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0000950153-01-000327.txt : 20010402
0000950153-01-000327.hdr.sgml : 20010402
ACCESSION NUMBER: 0000950153-01-000327
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20010501
FILED AS OF DATE: 20010330
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PHELPS DODGE CORP
CENTRAL INDEX KEY: 0000078066
STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY SMELTING & REFINING OF NONFERROUS METALS [3330]
IRS NUMBER: 131808503
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT:
SEC FILE NUMBER: 001-00082
FILM NUMBER: 1586222
BUSINESS ADDRESS:
STREET 1: 2600 NORTH CENTRAL AVE
CITY: PHOENIX
STATE: AZ
ZIP: 85004-3089
BUSINESS PHONE: 6022348100
MAIL ADDRESS:
STREET 1: 2600 NORTH CENTRAL AVENUE
CITY: PHOENIX
STATE: AZ
ZIP: 85004-3089
DEF 14A
1
p64480def14a.htm
DEF 14A
def14a
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Notice of |
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Annual Meeting |
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of Shareholders |
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and Proxy |
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Statement |
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May 1, 2001 |
J. Steven Whisler
Chairman, President and
Chief Executive Officer
April 1, 2001
Dear Shareholder:
You are cordially invited to attend our annual meeting of
shareholders to be held at 3:00 p.m. (MST) on Tuesday,
May 1, 2001, at The Heard Museum, 2301 North Central
Avenue, Phoenix, Arizona. Enclosed with this proxy statement are
your proxy card and the 2000 annual report, which includes the
Corporations Annual Report on Form 10-K.
Your vote is important. Whether you plan to attend or not,
please access electronic voting via the internet or the
automated telephone voting feature which are described on your
enclosed proxy card, or you may sign, date and return the proxy
card in the envelope provided. If you plan to attend the meeting
you may vote in person.
Registration and seating will begin at 2:30 p.m. Each
shareholder will be asked to sign an admittance card and may be
asked to present a valid picture identification. Shareholders
holding stock in brokerage accounts will need to bring a copy of
a brokerage statement reflecting stock ownership as of the
March 15 record date. Cameras and recording devices will
not be permitted at the meeting.
Last year, 84% of our outstanding shares were represented in
person or by proxy, and we hope to increase our shareholder
participation this year.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Phelps Dodge Corporation:
The annual meeting of shareholders of Phelps Dodge Corporation
will be held at The Heard Museum, 2301 North Central Avenue,
Phoenix, Arizona, on Tuesday, May 1, 2001, at
3:00 p.m., to consider and take action on the following:
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1. Elect four directors; |
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2. Ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the Corporation for the year 2001;
and |
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3. Transact any other business that may properly be
brought before the annual meeting. |
Only holders of record of the Corporations common shares
at the close of business on March 15, 2001, will be
entitled to vote at the meeting. On March 15, 2001 we had
78,713,713 common shares outstanding.
If you participate in the Mellon Investor Services LLC Investor
Services Program for Phelps Dodge Corporation Shareholders, all
common shares held for your account under that service will be
voted in accordance with your proxy.
Proxies are solicited by the Board of Directors. You may revoke
your proxy before it is voted at the annual meeting by
delivering a signed revocation letter or new proxy, dated later
than your first proxy, to Robert C. Swan, Vice President
and Secretary.
Shareholders who do not expect to attend the meeting in person
are asked to access electronic voting via the internet or
telephone voting as described on the enclosed proxy card or
date, sign and complete the proxy card and return it without
delay in the enclosed envelope, which requires no postage stamp
if mailed in the United States. If you are attending in person
and if you have mailed your proxy card, you may revoke your
proxy and vote in person at the meeting.
This proxy statement and accompanying materials are being first
sent to shareholders on April 1, 2001.
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By order of the Board of Directors, |
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Robert C. Swan |
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Vice President and Secretary |
Phoenix, Arizona
April 1, 2001
1. ELECTION OF DIRECTORS
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Board Structure |
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The Corporation currently has ten directors, divided into three
classes: four in Class I, four in Class II, and two in
Class III. The terms of office of four Class I
directors expire at the 2001 annual meeting of shareholders. |
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Class I Election |
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The four nominees for election as Class I directors are
listed below. If elected, the nominees will serve for a term of
three years and until their successors are elected and qualify.
Unless you instruct us on the proxy card to vote differently, we
will vote signed, returned proxies FOR the election of such
nominees. If for any reason any nominee cannot or will not serve
as a director, we may vote such proxies for the election of a
substitute nominee designated by the Board of Directors. |
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Class I Nominees |
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A nominee must receive a plurality of the votes cast at the
annual meeting to be elected. Abstentions and broker non-votes
therefore have no effect on the election of directors. |
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Age, Principal Occupation, Business |
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Director |
Nominee |
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Experience and Other Directorships Held |
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Since |
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Paul Hazen
(Class I) |
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Mr. Hazen has been Chairman of Wells Fargo & Co. since
1998. He was Chairman and Chief Executive Officer of Wells Fargo
& Co., San Francisco (bank holding company) and of Wells
Fargo Bank, N.A. (national banking association) from 1995 until
1998. He is a director of Wells Fargo & Co., Safeway, Inc.,
Vodafone, Plc., E. piphany, Inc., XstrataAG, Epoch
Partners and Accel-KKR. Age 59. |
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1988 |
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Manuel J. Iraola
(Class I) |
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Mr. Iraola has been President of Phelps Dodge Industries, a
division of the Corporation since 1995, and a Senior Vice
President of the Corporation since 1995. From 1992 until 1995 he
was President of Phelps Dodge International Corporation. He is a
director of Southern Peru Copper Corporation. Age 53. |
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1997 |
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Marie L. Knowles
(Class I)
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Mrs. Knowles was Executive Vice President and Chief
Financial Officer of Atlantic Richfield Company (diversified
energy company) from 1996 until her retirement on June 1,
2000. From 1993 until 1996 she was Senior Vice President of
Atlantic Richfield Company, and President of ARCO Transportation
Company, a former subsidiary of Atlantic Richfield Company.
Mrs. Knowles is a director of America West Holdings
Corporation, URS Corporation, and a trustee of the Fidelity
Funds. Age 54. |
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1994 |
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Gordon R. Parker
(Class I)
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Mr. Parker was Chairman of Newmont Mining Corporation from
1986 until his retirement in 1994. He was Chief Executive
Officer from 1985 until 1993. Mr. Parker is a director of
Caterpillar, Inc., Gold Fields Limited and The Williams
Companies, Inc. Age 65. |
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1995 |
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1
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Continuing Directors |
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The six directors whose terms will continue after the annual
meeting and will expire at the 2002 annual meeting
(Class II) or the 2003 annual meeting (Class III) are
listed below. |
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Age, Principal Occupation, Business |
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Director |
Director |
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Experience and Other Directorships Held |
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Since |
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Archie W. Dunham
(Class II) |
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Mr. Dunham has been Chairman of Conoco Inc. (integrated
energy company) since 1999, and has been the President and Chief
Executive Officer of Conoco Inc. since 1996. He was an Executive
Vice President of Conoco Inc. from 1992 to 1995. Mr. Dunham
is a director of Conoco Inc., Louisiana Pacific Corporation and
Union Pacific Corp. Age 62. |
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1998 |
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William A. Franke
(Class II) |
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Mr. Franke has been Chairman and Chief Executive Officer of
America West Holdings Corporation since 1997 and President since
1999. He has been Chief Executive Officer of its principal
subsidiary, America West Airlines, Inc., (airline carrier) since
April 1999, and Chairman of its Board since 1992. He was
President from April 1999 until May 2000. He has been President
of Franke and Company, Inc., (investment firm) since 1987. He is
a director of America West Holdings Corporation, America West
Airlines, Inc., ON SemiConductor Corporation and The Air
Transport Association of America. Age 64. |
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1980 |
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Southwood J. Morcott
(Class II)
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Mr. Morcott was Chairman of the Board of Dana Corporation
(manufacturer and distributor of automotive and vehicular parts)
from 1990 until his retirement on April 30, 2000. He was
Chief Executive Officer of Dana Corporation from 1989 until
1999, and President from 1986 until 1995. Mr. Morcott is a
director of CSX Corporation, Johnson Controls, Inc. and Navistar
Corp. Age 63. |
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1991 |
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J. Steven Whisler
(Class II)
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Mr. Whisler was elected Chairman of the Corporation on
May 3, 2000, and has been Chief Executive Officer since
January 1, 2000. He has been President since
December 1997 and was also Chief Operating Officer from
December 1997 until January 1, 2000. He was President
of Phelps Dodge Mining Company, a division of the Corporation,
from 1991 to 1998. He is a director of America West Holdings
Corporation and its principal subsidiary, America West Airlines,
Inc., Burlington Northern Santa Fe Corporation and Southern Peru
Copper Corporation. Age 46. |
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1995 |
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Robert N. Burt
(Class III)
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Mr. Burt has been Chairman of the Board and Chief Executive
Officer of FMC Corporation (chemicals and machinery for
industry, agriculture and government) since 1991. He is a
director of FMC Corporation and Pfizer, Inc. Age 63. |
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1993 |
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2
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Age, Principal Occupation, Business |
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Director |
Director |
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Experience and Other Directorships Held |
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Since |
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Robert D. Krebs
(Class III)
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Mr. Krebs has been Chairman of Burlington Northern Santa Fe
Pacific Corporation and The Burlington Northern and Santa Fe
Railway Company (transportation) since December 2000. He
was Chairman and Chief Executive Officer of Burlington Northern
Santa Fe Corporation from 1999 until December 2000, and its
Chairman, President and Chief Executive Officer from 1997 to
1999 and its President and Chief Executive Officer from 1995 to
1997. He is a director of Burlington Northern Santa Fe
Corporation. Age 58. |
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1987 |
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3
INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
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Board Meetings |
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The Board of Directors met eight times during 2000. Various
committees of the Board also met during the year. All directors
attended at least 75% of all Board and committee meetings and
the average attendance was 97%. |
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Board Committees
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The Audit Committee is comprised of Messrs. Dunham,
Franke, (Mrs.) Knowles (Chair), Krebs, and Parker. The
Board of Directors has (i) adopted a written Charter of the
Audit Committee, which was printed in full on pages 19 and
20 of the Corporations 2000 proxy statement, and
(ii) determined that each member of the Committee is
independent for purposes of the rules of the New York Stock
Exchange. The primary duties and responsibilities of the
Committee, which met five times during 2000, are to: |
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Serve as an independent and objective party to
monitor the Corporations financial reporting process and
internal control systems; |
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Review and appraise the audit efforts of the
Corporations independent accountants and internal auditing
function; and |
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Provide an open avenue of communication among the
independent accountants, financial and senior management, the
internal auditing function, and the Board of Directors. |
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The Compensation and Management Development Committee,
comprised of Messrs. Burt, Dunham, Hazen (Chair), (Mrs.)
