive Performance Incentive Plan, which will be terminated, except with respect to outstanding awards previously granted thereunder. No further awards would be granted under the 2003 plan.
The 2008 Plan has a number of special terms and limitations, including:
Name of Beneficial Owner | Shares Beneficially Owned | Percent of Class | |||
---|---|---|---|---|---|
FMR LLC and related entities | 22,819,412 | (1) | 12.9% | ||
BlackRock, Inc. | 12,672,555 | (2) | 7.2% |
Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda. The 2008 plan is substantially identical to the 2003 Executive Performance Incentive Plan, except that:
Set forth below is a summary of the features of the 2008 plan. A copy of the 2008 plan is set forth as Exhibit A to this proxy. Because this is a summary, it may not contain all the information that you consider important, and thus, we encourage you to read the full text of the 2008 plan.
The 2008 plan is designed to enable Fluor to attract, retain and motivate its management and other key employees, and to further align the interests of such employees with those of the shareholders of Fluor, by providing for or increasing the proprietary interest of such employees in Fluor. The 2008 plan authorizes the grant and issuance of awards that may take the form of stock options, stock appreciation rights, restricted stock, incentive awards and stock units. The 2008 plan has various provisions so that awards granted under it may, but need not, qualify for an exemption from the "short swing liability" provisions of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 and/or qualify as "performance-based compensation" that is exempt from the $1 million limitation on the deductibility of compensation under Section 162(m) of the Code.
Stock Subject to the 2008 Plan
The aggregate number of shares of Fluor common stock that can be issued under the 2008 plan may not exceed 5,500,000 shares, plus the number of shares that are subject to outstanding awards previously issued under Fluor's 2000, 2001 or 2003 plans, but which are not thereafter issued upon exercise or settlement of such awards. The number of shares of Fluor common stock that may be issued under the plan will be reduced by 1.75 times the number of shares issued upon settlement of an award, other than a stock option or stock appreciation right. The number of shares subject to the 2008 plan and to outstanding awards under the 2008 plan shall be adjusted appropriately by the Board if Fluor's common stock is affected through a reorganization, merger, consolidation, recapitalization, restructuring, reclassification, dividend (other than quarterly cash dividends) or other distribution, stock split, spin-off or sale of substantially all of Fluor's assets. For purposes of calculating the aggregate number of shares issued under the 2008 plan, only the number of shares actually issued upon exercise or settlement of an award and not returned to Fluor upon cancellation, expiration or forfeiture of an award will be counted. The 2008 plan provides that shares retained by or delivered to us to pay the exercise price or withholding taxes in connection with the exercise of an outstanding stock option, unissued shares resulting from the settlement of stock appreciation rights in cash and shares purchased by us in the open market do not become available for issuance as future awards under the plan.
Eligibility
Any person who is an employee and an officer, key employee or member of Fluor's executive management team, or a prospective employee who is to be an officer, key employee or member of the executive management team, or a consultant or advisor of Fluor or any of its subsidiaries or affiliates is eligible to be selected as a recipient of an award under the 2008 plan. There are approximately 700 members of the executive management team who are covered under the 2008 plan.
Administration
The 2008 plan will be administered by the Organization and Compensation Committee and/or one or more other committees of Fluor's Board of Directors. Subject to certain limitations, the Committee may delegate certain of its responsibilities to a subcommittee composed of one or more directors or officers of Fluor, including individuals who participate in the 2008 plan.
Subject to the express provisions of the 2008 plan, the Committee has broad authority to administer and interpret the 2008 plan, including, without limitation, authority to:
Awards
The 2008 plan authorizes the grant and issuance of the following types of awards: stock options, stock appreciation rights, restricted stock, incentive awards and stock units.
Stock Option Awards
Subject to the express provisions of the 2008 plan and as discussed in this paragraph, the Committee has discretion to grant stock options and to determine:
Stock options granted under the 2008 plan may be either incentive stock options qualifying under Section 422 of the Code, referred to as incentive stock options, or stock options which are not intended to qualify as incentive stock options, referred to as non-qualified stock options. The exercise price for stock options may not be less than 100% of the fair market value of Fluor's stock on the date the stock option is granted, exceptcompany believes that the exercise priceaddress of such stock options may be above or below the fair market value of Fluor's stock on the date the stock option is granted if the stock options are granted in assumption and substitution of stock options held by employees of a company acquired by Fluor or to the extent that an optionee foregoes current cash compensation in exchange for a stock option grant. No stock option award will first become exercisable within one year from its date of grant, other than upon death, disability, termination of employment or a change of control. The exercise price of a stock option may be paid through various means specified by the Committee, including in cash or check, by delivery to Fluor of shares of Fluor stock, by a reduction in the number of shares issuable pursuant to such stock option, or by a promissory note or other commitment to pay (including such a commitment by a stock broker). The Committee may, but need not, provide that the holder of an award has a right to receive a number of shares or cash, or a combination thereof, the amount of which is determined by
reference to the value of the award. Unless approved by shareholders, outstanding stock options may not be amended to reduce the exercise price.
Stock Appreciation Rights
Stock Appreciation Rights may be granted alone ("freestanding SARs") or in conjunction with all or part of a stock option ("tandem SARs"). Upon exercising an SAR, the participant is entitled to receive the amount by which the fair market value of the common stock at the time of exercise exceeds the strike price of the SAR. The strike price of a freestanding SAR will be specified in the award agreement and is subject to the same limitations as the exercise price of a stock option. The strike price of a tandem SARMr. Johnson is the same as that of FMR.
Restricted Stock AwardsSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Restricted stock is an award of shares, the grant, issuance, retention and/or vesting of which is subject to such performance and other conditions as are specified by the Committee. Subject to the express provisions of the 2008 plan and as discussed in this paragraph, the Committee has discretion to determine the terms of any restricted stock award, including:
The performance criteria upon which restricted stock is granted, issued, retained and/or vested may be based on financial performance, personal performance evaluations and/or completion of service by the participant. However, no restricted stock award that vests based on the passage of time will fully vest within three years from its date of grant, other than upon death, disability, termination of employment, a change of control or upon satisfaction of such performance requirements deemed appropriate by the Committee (such events being the only circumstances when the Committee has the discretion to accelerate vesting). For example, under the 2008 Plan, the Company could grant a restricted stock award that vests one-third on each of the first three anniversaries following the grant. No portion of a restricted stock award with vesting based upon the satisfaction of performance requirements may vest in less than a year from its date of grant other than upon death, disability, termination of employment or a change of control. Notwithstanding the foregoing, for any restricted stock that is intended by the Committee to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code, the performance criteria will be a measure based on one or more "qualifying performance criteria," as described below. Notwithstanding satisfaction of any completion of service or performance goals, the number of shares granted, issued, retainable and/or vested under a restricted stock award may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion determines.
Incentive Awards
The 2008 plan authorizes the grant of incentive awards pursuant to which a participant may become entitled to receive an amount, which may be paid in cash, stock or stock units, based on satisfaction of such performance criteria as are specified by the Committee. Subject to the express provisions of the 2008 plan and as discussed in this paragraph, the Committee has discretion to determine the terms of any incentive award, including:
All or any portion of an incentive award may be designed to qualify as "performance-based compensation" that is exempt from the $1 million limit on deductible compensation under Section 162(m) of the Code. The performance criteria for any portion of an incentive award that is intended to satisfy the requirements for "performance-based compensation" will be a measure based on one or more "qualifying performance criteria," as described below. Notwithstanding satisfaction of any performance goals, the amount paid under an incentive award may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion will determine.
Stock Unit Awards
A "stock unit" is a bookkeeping entry representing an amount equivalent to the fair market value of one share of common stock and is also referred to as a "restricted unit" or "shadow stock." Stock units may be settled in common stock or cash. The grant, issuance, retention and/or vesting of stock units will be subject to such performance conditions and to such further terms and conditions as the Committee deems appropriate. Each stock unit award will reflect:
Stock units may also be issued upon exercise of stock options, may be granted in payment and satisfaction of incentive awards and may be issued in lieu of any other compensation that the Committee elects to be paid in the form of stock units.
The grant, issuance, retention and or vesting of each stock unit will be subject to such performance criteria and level of achievement versus these criteria as the Committee may determine, which criteria may be based on financial performance, personal performance evaluations and/or completion of service by the participant. However, no stock unit will first vest within one year from its date of grant, other than upon death, disability, termination of employment, a change of control or upon satisfaction of such performance requirements as deemed appropriate by the Committee. Notwithstanding anything to the contrary in this paragraph, the performance criteria for any stock unit that is intended by the Committee to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code will be a measure based on one or more "qualifying performance criteria" selected by the Committee and specified at the time the stock unit is granted.
The Committee will determine the timing of award of any stock unit. The Committee may provide for or, subject to such terms and conditions as the Committee may specify, may permit a participant to elect for the award or vesting of any stock unit to be deferred to a specified date or event. The Committee may provide for a participant to have the option for his or her stock unit, or such portion thereof as the Committee may specify, to be granted in whole or in part in shares. The Committee may provide for stock units to be settled in cash or shares (at the election of Fluor or the participant, as specified by the Committee) and to be made at such other times as it determines appropriate or as it permits a participant to choose. Notwithstanding satisfaction of any completion of service or performance goals, the number of stock units granted, issued, retainable and/or vested under a stock unit award may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion will determine.
