FREEPORT-MCMORAN INC
10-Qs and 10-Ks
PROXIES
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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. )
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Filed by a Party other than the Registrant o
Check the appropriate box:
| o | Preliminary Proxy Statement | |
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| þ | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material Pursuant to §240.14a-12 |
Freeport-McMoRan
Copper & Gold Inc.
Payment of Filing Fee (Check the appropriate box):
| þ | No fee required. | |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: | ||
| (2) | Aggregate number of securities to which transaction applies: | ||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
| (4) | Proposed maximum aggregate value of transaction: | ||
| (5) | Total fee paid: | ||
| o | Fee paid previously with preliminary materials. | |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: | ||
| (2) | Form, Schedule or Registration Statement No.: | ||
| (3) | Filing Party: | ||
| (4) | Date Filed: | ||
Table of Contents
Notice of Annual Meeting of
Stockholders
June 15, 2011
April 28,
2011
|
Date:
|
Wednesday, June 15, 2011 | |||
|
Time:
|
10:00 a.m., Eastern Time | |||
|
Place:
|
Hotel du Pont 11th and Market Streets Wilmington, Delaware 19801 |
|||
|
Purpose:
|
• | To elect twelve directors; | ||
| • | To approve, on an advisory basis, the compensation of our named executive officers; | |||
| • | To approve, on an advisory basis, the frequency of future advisory votes on the compensation of our named executive officers; | |||
| • | To ratify the appointment of the independent registered public accounting firm; | |||
| • | To vote on a stockholder proposal, if presented at the meeting; and | |||
| • | To transact such other business as may properly come before the meeting. | |||
|
Record Date:
|
Close of business on April 19, 2011 | |||
Your vote is important. Whether or not you plan to attend the
annual meeting in person, it is important that your shares be
represented and voted at the annual meeting. You may transmit
your vote via the internet or you may complete and return a
proxy card. Your cooperation is appreciated.
By Order of the Board of Directors.
DOUGLAS N. CURRAULT II
Secretary
Secretary
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Information
about Attending the Annual Meeting
Only stockholders of record on the record date of April 19,
2011, are entitled to notice of and to attend or vote at our
annual meeting. If you plan to attend the meeting in person,
please bring the following:
1. Proper identification.
2. Acceptable Proof of Ownership if your shares are held in
“street name.”
Street Name means your shares are held of record by
brokers, banks or other institutions.
Acceptable Proof of Ownership is either (a) a letter
from your broker confirming that you beneficially owned
Freeport-McMoRan Copper & Gold Inc. stock on the
record date or (b) an account statement showing that you
beneficially owned Freeport-McMoRan Copper & Gold Inc.
stock on the record date.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON JUNE 15, 2011.
STOCKHOLDER MEETING TO BE HELD ON JUNE 15, 2011.
This
proxy statement and the 2010 Annual Report are available at
http://www.edocumentview.com/FCX MTG
http://www.edocumentview.com/FCX MTG
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Table of Contents
FREEPORT-McMoRan
COPPER & GOLD INC.
333 North Central Avenue
Phoenix, Arizona 85004
333 North Central Avenue
Phoenix, Arizona 85004
The 2010 Annual Report to Stockholders, including financial
statements, is being made available to stockholders together
with these proxy materials on or about April 28, 2011.
Questions
and Answers about the Proxy Materials, Annual Meeting and
Voting
Why am I
receiving these proxy materials?
Our board of directors (board) is soliciting your proxy to vote
at our 2011 annual meeting of stockholders because you owned
shares of our common stock at the close of business on
April 19, 2011, the record date for the annual meeting, and
are therefore entitled to vote at the meeting. This proxy
statement, along with a proxy card or a voting instruction card,
is being made available to stockholders on or about
April 28, 2011. We have made these materials available to
you on the internet and, in some cases, we have delivered
printed proxy materials to you. This proxy statement summarizes
the information that you need to know in order to cast your vote
at the annual meeting. You do not need to attend the annual
meeting in person to vote your shares.
Why did I
receive a notice of internet availability of proxy materials
instead of a full set of proxy materials?
In accordance with the rules of the U.S. Securities and
Exchange Commission (SEC), we are permitted to furnish proxy
materials, including this proxy statement and our 2010 Annual
Report, to stockholders by providing access to these documents
on the internet instead of mailing printed copies. Most
stockholders will not receive printed copies of the proxy
materials unless requested. Instead, the notice will instruct
you as to how you may access and review the proxy materials on
the internet. The notice also instructs you as to how you may
cast your vote via the internet. If you would like to receive a
printed or email copy of our proxy materials, please follow the
instructions for requesting the materials in the notice.
When and
where will the annual meeting be held?
The annual meeting will be held at 10:00 a.m. Eastern
Time on Wednesday, June 15, 2011, at the Hotel du Pont
located at 11th and Market Streets, Wilmington, Delaware
19801. You can obtain directions to the Hotel du Pont online at
the hotel’s web site at
http://www.hoteldupont.com/map-directions/index.cfm.
Who is
soliciting my proxy?
Our board is soliciting your proxy to vote on all matters
scheduled to come before the 2011 annual meeting of
stockholders, whether or not you attend in person. By completing
and returning the proxy card or voting instruction card, or by
transmitting your voting instructions via the internet, you are
authorizing the proxy holders to vote your shares at our annual
meeting as you have instructed.
On what
matters will I be voting? How does the board recommend that I
cast my vote?
At the annual meeting, you will be asked to elect our director
nominees; approve, on an advisory basis, the compensation of our
named executive officers; approve, on an advisory basis, the
frequency of future advisory votes on the compensation of our
named executive officers; ratify the appointment of our
independent registered public accounting firm; consider a
stockholder proposal included in this proxy statement, if
presented at the meeting; and consider any other matter that
properly comes before the meeting.
Our board unanimously recommends that you vote:
| • | FOR all of the director nominees; | |
| • | FOR the approval, on an advisory basis, of the compensation of our named executive officers; and |
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| • | In favor of holding an advisory vote on the compensation of our named executive officers EVERY YEAR; | |
| • | FOR the ratification of the appointment of our independent registered public accounting firm; and | |
| • | AGAINST the stockholder proposal included in this proxy statement, if presented at the meeting. |
We do not expect any matters to be presented for action at the
meeting other than the matters described in this proxy
statement. By signing and returning a proxy card, however, you
will give to the persons named as proxies discretionary voting
authority with respect to any other matter that may properly
come before the annual meeting, and they intend to vote on any
such other matter in accordance with their best judgment.
How many
votes may I cast?
You may cast one vote for every share of our common stock that
you owned on the record date.
How many
shares are eligible to be voted?
As of the record date, we had 947,155,321 shares of common
stock outstanding, each of which is entitled to one vote.
How many
shares must be present to hold the annual meeting?
Under Delaware law and our by-laws, the presence in person or by
proxy of a majority of the outstanding shares of our common
stock entitled to vote is necessary to constitute a quorum at
the annual meeting. The inspector of election will determine
whether a quorum is present. If you are a beneficial owner (as
defined below) of shares of our common stock and you do not
instruct your bank, broker, trustee or other nominee how to vote
your shares on any of the proposals, your shares will be counted
as present at the annual meeting for purposes of determining
whether a quorum exists. In addition, votes of stockholders of
record who are present at the annual meeting in person or by
proxy will be counted as present at the annual meeting for
purposes of determining whether a quorum exists, whether or not
such holder abstains from voting on any of the proposals.
How do I
vote?
Stockholders
of Record
If your shares are registered directly in your name with our
transfer agent, BNY Mellon Shareowner Services, you are the
stockholder of record of those shares and these proxy materials
have been made available or mailed to you by us. You may vote
your shares by internet or by mail as further described below.
Your vote authorizes each of James R. Moffett, Richard C.
Adkerson and Kathleen L. Quirk, as your proxies, each with the
power to appoint his or her substitute, to represent and vote
your shares as you directed.
| • | Vote by Internet — http://www.ivselection.com/freeport11 |
| • | Use the internet to transmit your voting instructions 24 hours a day, seven days a week until 11:59 p.m. (Eastern Time) on June 14, 2011. | |
| • | Please have your proxy card available and follow the instructions to obtain your records and create an electronic ballot. |
| • | Vote by Mail — Complete, date and sign your proxy card and return it in the postage-paid envelope provided. |
Only the latest dated proxy received from you, whether by
internet or mail, will be voted at the annual meeting. If you
vote by internet, please do not mail your proxy card. You may
also vote in person at the annual meeting.
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Beneficial
Owners
If your shares are held in a stock brokerage account, by a bank,
broker, trustee, or other nominee, you are considered the
beneficial owner of shares held in street name and these proxy
materials are being forwarded to you by your bank, broker,
trustee or nominee that is considered the owner of record of
those shares. As the beneficial owner, you have the right to
direct your bank, broker, trustee or nominee on how to vote your
shares via the internet or by telephone if the bank, broker,
trustee or nominee offers these options or by signing and
returning a proxy card. Your bank, broker, trustee or nominee
will send you instructions for voting your shares. For a
discussion of the rules regarding the voting of shares held by
beneficial owners, please see the question below entitled
“What happens if I don’t vote for a proposal? What is
discretionary voting? What is a broker non-vote?”
Participants
in our Employee Capital Accumulation Program
If you hold shares of our common stock through our Employee
Capital Accumulation Program, which is the company’s 401(k)
plan (ECAP), you may only vote your shares by mail. Accordingly,
please complete, date and sign your proxy card and return it in
the postage-paid envelope provided to you.
What
happens if I don’t vote for a proposal? What is
discretionary voting? What is a broker non-vote?
If you properly execute and return a proxy or voting instruction
card, your shares will be voted as you specify. If you are a
stockholder of record and you make no specifications on your
proxy card, your shares will be voted in accordance with the
recommendations of our board, as provided above.
If you are a beneficial owner and you do not provide voting
instructions to your broker, bank or other holder of record
holding shares for you, your shares will not be voted with
respect to any proposal for which your broker does not have
discretionary authority to vote. Rules of the New York Stock
Exchange (NYSE) determine whether proposals presented at
stockholder meetings are “discretionary” or
“non-discretionary.” If a proposal is determined to be
discretionary, your broker, bank or other holder of
record is permitted under NYSE rules to vote on the proposal
without receiving voting instructions from you. If a proposal is
determined to be non-discretionary, your broker, bank or
other holder of record is not permitted under NYSE rules to vote
on the proposal without receiving voting instructions from you.
A “broker non-vote” occurs when a bank, broker or
other holder of record holding shares for a beneficial owner
does not vote on a non-discretionary proposal because the
holder of record has not received voting instructions from the
beneficial owner.
Under the rules of the NYSE, the proposal relating to the
ratification of our independent registered public accounting
firm is a discretionary proposal and all other proposals are
non-discretionary proposals. If you are a beneficial owner and
you do not provide voting instructions to your bank, broker or
other holder of record holding shares for you, your shares may
be voted with respect to the ratification of our independent
registered public accounting firm. Whereas, if you are a
beneficial owner and you do not provide voting instructions to
your broker, bank or other holder of record holding shares for
you, your shares will not be voted with respect to the
election of directors, the compensation of our named executive
officers, the frequency of future advisory votes on the
compensation of our named executive officers and the stockholder
proposal. Without your voting instructions on these matters, a
broker non-vote will occur with respect to your shares. Shares
subject to broker non-votes will not be counted as votes for or
against and will not be included in calculating the number of
votes necessary for approval of such matters to be presented at
the annual meeting; however, such shares will be considered
present at the annual meeting for purposes of determining the
existence of a quorum.
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What vote
is required, and how will my votes be counted, to elect
directors and to adopt the other proposals?
|
Vote Required |
Effect of |
|||||||
|
to Adopt the |
Effect of |
Broker |
||||||
| Proposal | Voting Options | Proposal | Abstentions | Non-Votes | ||||
| No. 1: Election of directors |
For or withhold on each nominee |
Affirmative vote of a majority of votes cast |
Treated as votes against |
No effect | ||||
|
No. 2: Approval, on an advisory basis, of the compensation of our named executive officers |
For, against or abstain |
Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote thereon |
Treated as votes against |
No effect | ||||
| No. 3: Approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our named executive officers |
Stockholders may select whether such votes should occur every year, every two years or every three years, or stockholders may abstain from voting |
Plurality of shares voted | No effect | No effect | ||||
| No. 4: Ratification of independent registered public accounting firm |
For, against or abstain |
Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote thereon |
Treated as votes against |
N/A | ||||
| No. 5: Consideration of the stockholder proposal included in this proxy statement, if presented at the meeting |
For, against or abstain |
Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote thereon |
Treated as votes against |
No effect |
In uncontested elections, our directors are elected by the
affirmative vote of the holders of a majority of the shares
voted. In contested elections (where the number of nominees
exceeds the number of directors to be elected), our directors
are elected by a plurality of shares voted. Under our by-laws,
all other matters require the affirmative vote of the holders of
a majority of our common stock present in person or by proxy and
entitled to vote thereon, except as otherwise provided by
statute, our certificate of incorporation or our by-laws. With
respect to Proposal No. 3, although the vote is
non-binding, our board will consider the stockholders to have
“approved” the frequency selected by a plurality of
the votes cast; that is, the frequency receiving the highest
number of affirmative votes.
Can I
revoke or change my vote after I deliver my proxy?
Yes. Your proxy can be revoked or changed at any time before it
is voted if you provide notice in writing to our corporate
secretary before the annual meeting, if you timely provide to us
another proxy with a later date or if you vote in person at the
annual meeting or notify the corporate secretary in writing at
the annual meeting of your wish to revoke your proxy.
Who pays
for soliciting proxies?
We pay all expenses incurred in connection with the solicitation
of proxies for the annual meeting. We have retained Georgeson
Inc., 199 Water Street, 26th Floor, New York, New York, for
an estimated fee of
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$10,500, plus reimbursement of certain reasonable expenses, to
assist in the solicitation of proxies and otherwise in
connection with the annual meeting. We and our proxy solicitor
will also request banks, brokers, and other intermediaries
holding shares of our common stock beneficially owned by others
to send this document to, and obtain proxies from, the
beneficial owners and will reimburse holders for their
reasonable expenses in so doing. Solicitation of proxies by mail
may be supplemented by telephone, email and other electronic
means, advertisements and personal solicitation by our
directors, officers and employees. No additional compensation
will be paid to directors, officers or employees for such
solicitation efforts.
Could
other matters be considered and voted upon at the annual
meeting?
Our board does not expect to bring any other matter before the
annual meeting, and it is not aware of any other matter that may
be considered at the meeting. In addition, pursuant to our
by-laws, the time has elapsed for any stockholder to properly
bring a matter before the meeting. However, if any other matter
does properly come before the meeting, the proxy holders will
vote the proxies in his or her discretion.
What
happens if the annual meeting is postponed or
adjourned?
Unless a new record date is fixed, your proxy will still be
valid and may be voted at the postponed or adjourned meeting.
You will still be able to change or revoke your proxy until it
is voted.
How does
the February 1, 2011
two-for-one
stock split affect the disclosures in this proxy
statement?
In December 2010, our board declared a
two-for-one
split of our common stock in the form of a stock dividend on
issued and outstanding shares, with the additional shares issued
on February 1, 2011. Accordingly, all references to shares
of common stock, per share amounts, share prices and other
equity-based amounts in the proxy statement have been adjusted
to reflect the
two-for-one
stock split, unless otherwise noted.
2012
Stockholder Proposals
If you want us to consider including a proposal in next
year’s proxy statement, you must deliver it in writing to:
Corporate Secretary, Freeport-McMoRan Copper & Gold
Inc., 333 North Central Avenue, Phoenix, Arizona 85004 by
December 30, 2011.
If you want to present a proposal at next year’s annual
meeting but do not wish to have it included in our proxy
statement, you must submit it in writing to our corporate
secretary by February 16, 2012, in accordance with the
specific procedural requirements in our by-laws. If you would
like a copy of these procedures, please contact our corporate
secretary, or access our by-laws on our web site at
www.fcx.com under Investor Center — Corporate
Governance. Failure to comply with our by-law procedures and
deadlines may preclude presentation of the matter at the meeting.
Corporate
Governance
Corporate
Governance Guidelines; Principles of Business Conduct
Our corporate governance guidelines and our principles of
business conduct are available at www.fcx.com under
Investor Center — Corporate Governance. Both are
available in print upon request. Amendments to or waivers of our
principles of business conduct granted to any of our directors
or executive officers will be published promptly on our web site.
Board and
Committee Meeting Attendance
Our board held five regular meetings and three special meetings
during 2010. In 2010, our board authorized a special committee
of independent directors comprised of Messrs. Allison,
Krulak, Lackey, Madonna and McCoy to evaluate a potential
investment transaction with McMoRan Exploration Co. (McMoRan).
The special committee met ten times during 2010.
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During 2010, each of our directors attended more than 75% of the
aggregate of the total number of meetings of the board and the
total number of meetings held by each committee of the board on
which each such director served. Directors are invited but not
required to attend annual meetings of our stockholders.
Mr. Adkerson attended the last annual meeting of
stockholders.
Board
Composition and Leadership Structure
As of the date of this proxy statement, our board consists of
twelve members, nine of whom have no material relationship with
the company and are independent within the meaning of our
corporate governance guidelines, which comply with the NYSE
director independence standards as currently in effect. We also
have four advisory directors who do not vote. For more
information about our advisory directors, see “Advisory
Directors” below. We also have one director emeritus, Henry
A. Kissinger. The director emeritus does not vote.
James R. Moffett serves as chairman of our board and Richard C.
Adkerson serves as president and chief executive officer. We
separated the positions of chairman of the board and chief
executive officer in 2003, when we named Mr. Moffett as
chairman of the board and Mr. Adkerson as chief executive
officer. Our board determined that the separation of these roles
would maximize management’s efficiency. Separating these
positions allows our chief executive officer to focus on our
day-to-day
business, while allowing the chairman of the board to lead the
board in its fundamental role of providing guidance to and
oversight of management.
As executive chairman, Mr. Moffett furthers our business
strategy by applying his exceptional talents and experience as a
geologist. He directs our global exploration programs.
Mr. Moffett also has been, and continues to be,
instrumental in fostering our relationships with host
governments, including the government of Indonesia, the location
of our Grasberg mine. Mr. Moffett is not considered an
independent director because he is part of our management team
and receives compensation for services to the company.
Mr. Adkerson, as president and chief executive officer, is
responsible for the executive management of the company.
Mr. Adkerson has demonstrated exceptional leadership
abilities in developing and executing a financial strategy that
has benefited our stockholders, and in building an operational,
financial and administrative organization that efficiently
supports our business.
Our board has concluded that the current leadership structure
provides an appropriate framework for our directors to provide
independent, objective and effective oversight of management.
While our by-laws and corporate governance guidelines do not
require our chairman and chief executive officer positions to be
separate, the board believes that having separate positions is
the appropriate leadership structure for the company at this
time. Our board, however, periodically reviews the leadership
structure and may make such changes in the future as it deems
appropriate.
In accordance with our corporate governance guidelines, our
non-management directors meet in executive session at the end of
each regularly scheduled board meeting. The presiding director
for executive session meetings rotates among the independent
directors who are chairpersons of our four principal board
committees (audit, corporate personnel, nominating and corporate
governance, and public policy; see discussion below), except as
the directors may otherwise determine for a specific meeting. We
believe that this approach effectively encourages full
engagement of the non-management directors in executive
sessions. Following each executive session of non-management
directors, the presiding director serves as a liaison between
the non-management directors and the chairman regarding any
specific feedback or issues that have been discussed in
executive session.
Advisory
Directors
Advisory directors provide general policy advice to our board as
determined from time to time by our board. Advisory directors,
upon the invitation of the board, have the privilege to receive
notice of and to attend regular meetings of our board or any
board committee for which the advisory director has been
appointed to serve as an advisor or consultant. Advisory
directors serve at the pleasure of the board, are not entitled
to vote on any matter brought before the board or any board
committee and are not considered a director of the company for
any purpose. Compensation paid to advisory directors is
determined from time to
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time by the board, and advisory directors may have consulting
agreements with the company. Effective June 9, 2010, our
board appointed J. Bennett Johnston, Gabrielle K. McDonald, J.
Stapleton Roy and J. Taylor Wharton to serve as advisory
directors.
J. Bennett Johnston is Chairman of
Johnston & Associates, LLC, a business consulting firm
and consultant to the company, and Chairman of Johnston
Development Co. LLC, a project development firm. He served as
United States Senator from 1972 to 1997.
Gabrielle K. McDonald has served as a judge on the
Iran-United
States Claims Tribunal, The Hague, The Netherlands since
November 2001. Judge McDonald has also served as the Special
Counsel on Human Rights to the company since 1999.
J. Stapleton Roy is Director of the Kissinger
Institute on China and the United States at the Woodrow Wilson
International Center for Scholars. He is Senior Advisor and
previously served as Vice Chairman and Managing Director of
Kissinger Associates, Inc., international consultants and
consultants to the company. He previously served as Assistant
Secretary of State for Intelligence and Research and United
States Ambassador to Indonesia.
J. Taylor Wharton is the retired Special Assistant
to the President for Patient Affairs and professor of
Gynecologic Oncology at The University of Texas M. D. Anderson
Cancer Center and a consultant to the company.
Board
Committees
Our board has four standing committees: an audit committee, a
corporate personnel committee, a nominating and corporate
governance committee and a public policy committee. Each of our
audit, corporate personnel and nominating and corporate
governance committees are composed entirely of independent
directors. Each committee operates under a written charter
adopted by the board. All of the committee charters are
available on our web site at www.fcx.com under Investor
Center — Corporate Governance and are available in
print upon request. The primary functions of each board
committee are described below.
|
Audit |
Meetings |
|||||
| Committee Members |
Functions of the Committee
|
in 2010 | ||||
|
Robert A. Day, Chairman Gerald J. Ford H. Devon Graham, Jr. Jon C. Madonna Stephen H. Siegele |
• | please refer to “Audit Committee Report” included in this proxy statement | 4 | |||
|
Corporate Personnel |
Meetings |
|||||
| Committee Members |
Functions of the Committee
|
in 2010 | ||||
|
H. Devon Graham, Jr., Chairman Robert J. Allison, Jr. Charles C. Krulak Bobby Lee Lackey |
• | determines the compensation of our executive officers | 3 | |||
|
•
|
administers our cash-based and equity-based incentive compensation plans | |||||
|
•
|
oversees our assessment of whether our compensation practices are reasonably likely to expose the company to material risks | |||||
|
•
|
please refer to “Corporate Personnel Committee Procedures” included in this proxy statement for more information | |||||
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|
Nominating and Corporate Governance |
Meetings |
|||||
| Committee Members |
Functions of the Committee
|
in 2010 | ||||
|
Robert J. Allison, Jr., Chairman Robert A. Day Gerald J. Ford |
• | nominates individuals to stand for election or re-election as directors | 2 | |||
|
•
|
considers recommendations by our stockholders of potential nominees for election as directors | |||||
|
•
|
makes recommendations to our board concerning the structure of our board and board committees | |||||
|
•
|
conducts annual board and committee evaluations | |||||
|
•
|
maintains and makes recommendations to our board regarding our corporate governance guidelines | |||||
|
•
|
oversees the form and amount of director compensation | |||||
|
Public Policy |
Meetings |
|||||
| Committee Members |
Functions of the Committee
|
in 2010 | ||||
|
Stephen H. Siegele, Chairman Robert J. Allison, Jr. Charles C. Krulak Bobby Lee Lackey Dustan E. McCoy B. M. Rankin, Jr. |
• | oversees our environmental policy and implementation programs | 3 | |||
|
•
|
oversees our compliance programs relating to our human rights, social, community and employment policies and practices | |||||
|
•
|
oversees our governmental and community relations and information programs | |||||
|
•
|
oversees our health and safety programs | |||||
|
•
|
oversees our charitable and philanthropic contributions | |||||
Corporate
Personnel Committee Procedures
The corporate personnel committee has the sole authority to set
annual compensation amounts and annual and long-term incentive
plan criteria for our executive officers, evaluate the
performance of our executive officers, and make awards to our
executive officers under our stock incentive plans. The
committee also reviews, approves and recommends to our board any
proposed plan or arrangement providing for incentive, retirement
or other compensation to our executive officers. The committee
oversees our assessment of whether our compensation practices
are reasonably likely to expose the company to material risks.