Knowles and Morcott met five times during 2000. The Committee
performs the following functions: |
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Reviews and approves the compensation of the
Corporations senior officers; |
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Reviews management recommendations concerning the
compensation of other officers and key personnel; |
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Reviews the Corporations program for
management development; and |
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Reviews and approves incentive compensation awards,
stock option grants and awards of restricted stock. |
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The Committee on Directors is comprised of
Messrs. Burt (Chair), Dunham, Hazen, Krebs and Morcott. The
Committee, which met twice during 2000, performs the following
functions: |
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Makes recommendations concerning the composition of
the Board and its committees, and reviews director compensation;
and |
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Reviews the qualifications of potential director
candidates and recommends to the Board nominees for election as
directors. |
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The Committee on Directors will consider potential nominees
recommended by shareholders. Recommendations should be sent to
the Secretary of the Corporation and should include the address
and a brief description of the qualifications of the individual
recommended. |
4
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The Environmental, Health and Safety Committee, comprised
of Messrs. Burt, Franke, (Mrs.) Knowles and Parker (Chair),
met four times in 2000. The Committee generally performs the
following functions: |
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Reviews the Corporations environmental,
health and safety policies; |
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Reviews managements implementation of these
policies; and |
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Makes reports and recommendations to the Board
concerning the results of its reviews. |
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The Finance Committee is comprised of
Messrs. Franke, Hazen, Krebs (Chair), Morcott and Parker.
The Committee, which met four times during 2000, is responsible
for: |
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Reviewing the financial affairs of the Corporation
and its subsidiaries; |
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Recommending to the Board financial policies and
actions to accommodate the Corporations goals and
operating strategies while maintaining a sound financial
condition; and |
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Reviewing the funding and management of assets for
retirement income plans of the Corporation and its subsidiaries. |
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Directors Stock
Ownership Policy
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The Board of Directors has adopted a policy that each director,
within three years of his or her election, shall own a total of
not less than 2,000 common shares of the Corporation. Stock
units granted to a director under the Corporations
Directors Stock Unit Plan or the Deferred Compensation Plan
apply toward attainment of the requirement. All of our directors
are in compliance with this policy. |
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Board Compensation |
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Retainer and Fees
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Directors who are not salaried employees of the Corporation
(non-employee directors) receive the following
annual compensation for their Board service: |
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Annual Retainer: |
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$36,000 |
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Annual Committee
Chair Stipend: |
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$3,000 |
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Attendance Fees: |
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$1,000 for each Board meeting
$1,000 for each Board Committee meeting |
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Expenses related to attendance |
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Shares of Stock: |
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The foregoing retainer and fees, at the election of the
director, may be received in an equivalent number of the
Corporations common shares in lieu of cash. |
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Stock Units: |
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Number of units equal in value to $50,000 on date of grant. |
5
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Directors Stock Unit Plan
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In order to encourage increased stock ownership, the Board of
Directors adopted the Directors Stock Unit Plan. Pursuant to
that Plan, each non-employee director receives an annual grant
of stock units having a value equal to $50,000 on the date of
the grant. One unit is equal in value to one share of the
Corporations common stock. While stock units do not confer
on a director the right to vote, each stock unit is credited on
each dividend payment date with stock units equal to the
applicable dividend payable on the Corporations common
shares. Upon termination of service as a director, the director
is entitled to payment of his or her accumulated stock units in
an equivalent number of the Corporations common shares or
in cash. |
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Directors Deferred
Compensation Plan
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Directors may defer payment of retainer and/or meeting fees to
future years and may elect to have such deferred compensation |
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receive interest at prevailing market rates |
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invested in the Corporations common shares, or |
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invested in one of several mutual funds designated
for that purpose. |
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Expenses and Benefits
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All directors are reimbursed for travel and other related
expenses incurred in attending shareholder, Board and committee
meetings. The Corporation also provides non-employee directors
with life insurance benefits and allows them to participate in
its Matching Gifts Program by matching gifts from directors to
qualified organizations up to a total of $10,000 per year. |
Directors and Officers Liability Insurance
The Corporation maintains directors and officers liability
insurance policies and pension trust liability policies (placed
on three-year terms) issued by National Union Fire Insurance
Company of Pittsburgh, Pa., Executive Risk Indemnity Inc.,
Continental Casualty Company, Federal Insurance Company and XL
Insurance Company. The policies insure (i) directors,
officers, division presidents and vice presidents of the
Corporation and its subsidiaries, and employees who are
fiduciaries of employee benefit plans of the Corporation and its
subsidiaries, against certain liabilities they may incur in the
performance of their duties and (ii) the Corporation
against its obligation to indemnify such persons against such
liabilities, and (iii) the Corporation for allegations
related to securities claims. On June 1, 2000, the
Corporation extended those policies to June 1, 2003 at
annual prepaid premiums of $413,699, $132,000, $103,500, $44,550
and $60,720, respectively.
6
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The following directors served on the Compensation and
Management Development Committee during 2000: Messrs. Burt,
Dunham, Hazen (Chair), (Mrs.) Knowles (appointed
May 3, 2000) and Morcott. None of these directors is or has
been an officer or employee of the Corporation or any of its
subsidiaries or has had any other relationship with the
Corporation or any of its subsidiaries requiring disclosure
under the applicable rules of the Securities and Exchange
Commission.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the common share ownership as of
February 2, 2001 for our directors and the five named
executive officers. Beneficial Ownership includes
shares a director or officer has the power to vote or transfer,
and stock options that were exercisable on February 2, 2001
or within 60 days thereafter. On February 2, 2001, the
directors and the five named executive officers of the
Corporation owned, in the aggregate, 1,067,188 shares of the
Corporations common stock (approximately 1.36 percent
of the shares outstanding). The Corporations non-employee
directors also have interests in stock-based units under
Corporation plans. While these units may not be voted or
transferred, they are listed in the table below because they
represent a component of the total economic interest of our
directors in the Corporations stock.