Qualifying Performance Criteria and Section 162(m) Limits
The performance criteria for any restricted stock, incentive award or stock unit that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code will be any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either Fluor as a whole or to a business unit, subsidiary or business segment, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to a designated comparison group, in each case as specified by the Committee in the award:
The Committee will appropriately adjust any evaluation of performance under a qualifying performance criteria to exclude any of the following events that occurs during a performance period:
The aggregate number of shares subject to stock options and stock appreciation rights granted under the 2008 plan during any calendar year to any one participant may not exceed 750,000. The aggregate number of shares issued, issuable or underlying any incentive awards denominated in shares, restricted stock awards or stock unit awards (other than stock units issued or issuable upon exercise of stock options) granted under the 2008 plan during any calendar year to any one participant may not exceed 250,000. The maximum amount payable as an incentive award that is settled for cash may be a multiple of the target amount payable, but the maximum amount payable pursuant to that portion of an incentive award granted for any fiscal year to any person that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code may not exceed $5 million.
Change of Control
The Committee may provide that in connection with a change of control, awards will become exercisable, payable, vested, paid or canceled, and may provide for an absolute or conditional exercise, payment or lapse of conditions or restrictions on an award which would be effective only if, upon the announcement of a transaction intended or reasonably expected to result in a change of control, no provision is made under the terms of such transaction for the holder of an award to realize the full benefit of the award.
A change of control of Fluor shall be deemed to have occurred if (1) a third person, including a "group" as defined in Section 13(d)(3)16(a) of the Securities Exchange Act of 1934, acquires sharesas amended, requires our directors, executive officers and holders of more than 10% of Fluor having twenty-five percent or morecommon stock to file with the Securities and Exchange Commission reports regarding their ownership and changes in ownership of our securities. Based solely upon a review of filings with the total numberSecurities and Exchange Commission, a review of votescompany records and written representations by our directors and executive officers, the company believes that may be cast for the election of directors of Fluor or (2) asMr. Watson, a result of any cash tender or exchange offer, merger or other business combination, or any combination of the foregoing transactions, the persons who were directors of Fluor before such transaction shall cease to constitute a majority of the Board of Directors of Fluor or any successor to Fluor.
Transferability of Awards
Generally, awards granted under the 2008 plan may not be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner priorformer director, made one late filing on Form 4 relating to the vesting or lapse of anyhis stock upon retirement and all restrictions applicableMr. Sultan, a current director, made two late filings on Form 4 relating to the award, other than by will or the lawshis receipt of descent and distribution, except that the Committee may permit an award to be transferable to a member or members of the participant's family or to entities owned or established for the benefit of a participant's family.
Amendments and Termination
The Board of Directors may amend, alter or discontinue the 2008 plan or any agreement evidencing an award made under the 2008 plan, but any such amendment is subject to approval by Fluor's shareholders to the extent required by law or applicable standards of the New York Stock Exchange. In addition, without the approval of the shareholders of Fluor, no amendment may:
After the date of a change of control, no amendment to the plan or any award document may be effected that impairs the rights of any award holder, without such holder's consent, under any award granted prior to the date of any change of control. No stock option award, restricted stock award or incentive award granted under the 2008 plan may be granted pursuant to the 2008 plan more than ten years after the date of the Board of Directors' adoption of the 2008 plan.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of the 2008 plan is intended to be a summary of applicable federal law as currently in effect. State and local tax consequences may differ and may be amended or interpreted differently during the term of the 2008 plan or of stock options granted under the 2008 plan. Because the federal income tax rules governing stock options and related
payments are complex and subject to frequent change, optionees are advised to consult their tax advisors prior to exercise of stock options or dispositions of stock acquired pursuant to option exercise.
Incentive stock options and non-qualified stock options are treated differently for federal income tax purposes. Incentive stock options are intended to comply with the requirements of Section 422 of the Code. Non-qualified stock options need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an incentive stock option. The difference between the exercise price and the fair market value of the shares on the exercise date, however, will be taken into account for purposes of the alternative minimum tax. If an optionee holds the shares acquired upon exercise of an incentive stock option for at least two years following the option grant date and at least one year following exercise, the optionee's gain, if any, upon a subsequent disposition of such shares is long term capital gain. The measure of the gain is the difference between the proceeds received on disposition and the optionee's basis in the shares (which generally equals the exercise price). If an optionee disposes of stock acquired pursuant to exercise of an incentive stock option before satisfying the one- and two-year holding periods described above, the optionee may recognize both ordinary income and capital gain in the year of disposition. The amount of the ordinary income will be the lesser of the amount realized on disposition or the fair market value of the stock on the exercise date reduced in both instances by the exercise price. The excess of the consideration received on such a disposition over the lesser of the amount realized on disposition or the fair market value of the stock on the exercise date will generally be long term capital gain if the stock had been held for more than one year following exercise of the incentive stock option. Fluor is not entitled to an income tax deduction on the grant or exercise of an incentive stock option or on the optionee's disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, Fluor will be entitled to a deduction in the year the optionee disposes of the shares in an amount equal to the ordinary income recognized by the optionee.
An optionee is not taxed on the grant of a non-qualified stock option. On exercise, however, the optionee recognizes ordinary income equal to the excess of the fair market value of the shares acquired on the date of exercise over the exercise price. Fluor is entitled to an income tax deduction in the year of exercise in the amount recognized by the optionee as ordinary income. Any gain on subsequent disposition of the shares is long term capital gain if the shares are held for more than one year following exercise. Fluor does not receive a deduction for this gain.
A participant will not recognize taxable income upon the grant of an SAR. Upon exercise of an SAR, a participant will recognize taxable ordinary income in an amount equal to the amount of cash received and the difference between the fair market value of the underlying shares on the date of exercise and the strike price of the SAR. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
An employee who receives restricted stock subject to restrictions which create a "substantial risk of forfeiture" (within the meaning of Section 83 of the Code) will normally realize taxable income on the date the shares become transferable or no longer subject to substantial risk of forfeiture or on the date of their earlier disposition. The amount of such taxable income will be equal to the amount by which the fair market value of the shares of common stock on the date such restrictions lapse (or any earlier date on which the shares become transferable or are disposed of) exceeds their purchase price, if any.
An employee may elect pursuant to Section 83(b) of the Code, however, to include in income in the year of grant the excess of the fair market value of the shares of common stock (without regard to any restrictions) over their purchase price, if any, on the date of grant.
A participant will not recognize taxable income upon the grant of a stock unit. Upon the distribution of cash or shares to a participant pursuant to the terms of a stock unit, the participant will recognize taxable ordinary income equal to the amount of any cash and/or the fair market value of any shares received.
Upon accelerated exercisabilityTable of stock optionsContents
deferred fees in 2010. In addition, each of Mr. Grimes and accelerated lapsingMr. Hopkins made one late filing on Form 4 relating to a vesting of restrictions upon restricted stock in connection with2010; Mr. Stanski made one late filing on Form 4 relating to a changestock award in 2010; and Mr. Smalley made one late filing on Form 4 relating to a transfer of control of Fluor, certain amounts associated with such awards could, depending uponfunds into the individual circumstancescommon stock fund of the recipient participant, constitute "excess parachute payments" under the golden parachute provisions of the Code. Pursuant to these provisions a participant will be subject to a 20% excise tax on any excess parachute payment and Fluor will be denied any deduction with respect to such excess parachute payment. The limit on the deductibility of compensation under Section 162(m) of the Code is also reduced by the amount of any excess parachute payments. Whether amounts constitute excess parachute payments depends upon, among other things, the value of the awards accelerated and the past compensation of the participant.
As described above, stock options granted under the 2008company's 401(k) plan may qualify as "performance-based compensation" under Section 162(m) of the Code in order to preserve federal income tax deductions by Fluor with respect to annual compensation required to be taken into account under Section 162 of the Code that is in excess of $1 million and paid to a "covered employee" (as defined under the Section 162 regulations). To so qualify, stock options must have an exercise price at least equal to the fair market value of the underlying shares on the date of grant, be awarded by a committee consisting solely of two or more "outside directors" (as defined under the Section 162 regulations) and satisfy the 2008 plan's limit on the total number of shares subject to stock options that may be awarded to any one participant during any calendar year.
Board Recommendation
The Board of Directors recommends a vote FOR the approval of the Fluor 2008 Executive Performance Incentive Plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2007 with respect to the shares of common stock that may be issued under the company's equity compensation plans:
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted-average exercise price of outstanding options, warrants and rights | (c) Number of securities available for future issuance under equity compensation plans (excluding securities listed in column (a)) | ||||
---|---|---|---|---|---|---|---|
Equity compensation plans approved by shareholders(1) | 705,203 | $ | 81.71 | 2,200,920 | |||
Equity compensation plans not approved by shareholders(2) | 66,830 | $ | 32.49 | 0 | |||
Total | 772,033 | $ | 77.45 | 2,200,920 | |||
The 2000 Plan and 2001 Plan were broad-based plans that provided for the issuance of up to 12,000,000 and 3,600,000 shares of common stock, respectively, pursuant to stock options, restricted stock, incentive awards or stock units. Any person who was a full-time "exempt" employee or prospective employee of the company or any consultant or advisor of the company was eligible for the
grant of awards under the 2000 Plan and 2001 Plan. No awards under the 2001 Plan were granted to executive officers of the company. The 2000 Plan and 2001 Plan were terminated when the company's 2003 Executive Performance Incentive Plan was approved by shareholders at the company's annual shareholders meeting in 2003.2010.