The committee annually recommends to our board the slate of
officers for the company, periodically reviews the functions of
our executive officers and makes recommendations to the board
concerning those functions.
To the extent stock options or other equity awards are granted
in a given year, the committee’s historical practice has
been to grant such awards at its first meeting of that year,
which is usually held in January or February. Each July or
August, the board establishes a meeting schedule for itself and
its committees for the next calendar year. Thus, the first
meeting of each year is scheduled approximately six months in
advance and is scheduled to fall within the window period
following the release of the company’s earnings for the
fourth quarter of the previous year. The committee has a written
policy stating that it will approve all regular annual equity
awards at its first or second meeting of each fiscal year, and
that to the extent the committee approves any
out-of-cycle
awards at other times during the year, such awards will be made
during an open window period during which our executive officers
and directors are permitted to trade.
The terms of our stock incentive plans provide that the exercise
price of each stock option cannot be less than the fair market
value of a share of our common stock on the grant date. Pursuant
to the committee’s policies, for purposes of our stock
incentive plans, the fair market value of our common stock will
be determined by reference to the closing sale price on the
grant date. In addition, our stock incentive plans permit the
committee to delegate to appropriate personnel its authority to
make awards to employees other than those subject to
Section 16 of the Securities Exchange Act of 1934, as
amended. Our current equity grant
8
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policy provides that each of the chairman of the board and the
chief executive officer of the company has authority to make or
modify grants to such employees, subject to the following
conditions:
| • | No grant may relate to more than 20,000 shares of our common stock; | |
| • | Such grants must be made during an open window period and must be approved in writing by such officer, the grant date being the date of such written approval or on a future date within an open window period; | |
| • | The exercise price of any options granted may not be less than the fair market value of our common stock on the date of grant; and | |
| • | The officer must report any such grants to the committee at its next meeting. |
The committee engages an independent executive compensation
consultant to advise the committee on matters related to
executive compensation. Please refer to “Compensation
Discussion and Analysis” for more information related to
the independent executive compensation consultant. In addition,
the board has its own independent legal counsel, with whom the
committee consults on an as needed basis.
Compensation
Committee Interlocks and Insider Participation
The current members of our corporate personnel committee are
Messrs. Allison, Graham, Krulak and Lackey. In 2010, none
of our executive officers served as a director or member of the
compensation committee of another entity, where an executive
officer of the entity served as one of our directors or on our
corporate personnel committee.
Board’s
Role in Oversight of Risk Management
Our board as a whole is responsible for risk oversight, with
reviews of certain areas being conducted by the relevant board
committees that report to the full board. In its risk oversight
role, our board reviews, evaluates and discusses with
appropriate members of management whether the risk management
processes designed and implemented by management are adequate in
identifying, assessing, managing and mitigating material risks
facing the company. In addition, as reflected in our principles
of business conduct, our board seeks to establish a “tone
at the top” communicating the board’s strong
commitment to ethical behavior and compliance with the law.
Our board believes that full and open communication between
senior management and the board is essential to effective risk
oversight. Our chairman and our chief executive officer meet and
discuss regularly with senior management a variety of matters
including business strategies, opportunities, key challenges and
risks facing the company, as well as management’s risk
mitigation strategies. Senior management attends all regularly
scheduled board meetings where they conduct presentations to the
board on various strategic matters involving our operations and
are available to address any questions or concerns raised by the
board on risk management-related or any other matters. Our board
oversees the strategic direction of the company, and in doing so
considers the potential rewards and risks of the company’s
business opportunities and challenges, and monitors the
development and management of risks that impact our strategic
goals.
While our board is ultimately responsible for risk oversight at
the company, our four board committees assist our board in
fulfilling its oversight responsibilities with respect to
certain areas of risk. As part of its responsibilities as set
forth in its charter, the audit committee is responsible for
reviewing and discussing with management and our independent
registered public accounting firm the company’s major
financial risk exposures and the measures management has taken
to monitor, control and minimize such risks, including the
company’s risk assessment and risk management policies. The
audit committee assists our board in fulfilling its oversight
responsibilities by monitoring the effectiveness of the
company’s systems of financial reporting, auditing,
internal controls and legal and regulatory compliance, and
monitoring the company’s significant insurance programs.
Our internal audit firm and independent registered public
accounting firm meet regularly in executive session with the
audit committee. As part of its responsibilities as set forth in
its charter, the corporate personnel committee is responsible
for overseeing the company’s assessment of whether its
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compensation policies and practices are reasonably likely to
expose the company to material risks and, in consultation with
management, is also responsible for overseeing the
company’s compliance with regulations governing executive
compensation. The nominating and corporate governance committee
assists our board in fulfilling its oversight responsibilities
with respect to the management of risks associated with the
company’s board leadership structure and corporate
governance matters. The public policy committee assists the
board in fulfilling its oversight responsibilities with respect
to the management of risks associated with our environmental
policy and implementation programs, governmental and community
relations programs, human rights, social, community and
employment policies and practices, and health and safety
programs. Each committee regularly reports on these matters to
the full board.
Board and
Committee Independence and Audit Committee Financial
Experts
On the basis of information solicited from each director, and
upon the advice and recommendation of the nominating and
corporate governance committee, our board has affirmatively
determined that each of Messrs. Allison, Day, Ford, Graham,
Krulak, Lackey, Madonna, McCoy and Siegele has no material
relationship with the company and is independent within the
meaning of our corporate governance guidelines, which comply
with the applicable NYSE listing standards and SEC rules. In
making this determination, the nominating and corporate
governance committee, with assistance from the company’s
legal counsel, evaluated responses to a questionnaire completed
annually by each director regarding relationships and possible
conflicts of interest between each director, the company and
management. In its review of director independence, the
committee considered the commercial, industrial, banking,
consulting, legal, accounting, charitable, and familial
relationships any director may have with the company or
management. The nominating and corporate governance committee
recommended to the board that the nine directors named above be
considered independent, which the board approved.
Our board also has determined that each of the members of the
audit, corporate personnel, and nominating and corporate
governance committees has no material relationship with the
company and satisfies the independence criteria (including the
enhanced criteria with respect to members of the audit
committee) set forth in the applicable NYSE listing standards
and SEC rules. In addition, our board has determined that each
of the following members of the audit committee —
Messrs. Day, Ford, Graham and Madonna — qualifies
as an “audit committee financial expert,” as such term
is defined by the rules of the SEC.
Director
Stock Ownership Guidelines
In 2006, the nominating and corporate governance committee
adopted stock ownership guidelines applicable to our directors.
Under the guidelines, each non-management director is encouraged
to maintain ownership of company stock valued at five times his
or her annual retainer, determined by reference to the one-year
or five-year trailing average monthly stock price. Shares of
common stock currently owned by the directors are counted for
purposes of the stock ownership guidelines, as are shares held
in individual retirement accounts, shares issuable upon the
vesting of outstanding restricted stock units (RSUs) and shares
held in certain trusts. As of December 31, 2010, all of our
non-management directors had reached or exceeded their target
ownership levels.
Consideration
of Director Nominees
In evaluating nominees for membership on our board, our
nominating and corporate governance committee applies the board
membership criteria set forth in our corporate governance
guidelines. Under these criteria, the committee takes into
account many factors, including personal and professional
integrity, general understanding of our industry, corporate
finance and other matters relevant to the successful management
of a large publicly traded company in today’s business
environment, educational and professional background,
independence, and the ability and willingness to work
cooperatively with other members of the board and with senior
management. In selecting nominees, the committee seeks to have a
board that represents a diverse range of perspectives and
experience relevant to the company. The committee also evaluates
each individual in the context of the board as a whole, with the
objective of recommending nominees who can best perpetuate
10
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the success of the business, be an effective director in
conjunction with the full board, and represent stockholder
interests through the exercise of sound judgment using their
experience in these various areas.
Our nominating and corporate governance committee regularly
assesses the appropriate size of our board, and whether any
vacancies on our board are expected due to retirement or
otherwise. In the event that vacancies are anticipated, or
otherwise arise, the committee will consider various potential
candidates who may come to the attention of the committee
through current board members, professional search firms,
stockholders or other persons. Each candidate brought to the
attention of the committee, regardless of who recommended such
candidate, is considered on the basis of the criteria set forth
in our corporate governance guidelines.
As stated above, our nominating and corporate governance
committee will consider candidates proposed for nomination by
our stockholders. Stockholders may propose candidates by
submitting the names and supporting information to: Corporate
Secretary, Freeport-McMoRan Copper & Gold Inc., 333
North Central Avenue, Phoenix, Arizona 85004. Supporting
information should include (a) the name and address of the
candidate and the proposing stockholder, (b) a
comprehensive biography of the candidate and an explanation of
why the candidate is qualified to serve as a director taking
into account the criteria identified in our corporate governance
guidelines, (c) proof of ownership, the class and number of
shares, and the length of time that the shares of our voting
securities have been beneficially owned by each of the candidate
and the proposing stockholder, and (d) a letter signed by
the candidate stating his or her willingness to serve, if
elected.
In addition, our by-laws permit stockholders to nominate
candidates directly for consideration at next year’s annual
meeting. Any nomination must be in writing and received by our
corporate secretary at our principal executive office no later
than February 16, 2012. If the date of next year’s
annual meeting is moved to a date more than 90 days after
or 30 days before the anniversary of this year’s
annual meeting, the nomination must be received no later than
90 days prior to the date of the 2012 annual meeting or
10 days following the public announcement of the date of
the 2012 annual meeting. Any stockholder submitting a nomination
under our by-law procedures must include (a) all
information relating to the nominee that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such nominee’s written
consent to being named in the proxy statement as a nominee and
to serving as a director if elected), and (b) the name and
address (as they appear on the company’s books) of the
nominating stockholder and the class and number of shares
beneficially owned by such stockholder. Nominations should be
addressed to: Corporate Secretary, Freeport-McMoRan
Copper & Gold Inc., 333 North Central Avenue, Phoenix,
Arizona 85004.
Communications
with the Board
Stockholders or other interested parties may communicate
directly with one or more members of our board, or the
non-management directors as a group, by writing to the director
or directors at the following address: Freeport-McMoRan
Copper & Gold Inc., Attn: Board of Directors or the
name of the individual director or directors, 333 North Central
Avenue, Phoenix, Arizona 85004. The communication will be
forwarded to the appropriate directors.
Director
Compensation
We use a combination of cash and equity-based incentive
compensation to attract and retain qualified candidates to serve
on our board. In setting director compensation, we consider the
significant amount of time directors dedicate in fulfilling
their duties as directors as well as the skill-level required by
the company to be an effective member of our board. The form and
amount of director compensation is reviewed by our nominating
and corporate governance committee, which makes recommendations
to the full board.
Cash
Compensation
Each non-management director receives an annual fee of $70,000.
Committee chairs receive an additional annual fee as follows:
audit committee, $20,000; corporate personnel committee,
$15,000; and
11
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nominating and corporate governance committee and public policy
committee, $10,000. Committee members, excluding the committee
chairman, receive an additional annual fee as follows: audit
committee, $10,000; corporate personnel committee, $7,500; and
nominating and corporate governance committee and public policy
committee, $5,000. Each non-management director receives a fee
of $1,500 for attending each board and committee meeting (for
which he or she is a member) and is reimbursed for reasonable
out-of-pocket
expenses incurred in attending such meetings. In addition,
Messrs. Krulak, Lackey, Madonna and McCoy received a
one-time fee of $100,000 and Mr. Allison received a
one-time fee of $125,000 in connection with their service in
2010 on the special committee of the board. The compensation of
each of Messrs. Moffett and Adkerson is reflected in the
“Summary Compensation Table” included in this proxy
statement.
Equity-Based
Compensation
Non-management directors and advisory directors receive
equity-based compensation under our Amended and Restated 2006
Stock Incentive Plan (2006 Plan), which was approved by our
stockholders. The nominating and corporate governance committee
is authorized to make an annual grant of options to acquire
shares of our common stock and RSUs to each non-management
director. The options are granted at fair market value on the
grant date, vest ratably over the first four anniversaries of
the grant date and expire on the tenth anniversary of the grant
date. The RSUs also vest ratably over the first four
anniversaries of the grant date. Each RSU entitles the director
to receive one share of our common stock upon vesting. Dividend
equivalents are accrued on the RSUs on the same basis as
dividends are paid on our common stock and include market rate
interest. The dividend equivalents are only paid upon vesting of
the shares of our common stock. In addition, upon initial
election to the board other than at an annual meeting, a
director will receive a pro rata grant of options and RSUs. On
June 1, 2010, each non-management director was granted
options to acquire 10,000 shares of common stock with an
exercise price of $66.49, and 2,000 RSUs (20,000 options at
$33.245 and 4,000 RSUs on a post-split basis).
Non-management directors may elect to exchange all or a portion
of their annual fee for an equivalent number of shares of our
common stock on the payment date, based on the fair market value
of our common stock on the date preceding the payment date.
Non-management directors may also elect to defer all or a
portion of their annual fee and meeting fees, and that such
deferred amounts will accrue interest at a rate equal to the
prime commercial lending rate announced from time to time by
JPMorgan Chase (compounded quarterly), and shall be paid out at
such time or times as directed by the participant. See footnote
(1) to the “Director Compensation” table for
details regarding participation in this program by our
non-management directors.
Revised
Retirement Plan for Current Non-Management Directors
In April 2008, we revised our retirement plan for non-management
directors who reach age 65 and are entitled to a retirement
benefit based on the annual director fees. We froze the benefit
under this plan for our existing directors and terminated the
plan for any future directors. Under the plan, as revised, an
eligible current director is entitled to an annual benefit up to
a maximum of $40,000 (the prior level of annual director fees),
depending on the number of years the retiree served as a
non-management director for us or our predecessors. The
percentage of the maximum annual benefit, which is at least 50%
but not greater than 100%, will depend on the number of years
the retiree served as a non-management director for us or our
predecessors. The benefit is payable from the date of retirement
until the retiree’s death. Each eligible director who was
also a director of Freeport-McMoRan Inc., our former parent, and
who did not retire from that board, will receive upon retirement
from our board an additional annual benefit of $20,000, which is
also payable from the date of retirement until the
retiree’s death.
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The chart below identifies the current non-management directors
who would have been eligible to participate in the retirement
plan as of December 31, 2010, and summarizes the projected
benefit to each assuming the director had retired from our board
on such date:
|
Percent of Annual |
||||||||
|
Benefit (Maximum |
||||||||
|
$40,000) to be Paid |
Eligible for |
|||||||
|
Annually Following |
Additional |
|||||||
|
Name of Eligible Director
|
Retirement | $20,000 Benefit | ||||||
|
Robert J. Allison, Jr.
|
90 | % | No | |||||
|
Robert A. Day
|
100 | % | Yes | |||||
|
Gerald J. Ford
|
100 | % | No | |||||
|
H. Devon Graham, Jr.
|
100 | % | No | |||||
|
Charles C. Krulak
|
50 | % | No | |||||
|
Bobby Lee Lackey
|
100 | % | Yes | |||||
|
Jon C. Madonna
|
50 | % | No | |||||
|
B. M. Rankin, Jr.
|
100 | % | No | (1) | ||||
|
J. Bennett Johnston
|
100 | % | No | |||||
|
Gabrielle K. McDonald
|
100 | % | Yes | |||||
|
J. Stapleton Roy
|
90 | % | No | |||||
|
J. Taylor Wharton
|
100 | % | Yes | |||||
| (1) | Mr. Rankin previously retired from the company’s former parent and is currently receiving the additional $20,000 retirement benefit from a successor entity. |
Matching
Gifts Program
Our foundation (the Foundation) administers a matching gifts
program, which is available to our directors, officers,
employees, full-time consultants and certain retirees. Under the
program, the Foundation will match a participant’s gifts to
eligible institutions, including educational institutions,
educational associations, educational funds, cultural
institutions, social service community organizations, hospital
organizations and environmental organizations. The Foundation
provides the gifts directly to the institution. For directors,
the Foundation double matches the first $1,000 of donations per
year per eligible institution. Donations above $1,000 are single
matched. The annual amount of our matching gifts for any
director may not exceed $40,000. However, in 2010 the Foundation
waived the limit on matching gifts made to organizations related
to the Haiti earthquake relief efforts.
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2010 Director
Compensation
The table below summarizes the total compensation paid to or
earned by our non-management directors during 2010.
2010 Director
Compensation
|
Change in Pension |
||||||||||||||||||||||||
|
Value and |
||||||||||||||||||||||||
|
Nonqualified |
||||||||||||||||||||||||
|
Fees Earned |
Deferred |
|||||||||||||||||||||||
|
or Paid |
Stock |
Option |
Compensation |
All Other |
||||||||||||||||||||
|
in Cash |
Awards |
Awards |
Earnings |
Compensation |
||||||||||||||||||||
|
Name of Director
|
(1) | (2) | (3) | (4) | (5) | Total | ||||||||||||||||||
|
Robert J. Allison, Jr.
|
$ | 241,500 | $ | 132,980 | $ | 255,500 | $ | 43,550 | $ | 47,864 | $ | 721,394 | ||||||||||||
|
Robert A. Day
|
116,000 | 132,980 | 255,500 | 19,926 | 25,208 | 549,614 | ||||||||||||||||||
|
Gerald J. Ford
|
106,000 | 132,980 | 255,500 | 57,139 | 40,208 | 591,827 | ||||||||||||||||||
|
H. Devon Graham, Jr.
|
117,500 | 132,980 | 255,500 | 34,837 | 12,110 | 552,927 | ||||||||||||||||||
|
Charles C. Krulak
|
203,500 | 132,980 | 255,500 | 5,736 | 40,909 | 638,625 | ||||||||||||||||||
|
Bobby Lee Lackey
|
203,500 | 132,980 | 255,500 | 10,914 | 18,847 | 621,741 | ||||||||||||||||||
|
Jon C. Madonna
|
198,000 | 132,980 | 255,500 | 6,226 | 3,442 | 596,148 | ||||||||||||||||||
|
Dustan E. McCoy
|
188,500 | 132,980 | 255,500 | 22,608 | 558 | 600,146 | ||||||||||||||||||
|
B. M. Rankin, Jr.
|
91,500 | 132,980 | 255,500 | — | 826,207 | 1,306,187 | ||||||||||||||||||
|
Stephen H. Siegele
|
112,500 | 132,980 | 255,500 | 16,936 | 10,218 | 528,134 | ||||||||||||||||||
|
J. Bennett Johnston*
|
86,000 | 132,980 | 255,500 | 800 | 304,513 | 779,793 | ||||||||||||||||||
|
Gabrielle K. McDonald*
|
13,500 | 132,980 | 255,500 | 12,924 | 308,208 | 723,112 | ||||||||||||||||||
|
J. Stapleton Roy*
|
84,500 | 132,980 | 255,500 | 34,439 | 48,513 | (6) | 555,932 | |||||||||||||||||
|
J. Taylor Wharton*
|
86,000 | 132,980 | 255,500 | 10,914 | 404,571 | 889,965 | ||||||||||||||||||
| * | Effective June 9, 2010, our board appointed J. Bennett Johnston, Gabrielle K. McDonald, J. Stapleton Roy and J. Taylor Wharton to serve as advisory directors. | |
| (1) | Each of Messrs. Allison, Ford, Johnston and Siegele elected to receive an equivalent number of shares of our common stock in lieu of 100% of his annual fee, and Mr. Roy elected to receive an equivalent number of shares of our common stock in lieu of 50% of his annual fee. Each of Messrs. Johnston and Roy elected to defer 100% of his meeting fees and Mr. Roy elected to defer 50% of his annual fee to be paid out in installments after separation from service. The amounts reflected in this column include the fees used to purchase shares of our common stock and fees deferred by the directors. | |
| (2) | On June 1, 2010, each non-management director was granted 2,000 RSUs (4,000 on a post-split basis). Amounts reflect the aggregate grant date fair value of the RSUs, which are valued on the date of grant at the closing sale price per share of our common stock. | |
| (3) | On June 1, 2010, each non-management director was granted options to purchase an aggregate of 10,000 shares of our common stock (20,000 on a post-split basis). Amounts reflect the aggregate grant date fair value of the options. The options that were granted had a grant date fair value of $25.55 per option on a pre-split basis using the Black-Scholes option model. For information relating to the assumptions made by us in valuing the option awards made to our non-management directors in fiscal year 2010, refer to Notes 1 and 11 of our financial statements in our annual report on Form 10-K for the year ended December 31, 2010. | |
| The following table sets forth the total number of outstanding RSUs, stock options and stock appreciation rights (SARs) held by each non-management director as of December 31, 2010: |
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Table of Contents
|
Name of Director
|
RSUs | Options | SARs(†) | |||||||||
|
Robert J. Allison, Jr.
|
18,000 | 100,000 | — | |||||||||
|
Robert A. Day
|
10,000 | 200,000 | 39,336 | |||||||||
|
Gerald J. Ford
|
10,000 | 200,000 | 39,336 | |||||||||
|
H. Devon Graham, Jr.
|
23,000 | 65,000 | — | |||||||||
|
Charles C. Krulak
|
12,500 | 90,000 | — | |||||||||
|
Bobby Lee Lackey
|
12,000 | 60,000 | — | |||||||||
|
Jon C. Madonna
|
12,500 | 90,000 | — | |||||||||
|
Dustan E. McCoy
|
12,500 | 90,000 | — | |||||||||
|
B. M. Rankin, Jr.
|
10,000 | 60,000 | — | |||||||||
|
Stephen H. Siegele
|
10,000 | 100,000 | — | |||||||||
|
J. Bennett Johnston
|
27,000 | 110,000 | — | |||||||||
|
Gabrielle K. McDonald
|
10,000 | 110,000 | — | |||||||||
|
J. Stapleton Roy
|
27,000 | 125,000 | 834 | |||||||||
|
J. Taylor Wharton
|
21,000 | 165,000 | 16,390 | |||||||||
(†) Reflects SARs awarded under our former director
compensation program.
| (4) | Amounts reflect the aggregate change in the actuarial present value of each director’s accumulated benefit under the revised retirement plan as calculated in accordance with Item 402 of Regulation S-K. Mr. Rankin had a negative change in the actuarial present value of the pension benefit in the amount of ($868). A negative change in actuarial present value of the pension benefit occurred in 2010 due to changes in the discount rate and/or decreasing life expectancies when the director continues to provide services past the normal retirement date age of 65. As noted above, the director retirement plan has been terminated for any future directors. | |
| (5) | Includes (a) the foundation’s matching of contributions to charitable organizations under the matching gifts program, (b) consulting fees received in connection with the consulting arrangements described under “Certain Transactions” below, (c) interest credited on dividend equivalents on unvested RSUs during 2010 and (d) the dollar value of life insurance premiums and the related tax reimbursement paid by the company pursuant to an arrangement assumed in connection with our acquisition of Phelps Dodge Corporation as follows: |
|
Interest Credited |
Life Insurance |
|||||||||||||||
|
on Dividend |
Premium and Tax |
|||||||||||||||
|
Name of Director
|
Matching Gifts | Consulting Fees | Equivalents | Paid | ||||||||||||
|
Robert J. Allison, Jr.
|
$ | 46,000 | $ | — | $ | 1,864 | $ | — | ||||||||
|
Robert A. Day
|
25,000 | — | 208 | — | ||||||||||||
|
Gerald J. Ford
|
40,000 | — | 208 | — | ||||||||||||
|
H. Devon Graham, Jr.
|
10,500 | — | 1,610 | — | ||||||||||||
|
Charles C. Krulak
|
40,000 | — | 226 | 683 | ||||||||||||
|
Bobby Lee Lackey
|
18,600 | — | 247 | — | ||||||||||||
|
Jon C. Madonna
|
2,500 | — | 226 | 716 | ||||||||||||
|
Dustan E. McCoy
|
— | — | 226 | 332 | ||||||||||||
|
B. M. Rankin, Jr.
|
46,000 | 779,999 | 208 | — | ||||||||||||
|
Stephen H. Siegele
|
10,000 | — | 218 | — | ||||||||||||
|
J. Bennett Johnston
|
2,000 | 300,000 | 2,513 | — | ||||||||||||
|
Gabrielle K. McDonald
|
8,000 | 300,000 | 208 | — | ||||||||||||
|
J. Stapleton Roy
|
46,000 | — | 2,513 | — | ||||||||||||
|
J. Taylor Wharton
|
3,000 | 400,000 | 1,571 | — | ||||||||||||
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Table of Contents
| (6) | As described under “Certain Transactions,” Mr. Roy is Senior Advisor of Kissinger Associates, Inc., which received $200,000 in 2010 from FM Services Company, one of our wholly owned subsidiaries, for the provision of consulting services. Because these fees are not paid to Mr. Roy, we have not included them in this table. |
Proposal No. 1:
Election of Directors
The terms of all of our directors expire at the 2011 annual
meeting of stockholders. In accordance with our by-laws, our
board has fixed the number of directors at twelve. Upon the
recommendation of our nominating and corporate governance
committee, our board has nominated each of
Messrs. Adkerson, Allison, Day, Ford, Graham, Krulak,
Lackey, Madonna, McCoy, Moffett, Rankin and Siegele to serve a
one-year term commencing at the 2011 annual meeting and
continuing until the 2012 annual meeting or until their
successors are duly elected and qualified. The persons named as
proxies on the proxy card intend to vote your proxy for the
election of each such director, unless otherwise directed. If,
contrary to our expectations, a nominee should become
unavailable for any reason, your proxy will be voted for a
substitute nominee designated by our board, unless otherwise
directed.
