UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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¨ | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to §240.14a-12 |
The Procter & Gamble Company
(Name of Registrant as Specified In Its Charter)
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THE PROCTER & GAMBLE COMPANY
Notice of Annual Meeting
and
Proxy Statement
Procter & Gamble Hall
at the Aronoff Center for the Arts
Annual Meeting of Shareholders
October 13, 200911, 2011
THE PROCTER & GAMBLE COMPANY
P.O. Box 599
Cincinnati, Ohio 45201-0599
August 28, 2009[·]
Fellow Procter & Gamble Shareholders:
It is ourmy pleasure to invite you to this year’s annual meeting of shareholders, which will be held on Tuesday, October 13, 2009.11, 2011.
The meeting will start at 9:00 a.m., Eastern Daylight Time, at the Procter & Gamble Hall at the Aronoff Center for the Arts, 650 Walnut Street, in Cincinnati.
We appreciate your continued confidence in our Company and look forward to seeing you on October 13.11.
Sincerely, | ||
| ||
ROBERT A. MCDONALD | ||
CHAIRMAN OF THE BOARD, PRESIDENT | ||
|
THE PROCTER & GAMBLE COMPANY
P.O. Box 599
Cincinnati, Ohio 45201-0599
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
August 28, 2009[·]
Date: | Tuesday, October | |
Time: | 9:00 a.m., Eastern Daylight Time | |
Place: | Procter & Gamble Hall at the Aronoff Center for the Arts | |
650 Walnut Street, Cincinnati, Ohio 45202 |
Purposes of the meeting:
To review the minutes of the 20082010 annual meeting of shareholders;
To receive reports of officers;
To elect twelve11 members of the Board of Directors;
To vote on a Board proposal to ratify the appointment of the independent registered public accounting firm;
To provide an advisory vote on a Board proposal to approve the Company’s executive compensation (the “Say on Pay” vote);
To provide an advisory vote on a Board proposal to recommend the frequency of holding the Say on Pay vote in the future;
To vote on a Board proposal to amend the Company’s CodeAmended Articles of Regulations;
To vote on a Board proposal to approve The Procter & Gamble 2009 Stock and Incentive Compensation Plan;Incorporation;
To vote on [Ÿ·] shareholder proposals;proposal(s); and
To consider any other matters properly brought before the meeting.
Who may attend the meeting:
Only shareholders, persons holding proxies from shareholders and invited representatives of the media and financial community may attend the meeting.
Shareholders attending the meeting who are hearing-impaired should identify themselves during registration so they can sit in a special section where an interpreter will be available.
What to bring:
If your shares are registered in your name and you requested and received a printed copy of the proxy materials, you should bring the enclosed Admission Ticket to the meeting. If you received a Notice of Internet Availability of Proxy Materials and will not be requesting a printed copy of the proxy materials, please bring that Notice with you as your Admission Ticket.
If your shares are held in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or letter from that broker, trust, bank or nominee that confirmsconfirming that you are the beneficial owner of those shares.
WebcastAudiocast of the annual meeting:
If you are not able to attend the meeting in person, you may join a live video and audiocast of the meeting on the Internet by visitingwww.pg.com/investors at 9:00 a.m., Eastern Daylight Time on October 13, 2009.11, 2011.
Record Date:
August 14, 200912, 2011, is the record date for the meeting. This means that owners of Procter & Gamble stock at the close of business on that date are entitled to:
receive notice of the meeting; and
vote at the meeting and any adjournments or postponements of the meeting.
Information About the Notice of Internet Availability of Proxy Materials:
Again this year, instead of mailing a printed copy of our proxy materials, including our Annual Report, to each shareholder of record, we have decided to provide access to these materials in a fast and efficient manner via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all shareholders. On August 28, 2009,[·], we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to all shareholders of record as of August 14, 2009,12, 2011, and we posted our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all shareholders may choose to access our proxy materials on the website referred to in the Noticeat www.proxyvote.com or may request to receive a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those who previously requested printed proxy materials or electronic materials on an ongoing basis, you will receive those materials as you requested.
Householding Information:
We have adopted a procedure approved by the Securities and Exchange Commission (“SEC”) called “householding.” Under this procedure, shareholdersShareholders of record who have the same address and last name and have not previously requested electronic delivery of proxy materials will receive a single envelope containing the Notices for all shareholders having that address. The Notice for each shareholder will include that shareholder’s unique control number needed to vote his or her shares. This procedure reduces our printing costs and postage fees.
If, in the future, you do not wish to participate in householding and prefer to receive your Notice in a separate envelope, please call us toll-free at 1-800-742-6253 in the U.S., or inform us in writing at: The Procter & Gamble Company, Shareholder Services, P.O. Box 5572, Cincinnati, OH 45201-5572, or by email at shareholders.im@pg.com. We will respond promptly to such requests.
For those shareholders who have the same address and last name and who request to receive a printed copy of the proxy materials by mail, we will send only one copy of such materials to each address unless one or more of those shareholders notifies us, in the same manner described above, that they wish to receive a printed copy for each shareholder at that address.
Beneficial shareholders can request information about householding from their banks, brokers or other holders of record.
Proxy Voting:
Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the annual meeting. You can vote by Internet, by telephone or by requesting a printed copy of the proxy materials and using the enclosed proxy card.
Our proxy tabulator, Broadridge Financial Solutions, must receive any proxy that will not be delivered in person to the annual meeting by 11:59 p.m., Eastern Daylight Time on Monday, October 12, 2009.10, 2011.
By order of the Board of Directors,
DEBORAH P. MAJORAS Chief Legal Officer and Secretary |
Proxy Statement
As more fully described in the Notice, the Board of Directors (“Board”) of The Procter & Gamble Company (the “Company”) has made these materials available to you over the Internet or, upon your request, has mailed you printed versions of these materials in connection with the Company’s 20092011 annual meeting of shareholders, which will take place on October 13, 2009.11, 2011. The Notice was mailed to Company shareholders beginning August 28, 2009,[·], and our proxy materials were posted on the website referenced in the Notice on that same date. The Company, on behalf of its Board, of Directors, is soliciting your proxy to vote your shares at the 20092011 annual meeting of shareholders. We solicit proxies to give all shareholders of record an opportunity to vote on matters that will be presented at the annual meeting. In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.
Who can vote?
You can vote if, as of the close of business on Friday, August 14, 2009,12, 2011, you were a shareholder of record of the Company’s:
Common Stock;Stock (“Common Stock”);
Series A ESOP Convertible Class A Preferred Stock; or
Series B ESOP Convertible Class A Preferred Stock.
Each share of Company stock gets one vote. On August 14, 2009,12, 2011, there were issued and outstanding:
[Ÿ·] shares of Common Stock;
[Ÿ·] shares of Series A ESOP Convertible Class A Preferred Stock; and
[Ÿ·] shares of Series B ESOP Convertible Class A Preferred Stock.
For The Procter & Gamble Shareholder Investment Program participants:
If you are a participant in The Procter & Gamble Shareholder Investment Program, you can vote shares of common stockCommon Stock held for your account through the custodian for that program.
For participants in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan and/or The Procter & Gamble Savings Plan:
If you are a participant in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan and/or The Procter & Gamble Savings Plan, you can instruct the Trustees how to vote the shares of stock that are allocated to your account. If you do not vote your shares, the Trustees will vote them in proportion to those shares for which they have received voting instructions. Likewise, the Trustees will vote shares held by the trust that have not been allocated to any account in the same manner.
How do I vote by proxy?
Most shareholders can vote by proxy in three ways:
• | By Internet—You can vote |
By Telephone—In the United States and Canada you can vote by telephone by following the instructions in the Notice or by calling 1-800-690-6903 (toll free)(toll-free) and following the instructions; or
By Mail—You can vote by mail by requesting a full packet of proxy materials be sent to your home address. Upon receipt of the materials, you may fill out the enclosed proxy card and return it per the instructions on the card.
Please see the Notice or the information your bank, broker or other holder of record provided you for more information on these options.
If you authorize a proxy to vote your shares over the Internet or by telephone, you should not return a proxy card by mail (unless you are revoking your proxy).
If you vote by proxy, your shares will be voted at the annual meeting in the manner you indicate on your proxy card. If you sign your proxy card but do not specify how you want your shares to be voted, they will be voted as the Board of Directors recommends.
Can I change or revoke my vote after I return my proxy card?
Yes. You can change or revoke your proxy by Internet, telephone or mail at any time before the annual meetingprior to 11:59 p.m., Eastern Daylight Time on Monday, October 10, 2011 or by attending the annual meeting and voting in person.
Can I vote in person at the annual meeting instead of voting by proxy?
Yes. However, we encourage you to vote your proxy by Internet, telephone or mail prior to the meeting.
Voting Procedures
Election of Directors—Each of the twelve11 nominees for Director who receivereceives a majority of votes cast will be elected as a member of the Board of Directors.Board. A “majority of votes cast” means that the number of shares cast “for” a nominee must exceed the number of votes cast “against” that nominee. Abstentions and broker non-votes will have no effect. Pursuant to the By Laws of the Board of Directors, if a non-incumbent nominee for Director receives a greater number of votes cast “against” than votes cast “for” such nominee, such nominee shall not be elected as a member of the Board of Directors.Board. Any incumbent nominee for Director who receives a greater number of votes cast “against” than votes cast “for” such nominee shall continue to serve on the Board pursuant to Ohio law, but shall immediately tender his or her resignation as a Director to the Board of Directors.Board. Within 90 days, the Board will decide, after taking into account the recommendation of the Governance & Public Responsibility Committee (in each case excluding the nominee in question), whether to accept the resignation. Absent a compelling reason for the Director to remain on the Board, the Board of Directors shall accept the resignation. The Board’s explanation of its decision shall be promptly disclosed on a Form 8-K submitted to the SEC.Securities and Exchange Commission (“SEC”).
The Board Proposal to amendProposals regarding Say on Pay and Say on Pay vote frequency are advisory and not binding on the Company’s Code of Regulations—The affirmative vote of a majority ofCompany. They require the Company’s issued and outstanding shares is required for adoption. Accordingly, abstentions and broker non-votes have the same effect as votes against these proposals.
Board Proposal to approve The Procter & Gamble 2009 Stock and Incentive Compensation Plan—The affirmative vote of a majority of shares participating in the voting on thiseach proposal is required for adoption.approval. Abstentions and broker non-votes will not be counted as participating in the voting and will therefore have no effect.
The Board Proposal to amend the Company’s Amended Articles of Incorporation requires the affirmative vote of a majority of the Company’s issued and outstanding shares for adoption. Accordingly, abstentions and broker non-votes have the same effect as votes against this proposal.
All Other Proposals—TheProposals require the affirmative vote of a majority of shares participating in the voting on each proposal is required for adoption.approval. Abstentions and broker non-votes will not be counted as participating in the voting and will therefore have no effect.
Who pays for this proxy solicitation?
The Company does. We have hired Georgeson Shareholder Communications, Inc.,Phoenix Advisory Partners, a proxy solicitation firm, to assist us in soliciting proxies for a fee of $22,000$15,000 plus reasonable expenses. In addition, GeorgesonPhoenix Advisory Partners and the Company’s Directors, officers and employees may also solicit proxies by mail, telephone, personal contact, email or other online methods. We will reimburse their expenses for doing this.
We will also reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Company stock. Other proxy solicitation expenses that we will pay include those for preparing, mailing, returning and tabulating the proxies.
Experiences, Skills and Qualifications
Each individual Director should epitomize the Company’s Purpose, Values and Principles, possess the highest ethics and integrity and demonstrate commitment to representing the long-term interests of the Company’s shareholders. Each Director should also have individual experiences that provide practical wisdom, mature judgment and an inquisitive and objective mind. These experiences, at policy-making levels, may include business, government, technology, international, marketing and other areas that are relevant to the Company’s global operations. In addition, as noted above, the evaluation of Director nominees by the Governance & Public Responsibility Committee takes into account diversity, including with respect to international background, age, gender and race.
Below we identify and describe specific experiences, skills and qualifications our Directors bring to the Board. Each Director’s specific experiences, skills and qualifications that the Board considered in their re-nomination are included in their individual biographies. However, the fact that we do not list a particular experience, skill or qualification for a Director does not mean that Director does not possess that particular experience, skill or qualification.
Leadership experience. Directors with significant leadership experience over an extended period, especially current and former chief executive officers, provide the Company with special insights. These individuals demonstrate a practical understanding of how large organizations operate including the importance of human resource management and how employee and executive compensation are set. They understand strategy and risk management. They possess extraordinary leadership qualities and are able to identify and develop leadership qualities in others. And, through their various leadership positions, they have access to important information and relationships that benefit the Company.
Consumer Industry experience. Directors with experience in dealing with consumers, particularly in the areas of marketing and selling products or services to consumers, provide valuable insights to the Company. They understand consumer needs, recognize products and marketing campaigns that might resonate with consumers and identify potential changes in consumer trends and buying habits.
International experience. Directors with experience in markets outside of the United States bring valuable knowledge to the Company, which generates over [·]% of its revenue from international markets.
Marketing experience. Directors with experience identifying, developing and marketing new products, as well as new areas for existing products, can add significant positive impact to the Company’s operational results. As one of the world’s largest advertisers, this is a particularly important attribute.
Finance experience. Directors with an understanding of accounting and financial reporting processes, particularly as they relate to a large, complex, international business, provide an important oversight role. The Company employs a number of financial targets to measure its performance, and accurate financial reporting is critical to the Company’s success. Directors with financial experience are critical to ensuring effective oversight of the Company’s financial measures and processes.
Government experience. Directors with government experience, whether as members of the government or through extensive interactions with government and government agencies, are able to recognize, identify and understand the key issues that the Company faces in an economy increasingly affected by the role of governments around the world.
Technology experience. Directors with an understanding of technology and innovation help the Company focus its efforts in these important areas, as well as track progress. As one of the few companies with an Innovation & Technology Committee of the Board, this is particularly important to the Company’s overall success.
Diversity
The Board considers diversity to be an important criterion in the selection and nomination of candidates for Director. As a global company, the Board seeks Directors with international background and global experience, among other factors. This is reflected in the Board’s Corporate Governance Guidelines, which set forth the minimum criteria for Board members, and note that the Board “seeks to achieve a mix of Board members that represents a diversity of background and experience, including with respect to age, gender, international background, race and specialized experience.”
Although the Board does not establish specific goals with respect to diversity, the Board’s overall diversity is a significant consideration in the Director nomination process. For this year’s election, the Board has nominated 11 individuals. Those 11 individuals range in age from 50 to 65. Each nominee is a strategic thinker and has varying, specialized experience in areas that are relevant to the Company. Moreover, their collective experience covers a wide range of countries, geographies and industries, including consumer products, technology, financial services, media, agriculture, aerospace and health care, as well as roles in consulting and government. Five are women; two are African-American and one is Mexican.
The Board assesses the effectiveness of its diversity policy every year as part of the nomination process for the annual election of Directors by the Company’s shareholders. The Board’s Governance & Public Responsibility Committee, responsible for making recommendations for Director nominations to the full Board, reviews the Director nominees (including shareholder nominees) and ascertains whether, as a whole, the group meets the Board’s policy in this regard. Having reviewed the collective background and experience of the 11 nominees, the Board has concluded that they provide sufficient diversity to meet the Board’s policy.
All of the Board’s nominees for Director are incumbent nominees who will be elected for a one-year term. Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Rajat K. Gupta,Robert A. G. Lafley, Charles R. Lee, Lynn M. Martin,McDonald, W. James McNerney, Jr., Johnathan A. Rodgers, Ralph Snyderman,Mary Agnes Wilderotter, Patricia A. Woertz and Ernesto Zedillo were elected for one yearone-year terms at the 20082010 annual meeting. Robert A. McDonaldSusan Desmond-Hellmann was appointed to the Board effective July 1, 2009.December 13, 2010 and Margaret C. Whitman was appointed to the Board effective February 8, 2011. The current terms of all nominees for Director will expire at the 20092011 annual meeting. The Board has nominated each of these individuals for new terms that will expire at the 20102012 annual meeting.
Each of the nominees for Director has accepted the nomination and agreed to serve as a Director if elected by the Company’s shareholders. If any nominee becomes unable or unwilling to serve between the date of the proxy statement and the annual meeting, the Board may designate a new nominee and the persons named as proxies will vote for that substitute nominee.
The Board of Directors recommends a vote FOR Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Rajat K. Gupta, A. G. Lafley, Charles R. Lee, Lynn M. Martin,Susan Desmond-Hellmann, Robert A. McDonald, W. James McNerney, Jr., Johnathan A. Rodgers, Ralph Snyderman,Margaret C. Whitman, Mary Agnes Wilderotter, Patricia A. Woertz and Ernesto Zedillo as Directors to hold office until the 20102012 annual meeting of shareholders and until their successors are elected.
Nominees for Election as Directors with Terms Expiring in 2012
Director since 2009, Age 50 | ||||
Ms. Braly is Chair of the Board, President and Chief Executive Officer of WellPoint, Inc. (a healthcare insurance company). She has served as Chair of the Board since March, 2010 and President and Chief Executive Officer since 2007. She previously served as Executive Vice President, General Counsel and Chief Public Affairs Officer of WellPoint from 2005 to 2007 and President and Chief Executive Officer of Blue Cross Blue Shield of Missouri from 2003 to 2005. As Chief Executive Officer of a major health benefits company that interacts directly with consumers, Ms. Braly has a vast amount of leadership, consumer industry and marketing experience. Ms. Braly also brings a significant amount of government experience, given her prior role as general counsel and chief public affairs officer for
Member of the Audit and Governance & Public Responsibility Committees. | ||||
Kenneth I. Chenault | Director since 2008, Age 60 | |||
Mr. Chenault is Chairman and Chief Executive Officer of the American Express Company As Chairman and Chief Executive Officer of American Express, Mr. Chenault has significant leadership and financial experience. With more than 30 years experience delivering products and services to consumers and businesses all across the world, Mr. Chenault brings consumer and business insights, marketing expertise, as well as a global perspective to the Board.
Member of the Audit and Compensation & Leadership Development Committees. |
Scott D. Cook | Director since 2000, Age 59 | |||||
Mr. Cook is Chairman of the Executive Committee of the Board of Intuit Inc.
Chair of the Innovation & Technology Committee and member of the Compensation & Leadership Development | ||||||
Director since | ||||||
As Chancellor of UCSF, a member of the California Academy of Sciences board of trustees and president of product development at Genentech, Dr. Desmond-Hellmann has extensive leadership and technology experience. As a member of the Federal Reserve Bank of San Francisco’s Economic Advisory Council, she also
Member of the Audit and Innovation & Technology Committees. | ||||||
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Robert A. McDonald | Director since 2009, Age 58 | |||||
Mr. McDonald is Chairman of the Board, President and Chief Executive Officer of the | ||||||
As someone who has spent his entire career with the Company, much of it outside of the United States, and who currently serves as Chief Executive Officer, Mr. McDonald has an extensive, in-depth knowledge of the Company’s business. His wide-ranging roles throughout his career at the Company also provide him with significant leadership, consumer industry, marketing and international experience. |
W. James McNerney, Jr. | Director since 2003, Age 61 | ||||
Mr. McNerney is Chairman of the Board, President and Chief Executive Officer of The Boeing Company As the Chief Executive Officer of Boeing, former Chief Executive Officer of 3M and former executive of General Electric, Mr. McNerney brings a wealth of leadership, global and technology experience. His extensive experience managing large, global manufacturing companies, as well as his insight into government affairs, enable him to advise the Board on a variety of strategic and business matters.
Presiding Director, Chair of the Compensation & Leadership Development Committee and member of the Governance & Public Responsibility Committee. | |||||
Johnathan A. Rodgers | Director since 2001, Age 65 | ||||
Mr. Rodgers is President and Chief Executive Officer of TV One, LLC As Chief Executive Officer of TV One, LLC, Mr. Rodgers has significant leadership experience. His current role in media and communications, combined with past management roles at Discovery Networks and CBS, Inc., also give him extensive consumer industry, marketing and technology experience.
Member of the Innovation & Technology Committee. | |||||
Director since | |||||
Member of the Compensation & Leadership Development and Innovation & Technology |
Mary Agnes Wilderotter | Director since 2009, Age 56 | |||||
Mrs. Wilderotter is Chairman of the Board, President and Chief Executive Officer of Frontier Communications Corporation (a communications company specializing in providing services to rural areas and small and medium-sized towns and cities), which she joined as President and Chief Executive Officer in 2004. Mrs. Wilderotter previously held positions as Senior Vice President of Worldwide Public Sector at Microsoft, President and Chief Executive Officer of Wink Communications, Inc. and Executive Vice President of National Operations for AT&T’s Wireless Service, Inc. She has been a Director of Xerox Corporation since 2006. Mrs. Wilderotter was a Director of The McClatchy Company from 2001 to 2007, and she was a Director of Yahoo! Inc. from 2007 to 2009. As Chief Executive Officer of Frontier Communications, and previously as Chief Executive Officer of Wink Communications, Mrs. Wilderotter has significant leadership experience. Her current role, along with her prior roles at Microsoft, Wink Communications and AT&T, also give her a vast amount of consumer industry, marketing and technology experience. Member of the Compensation & Leadership Development and Governance & Public Responsibility Committees. | ||||||
Patricia A. Woertz | Director since 2008, Age 58 | |||||
Ms. Woertz is Chairman, Chief Executive Officer and President of Archer Daniels Midland Company (agricultural processors of oilseeds, corn, wheat and
Chair of the Audit Committee and member of the Governance & Public Responsibility | ||||||
Ernesto Zedillo | Director since 2001, Age 59 | |||||
Dr. Zedillo Dr. Zedillo’s prior service as President of Mexico provides him with significant government and leadership experience. His current role as Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University provides him with a wealth of international experience. He also has significant financial experience, having previously served on the Audit Committee of Union Pacific and as the Secretary of Economic Programming and the Budget for Mexico, as well as having held various positions at the Banco de Mexico.
Chair of the Governance & Public Responsibility Committee and member of the Innovation & Technology Committee. | ||||||
Messrs. Chenault, Lafley, McDonald and Rodgers have been executive officers of their respective employers for more than the past five years. Messrs. Cook and Lee have been retired from executive officer positions with their respective former employers for more than the past five years.
Mr. Gupta was named Senior Partner Emeritus at McKinsey & Company in 2007, where he previously held the positions of Senior Partner Worldwide and Managing Director. Ms. Martin was a Professor at Northwestern University from 1993 until her retirement in 1999. Mr. McNerney was Chairman of the Board and Chief Executive Officer of 3M Company from 2001 until July 2005. Dr. Snyderman previously served as Chancellor for Health Affairs and Dean of the Duke University School of Medicine from 1985 until 2004. Ms. Woertz was Executive Vice President of Chevron Texaco from 2001 until 2006. Dr. Zedillo was President of Mexico from 1994 until 2000.
General Oversight
The Board of Directors has general oversight responsibility for the Company’s affairs pursuant to Ohio’s General Corporation Law, the Company’s Amended Articles of Incorporation, andthe Code of Regulations, and the By Laws of the Board of Directors’ By Laws.Directors. The Board has established committees to assist in this regard. In exercising its fiduciary duties, the Board of Directors represents and acts on behalf of the Company’s shareholders. Although the Board of Directors does not have responsibility for the day-to-day management of the Company, it stays informed about the Company’s business and provides guidance to Company management through periodic meetings, site visits and other interactions. The Board is deeply involved in the Company’s strategic planning process, leadership development and succession planning. Additional details concerning the role and structure of the Board of Directors are contained in the Board’s Corporate Governance Guidelines, which can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.
Leadership Structure
The Board regularly considers the appropriate leadership structure for the Company and has concluded that the Company and its shareholders are best served by not having a formal policy on whether the same individual should serve as both Chief Executive Officer (“CEO”) and Chairman of the Board. The Board believes that it is important to retain the flexibility to make this determination at any given point in time based on what it believes will provide the best leadership structure for the Company at that time. This approach allows the Board to utilize its considerable experience and knowledge to elect the most qualified Director as Chairman of the Board, while maintaining the ability to separate the Chairman and CEO roles when necessary. Accordingly, at different points in time in the Company’s history, the CEO and Chairman of the Board roles have been held by the same person. At other times, they have been held by different individuals. In each instance, the decision on whether to combine or separate the roles was made in the best interests of the Company’s shareholders, based on the circumstances at the time.
Further, in the event that the Board determines that the same individual should hold the positions of CEO and Chairman of the Board, the Board elects a Presiding Director from the independent Directors. The Presiding Director has the authority to call meetings of the independent Directors, can be contacted directly by shareholders, acts as the key Board liaison with the CEO, chairs the executive sessions of the Board, presides over Board meetings in the absence of the Chairman and communicates the Board’s feedback to the CEO, including the non-management Directors’ annual evaluation of his performance. This guarantees full involvement in decision-making by the non-employee Directors. The Presiding Director also advises the Chairman and the Chair of the Governance & Public Responsibility Committee regarding membership of the various Board Committees and selection of the Committee Chairs, advises the Chairman on retention of advisors and consultants to the Board and advises on issues discussed at executive sessions. This ensures that the Presiding Director plays an active role in Board governance. Finally, the Presiding Director also approves meeting agendas and other information sent to the Board and ensures that there is sufficient time for discussion of all agenda items.
The Board believes that its current leadership structure, with Mr. McDonald serving as both CEO and Chairman of the Board, provides unified leadership and direction for the Company and gives clear focus for management to execute the Company’s strategy and business plans at this time. This structure has served the Company and its shareholders well in the past, as evidenced by the Company’s success. The Board will continue to evaluate the Company’s leadership structure to ensure the Board’s structure is right and appropriate at all times.
Risk Oversight
It is the responsibility of the Company’s senior management to develop and implement the Company’s strategic plans and to identify, evaluate, manage and mitigate the risks inherent in those plans.
It is the responsibility of the Board to understand and oversee the Company’s strategic plans, the associated risks and the steps that senior management is taking to manage and mitigate those risks. The Board takes an active approach to its risk oversight role. This approach is bolstered by the Board’s leadership and committee structure, which ensures: (1) proper consideration and evaluation of potential enterprise risks by the full Board under the auspices of the Chairman of the Board and Presiding Director; and (2) further consideration and evaluation of discrete risks at the committee level.
To ensure proper oversight of the Company’s management and the potential risks that face the Company, the non-employee members of the Board elect annually a Presiding Director from the Board’s independent Directors. In addition, the Board is predominantly comprised of independent Directors, and all members of the key committees of the Board (Audit, Compensation & Leadership Development, and Governance & Public Responsibility) are independent. This strong system of checks and balances ensures that key decisions made by the Company’s most senior management, up to and including the CEO, are reviewed and overseen by the non-employee Directors of the Board.
Risk management oversight by the full Board includes a comprehensive annual review of the Company’s overall strategic plan and the plans for each of the Company’s global business units, including the risks associated with these strategic plans. The Board also conducts an annual review of the conclusions and recommendations generated by management’s enterprise risk management process. This process involves a cross-functional group of the Company’s senior management which, on a continual basis, identifies current and future potential risks facing the Company and ensures that actions are taken to manage and mitigate those potential risks. The Board also has overall responsibility for leadership succession for the Company’s most senior officers and reviews succession plans each year.
In addition, the Board has delegated certain risk management oversight responsibilities to certain Board committees, each of which reports regularly to the full Board. In performing these oversight responsibilities, each committee has full access to management, as well as the ability to engage independent advisors. The Audit Committee oversees the Company’s compliance with legal and regulatory requirements and its overall risk management process. It also regularly receives reports regarding the Company’s most significant internal controls, compliance risks, and potential legal and regulatory risks, along with management’s plans for managing and mitigating those risks, and processes for maintaining compliance within a strong internal controls environment. Representatives from the Company’s independent auditor attend Audit Committee meetings, regularly make presentations to the Audit Committee and comment on management presentations. In addition, the Company’s Chief Financial Officer (“CFO”), Chief Legal Officer, chief audit executive and representatives of the Company’s independent auditor individually meet in private session with the Audit Committee to raise any concerns they might have with the Company’s risk management practices.
The Board’s Compensation & Leadership Development (“C&LD”) Committee employs an independent compensation consultant, Frederic W. Cook & Co., Inc., who does not work for management and, among other tasks, reviews and reports on all of the Company’s executive compensation programs, including the potential risks and other impacts of incentives created by the programs. For more details on the arrangement with Frederic W. Cook & Co., Inc., please see the section entitled “Engagement of Independent Adviser” found on page [·] of this proxy statement.
This review included an analysis of the Company’s short-term and long-term compensation programs covering key program details, performance factors for each program, target award ranges, maximum funding levels, and plan administrative oversight and control requirements. Key program elements assessed relating to potential compensation risks were pay mix, performance metrics, performance goals and payout curves, payment timing and adjustments, severance packages, equity incentives and stock ownership requirements and trading policies. Simultaneously, members of management performed a
similar review of the Company’s other compensation programs. The results of the consultant’s analysis of the Company’s executive compensation programs, as well as management’s review of the Company’s other compensation programs, were shared with the C&LD Committee, which concluded that the Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company as a whole.
In reaching its conclusion, the C&LD Committee noted that the Company’s compensation programs include a mix of cash and equity and annual and long-term incentives. This mix of compensation, the design features of these programs and the Company’s respective oversight and control requirements mitigate the potential of any individual inclination toward taking unnecessary risks. The C&LD Committee also acknowledged various other features of the Company’s compensation programs, policies and practices designed to mitigate unwarranted risk. For example, the Company’s annual cash bonus program, the Short-term Achievement Reward (“STAR”), provides the C&LD Committee with discretion to reduce or eliminate any award that would otherwise be payable. In addition, the performance metrics under STAR include both quantitative measures (e.g. top-line growth, bottom-line profits, free cash flow, etc.) and qualitative measures (e.g., relative performance, internal collaboration, strategic strength, innovation, etc.). These non-metric features mitigate any tendency for an executive to focus too much on the specific financial metrics under STAR. Moreover, the performance metrics associated with STAR (50% Core earnings per share growth and 50% organic sales growth) are aligned with the Company’s business plans and strategic objectives, and the weighting of STAR target awards in the mix of annual target total direct pay is generally at or below the median for the Peer Group (as defined on page [·] of this proxy statement).
Further, the C&LD Committee recognized that the Company’s long-term incentives include a balanced portfolio of options, restricted stock units and performance-vested stock (under the Performance Stock Plan). These long-term incentives incorporate a variety of payout horizons that focus executives on long-term performance: 10-year terms with three-year cliff vesting for stock options, restricted stock units with five-year cliff vesting and a three-year performance period for performance-vested stock. The C&LD Committee also noted that the design of the Performance Stock Plan reduces the likelihood that an executive will focus too much on a single performance measure by including four different performance categories, each of which is equally weighted: organic sales growth, adjusted before tax operating profit, adjusted earnings per share growth and adjusted free cash flow productivity. Each of the financial measures are defined on page [·] of this proxy statement.
Finally, the C&LD Committee acknowledged that the Company has adopted several policies intended to mitigate inappropriate risk taking, including stock ownership guidelines for senior executives, a recoupment policy that applies in the event of any significant financial restatement and an insider trading policy that prohibits margin and hedging transactions by senior executives.
To facilitate deeper penetration ofinto certain key areas of oversight, the Board of Directors has established four Committees.committees. Membership on these Committees, as of June 30, 2009,July 1, 2011, is shown in the following chart.chart:
Audit | Compensation &
| Governance & Public Responsibility | Innovation & Technology | |||
| Mr. | Dr. Zedillo1 | Mr. Cook1 | |||
Ms. Braly |
| Ms. Braly | Dr. | |||
Mr. Chenault |
|
| Mr. Cook | |||
|
| Mr. McNerney | Mr. | |||
Dr. | Ms. Whitman |
| Ms. Whitman | |||
Mrs. Wilderotter | Ms. Woertz |
| ||||
|
| |||||
Dr. Zedillo |
Committee Chair |
All Directors served on the respective Committeescommittees listed above, including Committee Chairs,committee chairs, for the Company’s entire fiscal year, with the exception of following exceptions:
Dr. Zedillo, whoDesmond-Hellmann was appointed Chair of the Governance & Public Responsibility Committee at the February 10, 2009 Board of Director’s meeting, following the resignation of Ms. Margaret C. Whitman from the Board effective December 31, 2008. From July 1, 2008 through December 31, 2008, Ms. Whitman served as a member of the Audit and Innovation & Technology Committees effective upon her appointment to the Board of Directors, Chair of the Governance & Public Responsibility Committee andon December 13, 2010.
Ms. Whitman was appointed as a member of the CompensationC&LD and Innovation & Leadership Development Committee.Technology Committees effective as of the Board’s April 2011 meeting.
The Company’s Committee Charter Appendix applies to all Committees and can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.
TheAudit Committeemet nine8 times during the fiscal year ended June 30, 20092011, to carry out its responsibilities under its charter. At all of these meetings, representatives of Deloitte & Touche LLP (“Deloitte”), the Company’s independent registered public accounting firm, and financial management were present to review accounting, control, auditing and financial reporting matters. During certain of these meetings, the Committee also held fiveprivate sessions where onlywith the Company’s CFO, Chief Legal Officer, chief audit executive and representatives of Deloitte & Touche, LLP were present and five sessions with only the Company’s Vice President of Internal Audit present.Deloitte. All members of the Committee are independent under the New York Stock Exchange (“NYSE”) listing standards and the Board of Directors’ Guidelines for Determining the Independence of its Members (the “Independence Guidelines,”Guidelines”) which can be found in the corporate governance section of the Company’s website atwww.pg.com/investors). The Audit Committee has the responsibilities set forth in its charter with respect to accounting, financial reporting and disclosure processes and adequacy of systems of disclosure and internal control established by management; the quality and integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory requirements; the Company’s overall risk management process;profile; the independent registered public accounting firm’s qualifications and independence; the performance of the Company’s internal audit function and the independent registered public accounting firm; and preparing the annual Report of the Audit Committee to be included in the Company’s proxy statement; and assisting the Board of Directors and the Company in interpreting and applying the Company’sWorldwide Business Conduct Manual.statement. In addition to these responsibilities, during fiscal year 2008-09, in response to actions taken by external regulatory authorities, the Company launched an internal investigation into potential violationsCommittee, at the request of competition laws in Europe, and the Board, assigned the Committee responsibility for the oversight of that investigation. In that capacity, the Committee met four additional timescontinued to discuss and reviewoversee the Company’s internal investigation, as well as the external investigations, duringinto competition law violations in Europe, for which it held four sessions where no members of management were present.the Board assigned oversight responsibility to the Committee. The Audit Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors and is attached to this proxy statement as Exhibit A..