The company does not intend to present any other business for action at the Annual Meeting and does not know of any other business intended to be presented by others.
"Householding"Expenses of Solicitation and "Householding" of Proxy Materials
The expense of the proxy solicitation will be paid by the company. Some officers and employees may solicit proxies personally, by telephone or electronically, without additional compensation. Georgeson & Company Inc. has been engaged to assist in the solicitation for which it will receive approximately $14,000, plus reimbursement of reasonable expenses incurred on our behalf. The company also expects to reimburse banks, brokers and other persons for their reasonable out-of-pocket expenses in handling proxy materials for beneficial owners of the company's common stock.
The Securities and Exchange Commission has adopted rules that permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statementsmaterials with respect to two or more shareholders sharing the same address by delivering a single copy of the Notice or certain proxy statementmaterials addressed to those shareholders. This process, which is commonly referred to as "householding," potentially provides extra convenience for shareholders and cost savings for companies. The company and some brokers householdwill be householding the Notice and proxy materials delivering a singlefor shareholders who do not participate in electronic delivery of proxy statement to multiple shareholders sharing an addressmaterials, unless contrary instructions have beenare received from the affected shareholders. Once you have received notice from your broker or us that they or we will be householding the Notice or proxy materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of the Notice or proxy statementmaterials, or if you share an address with another shareholder and you would prefer to receive a single copy of the Notice or proxy statementmaterials instead of multiple copies, please notify Fluor's investor relations department at (469) 398-7220, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039 or, if your shares are held in a brokerage account, your broker. The company promptly will deliver to a shareholder who received one copy of the Notice or proxy statementmaterials as the result of householding a separate copy of the Notice or proxy statementmaterials upon the shareholder's written or oral request directed to Fluor's investor relations department at (469) 398-7220, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. Please note, however, that if you wish to receive a paper proxy card or other proxy materials for purposes of this year's Annual Meeting, you should follow the instructions provided in the Notice.
Advance Notice Procedures
Under the company'sAmended and Restated Bylaws,, no nominations of directors or other business may be brought before an annual meeting by a shareholder unless written notice is delivered to the company's Secretary (containing certain information specified in theAmended and Restated Bylaws about the shareholder and the proposed action) not less than 90 nor more than 120 days prior to the first anniversary of the preceding year's annual meeting—that is, with respect to the 20092012 annual meeting, between January 6, 20092012 and February 6, 2009.5, 2012. However, in the event that the 20092011 annual meeting is to be held on a date that is more than 30 days before or more than 70 days after May 7, 20095, 2012 (the first anniversary of the 20082011 Annual Meeting), then such notice must be received not earlier
than the 120th day and not later than the later of the 90th day prior to the date of the 20092012 annual meeting or the 10th day following the day on which public announcement of the date of the 20092012 annual meeting is first made by the company. These requirements are separate from the Securities and Exchange Commission's requirements that a shareholder must meet in order to have a shareholder proposal included in the company's proxy statement. Any notices should be sent to: Carlos M. Hernandez, Chief Legal Officer and Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039. If a shareholder fails to meet these deadlines and fails to satisfy the requirements of Rule 14a-4 under the Securities Exchange Act of 1934, as amended, the company may exercise discretionary voting authority under proxies it solicits to vote on any such proposal as it determines appropriate.
Shareholder Proposals for the 20092012 Annual Meeting
Shareholders interested in submitting a Rule 14a-8 proposal for inclusion in the proxy materials for the annual meeting of shareholders in 20092011 may do so by following the procedures prescribed in Rule 14a-8, under the Securities Exchange Act of 1934, as amended. To be eligible for inclusion, shareholder proposals must be received by the company's Secretary no later than November 14, 2008.16, 2011. Any proposals should be sent to: Carlos M. Hernandez, Chief Legal Officer and Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, Texas 75039.
Electronic Voting
If you own your shares of common stock of record you may authorize the voting of your shares over the Internet atwww.proxyvote.com or telephonically by calling 1-800-690-6903 and by following the instructions on the enclosed proxy card. If you hold shares in a Fluor or Fluor subsidiary's retirement plan participant account, you may authorize the voting of your shares over the Internet atwww.proxyvote.com or telephonically by calling 1-800-690-6903 and by following the instructions on the enclosed voting instruction card. Authorizations submitted over the Internet or by telephone must be received by 11:59 p.m. Eastern Daylight Time on May 6, 2008, except with respect to shares held in company retirement plans which must be received by 5:59 p.m. Eastern Daylight Time on May 5, 2008 to be voted by the trustee.
Use of thesethe Internet or telephonic voting procedures described on page 1 of this proxy statement constitutes your authorization of Broadridge Financial Solutions, or in the case of shares held in company retirement plans, the trustee, to deliver a proxy card on your behalf to vote at the Annual Meeting in accordance with your Internet or telephonically communicated instructions.
If the shares you own are held in "street name" by a bank or brokerage firm, your bank or brokerage firm will provide a voting instruction form to you with this proxy statement, which you may use to direct how your shares will be voted. Many banks and brokerage firms also offer the option of voting over the Internet or by telephone, instructions for which would be provided by your bank or brokerage firm on your vote instruction form.
Electronic Delivery of Our Shareholder Communications
If you received your annual meetingthe Notice or proxy materials by mail, we strongly encourage you to conserve natural resources and reduce your company's printing and processing costs by signing up to receive your shareholder communications via e-mail. With electronic delivery, we will notify you via e-mail as soon as the annual report and the proxy statement are available on the Internet, and you can submit your vote easily online. Electronic delivery can help reduce the number of bulky documents in your personal files and eliminate duplicate mailings. Your electronic delivery enrollment will be effective until you cancel it. To sign up for electronic delivery, go tohttp://enroll.icsdelivery.com/fluor.fluor. This link is also available onin the investor relations home page, http://investor.fluor.com.section of our website atwww.fluor.com. If you have questions about electronic delivery, please call our investor relations department at 469-398-7220.
Annual Report
Any shareholder who would like a copy of our 2010 Annual Report on Form 10-K may obtain one, without charge, by addressing a request to the Corporate Secretary, Fluor Corporation, 6700 Las Colinas Boulevard, Irving, TX 75039. You may also obtain a copy of the Form 10-K from the investor relations section of our website atwww.fluor.com by clicking on "Financial Information" and "SEC Filings."
Carlos M. Hernandez Senior Vice President, Chief Legal Officer and Secretary | ||
March 15, 2011
Irving, Texas
FLUOR CORPORATION 2008 EXECUTIVE PERFORMANCE INCENTIVE PLAN
Proposed Amendments to Declassify the Board of Directors
SECTION 1. Purpose of Plan
SEVENTH: (1) The purpose of this "Fluor Corporation 2008 Executive Performance Incentive Plan" (the "Plan") of Fluor Corporation, a Delaware corporation, is to enable the Company, as defined in Section 2.2(a)(ii) hereof, to attract, retainbusiness and motivate its officers, executives, management and other key personnel, and to further align the interests of such persons with thoseaffairs of the shareholders of the Company, by providing for or increasing their proprietary interest in the Company.
SECTION 2. Administration of the Plan
2.1 Composition of Committee. The PlanCorporation shall be administeredmanaged by, or under the Organization and Compensation Committeedirection of, the Board of Directors of the Company and/Corporation (the "Board"). Except as otherwise provided for or byfixed pursuant to the Boardprovisions of DirectorsArticle FOURTH of this Certificate of Incorporation relating to the rights of the Company or another committeeholders of any series of Preferred Stock to elect additional directors, the total number of directors constituting the entire Board of Directors of the Company, as appointedshall be fixed from time to time by resolution of the BoardBoard.
(2) Thedirectors elected at any annual meeting of Directors (any such administrative body, the "Committee"). The Board of Directors shall fill vacancies on, and may remove from or add membersstockholders prior to the Committee. The Committee shall actannual meeting of stockholders to be held in 2012Board (other than those directors elected by the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article FOURTH hereof (the "Preferred Stock Directors")) shall be divided into three classes, as nearly equal in number as possible, designated Class I, Class II and Class III, and. Class I directors shall initially serve until the 2001 annual meeting of stockholders; Class II directors shall initially serve until the 2002 annual meeting of stockholders; and Class III directors shall initially serve until the 2003 annual meeting of stockholders. Commencing with the annual meeting of stockholders in 2001,directors of each classthe term of which shall then expireshall be elected to hold office for a majority vote or unanimous written consent. If an award granted underthree-year term and until the Plan (an "Award") is intendedelection and qualification of their respective successors in office. Notwithstanding the first sentence of this paragraph (2) of Article SEVENTH, at the annual meeting of stockholders to satisfybe held in 2012, the conditions of Section 162(m)(4)(C)successors of the Internal Revenue Code of 1986, as amended (the "Code"), then approval of such grantdirectors whose terms expire at that meeting shall be requiredelected for a term expiring at the annual meeting of stockholders to be made solely by Committee members who are an "outside director" as describedheld in 2013; at the annual meeting of stockholders to be held in 2013, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the annual meeting of stockholders to be held in 2014; and at each annual meeting of stockholders thereafter, the directors shall be elected for terms expiring at the next annual meeting of stockholders. Directors may not be removed without cause unless and until elected for a term expiring at the next annual meeting of stockholders.In case of any increase or decrease, from time to time, in the Treasury regulations under Section 162(m). Notwithstanding the foregoing, with respect to any Award that is not intended to satisfy the conditionsnumber of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or Code Section 162(m)(4)(C)directors (other than Preferred Stock Directors), the Committee may appointnumber of directors in each class shall be apportioned as nearly equal as possible.