Vote
Required to Elect Director Nominees
Under our by-laws, in uncontested elections, directors are
elected by a majority of the votes cast. In contested elections
where the number of nominees exceeds the number of directors to
be elected, directors are elected by a plurality vote, with the
director nominees who receive the most votes being elected.
In an uncontested election, any nominee for director who has a
majority of votes cast “withheld” from his or her
election will be required to promptly tender his or her
resignation to the board. Our nominating and corporate
governance committee will recommend to the board whether to
accept or reject the tendered resignation. Our board will act on
the committee’s recommendation and publicly disclose its
decision within 90 days from the date of the annual meeting
of stockholders. Any director who tenders his or her resignation
will not participate in the committee’s recommendation or
the board action regarding whether to accept or reject the
tendered resignation.
In addition, if each member of the nominating and corporate
governance committee fails to be elected at the same election,
the independent directors who were elected will appoint a
committee to consider the tendered resignations and recommend to
our board whether to accept or reject them. Any vacancies on our
board may be filled by a majority of the directors then in
office. Each director elected in this manner will hold office
until his or her successor is elected and duly qualified.
Recommendation
of the Board of Directors
OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ALL OF THE DIRECTOR NOMINEES LISTED ABOVE.
Information
About Director Nominees
The following table provides certain information as of
April 19, 2011, with respect to each director nominee,
including information regarding the person’s business
experience, director positions held currently or at any time
during the last five years, and the experiences, qualifications,
attributes or skills that caused our nominating and corporate
governance committee and our board to determine that the person
should be
16
Table of Contents
nominated at the 2011 annual meeting of stockholders to serve as
a director of the company. Unless otherwise indicated, each
person has been engaged in the principal occupation shown for
the past five years.
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
Richard C. Adkerson
|
64 |
Chief Executive Officer of the company since December 2003.
President of the company since January 2008 and from April 1997
to March 2007. Chief Financial Officer of the company from
October 2000 to December 2003. Current Co-Chairman of the Board
of McMoRan Exploration Co. (McMoRan). President and Chief
Executive Officer of McMoRan from 1998 to 2004. Vice Chairman of
Freeport-McMoRan Inc. from 1995 to 1997. Chairman, Chief
Executive Officer & President of Stratus Properties Inc.
from 1992 to 1998. Partner in Arthur Andersen & Co. where
he served as a Managing Director and head of the firm’s
global oil and gas industry services from 1978 to 1989.
Professional Accounting Fellow with the Securities and Exchange
Commission and Presidential Exchange Executive from 1976 to
1978. Holds B.S. in Accounting with highest honors and M.B.A.
from Mississippi State University and completed Advanced
Management Program at Harvard Business School.
|
2006 | |||
|
Mr. Adkerson is an experienced business leader making him highly
qualified to serve as a member of our board of directors. As
President and Chief Executive Officer, he is responsible for the
executive management of the company. He has demonstrated
exceptional leadership abilities in developing and executing a
financial strategy that has benefited our stockholders, and in
building an operational, financial and administrative
organization that efficiently supports our business. Mr.
Adkerson is recognized as a mining industry leader, currently
serving as Chairman of the International Council on Mining and
Metals and on the Executive Board of the International Copper
Association.
|
||||||
|
Robert J. Allison, Jr.
|
72 |
Director and Chairman Emeritus of Anadarko Petroleum
Corporation. Chairman of the Board of Anadarko Petroleum
Corporation from 1986 to 2005. President and Chief Executive
Officer of Anadarko Petroleum Corporation from 1979 to 2002 and
March 2003 to December 2003. Holds B.S. in Petroleum Engineering
from The University of Kansas.
|
2001 | |||
|
Mr. Allison’s experience serving as the former President
and Chief Executive Officer and Chairman of the Board of one of
the largest independent oil and gas exploration and production
companies in the world provides him with a wealth of knowledge
in dealing with operational, strategic, financial, regulatory
and international matters at the board level. His business and
board experience make him highly qualified to serve as the
chairman of our nominating and corporate governance committee.
|
17
Table of Contents
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
Robert A. Day
|
67 |
Chairman of the Board, Chief Executive Officer and founder of
Trust Company of the West, an investment management company and
one of the largest independent trust companies in the U.S.
Chairman of the Board of TCW Group, a registered investment
management company. Chairman of Oakmont Corporation, a
registered investment advisor. Chairman, President and Chief
Executive Officer of W. M. Keck Foundation, a national
philanthropic organization. Holds B.S. in Economics from
Claremont McKenna College. Current director of McMoRan. Former
director of Syntroleum Corp. and Société
Générale.
|
1995 | |||
|
Mr. Day is an experienced entrepreneur and financial leader with
the skills necessary to serve on our board of directors and to
lead our audit committee. With his extensive experience in the
financial services industry, Mr. Day is well-versed in
accounting standards and regulations, and is equipped to
evaluate financial results and generally oversee the financial
reporting process of a large corporation. Mr. Day brings
significant business and finance experience to our board and
provides insight into strategies and solutions to address an
increasingly complex business environment.
|
||||||
|
Gerald J. Ford
|
66 |
Chairman of the Board of Diamond-A Ford Corp. from 1994 to
present. General Partner of Ford Financial Fund, L.P., a private
equity firm, from January 2010 to present. Chairman of the Board
of Pacific Capital Bancorp from 2010 to present. Chairman of
the Board and Chief Executive Officer of Golden State Bancorp,
Inc. and its wholly owned subsidiary, California Federal Bank, a
Federal Savings Bank, from 1998 through its 2002 merger with
Citigroup Inc. Chief Executive Officer of First Acceptance
Corporation from 1994 to 2002. Holds B.A. in Economics and J.D.
from Southern Methodist University. Current director of
McMoRan, First Acceptance Corporation, Hilltop Holdings Inc. and
Scientific Games Corporation. Former director of Liberté
Investors, Inc., Americredit Corp., and Affordable Residential
Communities.
|
2000 | |||
|
Mr. Ford has been a financial institutions entrepreneur and
private investor involved in numerous mergers and acquisitions
of private and public sector financial institutions for over
30 years. His extensive banking industry experience and
educational background provide him with significant knowledge in
dealing with financial, accounting and regulatory matters,
making him a valuable member of our board of directors. In
addition, his service on the board of directors and audit and
corporate governance committees of a variety of public companies
gives him a deep understanding of the role of the board.
|
18
Table of Contents
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
H. Devon Graham, Jr.
|
76 |
President of R. E. Smith Interests, an asset management company,
from 1997 to present. U.S. Regional Managing Partner, Arthur
Andersen & Co. from 1985 to 1997. Chairman of the Board of
Partners of Arthur Andersen & Co. from 1984 to 1986. Holds
B.S. in Accounting from Mississippi State University. Current
director of McMoRan.
|
2000 | |||
|
Mr. Graham has over 40 years of experience in public
accounting, and has served in various leadership positions with
an international accounting firm, including Chairman of the
Board of Partners, member of the Worldwide Executive Committee,
U.S. Regional Managing Partner, member of the U.S. Leadership
Committee and Chairman of the Industry Steering Committee,
making him a valuable member of our board of directors. In
addition, Mr. Graham brings invaluable management and
administrative experience as President of an asset management
company. His experience provides him with the necessary skills
to lead our corporate personnel committee.
|
||||||
|
Charles C. Krulak
|
69 |
President of Birmingham-South College from March 2011 to
present. Former Commandant, United States Marine Corps, the
Marine Corps’ highest-ranking officer. Retired from United
States Marine Corps in 1999 after serving 35 years.
Executive Vice Chairman and Head of Mergers and Acquisitions of
MBNA Corp., a financial services company, from March 2004 to
June 2005. Chief Executive Officer of MBNA Europe from January
2001 to March 2004, and Senior Vice Chairman of MBNA America
from 1999 to 2001. Holds B.S. in Engineering from U.S. Naval
Academy and M.S. in Labor Relations from George Washington
University. Current director of Union Pacific Corporation and
the Aston Villa Football Club, U.K. Former director of
ConocoPhillips and Phelps Dodge Corporation.
|
2007 | |||
|
As a retired Commandant of the United States Marine Corps,
General Krulak brings a unique perspective to our board. His
successful record of leadership and military service makes him
highly suited to understand and oversee the complex managerial,
strategic and international considerations addressed by our
board. In addition, General Krulak’s service on the boards
of other public companies allows him to provide our board with a
variety of insights.
|
19
Table of Contents
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
Bobby Lee Lackey
|
73 |
Consultant. President and Chief Executive Officer of
McManus-Wyatt-Hidalgo Produce Marketing Co., shipper of fruits
and vegetables from 1998 to 2000. Chairman of the Board and
Chief Executive Officer of McManus Produce Co., Inc., McManus
Cotton Gin, Inc. and McManus Ice Co., Inc. from 1968 to 1998.
Former President of Texas Citrus and Vegetable Growers &
Shippers Association. Attended The University of Texas at Austin.
|
1995 | |||
|
Mr. Lackey’s over 40 years of experience in the
agricultural business, where he served in various leadership
positions, including President and Chief Executive Officer,
makes him a valuable member of our board of directors. This
experience provides him with a broad understanding of the
operational, financial and strategic issues facing the company.
|
||||||
|
Jon C. Madonna
|
67 |
Retired Chairman and Chief Executive Officer of KPMG, an
international accounting and consulting firm. Retired from KPMG
in 1996 having held numerous senior leadership positions
throughout his career spanning over 25 years. Chairman of
DigitalThink, Inc. from April 2002 to May 2004 and Chief
Executive Officer of DigitalThink, Inc. from 2001 to 2002.
President and Chief Executive Officer of Carlson Wagonlit
Corporate Travel, Inc. from 1999 to 2000 and Vice Chairman of
Travelers Group, Inc. from 1997 to 1998. Holds B.S. in
Accounting from The University of San Francisco. Current
director of AT&T Inc. and Tidewater Inc. Former director of
Albertson’s, Inc., Visa Inc., Jazz Technologies, Inc. and
Phelps Dodge Corporation.
|
2007 | |||
|
Mr. Madonna’s long career in public accounting with an
international accounting firm and his service as an executive
and a director for several publicly traded companies provides
him with extensive experience in dealing with financial,
accounting and regulatory matters at the board level and gives
him a deep understanding of the role of the board and
expectations of our directors. In addition, his service on the
audit and nominating committees of public companies in a variety
of industries positions him well to serve as a member of our
audit committee and to provide insights into strategies and
solutions to address the challenges of our business.
|
20
Table of Contents
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
Dustan E. McCoy
|
61 |
Chairman and Chief Executive Officer since December 2005 of
Brunswick Corporation, a leading, publicly traded, global
manufacturer and marketer of recreation products including
marine engines, boats, fitness equipment and bowling and
billiards equipment. President of the Brunswick Boat Group from
2000 until 2005. Joined Brunswick in 1999 as Vice President,
General Counsel and Corporate Secretary. Prior to joining
Brunswick, served as Executive Vice President for Witco
Corporation, a publicly traded specialty chemical products
company, with operating responsibility for a variety of global
businesses and functions and served as Senior Vice President,
General Counsel and Corporate Secretary. Holds B.S. in
Political Science from Eastern Kentucky University and J.D. in
Law from Salmon P. Chase College of Law. Current director of
Louisiana-Pacific Corporation. Former director of Phelps Dodge
Corporation.
|
2007 | |||
|
Mr. McCoy’s experience serving as Chairman and Chief
Executive Officer of a large, global publicly traded company
provides him with a broad understanding of the operational,
financial and strategic issues facing the company. In addition,
his experience and qualifications as a general counsel enable
him to provide insight in addressing legal and regulatory
matters.
|
21
Table of Contents
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
James R. Moffett
|
72 |
Chairman of our board from 1992 to present. Chief Executive
Officer of the company from 1995 to 2003. Co-Chairman of the
Board, President and Chief Executive Officer of McMoRan.
Received Horatio Alger Association of Distinguished Americans
Award in 1990. Received Norman Vincent Peale Award in 2000 for
exceptional humanitarian contributions to society. Holds B.S.
with special honors in Geology from The University of Texas at
Austin and M.S. in Geology from Tulane University.
|
1992 | |||
|
Mr. Moffett, one of the founders of the company, has extensive
expertise as a practicing geologist and with respect to our
business operations, making him uniquely qualified to lead our
board. In 1969, he and two associates founded McMoRan Oil &
Gas Co., which developed into one of America’s leading
independent oil and gas companies. In 1981, Mr. Moffett led the
effort to merge McMoRan Oil & Gas Co. and Freeport Minerals
Company. The merger resulted in the establishment of a new
company, Freeport-McMoRan Inc., our former parent company, which
became one of the world’s leading natural resource
companies of which he served as Chairman and Chief Executive
Officer from 1984 until 1997 when it was acquired. Through his
leadership and skill as a geologist, Mr. Moffett has guided our
growth through significant discoveries of metal reserves and the
development of our mines, milling facilities and infrastructure.
As executive chairman, he continues to further our business
strategy by applying his exceptional talents and experience as a
geologist. He directs our global exploration programs and
continues to be instrumental in fostering our relationships with
host governments, including the government of Indonesia, the
location of our Grasberg mine.
|
22
Table of Contents
|
Year First |
||||||
|
Principal Occupation, Business Experience, and |
Elected a |
|||||
|
Name of Director
|
Age | Other Directorships | Director | |||
|
B. M. Rankin, Jr.
|
81 |
Private investor. Vice Chairman of our board from 2001 to
present. Current Vice Chairman of the Board of McMoRan. Director
and member of the Executive Committee of U.S. Oil and Gas
Association, serving as Chairman from 2008 to 2010. McCombs
School of Business, The University of Texas at Austin Hall of
Fame, 2006. Hunt Oil Company 1955 to 1967. Director of Texas Oil
and Gas Association. Holds B.B.A. from The University of Texas
at Austin.
|
1995 | |||
|
Mr. Rankin is one of the founders of the company and has more
than 50 years of experience in the natural resources
industry. In 1969, along with Mr. Moffett and another associate,
he founded McMoRan Oil & Gas Co., which developed into one
of America’s leading independent oil and gas companies. In
1981, McMoRan Oil & Gas Co. and Freeport Minerals Company
merged, resulting in the establishment of one of the
world’s leading natural resource companies,
Freeport-McMoRan Inc., our former parent company. As a founder,
he has a comprehensive understanding of the company and its
management, operations and financial requirements. With his
detailed knowledge of our business and his perspectives
regarding strategic and operational opportunities and challenges
facing us, he continues to provide valuable insight to our board
of directors.
|
||||||
|
Stephen H. Siegele
|
51 |
Private investor. Founder and Chief Executive of Advanced
Delivery & Chemical Systems, Inc. (ADCS), a worldwide
leader in advanced chemicals and delivery hardware serving
markets in Asia, Europe and the U.S., from 1988 to 1997. In
1997, ADCS merged with Advanced Technology Materials, Inc., a
public company, where Mr. Siegele became a divisional president
and Vice Chairman of the Board of Directors until his retirement
in 2000. He then founded Fluorine On Call, Ltd., a private
company that designs and manufactures high purity fluorine
generators. Mr. Siegele retired from Fluorine On Call, Ltd. in
April 2006. Holds B.S. in Chemical Engineering from the
University of Wisconsin-Madison, and is an inventor of numerous
U.S. patents.
|
2006 | |||
|
Mr. Siegele has extensive experience as an entrepreneur and
inventor within the semiconductor, microelectronics and chemical
industries, and as a director and senior manager of public and
private companies. These experiences provide him with a strong
background in addressing the strategic, operational, financial
and technical matters presented to our board, and make him
highly qualified to serve as chairman of our public policy
committee.
|
23
Table of Contents
Stock
Ownership of Directors and Executive Officers
We believe that it is important for our directors and executive
officers to align their interests with the long-term interests
of stockholders. We encourage stock accumulation through the
grant of equity incentives to our directors and executive
officers and through our stock ownership guidelines applicable
to our directors and executive officers.
Except as otherwise indicated below, the table below shows the
amount of our common stock each of our directors and our chief
executive officer, our chief financial officer and our other
executive officers (collectively, the named executive officers)
beneficially owned as of the record date, April 19, 2011.
Unless otherwise indicated, all shares shown in the table below
are held with sole voting and investment power.
|
Number of |
||||||||||||||||
|
Number of |
Shares Subject |
Total Number |
||||||||||||||
|
Shares Not |
to Exercisable |
of Shares |
Percent |
|||||||||||||
|
Subject to |
Options and |
Beneficially |
of |
|||||||||||||
|
Name of Beneficial Owner
|
Options | Vesting of RSUs(1) | Owned(2) | Class(3) | ||||||||||||
|
Richard C. Adkerson(4)
|
2,140,804 | 3,250,000 | 5,390,804 | * | ||||||||||||
|
Robert J. Allison, Jr.(5)
|
162,126 | 74,000 | 236,126 | * | ||||||||||||
|
Michael J. Arnold(6)
|
157,746 | 820,000 | 977,746 | * | ||||||||||||
|
Robert A. Day(7)
|
1,290,000 | 174,000 | 1,464,000 | * | ||||||||||||
|
Gerald J. Ford(8)
|
72,530 | 174,000 | 246,530 | * | ||||||||||||
|
H. Devon Graham, Jr.
|
9,000 | 37,000 | 46,000 | * | ||||||||||||
|
Charles C. Krulak
|
5,500 | 63,000 | 68,500 | * | ||||||||||||
|
Bobby Lee Lackey
|
16,842 | 33,000 | 49,842 | * | ||||||||||||
|
Jon C. Madonna
|
12,180 | 62,000 | 74,180 | * | ||||||||||||
|
Dustan E. McCoy
|
5,500 | 62,000 | 67,500 | * | ||||||||||||
|
James R. Moffett(9)
|
3,091,263 | 1,000,000 | 4,091,263 | * | ||||||||||||
|
Kathleen L. Quirk
|
232,998 | 1,686,500 | 1,919,498 | * | ||||||||||||
|
B. M. Rankin, Jr.(10)
|
702,360 | 34,000 | 736,360 | * | ||||||||||||
|
Stephen H. Siegele
|
223,231 | 74,000 | 297,231 | * | ||||||||||||
|
Directors and executive officers as a group (14 persons)
|
8,122,080 | 7,543,500 | 15,665,580 | 1.64 | % | |||||||||||
| * | Ownership is less than 1%. | |
| (1) | Reflects our common stock that could be acquired within sixty days of the record date upon the exercise of options, the vesting of RSUs granted pursuant to our stock incentive plans and the termination of deferrals on previously vested RSUs. |
24
Table of Contents
| (2) | In addition to the RSUs included in “Number of Shares Subject to Exercisable Options and Vesting of RSUs,” each beneficial owner holds the following unvested RSUs, which are not included in the table above: |
|
Name of Beneficial Owner
|
Number of RSUs | |||
|
Richard C. Adkerson
|
326,607 | |||
|
Robert J. Allison, Jr.
|
14,000 | |||
|
Michael J. Arnold
|
63,970 | |||
|
Robert A. Day
|
6,000 | |||
|
Gerald J. Ford
|
6,000 | |||
|
H. Devon Graham, Jr.
|
21,000 | |||
|
Charles C. Krulak
|
9,000 | |||
|
Bobby Lee Lackey
|
9,000 | |||
|
Jon C. Madonna
|
10,000 | |||
|
Dustan E. McCoy
|
10,000 | |||
|
James R. Moffett
|
246,607 | |||
|
Kathleen L. Quirk
|
107,268 | |||
|
B. M. Rankin, Jr.
|
6,000 | |||
|
Stephen H. Siegele
|
6,000 | |||
| For more information regarding the RSUs, see the sections titled “Director Compensation,” “Compensation Discussion and Analysis” and “Executive Officer Compensation — Grants of Plan Based Awards.” | ||
| (3) | Based on 947,155,321 shares of our common stock outstanding as of April 19, 2011. | |
| (4) | Includes 20,330 shares of our common stock held in his individual retirement account (IRA). Mr. Adkerson has entered into a forward sale contract with a securities broker pursuant to which he agreed to sell up to 500,000 shares of common stock on August 6, 2011, with the exact number of shares to be delivered on the maturity date determined by the closing price on such date. Mr. Adkerson may elect to settle the contract in cash and retain ownership of the shares. Mr. Adkerson has pledged 500,000 shares to secure his obligations under this contract but continues to hold beneficial ownership and voting power with respect to the 500,000 shares. In addition, Mr. Adkerson has pledged 1,306,000 shares of our common stock to secure a line of credit. | |
| (5) | Includes 59,244 shares of our common stock held by Mr. Allison through a Grantor Retained Annuity Trust (GRAT) and 59,244 shares of our common stock held by Mr. Allison’s spouse through a GRAT. | |
| (6) | Includes 5,014 shares of our common stock held in our ECAP. | |
| (7) | Includes 42,000 shares of our common stock held by his spouse, as to which he disclaims beneficial ownership. Mr. Day has pledged 600,000 shares of our common stock to secure a line of credit. | |
| (8) | Includes 20,000 shares of our common stock held as trustee of a trust. | |
| (9) | Includes (a) 3,030,503 shares of our common stock held by a limited liability company with respect to which Mr. Moffett, as a member, shares voting and investment power, (b) 53,208 shares of our common stock held in our ECAP and (c) 7,552 shares of our common stock held by his spouse, as to which he disclaims beneficial ownership. The limited liability company through which Mr. Moffett owns his shares has entered into four forward sale contracts with a securities broker pursuant to which the limited liability company agreed to sell: (a) 600,000 shares of common stock on September 5, 2012, 171,598 shares of common stock on March 15, 2013, and 300,000 shares of common stock on November 3, 2014, with the sale price to be determined and paid on the respective maturity dates, and (b) up to 1,500,000 shares on November 3, 2014, with exact number of shares to be delivered on the maturity date determined by the closing price on such date, and in exchange for which the limited liability company received a payment upon execution of the contract. Under all four contracts, the limited liability company may elect to settle the contract in cash and retain ownership of the shares. The |
25
Table of Contents
| limited liability company has pledged a total of 2,571,598 shares in part to secure its obligations under these contracts but continues to hold beneficial ownership, voting power and the right to receive quarterly dividend payments of up to $0.15625 per share with respect to 771,598 of the shares. | ||
| (10) | Of the shares shown, 585,360 are held by a limited partnership in which Mr. Rankin is the sole shareholder of the sole general partner. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers and
persons who own more than 10% of our common stock to file
reports of ownership and changes in ownership with the SEC.