TheCompensation & Leadership Development Committeemet six5 times during the fiscal year ended June 30, 2009,2011, during which it held five5 executive sessions with no member of management present. All members of this Committee are independent under the NYSE listing standards and the Independence Guidelines. The Compensation & Leadership DevelopmentC&LD Committee has a charter, under which it has full authority and responsibility for the Company’s overall compensation policies, including base pay, short and long-term pay, retirement benefits, perquisites, clawback policy, stock ownership requirements, stock holding requirements and severance arrangements, if any, and their specific application to principal officers elected by the Board of Directors (including review and evaluation of their compensation) and the compensation of the non-employeeto members of the Board of Directors.Board. This Committee also assists the Board in the leadership development and evaluation of principal officers. As a practical matter, the Chief Executive OfficerCEO makes recommendations to the C&LD Committee regarding the compensation elements of the principal officers (other than his own compensation) based on Company performance, individual performance and input from Company management and the C&LD Committee’s independent compensation consultant. This Committee makes a recommendation to the Board regarding the shareholder votes related to executive compensation. All final decisions regarding compensation for principal officers are made by this Committee. For more details regarding principal officer compensation or this Committee’s process for making decisions regarding the compensation of principal officers, please see the Compensation Discussion and Analysis section of this proxy statement found on pages [Ÿ·] to [Ÿ·]. This Committee also approves all stock-based equity grants made under The Procter & Gamble 20012009 Stock and
Incentive Compensation Plan and The Gillette Company 2004 Long-Term Incentive Plan to non-principal officers. This Committee has delegated to the Chief Executive OfficerCEO the authority to make equity grants to non-principal officers and determinesubject to the specific terms and conditions of such grants withindetermined by the guidelines set forth by theC&LD Committee. This Committee retains an independent compensation consultant, hired directly by the C&LD Committee, to advise it regarding executive compensation matters. For more details on this arrangement, please see the section entitled “How is competitiveness established for executive compensation?” found on page [Ÿ] of this proxy statement. The Compensation & Leadership DevelopmentC&LD Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.
TheGovernance & Public Responsibility Committeemet five6 times during the fiscal year ended June 30, 2009.2011. All members of the Governance & Public Responsibility Committee are independent under the NYSE listing standards and the Independence Guidelines. The Governance & Public Responsibility Committee has thegovernance responsibilities set forth in its charter with respect to identifying individuals qualified to become members of the Board of Directors;Board; recommending when new members should be added to the Board; recommendingBoard and individuals to fill vacant Board positions; recommending to the Board the Director nominees for the next annual meeting of shareholders; recommending to the Boardshareholders and whether to accept the resignation of any incumbent Director nominee who received a greater number of “against” votes than “for” votes in a non-contested election; recommending Board committees and committee assignments; periodically developingreviewing and recommending updates to the Board’s Corporate Governance Guidelines; educating the Board and the Company in applicable governance laws and regulations; assisting the Board and the Company in interpreting and applying the Company’s Corporate Governance Guidelines and other issues related to Director governanceBoard governance; and ethics; evaluation ofevaluating the Board of Directors and its members;members. The Committee also covers public responsibility topics such as overseeing the Company’s social investments and commitment to making a meaningful impact around the world, by reviewing strategies and plans for improving lives in ways that enable people to thrive and making recommendationsthat increase their quality of living; overseeing the Company’s commitment to and efforts regarding environmental sustainability; overseeing the Board onCompany’s community and government relations; overseeing the Company’s product quality and quality assurance systems; overseeing protection of the Company’s corporate sustainability efforts (including environmental quality, economic developmentreputation and corporate social responsibility); and overseeingother matters of importance to the Company and its stakeholders including(including employees, consumers, customers, suppliers, shareholders, governments, local communities and the general public. Public responsibility topics considered by this Committee include organization diversity, sustainable development, communitypublic); and government relations, product quality and quality assurance systems and corporate reputation.overseeing the Company’s organizational diversity. The Governance & Public Responsibility Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.
TheInnovation & Technology Committeemet twice2 times during the fiscal year ended June 30, 2009.2011. The Innovation & Technology Committee has the responsibilities set forth in its charter with respect to overseeing and providing counsel on matters of innovation and technology. Topics considered by this Committee include the Company’s approach to technical and commercial innovation; the innovation and technology acquisition process; and tracking systems important to successful innovation. The Innovation & Technology Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.
Board and Committee Meeting Attendance
During the fiscal year ended June 30, 2009,2011, the Board of Directors held seven8 meetings and the Committees of the Board of Directors held 2621 meetings for a total of 3329 meetings. Average attendance at these meetings by members of the Board during the past year exceeded 95%98%. All Directors attended greater than 88%86% of the meetings of the Board and the Committees on which they serve, except for Mr. Cook, who was only able to attend 73% of the meetings due to prior commitments.serve.
Corporate Governance Guidelines
The Board of Directors has adopted Corporate Governance Guidelines to set forth its commitments and guiding principles concerning overall governance practices. These guidelines can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.
Director Independence
The Board of Directors has determined that the following Directors are independent under the NYSE listing standards and the Independence Guidelines because they have either no relationship with the Company (other than being a Director and shareholder of the Company) or only immaterial relationships with the Company: Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Rajat K. Gupta, Charles R. Lee, Lynn M. Martin,Susan Desmond-Hellmann, W. James McNerney, Jr., Ralph Snyderman,
Margaret C. Whitman, Mary Agnes Wilderotter, Patricia A. Woertz and Ernesto Zedillo. In addition, Ms. Whitman was independent during the period in which she served as Director. As noted previously, all members of the Board’s Audit, Compensation & Leadership Development,C&LD and Governance & Public Responsibility Committees are independent.
In making these independence determinations, the Board applied the NYSE listing standards and the categorical independence standards contained in the Independence Guidelines. Under the Independence Guidelines, certain relationships were considered immaterial and, therefore, were not considered by the Board in determining independence, but were reported to the Chair of the Governance & Public Responsibility Committee. Applying the NYSE listing standards and the Independence Guidelines, the Board determined that there are no transactions, relationships or arrangements that would impair the independence or judgment of any of the directors deemed independent by the Board.
Effective July 1, 2009, Mr. Lafley moved full-time into the role ofMcDonald is Chairman of the Board, and Mr. McDonald was elected President and Chief Executive OfficerCEO of the Company. As such, theyhe cannot be deemed independent under the NYSE listing standards and the Independence Guidelines. Mr. Rodgers is the President and CEO of TV One, LLC, a cable television network. The Board has declared Mr. Rodgers not independent under the NYSE listing standards and the Independence Guidelines which contain a three-year look-back provision, because, during 2006,two of the past three years, the Company paid TV One, LLC for advertising time in an amount that exceeded 2% of TV One, LLC’s gross revenue for that year.
Code of Ethics
For a number of years, theThe Company has had a code of ethics for its employees. The most recent version of this code of ethics, which is consistent with SEC regulations and NYSE listing standards, is contained in theWorldwide Business Conduct Manual, which applies. TheWorldwide Business Conduct Manual was updated and redeployed to all of the Company’s employees, officers and Directors in early 2011, and is availablecan be found on the Company’s website atwww.pg.com., along with any future amendments thereto. TheWorldwide Business Conduct Manual is firmly rooted in the Company’s long-standing Purpose, Values and Principles, which can also be found on the Company’s website atwww.pg.com. During the fiscal year ended June 30, 2009,2011, the Company continued its deployment of theWorldwide Business Conduct Manual throughout the Company in 29 different languages, including online training.
Review and Approval of Transactions with Related Persons
The Company’sWorldwide Business Conduct Manual requires that all employees and Directors disclose all potential conflicts of interest and promptly take actions to eliminate any such conflict when the Company requests. In addition, the Company has adopted a written Related Person Transaction Policy that prohibits any of the Company’s executive officers, Directors or any of their immediate family members from entering into a transaction with the Company, except in accordance with the policy.
Under our Related Person Transaction Policy, the Chief Legal Officer is charged with primary responsibility for determining whether, based on the facts and circumstances, a related person has a direct or indirect material interest in a proposed transaction. To assist the Chief Legal Officer in making this determination, the policy sets forth certain categories of transactions that are deemed not to involve a direct or indirect material interest on behalf of the related person. If, after applying these categorical standards and weighing all of the facts and circumstances, the Chief Legal Officer determines that the related person would have a direct or indirect material interest in the transaction, the Chief Legal Officer must present the proposed transaction to the Audit Committee for review or, if impracticable under the circumstances, to the Chair of the Audit Committee. The Audit Committee must then either approve or reject the transaction in accordance with the terms of the policy. In the course of making this determination, the Audit Committee shall consider all relevant information available to it and, as appropriate, must take into consideration the following:
Whether the proposed transaction was undertaken in the ordinary course of business of the Company;
Whether the proposed transaction was initiated by the Company or the related person;
Whether the proposed transaction contains terms no less favorable to the Company than terms that could have been reached with an unrelated third party;
The purpose of, and the potential benefits to the Company of, the proposed transaction;
The approximate dollar value of the proposed transaction, particularly as it involves the related person;
The related person’s interest in the proposed transaction; and
Any other information regarding the related person’s interest in the proposed transaction that would be material to investors under the circumstances.
The Audit Committee may only approve the proposed transaction if it determines that the transaction is not inconsistent with the best interests of the Company as a whole. Further, in approving any such transaction, the Audit Committee has the authority to impose any terms or conditions it deems appropriate on the Company or the related person. Absent this approval, no such transaction may be entered into by the Company with any related person.
Mr. Jon R. Moeller, the Company’s Chief Financial Officer,CFO, is married to Lisa Sauer, a long-tenured employee of the Company who currently holds the position of Manager—Vice President–Purchases, Global Product Supply, Purchases, OrganicPackaging and Hygiene Materials. Her total compensation in the last year was approximately [Ÿ·], consisting of salary, bonus, equity grants and retirement benefits. Her compensation is consistent with the Company’s overall compensation principles based on her years of experience, performance and position within the Company. Prior to Mr. Moeller becoming Chief Financial Officer,CFO, the Audit Committee approved the continued employment of Ms. Sauer with the Company under the Company’s Related Person Transaction Policy, concluding that her continued employment was not inconsistent with the best interests of the Company as a whole.
Deborah P. Majoras, the Company’s Chief Legal Officer and Secretary, is married to John M. Majoras, one of over 800 partners in the law firm of Jones Day. The Company has hired Jones Day in the ordinary course of business, to perform legal services. The Company’s relationship with Jones Day dates back more than 25 years and significantly precedes Ms. Majoras joining the Company as Vice President and General Counsel in 2008 from the Federal Trade Commission, where she served as Chairman. Mr. Majoras does not receive any direct compensation from the fees paid to Jones Day by the Company, his ownership in the Jones Day law firm is significantly less than 1%, and the fees paid by the Company to Jones Day in our last fiscal year were significantly less than 1% of their annual revenues. Mr. Majoras did not personally render any legal services to the Company, nor supervise any attorney in rendering legal services to the Company during the previous fiscal year. Under the Company’s Related Person Transaction Policy, the Audit Committee reviewed and approved the continued use of Jones Day as a provider of legal services to the Company, but required Mr. McDonald, the Company’s CEO, to approve any recommendations by Ms. Majoras to hire Jones Day for a specific legal matter. In doing so, the Committee concluded that the Majorases did not have a direct or indirect material interest in the Company’s hiring of Jones Day and that the relationship is not inconsistent with the best interests of the Company as a whole.
Other than as noted above, there were no transactions, nor are there any currently proposed transactions, in which the Company or any of its subsidiaries was or is to be a participant, the amount involved exceeded $120,000, and any Director, Director nominee, executive officer or any of their immediate family members had a direct or indirect material interest reportable under applicable SEC rules or that required approval of the Audit Committee under the Company’s Related Person Transaction Policy.Policy nor are there any currently proposed.
Presiding Director and Executive Sessions
After consultation withUpon recommendation of the Governance & Public Responsibility Committee, the non-employee members of the Board of Directors reappointed W. James McNerney, Jr. to serve as the Presiding Director for fiscal year 2009 -10.2011-12. Mr. McNerney began his service as Presiding Director on August 14, 2007. The Presiding Director acts as the key Board liaison with the Chief Executive Officer, assists in settingDirector:
presides at all meetings of the Board agenda, chairsin the absence of, or upon the request of, the Chairman of the Board, including executive sessions of the independent directors;
approves meeting agendas for the Board and communicatesinformation sent to the Board;
approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;
advises the Chairman of the Board and/or the Secretary regarding the agendas for the Board meetings;
calls meetings of Directors’ feedbackthe non-management and/or independent directors, with appropriate notice;
advises the Governance & Public Responsibility Committee and the Chairman of the Board on the membership of the various Board committees and the selection of committee chairs;
advises the Chairman of the Board on the retention of advisors and consultants who report directly to the Chief Executive Officer.Board;
advises the Chairman of the Board, as appropriate, on issues discussed at executive sessions of non-management and/or independent directors;
with the Chair of the C&LD Committee, reviews with the CEO the non-management directors’ annual evaluation of his performance;
serves as principal liaison between the non-management and/or independent directors, as a group, and the Chairman of the Board, as necessary;
serves, when necessary and appropriate, after consultation with the CEO, as the liaison between the Board and the Company’s shareholders; and
selects an interim Presiding Director to preside over meetings at which he or she cannot be present.
The non-employee members of the Board of Directors met six6 times during fiscal year 2008-092010-11 in executive session (without the presence of employee Directors or other employees of the Company) to discuss various matters related to the oversight of the Company, the management of Board affairs, succession planning for the Company’s top management (including the Chief Executive OfficerCEO position), and the Chief Executive Officer’sCEO’s performance. It also met in semi-executive session (with the Chief Executive OfficerCEO present for portions of the discussion) on five3 occasions.
Communication with Directors and Executive Officers
Shareholders and others who wish to communicate with the Board of Directors or any particular Director, including the Presiding Director, or with any executive officer of the Company, may do so by writing to the following address:
[Name of Director(s)/Executive Officer or “Board of Directors”]
The Procter & Gamble Company
c/o Secretary
One Procter & Gamble Plaza
Cincinnati, OH 45202-3315
All such correspondence is reviewed by the Secretary’s office, which logs the material for tracking purposes. The Board of Directors has asked the Secretary’s office to forward to the appropriate Director(s) all correspondence, except for personal grievances, items unrelated to the functions of the Board, of Directors, business solicitations, advertisements and materials that are profane.
Availability of Corporate Governance Documents
In addition to their availability on the Company’s website atwww.pg.com, copies of the Company’s Amended Articles of Incorporation, the Company’s Code of Regulations, all Committee Charters, the Committee Charter Appendix, the Corporate Governance Guidelines the(including Independence Guidelines, Confidentiality Policy and Financial Literacy and Expertise Guidelines), theWorldwide Business Conduct Manual, the Company’s Purpose, Values and Principles and the Related Person Transaction Policy are available in print upon request by writing to the Company Secretary at One Procter & Gamble Plaza, Cincinnati, OH 45202-3315.
Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees
The Governance & Public Responsibility Committee will consider shareholder recommendations for candidates for the Board, which should be submitted to:
Chair of the Governance & Public Responsibility Committee
The Procter & Gamble Company
c/o Secretary
One Procter & Gamble Plaza
Cincinnati, OH 45202-3315
Shareholder recommendations should includePursuant to the nameCompany’s Code of Regulations, a shareholder wishing to nominate a candidate for election to the Board at an annual meeting of shareholders is required to give written notice to the Secretary of the Company of his or her intention to make such nomination. The notice of nomination must be received at the Company’s principal executive offices not less than 140 days nor more than 240 days prior to the one-year anniversary of the preceding year’s annual shareholder meeting. Certain other notice periods apply if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date. Based on the one-year anniversary of the 2011 annual meeting, a shareholder wishing to nominate a candidate as well as relevant biographical information. for election to the Board at the 2012 annual meeting must provide such notice no earlier than February 14, 2012, and no later than May 24, 2012.
As set forth in the Company’s Code of Regulations, the notice of nomination is required to contain information about both the nominee and the shareholder making the nomination, including information sufficient to allow the Governance & Public Responsibility Committee to determine if the candidate meets certain criteria. A nomination that does not comply with the requirements set forth in the Company’s Code of Regulations will not be considered for presentation at the annual meeting.
The minimum qualifications and preferred specific qualities and skills required for Directors are set forth in Article II, Sections B through E of the Board’s Corporate Governance Guidelines.
The Committee considers all candidates using these criteria, regardless of the source of the recommendation. The Committee’s process for evaluating candidates includes the considerations set forth in Article II, Section B of the Committee’s Charter. After initial screening for minimum qualifications, the Committee determines appropriate next steps, including requests for additional information, reference checks and interviews with potential candidates. In addition to shareholder recommendations, the Committee also relies on recommendations from current Directors, Company personnel and others. From time to time, the Committee may engage the services of outside search firms to help identify candidates. During the fiscal year ended June 30, 2009,2011, no such engagement existed (and none currently exists), and no funds were
paid to outside parties in connection with the identification of nominees. All nominees for election as Directors who currently serve on the Board are known to the Committee and were recommended by the Committee to the Board as Director nominees. Dr. Desmond-Hellmann was recommended to the Governance & Public Responsibility Committee by various non-employee members of the Board and other executive officers. Ms. Whitman was recommended to the Governance & Public Responsibility Committee by various non-employee members of the Board who know her professionally and through her prior service on the Company’s Board.
Annual Meeting Attendance
The Board’s expectation is that all of its members attend the annual meeting of shareholders. All Directors except Scott D. Cook who was unavailable due to personal reasons, attended the 20082010 annual meeting.
The following table and footnotes provide information regarding the compensation paid to the Company’s non-employee Directors in fiscal year 2008-09.2010-11. Directors who are employees of the Company receive no compensation for their services as Directors.
Fees | Fees | ||||||||||||||||||||||||||||||||||||||||||
Name | Annual Retainer ($) | Committee ($) | Committee Chair Fees1 ($) | Total Fees ($) | Stock Awards2 ($) | All Other Compen- sation3 ($) | Total ($) | Annual ($) | Committee ($) | Committee ($) | Total Fees in Cash ($) | Stock ($) | All Other Compen- ($) | Total ($) | |||||||||||||||||||||||||||||
Name
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100,000 | 6,000 | 0 | 106,000 | 6 | 160,000 | 15,262 | 281,262 | ||||||||||||||||||||||||||||||||||||
Kenneth I. Chenault | 100,000 | 34,000 | 0 | 134,000 | 4 | 125,000 | 215 | 259,215 | 100,000 | 6,000 | 0 | 106,000 | 7 | 160,000 | 109 | 266,109 | |||||||||||||||||||||||||||
Scott D. Cook | 100,000 | 12,000 | 0 | 112,000 | 5 | 125,000 | 215 | 237,215 | 100,000 | 4,000 | 13,750 | 117,750 | 8 | 160,000 | 117 | 277,867 | |||||||||||||||||||||||||||
Susan Desmond-Hellmann | 58,333 | 0 | 0 | 58,333 | 0 | 11,898 | 70,231 | ||||||||||||||||||||||||||||||||||||
Rajat K. Gupta | 100,000 | 30,000 | 0 | 130,000 | 125,000 | 215 | 255,215 | 66,667 | 6,000 | 0 | 72,667 | 0 | 0 | 72,667 | |||||||||||||||||||||||||||||
Charles R. Lee | 100,000 | 38,000 | 15,000 | 153,000 | 125,000 | 215 | 278,215 | ||||||||||||||||||||||||||||||||||||
Lynn M. Martin | 100,000 | 14,000 | 0 | 114,000 | 125,000 | 120 | 239,120 | ||||||||||||||||||||||||||||||||||||
W. James McNerney, Jr. | 100,000 | 22,000 | 10,000 | 132,000 | 6 | 125,000 | 120 | 257,120 | 100,000 | 4,000 | 32,500 | 136,500 | 9 | 160,000 | 123 | 296,623 | |||||||||||||||||||||||||||
Johnathan A. Rodgers | 100,000 | 4,000 | 0 | 104,000 | 7 | 125,000 | 120 | 229,120 | 100,000 | 2,000 | 0 | 102,000 | 10 | 160,000 | 12,566 | 274,566 | |||||||||||||||||||||||||||
Ralph Snyderman | 100,000 | 30,000 | 10,000 | 140,000 | 8 | 125,000 | 215 | 265,215 | |||||||||||||||||||||||||||||||||||
Margaret C. Whitman | 50,000 | 8,000 | 5,000 | 63,000 | 0 | 120 | 63,120 | 41,667 | 0 | 0 | 41,667 | 0 | 107 | 41,774 | |||||||||||||||||||||||||||||
Mary Agnes Wilderotter | 100,000 | 4,000 | 0 | 104,000 | 160,000 | 16,679 | 280,679 | ||||||||||||||||||||||||||||||||||||
Patricia A. Woertz | 100,000 | 36,000 | 0 | 136,000 | 125,000 | 120 | 261,120 | 100,000 | 6,000 | 18,750 | 124,750 | 160,000 | 107 | 284,857 | |||||||||||||||||||||||||||||
Ernesto Zedillo | 100,000 | 12,000 | 5,000 | 117,000 | 9 | 125,000 | 120 | 242,120 | 100,000 | 4,000 | 13,750 | 117,750 | 160,000 | 11,825 | 289,575 |
1 | The |
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3 | Committee Chair Fees for the first quarter of FY 2010-11 were paid consistent with the Director compensation package in effect for the 2009-10 Director’s term which ended in October 2010. Committee Chair and Presiding Director Fees for the 2010-11 Director’s term were paid consistent with the Director compensation package approved on June 8, 2010, by the C&LD Committee. |
4 | Annually, upon election at the Company’s annual meeting of shareholders, each Director is awarded a grant of restricted stock units (RSUs) with a grant date fair value of |
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b. | Mr. Chenault has [·] unvested stock awards outstanding. |
c. | Mr. Cook has |
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Unvested stock awards include RSUs that have not yet delivered in shares and restricted stock for which the restrictions have not lapsed. RSUs earn dividend equivalents which are accrued in the form of additional RSUs each quarter and credited to each Director’s holdings. These RSUs have the same vesting restrictions as the underlying RSUs and are ultimately deliverable in shares. Restricted stock earns cash dividends that are paid quarterly.
The All Other Compensation total includes certain costs associated with Directors and their guests (spouse, family member or similar guest) attending Board meetings and/or Board activities. For |
Ms. Braly took her fees for the FY 2010-11 in retirement restricted stock, which had a grant date fair value of $106,000. |
7 | Mr. Chenault took his fees for the first half of the fiscal year in |
Mr. Cook took his fees for the first half of the fiscal year in unrestricted stock which had a grant date fair value of |
Mr. McNerney took |
Mr. Rodgers took |
|
|
The objective of the Compensation & Leadership DevelopmentC&LD Committee of the Board of Directors is to provide non-employee members of the Board of Directors a compensation package consistent with the median of the Peer Group (as this group is further described on page [Ÿ]companies. Directors can elect to receive any part of this proxy statement). Intheir fees or retainer (other than the grant of RSUs) as cash, retirement restricted stock or unrestricted stock. The Company did not grant any stock options to Directors in fiscal year 2008-09,2010-11. Effective October 12, 2010, non-employee members of the Board of Directors received the following compensation:
A grant of restricted stock units (RSUs) on October 14, 2008,RSUs following election to the Board at the Company’s 2008October 12, 2010 annual meeting of shareholders, with a grant date fair value of $125,000.$160,000. These units arewill be forfeitable if the Director resigns during the year, will not deliver in shares until at least one year after the Director leaves the Board, and cannot be sold or traded until delivered in shares, thus encouraging alignment with the Company’s long-term interests and the interests of shareholders. These RSUs will earn dividend equivalents at the same rate as dividends paid to shareholders;
An annual retainer fee of $100,000 paid in quarterly increments;
A committee meeting fee of $2,000 for every Committee meeting attended; and
An additional annual retainer paid to the Presiding Director and Chair of each committee as follows: ChairPresiding Director and Chairs of the Audit Committee, $15,000;and C&LD Committees—$20,000; Chairs of the Compensation & Leadership Development, Governance & Public Responsibility and Innovation & Technology Committees, $10,000.Committees—$15,000.
In addition, for the period of July 1, 2010 until October 12, 2010, Directors can electreceived a committee meeting fee of $2,000 for every Committee meeting attended prior to receive any partthe effective date of their fees or retainer (other than the grant of RSUs) as cash, retirement restricted stock, or unrestricted stock. The Company did not grant any stock options to Directors in fiscal year 2008-09.current compensation package.
Non-employee members of the Board of Directors must own Company stock and/or RSUs worth six times their annual cash retainer. Except for Mr. Gupta, who wasA number of the non-employee Directors were recently appointed in June 2007, Ms. Woertz, who was appointed in January 2008, and Mr. Chenault, who was appointed in April 2008,or elected to the Board within the last few years. However, all non-employee Directors have already achieved this ownership requirement. Ms. Woertz and Messrs. Gupta and Chenaulteither meet or are on track to achieve this goalmeet the ownership requirements within the five-year period established by the Compensation & Leadership Development Committee for achieving this level of ownership.C&LD Committee.
Report of the Compensation & Leadership Development Committee
The Compensation & Leadership Development Committee of the Board of Directors has reviewed and discussed the following section of this proxy statement entitled “Compensation Discussion and Analysis” with management. Based on this review and discussion, the Committee has recommended to the Board that the section entitled “Compensation Discussion and Analysis” as it appears below, be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009.2011.
W. James McNerney, Jr. (Chair)
Kenneth I. Chenault
Scott D. Cook
Charles R. LeeMargaret C. Whitman
August [Ÿ], 2009Mary Agnes Wilderotter
Compensation Discussion and Analysis
Executive Summary
A summary of our key financial targets for fiscal year 2010-11, and our results relative to those targets, are set forth below:
FY 2010-11 Targets | Actual | |||
Core EPS1 | 7% to 9% | |||
Organic sales growth2 | 4% to 6% | |||
Free cash flow productivity3 | 90% |
1 | Core EPS measures the Company’s diluted net earnings per share from continuing operations excluding certain items that are not judged to be part of the Company’s sustainable results or trends. These exclusions include a significant benefit in 2011 for the release of a reserve for an uncertain income tax position related to the deductibility of technology donations, charges in both 2011 and 2010 related to pending European legal matters, and a 2010 charge related to a tax provision for retiree healthcare subsidy payments in the U.S. healthcare reform legislation. |
2 | Organic Sales growth measures sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. |
3 | Free cash flow productivity is defined as the ratio of operating cash flow less capital spending to net earnings. |
Our Compensation Philosophy
Our fundamental and overriding objective is to create value for our shareholders at leadership levels on a consistent basis. To accomplish this goal, we design executive compensation programs that emphasize pay for performance, support our business strategies, and discourage our executives from taking excessive risks. We ensure that target compensation opportunities for our executives are competitive with the target opportunities for comparable positions at our Peer Group companies. This is crucial for retention of our talented employees who are committed to the Company’s long-term success and spending their careers with the Company. Furthermore, we align the interests of executives and shareholders by tying a significant portion of executive compensation to performance goals and the value of our Company’s stock. These design features, along with significant stock ownership requirements, ensure that executives focus on building long-term shareholder value and benefit from this value along with our shareholders.
Our Compensation Programs
Our executive compensation program consists of four key components: salary, Short-Term Achievement Reward (“STAR”) and two long-term incentive equity programs—the Performance Stock
Program (“PSP”) and the Key Manager Stock Program. These four components constitute approximately [Ÿ·]% of each Named Executive Officer’s (“NEO”) total compensation. The remaining [·]% consists of retirement and other benefits.
We design our programs so that NEO compensation varies by type (fixed versus performance-based), length of performance period (short versus long-term) and form (cash versus equity). We believe that such variation is necessary to (1) strike the appropriate balance between short and long-term business goals; (2) encourage the right behaviors and discourage excessive risk-taking; and (3) align the interests of the Company’s executives with our shareholders. Salary is the only key component of pay that is fixed—the value of the remaining components vary based on the performance of the individual, the performance of the individual’s business unit and the performance of the Company as a whole. This mix of components is designed to incent both individual accountability and teamwork to build long-term shareholder value. The charts below show the average mix of NEO compensation by type, length and form.
Consistent with our design principles, actual compensation earned under each of our performance-based programs varies based on results.
CEO Compensation
The target compensation opportunity for Mr. McDonald is structured to position him in line with chief executive officers in our Peer Group companies. Approximately [·]% of Mr. McDonald’s compensation is performance-based, with [·] being tied to the three-year quantitative performance goals in the PSP, [·] in the Key Manager Stock Program and the remaining [·] in STAR. In addition to a significant portion of his total compensation being performance-based, Mr. McDonald holds [·] times his salary in Company stock, [·].
Our Approach to Stock Ownership
Employee stock ownership has been a cornerstone of our compensation and retirement programs since William Cooper Procter established the Company’s employee stock ownership plan in 1887. This stock-based retirement program, along with the Company’s other compensation programs, result in equity accounting for approximately [·]% of our NEOs’ compensation.
We reinforce this approach to ownership through share ownership requirements and share retention requirements from stock option exercises. These requirements, when combined with the significant percentage of executive compensation paid in Company equity, ensure that our senior executives always have a significant stake in the long-term success of the Company.
Other Key Program Features
Engagement of Independent Adviser.Our C&LD Committee engages an independent compensation consultant, who performs no other work for the Company, to advise on executive compensation matters.
Avoidance of Poor Pay Practices.Our compensation programs are consistent with best practices and sound corporate governance. Wedo not:
n | Provide excessive perquisites for executives (less than [·]% of NEO compensation for FY 2010-11); |
n | Execute employment agreements with executives containing special severance payments such as golden parachutes; |
n | Utilize severance programs that are specific to executive officers; |
n | Gross-up payments to cover personal income taxes that pertain to executive or severance benefits; |
n | Provide special executive retirement programs; |
n | Re-price or backdate stock options; or |
n | Grant time-based equity awards that vest immediately solely on account of a change-in-control (requires a qualifying termination following a change-in-control). |
Mitigation of Excessive Risk-Taking. We design our compensation programs to discourage excessive risk-taking by executive officers. These design features include the following:
n | Clawback policy that permits the Company to recoup certain compensation payments in the event of a significant restatement of financial results for any reason; |
n | Clawback provision in our stock plan to allow recovery of proceeds from stock transactions if a participant violates certain plan provisions; |
n | Multiple performance metrics under STAR and PSP discourage excessive risk-taking by removing any incentive to focus on a single performance goal to the detriment of others; and |
n | Prohibition on engaging in the following transactions that include shares of Company common stock: pledging, collars, short sales, hedging investments and other derivative transactions. |
2011 Compensation Actions and Performance Highlights
Salary. [·].
STAR Annual Bonus Program[·]
PSP Grant.[·].
Key Manager Stock Grant.[·]
We design our compensation programs to motivate our executives to win during these tough economic times and to achieve our fundamental and overriding objective—to create value for our shareholders at leadership levels on a consistent basis.
Our Compensation Philosophy
What are the Company’s overall compensation principles?
The Compensation & Leadership DevelopmentC&LD Committee designs and oversees the Company’s compensation policies and approves compensation for all seniorprincipal officers, including the Named Executive Officers.NEOs. The C&LD Committee has established the following principles for compensating all Company employees:
Pay for performance. We pay more when goals are exceeded and less when goals are not met.
Pay competitively. We set target compensation opportunity to be competitive with other multinational corporations of similar size, value and complexity.
Support the business strategystrategies—. We align compensation programs with business strategies focused on long-term growth and creating value for shareholders. We motivateThese programs provide an incentive for executives to overcome challenges, to deliver commitmentsmeet and to exceed Company goals;
Pay for performance—We pay higher compensation when goals are exceeded and lower compensation when goals are not met; and
Pay competitively—We set target compensation to be competitive with other multi-national corporations of similar size, value and complexity.goals.
These principles serveencourage the Company well andright behaviors, enable us to deliver strong shareholder value over time. Application of these principles also ensurestime, and ensure the development and retention of talented employees who are committed to the Company’s long-term success.success and career development.
What are the Company’s executive compensation objectives?
The Committee established the following objectives to continue the Company’s history of superior management and leadership:
DriveTo drive superior business results and financial performance—Inspire by providing incentives to executives to achieve or exceed Company, business unit and individual goals;goals, while discouraging excessive risk-taking by removing any incentive to focus on a single performance goal to the detriment of others.
FocusTo instill a focus on long-term success—Ensure executives’ accountabilityby holding executives accountable for long-term measures of success so the Company continuesdesigned to provide superior returns for shareholders over time;time.
Ownership—Align executivesTo create ownership alignment with shareholders’ long-term interestsshareholders by building significant ownership ofincluding Company stock intoas a cornerstone of our executive pay programs; andprograms.
RetentionTo strengthen retention—Retain by paying competitively and rewarding talented executives with demonstrated records of superior performance whose continued employment is key to overall Company success.who meet or exceed goals.
Who are the Company’s Named Executive Officers?
The Company’s Named Executive Officers for fiscal year 2008-09 are: A.G. Lafley, Chairman of the Board and Chief Executive Officer; Jon R. Moeller, Chief Financial Officer; Robert A. McDonald, Chief Operating Officer; Werner Geissler, Vice Chairman—Global Operations; E. Dimitri Panayotopoulos, Vice Chairman—Global Household Care; Susan E. Arnold, former President, Global Business Units; and Clayton C. Daley, Jr., Vice Chairman and former Chief Financial Officer.
Effective July 1, 2009. Mr. Lafley stepped down as Chief Executive Officer and Mr. McDonald became President and Chief Executive Officer. Mr. Lafley will continue as Chairman of the Board.
Ms. Arnold and Mr. Daley were no longer executive officers of the Company at fiscal year-end and have announced their intention to retire. Since announcing their retirements, both have continued to report to Mr. Lafley, working on assignments and projects as required by Mr. Lafley.
Throughout this Compensation Discussion and Analysis and the compensation tables that follow, we will refer to the title of each Named Executive Officer in effect on the last day of the fiscal year, June 30, 2009.
What are the elements of the Company’s executive compensation programs?
The Company achieves its executive compensation objectives through the following programs in which some or all of our Named Executive Officers participate. A more detailed discussion of each program is provided later in this Compensation Discussion and Analysis.
How do we assure that compensation keeps executives focused on long-term success?
For our employees, focus on the long-term success of the Company begins at hire and is built over careers which often span decades. Because P&G has a longstanding practice of building the organization from within, most employees spend their entire career at the Company. P&G’s people are a cornerstone of P&G’s success.
Employee stock ownership has long been an important aspect of the Company’s culture of commitment to long-term success. William Cooper Procter established the Company’s employee stock ownership plan in 1887, and today it is the oldest continuous profit sharing plan of its kind in the United States. For more than 120 years, this innovative plan has connected employees to the Company’s long-term success. The Company makes annual contributions of P&G stock to the retirement accounts of all U.S.-based employees from the time that they complete their first two years of service until the end of their careers with P&G. Employees think and act like owners from the day they are hired until the day they retire. As a result, those who rise to the senior executive levels in the Company have been focused on the long-term success of the Company from the outset—and continue this focus as their equity-based compensation increases over time. Our Named Executive Officers have an average of almost 30 years of service at the Company—long-term careers during which these individuals—first as employees, then as managers, then as senior executives—build shareholder value and benefit from the value they help to create. This is enhanced by talented employees who join the Company through acquisitions.
