-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CHyKDPjwt1bxj1Yc4/AwsUfVeQKSSjVerWUTO8SMSXCGTODGtvWmnFO7r64sr8wz bC2xh5zrTY8YUh7Vlk19NA== 0000950109-98-001664.txt : 19980310 0000950109-98-001664.hdr.sgml : 19980310 ACCESSION NUMBER: 0000950109-98-001664 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980422 FILED AS OF DATE: 19980309 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CARBIDE CORP /NEW/ CENTRAL INDEX KEY: 0000100790 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 131421730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-01463 FILM NUMBER: 98559732 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 BUSINESS PHONE: 2037942000 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE CORP DATE OF NAME CHANGE: 19890806 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE & CARBON CORP DATE OF NAME CHANGE: 19710317 DEF 14A 1 NOTICE & PROXY SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 UNION CARBIDE CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [_] 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: ------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] 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: ------------------------------------------------------------------------- [LOGO OF UNION Union Carbide Corporation CARBIDE APPEARS HERE] 39 Old Ridgebury Road, Danbury, CT 06817-0001 - -------------------------------------------------------------------------------- NOTICE of Annual Meeting of Stockholders to be held on April 22, 1998 March 12, 1998 The annual meeting of the stockholders of Union Carbide Corporation will be held at 10:00 a.m. on Wednesday, April 22, 1998, in the John C. Creasy Health Education Center, 24 Hospital Avenue, Danbury, Connecticut, 06810, for the following purposes: 1. To elect a Board of nine directors for the ensuing year. 2. To ratify the selection of KPMG Peat Marwick LLP as independent auditors for 1998. 3. To transact such other business as may properly come before the meeting. So that your stock will be represented at the meeting in the event that you do not attend, please sign the proxy and return it in the enclosed envelope. By Order of the Board of Directors [SIGNATURE APPEARS HERE] Vice-President, General Counsel and Secretary 3 [LOGO OF UNION Union Carbide Corporation CARBIDE APPEARS HERE] 39 Old Ridgebury Road, Danbury, CT 06817-0001 - -------------------------------------------------------------------------------- PROXY STATEMENT Table of Contents
Page General Information for Stockholders.............................................. 6 Matters to be Considered at the Annual Meeting: 1. Election of Directors.................................................... 7 Committees of the Board: Audit............................................................... 11 Compensation and Management Development............................. 11 Executive........................................................... 11 Finance and Pension................................................. 11 Health, Safety and Environmental Affairs............................ 11 Nominating.......................................................... 12 Public Policy....................................................... 12 Compensation of Directors.............................................. 12 Five Year Cumulative Total Return...................................... 13 Report of Compensation and Management Development Committee............ 14 Summary Compensation Table............................................. 18 Stock Options Granted -- 1997......................................... 19 Stock Options Exercised -- 1997....................................... 20 Retirement Program.................................................... 20 Long-Term Incentive Plan............................................... 21 Security Ownership of Management....................................... 22 Section 16(a) Beneficial Ownership Reporting Compliance ............... 23 Security Ownership of Certain Beneficial Owners........................ 23 Change in Control Arrangements......................................... 24 2. Management Proposal to Ratify KPMG Peat Marwick LLP as Independent Auditors for 1998............................................ 25 3. Other Business........................................................... 26 Stockholder Proposals for 1999 Annual Meeting..................................... 26 Proxy Solicitation................................................................ 26
5 General Information for Stockholders Proxies are solicited from stockholders by the Board of Directors of the Corporation to provide every stockholder an opportunity to vote on all matters scheduled to come before the meeting, whether or not he or she attends in person. When the enclosed proxy card is properly executed and returned, the shares represented will be voted by the proxyholders named on the card in accordance with the stockholder's directions. Stockholders may vote on a matter by marking the appropriate box on the card. If the card is executed and returned, and no choice is specified for a matter, the shares will be voted as recommended by the Board of Directors on that matter. If a stockholder is a participant in the Corporation's Dividend Reinvestment and Stock Purchase Plan, the proxy card will represent both the number of shares registered in the participant's name and the number of whole shares credited to the participant's account, and all shares will be voted in accordance with the instructions on the proxy card. It is Union Carbide's policy that all stockholder proxies, ballots and voting tabulations that identify the votes of specific stockholders be kept permanently confidential except as may be required by law or to carry out the purpose of this policy or in the event of a contested proxy solicitation. Access to proxies and other stockholder voting records will be limited to independent inspectors of election, independent tabulators and to certain Union Carbide employees engaged in the receipt, count and tabulation of proxies. Such employees will be advised of this policy, instructed to comply therewith, and will sign a statement of compliance. The independent inspectors of election, in their report to the Board of Directors, will confirm that, to the best of their knowledge, the Corporation's policy was followed in the tabulation of the votes. This policy shall not operate to prohibit stockholders from disclosing the nature of their votes to the Corporation or the Board of Directors if any stockholder so chooses or to impair free and voluntary communication between the Corporation and its stockholders. Management knows of no matters other than those set forth on the proxy card that will be presented for action at the meeting. Execution of a proxy, however, confers on the designated proxyholders discretionary authority to vote the shares represented in accordance with their best judgment on any other business that may come before the meeting, including stockholder proposals excluded from the Proxy Statement pursuant to SEC rule 14a-8. Any stockholder executing a proxy may revoke that proxy or submit a revised one at any time before it is voted. A stockholder may also vote by ballot at the annual meeting, thereby canceling any proxy previously returned as to any matter voted on by ballot. A stockholder wishing to name as his or her proxy someone other than those designated on the proxy card may do so by crossing out the names of the three designated proxies and inserting the name(s) of the person(s) he or she wishes to have act as his or her proxy. No more than three individuals should be so designated. In such a case, it will be necessary that the proxy be delivered by the stockholder to the person(s) named, and that the person(s) named be present and vote at the meeting. Proxy cards on which alternate proxies have been named should not be mailed directly to the Corporation. Stockholders of record at the close of business on March 3, 1998 are entitled to notice of the meeting and to vote the shares held on that date at the meeting. Each share of common stock of the Corporation is entitled to one vote. As of January 31, 1998, 137,026,711 shares of common stock of the Corporation were outstanding. Those shares were held by 47,529 stockholders of record. The nominees receiving a plurality of the votes cast will be elected as directors. An affirmative vote of a majority of the votes cast is required to ratify the appointment of auditors. Only those votes cast for or against a proposal are used in determining the results of a vote. Abstentions are counted for quorum purposes only. Broker non-votes have the same effect as abstentions. 6 Matters to be Considered at the Annual Meeting 1. Election of Directors Unless individual stockholders specify otherwise, each returned proxy will be voted for the election to the Board of Directors of the Corporation of the nine nominees who are named on the following pages. These nominees were recommended by the Nominating Committee and approved by the Board. Each director has consented to being named as a nominee for director and agreed to serve if elected. Each director, if elected, would serve for a term of one year. If any of those named is not available for election at the time of the annual meeting, discretionary authority will be exercised to vote for substitutes unless the Board chooses to reduce the number of directors. Management is not aware of any circumstances that would render any nominee named herein unavailable. All nominees are currently serving on the Corporation's Board of Directors. The ages of the nominees are as of March 1, 1998. - -------------------------------------------------------------------------------- [PHOTO C. Fred Fetterolf, age 69, Director since 1987, is Director of APPEARS Various Corporations and Retired Director, President and Chief HERE] Operating Officer of Aluminum Company of America. Mr. Fetterolf is a graduate of Grove City (PA) College, where he received a B.S. in chemistry in 1952. He joined the Aluminum Company of America that same year and, following a number of sales and marketing assignments and service as Vice-President -- Operations, Primary Products, he was named Vice-President -- Science and Technology in February 1981 and Executive Vice-President -- Mill Products later that year. Mr. Fetterolf became President and a member of the Board of Directors in 1983 and in 1985 he assumed the additional responsibility of Chief Operating Officer until retiring in 1991. Mr. Fetterolf is a director of Allegheny Teledyne Corporation, Dentsply International, Inc., Mellon National Bank, Praxair, Inc., Quaker State Corporation and Commonwealth Aluminum Corp., a trustee of Carnegie Mellon University and Eastern College and serves on a number of non-profit boards. He is Chairman of the Health, Safety and Environmental Affairs Committee and a member of the Audit, Compensation and Management Development and Nominating Committees of Union Carbide's Board. - -------------------------------------------------------------------------------- [PHOTO Joseph E. Geoghan, age 60, Director since 1990, is APPEARS Vice-President, General Counsel and Secretary of Union Carbide HERE] Corporation. Mr. Geoghan was graduated from St. John's University, where he received a B.B.A. degree in 1959, and from Fordham University's School of Law, where he received the degree of J.D. in 1964. He joined Union Carbide in 1957, became a member of Union Carbide's Law Department in 1963 and in 1973 was appointed Chief International Counsel. He was named Senior Group Counsel in 1976, Assistant General Counsel in 1980 and, in 1985, was appointed Deputy General Counsel. Mr. Geoghan was elected Vice-President and General Counsel of the Corporation in 1987 and in 1990 was elected to the additional office of Corporate Secretary. At that time, he also assumed responsibility for government affairs. He is a director of The Westchester-Fairfield Pro Bono Partnership and the Fund for Modern Courts and is a member of the American Bar Association, the New York City Bar, the New York State Bar Association and the Association of General Counsel. Mr. Geoghan is a member of the Executive and Public Policy Committees of Union Carbide's Board. 