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Options |
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Shares |
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Exercisable |
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Beneficially |
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Within |
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Stock |
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Name of Beneficial Owner |
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Owned |
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60 Days |
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Units(1) |
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Total |
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Robert N. Burt |
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2,398 |
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3,444 |
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4,458 |
(2) |
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10,300 |
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Archie W. Dunham
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1,000 |
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0 |
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3,818 |
(2) |
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4,818 |
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William A. Franke
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2,000 |
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9,184 |
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3,877 |
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15,061 |
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Paul Hazen
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587 |
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9,184 |
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9,035 |
(2) |
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18,806 |
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Manuel J. Iraola
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46,483 |
(3) |
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196,914 |
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0 |
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243,397 |
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Marie L. Knowles
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1,000 |
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2,296 |
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2,920 |
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6,216 |
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Robert D. Krebs
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2,122 |
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8,036 |
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3,492 |
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13,650 |
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Arthur R. Miele
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6,292 |
(3) |
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71,866 |
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0 |
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78,158 |
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Southwood J. Morcott
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2,018 |
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5,740 |
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8,547 |
(2) |
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16,305 |
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Gordon R. Parker
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2,171 |
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2,296 |
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3,057 |
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7,524 |
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Ramiro G. Peru
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32,218 |
(3) |
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85,508 |
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0 |
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117,726 |
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Timothy R. Snider
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19,805 |
(3) |
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99,237 |
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0 |
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119,042 |
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J. Steven Whisler
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90,232 |
(3) |
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325,953 |
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0 |
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416,185 |
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Directors and executive officers as a group
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208,326 |
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819,658 |
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39,204 |
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1,067,188 |
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(1) Represents stock units awarded under the Directors
Stock Unit Plan.
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(2) |
Includes stock units awarded under the Directors Deferred
Compensation Plan. |
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(3) |
Includes the following shares of restricted stock awarded under
the 1998 Stock Option and Restricted Stock Plan:
Mr. Whisler, 20,000 shares, Mr. Peru, 22,500 shares,
Mr. Snider, 7,500 shares, Mr. Iraola, 2,500 shares,
Mr. Miele 1,754. |
7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of reports filed by our directors, executive
officers and beneficial holders of 10% or more of our
outstanding shares, and upon representations from those persons,
all reports required to be filed by our reporting persons during
2000 were filed on time with the exception of one executive
officer who filed a late report of an open-market acquisition.
To the knowledge of the Corporation, the following entities
beneficially owned in excess of five percent of the
Corporations common shares as of December 31, 2000:
|
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Number |
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of |
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Percent of |
Name and Address |
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Shares |
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Outstanding |
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Capital Research and Management Company(a)
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7,582,060 |
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9.60 |
% |
333 South Hope Street |
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Los Angeles, CA 90071 |
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FMR Corp.(b) |
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6,761,216 |
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8.588 |
% |
82 Devonshire Street |
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Boston, MA 02109 |
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Wellington Management Company, LLP(c) |
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4,383,200 |
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5.57 |
% |
75 State Street
Boston, MA 02109 |
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(a) |
A report on Schedule 13G, dated February 9, 2001,
disclosed that this entity, as a registered investment advisor,
had sole dispositive power over 7,582,060 shares which
represented 9.60% of the outstanding common shares at
December 31, 2000. |
|
(b) |
A report on Schedule 13G, dated February 14, 2001,
disclosed that this entity, as a registered investment advisor,
had sole voting power over 726,946 shares and sole dispositive
power over 6,761,216 shares which represented 8.588% of the
outstanding common shares at December 31, 2000. |
|
(c) |
A report on Schedule 13G, dated February 14, 2001,
disclosed that this entity, as a registered investment advisor,
had shared voting power over 694,800 shares and shared
dispositive power over 4,383,200 shares which represented 5.57%
of the outstanding common shares at December 31, 2000. |
8
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid our five
most highly compensated executive officers in 2000, 1999 and
1998.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term |
|
|
|
|
Annual Compensation |
|
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
Restricted |
|
|
|
|
|
|
|
|
Base |
|
|
|
Annual |
|
Stock |
|
Options |
|
All Other |
|
|
|
|
Salary |
|
Bonus |
|
Compensation |
|
Awards |
|
Granted |
|
Compensation |
Name and Principal Position |
|
Year |
|
($) |
|
($)(1) |
|
($)(2) |
|
($)(3) |
|
(#) |
|
($)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Steven Whisler(6)
|
|
|
2000 |
|
|
|
650,000 |
|
|
|
300,000 |
|
|
|
23,398 |
|
|
|
0 |
|
|
|
200,000 |
|
|
|
20,360 |
|
Chairman, President and Chief
|
|
|
1999 |
|
|
|
480,000 |
|
|
|
235,000 |
|
|
|
27,422 |
|
|
|
1,036,250 |
|
|
|
150,000 |
|
|
|
45,112 |
|
Executive Officer |
|
|
1998 |
|
|
|
480,000 |
|
|
|
240,000 |
|
|
|
13,240 |
|
|
|
0 |
|
|
|
80,000 |
|
|
|
50,110 |
|
|
|
|
|
Manuel J. Iraola
|
|
|
2000 |
|
|
|
430,000 |
|
|
|
178,264 |
|
|
|
32,905 |
|
|
|
147,422 |
|
|
|
60,000 |
|
|
|
18,084 |
|
Senior Vice President;
|
|
|
1999 |
|
|
|
390,000 |
|
|
|
176,740 |
|
|
|
11,345 |
|
|
|
0 |
|
|
|
63,000 |
|
|
|
39,096 |
|
President, PDI; and Director |
|
|
1998 |
|
|
|
390,000 |
|
|
|
340,000 |
|
|
|
64,057 |
|
|
|
0 |
|
|
|
52,414 |
(4) |
|
|
48,031 |
|
|
|
|
|
Timothy R. Snider
|
|
|
2000 |
|
|
|
350,000 |
|
|
|
159,113 |
|
|
|
10,690 |
|
|
|
442,266 |
|
|
|
60,000 |
|
|
|
13,634 |
|
Senior Vice President; and
|
|
|
1999 |
|
|
|
310,000 |
|
|
|
158,472 |
|
|
|
14,841 |
|
|
|
0 |
|
|
|
64,811 |
(4) |
|
|
26,113 |
|
President, PDMC
|
|
|
1998 |
|
|
|
285,000 |
|
|
|
100,000 |
|
|
|
7,138 |
|
|
|
0 |
|
|
|
55,000 |
|
|
|
28,888 |
|
|
|
|
|
Ramiro G. Peru
|
|
|
2000 |
|
|
|
320,000 |
|
|
|
158,774 |
|
|
|
10,202 |
|
|
|
0 |
|
|
|
50,000 |
|
|
|
9,420 |
|
Senior Vice President
|
|
|
1999 |
|
|
|
247,500 |
|
|
|
92,993 |
|
|
|
7,916 |
|
|
|
1,400,624 |
|
|
|
45,000 |
|
|
|
20,573 |
|
and Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur R. Miele(7)
|
|
|
2000 |
|
|
|
270,000 |
|
|
|
116,449 |
|
|
|
13,012 |
|
|
|
0 |
|
|
|
30,000 |
|
|
|
16,739 |
|
Senior Vice President,
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts shown under Bonus were paid under the Annual
Incentive Compensation Plan and include special bonuses paid
during 1999 due to the acquisition of Cyprus Amax Minerals
Company. Amounts shown under Base Salary and
Bonus include any salary or bonus deferred by the
executive under the Phelps Dodge Employee Savings Plan (the
Savings Plan) and the Phelps Dodge Corporation
Supplemental Savings Plan (the Supplemental Savings
Plan). |
|
(2) |
Amounts shown under Other Annual Compensation
include tax payment reimbursements and personal benefits. |
|
(3) |
Dividends are paid on the restricted shares in the same amount
and at the same time as dividends paid to all other owners of
common shares. |
|
(4) |
The option grants denoted by (4) include reload
options, as well as normal compensatory options. See Stock
Options on page 10. |
|
(5) |
Amounts shown include the following contributions and accruals
by the Corporation for 2000 to the Savings Plan and 2000
accruals under the Supplemental Savings Plan, and for premium
payments for life insurance policies issued through the
Executive Life Insurance Plan for the reported executives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee |
|
Supplemental |
|
Executive Life |
Name |
|
Savings Plan |
|
Savings Plan |
|
Insurance Plan |
|
|
|
|
|
|
|
J. Steven Whisler
|
|
|
4,250 |
|
|
|
8,000 |
|
|
|
8,110 |
|
|
|
|
|
Manuel J. Iraola
|
|
|
4,250 |
|
|
|
5,750 |
|
|
|
8,084 |
|
|
|
|
|
Timothy R. Snider
|
|
|
4,250 |
|
|
|
3,750 |
|
|
|
5,634 |
|
|
|
|
|
Ramiro G. Peru
|
|
|
4,250 |
|
|
|
2,188 |
|
|
|
2,982 |
|
|
|
|
|
Arthur R. Miele
|
|
|
4,250 |
|
|
|
1,600 |
|
|
|
10,889 |
|
|
|
(6) |
Mr. Whisler was elected Chief Executive Officer effective
January 1, 2000 and Chairman effective May 3, 2000. |
|
(7) |
Mr. Miele was elected a Senior Vice President of the
Corporation effective June 21, 2000. |
9
Stock Options
Each of the executives listed in the Summary Compensation Table
was eligible to receive two types of option grants during 2000:
normal option grants and reload option grants. The first type of
grant is a compensatory award normally made on an annual basis
which is intended to reward each named executive based on the
Corporations future performance. Normal option grants
customarily include the right to receive reload options.