In addition to PST, the Company makes an annual grant of stock options and RSUs to the Company’s key managers. These awards reinforce the executives’ focus on the long-term success of the Company by tying their personal success to that of other shareholders. Our key managers hold stock options for an average of eight years (five years beyond the vesting date) before they exercise. These behaviors reflect a culture that is focused on, and confident in, the long-term success of the Company.
Many companies use employment contracts for their top executives. Generally, the Committee believes these arrangements are not necessary for our executives because most have spent the majority of their professional careers with the Company, and have developed a focus on the Company’s long-term success. Except in certain circumstances such as acquisitions, or where required by law in certain jurisdictions, the Company does not have any employment contracts with its executives. None of our current Named Executive Officers has an employment contract.
Ownership and Holding Requirements Focus on Long-Term Success
The Committee established the Executive Share Ownership Program and Stock Option Exercise Holding Requirement Policy to ensure that our most senior executives, including the Named Executive Officers, continue to own and hold a significant amount of Company stock. This aligns management’s interests with shareholders’ interests and further focuses executives on the long-term success of the Company.
TheExecutive Share Ownership Program requires executives to own shares of Company stock and/or RSUs valued at eight times base salary for the Chief Executive Officer, and five times base salary for the other Named Executive Officers. The Committee reviews the holdings of our Named Executive Officers annually, and in 2009 they each exceeded these requirements with the exception of the newly appointed Chief Financial Officer, who is on track to meet these requirements. TheStock Option Exercise Holding Requirement Policy ensures executives remain focused on sustained shareholder value, even after exercising stock options. Under this policy, the Chief Executive Officer must hold the net shares received from stock option exercises for at least two years, and the other Named Executive Officers must hold such net shares for at least one year after exercise. This policy reinforces our executives’ focus on the long-term business and financial performance of the Company. Incentive plan awards that executives elect to take as stock options instead of cash or unrestricted stock are not subject to the holding requirement.
Finally, to further align our executives with the interests of our shareholders, the Company’s Insider Trading Policy prohibits collars, short sales, hedging investments or other derivative transactions involving Company stock. Purchases and sales of Company stock by Named Executive Officers can only be made during the one-month period following public earnings announcements or, if outside these window periods, with express permission from the Company’s Chief Legal Officer or in accordance with a
previously established trading plan that meets SEC requirements. Only Mr. Lafley currently has such a plan, which began in 2003 and is updated periodically, most recently in May 2007.
The Company Emphasizes Pay for Performance
Our long-term success depends on excellent financial and operational performance year after year. Therefore, the Committee ties approximately [Ÿ] of our senior executives’ compensation to the achievement of short and long-term goals, taking into consideration the individual’s impact on delivering those goals. If short-term and long-term financial and operational goals are not achieved, then performance-related compensation decreases. If goals are exceeded, then performance-related compensation increases.
Moreover, all compensation in the form of Company stock, RSUs or stock options changes in value with changes in the Company’s stock price. Because such a large percentage of the Company’s executive compensation is tied both to performance and to the Company’s stock price, our executives have a significant stake in the long-term success of the Company—just like other shareholders.
The chart below shows that [Ÿ]% of the Chief Executive Officer’s total compensation was performance-based and a full [Ÿ]% of his total compensation was paid in stock, RSUs or options—forms of compensation tied to the Company’s stock price. Since becoming Chief Executive Officer in 2000, Mr. Lafley has received 80% of his compensation in equity, and has not sold any of these shares (except those used to pay taxes). On average, [Ÿ]% of the other Named Executive Officers’ compensation was performance-based and [Ÿ]% of their total compensation was in stock, RSUs or stock options. Tying pay to the Company’s and the individual’s performance, as well as to the Company’s stock price, motivates Company executives to drive superior business and financial performance for the long-term, while retaining talented executives and encouraging stock ownership.
How is competitiveness established for executive compensation?
The C&LD Committee structures executive compensation so that total targeted annual cash and long-term compensation opportunities are competitive with the targets for comparable positions at 25 companies considered to be our peers, (basedbased on criteria described below) (Peer Group)below (“Peer Group”). The C&LD Committee sets targets for each element of compensation based on the same elements of compensation paid to those holding similar jobs at companies in our Peer Group, focusing on positions with similar management and revenue responsibility. The C&LD Committee uses a regression analysis to adjust for the differences in revenue size within the Peer Group companies.Group. For the CEO’s compensation analysis, the C&LD Committee considers the Company’s revenue and market capitalization compared to our Peer Group.
The Peer Group is objectively determined and consists of companies that generally meet the following criteria:
Revenue comparable to the Company ($8379 billion in fiscal year 2007-08)2009-10) and/or market capitalization comparable to the Company (approximately $185$171 billion as of June 30, 2008)2010);
n | Peer |
n | Peer |
Compete with the Company in the marketplace for business and investment capital;
Compete with the Company for executive talent; and
Have generally similar pay models (we do not compare with financial services, insurance or gas and electric utility companies where the mix of pay elements or program structure is materially different).
TheEach year, the C&LD Committee evaluates and, if appropriate, updates the composition of the Peer Group each year to ensure it remains relevant and is not skewed by over-representation of any non-consumer products industry.Group. Changes to the Peer Group are carefully considered and made infrequently to assure continuity from year to year. The Peer Group currently consists of the following companies:companies unchanged from the prior year:
3M Altria Group AT&T Boeing Chevron | Coca-Cola Colgate-Palmolive ConocoPhillips Du Pont Exxon Mobil | General Electric Hewlett-Packard Home Depot IBM Johnson & Johnson | Kimberly-Clark Kraft Foods Lockheed Martin Merck PepsiCo | Pfizer Target United Technologies Verizon Communications Wal-Mart Stores |
At its annual review in April 2009,While the Committee replaced General Motors and Motorola with ConocoPhillips and United Technologies which better fit the Committee’s criteria for market capitalization and pay models.
While Named Executive Officers’target total compensation targets arefor our NEOs is set consistent withbased on the median target total compensation inwithin our Peer Group, actual compensation varies depending on experience in role and total Company, business unit and individual performance. This may result in substantial differences among the Named Executive Officers’NEOs’ pay. Consistent with our principles to pay competitively and to pay for performance and pay competitively, the C&LD Committee does not set guidelines for the ratio of any one position’s pay to another such as Chief Executive Officer pay relative to other Named Executive Officers.another.
Who are the Company’s NEOs?
The CommitteeCompany’s NEOs for fiscal year 2010-11 are: Robert A. McDonald, Chairman of the Board, President and CEO; Jon R. Moeller, CFO; and our Vice Chairmen (in alphabetical order) Werner Geissler, Vice Chairman—Global Operations; E. Dimitri Panayotopoulos, Vice Chairman—Global Household Care; Edward D. Shirley, Vice Chairman—Global Beauty & Grooming; and Robert A. Steele, Vice Chairman—Health Care Strategy, former Vice Chairman—Global Health and Well-Being. Mr. Steele has directed Frederic W. Cook & Co., its outsideannounced his intention to retire effective September 1, 2011 and independent compensation consultant,Mr. Shirley has announced his intention to advise it on various compensation matters, including peer group identification, competitive practicesretire effective January 1, 2012.
Throughout this Compensation Discussion and trends, specific program design, and Committee actions with respect to principal officer compensation. Under the terms of its agreement with the Committee, Frederic W. Cook & Co. is prohibited from doing any other business for the Company or its management,Analysis and the Committee may contact Frederic W. Cook & Co. without any interaction from Company management. This is meantcompensation tables that follow, except where noted, we refer to ensure the independencetitle of each NEO in effect on the last day of the Committee’s compensation consultant. Consistent withfiscal year, June 30, 2011.
Our Compensation Programs
What are the termselements of the Committee’s agreement with Frederic W. Cook & Co., the Committee has adopted a policy prohibiting anyCompany’s executive compensation consultant retained by the Committee from doing any other business for the Company or its management.programs?
Company management uses a separate compensation consultant, Hewitt Associates, to provide compensation advice, competitive survey data and other benchmark information related to trends and competitive practices in executive compensation.
Details regarding each element of executive compensation
Annual Cash Compensation
The building blocks of the Company’s annual cash compensation program are baseconsists of salary and annual bonus (STAR).STAR. We collect and analyze data from the Peer Group on the total annual cash compensation (base salaryopportunity (salary plus annual bonus target) offor positions comparable to those at the Company. For each position, we set a target amount for both base salary and STAR, where the STAR Target is thean amount payable as a percentage of annual base salary if all goals are met. The sum of the base salary range midpoint and STAR targets for each positionTarget [·] is generally set at the target median annual cash compensation opportunity of our Peer Group for each position, adjusted for size using a regression analysis of Peer Group revenues.
Base Salary
Base salarySalary provides a competitive fixed rate of pay, recognizing different levels of responsibility within the Company. Salaries are the basis for the other performance-driven programs discussed below, as well as the basis for retirement programs, executive group life insurance and certain benefits available to all employees. [Ÿ·]
STAR Annual Bonus
The STAR bonus program provides an incentive for approximately 14,000[·] senior managers to achievemeet or exceed annual performance and exceed the annual business goals set for the business units and the Company as a whole. The program rewards outstanding business results and pays reduced awards when target business goals are not met.goals. The program primarily focuses on the achievement of business unit results, but includes a component that measures the performance of the Company as well as total Company performance.a whole. STAR Awardsawards are generally paid in cash, but executives can elect to receive their awards in RSUs, stock options or deferred compensation, at the executive’s election.compensation.
STAR Awardsawards are based on three factors: 1)(1) STAR Target; 2)Target, (2) business unit performance;performance and 3)(3) total Company performance. By multiplying these factors, as shown inSTAR awards are calculated using the formula below, both individual business unit and Company performance are recognized. The measures that determine each factor are discussed below. The STAR Award calculation is:following formula:
STAR Target
| X | Business Unit Factor (%)
| X | Total Factor (%)
| = | STAR Award ($)
|
The basis for each element of the STAR Award is:
STAR Target—. The C&LD Committee sets STAR Targets, expressed as a percentage of base salaries, are set by the Committeesalary for Named Executive OfficersNEOs, based on the target annual bonus opportunities for similar positions at Peer Group companies. This year, based on an analysis ofcompanies after taking into account the total annual cash compensation and bonus targets at Peer Group companies,for those positions. Based solely on that analysis, the C&LD Committee increased Mr. Lafley’s STAR Target from 170% to 175% of base salary. Ms. Arnold’s and Mr. McDonald’s STAR Targets were increased from 115% to 125% of base salary. Mr. Daley’s STAR Target remained flat versus the prior year at 115%, and Mr. Moeller’s STAR Target was 45% for the first six monthsmade each of the fiscal year and with his promotion to Chief Financial Officer was set at 105% for the last six months of the fiscal year. Messrs. Geissler and Panayotopoulos had STAR Targets of 90%, consistent with the prior year.following decisions: [·].
Business Unit Performance Factor—Tying STAR awards to business unit results motivates participants to help their business succeed.. The Business Unit Performance Factor determined for each business unit ranges(“Business Unit”) is derived from 53% to 167% (with a target levelretrospective assessment of 100%). Thethe qualitative and quantitative performance of the Business Unit Factor hasagainst certain performance targets. Business Units include global product categories, regional market development organizations (“MDOs”) and corporate functions (see table below for a wider range and the greatest potential impact on the amountdescription of the final award.Business Units for each Vice Chairman). The targets for each business unitBusiness Unit vary, reflecting a variety of factors such as the different industries in which the Company’s businesses compete, their competitive position within those industries and their growth potential. The targets are determined based on the long-term goals in relation to each business’ role in the Company’s portfolio.
The C&LD Committee carefully considers the metrics used to measure performance to minimize the risk of too much focus on one result to the detriment of building long-term shareholder value. Each Business Unit’s performance against these targets is discussed and evaluated by the Chairman ofCEO, the Board, the Chief Executive Officer, the Chief Financial OfficerCFO and the Global Human Resources Officer, who collectively makeOfficer. Based on their review, they provide a recommendation for each Business Unit Performance Factor to the C&LD Committee for review and approval. None of these officers participates in the determination or recommendation for any Business Unit Performance Factor that could impact their own STAR award. Each Business Unit Performance Factor is determined by:established after considering:
n | Quantitative measurements of top-line growth in volume, sales and market share, and bottom-line measures of profit, operating cash flow and operating total shareholder return (a cash flow return on investment model that measures sales growth, earnings growth and cash flow to determine the rate of return that a business earns); and |
n | Qualitative measures |
The Business Unit Performance Factor for each Business Unit can range from 53% to 167% (with a target level of 100%). The Business Unit Performance Factor has a wide range and the greatest potential impact on the amount of each STAR award.
The Business Unit Performance Factor for each of the NEOs is based on the combined results of each of the smaller Business Units for which the NEO is ultimately responsible. For example, the Business Unit Performance Factor for the Vice Chairman—Global Household Care, consists of a weighted average of the Business Unit Performance Factors of the individual Business Units within Global Household Care. There are no separate performance goals for Global Household Care for purposes of compensation.
Fiscal Year 2008-09 Results2010-11 Results:: The table below summarizes: 1)that follows summarizes the quantitative measuresprimary responsibilities and inputs used to determine each Business Unit Factor, 2) the fiscal year results for those quantitative measures, and 3) the Business UnitPerformance Factor recommended to the C&LD Committee for each Named Executive OfficerNEO other than Messrs. Lafley, MoellerMcDonald and McDonald.Moeller. [·]
Role | STAR Business Unit
|
Factor Inputs | Business Performance Factor (%) | |||||||||
Werner Geissler | Vice Operations | • | • | |||||||||
E. Dimitri Panayotopoulos | Vice | • | • | |||||||||
| • | • | ||||||||||
| Vice | • | • |
|
Total Company Performance Factor—Based on a numeric formula ranging from 80% to 130% (with a target level of 100%), this. This factor is determined by equally weightingevaluating Company performance on two measures against targets predetermined by the C&LD Committee: 1)(1) organic sales growth and 2) earnings per share (EPS)(2) Core EPS growth. The C&LD Committee selected metrics that, in combination, encourage a balanced focus on both short and long-term results.
Organic sales growth: OrganicThe C&LD Committee includes organic sales growth excludesin the impact of acquisitions, divestitures and foreign exchange. The Committee selected organic sales growthTotal Company Performance Factor because it drives total shareholder return, is a tangible measure for which managers take ownership and is directly linked to the performance of each business. For fiscal year 2008-09, the target was 5%, which is at the midpoint of the Company’s long-term goal of 4% to 6%2010-11, [·].
Core EPS growth: This measure is used in the STAR calculation because it assures continued Company alignment with shareholder interests. The target for Core EPS growth for fiscal year 2008-092010-11 was 10% diluted[·].
The Total Company Performance Factor is determined by a matrix that includes a series of growth rates for organic sales growth ranging from£ [·]% to³ [·]% along a horizontal axis and a series of growth rates for Core EPS growth, consistentranging from£ [·]% to³ [·]% along a vertical axis. The matrix provides for a Total Company Performance Factor of 100% when both results are at the target performance level. If both results are at or below the minimum performance level, the Total Company Performance Factor is 80%. If both results are at or above the maximum performance level, the Total Company Performance Factor is 130%. For results that fall between the minimum and maximum performance levels, the matrix assigns a Total Company Performance Factor between 80%-130%. The Total Company Performance Factor varies with each particular combination of results achieved for these measures within the Company’s long-term goal.ranges set forth in the matrix.
Fiscal Year 2008-09 Results2010-11 Results:: Reported organic sales growth for the Company was [Ÿ·]%, and EPS growth was [Ÿ]. These two results are equally weighted and, when entered into a formula previously approved by the Committee, derived a Total Company Factor of [Ÿ]%, which was [Ÿ] the target of 100%.
The recommended STAR Awards for Ms. Arnold and Messrs. Geissler, Panayotopoulos and Daley were set using the multiplicative formula shown and described above. The recommendations for Ms. Arnold and Mr. Daley were based on [Ÿ]. The Committee reviews the recommendations for the Business Unit Factors and total STAR Award and considering Company performance results, determines final payments for these Named Executive Officers.
Because they evaluate and recommend Business Unit Factors for the other Named Executive Officers, the STAR Awards for Messrs. Lafley, Moeller and McDonald are determined separately and directly by the Committee. The Committee sets their awards after the range for all other STAR Awards is decided, taking into account [Ÿ]. TheC&LD Committee retains the authority to make no STAR award in a given year and the discretion to accept, modify or reject management’s recommendations for any or all employees, including the Named Executive Officers.
NEOs. For fiscal year 2008-09, the combined STAR performance factors resulted in a Company average STAR Award of2010-11, [Ÿ]% of STAR Target. The Committee concluded that Mr. Lafley should receive an award of [Ÿ] based on [Ÿ]. Mr. Moeller’s award of [Ÿ] was based on [Ÿ]. Based on [Ÿ], Mr. McDonald received an award of [Ÿ·].
The following shows the actualcalculation of the C&LD Committee-approved STAR calculationawards for each Named Executive Officer:NEO:
STAR Annual Bonus
(Dollar Figures Shown in Thousands)
STAR Target ($) | Total
| Business Unit
| STAR Award ($) | STAR Award as % of Target | ||||||
| Committee Decision Based on Performance | |||||||||
Jon R. Moeller | Committee Decision Based on Performance | |||||||||
Werner Geissler | ||||||||||
E. Dimitri Panayotopoulos | ||||||||||
Edward D. Shirley | ||||||||||
Robert A. Steele |
The STAR awards approved by the C&LD Committee for Messrs. Geissler, Panayotopoulos, Shirley and Steele were calculated using the formula described on page [·] of this proxy statement. The C&LD Committee reviewed [·].
Because they evaluate and recommend Business Unit Performance Factors for the other NEOs, the STAR awards for Messrs. McDonald and Moeller are determined separately and directly by the C&LD Committee. The CEO provides the C&LD Committee with a recommendation to assist with its evaluation and determination of Mr. Moeller’s STAR award. That recommendation was based on his [·].
[·]
The C&LD Committee approved a STAR award of $[·] for Mr. McDonald which was [·].
Summary of Total Annual Cash Compensation
The total annual cash compensation for each of our NEOs for fiscal year 2010-11 is the sum of each officer’s salary and STAR award and reflects the scope and complexity of the business he leads. Mr. McDonald’s total annual cash compensation was $[·], which was [·].
The C&LD Committee sets the remaining NEO’s salary and STAR Target to be aligned with the size-adjusted median of total salary and bonus opportunity of those holding similar roles in the Peer Group. Total annual compensation is based on the performance of the Company and their respective business units as described on pages [·]-[·] of this proxy statement.
The table below summarizes the total annual cash compensation of each NEO:
NEO | Salary ($) | STAR Target ($) | STAR Payout (%) | STAR Actual ($) | Total Annual Cash Compensation ($) | |||||
Robert A. McDonald | ||||||||||
Jon R. Moeller | ||||||||||
Werner Geissler | ||||||||||
E. Dimitri Panayotopoulos | ||||||||||
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Summary of Total Annual Cash Compensation
The total annual cash compensation for each of our Named Executive Officers for fiscal year 2008-09 is the sum of each officer’s base salary and STAR award and reflects his or her performance in a company of our size, scope and complexity. [Ÿ]
Long-Term Incentive Programs
Long-term incentive compensation comprises the majority of total compensation for senior executives and is paid through two programs—the PSP and the Key Manager Annual Stock Grant and the BGP three-year incentive plan.Grant. The C&LD Committee establishes an annual target for total long-term compensation consistent with the target median, total long-term compensation of comparable positions at Peer Group companies regressed for revenue size. It then allocates this overall target into a target for each of the two programs. BGP allocationsFirst, PSP targets are annualized based on salaries atset to represent about half of the beginning of each BGP three-year cycle. The amounts allocated tototal long-term compensation target. Next, the targets for the Key Manager programStock Grant are established by subtracting these BGP allocationsthe discounted value of the PSP targets from the medianoverall target total long-term compensationcompensation. In fiscal year 2010-11, [·]. The ultimate value of similar positions in the Peer Group described above. Actual amounts earned dependthese awards depends upon Company performance and individual performance.stock price.
Key ManagerPerformance Stock GrantProgram
The Key Manager Stock Grant, which is paid in stock options and RSUs, focuses senior executives’ attention on the long-term performance of the Company and directly links executives’ interests to those of the shareholders. Stock options are not exercisable (do not vest) until three years from the grant and
expire ten years from the date of grant. RSUs deliver in shares five years from the date of grant. These restrictions enhance retention because employees who voluntarily resign from the Company during the specified periods prior to retirement forfeit their grants.
Once the Key Manager Grant target is established based on Peer Group competitive data, the Chief Executive Officer recommends specific grants to the Committee for Named Executive Officers based on their individual performance. These recommendations can be up to 50% above or 50% below target. In exceptional cases, no grant will be awarded. The Committee retains full authority to accept, modify or reject these recommendations.
For the 2008-09 fiscal year, the Committee awarded grants to the Named Executive Officers as follows: [Ÿ]. Named Executive Officers receive 50% of their respective award in stock options, and the remaining 50% may be taken in stock options or RSUs at the election of the Named Executive Officer.
The Committee determined Mr. Lafley’s Key Manager Grant based on [Ÿ]. Mr. Lafley’s Key Manager Grant was awarded in 50% RSUs and 50% stock options.
Business Growth Program (BGP) Three-Year Incentive
BGP is the second component of the Company’s long-term incentive compensation for its senior executives. ItPSP focuses executives on the long-term goals most critical to the overall success of the Company. BGPPSP compensation is subject tocontingent upon the achievement of specific Company growth objectives over aperformance against three-year performance period. On June 30, 2008, the Company’s current BGP program expiredgoals (“Performance Goals”) in categories (“Performance Categories”) focused on its own terms.building shareholder value. The Committee renewed BGP, incorporating the Company’s current business objectives for the new three-year performance period beginning July 1, 2008 and ending on June 30, 2011 (Performance Period). In setting the performance metrics for the newfour Performance Period, the Committee took the metrics from the previous three-year program—operating total shareholder return and earnings per share growth—and broke operating total shareholder return into the following:Categories include: organic sales growth, adjusted before tax operating profit, adjusted earnings per share growth and adjusted free cash flow efficiency. Separatingproductivity. The C&LD Committee sets the combined measure makesPerformance Goals for each metric more visiblethree-year period that begins on July 1 and ends on June 30, three years later (the “Performance Period”). In the first year of each Performance Period, the C&LD Committee grants Performance Stock Units (“PSUs”) to participants allowing them(“Initial PSU Grant”).
The C&LD Committee also establishes a sliding scale of performance factors (each, individually, a “Performance Factor;” together, in the aggregate, “Performance Factors”) for each of the Performance Goals. The performance factors range from a minimum of 0% to a maximum of 200%, with a target of 100% for each Performance Goal. This results in a participant having the ability to earn a maximum number of shares of common stock equal to two times the Initial PSU Grant or a minimum of zero depending on the Company performance versus the Performance Goals. Performance Factors for Company results falling between the minimum, target and maximum levels are determined via linear interpolation. Using the sliding scale to reward performance versus the Performance Goals, as opposed to “all or nothing” goals, discourages participants from taking unnecessary risks to ensure a final payment under the program. This aligns the interests of the NEOs with shareholders by encouraging participants to focus on deliveringthe long-term performance of the Company over a multi-year period.
After each of these important long-term goals.
The three-year BGP Awards arePerformance Period, the C&LD Committee determines the Performance Factors for each Performance Category based on the Company’s performance in eachresults versus the Performance Goals. The average of the following four performance categories measured against the three-year performance goals establishedPerformance Factors is multiplied by the Committee atInitial PSU Grant to determine the beginningvested PSUs. The formula is as follows:
Average of Sales Performance Factor, Profit Performance Factor, EPS Performance Factor, and Cash Flow Performance Factor | X | Initial PSU Grant | = | Vested PSUs |
The vested PSUs are then converted into shares of Company’s common stock and delivered to the applicable participant following the end of the Performance Period:Period.
For the Performance Period July 1, 2010 through June 30, 2013, The C&LD Committee granted Mr. McDonald [·] PSUs valued at $[·] and granted Messrs. Geissler, Moeller, Panayotopoulos, Shirley and Steele [·] PSUs valued at $[·]. The following chart outlines the Performance Goals established for each Performance Category and their minimum, target and maximum levels for each Performance Factor.
Performance Category | Description | Three-Year Performance Goal Performance Factor Target (100%) | Performance Min (0%) | Performance Max (200%) | ||||
Organic Sales Growth | Sales growth that excludes the impact of acquisitions, divestitures and foreign exchange | |||||||
Adjusted Before Tax Operating Profit | Net sales, less the cost of product sold and less selling, general and administrative expense, after adjustments | |||||||
Core EPS Growth | Diluted earnings per share growth, after adjustments | |||||||
Adjusted Free Cash Flow | Operating cash flow, less capital spending, divided by net earnings | |||||||
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Basing BGP Awards on these four metrics encourages sound business decisions for the long-term health of the Company and minimizes the risk that participants over-emphasize one success measure to the detriment of others.
At the end of the Performance Period, the Committee determines the Payout Factor for each performance category by comparing the Company’s results to a sliding payout scale ranging from 0%-200%. By rewarding incremental improvements in Company results, as opposed to “all or nothing” three-year goals, this pay-out mechanism discourages the taking of unnecessary risks to ensure a Final Payment under the program. This aligns the interests of the Named Executive Officers with shareholders by encouraging participants to focus on the long-term performance of the Company over a multi-year period.
The target BGP award for the three-year performance period is six times base salary for the Chief Executive Officer and three times base salary for the other Named Executive Officers.
The payout formula for the BGP Award is:
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While the BGP payout formula is based on results at the end of the Performance Period, the Committee may make an Interim Payment at the end of year one for any performance category where Company results are on track to meet or exceed the three-year performance goals. At the end of year two, the Committee may make an Interim Payment for each performance category where the Company’s cumulative results for years one and two are on track to meet or exceed the three-year performance goals. For Interim Payments, the Payout Factor for each performance category is 0% if results are not on track and 100% if results are on track to meet or exceed the three-year performance goals. The total amount of any Interim Payment is calculated using these Payout Factors (0% or 100%) in the payout formula above to obtain a total, and then by dividing this total by three (since any Interim Payment is based on annual performance against the three-year program). The Committee uses these interim payments to even out compensation when performance is on track.
At the end of the third year of the Performance Period, the Final Payment of the BGP Award will be calculated by inserting the applicable Payout Factors (from the 0%-200% payout scale) in the above payout formula to obtain a total, and then subtracting any Interim Payments made during the Performance Period from this total. In the unlikely event that total Interim Payments exceed the amount of the BGP Award Final Payment, the Committee will require repayment of any amount overpaid. The Committee may make adjustments for program participants who did not participate for the entire Performance Period and may make any necessary adjustments to the payments pursuant to program accounting guidelines. The Committee retains discretion to reduce or eliminate either Final or Interim Payments if it determines that such payments are inconsistent with shareholders’ best interests.
Any Interim Payment will be paid 75% in RSUs and 25% in cash to more closely align executives with shareholder interests during the Performance Period. Any Final Payment will be made in 100% cash. Participants may elect to receive RSUs or deferred compensation instead of cash. BGP RSUs deliver in shares on the day of the Final Payment if any. Paying a portion of BGP Awards in RSUs aligns participants with shareholder interests and promotes the retention of key top talent who will forfeit undelivered RSUs if they resign.
Fiscal Year 2008-2009 Results[Ÿ]
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BGP Payment Summary
(Dollar Figures Shown in Thousands)
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Key Manager Stock Grant
The Key Manager Stock Grant is the second component of the Company’s long-term incentive compensation for its senior executives. It is paid in stock options and/or RSUs, focuses senior executives’ attention on the long-term performance of the Company and directly links executives’ interests to those of shareholders. Stock options are not exercisable (do not vest) until three years from the grant and expire ten years from the date of grant. RSUs deliver in shares five years from the date of grant. In addition to focusing executives on the long-term success of the Company, these restrictions enhance retention because employees who voluntarily resign from the Company during the specified periods forfeit their grants.
Once the Key Manager Stock Grant target is established based on Peer Group competitive data and the establishment of the PSP target, the CEO recommends specific grants to the C&LD Committee for each NEO based on: (1) the prior year’s business results for which each NEO is responsible; (2) the prior year’s Key Manager Stock Grant for each NEO; (3) summaries of business results for each Business Unit for the current fiscal year; and (4) individual contributions by each NEO, including that individual’s leadership skills. These recommendations can be up to 50% above or 50% below target. In exceptional cases, no grant will be awarded. The C&LD Committee retains full authority to accept, modify or reject these recommendations.
For the fiscal year 2010-11, the C&LD Committee awarded the following grants to each of the Vice Chairmen and the CFO: Mr. Geissler $[·]; Mr. Panayotopoulos $[·]; Mr. Shirley $[·]; Mr. Steele $[·]; and Mr. Moeller $[·]. [·]
The C&LD Committee awarded Mr. McDonald a Key Manager Stock Grant of [·].
Summary of Total Long-Term Incentive Compensation
Our Named Executive Officers’NEOs’ total long-term compensation includes the PSP and the Key Manager Stock Grant. The PSP grant represents approximately half of the total long-term incentive compensation includesfor each NEO and is payable at the Key Manager Stock Grant and any Interim or Final Payment amounts under the three-year BGP. The Committee considersend of the performance of these individualsperiod only to the extent that results are delivered in the contextfour
performance categories. The total long-term incentive compensation for each of the sizeVice Chairmen and scope of the organization in which they lead. [CFO was: Mr. Geissler $[Ÿ·]; Mr. Panayotopoulos $[·]; Mr. Shirley $[·]; Mr. Steele $[·]; and Mr. Moeller $[·].
Mr. McDonald’s total long-term incentive compensation of [·].
Special Equity Awards
On rare occasions, the C&LD Committee makes special equity grants in the form of restricted stock or RSUs to senior executives to assure retention of the talent necessary to manage the Company successfully or to recognize superior performance. In 2008-09 the Committee awarded two special equity grants, in the form of RSUs, to recognize superior performance by Mr. Lafley[·].
Retirement Programs
The Procter & Gamble Profit Sharing Trust and Mr. Daley in connection with one of the largest and most successful transactions in the Company’s history—the acquisition and integration of The Gillette Company. Specifically, the Committee recognized Mr. Lafley’s foresight for initiating the acquisition and his leadership throughout the acquisition and integration process by granting him a $3,500,000 award paid in RSUs on February 27, 2009. These RSUs are forfeitable until August 27, 2009 and will deliver in shares on February 27, 2012 unless deferred by Mr. Lafley. The Committee separately granted Mr. Daley a $1,500,000 award paid in RSUs on August 12, 2008, recognizing the integral role that he played in the valuation, negotiation and acquisition of Gillette as well as his role in the integration of Gillette into P&G. Mr. Daley’s RSUs are forfeitable until August 12, 2010, although retirement prior to that date will not result in forfeiture. Unless Mr. Daley chooses to defer, the RSUs will deliver in shares on August 12, 2010.
Retirement Programs
PSTEmployee Stock Ownership Plan (PST) is the Company’s primary retirement program for U.S.-based employees. PST is a qualified defined contribution plan providing retirement benefits for full-time U.S. employees, including the Named Executive Officers.NEOs. Under the PST, program, each employee’s PST account receivesthe Company makes an annual grantcontribution of cash used to purchase Company stock deposited into each participant’s PST account, upon which dividends are earned. The amount of the stock grant varies based upon individual base salaries and years of service.
Some participants in PST (including the Named Executive Officers)NEOs) do not receive their full grant due to federal tax limitations andlimitations. As a result, they participate in the nonqualified PST Restoration Program. These individuals receive RSUs valued at an amount equal to the difference between the amount grantedcontribution made under PST and what would have otherwise been grantedcontributed under PST, but for the tax limitations. Participants are vested in their PST accounts after five years and their PST Restoration RSUs are forfeitable until they become eligible for retirement.
We are proud of the way PST and the PST Restoration Program have created ownership at all levels of our Company. We believe these programs continue to serve the Company and its shareholders well by focusing employees on the long-term success of the business. We do not have Special Executive Retirement Programs (SERP) for our senior executives. Because the accumulation of retirement benefits for all other U.S. employees is dependent upon the Company’s share price and PST contributions, we believe it is appropriate for the Named Executive Officers to share the same risk and reward.
For non U.S.-based employees, the Company offers individual country pension plans that provide retirement benefits. In addition, the Company offers the International Retirement Plan (IRP)(“IRP”) and the Global International Retirement Arrangement which provide supplemental benefits to senior executivesemployees who work in multiple countries during their careers. Employees on extended expatriate assignments or who transfer out of their home country on a permanent basis also receive competitive retirement benefits under international retirement plans. Messrs. Geissler and Panayotopoulos participate in these programs.
Mr. Shirley was employed by The Gillette Company prior to the merger and participated in The Gillette Retirement Plan, a defined benefit plan covering full-time U.S. employees. The benefits in this plan were frozen as of December 31, 2007. Some participants in The Gillette Retirement Plan, including Mr. Shirley, would not receive their full pension benefits due to federal tax limitations and participate in the nonqualified Gillette Supplemental Retirement Plan. Similar to the PST Restoration Plan described above, the Gillette Supplemental Retirement Plan provides a benefit equal to the difference between the benefit provided under the Gillette Retirement Plan and the benefit that otherwise would have been provided by that plan, but for the tax limitations. In addition, Mr. Shirley participates in the Gillette Employee Stock Ownership Plan, which is a qualified retirement plan allowing eligible participants to fund their participation in a Gillette retiree medical plan.
Executive Benefits
The Company provides certain other limited benefits to certainsenior executives to fulfill particular business purposes. purposes, which are primarily for convenience and personal security. Total executive benefits were [·].
Benefits such as home security systems, secured workplace parking and an annual physical health examination are provided to safeguard Named Executive Officers.NEOs. While Company aircraft are generally used for Company business only, for security reasons Mr. LafleyMcDonald is required by the Board to use Company aircraft for all air travel, including personal travel. To increase executive efficiency, in limited circumstances, Named Executive OfficersNEOs may travel to outside board meetings on Company aircraft, in which case the Company generally receives some reimbursement from the companies on whose boards our executives serve. In addition, if a Company aircraft flight is already scheduled for business purposes and can accommodate additional passengers, Named Executive OfficersNEOs and their spouse/guests may join flights for personal travel. To the extent any travel on Company aircraft results in imputed income to the Named Executive Officer,NEO, the Company does not provide gross-up payments to cover the Named Executive Officer’sNEO’s personal income tax due on such imputed income. We also reimburse Named Executive OfficersNEOs for tax preparation and some financial counseling to focusminimize distractions and keep their attention focused on Company business issues and to assure accurate personal tax reporting. To remain competitive and retain our top executives, we offer executive group whole life insurance coverage (equal to base salary plus STAR Target). Finally, to further increase executive efficiency, we provide limited local transportation within Cincinnati.