7 - -------------------------------------------------------------------------------- [PHOTO Rainer E. Gut, age 65, Director since 1994, is Chairman of the APPEARS Board of Directors of Credit Suisse Group, Credit Suisse First HERE] Boston and Credit Suisse. Mr. Gut was graduated from Cantonal School of Zug, Switzerland, and had professional training in Switzerland, Paris and London. Prior to his nomination in 1971 as Chairman and Chief Executive Officer of Swiss American Corporation, Credit Suisse's U.S. investment banking affiliate at that time, Mr. Gut was a general partner of Lazard Freres & Co. in New York. Elected as a Member of the Executive Board of Credit Suisse in 1973, he became its Speaker in 1977 and its President in 1982. In 1983, he was elected to Credit Suisse's Board of Directors and became its Chairman. Since 1986 Mr. Gut has chaired the Board of Directors of Credit Suisse Group. Mr. Gut is Vice-Chairman of the Board of Directors of Nestle S.A., Vevey, and is a Member of the Board of Directors of Daimler-Benz Holding, Zurich, Pechiney, Paris, and Sofina S.A., Brussels. Mr. Gut is a member of the Compensation and Management Development, Finance and Pension and Nominating Committees of Union Carbide's Board. - -------------------------------------------------------------------------------- [PHOTO Vernon E. Jordan, Jr., age 62, Director since 1987, is Senior APPEARS Partner, Akin, Gump, Strauss, Hauer & Feld, LLP. Mr. Jordan is a HERE] graduate of DePauw University where he received the degree of B.A. in 1957. He received the degree of J.D. from Howard University Law School in 1960 and a fellowship from the Institute of Politics, John F. Kennedy School of Government of Harvard University in 1969. Mr. Jordan has also received honorary degrees from numerous colleges and universities. Mr. Jordan, former Executive Director of The United Negro College Fund and President of the National Urban League, Inc. became a partner in the law firm of Akin, Gump, Strauss, Hauer & Feld in 1982. He is a member of the Arkansas Bar, District of Columbia Bar, Georgia Bar, The U.S. Supreme Court Bar, The American Bar Association, The National Bar Association and The Council on Foreign Relations. He is a director of the American Express Company, Bankers Trust Company, Bankers Trust New York Corporation, Callaway Golf Co., Chancellor Media Corporation, Dow Jones & Co., Inc., The Ford Foundation, J.C. Penney Company, Inc., Revlon Group, Inc., Ryder System Inc., Sara Lee Corporation and Xerox Corporation and a trustee of Howard University. Mr. Jordan is Chairman of the Nominating Committee and a member of the Executive, Finance and Pension and Public Policy Committees of Union Carbide's Board. - -------------------------------------------------------------------------------- [PHOTO William H. Joyce, age 62, Director since 1992, is Chairman of APPEARS the Board, President and Chief Executive Officer of Union HERE] Carbide Corporation. Dr. Joyce was graduated from Penn State University in 1957 with the degree of B.S. in chemical engineering and from New York University with the degree of M.B.A. in 1971 and a Ph.D. in Business in 1984. He joined the Chemicals and Plastics Division of Union Carbide in 1957 and has been associated primarily with the Corporation's chemicals and plastics business throughout his career. Dr. Joyce became President of the Silicones and Urethane Intermediates Division in 1982 and was appointed President of the Polyolefins Division in 1985. Dr. Joyce became Executive Vice-President, Union Carbide Chemicals and Plastics Company Inc. in 1990, and that same year was elected a Vice-President of the Corporation. In 1992, Dr. Joyce was elected Executive Vice-President of the Corporation responsible for operations, and in 1993, was elected President and Chief Operating Officer. In 1995, Dr. Joyce was elected President and Chief Executive Officer and effective January 1, 1996, he was also elected Chairman of the Board. In 1993, Dr. Joyce received the Medal of Technology from President Clinton. He is a director of CVS Corporation, Reynolds Metals Company, The Chemical Manufacturers Association and The American Plastics Council and a trustee of Universities Research Association, Inc. Dr. Joyce is Chairman of the Executive Committee of Union Carbide's Board. - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- Robert D. Kennedy, age 65, Director since 1985, is Retired Chairman of the Board and Chief Executive Officer of Union Carbide Corporation. Mr. Kennedy is a graduate of Cornell University where he received a B.S. degree in Mechanical Engineering in 1955. He joined Union Carbide that same year. Mr. Kennedy became President of the Linde Division in 1977, was elected a Senior Vice-President of the Corporation in 1981 and an Executive Vice-President in 1982. In 1985, he was elected a Director and President of Union Carbide Corporation, responsible for the Chemicals and Plastics Group. In April 1986, he was elected President and Chief Executive Officer of Union Carbide Corporation and effective December 1986 he was elected Chairman of the Board. He retired from the Corporation on December 31, 1995. Mr. Kennedy is a director of Birmingham Steel Corporation, General Signal Corporation, Kmart Corporation, Lion Ore Mining International Ltd., Sun Company, Inc., Union Camp Corporation and UCAR International, Inc. He is also a member of the Advisory Boards of The Blackstone Group and RFE Investment Partners, past Chairman of the Chemical Manufacturers Association, a member of the Board of Trustees of Cornell University, member and past Chairman of the New Hampton School Trustees, past Chairman of INROADS, Inc., past board member of the Fairfield/Westchester County Chapter of INROADS, Inc., a member of the Business Council, past member of the Business Round Table and of the Business Round Table's Education Task Force and its Environmental Task Force, past Chairman and past member of the Connecticut Business For Education Coalition (CBEC) and past member of the Commission on Education Excellence for Connecticut. He is a member of the Audit, Executive, Nominating and Public Policy Committees of Union Carbide's Board. - -------------------------------------------------------------------------------- Ronald L. Kuehn, Jr., age 62, Director since 1984, is Director, Chairman, President and Chief Executive Officer of Sonat Inc. Mr. Kuehn received the degrees of B.S. in 1957 and LL.B. in 1964 from Fordham University. He joined Sonat's legal staff in 1970 and was named Vice-President in 1979. He was elected Senior Vice-President in 1980 and Executive Vice-President in January 1981. In April 1981, he was elected a director of the Company and was named President and Chief Operating Officer in 1982. He was appointed Chief Executive Officer in 1984 and elected Chairman in 1986. Mr. Kuehn is a director of various wholly-owned subsidiaries of Sonat Inc. and a director of AmSouth Bancorporation, The Dun & Bradstreet Corporation, Praxair, Inc., Protective Life Corporation, Transocean Offshore Inc., Gas Research Institute and a number of civic organizations. He is a member of the Board of Trustees of Southern Research Institute and Tuskegee University. Mr. Kuehn is Chairman of the Compensation and Management Development Committee and a member of the Finance and Pension and Health, Safety and Environmental Affairs Committees of Union Carbide's Board. - -------------------------------------------------------------------------------- Rozanne L. Ridgway, age 62, Director since 1990, former Assistant Secretary of State for Europe and Canada. A retired diplomat in the Foreign Service of the United States, Ambassador Ridgway's 32 year career included ambassadorial assignments to Finland, to the German Democratic Republic, for Oceans and Fisheries Affairs and as Counselor of the United States State Department. She served as Assistant Secretary of State for European and Canadian Affairs from 1985 to 1989. She was President of the Atlantic Council from 1989 through 1992 and Co-Chairman through June, 1996. Ambassador Ridgway is a director of Bell Atlantic Corporation, The Boeing Company, Citicorp, Citibank N.A., Emerson Electric Co., Minnesota Mining and Manufacturing Company, RJR Nabisco and Sara Lee Corporation. She is a member of the International Advisory Board of the New Perspective Fund and a trustee of The CNA Corporation and the National Geographic Society. She is a member of several nonprofit institutions concerned with public policy and serves as non-executive chairman of the Board of the Baltic-American Enterprise Fund. Ambassador Ridgway is chairman of the Public Policy Committee and a member of the Audit, Health, Safety and Environmental Affairs and Nominating Committees of Union Carbide's Board. 9 - -------------------------------------------------------------------------------- [PHOTO James M. Ringler, age 52, Director since 1996, is Chairman, APPEARS President and Chief Executive Officer of Premark International, HERE] Inc. Mr. Ringler received the degree of B.S. in Business Administration in 1967 and an MBA degree in Finance in 1968 from the State University of New York. Mr. Ringler was President and Chief Operating Officer of the Tappan Company from 1982 to 1986 and President of White Consolidated Industries' Major Appliance Group from 1986 to 1990. Both companies are subsidiaries of Electrolux AB. He joined Premark International, Inc. in 1990 as Executive Vice-President and was elected to the company's Board of Directors. He became President and Chief Operating Officer in 1992 and was appointed Chief Executive Officer in 1996 upon the completion of the spin-off of Tupperware. Mr. Ringler is a director of Reynolds Metals Company, National Association of Manufacturers, the Business Round Table and Evanston Hospital and is a trustee of the Manufacturers' Alliance for Productivity and Innovation. He is a member of the Compensation and Management Development and Finance and Pension Committees of Union Carbide's Board. - -------------------------------------------------------------------------------- During 1997, there were nine regular meetings of the Board of Directors. At present, there are twelve directors. Pursuant to action by the Board, the number of directors to be elected at the annual meeting will be nine. John J. Creedon and William S. Sneath, directors for over 13 and 28 years, respectively, will not stand for re-election in accordance with the retirement policy of the Board. Thomas P. Gerrity, a director since February 1997 resigned from the Board effective February 23, 1998. The retirement policy of the Board provides that non-employee directors are not eligible for re-election after reaching age 72 unless an exception is granted by a majority of the Board. Employee directors, except the Chief Executive Officer, will retire from the Board at the time of their retirement from the Corporation. Of the nine nominees for election at the annual meeting of stockholders, two are currently officers of the Corporation. Seven are non-employee directors, one of whom is a retired Chief Executive Officer of the Corporation. Each director is required to be a stockholder of the Corporation. Each director serves on one or more committees of the Board that oversee such vital matters as audits, compensation, finance, health, safety and environmental affairs, nominations, and public policy. Average attendance by directors at meetings of the Board and its committees during 1997 was 94%. Each director attended 75% or more of the aggregate of the meetings of the Board and of the Board committees on which he or she served, except Mr. Gut who attended 67% of the meetings. Vernon E. Jordan, Jr. is a partner of the law firm of Akin, Gump, Strauss, Hauer and Feld, LLP. That firm was retained by and rendered services to the Corporation in 1997 and continues to provide services in 1998. In addition to attending Board and committee meetings, the directors devoted time during the year to conferring with officers regarding corporate matters and to reviewing material submitted by management to the Board and Board committees for consideration and action. 