A reload option is granted to an employee who exercises an
option with already-owned shares. It replaces the opportunity
for future appreciation that the employee would otherwise lose
by exercising the original option, while encouraging the
employee to increase his share ownership. Reload option grants
customarily include the right to receive additional reload
options.
The following table contains information with respect to the
normal compensatory option grants and reload option grants made
to each named executive during 2000 and the hypothetical value
at the time of grant based on a variation of the Black-Scholes
model (see footnote (3) below). The Corporation is not
aware of any option pricing model which can provide a true
assessment of the value of the options. Over their lives, the
options could have a greater or a lesser value than that shown
in the table, and under some circumstances they could have zero
value.
Option Grants in 2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal |
|
% of Total |
|
|
|
|
|
|
|
|
|
|
and Reload |
|
Options Granted |
|
|
|
|
|
|
|
|
|
|
Options |
|
to Employees |
|
|
|
Expiration |
|
Grant Date |
Name |
|
|
|
Granted(1) |
|
In 2000(2) |
|
Price |
|
Date |
|
Present Value(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Steven Whisler
|
|
|
Normal |
|
|
|
200,000 |
|
|
|
13.79 |
|
|
$ |
51.9375 |
|
|
|
12/7/10 |
|
|
$ |
2,706,000 |
|
|
|
|
|
Manuel J. Iraola
|
|
|
Normal |
|
|
|
60,000 |
|
|
|
4.14 |
|
|
|
51.9375 |
|
|
|
12/7/10 |
|
|
|
811,800 |
|
|
|
|
|
Timothy R. Snider
|
|
|
Normal |
|
|
|
60,000 |
|
|
|
4.14 |
|
|
|
51.9375 |
|
|
|
12/7/10 |
|
|
|
811,800 |
|
|
|
|
|
Ramiro G. Peru
|
|
|
Normal |
|
|
|
50,000 |
|
|
|
3.45 |
|
|
|
51.9375 |
|
|
|
12/7/10 |
|
|
|
676,500 |
|
|
|
|
|
Arthur R. Miele
|
|
|
Normal |
|
|
|
30,000 |
|
|
|
2.07 |
|
|
|
51.9375 |
|
|
|
12/7/10 |
|
|
|
405,900 |
|
|
|
(1) |
Normal options expire no later than the tenth anniversary of the
date of grant, plus one day. If an employee retires on his
normal retirement date, or retires early under any pension or
retirement plan maintained by the Corporation or any subsidiary,
or dies, his exercisable options terminate upon the fifth
anniversary of his retirement or death or the original
expiration date, if earlier. If an optionees employment
terminates for any reason other than retirement or death, his
exercisable options terminate no later than 30 days
following the termination of his employment. |
|
|
Normal options become exercisable in three or four substantially
equal annual installments beginning on the first anniversary of
the date of grant or earlier as the Compensation and Management
Development Committee in its discretion may determine. The
Committee may also approve provisions making installments
exercisable (a) upon the employees retirement,
(b) six months from the date an option is granted if it is
the result of a previous exercise in which pre-owned shares were
used in payment of the exercise, and (c) as the Committee
deems appropriate in a change of control of the Corporation but
not later than two years after the employee ceases employment. |
|
|
Options customarily include the right to receive reload options
in the event the optionee exercises an option with already-owned
shares. Reload options contain the same expiration dates and
other terms as the options they replace except that they have an
exercise price per share equal to the fair market value of a
common share on the date the reload option is granted and become
exercisable in full six months after they are granted. Reload
options customarily include the right to receive additional
reload options. |
|
(2) |
Illustrates the total number of normal and reload options
granted as a percent of the aggregate number of 2000 normal
options (1,447,700 shares) and 2000 reload options (2,712
shares) granted to all employees. |
10
|
|
(3) |
The hypothetical present value of the options at the date of
grant was determined using a variation of the Black-Scholes
option pricing model. The Black-Scholes model is a complicated
mathematical formula which is widely used to value options
traded on the stock exchanges. However, executive stock options
differ from exchange-traded options in several key respects.
Executive options are long-term, non-transferable and subject to
vesting restrictions, whereas exchange-traded options are
short-term and can be exercised or sold immediately in a liquid
market. The model used here is adapted to estimate the present
value of an executive option and considers a number of factors,
including the grant price of the option, the volatility of the
Corporations common shares, the dividend rate, the term of
the option, the time it is expected to be outstanding and
interest rates. The Black-Scholes values were derived using as
assumptions the following financial factors which existed at or
about the time that the options were granted: volatility of
.3910, dividend yield of 3.30%, and interest rates of 5.321% for
normal options and 5.948% for reload options. In view of the
Corporations historic exercise experience and the inherent
motivation to exercise options early in their terms because of
the reload option feature, normal options were assumed to be
outstanding for three years at time of exercise and reload
options for one year. No downward adjustments were made to the
resulting grant-date option values to account for potential
forfeiture or non-transferability of the options in question.
Because the Black-Scholes model was not developed for executive
options and requires the use of assumptions primarily based on
conditions in effect at the time of grant (and not over the term
of the option), it provides only a theoretical estimate of the
value of these options. |
|
|
Reload option grants are part of the Corporations overall
program to increase the number of common shares owned by its
executive officers and other key employees. Traditional option
programs generally do not encourage optionees to exercise
options prior to the end of their term or to hold the shares
received upon such exercise. The Compensation and Management
Development Committee adopted the reload option program, with
shareholder approval, to encourage option exercises and stock
retention by permitting an optionee to exercise an option with
already-owned common shares and to be restored to the same
economic opportunity available immediately prior to such
exercise. |
|
|
Under the reload program, an employee who exercises an option
(the Original Option) with already-owned shares
prior to the end of the option term will receive an additional
option (the Reload Option) covering a number of
shares equal to the number used to exercise the Original Option.
The Reload Option will be exercisable, beginning six months
after grant and continuing for the remaining term of the
Original Option, at a price equal to the fair market value of
the shares on the date the Original Option is exercised. As a
result of the exercise of the Original Option with already-owned
shares, the net number of common shares held by the employee
will increase by the number of shares that has an aggregate
market value equal to the spread on the option (the
spread equals the aggregate market price of the
option shares on the day of exercise less the aggregate exercise
price). Thus, the number of shares covered by the Reload Option
plus the number of additional shares received on the exercise of
the Original Option will equal the number of shares covered by
the Original Option. The program thereby serves to replace the
opportunity for future appreciation that an optionee would
otherwise lose by exercising an option using already-owned
shares. In addition, by inducing option exercises and stock
retention, the reload feature offers optionees the opportunity
to receive dividends on a greater number of shares than would be
the case without such a feature. |
11
Aggregated Option Exercises in 2000 and December 31,
2000 Option Values
The following table provides information concerning options
exercised in 2000 by the named executives and the options held
by them at the end of 2000:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
|
|
|
|
Number of |
|
Unexercised |
|
|
|
|
|
|
Unexercised |
|
In-the-Money |
|
|
|
|
|
|
Options at |
|
Options at |
|
|
Shares |
|
|
|
12/31/00 |
|
12/31/00 |
|
|
Acquired On |
|
Value |
|
(Exercisable/ |
|
(Exercisable/ |
Name |
|
Exercise |
|
Realized |
|
Unexercisable) |
|
Unexercisable)(1) |
|
|
|
|
|
|
|
|
|
J. Steven Whisler
|
|
0 |
|
0 |
|
|
325,953/ |
326,667 |
|
|
284,900/ |
1,363,558 |
|
|
|
|
Manuel J. Iraola
|
|
0 |
|
0 |
|
|
196,914/ |
117,000 |
|
|
236,793/ |
471,100 |
|
|
|
|
Timothy R. Snider
|
|
0 |
|
0 |
|
|
99,237/ |
118,334 |
|
|
217,918/ |
509,277 |
|
|
|
|
Ramiro G. Peru
|
|
0 |
|
0 |
|
|
85,508/ |
90,000 |
|
|
89,845/ |
367,192 |
|
|
|
|
Arthur R. Miele
|
|
0 |
|
0 |
|
|
71,866/ |
48,334 |
|
|
225,816/ |
198,078 |
|
|
(1) |
Value is based on the mean of the high and low of the common
shares on the Consolidated Trading Tape on December 29,
2000 ($56.3438). |
PENSION AND OTHER RETIREMENT BENEFITS
Retirement Plans
The following pension table shows the estimated aggregate annual
benefits payable in the form of a straight life annuity
commencing at age 65 under the Phelps Dodge Retirement Plan for
Salaried Employees (the Retirement Plan) as
supplemented by the Phelps Dodge Corporation Supplemental
Retirement Plan (the Supplemental Retirement Plan)
that make up amounts limited by the Internal Revenue Code (the
Code).
