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OMB
APPROVAL
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OMB Number: 3235-0059
Expires: January 31,
2008
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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
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Filed by the
Registrant:
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X
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Filed by a Party other than the
Registrant:
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Check the appropriate
box:
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Preliminary Proxy
Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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X
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material Pursuant to
§240.14a-12
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Caterpillar
Inc.
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(Name of Registrant as Specified
In Its Charter)
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(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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X
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No fee
required.
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities
to which transaction applies:
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(2)
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Aggregate number of securities to
which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value
of transaction:
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(5)
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Total fee
paid:
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Fee paid previously with
preliminary materials.
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Check box if any part of the fee
is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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SEC 1913
(04-05)
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Persons who are to respond to the
collection of information contained in this form are not required to
respond unless the form displays a currently valid OMB control
number.
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100 NE Adams Street
Peoria,
Illinois 61629
Notice of Annual Meeting of
Stockholders
Wednesday, June 10,
2009
1:30 p.m. — Central Daylight
Time
Northern Trust
Building
50 South LaSalle
Street
Chicago, Illinois
60675
May 1, 2009
Fellow stockholder:
On behalf of the board of directors, you
are cordially invited to attend the 2009 Caterpillar Inc. annual meeting of
stockholders (annual meeting) to:
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Elect
directors.
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Ratify Independent Registered
Public Accounting Firm.
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Act on stockholder proposals, if
properly presented.
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Conduct any other business
properly brought before the
meeting.
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We have elected to furnish materials for
the 2009 annual meeting to stockholders via the Internet. We believe
the use of the Securities and Exchange Commission e-proxy rule will expedite
stockholders’ receipt of the 2009 proxy materials, lower the costs and reduce
the environmental impact of our annual meeting. On May 1, 2009, we
mailed a notice to most stockholders containing instructions on how to access
the proxy materials and to vote online. All other stockholders were
sent a copy of the proxy materials by mail or e-mail. See page 1
of this proxy statement for
more information on e-proxy and instructions on how you can (i) receive a
paper copy of the proxy materials if you received a notice by mail, or
(ii) elect to receive your proxy materials over the Internet or by e-mail,
if you received them by mail this year.
You must have an admission ticket to
attend the annual meeting. Procedures for requesting the admission
ticket are detailed on page 61 of this proxy
statement. Attendance and voting is limited to stockholders of record
at the close of business on April 13, 2009.
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Sincerely
yours,
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James W. Owens
Chairman
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Table of
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As permitted by e-proxy rules adopted by
the Securities and Exchange Commission (SEC), Caterpillar Inc. (Caterpillar, the company or we or us)
is providing, in most
cases, the proxy materials for its 2009 annual meeting electronically via the
Internet. On May
1, 2009, we initiated delivery of proxy materials to our stockholders of record
as of the close of business on April 13, 2009 one of three ways: 1) a notice
containing instructions on how to access proxy materials via the Internet
(notice), 2) paper copy mailing or 3) e-mail
distribution. If
you received a notice, you will not receive a printed copy of the proxy
materials in the mail. Instead, the notice provides instructions on
how to access the proxy materials and to vote online or by
telephone. If you received a notice by mail and would like to receive
a printed copy of the proxy materials or elect to receive the materials via
e-mail in the future, please follow the instructions included in the
notice. If you received a printed copy of proxy materials by mail and
would like to register to receive a notice of proxy materials or an e-mail
regarding availability of proxy materials in the future, you can do so by any of
the following methods:
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Internet – Access the
Internet and go to www.eproxyaccess.com/cat2009.
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Telephone – From within
the United States or Canada, call us free of charge at
1-888-216-1280.
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E-mail – Send us an
e-mail at cat@eproxyaccess.com,
using the control number on the card as the subject line, and indicate
whether you wish to receive a paper or e-mail copy of the proxy materials
and whether your request is for this meeting only or all future
meetings.
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Q:
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Why am I receiving this proxy
statement?
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A:
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You have received these proxy
materials because Caterpillar’s board of directors (board) is soliciting
your proxy to vote your shares at the annual meeting. This
proxy statement includes information that we are required to provide to
you under SEC rules and is designed to assist you in voting your
shares.
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Q:
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What is e-proxy and why did
Caterpillar choose to use it this year?
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A:
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SEC rules allow companies to
choose the method for delivery of proxy materials to
stockholders. For most stockholders, we have elected to mail a notice
regarding the availability of proxy materials rather than sending a full
set of these materials in the mail. Utilizing this method of
delivery will expedite receipt of proxy materials by our stockholders and
lower the costs and reduce the environmental impact of our annual
meeting.
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Q:
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Why didn’t I receive an annual
report or sustainability report with my proxy
materials?
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A:
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Our 2008 annual report and 2008
sustainability report
are available exclusively online (www.CAT.com/investor). The online,
interactive format of the reports furthers our efforts to lower costs and reduce the
environmental impact of our annual meeting. Complete financial statements,
financial statement notes and management’s discussion and analysis for
2008 are included in the proxy materials as an appendix to the proxy
statement.
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Page 1
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Q:
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Who can attend the annual
meeting?
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A:
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Anyone wishing to attend the
annual meeting must have an admission ticket issued in his or her
name. Admission is limited
to:
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Stockholders of record on April
13, 2009 and one immediate family member.
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Authorized proxy holder of a
stockholder of record.
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Authorized representative of a
stockholder of record who has been designated to present a stockholder
proposal.
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You must provide evidence of your
ownership of shares with your ticket request. The requirements
for obtaining an admission ticket are specified in the “Admission & Ticket Request
Procedure” on page
61. Notwithstanding the
above, members of the media and analysts are permitted to attend the
annual meeting pursuant to the directions provided in the “Admission & Ticket Request
Procedure” on page
61.
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Q:
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What is a stockholder of
record?
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A:
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A stockholder of record or
registered stockholder is a stockholder whose ownership of Caterpillar
stock is reflected directly on the books and records of our transfer
agent, BNY Mellon Shareowner Services (transfer agent). If you
hold stock through a bank, broker or other intermediary, you hold your
shares in “street name” and are not a stockholder of record. For shares
held in street name, the stockholder of record is your bank, broker or
other intermediary. Caterpillar only has access to ownership
records for the registered shares. So, if you are not a
stockholder of record, the company needs additional documentation to
evidence your stock ownership as of the record date – such as a copy of
your brokerage account statement, a letter from your broker, bank or other
nominee or a copy of your voting instruction
card.
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Q:
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When is the record date and who is
entitled to vote?
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A:
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The board set April 13, 2009 as
the record date for the 2009 annual meeting. Holders of
Caterpillar common stock on that date are entitled to one vote per
share. As of April 13, 2009, there were 601,751,560 shares of
Caterpillar common stock outstanding.
A list of all registered
stockholders will be available for examination by stockholders during
normal business hours at 100 NE Adams Street, Peoria, Illinois 61629, at
least ten days prior to the annual meeting and will also be available for
examination at the annual
meeting.
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Q:
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How do I
vote?
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A:
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You may vote
by any of the following methods:
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In
person – stockholders
of record and stockholders with shares held in street name that obtain an
admission ticket (following the specified procedure) and attend the
meeting will receive a ballot for voting. If you hold shares in
street name, you must also obtain a legal proxy from your broker to vote
in person at the meeting and submit it along with your
ballot.
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By
mail –
signing and returning
the proxy and/or voting instruction card
provided.
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By phone or
via the Internet – following the instructions on your notice card,
proxy and/or voting instruction card or e-mail
notice.
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If you vote by phone or the
Internet, please have your notice, proxy and/or voting instruction card
available. The control number appearing on your notice or card
is necessary to process your vote. A phone or Internet vote
authorizes the named proxies in the same manner as if you marked, signed
and returned the card by
mail.
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Page 2
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Q:
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How can I authorize someone else
to attend the meeting or vote for me?
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A:
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Stockholders of record can
authorize someone
other than the individual(s) named on the proxy and/or voting instruction
card to vote on their behalf by crossing out the individual(s) named on
the card and inserting the name of the individual being authorized or by
providing a written authorization to the individual being authorized to
attend or vote.
Street name holders can contact
their broker to obtain documentation with authorization to attend or vote
at the meeting.
To obtain an admission ticket for
an authorized proxy representative, see the requirements specified in the
“Admission & Ticket Request Procedure” on page 61.
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Q:
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How can I change or revoke my
vote?
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A:
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For
stockholders of record: You may change or revoke your
vote by submitting a written notice of revocation to Caterpillar Inc. c/o
the Corporate Secretary at 100 NE Adams Street, Peoria, Illinois 61629 or
by submitting another vote on or before June 10, 2009 (including a vote
via the Internet or by telephone). For all methods of voting,
the last vote cast will supersede all previous
votes.
For holders in
street name: You may
change or revoke your voting instructions by following the specific
directions provided to you by your bank or
broker.
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Q:
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Is my vote
confidential?
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A:
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Yes. Proxy cards, ballots,
Internet and telephone votes that identify stockholders are kept
confidential. There are exceptions for contested proxy
solicitations or when necessary to meet legal
requirements. Innisfree M&A, the independent proxy
tabulator used by Caterpillar, counts the votes and acts as the inspector
of election for the annual
meeting.
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Q:
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What is the quorum for the
meeting?
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A:
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A quorum of stockholders is
necessary to hold a valid meeting. For Caterpillar, at least
one-third of all stockholders must be present in person or by proxy at the
annual meeting to constitute a quorum. Abstentions and broker
non-votes are counted as present for establishing a quorum. A
broker non-vote generally occurs when a nominee (such as broker) holding
shares for a beneficial owner does not receive instructions from the
beneficial owner on how to vote on a discretionary matter. Because the
nominee does not have discretionary voting power (as provided under New
York Stock Exchange (NYSE) rules), he or she will not be able to vote on
the matter.
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Q:
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What vote is necessary for action
to be taken on proposals?
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A:
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Directors are elected by a
plurality vote of the shares present at the meeting, meaning that director
nominees with the most affirmative votes are elected to fill the available
seats. All other actions presented for a vote of the
stockholders at the 2009 annual meeting require an affirmative vote of the
majority of shares present or represented at the
meeting. Abstentions and broker non-votes have the effect of a
vote against matters other than director elections.
Votes submitted by mail, telephone
or Internet will be voted by the individuals named on the card (or the
individual properly authorized) in the manner indicated. If you
do not specify how you want your shares voted, they will be voted in
accordance with management’s recommendations. If you hold
shares in more than one account, you must vote each proxy and/or voting
instruction card you receive to ensure that all shares you own are
voted.
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Q:
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When are stockholder proposals due
for the 2010 annual meeting?
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A:
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To be considered for inclusion in
the company’s 2010 proxy statement, stockholder proposals must be received
in writing no later than January 1, 2010. Stockholder proposals
should be sent to Caterpillar Inc. by mail c/o the Corporate Secretary at
100 NE Adams Street, Peoria, Illinois 61629. Additionally, we
request that you also forward all stockholder proposals via facsimile to
the following facsimile
number: 309-494-1467.
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Page 3
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Q:
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What does it mean if I receive
more than one proxy card?
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A:
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Whenever possible, registered
shares and plan shares for multiple accounts with the same registration
will be combined into the same card. Shares with different
registrations cannot be combined and as a result, the
stockholder may receive more than one proxy card. For example,
registered shares held individually by John Smith will not be combined on
the same proxy card as registered shares held jointly by John Smith and
his wife.
Street shares are not combined with
registered or plan shares and may result in the stockholder receiving more
than one proxy card. For
example, street shares held by a broker for John Smith will not be
combined with registered shares for John Smith.
If you hold shares in more than one
account, you must vote for each notice, proxy and/or voting instruction
card or e-mail notification you receive that has a unique control number
to ensure that all shares you own are voted.
If you receive more than one card
for accounts that you
believe could be combined because the registration is the same, contact
our stock transfer agent (for registered shares) or your broker (for
street shares) to request that the accounts be combined for future
mailings.
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Q:
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Who pays for the solicitation of
proxies?
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A:
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Caterpillar pays the cost of
soliciting proxies. Proxies will be solicited on behalf of the
board. This solicitation is being made by mail, but also may be
made by telephone or in person. We have hired Innisfree M&A
Incorporated for $15,000, plus out-of-pocket expenses, to assist in the
solicitation. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for sending proxy materials to stockholders and obtaining their
votes.
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Q:
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Are there any matters to be voted
on at the meeting that are not included in this proxy
statement?
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A:
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We do not know of any matters to
be voted on by stockholders at the meeting other than those discussed in
this proxy statement. If any other matter is properly presented
at the annual meeting, proxy holders will vote on the matter in their
discretion.
Under Caterpillar bylaws, a
stockholder may bring a matter to vote at the annual meeting by giving
adequate notice to Caterpillar Inc. by mail c/o the Corporate Secretary at
100 NE Adams Street, Peoria, Illinois 61629. To qualify as
adequate, the notice must contain information specified in our bylaws and
be received by us not less than 45 days nor more than 90 days prior to the
annual meeting. However, if less than 60 days notice of the
annual meeting date is given to stockholders, notice of a matter to be
brought before the annual meeting may be provided to us up to the
15th day following the date the notice
of the annual meeting was
provided.
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Q:
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Can I submit a question in advance
of the annual meeting?
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A:
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Stockholders wishing to submit a
question for consideration in advance of the annual meeting may do so by
sending an e-mail to the Corporate Secretary at Directors@CAT.com or by mail to Caterpillar Inc.
c/o the Corporate Secretary at 100 NE Adams Street, Peoria, Illinois
61629. At the annual meeting, the chairman will alternate
taking live questions with questions submitted in advance, if
any.
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Page 4
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PART TWO — Corporate
Governance
Information
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Our board has adopted Guidelines on
Corporate Governance Issues (corporate governance guidelines), which are
available on our Internet site (www.CAT.com/governance) and also available in print upon
written request to Caterpillar Inc. c/o the Corporate Secretary at 100 NE Adams
Street, Peoria, Illinois 61629. The corporate governance guidelines
reflect the board’s commitment to oversee the effectiveness of policy and
decision-making both at the board and management level, with a view to enhancing
stockholder value over the long term.
Structure
As of the date of this proxy statement,
our board consists of 14 directors and is divided into three classes for
election purposes. One class is elected at each annual meeting to
serve for a three-year term. With the exception of the Chairman, all
directors are independent as determined under NYSE listing standards and the
categorical standards described under “Director Independence Determinations” on
page 7.
Directors elected at the 2009 annual
meeting will hold office for a three-year term expiring at the 2012 annual
meeting. Directors in the other two classes will continue in office
for the remainder of their terms. See pages 15 and 16 for proposal information regarding
directors up for election this year.
If a nominee is unavailable for
election, proxy holders will vote for another nominee proposed by the board or,
as an alternative, the board may reduce the number of directors to be elected at
the meeting.
At the April 2009 board meeting, the
board elected, effective June 1, 2009, Ambassador Susan C. Schwab as a director
of the company. Ambassador Schwab will be appointed to a board
committee at a future board meeting. Upon the effective date of her
directorship, Ambassador Schwab will be a Class III director, and her business
experience and current directorships, if any, are provided with her description
as a Class III director below. Upon the effective date of Ms. Schwab's
election, the board will have 15 directors.
The current composition of the board
classes is as follows:
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Class I – Directors with terms
expiring in 2011
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W.
FRANK BLOUNT,
70, Chairman and CEO
of JI Ventures, Inc. (venture capital). Other directorships:
Alcatel-Lucent S.A.; Entergy Corporation; and KBR, Inc. Mr.
Blount has been a director of the company since
1995.
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JOHN
R. BRAZIL, 63,
President of Trinity University (San Antonio, Texas). Dr.
Brazil has been a director of the company since
1998.
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EUGENE
V. FIFE, 68, Managing
Principal of Vawter Capital LLC (private investment). Mr. Fife
served as the interim CEO and President of Eclipsys Corporation
(healthcare information services) from April to November of
2005. He currently serves as the non-executive Chairman of
Eclipsys Corporation. Mr. Fife has been a director of the
company since 2002.
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GAIL
D. FOSLER, 61, President and Trustee of The
Conference Board (research and business membership). Prior to
her current position, Ms. Fosler served as Executive Vice President,
Senior Vice President and Chief Economist of The Conference
Board. Other directorship: Baxter International
Inc. Ms. Fosler has been a director of the company since
2003.
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PETER
A. MAGOWAN, 67,
former President and Managing General Partner of the San Francisco Giants
(major league baseball team). Mr. Magowan has been a director
of the company since 1993.
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Page 5
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Class II – Directors nominated
for election this
year
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DANIEL
M. DICKINSON, 47,
Managing Partner of Thayer | Hidden Creek (private equity
investment). Other directorship: BFI Canada
Ltd. Mr. Dickinson has been a director of the company since
2006.
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DAVID
R. GOODE, 68, former
Chairman, President and CEO of Norfolk Southern Corporation (holding
company engaged principally in surface transportation). Other
directorships: Delta Air Lines, Inc. and Texas Instruments
Incorporated. Mr. Goode has been a director of the company
since 1993.
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JAMES
W. OWENS, 63,
Chairman and CEO of Caterpillar Inc. (machinery, engines and financial
products). Prior to his current position, Mr. Owens served as
Vice Chairman and as Group President of Caterpillar. Other
directorships: Alcoa Inc. and International Business Machines
Corporation. Mr. Owens has been a director of the company since
2004.
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CHARLES
D. POWELL, 67,
Chairman of Capital Generation Partners (asset and investment management),
LVMH Services Limited (luxury goods) and Magna Holdings (real estate
investment). Prior to his current positions, Lord Powell was
Chairman of Sagitta Asset Management Limited (asset
management). Other directorships: Hongkong Land Holdings
Limited; LVMH Moet-Hennessy Louis Vuitton; Mandarin Oriental International
Ltd.; Textron Corporation; Schindler Holding Ltd.; and Yell Group
plc. Lord Powell has been a director of the company since
2001.
Consistent with the company’s corporate governance guidelines requiring directors to serve on no more than five public company boards in addition to the company’s board, on March 29, 2009 Charles Powell tendered notice of his resignation as a member of the Yell Group plc board of directors, effective July 24, 2009. |
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JOSHUA
I. SMITH, 68,
Chairman and Managing Partner of the Coaching Group, LLC (management
consulting). Other directorships: Comprehensive Care
Corporation, Federal Express Corporation and The Allstate
Corporation. Mr. Smith has been a director of the company since
1993.
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Class III – Directors with
terms expiring in
2010
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JOHN
T. DILLON, 70, former Chairman and CEO of
International Paper (paper and forest products). Mr. Dillon
serves as Vice Chairman of Evercore Capital Partners (advisory and
investment firm) and Senior Managing Director of the firm's investment
activities and private equity business. Other directorships:
E. I. du Pont de Nemours and Company and Kellogg Co. Mr. Dillon
has been a director of the company since
1997.
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§
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JUAN
GALLARDO, 61, Chairman of Grupo
Embotelladoras Unidas S.A. de C.V. (bottling). Former Vice
Chairman of Home Mart de Mexico, S.A. de C.V. (retail trade), former
Chairman of Grupo Azucarero Mexico, S.A. de C.V. (sugar mills) and former
Chairman of Mexico Fund Inc. (mutual fund). Other
directorships: Grupo Mexico, S.A. de C.V. and Lafarge S.A. Mr.
Gallardo has been a director of the company since
1998.
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§
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WILLIAM
A. OSBORN,
61, Chairman and
former CEO of Northern Trust Corporation (multibank holding company) and
The Northern Trust Company (bank). Other directorship: Abbott
Laboratories. Mr. Osborn has been a director of the company
since 2000.
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§
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EDWARD
B. RUST, JR.,
58, Chairman,
President and CEO of State Farm Mutual Automobile Insurance Company
(insurance). He is also President and CEO of State Farm Fire and Casualty
Company, State Farm Life Insurance Company and other principal State Farm
affiliates as well as Trustee and President of State Farm Mutual Fund
Trust and State Farm Variable Product Trust. Other
directorships: Helmerich & Payne, Inc. and The McGraw-Hill
Companies, Inc. Mr. Rust has been a director of the company
since 2003.
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§
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SUSAN C.
SCHWAB (effective June 1, 2009),
54, Professor, University of Maryland School of Public Policy.
Prior to her current position, Ambassador Schwab held various positions
including United States Trade Representative (member of the President’s
cabinet), Deputy United States Trade Representative and President and
Chief Executive Officer of the University System of Maryland Foundation
and Vice-Chancellor of Advancement, University System of
Maryland.
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Page 6
Caterpillar’s board adopted a written process
governing the approval of related party transactions for directors and certain
officers in April 2007. Under the process, all related party
transactions are to be approved in advance by the Governance
Committee. A related party includes directors and
executive officers and their immediate family members.
Prior to entering into such a
transaction, the applicable director or officer must submit a form to
the company’s General Counsel providing the details
of the proposed transaction
including whether: (i) the aggregate amount involved will or may be
expected to exceed $120,000 in any calendar year; (ii) the company is a party;
and (iii) the related person or his or her immediate family member
has or will have a direct or indirect interest (other than
solely as a result of being a director or a less than 10 percent beneficial
owner of an entity involved in the transaction). The General Counsel
will then evaluate, based on the facts and circumstances of the
transaction, whether the related person has a
direct or indirect material interest in the transaction. If so, the
General Counsel will submit the matter to the Governance Committee for it to
consider the following:
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The nature of the related
person’s interest in the
transaction.
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The material terms of the
transaction, including, without limitation, the amount and type of
transaction.
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§
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The importance of the transaction
to the related person.
|
|
|
§
|
The importance of the transaction to the
company.
|
|
|
§
|
Whether the transaction
would impair the
judgment of the
director or executive officer to act in the best interest of the
company.
|
|
|
§
|
The alternatives to entering into
the transaction.
|
|
|
§
|
Whether the transaction is on
terms comparable to
those available to third parties, or in the case of employment
relationships, to employees
generally.
|
|
|
§
|
The potential for the transaction
to lead to an actual or apparent conflict of interest and any safeguards
imposed to prevent such actual or apparent conflicts.
|
|
|
§
|
The overall fairness of the
transaction to the company.
|
There were no transactions reported
under the process for 2008. However, the Governance Committee did consider
long-term transactions/relationships between the company and The Conference Board, for which Ms. Fosler is
the president and trustee, The Northern Trust Company, for which Mr. Osborn is
chairman and LSV Asset Management, for which Mr. Owens’ son is a partner. On each
occasion, the Governance Committee concluded that Ms. Fosler, Mr. Osborn and Mr.
Owens’ son do not have a direct or
indirect material interest in the applicable
relationship/transaction.
The company’s corporate governance guidelines
establish that no more than two non-independent directors shall serve on
the board at any point in time. A director is “independent” if he or she has no direct or indirect
material relationship with the company or with senior management of the company
and their affiliates. Annually, the board makes an affirmative determination
regarding the independence of each director based upon the recommendation of the
Governance Committee. The board makes its independence determination
on a case-by-case basis, after consideration of all relevant facts and circumstances. To
assist the board in making its independence determination, the board has adopted
the following standards, which conform to the applicable NYSE
rules. Under these standards, a director shall be considered
independent if he or she:
|
(1)
|
Has no material relationship with
the company, either directly or as a partner, stockholder or officer of an
organization that has a relationship with the company, and does not have
any relationship that precludes independence under the NYSE
director independence
standards;
|
Page
7
|
(2)
|
Is not currently, or within the
past three years, employed by the company, or an immediate family member
is not currently, or for the past three years, employed as an executive
officer of the company;
|
|
(3)
|
Is not a current employee, nor is an immediate family
member a current executive officer of, a company that has made payments
to, or received payments from, the company for property or services in an
amount which, in any of the past three years, exceeds the greater of $1
million or 2 percent of the
consolidated gross revenues of that
company;
|
|
(4)
|
Has not received, nor has an
immediate family member received, during any twelve month period within
the last three years, direct remuneration in excess of $120,000 from the
company other than
director and committee fees and pension or other forms of deferred
compensation for prior
services;
|
|
(5)
|
(i) is not a current partner or
employee of a firm that is the company's internal or external auditor;
(ii) does not have an immediate family member who is a current partner
of such a firm; (iii) does not have an immediate family member who is a
current employee of such a firm and personally works on the company's
audit; or (iv) has not, nor has an immediate family member, been a partner
or employee of such a firm and
personally worked on the listed company's audit within the last three
years;
|
|
(6)
|
Is not part of an “interlocking
directorate,” whereby
an executive officer of the company simultaneously served on the
compensation committee of another company that employed the
director as an executive officer during the last three
years;
|
|
(7)
|
Is free of any relationships with
the company that may impair, or appear to impair his or her ability to
make independent judgments;
and
|
|
(8)
|
Is not employed by a non-profit organization
where a substantial portion of funding for the past three years
(representing at least a greater of $1 million or 2 percent of the
organization’s annual consolidated gross
revenues) comes from the company or the Caterpillar Foundation.
|
Applying these standards, on April 8,
2009 the board determined that each of the following directors met the
independence standards: W. Frank Blount, John R. Brazil, Daniel M. Dickinson,
John T. Dillon, Eugene V. Fife, Gail D. Fosler, Juan Gallardo, David R. Goode, Peter A. Magowan,
William A. Osborn, Charles D. Powell, Edward B. Rust, Jr. and Joshua I.