In general, executive benefits make up a very small percentage of total compensation (less than 1%) for the Named Executive Officers. The Company does not gross-up payments to cover personal income taxes that may pertain to any of the executive benefits. TheC&LD Committee reviews these arrangements regularly to assure they continue to fulfill business needs.
Total Compensation for Named Executive Officers
Given the Company’s emphasis on stock-based compensationneeds and because the SEC requires stock-based compensation to be reported based on what is expensed in our financial statements, we provide the table below to facilitate understanding of the actual compensation awarded to our Named Executive Officers in the fiscal year. The table summarizes all compensation awarded to Named Executive Officers in the fiscal year and reconciles amounts shown in the table to amounts in the Summary Compensation Table that follows this Compensation Discussion and Analysis. Inclusion of this table is not designed to replace the Summary Compensation Table, but rather to reflect the Committee’s decisions about compensation awarded to the Named Executive Officers during the fiscal year and to better illustrate the relationship between compensation and performance for the period reported.remain reasonable versus market practice.
Actual Compensation Awarded 2008-09
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Chief Executive OfficerCEO Compensation
Mr. Lafley’sMcDonald’s compensation is determined by the C&LD Committee using the same principles applied to all Company executives.executives, focusing on paying for performance, paying competitively and supporting the business strategies. The Committee works to make itsC&LD Committee’s process for assessing Mr. Lafley’sMcDonald’s compensation and performance is rigorous and objective, with performance standards based on what is important to the Company’s success. The entire process is supported by the C&LD Committee’s independent compensation consultant, Frederic W. Cook & Co., which does no other work for the Company.
as described on pages [·]-[·] of this proxy statement. Mr. Lafley’sMcDonald’s total compensation is linked directly to his personal performance andcontribution to the Company’s performance. ThroughAs explained below, through STAR and BGP,PSP, his compensation is aligned with business strategies and focused on rewarding sustained, long-term growth in shareholder value. [Ÿ]
The Committee primarily considered the following factors in determining Mr. Lafley’s short and long-term incentive compensation in fiscal year 2008-09:
The Company’s overall results for fiscal year 2008-09;
Mr. Lafley’s individual performance during the year;
The compensation awarded to other chief executives in our Peer Group producing similar results; and
Our compensation principles and objectives as discussed on pages [Ÿ] to [Ÿ] of this proxy statement.
In evaluating Mr. Lafley’sMcDonald’s individual performance the Committee considered the results of Mr. Lafley’s individual leadership and hisduring fiscal year 2010-11, [·]
Our Approach To Stock Ownership
For our employees, focus on sustaining growth for the futurelong-term success of the Company including:and creating shareholder value begins at hire and is often built over decades. Because we have a longstanding practice of building our organization from within, most of our employees spend their entire careers with the Company. Whether an employee begins a career with the Company, or joins as a result of an acquisition, our compensation programs and our approach towards stock ownership, encourage them to focus on the long-term success of the Company and creating shareholder value. This dynamic creates an inextricable link between the long-term success of the individual and the long-term success of the Company—it is difficult to achieve the former without the latter. We tailor our compensation programs to reinforce this result.
Employee Stock Ownership Aligns the Interests of Executives and Shareholders
Employee stock ownership has long been an important aspect of the Company’s culture of commitment to long-term success. William Cooper Procter established the Company’s employee stock ownership plan in 1887. Today it is the oldest continuous profit sharing plan of its kind in the United States. For more than 120 years, this innovative plan has connected employees to the Company’s long-term success. The Company makes annual contributions of P&G stock to the retirement accounts of all U.S.-based employees beginning shortly after they are hired until the end of their careers. By making employees shareholders early on, and increasing their level of ownership over time, we consistently reinforce the importance of long-term success—both for the individual and for the Company.
The Company’s annual grant of stock options and RSUs to the Company’s key managers further reinforces the executives’ focus on the long-term success of the Company and creating shareholder value by further tying their personal success to that of other shareholders. Our key managers hold these stock options for an average of [Ÿ·] before they exercise. This reflects a culture that is focused on, and confident in, the long-term success of the Company.
The long-term focus that comes with stock ownership is even more pronounced for our senior executives. Most of our NEOs have risen through the Company’s ranks and their personal wealth is often tied to the Company stock and options that they have accumulated over the course of their careers. Our NEOs have an average of [·] years of service at the Company or its subsidiaries—long-term careers during which these individuals—first as employees, then as managers, then as senior executives—build shareholder value and benefit from the value they help to create.
Ownership and Holding Requirements Focus on Long-Term Success
To gain further perspective on Mr. Lafley’s total compensation, before making decisions on each elementreinforce the importance of his total compensation,stock ownership and long-term focus for our most senior executives, including the NEOs, the C&LD Committee established the Executive Share Ownership Program and Stock Option Exercise Holding Requirement. The Executive Share Ownership Program requires the CEO to own shares of Company stock and/or RSUs valued at a minimum of eight times salary. All other NEOs must own stock and/or RSUs valued at a minimum of five times salary. The C&LD Committee annually reviews a summary of all elements of Mr. Lafley’s total compensation, including base salary, STAR annual bonus, Key Manager Stock Grant, BGP three-year incentive award, any special equity award, unrealized gains from stock options, restricted stock and RSUs, and the cost to the Company of all retirement programs, benefits and executive benefits. Based on its review of this summarythese holdings, and in consultation with its independent compensation consultant, the Committee determined that2011 [Ÿ·].
The Stock Option Exercise Holding Requirement ensures executives remain focused on sustained shareholder value even after exercising their stock options. The holding requirement applies when an executive, including a NEO, has not met the ownership requirements of the Executive Share Ownership Program. Additionally, the holding requirement does not apply to incentive plan awards that executives elect to take as stock options instead of cash or unrestricted stock. Under the holding requirement, the CEO would be required to hold the net shares received from stock option exercises for at least two years while the other NEOs must hold net shares for at least one year.
Additional InformationOther Key Compensation Program Features
This additional information may assist the reader in better understanding the Company’s compensation practices and principles.
RoleEngagement of Independent Adviser
The C&LD Committee has directed Frederic W. Cook & Co., its outside and independent compensation consultant, to advise it on various compensation matters, including Peer Group identification, competitive practices and trends, specific program design, and Committee actions with respect to principal officer compensation. Under the terms of its agreement with the C&LD Committee, Frederic W. Cook & Co. is prohibited from doing any other business for the Company or its management, and the C&LD Committee may contact Frederic W. Cook & Co. without any interaction from Company management. This is meant to ensure the independence of the Chief Executive OfficerC&LD Committee’s compensation consultant. Consistent with the terms of the C&LD Committee’s agreement with Frederic W. Cook & Co., the C&LD Committee has adopted a policy prohibiting any compensation consultant retained by the C&LD Committee from doing any other business for the Company or its management.
Company management uses a separate compensation consultant, Meridian Compensation Partners, LLC, to provide compensation advice, competitive survey analysis and other benchmark information related to trends and competitive practices in Setting Other Named Executive Officers’ Compensationexecutive compensation.
Avoidance of Poor Pay Practices
Perquisites
The Company provides limited benefits to NEOs to fulfill particular business purposes as explained on pages [·] to [·] of this proxy statement. [·].
Employment Contracts
The C&LD Committee has broad authority overbelieves employment contracts for executives are not necessary because most have spent the compensationmajority of their professional careers with the Company, and have developed a focus on the Company’s Named Executive Officers, includinglong-term success. Moreover, the review and evaluationC&LD Committee does not provide special severance payments, such as golden parachutes, to its executives. In the event the Company encourages a NEO, or any other U.S. employee, to terminate employment with the Company (but not for cause), that individual may receive a separation allowance of their total compensation. The Chief Executive Officer makes recommendationsup to the Committee regarding theone year’s annual cash and long-term incentive compensation of the Company’s Named Executive Officers (other than his own)salary, calculated based on Company performance, individual performance and input from the Company’s compensation consultant and the Committee’s independent compensation consultant. All final decisions regarding compensation for Named Executive Officers are made by the Committee.years of service.
Tax Gross-Ups
Generally, the Company does not increase payments to any employees, including Named Executive Officers,NEOs, to cover non-business-relatednon-business related personal income taxes. However, certain expatriate allowances, relocation reimbursements and tax equalization payments are made to employees assigned to work outside their home countries, and the Company will cover the personal income taxes due on these items in accordance with expatriate policy.policy because there is a business purpose. In addition, from time to time, the Company may be required to pay personal income taxes for certain separating executives hired through acquisitions in conjunction with pre-existing contractual obligations.
Governing Plans, Timing, Pricing and PricingVesting of Stock-Based Grants
All grants of stock options, PSUs, restricted stock and/or RSUs made after October 13, 2009, are made under The Procter & Gamble 2009 Stock and Incentive Compensation Plan (as amended) (“2009 Plan”). The 2009 Plan was approved by Company shareholders at the October 13, 2009, annual shareholders’ meeting. Previous grants were made under The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended) (2001 Plan) or(“2001 Plan”) and The Gillette Company 2004 Long-Term Incentive Plan (Gillette Plan)(“2004 Gillette Plan”). The 2001 Plan was approved by Company shareholders in 2001.shareholders. The 2004 Gillette Plan was approved by Gillette shareholders in 2004 and adopted by the Company in 2005 as part of our merger with The Gillette Company.
The 2009 Plan contains a “second trigger” vesting provision which limits accelerated vesting to involuntary terminations of employment for reasons other than cause and for terminations of employment for good reason when time-based equity awards are assumed as part of a change in control.
With the exception of any Special Equity Awardsawards discussed on page [Ÿ·], of this proxy statement, the Company grants stock, PSUs, RSUs and stock options on dates that are consistent from year to year. If the C&LD Committee changes a grant date, it is done in advance and only after careful review and discussion. The Company does not backdate stock options.
The Company has never repricedre-priced stock options and is not permitted to do so without prior shareholder approval.
We use the closing price of the Company’s stock on the date of grant to determine the grant price for executive compensation awards. However, because PST uses the value of shares based on the average price of Company stock for the last five days in June, the grants of RSUs made under the PST Restoration Program and IRP follow this same grant price practice. The pre-established grant dates for
the programs are as follows: PST Restoration and IRP, first Thursday in August; STAR, and BGP, last business day on or before September 15; and PSP and Key Manager Stock Grants, last business day of February (and, if necessary for corrections, on the last business day on or before May 9).
Mitigation of Excessive Risk-Taking
Recoupment Policy& Clawback
The C&LD Committee has adopted the Senior Executive Officer Recoupment Policy that permits the Company to recoup or “claw back”“clawback” STAR or BGPlong-term incentive program payments made to executives in the event of a significant restatement of financial results for any reason. This authority is in addition to the C&LD Committee’s authority under the 2001 Plan and the 2009 Plan to suspend or terminate any outstanding stock optionoptions if the C&LD Committee determines that the participant acted significantly contraryviolated certain plan provisions. Moreover, the 2009 Plan has a clawback provision that allows the Company to recover certain proceeds from option exercises or delivery of shares if the participant violates certain plan provisions.
Balanced Weighting of Performance Metrics in Compensation Programs
The STAR program and PSP use balanced weighting of multiple performance metrics to determine the payout. This discourages excessive risk-taking by removing any incentive to focus on one goal to the best interestsdetriment of others. STAR and PSP are described on pages [·] to [·] and pages [·] to [·] of this proxy statement, respectively.
Prohibition of use of Company Stock in Derivative Transactions
The Company’s Insider Trading Policy prohibits NEOs from involving Company stock in pledging, collars, short sales, hedging investments and other derivative transactions. Purchases and sales of Company stock by NEOs can only be made during the Companyone-month period following public earnings announcements or, its subsidiaries.if outside these window periods, with express permission from the Company’s Legal Division or in accordance with a previously established trading plan that meets SEC requirements.
Additional Information
Deferred Compensation Plan
The Procter & Gamble Company Executive Deferred Compensation Plan (“EDCP”) allows executives to defer receipt of up to 100% of their STAR annual bonus, up to 25% of their interim BGP payments and 100% of their final BGP payment,award and/or up to 50% of their annual base salary. Beginning in 2008-09 executivesExecutives may also elect to convert a portion of their PST Restoration RSUs into notional cash contributions to the Deferred Compensation PlanEDCP with investment choices that mirror those available to all U.S. employees who participate in the Company’s 401(k) plan. No above-market or preferential interest is credited on deferred compensation, as those terms are defined by the SEC.
Tax Treatment of Certain Compensation
Section 162(m) of the Internal Revenue Code limits the Company deductibility of executive compensation paid to certain Named Executive OfficersNEOs to $1,000,000 per year, but contains an exception for certain performance-based compensation.
For fiscal year 2008-09,2010-11, awards granted under STAR, the STAR, Key Manager Stock Grant and BGPPSP programs satisfied[·]. PSP award payments do not vest until the performance-based requirements for deductible compensation. Theend of FY 2012-13 at which time the C&LD Committee approved award pools for STAR and BGP based on net earnings with a maximum portion of each pool set for each ofwill determine the Named Executive Officers subject to Section 162(m). The Committee then used its discretion to determine STAR Awards and BGPPSP payments based on Company and business results. Each ofresults for the amounts approved for Named Executive Officers subject to Section 162(m) were below the maximums established, and are therefore deductible by the Company.three year performance period.
Company deductibility of compensation was taken into account by the C&LD Committee when setting compensation levels for current Named Executive Officers.NEOs. While the C&LD Committee’s general policy is to preserve the deductibility of compensation paid to the Named Executive Officers,NEOs, the C&LD Committee nevertheless authorizes payments that might not be deductible if it believes they are in the best interests of the Company and its shareholders. The C&LD Committee determined that it was appropriate to pay Mr. Lafley a competitive base salary of [Ÿ·], although [Ÿ] was not deductible by the Company. Named Executive Officers are eligible for certain grants that may not be deductible by the Company.. In addition, in certain years individuals may receive non-deductible payments resulting from awards made prior to becoming a Named Executive Officer.NEO.
2009-102011-12 Executive Compensation Changes
As further described in this Proxy Statement on pages [Ÿ·] to [Ÿ], the Board is proposing that Company shareholders approve The Procter & Gamble 2009 Stock and Incentive Compensation Plan, attached to this proxy statement as Exhibit C. [Ÿ].
The following tables, footnotes and narratives found on pages [Ÿ·]to [Ÿ·], provide information regarding the compensation, benefits and equity holdings in the Company for the Named Executive Officers. The tables reflect each Named Executive Officer’s title as of June 30, 2009.NEOs.
Summary Compensation
The following table and footnotes provide information regarding the compensation of the Named Executive OfficersNEO for the fiscal years shown.
Name and Principal Position | Year | Salary1 | Bonus2 | Stock Awards3 | Option Awards4 | Non-Equity Plan | Change in Value and pensation | All Other pensation7 | Total | ||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||
A. G. Lafley | 2008-09 | ||||||||||||||||||||||||||
Chairman of | 2007-08 | 1,700,000 | 4,000,000 | 9,139,783 | 7,782,736 | 566,100 | 0 | 343,791 | 23,532,410 | ||||||||||||||||||
the Board and Chief Executive Officer | 2006-07 | 1,700,000 | 3,500,000 | 9,230,459 | 10,327,514 | 2,601,000 | 0 | 376,761 | 27,735,734 | ||||||||||||||||||
Jon R. Moeller | 2008-09 | ||||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||
Robert A. McDonald | 2008-09 | ||||||||||||||||||||||||||
Chief Operating | 2007-08 | 1,000,000 | 1,640,619 | 621,575 | 7,187,889 | 151,515 | 0 | 350,179 | 10,951,777 | ||||||||||||||||||
Officer | 2006-07 | 910,000 | 1,064,274 | 1,147,466 | 3,484,793 | 696,150 | 0 | 321,591 | 7,624,274 | ||||||||||||||||||
Werner Geissler | 2008-09 | ||||||||||||||||||||||||||
Vice Chairman-Global Operations | |||||||||||||||||||||||||||
E. Dimitri | 2008-09 | ||||||||||||||||||||||||||
Panayotopoulos | 2007-08 | 910,000 | 1,313,164 | 499,579 | 2,935,217 | 133,200 | 0 | 2,241,145 | 8,032,305 | ||||||||||||||||||
Vice Chairman—Global Household Care | |||||||||||||||||||||||||||
Susan E. Arnold | 2008-09 | ||||||||||||||||||||||||||
Former President- | 2007-08 | 1,000,000 | 1,524,469 | 471,580 | 4,346,219 | 151,515 | 0 | 59,487 | 7,553,270 | ||||||||||||||||||
Global Business Units | 2006-07 | 910,000 | 946,021 | 1,047,474 | 2,445,322 | 696,150 | 0 | 65,840 | 6,110,807 | ||||||||||||||||||
Clayton C. Daley, Jr. | 2008-09 | ||||||||||||||||||||||||||
Vice Chairman | 2007-08 | 910,000 | 1,453,327 | 1,262,555 | 2,751,751 | 139,860 | 0 | 66,893 | 6,584,386 | ||||||||||||||||||
and Former Chief Financial Officer | 2006-07 | 895,000 | 1,005,550 | 790,604 | 4,167,534 | 642,600 | 0 | 93,761 | 7,595,049 |
Name and Principal Position
| Year
| Salary ($) | Bonus1 ($) | Stock Awards2 ($) | Option Awards3 ($) | Non- Equity Incentive Plan Com- pensation4 ($) | Change in Pension Value and Nonqualified Deferred Com- pensation Earnings5 ($) | All Other Com- pensation6 ($) | Total ($) | |||||||||||||||||||||||||||
Robert A. McDonald | 2010-11 | |||||||||||||||||||||||||||||||||||
Chairman of the Board, President and Chief Executive Officer | 2009-10 | 1,400,000 | 2,670,000 | 2,956,724 | 5,616,469 | 175,000 | 0 | 297,035 | 13,115,228 | |||||||||||||||||||||||||||
2008-09 | 1,000,000 | 1,125,000 | 3,020,056 | 3,822,401 | 62,500 | 0 | 160,986 | 9,190,943 | ||||||||||||||||||||||||||||
Jon R. Moeller | 2010-11 | |||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2009-10 | 675,000 | 807,975 | 516,146 | 1,161,306 | 37,500 | 0 | 59,634 | 3,257,561 | |||||||||||||||||||||||||||
2008-09 | 550,000 | 388,800 | 943,153 | 1,122,840 | 37,500 | 0 | 53,379 | 3,095,672 | ||||||||||||||||||||||||||||
Werner Geissler | 2010-11 | |||||||||||||||||||||||||||||||||||
Vice Chairman-Global Operations | 2009-10 | 907,500 | 1,071,630 | 141,311 | 2,654,409 | 54,375 | 772,000 | 78,083 | 5,679,308 | |||||||||||||||||||||||||||
2008-09 | 870,000 | 632,664 | 2,830,119 | 1,194,511 | 54,375 | 81,000 | 2,084,678 | 7,747,347 | ||||||||||||||||||||||||||||
E. Dimitri Panayotopoulos | 2010-11 | |||||||||||||||||||||||||||||||||||
Vice Chairman—Global Household Care | 2009-10 | 947,500 | 1,396,238 | 150,140 | 3,096,801 | 56,875 | 601,000 | 94,923 | 6,343,477 | |||||||||||||||||||||||||||
2008-09 | 910,000 | 792,792 | 1,531,376 | 2,866,803 | 56,875 | 0 | 655,446 | 6,813,292 | ||||||||||||||||||||||||||||
Edward D. Shirley | 2010-11 | |||||||||||||||||||||||||||||||||||
Vice Chairman—Global | 2009-10 | 907,500 | 893,025 | 603,792 | 1,327,204 | 46,250 | 1,168,000 | 65,683 | 5,011,454 | |||||||||||||||||||||||||||
Robert A. Steele | 2010-11 | |||||||||||||||||||||||||||||||||||
Vice Chairman—Health Care Strategy | 2009-10 | 907,500 | 992,250 | 845,577 | 1,824,901 | 54,375 | 0 | 65,741 | 4,690,344 |
1 |
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For |
For |
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Option Awards for |
contained in the Company’s |
4 | This column reflects |
5 |
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6 |
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Please see the |
All Other Compensation
Name | Year | Retirement butionsi ($) | Executive Group ($) | Flexible ($) | Expatriate, ($) | Executive ($) | Total ($) | Year | Retire- ment Plan butionsi ($) | Executive Group Life Insuranceii ($) | Flexible Compensation Program Contributionsiii ($) | Expatriate, Relocation and Tax Paymentsiv ($) | Executive Benefitsv ($) | Totalvi ($) | |||||||||||||||||||||||||||||||||||
A. G. Lafley | 2008-09 | ||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. McDonald | 2010-11 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007-08 | 49,052 | 12,825 | 4,450 | 26,963 | 250,501 | 343,791 | 2009-10 | 52,710 | 6,058 | 4,750 | 0 | 233,517 | 297,035 | ||||||||||||||||||||||||||||||||||||
2006-07 | 47,958 | 10,628 | 6,400 | 63,309 | 248,466 | 376,761 | 2008-09 | 50,347 | 3,888 | 4,550 | 85,546 | 16,655 | 160,986 | ||||||||||||||||||||||||||||||||||||
Jon R. Moeller | 2008-09 | 2010-11 | |||||||||||||||||||||||||||||||||||||||||||||||
Robert A. McDonald | 2008-09 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007-08 | 49,052 | 3,037 | 4,450 | 274,925 | 18,715 | 350,179 | 2009-10 | 52,710 | 1,710 | 3,563 | 0 | 1,651 | 59,634 | ||||||||||||||||||||||||||||||||||||
2006-07 | 47,958 | 2,397 | 6,400 | 254,504 | 10,332 | 321,591 | 2008-09 | 48,405 | 999 | 3,975 | 0 | 0 | 53,379 | ||||||||||||||||||||||||||||||||||||
Werner Geissler | 2008-09 | 2010-11 | |||||||||||||||||||||||||||||||||||||||||||||||
2009-10 | 52,710 | 3,240 | 4,750 | 10,115 | 7,268 | 78,083 | |||||||||||||||||||||||||||||||||||||||||||
2008-09 | 50,347 | 2,918 | 4,550 | 2,016,249 | 10,614 | 2,084,678 | |||||||||||||||||||||||||||||||||||||||||||
E. Dimitri Panayotopoulos | 2008-09 | 2010-11 | |||||||||||||||||||||||||||||||||||||||||||||||
2007-08 | 33,065 | 3,046 | 4,450 | 2,183,852 | 16,732 | 2,241,145 | 2009-10 | 52,710 | 4,106 | 4,750 | 6,500 | 26,837 | 94,923 | ||||||||||||||||||||||||||||||||||||
Susan E. Arnold | 2008-09 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007-08 | 49,052 | 2,832 | 4,450 | n/a | 3,153 | 59,487 | 2008-09 | 50,347 | 3,743 | 4,550 | 573,298 | 23,508 | 655,446 | ||||||||||||||||||||||||||||||||||||
Edward D. Shirley | 2010-11 | ||||||||||||||||||||||||||||||||||||||||||||||||
2006-07 | 47,958 | 2,230 | 5,350 | n/a | 10,302 | 65,840 | 2009-10 | 42,851 | 5,266 | 4,750 | 0 | 12,816 | 65,683 | ||||||||||||||||||||||||||||||||||||
Clayton C. Daley, Jr. | 2008-09 | ||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Steele | 2010-11 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007-08 | 49,052 | 3,447 | 4,450 | n/a | 9,944 | 66,893 | 2009-10 | 52,710 | 2,670 | 4,750 | 0 | 5,611 | 65,741 | ||||||||||||||||||||||||||||||||||||
2006-07 | 47,958 | 2,520 | 6,400 | n/a | 36,883 | 93,761 |
i | Amounts contributed by the Company pursuant to PST, a qualified defined contribution plan providing retirement benefits for U.S.-based employees. |
ii | Under the Executive Group Life Insurance Program |
iii | Flexible Compensation Program Contributions are given to U.S.-based employees in the form of credits to pay for coverage in a number of benefit plans including, but not limited to, medical insurance and additional life insurance. Employees may also receive unused credits as cash. Credits are earned based on PST years of service. |
iv | The amounts shown for the current year are for fees paid by the Company |
v | The |
|
vi | This total does not reflect a charitable donation of $[·] made by the Company to the Children’s Safe Drinking Water Program on |
The material factors necessary for an understanding of the compensation detailed in the above two tables are further described in the Compensation Discussion and Analysis section of this proxy statement and the footnotes to the two tables above.statement.
Grants of Plan-Based Awards
The following table and footnotes provide information regarding grants of equity under Company plans made to the Named Executive OfficersNEOs during fiscal year 2008-09.2010-11.
Grants of Plan-Based Awards Table
NEO/Plan Name1 | Grant Date |
| Committee
| Estimated Future Payouts Under Plan Awards | All Stock Number Shares (#) | All Other
Number of Securities Underlying Options (#) | Exercise or Base Price of Option
($ per share) |
Grant Fair of Stock and Awards ($) | ||||||||||||||||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||
Robert A. | ||||||||||||||||||||||||||||||||||||||
| 02/ | 02/09/2011 | ||||||||||||||||||||||||||||||||||||
02/26/2011 | 02/09/2011 | |||||||||||||||||||||||||||||||||||||
Performance Stock Plan PSUs6 | ||||||||||||||||||||||||||||||||||||||
PST Restoration RSUs7 | 08/06/2010 | 04/14/2010 | ||||||||||||||||||||||||||||||||||||
Jon R. Moeller | ||||||||||||||||||||||||||||||||||||||
| 02/ | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Key Manager RSUs8 | 02/26/2010 | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Performance Stock Plan PSUs6 | ||||||||||||||||||||||||||||||||||||||
PST Restoration RSUs9 | 08/06/2009 | 04/14/2009 | ||||||||||||||||||||||||||||||||||||
Werner Geissler | ||||||||||||||||||||||||||||||||||||||
| 02/ | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Key Manager RSUs8 | ||||||||||||||||||||||||||||||||||||||
Performance Stock Plan PSUs6 | ||||||||||||||||||||||||||||||||||||||
PST Restoration RSUs7 | 08/06/2009 | 04/14/2009 | ||||||||||||||||||||||||||||||||||||
E. Dimitri Panayotopoulos | ||||||||||||||||||||||||||||||||||||||
| 02/ | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Performance Stock Plan PSUs6 | ||||||||||||||||||||||||||||||||||||||
PST Restoration RSUs7 | 08/06/2009 | 04/14/2009 | ||||||||||||||||||||||||||||||||||||
Edward D. Shirley | ||||||||||||||||||||||||||||||||||||||
| 02/ | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Key Manager RSUs8 | 02/26/2010 | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Performance Stock Plan PSUs6 | ||||||||||||||||||||||||||||||||||||||
PST Restoration RSUs9 | 08/06/2009 | 04/14/2009 | ||||||||||||||||||||||||||||||||||||
Robert A. Steele | ||||||||||||||||||||||||||||||||||||||
| 02/ | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
Key Manager RSUs6 | 02/26/2010 | 02/09/2010 | ||||||||||||||||||||||||||||||||||||
PST Restoration RSUs7 | ||||||||||||||||||||||||||||||||||||||
04/ | ||||||||||||||||||||||||||||||||||||||
1 | For awards granted under the PST Restoration Program and IRP, dividend equivalents are earned at the same rate as dividends paid on the Company's common stock. All references below to delivery of RSUs in shares reflect the current election of the NEO and may be changed at a later date, subject to applicable tax rules and regulations. |
2 | Grant dates for equity awards are consistent from year to year, as described on page [·] of this proxy statement. |
3 | The options granted were awarded using the closing price of the Company stock on the date of the grant. |
4 | This column reflects the grant date fair value of each award computed in accordance with FASB ASC Topic 718. |
5 | These options are forfeitable until the later of retirement eligibility or six months after the grant date, vest on February 28, 2014, and expire February 28, 2021. |
6 | These units are forfeitable until August 31st following the first year of the Performance Period and will deliver in shares within 60 days following the end of the Performance Period. |
7 | These units will deliver in shares one year following retirement. |
8 | These units are forfeitable until the later of retirement eligibility or six months after the grant date and will deliver in shares on February 28, 2016. |
9 | These units are forfeitable until Messrs. Moeller and Shirley are eligible for retirement, and will deliver in shares one year following such retirement. |
Outstanding Equity at Fiscal Year-End
The following table and footnotes provide information regarding unexercised stock options and stock awards that have not yet vested as of the end of fiscal year 2010-11.
Outstanding Equity at Fiscal Year-End Table
Option Awards | Stock Awards | |||||||||||||
Name | Grant | Number of Securities (#) | Number of Securities (#) | Option ($) | Option | Number of Shares or Units of Stock That Have Not (#) | Market ($) | |||||||
Robert A. McDonald | ||||||||||||||
Jon R. Moeller | ||||||||||||||
Werner Geissler | ||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||
Name | Grant | Number of Securities (#) | Number of Securities (#) | Option ($) | Option | Number of Shares or Units of Stock That Have Not (#) | Market ($) | |||||||||||
E. Dimitri Panayotopoulos | ||||||||||||||||||
Edward D. Shirley | ||||||||||||||||||
Robert A. Steele | ||||||||||||||||||
1 |
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Outstanding Equity at Fiscal Year-End
The following table and footnotes provide information regarding unexercised stock options and stock that has not yet vested as of the end of fiscal year 2008-09.