Pension Plan Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Annual Benefits for Years of Service Indicated(b) |
Final Average |
|
|
Compensation(a) |
|
10 |
|
15 |
|
20 |
|
25 |
|
30 |
|
35 |
|
40 |
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
300,000 |
|
|
$ |
45,851 |
|
|
$ |
68,776 |
|
|
$ |
91,701 |
|
|
$ |
114,626 |
|
|
$ |
137,552 |
|
|
$ |
160,477 |
|
|
$ |
183,402 |
|
|
$ |
206,327 |
|
|
|
|
|
$ |
400,000 |
|
|
$ |
61,851 |
|
|
$ |
92,776 |
|
|
$ |
123,701 |
|
|
$ |
154,626 |
|
|
$ |
185,552 |
|
|
$ |
216,477 |
|
|
$ |
247,402 |
|
|
$ |
278,327 |
|
|
|
|
|
$ |
500,000 |
|
|
$ |
77,851 |
|
|
$ |
116,776 |
|
|
$ |
155,701 |
|
|
$ |
194,626 |
|
|
$ |
233,552 |
|
|
$ |
272,477 |
|
|
$ |
311,402 |
|
|
$ |
350,327 |
|
|
|
|
|
$ |
600,000 |
|
|
$ |
93,851 |
|
|
$ |
140,776 |
|
|
$ |
187,701 |
|
|
$ |
234,626 |
|
|
$ |
281,552 |
|
|
$ |
328,477 |
|
|
$ |
375,402 |
|
|
$ |
422,327 |
|
|
|
|
|
$ |
700,000 |
|
|
$ |
109,851 |
|
|
$ |
164,776 |
|
|
$ |
219,701 |
|
|
$ |
274,626 |
|
|
$ |
329,552 |
|
|
$ |
384,477 |
|
|
$ |
439,402 |
|
|
$ |
494,327 |
|
|
|
|
|
$ |
800,000 |
|
|
$ |
125,851 |
|
|
$ |
188,776 |
|
|
$ |
251,701 |
|
|
$ |
314,626 |
|
|
$ |
377,552 |
|
|
$ |
440,477 |
|
|
$ |
503,402 |
|
|
$ |
566,327 |
|
|
|
|
|
$ |
900,000 |
|
|
$ |
141,851 |
|
|
$ |
212,776 |
|
|
$ |
283,701 |
|
|
$ |
354,626 |
|
|
$ |
425,552 |
|
|
$ |
496,477 |
|
|
$ |
567,402 |
|
|
$ |
638,327 |
|
|
|
|
|
$ |
1,000,000 |
|
|
$ |
157,851 |
|
|
$ |
236,776 |
|
|
$ |
315,701 |
|
|
$ |
394,626 |
|
|
$ |
473,552 |
|
|
$ |
552,477 |
|
|
$ |
631,402 |
|
|
$ |
710,327 |
|
|
|
|
|
$ |
1,100,000 |
|
|
$ |
173,851 |
|
|
$ |
260,776 |
|
|
$ |
347,701 |
|
|
$ |
434,626 |
|
|
$ |
521,552 |
|
|
$ |
608,477 |
|
|
$ |
695,402 |
|
|
$ |
782,327 |
|
|
|
|
|
$ |
1,200,000 |
|
|
$ |
189,851 |
|
|
$ |
284,776 |
|
|
$ |
379,701 |
|
|
$ |
474,626 |
|
|
$ |
569,552 |
|
|
$ |
664,477 |
|
|
$ |
759,402 |
|
|
$ |
854,327 |
|
|
|
|
|
$ |
1,300,000 |
|
|
$ |
205,851 |
|
|
$ |
308,776 |
|
|
$ |
411,701 |
|
|
$ |
514,626 |
|
|
$ |
617,552 |
|
|
$ |
720,477 |
|
|
$ |
823,402 |
|
|
$ |
926,327 |
|
|
|
|
|
$ |
1,400,000 |
|
|
$ |
221,851 |
|
|
$ |
332,776 |
|
|
$ |
443,701 |
|
|
$ |
554,626 |
|
|
$ |
665,552 |
|
|
$ |
776,477 |
|
|
$ |
887,402 |
|
|
$ |
998,327 |
|
|
|
|
|
$ |
1,500,000 |
|
|
$ |
237,851 |
|
|
$ |
356,776 |
|
|
$ |
475,701 |
|
|
$ |
594,626 |
|
|
$ |
713,552 |
|
|
$ |
832,477 |
|
|
$ |
951,402 |
|
|
$ |
1,070,327 |
|
|
|
|
|
$ |
1,600,000 |
|
|
$ |
253,851 |
|
|
$ |
380,776 |
|
|
$ |
507,701 |
|
|
$ |
634,626 |
|
|
$ |
761,552 |
|
|
$ |
888,477 |
|
|
$ |
1,015,402 |
|
|
$ |
1,142,327 |
|
|
|
|
|
$ |
1,700,000 |
|
|
$ |
269,851 |
|
|
$ |
404,776 |
|
|
$ |
539,701 |
|
|
$ |
674,626 |
|
|
$ |
809,552 |
|
|
$ |
944,477 |
|
|
$ |
1,079,402 |
|
|
$ |
1,214,327 |
|
|
|
|
|
$ |
1,800,000 |
|
|
$ |
285,851 |
|
|
$ |
428,776 |
|
|
$ |
571,701 |
|
|
$ |
714,626 |
|
|
$ |
857,552 |
|
|
$ |
1,000,477 |
|
|
$ |
1,143,402 |
|
|
$ |
1,286,327 |
|
|
|
(a) |
The Retirement Plan provides a member upon retirement at
age 65 with a pension for life in a defined amount based
upon final average compensation and length of benefit service.
Under the Retirement Plan, final average compensation is the
highest average annual base salary for any consecutive 36- |
12
|
|
|
month period plus the highest average annual incentive
compensation for any consecutive 60-month period during a
members last 120 months of employment. Benefit
service includes all periods of employment with the Corporation
or its participating subsidiaries. Benefits under the Retirement
Plan are subject to certain limitations under the Code, and to
the extent the result of such limitations would be a benefit
less than would otherwise be paid under such Plan, the
difference is provided under the Supplemental Retirement Plan.
The formula for determining benefits payable under the
Retirement Plan takes into account estimated social security
benefits payable. The amounts set forth in the table assume
maximum social security benefits payable in 2000. |
|
(b) |
The expected credited years of benefit service at normal
retirement for the Corporations five current named
executive officers as of December 31, 2000 are as follows:
Mr. Whisler, 43 years; Mr. Iraola,
30 years; Mr. Snider, 45 years; Mr. Peru,
42 years; and Mr. Miele, 38 years. The years of
service are based on normal retirement for all executive
officers under the Retirement Plan and the applicable provisions
of the Supplemental Retirement Plan. |
SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
Severance Agreements With Our Executives
The Corporation has severance agreements (Severance
Agreements) with each of its five named executive officers
under which the executive would receive a lump sum payment equal
to his annual base salary in the event the Corporation
terminates his employment, other than for cause or mandatory
retirement, or the executive voluntarily terminates his
employment because of material reductions in his salary or his
position, duties and responsibilities. The terminated executive
would also receive (i) outplacement services at a cost up
to 15% of his base salary and (ii) the cost of continued
coverage for a limited period under the Corporations group
health, life insurance and disability plans.