Based solely upon our review of the Forms 3, 4 and 5 filed
during 2010, and written representations from certain reporting
persons that no Forms 5 were required, we believe that all
required reports were timely filed.
Stock
Ownership of Certain Beneficial Owners
Based on filings with the SEC, the table below shows the
beneficial owner of more than 5% of our outstanding common stock
as of December 31, 2010. Unless otherwise indicated, all
information is presented as of December 31, 2010, and all
shares beneficially owned are held with sole voting and
investment power.
|
Percent of |
||||||||
|
Number of Shares |
Outstanding |
|||||||
|
Name and Address of Beneficial Owner
|
Beneficially Owned | Shares(1) | ||||||
|
BlackRock, Inc.
|
74,042,424 | (2) | 7.8 | % | ||||
|
40 East 52nd Street New York, NY 10022
|
||||||||
| (1) | Based on 944,825,850 shares of our common stock outstanding as of December 31, 2010. | |
| (2) | Based on a Schedule 13G/A filed with the SEC on February 4, 2011, by BlackRock, Inc. on its own behalf and on behalf of its subsidiaries identified therein. |
Executive
Officer Compensation
Compensation
Discussion and Analysis
This section of the proxy statement describes and analyzes our
executive compensation philosophy and program in the context of
the compensation paid during the last fiscal year to our chief
executive officer, our chief financial officer, and each of our
two other executive officers (referred to as our named executive
officers). For fiscal year 2010, our named executive officers
are:
| • | James R. Moffett, our chairman of the board; | |
| • | Richard C. Adkerson, our president and chief executive officer; | |
| • | Kathleen L. Quirk, our executive vice president, chief financial officer and treasurer; and | |
| • | Michael J. Arnold, our executive vice president and chief administrative officer. |
In this CD&A, we first provide an Executive Summary
of our actions and highlights from 2010. We next explain the
principles that guide our corporate personnel committee’s
(the committee) executive compensation decisions and the process
we follow when setting executive compensation. Finally, we
discuss in detail each component of executive compensation,
including the actual results yielded for each named executive
officer in fiscal 2010. You should read this section of the
proxy statement in conjunction with the advisory vote that we
are conducting on the compensation of our named executive
officers (see proposal no. 2), as it contains information
that is relevant to your voting decision.
26
Table of Contents
Executive
Summary
We are the world’s largest publicly traded copper producer
and have a dynamic portfolio of operating, expansion and growth
projects in the copper industry. We are also the world’s
largest producer of molybdenum and a significant gold producer.
Our portfolio of assets includes the Grasberg minerals district
in Indonesia, which is the world’s largest copper and gold
mine in terms of recoverable reserves; significant mining
operations in North and South America, including the large scale
Morenci and Safford minerals districts in North America and the
Cerro Verde and El Abra operations in South America; and the
Tenke Fungurume minerals district in the Democratic Republic of
Congo. Our global workforce includes over 29,500 employees
and over 22,000 contractors. For more information about our
business, please see “Business” and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Annual Report
on
Form 10-K
for the year ended December 31, 2010.
2010 Company Performance
Highlights. After successfully managing
through one of the most severe economic downturns in history, we
achieved in 2010 the best financial results in our
company’s history. Our global team performed at an
exceptional level and achieved a number of financial and
operational records. We were also successful in achieving a
significant increase in our mineral reserves, which provide
building blocks of future growth. Our financial strategy is
focused on building value for shareholders. We are actively
pursuing large investments in mine expansions at several of our
operating sites around the world to grow our production profile,
improve efficiencies, and generate increased cash flows and
profits. We will also continue to maintain a strong balance
sheet and liquidity position, which will enable us to
effectively manage inherent volatility in our business and
pursue large-scale development opportunities. We also expect to
continue our longstanding tradition of providing attractive cash
returns to shareholders as market conditions warrant. The
following highlights certain of our accomplishments during 2010:
| Ø | Positive safety performance — 2010 total reportable incident rate 74% below US industry average and 12% below our 2009 rate | |
| Ø | Net income attributable to common stock increased to $4.3 billion for 2010 compared to $2.5 billion for 2009 | |
| Ø | Operating cash flow of $6.3 billion, net of $834 million working capital uses, for 2010 compared to $4.4 billion, net of $770 million working capital uses, for 2009 | |
| Ø | Positive exploration results resulting in significant net proven and probable reserve additions on a consolidated basis of |
| o | 20.2 billion pounds of copper replacing approximately five times our 2010 copper production | |
| o | 0.87 billion pounds of molybdenum replacing approximately 12 times our 2010 molybdenum production |
| Ø | Sales for copper, gold and molybdenum exceeded January 2010 estimates |
| o | 3.9 billion pounds of copper (estimate: 3.8 billion pounds) | |
| o | 1.9 million ounces of gold (estimate: 1.8 million ounces) | |
| o | 67 million pounds of molybdenum (estimate: 60 million pounds) |
| Ø | Strong operations and advancement of projects |
| o | North America — restarted the Morenci mill and commenced a staged ramp-up of Morenci’s mining rates; initiated restarts of mining at the Miami and Chino mines; continued exploration and studies for future expansion at North American sites; advanced construction at Climax primary molybdenum mine development | |
| o | South America — continued construction activities for development of a large sulfide ore deposit at El Abra; completed project to optimize throughput at the existing Cerro Verde |
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| concentrator operations; continued studies for major mill projects at Cerro Verde and El Abra |
| o | Indonesia — continued development of the large-scale, high-grade underground ore bodies at Grasberg; produced copper for a unit net cash credit of $0.04 per pound in 2010 | |
| o | Africa — completed contract review process with Democratic Republic of Congo government; continued exploration activities for long range planning; continued study for second phase expansion; milling facilities performed above capacity in 2010 |
| Ø | Increased returns to our stockholders |
| o | Increased quarterly cash dividends to stockholders by over 200% during 2010; current annual dividend rate of $1.00 per share (post-split) | |
| o | Paid a supplemental dividend of $0.50 per share (post-split) in December 2010 | |
| o | Authorized a two-for-one stock split (effected on February 1, 2011) |
| Ø | Strong stock performance — 51% increase in common stock price | |
| Ø | Repaid $1.6 billion in debt during the year and increased cash position by $1.0 billion |
Highlights of our Executive Compensation
Program. Our executive compensation program
is designed to provide competitive levels of compensation that
reward our executives for high performance and align executive
compensation with the long-term interests of our stockholders.
Some of the primary features of our program, which are discussed
in more detail elsewhere in this CD&A, include:
| Ø | Our annual incentive awards are tied to the level of the company’s operating cash flow, which we believe is a meaningful indicator of our performance; awards are limited to eight times the executive’s base salary, with amounts over four times paid in an equivalent value of restricted stock units (RSUs) that vest over a multi-year period. | |
| Ø | We do not routinely increase base salaries. | |
| Ø | We no longer provide excise tax gross-up protections in any change of control arrangements. | |
| Ø | We require that our executive officers maintain certain levels of stock ownership based on their positions, and all of our executive officers currently exceed his or her ownership level, some by a significant margin. | |
| Ø | The committee’s independent compensation consultant, Pay Governance LLC, is retained directly by the committee and performs no other services for us. |
In addition, the committee continues to monitor market
developments in executive compensation, including changes
resulting from the Dodd-Frank Act. During 2011, rules are
expected to be adopted to implement provisions of Dodd-Frank
relating to compensation clawbacks, hedging transactions, and
pay ratio and
pay-for-performance
disclosures. The committee expects to consider adopting new, or
modifying current, policies and practices relating to these
matters during the course of the next year.
Compensation
Philosophy and Processes
Our Philosophy. Our company’s
executive compensation philosophy is to:
| • | pay for performance by emphasizing performance-based compensation that balances rewards for both short- and long-term results and provides our executives with high reward opportunities for high corporate performance, | |
| • | tie compensation to the interests of stockholders, and | |
| • | provide a competitive level of compensation that will attract and retain talented executives. |
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Role of Advisors. From August 2007
until February 2010, the committee retained Towers Perrin (now
Towers Watson) as its executive compensation consultant. In
early 2010, the principal individual who has provided executive
compensation consulting services to the committee for the
previous three years departed from Towers Watson and formed a
new firm, Pay Governance LLC (Pay Governance). The committee
elected to engage Pay Governance as its new independent
executive compensation consultant in February 2010. Consistent
with the committee’s longstanding policy, Pay Governance
will not provide any services to the company’s management.
A representative of Pay Governance attends meetings of the
committee and communicates with the committee chair between
meetings; however, the committee makes all decisions regarding
the compensation of our executive officers. Pay Governance
provides various executive compensation services to the
committee, including advising the committee on the principal
aspects of our executive compensation program and evolving
industry practices and providing market information and analysis
regarding the competitiveness of our program design.
Executive Chairman and Chief Executive
Officer. We recognize that the level of
compensation paid to our chairman and our chief executive
officer is significantly greater than that paid to our other
executive officers. The compensation levels of
Messrs. Moffett and Adkerson reflect our view that their
management of the organization provides the basis for the
company to achieve success and reflects the value that we place
on the quality of their leadership and capabilities.
Messrs. Moffett and Adkerson each impart extraordinary
value to our company, each bringing to their
“partnership” a set of complementary skills. We
believe their respective compensation arrangements recognize
those skills and their contributions to the success of our
company.
Mr. Moffett has been at the helm of our company since its
formation and has guided our growth through significant
discoveries of metal reserves using his skill as a geologist. He
also led the development of our Grasberg minerals district. As
executive chairman, Mr. Moffett continues to further our
business strategy by applying his exceptional talents, which has
created substantial value for our company. He directs our global
exploration programs and also continues to be instrumental in
fostering our relationship with host governments, including the
government of Indonesia, the location of our Grasberg mine.
Mr. Adkerson, as president and chief executive officer, is
responsible for the executive management of our company.
Mr. Adkerson has demonstrated outstanding leadership
abilities in developing and executing a business and financial
strategy that is positive for our stockholders, and in building
an operational, financial and administrative organization that
efficiently supports our business through various economic
cycles. He led the combination and successful integration of our
company and Phelps Dodge to become the world’s largest
publicly traded copper company. In addition, Mr. Adkerson
has provided strong leadership and sound judgment in our efforts
to respond aggressively to changing economic circumstances.
Setting Compensation Levels. Although
objective criteria are reviewed, the committee does not apply
“hard metrics” to decisions regarding executive
compensation. We have a small group of executive officers, and
the committee’s decisions regarding salary levels and grant
amounts (in the form of equity awards and percentage allocations
under the annual incentive plan) reflect the committee’s
views as to the broad scope of responsibilities of our executive
officers and the committee’s subjective assessment of their
individual impact on the company’s overall success. The
committee also consults with our executive chairman and our
chief executive officer regarding compensation decisions
affecting our other executive officers.
Stock Ownership. We believe that it is
important for our executive officers to align their interests
with the long-term interests of our stockholders. With that
philosophy in mind, we have structured our compensation programs
to ensure that a portion of our executive officers’
compensation is delivered in a form of equity, such as stock
options and RSUs. Under our program, our executive officers will
receive annual grants of stock options
and/or RSUs,
and our annual incentive plan requires that award amounts in
excess of four times an executive’s base salary must be
paid in an equivalent number of RSUs. In 2006, the committee
adopted stock ownership guidelines applicable to our executive
officers. For purposes of the guidelines, the stock value is
calculated annually, determined by reference to either the
one-year or five-year trailing average monthly stock price.
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Under the guidelines, each of Messrs. Moffett and Adkerson
is required to maintain ownership of company stock valued at
five times his base salary, and our other executive officers are
required to maintain ownership of company stock valued at three
times their base salaries. As of December 31, 2010, all of
our executive officers had exceeded their target ownership
level. In particular, using the one year trailing average stock
price under the guidelines, Mr. Moffett owned shares valued
at 54 times his base salary (approximately ten times his target
ownership level) and Mr. Adkerson owned shares valued at 40
times his base salary (approximately eight times his target
ownership level). These levels reflect their individual
commitments to aligning their interests with those of the
stockholders and provide an incentive to maximize the value of
our stock over the long term. For more information regarding the
current stock holdings of our executive officers, please see
“Stock Ownership of Directors and Executive Officers.”
Consideration of Stock Option Exercises and RSU
Vestings. The committee does not factor into
its decisions regarding executive compensation the gains
received by our executive officers in connection with exercise
of stock options or the vesting of RSUs. The value an executive
receives from a stock option exercise is directly related to the
appreciation in value of our common stock, which in turn we
believe is directly affected by the efforts of our executive
officers in managing our company. Because RSUs are granted as
performance compensation for the year awarded, we believe it
would be inappropriate to allow the value of the award at
vesting to affect future compensation decisions. Our annual
incentive plan requires that any portion of our executive’s
annual bonus paid in RSUs will continue to be subject to a
performance condition for three years. Further, a key purpose
behind granting equity awards to executives is to provide an
incentive for them to increase stockholder value over time.
Accordingly, the committee has not taken realized option gains
into account when making decisions regarding future
compensation, nor did it revise its compensation or grant
practices during years when our executives did not exercise any
stock options.
Overview
of Principal Components of Executive Compensation
The principal components of executive officer compensation for
2010 were base salaries, annual incentive awards, and long-term
incentive awards, the sum of which are viewed by the committee
as the executives’ “total direct compensation.”
In addition, we also provide our executives with certain
personal benefits and perquisites, as well as post-employment
compensation, which the committee considers separately from
total direct compensation and which are further described below.
|
Principal Components of |
||
|
Compensation
|
Summary and Purpose of the Component | |
|
Base Salaries
|
Base salaries provide fixed compensation to our executives. Each executive officer’s base salary is based on his or her level of responsibility. | |
|
Annual Incentive Awards
|
Annual cash incentives payable under our annual incentive plan (AIP) are a variable component of compensation designed to reward our executives for maximizing annual operating performance, including safety performance. The aggregate plan funding amount for the annual awards is based on our cash provided by operating activities, which we believe is a significant measure of our company’s success. | |
|
Long-Term Incentive Awards
|
Long-term incentives are also a variable component of compensation intended to reward our executives for the company’s success in achieving sustained, long-term profitability and increases in stock value. We provide long-term incentive awards in the form of performance-based RSUs and stock options, which provide a focus on stock price performance and encourage executive ownership of our stock. |
30
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The following charts illustrate the component mix of the
aggregate total direct compensation paid to our named executive
officers for 2010:
![[GRAPHS]](https://www.sec.gov/Archives/edgar/data/831259/000095012311041071//h79585h7958502.gif)
After reviewing the company’s significant compensation
programs, management and the committee believe that the risks
arising from our compensation policies and practices for our
employees, including our executive officers, are not reasonably
likely to have a material adverse effect on the company. In
reaching this conclusion, we have taken into account the purpose
and structure of these programs and the following design
elements of our compensation programs and policies: our balance
and amount of annual and long-term compensation elements at the
executive and management levels; our use of operating cash flow
as a performance metric for executives and management level
employees, which we believe is a meaningful indicator of our
performance; the multi-year vesting of equity awards that
promotes focus on the long-term operational and financial
performance of our company; and bonus arrangements for most
employees that are not guaranteed and are ultimately at the
discretion of either the committee (for our executive officers
and senior management) or senior management (for other
employees). These features, as well as the stock ownership
requirements for our executive officers, result in a
compensation program that aligns our executives’ interests
with those of our stockholders and does not promote excessive
risk-taking on the part of our executives or other employees.
The following is an explanation of each principal component of
our executive compensation program, including a description of
the committee’s compensation decisions for 2010.
Base
Salaries
Our philosophy is that base salaries should meet the objective
of attracting and retaining the executive officers needed to
manage our business successfully. Actual individual salary
amounts reflect the committee’s judgment with respect to
each executive officer’s responsibility, performance, work
experience and the individual’s historical salary level.
Our goal is to allocate more compensation to the
performance-dependent elements of the total compensation
package, and we do not routinely provide base salary increases.
Consequently, we have not increased the base salaries of our
executive officers since May 2007, when increases to the base
salaries of certain executive officers were approved to address
the increased responsibilities of these executives following the
acquisition of Phelps Dodge. The base salaries of
Messrs. Moffett and Adkerson and Ms. Quirk are
contractually set pursuant to their employment agreements.
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Annual
Incentive Awards
Our annual incentive plan, or AIP, is designed to provide
performance-based awards to our executive officers, each of
whose performance has a significant impact on our financial
stability, profitability and future growth. The committee
believes the overall design of the AIP supports our compensation
philosophy and objectives for the following reasons:
| • | it encourages the entrepreneurial spirit of the organization; | |
| • | its focus on operating cash flow, the underlying metric of the plan, reflects our goal to maximize cash flows and long-term values for our stockholders; | |
| • | we believe that the variability of cash flows associated with changes in commodity prices, changes in production volumes, cost management and other changes in business conditions closely aligns management and stockholder interests; | |
| • | its limit on overall awards to eight times the executive’s base salary prevents excessive payouts to the executives while permitting significant compensation opportunities if the company’s performance warrants high payouts; and | |
| • | mandating that all payments over four times the executive’s base salary be made in RSUs having an equivalent value, the vesting of which will be subject to our continued achievement of the 6% return on investment threshold, converts a portion of the annual award to a long-term incentive dependent upon the company’s continued performance. |
The current AIP was approved by our stockholders in 2009, and
its design is intended to provide compensation opportunities
that reflect the performance of our business, which may vary
significantly from year to year, and that are consistent with
observed market pay levels. The financial measure used to fund
the AIP pool is operating cash flow, excluding working capital
changes, reflecting the committee’s belief that operating
cash flow is a meaningful indicator of overall performance for
our company.
The plan is designed to meet the requirements of
Section 162(m) of the Internal Revenue Code (the Code) by
setting an objective performance target and a maximum funding
amount. Under the plan, once the performance target has been
achieved, the committee retains the discretion to reduce or
eliminate the award pool and the awards to specific officers.
Accordingly, this plan design preserves the company’s tax
treatment of these awards as “performance-based” under
Section 162(m), but gives the committee flexibility in
operating the plan. The new plan also specifically enumerates
qualitative factors that the committee may consider in
exercising this discretion, including total shareholder return
and safety performance.
2010 Awards under the AIP. In February 2010,
we assigned each of our executive officers a percentage of the
aggregate plan funding amount under the AIP for 2010: 40% to
each of Messrs. Moffett and Adkerson, 11% to Ms. Quirk
and 9% to Mr. Arnold. These allocations were based on each
officer’s position and were consistent with the prior
year’s allocations.
Under the AIP, if our five-year return on investment is 6% or
greater, our executive officers would share in a plan funding
amount equal to 0.625% of our operating cash flow, as adjusted.
As noted previously, 2010 was an outstanding year for our
company, resulting in the best financial results in our history.
During the five-year period ending in 2010, the average return
on investment was 22%. For 2010, operating cash flow as adjusted
for working capital changes as reflected in our consolidated
statements of cash flows for 2010 was $7.11 billion, thus
producing a plan funding amount of $44.43 million. The plan
permits the committee to make downward adjustments to the plan
funding amount or individual awards if it determines that
adjustments are warranted based on other factors, such as safety
performance. After reviewing the company’s overall
performance, including its safety performance, the committee
concluded that no such adjustments were warranted. As required
under the plan, each executive received a cash award equal to
four-times his or her base salary, and the balance of the award
value was delivered in the form of performance-based RSUs of
equivalent value. These performance-based RSUs ratably convert
to shares of our common stock over a three-year period, provided
the company continues to meet the 6% return on investment
threshold discussed above
32
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on each lapse date. The table below reflects the value of the
2010 AIP awards, which were paid in February 2011 (in millions).
| 2010 AIP Awards | ||||||||||||
|
Aggregate Value |
||||||||||||
|
Value Paid |
Value Paid |
Awarded Based on |
||||||||||
|
Name
|
in Cash | in RSUs | Award Pool | |||||||||
|
Mr. Moffett
|
$ | 10.00 | $ | 7.77 | $ | 17.77 | ||||||
|
Mr. Adkerson
|
10.00 | 7.77 | 17.77 | |||||||||
|
Ms. Quirk
|
2.60 | 2.29 | 4.89 | |||||||||
|
Mr. Arnold
|
2.20 | 1.80 | 4.00 | |||||||||
|
Totals
|
$ | 24.80 | $ | 19.63 | $ | 44.43 | ||||||
The following graph illustrates the aggregate awards under the
AIP for the previous three fiscal years, as compared to our
operating cash flows, as adjusted, for the same periods. For
2008, our executive chairman and our chief executive officer
declined to receive any payments under our AIP.
![[GRAPHS]](https://www.sec.gov/Archives/edgar/data/831259/000095012311041071//h79585h7958503.gif)
Long-Term
Incentive Awards
Long-term incentives granted by the company may consist of stock
options, RSUs, or a combination of the two.
Stock Options. The committee believes that
stock options are an effective and appropriate long-term
incentive for our executives in that their value is dependent on
an increase in our stock price and aligns the executives’
interests with those of our stockholders. Since 2009, the
committee’s practice has been to make annual equity-based
awards to the executives in the form of stock options, although
it may also grant RSUs in addition to any RSUs awarded pursuant
to the AIP. The committee recognizes that the value of the
options on the grant date should be considered but does not
believe this should be the only means of determining the
appropriate grant level due to the significant changes in value
that can occur from one year to the next. Historically, the
committee has used a fixed share approach for all employees,
pursuant to which it would generally grant options for the same
number of shares each year.