(3) Subject to the rights of the holders of any one or more separate committees (any such committee,series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by the affirmative vote of a "Subcommittee") composed of one or more directorsmajority of the Company (who may but need not be membersremaining directors then in office, even though less than a quorum of the Committee) or officersBoard. Any director so chosen shall hold office until the nextannual meeting at which directors are electedelection of the and Company who may but need not be members of the Board of Directors of the Company class for which such director shall have been chosenmay delegate to anyuntil such Subcommittee(s) the authority to grant Awards, as defined in Section 5.1 hereof, under the Plan to employees, to determine all terms of such Awards, and/or to administer the Plan or any aspect of it; provided, however, that if the Subcommittee is composed of one or more officers of the Company who are not members of the Board of Directors of the Company, the resolution so authorizing such Subcommittee shall specify the total number of Awards (if any) such Subcommittee may award pursuant to such delegated authority, and any such Awarddirector's successor shall be subject to the form of award agreement theretofore approved by the Committee. Any action taken by a Subcommittee within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee. The Committee hereby designates the Secretary of the Companyelected and the head of the Company's human resource function to assist the Committeequalified. No decrease in the administration of the Plan and execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Committee or the Company. In addition, the Committee may designate other Company employees to assist the Committee in the administration of the Plan, and may grant authority to such persons to execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Committee or the Company.
2.2 Powers of the Committee. Subject to the express provisions of this Plan, the Committee shall be authorized and empowered to do all things necessary or desirable in connection with the administration of this Plan with respect to the Awards over which such Committee has authority, including, without limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; provided that, unless the Committee shall specify otherwise, for purposes of this Plan: (i) the term "fair market value" shall mean, as of any date, the closing price per share at which the Shares (as defined in Section 3.1 hereof) are sold in the regular way
on the New York Stock Exchange or, if no Shares are traded on the New York Stock Exchange on the date in question, then for the next preceding date for which Shares are traded on the New York Stock Exchange; and (ii) the term "Company" shall mean Fluor Corporation and its subsidiaries and affiliates, unless the context otherwise requires.
(b) to determine which persons are Eligible Employees (as defined in Section 4 hereof), to which of such Eligible Employees, if any, Awards shall be granted hereunder, to make Awards under the Plan and to determine the terms of such Awards and the timing of any such Awards;
(c) to determine the number of Shares subject to Awards and the exercise or purchase price of such Shares;
(d) to establish and verify the extent of satisfaction of any performance goals applicable to granting Awards;
(e) to prescribe and amend the terms of the agreements or other documents evidencing Awards made under this Plan (which need not be identical);
(f) to determine the extent to which adjustments are required pursuant to Section 12 hereof;
(g) to interpret and construe this Plan, any rules and regulations under the Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions in good faith and for the benefit of the Plan, Participants (as defined in Section 4 hereof) and the Company;
(h) to approve corrections in the documentation or administration of any Award; and
(i) to make all other determinations deemed necessary or advisable for the administration of the Plan.
2.3 Determinations of the Committee. All decisions, determinations and interpretations by the Committee or the Board of Directors regarding the Plandirectors shall be final and binding on all Eligible Employees and Participants, as defined in Section 4 hereof. The Committee or the Board of Directors, as applicable, shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer of the Company or Eligible Employee and such attorneys, consultants and accountants as it may select.
SECTION 3. Stock Subject to Plan
3.1 Aggregate Limits. Subject to adjustment as provided in Section 12, at any time, the aggregate number of shares of the Company's common stock, $0.01 par value ("Shares"), issued pursuant to all Awards (including all ISOs (as defined in Section 5.1 hereof)) granted under this Plan shall not exceed 5,500,000 (number of shares), plus the number of Shares subject to awards outstanding as of May 7, 2008 (the date of the Annual Shareholder's Meeting) under the Company's 2000 Executive Performance Incentive Plan, the Company's 2001 Key Employee Performance Incentive Plan and the Company's 2003 Executive Performance Incentive Plan (collectively, the "Prior Plans") but which shares are not thereafter issued upon exercise or settlement of such awards; provided that the aggregate limit of the total number of Shares that may be issued under this Plan shall be further reduced by an additional three-quarters (3/4) of a Share for each Share issued upon settlement of an Award granted in terms of Shares under the Plan other than as a Stock Option or Stock Appreciation Right. The Shares to be utilized in the Plan may be either Shares reacquired by the Company, including Shares purchased in the open market, or authorized but unissued Shares.
3.2 Code Section 162(m) Limits. The aggregate number of Shares subject to Stock Options or Stock Appreciation Rights granted under this Plan during any calendar year to any one Eligible
Employee shall not exceed 750,000. The aggregate number of Shares issuable with respect to any Restricted Stock Awards, Incentive Awards denominated in Shares or Stock Unit Awards (other than Shares issued or issuable upon exercise of Options or Stock Appreciation Rights) granted under this Plan during any calendar year to any one Eligible Employee shall not exceed 250,000. Notwithstanding anything to the contrary in the Plan, the foregoing limitations shall be subject to adjustment under Section 12 only to the extent that such adjustment will not affect the status of any Award intended to qualify as "performance based compensation" under Code Section 162(m).
3.3 Issuance of Shares. For purposes of Section 3.1, the aggregate number of Shares issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. Notwithstanding the foregoing, Shares subject to an Award under the Plan (or an award under any of the Prior Plans) may not again be made available for issuance under this Plan if such Shares are: (i) Shares that were subject to a Stock Option or Stock Appreciation Right and were not issued upon the net settlement or net exercise of such Award, (ii) Shares used to pay the exercise price of a Stock Option, (iii) Shares delivered to or withheld by the Company to pay the withholding taxes related to an Award, or (iv) Shares repurchased on the open market with the proceeds of a Stock Option exercise. Shares subject to Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and Shares subject to Awards settled in cash shall not count as Shares issued under this Plan.
SECTION 4. Persons Eligible Under Plan
Any person who is (i) an employee of the Company (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual) and who also is an officer, key employee or member of the Executive Management Team ("EMT"), (ii) a prospective employee of the Company who is to be an officer, key employee or member of the EMT, (iii) a consultant to the Company, or (iv) an advisor of the Company (each, an "Eligible Employee") shall be eligible to be considered for the grant of Awards. For purposes of this Plan, the Chairman of the Board's status as an employee shall be determined by the Board of Directors. For purposes of determining eligibility for Awards, the term "Eligible Employee" shall also include a former Eligible Employee or any person (including any estate) who is a beneficiary of a former Eligible Employee. A "Participant" is any Eligible Employee to whom an Award has been made and any person (including any estate) to whom an Award has been assigned or transferred pursuant to Section 11.1.
SECTION 5. Plan Awards
5.1 Award Types. The Committee, on behalf of the Company, is authorized under this Plan to enter into certain types of arrangements with Eligible Employees and to confer certain benefits to them ("Awards"). The following types of Awards are authorized under the Plan if granted according to the terms and conditions of the Plan: Stock Option (including Incentive Stock Options), Restricted Stock, Incentive and Stock Unit. These authorized types of Awards are defined as follows:
Stock Option Award: A Stock Option is a right granted under Section 6 of this Plan to purchase a specified number of Shares at a specified exercise price, at such times, and on such other terms and conditions as are specified in or determined pursuant to the document(s) evidencing the Award (the "Option Agreement"). Stock Options intended to qualify as Incentive Stock Options ("ISOs") pursuant to Code Section 422 and Stock Options that are not intended to qualify as ISOs ("Non-Qualified Stock Options" or "NQSOs") may be granted.
Stock Appreciation Right Award: A Stock Appreciation Right is a right granted pursuant to Section 7 of this Plan that entitles the Participant to receive, in cash or Shares or a combination thereof, as determined by the Committee, value equal to or otherwise based on the excess of (i) the fair market value of a specified number of Shares at the time of exercise over (ii) the
exercise price of the right, as established by the Committee on the date of grant, and on such other terms and conditions as are specified in or determined pursuant to the document(s) evidencing the Award (the "Stock Appreciation Right Agreement").
Restricted Stock Award: A Restricted Stock Award is an award of Shares made under Section 8 of this Plan, the grant, issuance, retention and/or vesting of which is subject to such performance and other conditions as are expressed in the document(s) evidencing the Award (the "Restricted Stock Agreement").