Smith. In making its determination, the board considered the
following company transactions, relationships or arrangements, which the board
determined did not affect the applicable
director’s independence:
|
§
|
The Conference Board, for which
Ms. Fosler is the president and a trustee, received payments from the
company for research, subscriptions, conferences, webcasts,
etc. The board determined that Ms. Fosler’s independence was not affected by
these payments because the amount of the payments made by the company was
below the greater of $1 million or 2 percent of The Conference
Board’s consolidated gross
revenues.
|
|
§
|
The Northern Trust
Company, for which
Mr. Osborn is the chairman, received payments from the company primarily
for trustee services related to the administration of benefit
plans. The board determined that Mr. Osborn’s independence was not affected by
these payments because the amount of the payments made by the
company was below the greater of $1 million or 2 percent of The Northern
Trust Company’s consolidated gross
revenues.
|
|
§
|
Various matching contributions
made by the Caterpillar Foundation to non-profit organizations where
directors or immediate family members are employed were also considered,
however, none of the contributions affected the independence of any of the
applicable
directors.
|
In addition, the board determined that
because Mr. Owens is the Chief Executive Officer of the company he is not
independent based on the above standards.
Page 8
In 2008, our full board met
eight times and regularly
scheduled executive sessions, led by the presiding director, were held without
management present. In addition to those
meetings, directors attended meetings of individual board
committees. Overall attendance for our directors at full board and committee meetings held
in 2008 was 94.03 percent. For board meetings only, attendance was
93.14 percent in 2008. No director attended fewer than 75 percent of
the total meetings held in 2008. Company policy, posted on our
Internet site, states that absent unavoidable conflict,
all directors are expected to attend the annual stockholder
meeting. All of our directors attended the annual meeting in June
2008.
Our board has four standing committees -
Audit, Compensation, Governance
and Public
Policy. Each
committee’s charter is available on our Internet
site (www.CAT.com/governance) or available in print upon written
request to Caterpillar Inc. c/o the Corporate Secretary at 100 NE Adams Street,
Peoria, Illinois 61629.
Following is a description of each committee of the
board. Committee memberships as of March 2, 2009, are listed in the
Committee Membership table on page 10.
The Audit
Committee assists the board
in fulfilling its oversight responsibilities with respect to the
integrity of
Caterpillar’s financial statements,
Caterpillar’s compliance with legal and regulatory
requirements, the qualifications and independence of Caterpillar’s Independent Registered Public
Accounting Firm (auditors), the performance of Caterpillar’s internal audit function and the auditors, the
effectiveness of Caterpillar’s internal controls and the
implementation and effectiveness of Caterpillar’s ethics and compliance
program. The Audit Committee performs this function by monitoring
Caterpillar’s financial reporting process and internal
controls and by assessing the audit efforts of the auditors and the internal
auditing department. The Audit Committee has ultimate authority and
responsibility to appoint, retain, compensate, evaluate and, where
appropriate, replace the auditors. The
Audit Committee also reviews updates on emerging accounting and auditing issues
provided by the auditors and by management to assess their potential impact on
Caterpillar. During 2008, the Audit Committee met 11 times and
overall attendance was 95.45
percent. All members of the Audit Committee meet the standards for
independence set forth in the NYSE listing standards and meet financial literacy
guidelines adopted by the board. Additionally, the board has
determined that each member of the Audit Committee
qualifies as an “audit
committee financial expert”
as defined under SEC rules.
The Compensation
Committee assists the board
in fulfilling its responsibilities in connection with the compensation of the
company’s directors, officers and employees. It performs
this function by establishing and overseeing the company’s compensation programs, recommending to
the board the compensation of directors who are not officers of the company,
administering the company’s equity compensation plans, furnishing an annual
Compensation Committee Report on executive compensation and approving the filing
of the Compensation Discussion & Analysis section in accordance with
applicable SEC rules and regulations for inclusion in the company’s proxy statement. All members of the Compensation
Committee meet the standards for independence set forth in the NYSE listing
standards. During 2008, the Compensation Committee met five times and
overall attendance was 93.33 percent.
The Governance
Committee assists the board by making
recommendations regarding the size and composition of the board and the criteria
to be used for the selection of candidates to serve on the board. The
Governance Committee discusses and evaluates the qualifications of
directors up for re-election and recommends the
slate of director candidates to be nominated for election at the annual
meeting. Stockholders who are interested in nominating a director
candidate can do so in accordance with the policy discussed in the “Governance Committee” section on page 14. In addition, the Governance
Committee recommends to the board candidates for election as officers of the
company. The Governance Committee also oversees the corporate
governance guidelines and leads the board in its annual self-evaluation process and shares the
results thereof with the board for discussion and deliberation. All
members of the Governance Committee meet the standards for independence set
forth in the NYSE listing standards. During 2008, the Governance
Committee met five times and overall
attendance was 93.33 percent.
Page 9
The Public
Policy Committee assists
the board in general oversight with respect to matters of national and
international public policy affecting the company’s business, trade policy and
international trade
negotiations impacting the company, major global legislative and regulatory
developments both in the U.S. and internationally affecting the company,
investor, consumer and community relations issues, employee relations,
implementation of policies promoting diversity within the
company, sustainable development initiatives, and charitable and political
contributions by the company or by any committee or foundation affiliated with
the company. All members of the Public Policy Committee meet
the standards for independence set forth
in the NYSE listing standards. During 2008, the Public Policy
Committee met five times and overall attendance was 93.33
percent.
|
Committee
Membership
(as of March 2,
2009)
|
||||
|
Audit
|
Compensation
|
Governance
|
Public Policy
|
|
|
W. Frank
Blount
|
Ö*
|
|||
|
John R.
Brazil
|
Ö
|
|||
|
Daniel M.
Dickinson
|
Ö
|
|||
|
John T.
Dillon
|
Ö*
|
|||
|
Eugene V.
Fife
|
Ö
|
|||
|
Gail D.
Fosler
|
|
Ö
|
||
|
Juan
Gallardo
|
Ö
|
|||
|
David R.
Goode
|
Ö*
|
|||
|
Peter A.
Magowan
|
Ö
|
|||
|
William A.
Osborn
|
Ö
|
|||
|
James W.
Owens
|
||||
|
Charles D.
Powell
|
Ö*
|
|||
|
Edward B. Rust,
Jr.
|
Ö
|
|||
|
Joshua I.
Smith
|
Ö
|
|||
|
* Chairman of
committee
|
||||
You may communicate with any of our
directors, our board as a group, our non-management directors as a group or any
board committee as a group
by sending an e-mail to a particular director, the board or a committee at
Directors@CAT.com or by mail to Caterpillar Inc. c/o the
Corporate Secretary at 100 NE Adams Street, Peoria, Illinois
61629. The board has delegated to the Corporate Secretary, or his designee,
responsibility for determining, in his discretion, whether the communication is
appropriate for consideration by the presiding director, an individual director,
a committee, a group or the full board. According to the
policy adopted by the board, the Corporate
Secretary is required to direct all communications regarding personal
grievances, administrative matters, the conduct of the company’s ordinary business operations, billing
issues, product or service related inquiries, order requests and similar issues to
the appropriate individual within the company. All other
communications are to be submitted to the board as a group, to the particular
director to whom it is directed or, if appropriate, to the presiding director
or committee the Corporate Secretary
believes to be the most appropriate recipient, as the case may be. If
a legitimate business concern is sent by e-mail or letter to the presiding
director, a specific director, the board or a board committee, you will
receive a written acknowledgement from the
Corporate Secretary’s office confirming receipt of your
communication.
Caterpillar’s code of ethics is called
Our Values in Action (code). Integrity, Excellence, Commitment and
Teamwork are the core values identified in the code and are the foundation for
Caterpillar’s corporate strategy. The code applies to all members of
the board and to management and employees worldwide. It documents the
high ethical standards that Caterpillar has upheld since its formation in
1925. The code is available on our Internet site (www.CAT.com/code) and in print upon written request to
Caterpillar Inc. c/o the Corporate Secretary at 100 NE Adams Street, Peoria,
Illinois 61629.
The Audit Committee has established a
means for employees, customers, suppliers, stockholders and other interested
parties to submit confidential and anonymous reports of suspected or actual
violations of the code or our enterprise policies or applicable laws, including
those related to accounting practices, internal controls or auditing matters and
procedures; theft or fraud of any amount; insider trading; performance and
execution of contracts; conflicts of interest; violation of securities and
antitrust laws; and violation of the Foreign Corrupt Practices
Act.
Any employee, stockholder or other
interested party can submit a report via the following
methods:
|
|
§
|
Direct
Telephone: 309-494-4393 (English
only)
|
|
|
§
|
Call Collect
Helpline: 770-582-5275 (language translation
available)
|
|
|
§
|
Confidential
Fax: 309-494-4818
|
|
|
§
|
E-mail: BusinessPractices@cat.com
|
|
|
§
|
Internet: www.CAT.com/obp
|
The Audit Committee is comprised
entirely of independent directors (as defined for members of an audit committee
in the NYSE listing standards) and operates under a written charter
adopted by the board, a copy of which is available on our Internet site
(www.CAT.com/governance). The current members of the
Audit Committee are listed at the end of this report. Management is
responsible for the company’s internal controls and the financial
reporting process. The auditors are responsible for performing an
independent audit of the company’s consolidated financial statements and
internal controls over financial reporting in accordance with standards
established by the Public Company Accounting
Oversight Board in the United States (PCAOB) and issuing a report
thereon. The Audit Committee’s responsibility is to monitor these
processes. In this regard, the Audit Committee meets periodically
with management, the internal auditors and
auditors. The Audit Committee has the authority to conduct or
authorize investigations into any matters within the scope of its
responsibilities and the authority to retain such outside counsel, experts and
other advisors as it determines appropriate to assist it in
conducting any such investigations. The Audit Committee is
responsible for selecting and, if appropriate, replacing the current auditors
(PricewaterhouseCoopers LLP).
The Audit Committee has discussed with
the company’s auditors the overall scope and execution of the independent audit
and has reviewed and discussed the audited financial statements with
management. Management represented to the Audit Committee that the
company’s consolidated financial statements were prepared in accordance with
generally accepted accounting principles in the United
States. Discussions about the company’s audited financial statements
included the auditors’ judgments about the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments and
the clarity of disclosures in the financial statements. The Audit
Committee also discussed with the auditors other matters required by Statement
on Auditing Standards No. 61 Communication with
Audit Committees, as
amended by SAS No. 90 Audit Committee
Communications (as adopted
by the PCAOB in Rule 3200T). Management, the internal auditors and
the auditors also made presentations to the Audit Committee throughout the year
on specific topics of interest, including, without limitation: (i)
management’s philosophy, asset allocation levels, risk management and oversight
of the company’s pension funds; (ii) accounting for the company’s
pension funding obligations; (iii) the company’s derivatives policy
and usage review; (iv) the internal audit plan for
2008; (v) updates on the implementation of the internal audit plan
for 2008; (vi) the company’s information technology systems and the
controls in place within those systems for compliance with the Sarbanes-Oxley
Act of 2002; (vii) the applicability of new accounting
releases; (viii) the company’s critical accounting
policies; (ix) risk management initiatives and controls for various
business units within the company; and (x) the company’s compliance
with the internal controls requirements under Section 404 of the Sarbanes-Oxley
Act of 2002.
Page
11
The auditors provided to the Audit
Committee the written disclosures required by applicable requirements of the PCAOB
regarding the independent accountant's communications with the audit committee
concerning independence,
and the Audit Committee discussed the auditors’ independence with management and
the auditors. The Audit Committee concluded that the auditors’
independence had not been impaired.
Based on: (i) the Audit Committee’s
discussions with management and the auditors; (ii) the Audit Committee’s review
of the representations of management; and (iii) the report of the auditors to
the Audit Committee, the Audit Committee recommended to the board that the
audited consolidated financial statements be included in the company’s Annual
Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on
February 20, 2009.
|
By the current members of
the
Audit Committee consisting
of:
|
|||||
|
John T. Dillon
(Chairman)
|
Eugene V.
Fife
|
||||
|
Daniel M.
Dickinson
|
William A.
Osborn
|
||||
Pre-Approval Process
The Audit Committee pre-approves all
audit and non-audit services to be performed by the auditors. It has
policies and procedures in
place to ensure that the company and its subsidiaries are in full compliance
with the requirements for pre-approval set forth in the Sarbanes-Oxley Act of
2002 and the SEC rules regarding auditor independence. These policies
and procedures provide a mechanism by which
management can request and secure pre-approval of audit and non-audit services
in an orderly manner with minimal disruption to normal business
operations. The policies and procedures are detailed as to the
particular service and do not delegate the Audit
Committee’s responsibility to
management. These policies and procedures address any service
provided by the auditors, and any audit or audit-related services to be provided
by any other audit service provider. The pre-approval process includes an annual and
interim component.
Annual Pre-Approval
Process
Annually, but no later than the April
Audit Committee meeting, management and the auditors jointly submit a Service
Matrix of the types of audit and non-audit services that management may wish to have the
auditors perform for the year. The Service Matrix categorizes the
types of services by Audit, Audit-Related, Tax and All
Other. Approval of a service is merely an authorization that this
type of service is permitted by the Audit Committee, subject to
pre-approval of specific services. Management and the auditors
jointly submit an Annual Pre-Approval Limits Request. The request
lists individual project and aggregate pre-approval limits by service
category. The request also lists known or anticipated
services and associated fees. The Audit Committee approves or rejects
the pre-approval limits and each of the listed services. For 2008,
the pre-approval limits were as follows:
|
Type of
Service
|
Pre-Approval Limits
(in
thousands)
|
||||||||
|
Per Project
|
Aggregate
Limit
|
||||||||
|
Audit
Services
|
$
|
500
|
$
|
25,000
|
|||||
|
Audit-Related
Services
|
$
|
500
|
$
|
10,000
|
|||||
|
Tax
Services
|
$
|
500
|
$
|
15,000
|
|||||
|
All Other
Services
|
$
|
500
|
$
|
1,000
|
|||||
Page
12
Interim Pre-Approval
Process
During the course of the year, the Audit
Committee chairman has the authority to pre-approve requests for services that
were not approved in the Annual Pre-Approval Process. Committee
approval is not required for individual projects below the pre-approval project
limits. However, all services, regardless of fee amounts, are subject
to restrictions on the services allowable under the Sarbanes-Oxley Act of 2002
and SEC rules regarding auditor independence. In addition, all fees
are subject to on-going monitoring by the Audit Committee.
On-Going Monitoring
At each Audit Committee meeting
subsequent to the board meeting at which the Service Matrix and Annual
Pre-Approval Limits Request are approved, the chairman reports any interim
pre-approvals since the last meeting. Also, at each of these
meetings, management and the auditor provide the Audit Committee with an update
of fees expected to be incurred for the year compared to amounts initially
pre-approved.
Independent Registered Public Accounting
Firm Fee Information
Fees for professional services provided
by our auditors included the following (in millions):
|
2008
Actual
|
2007
Actual
|
|||||||||
|
Audit
Fees 1
|
$
|
22.2
|
$
|
21.4
|
||||||
|
Audit-Related Fees 2
|
5.5
|
4.7
|
||||||||
|
Tax Compliance Fees 3
|
2.8
|
2.2
|
||||||||
|
Tax Planning and Consulting Fees
4
|
2.3
|
2.7
|
||||||||
|
All Other Fees 5
|
0.3
|
0.1
|
||||||||
|
TOTAL
|
$
|
33.1
|
$
|
31.1
|
||||||
|
1
|
Actual 2008 “Audit Fees” include
$1.1 of audit fees related to Caterpillar Japan Ltd. following the
consolidation of this entity in 2008.
|
|||||||||
|
2
|
“Audit-Related Fees” principally
includes agreed upon procedures for securitizations, attestation services
requested by management, accounting consultations, pre- or post-
implementation reviews of processes or systems and audits of employee
benefit plan financial statements. Total fees paid directly by
the benefit plans, and not by the company, were $0.6 and $0.6 in 2007 and
2008, respectively.
|
|||||||||
|
3
|
“Tax Compliance Fees” includes,
among other things, statutory tax return preparation and review and
advising on the impact of changes in local tax
laws.
|
|||||||||
|
4
|
“Tax Planning and Consulting Fees”
includes, among other things, tax planning and advice and assistance with
respect to transfer pricing issues.
|
|||||||||
|
5
|
“All Other Fees” principally
includes subscriptions to knowledge tools and attendance at training
classes/seminars.
|
|||||||||
Page
13
The Governance Committee is
comprised of three directors, all of whom meet the independence requirements for nominating committee
members as defined in the NYSE listing standards and determined by the board in
its business judgment. The Governance Committee
operates under a written charter adopted by the board, a copy of which is
available on our Internet site (www.CAT.com/governance). As part of its mandate,
the Governance Committee evaluates and makes recommendations
regarding proposed
candidates to serve on the board, including recommending the slate of nominees
for election at the annual meeting.
Presiding Director
The independent directors of the board
unanimously elected W. Frank Blount, an independent director of the
company since 1995, to
serve as presiding director. Among the duties and responsibilities of the
presiding director are the following:
|
|
§
|
Presides at all meetings of the
board at which the Chairman & CEO is not present, including executive
sessions of the independent directors, and has the
authority to call meetings of the independent directors if
necessary.
|
|
|
§
|
Meets separately with the Chairman
& CEO immediately following the meetings of the independent directors,
and acts as a liaison between the Chairman & CEO and the independent directors
by providing guidance and feedback and reviewing action items from those
meetings.
|
|
|
§
|
Approves board meeting agendas and
information provided to directors prior to board
meetings.
|
|
|
§
|
Approves meeting schedules to
assure that there is
sufficient time for discussion of all agenda
items.
|
|
|
§
|
Is available for consultation and
direct communication with major
stockholders.
|
|
|
§
|
Provides the Chairman & CEO
with the results of the annual performance review in conjunction with the
chairman of the
Compensation Committee.
|
Director Resignation
Policy
The board has adopted a director
resignation policy (resignation policy), which can be found in the
company’s corporate governance
guidelines. The resignation policy establishes that any
director who receives more
“withheld” votes than “for” votes in an election shall promptly
tender his or her resignation. The independent directors of
the board will then evaluate the relevant facts and circumstances and shall make
a decision, within 90 days after the election, on whether to accept such
tendered resignation. The board will promptly publicly disclose its
decision and, if applicable, the reasons for rejecting the tendered
resignation.
Process for Nominating
Directors
The Governance Committee solicits and receives recommendations for
potential director candidates from directors, the Chairman and Caterpillar
management and may also utilize the services of a third party consultant to
identify and evaluate potential nominees. The Governance
Committee also considers unsolicited inquiries
or nominees recommended by stockholders in accordance with the following
procedures and in compliance with the company’s bylaws.
When considering a candidate, the
Governance Committee believes that certain characteristics are essential. For
example, candidates must be individuals of high integrity, honesty and
accountability, with a willingness to express independent
thought. Candidates must also have successful leadership experience
and stature in their primary fields, with a background that
demonstrates an understanding of business affairs as well as the complexities of
a large, publicly held company. Particular consideration will be
given to candidates with experience as chief executive officer of a
successful, capital-intensive businesses with
international operations. In addition, candidates must have a
demonstrated ability to think strategically and make decisions with a
forward-looking focus and the ability to assimilate relevant information on a
broad range of complex
topics.
Page
14
The Governance Committee also believes
that certain characteristics are desirable, such as being a team player with a
demonstrated willingness to ask tough questions in a constructive manner that
adds to the decision-making process of the board. At the same
time, candidates should be independent, with an absence of conflicts of
interests. Moreover, candidates should have the ability to devote the
time necessary to meet director responsibilities and serve on no more than five
public company boards in addition to the
Caterpillar board. Candidates must also have the ability to commit to
stock ownership requirements according to the company’s corporate governance
guidelines.
Stockholder
Nominations
In accordance with the
company’s bylaws, stockholders may nominate a
director candidate to serve on the board by providing advance written notice to
Caterpillar Inc. c/o the
Corporate Secretary at 100 NE Adams Street, Peoria, Illinois 61629. Such written notice of an
intent to nominate a director candidate at an annual meeting
must be given either by personal delivery or by United States mail, postage
prepaid, to Caterpillar Inc. at the address previously provided no later than
ninety (90) days in advance of such meeting. The notice must
set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the nominating stockholder is a
stockholder of record of the company’s stock entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (iv) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of
the SEC, had the nominee been nominated, or intended to be nominated, by the
board; and (v) the consent of each nominee to serve as a director of the company
if so elected. The presiding officer of the annual meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure. You may request a copy of the company’s bylaws by writing the Corporate
Secretary at 100 NE Adams Street, Peoria, Illinois 61629.
The board has nominated the following
directors to stand for re-election for a three-year term expiring at the annual
meeting in
2012. The nominees were evaluated and recommended by the Governance
Committee in accordance with the process for nominating directors as found on
pages 14 and 15 of this
proxy statement.
Directors are elected by a plurality
vote of the shares present at the meeting, meaning that director nominees with
the most affirmative votes are elected to fill the available
seats.
|
Class II – Directors nominated
for election this
year
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§
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DANIEL
M. DICKINSON, 47,
Managing Partner of Thayer | Hidden Creek (private equity
investment). Other directorship: BFI Canada
Ltd. Mr. Dickinson has been a director of the company since
2006.
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§
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DAVID
R. GOODE, 68, former
Chairman, President and CEO of Norfolk Southern Corporation (holding
company engaged principally in surface transportation). Other
directorships: Delta Air Lines, Inc. and Texas Instruments
Incorporated. Mr. Goode has been a director of the company
since 1993.
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§
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JAMES
W. OWENS, 63,
Chairman and CEO of Caterpillar Inc. (machinery, engines and financial
products). Prior to his current position, Mr. Owens served as
Vice Chairman and as Group President of Caterpillar. Other
directorships: Alcoa Inc. and International Business Machines
Corporation. Mr. Owens has been a director of the company since
2004.
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15
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§
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CHARLES
D. POWELL, 67,
Chairman of Capital Generation Partners (asset and investment management),
LVMH Services Limited (luxury goods) and Magna Holdings (real estate
investment). Prior to his current positions, Lord Powell was
Chairman of Sagitta Asset Management Limited (asset
management). Other directorships: Hongkong Land Holdings
Limited; LVMH Moet-Hennessy Louis Vuitton; Mandarin Oriental International
Ltd.; Textron Corporation; Schindler Holding Ltd.; and Yell Group
plc. Lord Powell has been a director of the company since
2001.
Consistent with the company’s
corporate governance guidelines requiring directors to serve on no more
than five public company boards in addition to the company’s board, on
March 29, 2009 Charles Powell tendered notice of his resignation as a
member of the Yell Group plc board of directors, effective July
24, 2009.
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§
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JOSHUA
I. SMITH, 68,
Chairman and Managing Partner of the Coaching Group, LLC (management
consulting). Other directorships: Comprehensive Care
Corporation, Federal Express Corporation and The Allstate
Corporation. Mr. Smith has been a director of the company since
1993.
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YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS VOTING “FOR” THE NOMINEES PRESENTED IN PROPOSAL
1.
The board seeks an indication from stockholders of their approval or disapproval of the Audit Committee’s appointment of PricewaterhouseCoopers LLP (PricewaterhouseCoopers) as auditors for 2009.
PricewaterhouseCoopers has been our
auditors since 1925. For additional information regarding
the company’s relationship with
PricewaterhouseCoopers, please refer to the Audit Committee Report on page 11
and the Audit Fees
disclosure on page 12.