Outstanding Equity at Fiscal Year-End Table
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Grant Date1 | Number of (#) | Number of Securities (#) | Option ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not (#) | Market ($) | |||||||||||||||||
A. G. Lafley | 02/26/1999 | 33,550 | 44.2656 | 02/26/2014 | ||||||||||||||||||||
07/01/1999 | 1,908 | 43.2423 | 07/01/2014 | |||||||||||||||||||||
07/09/1999 | 7,496 | 42.7329 | 07/09/2014 | |||||||||||||||||||||
09/15/1999 | 83,301 | 49.4759 | 09/15/2014 | |||||||||||||||||||||
07/10/2000 | 21,720 | 27.4459 | 07/10/2015 | |||||||||||||||||||||
09/15/2000 | 204,691 | 31.0118 | 09/15/2015 | |||||||||||||||||||||
09/24/2001 | 384,061 | (1) | 34.5688 | 09/24/2016 | ||||||||||||||||||||
09/13/2002 | 336,712 | 45.6625 | 09/13/2012 | |||||||||||||||||||||
09/15/2003 | 97,890 | 45.9700 | 09/15/2013 | |||||||||||||||||||||
02/27/2004 | 352,917 | 51.4150 | 02/27/2014 | |||||||||||||||||||||
09/15/2004 | 92,896 | 56.5150 | 09/15/2014 | |||||||||||||||||||||
09/15/2004 | 68,041 | 3,476,895 | (3 | ) | ||||||||||||||||||||
09/15/2004 | 48,218 | 2,463,940 | (4 | ) | ||||||||||||||||||||
02/28/2005 | 573,229 | 53.5950 | 02/28/2015 | |||||||||||||||||||||
08/04/2005 | 3,189 | 162,958 | ||||||||||||||||||||||
09/15/2005 | 46,918 | 2,397,510 | (7 | ) | ||||||||||||||||||||
09/15/2005 | 30,962 | 1,582,158 | (6 | ) | ||||||||||||||||||||
12/01/2005 | 129,185 | 6,601,354 | ||||||||||||||||||||||
02/28/2006 | 430,441 | 60.5000 | 02/28/2016 | |||||||||||||||||||||
02/28/2006 | 69,560 | 3,554,516 | ||||||||||||||||||||||
08/03/2006 | 2,936 | 150,030 | ||||||||||||||||||||||
09/15/2006 | 64,146 | 3,277,861 | (9 | ) | ||||||||||||||||||||
02/28/2007 | 579,906 | 63.4900 | 02/28/2017 | |||||||||||||||||||||
02/28/2007 | 85,313 | 4,359,494 | ||||||||||||||||||||||
08/02/2007 | 5,253 | 268,428 | ||||||||||||||||||||||
09/14/2007 | 38,050 | 1,944,355 | (12 | ) | ||||||||||||||||||||
02/29/2008 | 480,783 | 66.1800 | 02/28/2018 | |||||||||||||||||||||
02/29/2008 | 130,568 | 6,672,025 | ||||||||||||||||||||||
Jon R. Moeller | 02/26/1999 | 2,016 | 44.2656 | 02/26/2014 | ||||||||||||||||||||
07/01/1999 | 832 | 43.2423 | 07/01/2014 | |||||||||||||||||||||
09/15/1999 | 7,528 | 49.4759 | 09/15/2014 | |||||||||||||||||||||
02/27/2004 | 37,722 | 51.4150 | 02/27/2014 | |||||||||||||||||||||
02/28/2005 | 43,474 | 53.5950 | 02/28/2015 | |||||||||||||||||||||
08/04/2005 | 402 | 20,542 | ||||||||||||||||||||||
12/01/2005 | 257 | 13,133 | ||||||||||||||||||||||
02/28/2006 | 43,665 | 60.5000 | 02/28/2016 | |||||||||||||||||||||
08/03/2006 | 509 | 26,010 | ||||||||||||||||||||||
10/10/2006 | 8,015 | 409,567 | (11 | ) | ||||||||||||||||||||
02/28/2007 | 58,720 | 63.4900 | 02/28/2017 | |||||||||||||||||||||
08/02/2007 | 573 | 29,280 | ||||||||||||||||||||||
02/29/2008 | 56,709 | 66.1800 | 02/28/2018 |
Number of (#) Number of Securities (#) Option ($) Number of Shares or Units of Stock That Have Not (#) Market ($) Robert A. McDonald Werner Geissler E. Dimitri Panayotopoulos Option Awards Stock Awards Name Grant
Date1
Securities
Underlying
Unexercised
Options
Exercisable2
Underlying
Unexercised
Options
Unexercisable2
Exercise
Price Option
Expiration
Date
Vested3
Value of
Shares or
Units That
Have Not
Vested4 02/26/1999 14,886 44.2656 02/26/2014 09/15/1999 46,256 49.4759 09/15/2014 07/10/2000 20,256 27.4459 07/10/2015 09/15/2000 161,204 31.0118 09/15/2015 09/24/2001 154,210 (2 ) 34.5688 09/24/2016 09/13/2002 161,034 45.6625 09/13/2012 09/15/2003 28,284 45.9700 09/15/2013 02/27/2004 223,672 51.4150 02/27/2014 09/15/2004 26,542 1,356,296 (5 ) 02/28/2005 158,597 53.5950 02/28/2015 08/04/2005 3,176 162,294 12/01/2005 14,873 760,010 02/28/2006 140,496 60.5000 02/28/2016 08/03/2006 2,880 147,168 09/15/2006 13,405 684,996 (8 ) 02/28/2007 160,656 63.4900 02/28/2017 08/02/2007 845 43,180 09/14/2007 10,463 534,659 (12 ) 02/29/2008 264,431 66.1800 02/28/2018 02/26/1999 14,626 44.2656 02/26/2014 07/09/1999 5,540 42.7329 07/09/2014 09/15/1999 43,786 49.4759 09/15/2014 07/10/2000 14,378 27.4459 07/10/2015 09/15/2000 116,148 31.0118 09/15/2015 09/24/2001 101,260 (1 ) 34.5688 09/24/2016 09/13/2002 54,750 45.6625 09/13/2012 09/15/2004 30,158 1,541,074 (4 ) 02/27/2004 92,388 51.4150 02/27/2014 08/04/2005 3,990 203,889 02/28/2005 69,970 53.5950 02/28/2015 09/15/2005 26,455 1,351,851 (6 ) 12/01/2005 4,121 210,583 02/28/2006 70,248 60.5000 02/28/2016 08/03/2006 2,449 125,144 09/15/2006 16,796 858,276 (9 ) 10/10/2006 17,111 874,372 (10 ) 02/28/2007 94,504 63.4900 02/28/2017 08/02/2007 941 48,085 09/14/2007 6,296 321,726 (13 ) 09/14/2007 6,572 335,829 (14 ) 02/29/2008 113,328 66.1800 02/28/2018 02/29/2008 10,133 517,796 02/26/1999 26,194 44.2656 02/26/2014 07/01/1999 13,860 43.2423 07/01/2014 07/09/1999 9,834 42.7329 07/09/2014 09/15/1999 64,574 49.4759 09/15/2014 07/10/2000 28,516 27.4459 07/10/2015 09/15/2000 179,206 31.0118 09/15/2015 09/24/2001 202,644 (1 ) 34.5688 09/24/2016 09/13/2002 163,464 45.6625 09/13/2012 09/15/2003 55,758 45.9700 09/15/2013 02/27/2004 143,442 51.4150 02/27/2014 09/15/2004 44,253 56.5150 09/15/2014 02/28/2005 111,951 53.5950 02/28/2015 08/04/2005 3,363 171,849 09/15/2005 30,531 55.4050 09/15/2015 12/01/2005 21,267 1,086,744
Number of (#) Number of Securities (#) Option ($) Number of Shares or Units of Stock That Have Not (#) Market ($) E. Dimitri Panayotopoulos (cont.) Susan E. Arnold Clayton C. Daley, Jr. Option Awards Stock Awards Name Grant
Date1
Securities
Underlying
Unexercised
Options
Exercisable2
Underlying
Unexercised
Options
Unexercisable2
Exercise
Price Option
Expiration
Date
Vested3
Value of
Shares or
Units That
Have Not
Vested4 02/28/2006 103,306 60.5000 02/28/2016 05/01/2006 17,178 877,796 08/03/2006 3,275 167,353 09/15/2006 46,314 61.3250 09/15/2016 09/15/2006 11,755 600,681 (8 ) 02/28/2007 118,129 63.4900 02/28/2017 08/02/2007 2,972 151,869 09/14/2007 9,175 468,843 (12 ) 09/14/2007 45,198 67.8100 09/14/2017 02/29/2008 166,214 66.1800 02/28/2018 05/09/2008 30,671 65.2100 05/09/2018 02/26/1999 13,012 44.2656 02/26/2014 09/15/1999 37,062 49.4759 09/15/2014 09/15/2000 96,752 31.0118 09/15/2015 09/24/2001 130,192 (1 ) 34.5688 09/24/2016 09/13/2002 98,550 45.6625 09/13/2012 02/27/2004 136,150 51.4150 02/27/2014 09/15/2004 14,392 735,431 (4 ) 02/28/2005 135,274 53.5950 02/28/2015 08/04/2005 3,077 157,235 09/15/2005 16,763 856,589 (9 ) 12/01/2005 11,324 578,656 02/28/2006 136,364 60.5000 02/28/2016 08/03/2006 2,791 142,620 09/15/2006 13,032 665,935 (8 ) 02/28/2007 157,506 63.4900 02/28/2017 08/02/2007 2,445 124,940 09/14/2007 10,169 519,636 (12 ) 02/29/2008 226,655 66.1800 02/28/2018 02/26/1999 23,816 44.2656 02/26/2014 07/01/1999 5,894 43.2423 07/01/2014 07/09/1999 8,358 42.7329 07/09/2014 09/15/1999 88,580 49.4759 09/15/2014 07/10/2000 27,180 27.4459 07/10/2015 09/15/2000 204,964 31.0118 09/15/2015 09/24/2001 197,480 (1 ) 34.5688 09/24/2016 09/13/2002 109,500 45.6625 09/13/2012 02/27/2004 153,168 51.4150 02/27/2014 09/15/2004 19,549 998,954 (4 ) 02/28/2005 149,268 53.5950 02/28/2015 08/04/2005 2,563 130,969 09/15/2005 14,423 737,015 (6 ) 12/01/2005 39,241 2,005,215 02/28/2006 132,232 60.5000 02/28/2016 08/03/2006 2,572 131,429 09/15/2006 12,096 618,106 (9 ) 02/28/2007 163,806 63.4900 02/28/2017 08/02/2007 2,395 122,385 09/14/2007 9,452 482,997 (14 ) 02/29/2008 169,991 66.1800 02/28/2018 02/29/2008 15,462 790,108
On December 1, 2005, the Company converted all outstanding retirement restricted stock to RSUs that are deliverable in shares one year following retirement. The numbers contained in this table for December 1, 2005, reflect this conversion. They do not represent an incremental grant of stock awards on that date. |
2 | The following provides details regarding the vesting date for each of the option grants included in the table. The Vest Date indicates the date the options become exercisable. |
Option Awards | ||||||||||||
Grant Date | Vest Date | Grant Date | Vest Date | |||||||||
02/26/1999 | 02/26/2002 | |||||||||||
02/28/2005 | 02/28/2008 | |||||||||||
07/01/1999 | 07/01/2002 | 06/16/2005 | 1/3 each on 06/16/2006, 06/16/2007, 06/16/2008 | |||||||||
07/09/1999 | 07/09/2002 | 09/15/2005 | 09/15/2008 | |||||||||
09/15/1999 | 09/15/2002 | 02/28/2006 | 02/28/2009 | |||||||||
07/10/2000 | 07/10/2003 | 09/15/2006 | 09/15/2009 | |||||||||
09/15/2000 | 09/15/2003 | 02/28/2007 | 02/28/2010 | |||||||||
(1) | 09/24/2001 | 01/01/2005 | 09/14/2007 | 09/14/2010 | ||||||||
(2) | 09/24/2001 | 09/24/2004 | 02/29/2008 | 02/28/2011 | ||||||||
06/20/2002 | 10/01/2005 | 05/09/2008 | 05/09/2011 | |||||||||
09/13/2002 | 09/13/2005 | 02/27/2009 | 02/27/2012 | |||||||||
09/15/2003 | 09/15/2006 | 09/15/2009 | 09/15/2012 | |||||||||
02/27/2004 | 02/27/2007 | 02/26/2010 | 02/26/2013 | |||||||||
06/17/2004 | 10/01/2005 | 09/15/2010 | 09/15/2013 | |||||||||
09/15/2004 | 09/15/2007 | 02/28/2011 | 02/28/2014 |
3 | Restricted |
Stock Awards | Stock Awards | |||||||||||||||||||||||
Grant Date | Vest Date | Grant Date | Vest Date | Grant Date | Vest Date | Grant Date | Vest Date | |||||||||||||||||
(3) | 09/15/2004 | 09/15/2019 | 02/28/2007 | One year following retirement; no earlier than 02/28/2010 | 09/15/2004 | One year following retirement | 08/07/2008 | One year following retirement | ||||||||||||||||
(4) | 09/15/2004 | One year following retirement | 08/02/2007 | One year following retirement | 09/15/2004 | 09/15/2017 | (11) | 09/15/2008 | 09/15/2011 | |||||||||||||||
08/04/2005 | One year following retirement | (12) | 09/15/2008 | One year following retirement | ||||||||||||||||||||
(5) | 09/15/2004 | 09/15/2009 | (12) | 09/14/2007 | 09/14/2010 | 09/15/2005 | One year following retirement | (13) | 09/15/2008 | One year following retirement; no earlier than 09/15/2011 | ||||||||||||||
08/04/2005 | One year following retirement | (13) | 09/14/2007 | One year following retirement | ||||||||||||||||||||
(6) | 09/15/2005 | One year following retirement | (14) | 09/14/2007 | One year following retirement; not before 09/15/2010 | 09/15/2005 | 09/15/2018 | 01/13/2009 | One year following retirement | |||||||||||||||
(7) | 09/15/2005 | 09/15/2020 | 02/29/2008 | 02/28/2013 | ||||||||||||||||||||
12/01/2005 | One year following retirement | 12/01/2005 | One year following retirement | 02/27/2009 | 02/27/2014 | |||||||||||||||||||
02/28/2006 | 2009 or as soon as practical after retirement; whichever is later | 05/01/2006 | 05/01/2011 | 08/06/2009 | One year following retirement | |||||||||||||||||||
05/01/2006 | 05/01/2011 | 08/03/2006 | One year following retirement | (14) | 09/15/2009 | 09/15/2011 | ||||||||||||||||||
08/03/2006 | One year following retirement | 09/15/2006 | One year following retirement | (15) | 09/15/2009 | One year following retirement; no earlier than 09/15/2011 | ||||||||||||||||||
(8) | 09/15/2006 | 09/15/2009 | ||||||||||||||||||||||
(7) | 10/10/2006 | 50% 10/10/2010 | 02/26/2010 | 02/26/2015 | ||||||||||||||||||||
50% 10/10/2011 | 08/05/2010 | One year following retirement | ||||||||||||||||||||||
09/15/2006 | One year following retirement | 10/10/2006 | 10/10/2011 | 09/15/2010 | ||||||||||||||||||||
08/02/2007 | One year following retirement | 09/15/2010 | ||||||||||||||||||||||
(9) | 09/14/2007 | 09/14/2010 | 02/28/2011 | 02/28/2016 | ||||||||||||||||||||
(10) | 10/10/2006 | 10/10/2011 | 09/14/2007 | One year following retirement | 02/28/2011 | 08/ /2013 | ||||||||||||||||||
(11) | 10/10/2006 | 50% 10/10/2010; 50% 10/10/2011 | ||||||||||||||||||||||
02/29/2008 | 02/28/2013 |
4 | The Market Value of shares or RSUs that have not vested was determined by multiplying the closing market price of Company stock on June 30, |
Option Exercises and Stock Vested
The following table and footnotes provide information regarding stock option exercises and stock vesting during fiscal year 2008-092010-11 for the Named Executive Officers.NEOs.
Option Exercises and Stock Vested Table
Option Awards | Stock Awards | ||||||||||||||||
Name | Option | Number of Shares (#) | Value Realized ($) | Stock Award | Number of (#) | Value Realized ($) | |||||||||||
A. G. Lafley | — | — | — | — | — | — | |||||||||||
Jon R. Moeller | — | — | — | — | — | — | |||||||||||
Robert A. McDonald | — | — | — | 09/15/2005 | 17,071 | 1,243,708 | |||||||||||
Werner Geissler | — | — | — | — | — | — | |||||||||||
E. Dimitri Panayotopoulos | — | — | — | 09/15/2005 | 14,045 | 1,023,248 | |||||||||||
Susan E. Arnold | — | — | — | — | — | — | |||||||||||
Clayton C. Daley, Jr. | — | — | — | — | — | — |
Option Awards | Stock Awards | |||||||||||
Name | Option Grant Date | Number of Shares (#) | Value Realized ($) | Stock Award Grant Date | Number of (#) | Value Realized ($) | ||||||
Robert A. McDonald | ||||||||||||
Jon R. Moeller | ||||||||||||
Werner Geissler | ||||||||||||
E. Dimitri Panayotopoulos | ||||||||||||
Edward D. Shirley | ||||||||||||
Robert A. Steele |
1 | Numbers of Shares Acquired on Vesting is the gross number of shares acquired. Please see footnote |
2 | Value Realized on Vesting was determined by multiplying the number of shares of stock by the average of the high and low price of the Company’s |
Pension Benefits
The following table and footnotes provide information regarding the Company’s pension plans for Messrs. Geissler, Panayotopoulos and PanayotopoulosShirley as of the end of fiscal year 2008-09.2010-11. None of the other Named Executive OfficersNEOs had any such arrangements with the Company.
Name | Plan Name | Number of Years of Credited Service1 | Present Value of Accumulated Benefit2 ($) | Payments During Last Fiscal Year ($) | ||||||
Werner Geissler | The Procter & Gamble Company Global IRA3 | 21 years 9 months4 | 0 | |||||||
The Procter & Gamble Pension Fund (Germany) | 21 years 9 months4 | 0 | ||||||||
E. Dimitri Panayotopoulos | The Procter & Gamble Company Global IRA | 3 | ||||||||
| 0 | |||||||||
The Procter & Gamble Pension Fund (UK)6 | 17 years 5 months7 | 0 | ||||||||
Edward D. Shirley | The Procter & Gamble Master Retirement Plan (US)8 | 9 | 0 | |||||||
The Gillette Company Supplemental Retirement Plan (US)10 | 11 | 0 |
1 | Numbers in this column are computed as of the same pension plan measurement date used for financial statement reporting purposes for the Company’s audited financial statements as found in Note [ |
2 | The following provides the assumptions used in each plan to calculate present value: |
Assumptions | Global IRA | German Pension Plan | UK Pension Plan | US Plans | ||||
Retirement age | 60 | 65 | 65 | 57 | ||||
Discount rate | ||||||||
Salary increase rate | ||||||||
Social security increase rate | ||||||||
Pension increase rate | ||||||||
Pre-Retirement Decrements | ||||||||
Post-Retirement Mortality Table |
The following exchange rates as of June 30, 2011, were used to calculate present value: |
US $[·] : Euro $[·] |
US $[·] : GBP $[·] |
Because Messrs. Geissler and Panayotopoulos have reached age 55, they are eligible for early retirement under this plan. However, their benefits would be reduced by 5% for each year retirement precedes age 60. The earliest age at which either may retire with full benefits is age 60. |
4 | Years of credited service accrued under this plan represent the number of years from the date that Mr. Geissler became eligible to participate in the plan until March 1, 2001, when he was transferred to the Company. |
5 | Years of credited service accrued under this plan represent the number of years that Mr. Panayotopoulos worked outside of his home country from the date of hire until July 1997, when he |
Mr. Panayotopoulos is eligible to retire early under the plan, but his benefits would be reduced by 4% for each year retirement precedes age 60. |
7 | Years of credited service accrued under this plan represent the number of years that Mr. Panayotopoulos worked from the date that he became eligible to participate in the plan until June 30, 1995, when he was no longer eligible to accrue additional benefits under the plan. |
8 | Mr. Shirley is eligible to retire early under the plan, but his benefits would be reduced by 1.5% for each year that his age plus years of service total less than 100. |
9 | Years of credited service accrued under this plan are equal to the number of years that Mr. Shirley has worked either for the Company or The Gillette Company since his initial date of hire until December 31, 2007, when this plan was frozen and Mr. Shirley was enrolled in the Company’s PST program. |
10 | Mr. Shirley is eligible to retire early under the plan, but his benefits would be reduced by 1.5% for each year that his age plus years of service total less than 100. Note, however, that Mr. Shirley would be entitled to full retirement benefits under the plan on December 1, 2013, if he remains employed with the Company because he received six years of additional credit pursuant to the plan’s change in control provisions when the Company acquired The Gillette Company in 2005. |
11 | Years of credited service accrued under this plan are equal to the number of credited service years accrued under The Procter & Gamble Master Retirement Plan (US) plus a premium of three additional years provided pursuant to the plan’s change in control provisions triggered when the Company acquired The Gillette Company in 2005. |
The Procter & Gamble Pension Fund (UK) (UK(“UK Pension Plan)Plan”) is a defined benefit plan for employees whose home country was within the United Kingdom for all or a portion of their career. The UK Pension Plan provides for post-retirement payments based on the employee’s salary and years of service at the time of retirement. The benefit paid is calculated using the following formula:
.02 x creditable years of service x employee’s pensionable base salary (at time of exit from plan)
This benefit is paid at retirement and is reduced to account for government-sponsored pension benefits received by the employee. Furthermore, the UK Pension Plan includes a “temporary” pension benefit that provides temporary pension payments to those employees who retire after age 59 but before they reach their social security retirement age. The amount of these payments is based on the government-sponsored pension benefits that these employees will receive from the UK government when they retire and reach their social security retirement age. Temporary pension benefit payments under this plan cease when government pension payments begin.
The Procter & Gamble Pension Fund (Germany) (German(“German Pension Plan)Plan”) is a defined benefit plan for Germany-based employees hired before December 31, 1999. The German Pension Plan provides for post-retirementpost-
retirement payments based on the employee’s salarypensionable income, which for certain employees, including Mr. Geissler, includes a portion of their STAR award, and years of service at the time of retirement. The benefit is paid using the following formula:
.017 x creditable years of service x average salarypensionable income for three years preceding retirement x years of serviceexit from the plan
The benefit is paid at retirement and reduced by the German social security benefit based on years of service. The normal retirement age for the plan is 65, and there is a surviving spouse benefit equal to 60% of employee’s pension benefit.
The Procter & Gamble Company Global International Retirement Arrangement (Global IRA)(“Global IRA”) is designed to provide retirement benefits to certain employees whose benefits are frozen under their home country pension plan(s) as a result of having been transferred away from their home country on a permanent basis. The Global IRA benefit is calculated in accordance with the following formula:
.017 x average salary for three years preceding retirement x years of service outside of home country (before
(before localization)
The Global IRA accounts for the differences in retirement benefits attributable to a higher salary at the time of retirement than at the time of transfer out of the home country. As such, the Global IRA is reduced on a dollar for dollar basis by any retirement pension benefit paid by either the Company or the government which was earned through the employee’s home country.
The Procter & Gamble Master Retirement Plan (US) (“P&G MRP”) is a qualified defined benefit plan into which all qualified defined benefit plans that are acquired by the Company in conjunction with business acquisitions are consolidated. The qualified defined benefit plans administered by The Gillette Company (“Gillette”), including the plan in which Mr. Shirley was a participant, were consolidated into the P&G MRP after the Company acquired Gillette. The pension benefit provided by the plan is calculated in accordance with the following formula:
.02 x years of service as of December 1, 2007 (maximum 25 years) x average annual compensation
(salary plus bonus)
in highest 5 of last 10 years
The benefit is paid at age 65 or later and is reduced by 75% of the employee’s social security benefit. The plan allows for early retirement at the age of 50 if the employee’s age plus years of service total 80 years or more.
The Gillette Company Supplemental Retirement Plan (US) (“GCSRP”) is a nonqualified defined benefit plan which provides benefits to former Gillette employees whose benefits under the P&G MRP are limited by reason of the Internal Revenue Code. The benefit formula is identical to that of the P&G MRP, except that no Internal Revenue Code income limits are applied and the total benefit provided is reduced by the benefit amount provided pursuant to the P&G MRP. The retirement age and early retirement age are identical to the P&G MRP.
Nonqualified Deferred Compensation
The following table and footnotes provide information regarding the Company’s non tax-qualified defined contribution and deferred compensation plans for each of the Named Executive OfficersNEOs for fiscal year 2008-09.2010-11. For a complete understanding of the table and the footnotes, please read the narrative that follows the table.
Nonqualified Deferred Compensation Table
Name | Plan Name | Executive ($) |
Registrant
($) | Aggregate ($) | Aggregate ($) | Aggregate ($) |
| |||||||||||
| ||||||||||||||||||
PST Restoration Program | ||||||||||||||||||
Jon R. Moeller | PST Restoration Program | |||||||||||||||||
| ||||||||||||||||||
Werner Geissler | ||||||||||||||||||
Compensation Plan | ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
PST Restoration Program | ||||||||||||||||||
Plan | ||||||||||||||||||
E. Dimitri Panayotopoulos | PST Restoration Program | |||||||||||||||||
International Retirement Plan | ||||||||||||||||||
Edward D. Shirley | PST Restoration Program | |||||||||||||||||
Robert A. Steele | Executive Deferred Compensation Plan | |||||||||||||||||
PST Restoration Program |
1 | Total reflects registrant contributions in the form of RSUs pursuant to the PST Restoration Program, |
2 | Because none of the |
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|
|
|
|
|
|
|
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The Named Executive OfficersNEOs are eligible to participate in The Procter & Gamble Company Executive Deferred Compensation Plan (EDCP)(“EDCP”). Under EDCP, a participant may defer up to 50%[·]% of base salary and, up to 100%[·]% of the STAR award, and up to 25% of the BGP long-term incentive award. Amounts may be deferred for a minimum of one year or until termination of employment. Payments that commence upon retirement, death or disability may be taken in a lump sum or installments (over a maximum period of ten years). All other payments under the plan are paid as a lump sum.
Amounts deferred under EDCP are credited with market earnings based on the same fund choices available to all employees under the Company’s tax-qualified plan. Participants may change fund choices on a daily basis.
As described in the Compensation Discussion and Analysis on page[Ÿ·] of this proxy statement, federal tax rules limit the size of contributions that can be made to individuals pursuant to tax-qualified defined contribution plans like the PST. These limits are based on the annual salary of the plan participant. Because of these limits, certain participants, including the Named Executive Officers,NEOs, are unable to receive their full contributions pursuant to the terms and conditions of the PST.
To account for these limitations, the Company utilizes the PST Restoration Program. This is a nonqualified defined contribution plan under which the Company makes an additional annual contribution in the form of RSUs to those executives whose calculated contribution to their PST accounts was limited by federal tax laws.
These RSUs are forfeitable until the executive becomes eligible for retirement. Executives can elect to receive either a lump sum payment one year post-retirement or ten annual installment payments beginning one year post-retirement, or they can defer receipt of either the lump sum or the ten annual installments to six or eleven years post-retirement. Generally, executives have up until retirement to change a previous deferral election, with any such deferral elections or changes to deferral elections made in compliance with Section 409A of the Internal Revenue Code. These RSUs earn dividend equivalents at the same rate as dividends on Company common stockCommon Stock and are accrued in the form of additional RSUs each quarter and credited to the executive’s holdings. The value of each RSU may increase or decrease over time as the value is tied to the price of the Company stock.
Named Executive OfficersNEOs may convert certain of their PST Restoration Program RSUs into contributions to the EDCP. All such contributions are forfeitable until the executive becomes eligible for retirement and are paid out in the same manner described above.
The Company’s International Retirement Plan (IRP)(“IRP”) is designed to provide retirement benefits for employees whose participation in retirement plans in their home countries has been suspended because they are on expatriate assignments outside of that country or have been transferred out of that country on a permanent basis.country. Under the IRP, the Company makes an annual contribution for each participant equal to the contribution that would have been made under the participant’s home country retirement plan had the participant remained in that country and eligible to participate in that plan.
At each participant’s election, the Company’sHistorically, Company contributions to IRP contribution iswere placed into one of several investment vehicles available within the IRP.IRP, at each participant’s election. Participants are also eligible toin the U.S. receive all or a portion of this contributiontheir contributions in RSUs. These contributions vest according to the terms and conditions of the participant’s home country retirement plan. Upon retirement from the Company, participants must elect to receive distributions from their IRP accounts in one of four ways: 1)(1) fixed-income annuity, 2)(2) variable annuity, 3)(3) lump sum, or 4)(4) annual installments (over a maximum of 15 years).
Amounts the Named Executive OfficersNEOs defer under any of the above mentioned plans that are scheduled to be paid after termination of employment must be held by the Company for a minimum of six months in order to comply with Section 409A of the Internal Revenue Code.
Payments upon Termination or Change-in-ControlChange in Control
Because theThe Company does not have any employment contracts with its Named Executive Officers, there are noNEOs that require severance payments required to be made to any of these officers upon termination of their employment. Certain elements of compensation are, however, treated differently upon various termination of employment scenarios, as described below. The following describes how certain elements of compensation are generally handled under these scenarios for all Company employees, including the Named Executive Officers.NEOs.
Base salary—Salary—Base salary is paid through the last day worked, regardless of reason for termination of employment. In the event that the Company encourages a U.S. employee to terminate employment with the Company (but not for cause), that individual may receive a separation allowance of up to one year’s annual base salary, calculated based on years of service.
STAR—Individuals who work through the last day of the fiscal year are eligible for the STAR award payable for that year, regardless of the reason for termination of employment. Individuals who retire or terminate as a result of Company encouragement (not for cause) prior to fiscal year-end receive a pro-rated amount. Past short-term bonus awards where the employee voluntarily elected stock or options in lieu of cash are either retained or paid out in a lump sum, regardless of the reason for termination.
Equity Awardsawards under the Company’s Key Manager Annual Stock Grant program, BGP,PSP, the PST Restoration Program and IRP—Treatment is governed by the Company’s equity compensation plans and depends on the reason for termination of employment, as follows. Past equity awards where the employee voluntarily elected stock or stock options in lieu of cash or unrestricted stock are either retained or paid out in a lump sum, regardless of the reason for termination. Further, in certain situations, employees are entitled to keep all equity awards according to their original terms. Each of the following assumes that the individual fully complies with certainthe provisions of the Company’s equity compensation plans, including compliance with the Company’s Purpose, Values and Principles and the provision that prohibits individuals from competing with the Company following termination of employment, each of which can result in forfeiture and/or cancellation of outstanding equity awards.
n | Voluntary Termination by the Employee |
— | All stock options that were not vested |
— | All vested stock options that were not exercised prior to termination are forfeited. |
— | All RSUs for which the forfeiture date has not yet occurred are forfeited effective upon the date of termination. |
— | All |
n | Retirement or Permanent Disability |
— | Key Manager Annual Stock Grant stock options and |
— | Key Manager Annual Stock Grant stock options and RSUs received less than six months prior to retirement or permanent disability are forfeited. |
— | PSUs are forfeited for retirement or permanent disability that occurs on or before August 31st following the grant of the PSUs. |
— | PSUs are retained according to their original terms for retirement or permanent disability after August 31st following the grant of PSUs. |
— | Business Growth Program RSUs are retained according to their original terms. |
— | All other RSUs for which the forfeiture date has not yet occurred are |
n | Company Encouraged Termination, Not for Cause |
— | Key Manager Annual Stock Grant stock options and RSUs received less than six months prior to termination are forfeited. |
— | Key Manager Annual Stock Grant stock options and RSUs received at least six months prior to termination are retained, with stock options held until expiration and |
— | All other RSUs for which the forfeiture date has not yet occurred are forfeited, unless otherwise agreed |
— | PSUs are forfeited if the termination occurs on or before August 31st following the grant of PSUs. |
— | PSUs are retained according to their original terms if the termination occurs after August 31st following the grant of PSUs. |
n | Termination for Cause |
— | All stock options and RSUs are forfeited effective upon the date of termination. |
— | All PSUs for which the forfeiture date has not yet occurred are forfeited effective upon the date of termination. |
n |
|
|
— | 2009 Plan: |
Stock Options/RSUs: All stock options vest immediately and all RSUs are deliverable in shares immediately upon change in control for any awards not assumed. For awards that are assumed, stock options vest and RSUs are deliverable in shares only if a participant’s employment is involuntarily terminated for reasons other than cause or the participant terminates their employment with “good reason.”
PSUs: All PSUs will vest at 100% of the Initial PSU Grant, or the PSP target if the Initial PSU Grant has not occurred, upon a change in control that meets the requirements of a change in control under Section 409A of the Internal Revenue Code and shall be paid in shares of common stock at the time of such change in control. If there is a change in control event that does not meet the requirements of a change in control event under Section 409A, all outstanding PSP awards will be settled according to the original terms and conditions.
n | Death—All stock options, RSUs and |
Special Equity Awards—In special circumstances, the Compensation & Leadership DevelopmentC&LD Committee may make a special award of restricted stock or RSUs. Terms and conditions of these awards are determined by the Compensation & Leadership DevelopmentC&LD Committee at the time of grant. In the event of a change-in-control,change in control, all restrictions lapse immediately and, in a case of hardship, the Committee may accelerate the lapse of restrictions.immediately.
BGP—Employees who work through the last day of the three-year performance period are eligible for the BGP awards payable for that year, unless otherwise determined by the Compensation & Leadership Development Committee. For employees who leave prior to the end of the performance period, the Committee has discretion to determine the amount of a BGP award, if any.
Retirement Plans—The retirement plans in which the Named Executive OfficersNEOs participate do not discriminate in scope, terms or operation for Named Executive OfficersNEOs versus all other participants. All Named Executive OfficersNEOs are fully vested in PST and will retain all shares upon termination of employment regardless of reason. PST Restoration RSUs vest upon eligibility for retirement. Messrs. Geissler and Panayotopoulos are currentlyretirement eligible for retirement and so each becomes vested in the IRA and entitled to the full Global IRA benefit value upon separation from the Company. Mr.Messrs. Geissler is [Ÿ]. Mr.and Panayotopoulos isare each fully vested in histheir respective IRP and UK Pensioncountry pension plan account balances and therefore, would retain those balances upon termination for any reason. Mr. Shirley is fully vested in both the P&G MRP and the GCSRP and will receive those benefits upon termination from the Company for any reason.
Deferred Compensation—AmountsCash amounts deferred under The Procter & Gamble Company Executive Deferred Compensation PlanEDCP have been earned and therefore are retained upon termination for any reason. Any RSUs granted pursuant to the PST Restoration Program or IRP would be treated as described above under Equity Awards, butAwards. The same is true for any cash contributions to EDCP resulting from the conversion of PST Restoration RSUs. None of these amounts are not included in the following table because they are reported onin the Nonqualified Deferred Compensation Table on page [Ÿ·] of this proxy statement.
Executive Benefits
n | Executive Group Life Insurance—Benefits are retained if employee is eligible for early retirement. |
n | Financial Counseling—Employee may use the remaining balance until the end of the current calendar year for reimbursable charges under the program. |
n | Unused Vacation—Employee is entitled to lump sum payment equal to value of accrued, but unused, vacation days. |
n | Other |
Expatriate and Relocation Program—If an employee’s expatriate assignment terminates for any reason, the Company would pay for relocation to the home country and would cover future taxes due related to the expatriate assignment.
The following table and footnotes quantify the payments and benefits that each Named Executive OfficerNEO would be required to be paid under the Company’s compensation programs upon various scenarios for termination of employment or a change-in-controlchange in control of the Company.