10 Committees of the Board -- The Board has seven standing committees. Their functions are described below: Audit -- The Audit Committee was established in 1972. The Committee supports the independence of the Corporation's independent and internal auditors and the objectivity of the Corporation's financial statements; reviews the Corporation's principal policies for accounting, internal control and financial reporting; recommends to the Board the engagement or discharge of the independent auditors; reviews with the independent auditors the plan, scope and timing of their audit; reviews the auditors' fees and, after completion of the audit, reviews with management and the independent auditors the auditors' report. The Committee also reviews the annual financial statements of the Corporation; and the procedures for monitoring compliance with the Corporation's policies on business integrity and ethics and conflicts of interest. The Committee also performs a number of other review functions related to auditing the financial statements and internal controls. The Committee met four times during 1997. Members of the Committee are: John J. Creedon, Chairman; C. Fred Fetterolf; Robert D. Kennedy and Rozanne L. Ridgway. Compensation and Management Development -- The Compensation and Management Development Committee was established in 1972. The Committee reviews and recommends to the Board the direct and indirect compensation and employee benefits of the Chairman of the Board and other executive officers of the Corporation; reviews, recommends to the Board and administers any incentive plans and variable compensation plans that include executive officers; and reviews the Corporation's policies relating to the compensation of senior management and, generally, other employees. In addition, the Committee reviews management's long-range planning for executive development and succession; establishes and periodically reviews policies on management perquisites; and performs certain other review functions relating to management compensation and employee relations policies. The Committee met five times during 1997. Members of the Committee are: Ronald L. Kuehn, Jr., Chairman; John J. Creedon; C. Fred Fetterolf, Rainer E. Gut and James M. Ringler. Executive -- The Executive Committee was established in 1917. Subject to any limitations prescribed by law or by the Board, the Executive Committee has and may exercise, when the Board is not in session, all the powers of the Board. The Committee did not meet during 1997. Members of the Committee are: William H. Joyce, Chairman; John J. Creedon; Joseph E. Geoghan; Vernon E. Jordan, Jr.; Robert D. Kennedy and William S. Sneath. Finance and Pension -- The Finance and Pension Committee was established in 1980. The Committee reviews periodically the Corporation's financial policies and objectives; monitors the Corporation's financial condition and its requirements for funds; reviews management recommendations as to the amounts, timing, types and terms of public stock issues and public and private debt issues; and reviews, periodically the Corporation's dividend policy and foreign exchange operations. The Committee also reviews the financial, investment and actuarial policies and objectives of the pension program and, periodically, other employee benefit programs and the investment performance of the fund established for the pension program. The Committee also performs certain other review functions related to finance and pension matters. The Committee met four times during 1997. Members of the Committee are: William S. Sneath, Chairman; Rainer E. Gut; Vernon E. Jordan, Jr.; Ronald L. Kuehn, Jr. and James M. Ringler. Health, Safety and Environmental Affairs -- The Health, Safety and Environmental Affairs Committee was established in 1985, for the purpose of enabling the Board to expand its review functions with respect to health, safety and environmental matters. Prior to January 1985, those matters were reviewed by the Public Policy Committee. The Health, Safety and Environmental Affairs Committee reviews the Corporation's policies for health, safety and environmental affairs ("HS&EA"); reviews the Corporation's HS&EA performance and its compliance with HS&EA policies and legal requirements; reviews the Corporation's system for monitoring its compliance with HS&EA policies and legal requirements; reviews any significant HS&EA problem and management's response to the problem; and reviews significant scientific, legislative, governmental and judicial developments and their effect on corporate policies. The Committee met four times during 1997. Members of the Committee are: C. Fred Fetterolf, Chairman; John J. Creedon; Ronald L. Kuehn, Jr.; Rozanne L. Ridgway and William S. Sneath. 11 Nominating -- The Nominating Committee was established in 1977. The Committee recommends to the Board nominees for election as directors, and periodically reviews potential candidates, including incumbent directors. The Committee reviews policies with respect to the composition, organization and practices of the Board, and developments in corporate governance matters generally. The Committee met twice during 1997. Members of the Committee are: Vernon E. Jordan, Jr., Chairman; C. Fred Fetterolf; Rainer E. Gut; Robert D. Kennedy; Rozanne L. Ridgway and William S. Sneath. Candidates for nomination as director are considered on the basis of their broad business, financial and public service experience; their ability to represent the interests of all stockholders, rather than the special interests of a particular group; their reputation, capability and integrity within their fields or professions; and their ability and willingness to devote the time required to serve effectively as a director and as a member of one or more Board committees. In addition, candidates are considered on the basis of their ability, as a group, to bring to the Board familiarity with national and international business matters, an appreciation of the appropriate role of the Corporation in today's society and diverse points of view regarding the many areas in which the Corporation is involved. Nominees must also be free of any conflicts of interest, legal impediments or other considerations that might preclude service as a director of the Corporation. The Committee will consider nominees recommended by stockholders. All letters of nomination should be sent to the Secretary of the Corporation and should include the nominee's name and qualifications and a statement from the nominee that he or she consents to being named in the proxy statement and will serve as a director if elected. In order for any nominee to be considered by the Nominating Committee and, if accepted, to be included in the proxy statement, such recommendation should be received by the Secretary on or before November 1 preceding the annual meeting at which directors will be elected by the stockholders. Public Policy -- The Public Policy Committee was established in 1972. The Committee reviews the Corporation's policies on and responses to important social, political and public issues, including matters relating to international operations, equal employment opportunity, charitable and education contributions, and legislative issues, as well as policies on and responses to important stockholder issues, including stockholder proposals for the proxy statement. The Committee also performs various other functions relating to public policy matters generally. The Committee met three times during 1997. Members of the Committee are: Rozanne L. Ridgway, Chairman; Joseph E. Geoghan; Vernon E. Jordan, Jr. and Robert D. Kennedy. Compensation of Directors No director who is an employee is compensated for service as a member of the Board or any Committee of the Board. Each non-employee director receives an annual retainer of $30,000. Each non-employee director receives a $1,500 fee for each Board meeting attended and a $1,500 fee for each committee meeting attended. The Chairman of a meeting of a Committee of the Board receives a $3,000 meeting fee. Non-employee directors who perform special services at the request of the Chairman are compensated by a per diem fee of $1,500. No per diem fees were paid in 1997. Reimbursement for travel expense is paid when appropriate. Non-employee directors are not eligible to participate in the incentive compensation plans or benefit plans which the Corporation maintains for its employees. Stock Option Plan for Non-Employee Directors -- The plan was approved by the stockholders on April 23, 1997 and provides for awards to non-employee directors of options to purchase shares of the Corporation's common stock. Under the Plan, the number of shares subject to options may not exceed 200,000 and no award may be granted subsequent to the date of the meeting of stockholders in 2002. The option price will not be less than the closing price of the Corporation's common stock as listed on the New York Stock Exchange-Composite Transactions on the date the option is granted, the term of the option may not be longer than ten years duration and the option will be exercisable only after the earliest of (i) the second anniversary of date of grant; (ii) the participant's death; or (iii) a Change in Control of the Corporation. During 1997, each non-employee director was granted 5,800 options. 12 Non-Employee Directors' Compensation Deferral Plan -- The plan, adopted by the Board effective February 1, 1997, allows non-employee directors to defer all or part of their annual retainer and meeting fees, generally until separation of service as a non-employee director. Participants in this unfunded plan will be credited with a return on the deferred amounts measured on the same choice of investment features as those offered under an employee deferral program, including a fixed income rate, discounted common stock of the Corporation and five Fidelity Fund alternatives. For those non-employee directors who elected to participate in the Plan, their allocations into Deferral Plan stock units are reported in the Security Ownership of Management table on page 22. Other -- The Union Carbide Corporation Group Life Insurance Plan for Non- Employee Directors extends group life insurance coverage of $50,000 to each non- employee director who elects to participate in the Plan. Costs of premiums are shared by the participating directors and the Corporation. The Corporation's share of such premiums in 1997 was $1,368. Effective March 1, 1998, the Corporation purchased Director's and Officer's liability insurance from Corporate Officers and Directors Assurance Ltd., X.L. Insurance Company, Ltd., and ACE Limited to provide continuing coverage for the individual directors and officers of the Corporation and its subsidiaries at an annual cost of approximately $450,000. Compensation Committee Interlocks and Insider Participation -- The members of the Compensation and Management Development Committee are: Ronald L. Kuehn, Jr., Chairman; John J. Creedon; C. Fred Fetterolf; Rainer E. Gut and James M. Ringler. Mr. Gut is chairman of the Board of Directors of Credit Suisse Group, Credit Suisse First Boston and of Credit Suisse. During 1997 and in 1998 to date, Credit Suisse First Boston and Credit Suisse rendered services to the Corporation. Five Year Cumulative Total Return/(1)/ - -------------------------------------------------------------------------------- [LINE GRAPH APPEARS HERE] (1) For fiscal years ending December 31. Total return assumes that the value of an investment in UCC common stock and each index was $100.00 on December 31, 1992 and that all dividends were reinvested. Past performance is not necessarily an indicator of future results.