If the appointment of
PricewaterhouseCoopers as auditors for 2009 is not approved by the
stockholders, the adverse
vote will be considered a direction to the Audit Committee to consider other
auditors for next year. However, because of the difficulty in making
any substitution of auditors so long after the beginning of the current year,
the appointment for the year 2009 will stand, unless the
Audit Committee finds other good reason for making a change.
Representatives of
PricewaterhouseCoopers will be present at the annual meeting and will have the
opportunity to make a statement if they desire to do so. The representatives will also be
available to respond to questions at the meeting.
YOUR BOARD OF DIRECTORS AND AUDIT
COMMITTEE UNANIMOUSLY RECOMMEND VOTING “FOR” PROPOSAL 2.
Pursuant to Rule
14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name,
address and number of company securities held by the proponent of this
stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative vote of the
majority of shares present at the meeting to pass. Abstentions and
broker non-votes have the effect of a vote against this
proposal.
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16
Resolution Proposed by
Stockholder
Resolved: That the
shareowners of Caterpillar Inc. (CAT) ask that the company take the steps
necessary to reorganize the Board of Directors into one class subject to
election each year and to complete this within one-year.
Supporting Statement of
Stockholder
This proposal seeks
to reorganize the Board of Directors of the Company so that each director stands
before the shareowners for re-election each year. We hope to
eliminate the Company’s so-called “classified board”, whereby the directors are
divided into three classes, each serving a three-year term. Under the
current structure, shareowners can only vote on one-third of the Board at any
given time.
This proposal topic
won 69% support at our 2008 annual meeting based on yes and no
votes. The Council of Institutional Investors recommends timely
adoption of shareholder proposals upon receiving their first greater than 50%
vote: “Boards should take actions recommended in shareowner proposals that
receive a majority of votes cast for and against.”
We believe that
corporate governance procedures and practices, and the level of accountability
they impose, are closely related to financial performance. It is
intuitive that when directors are accountable for their actions, they perform
better. We also believe that shareowners are willing to pay a premium
for corporations with excellent corporate governance. If the Company
were to take the steps necessary to declassify its Board, it would be a strong
statement that this Company is committed to good corporate governance and its
long-term financial performance.
We seek to improve
that performance and ensure the Company’s continued viability through this
structural reorganization of the Board. If passed, shareowners would
have the opportunity to register their views at each annual meeting – on
performance of the Board as a whole and of each director as an
individual.
We urge you to join
us in urging the Company to take the steps necessary to declassify the election
of directors, as a powerful tool for management incentive and
accountability. We urge your support FOR this proposal.
Caterpillar Statement in Opposition
After thoughtful
consideration, the board recommends voting AGAINST this proposal for the
reasons provided below.
The board
acknowledges that a majority of stockholders voted last year in favor of a
similar proposal. With
that in mind, the board and the Governance Committee has considered the most
effective structure for the board and determined, for the reasons presented
below, that the current classified board structure continues to be in the best
long-term interests of the company and its stockholders.
Stability
and Continuity. In accordance with the company’s
articles of incorporation, the board is divided into three classes – each
serving a staggered three-year term. This structure provides the board
stability, continuity and independence. This structure also enhances long-term
planning and ensures that, at any given time, the board is comprised of
directors who are intimately familiar with the company’s business and strategic
goals. A classified board also benefits the company and its stockholders because
it helps attract and retain director candidates who are willing to make
long-term commitments of their time and energy. This commitment is necessary to
achieve the goals established under the company’s Vision 2020 strategic plan – a
commitment that stretches over several years and will be best fulfilled by a
stable and continuous board.
Independence. Electing directors to three-year terms
also enhances the independence of non-management directors by providing them
with a longer term of office. The longer term provides a certain amount of
autonomy from special interest groups who may have an agenda contrary to the
company’s long-term goals and objectives and those of a majority of
stockholders. As a result, independent directors are able to make decisions that
are in the best interests of the company and its
stockholders.
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17
Accountability
to Stockholders. Because all directors are required to
uphold their fiduciary duties to the company and its stockholders regardless of
term, directors elected to three-year terms are equally accountable to
stockholders as directors elected annually. Additionally, the company’s Director
Resignation Policy promotes director accountability to
shareholders. The Director Resignation Policy, which is set
forth in the company's Guidelines on Corporate Governance Issues (www.CAT.com/governance),
establishes that any director nominee who receives a greater number of
“withheld” votes than votes “for” is required to tender his or her resignation
to the Governance Committee. The Governance Committee will consider the
resignation and recommend to the board whether or not to accept the resignation.
The independent directors will then make a decision regarding the resignation
and publicly disclose their decision. The Director Resignation Policy provides
stockholders a meaningful role in the election of directors, ensures public
disclosure of directors’ decisions and acts as a vehicle for holding directors
accountable for their actions or failure to act.
Financial
Results and Stockholder Value. The proposal intimates that a
declassified board equals improved financial performance. There is no objective
evidence to confirm this suggestion, and is contrary to the company’s recent
financial results. For fiscal year 2008, the company’s results marked the
sixth straight year of record sales and revenues of $51.324 billion. The board
believes that these financial results are a direct result of the board being
comprised of independent directors who: (i) have had sufficient time to learn
the company’s business and thereby contribute best to the development of its
strategy to create long-term stockholder value and to oversee management’s
implementation of that strategy; (ii) are knowledgeable about the company; and
(iii) are pursuing the company’s long-term business plans and
goals.
Protection
Against Takeovers. A classified board structure also
strongly encourages potential acquirers to deal directly with the board and
better positions the board to negotiate the greatest possible stockholder
value. The classified board structure is designed to safeguard
against a hostile purchaser gaining control of the company and its assets
without paying fair market value. Because only one-third of the directors are
elected at any annual meeting, it is impossible to elect an entirely new board
or a majority of the board at a single meeting. A classified board
does not preclude a takeover. Rather, it provides a company with time
and leverage to evaluate the adequacy and fairness of any takeover proposal,
negotiate on behalf of all stockholders and weigh alternative methods of
maximizing stockholder value, including evaluating competing expressions of
interest. In fact, recent studies suggest that classified boards may improve the
relative bargaining power of managers and the board, as well as the stockholders
who are the ultimate beneficiaries of such leverage, in any hostile takeover
bid. See Bates, Becker and Lemmon, Board Classification
and Managerial Entrenchment: Evidence from the Market for Corporate
Control, (April 2007) at p.
30.
It is important to note that stockholder
approval of this proposal would not in itself declassify the board. Under
Delaware law, the state where the company is incorporated, to change the class
structure of the board, the board must first authorize amendments to the
company’s articles of incorporation and bylaws. Stockholders would
then have to approve each of those amendments with an affirmative vote of not
less than 75 percent of the total voting power of all outstanding shares of
company stock entitled to vote generally in the election of
directors.
After careful consideration of this
proposal, the board believes that the retention of a classified board structure
remains in the best long-term interests of the company and its
stockholders.
FOR THESE REASONS, YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “AGAINST” PROPOSAL
3.
Pursuant to Rule 14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name, address and number of company securities held by the proponent of this stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative
vote of the majority of shares present at the meeting to
pass. Abstentions and broker non-votes have the effect of a vote
against this proposal.
Resolution Proposed by
Stockholder
Resolved: That the
shareholders of Caterpillar Inc. (“Company”) hereby request that the Board of
Directors initiate the appropriate process to amend the Company’s bylaws to
provide that director nominees shall be elected by the affirmative vote of the
majority of votes cast at an annual meeting of shareholders, with a plurality
vote standard retained for contested director elections, that is, when the
number of director nominees exceeds the number of board seats.
Page
18
Supporting Statement of
Stockholder
In order to provide
shareholders a meaningful role in director elections, our Company’s director
election vote standard should be changed to a majority vote
standard. A majority vote standard would require that a nominee
receive a majority of the votes cast in order to be elected. The
standard is particularly well-suited for the vast majority of director elections
in which only board nominated candidates are on the ballot. We
believe that a majority vote standard in board elections would establish a
challenging vote standard for board nominees and improve the performance of
individual directors and entire boards. Our Company presently uses a
plurality vote standard in all director elections. Under the
plurality vote standard, a nominee for the board can be elected with as little
as a single affirmative vote, even if a substantial majority of the votes cast
are “withheld” from the nominee.
In response to
strong shareholder support for a majority vote standard in director elections, a
strong majority of the nation’s leading companies, including Intel, General
Electric, Motorola, Hewlett-Packard, Morgan Stanley, Wal-Mart, Home Depot,
Gannett, Marathon Oil, and Safeway have adopted a majority vote standard in
company bylaws or articles of incorporation. Additionally, these
companies have adopted director resignation policies in their bylaws or
corporate governance policies to address post-election issues related to the
status of director nominees that fail to win election. However, our
Company has responded only partially to the call for change, simply adopting a
post-election director resignation policy that sets procedures for addressing
the status of director nominees that receive more “withhold” votes than “for”
votes. The plurality vote standard remains in place.
We believe that a
post-election director resignation policy without a majority vote standard in
Company bylaws or articles is an inadequate reform. The critical
first step in establishing a meaningful majority vote policy is the adoption of
a majority vote standard. With a majority vote standard in place, the
Board can then consider action on developing post-election procedures to address
the status of directors that fail to win election. A majority vote
standard combined with a post-election director resignation policy would
establish a meaningful right for shareholders to elect directors, and reserve
for the Board an important post-election role in determining the continued
status of an unelected director. We feel that this combination of the
majority vote standard with a post-election policy represents a true majority
vote standard.
Caterpillar Statement in Opposition
After thoughtful
consideration, the board recommends voting AGAINST the proposal for the
reasons provided below.
For the past five
years, the company has received a similar proposal, and each year the proposal
received less than a majority of the votes cast by stockholders. In light of
these results and for the reasons provided below, the board believes that the
company’s current method of electing directors continues to be in the best
long-term interests of the company and its stockholders.
Company
stockholders currently elect their directors by plurality voting. Plurality
voting is the default standard under Delaware law, the state where the company
is incorporated, and has long been the accepted standard among large public
companies. Consequently, the rules governing plurality voting are well
established and understood. Notwithstanding the foregoing, the board is
cognizant of recent developments with respect to majority voting in director
elections. In fact, in 2007, in response to a similar proposal, the board
adopted a director resignation policy in connection with director elections (the
“Director Resignation Policy”) to address the concerns presented in the
proposal. The Director Resignation Policy, which is set forth in the
company's Guidelines on Corporate Governance Issues (www.CAT.com/governance),
establishes that any director nominee who receives a greater number of
“withheld” votes than votes “for” is required to tender his or her resignation
to the Governance Committee. The Governance Committee will consider the
resignation and recommend to the board whether or not to accept the resignation.
The independent directors will then make a decision regarding the resignation
and publicly disclose their decision. The board believes that the Director
Resignation Policy promotes a good balance between providing stockholders a
meaningful and significant role in the process of electing directors and
allowing the board flexibility to exercise its independent judgment on a
case-by-case basis.
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19
Moreover, the
proponent’s characterization of plurality voting, particularly the statement
that a director may be elected by a single vote even if a substantial majority
of the votes cast are “withheld,” is improbable – especially in light of the
company’s past voting results. The company’s stockholders have an
excellent history of electing strong and independent directors by plurality
voting. During the past ten years, the average affirmative vote for directors
has been greater than 96 percent of the shares voted through the plurality
voting process. Further, as explained above, under the Director Resignation
Policy, if a director receives more “withheld” votes than votes “for,” the
director, must resign his or her position.
In addition, the
Governance Committee, in conjunction with the Chairman and Chief Executive
Officer, establishes and maintains stringent director criteria to ensure that
the board is comprised of strong and independent directors. These criteria
include the following: (i) integrity, honesty and accountability, with a
willingness to express independent thought; (ii) successful leadership
experience and stature in an individual’s primary field, with a background that
demonstrates an understanding of business affairs as well as the complexities of
a large, publicly held company; (iii) demonstrated ability to think
strategically and make decisions with a forward-looking focus, and the ability
to assimilate relevant information on a broad range of complex topics; (iv)
being a team player with a demonstrated willingness to ask tough questions in a
constructive manner that adds to the decision making process of the board; (v)
independence and absence of conflicts of interest; (vi) ability to devote
necessary time to meet director responsibilities; and (vii) the ability to
commit to company stock ownership. These same criteria are applied to evaluate
candidates nominated by stockholders. The nomination and election process has
been instrumental in the construction of a board that is comprised of highly
qualified directors from diverse backgrounds, and, with the exception of the
Chairman, are all independent as defined under NYSE regulations.
FOR
THESE REASONS, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “AGAINST”
PROPOSAL 4.
Pursuant to Rule 14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name, address and number of company securities held by the proponent of this stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative
vote of the majority of shares present at the meeting to
pass. Abstentions and broker non-votes have the effect of a vote
against this proposal.
Resolution Proposed by
Stockholder
Whereas: the United
States exports weapon and related military equipment and services through
foreign military sales (government-to-government), direct commercial weapons
sales (U.S. companies to foreign buyers), equipment leases, transfers of excess
defense materiel and emergency drawdowns of weaponry.
In 2007, the United
States ranked first in arms transfer agreements with developing
nations with $12.2 billion or 28.8% of these agreements. The United
States also ranked first in the value of arms deliveries to developing
nations at $7.6 billion, or 44.2% of all such deliveries. The weapons
sold range from ammunition to tanks, supersonic combat aircraft, missiles and
submarines. (“Conventional Arms Transfers to Developing Nations,
2000-2007,” Congressional Research Service, Report for Congress, October 23,
2008)
Although it does
not produce weapons systems, Caterpillar has, in the past, sold dual use
equipment such as bulldozers through foreign military sales; however, the
frequency and volume of sales is unknown. Nor is there precise
information on which countries have received Caterpillar equipment.
Resolved:
Shareholders request that, within six months of the annual meeting, the Board of
Directors provide a comprehensive report, at reasonable cost and omitting
proprietary and classified information, on Caterpillar’s foreign sales of
weapons-related products, and other equipment and services related to those
products for the past 10 years, including the country of destination for the
products.
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20
Supporting Statement of
Stockholder
We believe with the
American Red Cross that “the greater the availability of arms, the greater the
violations of human rights and international humanitarian
law.” Global security is security of all people. We are
seeing an increase in human rights abuses inflicted on women, people of minority
ethnicities, personnel of NGOs offering medical and other human services as well
as employees of corporations servicing DOD contracts. Use of
Caterpillar equipment by foreign militaries in actions that violate human rights
and international humanitarian law raises issues for Caterpillar corporate
policy and risks damage to the Company’s reputation.
Therefore, we
believe it is reasonable that the report include:
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|
1.
|
Processes
used to determine and promote foreign
sales;
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2.
|
Criteria for
choosing countries with which to do
business;
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3.
|
A description
of procedures used to negotiate foreign arms sales,
government-to-government and direct commercial sales and the percentage of
sales for each category;
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|
4.
|
For the past
ten years, categories of military equipment or components, including dual
use items exported for the past five years, with as much statistical
information as permissible; contracts for servicing/maintaining equipment;
offset agreements; and licensing and/or co-production with foreign
governments.
|
Caterpillar Statement in Opposition
After thoughtful
consideration, the board recommends voting AGAINST this proposal because
it believes completing the requested report is an inappropriate use of company
resources.
The company does not manufacture or sell
weapons or weapon systems. It does, however, sell a limited amount of commercial
equipment modified for military purposes (modified equipment) to foreign
governments. These sales are predominantly performed one of two ways: (i)
federally sponsored programs – most notably the Foreign Military Sales Program
(program), or (ii) to company dealers who then sell such equipment to foreign
governments.
As provided above, the company sells
modified equipment to foreign governments under the program, although the
overwhelming majority of sales performed by the company under the program
involves ordinary equipment and not modified equipment. Under the program, the
U.S. government provides financing to eligible foreign governments or
organizations for the procurement of defense articles and services as well as
ordinary commercial products. The U.S. government then sources these requests
with U.S. manufacturers and administers the resulting contract. Sales and
services under the program may be made only after the U.S. government has
determined that the sale is consistent with the national security, foreign
policy and economic interests of the U.S. The company has procedures and
processes in place to ensure that sales of modified equipment and ordinary
equipment made under the program are performed in accordance with the program
and all other U.S. laws and regulations. In 2008, the company’s total sales and
revenues under the program were approximately $18.9 million, which largely
represents sales of ordinary equipment. These sales account for approximately
0.04 percent of the company’s 2008 sales and revenues of $51.324
billion.
In addition, the company sells modified
equipment to its dealers who then sell such equipment to foreign governments. In
2008, sales of modified equipment to company dealers who then sold such
equipment to foreign governments were very limited and amounted to approximately
$11.9 million - approximately 0.02 percent of the company’s 2008 sales and
revenues. The company also sold ordinary equipment to company dealers who then
sold such ordinary equipment to foreign governments. However, pursuant to the
language of the proposal, sales of ordinary equipment to foreign governments are
outside the scope of this response. Given the company’s relatively small volume
of sales of modified equipment to foreign governments in 2008, under both of the
above-described methods, the board believes that it would be an inappropriate
use of the company’s resources to complete the requested
report.
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21
Moreover, any sales of modified
equipment (and ordinary equipment) by the company under the program are a matter
of public record through information provided by the U.S. government. The
Department of Defense and Department of State provide notification of such sales
to Congress, which is also made available to the public. Therefore, the board
believes that producing the requested report would be, for the most part,
duplicative and unnecessary.
The board believes that to allocate the
necessary resources to complete a detailed report addressing an insignificant
portion of the company’s business is an inappropriate use of company resources
and not in the best interests of the company or its
stockholders.
FOR THESE REASONS, YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST" PROPOSAL
5.
Pursuant to Rule 14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name, address and number of company securities held by the proponent of this stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative vote of the
majority of shares present at the meeting to pass. Abstentions and
broker non-votes have the effect of a vote against this
proposal.
Resolution Proposed by
Stockholder
Resolved: Shareholders
request that our board take the steps necessary so that each shareholder voting
requirement in our charter and bylaws, that calls for a greater than simple
majority vote, be changed to a majority of the votes cast for and against
related proposals in compliance with applicable laws. This includes
each 75% shareholder voting provision in our charter and/or bylaws.
Supporting Statement of
Stockholder
Currently a
1%-minority can frustrate the will of our 74%-shareholder
majority. Our supermajority vote requirements can be almost
impossible to obtain when one considers abstentions and broker
non-votes. For example, a Goodyear (GT) management proposal for
annual election of each director failed to pass even though 90% of votes cast
were yes-votes. Supermajority requirements are arguably most often
used to block initiatives supported by most shareowners but opposed by
management.
The Council of
Institutional Investors www.cii.org
recommends adoption of simple majority voting. This proposal topic
also won up to 89% support at the following companies in 2008:
Whirlpool
(WHR)
79% Ray
T. Chevedden (Sponsor)
Lear Corp.
(LEA) 88% John
Chevedden
Liz Claiborne
(LIZ) 89% Kenneth
Steiner
The merits of this
Simple Majority Vote proposal should also be considered in the context of the
need to initiate improvements in our company’s corporate governance and in
individual director performance. For instance in 2008 the following
governance and performance issues were identified:
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·
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The Corporate
Library www.thecorporatelibrary.com,
an independent investment research firm, rated our
company:
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“D” in governance.
“High Governance Risk Assessment.”
“Very High Concern” in Executive Pay with $17 million for
James Owens.
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22
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·
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Our directors
served on 8 boards rated “D” by the Corporate Library:
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James
Owens Alcoa
(AA)
James
Owens International
Business Machines (IBM)
William
Osborn Abbott
Laboratories (ABT)
William
Osborn Northern
Trust (NTRS)
Edward
Rust Helmerich
& Payne (HP)
Edward
Rust McGraw-Hill
(MHP)
Joshua
Smith FedEx
(FDX)
Eugene
Fife Eclipsys
(ECLP)
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·
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James Owens
and William Osborn were designate “Accelerated Vesting” directors by The
Corporate Library due to their accelerating of stock option vesting to
avoid recognizing the related cost.
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·
|
Two directors
were “Problem Directors” according to The Corporate
Library:
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David Goode
due to his involvement with Delta Air Lines and its
bankruptcy.
Frank Blount
(our lead Director no less) due to his involvement with Entergy
Corporation and its bankruptcy.
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·
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Three
directors had more than 15-years tenure (independence
concern):
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David
Goode
Joshua
Smith
Peter
Magowan
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·
|
Our directors
still had a $1 million gift plan – Conflict of interest
concern.
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·
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We had no
shareholder right to:
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Annual
election of each director.
An
independent Chairman.
Cumulative
voting.
To act by
written consent.
To Call
a special meeting.
Elect
directors by a majority vote – one yes-vote can now elect a director for
3-years.
|
The above concerns
shows there is need for improvement. Please encourage our board to
respond positively to this proposal.
Caterpillar Statement in Opposition
After thoughtful
consideration, the board of directors recommends voting AGAINST the proposal for the
reasons provided below.
The board believes that the
super-majority voting standards under the company’s Restated Certificate of
Incorporation (certificate) and Bylaws (collectively, governance documents) are
appropriate and necessary. These super-majority standards ensure that broad
stockholder support exists before significant changes to the company’s corporate
and governance structure can be implemented. The company’s super-majority voting
standards require approval of at least 75 percent of the outstanding stock of
the company for a small but important number of matters of corporate structure
and governance, which are as follows: (i) special meetings of the stockholders;
(ii) actions by stockholders without a special meeting; (iii) the number, class
and nomination of directors; and (iv) removal of a director without cause. The
super-majority standards do not apply to the approval of a merger or business
combination, for which only a simple majority is required.
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23
The board believes that a higher voting
threshold for significant changes to the company’s corporate structure or
governance is in the best long-term interests of the company and its
stockholders. The board intentionally created a super-majority vote standard to
apply to the areas described above because of their importance to the company.
For example, the provisions not allowing stockholders to call a special meeting
of stockholders or acting by written consent are meant to protect the interests
of all stockholders and help create long-term stockholder value under all
circumstances. These provisions encourage potential acquirers to deal directly
with the board, which in turn provides the board greater leverage to negotiate
the best possible return for all stockholders.
In addition, the board is subject to
fiduciary duties under the law to act in a manner that it believes to be in the
best interests of the company and all of its stockholders. Stockholders, on the
other hand, do not have the same fiduciary duty as the Directors. As a result, a
single stockholder or a group of stockholders acting in concert may act in their
own self-interests to the detriment of other stockholders. Accordingly, the
super-majority voting standards are necessary to safeguard the long-term
interests of the company and its stockholders.
It is important to note that stockholder
approval of this proposal would not in itself remove the super-majority vote
standards from the governance documents. Under Delaware law, the jurisdiction
where the company is incorporated, to change the super-majority standards the
board must first authorize amendments to the company’s certificate and Bylaws.
Stockholders would then have to approve each of those amendments with an
affirmative vote of not less than 75 percent of the outstanding stock of the
company entitled to vote generally in the election of
directors.
FOR THESE REASONS,
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “AGAINST” PROPOSAL
6.
Pursuant to Rule 14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name, address and number of company securities held by the proponent of this stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative
vote of the majority of shares present at the meeting to
pass. Abstentions and broker non-votes have the effect of a
vote against this
proposal.
Resolution Proposed by
Stockholder
Resolved: That
the shareholders of Caterpillar Inc. (the “Company”) request that the board of
directors (the “Board”) adopt a policy stating that any consultant retained to
advise the Board or the Board’s compensation committee on executive compensation
matters (each, a “Compensation Consultant”), or any affiliate of a Compensation
Consultant, should not be retained to provide any other services to the Company,
to any affiliate of the Company, or to any of the Company’s senior executive
officers.
The policy should
be implemented so as not to violate any contractual obligations.
Supporting Statement of
Stockholder
In our opinion,
there has been increasing concern regarding the role compensation consultants
may play in escalating executive pay. Specifically, we believe the
independence of compensation consultants is an important factor in determining
how senior executives are compensated. Regarding the selection of
compensation consultants, one study observes that, “CEOs have often been
involved in the selection process” (Bebchuk and Fried, “Pay Without
Performance,” 2004). The authors add that, “Even if the CEO has not
been involved [in the selection process], the chosen consultant has understood
that a recommendation that displeases the CEO may pre-empt the consultant’s
future employment.”