Change of Control Agreements With Our Executives
The Corporation also has agreements with such executives under
which each executive would receive, in the event he ceases to be
employed by the Corporation within two years following a change
of control of the Corporation (for a reason other than death,
disability, willful misconduct, normal retirement or under
certain circumstances a voluntary termination of employment by
the executive), a lump sum equal to (i) three times the
executives highest base salary during that year and the
prior two years plus (ii) three times the executives
average bonus paid under the Annual Incentive Compensation Plan
for the two calendar years preceding the year in which the
change of control occurs, less (iii) any severance payable
under his Severance Agreement. The amount of such payments, when
combined with any other payments that are contingent upon a
change of control, may be capped at the maximum amount that can
be paid without triggering an excise tax under the Internal
Revenue Code. This Cap on payments does not apply if
the amount of such payments, calculated without the Cap, is at
least 20% more than the amount of such payments calculated with
the Cap. If the payments are not subject to the Cap, the
Corporation will provide the executive with a tax gross-up
payment to reimburse the executive for any excise taxes, as well
as the presumed income taxes on the gross-up. The terminated
executive would also receive the cost of continued coverage for
a limited period under the Corporations group health, life
insurance and disability plans. Except under certain
circumstances, these change of control agreements expire on
December 31, 2002.
Other Change of Control Provisions
Although normal compensatory options granted by the Corporation
become exercisable in three or four substantially equal annual
installments beginning on the first anniversary of the date of
grant, they also become exercisable in certain change of control
situations. Specifically, such options are exercisable (but not
earlier than six months from the date of grant) for a period of
30 days beginning on the date the Corporations common
shares are purchased pursuant to a third party tender offer or
the Corporations shareholders approve
13
a merger or similar transaction which the Corporation will not
survive as a publicly held corporation or, in the case of the
five named executive officers and certain other employees, the
date the employee ceases to be employed if he/she ceases to be
employed within two years following a change of control.
The Supplemental Retirement Plan provides for the payment of
unreduced benefits to employees who meet liberalized age and
length of service requirements and whose employment is
terminated by the Corporation or any of its subsidiaries within
two years following a change of control of the Corporation. The
Supplemental Retirement Plan also provides an additional
36 months of service credit to an executive who, due to his
termination of employment within two years following a change of
control of the Corporation, becomes entitled to receive payments
under his change of control agreement with the Corporation. The
Supplemental Savings Plan obligates the Corporation to transfer
an amount equal to the deficiency in the assets of the
Plans trust fund, if any, prior to the day on which a
change of control occurs.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Committee
The Committee is composed solely of directors (currently five)
who are not employees of the Corporation. It has periodically
retained respected independent compensation consultants to
advise and assist it in connection with various compensation
matters.
Goals
The Corporations goal is to be the leader in each of the
domestic and international mining and manufacturing activities
in which it competes while maximizing shareholder value.
The Compensation and Management Development Committee designs
its executive compensation program to ensure the
Corporations ability to attract, retain and motivate the
highest performing employees. The Committee believes it can
align total compensation with shareholder interests and motivate
senior managers participating in these programs by:
|
|
|
|
|
Emphasizing the relationship between pay and performance by
rewarding managers who bring about solid achievement with regard
to key business strategies and specific operational objectives. |
|
|
|
Increasing the relative amount of compensation at risk as
management responsibilities increase. |
|
|
|
Assuring that the elements of variable compensation are linked
as directly as practicable to measurable financial, operational
and other forms of performance. |
|
|
|
Encouraging stock ownership by executives. |
|
|
|
Tying pay for performance as closely as possible to success in
maximizing the value of the Corporations stock over the
long term. |
Elements of Executive Compensation
The executive officers are compensated by salaries, annual
incentive awards and long-term incentive compensation, in the
form of stock options and restricted stock grants. Each element
focuses on performance in a different but complementary way.
Salaries focus on individual performance, competence and the
Corporations performance during the officers tenure.
Annual incentives relate to corporate, division and, where
appropriate, unit and individual performance. Long-term
incentive awards, which are awarded most often in the form of
stock options, and, from time to time, in restricted stock,
create a long-term identity of interest with the shareholders
based on the Corporations performance and related growth
of shareholder value.
14
The Committee believes that the Corporation competes for its
executive talent primarily with similarly sized industrial
companies located in the United States. Accordingly, where
possible, the Committee compares the compensation for the top
five executives, at least annually, to the compensation paid to
executives holding similar positions at 16 publicly held
industrial corporations of an average size, measured by revenues
and market capital, similar to that of the Corporation (referred
to below as the comparison group). The Committee
believes that the competitive data used is generally
representative of the competitive level of compensation paid to
executive officers in companies the size of the Corporation.
Thus, the companies used for comparison purposes in connection
with the compensation paid to the Corporations executive
officers are different from the companies included in the peer
group used in the performance graphs on pages 18 and 19 to
compare shareholder returns.
Executive Salaries
Individual salaries for executive officers are established by
the Committee to reflect the officers performance and
competence, existing general economic and industry conditions
and the Corporations performance during the executive
officers tenure. Generally, salary adjustments are
targeted to move salaries to competitive levels when compared to
the comparison group over time for sustained and expected
performance and competence.
Annual Incentives
The Annual Incentive Compensation Plan provides the executive
officers and certain other officers and managers with
compensation based on success in achieving annual corporate,
division and, where appropriate, unit and individual goals. For
each executive officer, a target award is determined
approximating the 60th percentile of the annual incentive
compensation paid by the comparison group to individuals holding
comparable positions. Lower threshold awards and higher maximum
awards are also established. Corporate goals are set using
return on equity, economic profit and net operating cash flow
return on invested capital, all of which are fundamental
indicators of the Corporations performance. In 2000, the
Corporations performance with respect to both return on
equity and economic profit were below the threshold goal, while
net operating cash flow return on invested capital was between
the threshold and target goal. Based on these results and the
Committees evaluation of performance relative to
individual and, where appropriate, division and unit goals, the
Committee approved Annual Incentive Compensation awards for 2000
below the targeted amounts for the listed executives.
Long-Term Incentive Compensation
The Committee uses stock options as the principal method of
providing long-term incentive compensation primarily because
employees benefit from options, if at all, only to the extent of
increases in the value of the Corporations common shares.
To further the identity of interest with the shareholders, the
executive officers are expected to acquire and own significant
numbers of the Corporations shares.
The Committee has determined that to focus the executives
attention to an appropriate extent on the long-term growth of
shareholder value, the targeted compensation levels with respect
to the present value of stock options should be approximately
midway between the 50th and 75th percentiles of the long-term
incentive awards made to executives holding similar positions in
the comparison group. Adjustments are made to individual grants
from these levels based on the performance, career potential,
critical skills and prior grant history of the executive officer.
Grants of Restricted Stock
The Committee also made grants of restricted stock to a limited
number of other employees under the Corporations Stock
Option and Restricted Stock Plan. Grants were made to two
executives named in the Summary Compensation Table. The size of
each award was determined based on the Committees
subjective determination of the recipients expected
contribution to the Corporation over the stated vesting period,
the
15
significance of the recipients position with the
Corporation, and the importance of maintaining continuity of
management and critical skills in the recipients function.
Stock Ownership Guidelines
To underscore the connection between the interests of management
and stockholders, the Corporation established stock ownership
targets for officers and management of the Corporation. The
targets are expressed in terms of the value of the
Corporations common shares held by the executive as a
multiple of salary grade midpoint. The targets range from one
and one-half times salary midpoint up to five times salary
midpoint for the CEO. Three of the five named executives have
met or exceeded their respective stock ownership guideline, but
those who have not have five years from the date they became
subject to the ownership requirements to reach their ownership
target.
Tax Code Issues
Section 162(m) of the Internal Revenue Code generally
places a $1 million per person limit on the deduction a
publicly held corporation may take for compensation paid to its
chief executive officer and its four other highest compensated
covered employees, excluding for this purpose
deferred compensation and, in general, compensation constituting
performance-based compensation. In 1998, the
Corporation obtained shareholder approval for the 1998 Stock
Option and Restricted Stock Plan which continues to exclude the
compensation from stock options from the $1 million
deductibility limit. Other elements of the compensation payable
to executive officers, such as salary, annual incentive
compensation and restricted stock, are not excludable from such
limit.