Incentive Award: An Incentive Award is a bonus opportunity awarded under Section 9 of this Plan pursuant to which a Participant may become entitled to receive an amount payable either in cash, Shares or other property based on satisfaction of such performance criteria as are specified in the document(s) evidencing the Award (the "Incentive Bonus Agreement").
Stock Unit Award: A Stock Unit Award is an award of a right to receive the fair market value of a specified number of Shares made under Section 10 of this Plan, the grant, issuance price, retention and/or vesting of which is subject to such performance and other conditions as are expressed in the document(s) evidencing the Award (the "Stock Unit Agreement").
5.2 Grants of Awards. An Award may consist of one or two or more Award types made in any combination or in the alternative.
SECTION 6. Stock Option Awards
The Committee may grant a Stock Option or provide for the grant of a Stock Option, in the discretion of the Committee or automatically upon the occurrence of specified events previously established by the Committee including, without limitation, the achievement of performance goals, the satisfaction of an event or condition within the control of the recipient of the Award, within the control of others or not within any person's control.
6.1 Option Agreement. Each Option Agreement shall contain provisions regarding (a) the number of Shares which may be issued upon exercise of the Stock Option, (b) the purchase price of the Shares and the means of payment for the Shares, (c)shorten the term of the Stock Option, (d) such terms and conditions of exercisability as may be determined by the Committee, (e) any restrictions on the transfer of the Stock Option, (f) forfeiture provisions, and (g) such further terms and conditions, consistent with the Plan as may be determined by the Committee. Option Agreements evidencing ISOs shall contain such terms and conditions as may be necessary to comply with the applicable provisions of Code Section 422.incumbent director.
6.2 (4) During any period when the holders of any series of Preferred Stock Option Price. The purchase price per Share of the Shares subject to each Stock Option granted under the Plan shall equal or exceed 100% of the fair market value of such Stock on the date the Stock Option is granted, except that the Committee may specifically provide that the exercise price of a Stock Option may be higher or lower in the case of a Stock Option granted to employees of a company acquired by the Company in assumption and substitution of options held by such employees at the time such company is acquired. The assumption and substitution of options shall not result in discounted options subject to Section 409A.
6.3 Stock Option Term. The "term" of each Stock Option granted under the Plan, including any ISOs, shall be stated in the Option Agreement but may not exceed ten (10) years from the date of its grant.
6.4 Stock Option Vesting. Stock Options granted under the Plan shall be exercisable at such time and in such manner prior to the expiration of the Stock Option's term as determined in the sole discretion of the Committee and evidenced in the terms of the Option Agreement. The Committee shall have the right to make the timing of the ability to exercise any Stock Option granted under the
Plan subject to such performance requirementselect additional directors as deemed appropriate by the Committee. At any time after the grant of a Stock Option, the Committee may, in its sole discretion, reduceprovided for or eliminate any restrictions surrounding any Participant's right to exercise all or part of the Stock Option, limited by the fact that a Stock Option shall first become exercisable upon satisfaction of such performance requirements as deemed appropriate by the Committee but in no case shall such Stock Option become fully exercisable prior to the twelfth (12th) month following its date of grant, other than as a result of the Participant's death, disability or termination of employment, or a change of control of the Company.
6.5 Option Exercise.
(a) Partial Exercise. An exercisable Stock Option may be exercised in whole or in part. However, a Stock Option shall not be exercisable with respect to fractional Shares and the Committee may require, by the terms of the Option Agreement, that any partial exercise must be for a minimum number of whole Shares.
(b) Manner of Exercise. An exercisable Stock Option shall be deemed exercised (in whole or in part) only upon delivery to the Company representative designated by the Committee all of the following: (i) a notice of exercise (in such form as the Committee authorizes) specifying the number of Shares to be purchased by the Participant; (ii) payment or provision for payment of the exercise price (in compliance with Section 6.5(c) hereof) for such number of Shares; (iii) such representations and documents as the Committee, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other Federal, state or foreign securities laws or regulations; (iv) in the event that the Stock Option shall be exercisedfixed pursuant to Section 11.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option; and (v) such representations and documents as the Committee, in its sole discretion, deems necessary or advisable to provide for tax withholding. Unless provided otherwise by the Committee, no Participant shall have any right as a shareholder with respect to any Shares purchased pursuant to any Stock Option until the registration of Shares in the name of the Participant, and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such Shares are so registered.
(c) Payment of Exercise Price. To the extent authorized by the Committee, the exercise price of a Stock Option may be paid at the time established by the terms of the Option Agreement or at the time of exercise of the Stock Option in one or more of the following methods: (i) cash or certified or cashiers' check; (ii) shares of Company capital stock that have been held by the Participant for such period of time as the Committee may specify; (iii) other property deemed acceptable by the Committee; (iv) a reduction in the number of Shares or other property otherwise issuable pursuant to such Stock Option; or (v) any combination of (i) through (iv).
6.6 No Repricing without Stockholder Approval. Other than in connection with a change in the Company's capitalization (as described in Section 12) the exercise price of a Stock Option may not be reduced without stockholder approval (including canceling previously awarded Stock Options and regranting them with a lower exercise price).
SECTION 7. Stock Appreciation Right Awards
Stock Appreciation Rights may be granted to Participants from time to time either in tandem with or as a component of other Awards granted under the Plan ("tandem Stock Appreciation Rights") or not in conjunction with other Awards ("freestanding Stock Appreciation Rights") and may, but need not, relate to a specific Stock Option granted under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation
Right granted in tandem with an Award may be granted at the same time such Award is granted or at any time thereafter before exercise or expiration of such Award. All freestanding Stock Appreciation Rights shall be granted subject to the same terms and conditions applicable to Stock Options as set forth in Section 6 and all tandem Stock Appreciation Rights shall have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the Award to which they relate. Subject to the provisions of Section 6Article FOURTH hereof, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the immediately preceding sentence,holders of such series of Preferred Stock shall be entitled to elect the Committee may imposeadditional directors so provided for or fixed pursuant to said provisions, and (ii) each such other conditionsadditional director shall serve until such director's successor shall have been duly elected and qualified, or restrictions on any Stock Appreciation Rightuntil such director's right to hold such office terminates or expires pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. Except as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determinedotherwise provided by the Committee and set forthBoard in the applicable award agreement. Other than in connection with a change inresolution or resolutions establishing such series, whenever the Company's capitalization (as described in Section 12)holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the exercise priceprovisions of such Preferred Stock, Appreciation Rights may notthe terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total and authorized number of directors of the Corporation shall be reduced without stockholder approval (including canceling previously awarded Stock Appreciation Rightsaccordingly.
Proposed Amendments to Remove and regranting them with a lower exercise price).
SECTION 8. Restricted Stock Awards
Restricted Stock consists of an award of Shares, the grant, issuance, retention and/or vesting of which shall be subject to such performance conditions and to such further terms and conditions as the Committee deems appropriate.
8.1 Restricted Stock Award. Each Restricted Stock Award shall reflect, to the extent applicable (a) the number of Shares subject to such Award or a formula for determining such, (b) the time or times at which Shares shall be granted or issued and/or become retainable or vested, and the conditions or restrictions on such Shares, (c) the performance criteria and required level of achievement relative to these criteria which shall determine the number of Shares granted, issued, retainable and/or vested, (d) the measuring period for determining achievement of performance, (e) forfeiture provisions, and (f) such further terms and conditions consistent with the Plan as may be determined from time to time by the Committee.Replace Supermajority Voting Provisions
8.2 Restrictions and Performance Criteria. The grant, issuance, retention and/SIXTH: In addition to any other vote required by law, the affirmative vote of the holders ofa majoritynot less than 80% of the total voting power of all outstanding shares ofvotingstock of the Corporationentitled to vote thereonshall be required for the stockholders to amend, alter, repeal or vestingrescind the Bylaws of each Restricted Stock Award may be subjectthe Corporation.
TWELFTH: In addition to such performance criteria andany other vote required levelby law, the affirmative vote of achievement relative to these criteria as the Committee shall determine, which criteria may be based on financial performance, personal performance evaluations and/or completion of a specified period of service by the Participant. The grant, issuance, retention, vesting and/or settlement of any such Restricted Stock Award that is based on performance criteria and level of achievement relative to such criteria will be subject to a performance periodholders of not less than one year, and80% of the grant, issuance, retention, vesting and/or settlementtotal voting power of all outstanding shares of voting stock of the Corporation shall be required for the approval of any proposal that (1) the Corporation merge or consolidate with any other entity or any affiliate of such Restricted Stock Award that is based solely upon continued service and/other entity if such other entity and its affiliates singly or in the passageaggregate are directly or indirectly the beneficial owners of time may not vest or be settled in full prior to the thirty-sixth month following its date of grant, but may be subject to pro-rata vesting over such period, in each case, othermore than as a result15% of the Participant's death, disability or terminationtotal voting power of employment, or a changeall outstanding shares of controlvoting stock of the Company.
Notwithstanding anything to the contraryCorporation (such other entity and any affiliate thereof being herein the performance criteria for any Restricted Stock Award that is intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall be a measure based solely on one or more Qualifying Performance Criteria (as defined in Section 11.2 hereof) selected by the Committee.