In our view, the
independence of compensation consultants can be compromised by additional
business relationships. According to an April 9, 2006 New York Times article,
compensation consultants “are often motivated to produce big paydays for
managers. After all, the boss can hand their company lucrative
contracts down the road.” In 2007, the U.S. House of
Representatives’ Committee on Oversight and Government Reform began
investigating whether major U.S. consulting firms that provide pay advice to
boards of directors also perform other services for company managers that may
compromise their independence.
Page
24
According to a
study by The Corporate Library, an authority on corporate governance,
compensation consultants are associated with companies that pay at levels higher
than the market median. Further, these higher levels of pay are in
general not associated with higher levels of shareholder returns (The Effect of Compensation
Consultants, The Corporate Library, 2007).
Given these
concerns, we believe that adopting a policy to require the use of independent
compensation consultants will ensure that executive compensation decisions are
rendered independently and in the best interests of shareholders.
Caterpillar
Statement in Opposition
After thoughtful consideration, the
board recommends voting AGAINST the proposal for the reasons provided
below.
The Compensation
Committee is responsible for overseeing the company’s compensation practices and
programs. Hewitt Associates (Hewitt), through John Anderson (compensation
consultant), assists the Compensation Committee with these tasks. Specifically,
the compensation consultant assists the Compensation Committee by providing
information and advice regarding the design and implementation of the company’s
compensation programs, providing “benchmarking” data and providing analysis on
trends and important new developments in the executive compensation
field.
Contrary to the
proponent’s assertions, the compensation consultant was not selected by the
company’s CEO or management team. Rather, he was selected solely by the
Compensation Committee and he reports directly to the Compensation Committee.
The Compensation Committee also has the sole authority to terminate the
compensation consultant and determine the terms and conditions of its
relationship with the compensation consultant – including the fees for his
services.
As documented in
the company’s Compensation Discussion and Analysis (CD&A) in this proxy
statement, a separate and distinct unit of Hewitt provides administrative
services to the company in connection with its retirement and health-care plans
(collectively, administrative services). As a result, the company and Hewitt go
to great lengths to ensure the compensation consultant is separated, physically
and financially, from the Hewitt business units that provide the administrative
services. For example: (i) Hewitt has separated its executive compensation
consulting group, to which the compensation consultant belongs, into a single,
segregated business unit within Hewitt; (ii) neither the compensation consultant
or any member of his team participates in any activities related to the
administrative services; (iii) Hewitt pays its executive compensation
consultants solely on their individual results and accomplishments (i.e., the
compensation consultant does not receive any compensation or incentives based on
the administrative services); and (iv) the administrative services are under a
separate contractual arrangement and managed by a separate business unit of
Hewitt.
The Compensation Committee annually
reviews and examines the processes and policies Hewitt utilizes to keep its
executive compensation services separated and “independent” from its other
business units at Hewitt. The Compensation Committee performed this review in
2009 and it believes that the compensation consultant provides valued and
objective compensation consulting services.
The proponent
asserts that because Hewitt provides the administrative services in addition to
compensation consulting, it is a foregone conclusion, without any specific
factual support, that the company’s CEO is paid at a level “higher than the
market median.” This assertion is misplaced and erroneous. The Compensation
Committee is comprised of independent directors, as defined under NYSE
regulations, who all have significant experience addressing and resolving
sophisticated business issues. Contrary to the proponent’s
assumption, the Compensation Committee is not comprised of “zombies” who blindly
follow the recommendations of the compensation consultant. Although the
compensation consultant’s input is valued, the Compensation Committee
independently makes the executive compensation decisions.
Additionally,
contrary to the proponent’s assertions, the total compensation paid by the
company to its CEO for 2008 was paid at “market level.” The Compensation
Committee targets the CEO’s total compensation at the median level of the
company’s benchmark group (See discussion of the company’s benchmark group on
page 35 of this proxy statement). The company’s benchmark group includes some of
its industry competitors, but it is mostly made up of companies that are similar
in size (financial or otherwise) and global presence to the company and compete
with the company for executive talent. In 2008, the company targeted and paid
its CEO at the median level of the benchmark group; or in other words, at
“market level.”
Page
25
Finally, the
company provides significantly more information regarding its compensation
consultant than what is required by SEC regulations. Generally, SEC regulations
require companies to disclose whether it uses a compensation consultant and the
role of the compensation consultant in determining executive compensation. In
the CD&A included in this proxy statement, the company discloses the SEC
required information and substantially more information concerning the
compensation consultant (See page 33 of this proxy statement).
FOR
THESE REASONS, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST"
PROPOSAL 7.
Pursuant to Rule 14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name, address and number of company securities held by the proponent of this stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative
vote of the majority of shares present at the meeting to
pass. Abstentions and broker non-votes have the effect of a vote
against this proposal.
Resolution Proposed by
Stockholder
Resolved: That
pursuant to Section 109 of the Delaware General Corporation Law, and Article VI
Section 5 of Caterpillar Inc.’s Bylaws, the stockholders of Caterpillar Inc.
(“Caterpillar”) hereby amend the Bylaws as follows:
Amend “Article IV Section 1
Officers,” which currently reads – “The officers of the corporation
shall be a chairman of the board, who shall be the chief executive officer, one
or more group presidents, one or more vice presidents (one of whom shall be
designated the chief financial officer), a secretary and a treasurer,
together with
such other officers as the board of directors shall determine. Any
two or more offices may be held by the same person”―
to read as
follows:
“The officers of the corporation
shall be a chairman of the board, a chief executive officer, one or more group
presidents, one or more vice presidents (one of whom shall be designated the
chief financial officer), a secretary and a treasurer, together with such other
officers as the board of directors shall determine. Any two or more
offices may be held by the same person, with the exception of chairman, as
indicated by Section 1a.”
And to add the
following text as “Section 1a.
Chairman”
to Article IV:
“The Chairman shall
be a director who is independent from the Corporation. For purposes
of this requirement, “independent” has the meaning set forth in the New York
Stock Exchange (“NYSE”) listing standards, unless the Corporation’s common stock
ceases to be listed on the NYSE and is listed on another exchange, in which case
such exchange’s definition of independence shall apply. If the Board
determines that a Chairman who was independent at the time he or she was
selected is no longer independent, the Board shall select a new Chairman who
satisfies this independence requirement within 60 days of such
determination. Compliance with this independence requirement shall be
excused if no director who qualifies as independent is elected by the
stockholders or if no director who is independent is willing to serve as
Chairman. This independence requirement shall apply prospectively so
as not to violate any contractual obligation of the Corporation in effect when
the requirement was adopted.”
Supporting Statement of
Stockholder
CEO James W. Owens
currently also serves as chairman of Caterpillar’s Board of
Directors.
We believe the role
of Chairman should meet high standards of independence to ensure proper
oversight of senior executives, and to increase accountability by management to
the entire Board – something that is difficult to accomplish when management
oversees the Board. An independent Chairman would also likely promote
more objective evaluation and compensation of our CEO, and would help facilitate
an inclusive Board agenda.
Page
26
Additionally, we
believe Caterpillar has demonstrated poor governance in many respects, including
its continued classified board of directors, its high executive compensation
(CEO Owens received over $17 million in 2007), its Guidelines on Corporate
Governance, and its responses to proxy proposals in recent years.
We urge
shareholders to vote FOR this Proposal.
Caterpillar Statement in Opposition
After thoughtful consideration, the
board recommends voting AGAINST this proposal for the reasons provided
below.
Similar to the proposals rejected by
stockholders in 2006 and 2007, this proposal asserts that the board cannot
provide effective independent oversight of the company and its management team
because an independent director does not hold the office of Chairman. The board
believes that this assertion is without merit.
The company’s Guidelines on Corporate Governance
Issues establishes that the role of the company’s Chairman is to be filled by the
company’s CEO. The board
believes the combined role
of Chairman and CEO promotes unified leadership and direction for the company,
which allows for a single, clear focus for management to execute the
company’s strategy and business plans. This
leadership structure has resulted in the continued growth and financial success
of the company. For fiscal year 2008, the company’s results marked the sixth straight year
of record sales and revenues of $51.324 billion. The board believes that these
financial results are, in part, the product of the unified and focused leadership of
its Chairman and CEO.
Notwithstanding the foregoing, the
company has adopted various policies to ensure a strong and independent board.
All directors, with the exception of the Chairman, are independent as defined
under NYSE regulations, and
all committees of the board are made up entirely of independent directors. In
addition, the board and Governance Committee have assembled a board comprised of
strong and sophisticated directors who are currently or have recently been leaders of major companies or
institutions, are independent thinkers and have a wide range of expertise and
skills.
In addition, in 2007 the independent
directors unanimously elected, by and from the ranks of the independent
directors, the Chairman of the Governance Committee as the board’s Presiding
Director. The Presiding Director’s duties and responsibilities include: (i)
presiding at all meetings of the board at which the Chairman is not present;
(ii) serving as a liaison between the Chairman and the independent directors;
(iii) approving information sent to the board; (iv) approving meeting agendas
for the board; (v) approving meeting schedules to assure that there is
sufficient time for discussion of all agenda items; (vi) the authority to call
meetings of the independent directors; and (vii) if requested by major
shareholders, ensures that he is available for consultation and direct
communication. Based on these duties and responsibilities, the board believes
that the Presiding Director provides an effective “counter-balance” to the
combined role of CEO and Chairman.
Additionally, the board regularly meets
in executive session without the presence of management. The Presiding Director
presides at these meetings and provides the board’s guidance and feedback to the Chairman and the
company’s management team. Further,
the board has complete access to the company’s management team. On a regular basis,
the board and its committees receive valuable information and insight from
management on the “status” of the company and the
company’s current and future
issues.
Given the strong leadership of the
company’s Chairman and CEO, the counterbalancing role of the Presiding Director
and a board comprised of strong and independent directors, the board believes it
is in the best long-term interests of the company and its stockholders to
maintain a combined role of Chairman and CEO.
FOR THESE REASONS, YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “AGAINST” PROPOSAL
8.
Page
27
Pursuant to Rule 14a-8(l)(1) of the Securities Exchange Act of 1934, we will provide the name, address and number of company securities held by the proponent of this stockholder proposal upon receipt of a written or oral request.
This proposal requires an affirmative
vote of the majority of shares present at the meeting to
pass. Abstentions and broker non-votes have the effect of a vote
against this proposal.
Resolution Proposed by
Stockholder
Resolved: The
shareholders request the Board of Directors, at reasonable cost and excluding
confidential information, report to shareholders as soon as possible on the
Company’s process for identifying and prioritizing legislative and regulatory
public policy advocacy activities. The report should:
|
|
1.
|
Describe the
process by which the Company identifies, evaluates and prioritizes public
policy issues of interest to the
Company;
|
|
|
2.
|
Identify and
describe public policy issues of interest to the
Company;
|
|
|
3.
|
Prioritize
the issues by importance to creating shareholder value;
and
|
|
|
4.
|
Explain the
business rationale for
prioritization.
|
Supporting Statement of
Stockholder
The coal mining
industry represents an important customer base to Caterpillar.
Caterpillar belongs
to the U.S. Climate Action Partnership, a Washington, D.C.-based coalition that
is lobbying for the regulation of greenhouse gas emissions.
Greenhouse gas
regulation could harm the coal industry by forcing electric utilities to switch
to other energy sources such as natural gas or wind. Currently, about
50 percent of the U.S. electricity supply is produced by burning
coal.
Greenhouse gas
regulations are not likely to produce tangible, measurable or significant
environmental benefits.
Shareholders want
to know how Caterpillar could decide to lobby for dubious laws and regulations
that would harm important customers.
Caterpillar Statement in Opposition
After thoughtful
consideration, the board recommends voting AGAINST this proposal for the
reasons provided below.
The board believes that it is in the
company’s best interests to be involved in and contribute to the legislative and
regulatory process. To that end, the company engages in lobbying and
other political activities, as permitted by applicable law, to further its
priority interests that will likely affect the company’s long-term goals and
objectives such as fair trade, tax reform and financial appropriations for
infrastructure. Federal and state laws require public disclosure of the
company’s lobbying activities. Specifically, under the Lobbying
Disclosure Act of 1995, the company submits to Congress reports disclosing the
amount spent on lobbying activities and the issues addressed by these lobbying
activities. Accordingly, much of the information requested by the proponent is
already publicly available.
Page
28
Submitting the
requested report will also likely put the company at a competitive
disadvantage. The proponent requests that the proposed report not
only disclose the public policies of interest to the company, but also the
priority of such policies and the business rationale for such
priority. Most troubling, is the request to disclose the company’s
rationale for its lobbying priorities. Disclosing this information will
indirectly provide the company’s competitors information on the company’s
strategy, goals and possible weaknesses. In turn, the company’s competitors will
likely use this information in targeting marketing and lobbying activities of
their own to exploit perceived weaknesses of the company. Moreover, because the
company’s many competitors will likely not be required to complete the same type
of report, the company would be competing on an “un-even playing
field.”
Although the proponent is seeking a
report on the company’s lobbying practices, it is obvious from the proponent’s
supporting statement that its primary concern is the company’s involvement in
the U.S. Climate Action Partnership. In 2007, the company joined some
of the world’s largest companies, such as Dupont, BP American, General Electric,
General Motors and Rio Tinto, to form the U.S. Climate Action Partnership
(USCAP). The company joined USCAP, in part, to ensure that any
climate change legislation passed by Congress does not unfairly impact the
company or its customers. Climate change legislation has already been passed in
California, and under the current U.S. presidential administration it is likely
similar legislation will pass in the near term. To this end, the
company believes that being part of the legislative process will better position
it to advocate the interests of the company and its stockholders and customers.
In addition, through its involvement in USCAP, the company has been able to
educate its USCAP partners of the critical role the company and its customers
play in providing competitive energy supplies, energy security, energy
infrastructure and environmental protection.
FOR THESE
REASONS, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “AGAINST”
PROPOSAL 9.
Based on a review of any Schedule 13G or
amendments to Schedule 13G filed with the SEC through April 19, 2009, there are
no persons that beneficially own more than five percent of Caterpillar common
stock.
Security
Ownership of Certain Beneficial Owners and Management
Security ownership of management is
included in the following table.
Page
29
|
(as
of December 31,
2008)
|
|
Blount
|
73,571
|
1
|
Magowan
|
329,002
|
12
|
|||
|
Brazil
|
32,803
|
2
|
Oberhelman
|
716,349
|
13
|
|||
|
Burritt
|
124,316
|
3
|
Osborn
|
48,657
|
14
|
|||
|
Dickinson
|
783
|
4
|
Owens
|
1,717,537
|
15
|
|||
|
Dillon
|
70,625
|
5
|
Powell
|
45,400
|
16
|
|||
|
Fife
|
46,000
|
6
|
Rapp
|
318,699
|
17
|
|||
|
Fosler
|
24,515
|
7
|
Rust
|
28,933
|
18
|
|||
|
Gallardo
|
268,110
|
8
|
Smith
|
36,345
|
19
|
|||
|
Goode
|
100,531
|
9
|
Vittecoq
|
522,215
|
20
|
|||
|
Lavin
|
240,775
|
10
|
Wunning
|
476,233
|
21
|
|||
|
Levenick
|
423,135
|
11
|
All
directors and executive officers as a group
|
5,981,641
|
22
|
|||
|
1
|
Blount - Includes 56,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to the Directors’ Deferred Compensation Plan (DDCP)
representing an equivalent value as if such compensation had been invested
on December 31, 2008, in 1,382 shares of common
stock.
|
|||||||
|
2
|
Brazil - Includes 24,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 497 shares of
common stock.
|
|||||||
|
3
|
Burritt - Includes 100,200 shares
subject to stock options exercisable within 60
days.
|
|||||||
|
4
|
Dickinson - In addition to the
shares listed above, a portion of compensation has been deferred pursuant
to DDCP representing an equivalent value as if such compensation had been
invested on December 31, 2008, in 2,848 shares of common
stock.
|
|||||||
|
5
|
Dillon - Includes 52,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 706 shares of
common stock.
|
|||||||
|
6
|
Fife - Includes 24,000 shares
subject to stock options exercisable within 60
days.
|
|||||||
|
7
|
Fosler - Includes 20,000 shares
subject to stock options exercisable within 60
days.
|
|||||||
|
8
|
Gallardo - Includes 56,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 4,671 shares of
common stock.
|
|||||||
|
9
|
Goode - Includes 56,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 39,240 shares of
common stock.
|
|||||||
|
10
|
Lavin - Includes 202,132 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to the Supplemental Deferred Compensation Plan (SDCP),
Supplemental Employees’ Investment Plan (SEIP) and/or the Deferred
Employees’ Investment Plan (DEIP) representing an equivalent value as if
such compensation had been invested on December 31, 2008, in 8,747 shares
of common stock.
|
|||||||
|
11
|
Levenick - Includes 364,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to SDCP, SEIP and/or DEIP representing an equivalent
value as if such compensation had been invested on December 31, 2008, in
5,611 shares of common stock.
|
|||||||
|
12
|
Magowan - Includes 56,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 16,086 shares of
common stock.
|
|||||||
|
13
|
Oberhelman - Includes 638,000
shares subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to SDCP, SEIP and/or DEIP representing an equivalent
value as if such compensation had been invested on December 31, 2008, in
35,404 shares of common stock.
|
|||||||
|
14
|
Osborn - Includes 24,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 139 shares of
common stock.
|
|||||||
|
15
|
Owens - Includes 1,398,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to SDCP, SEIP and/or DEIP representing an equivalent
value as if such compensation had been invested on December 31, 2008, in
6,732 shares of common stock.
|
|||||||
|
16
|
Powell - Includes 40,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 139 shares of
common stock.
|
|||||||
|
17
|
Rapp - Includes 281,202 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to SDCP, SEIP and/or DEIP representing an equivalent
value as if such compensation had been invested on December 31, 2008, in
8,985 shares of common stock.
|
|||||||
|
18
|
Rust - Includes 24,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 8,569 shares of
common stock.
|
|||||||
|
19
|
Smith - Includes 20,000 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2008, in 1,511 shares of
common stock.
|
|||||||
|
20
|
Vittecoq - Includes 435,968 shares
subject to stock options exercisable within 60
days.
|
|||||||
|
21
|
Wunning - Includes 435,968 shares
subject to stock options exercisable within 60 days. In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to SDCP, SEIP and/or DEIP representing an equivalent
value as if such compensation had been invested on December 31, 2008, in
20,406 shares of common stock.
|
|||||||
|
22
|
This group includes directors,
named executive officers and five additional executive officers subject to
Section 16 filing requirements (group). Amount includes
4,577,752 shares subject to stock options exercisable within 60 days and
364,551 shares for which voting and investment power is
shared. The group beneficially owns less than one percent of
the company’s outstanding common stock. None of the shares held
by the group have been
pledged.
|
|||||||
Page
30
At Caterpillar,
integrity is one of our core values. We believe in the power of
honesty and know the only way to build and strengthen our reputation is through
trust. We hold ourselves to the highest standard of integrity and
ethical behavior and strive for transparency. We welcome the
opportunity to share this Compensation Discussion and Analysis (CD&A) with
our stockholders.
We understand
investors have a vested interest in executive compensation. After
reading this CD&A, we hope you will recognize a few vital
points:
|
|
§
|
We have a
thorough compensation review
process
|
|
|
§
|
We have a
competitive compensation plan that aligns executive performance and
long-term stockholder interests
|
|
|
§
|
We do not
backdate or re-price equity grants
|
|
|
§
|
We believe
the best way to compensate our executives is to base their rewards on
performance
|
|
|
§
|
We have no
severance packages that apply solely to executives. Change in
Control provisions are found within existing compensation plans and apply
equally to all participants in those
plans.
|
During fiscal year
2008, Caterpillar was organized into six groups, each led by a group
president. Because the six group presidents have comparable
responsibilities and are similarly compensated, we are including all six of the
group presidents as named executive officers (NEOs), in addition to the Chief
Executive Officer and Chief Financial Officer.
This CD&A
describes the overall compensation practices at Caterpillar and specifically
describes total compensation for the following NEOs:
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James W.
Owens, Chairman and CEO
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Richard P.
Lavin, Group President
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Stuart L.
Levenick, Group President
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Douglas R.
Oberhelman, Group President
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Edward J.
Rapp, Group President
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Gerard R.
Vittecoq, Group President
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Steven H.
Wunning, Group President
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David B.
Burritt, Vice President and Chief Financial
Officer
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We are fortunate to
have executives who are “career employees” with a strong commitment to the
long-term success of Caterpillar. In fact, the average tenure of our NEOs is 32
years. Our reputation is a reflection of our employees’ ethical
performance, and the values that guide Caterpillar have in turn rewarded our
employees and stockholders with a successful and profitable
company.
Compensation
Philosophy and Objectives
Two primary
components define Caterpillar’s compensation philosophy: Pay for Performance and Pay at Risk.
As an employee’s responsibility
increases, so does the proportional amount of “at risk” pay. This is especially
true for our executives who have direct responsibility for overall company
performance. A significant portion of executive pay depends on meeting certain
performance goals, which is fundamental to aligning executive pay with long-term
stockholder interests.
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31
The Compensation
Committee established three principles to drive this philosophy through the
company’s compensation design.
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1.
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Base salary, as a percentage of
total direct compensation, should decrease as salary grade levels
increase. As employees move to higher levels of responsibility with
more direct influence over the company’s performance, they have a higher
percentage of pay at risk.
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2.
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The ratio of long-term
incentive compensation to short-term incentive compensation should
increase as salary grade levels increase. Caterpillar expects
executives to focus on the company’s long-term success. The compensation
program is designed to motivate executives to take actions that are best
for the company’s long-term
viability.
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3.
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Equity compensation should
increase as salary grade levels increase. Employees in positions
that most directly affect the company’s performance should have profitable
growth for the company as their main priority. Receiving part of their
compensation in the form of equity reinforces the link between their
actions and stockholders’ investment. Equity ownership encourages
executives to behave like owners and provides a clear link with
stockholders’ interests.
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In following these
principles and tying employee compensation to both individual performance and
the long-term performance of the company, Caterpillar links the interests of
management and long-term stockholders. In addition, the compensation program is
designed to attract and retain high-caliber, talented employees who will guide
the company in continuing to meet and exceed its performance goals.
Overview of
Compensation Practices
The Compensation
Committee is responsible for the compensation program design and decision making
process for NEOs. The Compensation Committee regularly reviews
Caterpillar’s compensation practices, including the methodologies for setting
NEO total compensation. The Compensation Committee also uses
benchmarking to track Caterpillar’s practices and compensation levels against
comparable companies within its industry and across multiple
industries. However, the Compensation Committee exercises its
independent judgment when establishing compensation policies, especially when
rewarding individual performance. The responsibilities of the Compensation
Committee are described more fully in its charter available at www.CAT.com/governance.
Compensation
Philosophy in Action - 2008 and 2009
2008 marked our
sixth consecutive year of record sales and revenues, and we posted a record
profit per share of $5.66. Consistent with our Pay for Performance philosophy
described above, executives were compensated accordingly. As the 2008 Summary
Compensation Table on page 49 shows, CEO Jim Owens received a base salary
of $1.55 million and incentive pay totaling $4.35 million. He also received an
equity award on March 3, 2008, valued at the time at $8.53 million, based on a
stock closing price of $73.20 per share. Since that date, the price of the
company’s stock has changed significantly.
Caterpillar faces unprecedented economic
challenges in 2009. Consequently, we have, among other things, suspended merit
increases and frozen salary structures for all management and support staff
globally (Mr. Owens’ salary has been frozen since April 1, 2007). Consistent
with our Pay at
Risk philosophy, described
above, our executives’ total compensation for 2009 will be reduced
dramatically. For example, any payment under Caterpillar’s short-term
incentive plans is contingent upon the company’s extremely challenging goal of
earning $2.50 profit per share (including redundancy costs). Mr.
Owens received an equity award on March 2, 2009, valued at just over $4 million,
based on a stock closing price of $22.17 per share. In addition, the
value of Mr. Owens’ 2006 - 2008 equity awards, and those of the other NEOs (all
of which require three years to vest), have declined significantly since the
grant dates and are now “under water” (see the “Outstanding Equity Awards at
2008 Fiscal Year-End” table on page 52). Clearly, Caterpillar’s aggressive
stock ownership requirements (discussed on page 41), coupled with its Pay at
Risk and Pay for
Performance compensation
philosophy, directly align our executive team with long-term stockholder
interests.