CEO Compensation
Phelps Dodge bases the chief executive officers
compensation on the same philosophy and policies as for all
executive officers, as discussed above. This compensation
includes base salary, annual incentives and long-term incentives.
J. Steven Whisler, Chief Executive Officer of the
Corporation in 2000, received a base salary of $650,000 in 2000,
an Annual Incentive Compensation Plan award of $300,000 for 2000
performance compared to stated corporate and individual
performance goals, and a stock option grant in 2000 to purchase
200,000 common shares.
Conclusion
The Committee will continue to evaluate the Corporations
compensation programs to best enable the Corporation to employ
and motivate high caliber, dedicated people. Such employees,
properly motivated, are believed to be key to achievement of the
Corporations goal to be the international leader in the
mining and manufacturing activities in which it competes and the
related enhancement of shareholder value over the long term.
|
|
|
THE COMPENSATION AND MANAGEMENT |
|
DEVELOPMENT COMMITTEE |
|
|
Paul Hazen, Chair |
|
Robert N. Burt |
|
Archie W. Dunham |
|
Marie L. Knowles |
|
Southwood J. Morcott |
16
AUDIT COMMITTEE REPORT
The Committee has reviewed and discussed with management of the
Corporation the audited financial statements of the Corporation
for the fiscal year ended December 31, 2000 (the
Audited Financial Statements).
The Committee has discussed with PricewaterhouseCoopers LLP,
independent accountants for the Corporation, the matters
required to be discussed by Statement on Auditing Standards
No. 61, as in effect on the date of this proxy statement.
The Committee has received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by the
Independence Standards Board Standard No. 1, as in effect
on the date of this proxy statement, and has discussed with
PricewaterhouseCoopers LLP its independence and has considered
the compatibility of the non-audit services which it provides
with maintenance of that independence.
Based on the reviews and discussions described above, the
Committee recommended to the Board of Directors of the
Corporation that the Audited Financial Statements be included in
the Corporations Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 for filing with the
Securities and Exchange Commission.
The Board of Directors has adopted a Charter of the Audit
Committee, a copy of which was published as part of the
Corporations 2000 proxy statement.
|
|
|
THE AUDIT COMMITTEE |
|
|
Marie L. Knowles, Chair |
|
Archie W. Dunham |
|
William A. Franke |
|
Robert D. Krebs |
|
Gordon R. Parker |
PRINCIPAL ACCOUNTING FIRM FEES
The Corporation incurred the following fees for services
performed by its principal accounting firm,
PricewaterhouseCoopers LLP, during fiscal 2000:
AUDIT FEES
Fees for the fiscal year 2000 audit and reviews of quarterly
financial statements: $1,250,000, of which $965,000 has been
billed to December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP did not render any services related
to financial information systems design and implementation for
the fiscal year ended December 31, 2000.
ALL OTHER FEES
Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for fiscal year 2000 are $2,613,800
(includes fees for tax consulting and compliance; services
associated with acquisitions and divestitures, including those
related to the late 1999 acquisition of Cyprus Amax Minerals
Company; and other non-audit services).
17
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG PHELPS DODGE CORPORATION, THE S & P 500 INDEX
AND THE S & P METALS MINING INDEX
The chart above reflects $100 invested at 12/31/95 in Phelps
Dodge common stock, the S&P 500, and in a peer group
represented by the S&P Metals Mining index, which is
comprised of Phelps Dodge, Freeport-McMoRan Copper &
Gold Inc., and Inco Ltd.
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
1995 |
|
1996 |
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
|
Phelps Dodge Corporation
|
|
|
100 |
|
|
|
112 |
|
|
|
106 |
|
|
|
89 |
|
|
|
123 |
|
|
|
106 |
|
S&P 500
|
|
|
100 |
|
|
|
123 |
|
|
|
164 |
|
|
|
211 |
|
|
|
255 |
|
|
|
232 |
|
S&P METALS MINING
|
|
|
100 |
|
|
|
102 |
|
|
|
69 |
|
|
|
49 |
|
|
|
94 |
|
|
|
65 |
|
|
18
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN
AMONG PHELPS DODGE CORPORATION, THE S & P 500 INDEX
AND THE S & P METALS MINING INDEX
The chart above reflects $100 invested at 12/31/90 in Phelps
Dodge common stock, the S&P 500, and in a peer group
represented by the S&P Metals Mining index, which is
comprised of Phelps Dodge, Freeport-McMoRan Copper & Gold
Inc., and Inco Ltd. This 10-year graph illustrates the relative
stock performances over a period that more closely represents
the longer business cycle generally associated with the industry
of the Corporation and is especially meaningful because the
business focus and growth strategies of the Corporation have
been and continue to be long term.
Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
1990 |
|
1991 |
|
1992 |
|
1993 |
|
1994 |
|
1995 |
|
1996 |
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
|
Phelps Dodge Corporation
|
|
|
100 |
|
|
|
130 |
|
|
|
186 |
|
|
|
193 |
|
|
|
252 |
|
|
|
262 |
|
|
|
292 |
|
|
|
277 |
|
|
|
234 |
|
|
|
321 |
|
|
|
277 |
|
S&P 500
|
|
|
100 |
|
|
|
124 |
|
|
|
140 |
|
|
|
155 |
|
|
|
157 |
|
|
|
215 |
|
|
|
265 |
|
|
|
353 |
|
|
|
454 |
|
|
|
550 |
|
|
|
500 |
|
S&P METALS MINING
|
|
|
100 |
|
|
|
113 |
|
|
|
121 |
|
|
|
135 |
|
|
|
157 |
|
|
|
174 |
|
|
|
178 |
|
|
|
119 |
|
|
|
86 |
|
|
|
163 |
|
|
|
114 |
|
|
19
2. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of
Directors has appointed PricewaterhouseCoopers LLP as
independent accountants for the Corporation for the
year 2001.
PricewaterhouseCoopers LLP or a predecessor firm has been
the independent accountants for the Corporation since 1915.
A representative of PricewaterhouseCoopers LLP will be
present at the annual meeting with the opportunity to make a
statement if he so desires and to respond to appropriate
questions.
The Board of Directors recommends a vote FOR ratification of
the appointment of PricewaterhouseCoopers LLP as
independent accountants.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to be
presented at the annual meeting. If any other matter proper for
action at the meeting should be presented, the holders of the
accompanying proxy will vote the shares represented by the proxy
on such matter in accordance with their best judgment. If any
matter not proper for action at the meeting should be presented,
the holders of the proxy will vote against consideration of the
matter or the proposed action.
VOTING PROCEDURES
All shares represented by the accompanying proxy, if the proxy
is duly executed and received by the Corporation at or prior to
the annual meeting, will be voted at the meeting in accordance
with any instructions specified on such proxy. Where no
instruction is specified, the shares may be voted according to
the printed instructions on the proxy.
It is the policy of the Corporation that, except under limited
circumstances, each shareholder proxy card, ballot and voting
tabulation that identifies any shareholder will be kept
confidential and that the receipt and tabulation of such votes
will be conducted by independent third parties, including the
Corporations transfer agent and its proxy solicitation
firm, and not by employees of the Corporation.
The cost of soliciting proxies for the meeting will be borne by
the Corporation. The Corporation has retained
Morrow & Co., Inc., 445 Park Avenue. New
York, NY 10022 to assist in soliciting proxies for a fee
estimated at $12,500 plus reasonable expenses.
Morrow & Co., Inc. and some officers and other
employees of the Corporation may solicit proxies in person and
by telephone or otherwise. The Corporation may also reimburse
brokers and others who are record holders of the
Corporations shares for their reasonable expenses incurred
in obtaining voting instructions from beneficial owners of such
shares.
PROPOSALS FOR 2002
The Corporation will review for inclusion in next years
proxy statement shareholder proposals received by
December 1, 2001. Prior to November 1, 2001, proposals
should be sent to the Secretary of the Corporation,
2600 North Central Avenue, Phoenix,
Arizona 85004-3014. As of November 1, 2001, proposals
should be sent to the Secretary at One North Central Avenue,
Phoenix, Arizona 85004-2306.