8.3 Timing of Award. The Committee shall determine all specifics concerning the timing of any Restricted Stock Award.
8.4 Discretionary Adjustments. Notwithstanding satisfaction of any required period of service or performance goals, the number of Shares granted, issued, retainable and/or vested under a Restricted Stock Award based on either financial performance or personal performance evaluations may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.
SECTION 9. Incentive Awards
Each Incentive Award will confer upon the Eligible Employee the opportunity to earn a future payment tied to a specified level of achievement with respect to one or more performance criteria for a specific performance period of not less than one year.
9.1 Incentive Award. Each Incentive Award shall contain provisions regarding (a) the target and maximum amount payable to the Participant as an Incentive Award, (b) the performance criteria and required level of achievement relative to these criteria which shall determine the amount of such payment, (c) the period as to which performance shall be measured for establishing the amount of any payment, (d) the vesting of the Incentive Award, (e) restrictions on the alienation or transfer of the Incentive Award prior to actual payment, (f) forfeiture provisions, and (g) such further terms and conditions, consistent with the Plan as may be determined by the Committee. In establishing the provisions of Incentive Awards, the Committee may refer to categories of such Awards as parts of "Programs" or "Plans", which names will not affect the applicability of this Plan. The maximum amount payable pursuant to that portion of an Incentive Award granted under this Plan for any fiscal year to any Participant that is intended to satisfy the requirements for "performance based compensation" under Code Section 162(m) shall not exceed Five Million Dollars ($5,000,000).
9.2 Performance Criteria. The Committee shall establish the performance criteria and required level of achievement relative to these criteria which shall determine the target, minimum and maximum amount payable under an Incentive Award, which criteria may be based on financial performance and/or personal performance evaluations. The Committee may specify the amount or percentage of the target Incentive Award that is intended to satisfy the requirements for "performance-based compensation" under Code Section 162(m). Notwithstanding anything to the contrary herein, the performance criteria for any portion of an Incentive Award that is intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall be a measure based solely on one or more Qualifying Performance Criteria (as defined in Section 11.2 hereof) selected by the Committee and specified at the time required under Code Section 162(m).
9.3 Timing and Form of Payment. An Incentive Award will be paid in a single lump sum payment in the year following vesting, but no later than 21/2 months following the year of vesting. The Committee may permit a Participant or the Company to elect for the payment of any Incentive Award to be deferred to a specified date or event in accordance with an election made pursuant to the Fluor Executive 409A Deferred Compensation Program. The Committee may specify the form of payment of Incentive Awards, which may be cash, shares, or other property.
9.4 Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive Award based on either financial performance or personal performance evaluations may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.
SECTION 10. Stock Units
10.1 Stock Units. A "Stock Unit" is a bookkeeping entry representing an amount equivalent to the fair market value of one Share, also sometimes referred to as a "restricted unit" or "shadow stock". Stock Units represent an unfunded and unsecured obligation of the Company, except as otherwise provided for by the Committee.
10.2 Stock Unit Awards. Each Stock Unit Award shall reflect, to the extent applicable (a) the number of Stock Units subject to such Award or a formula for determining such, (b) the time or times at which Stock Units shall be granted and/or become vested, and the conditions or restrictions on such Stock Units, (c) the performance criteria and required level of achievement relative to these criteria which shall determine the number of Stock Units granted, issued, retainable and/or vested, (d) the
measuring period for determining achievement of performance, (e) forfeiture provisions, and (f) such further terms and conditions, in each case not inconsistent with the Plan as may be determined by the Committee.
10.3 Performance Criteria. The grant, issuance, retention and or vesting of each Stock Unit may be subject to such performance criteria and required level of achievement relative to these criteria as the Committee shall determine, which criteria may be based on financial performance, personal performance evaluations and/or completion of a specified period of service by the Participant. The grant, issuance, retention, vesting and/or settlement of any such Stock Unit that is based on performance criteria and level of achievement relative to such criteria will be subject to a performance period of not less than one year, and the grant, issuance, retention, vesting and/or settlement of any such Stock Unit that is based solely upon continued service and/or the passage of time may not vest or be settled in full prior to the thirty-sixth month following its date of grant, but may be subject to pro-rata vesting over such period, in each case, other than as a result of the Participant's death, disability or termination of employment, or a change of control of the Company.
Notwithstanding anything to the contrary herein, the performance criteria for any Stock Unit that is intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall be a measure based solely on one or more Qualifying Performance Criteria (as defined in Section 11.2 hereof) selected by the Committee and specified at the time the Stock Unit is granted.
10.4 Timing of Award. The Committee shall determine all specifics concerning the timing of any Stock Unit Award.
10.5 Settlement of Stock Units. The Committee may provide for Stock Units to be settled in cash and/or Shares. A Stock Unit Award will be settled in a single lump sum payment of cash and/or Shares in the calendar year following vesting, but no later than 21/2 months following the end of the calendar year of vesting. The Committee may permit a Participant or the Company to elect for the settlement of any Stock Unit Award to be deferred to a specified date or event in accordance with an election made pursuant to the Fluor Executive 409A Deferred Compensation Program. The amount of cash or Shares, to be distributed may, if the Stock Unit Agreement provides, be increased by an interest factor or by dividend equivalents, as the case may be, which may be valued as if reinvested in Shares. Until a Stock Unit is settled, the number of Shares represented by a Stock Unit shall be subject to adjustment pursuant to Section 12.
10.6 Discretionary Adjustments. Notwithstanding satisfaction of any required period of service or performance goals, the number of Stock Units granted, issued, retainable and/or vested under a Stock Unit Award due to financial performance or personal performance evaluations may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.
SECTION 11. Other Provisions Applicable to Awards
11.1 Transferability. Unless the agreement evidencing an Award (or an amendment thereto authorized by the Committee) expressly states that it is transferable as provided hereunder, no Award granted under the Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner, other than by will or the laws of descent and distribution, prior to the vesting or lapse of any and all restrictions applicable to an Award or any Shares issued under an Award. During a Participant's lifetime, Stock Options and Stock Appreciation Rights may only be exercised by the Participant.
The Committee may in its sole discretion grant an Award or amend an outstanding Award to provide that the Award is transferable or assignable to a member or members of the Participant's
"immediate family", as such term is defined under Exchange Act Rule 16a-1(e)"Related Corporation"), or to a trust forthat (2) the benefit solely of a memberCorporation sell or members of the Participant's immediate family,exchange all or to a partnership or other entity whose only owners are members of the Participant's family, provided that following any such transfer or assignment the Award will remain subject to substantially the same terms applicable to the Award while held by the Participant, as modified as the Committee in its sole discretion shall determine appropriate, and the Participant shall execute an agreement agreeing to be bound by such terms.
11.2 Qualifying Performance Criteria. For purposes of this Plan, the term "Qualifying Performance Criteria" shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, subsidiary or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to a designated comparison group, in each case as specified by the Committee in the Award: (a) cash flow; (b) earnings (including gross margin, earnings before interest and taxes ("EBIT"), earnings before taxes ("EBT"), and net earnings); (c) earnings per share; (d) growth in earnings or earnings per share; (e) stock price; (f) return on equity or average stockholders' equity; (g) total stockholder return; (h) return on capital; (i) return on assets or net assets; (j) return on investment; (k) revenue; (l) income or net income; (m) operating income or net operating income; (n) operating profit or net operating profit; (o) operating margin; (p) return on operating revenue; (q) market share; (r) contract awards or backlog; (s) overhead or other expense reduction; (t) growth in stockholder value relative to the two-year moving average of the S&P 500 Index; (u) growth in stockholder value relative to the two-year moving average of the Dow Jones Heavy Construction Index; (v) credit rating; (w) strategic plan development and implementation; (x) succession plan development and implementation; (y) retention of executive talent; (z) improvement in workforce diversity; (aa) return on average stockholders' equity relative to the Ten Year Treasury Yield (as hereinafter defined); (bb) improvement in safety records; (cc) capital resource management plan development and implementation; (dd) improved internal financial controls plan development and implementation; (ee) corporate tax savings; (ff) corporate cost of capital reduction; (gg) investor relations program development and implementation; (hh) corporate relations program development and implementation; (ii) executive performance plan development and implementation; (jj) tax provision rate for financial statement purposes; (ll) growth in stock price; (mm) return on invested capital (ROIC); (nn) return on assets employed (ROAE); (oo) project gross margin (PGM) in earnings and in contract awards; (pp) project gross margin percentage in earnings and contract awards; (qq) project working capital; (rr) cost of cash; (ss) overhead leverage; (tt) ratio of earnings to fixed charges; and (uu) debt as a percentage of total capitalization.
To the extent determined by the Committee at the time an Award is granted, the Committee shall appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to account for any of the following events that occurs during a performance period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (d) accruals for reorganization and restructuring programs; and (e) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for the applicable year.
The term "Ten Year Treasury Yield" shall mean, for any fiscal period, the daily average percent per annum yield for U.S. Government Securities—10 year Treasury constant maturities, as published in the Federal Reserve statistical release or any equivalent publication. Prior to the payment of any Award intended to qualify as "performance-based compensation" under Code Section 162(m) the Committee shall certify the extent to which any Qualifying Performance Criteria and any other material terms
under such Award have been satisfied (other than in cases where the criteria relate solely to the increase in the value of the Company's Common Stock).