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32
How
Caterpillar Determines Total Compensation for Executives
Performance
Evaluation: CEO
The board,
excluding the CEO, performs the CEO’s evaluation. The board’s
evaluation includes both objective and subjective criteria of the CEO’s
performance, including:
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Caterpillar’s
financial performance
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The
accomplishment of Caterpillar’s long-term strategic
objectives
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The
achievement of individual goals set at the beginning of each
year
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The
development of Caterpillar’s top management
team
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Prior to the board
meeting, the Compensation Committee evaluates CEO compensation using
benchmarking information (discussed on page 35) to set total
compensation. The Compensation Committee also performs its own
performance review and provides its recommendations to the board.
Performance
Evaluations: NEOs other than CEO
The Compensation
Committee, in conjunction with the CEO, performs the other NEOs’ evaluations,
excluding Mr. Burritt whose evaluation is performed by Mr. Rapp. Each
February, the CEO submits a performance assessment and compensation
recommendation to the Compensation Committee for each of the other
NEOs. The performance evaluation is based on factors such
as:
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Achievement
of individual and company
objectives
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Contribution
to the company’s performance
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Leadership
accomplishments
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The Compensation
Committee also reviews total compensation benchmark information, with respect to
the other NEOs, and has the discretion to increase or decrease the CEO’s
recommendation. The Compensation Committee makes the final decision
regarding the other NEOs’ total compensation.
Compensation
Consultant
The Compensation
Committee retains John L. Anderson (Mr. Anderson) of Hewitt to provide ongoing
advice and information regarding design and implementation of Caterpillar’s
executive compensation programs. Mr. Anderson also provides
information and updates to the Compensation Committee about regulatory and other
technical developments that may affect the company’s executive compensation
programs. In addition, Mr. Anderson and his team provide the Compensation
Committee with competitive market information, analyses and trends on base
salary, short-term incentives, long-term incentives, executive benefits and
perquisites.
With the full
knowledge of the Compensation Committee, Caterpillar has retained a separate and
distinct unit of Hewitt to be the third-party administrator for Caterpillar’s
U.S. retirement plans as well as Caterpillar’s U.S. Health & Welfare
plans.
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The Compensation
Committee believes that Mr. Anderson (and the team working with him from Hewitt)
provides candid, direct and objective advice to the Compensation Committee,
which is not influenced by any other services provided by Hewitt. To
insure independence:
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The
Compensation Committee directly hired and has the authority to terminate
Mr. Anderson
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Mr. Anderson
is engaged by and reports directly to the Compensation Committee and the
chair
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Mr. Anderson
meets regularly and as needed with the Compensation Committee in executive
sessions that are not attended by any of the company’s
officers
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Mr. Anderson
and his team at Hewitt have direct access to all members of the
Compensation Committee during and between
meetings
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Mr. Anderson
is not the Hewitt client relationship manager for
Caterpillar
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Neither Mr.
Anderson nor any member of his team participates in any activities related
to the administration services provided to Caterpillar by other Hewitt
business units
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Interactions
between Mr. Anderson and management generally are limited to discussions
on behalf of the Compensation Committee and information presented to the
Compensation Committee for approval
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Annual
Review of Consultant Independence
The Compensation
Committee is responsible, without the influence or input of management, for
retaining and terminating compensation consultants and determining their terms
and conditions, including fees. Hewitt provides the Compensation
Committee an annual update on its services and related fees. The Compensation
Committee determines whether the compensation consultant’s services are
performed objectively and free from the influence of management. The
Compensation Committee also closely examines the safeguards and steps Hewitt
takes to ensure that its executive compensation consulting services are
objective, for example:
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Hewitt has
separated its executive compensation consulting services into a single,
segregated business unit within
Hewitt
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Hewitt pays
its executive compensation consultants solely on their individual results
and the results of its executive compensation consulting
practice. Mr. Anderson receives no incentives based on other
services Hewitt provides to
Caterpillar.
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Mr. Anderson
does own shares in Hewitt; however, he does not receive stock options or
other equity-related awards from
Hewitt
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The total
amount of fees for consulting services to the Compensation Committee in
2008 was in the range of $250,000 to
$300,000
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The total
amount of fees paid by Caterpillar to Hewitt in 2008 for all other
services, excluding Compensation Committee services, was in the range of
$8 million to $10 million. This is compared to total Hewitt 2008 revenues
of approximately $3 billion.
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Other
services are provided under a separate contractual arrangement and by a
separate business unit at Hewitt
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For these reasons,
the Compensation Committee does not believe the services provided by Hewitt in
conjunction with administering Caterpillar’s benefit plans compromises Mr.
Anderson’s ability to provide the Compensation Committee with perspective and
advice that is objective.
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Peer
Group Benchmarking
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Caterpillar
uses a comparator
group to benchmark (compare) all components of compensation to
other companies within the group. Caterpillar targets the
executive total cash compensation package, as well as the long-term
incentive compensation components, at the size-adjusted median level of
the comparator group. The Compensation Committee believes that
targeting at the size-adjusted median level of the comparator group is
necessary to attract and retain high-caliber employees. This
ensures that Caterpillar remains competitive while maximizing its
resources for stockholders.
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In an effort
to attract and retain high-performing talent, the Compensation Committee
uses benchmarking data when setting executive
compensation. Caterpillar’s revenues have risen sharply and far
exceeded the median annual revenue for its previous comparator group –
Hewitt Core Group 1 (HCG1). To better align the comparator
group with the company’s increased size and future plans for growth, the
Compensation Committee revised the comparator group for
2008. The Compensation Committee considered factors such as
gross revenues and sales, global presence and positive earnings growth to
determine what companies should be included in the comparator
group. Larger companies with higher revenues were added to
provide a better basis for comparison.
For 2008,
Caterpillar used the comparator group Caterpillar Compensation Comparator
Group (CCCG), which includes 28 large public companies, listed
below. Because we compete for executive talent from a variety
of industries, the 28 companies represent a cross section of industries,
not just heavy manufacturing companies. The peer group study
methodology is consistent each year, which makes it easier to isolate how
Caterpillar’s executive compensation is changing in relation to the
market. The Compensation Committee monitors the CCCG to ensure
that it continues to provide a reasonable comparison basis for executive
compensation.
The CCCG’s
median annual revenue is less than Caterpillar’s. To account
for differences in the size of the companies in that group, the
Compensation Committee conducts a regression analysis with each
comparison. Regression analysis adjusts the compensation data
for differences in the companies’ revenue, allowing Caterpillar to compare
its compensation levels to similarly sized companies. The
following companies compose the CCCG:
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Page 35
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Components
of Caterpillar’s Compensation Program
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Total
compensation is a mix of total cash and long-term
incentives.
Executive
Short-Term Incentive Plan (ESTIP) and Short-Term
Incentive Plan (STIP) are annual incentive plans that deliver a
targeted percentage of base salary (excluding any variable base pay) based
on performance against predetermined enterprise goals. The
plans are designed to focus the NEOs on the shorter-term critical issues
that are indicative of improved year-over-year performance.
The Long-Term
Incentive Plan (LTIP) includes both equity and cash under the
Long-Term Cash Performance Plan (LTCPP). LTIP is designed to reward
the company’s key employees for achieving and exceeding the company’s
long-term goals, to drive stockholder return and to foster stock
ownership.
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Total
compensation for all NEOs is a mix of annual total cash and long-term
incentives.
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Annual base
salary represents a small portion of our NEOs’ compensation. In
fact, on average, 82 percent of annual compensation for our NEOs
varies each year based on Caterpillar’s performance. The
following chart shows the 2008 Total Compensation mix (based on targeted
compensation).
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Page 36
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Total
Annual Cash Compensation
The
Compensation Committee’s review of 2008 market data showed total annual
cash compensation structures for all NEOs were in line with the median
level of the CCCG. The Compensation Committee made no
adjustments to the base salary compensation structures, or to the
short-term incentive target opportunities shown below.
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Total
cash includes base salary and the Executive Short-Term Incentive
Plan or Short-Term Incentive Plan.
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Base
Salary
Base salary
increases are performance-driven. The Compensation Committee uses the
criteria described in the “Performance Evaluation” section to assess
performance, which are assigned no particular weighting. Base salary
increases, however, are dependent upon assessment of these
factors. Base salary structures for Caterpillar executives are
designed with a midpoint set at the median level of the CCCG. For all
employees, the minimum of the base salary structure is 80 percent of the
midpoint and the maximum is 120 percent of the midpoint. Base
salaries for the NEOs are not increased above the midpoint of their respective
structures without meeting certain performance requirements. If NEOs
reach the midpoint of their salary structure, any amount awarded above midpoint
must be re-earned annually and approved by the Compensation
Committee. This amount is called variable base pay and is paid in the
form of an annual lump sum cash award (disclosed in the “Bonus” column of the
Summary Compensation Table on page 49). This reinforces the Pay for Performance component
of Caterpillar’s compensation program.
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Executive Short-Term
Incentive Plan
The NEOs,
excluding Mr. Burritt, participated in the 2008 ESTIP. The CEO
was eligible for a target opportunity of 135 percent of base salary and
the group presidents were eligible for a target opportunity of 100 percent
of base salary.
In February
2008, the Compensation Committee reviewed and approved two
enterprise-focused measures for the 2008 ESTIP. As further
described below, these two measures link the CEO and group presidents
directly to the overall performance of Caterpillar. The
measures and their relative weights in determining ESTIP are as
follows:
§ 75% Corporate Return on
Assets
§ 25% Enterprise
Quality
Prior to any
ESTIP payout a “trigger” must be achieved, which is based on the company’s
PPS. If the trigger is not achieved, there is no ESTIP
payout. The Compensation Committee approved a PPS trigger of
$2.50 for ESTIP because Caterpillar has a strategic goal of maintaining a
PPS of at least $2.50 during a “trough” or economic downturn.
As with all
components of Caterpillar’s compensation program, ESTIP rewards
performance. For both measures listed above, the Compensation
Committee established the threshold, target and maximum performance
levels. If the threshold level is not achieved for a given
measure, there is no ESTIP payout on that measure. Increasingly
larger payouts are awarded for achievement of target and maximum
performance levels. The following table outlines the
payout factor range that applies to each performance level. The
payout factor for each measure does not exceed 200
percent.
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Corporate
Return on Assets (ROA) is Machinery and Engines profit after tax
plus short-term incentive compensation expense (after tax) divided by
average monthly Machinery and Engines assets.
Enterprise
quality is a weighted average of the business unit quality
performance factors.
Profit Per
Share (PPS) is the portion of a company's profit allocated to each
outstanding share of common stock, diluted by the assumed exercise of
stock-based compensation awards. PPS serves as an indicator
of a company's profitability. This is also known as
Earnings Per Share.
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Page 37
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Return On
Assets
The
Compensation Committee approved ROA as the largest portion of 2008
ESTIP. The Compensation Committee selected ROA because it is a
good indication of how efficiently the company is using its assets to
generate earnings and, if successful, it ultimately drives value to our
stockholders. The Compensation Committee reviewed forecasted
versus actual ROA results to determine the appropriate target for the 2008
measure. The corporate ROA slope ranged from a threshold of
6.50 percent to the maximum of 17.70 percent, with a target of 13.80
percent. The following chart illustrates ROA performance
levels.
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Mean
Dealer Repair Frequency measures the dealer repair
frequency for a collection of products over a period of time approximately
equal to their first year of operation.
Very
Early Hour Reliability captures the number of
dealer-performed repairs to a product that occur from the pre-delivery
inspection through the initial hours of machine
operation.
Significant
Part Numbers are part
numbers that have had failures in the last three years on products built
in the last five years (unless the part is a remanufactured
part).
Cat
Production System (CPS) Assessment is the common Order-To-Delivery
process to achieve our safety, quality, velocity, earnings and growth
goals for 2010 and beyond.
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Enterprise
Quality
The
Compensation Committee approved enterprise quality as the other 2008 ESTIP
factor. The Compensation Committee selected enterprise quality
because Caterpillar must continue to place an increased emphasis on
quality across the entire organization to meet our long-term
goals. Enterprise quality was measured by the weighted average
of the various business unit quality performance factors, which are Mean
Dealer Repair Frequency, Very Early Hour Reliability, Significant Part
Numbers and Cat Production System (CPS) Assessment. Each
business unit’s quality performance factor or factors were weighted based
on its applicable 2008 net sales and transfers (an inter-company
sale). The results were averaged to determine the enterprise
quality result.
The 2008 ESTIP results were as
follows:
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The final 2008 ESTIP ROA was 12.6
percent, resulting in a payout factor of 88.62 percent. The
enterprise quality payout factor was 88.40 percent. The
resulting weighted payout factors from ROA and enterprise quality were
added together to calculate the total cash payout factor of
88.57 percent, which resulted in a total payout of $5.6 million to the
NEOs, excluding Mr. Burritt. The Compensation Committee has
discretion to reduce ESTIP awards based on performance, but individual
increases are not permitted. There were no adjustments
made to the 2008 ESTIP payouts to the applicable
NEOs. Individual amounts paid under ESTIP are disclosed in the
Summary Compensation Table on page 49 of this proxy
statement, in the “Non-Equity Incentive Plan Compensation”
column.
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Short-Term Incentive
Plan
As a vice
president, our CFO, Mr. Burritt, participated in Caterpillar’s 2008 STIP (as did
over 50,000 employees worldwide). Vice presidents are not only
measured on the achievement of their business unit goals, but also on corporate
performance factors such as ROA and enterprise quality. Mr. Burritt
was eligible for a target opportunity of 90 percent of base
salary. His weighting was as follows:
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77.5%
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Corporate Return on
Assets
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12.5%
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Enterprise
Quality
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10%
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Business Unit Cost Reduction
Measure
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Page 38
PPS of $2.50 was
also used as the “trigger” for 2008 STIP. The same trigger
methodology applies for STIP as described previously for ESTIP. The
2008 results are included in the following table.
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2008 STIP
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Payout
Factor
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Measurement
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Corporate
Return on Assets
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88.62
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Enterprise
after-tax Return on Assets
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Enterprise
Quality
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88.40
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Based on a weighted average of
several quality measures
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Business
Unit Measure
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162.46
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Composite of
specific cost reduction goals for Global Finance & Strategic
Services
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The resulting
weighted payout factors from ROA, enterprise quality and Mr. Burritt’s business
unit measures were added together to calculate the total cash payout factor of
95.98 percent under the 2008 STIP. Mr. Burritt’s individual STIP award amount is disclosed
in the Summary Compensation Table on page 49 of this proxy statement, in the
“Non-Equity Incentive Plan Compensation” column.
Level of
Difficulty
The Compensation Committee sets the
ESTIP and STIP threshold, target and maximum levels for all measures, including
enterprise quality, so the relative difficulty of achieving the target level is
consistent from year to year. Target level performance goals
are “stretch” goals that the Compensation Committee believes the NEOs will (on
average over a long period) attain; however, as evidenced by the past three year
payout levels, there is a substantial risk that target payout levels will not
occur. Even during the last three-year period of record sales and
profits, our NEOs have not reached the maximum payout during any
year. Collectively, as illustrated in the table below, NEOs have
averaged less than target over this same three-year period.
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2008 Short-term
Payout
Factor
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2007 Short-term
Payout
Factor
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2006 Short-term
Payout
Factor
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Three-year
Average
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Chairman
and CEO
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88.57
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95.13
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67.11
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83.60
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Group
President
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88.57
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95.13
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67.11
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83.60
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Chief
Financial Officer
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95.98
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116.10
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107.11
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106.40
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Long-Term
Incentive Plan
The
Compensation Committee annually analyzes market data on portfolio
approaches for long-term incentive plans. Portfolio approaches,
where two or more long-term incentive compensation awards are used in some
combination, are common practice. For example, SARs reward share
appreciation; time-vested restricted units strengthen and enhance
retention; and cash performance awards reinforce a long-term
pay-for-results culture.
Caterpillar
uses all three awards in its executive compensation
package. Instead of awarding all long-term compensation in the
form of equity, the Compensation Committee has decided to award a portion
in cash. The mix between cash and equity is based on the market
comparison. The cash award is tied to long-term stockholder
performance due to the measures within the plan. Providing a
portion of long-term incentive in the form of cash also allows Caterpillar
the ability to manage its share run rate, and preserve the available pool
of shares authorized for issuance under its equity plan. The
2008 LTIP award mix is in the following table.
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Run
rate measures the rate
at which companies grant equity. It is the number of shares
granted under LTIP in any one year divided by the number of common shares
outstanding.
An
equity award is a stock award representing ownership in the
company. Equity for Caterpillar currently consists of
stock-settled Stock Appreciation Rights, Restricted Stock Units and
restricted stock.
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Equity
Each year,
the Compensation Committee benchmarks against the CCCG to determine a
competitive equity award for each salary grade, including
NEOs. Our process benchmarks total equity value for all salary
grades. Consistent with the company’s compensation philosophy,
individuals at higher levels receive a greater proportion of total pay in
the form of equity.
In December
2007, the Compensation Committee approved the 2008 equity design, which
consisted of a mix of SARs and RSUs. This equity design
supports our Pay for Performance and Pay at Risk
philosophy. RSUs represent actual shares of stock and therefore
carry less risk than SARs.
The
Compensation Committee has the discretion to make positive or negative
adjustments to equity awards based on a subjective assessment of an
individual’s performance, provided these adjustments do not increase the
total number of awards issued to employees.
At the
February 2008 Compensation Committee meeting, Mr. Owens discussed his
recommendations with respect to standard equity award adjustments for all
other NEOs. Equity award adjustments were made and were based
upon individual performance (discussed in “Other NEOs Compensation
Decisions” section of this CD&A). At the February 2008 board meeting
the Chairman of the Compensation Committee, Mr. Osborn, in consultation
with the board and in accordance with the following “Annual Equity Grant
Timing” section, established the equity award for Mr. Owens based on
exceptional performance (discussed in “Compensation Decisions in 2008 and
2009” section of this CD&A).
The final
2008 SAR & RSU awards are disclosed in the Grants of Plan-Based Awards
Table on page 51.
Annual
Equity Grant Timing
The grant
date for annual equity awards has historically been between mid-February
to early March. The Compensation Committee has used this timing for annual
equity awards because it was well after Caterpillar announced year-end
financial results and allowed sufficient time for the company’s stock
price to stabilize. For the 2008 equity grant, the Compensation Committee
assigned March 3, 2008 as the grant date. Caterpillar does not
backdate, re-price or grant equity awards retroactively. The Compensation
Committee approved the valuation of the 2008 equity awards at the February
12, 2008 meeting and delegated its authority to finalize the individual
grants on the grant date to the Compensation Committee chair. The grant
price ($73.20) was the closing price for Caterpillar stock as reported on
the NYSE on March 3, 2008 (grant date). All 2008 equity grants
for the NEOs are disclosed in the Grants of Plan-Based Awards Table on
page 51 of this proxy
statement.
At the
October 2008 meeting, the Compensation Committee approved a formal policy
for the timing of the annual equity date. As a result,
beginning in 2009, the grant date for the annual equity grant will be the
first Monday in March.
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The standard
equity award is the equity value determined each year by the
Compensation Committee. Each year, we benchmark against our
comparator group to determine our standard award level, which is set at
the median level of the comparator group.
A Stock
Appreciation Rights (SAR) is a right to receive Caterpillar common
shares based on the appreciation in value of a set number of shares of
company stock between the grant date and the exercise
date. SARs were introduced in 2006 because they extend the life
of the Caterpillar stock option pool and minimize stockholder
dilution.
A Restricted
Stock Unit (RSU) is a grant valued in terms of company stock. At
the time of the grant, no company stock is issued. The grant entitles the
recipient to receive Caterpillar common shares at the time of
vesting. RSUs were introduced in 2007 because they reduce the
share run rate and may be more tax efficient for equity-eligible employees
outside the United States.
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Chairman’s
Restricted Stock Award Program
The CEO
submits restricted stock grant recommendations to the Compensation
Committee at each Compensation Committee meeting. The
Compensation Committee reviews the amount of the proposed grants as well
as the CEO’s reasoning and approves or rejects the requested restricted
stock grants.
At the
February 2008 meeting, the board awarded Mr. Lavin 1,000 shares and Mr.
Rapp 500 shares of restricted stock. These awards were granted
due to Mr. Lavin’s and Mr. Rapp’s exceptional performance, which is
described in the “Other NEOs Compensation Decisions” section of this
CD&A.
Stock
Ownership Requirements
Equity
compensation encourages our executives to have an owner’s perspective in
managing the company. Accordingly, the Compensation Committee
approved stock ownership guidelines for all participants receiving equity
compensation.
Specifically,
NEOs are required to own shares equal to a minimum of 50 percent of the
average (based on number of shares) of the last five grants
received. Failure to meet these guidelines results in automatic
grant reductions, unless compelling personal circumstances prevent an
employee from meeting his or her targeted ownership
requirement.
Even though
Caterpillar targets all officers’ total compensation at the median level
of the CCCG, its stock ownership guidelines are much higher than the
median level, reaching well into the upper quartile of practices of the
companies examined. At present, all NEOs exceed stock ownership
guidelines.
Long-Term Cash
Performance Plan
The LTCPP is
a Pay at Risk plan that delivers a targeted percentage of base salary to
each participant based on performance against the goals of the entire
company. The LTCPP is offered to NEOs and other key
employees. A three-year performance cycle is established each
year for determining compensation under the LTCPP. The
Compensation Committee generally sets threshold, target and maximum levels
that make the relative difficulty of achieving the target level consistent
from year to year. The payout amount can vary greatly from one
year to the next. The objective is to have payouts under the
LTCPP be at target, on average, over a period of years.
Each year the
Compensation Committee specifies two measures, such as relative PPS growth
and ROE, each weighted 50 percent for the LTCPP. The threshold
performance levels must be met under each measure before a payout is made
under that particular measure; however, there is no overall trigger as
there is under ESTIP and STIP. In other words, each measure
triggers independently of the other. Increasingly larger
payments are awarded when the target and maximum performance levels are
achieved. The following table outlines the payout factor range
that applies to each performance level.
|
The Chairman’s
restricted stock award program is a tool that makes equity a part
of the compensation program to help attract and retain outstanding
performers. Key elements of the program are 1) selected performance and
retention-based grants can be made to officers and other key employees, as
well as prospective employees; 2) restricted shares have three to five
year vesting schedules; and 3) restricted shares are forfeited if the
grantee leaves Caterpillar prior to vesting.
Relative
PPS growth
is one of two
measures in the LTCPP. It measures Caterpillar’s PPS growth against those
companies in the Standard & Poor’s peer group.
Return On Equity
(ROE)
is a
profitability measure that reveals how much profit a company
generates with the money stockholders have invested. This
is one of two measures in the 2006-2008 LTCPP.
|
|
 |
The Compensation Committee selected the
following Standard & Poor’s 500 companies (S&P group) to compare
Caterpillar’s performance against the performance of our specific
industry. This S&P group is used because market cycle
fluctuations are minimized when compared to similar companies. The
S&P group is used only for the relative PPS growth measure, not for setting
levels of compensation under the LTCPP.
Page 41
The companies in this S&P group
are:
|
Standard & Poor’s
Group
|
||
|
§3M
Company
|
§General Electric
Company
|
§Navistar
International Corporation
|
|
§Cummins
Inc.
|
§Honeywell
International Inc.
|
§PACCAR
Inc
|
|
§Danaher
Corporation
|
§Illinois Tool
Works Inc.
|
§Pall
Corporation
|
|
§Deere &
Company
|
§Ingersoll-Rand
Company Limited
|
§Parker-Hannifin
Corporation
|
|
§Dover
Corporation
|
§ITT Industries,
Inc.
|
§Textron
Inc.
|
|
§Eaton
Corporation
|
§Johnson Controls,
Inc.
|
§United
Technologies Corporation
|
The 2008 LTCPP
payout was based on a three-year cycle, which began in 2006 and ended in
2008. The 2006-2008 cycle evaluated two
components: relative PPS growth, measured against the S&P Peer
Group, and ROE, again each weighted 50 percent. At the February 2006
meeting, the Compensation Committee determined that the targets (shown in the
following table) were very challenging and that achieving the targets during
this cycle would put the company far ahead of historical benchmark levels at
other companies, including the CCCG, the S&P Peer Group and the S&P 500
overall.
|
2006-2008
LTCPP Measures
|
||
|
Relative
PPS Growth
|
ROE
|
|
|
Threshold
|
25th
percentile
|
20%
|
|
Target
|
50th
percentile
|
30%
|
|
Maximum
|
75th
percentile
|
40%
|
The final 2008
LTCPP ROE was 35.48 percent, resulting in a payout factor of 127.41
percent. The relative PPS growth percentile rank was 42, resulting in
a payout factor of 84.80 percent. The resulting weighted payout
factors were added together to calculate the total cash payout factor of 106.11
percent, which resulted in a payout of $7.5 million for all of the
NEOs.
|
2006-2008
LTCPP
|
Payout
Factor
|
Measurement
|
|
Return
on Equity
|
127.41
|
Enterprise
Return on Equity
|
|
Relative
PPS Growth
|
84.80
|
Relative PPS Growth measured
against S&P Peer Group
|
The Compensation
Committee has the discretion to reduce individual LTCPP awards based on
performance, but individual increases are not permitted. No
adjustments were made to the 2008 LTCPP payouts to the
NEOs. Individual payouts were capped at $2.5 million and are
disclosed in the Summary Compensation Table in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table.