When making the 2009 awards in February 2010, the committee
considered both the number of options granted and the grant date
values and decided to grant the same number of options as
granted for 2008. In February 2011, the committee once again
evaluated this approach for the 2010 awards and, after reviewing
the grant date values of the proposed awards, concluded that a
fixed share level remained the appropriate method to determine
the grant level. As a result, the committee elected not to
adjust for the
two-for-one
stock split and awarded the same number of options for 2010 as
granted for 2009. Although the awards made in February
33
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2010 are viewed by the committee as part of 2009 total direct
compensation, SEC regulations require that they be reflected in
the Summary Compensation Table for 2010 because they were
granted during 2010.
As of result of the fixed share approach, the committee awarded
a total of 1.27 million options to the named executive
officers for each of the previous three years. The following
chart shows the varying Black-Scholes value of these option
grants:
![[GRAPHS]](https://www.sec.gov/Archives/edgar/data/831259/000095012311041071//h79585h7958504.gif)
The stock options granted for 2009 (granted in February
2010) have an exercise price of $36.255, and the stock
options granted for 2010 (granted in February 2011) have an
exercise price of $55.64. The grant date values of these awards
are reflected in the table below (2009 option grant amounts have
been adjusted to reflect our
two-for-one
stock split effective February 1, 2011):
|
Black-Scholes Value |
||||||||||||||||
|
Number of Options |
Black-Scholes Value |
of Options |
||||||||||||||
|
Granted for 2009 |
of Options Granted |
Granted |
||||||||||||||
|
(as adjusted for |
for 2009 |
Number of Options |
for 2010 |
|||||||||||||
|
Executive
|
stock split) | (in millions) | Granted for 2010 | (in millions) | ||||||||||||
|
James R. Moffett
|
1,000,000 | $ | 15.42 | 500,000 | $ | 10.30 | ||||||||||
|
Richard C. Adkerson
|
1,000,000 | 15.42 | 500,000 | 10.30 | ||||||||||||
|
Kathleen L. Quirk
|
300,000 | 4.63 | 150,000 | 3.09 | ||||||||||||
|
Michael J. Arnold
|
240,000 | 3.70 | 120,000 | 2.47 | ||||||||||||
Restricted Stock Units. In addition to the
performance-based RSUs granted to our named executive officers
in February 2010 in connection with the AIP payout for 2009, as
discussed above, and in recognition of the company’s
accomplishments during 2009, the committee made an additional
grant of performance-based RSUs in February 2010 to each of our
executive officers. These performance-based RSUs have the same
terms as the performance-based RSUs related to the AIP. These
awards are viewed by the committee as part of 2009 total direct
compensation, however because they were granted during 2010, SEC
regulations require that they be reflected in the Summary
Compensation Table for 2010.
Summary
of 2010 Total Direct Compensation
As noted above, the committee views each executive’s
“total direct compensation” for a given year as the
sum of the executive’s base salary, aggregate awards under
the AIP for that year, and the value of long-term incentives
granted in recognition of our performance for that year. In
making its decisions regarding the appropriate levels of annual
incentive and long-term incentive awards, the committee
evaluates the impact of its decisions on the amount of total
direct compensation and the percentage of each component to
total direct compensation of the executive team as a group. The
committee concluded that the award levels described above
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and the resulting total direct compensation set forth below for
the executive team were appropriate considering the
company’s performance during 2010. See “Executive
Compensation Market Assessment” below.
2010
Total Direct Compensation(1)
(in millions)
(in millions)
| 2010 AIP Awards | ||||||||||||||||||||
|
Value |
Value |
Black-Scholes Value |
||||||||||||||||||
|
Paid in |
Paid in |
of Stock Options |
||||||||||||||||||
|
Executive
|
Base Salary | Cash | RSUs | Granted(2) | Total | |||||||||||||||
|
James R. Moffett
|
$ | 2.50 | $ | 10.00 | $ | 7.77 | $ | 10.30 | $ | 30.57 | ||||||||||
|
Richard C. Adkerson
|
2.50 | 10.00 | 7.77 | 10.30 | 30.57 | |||||||||||||||
|
Kathleen L. Quirk
|
0.65 | 2.60 | 2.29 | 3.09 | 8.63 | |||||||||||||||
|
Michael J. Arnold
|
0.55 | 2.20 | 1.80 | 2.47 | 7.02 | |||||||||||||||
| (1) | Does not include the value of perquisites and personal benefits, as well as commitments for post-employment compensation, which amounts are included in the Summary Compensation Table and supplementary tables below. | |
| (2) | Although the committee granted these stock options in February 2011, the committee views these grants as part of the executives’ 2010 total direct compensation. See the description of these awards under “Overview of Principal Components of Executive Compensation — Long-Term Incentive Awards.” |
The values of base salary and the non-equity incentive plan
compensation reflected in the Summary Compensation Table for
2010 are equivalent to the base salary and the cash portion of
the annual incentive award reflected above. However, SEC
regulations require that the Summary Compensation Table include
the value of equity awards granted “in” a given year,
and do not allow companies to treat equity awards granted
subsequent to the applicable fiscal year as part of the total
compensation for that fiscal year. As such, the equity awards
included in the Summary Compensation Table for 2010 reflect the
value of stock options and performance-based RSUs granted in
February 2010, and not the stock options and performance-based
RSUs granted in 2011, which are reflected above.
35
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Performance-Based Compensation v. Stock
Performance. The following chart illustrates
the link between the company’s performance-based
compensation (total value of the AIP cash awards, RSU awards and
stock option awards to our named executive officers) to the
company’s stock performance over the previous three years.
![[GRAPHS]](https://www.sec.gov/Archives/edgar/data/831259/000095012311041071//h79585h7958505.gif)
Executive Compensation Market
Assessment. In February 2011, Pay Governance
presented the committee with a competitive market compensation
assessment for the named executive officers. Pay Governance
conducted a review of publicly traded companies to ensure that
the comparator groups were appropriate, and also used published
survey data to assess our executive compensation levels. Pay
Governance compared our executive compensation levels with those
of the following companies:
|
U.S. Natural Resource Companies
|
Non-U.S. Metals and Mining Companies | |
|
Anadarko Petroleum Corporation
|
BHP Billiton plc | |
|
Apache Corp.
|
Xstrata plc | |
|
Chesapeake Energy Corporation
|
Teck Resources Limited | |
|
Devon Energy Corporation
|
Rio Tinto plc | |
|
Hess Corporation
|
Barrick Gold Corporation | |
|
Murphy Oil Corporation
|
Anglo American plc | |
|
Newmont Mining Corp.
|
Vedanta Resources plc | |
|
Occidental Petroleum Corporation
|
Based on its review, Pay Governance reported that the
company’s total executive compensation opportunities are
among the highest of the comparator groups, but also noted that
our stock has performed at or near the top quartile of the
S&P 500 in recent years. The committee requested this
report in order to evaluate our executive compensation levels,
and not with the intention of setting compensation levels based
on the results. The committee recognizes that our 2010 executive
compensation levels are high and believes this is directly
attributable to the company’s strong performance during
2010.
Personal
Benefits and Perquisites
In addition to the primary elements of our compensation program
discussed above, we also provide certain personal benefits and
perquisites to our executive officers. In early 2009, in
connection with restructuring our executive compensation
program, the committee evaluated the personal benefits and
perquisites that we provide to our executives, and revised this
program to discontinue certain benefits, including tax
gross-ups on
personal benefits and perquisites. The company retained the
personal benefits and
36
Table of Contents
perquisites reflected in note 6 of the “Summary
Compensation Table.” Many of these benefits are designed to
provide an added level of security to our executives and
increase travel efficiencies, thus ensuring the executives’
ready availability on short notice and enabling the executives
to focus more time and energy on company matters. The benefits
also recognize the high degree of integration between the
personal and professional lives of these executive officers, and
ensures the security of the company’s proprietary
information by enabling our officers to conduct business while
traveling without concern that company information will be
compromised. In addition, our longstanding matching contribution
program is designed to encourage all employees, including our
executives, to contribute to charitable organizations by
providing that we will match such contributions up to certain
limits.
The amounts reflected in the “Summary Compensation
Table” represent our incremental cost of providing the
benefit, and not the value of the benefit to the recipient. With
respect to personal use of fractionally owned company aircraft,
the aggregate incremental cost includes the hourly operating
rate, fuel costs, and excise taxes. With respect to personal use
of vehicles and the provision of security services, the
aggregate cost of providing a car and driver is determined on an
annual basis and includes annual driver compensation and annual
car lease and insurance costs. Although the cars and drivers are
available for both business and personal use, the amounts
reflected in the “Summary Compensation Table” reflect
the aggregate cost to us without deducting costs attributable to
business use.
Post-Termination
Compensation
In addition to the compensation received by the executive
officers during 2010 and benefits under the company’s ECAP,
which we provide to all qualified employees, we also provide
certain post-employment benefits to our executive officers,
including a nonqualified defined contribution plan and a
supplemental executive retirement plan, as well as certain
change of control and severance benefits.
Nonqualified Defined Contribution Plan
— Our nonqualified defined contribution plan
provides those employees whose earnings in a prior year were in
excess of the dollar limit under Section 401(a)(17) of the
Code, including our executive officers, the ability to defer up
to 20% of their base salary after deferrals to the ECAP have
ceased due to qualified plan limits. The company makes a
matching contribution equal to the participant’s deferrals
in this plan and the ECAP (the qualified plan) limited to 5% of
the participant’s base salary. We do not take into account
bonuses or income associated with option exercises or the
vesting of RSUs when determining the company’s matching
contributions. The matching contribution noted above is the same
as the matching contribution in the ECAP, which provides that
participants will receive a company contribution equal to 100%
of the participant’s deferrals to the ECAP, subject to
qualified plan limits. The purpose of the 5% company
contribution in our nonqualified plan is to continue the 5%
contribution in the ECAP that is subject to qualified plan
limits. The nonqualified defined contribution plan is unfunded.
We had a defined benefit program in place until June 30,
2000. To compensate for the discontinuance of benefit accruals
under the defined benefit plan, we decided that we prospectively
would make an additional company contribution to our ECAP
participants equal to 4% of each participant’s pensionable
compensation up to the applicable IRS limits, and also an
additional company contribution of 4% of compensation in excess
of such limits to participants in our nonqualified plan.
Further, because participants in a pension plan accrue most of
their benefits in the last 10 years of service, we decided
that employees who met certain age and service requirements as
of June 30, 2000, would receive an additional 6% company
contribution, for a total of 10%, to both the qualified and
nonqualified plans. As of June 30, 2000, the only two named
executive officers who met the applicable age and service
requirements were Messrs. Moffett and Adkerson, thus
resulting in the 10% contribution for each. The purpose of the
nonqualified plan is to make total retirement benefits for our
employees who earn over the qualified plan limits commensurate
with those available to other employees as a percentage of pay.
Supplemental Executive Retirement Plan
— We established an unfunded supplemental
executive retirement plan (SERP) for Messrs. Moffett and
Adkerson in February 2004. The committee, advised by Mercer, its
independent compensation consultant at the time, approved the
SERP, which was then recommended to and approved by our board.
The SERP provides for benefits payable in the form of a 100%
37
Table of Contents
joint and survivor annuity, life annuity or an equivalent lump
sum. The annuity will equal a percentage of the executive’s
highest base pay for any three of the five years immediately
preceding the executive’s retirement or the completion of
25 years of credited service, plus his average bonus for
those years, provided that the average bonus cannot exceed 200%
of average base pay. The percentage used in this calculation is
equal to 2% for each year of credited service up to
25 years, or a maximum of 50%. Income associated with
option exercises or the vesting of RSUs is not a factor in
determining the benefits payable under the SERP.
The SERP benefit will be reduced by the value of all benefits
received under all other retirement plans (qualified and
nonqualified), sponsored by the company, by FM Services Company,
one of our wholly owned subsidiaries, or by any predecessor
employer (including our former parent company, Freeport-McMoRan
Inc.), except for benefits produced by accounts funded
exclusively by deductions from the participant’s pay. In
addition, the SERP benefit will be reduced by 3% per year if
retirement precedes age 65. Messrs. Moffett and
Adkerson are both 100% vested under the SERP.
Change of Control and Severance Benefits
— We provide all of our named executive
officers with contractual protections in the event of a change
of control, and have also entered into employment agreements
with each of Messrs. Moffett and Adkerson and
Ms. Quirk that provide additional severance benefits. We
believe that severance protections, particularly in the context
of a change of control transaction, can play a valuable role in
attracting and retaining key executive officers by providing
protections commonly provided in the market. In addition, we
believe these benefits also serve the company’s interest by
promoting a continuity of management in the context of an actual
or threatened change of control transaction. The existence of
these arrangements does not impact our decisions regarding other
components of our executive compensation program, although we
consider these severance protections an important part of our
executives’ compensation packages.
We also believe that the occurrence, or potential occurrence, of
a change of control transaction will create uncertainty
regarding the continued employment of our executive officers.
This uncertainty results from the fact that many change of
control transactions result in significant organizational
changes, particularly at the senior executive level. In order to
encourage certain executive officers to remain employed with the
company during an important time when their prospects for
continued employment following the transaction are often
uncertain, we provide our executive officers with enhanced
severance benefits if their employment is terminated by the
company without cause or, in certain cases, by the executive in
connection with a change of control. Because we believe that a
termination by the executive for good reason may be conceptually
the same as a termination by the company without cause, and
because we believe that in the context of a change of control,
potential acquirors would otherwise have an incentive to
constructively terminate the executive’s employment to
avoid paying severance, we believe it is appropriate to provide
severance benefits in these circumstances. In December 2008, the
committee adopted a policy whereby the company will no longer
provide excise tax
gross-up
protections in change of control arrangements adopted, renewed
or extended after December 2, 2008. In April 2011,
Mr. Adkerson and Ms. Quirk voluntarily waived their
rights to the excise tax
gross-up
protections provided in their employment agreements, which
rights were not going to be renewed by the committee beyond
January 1, 2012. Accordingly, we do not currently provide
excise tax
gross-up
protections under any change of control arrangements.
We do not believe that our executive officers should be entitled
to receive cash severance benefits merely because a change of
control transaction occurs. The payment of cash severance
benefits is only triggered by an actual or constructive
termination of employment following a change of control (i.e.
a “double trigger”). Under their respective
incentive agreements, however, our executive officers would be
entitled to accelerated vesting of their outstanding equity
awards automatically upon a change of control of the company,
whether or not the officer’s employment is terminated. This
treatment of the equity awards in connection with a change of
control applies to all award recipients.
As described in more detail below under “Potential Payments
Upon Termination or Change of Control,”
Messrs. Moffett and Adkerson and Ms. Quirk would also
be entitled under their employment agreements to severance
benefits in the event of a termination of employment by the
company without cause or by the executive for good reason. The
committee has determined that it is appropriate to provide these
38
Table of Contents
executives with severance benefits under these circumstances in
light of their positions with the company and as part of their
overall compensation package.
Tax
Considerations
Section 162(m). Section 162(m)
of the Internal Revenue Code limits to $1 million a public
company’s annual tax deduction for compensation paid to
each of its most highly compensated executive officers.
Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. The
committee’s policy is to structure compensation awards that
will be deductible where doing so will further the purposes of
our executive compensation program. The committee also considers
it important to retain flexibility to design compensation
programs that recognize a full range of criteria important to
our success, even where compensation payable under the programs
may not be fully deductible. As such, the committee may
implement revised or additional compensation programs in the
future as it deems appropriate or necessary to adequately
compensate our executive team.
With respect to the compensation received by our named executive
officers for 2010, the committee believes that the stock options
and the awards under our AIP qualify for the exclusion from the
deduction limitation under Section 162(m). With the
exception of a portion of the salary paid to our executive
chairman and our chief executive officer, the committee
anticipates that the remaining components of individual
executive compensation that do not qualify for an exclusion from
Section 162(m) should not exceed $1 million in any
given year and therefore will qualify for deductibility.
Sections 280G and 4999. Code
Section 4999 imposes a 20% excise tax on the recipient of
an “excess parachute payment” and Code
Section 280G disallows the tax deduction to the payor of
any amount of an excess parachute payment that is contingent on
a change of control. As noted above, in December 2008, the
committee adopted a policy whereby the company will no longer
provide excise tax
gross-up
protections in change of control arrangements adopted, renewed
or extended after December 2, 2008. Further, all excise tax
gross-up
protections provided in former agreements have terminated as of
the date of this proxy statement, thus we currently do not
provide excise tax
gross-up
protections under any change of control arrangements.
39
Table of Contents
Corporate
Personnel Committee Report
The corporate personnel committee of our board has reviewed and
discussed with management the Compensation Discussion and
Analysis required by Item 402(b) of
Regulation S-K,
and based on such review and discussion, the corporate personnel
committee recommended to the board that the Compensation
Discussion and Analysis be included in this proxy statement.
Submitted by the Corporate Personnel Committee as of
April 18, 2011:
H. Devon Graham, Jr., Chairman
Robert J. Allison, Jr.
Charles C. Krulak
Bobby Lee Lackey
Executive
Compensation Tables
The table below summarizes the total compensation paid to or
earned by our named executive officers. See “Compensation
Discussion and Analysis” for a more detailed discussion of
our executive compensation program.