Shareholder proposals not included in next years proxy
statement may be brought before the May 1, 2002 annual
meeting of shareholders by a shareholder of the Corporation who
is entitled to vote at the meeting, who has given a written
notice to the Secretary of the Corporation containing certain
information specified in the By-Laws and who was a shareholder
of record at the time such notice was given. Such notice must be
delivered or mailed and received at the One North Central Avenue
address in the preceding paragraph no earlier than
January 1, 2002 and no later than January 31, 2002,
except that if the date of the 2002 annual meeting of
shareholders is changed, and the meeting is held before
April 1, 2002 or after June 30,
20
2002, such notice must be delivered or mailed and received at
the One North Central Avenue address in the preceding paragraph
no earlier than the close of business on the 120th day prior to
the new date of such annual meeting and no later than the close
of business on the later of (i) the 90th day prior to the
new date of such meeting and (ii) the 10th day following
the day on which a public announcement of the new date of such
annual meeting is first made.
If a shareholder notifies the Corporation after January 31,
2002 of an intention to present a proposal at the
Corporations May 1, 2002 annual meeting or, if the
date of the 2002 annual meeting is changed and the meeting is
held before April 1, 2002 or after June 30, 2002, if a
shareholder notifies the Corporation of an intention to present
a proposal at such meeting after the close of business on the
later of (i) the 90th day prior to the new date of
such meeting and (ii) the 10th day following the day
on which a public announcement of the new date of such annual
meeting is first made, and for any reason any such proposal is
voted on at such meeting, the Corporations proxy holders
will have the right to exercise discretionary voting authority
with respect to such proposal.
ANNUAL REPORT FOR 2000
The annual report of the Corporation for the year 2000, which
includes the Corporations Annual Report on Form 10-K,
is being furnished concurrently with this proxy statement to
persons who were shareholders of record as of March 15,
2001, the record date for the annual meeting. These materials do
not form part of the material for the solicitation of proxies.
|
|
|
By order of the Board of Directors, |
|
|
Robert C. Swan |
|
Vice President and Secretary |
Phoenix, Arizona
April 1, 2001
21
PHELPS DODGE CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PHELPS DODGE CORPORATION
The undersigned shareholder of Phelps Dodge
Corporation hereby appoints ROBERT N. BURT, ROBERT D.
KREBS and J. STEVEN WHISLER, or any of them, proxies of the
undersigned, each with power of substitution, at the annual
meeting of shareholders of the Corporation to be held at the
Heard Museum, 2301 North Central Avenue, Phoenix, Arizona, on
Tuesday, May 1, 2001 at 3:00 p.m., and at any
adjournments thereof, to vote all Common Shares of the
Corporation held or owned by the undersigned, including any
which may be held for the undersigneds account under the
Mellon Investor Services Investor Services Program for Phelps
Dodge Common Shares administered by Mellon Investor Services
LLC.
The proxies are instructed to vote as directed
below, and in their discretion on all other matters. Where no
direction is specified, this proxy will be voted FOR Management
Proposals 1 and 2 as recommended by the Board of
Directors.
Management Proposals:
The Board of Directors recommends you vote FOR
Management Proposals 1 and 2
Proposal 1: Election of Directors for the
respective terms specified in the Proxy Statement:
Messrs. Hazen, Iraola, (Mrs.) Knowles and
Parker.
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FOR all
nominees
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WITHHELD
for all nominees
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WITHHELD for the following only
(write name(s) of nominee(s) below)
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PLEASE SIGN ON REVERSE SIDE AND RETURN
PROMPTLY
PROXY
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Proposal 2: Ratification of Independent Public Accountants FOR |
AGAINST |
ABSTAIN |
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Dated:
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Signature
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Signature
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Please sign exactly as name appears above. When
shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized
person.
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Please
mark |
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your votes
as |
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indicated
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example. |
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FOR |
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ALL |
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FOR ALL |
PROPOSAL
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Election
of Directors for the term specified in the Proxy Statement:
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01 P
Hazen |
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03 M.
Knowles |
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02 M.
Iraola |
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04 G.
Parker |
WITHHELD FOR: (Write name(s) of nominee(s) below).
_______________________________________________
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FOR |
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AGAINST |
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PROPOSAL
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Ratification of Independent Public Accountants |
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The Board of Directors recommends you vote FOR MANAGEMENT PROPOSALS 1 AND 2.
The proxies are instructed to vote as directed above, and in their discretion
on all other matters. Where no direction is specified, this proxy will be voted
FOR Management Proposals 1 and 2 as recommended by the Board of Directors.
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I consent to future access of the
Annual Reports and Proxy Statements electronically via the Internet. I
understand that the Corporation may no longer distribute printed materials
to me for any future shareholder meeting until such consent is revoked. I
understand that I may revoke my consent at any time. |
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IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET PLEASE READ THE
INSTRUCTIONS BELOW
Signature(s)_________________________________________________________
Date ________________
NOTE: Please sign name exactly as it appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
^ FOLD AND DETACH HERE ^
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[TELEPHONE] |
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VOTE BY
TELEPHONE OR INTERNET |
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[COMPUTER] |
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QUICK
*** EASY *** IMMEDIATE |
YOUR VOTE IS IMPORTANT! YOU CAN VOTE IN ONE OF THREE WAYS:
1. TO VOTE BY PHONE: Call toll-tree 1-800-840-1208 on a touch
tone telephone 24 hours a day-7 days a week
There is NO CHARGE to you for this call.
Have your proxy
card in hand.
You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form
OPTION 1: To vote as the Board of
Directors recommends on ALL proposals, press 1
When asked, please confirm by Pressing 1.
OPTION 2: If you choose to vote on
each proposal separately, press 0. You will hear these instructions:
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Proposal 1 To vote FOR ALL
nominees, press 1; to WITHHOLD FOR ALL nominees, press
9 |
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To WITHHOLD FOR AN
INDIVIDUAL nominee, Press 0 and listen to the
instructions |
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Proposal 2 To vote FOR,
press 1; AGAINST, press 9; ABSTAIN, press
0 |
When asked, please confirm by Pressing 1.
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CONSENT TO VIEW ANNUAL REPORTS
AND PROXY STATEMENTS ONLINE |
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Press 1 to consent to view future
Annual Reports and Proxy Statements for this account via the
Internet. You may revoke this consent at any
time by giving written notice to the Corporation. When
asked, please confirm your
consent by pressing 1.
The instructions are the same for all remaining
proposals. |
or
2. VOTE BY INTERNET: Follow the instructions at our Website
Address: http://www.eproxy.com/pd.
or
3. VOTE BY PROXY CARD: Mark, sign and date your proxy card and
return promptly in the enclosed envelope.
NOTE: If you vote by telephone or Internet, THERE
IS
NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
PROXY
PHELPS DODGE CORPORATION
Solicited on Behalf of the Board of Directors of Phelps Dodge
Corporation
The undersigned shareholder of PHELPS
DODGE CORPORATION hereby appoints Robert N. Burt, Robert D. Krebs, and J. Steven
Whisler or any of them, proxies of the undersigned, each with power of
substitution, at the annual meeting of shareholders of the Corporation to be
held at The Heard Museum, 2301 North Central Avenue, Phoenix, Arizona, on
Tuesday, May 1, 2001 at 3:00 p.m., and at any adjournments thereof, to vote
all Common Shares of the Corporation held or owned by the undersigned, including
any which may be held for the undersigned's account under the Phelps Dodge
Corporation Common Stock Investor Services Program administered by Mellon
Investor Services LLC.
For those participants who hold accounts
with Common Shares through the Phelps Dodge Employee Savings Plan and/or The
Phelps Dodge Corporation Supplemental Savings Plan: The undersigned instructs
the UMB Bank, N.A. as Trustee for the Plans, to vote all shares or fractions of
shares credited to the account as of the latest available processing date on or
before May 1, 2001, as directed on the reverse side of this proxy. Those
shares for which no directions are received will be voted by the Trustee in its
sole discretion.
THIS PROXY IS CONTINUED ON THE REVERSE
SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. |
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To Vote by Internet at our Internet Address:
http://www.eproxy.com/pd |
or
2. |
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Call toll free 1-800-840-1208 on a Touch Tone
telephone and follow the instructions on the reverse side. There is NO
CHARGE to you for this call. |
or
3. |
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Mark, sign and date your proxy card and return it promptly
in the enclosed envelope. |
PLEASE VOTE
If you wish to view future Phelps Dodge Corporation Annual Reports and Proxy
Statements on-line instead of receiving the printed documents, which will assist
the Corporation in reducing future printing and mailing costs, please
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visit Mellon's web site registration page at
http://www.eproxy.com/pd |
or
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call toll free 1-800-840-1208 on a Touch-Tone
Telephone and follow the instructions on the reverse
side |
or
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check the box on the signature side of the enclosed proxy
card and return in the postage paid envelope
provided. |
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-----END PRIVACY-ENHANCED MESSAGE-----