11.3 Dividends. Unless otherwise provided by the Committee, no adjustment shall be made in Shares issuable under any Award on account of cash dividends which may be paid or other rights which may be issued to the holders of Shares prior to their issuance under the Award. The Committee shall specify whether dividends or dividend equivalent amounts shall be paid to any Participant with respect to the Shares subject to an Award that has not vested or been issued or that is subject to any restrictions or conditions on the record date for dividends.
11.4 Agreements Evidencing Awards. The Committee shall, subject to applicable law, determine the date an Award is deemed to be granted, which for purposes of this Plan shall not be affected by the fact that an Award is contingent on subsequent stockholder approval of the Plan. The Committee or its delegate(s), except to the extent prohibited under applicable law, may establish the terms of agreements evidencing Awards under this Plan and may, but need not, require as a condition to any such agreement's effectiveness that such agreement be executed by the Participant and that the Participant agree to such further terms and conditions as specified in the agreement. The grant of an Award under this Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in this Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the agreement evidencing such Award.
11.5 Tandem Stock or Cash Rights. Either at the time an Award is granted or by subsequent action, the Committee may, but need not, provide that an Award shall contain as a provision thereof, a right, either in tandem with the other rights under the Award or as an alternative thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash or a combination thereof, the amount of which is determined by reference to the value of the Award; provided, however, that the number of such rights granted under any Award shall not exceed the per Eligible Employee share limitation for such Award as set forth in Section 3.2.
11.6 Financing. The Committee may in its discretion provide financing to a Participant in a principal amount sufficient to pay the exercise price associated with an Award and/or to pay any required tax withholding with respect to any Award. Any such loan shall be subject to all applicable legal requirements and restrictions pertinent thereto, including Regulation G promulgated by the Federal Reserve Board. The grant of an Award shall in no way obligate the Company or the Committee to provide any financing whatsoever in connection with the Award.
SECTION 12. Changes in Capital Structure
If the outstanding securities of the class then subject to this Plan are increased, decreased or exchanged for or converted into cash, property or a different number or kind of shares or securities, or if cash, property or shares or securities are distributed in respect of such outstanding securities, in either case as a result of a reorganization, merger, consolidation, recapitalization, restructuring, reclassification, dividend (other than a regular, quarterly cash dividend) or other distribution, stock split, reverse stock split, spin-off or the like, or if substantially all of its assets or business to or with such Related Corporation, or that (3) the property and assets of the Company are sold, then, the Committee shall make appropriate and proportionate adjustments in (i) the number and type of sharesCorporation issue or deliver any stock or other securities of its issue in exchange or cashpayment for any properties or other property that may be acquired pursuant to outstanding Awards under this Plan and the exercise or settlement priceassets of such Awards; provided, however, that anyRelated Corporation or securities issued by such adjustment shall be madeRelated Corporation, or in such a manner that will not affect the statusmerger of any Award intended to qualify (A) as an ISO under Code Section 422, (B) as exempt from coverage under Code Section 409A, or (C) as "performance based compensation" under Code Section 162(m), and (ii) the maximum number and type of shares or other securities that may be issued pursuant to such Awards thereafter granted under this Plan.
SECTION 13. Change of Control
13.1 Effect of Change of Control. The Committee may through the termsaffiliate of the AwardCorporation with or otherwise provide thatinto such Related Corporation or any or allof its affiliates, and to effect such transaction the approval of stockholders of the following shall occur, either immediately upon the Change of Control or a Change of Control Transaction, or upon termination of the Eligible Employee's employment within twenty-four (24) months following a Change of Control or a Change of Control Transaction: (a) in the case of an Option, the Participant's ability to exercise any portion of the Option not previously exercisable; (b) in the case of an Incentive Award, the right to receive a payment equal to the target amount payable or, if greater, a payment based on performance through a date determined by the Committee prior to the Change of Control; and (c) in the case of Shares issued in payment of any Incentive Award, and/or in the case of Restricted Stock or Stock Units, the lapse and expiration of any conditions to the grant, issuance, retention, vesting or transferability of, or any other restrictions applicable to, such Award. The Committee also may, through the terms of the Award or otherwise, provide for an absolute or conditional exercise, payment or lapse of conditions or restrictions on an Award which shall only be effective if, upon the announcement of a Change of Control Transaction, no provisionCorporation is made in such Change of Control Transaction for the exercise, payment or lapse of conditions or restrictions on the Award, or other procedure whereby the Participant may realize the full benefit of the Award.
13.2 Definitions. Unless the Committee or the Board shall provide otherwise, "Change of Control" shall mean an occurrence of any of the following events: (a) a third person, including a "group" as defined in Section 13(d)(3) of the Exchange Act, acquires shares of the Company having twenty-five percent or more of the total number of votes that may be cast for the election of directors of the Company; (b) as the result of any cash tender or exchange offer, merger or other business combination, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of the Company or any successor to the Company; or (c) such other events as the Committee or the Board from time to time may specify. "Change of Control Transaction" shall include any tender offer, offer, exchange offer, solicitation, merger, consolidation, reorganization or other transaction that is intended to or reasonably expected to result in a Change of Control.
SECTION 14. Taxes
14.1 Withholding Requirements. The Committee may make such provisions or impose such conditions as it may deem appropriate for the withholding or payment by the Eligible Employee or Participant, as appropriate, for any taxes required as a result of any Awards granted under this Plan, and a Participant's rights in any Award are subject to satisfaction of such requirements.
14.2 Payment of Withholding Taxes. Notwithstanding the terms of Section 14.1 hereof, the Committee may provide in the agreement evidencing an Award or otherwise that all or any portion of the required withholding for taxes by the Company or, if permitted by the Committee, desired to be withheld by the Participant, in connection with the exercise of a Stock Option or Stock Appreciation Right or the exercise, vesting, settlement or transfer of any other Award shall be paid or, at the election of the Participant, may be paid by the Company with cash or shares of the Company's capital stock otherwise issuable or subject to such Award, or by the Participant delivering previously owned shares of the Company's capital stock, in each case having a fair market value equal to the amount required or elected to be withheld or paid. Any such elections are subject to such conditions or procedures as may be established by the Committee and are subject to Committee approval.
SECTION 15. Amendments or Termination
The Board of Directors may amend, alter or discontinue the Plan or any agreement evidencing an Award made under the Plan, but any such amendment shall be subject to approval of the shareholders
of the Company to the extent required by law or by any applicable listing standardagreement between the Corporation and any national securities exchange; provided, however, that the foregoing shall not apply to any such merger, consolidation, sale or exchange, or issuance or delivery of the New York Stock Exchangestock or other securities exchange or stock market where the Company has listed the Shares. In addition, unlesswhich was approved by a majorityresolution of the shareholders of the Company present in person or by proxy and actually voting, no such amendment shall be made that would:
(a) materially increase the maximum number of Shares for which Awards may be granted under the Plan, other than an increase pursuant to Section 12 ("Changes in Capital Structure");
(b) reduce the price at which Stock Options or Stock Appreciation Rights may be granted, as described in Section 6.2;
(c) reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights;
(d) extend the term of the Plan; or
(e) change the class of persons eligible to be Participants.
After the date of a Change of Control, no amendment to the Plan or any agreement evidencing an Award made under the Plan shall be effected that impairs the rights of any Award holder, without such holder's consent, under any Award grantedBoard prior to the dateacquisition of the Changebeneficial ownership or more than 15% of Control.
SECTION 16. Compliancethe total voting power of all outstanding shares of voting stock of the Corporation by such Related Corporation and its affiliates, nor shall it apply to any such transaction solely between the Corporation and another entity, 50% or more of the voting stock of which is owned by the Corporation. For the purposes hereof, (1) an "affiliate" is any person (including a corporation, partnership, other legal entity, trust, estate or individual) who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Other Lawsthe person or entity specified; (2) "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and Regulations
The Plan,policies of a person or entity, whether through the grantownership of voting securities, by contract, or otherwise; and exercise(3) in computing the percentage of Awards hereunder,outstanding voting stock beneficially owned by any person or entity, the shares outstanding and the obligationshares owned shall be determined as of the Companyrecord date fixed to sell, issuedetermine the stockholders entitled to vote or deliver Shares under such Awards, shall be subject to all applicable Federal, state and foreign laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or qualification of such Shares under any Federal, state or foreign law or any ruling or regulation of any government body which the Committee shall, in its sole discretion, determine to be necessary or advisable. This Plan is intended to constitute an unfunded arrangement for a select group of management or other key employees.
No Stock Option or Stock Appreciation Right shall be exercisable unless a registration statementexpress consent with respect to the Stock Optionsuch proposal. The stockholder vote, if any, required for mergers, consolidations, sales or Stock Appreciation Right has been made and isexchanges of assets or issuances of stock or other securities not expressly provided for in effect or the Company has determined thatthis Article, shall be such registration is unnecessary. Unless the Awards and Shares covered by this Plan have been registered under the Securities Act of 1933, as amended, or the Company has determined that such registration is unnecessary, each person receiving an Award and/or Shares pursuant to any Award may be required by the Company to give a representation in writing that such person is acquiring such Shares for his or her own account for investment.applicable law.