Graph Dollar Values 1993 1994 1995 1996 1997 UCC 140.09 192.13 246.79 273.60 295.16 S&P 500 110.05 111.47 153.31 188.46 251.26 S&P Chemicals 111.84 129.27 168.92 223.18 274.34
13 Report of the Compensation and Management Development Committee on Executive Compensation The Corporation's compensation programs are approved and administered by the Compensation and Management Development Committee of the Board of Directors (the Committee), consisting only of non-employee Directors. The programs have three fundamental objectives: to set compensation at levels sufficient to attract and retain highly competent executives; to provide incentives to achieve the Corporation's strategic, financial and operational goals; and to reward individual achievement of business objectives with pay based on performance. Programs that meet these objectives ensure that the Corporation is well managed and that management's interests in building value are closely aligned with those of its shareholders. The Committee meets annually to review the Corporation's prior year performance against corporate goals set at the start of the year, to review executive compensation in light of performance, competitive compensation levels, and to consider goals for the new year in conjunction with the full Board. It meets again later in the year with the Chairman/CEO and non-employee Directors to evaluate executive performance and review management development and succession planning. The Committee considers revisions or improvements to compensation and management development programs to link compensation more closely to performance. The Committee met five times during 1997. Sources of Comparison Data -- The Corporation engages an independent consultant to advise it with respect to competitive compensation levels for both base salaries and total compensation. The analysis includes both chemical companies and the chemicals and plastics segments of major oil companies. The Corporation believes these companies represent an appropriate benchmark group, whose executive positions require talents and capabilities similar to the Corporation's own executive positions. For financial performance comparisons, the Corporation looks at different groupings of companies, depending on the performance metric. The companies selected for the Return on Capital (ROC) performance comparison best approximate the Corporation's businesses and are similarly affected by margins in the product markets in which the Corporation competes. The companies selected in the Market to Book ratio comparison are publicly traded chemical companies that are considered investment alternatives in the chemical industry. For both ROC and Market to Book performance, companies within as well as outside the S&P Chemicals Index are included in the comparison. Components of the Compensation Package -- The compensation package for the Corporation's executives has four components: base salary, which reflects the executive's scope and level of responsibility; profit sharing, based on the Corporation's ROC performance; variable compensation, which reflects relative corporate, business unit and individual performance; and long-term incentives. The Committee targets compensation for executives that will produce median total compensation opportunity for similar jobs in the industry. Base salary targets are established at 10% below median base salaries. When combined with profit sharing and a highly leveraged variable compensation program, total cash compensation including base salaries will pay at the median when program goals are met. Total cash compensation will exceed the median when goals are exceeded and will fall below the median when goals are not met. Base Salary -- At least once a year, the Committee reviews the base salary of the Chairman/CEO and, in consultation with the Chairman/CEO, reviews the base salaries of executive officers. Based on individual performance and impact on the Corporation's performance, as well as competitive pay levels, the Committee determines whether an adjustment to base salary is warranted for each executive officer. Dr. Joyce was granted an increase in 1998 of 8.8% of base pay. 14 Profit Sharing -- The cash profit sharing plan and ESOP profit sharing plan cover virtually all employees, including the Corporation's officers. Participants in the plans have the opportunity to earn extra pay every quarter in which ROC for the Corporation exceeds a predetermined level. The maximum total payout is ten days' base salary per calendar quarter or approximately 15% of base pay. For 1997, participants earned 32 days' pay. Sixteen days were paid from the cash profit sharing plan. Sixteen days were paid by an allocation of ESOP common stock to the participants' accounts in the ESOP profit sharing plan. ESOP common stock worth an additional four days was also allocated to cover additional taxes on a voluntary early withdrawal of the ESOP common stock by a participant. Variable Compensation -- Earnings in the chemicals and plastics industry are affected by the chemical business cycle. Therefore, the Corporation's variable compensation program is largely based on relative performance against the financial performance comparator companies, most of which are similarly affected by the cycle. Variable compensation serves to focus executives on key business objectives for which they are held accountable. It recognizes that individual performance can be strong or weak despite overall corporate business results that year, affording an opportunity to recognize outstanding individual contributions in any year. Consequently, some executives may receive considerably larger variable compensation payments than others. These individual differences reflect the Corporation's "pay for performance" policy. There are two plans which provide variable compensation to corporate officers -- the Performance Incentive Plan [PIP] and the Variable Compensation Plan [VCP], both described below. The PIP is based on the Corporation's ROC performance relative to financial performance comparator companies over a 12 month fiscal year ending September 30. The Corporation's expenses for the plan are deductible for federal income tax purposes under Section 162(m) of the Internal Revenue Code. The Committee awarded $725,000 to Dr. Joyce for 1997 ROC performance under the PIP. VCP payments for corporate officers are determined by the Committee, based on each officer's contribution to the achievement of specific financial measures as well as progress against non-financial Corporate Measures of Performance (MOPs). The financial measures, which represent 60% of the VCP award at target, include: Relative Shareholder Value -- as measured by the Market to Book ratio of the Corporation's common stock vs. the Market to Book of comparison companies Growth -- as measured by growth in sales volume over three years Productivity -- as measured by actual fixed cost per pound of product
The balance of the VCP award is based on Corporate MOPs set annually by the CEO and approved by the Board of Directors. The 1997 MOPs included a number of ambitious goals. . Continued improvement in Health, Safety and Environmental performance under the Responsible Care(R) Program; . "People Excellence," with continued emphasis on upward mobility of women and minorities; management education programs, performance management and career planning; . Strategic plan implementation, including implementation of global joint ventures and attainment of profit enhancement and capital program goals; . Technology leadership, including growth projects which build on the Corporation's competitively advantaged technology, and commercialization of new technology which will yield high returns consistent with UCC's ROC goals; . Continued progress in implementing UCC's corporate wide information system; . Continued excellence in customer focus and effective communications with our critical internal and external constituencies. 15 The Board approved the 1997 VCP at its February, 1998 meeting. The level of payment recommended by the Committee and approved by the Board balanced varying levels of performance results against the metrics and measures of performance. The Committee and Board gave particular consideration to financial performance, implementation of the capital program and Responsible Care performance. The Committee and Board also noted the higher levels of personal performance required of employees during 1997 as the Corporation implemented the first segment of its integrated information technology transformation program while continuing to pursue other critical objectives. Based on the above assessment, Dr. Joyce was awarded a VCP payment of $125,000. Long-Term Incentives: Stock Options and Earnings Per Share Program -- The Committee regularly reviews the competitiveness of the Corporation's long-term incentives to ensure total compensation is competitive. Stock Options -- Options are generally granted annually, at the closing price of the Corporation's common stock as reported on the New York Stock Exchange -- Composite Transactions on the date of the grant. They have a minimum holding period of two years from the grant date and expire after ten years. Except for an adjustment to reflect major changes in the Corporation's capital base, as occurred after the industrial gases spin-off in 1992, the Corporation has neither adjusted the price nor amended the financial terms of outstanding options. This means executives cannot benefit from stock price appreciation until and unless shareholders also benefit. Stock options serve both the Corporation and shareholder interests by linking all executives to a common goal -- increasing shareholder value. The Committee awarded Dr. Joyce 135,000 stock options in December 1997. Earnings Per Share Program -- In September 1997, the Board of Directors approved a new incentive program for a limited number of senior managers which is designed to grant awards if the Corporation achieves $4.00 or more diluted Earnings Per Share ("EPS") performance during 1999 and 2000, widely anticipated to be trough years in the chemical industry cycle. Under the leadership of Dr. Joyce, the Corporation has developed programs specifically designed to further constrain costs. Achieving the objectives of these programs will enhance the Corporation's abilities to reach its goal of $4.00 or more EPS in 1999 and 2000. Dr. Joyce will place an amount equivalent to 100% of one year's base salary at risk. The other participants will place an amount equivalent to 40% or 65% of base pay at risk, depending on their position level. This amount has been converted to units equivalent to shares of the Corporation's common stock based on the closing price on the day the program was approved by the Board. Participants also will be credited with dividend equivalents in the form of additional units. If the requirements of the plan are not met, Dr. Joyce and the other participants will forfeit the at risk money. If the Corporation meets or exceeds the $4.00 EPS target, the common stock units placed at risk will be retained by the participants. In addition, the participants could be awarded a multiple up to four times the number of common stock units at risk for each of the years 1999 and 2000, depending on the extent to which the goals are exceeded. The plan also provides that in order for participants to receive the multiple, the $4.00 EPS level must be achieved using the spread between the feedstock prices and product selling prices experienced in the last business trough in 1993. Payments from the plan will be made in cash in 2002, 2003 and 2004 and will be based on the value of the Corporation's common stock at the time of payment. 