Risk
The Compensation
Committee has reviewed the aforementioned incentive plans and does not believe
the goals, or the underlying philosophy, encourage NEOs to take excessive
risk. By utilizing long-term cash and equity as the bulk of NEO total
compensation, as well as our aggressive stock ownership requirements, we align
NEO objectives with that of the long-term stockholder.
Compensation
Decisions
The Executive Office (CEO and six group
presidents) works as a team to drive our corporate strategy and deliver the
annual business plan. Our ESTIP is based on corporate ROA and
enterprise quality metrics and is the same for each executive
officer. Our LTIP is the same for each executive officer and is based
on corporate PPS growth relative to our peer group and ROE. Annual
merit pay adjustment and equity grants are based on the NEOs achievement of
their goals set at the beginning of the year. Both elements of
compensation are benchmarked with peer companies and therefore keep the total
compensation package competitive.
Page 42
|
Chairman
and CEO Compensation Decisions
The CEO is
evaluated by the board on company and individual performance
metrics. In February of 2009, the board reviewed the
Compensation Committee’s assessment of Mr. Owens’ individual goals (which
were created at the beginning of 2008) and his performance against those
goals. The most critical results for Mr. Owens for 2008 were as
follows:
|
Integrated
service businesses
are service businesses containing an important
service component. These businesses include, but are not
limited to, aftermarket parts, Cat Financial, Cat Insurance, Cat
Logistics, Cat Reman, Progress Rail, OEM Solutions and Solar Turbine
Customer Services.
6
Sigma is a
term used to describe
Process Improvement methodology using data driven process measures to
strive for 6 sigma level performance (3.4 defects for every one million
opportunities or operations).
|
||
|
§
|
Sales and revenues exceeded the
2008 goal ($48.6 billion) by 5.6 percent. PPS was higher than
2007, but below the 2008 goal ($6.00). Strong sales and
revenues growth and improved price realization were offset by higher than
planned costs, such as material and freight.
|
||
|
§
|
Integrated service related sales
and revenue exceeded the 2008 goal by more than $600
million. Growth in service businesses continued to stabilize
earnings in peaks and troughs.
|
||
|
§
|
Overall employee engagement score
was a record 81 percent favorable. Achieved a world-class
participation rate of 92 percent (over 103,000
participants).
|
||
|
§
|
Overall safety improved by nearly
25 percent over 2007
|
||
|
§
|
As-delivered quality on machines,
measured by our Very Early Hour Reliability metric, improved 8 percent
over 2007
|
||
Other NEOs Compensation
Decisions
The CEO presents
each NEO’s performance evaluation to the Compensation Committee. The
focus of the evaluation for other NEOs is based upon product and business unit
metrics in their respective areas of responsibility. The CEO
presented the Compensation Committee the following key points for each named
executive officer in making compensation decisions in 2008 and
2009:
Richard
P. Lavin, Group President
|
|
§
|
Aggressively implemented the Cat
Production System across the Asia Pacific
region
|
|
|
§
|
Made
significant progress toward profitable growth targets in emerging
markets
|
|
|
§
|
Successfully executed capacity
expansion goals throughout the Asia Pacific
region
|
|
|
§
|
Exceeded 2008 employee engagement
goals in the Asia Pacific Marketing Division as well as overall safety for
his business units
|
Stuart
L. Levenick, Group President
|
|
§
|
Provided leadership for the
re-structuring of Caterpillar’s earthmoving machine business into five
end-to-end machinery business
divisions
|
|
|
§
|
Aggressively deployed CPS across
divisions, creating operational improvements in variable labor efficiency
and inventory turns
|
|
|
§
|
Substantial improvement in
engagement and safety among U.S. production
employees
|
|
|
§
|
Significant
focus on strategic acquisitions to position the company for future growth
opportunities
|
Page 43
Douglas
R. Oberhelman, Group President
|
|
§
|
Effectively managed period costs as a percent of
sales and increased accountable profit for his business
units
|
|
|
§
|
Significantly
improved employee engagement and safety for his business
units
|
|
|
§
|
Improved reciprocating engine
inventory turnover in 2008 for his business
units
|
|
|
§
|
Successfully expanded engine
capacity in Asia
|
Edward
J. Rapp, Group President
|
|
§
|
Significantly improved Building
Construction Products’ overall quality
metrics
|
|
|
§
|
Deployed a structured approach to
manage the company’s liquidity as financial markets were severely
disrupted
|
|
|
§
|
Provided leadership for long-term
capacity planning
initiatives
|
|
|
§
|
Effectively lowered inventory in
the Building Construction Products Division through the deployment of
CPS
|
Gerard
R. Vittecoq, Group President
|
|
§
|
Instrumental in providing
leadership for CPS initiatives, which resulted in improved safety, employee engagement and
quality for 2008
|
|
|
§
|
Increased focus on inventory turns
and provided leadership to the Corporate Supply Chain
Director
|
|
|
§
|
Markedly increased accountable
profit from 2007 to 2008 for his business
units
|
|
|
§
|
Strongly supported Caterpillar’s
Emerging Market strategy with an emphasis on
Russia
|
Steven
H. Wunning, Group President
|
|
§
|
Championed the company’s long-term
product technology strategy, including a more effective R&D
prioritization process, and led the development plan for the Tier 4
emissions product programs
|
|
|
§
|
Provided leadership to the
enterprise simplification initiative, significantly reducing the number of
suppliers and part numbers
|
|
|
§
|
Increased accountable profit
through focus on 6 Sigma, and continued to deliver exceptional performance
from the Progress Rail
Division
|
|
|
§
|
Supported the deployment of CPS
across reporting manufacturing operations, which resulted in higher
delivery performance and improved safety and quality
levels
|
David
B. Burritt, Vice President and Chief Financial Officer
|
|
§
|
Exceeded challenging cost
containment goals in 2008
|
|
|
§
|
Demonstrated leadership excellence
while reorganizing business
units
|
|
|
§
|
Delivered excellent cash flow
benefits to the corporation and strengthened internal controls through
continued focus on 6 Sigma
|
|
|
§
|
Maintained strong working rapport
with the Executive Office and the external financial
community
|
In February 2009,
the Compensation Committee approved lump sum discretionary bonuses for Mr.
Lavin, Mr. Levenick, Mr. Oberhelman, Mr. Rapp, Mr. Vittecoq and Mr. Wunning
based on exceptional 2008 performance (see discussion above, “Other NEOs
Compensation Decisions”). In addition, to recognize his exceptional
performance, Mr. Burritt received a lump sum discretionary award through
STIP. All compensation paid to or earned by NEOs in 2008 is disclosed
in the Summary Compensation Table on page 49 of this proxy
statement.
Page 44
|
Retirement
and Other Benefits
The defined
contribution and defined benefit plans available to the NEOs (excluding
Mr. Vittecoq for the reasons described below) are also available to most
U.S. Caterpillar salaried and management employees. All of the
NEOs (excluding Mr. Vittecoq) participate in all of the following U.S.
retirement plans.
Mr. Vittecoq
is not eligible for the U.S. benefit plans because he is on the Swiss
payroll and eligible for the Swiss benefit programs. He
participates in Caprevi, Prevoyance Caterpillar and the Swiss Employees’
Investment Plan. Both are Swiss retirement plans that are
available to all other Swiss management employees. Mr. Vittecoq is eligible under
Caprevi, Prevoyance Caterpillar for an early retirement benefit with no
reduction.
|
A defined
contribution savings plan is a retirement plan that provides for an
individual account for each participant and for benefits based solely upon
the amount contributed to the participant’s account, and any income,
expenses, gains and losses.
A defined
benefit pension plan is a retirement plan in which benefits must be
definitely determinable. Plan formulas are geared to retirement
benefits, not contributions. The plan is funded by
contributions to a trust account that are separate from the general assets
of the company. The Pension Benefit Guarantee Corporation
insures certain benefits.
A qualified
retirement plan is afforded special tax treatment for meeting a
host of requirements of the Internal Revenue Code.
A nonqualified
plan is designed primarily to provide retirement income for
essential employees. There are no limits on benefits or
contributions, and there are no reporting requirements so long as it is
not funded.
|
|
 |
||
|
Pension
Plans
Caterpillar
Inc. Retirement Income Plan (RIP)
Most U.S.
salaried and management employees are eligible to participate in
RIP. Benefit amounts are not offset for any Social Security
benefits. Plan participants may choose among several payment
options, such as a single life annuity, term-certain or various joint and
survivor annuity benefits. Of the NEOs, Mr. Lavin, Mr.
Levenick, Mr. Oberhelman, Mr. Wunning and Mr. Burritt are currently
eligible for early retirement, with a four percent benefit reduction, per
year, from age 62. Mr. Owens is currently eligible to retire
with no reduction in benefits.
Supplemental
Retirement Plan (SERP)
If an
employee’s annual compensation or retirement income benefit under RIP
exceeds the Internal Revenue Service tax code limitations, the excess
benefits are paid from the SERP. The formula used to calculate
the benefit payable in SERP is the same as that used under
RIP.
|
Page 45
Savings
Plans
Caterpillar
401(k) Plan
Most U.S. salaried
and management employees, including the NEOs, are eligible to participate in the
401(k) plan.
|
|
§
|
Contributions
are made on a pre-tax basis
|
|
|
§
|
Participants
can contribute up to 70 percent of their base salary and STIP
awards
|
|
|
§
|
Contributions
are limited by the tax code
|
|
|
§
|
Company
matches 100 percent of the first six percent of pay contributed to the
savings plan
|
|
|
§
|
All
contributions vest immediately
|
Supplemental
Deferred Compensation Plan (SDCP)
In addition to the
401(k) plan, all NEOs are allowed to participate in SDCP, which provides the
opportunity to increase deferrals of base salary and to elect deferrals of STIP
and LTCPP awards.
|
|
§
|
The plan was
created in March 2007 with a retroactive effective date of January 1,
2005. It effectively replaces SEIP and DEIP (both defined
below). The change allows the company to comply with the
American Jobs Creation Act of 2004, which added Internal Revenue Code
Section 409A.
|
|
|
§
|
Contributions
are made on a pre-tax basis and are comprised of four possible
contribution types:
|
|
|
•
|
Supplemental
Base Pay Deferrals (maximum 70 percent deferral
election)
|
|
|
•
|
Supplemental
STIP Deferrals (maximum 70 percent deferral
election)
|
|
|
•
|
Supplemental
LTCPP Deferrals (maximum 70 percent deferral
election)
|
|
|
•
|
Excess Base
Pay Deferrals (flat six percent deferral
election)
|
|
|
§
|
Supplemental
Base Pay Deferrals earn matching contributions at a rate of six percent of
the deferred amount
|
|
|
§
|
Supplemental
STIP Deferrals up to six percent are matched
dollar-for-dollar
|
|
|
§
|
Supplemental
LTCPP Deferrals are not eligible for an employer matching
contribution
|
|
|
§
|
Excess Base
Pay Deferrals are matched 100 percent by the company. This is
provided to restore the matching opportunity that is not available under
the qualified plan due to IRS
limits.
|
|
|
§
|
All
contributions vest immediately
|
Supplemental
Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan
(DEIP)
In addition to the
401(k) plan, all NEOs were previously allowed to participate in SEIP and
DEIP. These plans were frozen to new participants and new salary
deferrals in March of 2007. Pay deferred into SEIP and DEIP prior to
January 1, 2005 remains in SEIP and DEIP. Pay deferred on and after
January 1, 2005 was transferred to SDCP.
Page 46
Perquisites
The company
provides NEOs a very limited number of perquisites that it and the Compensation
Committee believe are reasonable and consistent with its overall compensation
program, and necessary to remain competitive. The Compensation
Committee annually reviews the levels of perquisites provided to the
NEOs. Costs associated with perquisites provided by the company are
included in the All Other Compensation Table appearing on page 50 of this proxy
statement. Descriptions of these perquisites are provided
below:
|
|
§
|
Limited
personal use of company aircraft is provided for security purposes and to
enable the NEOs to devote additional time to Caterpillar
business. A spouse may accompany a NEO on the company aircraft
while he or she is traveling for company business. Effective
January 1, 2009, the tax gross-up on the spousal accompany travel
perquisite was eliminated.
|
|
|
§
|
Home security
systems are provided to ensure the safety of our
NEOs
|
|
|
§
|
During 2008,
the NEOs were provided an annual financial counseling
allowance. This perquisite has been discontinued effective
January 1, 2009.
|
|
|
§
|
Mr. Owens
participates in the Director’s Charitable Award program, which is provided
to all directors of the company, and is funded by life insurance
arrangements for which the company pays the premiums. Mr. Owens
derives no direct financial benefit from the
program.
|
|
|
§
|
The
Director’s Charitable Award program was discontinued for new directors
after April 1, 2008. Directors as of that date were
grandfathered under the program.
|
Change
in Control
Except as required
by applicable law, Caterpillar has no special executive severance packages or
contracts. Mr. Vittecoq has an employment contract, which is required
under Swiss law. The change in control provisions are provided under
our long-term and short-term plans and are standard provisions for these types
of plans, which apply to all participants in those plans. Our change
in control provisions have no direct correlation with other compensation
decisions.
The change in
control provisions generally provide accelerated vesting and maximum payout
under the incentive plans. The change in control provisions impose a
“double-trigger,” whereby a change in control and termination of employment
without cause within 12 months of the change in control are needed to trigger
the change in control provisions. These provisions are intended to
allow executives to evaluate business opportunities with the best interests of
stockholders in mind, as opposed to maximizing their own personal
interests. The terms of the change in control provisions are
applicable to all employees covered by these plans and are not specific to the
NEOs. Additionally, no payments are made for voluntary separation,
resignation and termination for cause.
In the event of a
change in control, maximum payout factors are assumed for amounts payable under
the 1996 and 2006 Stock Option and LTIP.
|
|
§
|
LTIP allows
for the maximum performance level, 150 percent payout factor, to be paid
under each open plan cycle of the LTCPP. This is prorated based
on the time of active employment during the performance
cycle.
|
|
|
§
|
All unvested
stock options, SARs, restricted stock and restricted stock units vest
immediately
|
|
|
§
|
Stock options
and SARs remain exercisable over the normal life of the
grant
|
|
|
§
|
The ESTIP is
assumed to achieve the maximum payout factor, 200 percent, under a change
in control
|
Change in control
information is disclosed in the “Potential Payments Upon Termination or
Change in Control” section on page
56 of this proxy statement.
Page 47
Tax
and Accounting Implications
Deductibility
of Compensation
The goal of the
Compensation Committee is to comply with the requirements of Internal Revenue
Code Section 162(m), to the extent possible, with respect to long-term and
short-term incentive programs to avoid losing the deduction for compensation in
excess of $1 million paid to our NEOs. Caterpillar has generally
structured performance-based compensation plans with the objective that amounts
paid under those plans are tax deductible and the plans must be approved by the
company’s stockholders. However, the Compensation Committee may elect
to provide compensation outside those requirements when necessary to achieve its
compensation objectives.
Compensation
Recoupment Policy
If the board learns
of any misconduct by an officer who contributed to the company restating all or
a portion of its financial statements, it will do what is required to correct
the misconduct and prevent it from occurring again and, if appropriate, take
necessary remedial action.
To determine the
corrective action, the board will review the situation to identify whether the
restatement was the result of negligence, or intentional
misconduct. The board will require reimbursement of any bonus or
incentive compensation awarded to an officer or cancel unvested restricted or
deferred stock awards previously granted to the executive officer if all of the
following apply:
|
|
§
|
The amount of
the bonus or incentive compensation was calculated based on the
achievement of certain financial results that were subsequently the
subject of a restatement
|
|
|
§
|
The officer
engaged in intentional misconduct that caused or partially caused the need
for the restatement
|
|
|
§
|
The amount of
the bonus or incentive compensation that would have been awarded to the
executive had the financial results been properly reported would have been
lower than the amount actually
awarded
|
Additionally, at
the board’s discretion, it may dismiss the officer, authorize legal action for
breach of fiduciary duty or take other action to enforce the officer’s
obligations to the company. In determining appropriate remedial
action, the board may take into account penalties or punishments imposed by
third parties, such as law enforcement agencies, regulators or other
authorities. The board’s power to determine the appropriate
punishment for the wrongdoer is in addition to, and not in replacement of, third
party actions.
Page 48
|
2008
Summary Compensation Table
|
||||||||||||||||||||||||||
|
Name
and
Principal
Position
|
Year
|
Salary
|
Bonus2
|
Stock
Awards3
|
Option
Awards4
|
Non-Equity
Incentive Plan Compensation5 |
Change
in
Pension Value and Nonqualified Deferred Compensation Earnings6 |
All
Other Compensation7
|
Total
|
|||||||||||||||||
|
J.W.
Owens
|
2008
|
$
|
1,550,004
|
$
|
—
|
$
|
1,068,724
|
$
|
7,461,609
|
$
|
4,353,227
|
$
|
2,932,489
|
$
|
288,369
|
$
|
17,654,422
|
|||||||||
|
Chairman &
CEO
|
2007
|
$
|
1,512,504
|
$
|
300,000
|
$
|
918,626
|
$
|
7,136,911
|
$
|
4,442,998
|
$
|
2,575,395
|
$
|
221,307
|
$
|
17,107,741
|
|||||||||
|
2006
|
$
|
1,350,003
|
$
|
300,000
|
$
|
—
|
$
|
7,029,846
|
$
|
3,723,703
|
$
|
2,171,992
|
$
|
243,077
|
$
|
14,818,621
|
||||||||||
|
R.P.
Lavin 1
|
2008
|
$
|
584,004
|
$
|
10,000
|
$
|
317,172
|
$
|
2,484,182
|
$
|
1,071,222
|
$
|
381,424
|
$
|
619,217
|
$
|
5,467,221
|
|||||||||
|
Group
President
|
||||||||||||||||||||||||||
|
S.L.
Levenick
|
2008
|
$
|
729,996
|
$
|
10,000
|
$
|
351,818
|
$
|
3,161,374
|
$
|
1,457,336
|
$
|
699,119
|
$
|
161,532
|
$
|
6,571,175
|
|||||||||
|
Group
President
|
2007
|
$
|
712,248
|
$
|
110,000
|
$
|
260,667
|
$
|
3,379,672
|
$
|
1,560,817
|
$
|
531,446
|
$
|
85,148
|
$
|
6,639,998
|
|||||||||
|
2006
|
$
|
641,253
|
$
|
120,000
|
$
|
16,090
|
$
|
1,076,445
|
$
|
1,441,021
|
$
|
487,228
|
$
|
83,084
|
$
|
3,865,121
|
||||||||||
|
D.R.
Oberhelman
|
2008
|
$
|
729,996
|
$
|
60,000
|
$
|
351,818
|
$
|
3,270,500
|
$
|
1,495,186
|
$
|
619,845
|
$
|
111,227
|
$
|
6,638,572
|
|||||||||
|
Group
President
|
2007
|
$
|
729,996
|
$
|
198,000
|
$
|
260,667
|
$
|
3,412,413
|
$
|
1,666,505
|
$
|
568,400
|
$
|
100,431
|
$
|
6,936,412
|
|||||||||
|
2006
|
$
|
721,248
|
$
|
183,000
|
$
|
16,090
|
$
|
1,082,596
|
$
|
1,633,854
|
$
|
575,150
|
$
|
122,180
|
$
|
4,334,118
|
||||||||||
|
E.J. Rapp 1
|
2008
|
$
|
584,004
|
$
|
10,000
|
$
|
155,032
|
$
|
1,365,517
|
$
|
1,071,010
|
$
|
312,921
|
$
|
45,890
|
$
|
3,544,374
|
|||||||||
|
Group
President
|
||||||||||||||||||||||||||
|
G.R.
Vittecoq 5
|
2008
|
$
|
880,993
|
$
|
20,000
|
$
|
319,010
|
$
|
2,484,182
|
$
|
1,735,385
|
$
|
843,600
|
$
|
45,240
|
$
|
6,328,410
|
|||||||||
|
Group
President
|
2007
|
$
|
826,177
|
$
|
82,618
|
$
|
315,710
|
$
|
2,270,803
|
$
|
1,896,463
|
$
|
1,228,584
|
$
|
43,047
|
$
|
6,663,402
|
|||||||||
|
2006
|
$
|
753,981
|
$
|
114,870
|
$
|
—
|
$
|
2,226,118
|
$
|
1,707,398
|
$
|
1,532,982
|
$
|
40,159
|
$
|
6,375,508
|
||||||||||
|
S.H.
Wunning
|
2008
|
$
|
729,996
|
$
|
10,000
|
$
|
284,238
|
$
|
2,484,182
|
$
|
1,465,075
|
$
|
777,695
|
$
|
109,237
|
$
|
5,860,423
|
|||||||||
|
Group
President
|
2007
|
$
|
715,746
|
$
|
24,000
|
$
|
289,631
|
$
|
2,585,518
|
$
|
1,581,445
|
$
|
708,727
|
$
|
86,678
|
$
|
5,991,745
|
|||||||||
|
2006
|
$
|
657,747
|
$
|
130,000
|
$
|
—
|
$
|
2,226,118
|
$
|
1,501,523
|
$
|
621,107
|
$
|
78,674
|
$
|
5,215,169
|
||||||||||
|
D.B.
Burritt
|
2008
|
$
|
494,751
|
$
|
25,000
|
$
|
112,443
|
$
|
1,068,634
|
$
|
858,879
|
$
|
436,890
|
$
|
68,015
|
$
|
3,064,612
|
|||||||||
|
Vice President
& CFO
|
2007
|
$
|
454,503
|
$
|
—
|
$
|
43,190
|
$
|
647,601
|
$
|
930,660
|
$
|
352,648
|
$
|
63,152
|
$
|
2,491,754
|
|||||||||
|
2006
|
$
|
405,750
|
$
|
40,000
|
$
|
—
|
$
|
328,059
|
$
|
861,783
|
$
|
275,049
|
$
|
56,047
|
$
|
1,966,688
|
||||||||||
|
1
|
Mr. Lavin and
Mr. Rapp were not NEOs in 2006 or 2007.
|
|||||||||||||||||||||||||
|
2
|
Amounts
include lump sum discretionary bonus (LSDB) payments authorized by the
Compensation Committee of the board and lump sum discretionary awards
(LSDA) paid under STIP. For 2008 performance, NEOs earned the
following: Mr. Lavin — $10,000/LSDB; Mr. Levenick —
$10,000/LSDB; Mr. Oberhelman — $60,000/LSDB; Mr. Rapp — $10,000/LSDB; Mr.