Payments upon Termination or Change-in-ControlChange in Control Table
Name
| Voluntary Termination,
($) | Company Encouraged
($) |
Change in Control or
($) | |||||||||
Robert A. | ||||||||||||
Stock Options | ||||||||||||
Stock Awards | ||||||||||||
Salary | ||||||||||||
Executive Group Life Insurance | ||||||||||||
| ||||||||||||
| ||||||||||||
Stock Options | ||||||||||||
Stock Awards | ||||||||||||
Salary | ||||||||||||
Executive Group Life Insurance | ||||||||||||
| ||||||||||||
| ||||||||||||
Stock Options | ||||||||||||
Stock Awards | ||||||||||||
Salary | ||||||||||||
Executive Group Life Insurance | ||||||||||||
| ||||||||||||
| ||||||||||||
Stock Options | ||||||||||||
Stock Awards | ||||||||||||
Salary | ||||||||||||
Executive Group Life Insurance | ||||||||||||
| ||||||||||||
| ||||||||||||
Stock Options | ||||||||||||
Stock Awards | ||||||||||||
Salary | ||||||||||||
Executive Group Life Insurance | ||||||||||||
| ||||||||||||
| ||||||||||||
Stock Options | ||||||||||||
Stock Awards | ||||||||||||
Salary | ||||||||||||
Executive Group Life Insurance | ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
|
1 | As noted above, no severance payments are required to be made to any of the |
2 | Each of the |
3 | The amounts shown for stock options and stock awards represent the in-the-money value of unexercisable stock options and unvested RSUs (excluding PST Restoration RSUs and IRP RSUs which are reported in the Nonqualified Deferred Compensation Table) that would immediately become exercisable and/or deliverable in shares, respectively, upon a |
4 | The totals included in this column assume that the option and stock awards granted under the 2009 Plan vest upon change in control. However, these awards do not vest unless (a) the awards are not assumed or (b) the awards are assumed, but the recipient is terminated without cause or resigns with “good reason.” The table below shows the values of stock awards made pursuant to the 2009 Plan (which are included in this column) that would not vest on a change in control unless one of the events occurred as well. |
Name | Vesting Value/Second Trigger ($) | |||
Robert A. McDonald | ||||
Jon R. Moeller | ||||
Werner Geissler | ||||
E. Dimitri Panayotopoulos | ||||
Edward D. Shirley | ||||
Robert A. Steele |
Security Ownership of Management and Certain Beneficial Owners
The following tables and footnotes provide information regarding the ownership of the Company’s Common Stock and Series A and B ESOP Convertible Class A Preferred Stock by all Directors and nominees, each Named Executive Officer,NEO, all Directors and executive officers as a group, and the ownersshareholders of more than five percent of the outstanding Series A and B ESOP Convertible Class A Preferred Stock,5% ownership, on August 14, 2009:12, 2011:
COMMON STOCK
(Number of shares/options)
Amount and Nature of Beneficial Ownership | ||||||||||||||
Owner | Direct1 and Profit Sharing Plan2 | Right to Acquire3 | Trusteeships and Family Holdings4 | Total | Percent of Class | Restricted Stock Units5 | ||||||||
| ||||||||||||||
Kenneth I. Chenault | 6 | |||||||||||||
Scott D. Cook | 6 | |||||||||||||
| 6 | |||||||||||||
Werner Geissler | ||||||||||||||
| ||||||||||||||
| ||||||||||||||
| ||||||||||||||
| 6 | |||||||||||||
Robert A. McDonald | 6 | |||||||||||||
W. James McNerney, Jr. | 6 | |||||||||||||
Jon R. Moeller7 | 6 | |||||||||||||
E. Dimitri Panayotopoulos | 6 | |||||||||||||
Johnathan A. Rodgers | 6 | |||||||||||||
| 6 | |||||||||||||
Robert A. Steele | 6 | |||||||||||||
Margaret C. Whitman | 6 | |||||||||||||
Mary Agnes Wilderotter | 6 | |||||||||||||
Patricia A. Woertz | 6 | |||||||||||||
Ernesto Zedillo | 6 | |||||||||||||
[ | 6 |
1 | Includes unrestricted common stock over which each Director or executive officer has sole voting and investment power and restricted common stock over which they have voting power but no investment power (until restrictions lapse). |
2 | Common stock allocated to personal accounts of executive officers under the Retirement Trust pursuant to PST. Plan participants have sole discretion as to voting and, within limitations provided by PST, investment of shares. Shares are voted by the Trustees in accordance with instructions from participants. If instructions are not received by the Trustees as to the voting of particular shares, shares are to be voted in proportion to instructions actually received from other participants in the Retirement Trust. |
3 | Amounts reflect vested stock options and stock options that will vest within 60 days of the record date (August |
4 | The individuals involved share voting and/or investment powers with other persons with respect to the shares shown in this column. |
5 | RSUs represent the right to receive unrestricted shares of common stock upon the lapse of restrictions, at which point the holders will have sole investment and voting |
6 | Less than |
7 | Totals include shares, stock options and RSUs indirectly held by Mr. Moeller through his spouse who is also employed by the Company. |
SERIES A ESOP CONVERTIBLE CLASS A PREFERRED STOCK
(Number of shares)
Amount and Nature of Beneficial Ownership | ||||||||||||||
Owner | Profit Sharing Plan1 | Trusteeships | Percent of Series | |||||||||||
| — | |||||||||||||
Kenneth I. Chenault | — | — | — | |||||||||||
Scott D. Cook | — | — | — | |||||||||||
| — | — | ||||||||||||
Werner Geissler | ||||||||||||||
| — | |||||||||||||
| 2 | |||||||||||||
| ||||||||||||||
| ||||||||||||||
Robert A. McDonald | — | 2 | ||||||||||||
W. James McNerney, Jr. | — | — | — | |||||||||||
Jon R. Moeller3 | — | 2 | ||||||||||||
E. Dimitri Panayotopoulos | — | 2 | ||||||||||||
Johnathan A. Rodgers | — | — | — | |||||||||||
| — | — | ||||||||||||
Robert A. Steele | — | — | ||||||||||||
Margaret C. Whitman | — | — | — | |||||||||||
Mary Agnes Wilderotter | — | — | — | |||||||||||
Patricia A. Woertz | — | — | — | |||||||||||
Ernesto Zedillo | — | — | — | |||||||||||
[ | 2 | |||||||||||||
Employee Stock Ownership Trust of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan, P.O. Box 599, Cincinnati, Ohio 45201-0599 | |
1 | Shares allocated to personal accounts of executive officers under the Employee Stock Ownership Trust pursuant to PST. Plan participants have sole discretion as to voting and, within limitations provided by PST, investment of shares. Shares are voted by the Trustees in accordance with instructions from participants. If instructions are not received by the Trustees as to the voting of particular shares, shares are to be voted in proportion to instructions actually received from other participants in the Trust. |
2 | Less than . [ |
3 |
|
SERIES B ESOP CONVERTIBLE CLASS A PREFERRED STOCK
(Number of shares)
Owner | Amount and Nature of Beneficial Ownership | ||||||||||||
| Profit Sharing Plan1 | Trusteeships | Percent of Series | ||||||||||
| — | — | — | ||||||||||
Kenneth I. Chenault | — | — | — | ||||||||||
Scott D. Cook | — | — | — | ||||||||||
| — | — | — | ||||||||||
Werner Geissler | — | 2 | |||||||||||
| |||||||||||||
| |||||||||||||
| — | ||||||||||||
| |||||||||||||
| |||||||||||||
| 2 | ||||||||||||
W. James McNerney, Jr. | — | — | — | ||||||||||
Jon R. Moeller | — | — | — | ||||||||||
E. Dimitri Panayotopoulos | — | 2 | |||||||||||
Johnathan A. Rodgers | — | — | — | ||||||||||
| — | — | — | ||||||||||
Robert A. Steele | — | — | — | ||||||||||
Margaret C. Whitman | — | — | — | ||||||||||
Mary Agnes Wilderotter | — | — | — | ||||||||||
Patricia A. Woertz | — | — | — | ||||||||||
Ernesto Zedillo | — | — | — | ||||||||||
[ | 2 | ||||||||||||
Employee Stock Ownership Trust of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan, P.O. Box 599, Cincinnati, Ohio 45201-0599 | 3 |
1 | Shares allocated to personal accounts of executive officers under the Employee Stock Ownership Trust pursuant to PST. Plan participants have sole discretion as to voting and, within limitations provided by PST, investment of shares. Shares are voted by the Trustees in accordance with instructions from participants. If instructions are not received by the Trustees as to the voting of particular shares, shares are to be voted in proportion to instructions actually received from other participants in the Trust. |
2 | Less than . [ |
3 | Unallocated shares. The voting of these shares is governed by the terms of PST, which provides that the Trustees shall vote unallocated shares held by them in proportion to instructions received from Trust participants as to voting of allocated shares. The disposition of these shares in connection with a tender offer would be governed by the terms of PST, which provides that the Trustees shall dispose of unallocated shares held by them in proportion to instructions received from Trust participants as to the disposition of allocated shares. |
Section 16(a) Beneficial Ownership Reporting Compliance
Ownership of andany transactions in Company stock by executive officers and Directors of the Company are required to be reported to the SEC pursuant to Section 16 of the Securities Exchange Act of 1934. As a practical matter, the Company assists its Directors and officers by monitoring transactions and completing and filing Section 16 reports on their behalf.
On May 13, 2009, Robert Fregolle, an executive officer of All Directors and officers complied with these requirements during the Company, filed a Form 3/A to correct the Form 3 initially filed on February 4, 2009 on which the Company inadvertently underreported Mr. Fregolle’s common stock holdings by approximately 950 shares.past fiscal year.
On July 16, 2009, Filippo Passerini, an executive officer of the Company, filed a Form 5 to report three gifts totaling 1182 shares on December 21, 2004; three gifts totaling 1227 shares on January 31, 2005; and three gifts totaling 173 shares on February 2, 2006. These amounts, together with acquisitions resulting from reinvestment of dividends, were inadvertently omitted from Mr. Passerini’s indirect common stock holdings.
Each member of the Audit Committee is an independent Director as determined by the Board of Directors, based on the New York Stock Exchange listing standards and the Board’s own Independence Guidelines. Each member of the Committee also satisfies the SEC’s additional independence requirement for members of audit committees. The Board of Directors has determined that Messrs. LeeMs. Woertz and Gupta and Ms. WoertzMr. Chenault meet the criteria for “Audit���Audit Committee Financial Expert” as defined by SEC rules. The Board of Directors has also determined that all Audit Committee members are financially literate. As noted previously in the proxy statement, the Committee’s work is guided by a Board-approved Charter, which can be found in the corporate governance section of the Company’s website atwww.pg.com/investors and is attached to this proxy statement as Exhibit A..
The Committee reviews and oversees the Company’s financial reporting process on behalf of the Board. Management has the Company’s primary responsibility for establishing and maintaining adequate internal financial controllership, for preparing the financial statements and for the public reporting process. Deloitte & Touche LLP, the Audit Committee-appointed independent registered public accounting firm for the fiscal year ended June 30, 2009,2011, is responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on management’s assessment of the effectiveness of the Company’s internal control over financial reporting.
In its role of financial reporting oversight, the Committee reviewed and discussed with management and Deloitte & Touche LLP the audited financial statements for the year ended June 30, 2009,2011, and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. In this context, the Committee met nineeight times (including telephone meetings to discuss quarterly results) during the fiscal year ended June 30, 2009.2011. The Committee has discussed with Deloitte & Touche LLP the matters that are required to be discussed by Statement on Auditing Standards No. 61 (Communication With Audit Committees), as modified or supplemented. In addition, the Committee has discussed various matters with Deloitte & Touche LLP related to the Company’s consolidated financial statements, including critical accounting policies and practices used, alternative treatments for material items that have been discussed with management, and other material written communications between Deloitte & Touche LLP and management. The Committee has also received written disclosures and the letter from Deloitte & Touche LLP required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees” and has discussed with Deloitte & Touche LLP its independence from the Company and its management. In addition, the Committee has received written material addressing Deloitte & Touche LLP’s internal quality control procedures and other matters, as required by the New York Stock Exchange listing standards. The Committee understands the need for Deloitte & Touche LLP to maintain objectivity and independence in its audit of the Company’s financial statements and internal controls over financial reporting. The Committee has implemented a formal pre-approval process for non-audit fee spending, and it seeks to limit this spending to a level that keeps the core relationship with Deloitte & Touche LLP focused on financial statement review and evaluation. A copy of this pre-approval process is attached to this proxy statement as Exhibit B.A.
Based on the considerations referred to above, the Committee recommended to our Board of Directors that the audited financial statements for the year ended June 30, 20092011 be included in our
Annual Report on Form 10-K for 20092011 and selected Deloitte & Touche LLP as the independent registered public accounting firm for the Company for the fiscal year ending June 30, 2010.2012. This report is provided by the following independent Directors, who constitute the Committee:
Ms. Angela F. Braly
Mr. Kenneth I. Chenault
Dr. Sue Desmond-Hellmann
August, 2011
Fees Paid to the Independent Registered Public Accounting Firm
The Audit Committee, with the ratification of the shareholders, engaged Deloitte & Touche LLP to perform an annual audit of the Company’s financial statements for the fiscal year ended June 30, 2009.2011. Pursuant to rules of the SEC, the fees paid to Deloitte, & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively “Deloitte”), are disclosed in the table below:
Fees Paid to Deloitte
(Dollars in Thousands)
FY 2007-081 | FY 2008/09 | ||||
Audit Fees | $ | 31,827 | [$Ÿ] | ||
Audit-Related Fees | 3,821 | [Ÿ] | |||
Tax Fees | 1,757 | [Ÿ] | |||
Subtotal | 37,405 | [Ÿ] | |||
All Other Fees | 859 | [Ÿ] | |||
Deloitte Total Fees | $ | 38,264 | [$Ÿ] | ||
|
FY 2009/10 | FY 2010/11 | |||||
Audit Fees | $ | 29,879 | ||||
Audit-Related Fees | 2,942 | |||||
Tax Fees | 748 | |||||
Subtotal | 33,569 | |||||
All Other Fees | 354 | |||||
Deloitte Total Fees | $ | 33,923 | ||||
Services Provided by Deloitte
All services provided by Deloitte are permissible under applicable laws and regulations. The Company has adopted policies and procedures for pre-approval of services by Deloitte as described in Exhibit BA to this proxy statement. The fees paid to Deloitte shown in the table above were all pre-approved in accordance with these procedures and include:
1) | Audit Fees—These are fees for professional services performed by Deloitte for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s 10-Q filings, and services that are normally provided in connection with statutory and regulatory filings or engagements. |
2) | Audit-Related Fees—These are fees for assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of the Company’s financial statements. This includes: employee benefit and compensation plan audits; due diligence related to mergers and acquisitions; other attestations by Deloitte, including those that are required by statute, regulation or contract; audits in connection with dispositions; and consulting on financial accounting/reporting standards and controls. |
3) | Tax Fees—These are fees for professional services performed by Deloitte with respect to tax compliance and tax returns. This includes review of original and amended tax returns for the Company and its consolidated subsidiaries; refund claims, payment planning/tax audit assistance; and tax work stemming from “Audit-Related” items. |
4) | All Other Fees—These are fees for other permissible work performed by Deloitte that does not meet the above category descriptions. The fees cover various local engagements that are permissible under applicable laws and regulations including tax filings for individual employees included in the |
These services are actively monitored (both spending level and work content) by the Audit Committee to maintain the appropriate objectivity and independence in Deloitte’s core work, which is the audit of the Company’s consolidated financial statements. The Committee also concluded that Deloitte’s provision of audit and non-audit services to the Company and its affiliates is compatible with Deloitte’s independence.
PROPOSAL TO RATIFY APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm to perform the audit of our financial statements and our internal controls over financial reporting for the fiscal year ending June 30, 2010.2012. Deloitte & Touche LLP was our independent registered public accounting firm for the fiscal year ended June 30, 2009.2011.
Deloitte & Touche LLP representatives are expected to attend the 20092011 annual meeting. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate shareholder questions.
We are asking our shareholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm. Although ratification is not required by the Company’s Code of Regulations, the Board of Directors’ By Laws or otherwise, the Board is submitting the selection of Deloitte & Touche LLP to our shareholders for ratification as a matter of good corporate practice. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of the Company and our shareholders.
The Board of Directors recommends a vote FOR the following resolution:proposal:
RESOLVED, That action by the Audit Committee appointing Deloitte & Touche LLP as the Company’s independent registered public accounting firm to conduct the annual audit of the financial statements of the Company and its subsidiaries for the fiscal year ending June 30, 20102012, is hereby ratified, confirmed and approved.
PROPOSAL FOR AN ADVISORY VOTE ON
EXECUTIVE COMPENSATION (THE SAY ON PAY VOTE)
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires the Board to provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our NEOs as set forth in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission (“SEC”). This proposal is also referred to as the Say On Pay vote.
[·]
This vote is non-binding; however, we highly value the opinions of our shareholders. Accordingly, the Board and the C&LD Committee will consider the outcome of this advisory vote in connection with future executive compensation decisions.
[Company position to be included in definitive proxy statement.]
PROPOSAL FOR AN ADVISORY VOTE ON
THE FREQUENCY OF SAY ON PAY VOTES
The Dodd-Frank Wall Street Reform and Consumer Protection Act also provides that shareholders must be given the opportunity, at least once every six years, to cast a non-binding, advisory vote on whether a Say On Pay vote on the compensation of our NEOs should be held every one, two or three years.
After careful consideration of the various arguments supporting each frequency level, the Board believes that a vote of every “[·]” on Say On Pay is the best choice for the Company and its shareholders at the present time. Our recommendation for a vote of every “[·]” is indicative of the strong belief that we have in our executive compensation programs and their effectiveness.
[Company position to be included in definitive proxy statement.]
PROPOSAL TO AMEND THE COMPANY’S REGULATIONS TO AUTHORIZE
THE BOARDAMENDED ARTICLES OF DIRECTORS TO AMEND THE COMPANY’S REGULATIONS TO THE
EXTENT PERMITTED BY THE OHIO GENERAL CORPORATION LAWINCORPORATION
The following proposal will be presented for action at the annual meeting by direction of the Board of Directors:
RESOLVED, That Article VIII, Section 1Appendix A of the Company’s Regulations be amended to authorize the BoardAmended Articles of Directors to amend the Company’s Regulations to the extent permitted by Ohio General Corporation Law. The revised Article VIII, Section 1 would read as follows:
ARTICLE VIII
AMENDMENTS
SECTION 1. Amendments.These Regulations, or any of them, may be altered, amended, added to or repealed by the Board of Directors (to the extent permitted by the Ohio General Corporation law) or by the affirmative vote of the holders of at least a majority of the outstanding shares of capital stockIncorporation of the Company entitledis hereby amended to vote thereon, considered for the purposes of this SECTION 1 as one class.
The Board of Directors recommends a vote FOR this resolution for the following reasons:
Our Regulations were initially adopted in 1905 and contain many awkward and out-of-date provisions. Allowing the Board of Directors to amend these Regulations would allow the Board to streamline and improve the Regulations and adapt them to current times. If the proposed amendment is adopted, the Board would be able to address certain ministerial and administrative provisions in the
Regulations, including changing officer titles and duties, changing the order of business at the annual shareholders’ meeting and adopting an advance notice provision for the introduction of matters at the annual shareholders’ meeting. The Board would not be able to amend the Regulations in a manner that would adversely affect the fundamental rights of the Company’s shareholders. Other Ohio corporations have made the change to allow their regulations to be updated.
Historically, Ohio law did not permit the Board to amend the Regulations. In October 2006, Ohio General Corporation Law was changed to allow Directors to amend the Regulations without shareholder approval, within certain statutory limitations. The statute prohibits the Board from amending the Regulations in various areas that impact fundamental shareholder rights. Specifically, the Board may not amend the Regulations to do any of the following: (1) change the authority of the shareholders themselves; (2) establish or change the percentage of shares that must be held by shareholders in order to call a shareholders meeting or change the time period required for notice of a shareholders meeting; (3) establish or change the quorum requirements at shareholder meetings; (4) prohibit the shareholders or directors from taking action by written consent without a meeting; (5) change directors’ terms of office or provide for the classification of directors; (6) increase the vote of shareholders required to remove directors; (7) change the quorum or voting requirements at directors meetings; or (8) remove the requirement that a “control share acquisition” of an “issuing public corporation” must be approved by the shareholders of the corporation to be acquired. In addition, the Board may not delegate the authority to amend the Regulations to a Board Committee.
This proposal does not seek to change in any way these limitations placed on the Board under the Ohio General Corporation Law with respect to amendments to the Regulations, and would only allow the Board to amend the Regulations to the extent permitted by the Ohio General Corporation Law. Under Ohio law, the shareholders can always override amendments made by the Board, and the Regulations may never divest the shareholders of the power to adopt, amend or repeal the Regulations.
The 2006 amendments brought Ohio law into line with the law of most other states. Allowing the Board to make future amendments to the Regulations will bring the Company in line with most other companies.
Adoption of the amendment to the Regulations requires the affirmative vote of a majority of the Company’s issued and outstanding Common Stock.
For the reasons set forth above, the Board of Directors recommends a vote FOR this resolution.
PROPOSAL TO APPROVE THE PROCTER & GAMBLE
2009 STOCK AND INCENTIVE COMPENSATION PLAN
On [Ÿ], the Board of Directors approved for submission to the shareholders The Procter & Gamble 2009 Stock and Incentive Compensation Plan (the “2009 Plan” or “Plan”),read as set forth in Exhibit CB to the proxy statement for this proxy statement. The following proposal will be presented for action at the annual meeting by directionmeeting; and
RESOLVED FURTHER, That Appendix B of the BoardAmended Articles of Directors.
RESOLVED, That The Procter & Gamble 2009 Stock and Incentive Compensation Plan adopted byIncorporation of the Board of Directors,Company is hereby amended to read as set forth in Exhibit C to the proxy statement for this meeting; and
RESOLVED FURTHER, That the annual meeting, is hereby approvedBoard of Directors and authorized.the appropriate officers of the Company are authorized and directed to take appropriate steps to make effective the foregoing amendments to the Amended Articles of Incorporation of the Company, including filing such amendments in the office of the Secretary of State of Ohio.
The Board of Directors recommends a vote FOR this resolution for the following reasons:
Background
The Company’s shareholders have approved aCompany currently has two outstanding series of stock plans since 1951,preferred stock: Series A ESOP Convertible Class A Preferred Stock (“Series A Preferred Stock”) and there has been some form of stock award plan for certain officers and employees of the Company since 1949. The most recent stock plan,Series B ESOP Convertible Class A Preferred Stock (“Series B Preferred Stock”) (collectively referred to as “Preferred Stock”). The Procter & Gamble 2001Profit Sharing Trust and Employee Stock Ownership Plan (“PST”) is the holder of both series of Preferred Stock. The Series A Preferred Stock is used to fund the Company’s profit sharing contribution, which is the Company’s main U.S. pension plan, and the Series B Preferred Stock is used to fund retiree health care costs.
The Company’s current Amended Articles of Incorporation (“Articles”) establish different dividend record dates for Preferred Stock and Incentive Compensation Plan (the “2001 Plan”)
was adopted by the BoardCommon Stock. The Articles also require the PST to formally request redemption prior to having a right to convert its Preferred Stock into Common Stock. Both provisions were enacted with the authorization of Directors on July 10, 2001,Preferred Stock in 1989. Today, neither is necessary. Further, they create administrative burdens that cause inefficiencies and approved at the annual meeting of shareholders held on October 9, 2001. After eight years of grants under the 2001 Plan, there are not enough shares remaining to make additional grants in 2010 and subsequent years. The 2009 Plan, which will go into effect immediately upon approval at the annual meeting of shareholders, will incorporate many of the provisions of the 2001 Plan while adding certain features and provisions not currently foundcomplexities in the 2001 Plan.
The Company continuesprocesses of both the PST and the Company. Amending the Articles to grant awards under its plans at levels that it believes are reasonable in light of its business objectives, appropriatealign the record dates for attractingPreferred Stock and retaining top talent and consistent with the long term interests of its shareholders.
The following table sets forth information regarding awards granted and earned for each of the last three fiscal years.
(Amounts in Millions) | |||||||
Fiscal Year Ended June 30, | 2007 | 2008 | 2009 | ||||
Stock options granted | 33.0 | 28.3 | [ | Ÿ] | |||
Service-based restricted stock and restricted stock units granted | 0.5 | 0.8 | [ | Ÿ] | |||
Actual performance-based restricted stock and restricted stock units earned | 0.0 | 0.8 | [ | Ÿ] | |||
Weighted average basic common shares outstanding during the fiscal year | 3,159.0 | 3,080.8 | [ | Ÿ] |
The following is a summary of the basic features of the 2009 Plan. For additional information, please refer to the specific provisions of the full text of the 2009 Plan set forth in Exhibit C to this proxy statement.
Purpose
The purpose of the Plan is to attract, retain, and motivate key employees through the award of stock options, stock appreciation rights, shares of common stock, RestrictedCommon Stock Units (“RSUs”) and other performance related awards. The Board firmly believes that the granting of awards under the Plan will help enable the Company to retain key employees while further strengthening the alignment of interests between the Company’s key employees and shareholders.
The Plan is designed to encourage those officers and employees of the Company who are largely responsible for its continued growth, profitability, and success to remain with the Company and to increase their stock ownershipremove the requirement of formally requesting redemption in the Company. The Plan will incent these employeesorder to retain their focus on the long-term growth of the Company through the granting of options to purchase shares of the Company’s common stock and stock appreciation rights and the awarding of a portion of their compensation in the form of RSUs and/or shares of common stock. During the fifty years since plans of this type have been in existence at the Company, key management turnover has been minimal, and the Company has experienced solid growth in sales and earnings. The Board firmly believes that these results and the existence of the plans are directly related.
Administration
The Compensation and Leadership Development Committee (the “Committee”) of the Board of Directors will administer the Plan. The Committee is currently composed of four members. No member of the Committee is an employee of the Company or otherwise eligible to receive options, stock appreciation rights, or other awards under the Plan. The Committee will have the authority to:
select the Plan participants;
grant awards in such amounts and forms as the Committee shall determine;
impose restrictions, terms, and conditions upon such awards as the Committee shall deem appropriate;
establish administrative regulations consistent with the Plan; and
designate employees of the Company to assist in the administration and operation of the Plan.
Eligibility
The participants in the Plan shall be those employees who, in the opinion of the Committee, have demonstrated a capacity for contributing in a substantial manner to the success of the Company. This currently includes approximately 5,100 of the Company’s key managers who receive awards on an annual basis. The Plan also currently allows for up to 5,000 awards per year of 100 options each to employees not eligible for key manager grants but who make special contributions to the Company’s business. Finally, the approximately 15,000 employees currently eligible for cash bonuses can elect to take all or part of their bonuses in stock options issued pursuant to the Plan.
Shares Available
The Plan permits the award of [Ÿ] new shares. In addition, the following shares may be awarded under the Plan:
shares authorized to be awarded under the 2001 Plan that were not awarded under the 2001 Plan;
shares authorized to be awarded under The Gillette Company 2004 Long Term Incentive Plan (the ”2004 Plan”) that were not awarded under that plan; and
shares awarded under the Company’s previous stock plans (including The Gillette Company 1971 Stock Option Plan) that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares, are settled in cash in lieu of shares, or are exchanged with the committee’s permission prior to the issuance of shares for awards not involving shares.
All stock options and stock appreciation rights awarded under the Plan shall be counted against the aggregate number of shares on a one-for-one basis while all other awards shall be counted as [Ÿ] shares for each share awarded. The maximum number of shares with respect to which stock options or stock appreciation rights may be granted to any participant in any calendar year shall not exceed two million.
The following table provides the number of shares outstanding and the number of shares available for future grant under other Company plans as of June 30, 2009:
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There are no other shares remaining available for grant under any other Company plans or programs. Upon approval of the Plan by shareholders, shares remaining in the 2001 Plan and the 2004 Plan will be rolled over into the Plan and will become available for future grants under the terms and conditions of the 2009 Plan. No future grants will be made out of either the 2001 Plan or the 2004 Plan.
Granting of Awards
The Committee shall have authority to grant the following types of awards subject to the following conditions:
Nonstatutory and Incentive Stock Options. All stock options must have a maximum life of no more than ten years from the date of grant, and no options may be exercisable within one year from the date of grant except in the case of death of the recipient. At the time of grant, the Committee shall determine the exercise price for any stock options. In no event, however, may the exercise price be less than 100% of the fair market value of the Company’s common stock at the time of grant. At the time of exercise, payment in full of the exercise price shall be paid in cash, shares of common stock valued at their fair market value on the date of exercise, a combination thereof, or by such other method as the Committee may determine. Stock options may only be exercised by the recipient during the recipient’s lifetime, except in the event of legal incompetence of the recipient (where the recipient’s legally appointed guardian may exercise the stock option) or in the event the Committee approves transfer of a stock option. All unexercised stock options granted to a recipient who ceases to be an employee of the Company or any of its subsidiaries become void, except in the case of death, retirement or, under certain circumstances, in a change-in-control or special separation from the Company. In the event of a recipient’s death, stock options may be exercised by the recipient’s beneficiary.
Stock Appreciation Rights. Stock appreciation rights offer recipients the right to receive payment for the difference (spread) between the exercise price of the stock appreciation right and the market value of the Company’s common stock at the time of redemption. The primary purpose for granting stock appreciation rights has been to provide some of the incentive benefits of stock options to key International managers resident in those few countries where tax and other requirements make stock options impractical. The Plan would also permit awarding of stock appreciation rights to U.S. managers in the event that new tax or other requirements make stock options less attractive. The Committee may authorize payment of the spread for a stock appreciation right in the form of cash, common stock to be valued at its fair market value on the date of exercise, a combination thereof, or by such other method as the Committee may determine.convert Preferred Stock appreciation rights are generally subject to the same limitations and restrictions regarding exercise, transfer and forfeiture as are stock options.
into Common Stock and RSUs. Under the 2009 Plan, the Committee may award common stock and/or RSUs to an employee as a portion of the employee’s remuneration. In doing so, the Committee, in its discretion, may impose conditions or restrictions on the award. The Committee may also authorize any recipient to convert cash compensation otherwise payable to such recipient into stock options, RSUs or shares of Common Stock under the Plan upon such terms and conditions as the Committee may determine, provided that, pursuant to any such conversion, the RSUs and shares of Common Stock shall be valued at no less than 100% of their fair market value.
Performance Related Awards. Section 162(m) of the Internal Revenue Code generally limits to $1,000,000 the amount that a publicly held corporation may deduct for the compensation paid to its Chief Executive Officer and its three most highly compensated officers other than the Chief Executive Officer and Chief Financial Officer. “Qualified performance-based compensation,” however, is not subject to the $1,000,000 deduction limit. Accordingly, the Plan permits the Committee to establish performance goals consistent with Section 162(m) and authorizes the granting of cash, stock options, stock appreciation rights, Common Stock, other property, or any combination thereof to employees upon achievement of such established performance goals. In setting the performance goals, the Committee may use such measures as stock price, market share, sales revenue, organic sales growth, cash flow, cash flow efficiency, earnings per share, return on equity, total shareholder return, gross margin, costs, operating income or such other measures as the Committee deems appropriate. The performance goals may relate to the
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Conditions for Awards
At the time of exercise of a stock option or stock appreciation right, a recipient must certify the intention to remain employed by the Company or one of its subsidiaries for at least one year. The recipient must also agree that he or she has not 1) engaged in competitive employment with the Company or its subsidiaries for a period of three years following termination of employment, unless the recipient first obtains written permission from the Company; 2) solicited Company employees to work elsewhere or solicit business from the Company’s customers, suppliers or partners, unless the recipient first obtains written permission of the Company; 3) taken any action significantly contrary to the best interests of the Company; or 4) disclosed any of the Company’s trade secrets or confidential information. The Committee may waive certain ofwill alleviate these conditions or impose different conditions that do not increase or extend the rights of the recipients. The Plan also contains a claw back provision which allows the Company to recover the net proceeds resulting from the exercise of stock option or stock appreciation rights and the value of any common stock or other awards delivered pursuant to the Plan for certain periods should a participant violate these covenants.administrative burdens.
U.S. Federal Income Tax Consequences
The discussion below relates specifically to the U.S. tax consequences of equity awards. In addition to U.S. tax consequences, the awards may be subject to tax by the recipient’s country of residence or citizenship at the same time or at a different time than the awards would be subject to tax by the U.S. Recipients who may be subject to tax in a non-U.S. jurisdiction should consult their personal tax advisers regarding the taxation of awards under the Plan.
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The amount includable in income with respect to restricted stock is the fair market value of the shares as of the day the shares are transferable or not subject to a substantial risk of forfeiture, whichever is applicable; if the recipient has elected to include the income in the year in which the shares are received, the amount of income includable is the fair market value of the shares at the time of transfer.
Unrestricted stock is taxable as ordinary income when it is granted to the recipient. Dividends paid on restricted stock during the restricted period are taxable as ordinary income as paid. The Company is entitled to a deduction for restricted or unrestricted stock in the year the recipient is subject to ordinary income tax with respect to the stock.
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Additional Information
The Board or Committee may amend the Plan, provided that no amendment may increase the number of shares, reduce the exercise price or alter the class of individuals eligible to receive stock options without shareholder approval. However, shareholder approval may not necessarily be required for every amendment to the Plan that can increase the cost to the Company of the Plan or alter the allocation of benefits between the Company’s Named Executive Officers, executive officers, and other employees.
The Plan prohibits the re-pricing of underwater stock options by forbidding any stock option or stock appreciation right from being cancelled in exchange for cash, other awards, or stock options or stock appreciation rights having a lower exercise price without the prior approval of the shareholders of The Company.
The Committee has made no determinations as to any awards under the Plan. Because awards under the Plan are subject to the discretion of the Committee, awards and benefits under the Plan for any future year are not determinable. However, the Committee does not expect that awards to Plan participants made this year under the 2001 Plan would have been materially different in number or amount, if they had been made under the new Plan. Future option exercise prices under the Plan are not determinable because they will be based upon the fair market value of the Common Stock on the date of the grant. No RSUs, restricted stock awards, performance awards or other stock or option awards have been made under the Plan.
On, [Ÿ], the average of the high and low market prices of the Company’s Common Stock on the New York Stock Exchange was [$Ÿ] per share.
In the event that the Plan is terminated, recipients of stock options, stock appreciation rights, RSUs and common stock granted prior to such expiration shall retain all rights to such shares in accordance with their terms, including the right to exercise stock options or stock appreciation rights.
In the event of a change in control of the Company (as defined in the Plan), stock options and stock appreciation rights granted under the Plan shall vest immediately and any conditions or restrictions on RSUs and/or common stock granted under the Plan shall lapse if the successor doesnot assume the awards under the Plan. If a change in control occurs and the successor does assume the awards, stock options and stock appreciation rights granted under the Plan shall vest immediately and any conditions or restrictions on RSUs and/or common stock granted under the Plan shall lapseonly for those participants who are involuntarily terminated for reasons other than cause or who terminate their employment for good reason, as those terms are defined in the Plan.
Additional Equity Compensation Plan Information
The following table gives information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s equity compensation plans as of June 30, 2009. The table includes the following plans: The 1968 Procter & Gamble Plan for the Use of Shares in Payment of Remuneration; The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1992 Stock Plan (Belgian Version); The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan; The Procter & Gamble Future Shares Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan; The Gillette Company 1971 Stock Option Plan and The Gillette Company 2004 Long-Term Incentive Plan.
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The following narrative provides a description ofproposed changes do not confer new rights or remove existing rights from either Preferred Stock or Common Stock. This proposal requires the Company’s non-shareholder approved plans.
The Procter & Gamble 1992 Stock Plan (Belgian Version)
No further grants can be made under the plan, although unexercised stock options previously granted under this plan remain outstanding. This plan was approved by the Company’s Board of Directors on February 14, 1997. Although the plan has not been submitted to shareholders for approval it is nearly identical to The Procter & Gamble 1992 Stock Plan, approved by the Company’s shareholders on October 13, 1992, except for a few minor changes designed to comply with the Belgian tax laws.
The plan was designed to attract, retain and motivate key Belgian employees. Under the plan, eligible participants were: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company’s common stock. Except in the case of death of the recipient, all stock options and stock appreciation rights must vest in no less than one year from the date of grant and must expire no later than fifteen years from the date of grant. The exercise price for all stock options granted under the plan is the average price of the Company’s stock on the date of grant. If a recipient of a grant leaves the Company while holding an unexercised option or right, any unexercisable portions immediately become void, except in the case of death, and any exercisable portions become void within one month of departure, except in the case of death or retirement. Any common stock awarded under the plan may be subject to restrictions on sale or transfer while the recipient is employed, as the committee administering the plan may determine.
The Procter & Gamble Future Shares Plan
No further grants can be made under the plan which terminated on October 13, 2007, although unexercised stock options previously granted under this plan remain outstanding. On October 14, 1997, the Company’s Board of Directors approved The Procter & Gamble Future Shares Plan pursuant to which options to purchase shares of the Company’s common stock may be granted to employees worldwide. The purpose of this plan is to advance the interests of the Company by giving substantially all employees a stake in the Company’s future growth and success and to strengthen the alignment of interests between employees and the Company’s shareholders through increased ownership of shares of the Company’s stock. The plan has not been submitted to shareholders for approval.
Subject to adjustment for changes in the Company’s capitalization, the number of shares to be granted under the plan is not to exceed 17 million shares. Under the plan’s regulations, recipients are granted options to acquire 100 shares of the Company’s common stock at an exercise price equal to the average price of the Company’s common stock on the date of the grant. These options vest five years after the date of grant and expire ten years following the date of grant. If a recipient leaves the employ of the Company prior to the vesting date for a reason other than disability, retirement or special separation (as defined in the plan), then the award is forfeited.
At the time of the first grant following Board approval of the plan, each employee of the Company not eligible for an award under the 1992 Stock Plan was granted options for 100 shares. From the date of this first grant through June 30, 2003, each new employee of the Company received options for 100 shares.
The Gillette Company 1971 Stock Option Plan
No further grants can be made under the plan after April 25, 2005, although unexercised stock options previously granted under this plan remain outstanding. The plan was approved by shareholders of The Gillette Company and assumed by the Company upon the merger between the Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result
of the merger. After the merger, all outstanding options became options to purchase shares of The Procter & Gamble Company subject to an exchange ratio of 0.975 shares of P&G stock per share of Gillette stock.
The plan was designed to attract, retain and motivate key salaried employees of The Gillette Company and non-employee members of its Board of Directors. Under the plan, eligible participants receive the option to purchase Company stock at a pre-determined price which cannot be less than 100% of the fair market value per share at the time that the option is granted. The period of any option may not exceed ten years from the date of grant. Subject to adjustment for changes in the Company’s capitalization, the number of shares granted under the plan was not to exceed 198 million shares.
If a recipient leaves the employ of the Company for any reason other than death or discharge for cause, the recipient is permitted to exercise any vested options granted under the plan for a period between thirty days and five years after termination, depending on the circumstances of his/her departure. If a participant is discharged for cause, all options are immediately cancelled. If a participant dies while holding options, the options are exercisable for a period of one to three years depending on the date of grant.