2010
Summary Compensation Table
|
Change in |
||||||||||||||||||||||||||||||||
|
Pension |
||||||||||||||||||||||||||||||||
|
Value and |
||||||||||||||||||||||||||||||||
|
Nonqualified |
||||||||||||||||||||||||||||||||
|
Non-Equity |
Deferred |
|||||||||||||||||||||||||||||||
|
Option |
Incentive Plan |
Compensation |
All Other |
|||||||||||||||||||||||||||||
|
Name and |
Salary |
Stock Awards |
Awards |
Compensation |
Earnings |
Compensation |
||||||||||||||||||||||||||
|
Principal Position
|
Year | (1) | (2) | (3) | (4) | (5) | (6) | Total | ||||||||||||||||||||||||
|
James R. Moffett
|
2010 | $ | 2,500,000 | $ | 5,818,492 | $ | 15,420,000 | $ | 10,000,000 | $ | 1,241,272 | $ | 1,773,225 | $ | 36,752,989 | |||||||||||||||||
|
Chairman of the Board
|
2009 | 2,500,000 | — | 6,775,000 | 10,000,000 | 1,139,171 | 1,062,912 | 21,477,083 | ||||||||||||||||||||||||
| 2008 | 2,500,000 | 14,799,977 | — | — | 1,489,324 | 3,633,719 | 22,423,020 | |||||||||||||||||||||||||
|
Richard C. Adkerson
|
2010 | 2,500,000 | 5,818,492 | 15,420,000 | 10,000,000 | 4,241,511 | 1,555,531 | 39,535,534 | ||||||||||||||||||||||||
|
President & Chief Executive
|
2009 | 2,500,000 | — | 6,775,000 | 10,000,000 | 7,534,110 | 813,223 | 27,622,333 | ||||||||||||||||||||||||
|
Officer
|
2008 | 2,500,000 | 66,549,903 | — | — | 5,011,710 | 3,203,774 | 77,265,387 | ||||||||||||||||||||||||
|
Kathleen L. Quirk
|
2010 | 650,000 | 1,967,559 | 4,626,000 | 2,600,000 | — | 149,239 | 9,992,798 | ||||||||||||||||||||||||
|
Executive Vice President,
|
2009 | 650,000 | — | 2,032,500 | 2,600,000 | — | 106,629 | 5,389,129 | ||||||||||||||||||||||||
|
Chief Financial Officer
|
2008 | 650,000 | 10,043,673 | — | 1,000,000 | 9,936 | 205,541 | 11,909,150 | ||||||||||||||||||||||||
|
& Treasurer
|
||||||||||||||||||||||||||||||||
|
Michael J. Arnold
|
2010 | 550,000 | 1,721,677 | 3,700,800 | 2,200,000 | — | 146,180 | 8,318,657 | ||||||||||||||||||||||||
|
Executive Vice President
|
2009 | 550,000 | — | 1,626,000 | 2,200,000 | — | 109,354 | 4,485,354 | ||||||||||||||||||||||||
|
& Chief Administrative
|
2008 | 550,000 | 2,637,391 | — | 1,000,000 | 28,622 | 281,051 | 4,497,064 | ||||||||||||||||||||||||
|
Officer
|
||||||||||||||||||||||||||||||||
| (1) | Messrs. Moffett and Adkerson and Ms. Quirk also provide services to and receive compensation from McMoRan. | |
| (2) | RSU awards are valued on the date of grant at the closing sale price per share of our common stock. | |
| (3) | The amounts reported in the “Option Awards” Column reflect the grant date fair value of the options granted to the named executive officers in the year reflected, determined using the Black-Scholes option model. For information relating to the assumptions made by us in valuing the option awards made to our named executive officers in fiscal years 2008 through 2010, refer to Notes 1 and 11 of our financial statements in our annual report on Form 10-K for the year ended December 31, 2010. Our committee views options granted in a given as part of the prior year’s compensation. For more information regarding options granted to the named executive officers in 2011 relating to 2010 compensation, see “Compensation Discussion and Analysis.” | |
| (4) | The amounts reported in the “Non-Equity Incentive Plan Compensation” column reflect the annual cash incentive payments received under our annual incentive plan. |
40
Table of Contents
| (5) | The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column include (a) the change in actuarial value of our defined benefit program in 2008, (b) the change in actuarial value of our supplemental executive retirement plan for Messrs. Moffett and Adkerson in 2008, 2009 and 2010, and (c) above-market or preferential nonqualified deferred compensation earnings in 2008, as set forth in the table below. See the “Retirement Benefit Programs” section for more information. |
|
Supplemental |
||||||||||||||||
|
Defined |
Retirement |
Above-Market |
||||||||||||||
|
Name
|
Year | Benefit Plan | Plan | Earnings | ||||||||||||
|
Mr. Moffett
|
2010 | $ | — | $ | 1,241,272 | $ | — | |||||||||
| 2009 | — | 1,139,171 | — | |||||||||||||
| 2008 | 53,941 | 1,049,284 | 386,099 | |||||||||||||
|
Mr. Adkerson
|
2010 | — | 4,241,511 | — | ||||||||||||
| 2009 | — | 7,534,110 | — | |||||||||||||
| 2008 | 6,856 | 4,813,353 | 191,501 | |||||||||||||
|
Ms. Quirk
|
2010 | — | — | — | ||||||||||||
| 2009 | — | — | — | |||||||||||||
| 2008 | 1,841 | — | 8,095 | |||||||||||||
|
Mr. Arnold
|
2010 | — | — | — | ||||||||||||
| 2009 | — | — | — | |||||||||||||
| 2008 | 4,044 | — | 24,578 | |||||||||||||
| (6) | The amounts reported in the “All Other Compensation” column for 2010 reflect, for each named executive officer as applicable, the sum of the incremental cost to the company of all perquisites and other personal benefits and additional all other compensation required by SEC rules to be separately quantified, including (A) amounts contributed by the company to defined contribution plans, (B) the dollar value of life insurance premiums paid by the company, and (C) the dollar value of interest credited on dividend equivalents on unvested RSUs during 2010. The perquisites and other personal benefits reported include (a) the foundation’s matching of contributions to charitable organizations under the matching gifts program, (b) personal financial and tax advice under the company’s program, (c) the aggregate incremental cost to the company of the executive’s personal use of fractionally owned company aircraft, which includes the hourly operating rate, fuel costs and excise taxes, (d) personal use of company facilities and personnel, (e) personal use of company cars and security services, and (f) our premium payments for personal excess liability insurance, as reflected in the table below. The aggregate incremental cost to the company of Messrs. Moffett and Adkerson’s personal use of fractionally owned company aircraft does not include the lost tax deduction for expenses that exceeded the amounts reported as income for each executive, which for fiscal year 2010 was approximately $83,331 for Mr. Moffett and $72,905 for Mr. Adkerson. |
| Perquisites and Other Personal Benefits | Additional All Other Compensation | ||||||||||||||||||||||||||||||||||||
|
Personal |
|||||||||||||||||||||||||||||||||||||
|
Excess |
Interest |
||||||||||||||||||||||||||||||||||||
|
Financial |
Facilities |
Security |
Liability |
Life |
Credited |
||||||||||||||||||||||||||||||||
|
Matching |
and Tax |
Aircraft |
and |
and |
Insurance |
Plan |
Insurance |
on Dividend |
|||||||||||||||||||||||||||||
|
Name
|
Gifts | Advice | Usage | Personnel | Cars | Premiums | Contributions | Premiums | Equivalents | ||||||||||||||||||||||||||||
|
Mr. Moffett
|
$ | 53,500 | $ | 20,000 | $ | 242,279 | $ | 113,384 | $ | 179,771 | $ | 4,791 | $ | 1,000,605 | $ | 154,382 | $ | 4,513 | |||||||||||||||||||
|
Mr. Adkerson
|
53,500 | 20,000 | 257,062 | 49,366 | 140,196 | 4,791 | 973,105 | 38,250 | 19,261 | ||||||||||||||||||||||||||||
|
Ms. Quirk
|
25,000 | 7,773 | — | 225 | — | 1,575 | 109,340 | 2,250 | 3,076 | ||||||||||||||||||||||||||||
|
Mr. Arnold
|
23,500 | 17,327 | — | 4,275 | 756 | 1,575 | 92,400 | 5,418 | 929 | ||||||||||||||||||||||||||||
41
Table of Contents
Grants of
Plan-Based Awards
in Fiscal Year 2010
in Fiscal Year 2010
|
Estimated Future |
||||||||||||||||||||||||
|
Payouts Under |
Estimated Future |
All Other Option |
||||||||||||||||||||||
|
Non-Equity |
Payouts Under |
Awards:Number of |
Exercise or Base |
Grant Date Fair |
||||||||||||||||||||
|
Incentive Plan |
Equity Incentive |
Securities |
Price of Option |
Value of Stock and |
||||||||||||||||||||
|
Name
|
Grant Date | Awards: Target | Plan Awards: Target | Underlying Options | Awards(2) | Option Awards | ||||||||||||||||||
|
James R. Moffett
|
||||||||||||||||||||||||
|
AIP – Cash Award
|
— | $ | 10,000,000 | (1) | — | — | $ | — | $ | — | ||||||||||||||
|
AIP – RSU Award
|
02/02/10 | — | 80,488 | — | — | 2,918,092 | ||||||||||||||||||
|
RSU
|
02/02/10 | — | 80,000 | — | — | 2,900,400 | ||||||||||||||||||
|
Options
|
02/02/10 | — | — | 1,000,000 | 36.255 | 15,420,000 | ||||||||||||||||||
|
Richard C. Adkerson
|
||||||||||||||||||||||||
|
AIP – Cash Award
|
— | 10,000,000 | (1) | — | — | — | — | |||||||||||||||||
|
AIP — RSU Award
|
02/02/10 | — | 80,488 | — | — | 2,918,092 | ||||||||||||||||||
|
RSU
|
02/02/10 | — | 80,000 | — | — | 2,900,400 | ||||||||||||||||||
|
Options
|
02/02/10 | — | — | 1,000,000 | 36.255 | 15,420,000 | ||||||||||||||||||
|
Kathleen L. Quirk
|
||||||||||||||||||||||||
|
AIP – Cash Award
|
— | 2,600,000 | (1) | — | — | — | — | |||||||||||||||||
|
AIP – RSU Award
|
02/02/10 | — | 26,270 | — | — | 952,419 | ||||||||||||||||||
|
RSU
|
02/02/10 | — | 28,000 | — | — | 1,015,140 | ||||||||||||||||||
|
Options
|
02/02/10 | — | — | 300,000 | 36.255 | 4,626,000 | ||||||||||||||||||
|
Michael J. Arnold
|
||||||||||||||||||||||||
|
AIP – Cash Award
|
— | 2,200,000 | (1) | — | — | — | — | |||||||||||||||||
|
AIP – RSU Award
|
02/02/10 | — | 19,488 | — | — | 706,537 | ||||||||||||||||||
|
RSU
|
02/02/10 | — | 28,000 | — | — | 1,015,140 | ||||||||||||||||||
|
Options
|
02/02/10 | — | — | 240,000 | 36.255 | 3,700,800 | ||||||||||||||||||
| (1) | Represents the estimated maximum possible annual cash incentive payment that could have been received by each named executive officer pursuant to the annual incentive plan for fiscal year 2010. These estimated amounts were calculated by multiplying the percentage of the award pool under the plan allocated to each officer for 2010 by the maximum plan funding amount produced for the 2009 plan year and applying the cap of four times each executive’s base salary under the annual incentive plan. The actual amounts paid in early 2011 to each of the named executive officers pursuant to the annual incentive plan for 2010 are reflected in the “Summary Compensation Table.” See the discussion regarding our annual incentive plan in “Compensation Discussion and Analysis” for more information. | |
| (2) | The exercise price of each stock option reflected in this table was determined by reference to the closing quoted per share sale price of our common stock on the composite tape for NYSE-listed stocks on the grant date. |
42
Table of Contents
Outstanding
Equity Awards at December 31, 2010
| Option Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||
|
Equity |
||||||||||||||||||||||||||||
|
Incentive |
||||||||||||||||||||||||||||
|
Equity |
Plan |
|||||||||||||||||||||||||||
|
Incentive |
Awards: |
|||||||||||||||||||||||||||
|
Plan |
Market or |
|||||||||||||||||||||||||||
|
Awards: |
Payout |
|||||||||||||||||||||||||||
|
Number of |
Value of |
|||||||||||||||||||||||||||
|
Unearned |
Unearned |
|||||||||||||||||||||||||||
|
Number of |
Number of |
Shares, |
Shares, |
|||||||||||||||||||||||||
|
Securities |
Securities |
Units or |
Units or |
|||||||||||||||||||||||||
|
Underlying |
Underlying |
Other |
Other |
|||||||||||||||||||||||||
|
Option |
Unexercised |
Unexercised |
Option |
Option |
Rights That |
Rights That |
||||||||||||||||||||||
|
Grant |
Options |
Options |
Exercise |
Expiration |
Have Not |
Have Not |
||||||||||||||||||||||
|
Name
|
Date | Exercisable | Unexercisable | Price(3) | Date | Vested | Vested(4) | |||||||||||||||||||||
|
James R. Moffett
|
05/11/07 | — | 750,000 | $ | 36.46 | 05/11/17 | 276,158 | $ | 16,581,907 | |||||||||||||||||||
| 02/02/09 | — | 750,000 | 12.2950 | 02/02/19 | ||||||||||||||||||||||||
| 02/02/10 | — | 1,000,000 | 36.255 | 02/02/20 | ||||||||||||||||||||||||
|
Richard C. Adkerson
|
02/01/05 | 500,000 | (5) | — | 18.52 | 02/01/15 | 705,794 | 42,379,401 | ||||||||||||||||||||
| 05/11/07 | 2,250,000 | 750,000 | 36.46 | 05/11/17 | ||||||||||||||||||||||||
| 02/02/09 | 250,000 | 750,000 | 12.2950 | 02/02/19 | ||||||||||||||||||||||||
| 02/02/10 | — | 1,000,000 | 36.255 | 02/02/20 | ||||||||||||||||||||||||
|
Kathleen L. Quirk
|
02/04/03 | 15,000 | — | 9.4425 | 02/04/13 | 142,210 | 8,538,999 | |||||||||||||||||||||
| 02/03/04 | 75,000 | — | 18.3825 | 02/03/14 | ||||||||||||||||||||||||
| 02/01/05 | 371,500 | — | 18.52 | 02/01/15 | ||||||||||||||||||||||||
| 05/11/07 | 750,000 | 250,000 | 36.46 | 05/11/17 | ||||||||||||||||||||||||
| 02/02/09 | 75,000 | 225,000 | 12.2950 | 02/02/19 | ||||||||||||||||||||||||
| 02/02/10 | — | 300,000 | 36.255 | 02/02/20 | ||||||||||||||||||||||||
|
Michael J. Arnold
|
05/11/07 | 525,000 | 175,000 | 36.46 | 05/11/17 | 68,100 | 4,089,065 | |||||||||||||||||||||
| 02/02/09 | — | 180,000 | 12.2950 | 02/02/19 | ||||||||||||||||||||||||
| 02/02/10 | — | 240,000 | 36.255 | 02/02/20 | ||||||||||||||||||||||||
| (1) | The stock options become exercisable in 25% annual increments on each of the first four anniversaries of the date of grant and have a term of 10 years. The stock options will become immediately exercisable in their entirety if, under certain circumstances (a) any person or group of persons acquires beneficial ownership of shares in excess of certain thresholds, or (b) the composition of the board is changed after a tender offer, exchange offer, merger, consolidation, sale of assets or contested election or any combination of these transactions. |
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Table of Contents
| (2) | The RSUs held by the named executive officers will vest and be paid out in shares of our common stock as follows, provided the average return on investment for the five calendar years preceding the year of vesting is at least 6%: |
|
Name
|
RSUs | Vesting Date | ||||||
|
Mr. Moffett
|
115,670 | 01/28/11 | ||||||
| 53,498 | 02/15/11 | |||||||
| 53,494 | 02/15/12 | |||||||
| 53,496 | 02/15/13 | |||||||
|
Mr. Adkerson
|
80,000 | 01/01/11 | ||||||
| 385,306 | 01/28/11 | |||||||
| 53,498 | 02/15/11 | |||||||
| 80,000 | 01/01/12 | |||||||
| 53,494 | 02/15/12 | |||||||
| 53,496 | 02/15/13 | |||||||
|
Ms. Quirk
|
30,000 | 01/01/11 | ||||||
| 27,940 | 01/28/11 | |||||||
| 18,092 | 02/15/11 | |||||||
| 30,000 | 01/01/12 | |||||||
| 18,088 | 02/15/12 | |||||||
| 18,090 | 02/15/13 | |||||||
|
Mr. Arnold
|
20,612 | 01/28/11 | ||||||
| 15,830 | 02/15/11 | |||||||
| 15,828 | 02/15/12 | |||||||
| 15,830 | 02/15/13 | |||||||
| (3) | Effective January 30, 2007, the corporate personnel committee of our board amended its policies to provide that the exercise price of an option shall not be less than the closing quoted per share sale price of our common stock on the composite tape for NYSE-listed stocks on the grant date or, if there are no reported sales on such date, on the last preceding date on which any reported sale occurred. Thus, the exercise price of the stock options expiring in 2017 and thereafter was determined by reference to the closing price of our common stock. Prior to that time, the exercise price of each outstanding stock option reflected in this table was determined by reference to the average of the high and low quoted per share sale price of our common stock on the composite tape for NYSE-listed stocks on the grant date or, if there are no reported sales on such date, on the last preceding date on which any reported sale occurred. | |
| (4) | The market value of the unvested RSUs reflected in this table was based on the $60.045 closing market price per share of our common stock on December 31, 2010. | |
| (5) | Of the 500,000 outstanding options, Mr. Adkerson transferred the right to receive the underlying shares due upon exercise of 250,000 or one-half of the outstanding options, net of shares used to pay the exercise price and taxes pursuant to a partition agreement. |
Option
Exercises and Stock Vested During 2010
| Option Awards | Stock Awards | |||||||||||||||
|
Number of |
Number of |
|||||||||||||||
|
Shares |
Shares |
|||||||||||||||
|
Acquired on |
Value Realized |
Acquired on |
Value Realized |
|||||||||||||
| Name | Exercise | on Exercise(1) | Vesting | on Vesting(2) | ||||||||||||
|
James R. Moffett
|
1,750,000 | $ | 27,873,750 | 115,670 | $ | 4,120,744 | ||||||||||
|
Richard C. Adkerson
|
— | — | 721,234 | 25,472,045 | ||||||||||||
|
Kathleen L. Quirk
|
— | — | 76,524 | 2,819,396 | ||||||||||||
|
Michael J. Arnold
|
172,500 | 6,519,342 | 29,904 | 1,044,144 | ||||||||||||
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Table of Contents
| (1) | The value realized on exercise is based on the difference between the closing sale price on the date of exercise and the exercise price of each option. | |
| (2) | The value realized on vesting is based on the closing sale price on the date of vesting of the RSUs or, if there were no reported sales on such date, on the last preceding date on which any reported sale occurred. |
Retirement
Benefit Programs
Nonqualified Defined Contribution
Plan. We maintain an unfunded nonqualified
defined contribution plan for the benefit of our executive
officers, as well as others. The plan provides those employees
whose earnings in a prior year were in excess of the dollar
limit under Section 401(a)(17) of the Internal Revenue Code
the ability to defer up to 20% of their base salary after
deferrals to the ECAP have ceased due qualified plan limits. The
company makes a matching contribution equal to the
participant’s deferrals in this plan and the ECAP plan
limited to 5% of the participant’s base salary. In
addition, the company also makes enhanced contributions equal to
4% of eligible compensation (base salary plus 50% of bonus) in
excess of qualified plan limits for each eligible employee, with
employees who met certain age and service requirements in 2000
(including Messrs. Moffett and Adkerson) receiving an
additional 6% contribution. Distribution is made in a lump sum
as soon as practicable or if timely elected by the participant,
on January 1st of the year following retirement, but
no earlier than the date allowable under law following
separation from service. The table below sets forth the balances
under our unfunded nonqualified defined contribution plan as of
December 31, 2010 for each named executive officer listed
below.
2010
Nonqualified Deferred Compensation
|
Executive |
Registrant |
Aggregate |
Aggregate |
Aggregate Balance |
||||||||||||||||
|
Contributions in |
Contributions in |
Earnings in Last |
Withdrawals/ |
at Last Fiscal |
||||||||||||||||
|
Name
|
Last Fiscal Year(1) | Last Fiscal Year(2) | Fiscal Year(3) | Distributions | Year End(4) | |||||||||||||||
|
James R. Moffett
|
$ | 203,000 | $ | 968,105 | $ | 808,803 | — | $ | 25,767,767 | |||||||||||
|
Richard C. Adkerson
|
478,000 | 940,605 | 558,143 | — | 17,994,827 | |||||||||||||||
|
Kathleen L. Quirk
|
29,000 | 87,290 | 20,683 | — | 697,378 | |||||||||||||||
|
Michael J. Arnold
|
27,500 | 70,350 | 88,716 | — | 2,832,815 | |||||||||||||||
| (1) | The amounts reflected in this column are included in the “Salary” column for each named executive officer for 2010 reported in the “Summary Compensation Table.” | |
| (2) | The amounts reflected in this column are included in the “All Other Compensation” column for each named executive officer for 2010 in the “Summary Compensation Table,” although the “Plan Contributions” reflected in footnote 6 to that table also include contributions to the company’s ECAP. | |
| (3) | The assets in the plan are treated as if invested to produce a rate of interest equal to the prime rate, as published in the Federal Reserve Statistical Report at the beginning of each month. For 2010, that rate of interest was equal to 3.25% for the entire year and none of the earnings were considered preferential. | |
| (4) | The following amounts reflected in this column for each named executive officer were included in the 2009 “total” compensation for each named executive officer in the “Summary Compensation Table”: Mr. Moffett — $525,200, Mr. Adkerson — $772,700, Ms. Quirk — $84,290 and Mr. Arnold — $73,850. The following amounts reflected in this column for each named executive officer were included in the 2008 “total” compensation for each named executive officer in the “Summary Compensation Table”: Mr. Moffett — $3,144,148, Mr. Adkerson — $3,129,250, Ms. Quirk — $162,486 and Mr. Arnold — $255,889. |
Supplemental Executive Retirement Plan —
Messrs. Moffett and Adkerson. In February
2004, we established an unfunded Supplemental Executive
Retirement Plan (SERP) for Messrs. Moffett and Adkerson.
The corporate personnel committee, advised by its independent
compensation consultant at that time, approved the SERP, which
was then recommended to and approved by our board. The SERP
provides for benefits payable in the form of a 100% joint and
survivor annuity, life annuity or an equivalent lump sum. If a
participant retires prior to completing 25 years of
credited service, the annuity will equal a percentage of the
45
Table of Contents
executive’s highest average base pay for any three of the
five calendar years immediately preceding the executive’s
retirement, plus his average bonus for the same three years;
provided that the average bonus can not exceed 200% of the
average base pay. The percentage used in this calculation is 2%
for each year of credited service for the company and its
predecessor beginning in 1981, but capped at 25 years. For
Mr. Moffett, who has attained 25 years of credited
service, the annuity was fixed as of January 1st of
the year in which he completed 25 years of credited
service, and will only increase at retirement as a result of
mortality and interest adjustments.
The SERP benefit is reduced by the value of all benefits from
current and former retirement plans (qualified and
nonqualified), sponsored by the company, by FM Services Company
or by any predecessor employer (including our former parent
company, Freeport-McMoRan Inc.), except for benefits produced by
accounts funded exclusively by deductions from the
participant’s pay. The amounts provided in the table below
reflect these reductions. In addition, the SERP benefit will be
reduced by 3% per year if retirement precedes age 65.
Messrs. Moffett and Adkerson are both 100% vested under the
SERP, and each has elected to receive his SERP benefit in a lump
sum.
2010
Pension Benefits
|
Number of Years |
Present Value of |
|||||||||||
|
Credited Service |
Accumulated Benefit |
|||||||||||
|
Name
|
Plan Name | (1) | (2) | |||||||||
|
James R. Moffett
|
Supplemental Executive Retirement Plan | 25 | $ | 19,193,787 | ||||||||
|
Richard C. Adkerson
|
Supplemental Executive Retirement Plan | 22 | 25,799,320 | |||||||||
| (1) | The years of credited service under the SERP is the participant’s years of service with the company and its predecessor beginning in 1981, but capped at 25 years. | |
| (2) | The present value of the accumulated benefit at the normal retirement date is calculated using the following assumptions: the mortality table described in Revenue Ruling 2001-62 of the IRS, and a 6% interest rate. For Mr. Adkerson, who had not reached his normal retirement date as of the end of the year, the present value at normal retirement date is then discounted to December 31, 2010 using a 4% interest rate with no mortality. |
Potential
Payments upon Termination or Change of Control
Employment Agreements — Messrs. Moffett and
Adkerson and Ms. Quirk. We have entered into
employment agreements with each of Messrs. Moffett and
Adkerson and Ms. Quirk, which were approved by our
corporate personnel committee and our board.
Mr. Moffett. The employment agreement
with Mr. Moffett provides for a base salary of $2,500,000
per year and eligibility to participate in our annual incentive
plan. Mr. Moffett continues to be eligible for all other
benefits and compensation, including stock options, generally
provided to our most senior executives. The amended term of the
agreement continued through December 31, 2009, with
automatic one-year extensions unless a change of control occurs
or prior written notice is given by the committee that it does
not wish to extend the agreement. In the event of a change of
control during the employment term, Mr. Moffett’s
employment will continue for an additional three years following
the change of control pursuant to his change of control
agreement. Mr. Moffett’s agreement also contains
non-competition, nondisclosure and other provisions intended to
protect our interests in the event that he ceases to be employed.
Mr. Adkerson and Ms. Quirk. The
employment agreements with Mr. Adkerson and Ms. Quirk
reflect the current base salary for each executive officer,
$2,500,000 for Mr. Adkerson and $650,000 for
Ms. Quirk, and provide that each executive officer is
eligible to participate in our annual incentive plan.
Mr. Adkerson and Ms. Quirk continue to be eligible for
all other benefits and compensation, including stock options,
generally provided to our most senior executives. The original
term of each agreement expires January 1, 2012, but will
automatically extend for additional one-year terms unless prior
written notice is given by the committee that it does not wish
to extend the agreement. In the event of a change of control,
the agreements will expire three years following the change of
control. These agreements also contain non-competition,
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Table of Contents
nondisclosure and other provisions intended to protect our
interests in the event that the executive officer ceases to be
employed.
In addition to the post-employment benefits provided under the
company’s retirement benefit programs described above, as
of December 31, 2010, we provided the following additional
benefits to our named executive officers.
Severance Benefits — Messrs. Moffett and
Adkerson and Ms. Quirk. As of
December 31, 2010, the employment agreements for
Messrs. Moffett and Adkerson and Ms. Quirk provide
that if we terminate the executive’s employment without
cause or the executive terminates employment for good reason, we
will make certain payments and provide certain benefits to the
executive, including:
| • | payment of a pro rata bonus for the year in which the termination of employment occurs, | |
| • | a cash payment equal to three times the sum of (a) the executive’s base salary plus (b) the average of the bonuses paid to the executive for the immediately preceding three years, | |
| • | continuation of insurance and welfare benefits for three years or until the executive accepts new employment, if earlier, and | |
| • | acceleration of the vesting and payout of all outstanding stock options and RSUs. |
Under the employment agreements, “cause” is generally
defined as the executive’s (a) failure to perform
substantially the executive’s duties with the company,
(b) breach of the agreement, (c) felony conviction,
(d) unauthorized acts resulting in harm to the company or
(e) falsification of financial records. “Good
reason” is generally defined as (a) any failure by the
company to materially comply with any of the provisions of the
agreement or (b) the assignment to the executive of any
duties inconsistent in any material respect with the
executive’s position, authority, duties or responsibilities
under the agreement.
If the executive’s employment terminates as a result of
death, disability or retirement, benefits to the executive or
the executive’s estate include the payment of a pro rata
bonus for the year of termination and, in the case of
retirement, the continuation of insurance and welfare benefits
for three years or until the executive accepts new employment,
if earlier. The executive will also receive an additional
year’s vesting on unvested stock options and the vesting of
certain outstanding RSUs, all as described in footnotes
(1) and (2) to the table below.
As a condition to receipt of these severance benefits, the
executive must retain in confidence all confidential information
known to him or her concerning our business. Further,
Messrs. Moffett and Adkerson have each agreed not to
compete with us for a period of two years after termination of
employment. Ms. Quirk has agreed not to compete with us for
a period of six months after termination of employment.
Change of Control Benefits — Messrs. Moffett
and Adkerson and Ms. Quirk. The change of
control agreement for Mr. Moffett and the employment
agreement for each of Mr. Adkerson and Ms. Quirk
provide generally that the terms and conditions of the
executive’s employment (including position, compensation
and benefits) will not be adversely changed until the third
anniversary of the change of control.
If any of Messrs. Moffett or Adkerson or Ms. Quirk is
terminated without “cause,” as generally defined
above, or if the executive terminates for “good
reason” during the covered period after a change of
control, the executive is generally entitled to receive the same
payments and benefits that he or she would receive in the event
of a similar termination under the employment agreements,
described above, except the executive will receive a cash
payment equal to three times the sum of the executive’s
base salary plus the highest bonus paid to the executive (rather
than the average bonus paid to the executive) for the
immediately preceding three fiscal years. This is a “double
trigger” agreement meaning that they do not receive
benefits unless (1) a change of control occurs and
(2) employment is terminated. The term “good
reason” includes the failure of the acquiror to provide the
executive with substantially the same position, authority,
duties and responsibilities in the ultimate parent company of
the entity resulting from the transaction, in addition to the
reasons generally provided above.