Vittecoq — $20,000/LSDB; Mr. Wunning — $10,000/LSDB; and Mr. Burritt —
$25,000/LSDA. All amounts reported for Mr. Vittecoq were paid
in Swiss Franc and have been converted to U.S. dollars using the exchange
rate in effect on December 31, 2008 (1 Swiss Franc = .94731 US
Dollar).
|
|||||||||||||||||||||||||
|
3
|
The following
RSUs were granted to NEOs on March 3, 2008: Mr. Owens — 14,193;
Mr. Lavin — 4,109; Mr. Levenick — 4,109; Mr. Oberhelman — 4,109; Mr. Rapp
— 4,109; Mr. Vittecoq — 4,109; Mr. Wunning — 4,109; and Mr. Burritt —
2,450. The amounts included in this column represent the
amortized expense in accordance with FAS123R and not the compensation
realized by the NEO. Assumptions made in the calculation of
these amounts are included in Note 2 to the company’s financial statements
for the fiscal year ended December 31, 2008 included in Form 10-K filed
with the SEC on February 20, 2009. In addition to the $981,794
of RSUs granted to Mr. Owens, the amount reported also includes $86,930
for the 2008 amortized expense for restricted shares granted in
2007. In addition to the $284,238 of RSUs granted to Mr. Lavin,
he was also awarded 1,000 shares of restricted stock on April 1,
2008. The fair market value (average of high and low trading
price) of Caterpillar stock on the award date was $79.395 per
share. The restricted stock amount of $32,934 is also included
in this column and represents the 2008 amortized expense for Mr. Lavin’s
2008 and 2007 restricted stock awards as recognized for financial
reporting purposes. In addition to the $284,238 of RSUs granted
to Mr. Levenick, the amount reported also includes $48,272 for the 2008
expense for RSUs granted in 2007 and $19,308 for the 2008 expense for
restricted shares granted in 2006. In addition to the $284,238
of RSUs granted to Mr. Oberhelman, the amount reported also includes
$48,272 for the 2008 expense for RSUs granted in 2007 and $19,308 for the
2008 expense for restricted shares granted in 2006. In addition
to the $78,955 of RSUs granted to Mr. Rapp, he was also awarded 500
restricted shares on April 1, 2008. The fair market value (average of high
and low trading price) of Caterpillar stock on the award date was $79.395
per share. The $155,032 reported includes $50,917 for the 2008
expense for RSUs granted in 2007 and $25,160 for the 2008 expense for
restricted shares granted in 2008 and 2007. In addition to the
$284,238 of RSUs granted to Mr. Vittecoq, the amount reported also
includes $34,772 for the 2008 amortized expense for restricted shares (in
phantom form) granted in 2007. In addition to the $60,615 of
RSUs granted to Mr. Burritt, the amount reported also includes $51,828 for
the 2008 expense for RSUs granted in 2007.
|
|||||||||||||||||||||||||
|
4
|
The following
SARs were granted to NEOs on March 3, 2008: Mr. Owens —
334,288; Mr. Lavin — 111,294; Mr. Levenick — 115,484; Mr. Oberhelman —
115,484; Mr. Rapp — 109,898; Mr. Vittecoq — 111,294; Mr. Wunning —
111,294; and Mr. Burritt — 45,909. The amounts shown reflect
the expense recognized for financial reporting purposes in accordance with
FAS123R and not the compensation realized by the
NEO. Assumptions made in the calculation of these amounts are
included in Note 2 to the company’s financial statements for the fiscal
year ended December 31, 2008, included in Form 10-K filed with the SEC on
February 20, 2009.
|
|||||||||||||||||||||||||
|
5
|
The amounts in this column
reflect cash payments made to NEOs under ESTIP or STIP in 2009 with
respect to 2008 performance and under the LTCPP with respect to
performance over a three year plan cycle from 2006 through 2008 as
follows: Mr. Owens — $1,853,227/ESTIP and $2,500,000/LTCPP; Mr.
Lavin — $517,223/ESTIP and $553,999/LTCPP; Mr. Levenick — $646,521/ESTIP
and $810,815/LTCPP; Mr. Oberhelman — $646,521/ESTIP and $848,665/LTCPP;
Mr. Rapp — $517,223/ESTIP and $553,787/LTCPP; Mr. Vittecoq —
$780,252/ESTIP and $955,133/LTCPP; Mr. Wunning — $646,521/ESTIP and
$818,554/LTCPP; and Mr. Burritt — $427,404/STIP and
$431,475/LTCPP. All amounts reported for Mr. Vittecoq were paid
in Swiss Franc and have been converted to U.S. dollars using the exchange
rate in effect on December 31, 2008 (1 Swiss Franc = .94731 US
Dollar). Mr.
Vittecoq's 2008 Swiss Franc base salary has remained constant from 2007's
level at CHF 929,994. The conversion of Swiss Franc to the U.S.
dollar amount inflates Mr. Vittecoq's reported base salary, as the U.S.
dollar has depreciated against the Swiss
Franc.
|
|||||||||||||||||||||||||
|
6
|
Because NEOs
do not receive “preferred or above market” earning on compensation
deferred into SDCP, SEIP and/or DEIP, the amount shown represents only the
change between the actuarial present value of each officer’s total
accumulated pension benefit between December 31, 2007 and December 31,
2008. For Mr. Vittecoq, who is covered under a Swiss pension
plan, the actuarial present value of his pension benefit change was
calculated between September 30, 2007 and September 30,
2008. The amount assumes the pension benefit is payable at each
NEO’s earliest unreduced retirement age based upon the officer’s current
compensation.
|
|||||||||||||||||||||||||
|
7
|
All Other
Compensation consists of the following items detailed in a separate table
appearing on page 50: Matching contributions to the company’s
401(k) plan, matching contributions to SDCP, financial counseling, tax
gross-up, home security, life insurance premiums for the NEOs, life
insurance premiums for the Directors’ Charitable Award Program and ISE
allowances.
|
|||||||||||||||||||||||||
Page 49
|
2008
All Other Compensation Table
|
|||||||||||||||||||||||||||||
|
Name
|
Year
|
Matching
Contributions 401(k)
|
Matching
Contributions SDCP |
Financial
Counseling2 |
Corporate
Aircraft3 |
Tax
Gross-Up on Corporate Aircraft3 |
Home
Security4 |
Director’s
Charitable Award Insurance Premiums5 |
Other6
|
Total
All Other Compensation
|
|||||||||||||||||||
|
J. W.
Owens
|
2008
|
$
|
13,800
|
$
|
213,780
|
$
|
13,530
|
$
|
—
|
$
|
9,936
|
$
|
1,952
|
$
|
32,851
|
$
|
2,520
|
$
|
288,369
|
||||||||||
|
2007
|
$
|
13,500
|
$
|
168,672
|
$
|
4,545
|
$
|
—
|
$
|
3,660
|
$
|
919
|
$
|
30,011
|
$
|
—
|
$
|
221,307
|
|||||||||||
|
2006
|
$
|
13,200
|
$
|
150,876
|
$
|
14,000
|
$
|
5,805
|
$
|
3,694
|
$
|
25,491
|
$
|
30,011
|
$
|
—
|
$
|
243,077
|
|||||||||||
|
R. P.
Lavin
|
2008
|
$
|
13,800
|
$
|
50,972
|
$
|
8,000
|
$
|
—
|
$
|
98
|
$
|
1,520
|
$
|
—
|
$
|
544,827
|
$
|
619,217
|
||||||||||
|
S. L.
Levenick
|
2008
|
$
|
13,800
|
$
|
35,280
|
$
|
8,000
|
$
|
—
|
$
|
2,572
|
$
|
1,094
|
$
|
—
|
$
|
100,786
|
$
|
161,532
|
||||||||||
|
2007
|
$
|
13,500
|
$
|
62,265
|
$
|
8,000
|
$
|
—
|
$
|
464
|
$
|
919
|
$
|
—
|
$
|
—
|
$
|
85,148
|
|||||||||||
|
2006
|
$
|
13,200
|
$
|
55,541
|
$
|
8,000
|
$
|
1,376
|
$
|
603
|
$
|
2,150
|
$
|
—
|
$
|
2,214
|
$
|
83,084
|
|||||||||||
|
D. R.
Oberhelman
|
2008
|
$
|
13,800
|
$
|
83,544
|
$
|
5,325
|
$
|
—
|
$
|
3,273
|
$
|
4,385
|
$
|
—
|
$
|
900
|
$
|
111,227
|
||||||||||
|
2007
|
$
|
13,500
|
$
|
72,726
|
$
|
4,975
|
$
|
—
|
$
|
4,795
|
$
|
4,435
|
$
|
—
|
$
|
—
|
$
|
100,431
|
|||||||||||
|
2006
|
$
|
13,200
|
$
|
68,314
|
$
|
6,925
|
$
|
4,610
|
$
|
3,004
|
$
|
26,127
|
$
|
—
|
$
|
—
|
$
|
122,180
|
|||||||||||
|
E. J.
Rapp
|
2008
|
$
|
13,800
|
$
|
21,240
|
$
|
8,000
|
$
|
—
|
$
|
1,047
|
$
|
903
|
$
|
—
|
$
|
900
|
$
|
45,890
|
||||||||||
|
G. R.
Vittecoq
|
2008
|
$
|
N/A
|
1
|
$
|
35,240
|
$
|
10,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
45,240
|
|||||||||
|
2007
|
$
|
N/A
|
1
|
$
|
33,047
|
$
|
10,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
43,047
|
||||||||||
|
2006
|
$
|
N/A
|
1
|
$
|
30,159
|
$
|
10,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
40,159
|
||||||||||
|
S. H.
Wunning
|
2008
|
$
|
13,800
|
$
|
75,242
|
$
|
18,575
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,620
|
$
|
109,237
|
||||||||||
|
2007
|
$
|
13,500
|
$
|
65,178
|
$
|
8,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
86,678
|
|||||||||||
|
2006
|
$
|
13,200
|
$
|
57,474
|
$
|
8,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
78,674
|
|||||||||||
|
D. B.
Burritt
|
2008
|
$
|
13,800
|
$
|
44,390
|
$
|
6,600
|
$
|
—
|
$
|
1,423
|
$
|
902
|
$
|
—
|
$
|
900
|
$
|
68,015
|
||||||||||
|
2007
|
$
|
13,500
|
$
|
39,647
|
$
|
7,500
|
$
|
—
|
$
|
1,586
|
$
|
919
|
$
|
—
|
$
|
—
|
$
|
63,152
|
|||||||||||
|
2006
|
$
|
13,200
|
$
|
29,127
|
$
|
11,000
|
$
|
—
|
$
|
—
|
$
|
2,720
|
$
|
—
|
$
|
—
|
$
|
56,047
|
|||||||||||
|
1
|
Mr. Vittecoq
participates in a non-U.S. Employee Investment Plan.
|
||||||||||||||||||||||||||||
|
2
|
The Officers
Financial Counseling Program was eliminated effective January 1,
2009.
|
||||||||||||||||||||||||||||
|
3
|
There was no
personal use of corporate aircraft by NEOs in 2008. In some
cases, space permitting, a spouse accompanied an NEO on a business trip in
2008. There was no “incremental cost” to the company associated
with the spousal accompany travel on corporate aircraft, except for the
tax gross-up associated with the spousal travel. Effective
January 1, 2009, the tax gross-up on spousal accompany travel perquisite
has been eliminated. Company aircraft is provided for security
purposes and allows the NEOs to devote additional time to Caterpillar
business. CEO approval is required for personal use of
corporate aircraft. The amounts shown for the year 2006 were
based upon the Standard Industry Fare Level (SIFL)
formula.
|
||||||||||||||||||||||||||||
|
4
|
Amounts
reported for Home Security represent the cost provided by an outside
security provider for hardware and monitoring service.
|
||||||||||||||||||||||||||||
|
5
|
Mr. Owens
received no direct compensation for serving on the board, but is entitled
to participate in the Directors’ Charitable Award Program. The
amount reported includes company paid life insurance premium and
administrative fees for Mr. Owens.
|
||||||||||||||||||||||||||||
|
6
|
Mr. Lavin was an International
Service Employee (ISE) based in China until his return to the U.S. in
December of 2007. The amount shown includes numerous foreign
service allowances typically paid by the company on behalf of ISEs,
including allowances paid to Mr. Lavin by the company for mobility
premiums, housing, moving expenses and for that portion of his foreign and
U.S. taxes attributable to his employment as an ISE for the
company. These allowances are intended to ensure that our ISEs
are in the same approximate financial position as they would have been if
they lived in the U.S. during the time of their service as
ISEs. Mr. Levenick was an ISE based in Japan until his return
to the U.S. in July of 2004. Amounts shown include the net
additional foreign taxes paid by the company that were attributable to the
period of time served as an ISE.
The amount
shown also includes the premium cost of company provided basic life
insurance under a Group Variable Universal Life policy. The
coverage amount is two times base salary, capped at
$500,000. The premium cost is as follows: Mr. Owens —
$2,520; Mr. Lavin —
$1,620; Mr. Levenick — $900;
Mr. Oberhelman — $900;
Mr. Rapp — $900;
Mr. Wunning —
$1,620; and Mr. Burritt —
$900. Mr. Vittecoq is not covered under a company
sponsored life insurance
product.
|
||||||||||||||||||||||||||||
Page 50
|
Grants
of Plan-Based Awards in 2008
|
|||||||||||||||||||||
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under
Non-Equity Incentive Plan Awards1 |
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units 2
|
All
Other
Option Awards: Number
of
Securities
Underlying
Options 3
|
Exercise
or
Base Price of Option Awards ($/share) |
Grant
Date
Fair
Value
of
Stock
and Option Awards ($) 4 |
|||||||||||||||
|
Threshold
|
Target
|
Maximum
|
|||||||||||||||||||
|
J.W.
Owens
|
—
|
$
|
1,317,503
|
$
|
2,635,007
|
$
|
3,952,510
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
14,193
|
—
|
$
|
—
|
$
|
981,794
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
334,288
|
$
|
73.20
|
$
|
7,461,609
|
|||||||||
|
R. P.
Lavin
|
—
|
$
|
321,202
|
$
|
642,404
|
$
|
963,607
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
4,109
|
—
|
$
|
—
|
$
|
284,238
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
111,294
|
$
|
73.20
|
$
|
2,484,182
|
|||||||||
|
04/01/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
1,000
|
—
|
$
|
—
|
$
|
79,395
|
|||||||||
|
S.L.
Levenick
|
—
|
$
|
401,498
|
$
|
802,996
|
$
|
1,204,493
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
4,109
|
—
|
$
|
—
|
$
|
284,238
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
115,484
|
$
|
73.20
|
$
|
2,577,707
|
|||||||||
|
D.R.
Oberhelman
|
—
|
$
|
401,498
|
$
|
802,996
|
$
|
1,204,493
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
4,109
|
—
|
$
|
—
|
$
|
284,238
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
115,484
|
$
|
73.20
|
$
|
2,577,707
|
|||||||||
|
E.J.
Rapp
|
—
|
$
|
321,202
|
$
|
642,404
|
$
|
963,607
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
4,109
|
—
|
$
|
—
|
$
|
284,238
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
109,898
|
$
|
73.20
|
$
|
2,453,022
|
|||||||||
|
04/01/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
500
|
—
|
$
|
—
|
$
|
39,698
|
|||||||||
|
G.R.
Vittecoq
|
—
|
$
|
484,546
|
$
|
969,092
|
$
|
1,453,638
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
4,109
|
—
|
$
|
—
|
$
|
284,238
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
111,294
|
$
|
73.20
|
$
|
2,484,182
|
|||||||||
|
S.H.
Wunning
|
—
|
$
|
401,498
|
$
|
802,996
|
$
|
1,204,493
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
4,109
|
—
|
$
|
—
|
$
|
284,238
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
111,294
|
$
|
73.20
|
$
|
2,484,182
|
|||||||||
|
D.B.
Burritt
|
—
|
$
|
225,413
|
$
|
450,825
|
$
|
676,238
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
2,450
|
—
|
$
|
—
|
$
|
169,478
|
|||||||||
|
03/03/2008
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
45,909
|
$
|
73.20
|
$
|
1,024,730
|
|||||||||
|
1
|
The amounts
reported in this column are awards under the LTCPP based upon an
executive’s base salary throughout the three-year cycle, a predetermined
percentage of that salary and Caterpillar’s achievement of specified
performance levels (relative PPS growth and return on assets) over the
three-year period. The threshold amount will be earned if 50
percent of the targeted performance level is achieved. The
target amount will be earned if 100 percent of the targeted performance
level is achieved. The maximum award amount will be earned at
150 percent of targeted performance level. Base salary levels for 2008
were used to calculate the estimated dollar value of future payments for
the 2008 to 2010 performance cycle. The CD&A discusses in
greater detail the performance metrics used in the LTCPP
cycle. The actual ESTIP and STIP cash payouts for the 2008 plan
year are reported in the column "Non-Equity Incentive Plan Compensation"
of the Summary Compensation Table.
|
||||||||||||||||||||
|
2
|
All RSUs
granted to the NEOs will vest three years from the grant
date. Plan provisions exist for accelerated vesting in the
event of termination due to long-service separation (age 55 with 10 or
more years of company service), death, total disability or change in
control. The actual realizable value of the RSU will depend on
the fair market value of Caterpillar stock at the time of
vesting. In addition to the 4,109 RSUs granted to Mr. Lavin, he
was awarded 1,000 shares of restricted stock on April 1,
2008. The restricted stock vests over a five-year period, with
one third vesting after three years from the grant date, one third vesting
on the fourth year from the grant date, and the final third vesting on the
fifth year from the grant date. In addition to the 4,109
RSUs granted to Mr. Rapp, he was also awarded 500 shares of
restricted stock on April 1, 2008. The restricted stock vests
over a five-year period, with one third vesting after three years from the
grant date, one third vesting on the fourth year from the grant date and
the final third vesting on the fifth year from the grant
date.
|
||||||||||||||||||||
|
3
|
Amounts
reported represent SARs granted under the LTIP. The exercise
price for all SARs granted to the NEOs is the closing price of Caterpillar
stock on the grant date. The grant price was based upon the
closing price ($73.20) for Caterpillar stock on the grant date of March 3,
2008. All SARs granted to the NEOs will vest after three years
from the grant date. Plan provisions exist for accelerated
vesting in the event of terminations due to long-service separation (age
55 with 10 or more years of company service), death, total disability or
change in control. The actual realizable value of the SAR will
depend on the fair market value of Caterpillar stock at the time of
exercise.
|
||||||||||||||||||||
|
4
|
The amounts
shown do not reflect realized compensation by the NEO. The
amounts shown represent the value of the SAR, RSU and restricted stock
based upon the fair value on the granting date as determined in accordance
with FAS123R.
|
||||||||||||||||||||
Page 51
|
Outstanding Equity Awards at 2008
Fiscal Year-End
|
||||||||||||
|
Name
|
Grant
Date
|
Vesting
Date
|
Option
Awards
|
Stock
Awards
|
||||||||
|
Number
of Securities Underlying Unexercised SARs/Options
|
SAR
/ Option
Exercise
Price
|
SAR
/ Option
Expiration
Date1
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not Vested2
|
Market
Value
of
Shares
or
Units
of Stock
That
Have
Not Vested3
|
||||||||
|
Exercisable
|
Unexercisable
|
|||||||||||
|
J.W. Owens
|
06/12/2000
|
06/12/2003
|
108,000
|
—
|
$
|
19.2032
|
06/12/2010
|
—
|
$
|
—
|
||
|
06/12/2001
|
06/12/2004
|
108,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/11/2002
|
06/11/2005
|
122,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
|||
|
06/10/2003
|
06/10/2006
|
140,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
460,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||
|
02/18/2005
|
02/18/2005
|
460,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||
|
02/17/2006
|
02/17/2009
|
—
|
300,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||
|
03/02/2007
|
03/02/2010
|
—
|
344,198
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||
|
03/03/2008
|
03/03/2011
|
—
|
334,288
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
14,238
|
$
|
636,011
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
14,193
|
$
|
634,001
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
18,332
|
$
|
818,890
|
|||
|
R.P. Lavin
|
06/08/1999
|
06/08/2002
|
8,132
|
—
|
$
|
31.1719
|
06/08/2009
|
—
|
$
|
—
|
||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
70,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||
|
02/18/2005
|
02/18/2005
|
70,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||
|
02/17/2006
|
02/17/2009
|
—
|
48,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||
|
03/02/2007
|
03/02/2010
|
—
|
47,580
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||
|
03/03/2008
|
03/03/2011
|
—
|
111,294
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,594
|
$
|
115,874
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,109
|
$
|
183,549
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
3,330
|
$
|
148,751
|
|||
|
S.L.
Levenick
|
06/11/2002
|
06/11/2005
|
54,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
126,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||
|
02/18/2005
|
02/18/2005
|
130,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||
|
02/17/2006
|
02/17/2009
|
—
|
105,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||
|
03/02/2007
|
03/02/2010
|
—
|
124,396
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||
|
03/03/2008
|
03/03/2011
|
—
|
115,484
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,832
|
$
|
215,845
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,109
|
$
|
183,549
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
1,000
|
$
|
44,670
|
|||
|
D.R.
Oberhelman
|
06/12/2000
|
06/12/2003
|
48,000
|
—
|
$
|
19.2032
|
06/12/2010
|
—
|
$
|
—
|
||
|
06/12/2001
|
06/12/2004
|
48,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/11/2002
|
06/11/2005
|
122,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
|||
|
06/10/2003
|
06/10/2006
|
140,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
140,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||
|
02/18/2005
|
02/18/2005
|
140,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||
|
02/17/2006
|
02/17/2009
|
—
|
110,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||
|
03/02/2007
|
03/02/2010
|
—
|
125,894
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||
|
03/03/2008
|
03/03/2011
|
—
|
115,484
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,832
|
$
|
215,845
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,109
|
$
|
183,549
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,332
|
$
|
193,510
|
|||
|
E.J. Rapp
|
06/12/2000
|
06/12/2003
|
5,202
|
—
|
$
|
19.2032
|
06/12/2010
|
—
|
$
|
—
|
||
|
06/12/2001
|
06/12/2004
|
48,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/11/2002
|
06/11/2005
|
54,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
|||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
60,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||
|
02/18/2005
|
02/18/2005
|
60,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||
|
02/17/2006
|
02/17/2009
|
—
|
48,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||
|
03/02/2007
|
03/02/2010
|
—
|
47,044
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||
|
03/03/2008
|
03/03/2011
|
—
|
109,898
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,594
|
$
|
115,874
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,109
|
$
|
183,549
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,164
|
$
|
96,666
|
|||
(table
continued on next page)
Page 52
|
Outstanding Equity Awards at 2008
Fiscal Year-End (continued)
|
|||||||||||||
|
Name
|
Grant
Date
|
Vesting
Date
|
Option
Awards
|
Stock
Awards
|
|||||||||
|
Number
of Securities Underlying Unexercised SARs/Options
|
SAR
/ Option
Exercise
Price
|
SAR
/ Option
Expiration
Date1
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested2
|
Market
Value
of
Shares
or
Units
of Stock
That
Have
Not
Vested3
|
|||||||||
|
Exercisable
|
Unexercisable
|
||||||||||||
|
G.R.
Vittecoq
|
06/12/2000
|
06/12/2003
|
23,968
|
—
|
$
|
19.2032
|
06/12/2010
|
—
|
$
|
—
|
|||
|
06/12/2001
|
06/12/2004
|
48,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
||||
|
06/11/2002
|
06/11/2005
|
54,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
||||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
||||
|
06/08/2004
|
12/31/2004
|
126,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
130,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
—
|
95,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
109,516
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
111,294
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,832
|
$
|
215,845
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,109
|
$
|
183,549
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,086
|
$
|
93,182
|
||||
|
S.H.
Wunning
|
06/12/2001
|
06/12/2004
|
48,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/11/2002
|
06/11/2005
|
60,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
||||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
||||
|
06/08/2004
|
12/31/2004
|
126,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
130,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
—
|
95,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
124,694
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
111,294
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,832
|
$
|
215,845
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
4,109
|
$
|
183,549
|
||||
|
D.B.
Burritt
|
06/10/2003
|
06/10/2006
|
23,100
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
23,100
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
54,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
—
|
48,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
47,342
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
45,909
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,594
|
$
|
115,874
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,450
|
$
|
109,442
|
||||
|
1
|
SARs granted
in 2008 are exercisable three years after the grant date. The
SARs were granted with a 10-year term, subject to earlier termination in
the event of separation from service.
|
||||||||||||
|
2
|
In addition to
the RSUs and restricted stock granted in 2008 to the NEOs (reported in the
2008 Summary Compensation Table), the amounts shown also include the
portion of any prior grants that were not vested as of December 31,
2008.
|
||||||||||||
|
3
|
The market
value of the non-vested RSUs and restricted shares (or equivalent shares
in the case of Mr. Vittecoq) is calculated using the closing price of
Caterpillar common stock on December 31, 2008 ($ 44.67 per
share).
|
||||||||||||
Page 53
|
2008
Option Exercises and Stock Vested
|
|||||||||||||
|
Option
Awards 1
|
Stock
Awards 2
|
||||||||||||
|
Name
|
Number
of Shares
Acquired
on
Exercise
|
Value
Realized
on
Exercise
|
Number
of Shares
Acquired
on
Vesting
|
Value
Realized
on
Vesting
|
|||||||||
|
J.W.