The Gillette Company 2004 Long-Term Incentive Plan
Shareholders of The Gillette Company approved this plan on May 20, 2004, and the plan was assumed by the Company upon the merger between The Procter & Gamble Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result of the merger. After the merger, all outstanding options became options to purchase shares of The Procter & Gamble Company subject to an exchange ratio of 0.975 shares of P&G stock per share of Gillette stock. Only employees previously employed by The Gillette Company prior to October 1, 2005 are eligible to receive grants under this plan.
The plan was designed to attract, retain and motivate employees of The Gillette Company, and until the effective date of the merger between The Gillette Company and The Procter & Gamble Company, non-employee members of the Gillette Board of Directors. Under the plan, eligible participants are: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company’s common stock or restricted stock units (and dividend equivalents). Subject to adjustment for changes in the Company’s capitalization and the addition of any shares authorized but not issued or redeemed under The Gillette Company 1971 Stock Option Plan, the number of shares to be granted under the plan is not to exceed 19 million shares.
Except in the case of death of the recipient, all stock options and stock appreciation rights must expire no later than ten years from the date of grant. The exercise price for all stock options granted under the plan must be equal to or greater than the fair market value of the Company’s stock on the date of grant. Any common stock awarded under the plan may be subject to restrictions on sale or transfer while the recipient is employed, as the committee administering the plan may determine.
If a recipient of a grant leaves the Company while holding an unexercised option or right: (1) any unexercisable portions immediately become void, except in the case of death, retirement, special separation (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions; and (2) any exercisable portions immediately become void, except in the case of death, retirement, special separation, voluntary resignation that is not for Good Reason (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions.
Approval and Adoption
The affirmative vote of a majority of shares participating in the voting on this proposal is required for adoption of this resolution. Proxies will be voted FOR the resolution unless the Proxy Committee is instructed otherwise on a proxy returned to such Committee. Abstentions indicated on such a proxy card will not be counted as either “for” or “against” this proposal. “Broker non-votes” specified on proxies returned by brokers holding shares for beneficial owners who have not provided instructions as to voting on this issue will be treated as not present for voting on this issue.issued and outstanding shares.
ForBoard Position
The Board supports the reasons set forth above,proposed amendments to the Board recommendsArticles. Aligning record dates for Preferred Stock and Common Stock and eliminating a vote FOR this resolution.formal request for redemption will simplify the processes for both PST and the Company, while neither conferring new rights nor removing existing rights from either Preferred or Common shareholders.
Shareholder Proposal # [Ÿ]#1
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W., Suite 215, Washington, D.C. 20037, owner of 800 shares of common stock of the Company, has given notice that she intends to present for action at the annual meeting the following resolution:
RESOLVED: “That the stockholders of P&G, assembled in Annual Meeting in person and by proxy, hereby request the Board of Directors to take the necessary steps to provide for cumulative voting in the election of directors, which means each stockholder shall be entitled to as many votes as shall equal the number of shares he or she owns multiplied by the number of directors to be elected, and he or she may cast all of such votes for a single candidate, or any two or more of them as he or she may see fit.”
REASONS: “Many states have mandatory cumulative voting, so do National Banks.”
“In addition, many corporations have adopted cumulative voting.”
“The Company continues to meet EACH year in Cincinnati. Many corporations, such as GE, IBM, Verizon, U.S. Airways, Delta and numerous others rotate their meetings. A Director elected through cumulative voting, might be more inclined to support rotationvote for rotating the annual meetings to locations other than Cincinnati from time to time.
“In 2010 the owners of meeting locations, so that shareholders in other parts442,062,787 shares, representing approximately 25% of the country can also meet management and directors.shares voting, voted for this proposal.”
“If you AGREE, please mark your proxy FOR this resolution.”
The Board of Directors recommends a vote AGAINST this proposal.
[Company response to be included in definitive proxy statement.]
Shareholder Proposal #[Ÿ]#2
WaldenPeople for the Ethical Treatment of Animals, 501 Front St., Norfolk, VA 23510, which owns 56 shares of common stock in the Company, has given notice that it intends to present for action at the annual meeting the following resolution:
RESOLVED, that the Board release to shareholders by the end of 2011 a plan for entirely phasing out Iams’ use of animals in laboratories for testing dog and cat food products and formulations, and instead, relying entirely on humane testing methods with companion animals in their own homes.
Supporting Statement:
After People for the Ethical Treatment of Animals exposed the cruel treatment of dogs and cats at an Iams independent contract facility1, the company committed to using only its own laboratories and to a testing program using companion animals in their own homes. But more than 450 dogs and cats are still
confined at the company’s Dayton and Lewisberg, Ohio, laboratories2, and this year a former Iams laboratory employee provided PETA with first-hand information about how the dogs live: The animals—who are no different from our beloved companions—are reportedly confined for more than 23 hours a day, subjected to frequent blood draws, forced to sleep on cement floors, limited to 20 minutes of daily socialization, and denied normal lives and loving families. The tests to which they are subjected are not required by any government entity.
Further, Iams’ commitment to the animals it uses appears to be waning. Our company admitted in its most recent report that “there was no on-site meeting of the [Animal Welfare Advisory] Board and no unannounced review was conducted of the Pet Care program.”3 This lack of independent oversight violates Iams’ own policy, put in place to ensure at least minimal care of the animals and may have allowed problems to go unidentified and uncorrected, potentially causing animals to suffer.
It has been proven that animals are harmed by confinement in laboratories and that data collected in these animals is skewed. Physicians and scientists who reviewed 80 published studies concluded that “significant fear, stress, and possibly distress are predictable consequences of routine laboratory procedures and that these phenomena have substantial scientific and humane implications for the use of animals in laboratory research.”4This stress is eliminated by using companion animals in their own homes.
Subjecting animals to life in a laboratory is not consistent with our company’s stated commitment to bettering life for animal companions. Iams can correct the inconsistency between what it says and what it does by implementing 100 percent in-home product testing practices. Iams already has a successful but limited program in place, and should now complete this process.
We urge shareholders to support this socially, ethically, and fiscally responsible resolution.
1 | PETA, “Animals Still Suffer at Iams,” Retrieved 22 Apr. 2011 |
<http://www.iamscruelty.com/introductions.asp>. |
2 | U.S. Department of Agriculture, The Iams Company Annual Report, 2010, Retrieved 22 Apr. 2011 |
<http://acissearch.aphis.usda.gov/LPASearch/faces/pdfpage.jspx?p7023=211%2C2010>. |
3 | The Iams Company, “Pet Care International Animal Welfare Advisory Board Annual Report,” 2009, Retrieved 22 Apr. 2011 <http://www.iamstruth.com/truthArticles.do?pi=BA&method=articles&articleID=1013>. |
4 | Jonathan Balcombeet al., “Laboratory Routines Cause Animal Stress,”Contemporary Topics in Laboratory Animal Science 43.6 (2004): 42-51. |
[Company response to be included in definitive proxy statement.]
Shareholder Proposal #3
Northstar Asset Management One Beacon St.Inc., P.O. Box 301840 Boston, Massachusetts 02108,02130, owner of at least 295,410 shares$2,000 in value of common stock of the Company, has given notice that it intends to present for action at the annual meeting the following resolution:
ADVISORY VOTE ON EXECUTIVE COMPENSATIONShareholder Advisory Vote on Electioneering Contributions
RESOLVED,Whereas, the Supreme Court ruling inCitizens United v. Federal Election Commission (Citizens United) interpreted the First Amendment right of freedom of speech to include certain corporate political expenditures involving “electioneering communications,” and striking down elements of the previously well-established McCain-Feingold law;
WhereasCitizens United is viewed by some as having eroded a wall that shareholders ofhas stood for a century between corporations and electoral politics (e.g.,New York Times editorial, “The Court’s Blow to Democracy” on January 21, 2010);
Whereas, in July 2010 Target Corporation donated $150,000 to the political group Minnesota Forward, which was followed by a major national controversy with demonstrations, petitions, threatened boycotts and considerable negative publicity;
Whereas, “Guided by our Purpose, Values and Principles, P&G participates in the political process to help shape public policy and legislation that has a direct impact on the Company.”
Whereas, proponents believe The Procter & Gamble requestCompany (P&G) should establish policies that minimize risk to the boardfirm’s reputation and brand through possible future missteps in corporate electioneering;
Whereas, “A committee composed of directorsappropriate members of P&G senior management decides which candidates, campaigns and committees the P&G PAC will support based on a nonpartisan effort to advance and protect the interests of the company and our stockholders and employees;”
Whereas, P&G has a firm nondiscrimination policy which states, “P&G is committed to providing equal opportunities in employment. This means we must treat our fellow P&Gers and P&G applicants fairly and never engage in any form of unlawful discrimination. We follow all related laws and in our employment decisions (such as recruiting, hiring, training, salary and promotion) we do not discriminate against individuals on the basis of race, color, gender, age, national origin, religion, sexual orientation, gender identity and expression, marital status, citizenship, disability, veteran status, HIV/AIDS status, or any other legally protected factor.”
RESOLVED: Shareholders recommend that the Board of Directors adopt a policy that provides shareholdersunder which the opportunity atproxy statement for each annual shareholder meeting will contain a proposal describing:
the Company’s and P&G PAC policies on electioneering and political contributions and communications,
any specific expenditures for these electioneering and political contributions and communications known to be anticipated during the forthcoming fiscal year,
the total amount of anticipated expenditures,
a list of specific electioneering expenditures made in the prior fiscal year,
management’s analysis of the congruency of those policies and such expenditures with company values and policies;
and providing an advisory shareholder vote on an advisory resolution, proposed by management, to ratify the compensation of the named executive officers (“NEOs”) set forth in the proxy statement’s Summary Compensation Table (the “SCT”)those policies and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clearfuture plans.
Supporting Statement: Proponents recommend that the vote is non-binding and would not affect any compensation paid or awardedannual proposal also contain management’s analysis of risks to any NEO.
SUPPORTING STATEMENT
An Advisory Vote establishes an annual referendum process for shareholders about senior executive compensation. We believe the results of this vote would provide the board and management useful information about shareholder views on our company’s executive compensation.
Investorsbrand, reputation, or shareholder value. “Expenditures for electioneering communications” means spending directly, or through a third party, at any time during the year, on printed, internet or broadcast communications, which are increasingly concerned about mushrooming executive compensation especially when it is insufficiently linkedreasonably susceptible to performance. In 2008, shareholders filed over 80 “Say on Pay” resolutions with votes averaging 42% in favor, and 20 votes over 50% in 2007 and 2008 combined. At P&G the resolution received a 42% vote. Such votes demonstrate strong shareholder support for this reform.
In its 2008 proxy Aflac submitted an Advisory Vote supported by 93%, indicating strong investor support for good disclosure and a reasonable compensation package. Daniel Amos, Chairman and CEO said, “An advisory vote on our compensation report is a helpful avenue for our shareholders to provide feedback on our pay-for-performance compensation philosophy and pay package.”
Other companies have also agreed to an Advisory Vote, including Intel, Hewlett-Packard, Occidental Petroleum, Verizon, MBIA, PG & E, H&R Block, Blockbuster, Ingersoll-Rand and Motorola. And approximately 300 companies under TARP are implementing the Advisory Vote, an opportunity to see it in action.
Public concern about executive compensation has reached new heights stimulated by reported excesses and compensation problems. Problems with Golden Parachutes, paying executive income taxes (gross-ups), questionable percs for executives, bonuses in the midst of financial crisis and backdated options accelerated concern.
President Obama and SEC Chair Mary Schapiro both have spokeninterpretation as in support on the Advisory Vote and we expect legislationof or regulation is inevitable. A wise step for companies would beopposition to adopt an Advisory Vote without being compelled by legislation.a specific candidate.
We believe that existing SEC rules and stock exchange listing standards do not provide shareholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast, in the United Kingdom, public companies allow shareholders to cast a vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote isn’t binding, but gives shareholders a clear voice that helps shape senior executive compensation.
Most companies routinely vote to ratify auditors. A standard executive compensation vote could also be presented.
We believe that a company that has a clearly explained compensation philosophy and metrics, reasonably links pay to performance, and communicates effectively to investors will find an Advisory Vote a helpful tool.
The Board of Directors recommends a vote AGAINST this proposal.
[Company response to be included in definitive proxy statement.proxy.]
20102012 Annual Meeting Date and Shareholder Proposals
It is anticipated that the 20102012 annual meeting of shareholders will be held on Tuesday, October 12, 2010.9, 2012. Pursuant to regulations issued by the SEC, to be considered for inclusion in the Company’s proxy statement for presentation at that meeting, all shareholder proposals must be received by the Company on or before the close of business on April 30, 2010.28, 2012. Any such proposals should be sent to The Procter &
Gamble Company, c/o Secretary, One Procter & Gamble Plaza, Cincinnati, OH 45202-3315.
Annual Meeting Advance Notice Requirements
Our Code of Regulations requires advance notice for any business to be brought before an annual meeting of shareholders. In general, for business to be properly brought before an annual meeting by a shareholder (other than in connection with the election of directors, see section entitled “Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees” on page [·] of this proxy statement; or any matter brought pursuant to SEC Rule 14a-8), the shareholder must meet certain ownership requirements and written notice of such business must be received by the Secretary of the Company not less than 90 days nor more than 240 days prior to the one year anniversary of the preceding year’s annual meeting. Certain other notice periods apply if the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date. Based upon the one-year anniversary of the 2011 annual meeting, a shareholder wishing to bring such business before the 2012 annual meeting must provide such notice no earlier than February 14, 2012 and no later than July 13, 2012.
As set forth in the Code of Regulations, the shareholder’s notice to the Secretary must contain certain information. A copy of our Code of Regulations can be found on the Company’s website atwww.pg.comor may be obtained from the Secretary of the Company at the address provided above.
If a shareholder notifies the Company after July 14, 2010 of an intent to present a proposalbusiness at the 20102012 annual meeting of shareholders, and such business may be properly presented at that meeting consistent with the Company’s Code of Regulations and Articles of Incorporation, the Company will have the right to exercise its discretionary voting authority with respect to such proposalbusiness without including information regarding such proposal in its proxy materials.
No action will be taken with regard toUnless corrections are identified, the minutes of the annual meeting of shareholders held October 14, 2008, unless they have been incorrectly12, 2010 will be approved as recorded. Any such action approving the minutes does not constitute approval or disapproval of any of the matters referenced therein.
The Board of Directors knows of no other matters which will come before the meeting. However, if any matters other than those set forth in the notice should be properly presented for action, the persons named in the proxy intend to take such action as will be in harmony with the policies of the Company and in that connection will use their discretion.discretion accordingly.
The Procter & Gamble Company Board of Directors
Audit Committee Charter
February 10, 2009Policies
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INFORMATION CONCERNING COMMITTEE MEMBER QUALIFICATIONS, COMMITTEE MEMBER APPOINTMENT AND REMOVAL, COMMITTEE STRUCTURE AND OPERATIONS (INCLUDING AUTHORITY TO DELEGATE TO SUBCOMMITTEES), AND COMMITTEE REPORTING TO THE BOARD ARE ADDRESSED IN THE PROCTER & GAMBLE COMPANY BOARD OF DIRECTORS COMMITTEE CHARTERS APPENDIX.
Guidelines of
The Procter & Gamble Company Audit Committee
For Pre-Approval Of Independent Auditor Services
The Committee (the “Committee”) has adopted the following guidelines regarding the engagement of the Company’s independent auditor to perform services for the Company:
A. | For audit services (including statutory audit engagements as required under local country laws), the independent auditor will provide the Committee with an engagement letter during the fourth quarter of each fiscal year outlining the scope of the audit services proposed to be performed during the coming fiscal year. If agreed to by the Committee, this engagement letter will be formally accepted by Committee. |
B. | The independent auditor will submit to the Committee for approval an audit services fee proposal with
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C. | For non-audit services, Company management will submit to the Committee for approval the list of non-audit services that it recommends the Committee engage the independent auditor to provide for the fiscal year. Company management and the independent auditor will each confirm to the Committee that each non-audit service on the list is permissible under all applicable legal requirements. In addition to the list of planned non-audit services, a budget estimating non-audit service spending for the fiscal year will be provided. The Committee will approve both the list of permissible non-audit services and the budget for such services. The Committee will be informed routinely as to the non-audit services actually provided by the independent auditor pursuant to this pre-approval process. |
D. | To ensure prompt handling of unexpected matters, the Committee delegates to the Chair the authority to amend or modify the list of approved permissible non-audit services and fees. The Chair will report action taken to the Committee at the next Committee meeting. |
E. | The independent auditor must ensure that all audit and non-audit services provided to the Company have been approved by the Committee. The Vice-President of Internal Controls will be responsible for tracking all independent auditor fees against the budget for such services and report at least annually to the Audit Committee. |
Amended Articles of Incorporation of
The Procter & Gamble Company
Excerpt of Appendix A
Series A ESOP Convertible Class A Preferred Stock
(hereinafter referred to as Series A Preferred Stock)
2. | Dividends and Distributions. |
(A) Subject to the provisions for adjustment hereinafter set forth, the holders of shares of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefore, cash dividends (“Preferred Dividends”) in an amount per share initially equal to $8.124 As a result of four two-for-one stock splits on the Common Stock effective October 20, 1989, May 15, 1992, August 22, 1997 and May 21, 2004, and the Smucker transaction effective June 1, 2002, the Conversion Price, Liquidation Price and Preferred Dividend Rate were all adjusted in accordance with the terms of paragraph 9(A)(1) of this Appendix A to be as follows: Conversion Price—$6.82; Liquidation Price—$6.82; Preferred Dividend Rate—$.5036075 per share per annum, with a corresponding change in the quarterly dividend payment. (This footnote is not a part of the Company’s Amended Articles of Incorporation but is included to provide up-to-date information on the status of Series A ESOP Convertible Class A Preferred Stock.) per share per annum, subject to adjustment from time to time as hereinafter provided, (such amount, as adjusted from time to time, being hereinafter referred to as the “Preferred Dividend Rate”), payable quarterly, one-fourth on the third day of March, one-fourth on the third day of June, one-fourth on the third day of September, and one-fourth on the third day of December of each year (each a “Dividend Payment Date”) commencing on June 3, 1989, to holders of record at the start of business on such Dividend Payment Date, provided that if the Board of Directors has declared since the prior Dividend Payment Date a quarterly dividend on the Common Stock at a rate that exceeds one-fourth of the Preferred Dividend Rate in effect on such day, the holders of record on the start of business on therecordpayment date for such dividend on the Common Stock shall be entitled to receive a cash dividend in an amount per share equal to the quarterly dividend declared on a share of Common Stock, payable on the same date as such dividend on the Common Stock, and provided further that the Dividend Payment Date for the Series A Preferred Stock shall thereafter be the same date as therecordpayment date for the dividend on the Common Stock or if no dividend is declared on the Common Stock in any quarter, the Dividend Payment Date shall be, as appropriate, the fifteenth day of February, May, August or November or if such days are not a day on which the New York Stock Exchange is open for business, then the next preceding day when the New York Stock Exchange is open for business. Preferred Dividends shall begin to accrue on outstanding shares of Series A Preferred Stock from the date of issuance of such shares of Series A Preferred Stock. Preferred Dividends shall accrue on a daily basis, based on the Preferred Dividend Rate in effect on such day, whether or not the Company shall have earnings or surplus at the time, but Preferred Dividends accrued after March 3, 1989 on the shares of Series A Preferred Stock for any period less than a full quarterly period between Dividend Payment Dates shall be computed on the basis of a 360-day year of 30-day months. A full quarterly dividend payment of $2.034 per share shall accrue for the period from the date of issuance until June 3, 1989. Accumulated but unpaid Preferred Dividends shall cumulate as of the Dividend Payment Date on which they first become payable, but no interest shall accrue on accumulated but unpaid Preferred Dividends.
5. | Conversion into Common Stock. |
(A) A holder of shares of Series A Preferred Stock shall be entitled, at any time prior to the close of business on the date fixed for redemption of such share pursuant to section 6, 7, or 8 hereof, to cause any or all of such shares to be converted into shares of Common Stock. The number of shares of Common Stock into which each share of the Series A Preferred Stock may be converted shall be determined by dividing the Liquidation Price in effect at the time of conversion by the Conversion Price (as hereinafter defined) in effect at the time of conversion. The Conversion Price per share at which shares of Common Stock shall be initially issuable upon conversion of any shares of Series A Preferred Stock shall be $110.004, subject to adjustment as hereinafter provided.
4 | As a result of four two-for-one stock splits on the Common Stock effective October 20, 1989, May 15, 1992, August 22, 1997 and May 21, 2004, and the Smucker transaction effective June 1, 2002, the Conversion Price, Liquidation Price and Preferred Dividend Rate were all adjusted in accordance with the terms of paragraph 9(A)(1) of this Appendix A to be as follows: Conversion Price—$6.82; Liquidation Price—$6.82; Preferred Dividend Rate—$.5036075 per share per annum, with a corresponding change in the quarterly dividend payment. (This footnote is not a part of the Company’s Amended Articles of Incorporation but is included to provide up-to-date information on the status of Series A ESOP Convertible Class A Preferred Stock.) |
THE PROCTER & GAMBLE 2009 STOCK AND INCENTIVE COMPENSATION PLANAmended Articles of Incorporation of
ARTICLE A—Purpose.
The purposes of The Procter & Gamble 2009 Stock and Incentive Compensation Plan (the “Plan”) are to strengthen the alignment of interests between those employees of The Procter & Gamble Company (the “Company”) and its subsidiaries who are largely responsible
Excerpt of Appendix B
Series B ESOP Convertible Class A Preferred Stock
(hereinafter referred to as Series B Preferred Stock)
2. | Dividends and Distributions. |
(A) Subject to the provisions for adjustment hereinafter set forth, the success of the business (the “Participants”) and the Company’s shareholders through ownership behavior and the increased ownershipholders of shares of the Company’s common stock (the “Common Stock”), and to encourage the Participants to remain in the employ of the Company and its subsidiaries. This will be accomplished through the granting of options to purchase shares of CommonSeries B Preferred Stock the granting of performance related awards, the payment of a portion of the Participants’ remuneration in shares of Common Stock, the granting of deferred awards related to the increase in the price of Common Stock, and the granting of restricted stock units (“RSUs”) or other awards that are related to the price of Common Stock.
ARTICLE B—Administration.
1. The Plan shall be administeredentitled to receive, when and as declared by the Compensation & Leadership Development Committee (the “Committee”) of the Board of Directors out of the Company (the “Board”funds legally available therefor, cash dividends (“Series B Preferred Dividends”), or such other committee as may be designated by the Board. The Committee shall consist of not fewer than three (3) members of the Board who are “Non-Employee Directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”)an amount per share initially equal to be appointed by the Board$4.125 per share per annum, subject to adjustment from time to time and to serve at the discretion of the Board. They shall also have been deemed independent by the Board under the Company’s independence guidelines and the applicable national securities exchange which serves as the principal trading market for the Common Stock. The Committee may establish such regulations, provisions, and procedures within the terms of the Planhereinafter provided, (such amount, as in its opinion, may be advisable for the administration and operation of the Plan, and may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration and operation of the Plan and may grant authority to such persons to execute documents on behalf of the Committee. The Committee shall report on the administration of the Plan as requested by the Board.
2. Subject to the express provisions of the Plan, the Committee shall have authority: to grant nonstatutory and incentive stock options; to grant stock appreciation rights either freestanding or in tandem with simultaneously granted stock options; to grant Performance Awards (as defined in Article J); to award a portion of a Participant’s remuneration in shares of Common Stock subject to such conditions or restrictions, if any, as the Committee may determine; to award RSUs or other awards that are related to the price of Common Stock; to determine all the terms and provisions of the respective stock option, stock appreciation right, stock award, RSU, or other award agreements including setting the dates when each stock option or stock appreciation right or part thereof may be exercised and determining the conditions and restrictions, if any, of any shares of Common Stock acquired through the exercise of any stock option; to provide for special terms for any stock options, stock appreciation rights, stock awards, RSUs or other awards granted to Participants who are foreign nationals or who are employed by the Company or any of its subsidiaries outside of the United States of America in order to fairly accommodate for differences in local law, tax policy or custom and to approve such supplements to or amendments, restatements or alternative versions of the Plan as the Committee may consider necessary or appropriate for such purposes (without affecting the terms of the Plan for any other purpose); and to make all other determinations it deems necessary or advisable for administering the Plan. In addition, at the time of grant the Committee shall have the further authority to:
(a) waive the provisions of Article F, Paragraph 1(a), 1(b) and 1(c);
(b) waive the provisions of Article G, Paragraph 9(a) and 9(b);and
(c) impose conditions in lieu of those set forth in Article G, Paragraphs 7, 8, 9 and 11 for nonstatutory stock options, incentive stock options and stock appreciation rights which do not increase or extend the rights of the Participant.
ARTICLE C—Participation.
The Committee shall select as Participants those employees of the Company and its subsidiaries who, in the opinion of the Committee, have demonstrated a capacity for contributing in a substantial manner to the success of such companies.
ARTICLE D—Limitation on Number of Shares Available Under the Plan.
1. Unless otherwise authorized by the shareholders, or as provided in this Article D or Article K of the Plan, the maximum aggregate number of shares available for award under the Plan shall be the sum of:
(a) [Ÿ] new shares; and
(b) the shares previously authorized but not awarded under The Procter & Gamble 2001 Stock and Incentive Compensation Plan and The Gillette Company 2004 Long-Term Incentive Plan, in each case, as of the date on which the Plan is approved by shareholders (e.g., approximately [Ÿ] shares in total).
2. In addition to the shares authorized for award by Paragraph 1 of this Article D, any shares awarded under the Plan, or any of the following plans, that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares, are settled in cash in lieu of shares, or are exchanged with the Committee’s permission prior to the issuance of shares, for awards not involving shares, shall be available for award under the Plan:
(a) The Procter & Gamble 1992 Stock Plan;
(b) The Procter & Gamble 1992 Stock Plan (Belgian Version);
(c) The Procter & Gamble Future Shares Plan;
(d) The Procter & Gamble 2001 Stock and Incentive Compensation Plan;
(e) The Gillette Company 1971 Stock Option Plan; and
(f) The Gillette Company 2004 Long-Term Incentive Plan.
Any shares that become available for award under this Article D, Paragraph 2 shall be added back to the aggregate shares available using the ratio set forth in Article D, Paragraphs 3(a) and 3(b) below (e.g., one for one for stock options and stock appreciation rights and [Ÿ] shares for each share awarded for all other awards).
3. Solely for purposes of calculating the number of shares remaining available for grant under this Article D:
(a) all stock options and stock appreciation rights awards shall be counted on a one for one basis;
(b) all full value awards under the Plan to be settled in shares shall be counted as [Ÿ] shares for each share awarded;
(c) except as otherwise noted in this Article D, Paragraph 4 below, only shares actually issued by the Company shall be counted against the number of shares available; and
(d) “shares issued” shall include all shares actually delivered pursuant to the Plan and all shares tendered, exchanged or withheld to cover option costs and/or taxes.
4. Shares that were subject to a stock option or stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock option or stock appreciation right may not again be made available for issuance under the Plan.
5. Notwithstanding anything to the contrary contained herein, shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of stock options shall not be added to the shares available for award under Article D, Paragraph 1 above.
6. Subject to the provisions of Article K and Article L, and notwithstanding anything else herein to the contrary, without affecting the number of shares reserved or available hereunder the Committee may authorize the issuance or assumption of benefits under the Plan in connection with any merger, consolidation acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with the rules under Sections 162(m), 409A, 422 and 424 of the Internal Revenue Code (“Code”) as and where applicable.
ARTICLE E—Shares Subject to Use Under the Plan.
1. The shares to be delivered by the Company upon exercise of stock options or stock appreciation rights shall be determined by the Committee and may consist, in whole or in part, of authorized but unissued shares or treasury shares. In the case of redemption of stock appreciation rights by one of the Company’s subsidiaries, such shares shall be shares acquired by that subsidiary.
2. For purposes of the Plan, restricted or unrestricted stock awarded or issued following settlement of RSUs under the terms of the Plan shall be authorized but unissued shares, treasury shares, or shares acquired in the open market by the Company or a subsidiary, as determined by the Committee.
ARTICLE F—Restrictions & Covenants.
1. In addition to such other conditions as may be established by the Committee, in consideration of the granting of an award under the terms of the Plan, each Participant agrees as follows:
(a) The right to exercise any stock option or stock appreciation right shall be conditional upon certification by the Participant at time of exercise that the Participant intends to remain in the employ of the Company or one of its subsidiaries for at least one (1) year following the date of the exercise of the stock option or stock appreciation right (provided that termination of employment due to Retirement or Special Separation shall not constitute a breach of such certification).
(b) In order to better protect the goodwill of the Company and its subsidiaries and to prevent the disclosure of the Company’s or its subsidiaries’ trade secrets and confidential information and thereby help ensure the long-term success of the business, the Participant, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of three (3) years following the date of the Participant’s termination of employment with the Company, in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of the Company or its subsidiaries (including both existing products as well as products known to the Participant, as a consequence of the Participant’s employment with the Company or one of its subsidiaries, to be in development):
(i) with respect to which the Participant’s work has been directly concerned at any time during the two (2) years preceding termination of employment with the Company or one of its subsidiaries or
(ii) with respect to which during that period of time the Participant, as a consequence of the Participant’s job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company or its subsidiaries.
For purposes of this Paragraph (b), it shall be conclusively presumed that Participants have knowledge of information they were directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.
(c) To better protect the Company’s investment in its employees and to ensure the long-term success of the business, the Participant, without prior written consent of the Company, will not attempt directly or indirectly to induce any employee of the Company or its affiliates or subsidiaries to be employed or perform services elsewhere or attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or its affiliates or subsidiaries.
(d) Because a main purpose of the Plan is to strengthen the alignment of interests between employees of the Company (including all affiliates and subsidiaries) and its shareholders to ensure the continued success of the Company, the Participant will not take any action that is significantly contrary to the best interests of the Company or its affiliates or subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of the Company or its affiliates or subsidiaries” includes without limitation any action taken or threatened by the Participant that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of the Company or any affiliate or subsidiary.
(e) The provisions of this Article F are not in lieu of, but are in addition to the continuing obligation of the Participant (which Participant acknowledges by accepting any award under the Plan) to not use or disclose the Company’s or its subsidiaries’ trade secrets and confidential information known to the Participant until any particular trade secret or confidential information becomes generally known (through no fault of the Participant), whereupon the restriction on use and disclosure shall cease as to that item. Information regarding products in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company or one of its subsidiaries is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented. As used in this Article F, “generally known” means known throughout the domestic U. S. industry or, in the case of Participants who have job responsibilities outside of the United States, the appropriate foreign country or countries’ industry.
(f) By acceptance of any award granted under the terms of the Plan, the Participant acknowledges that if the Participant were, without authority, to use or disclose the Company’s or any of its affiliates’ or subsidiaries’ trade secrets or confidential information or threaten to do so, the Company or one of its subsidiaries would be entitled to injunctive and other appropriate relief to prevent the Participant from doing so. The Participant acknowledges that the harm caused to the Company by the breach or anticipated breach of this Article F is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. The Participant consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company or one of its subsidiaries, be entered on consent and enforced by any court having jurisdiction over the Participant, without prejudice to any rights either party may have to appeal from the proceedings which resulted in any grant of such relief.
(g) If any of the provisions contained in this Article F shall for any reason, whether by application of existing law or law which may develop after the Participant’s acceptance of an award under the Plan be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the Participant agrees to join the Company or any of its subsidiaries in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then applicable law. If any one or more of the terms, provisions, covenants, or restrictions of this Article F shall be determined by a court of competent jurisdiction to
be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, and restrictions of this Article F shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.
2. The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid or deferred awards at any time if the Participant is not in compliance with all terms and conditions set forth in the Plan. By acceptance of any award granted under the terms of the Plan, Participant acknowledges that the remedies outlined in this Paragraph 2 and in Paragraph 3 below are in addition to any remedy the Company or any affiliate or subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.
3. Upon exercise, payment or delivery of an award, the Participant shall certify in a manner acceptable to the Company that he or she has complied with the terms and conditions of the Plan. In the event a Participant fails to comply with any provision in this Article F, the Participant shall repay to the Company the net proceeds of any exercises, payments or deliveries of awards which occur at any time after the earlier of the following two dates: (a) the date three years immediately preceding any such violation; or (b) the date 6 months prior to the Participant’s termination of employment with the Company. The Participant shall repay to the Company the net proceeds in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such net proceeds any amount owed to the Participant by the Company, to the extent that such set-off is not inconsistent with Section 409A of the Code. For purposes of this paragraph, net proceeds shall mean (1) for each stock option or stock appreciation right exercise, the difference between the exercise price and the greater of (i) the price of Common Stock on the date of exercise or (ii) the amount realized upon the disposition of the underlying shares, less any applicable taxes withheld by the Company; (2) for RSUs, the greater of (i) the number of net shares delivered to Participant multiplied by the closing price of Common Stock on the date of delivery or (ii) the amount realized upon the disposition of the number of net shares delivered, less any applicable taxes withheld by the Company; and (3) for restricted stock, the greater of (i) the number of net shares retained by, or delivered to, Participant after any restrictions lapse multiplied by the closing price of Common Stock on the date the restrictions lapse or (ii) the amount realized upon the disposition of the number of net shares delivered, less any applicable taxes withheld by the Company.
4. The fact that a Participant has been granted an award under the Plan shall not limit the right of the employer to terminate the Participant’s employment at any time.
5. The Company reserves the rightadjusted from time to time, being hereinafter referred to suspendas the exercise“Series B Preferred Dividend Rate”), payable quarterly, one-fourth on the twenty-seventh day of any stock option or stock appreciation right,November, one-fourth on the deliverytwenty-seventh day of any shares orFebruary, one-fourth on the settlementtwenty-seventh day of any RSUs, where such suspension is deemed byMay, and one-fourth on the Company as necessary or appropriate for corporate purposes. No such suspension shall extendtwenty-seventh day of August of each year (each a “Series B Dividend Payment Date”) commencing on August 27, 1993, to holders of record at the lifeclose of business on the second Friday of the stock option or stock appreciation right beyond its expiration date, and in no event will there berelevant Series B Dividend Payment Date month, provided that if the Board of Directors has declared since the prior Dividend Payment Date a suspension in the five (5) calendar days immediately preceding the expiration date.
6. The Committee may require any Participant to accept any award under the Plan and/or to exercise any stock options or stock appreciation rights by means of electronic signature.
ARTICLE G—Stock Options and Stock Appreciation Rights.
1. All stock options and stock appreciation rights granted hereunder shall have a maximum life of no more than ten (10) years from the date of grant.
2. No stock options or stock appreciation rights shall be exercisable within one (1) year from their date of grant, except in the case of the death of the Participant.
3. The exercise price for all stock options and stock appreciation rights shall be established by the Committee at the time of their grant and shall be not less than one hundred percent (100%) of the fair market value ofquarterly dividend on the Common Stock at a rate that exceeds one-fourth of the Preferred Dividend Rate in effect on such day, the holders of record on the datestart of grant.