16 Stock Ownership -- Five years ago, the Board of Directors initiated stock ownership guidelines for senior management to directly link management and shareholder interests and create an incentive to increase the company's market value. Under the guidelines, the Chairman/CEO is expected to own stock valued at four times his annual base salary within five years from inception of the plan. Dr. Joyce now holds approximately twelve (12) times his December base salary in the Corporation's stock. Other Corporate officers are expected to own stock valued at one times their base salary. All have met or exceeded the guideline amount. In October 1993, the Committee endorsed the extension of these ownership guidelines to a broader group of managers (approximately 115 others) who are expected to own stock valued at either one times annual base salary or at one third of annual base salary, depending on position level. They also have five years to achieve these stock ownership levels. At year-end 1997, over 90% of the group had attained their guideline level of ownership. Compensation Deferral Program -- The Corporation maintains a voluntary unfunded compensation deferral program into which participants may defer up to 25% of their base salary and up to 85% of their variable compensation, with payout generally commencing at or after retirement. A portion of these deferrals may be subject to a matching employer contribution. For those executive officers who elected to participate in the program, their allocations into deferral program stock units are reported in the Security Ownership of Management table on page 22. Summary -- The Compensation and Management Development Committee believes that the objectives of the compensation and incentive programs at Union Carbide Corporation are consistent with programs maintained by comparable industrial companies and serve to keep management closely aligned with shareholder interest in building value for the enterprise. Compensation and Management Development Committee Ronald L. Kuehn, Jr., Chairman John J. Creedon C. Fred Fetterolf Rainer E. Gut James M. Ringler 17 Summary Compensation Table - -------------------------------------------------------------------------------- All Other Annual Compensation Long-Term Compensation Compensation/(4)/ --------------------------------------------------- ----------------------- ---------------- Number of Securities Annual Other Underlying Variable Annual Restricted Options Name and Principal Position Year Salary Compensation/(1)/ Compensation/(2)/ Stock/(3)/ Granted - --------------------------- ----- ------- --------------- --------------- ---------- ---------- William H. Joyce 1997 $841,667 $ 850,000 $117,692 -0- 135,000 $118,045 Chairman, President and 1996 737,500 1,050,000 95,192 $222,396 130,000 166,538 Chief Executive Officer 1995 550,000 825,000 92,308 119,325 111,000 114,740 Joseph E. Geoghan 1997 $390,000 $ 246,000 $ 54,000 -0- 26,000 $ 14,712 Corporate Vice-President, 1996 378,750 265,000 49,500 $ 74,132 26,000 56,142 General Counsel and Secretary 1995 368,750 275,000 57,692 68,007 30,000 46,674 Lee P. McMaster 1997 $285,000 $ 283,000 $ 39,461 -0- 25,000 $ 24,282 Corporate Vice-President/General 1996 262,083 265,000 36,173 $ 62,006 21,000 53,514 Manager - Ethylene Oxide/Glycol 1995 241,667 230,000 40,000 46,192 25,000 33,502 Joseph C. Soviero 1997 $341,250 $ 226,000 $ 48,461 -0- 25,000 $ 14,712 Corporate Vice-President, 1996 333,750 265,000 42,519 $ 63,339 21,000 50,428 Corporate Ventures 1995 320,000 235,000 56,081 51,318 25,000 30,786 Roger B. Staub 1997 $308,333 $ 189,000 $ 44,308 -0- 25,000 $ 32,245 Corporate Vice-President/ 1996 290,000 265,000 38,077 $ 70,090 21,000 63,852 General Manager-UNIPOL Systems 1995 271,667 260,000 43,077 55,163 25,000 53,040 John K. Wulff 1997 $300,000 $ 197,000 $ 41,539 -0- 24,000 $ 29,885 Corporate Vice-President, 1996 280,000 215,000 35,538 $ 56,631 14,000 41,353 CFO and Controller 1995 271,667 210,000 43,077 46,192 15,000 27,422 - --------------------------------------------------------------------------------------------------------------------------------
(1) Annual Variable Compensation includes payments under both the Performance Incentive Plan and the Variable Compensation Plan. The Performance Incentive Plan rewards executive officers exclusively for ROC performance. The Variable Compensation portion of the annual award is based on performance against other key metrics and corporate Measures of Performance. The amounts in this column for 1997 do not include amounts which have been placed at risk pursuant to the 1997 Earnings Per Share Incentive Plan referred to in the Long-Term Incentive Plan table on page 21 and described in footnote 1 to that table. (2) Other Annual Compensation in 1995, 1996 and 1997 represents profit sharing and, for 1996 and 1997, ESOP profit sharing. Also included in this column for Mr. Soviero is a tax equalization payment of $6,850 in 1995 on the 1993 annuity purchase to fund the Corporation's obligations for certain nonqualified retirement benefits. (3) Restricted stock holdings as of December 31, 1997 and their fair market value based on the per share closing price of the Corporation's common shares on the New York Stock Exchange on December 31, 1997 ($42.875) were as follows: W.H. Joyce J.E. Geoghan L.P. McMaster J. C. Soviero R. B. Staub J.K. Wulff ---------- ------------ ------------- ------------- ----------- ---------- No. of Restricted Shares: 9,581 4,206 3,134 3,350 3,649 3,006 Value on Dec. 31, 1997: $410,785 $180,332 $134,370 $143,631 $156,451 $128,882
Dividends are payable on the restricted shares to the extent and on the same date as dividends are paid on all other Company common shares, are reinvested in restricted shares, and their value is included in the totals above. (4) All Other Compensation includes annual life insurance premiums, if any, paid to split dollar life insurance contracts and employer contributions to the Savings Program and allocations to the nonqualified compensation deferral program. For 1997, employer contributions to the Savings Program were $9,000 for Dr. Joyce and Messrs. Geoghan, McMaster, Soviero, Staub and Wulff. This matching contribution was made in the form of ESOP common stock. Under the Omnibus Budget Reconciliation Act of 1993 (OBRA), the maximum amount of compensation that may be recognized for employer matching contributions is limited to $160,000 per year (a reduction from the 1993 limit of $235,840.) Additional allocations to the nonqualified compensation deferral program for 1997 include $109,045 for Dr. Joyce; $15,282 for Mr. McMaster; $5,712 each for Messrs. Geoghan and Soviero; $23,245 for Mr. Staub and $20,885 for Mr. Wulff. 18 Stock Options Granted -- 1997 - -------------------------------------------------------------------------------- Potential Realizable Value at Assumed Annual Rates of Stock Price Individual Grants Appreciation for Option Term/(1)/ ---------------------------------------------- ------------------------------------------ 5% 10% ----------------- ------------------ Number of Securities % of Total Underlying Options Assumed Potential Assumed Potential Options Granted to Exercise Expiration Stock Realizable Stock Realizable Name Granted Employees Price Date Price Value Price Value - ------------------- ------------ ----------- -------- ---------- ------- ---------- ------- ---------- William H. Joyce 135,000 9.3% $46.312 12/03/07 $75.437 $3,931,875 $120.121 $9,964,215 Chairman, President and Chief Executive Officer Joseph E. Geoghan 26,000 1.8% $46.312 12/03/07 $75.437 $ 757,250 $120.121 $1,919,034 Corporate Vice-President, General Counsel and Secretary Lee P. McMaster 25,000 1.7% $46.312 12/03/07 $75.437 $ 728,125 $120.121 $1,845,225 Corporate Vice-President/ General Manager - Ethylene Oxide/Glycol Joseph C. Soviero 25,000 1.7% $46.312 12/03/07 $75.437 $ 728,125 $120.121 $1,845,225 Corporate Vice-President, Corporate Ventures Roger B. Staub 25,000 1.7% $46.312 12/03/07 $75.437 $ 728,125 $120.121 $1,845,225 Corporate Vice-President/ General Manager - UNIPOL Systems John K. Wulff 24,000 1.6% $46.312 12/03/07 $75.437 $ 699,000 $120.121 $1,771,416 Corporate Vice-President, CFO and Controller Gain of All Recipients of 1997 Stock Options as % --- --- --- --- $75.437 1.0%/(2)/ $120.121 1.0%/(2)/ of All Shareholders Gain
(1) The assumed annual rates of stock price appreciation of 5% and 10% are set by SEC rule and are not intended as a forecast of possible future appreciation in stock prices. (2) Assumes that the number of shares of common stock outstanding at December 31, 1997 is the same number outstanding at the relevant future date. Note: Stock Options are generally exercisable two years from the date of grant. In the event of a Change in Control of the Corporation, all outstanding stock options become immediately exercisable. Options also become immediately exercisable upon the death of the participant. Refer to Change in Control discussion on page 24 for further provisions regarding Change in Control. 19 Stock Options Exercised in 1997 and Stock Option Values at 12/31/97 - -------------------------------------------------------------------------------- Number of Securities Underlying Unexercised Value of Unexercised Options In-the-Money Options Shares Held at 12/31/96 Held at 12/31/97(1) Acquired Value --------------------------- --------------------------- Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ---------------------------------- ----------- -------- ----------- ------------- ----------- ------------- William H. Joyce Chairman, President and Chief Executive Officer 29,000 $1,086,415 498,000 265,000 $9,321,471 -0- Joseph E. Geoghan Corporate Vice-President, General Counsel and Secretary -0- -0- 236,000 52,000 $4,711,350 -0- Lee P. McMaster Corporate Vice-President/ General Manager - Ethylene Oxide/Glycol -0- -0- 152,400 46,000 $3,012,809 -0- Joseph C. Soviero Corporate Vice-President, Corporate Ventures -0- -0- 134,000 46,000 $2,370,750 -0- Roger B. Staub Corporate Vice-President/General Manager - UNIPOL Systems 12,800 $ 517,540 199,000 46,000 $4,569,634 -0- John K. Wulff Corporate Vice-President, CFO and Controller -0- -0- 142,000 38,000 $3,193,104 -0- - ---------------------------------------------------------------------------------------------------------------------------