SECTION 17. Award Grants by Subsidiaries
THIRTEENTH: In the case of a grant of an Awardaddition to any Participant employedother vote required by a subsidiarylaw, the affirmative vote of the holders of 80% of the total voting power of all outstanding shares of voting stock shall be required to amend, alter or affiliate, such grant may, ifrepeal the Committee so directs, be implemented by the Company issuing any subject Shares to the subsidiary or affiliate, for such lawful consideration as the Committee may determine, upon the condition or understanding that the subsidiary or affiliate will transfer the Shares to the Participantprovisions set forth in accordancethis Article THIRTEENTH and in Articles SIXTH (dealing with the termsamendment, alteration, repeal or rescission of Bylaws by stockholders), SEVENTH (dealing with the Award specifiedclassified board), TENTH (dealing with the prohibition against stockholder action without meetings) and TWELFTH (dealing with the 80% vote of stockholders required for certain transactions).
FOURTEENTWELFTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. Notwithstanding the Committee pursuant toforegoing, the provisions of the Plan. Notwithstanding any other provision hereof, such Awardset forth in Articles SIXTH, SEVENTH, TENTH, TWELFTH and THIRTEENTH may not be issued by and in the name of the subsidiaryrepealed or affiliate and shall be deemed granted on such date as the Committee shall determine.
SECTION 18. No Right to Company Employment
Nothing in this Plan or as a result of any Award granted pursuant to this Plan shall confer on any individual any right to continue in the employ of the Company or interfereamended in any way with the right of the Company to terminate an individual's employment at any time. The Award agreements may contain
respect unless such provisionsrepeal or amendment is approved as the Committee may approve with reference to the effect of approved leaves of absence by the Participant receiving the Award.
SECTION 19. Effectiveness and Expiration of Plan
The Plan shall be effective on the date the Board of Directors adopts the Plan. No Stock Option Award, Stock Appreciation Right Award, Restricted Stock Award, Incentive Award or Stock Unit Award shall be granted pursuant to the Plan more than ten (10) years after the effective date of the Plan.
SECTION 20. Non-Exclusivity of the Plan
Neither the adoption of the Plan by the Board of Directors nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board of Directors or the Committee to adopt such other incentive arrangements as it or they may deem desirable, including without limitation, the granting of restricted stock or stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable onlyspecified in specific cases.
SECTION 21. Governing LawArticle THIRTEENTH.
This Plan and any agreements hereunder shall be interpreted and construed in accordance with the laws of the State of Delaware and applicable Federal law. The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration. Any reference in this Plan or in the agreement evidencing any Award to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability.
Directions to the
Fluor Corporation 20082011 Annual Shareholders Meeting
Wednesday,Thursday, May 7, 2008,5, 2011, beginning at 9:00 a.m. Central Daylight TimeFour Seasons Resort and ClubFluor Corporation4150 North MacArthur6700 Las Colinas Boulevard
Irving, Texas 7503875039
From DFW Airport: | From Love Field: | |
Leaving the airport, take the north | Leaving the airport, turn right on Mockingbird Ln. | |
Travel east on TX 114 | Travel west on 114 W | |
Take the | Take the MacArthur Blvd. exit and turn right | |
| Turn right onto Fluor | |
End at Fluor Corporation entrance | End at Fluor Corporation entrance |
| |||
VOTE BY Use the Internet to transmit your voting instructions and for electronic delivery of information up until 5:59 P.M. Eastern Time on May 3, 2011 (benefit plan shares) or 11:59 | |||
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by | |||
VOTE BY Use any touch-tone telephone to transmit your voting instructions up until 5:59 P.M. Eastern Time on May 3, 2011 (for shares allocable to a benefit plan account) or 11:59 | |||
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to | |||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends |
0000086411_2 R1.0.0.11699 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, Notice & Proxy Statement is/ are available at www.proxyvote.com . FLUOR CORPORATION Annual Meeting of Shareholders This proxy is solicited by the Board of Directors The undersigned, a shareholder of Fluor Corporation, a Delaware corporation, revoking any proxy previously given, hereby constitutes and appoints C.M. Hernandez and D.M. Steuert, or either of them, the true and lawful agents and proxies of the undersigned with full power of substitution in each, to vote the shares of common stock of Fluor Corporation standing in the name of the undersigned at the Annual Meeting of Shareholders of Fluor Corporation, on Thursday, May 5, 2011 at 9:00 a.m. Central Daylight Time, and at any adjournment or postponement thereof with respect to the proposals listed on the reverse side of this proxy card and upon such other matters as may be properly presented. If you are a shareholder of record, this proxy card when properly executed will be voted as directed by the undersigned shareholder and in accordance with the discretion of the proxies as to any other matters that are properly presented. Unless otherwise directed, this proxy card will be voted FOR the election of the three nominees | |||||||||||||||||
FLUOR CORPORATION
2008 Annual Meeting of ShareholdersMay 7, 2008
You are cordially invited to attend the 2008 Annual Meeting of Shareholders which will be held on Wednesday, May 7, 2008, beginning at 9:00 a.m. Central Daylight Time, at:
Four Seasons Resort and Club
4150 North MacArthur Boulevard
Irving, TX 75038
A map is included on the last page of the Proxy Statement.
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Annual Report are available at www.fluor.com/2007annualreport
ADMITTANCE TICKET
This ticket entitles you, the shareholder, and one guest to attend the 2008 Annual Meeting.
Please bring it with you. Only shareholders and their guests will be admitted.
We look forward to welcoming you on Wednesday, May 7, 2008.
FLUOR CORPORATION
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING TO BE HELD ON MAY 7, 2008
The undersigned, a shareholder of Fluor Corporation, a Delaware corporation, acknowledges receipt of a Notice of Annual Meeting of Shareholders, the accompanying Proxy Statement and the Annual Report to Shareholders for the year ended December 31, 2007; and, revoking any proxy previously given, hereby constitutes and appoints C.M. Hernandez and D.M. Steuert, and each of them, the true and lawful agents and proxies of the undersigned with full power of substitution in each, to vote the shares of Common Stock of Fluor Corporation standing in the name of the undersigned at the Annual Meeting of Shareholders of Fluor Corporation, on Wednesday, May 7, 2008 at 9:00 a.m. Central Daylight Time, and at any adjournment or postponement thereof with respect to the proposals listed on the reverse side and upon such other matters as may be properly presented.
THIS PROXY CARD WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED SHAREHOLDER AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS THAT ARE PROPERLY PRESENTED. UNLESS OTHERWISE DIRECTED, THIS PROXY CARD WILL BE VOTED FOR THE ELECTION OF THE FOUR NOMINEES FOR DIRECTOR IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 and 4.
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be signed on the other side)
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED.
bring it with you. Only shareholders will be admitted. We look forward to welcoming you on Thursday, May 5, 2011.
FLUOR CORPORATION
2008 Annual Meeting of ShareholdersMay 7, 2008
You are cordially invited to attend the 2008 Annual Meeting of Shareholders which will be held on Wednesday, May 7, 2008, beginning at 9:00 a.m. Central Daylight Time, at:
Four Seasons Resort and Club
4150 North MacArthur Boulevard
Irving, TX 75038
A map is included on the last page of the Proxy Statement.
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Annual Report are available at www.fluor.com/2007annualreport
ADMITTANCE TICKET
This ticket entitles you, the shareholder, and one guest to attend the 2008 Annual Meeting.
Please bring it with you. Only shareholders and their guests will be admitted.
We look forward to welcoming you on Wednesday, May 7, 2008.
FLUOR CORPORATION
VOTING INSTRUCTION CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING TO BE HELD ON MAY 7, 2008
The undersigned, a participant in a 401(k) or other retirement plan sponsored by Fluor Corporation or a subsidiary, such as the Fluor Corporation Salaried Employees Savings Investment Plan (the "Company Retirement Plans"), acknowledges receipt of a Notice of Annual Meeting of Shareholders, the accompanying Proxy Statement and the Annual Report to Shareholders for the year ended December 31, 2007. This Voting Instruction Card constitutes your voting instructions to The Northern Trust Company which serves as trustee of the trust serving as the funding medium for the Company Retirement Plans (the "Trust") to vote the shares of Common Stock of Fluor Corporation allocated to the plan account at the Annual Meeting of Shareholders of Fluor Corporation, on Wednesday, May 7, 2008 at 9:00 a.m. Central Daylight Time, and at any adjournment or postponement thereof with respect to the proposals listed on the reverse side. As a participant in and a named fiduciary (i.e. the responsible party identified in the voting section of each plan document and the Trust) under the Company Retirement Plans, you have the right to direct The Northern Trust Company, as trustee, how to vote the shares of Fluor Corporation allocated to the Plan account as well as a portion of any shares for which no timely voting instructions are received from other participants with respect to Proposals 2, 3 and 4. If you do not sign, date and return this card, or no direction is made, the Trust provides that the trustee will vote FOR the nominees for Director in Proposal 1 and, with respect to Proposals 2, 3 and 4 will vote the shares allocated to the plan account in the same proportion as it votes the shares for which it has received such instructions unless to do so would be inconsistent with the trustee's duties.
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be signed on the other side)