4. The maximum number of shares with respect to which stock options or stock appreciation rights may be granted to any Participant in any calendar year shall not exceed 2,000,000 shares.
5. If the Committee grants incentive stock options, all such stock options shall contain such provisions as permit them to qualify as “incentive stock options” within the meaning of Section 422 of the Code, as may be amended from time to time.
6. The maximum number of shares that may be issued as incentive stock options under the Plan shall be the aggregate number of shares available for award under Article D. The aggregate fair market value (determined at the time when the incentive stock option is exercisable for the first time by a Participant during any calendar year) of the shares for which any Participant may be granted incentive stock options under the Plan and all other stock option plans of the Company and its subsidiaries in any calendar year shall not exceed $100,000 (or such other amount as reflected in the limits imposed by Section 422(d) of the Code, as it may be amended from time to time).
7. Unless a transfer has been duly authorized by the Committee pursuant to Article G, Paragraph 8 below, during the lifetime of the Participant, stock options and stock appreciation rights may be exercised only by the Participant personally, or, in the event of the legal incompetence of the Participant, by the Participant’s duly appointed legal guardian and are not transferable other than by will or by the laws of descent and distribution. For the purpose of exercising stock options or stock appreciation rights after the death of the Participant:
(a) the persons to whom the stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising remaining stock options, stock appreciation rights or parts thereof, whether or not exercisablebusiness on therecordpaymentdate of death offor such Participant, at any time prior todividend on the expiration date of the stock options or stock appreciation rights; and
(b) the duly appointed executors and administrators of the estate of the deceased Participant shall have the same rights and obligations with respect to the stock options and stock appreciation rights as legatees or distributees would have after distribution to them from the Participant’s estate.
8. The Committee may authorize the transfer of stock options and stock appreciation rights upon such terms and conditions as the Committee may require. Such transfer shall become effective only upon the Committee’s complete satisfaction that the proposed transferee has strictly complied with such terms and conditions, and both the original Participant and the transferee shall be subject to the same terms and conditions hereunder as the original Participant.
9. In the event that a Participant ceases to be an employee of the Company or any of its subsidiaries while holding an unexercised stock option or stock appreciation right:
(a) Any unexercisable portions thereof are then void, except in the case of: (1) death of the Participant; (2) Retirement or Special Separation that occurs more than six months from the date the options were granted; or (3) any option as to which the Committee has waived, at the time of grant, the provisions of this Article G, Paragraph 9(a).
(b) Any exercisable portions thereof are then void, except in the case of: (1) death of the Participant; (2) Retirement or Special Separation; or (3) any option as to which the Committee has waived, at the time of grant, the provisions of this Article G, Paragraph 9(b).
The definitions of “Special Separation” and “Retirement” are set forth in Article L, Paragraphs 5 and 6 of the Plan, respectively.
10. For purposes of this Article G, Paragraph 10 of the Plan, an employee on a leave of absence shall not be deemed to have “ceased to be an employee of the Company or any of its subsidiaries” during that time. Leave of absence means any period of time away from work granted to any employee by his or her employer because of illness, injury, or other reasons satisfactory to the employer.
11. Upon the exercise of stock appreciation rights, the ParticipantCommon Stock shall be entitled to receive a redemption differential for each such stock appreciation right which shall becash dividend in an amount per share equal to the difference between the then fair market value of onequarterly dividend declared on a share of Common Stock, and the exercise price of one stock appreciation right then being exercised. In the case of the redemption of stock appreciation rights by a subsidiary of the Company not located in the United States, the redemption differential shall be calculated in United States dollars and converted to the appropriate local currencypayable on the exercise date. As determined bysame date as such dividend on the Committee, the redemption differential may be paid in cash, Common Stock, toand provided further that the Dividend Payment Date for the Series B Preferred Stock shall thereafter be valued at its fair market value on the date of exercise, any other mode of payment deemed appropriate by the Committee or any combination thereof.
12. With respect to stock options granted in tandem with stock appreciation rights, the exercise of either such stock options or such stock appreciation rights will result in the simultaneous cancellation of the same number of tandem stock appreciation rights or stock options,date as the case may be.
13. Except as permitted by Article K or as otherwise authorized by shareholders, no stock option or stock appreciation right shall be amended to reduce the exercise price or cancelled in exchange for cash, other awards or stock options or stock appreciation rights having a lower exercise price without the prior approval of the shareholders of the Company. This Article G, Paragraph 13 is intended to prohibit the re-pricing of “underwater” stock options and stock appreciation rights and shall not be construed to prohibit the adjustments permitted under Article K of the Plan.
14. No dividends or dividend equivalents shall be awarded under the Plan for any stock options or stock appreciation rights.
ARTICLE H—Payment for Stock Options and Tax Withholding for All Awards.
Upon the exercise of a stock option, recordpaymentdate in full of the exercise price shall be made by the Participant. As determined by the Committee, the stock option exercise price may be paid by the Participant either in cash, shares of Common Stock valued at their fair market value on the of exercise, a combination thereof, or such other method as determined by the Committee. In addition to payment of the exercise price, the Committee may authorize the Company to charge a reasonable administrative fee for the exercise of any stock option. Furthermore, todividend on the extent the Company is required to withhold federal, state, local or foreign taxes in connection with any Participant’s stock option or stock appreciation right exercise or the lapse of restrictions on, or delivery of shares pursuant to, any Participant’s award of shares of Common Stock or RSUs, the Committee may require the Participant to make such arrangements as the Company may deem necessary for the payment of such taxes required to be withheld (including, without limitation, relinquishment of a portion of such stock options, the proceeds received by the Participant in a simultaneous exercise and sale of stock during a “cashless” exercise, or the RSUs or shares of Common Stock subject to such restrictions). Notwithstanding any action taken by the Company with respect to any income tax, social insurance, payroll tax, or other tax, the acceptance of an award under the Plan represents the Participant’s acknowledgement that the ultimate liability for any such tax owed by the Participantif no dividend is and remains the Participant’s responsibility, and that the Company makes no representations about the tax treatment of any award, and does not commit to structure any aspect of the award to reduce or eliminate a Participant’s tax liability. In no event, however, shall the Committee be permitted to require payment from a Participant in excess of the maximum required tax withholding rates.
ARTICLE I—Grant of Unrestricted Stock, Restricted Stock or RSUs.
The Committee may grant Common Stock or RSUs to Participants under the Plan subject to such conditions or restrictions, if any, as the Committee may determine. Unless the grant materials for an award made under this Article I, including any statements of terms and conditions accompanying such award, state specifically to the contrary, the restrictions and covenants set forth in Article F shall apply to all such awards.
ARTICLE J—Performance Related Awards.
1. The Committee, in its discretion, may establish performance goals for selected Participants and authorize the granting of cash, stock options, stock appreciation rights, Common Stock, RSUs or other awards that are related to the price of Common Stock, other property, or any combination thereof (“Performance Awards”) to such Participants upon achievement of such established performance goals during a specified time period (the “Performance Period”). The Committee, in its discretion, shall determine the Participants eligible for Performance Awards, the performance goals to be achieved during each Performance Period, the amount of any Performance Awards to be paid, and the method of payment for any Performance Awards. Performance Awards may be granted either alone or in addition to other grants made under the Plan.
2. Notwithstanding the foregoing, any Performance Awards granted under this Article to any Participant subject to the restrictions set forth in Section 162(m) of the Code, other than stock options and stock appreciation rights that would otherwise qualify as performance-based compensation under Section 162(m) without the restrictions of this Article J, Paragraph 2, shall comply with all of the following requirements:
(a) Each award shall specify the specific performance objectives (the “Performance Objectives”) which, if achieved, will result in payment of the Performance Award. The Performance Objectives may be described in terms of Company-wide objectives that are related to the individual Participant or objectives that are related to a subsidiary, division, department, region, function or business unit of the Company in which the Participant is employed, and may consist of one or more or any combination of the following criteria: stock price, market share, sales revenue, organic sales growth, cash flow, cash flow efficiency, earnings per share, returndeclared on equity, total shareholder return, gross margin, stock price growth measures, operating total shareholder return, net earnings or net income (before or after taxes), return on assets or capital, earnings (before or after interest, taxes, depreciation and/or amortization), operating income, operating margin, acquisition integration metrics, economic value added, and/or costs. The Performance Objectives may be made relative to the performance of other corporations. The Committee, in its discretion, may change or modify these criteria, however, at all times the criterion must be valid performance criterion for purposes of Section 162(m) of the Code. The Committee may not change the criteria or Performance Objectives for any Performance Period that has already been approved by the Committee. The Committee may cancel a Performance Period or replace a Performance Period with a new Performance Period, provided that any such cancellation or replacement shall not cause the Performance Award to fail to meet the requirements of Section 162(m) of the Code.
(b) Each award shall specify the minimum level of achievement required by the Participant relative to the Performance Objectives to qualify for a Performance Award. In doing so, the award shall establish a formula for determining the percentage of the Performance Award to be awarded if performance is at or above the minimum level, but falls short of full achievement of the specified Performance Objectives. Each award may also establish a formula for determining an additional award above and beyond the Performance Award to be granted to the Participant if performance is at or above the specified Performance Objectives. Such additional award shall also be established as a percentage of the Performance Award. The Committee may decrease a Performance Award as determined by the Performance Objectives, but in no case may the Committee increase any Performance Award as determined by the Performance Objectives.
(c) The maximum Performance Award that may be granted to any Participant for any one-year Performance Period shall not exceed $20,000,000 or 800,000 shares of Common Stock (the “Annual Maximum”). The maximum Performance Award that may be granted to any Participant for a Performance Period greater than one year shall not exceed the Annual Maximum multiplied by the number of full years in the Performance Period.
ARTICLE K—Adjustments.
In the event of any future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, split-off or other change affecting the corporate structure, capitalization or Common Stock of the Company occurring after the date of approval of the Plan by the Company’s shareholders, (i) the amount of shares authorized to be issued under the Plan; (ii) the number of shares and/or the exercise prices covered by outstanding stock options, stock appreciation rights or RSUs; and (iii) the maximum award limits set forth in Article D, Article G, Paragraph 4 and Article J, Paragraph 2(c) shall be adjusted appropriately and equitably to prevent dilution or enlargement of rights under the Plan. Following any such change, the term “Common Stock” shall be deemed to refer to such class of shares or other securities as may be applicable.
ARTICLE L—Additional Provisions and Definitions.
1. The Plan may not be amended without the express authority of the Committee or the Board. The Board may, at any time, repeal the Plan or may amend it except that no such amendment may amend this paragraph, increase the total aggregate number of shares subject to the Plan or the share counting ratios set forth in Article D, Paragraph 3, reduce the price at which stock options, stock appreciation rights, RSUs or shares of Common Stock may be granted or exercised, or alter the class of employees eligible to receive awards under the Plan. Participants and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding stock options, stock appreciation rights, RSUs or shares of Common Stock are materially affected adversely, notice thereof shall be given to the Participants holding such stock options and stock appreciation rights and such amendments shall not be applicable without such Participant’s written consent. If the Plan is repealed in its entirety, all theretofore granted unexercised stock options or stock appreciation rights shall continue to be exercisable in accordance with their terms and RSUs, Performance Awards and shares of Common Stock subject to conditions or restrictions granted pursuant to the Plan shall continue to be subject to such conditions or restrictions.
2. In the case of a Participant who is an employee of a subsidiary of the Company, performance under the Plan, including the granting of shares of the Company, may be by the subsidiary. Nothing in the Plan shall affect the right of the Company or any subsidiary to terminate the employment of any Participant with or without cause. None of the Participants, either individually or as a group, and no beneficiary, transferee or other person claiming under or through any Participant, shall have any right, title, or interest in any shares of the Company purchased or reserved for the purpose of the Plan except as to such shares, if any, as shall have been granted or transferred to him or her. Nothing in the Plan shall preclude the awarding or granting of shares of the Company to employees under any other plan or arrangement now or hereafter in effect.
3. “Subsidiary” means any company in which more than fifty percent (50%) of the total combined voting power of all classes of stock is owned, directly or indirectly, by the Company or, if the company does not issue stock, more than fifty percent (50%) of the total combined ownership interest is owned, directly or indirectly, by the Company. In addition, the Board may designate for participation in the Plan as a “subsidiary,” except for the granting of incentive stock options, those additional companies affiliated with the Company in which the Company’s direct or indirect stock ownership is fifty percent (50%) or less of the total combined voting power of all classes of such company’s stock, or, if the company does not issue stock, the Company’s direct or indirect ownership is fifty percent (50%) or less of the company’s total combined ownership interest.
4. Notwithstanding anything to the contrary in the Plan, and unless otherwise provided for in an applicable award letter, agreement or grant materials or in a Company short-term or long-term incentive program administered under the Plan, the following provisions shall apply in connection with a “Change in Control” (as defined in Paragraph (c) below).
(a)Awards Assumed by Successor
(i) Upon the occurrence of a Change in Control, any awards made under the Plan that are Assumed (as defined in Paragraph (v) below) by the entity effecting the Change in Control shall vest and be exercisable in accordance with the terms of the original grant unless, during the three (3) year period commencing on the date of the Change in Control (“Post-CIC period”):
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(ii) Any Participant whose employment is terminated as described in Paragraphs 4(a)(i)(A) or 4(a)(i)(B) above shall be deemed a Special Separation, and any outstanding stock options and stock appreciation rights shall become fully vested and exercisable and any restrictions that apply to awards made pursuant to the Plan shall lapse on the date of termination and provided that any Participant who terminates his or her employment for Good Reason must:
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(iii) Solely for purposes of this Article L, Paragraph 4 (and not for Article L, Paragraph 5), “Cause” shall mean:
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(iv) Solely for purposes of this Article L, Paragraph 4, “Good Reason” shall mean the occurrence, during the Post-CIC Period, of any of the following without Participant’s written consent, in each case, when compared to the arrangements in effect immediately prior to the Change in Control:
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(v) For purposes of this Article L, Paragraph 4, an award shall be considered assumed (“Assumed”) if each of the following conditions are met:
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(b)Awards Not Assumed by Successor
(i) Upon the occurrence of a Change in Control, awards under the Plan which are not Assumed by the person(s) or entity(s) effecting the Change in Control shall become fully vested and exercisable on the date of the Change in Control and any restrictions that apply to such awards shall lapse.
(ii)Stock Options and Stock Appreciation Rights. For each stock option and stock appreciation right, Participant shall receive a payment equal to the difference between the consideration (consisting of cash or other property (including securities of a successor or parent corporation)) received by holders of Common Stock in the Change in Control transaction and the exercise price of the applicable stock option or stock appreciation right, if such difference is positive. Such payment shall be made in the same form as the consideration received by holders of Common Stock. Any stock options or stock appreciation rights with an exercise price that is higher than the per share consideration received by holders of Common Stock in connection with the Change in Control shall be cancelled for no additional consideration.
(iii)Restricted Stock and RSUs. The Participant shall receive the consideration (consisting of cash or other property (including securities of a successor or parent corporation)) which such Participant would have received in the Change in Control transaction had he or she been, immediately prior to such transaction, a holder of the number of shares of the Common Stock equal to the number of RSUs and/or shares of restricted stock covered by the award.
(iv) The payments contemplated by clauses (ii) and (iii) of this Paragraph 4(b) shall be made at the same time as consideration is paid to the holders of the Common Stock in connection withany quarter, the Change in Control.
(c) For purposesDividend Payment Date shall be, as appropriate, the fifteenth day of February, May, August or November or if such days are not a day on which the Plan, a “Change in Control”New York Stock Exchange is open for business, then the next preceding day when the New York Stock Exchange is open for business. Series B Preferred Dividends shall mean the occurrence of any of the following:
(i) An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the 1934 Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the thenbegin to accrue on outstanding shares or the combined voting power of the
Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Paragraph 4(c), shares or Voting Securities which are acquired in a “Non-Control Acquisition” shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as defined in Paragraph 4(c)(iii)(A)(1) below);
(ii) The individuals who, as of October 14, 2009 are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least half of the members of the Board; or, following a Merger (as hereinafter defined) which results in a Parent Corporation (as defined in Paragraph 4(c)(iii)(A)(1) below), the board of directors of the ultimate Parent Corporation;provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board;provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(iii) The consummation of:
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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding shares or Voting Securities as a result of the acquisition of shares or Voting Securities by the Company which, by reducing the number of shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional shares or Voting Securities which increases the percentage of the then outstanding shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
5. The term “Special Separation” shall mean any termination of employment that occurs prior to the time a Participant is eligible to retire, except a termination for cause or a voluntary resignation that is not initiated or encouraged by the Company. For purposes of this provision, a resignation that is in lieu of a termination for cause shall not be a Special Separation.
6. The term “Retirement” shall mean: (a) retirement in accordance with the provisions of any appropriate retirement plan of the Company or any of its subsidiaries; or (b) termination of employment under the permanent disability provision of any retirement plan of the Company or any of its subsidiaries.
ARTICLE M—Consent.
Every Participant who receives a stock option, stock appreciation right, RSU, or grant of shares pursuant to the Plan shall be bound by the terms and provisions of the Plan and of the stock option, stock appreciation right, RSU, or grant of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, RSU, or grant of shares pursuant to the Plan shall constitute a binding agreement between the Participant and the Company and its subsidiaries and any successors in interest to any of them. Every Person who receives a stock option, stock appreciation right, RSU, or grant of shares from a Participant pursuant to the Plan shall, in addition to such terms and conditions as the Committee may require upon such grant, be bound by the terms and provisions of the Plan and of the stock option, stock appreciation right, RSU, or grant of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, RSU, or grant of shares by such Person shall constitute a binding agreement between such Person and the Company and its subsidiaries and any successors in interest to any of them. The Plan shall be governed by and construed in accordance with the laws of the State of Ohio, United States of America.
ARTICLE N—Purchase of Shares or Stock Options.
The Committee may authorize any Participant to convert cash compensation otherwise payable to such Participant into stock options, RSUs or shares of Common Stock under the Plan upon such terms and conditions as the Committee, in its discretion, shall determine. Notwithstanding the foregoing, in any such conversion the shares of Common Stock shall be valued at no less than one hundred percent (100%) of their fair market value.
ARTICLE O—Duration of Plan.
The Plan will terminate on October 13, 2019 unless a different termination date is fixed by the shareholders or by action of the Board of Directors, but no such termination shall affect the prior rights under the Plan of the Company (or any subsidiary) or of anyone to whom stock options or stock appreciation rights were granted prior thereto or to whom shares or RSUs have been granted prior to such termination.
ARTICLE P—Compliance with Section 409A of the Internal Revenue Code.
To the extent applicable, it is intended that the Plan and any awards made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion and/or 20% additional tax provisions of Section 409A(a)(1) of the Code do not apply to the Participants. The Plan and any awards made hereunder shall be administered in a manner consistent with this intent. Any reference in the Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
Neither a Participant nor any of a Participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under the Plan and awards hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under the Plan and awards hereunder may not be reduced by, or set-off against, any amount owing by a Participant to the Company or any of its Affiliates.
If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant shall be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, as soon as practicable after the end of such six-month period.
Notwithstanding any provision of the Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to the Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with the Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.
ADDITIONAL INFORMATION
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Any shares of Common Stock of the Company awarded as a portion of a participant’s remuneration shall be valued at not less than one hundred percent (100%) of the fair market value of the Company’s Common Stock on the date of the award. Theseissuance of such shares may be subject to such conditions or restrictions as the Committee may determine, includingof Series B Preferred Stock. Series B Preferred Dividends shall accrue on a requirement that the participant remain in the employ of the Company or one of its subsidiaries for a set period of time, or until retirement. Failure to abide by any applicable restriction will result in forfeiture of the shares.
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The following explanation of the U.S. tax effects of awards under the Plan is provided for general informational purposes and is not intended as individual tax guidance for the recipients of awards. It is each recipient’s responsibility to check with his or her personal tax adviser as to the tax effects and proper handling of stock options, stock appreciation rights, restricted stock, restricted stock units and Common Stock acquired. The discussion below relates specifically to the U.S. tax consequences of equity awards. In addition to U.S. tax consequences, the awards may be subject to tax by the recipient’s country of residence or citizenship at the same time or at a different time than the awards would be subject to tax by the U.S. Recipients who may be subject to tax in a non-U.S. jurisdiction should consult their personal tax advisers regarding the taxation of awards under the Plan.
Nonstatutory Stock Options
Nonstatutory stock options are not taxable to the optionee upon grant, but will result in taxable ordinary income to the optionee at the date of exercise of the option. The taxable amount will be equal to the difference between the market price of the optioned sharesdaily basis, based on the date of exercise and the option price. This amount is treated as a tax deductible expense to the Company at the time of the exercise of the option. Any appreciationSeries B Preferred Dividend Rate in the value of the stock after the date of exercise is considered a long-term or short-term capital gain to the optionee dependingeffect on such day, whether or not the stock was heldCompany shall have earnings or surplus at the time, but Series B Preferred Dividends accrued after June 30, 1993 on the shares of Series B Preferred Stock for any period less than a full quarterly period between Series B Dividend Payment Dates shall be computed on the basis of a 360-day year of 30-day months. A partial dividend payment of $.649355 per share shall accrue for the appropriate holding period prior to sale.
Incentive Stock Options
Incentive Stock options are generally not taxable to the optionee upon grant or exercise if the optionee has continuously been an employee from the time the option has been granted until at least three months before it is exercised. However, the spread at exercise is an “adjustment” item for alternative minimum tax purposes.
Any gain realized on the sale or other disposition of stock acquired on exercise of an incentive stock option is considered as long-term capital gain for tax purposes if the stock has been held more than two years after the date the option was granted and more than one year after the date of exercise of the option. If the stock is disposed of within one year after exercise, the lesser of any gain on such disposition or the spread at exercise (i.e., the excess of the fair market value of the stock on the date of exercise over the option price) is treated as ordinary income, and any appreciation after the date of exercise is considered long-term or short-term capital gain to the optionee depending on the holding period prior to sale. However, the spread at exercise (even if greater than the gain on the disposition) is treated as ordinary income if the disposition is one on which a loss, if sustained, is not recognized—e.g., a gift, a “wash” sale or a sale to a related party. The amount of ordinary income recognized by the optionee is treated as a tax deductible expense to the Company. No other amount relative to an incentive stock option is a tax deductible expense to the Company.
Stock Appreciation Rights
Like nonstatuory options, stock appreciation rights are not taxable to the recipient upon grant,issuance until August 27, 1993. Accumulated but result in taxable ordinary incomeunpaid Series B Preferred Dividends shall cumulate as of the date of exercise equal to the amount paid to the recipient, i.e., the difference between the grant price and the value of the sharesSeries B Dividend Payment Date on the date of exercise. This amount is treated as a tax deductible expense to the Company at the time of the exercise of the stock appreciation right.
Restricted and Unrestricted Stock
Restricted stock is generally taxable as ordinary income in the first taxable year in which the recipient’s rights to the stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. Recipients may also elect to include the income in their tax returns for the taxable year in which they receive the shares by filing an election to do so with the appropriate office of the Internal Revenue Service within 30 days of the date the shares are transferred to them.
The amount includable in income with respect to restricted stock is the fair market value of the shares as of the day the shares are transferable or not subject to a substantial risk of forfeiture, whichever is applicable; if the recipient has elected to include the income in the year in which the shares are received, the amount of income includable is the fair market value of the shares at the time of transfer.
Unrestricted stock is taxable as ordinary income when it is granted to the recipient. Dividends paid on restricted stock during the restricted period are taxable as ordinary income as paid. The Company is entitled to a deduction for restricted or unrestricted stock in the year the recipient is subject to ordinary income tax with respect to the stock.
Restricted Stock Units
Restricted stock units are generally taxable to the recipient as ordinary income when stock or cash is payable with respect to the restricted stock units, even if the restricted stock units become vested at an earlier date. The Company is generally entitled to a deduction at the time the recipient is subject to tax with respect to the grant. Dividend equivalents with respect to restricted stock units are generally accumulated and paid to the recipient when the stock or cash payable under the restricted stock unitsfirst become payable, and the dividend equivalents are taxable at the time of such payment.
Section 162(m)but no interest shall accrue on accumulated but unpaid Series B Preferred Dividends.
Under Section 162(m) of the Code, compensation paid to certain executives in excess of $1 million for any taxable year is not deductible unless an exception to such rule is applicable. Accordingly, in some circumstances the Company’s deduction with respect to awards under the Plan may be limited by Section 162(m).
The Plan is not subject to the qualification requirements of Section 401(a) of the I.R.C.
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The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.
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The following documents filed by the Company with the Securities and Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated into this document by reference:
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The Company will provide without charge to each participant in the Plan, upon oral or written request, a copy of any or all of these documents other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents. In addition, the Company will provide without charge to such participants a copy of the Company’s most recent annual report to shareholders, proxy statement, and other communications distributed generally to security holders of the Company. Requests for such copies should be directed to Mr. Jay A. Ernst, Manager, Shareholder Services, The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio 45201, (513) 983-3413.
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Additional information about(A) A holder of shares of Series B Preferred Stock shall be entitled, at any time prior to the , to cause any or all of such shares to be converted into shares of Common Stock. The number of shares of Common Stock into which each share of the Series B Preferred Stock may be Plan and its administratorsclose of business on the date fixed for redemption of such shares pursuant to Sections 6, 7 or 8 hereofobtained from Mr. E.J. Wunsch, Assistant Secretary,converted shall be determined by dividing the Series B Liquidation Price in effect at the time of conversion by the Series B Conversion Price (as hereinafter defined) in effect at the time of conversion. The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4370.Series B Conversion Price per share at which shares of Common Stock shall be initially issuable upon conversion of any shares of Series B Preferred Stock shall be $52.245, subject to adjustment as hereinafter provided.
5 | As a result of two two-for-one stock splits on the Common Stock effective August 22, 1997 and May 21, 2004 and the Smucker transaction effective June 1, 2002, the Conversion Price, Liquidation Price and Preferred Dividend Rate were all adjusted in accordance with the terms of paragraph 9(A)(1) of this Appendix B to be as follows: Conversion Price—$12.96; Liquidation Price —$12.96; Preferred Dividend Rate—$1.022 per share per annum, with a corresponding change in the quarterly dividend payment. (This footnote is not a part of the Company’s Amended Articles of Incorporation but is included to provide up-to-date information on the status of Series B ESOP Convertible Class A Preferred Stock.) |
0038-6004
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THE PROCTER & GAMBLE COMPANY P.O. BOX 5572 CINCINNATI, OH 45201-5572 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions | |||
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VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions | ||||
VOTE BY MAIL Mark, sign, and date your proxy/voting instruction card and return it in the postage-paid envelope we have provided or return it to The Procter & Gamble Company, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M37537-PTBD-ZTBD-ZTBD KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY | ||||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends a voteFOR the following action: | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||||||||
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Nominees: | ||||||||||||||||||||||||||||||||||||||||||||||
1a. Angela F. Braly | ¨ | ¨ | ¨ | Vote on Proposals | ||||||||||||||||||||||||||||||||||||||||||
1b. Kenneth I. Chenault | ¨ | ¨ | ¨ | The Board of Directors recommends a voteFOR the following proposal: | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||||
1c. Scott D. Cook | ¨ | ¨ | ¨ | 2. | Ratify Appointment of the Independent Registered Public Accounting Firm | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||||||||||||
1d. Susan Desmond-Hellmann | ¨ | ¨ | ¨ | |||||||||||||||||||||||||||||||||||||||||||
1e. Robert A. McDonald | ¨ | ¨ | ¨ | The Board of Directors recommends you vote [—] the following proposal: | ||||||||||||||||||||||||||||||||||||||||||
1f. W. James McNerney, Jr. | ¨ | ¨ | ¨ | 3. | Advisory Vote to Approve the Company’s Say on Pay Vote | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||||||||||||
1g. Johnathan A. Rodgers | ¨ | ¨ | ¨ | The Board of Directors recommends you vote [—] on the following proposal: | 1 Year | 2 Years | 3 Years | Abstain | ||||||||||||||||||||||||||||||||||||||
1h. Margaret C. Whitman | ¨ | ¨ | ¨ | 4. | Advisory Vote to Recommend the Frequency of the Say on Pay Vote | ¨ | ¨ | ¨ | ¨ | |||||||||||||||||||||||||||||||||||||
1i. Mary Agnes Wilderotter | ¨ | ¨ | ¨ | The Board of Directors recommends you voteFOR the following proposal: | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||||
1j. Patricia A. Woertz | ¨ | ¨ | ¨ | 5. | Amend the Company’s Amended Articles of Incorporation | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||||||||||||
1k. Ernesto Zedillo | ¨ | ¨ | ¨ | The Board of Directors recommends you vote [—] the following proposals: | ||||||||||||||||||||||||||||||||||||||||||
6. | Shareholder Proposal #1 - Cumulative Voting | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||||||||||||||||
7. | Shareholder Proposal #2 - Animal Testing | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||||||||||||||||
8. | Shareholder Proposal #3 - Electioneering Contributions | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||||||||||||||||
NOTE: Please sign exactly as name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee, or guardian, please give full title as such.
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Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||||||||||||||||||||||||
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND ADMISSION TICKET This is notice of your invitation to attend the annual meeting of shareholders of The Procter & Gamble Company to be held on Tuesday, October 11, 2011 at 9:00 a.m. at the Procter & Gamble Hall at The Aronoff Center for the Arts, 650 Walnut Street, Cincinnati, Ohio. | ||||
In addition to reviewing the minutes of last year’s annual meeting and receiving reports of officers, the purposes of the meeting are listed on the voting portion of the proxy card attached below to this Admission Ticket. | ||||
You should present this Admission Ticket in order to gain admittance to the meeting. This ticket admits only the shareholder listed on the reverse side and is not transferable. If the shares are held in the name of a broker, trust, bank or other nominee, you should bring with you a proxy or letter from the broker, trustee, bank or nominee confirming the beneficial ownership of the shares. | ||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. |
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M37538-PTBD-ZTBD-ZTBD |
THE PROCTER & GAMBLE COMPANY | ||||||||||
SHAREHOLDER’S PROXY AND CONFIDENTIAL VOTING INSTRUCTION CARD Annual Meeting of Shareholders-Tuesday, October | ||||||||||
The undersigned hereby appoints Robert A.
This proxy also provides voting instructions for shares held by the Trustees of the Retirement Trust and the Employee Stock Ownership Trust of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan and the Procter & Gamble Savings Plan (as applicable, with respect to shares of Common Stock and Series A and B ESOP Convertible Class A Preferred Stock held for the benefit of the undersigned) and directs such Trustees to vote all shares held for the benefit of the undersigned: as indicated on the reverse side of this card for the election of Directors and on the Board of Directors and shareholder proposals listed; and with the Proxy Committee on such other matters as may properly come before the meeting. The Trustees will vote shares of the Company’s Stock held by them for which instructions are not received in direct proportion to the voting of shares for which instructions have been received, provided that such voting is not contrary to the Employee Retirement Income Security Act of 1974, as amended. The Trustees will vote unallocated shares in direct proportion to voting by allocated shares of the same Class in aggregate, for which instructions have been received.
This proxy/voting instruction card is solicited jointly by the Board of Directors of The Procter & Gamble Company and the Trustees listed above pursuant to a separate Notice of Annual Meeting and Proxy Statement, receipt of which is hereby acknowledged. Votes should be received by the Company’s proxy tabulator, Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, NY 11717 by 11:59 p.m. on Monday, October | ||||||||||
Dear Shareholder:*** Exercise YourRight to Vote ***
On August 28, 2009 we sent you a notice indicating thatImportant Notice Regarding the proxy statement and voting instructionsAvailability of Proxy Materials for the annual meeting
Shareholder Meeting to Be Held on October 11, 2011.
Meeting Information | ||||||||
Meeting Type: Annual | ||||||||
THE PROCTER & GAMBLE COMPANY | For holders as of: August 12, 2011 | |||||||
Date: October 11, 2011 | Time: 9:00 a.m. | |||||||
Location: Procter & Gamble Hall | ||||||||
The Aronoff Center for the Arts | ||||||||
650 Walnut Street Cincinnati, Ohio |
THE PROCTER & GAMBLE COMPANY P.O. BOX 5572 CINCINNATI, OH 45201-5572 | You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online atwww.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. | |||
See the reverse side of this notice to obtain proxy materials and voting instructions. |
M37329-PTBD-ZTBD
— Before You Vote —
How to Access the Proxy Materials
Proxy Materials Available to VIEW or RECEIVE: | ||
NOTICE AND PROXY STATEMENT ANNUAL REPORT How to View Online: Have the information that is printed in the box marked by the arrow(located on the following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1)BY INTERNET: www.proxyvote.com 2)BY TELEPHONE: 1-800-579-1639 3)BY E-MAIL*: sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow(located on the following page) in the subject line. Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before September 27, 2011 to facilitate timely delivery. |
— How To Vote —
Please Choose One of shareholders of The Procter & Gamble Company to be held on Tuesday, October 13, 2009 were available on line atwww.proxyvote.com.the Following Voting Methods
As of September 29 we have not received your proxy. If you have in fact already voted, we thank you. If not, we hope you will do so now.
Vote In Person:Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go towww.proxyvote.com. Have the information that is printed in the box marked by the arrowavailable and follow the instructions. Vote By Mail:You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. |
M37330-PTBD-ZTBD
The Board of Directors recommends a voteFOR the following action: The Board of Directors recommends you voteFOR the following proposal: 1. ELECTION OF DIRECTORS 2. Ratify Appointment of the Independent Registered Public Accounting Firm Nominees: 1a. Angela F. Braly The Board of Directors recommends you vote[—] the following proposal: 1b. Kenneth I. Chenault 3. Advisory Vote to Approve the Company’s Say on Pay Vote 1c. Scott D. Cook The Board of Directors recommends you vote[—] on the following proposal: 1d. Susan Desmond-Hellmann 4. Advisory Vote to Recommend the Frequency of the Say on Pay Vote 1e. Robert A. McDonald The Board of Directors recommends you voteFOR the following proposal: 1f. W. James McNerney, Jr. 5. Amend the Company’s Amended Articles of Incorporation 1g. Johnathan A. Rodgers The Board of Directors recommends you vote[—] the following proposals: 1h. Margaret C. Whitman 6. Shareholder Proposal #1 - Cumulative Voting 1i. Mary Agnes Wilderotter 7. Shareholder Proposal #2 - Animal Testing 1j. Patricia A. Woertz 8. Shareholder Proposal #3 - Electioneering Contributions 1k. Ernesto Zedillo M37331-PTBD-ZTBDIn case you have lost the original notice, an additional notice and proxy card are enclosed together with a return envelope. You can also vote by telephone or via the Internet atwww.proxyvote.com. Instructions are included on the proxy card.Voting Items
Thank you for your attention to this matter.
THE PROCTER & GAMBLE COMPANY
M37332-PTBD-ZTBD