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Table of Contents
If employment terminates as a result of death, disability or
retirement following a change of control, the executive will
receive the same benefits described above under “Severance
Benefits - Messrs. Moffett and Adkerson and
Ms. Quirk” in the event of death, disability or
retirement. In addition, until April 2011, Mr. Adkerson and
Ms. Quirk’s employment agreements provided that if the
executive was subject to excise tax on amounts payable under the
agreements that are considered to be excess parachute payments
under Section 4999 of the Internal Revenue Code, the
executive was entitled to receive a
gross-up
payment in an amount sufficient to cover any excise taxes due if
the payments related to the change of control exceed 110% of the
Internal Revenue Code Section 280G limit. If the benefits
received were equal to or less than 110% of the 280G limit, such
benefit would be reduced to avoid imposition of the excise tax.
In April 2011, each of Mr. Adkerson and Ms. Quirk
voluntarily waived any right to the excise tax
gross-up
protections in their employment agreements.
In December 2008, the corporate personnel committee adopted a
policy pursuant to which the company will no longer provide
excise tax
gross-up
protections in change of control arrangements adopted, revised
or extended after December 2, 2008, although such
protections in place on such date would continue through the
term of the relevant agreement. As a result,
Mr. Moffett’s change of control agreement does not
provide an excise tax
gross-up. If
any part of the payments or benefits received by
Mr. Moffett in connection with a termination following a
change of control constitutes an excess parachute payment under
Section 4999 of the Internal Revenue Code, he will receive
the greater of (a) the amount of such payments and benefits
reduced so that none of the amount constitutes an excess
parachute payment, net of income taxes, or (b) the amount
of such payments and benefits, net of income taxes and net of
excise taxes under Section 4999 of the Internal Revenue
Code. As noted above, as of the date of this proxy statement,
Mr. Adkerson and Ms. Quirk have waived their rights to
the excise tax
gross-up
protections provided in their employment agreements.
The confidentiality and non-competition provisions of the
executives’ employment agreements continue to apply after a
change of control.
Change of Control Benefits —
Mr. Arnold. We have entered into an amended
and restated change of control agreement with Mr. Arnold,
which was approved by our corporate personnel committee and our
board. If a change of control (as defined in the change of
control agreement) occurs prior to December 31, 2011, the
agreement provides generally that the executive’s terms and
conditions of employment (including position, location,
compensation and benefits) will not be adversely changed until
the later of the third anniversary of the change of control or
December 31, 2011.
If the executive is terminated without cause or if the executive
terminates for “good reason” during the covered period
after a change of control (a “double trigger”), the
executive is generally entitled to receive the following:
| • | payment of a pro rata bonus for the year in which the termination of employment occurs, | |
| • | a cash payment equal to three times the sum of (a) the executive’s base salary plus (b) the highest bonus paid to the executive for any of the preceding three years, | |
| • | continuation of insurance and welfare benefits for three years or until the executive accepts new employment, if earlier, and | |
| • | acceleration of the vesting and payout of all outstanding stock options and RSUs. |
The term “good reason” includes the failure of the
acquiror to provide the executive with substantially the same
position, authority, duties and responsibilities in the ultimate
parent company of the entity resulting from the transaction. If
any part of the payments or benefits received by Mr. Arnold
in connection with a termination following a change of control
constitutes an excess parachute payment under Section 4999
of the Internal Revenue Code, he will receive the greater of
(a) the amount of such payments and benefits reduced so
that none of the amount constitutes an excess parachute payment,
net of income taxes, or (b) the amount of such payments and
benefits, net of income taxes and net of excise taxes under
Section 4999 of the Internal Revenue Code.
48
Table of Contents
The following table quantifies the potential payments to our
named executive officers under the contracts, arrangements or
plans discussed above for various scenarios involving a change
of control or termination of employment of each of our named
executive officers. In addition to these benefits, our named
executive officers would be entitled to receive the retirement
and pension benefits described above under “Retirement
Benefit Programs,” and outstanding vested stock options,
which amounts are reflected in the “Walk-Away Value”
column.
In accordance with SEC rules, the information below assumes a
termination date of December 31, 2010, except that we have
also included information for a change of control assuming a
more recent termination date (April 1, 2011). We have
included this additional disclosure because since the end of
2010, changes in our program have caused many of the potential
amounts to be materially reduced. In particular, following the
end of 2010, the lump sum payments are now based in part on the
annual incentive payments from
2008-2010,
which years more fully reflect the payment limits we implemented
under that program in 2009. In addition, as noted above, in
support of our stated policy not to provide excise tax
gross-up
protections any longer, Mr. Adkerson and Ms. Quirk
have voluntarily waived their rights to the excise tax
gross-up
protections provided in their employment agreements. For the
information assuming the termination date of December 31,
2010, we have used the closing price of our common stock of
$60.045 on December 31, 2010, as reported on the NYSE, and
for the information assuming the termination date of
April 1, 2011, we have used the closing price of our common
stock of $55.08 on April 1, 2011, as reported on the NYSE.
Potential
Payments upon Termination or Change of Control
(in millions)
(in millions)
|
Walk- |
||||||||||||||||||||||||||||||||
|
Restricted |
Accumulated |
Away |
||||||||||||||||||||||||||||||
|
Stock Units |
Dividends & |
Value |
||||||||||||||||||||||||||||||
|
Options |
(Unvested |
Interest |
Health |
(including |
||||||||||||||||||||||||||||
|
Lump |
(Unvested and |
and |
Payable on |
and |
Value of |
|||||||||||||||||||||||||||
|
Sum |
Accelerated) |
Accelerated) |
Accelerated |
Welfare |
Tax |
Vested Benefits) |
||||||||||||||||||||||||||
|
Name
|
Payment | (1) | (2) | RSUs | Benefits | Gross-Up | Total | (3) | ||||||||||||||||||||||||
|
James R. Moffett
|
||||||||||||||||||||||||||||||||
|
• Retirement
|
$ | 0 | $ | 35.57 | $ | 10.16 | $ | 0.29 | $ | 0.42 | n/a | $ | 46.44 | $ | 91.40 | |||||||||||||||||
|
• Death / Disability
|
0 | 35.57 | 10.16 | 0.29 | 0 | n/a | 46.02 | 90.98 | ||||||||||||||||||||||||
|
• Termination-Good Reason/No Cause
|
58.22 | 77.29 | 16.58 | 0.41 | 0.42 | n/a | 152.92 | 197.88 | ||||||||||||||||||||||||
|
• 12/31/10 Termination after Change of
Control(4)(5)
|
120.90 | 77.29 | 16.58 | 0.41 | 0.42 | n/a | 215.60 | 260.57 | ||||||||||||||||||||||||
|
• 4/1/11 Termination after Change of
Control(4)(5)
|
60.81 | 49.48 | 13.58 | 0.18 | 0.42 | n/a | 124.47 | 175.32 | ||||||||||||||||||||||||
|
Richard C. Adkerson
|
||||||||||||||||||||||||||||||||
|
• Retirement
|
0 | 35.57 | 26.35 | 0.82 | 0.09 | n/a | 62.82 | 192.38 | ||||||||||||||||||||||||
|
• Death / Disability
|
0 | 35.57 | 35.96 | 1.11 | 0 | n/a | 72.64 | 202.20 | ||||||||||||||||||||||||
|
• Termination-Good Reason/No Cause
|
58.22 | 77.29 | 32.77 | 0.94 | 0.09 | n/a | 169.30 | 298.86 | ||||||||||||||||||||||||
|
• 12/31/10 Termination after Change of
Control(4)
|
120.90 | 77.29 | 42.38 | 1.23 | 0.09 | $ | 57.12 | 299.01 | 428.57 | |||||||||||||||||||||||
|
• 4/1/11 Termination after Change of
Control(4)(5)
|
60.81 | 49.48 | 17.99 | 0.36 | 0.09 | n/a | 128.72 | 221.69 | ||||||||||||||||||||||||
|
Kathleen L. Quirk
|
||||||||||||||||||||||||||||||||
|
• Retirement
|
0 | 11.26 | 2.76 | 0.08 | 0.02 | n/a | 14.12 | 55.40 | ||||||||||||||||||||||||
|
• Death / Disability
|
0 | 11.26 | 6.37 | 0.19 | 0 | n/a | 17.81 | 59.09 | ||||||||||||||||||||||||
|
• Termination-Good Reason/ No Cause
|
10.70 | 23.78 | 4.94 | 0.12 | 0.02 | n/a | 39.55 | 80.83 | ||||||||||||||||||||||||
|
• 12/31/10 Termination after Change of
Control(4)
|
14.55 | 23.78 | 8.54 | 0.23 | 0.02 | 9.76 | 56.87 | 98.15 | ||||||||||||||||||||||||
|
• 4/1/11 Termination after Change of
Control(4)(5)
|
16.61 | 15.31 | 5.91 | 0.13 | 0.02 | n/a | 37.97 | 77.59 | ||||||||||||||||||||||||
|
Michael J. Arnold
|
||||||||||||||||||||||||||||||||
|
• Retirement
|
0 | 8.42 | 2.19 | 0.06 | 0 | n/a | 10.67 | 25.88 | ||||||||||||||||||||||||
|
• Death / Disability
|
0 | 8.42 | 2.19 | 0.06 | 0 | n/a | 10.67 | 25.88 | ||||||||||||||||||||||||
|
• Termination-No Cause(6)
|
0 | 0 | 0 | 0 | 0 | n/a | 0 | 15.21 | ||||||||||||||||||||||||
|
• 12/31/10 Termination after Change of
Control(4)(5)
|
14.25 | 18.43 | 4.09 | 0.09 | 0.02 | n/a | 36.88 | 52.10 | ||||||||||||||||||||||||
|
• 4/1/11 Termination after Change of
Control(4)(5)
|
13.64 | 11.78 | 3.52 | 0.05 | 0.02 | n/a | 29.02 | 45.43 | ||||||||||||||||||||||||
49
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| (1) | Generally, pursuant to the terms of the stock option agreements, upon termination of the executive’s employment as a result of death, disability or retirement, the unvested portion of any outstanding stock option that would have vested within one year of the date of termination will vest. The value of the accelerated options is determined by multiplying (a) the difference between the December 31, 2010 or April 1, 2011 closing price of our common stock and the applicable exercise price of each option, by (b) the number of unvested and accelerated options. | |
| (2) | Pursuant to the terms of the RSU agreements outstanding as of December 31, 2010 or April 1, 2011, termination of the executive’s employment as a result of death, disability or retirement will result in acceleration of vesting of certain outstanding RSUs and the related amounts credited to the participant’s dividend equivalent account and all property distributions deposited in such account. In particular, (a) the RSUs granted to the executives in connection with the elective restrictive stock unit program will fully vest upon the executive’s termination of employment as a result of death, disability or retirement, (b) the RSUs granted to the executives in January 2008 in connection with the 2007 annual incentive awards will partially vest upon the executive’s termination of employment as a result of death, disability or retirement, and (c) the RSUs granted to Mr. Adkerson and Ms. Quirk in connection with their employment agreements in January 2008 will fully vest upon the executive’s termination of employment as a result of death or disability, but not retirement. In addition, upon a termination by the company without cause, the corporate personnel committee, in its discretion, may elect to accelerate the vesting of the outstanding RSUs. Vesting of outstanding RSUs may be accelerated under certain termination scenarios pursuant to the employment agreements as discussed above. The values of the accelerated RSUs were determined by multiplying the December 31, 2010 or April 1, 2011 closing price of our common stock by the number of unvested and accelerated RSUs under each scenario. | |
| (3) | Includes the value of the following benefits as of December 31, 2010 or April 1, 2011, for each named executive officer, as applicable: outstanding, in-the-money vested stock options, the aggregate balance of the Nonqualified Defined Contribution Plan (as reflected on page 45), and the present value of the Supplemental Executive Retirement Plan (as reflected on page 46). These amounts do not include benefits under our ECAP or life insurance policies. In addition to the standard life insurance policy generally available to employees, Mr. Moffett and Mr. Adkerson each have an executive life insurance policy providing for a death benefit of $3.75 million and $1.5 million, respectively. | |
| (4) | Certain of the benefits described in the table would be achieved in the event of a change of control alone, and would not require a termination of the executive’s employment. In particular, pursuant to the terms of our stock incentive plans and the individual award agreements, upon a change of control as defined in the plans, (a) all outstanding stock options would immediately vest and (b) all restrictions on outstanding RSUs would lapse. | |
| (5) | Pursuant to the terms of the executive’s change of control agreement, the total payments may be subject to reduction if such payments result in the imposition of an excise tax under Section 280G of the Internal Revenue Code. | |
| (6) | Mr. Arnold is entitled to certain severance benefits in the event of his termination without cause under the company’s Severance Plan, which is generally available to all eligible employees. |
Proposal No. 2:
Advisory Vote on the Compensation of Our Named Executive
Officers
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(the Dodd-Frank Act), enacted in July 2010, requires that we
provide our stockholders with the opportunity to vote to
approve, on a non-binding, advisory basis, the compensation of
our named executive officers as disclosed in this proxy
statement in accordance with the rules of the SEC. This vote is
not intended to address any specific compensation arrangement or
amount, but rather the overall compensation of our named
executive officers and our compensation philosophy and practices
as disclosed under the “Executive Officer
Compensation” section of this proxy statement. This
disclosure includes the Compensation Discussion and Analysis and
the
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compensation tables and narrative discussion following the
compensation tables. Stockholders are asked to vote on the
following resolution:
RESOLVED, That the stockholders of Freeport-McMoRan
Copper & Gold Inc. (the Company) approve, on an
advisory basis, the compensation of the Company’s named
executive officers, as disclosed in the Company’s proxy
statement for the 2011 annual meeting of stockholders pursuant
to Item 402 of
Regulation S-K
of the rules of the Securities and Exchange Commission.
We understand that our executive compensation practices are
important to our stockholders. Our core executive compensation
philosophy continues to be based on pay for performance, and we
believe that our executive compensation program is strongly
aligned with the long-term interests of our stockholders. In
considering how to vote on this proposal, we encourage you to
review all of the relevant information in this proxy
statement — our Compensation Discussion and Analysis
(including the Executive Summary), the compensation tables and
the narrative discussion following the compensation tables
regarding our executive compensation program.
Although this advisory vote, commonly referred to as a
“say-on-pay”
vote, is not binding, our board and our corporate personnel
committee values the opinion of our stockholders and will
consider the outcome of the vote when evaluating our executive
compensation program.
Vote
Required to Approve, on an Advisory Basis, the Compensation of
Our Named Executive Officers
Approval of this proposal requires the affirmative vote of a
majority of the common stock present in person or by proxy and
entitled to vote thereon. For more information on the voting
requirements, see “Questions and Answers about the Proxy
Materials, Annual Meeting and Voting.”
Recommendation
of the Board of Directors
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
Proposal No. 3:
Advisory Vote on the Frequency of Future Advisory Votes on the
Compensation of Our Named Executive Officers
The Dodd-Frank Act also provides that stockholders must be given
the opportunity to vote, on a non-binding, advisory basis, as to
their preference on how frequently we should seek future
advisory votes on the compensation of our named executive
officers as disclosed in this proxy statement in accordance with
the rules of the SEC. Accordingly, we are asking our
stockholders to indicate, on a non-binding, advisory basis,
whether they would prefer an advisory vote on the compensation
of our named executive officers to occur every one, two or three
years. Stockholders also may, if they wish, abstain from casting
a vote on this proposal.
Our board is recommending that we hold an advisory vote on the
compensation of our named executive officers every year. In
formulating its recommendation, our board considered that an
annual advisory vote on executive compensation will allow our
stockholders to provide us with direct input on our compensation
philosophy, policies and practices as disclosed in the proxy
statement every year. However, stockholders should note that
because the advisory vote on executive compensation occurs well
after the beginning of the compensation year, and because the
different elements of our executive compensation program are
designed to operate in an integrated manner and to complement
one another, in many cases it may not be appropriate or feasible
to change our executive compensation program in consideration of
any one year’s advisory vote on executive compensation by
the time of the following year’s annual meeting of
stockholders. Our board believes that an annual vote is
consistent with our efforts to engage in an ongoing dialogue
with our stockholders on executive compensation and corporate
governance matters.
Our board and the corporate personnel committee will carefully
consider the outcome of the vote when making future decisions on
the frequency of advisory votes on executive compensation.
However, because this
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vote is advisory and not binding, our board may decide that it
is in the best interests of our stockholders and the company to
hold an advisory vote on executive compensation more or less
frequently than the frequency that has been selected by our
stockholders.
Vote
Required to Approve, on an Advisory Basis, the Frequency of
Future Advisory Votes on the Compensation of Our Named Executive
Officers
The proxy card provides stockholders with the opportunity to
choose among four options (holding the vote every one, two or
three years, or abstaining) and, therefore, stockholders will
not be voting to approve or disapprove the recommendation of the
board. Because this advisory vote has three possible substantive
responses (every one year, every two years, or every three
years), we will consider stockholders to have
“approved” the frequency selected by a plurality of
the votes cast.
Recommendation
of the Board of Directors
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO HOLD THE
ADVISORY VOTE ON EXECUTIVE COMPENSATION EVERY YEAR.
Audit
Committee Report
The audit committee is currently comprised of five directors,
all of whom are independent, as defined by SEC rules and in the
NYSE’s listing standards. We operate under a written
charter approved by our committee and adopted by the board. Our
primary function is to assist the board in fulfilling the
board’s oversight responsibilities by monitoring
(1) the company’s continuing development and
performance of its system of financial reporting, auditing,
internal controls and legal and regulatory compliance,
(2) the operation and integrity of the system and the
integrity of the financial statements, (3) performance and
qualifications of the company’s independent registered
public accounting firm and internal auditors and (4) the
independence of the company’s independent registered public
accounting firm.
We review the company’s financial reporting process on
behalf of the board. Our responsibility is to monitor this
process, but we are not responsible for preparing the
company’s financial statements or auditing those financial
statements. Those are the responsibilities of management and the
company’s independent registered public accounting firm,
respectively.
During 2010, management assessed the effectiveness of the
company’s system of internal control over financial
reporting in connection with the company’s compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. We reviewed
and discussed with management, Deloitte & Touche LLP,
the company’s internal auditor (Deloitte &
Touche) and Ernst & Young, LLP, the company’s
independent registered public accounting firm (Ernst &
Young) management’s report on internal control over
financial reporting and Ernst & Young’s report on
their audit of the company’s internal control over
financial reporting, both of which are included in the
company’s annual report on
Form 10-K
for the year ended December 31, 2010.
Appointment
of Independent Registered Public Accounting Firm; Financial
Statement Review
In February 2010, in accordance with our charter, we appointed
Ernst & Young as the company’s independent
registered public accounting firm for 2010. We have reviewed and
discussed the company’s audited financial statements for
the year 2010 with management and Ernst & Young.
Management represented to us that the audited financial
statements fairly present, in all material respects, the
financial condition, results of operations and cash flows of the
company as of and for the periods presented in the financial
statements in accordance with accounting principles generally
accepted in the United States, and Ernst & Young
provided an audit opinion to the same effect.
We have received from Ernst & Young the written
disclosures required by the Public Company Accounting Oversight
Board Ethics and Independence Rule 3526, Communication
with Audit Committees Concerning Independence, regarding the
independent registered public accounting firm’s
independence, and we have discussed with them their independence
from the company and management. We have also discussed with
Ernst & Young the matters required to be discussed by
Statement on Auditing Standards No. 61,
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Communication with Audit Committees, as amended and as
adopted by the Public Company Accounting Oversight Board in
Rule 3200T, and Public Company Accounting Oversight Board
Auditing Standard No. 5, An Audit of Internal Control
Over Financial Reporting that is Integrated with an Audit of
Financial Statements.
In addition, we have discussed with Ernst & Young the
overall scope and plans for their audit, and have met with them
and management to discuss the results of their examination,
their understanding and evaluation of the company’s
internal controls as they considered necessary to support their
opinions on the financial statements and on the internal control
over financial reporting for the year 2010, and various factors
affecting the overall quality of accounting principles applied
in the company’s financial reporting. Ernst &
Young also met with us without management being present to
discuss these matters.
In reliance on these reviews and discussions, we recommended to
the board, and the board approved, the inclusion of the audited
financial statements referred to above in the company’s
annual report on
Form 10-K
for the year 2010.
Internal
Audit
We also review the company’s internal audit function,
including the selection and compensation of the company’s
internal auditor. In February 2010, in accordance with our
charter, we appointed Deloitte & Touche as the
company’s internal auditor for 2010. We have discussed with
Deloitte & Touche the scope of their audit plan, and
have met with them to discuss the results of their reviews,
their review of management’s documentation, testing and
evaluation of the company’s system of internal control over
financial reporting, any difficulties or disputes with
management encountered during the course of their reviews and
other matters relating to the internal audit process. The
internal auditor also met with us without management being
present to discuss these matters.
Dated: April 18, 2011
Robert A. Day, Chairman
Gerald J. Ford
H. Devon Graham, Jr.
Jon C. Madonna
Stephen H. Siegele
Gerald J. Ford
H. Devon Graham, Jr.
Jon C. Madonna
Stephen H. Siegele
Independent
Registered Public Accounting Firm
Fees and
Related Disclosures for Accounting Services
The following table discloses the fees for professional services
provided by Ernst & Young in each of the last two
fiscal years:
| 2010 | 2009 | |||||||
|
Audit Fees
|
$ | 8,470,000 | $ | 8,253,000 | ||||
|
Audit-Related Fees(1)
|
— | 12,000 | ||||||
|
Tax Fees(2)
|
125,000 | 138,000 | ||||||
|
All Other Fees
|
— | — | ||||||
| (1) | Relates to services rendered in connection with compliance with financial, accounting and regulatory reporting matters. | |
| (2) | Relates to services rendered in connection with general tax consultation, transfer pricing and international tax matters. |
The audit committee has determined that the provision of the
services described above is compatible with maintaining the
independence of the independent registered public accounting
firm.
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Pre-Approval
Policies and Procedures
The audit committee’s policy is to pre-approve all audit
services, audit-related services and other services permitted by
law provided by the independent registered public accounting
firm. In accordance with that policy, the committee annually
pre-approves a list of specific services and categories of
services, including audit, audit-related and other services, for
the upcoming or current fiscal year, subject to specified cost
levels. Any service that is not included in the approved list of
services must be separately pre-approved by the audit committee.
In addition, if fees for any service exceed the amount that has
been pre-approved, then payment of additional fees for such
service must be specifically pre-approved by the audit
committee; however, any proposed service that has an anticipated
or additional cost of no more than $30,000 may be pre-approved
by the chairman of the audit committee, provided that the total
anticipated costs of all such projects pre-approved by the
chairman during any fiscal quarter does not exceed $60,000.
At each regularly-scheduled audit committee meeting, management
updates the committee on the scope and anticipated cost of
(a) any service pre-approved by the chairman since the last
meeting of the committee and (b) the projected fees for
each service or group of services being provided by the
independent registered public accounting firm. Since the 2003
effective date of the SEC rules stating that an auditor is not
independent of an audit client if the services it provides to
the client are not appropriately approved, each service provided
by our independent registered public accounting firm has been
approved in advance by the audit committee, and none of those
services required use of the de minimus exception to
pre-approval contained in the SEC’s rules.