(1) Based on a closing price of $42.875 per share on December 31, 1997 as reported on NYSE-Composite Transactions. No stock appreciation rights were outstanding in 1997. Messrs. Geoghan, McMaster, Soviero, Staub, Wulff and Dr. Joyce may also receive income from the exercise of certain options to purchase the stock of Praxair, Inc., which were granted in connection with the spinoff of Praxair, Inc. to stockholders on June 30, 1992. On that date, each holder of UCC options received an equal number of Praxair options and the exercise prices of the UCC options were reduced. Immediately after the spinoff, the combined exercise prices of the UCC options and Praxair options equaled the exercise prices of the UCC options prior to the spinoff. In 1997, the amount of income received by Mr. Staub and Dr. Joyce as a result of the exercise of Praxair options was $266,932, and $1,453,890, respectively. Retirement Program - -------------------------------------------------------------------------------- Average Final Compensation Estimated Annual Retirement Benefits at Age 65 Used for for Years of Service Indicated Calculating -------------------------------------------------------------------------------------------- Retirement Benefits(1) 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs. 40 Yrs. 45 Yrs. - --------------------------------------------------------------------------------------------------------------------------- $ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000 $ 67,500 150,000 33,750 45,000 56,250 67,500 78,750 90,000 101,250 250,000 56,250 75,000 93,750 112,500 131,250 150,000 168,750 500,000 112,500 150,000 187,500 225,000 262,500 300,000 337,500 750,000 168,750 225,000 281,250 337,500 393,750 450,000 506,250 1,000,000 225,000 300,000 375,000 450,000 525,000 600,000 675,000 1,500,000 337,500 450,000 562,500 675,000 787,500 900,000 1,012,500 2,000,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,350,000 2,500,000 562,500 750,000 937,500 1,125,000 1,312,500 1,500,000 1,687,500 - ---------------------------------------------------------------------------------------------------------------------------
(1) The compensation covered by the Retirement Program includes base salary, annual variable compensation and eligible profit sharing. Benefits are determined by average final compensation, are computed on a straight-life annuity basis, and are subject to an offset for Social Security. The table reflects the combination of qualified and nonqualified pension benefits. As of December 31, 1997, William H. Joyce, age 62 was credited with 40 years; Joseph E. Geoghan, age 60, 40 years; Lee P. McMaster, age 55, 25 years; Joseph C. Soviero, age 59, 32 years; Roger B. Staub, age 63, 41 years and John K. Wulff, age 49, 10 years. 20 Long-Term Incentive Plan - -------------------------------------------------------------------------------- Performance Estimated Future Payouts Under Number Period Non-Stock Price-Based Plan of Units/Dollars Until ---------------------------------------- Name at Risk/(1)/ Maturation/(2)/ Threshold/(3)/ Target/(4)/ Maximum/(5)/ - ----------------------------------------------------------------------------------------------------------------------- William H. Joyce 17,802/ 01/01/99 - 12/31/00 -0- 53,406 160,218 Chairman, President and $850,000 Chief Executive Officer Joseph E. Geoghan 5,309/ 01/01/99 - 12/31/00 -0- 15,927 47,781 Corporate Vice-President, $253,500 General Counsel and Secretary Lee P. McMaster 3,880/ 01/01/99 - 12/31/00 -0- 11,640 34,920 Corporate Vice-President/ $185,250 General Manager - Ethylene Oxide/Glycol Joseph C. Soviero 4,765/ 01/01/99 - 12/31/00 -0- 14,295 42,885 Corporate Vice-President, $227,500 Corporate Ventures Roger B. Staub 4,357/ 01/01/99 - 12/31/00 -0- 13,071 39,213 Corporate Vice-President/General $208,000 Manager - UNIPOL Systems John K. Wulff 4,084/ 01/01/99 - 12/31/00 -0- 12,252 36,756 Corporate Vice-President, $195,000 CFO and Controller - -----------------------------------------------------------------------------------------------------------------------
(1) The 1997 Earnings Per Share Incentive Plan requires the officers to place an amount (shown above) equivalent to a portion of their annual base pay at risk, up to 100%, should diluted earnings per share not equal or exceed $4.00 in 2000. The amount at risk will be deducted from compensation over three years and was converted to units (shown above) equivalent to common stock using a $47.75 share price, the closing price of the Corporation's common stock on the date the Plan was approved. (2) Any payout under the Plan will be made during 2002, 2003 and 2004. (3) If the requirements of the Plan are not met, there will be no payout and the units at risk shown in the first column will be forfeited. (4) If the minimum performance goals are achieved for each of 1999 and 2000, the executive will receive the value of the units at risk, in addition to a multiple of one times the units at risk for each such year, and dividend equivalents in the form of additional units. (5) If the performance goals are exceeded, the officers will receive the value of the units at risk, in addition to a multiple of up to four times the units at risk for each of 1999 and 2000, depending on the extent to which the goals are exceeded, and dividend equivalents in the form of additional units. 21 Security Ownership of Management At February 1, 1998, all directors and officers as a group (18 persons) beneficially owned 3,324,858 shares (2.26%) of the Corporation's common stock. As required by SEC rule, the number of shares of common stock beneficially owned includes shares as to which a right to acquire ownership exists, such as through the exercise of employee stock options.
- --------------------------------------------------------------------------------------------------------------------------- Number of Shares Beneficially Owned(l) ESOP Restricted Common Common Common Deferral Plan Exercisable Name Stock Stock/(2)/ Stock Stock/(3)/ Stock Options/(4)/ Total - --------------------------------------------------------------------------------------------------------------------------- W. H. Joyce Director, Chairman, President and Chief Executive Officer 252,379(5) 3,969 9,581 57,353 498,000 821,282 J. E. Geoghan Director, Corporate Vice-President, General Counsel and Secretary 24,504 1,199 4,206 -- 236,000 265,909 L. P. McMaster Corporate Vice-President/ General Manager - Ethylene Oxide/Glycol 6,115 3,077 3,134 6,794 152,400 171,520 J. C. Soviero Corporate Vice-President Corporate Ventures 10,795 3,880 3,350 -- 134,000 152,025 Roger B. Staub Corporate Vice-President/ General Manager - UNIPOL Systems 26,078 3,751 3,649 12,057 199,000 244,535 J. K. Wulff Corporate Vice-President, Chief Financial Officer and Controller 36,495 3,795 3,006 10,981 142,000 196,277 J. J. Creedon, Director 15,460 -- 7,319 -- 22,779 C. F. Fetterolf, Director 4,677 -- 5,356 -- 10,033 R. E. Gut, Director 5,000 -- 1,345 -- 6,345 V. E. Jordan, Jr., Director 4,024 -- 873 -- 4,897 R. D. Kennedy, Director 226,829/(6)/ 8,282 -- 750,000 985,111 R. L. Kuehn, Jr., Director 6,096 -- 1,682 -- 7,778 R. L. Ridgway, Director 3,033 -- 3,484 -- 6,517 J. M. Ringler, Director 479 -- 1,319 -- 1,798 W. S. Sneath, Director 17,865/(7)/ -- -- -- 17,865 All Officers and Directors (18 persons) 693,899 29,532 40,210 124,517 2,436,700 3,324,858 - ---------------------------------------------------------------------------------------------------------------------------
(1) Except as noted in the footnotes below, the beneficial owners of the shares shown above had sole voting power and sole investment power with respect to the shares of common stock. (2) The beneficial owners had shared voting power and shared investment power with respect to the shares of ESOP Common Stock. (See note 3 on the following table.) (3) Deferral Plan Stock represents units based on the price of the Corporation's common stock into which deferred compensation has been allocated pursuant to the Compensation Deferral Plan and the Union Carbide Non-Employee Directors' Compensation Deferral Program. There are no voting rights with respect to Deferral Plan Stock. The value of the units of Deferral Plan Stock varies with the price of the Corporation's common stock and, at the time of payout, the units are payable in common stock of the Corporation. (4) There are no voting rights with respect to Stock Options. (5) The shares of common stock listed as beneficially owned by Dr. Joyce include 2,000 shares that are owned by his children as to which beneficial ownership is disclaimed. (6) The shares of common stock listed as beneficially owned by Mr. Kennedy include 50,000 shares that are held by The Arnold F. Baggins Foundation in which Mr. and Mrs. Kennedy have shared investment and voting power and disclaim beneficial ownership. (7) The shares of common stock listed as beneficially owned by Mr. Sneath include 873 shares that are owned by his spouse as to which beneficial ownership is disclaimed. 22 Section 16(a) Beneficial Ownership Reporting Compliance During 1997, all reports required by Section 16(a) of the Securities Exchange Act were filed on time. Security Ownership of Certain Beneficial Owners
Number of Shares Title of Percent of Name and Address Beneficially Owned Class Class - --------------------------------------------------------------------------------------------------------------------------- Sanford C. Bernstein & Co., Inc. 767 Fifth Avenue New York, N.Y. 10153 12,738,275/(1)/ Common Stock 9.2% FMR Corp. 82 Devonshire Street Boston, Massachusetts 02109 13,894,709/(2)/ Common Stock 10.1% State Street Bank and Trust Company as Trustee of the Union Carbide Corporation Employee Stock Ownership Plan 225 Franklin Street Boston, Massachusetts 02110 18,303,959/(3)/ Common Stock 13.4% - ---------------------------------------------------------------------------------------------------------------------------