Proposal No. 4:
Ratification of the Independent Registered Public Accounting
Firm
In February 2011, our audit committee appointed
Ernst & Young as our independent registered public
accounting firm for 2011. Our audit committee and board seek
stockholder ratification of the audit committee’s
appointment of Ernst & Young as the independent
registered public accounting firm to audit our and our
subsidiaries’ financial statements for the year 2011. If
the stockholders do not ratify the appointment of
Ernst & Young, our audit committee will reconsider
this appointment. Representatives of Ernst & Young are
expected to be present at the meeting to respond to appropriate
questions, and those representatives will also have an
opportunity to make a statement if they desire to do so.
Vote
Required to Ratify the Appointment of the Independent Registered
Public Accounting Firm
Approval of this proposal requires the affirmative vote of a
majority of the common stock present in person or by proxy and
entitled to vote thereon. For more information on the voting
requirements, see “Questions and Answers about the Proxy
Materials, Annual Meeting and Voting.”
Recommendation
of the Board of Directors
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
Certain
Transactions
FM
Services Company
We are parties to a services agreement with our wholly owned
subsidiary, FM Services Company, under which FM Services Company
provides us with executive, technical, administrative,
accounting, financial, tax and other services on a
cost-reimbursement basis. FM Services Company also provides
these services to McMoRan. In 2010, McMoRan incurred
approximately $7.7 million of costs under its services
agreement, and we expect McMoRan’s costs under its services
agreement to approximate $7.5 million in 2011.
Several of our directors and executive officers also serve as
directors or executive officers of McMoRan.
Messrs. Moffett, Adkerson, Rankin, Day, Ford and Graham,
each of whom is a director of the company, also serve as
directors of McMoRan. Messrs. Moffett and Adkerson and
Ms. Quirk, each of whom
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is an executive officer of the company, also serve as executive
officers of McMoRan. For services rendered to McMoRan, in
February 2010, Mr. Moffett received options to purchase
450,000 shares of McMoRan’s common stock,
Mr. Adkerson received options to purchase
300,000 shares of McMoRan’s common stock, and
Ms. Quirk received options to purchase 75,000 shares
of McMoRan’s common stock, all at a grant price of $15.73,
which was determined by reference to the closing quoted per
share sale price on the composite tape for NYSE-listed stocks on
the grant date. For services rendered to McMoRan, in February
2011, Mr. Moffett received options to purchase
500,000 shares of McMoRan’s common stock,
Mr. Adkerson received options to purchase
250,000 shares of McMoRan common stock and Ms. Quirk
received options to purchase 75,000 shares of
McMoRan’s common stock, all at a grant price of $17.25,
which was determined by reference to the closing quoted per
share sale price on the composite tape for NYSE-listed stocks on
the grant date. As of the April 19, 2011, record date, our
directors and executive officers beneficially owned
approximately 9.8% of McMoRan’s common stock.
Investment
in McMoRan
On December 30, 2010, Freeport-McMoRan Preferred LLC (FCX
Preferred), our wholly owned subsidiary, completed the purchase
of 500,000 shares of 5.75% Convertible Perpetual
Preferred Stock, Series 2 (convertible perpetual preferred
stock) of McMoRan Exploration Co. (McMoRan) for an aggregate
purchase price of $500 million pursuant to a stock purchase
agreement dated September 19, 2010. The convertible
perpetual preferred stock is initially convertible into
62.5 shares of McMoRan common stock per share of
convertible perpetual preferred stock (an aggregate of
31.25 million shares or approximately 14% of McMoRan’s
common stock on a fully converted basis at December 31,
2010), or an initial conversion price of $16 per share of
McMoRan common stock.
In connection with the completion of our purchase of the
convertible perpetual preferred stock, we and FCX Preferred
entered into a stockholder agreement with McMoRan (Stockholder
Agreement), pursuant to which, among other things, we have the
right to nominate individuals to serve on McMoRan’s board
(FCX Designated Directors). For as long as we and our affiliates
beneficially own (1) not less than 75% of the percentage of
McMoRan’s common stock on a fully diluted basis owned at
closing by us and our affiliates, we have the right to designate
two members of McMoRan’s board; and (2) between 25%
and 75% of the percentage of McMoRan’s outstanding shares
of common stock on a fully diluted basis owned at closing by us
and our affiliates, we have the right to designate one member of
McMoRan’s board of directors; provided, however, that our
designation rights are suspended during such time as at least
two members of McMoRan’s board of directors are also
members of our board. We have no designation rights while we and
our affiliates beneficially own less than 25% of the percentage
of McMoRan’s outstanding shares of common stock on a fully
diluted basis owned at closing by us and our affiliates.
We and our controlled affiliates, including FCX Preferred, have
agreed to a
120-day
lock-up
period expiring April 29, 2011, during which we and our
controlled affiliates will not (1) loan, offer, pledge,
sell, contract to sell, sell any option or contract to purchase
or otherwise transfer or dispose of the convertible perpetual
preferred stock or shares of the common stock issuable upon
conversion of the convertible perpetual preferred stock or
(2) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic
consequences of ownership of the common stock or the convertible
perpetual preferred stock; provided, however, that we may make
transfers to our wholly owned affiliates. In addition, the
Stockholder Agreement provides that, prior to the first
anniversary of the closing date, neither we nor our
subsidiaries, controlled affiliates or any person that is an
officer or director of our company and who serves as one of
McMoRan’s officers or directors may sell or transfer to
Plains Exploration & Production Company (PXP) any
shares of the convertible perpetual preferred stock or any
shares of the common stock issued upon conversion of the
convertible perpetual preferred stock.
While we, our affiliates and certain of our affiliated persons
own at least 15% of McMoRan’s outstanding common stock, on
a fully diluted basis, we and our controlled affiliates have
agreed not to (1) acquire or seek to acquire additional
securities of McMoRan if the acquisition would result in us
owning more than 103% of the percentage of McMoRan’s
outstanding shares of common stock on a fully diluted basis
owned at closing by us and our affiliates; (2) form, join,
or in any way participate in or enter into agreements
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with a “group” (as defined in
Section 13(d)-3
of the Exchange Act) with regard to McMoRan; (3) commence a
tender offer or exchange offer for McMoRan’s securities;
(4) agree on, offer or otherwise become involved with a
merger or an acquisition transaction involving McMoRan;
(5) call, or seek to call, a meeting of McMoRan’s
stockholders, or seek to present a stockholder proposal; or
(6) seek to assist, advise, or finance any of the foregoing.
While we and our affiliates own at least 5% of McMoRan’s
outstanding common stock, on a fully diluted basis, we and our
controlled affiliates have agreed not to (1) participate in
any proxy solicitations with respect to McMoRan’s
securities (other than certain permitted activities relating to
solicitations by or on behalf of members of our board who are
also members of McMoRan’s board of directors); or
(2) enter into any agreements with regard to acquiring,
voting, holding or disposing of any of McMoRan’s capital
stock with any director or officer of the company or PXP who is
also one of McMoRan’s directors or officers.
While we and our affiliates own at least 5% of McMoRan’s
outstanding common stock, on a fully diluted basis, and prior to
the first anniversary of the issue date, we and our controlled
affiliates have agreed not to enter into any agreements for the
purpose of acquiring, voting, holding or disposing of any of
McMoRan’s capital stock with PXP or any of its affiliates,
directors or officers (provided that the foregoing restriction
shall not apply to any transaction in which either the company
or PXP or any of their controlled affiliates offers to acquire
all of the outstanding shares of McMoRan’s common stock).
In connection with the completion of the issuance of convertible
perpetual preferred stock to FCX Preferred, FCX Preferred also
entered into a registration rights agreement with McMoRan
(Registration Rights Agreement) pursuant to which McMoRan agreed
to, within 60 days of closing, (1) prepare and file
with the SEC a shelf registration statement with respect to the
securities issued to FCX Preferred (FCX Registrable Securities)
that would permit the FCX Registrable Securities to be resold in
registered transactions and (2) use its commercially
reasonable efforts to maintain the effectiveness of the shelf
registration statement while we and our affiliates hold FCX
Registrable Securities. McMoRan filed with the SEC a shelf
registration statement for the FCX Registrable Securities on
February 28, 2011. In addition, under certain
circumstances, the Registration Rights Agreement permits us to
demand or participate in an underwritten public offering by
McMoRan.
Director
Transactions
Our Corporate Governance Guidelines provide that any transaction
that would require disclosure under Item 404(a) of
Regulation S-K
of the rules and regulations of the SEC, with respect to a
director or executive officer, must be reviewed and approved, or
ratified, annually by our board. Any such related party
transactions will only be approved or ratified if the board
determines that such transaction will not impair the involved
person’s service to, and exercise of judgment on behalf of,
the company, or otherwise create a conflict of interest that
would be detrimental to the company. All of the transactions
described below have been reviewed and approved or ratified by
our board. Effective June 9, 2010, our board appointed J.
Bennett Johnston, Gabrielle K. McDonald, J. Stapleton Roy and J.
Taylor Wharton to serve as advisory directors.
B. M. Rankin, Jr. and FM Services Company are parties
to an agreement under which Mr. Rankin renders business
consulting services to us and McMoRan relating to finance,
accounting, guidance and advice on public policy matters and
business development. FM Services Company provides
Mr. Rankin compensation, medical coverage and reimbursement
for taxes in connection with those medical benefits. In 2010, FM
Services Company paid Mr. Rankin $490,000 ($389,991 of
which was allocated to us) pursuant to this agreement. During
2010, the cost to FM Services Company (all of which was
allocated to us) for Mr. Rankin’s personal use of
company facilities was $35,100, medical expenses was $10,346,
and reimbursement for a portion of his office rent and utilities
and for executive administrative and support services was
$26,369. In addition, during 2010 the aggregate incremental cost
to FM Services Company (all of which was allocated to us) for
Mr. Rankin’s personal use of fractionally owned
company aircraft, which includes the hourly operating rate, fuel
costs and excise taxes, was $318,193. The aggregate incremental
cost does not include the lost tax deduction for expenses that
exceeded the amounts reported as income for
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Mr. Rankin, which for fiscal year 2010 was approximately
$86,254. Accordingly, the total received by Mr. Rankin
during 2010 pursuant to this agreement was $880,008 of which
$779,999 was allocated to us.
J. Bennett Johnston and FM Services Company are parties to
an agreement, renewable annually, under which Mr. Johnston
renders consulting services to us relating to international
relations and commercial matters. Under this agreement,
Mr. Johnston receives an annual consulting fee of $300,000
and reimbursement of reasonable
out-of-pocket
expenses incurred in connection with rendering consulting
services.
Gabrielle K. McDonald and FM Services Company are parties to an
agreement, renewable annually, under which Ms. McDonald
renders consulting services to us in connection with her role as
Special Counsel on Human Rights to the company. Under this
agreement, Ms. McDonald receives an annual fee of $300,000,
plus reimbursement of reasonable
out-of-pocket
expenses incurred in connection with rendering consulting
services.
J. Stapleton Roy is Senior Advisor of Kissinger Associates,
Inc. Kissinger Associates and FM Services Company are parties to
agreements, renewable annually, under which Kissinger Associates
provides to us advice and consultation on specified world
political, economic, strategic and social developments affecting
our affairs. Under these agreements, Kissinger Associates
receives an annual fee of $200,000, additional consulting fees
based on the services rendered, and reimbursement of reasonable
out-of-pocket
expenses incurred in connection with providing such services. In
addition, Mr. Roy is Director of the Kissinger Institute on
China and the United States at the Woodrow Wilson International
Center for Scholars. In 2008, the company agreed to contribute
$150,000 to the Institute to be paid in three equal installments
in each of 2008, 2009 and 2010.
J. Taylor Wharton and FM Services Company are parties to an
agreement, renewable annually, under which Dr. Wharton
renders consulting services in connection with all medical and
health affairs affecting our directors, officers and employees.
Under this agreement, Dr. Wharton receives an annual fee of
$400,000, plus reimbursement of reasonable
out-of-pocket
expenses incurred in connection with rendering consulting
services.
Proposal No. 5:
Stockholder Proposal
We have received a stockholder proposal from the New York State
Common Retirement Fund for presentation at our annual meeting of
stockholders. Upon request, we will provide the addresses of the
proponents and the number of shares of our common stock held by
the proponent. Requests may be sent to the Corporate Secretary,
Freeport-McMoRan Copper & Gold Inc., 333 North Central
Avenue, Phoenix, Arizona 85004 or submitted by calling
(602) 366-8100.
Approval of the proposal would require the affirmative vote of a
majority of the shares of our common stock present in person or
by proxy and entitled to vote thereon. Our board opposes
the Stockholder Proposal for the reasons stated following the
proposal.
RESOLVED, that the shareholders request that, as the terms in
office of elected directors expire, at least one candidate shall
be selected and recommended for election to the company’s
board who:
(i) has a high level of expertise and experience in
environmental matters relevant to mining and is widely
recognized in the business and environmental communities as an
authority in such field, in each case as reasonably determined
by the company’s board, and
(ii) will qualify, subject to limited exceptions in
extraordinary circumstances explicitly specified by the board,
as an independent director under the standards applicable to the
company as a New York Stock Exchange listed company, in order
that the company’s board includes at least one director
satisfying the foregoing criteria, which director shall have
designated responsibility on the board for environmental matters.
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Supporting
statement
Environmental expertise is critical to the success of mining
companies in the twenty-first century because of the significant
environmental impacts mining can have. Shareholders, lenders,
host country governments and regulators, as well as affected
communities, are focused on the environmental impact of mining
operations. A company’s inability to demonstrate that its
environmental performance matches internationally accepted
standards can lead to difficulties in accessing capital for new
projects and obtaining the necessary regulatory licenses.
The company continues to receive sharp criticism regarding its
environmental policies and practices, notably over the impact of
riverine tailings disposal at its Grasberg operation (see e.g.,
Norway Sells $853 Million Rio Stake on Ethics Grounds,
http://www.marketwatch.com/news/story/story.aspx?guid=%7bBDE96994-B8D8-4A33-8ECD-0789B0763BED%7d&siteid=rss).
We believe that this controversy damages shareholder value and
that the company must respond to its environmental challenges in
an effective, strategic and transparent manner in order to
restore trust in the company and minimize the adverse
environmental impact of its operations.
Freeport does not currently have an independent director with
environmental expertise and designated responsibility for
environmental matters — yet environmental management
is critical to the company’s future success. We believe it
would benefit the company to address the environmental impact of
its business at the most strategic level in a similar manner to
the way it has addressed human rights — by appointing
a specialist to the board. An authoritative figure with
acknowledged environmental expertise and standing who is
respected in the environmental community could perform a
valuable and strategic role for the company. Such leadership
would enable the company more effectively to address the
environmental issues inherent in its business, including the
environmental and health impacts of riverine tailings disposal
and the feasibility of long-term rehabilitation of the tailings
deposition area at Grasberg. It would also help ensure that the
highest levels of attention are devoted to environmental
standards at new developments. Such a board role would
strengthen the company’s ability to demonstrate the
seriousness with which it is addressing environmental issues.
Board of
Directors’ Statement in Opposition to Stockholder
Proposal
Our board of directors opposes the proposal because it believes
the current process for the nomination, selection and election
of directors is effective. As a corporate governance matter, our
board does not believe that it is in our stockholders’ best
interests to require a particular type of specialist on our
board. As provided in more detail under “Consideration of
Director Nominees,” our nominating and corporate governance
committee considers a variety of factors in evaluating nominees
for membership on the board. We believe that our board of
directors represents a diverse group of individuals with broad
experience. Our board of directors believes that the sole
standard suggested by the proponents is too narrow and would
limit the board’s ability to identify and recruit the most
qualified candidates to serve on the board.
Our existing commitment to environmental sustainability is
evidenced by our established policies, practices and procedures.
Our board of directors appreciates the importance of
environmental sustainability and recognizes the company’s
responsibility to minimize the environmental impact of our
operations. Relevant issues are reviewed and discussed at the
highest levels of our organization. In 1995, our board of
directors established a public policy committee, which oversees
the company’s environmental programs. Our board of
directors, our public policy committee and our senior management
routinely review the company’s environmental policies and
practices, including any potential impacts that the
company’s operations could have on the environment. In
addition, our Chief Executive Officer currently serves as
Chairman of the International Council of Mining and Metals, a
CEO-led organization that represents many of the world’s
leading mining and metals companies. Our involvement with ICMM
exemplifies our commitment to working with industry experts on
improving our performance based on sustainable development
principles.
We have consistently met internationally acceptable standards
for environmental management. Our Grasberg operation has
undergone triennial external audits by recognized experts in the
industry, the results of
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which have been made publicly available. We completed
independent audits in 1996, 1999, 2002, 2005 and 2008. The
results of the 2005 and 2008 audits are posted on our web site.
All of these audits have concluded that (1) we are in
compliance with Indonesian laws, (2) we meet international
standards, and (3) our tailings management plan is the only
appropriate management system considering the applicable
geotechnical, topographic, climatological, seismic, and rainfall
conditions. We also were one of the first companies in Indonesia
to receive ISO 14001 certification of our Environmental
Management System in 2001 from the International Certification
Services Division of Société Générale de
Surveillance (SGS). We have retained ISO 14001 certification
following annual surveillance audits each year since that date.
We are committed to sound and sustainable environmental
practices in managing our tailings deposition in Papua,
Indonesia. We have prepared a special riverine tailings report,
available on our web site at
www.fcx.com/envir/pdf/riverine/Riverine 2009.pdf.
This report explains the extensive studies, planning,
permitting, and ongoing management and monitoring of tailings
that occurs, including our efforts for reclaiming affected land
as soon as feasible. In addition, our annual Working Toward
Sustainable Development report, available on our web site at
www.fcx.com/envir/index.htm, details our environmental
management programs and compliance with relevant environmental
laws and regulations and describes our procedures to ensure
future compliance with these laws. Our reclamation programs have
demonstrated that tailings can be reclaimed with native
vegetation or used for agricultural purposes. We have also shown
that tailings can be used in cement for infrastructure
construction. We have signed an agreement with the provincial
government to establish cement facilities that will utilize
tailings as a resource in the construction of roads, bridges,
building bricks and other similar uses, helping to provide
necessary infrastructure that will aid in the development of the
province, as well as employment for Papuans. This development
will proceed in conjunction with our other efforts to plant
trees and use available tailings land for agricultural and other
sustainable uses.
The company’s existing governance framework has produced a
strong commitment to environmental sustainability and progress
that is evident in our established policies, practices and
procedures, which continue to evolve. Thus, we believe this
proposal suggests action that is unnecessary in light of our
existing commitment to environmental sustainability, and
adopting the proposed resolution would be contrary to the
interests of the company and its stockholders.
Recommendation
of the Board of Directors
FOR THE REASONS SET FORTH ABOVE, OUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS YOU VOTE AGAINST THE ADOPTION OF THE
STOCKHOLDER PROPOSAL.
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| FREEPORT-MCMORAN COPPER & GOLD INC. Proxy Solicited on Behalf of the Board of Directors for Annual Meeting of Stockholders, June 15, 2011 The undersigned hereby appoints James R. Moffett, Richard C. Adkerson and Kathleen L. Quirk, each or any of them, as proxies, with full power of substitution, to vote the shares of the undersigned in Freeport-McMoRan Copper & Gold Inc. at the Annual Meeting of Stockholders to be held on Wednesday, June 15, 2011, at 10:00 a.m. Eastern Time, and at any adjournment thereof, on all matters coming before the meeting. The proxies will vote: (1) as you specify on the back of this card, (2) as the Board of Directors recommends where you do not specify your vote on a matter listed on the back of this card, and (3) as the proxies decide on any other matter. If you wish to vote on all matters as the Board of Directors recommends, please sign, date and return this card. If you wish to vote on items individually, please also mark the appropriate boxes on the back of this card. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE (continued on reverse side) _ FOLD AND DETACH HERE _ |
Table of Contents
| Please mark your votes as indicated in this example Your Board of Directors recommends a vote FOR Items 1, 2 and 4 below and recommends a vote of 1 YEAR on Item 3 below. X Item 1 — Election of twelve directors. Nominees are: 01 Richard C. Adkerson 07 Bobby Lee Lackey 02 Robert J. Allison, Jr. 08 Jon C. Madonna 03 Robert A. Day 09 Dustan E. McCoy 04 Gerald J. Ford 10 James R. Moffett 05 H. Devon Graham, Jr. 11 B. M. Rankin, Jr. 06 Charles C. Krulak 12 Stephen H. Siegele FOR, except withhold vote from following nominee(s): Item 2 — Approval, on an advisory basis, of the compensation of our named executive officers. FOR WITHHOLD Item 3 — Approval, on an advisory basis, 1 YEAR 2 YEARS 3 YEARS ABSTAIN of the frequency of future advisory votes on the compensation of our named executive officers. Item 4 — Ratification of the appointment of Ernst & FOR AGAINST ABSTAIN Young LLP as the independent registered public accounting firm. FOR AGAINST ABSTAIN Your Board of Directors recommends a vote AGAINST Item 5 below. Item 5 — Stockholder proposal regarding the selection of a candidate with environmental expertise to be recommended for election to the company’s Board of Directors. Signature(s) 2011 You may specify your votes by marking the appropriate boxes on this side.You need not mark any boxes, however, if you wish to vote all items in accordance with the Board of Directors’ recommendation. If your votes are not specified, this proxy will be voted FOR Items 1, 2 and 4, FOR a vote of 1 YEAR on Item 3 and AGAINST Item 5. _ FOLD AND DETACH HERE _ FREEPORT-MCMORAN COPPER & GOLD INC. OFFERS STOCKHOLDERS OF RECORD TWO WAYS TO VOTE YOUR PROXY Your Internet vote authorizes the named proxies to vote your shares in the same manner as if you had returned your proxy card. We encourage you to use this cost effective and convenient way of voting, 24 hours a day, 7 days a week. INTERNET VOTING VOTING BY MAIL Visit the Internet voting website at Simply sign and date your proxy card and return http://www.ivselection.com/freeport11. Have this it in the postage-paid envelope to Secretary, proxy card ready and follow the instructions Freeport-McMoRan Copper & Gold Inc., P.O. Box on your screen. You will incur only your usual 17149, Wilmington, Delaware 19885-9808. If you Internet charges. Available 24 hours a day, are voting by Internet, please do not mail your 7 days a week until 11:59 p.m., Eastern Time proxy card. on June 14, 2011. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 15, 2011. This proxy statement and the 2010 Annual Report are available at http://www.edocumentview.com/FCX_MTG |
TABLE OF CONTENTS
Questions and Answers about the Proxy Materials, Annual Meeting and Votingprint2012 Stockholder ProposalsprintCorporate GovernanceprintDirector CompensationprintProposal No. 1: Election of DirectorsprintInformation About Director NomineesprintStock Ownership of Directors and Executive OfficersprintSection 16(a) Beneficial Ownership Reporting ComplianceprintStock Ownership of Certain Beneficial OwnersprintExecutive Officer CompensationprintCompensation Discussion and AnalysisprintCorporate Personnel Committee ReportprintExecutive Compensation TablesprintProposal No. 2: Advisory Vote on the Compensation of Our Named Executive OfficersprintProposal No. 3: Advisory Vote on the Frequency of Future Advisory Votes on the Compensation of Our Named Executive OfficersprintAudit Committee ReportprintIndependent Registered Public Accounting FirmprintProposal No. 4: Ratification of the Independent Registered Public Accounting FirmprintCertain TransactionsprintProposal No. 5: Stockholder Proposalprint