(1) In a Schedule 13G dated February 14, 1998, Sanford C. Bernstein & Co., Inc. stated that it beneficially owned 12,738,275 shares of the common stock of the Corporation at December 31, 1997. As to such shares, Sanford C. Bernstein & Co., Inc. has sole voting power for 7,376,595 shares, shared voting power for 1,235,660 shares, and sole investment power for 12,738,725 shares. (2) In a Schedule 13G dated February 11, 1998, FMR Corp. stated that it beneficially owned 13,894,709 shares of the common stock of the Corporation at December 31, 1997. As to such shares, FMR Corp. has sole voting power for 949,109 shares and sole investment power for 13,894,709 shares. (3) As of December 31, 1997, State Street Bank and Trust Company held 15,370,688 shares of common stock ("ESOP Stock") as Trustee of the Corporation's Employee Stock Ownership Plan ("ESOP"), which is part of the Corporation's Savings Program, for the benefit of employees who participate in the Savings Program. Participants in the Saving Program are entitled to notice of the meeting. By the terms of a trust agreement, the ESOP Trustee will vote ESOP Common Stock allocated to individual participants' accounts (6,509,599 shares as of January 31, 1998) as instructed by such participants, and will vote all other unallocated shares or any shares for which instructions were not received in the same proportion as the Trustee votes allocated shares for which voting instructions are received. As of December 31, 1997, the ESOP Common Stock represented 11.2% of the total of common stock outstanding. The shares shown above include the ESOP Common Stock shown in the preceding table. In a Schedule 13G dated February 10, 1998, State Street Bank and Trust Company stated that as of December 31, 1997, in its capacity as trustee for various collective investment funds, index accounts and personal trusts, it also beneficially owned 2,933,271 shares (2.1%) of the Corporation's common stock. As to such shares, State Street Bank and Trust Company has sole voting power for 1,826,428 shares, shared voting power for 954,043 shares, sole investment power for 1,976,153 shares and shared investment power for 957,118 shares. 23 Change in Control Arrangements The Corporation has severance compensation agreements with the officers named in the Summary Compensation Table and certain other officers and employees. If a Change in Control of the Corporation, as defined in the severance compensation agreements occurs, and one or more of the following events occurs within a period of up to 24 months thereafter, an executive may resign and receive a lump sum payment and other benefits. The events include: (1) a change or diminution of the executive's responsibilities or compensation; (2) relocation; (3) discontinuance of compensation plans in which the executive participated; (4) reduction of life insurance, medical, health and accident, disability and certain other benefits for the executive; (5) failure by a successor corporation to assume the severance compensation agreement; and (6) termination of the executive's employment contrary to the terms of the severance compensation agreement. If an executive resigns because of one of the foregoing after a Change in Control, the executive will receive: (1) a lump sum severance payment equal to three times the executive's annual compensation (including base salary, annual variable compensation, profit sharing, stock option awards, restricted stock awards and other "fringe" compensation (not including any payouts under the 1997 EPS Incentive Plan), which amounts may differ from amounts shown in the Summary Compensation Table); (2) enhanced life, disability, accident and health insurance and enhanced pension benefits; (3) outplacement and financial counseling; and (4) tax gross-up payments in the event the payments exceed the limitations of Section 280G of the Internal Revenue Code. Payments will be made by the Corporation or through a grantor trust adopted by the Corporation. The severance compensation agreements terminate if the executive's employment by the Corporation is terminated by the executive or the Corporation prior to a Change in Control. In the event of a Change in Control of the Corporation, all outstanding stock options become exercisable. The Corporation has adopted the Mid-Career Hire Plan. Under the Plan, in the event of a Change in Control of the Corporation, an employee who has a severance compensation agreement and is not eligible for full retirement under the Corporation's retirement program will receive a retirement benefit as if the employee had additional years of service with the Corporation equal to the employee's years of service with the employee's immediate prior employer. A "Change in Control" for these purposes means the occurrence of any of the following events: (i) stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; (ii) a consolidation, reorganization or merger of all or substantially all of the assets of the Corporation ("a Business Combination") unless, following such Business Combination, (a) the stockholders of the Corporation prior to such Business Combination own more that 50% of the common stock of the corporation resulting from such Business Combination; (b) no person or group owns 20% or more of the common stock of the corporation resulting from such Business Combination; and (c) at least a majority of the board of directors of the corporation resulting from such Business Combination were members of the Board of Directors of the Corporation immediately prior to such Business Combination; (iii) a sale or other transfer of all or substantially all of the Corporation's assets; (iv) acquisition by a person or group of more than 20% of the Corporation's outstanding voting stock; (v) acquisition by a person or group of the right to vote more than 20% of the Corporation's outstanding voting stock for (a) the election of directors; (b) a merger or consolidation of the Corporation; or (c) any other matter; or (vi) in a 24 consecutive month period, present directors and/or new directors approved by at least two-thirds of the directors, cease to constitute a majority of the Board of Directors. 24 2. Management Proposal to Ratify KPMG Peat Marwick LLP as Independent Auditors for 1998 The Board of Directors, on the recommendation of the Audit Committee, has selected the firm of KPMG Peat Marwick LLP as independent auditors to examine the financial statements of the Corporation and its consolidated subsidiaries for the year 1998. KPMG Peat Marwick LLP is a member of the SEC Practice Section of the American Institute of Certified Public Accountants and has submitted a copy of each of its peer review results to date. The peer review consists of a review and evaluation of the quality of a firm's accounting and auditing services by partners and managers from another CPA firm or from several CPA firms. KPMG Peat Marwick LLP and its predecessor firms have been serving the Corporation in the capacity of independent auditors for many years. KPMG Peat Marwick LLP states that no partner or professional employee of that firm has any direct financial interest or any material indirect financial interest in the Corporation or in any of its subsidiaries. Accordingly, the following resolution will be offered at the meeting: RESOLVED: That the selection by the Board of Directors of KPMG Peat Marwick LLP as independent auditors of this Corporation and its consolidated subsidiaries for the year 1998 is ratified. The Board of Directors Recommends a Vote FOR this Proposal. Representatives of KPMG Peat Marwick LLP will be present at the meeting, will have an opportunity to make a statement if they wish to do so, and will be available to respond to appropriate questions from stockholders. 25 3. Other Business As of the date of delivery of the text of this Proxy Statement to the printer, management knew of no other business that will be presented for action at the meeting. In the event that any other business should come before the meeting, including proposals excluded from the Proxy Statement pursuant to SEC rule 14a-8, it is the intention of the proxyholders named in the proxy card to take such action as shall be in accordance with their best judgment. Stockholder Proposals for 1999 Annual Meeting Certain matters are required to be considered at the annual meeting of stockholders, such as the election of directors. From time to time, the Board of Directors may wish to submit to the stockholders other matters for consideration, such as the ratification of the selection of auditors, management proposals regarding new incentive programs, and most changes in the Certificate of Incorporation. Additionally, stockholders may be asked to consider and take action on proposals submitted by stockholders who are not members of management that cover matters deemed proper under regulations of the Securities and Exchange Commission and applicable state laws. Stockholders' eligibility to submit proposals for inclusion in the Corporation's Proxy Statement, proper subjects for such proposals and the form of stockholder proposals are regulated by Rule 14a-8 under Section 14(a) of the Securities Exchange Act of 1934. Each proposal submitted should be sent to the Secretary of the Corporation, 39 Old Ridgebury Road, Danbury, CT 06817-0001. The stockholder or his or her representative must appear in person at the annual meeting and must present the proposal, unless he or she can show good cause for not doing so. Stockholder proposals for inclusion in the 1999 proxy statement must be received at the Corporation's principal executive office on or before November 12, 1998. The Corporation plans to hold the 1999 annual meeting in Danbury, Connecticut on April 28, 1999. The Corporation's by-laws require stockholders who intend to propose the nominations of persons for election as directors or other business to be considered by stockholders at the annual meeting (other than stockholder proposals included in the Proxy Statement pursuant to Rule 14a-8) to give written notice to the Secretary of the Corporation at least 90 days but no more than 120 days prior to the anniversary date of the previous year's annual meeting. Matters to be raised by a stockholder at the 1999 annual meeting must be submitted on or after December 24, 1998 but no later than January 25, 1999. The written notice must include information relating to a person or persons nominated for director and the person's written consent to be named as nominee and to serve, if elected; a brief description of the business, the reasons for conducting such business and any material interest in such business by the stockholders. Management carefully considers all proposals and suggestions from stockholders. When adoption of a suggestion or proposal is clearly in the best interests of the Corporation and the stockholders generally, and does not require stockholder approval, it is usually adopted by the Board, if appropriate, rather than being included in the proxy statement. Proxy Solicitation In addition to the solicitation of proxies by mail, officers or other employees of the Corporation, without extra remuneration, may solicit proxies by telephone or personal contact. The Corporation also will request brokerage houses, nominees, custodians and fiduciaries to forward soliciting material to beneficial owners of stock held of record and will pay such persons for forwarding the material. All costs for the solicitation of proxies by the Board of Directors will be borne by the Corporation. 26 UC-1336 [LOGO OF RECYCLED PAPER APPEARS HERE] PRINTED ON RECYCLED PAPER PRINTED IN U.S.A. Union Carbide Corporation 39 Old Ridgebury Road, Danbury, CT 06817-0001 To Our Stockholders: It is my pleasure to invite you to our annual meeting. This year it will be held on Wednesday, April 22, at 10:00 a.m., in the John C. Creasy Health Education Center, 24 Hospital Avenue, Danbury, Connecticut 06810. You will find the formal notice of the annual meeting in the enclosed proxy statement. Please read the statement and when finished, promptly mark, sign, and return the attached proxy card, to insure that your shares will be represented. It is important that you exercise your right to vote, whether or not you plan to attend the meeting. We hope that many of you will be able to attend our annual meeting in person. If you plan to do so, please return the enclosed ticket request. We will send your ticket to you promptly together with directions to the meeting. We appreciate the continuing interest of stockholders in the business of Union Carbide and I look forward to seeing many of you at the Danbury meeting. Sincerely yours, /s/ William H. Joyce March 12, 1998 William H. Joyce Chairman of the Board . Detach Proxy Card here . PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION ANNUAL MEETING OF STOCKHOLDERS ON APRIL 22, 1998 I or we authorize V. E. Jordan Jr., W. H. Joyce, and J. E. Geoghan, and any one or more of them, as proxies, to vote all stock of mine or ours in Union Carbide Corporation on any matters that come before its 1998 Annual Meeting of Stockholders or any adjournment of the meeting. Each proxy may substitute another to act for him. Each item of business listed on the reverse side of this card is described in the Proxy Statement. The proxies will vote: (1) as you specify on this card, (2) as the Board of Directors recommends where you do not specify a choice, and (3) as the proxies decide on any other matter. To vote as the Board of Directors recommends, just sign, date and return this card. - -------------------------------------------------------------------------------- Signature(s) - -------------------------------------------------------------------------------- (Please add your title if signing as agent, administrator, executor, or trustee.) , 1998 - ------------------------------------------------------------------------ Date The Board of Directors Recommends a Vote FOR Management Proposals 1 and 2. 1. Election of Directors [ ] For all Nominees [ ] WITHHELD from all Nominees [ ] FOR, except for the following Nominee(s) -------------------------------------------- 2. Ratification of KPMG Peat Marwick LLP as Independent Auditors FOR [ ] AGAINST [ ] ABSTAIN [ ] Nominees for Director of Union Carbide Corporation C. Fred Fetterolf Joseph E. Geoghan Rainer E. Gut Vernon E. Jordan, Jr. William H. Joyce Robert D. Kennedy Ronald L. Kuehn, Jr. Rozanne L. Ridgway James M. Ringler Union Carbide Corporation 39 Old Ridgebury Road, Danbury, CT 06817-0001 To Our Stockholders: It is my pleasure to invite you to our annual meeting. This year it will be held on Wednesday, April 22, at 10:00 a.m., in the John C. Creasy Health Education Center, 24 Hospital Avenue, Danbury, Connecticut 06810. You will find the formal notice of the annual meeting in the enclosed proxy statement. Please read the statement and when finished, promptly mark, sign, and return the attached proxy card, to insure that your shares will be represented. It is important that you exercise your right to vote, whether or not you plan to attend the meeting. For your convenience and to reduce costs we have consolidated your holdings except for those shares that you may hold at a banking institution or brokerage house. We hope that many of you will be able to attend our annual meeting in person. If you plan to do so, please return the enclosed ticket request. We will send your ticket to you promptly together with directions to the meeting. We appreciate the continuing interest of stockholders in the business of Union Carbide and I look forward to seeing many of you at the Danbury meeting. Sincerely yours, /s/ William H. Joyce March 12, 1998 William H. Joyce Chairman of the Board . Detach Proxy Card here . The Board of Directors Recommends a Vote FOR Management Proposals 1 and 2. 1. Election of Directors (Nominees: C. Fred Fetterolf, Joseph E. Geoghan, Rainer E. Gut, Vernon E. Jordan, Jr., William H. Joyce, Robert D. Kennedy, Ronald L. Kuehn, Jr., Rozanne L. Ridgway, James M. Ringler) [_] FOR all Nominees [_] WITHHELD from all Nominees [_] FOR, except for the following Nominee(s) 2. Ratification of KPMG Peat Marwick LLP as Independent Auditors FOR [_] AGAINST [_] ABSTAIN [_] If you wish to vote as the Board of Directors' recommends, you need not mark this card. Just sign and date this card and return it promptly in the enclosed envelope. YOUR VOTE IS IMPORTANT -- PLEASE VOTE TODAY. ________________________________________________________________________________ Signature(s) ___________________________________________________________________________,1998 Date PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION ANNUAL MEETING OF STOCKHOLDERS ON APRIL 22, 1998 I or we authorize V. E. Jordan Jr., W. H. Joyce, and J. E. Geoghan, and any one or more of them, as proxies, to vote all stock of mine or ours in Union Carbide Corporation on any matters that come before its 1998 Annual Meeting of Stockholders or any adjournment of the meeting. Each proxy may substitute another to act for him. Each item of business listed on the reverse side of this card is described in the Proxy Statement. The proxies will vote: (1) as you specify on this card, (2) as the Board of Directors recommends where you do not specify a choice, and (3) as the proxies decide on any other matter. For Participants in the Union Carbide Common Stock Savings Program and for the ESOP Program: As to those shares of Union Carbide Corporation, if any, that are held for me, I instruct the Trustee of the applicable Program to sign a proxy for me in substantially the form set forth on the reverse side. The Trustee shall mark the proxy as I instruct. If the Trustee does not receive this proxy, my shares will be voted in the same proportion as the Trustee votes the shares for which it receives instructions. Union Carbide Corporation 39 Old Ridgebury Road, Danbury, CT 06817-0001 To Our Stockholders: It is my pleasure to invite you to our annual meeting. This year it will be held on Wednesday, April 22, at 10:00 a.m., in the John C. Creasy Health Education Center, 24 Hospital Avenue, Danbury, Connecticut 06810. You will find the formal notice of the annual meeting in the enclosed proxy statement. Please read the statement and when finished, promptly mark, sign, and return the attached proxy card, to insure that your shares will be represented. It is important that you exercise your right to vote, whether or not you plan to attend the meeting. We hope that many of you will be able to attend our annual meeting in person. If you plan to do so, please return the enclosed ticket request. We will send your ticket to you promptly together with directions to the meeting. We appreciate the continuing interest of stockholders in the business of Union Carbide and I look forward to seeing many of you at the Danbury meeting. Sincerely yours, March 12, 1998 /s/ W. H. Joyce William H. Joyce Chairman of the Board . Detach Proxy Card here . The Board of Directors Recommends a Vote FOR Management Proposals 1 and 2. 1. Election of Directors (Nominees: C. Fred Fetterolf, Joseph E. Geoghan, Rainer E. Gut, Vernon E. Jordan, Jr., William H. Joyce, Robert D. Kennedy, Ronald L. Kuehn, Jr., Rozanne L. Ridgway, James M. Ringler) [ ] FOR all Nominees [ ] WITHHELD from all Nominees [ ] FOR, except for the following Nominee(s) 2. Ratification of KPMG Peat Marwick LLP as Independent Auditors FOR [ ] AGAINST [ ] ABSTAIN [ ] - ---------------------------------------------------------------- If you wish to vote as the Board of Directors' recommends, you need not mark this card. Just sign and date this card and return it promptly in the enclosed envelope. YOUR VOTE IS IMPORTANT -- PLEASE VOTE TODAY. - ------------------------------------------- Signature(s) , 1998 - ------------------------------------------- Date PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION ANNUAL MEETING OF STOCKHOLDERS ON APRIL 22, 1998 I or we authorize V. E. Jordan Jr., W. H. Joyce, and J. E. Geoghan, and any one or more of them, as proxies, to vote all stock of mine or ours in Union Carbide Corporation on any matters that come before its 1998 Annual Meeting of Stockholders or any adjournment of the meeting. Each proxy may substitute another to act for him. Each item of business listed on the reverse side of this card is described in the Proxy Statement. The proxies will vote: (1) as you specify on this card, (2) as the Board of Directors recommends where you do not specify a choice, and (3) as the proxies decide on any other matter. For Participants in the Praxair, Union Carbide, UCAR or OSi Savings Programs: As to those shares in the aforementioned programs, that are held for me, I instruct the Trustee of the applicable Program to sign a proxy for me in substantially the form set forth on the reverse side. The Trustee shall mark the proxy as I instruct. If the Trustee does not receive this proxy, my shares will be voted in the same proportion as the Trustee votes the shares for which it receives instructions. -----END PRIVACY-ENHANCED MESSAGE-----