Owens
|
100,000
|
$
|
1,275,310
|
6,668
|
$
|
486,231
|
|||||||
|
R.P.
Lavin
|
6,708
|
$
|
341,514
|
1,635
|
$
|
123,550
|
|||||||
|
S.L.
Levenick
|
—
|
$
|
—
|
—
|
$
|
—
|
|||||||
|
D.R.
Oberhelman
|
61,410
|
$
|
1,605,242
|
2,668
|
$
|
207,501
|
|||||||
|
E.J.
Rapp
|
18,596
|
$
|
826,918
|
668
|
$
|
53,036
|
|||||||
|
G.R.
Vittecoq
|
—
|
$
|
—
|
699
|
$
|
50,976
|
|||||||
|
S.H.
Wunning
|
48,000
|
$
|
2,934,559
|
—
|
$
|
—
|
|||||||
|
D.B.
Burritt
|
—
|
$
|
—
|
—
|
$
|
—
|
|||||||
|
1
|
Upon exercise,
option holders may surrender shares to pay the option exercise price and
satisfy income tax-withholding requirements. The amounts shown
are gross amounts absent netting for shares
surrendered.
|
||||||||||||
|
2
|
Upon release
of the restricted stock, shares are surrendered to satisfy income
tax-withholding requirements. The amounts shown are gross
amounts absent netting for shares surrendered. Mr. Vittecoq
received a cash payment for the value of his equivalent restricted
shares. Equivalent restricted shares are issued to Mr. Vittecoq
as they provide a tax efficient award under Swiss tax
law.
|
||||||||||||
|
2008 Pension
Benefits
|
|||||||||
|
Name
|
Plan Name 1
|
Number of Years of Credited
Service 2
|
Present Value
of
Accumulated Benefit 3
|
Payments During
Last Fiscal Year
|
|||||
|
J.W. Owens
|
RIP
|
35.00
|
$
|
2,027,801
|
$
|
—
|
|||
|
SERP
|
35.00
|
$
|
14,275,411
|
$
|
—
|
||||
|
R.P. Lavin
|
RIP
|
24.25
|
$
|
1,031,118
|
$
|
—
|
|||
|
SERP
|
24.25
|
$
|
1,732,572
|
$
|
—
|
||||
|
S.L.
Levenick
|
RIP
|
31.50
|
$
|
1,258,496
|
$
|
—
|
|||
|
SERP
|
31.50
|
$
|
2,929,112
|
$
|
—
|
||||
|
D.R.
Oberhelman
|
RIP
|
33.50
|
$
|
1,338,400
|
$
|
—
|
|||
|
SERP
|
33.50
|
$
|
3,920,676
|
$
|
—
|
||||
|
E.J. Rapp
|
RIP
|
29.50
|
$
|
917,540
|
$
|
—
|
|||
|
SERP
|
29.50
|
$
|
1,307,989
|
$
|
—
|
||||
|
G.R.
Vittecoq
|
Caprevi,
Prevoyance
|
32.92
|
$
|
11,361,256
|
$
|
—
|
|||
|
S.H.
Wunning
|
RIP
|
35.00
|
$
|
1,568,368
|
$
|
—
|
|||
|
SERP
|
35.00
|
$
|
3,921,866
|
$
|
—
|
||||
|
D.B.
Burritt
|
RIP
|
30.92
|
$
|
1,070,161
|
$
|
—
|
|||
|
SERP
|
30.92
|
$
|
1,145,050
|
$
|
—
|
||||
|
1
|
Caterpillar Inc. Retirement Income Plan (RIP) is a
noncontributory U.S. qualified defined benefit pension plan and the
Supplemental Retirement Plan (SERP) is a U.S. non-qualified pension
plan. The benefit formula is 1.5 percent for each year of
service (capped at 35 years) multiplied by the final average
earnings during the highest five of the final ten years of
employment. Final average earnings include base salary,
short-term incentive compensation and deferred compensation. If
an employee’s annual retirement income
benefit under the qualified plan
exceeds the Internal Revenue Code limitations, the excess benefits are
paid from SERP. SERP is not funded. The same formula
is used to calculate the benefits payable in both the SERP and
RIP. Mr. Vittecoq participates in Caprevi, Prevoyance Caterpillar, a
Swiss pension benefit plan. The Swiss plan requires
participants to contribute approximately seven percent of pensionable
income to the plan. The benefit formula is 1.75 percent for
each year of service multiplied by the final average earnings for the
highest three years of a participant’s career. Final average
earnings consist of base salary and short-term incentive pay, reduced by a
prescribed percentage to arrive at “salary considered for
contribution.” The benefit
can be received in a 100 percent
lump sum payment or annuity.
|
||||||||
|
2
|
Mr. Owens and Mr. Wunning have
both accumulated more than 35 years of service with the
company. Amounts payable under both RIP and SERP are based upon
a maximum of 35 years of service. All RIP and SERP participants may
receive their benefit immediately following termination of employment, or
may defer benefit payments until any time between early retirement age and
normal retirement age. Normal retirement age is defined as age
65 with five years of service. Early
retirement is defined as: any age with 30 years of service, age
55 with 15 years of service, age plus service = 85 points, or age 60 with
10 years of service. If a participant elects early retirement,
benefits are reduced by four percent, per year, before age
62. Currently, all NEOs, with the exception of Mr. Rapp are
eligible to retire. Mr. Lavin, Mr. Levenick, Mr. Oberhelman,
Mr. Wunning and Mr. Burritt are eligible for early retirement, with a four
percent reduction per year under age 62. Mr.
Vittecoq is eligible under the Swiss pension plan for a retirement benefit
with no reduction.
|
||||||||
|
3
|
The amount in this column
represents the actuarial present value for each NEO’s accumulated pension benefit at
December 31, 2008, assuming benefits are payable at each
NEO’s earliest unreduced retirement
age based upon current level of pensionable income. The
interest rate of 6.05 percent and the RP2000 mortality table used in the
calculations are based upon the U.S. FAS 87 disclosure at
December 31, 2008. Mr.
Vittecoq’s lump sum present value
accumulated benefit is based upon the Swiss pension measurement date of
September 30, 2008. The EVK 2000 mortality table and the Swiss
FAS 87 interest rate of 3.0 percent were used to calculate Mr.
Vittecoq’s
benefit.
|
||||||||
Page 54
|
2008 Nonqualified Deferred
Compensation 1
|
|||||||||||||||
|
Name
|
Plan
Name
|
Executive
Contributions
in 2008 1
|
Registrant
Contributions
in 2008 2
|
Aggregate
Earnings in
2008 3
|
Aggregate
Balance
at 12/31/08 1
|
||||||||||
|
J.W. Owens
|
SDCP
|
$
|
213,780
|
$
|
213,780
|
$
|
(578,397
|
)
|
$
|
962,938
|
|||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
(347,722
|
)
|
$
|
541,571
|
||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(574,711
|
)
|
$
|
847,834
|
||||||
|
R.P. Lavin
|
SDCP
|
$
|
50,972
|
$
|
50,972
|
$
|
(152,780
|
)
|
$
|
242,839
|
|||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
(79,070
|
)
|
$
|
138,680
|
||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(5,287
|
)
|
$
|
9,273
|
||||||
|
S.L.
Levenick
|
SDCP
|
$
|
227,509
|
$
|
35,280
|
$
|
(267,172
|
)
|
$
|
1,437,548
|
|||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
(16,882
|
)
|
$
|
23,106
|
||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(1,053,527
|
)
|
$
|
2,785,944
|
||||||
|
D.R.
Oberhelman
|
SDCP
|
$
|
83,544
|
$
|
83,544
|
$
|
(386,544
|
)
|
$
|
706,258
|
|||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
(215,316
|
)
|
$
|
377,644
|
||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(283,740
|
)
|
$
|
497,657
|
||||||
|
E.J. Rapp
|
SDCP
|
$
|
21,240
|
$
|
21,240
|
$
|
(128,090
|
)
|
$
|
777,292
|
|||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
(25,354
|
)
|
$
|
36,177
|
||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(155,777
|
)
|
$
|
531,989
|
||||||
|
G.R.
Vittecoq
|
EIP
|
$
|
52,860
|
$
|
35,240
|
$
|
(909,238
|
)
|
$
|
1,565,871
|
|||||
|
S.H.
Wunning
|
SDCP
|
$
|
419,310
|
$
|
75,242
|
$
|
(467,008
|
)
|
$
|
1,606,387
|
|||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
(141,789
|
)
|
$
|
248,074
|
||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(393,001
|
)
|
$
|
686,628
|
||||||
|
D.B.
Burritt
|
SDCP
|
$
|
44,390
|
$
|
44,390
|
$
|
14,708
|
$
|
339,461
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
810
|
$
|
16,832
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
(20,233
|
)
|
$
|
83,309
|
||||||
|
1
|
The
Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred
compensation plan that was created in March of 2007 with a retroactive
effective date of January 1, 2005 and effectively replaced the existing
plans, Supplemental Employees’ Investment Plan (SEIP) and Deferred
Employees’ Investment Plan (DEIP). All future contributions
will be made under SDCP. The aggregate balance at 12/31/08 column
includes any amounts deferred under SEIP and/or DEIP prior to the creation
of SDCP. The investment choices available to the participant
mirror those of our 401(k) plan.
|
||||||||||||||
|
2
|
SDCP allows
eligible U.S. employees,
including all NEOs (except Mr. Vittecoq) to voluntarily defer a
portion of their base salary and short-term incentive pay into the plan
and receive a company matching contribution. LTCPP pay may also be deferred,
but does not qualify for any company matching
contributions. Mr. Vittecoq is a participant in a non-U.S.
Employee Investment Plan that allows him to contribute a portion of his
base salary to the plan and receive a company matching
contribution. Amounts deferred by executives in 2008 for base
salary, short-term incentive pay and/or long-term cash performance
payouts are included in the 2008 Summary Compensation
Table. Matching contributions in non-qualified deferred
compensation plans made by Caterpillar in 2008 are also included in the
2008 All Other Compensation Table under the Matching Contributions SDCP
column. SDCP participants may elect a lump sum payment, or an
installment distribution payable for up to 15 years after
separation.
|
||||||||||||||
|
3
|
Aggregate earnings comprise
interest, dividends, capital gains and appreciation/depreciation of investment
results.
|
||||||||||||||
Page 55
Potential Payments Upon Termination or
Change in Control
General
Caterpillar does not have any special
severance agreements or packages (such as golden parachutes) under which
payments are to be made to any NEO. Potential payments to NEOs may, however, be
available under the terms of existing compensation and benefit programs in the
case of 1) termination (including voluntary separation, termination for cause or
long-service separation) or
2) a change in control of the company. The terms applicable to
these potential payments in various termination scenarios are discussed
below.
Any payments that would be provided to a
named executive officer under plans generally available to management employees
similarly situated to the
NEOs in age, years of service, date of hire, etc. that do not discriminate in
favor of the NEOs (such as death and disability benefits, retiree medical and
life insurance benefits) are not quantified in the following tabular
information. The discussion below assumes that each NEO is
eligible for benefits unless otherwise noted.
The following narrative and tabular
information describes and quantifies certain payments and benefits that would
become payable under existing plans and arrangements if the named executive’s employment had terminated on December
31, 2008. The information is provided relative to the NEO’s compensation and service levels as of
the date specified. If applicable, they are based on the
company’s closing stock price on the
specified date.
Terms of Potential Payments -
Termination
The terms of potential payments to NEOs
in each of the following termination scenarios under existing compensation and
benefit programs follows:
|
|
§
|
Voluntary Separation (resignation
or termination without
cause)
|
|
|
§
|
Termination for Cause
(termination)
|
|
|
§
|
Long-Service Separation
(retirement)
|
Equity
awards
Unvested equity awards granted to NEOs
in accordance with the
long-term plan become fully vested and exercisable upon
retirement. In the event of resignation, NEOs keep vested equity awards but
forfeit any that are not yet vested. If terminated, equity awards
that are outstanding (whether vested or unvested) will
expire. Potential amounts and assumptions regarding equity awards are
included in the Potential Payments upon Termination or Change
in Control Table (Potential Payments Table) on page 58. These terms are applicable
to all employees covered by the LTIP.
Short-term
incentive pay
In the event of retirement at December
31, 2008, NEOs would be eligible to receive the amount otherwise
payable to them for the 2008 plan year under their applicable
STIP. In the case of termination or resignation at December 31, 2008,
the NEO would forfeit all short-term incentive pay. Potential amounts
and assumptions regarding the short-term incentive pay
are included in the Potential Payments Table on page 58.
Page 56
Long-term
performance awards
In the event of retirement at December
31, 2008, NEOs would be eligible to receive amounts otherwise payable to them
under the LTCPP feature of
the Caterpillar Inc. 2006 Long-Term Incentive Plan and the 1996 Stock Option and
Long-Term Incentive Plan. The NEOs’ eligibility and award amount would be
determined at the conclusion of the performance period, depending on the
achievement of the established performance
criteria. Potential amounts and assumptions regarding the short-term
incentive pay are included in the Potential Payments Table on page
58. These terms are
applicable to all employees covered by these long-term
plans.
Deferred
compensation
The Non-Qualified Deferred Compensation
Table on page 55
describes unfunded, non-qualified
deferred compensation plans that permit the deferral of salary, bonus and
short-term cash performance awards by NEOs. These plans also provide
for matching contributions
by the company. LTCPP pay may also be deferred, but is not eligible
for a company matching contribution.
NEOs are eligible to receive the amount
in their deferred compensation account following termination under any
termination scenario unless
the named executive elects to further defer payment as permitted by the
plans. The Non-Qualified Deferred Compensation column of the
Potential Payments Table assumes the NEO terminated employment at December 31,
2008 with no further deferral of payments.
Severance
pay
Other than in accordance with the terms
of existing compensation and benefit programs, no special severance payments
will be made to any NEOs.
Perquisites
In the event of retirement, perquisites
such as security may be provided to the NEO.
Pension
benefits
The footnotes to the Pension Benefits
Table on page 54 include a
description of the defined benefit pension plans (qualified and non-qualified)
in which the NEOs participate, including the years of credited service
and the present value of
each NEO’s accumulated pension
benefit. These pension benefits are available to management employees
generally and are not quantified in the tabular information in the Potential
Payments
Table.
Terms & Potential Payments
– Change in Control
Change in control provisions within our
long and short-term plans generally provide for accelerated
vesting. Potential payment amounts and assumptions are included in
the Potential Payments Table on page 58. These change in control
provisions are designed so
that employees are not harmed in the event of termination of employment without
cause or for good reason within 12 months following a change in
control. The provisions are intended to ensure that executives
evaluate business opportunities in the best interests of
stockholders. The terms are applicable to all employees covered by
these plans and there are no payments made for voluntary separation, resignation
and termination for cause.
Page 57
|
Potential Payments Upon
Termination or Change in Control
|
||||||||||||||||||||
|
Equity
Awards
|
Incentive
|
|||||||||||||||||||
|
Name
|
Termination Scenario
|
Stock
Options/
SARs 1
|
Restricted
Stock/ RSUs 2
|
Short-term
Incentive 3
|
Long-term
Incentive 4
|
Non-Qualified
Deferred
Compensation 5
|
Total
|
|||||||||||||
|
J.W.
Owens
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,352,343
|
$
|
2,352,343
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
2,088,903
|
$
|
1,853,227
|
$
|
2,620,840
|
$
|
2,352,343
|
$
|
8,915,313
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,352,343
|
$
|
2,352,343
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
2,088,903
|
$
|
4,000,000
|
$
|
3,931,260
|
$
|
2,352,343
|
$
|
12,372,506
|
||||||||
|
R.P.
Lavin
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
390,792
|
$
|
390,792
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
448,174
|
$
|
517,223
|
$
|
629,488
|
$
|
390,792
|
$
|
1,985,677
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
390,792
|
$
|
390,792
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
448,174
|
$
|
1,168,008
|
$
|
944,233
|
$
|
390,792
|
$
|
2,951,207
|
||||||||
|
S.L.
Levenick
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
4,246,598
|
$
|
4,246,598
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
444,064
|
$
|
646,521
|
$
|
798,657
|
$
|
4,246,598
|
$
|
6,135,840
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
4,246,598
|
$
|
4,246,598
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
444,064
|
$
|
1,459,992
|
$
|
1,197,986
|
$
|
4,246,598
|
$
|
7,348,640
|
||||||||
|
D.R.
Oberhelman
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,581,559
|
$
|
1,581,559
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
592,905
|
$
|
646,521
|
$
|
802,996
|
$
|
1,581,559
|
$
|
3,623,981
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,581,559
|
$
|
1,581,559
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
592,905
|
$
|
1,459,992
|
$
|
1,204,493
|
$
|
1,581,559
|
$
|
4,838,949
|
||||||||
|
E.J.
Rapp
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,345,459
|
$
|
1,345,459
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
396,089
|
$
|
517,223
|
$
|
629,326
|
$
|
1,345,459
|
$
|
2,888,097
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,345,459
|
$
|
1,345,459
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
396,089
|
$
|
1,168,008
|
$
|
943,989
|
$
|
1,345,459
|
$
|
3,853,545
|
||||||||
|
G.R.
Vittecoq
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,565,871
|
$
|
1,565,871
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
492,576
|
$
|
780,251
|
$
|
939,725
|
$
|
1,565,871
|
$
|
3,778,423
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,565,871
|
$
|
1,565,871
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
492,576
|
$
|
1,761,985
|
$
|
1,409,588
|
$
|
1,565,871
|
$
|
5,230,020
|
||||||||
|
S.H.
Wunning
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,541,089
|
$
|
2,541,089
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
399,394
|
$
|
646,521
|
$
|
799,512
|
$
|
2,541,089
|
$
|
4,386,516
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,541,089
|
$
|
2,541,089
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
399,394
|
$
|
1,459,992
|
$
|
1,199,268
|
$
|
2,541,089
|
$
|
5,599,743
|
||||||||
|
D.B.
Burritt
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
439,602
|
$
|
439,602
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
—
|
$
|
225,315
|
$
|
427,404
|
$
|
440,926
|
$
|
439,602
|
$
|
1,533,247
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
439,602
|
$
|
439,602
|
||||||||
|
Change
in Control
|
$
|
—
|
$
|
225,315
|
$
|
427,404
|
$
|
661,389
|
$
|
439,602
|
$
|
1,753,710
|
||||||||
|
1
|
In
the event of termination of employment due to a change in control, maximum
payout
factors are assumed for amounts payable under The Caterpillar Inc. 2006
Long-Term Incentive Plan (LTIP) and the prior plan The 1996 Caterpillar
Inc. Stock Option and Long-Term Incentive Plan and
ESTIP. Additionally, all unvested stock options,
SARs,
restricted stock and restricted stock units vest
immediately. Stock options and SARs remain exercisable over the
normal life of the grant. For valuation purposes, the vesting
of all open grant years (2006, 2007 and 2008) were “under
water” as
of 12/31/2008,
as the granting prices of $72.05, $63.04 and $73.20 were greater than the
year-end closing stock price of $44.67. The 2006, 2007 and 2008
grants were not fully vested as of 12/31/2008. For separations
due to long-service separation/retirement, death
and disability, the life of the equity grant is reduced to a maximum of 60
months from the date of separation or 10 years from the original granting
date, whichever date arrives first. For voluntary separations,
the equity grant life is reduced to 60 days
from the date of separation.
|
|||||||||||||||||||
|
2
|
The
LTIP allows immediate vesting to occur on outstanding restricted stock and
restricted stock units in the event of a change in control. The
valuation shown is based upon the number of shares vesting multiplied
by the
closing price of Caterpillar common stock on December 31, 2008, which was
$44.67 per share.
|
|||||||||||||||||||
|
3
|
ESTIP
provisions provide for the maximum payout allowed under the plan in the
event of a change in control. The plan provisions limit the
payout to a maximum of $4 million in any single year. Mr.
Owens’ payout for a change in control is capped at $4
million. This amount is less than his plan payout at
maximum. Therefore, amounts shown for change in control
represent the maximum payout available under ESTIP for all NEOs, with the
exception of Mr. Burritt. Mr. Burritt is a participant in STIP,
which has no plan
provisions for a change in control. Thus, Mr. Burritt’s
amount shown for change in control is his actual payout available under
the plan. In the event of a voluntary separation or termination
for cause before the completion of the performance period, both the ESTIP
and STIP plan participant forfeit any benefit. Participants in
both the ESTIP and STIP who separate via a long-service
separation/retirement receive a prorated benefit based on the time of
active employment during the performance period.
|
|||||||||||||||||||
|
4
|
The
LTCPP provisions provide for maximum payout allowed for each open plan
cycle in the event of a change in control. Participants who
separate via
a change in control receive a prorated benefit based on the time of active
employment during the performance period. Change in control
amounts shown for all NEOs represent a prorated benefit at maximum payout
for plan cycles 2007-2009 and 2008-2010,
both of which are open cycles as of 12/31/2008. Plan
provisions in effect for the 2007-2009 and 2008-2010 performance cycle
restrict Mr. Owens’ payout to a $5 million cap per plan
cycle. The 2006-2008 plan cycle amounts are not shown as
this
cycle was fully
vested as of 12/31/2008. Participants who separate via a
long-service separation/retirement receive a prorated benefit based on the
time of active employment during the performance period. The
amount shown for long-service separation/retirement is
the NEO’s
prorated benefit based on a target payout for plan cycles 2007-2009 and
2008-2010, both of which were open cycles as of
12/31/2008. Participants forfeit any benefit upon a voluntary
separation or a termination for cause that occurs prior to the
completion of the performance period.
|
|||||||||||||||||||
|
5
|
Amounts
assume Termination or Change in Control separation occurring on December
31, 2008, with no further deferral of available
funds.
|
|||||||||||||||||||
Page 58
Of our current board members, only Mr.
Owens is a salaried
employee of Caterpillar. Non-employee directors are compensated for board
service. For 2008, compensation for non-employee directors was
comprised of the following components:
|
Retainer:
|
$90,000
annually
|
||
|
Committee Chairman
Stipend:
|
Audit
|
$15,000
annually
|
|
|
Compensation
|
$10,000
annually
|
||
|
Governance
|
$ 10,000
annually
|
||
|
Public
Policy
|
$ 10,000
annually
|
||
|
Audit Committee Members
Stipend:
|
$10,000
annually
|
||
|
Restricted Stock Units
(RSUs):
|
1,606 RSUs – 2008
Grant
|
||
In addition to the above,
the company reimburses
non-employee directors’ expenses related to meeting
attendance.
Under Caterpillar’s Directors’ Deferred Compensation Plan (DDCP),
directors may defer 50 percent or more of their annual retainer and stipend in
an interest-bearing account
or an account representing equivalent shares of Caterpillar
stock. Directors can also elect to receive all or a portion of their
annual retainer and stipend in shares of Caterpillar stock.
Eligible directors may also participate
in a Charitable Award Program. Under the program, a
donation of up to $1 million will be made by the company, in the
director’s name, in 10 equal annual installments,
with the first installment to be made as soon as practicable after the
director’s death. Of the total
donation, half will be donated to the eligible
tax-exempt organization(s) selected by the director, and the remainder will be
directed to the Caterpillar Foundation. The maximum amount payable is
$1 million on behalf of each eligible director. The sum is based
on the director’s length of service. The
program is financed through the purchase of life insurance
policies. Directors derive no financial benefit from the
program. Premiums paid by the company for this program are included
in the All Other Compensation Tables on page 60 for non-employee directors and on
page 50 for Mr.
Owens.
|
Director Compensation for
2008
|
||||||||||||||||
|
Director
|
Fees Earned or
Paid in Cash
|
Stock
Awards 1
|
Option
Awards 1
|
All
Other
Compensation 2
|
Total
|
|||||||||||
|
W. Frank
Blount
|
$
|
99,590
|
$
|
111,094
|
$
|
—
|
$
|
11,108
|
$
|
221,792
|
||||||
|
John R.
Brazil
|
$
|
100,008
|
$
|
111,094
|
$
|
122,156
|
$
|
5,473
|
$
|
338,731
|
||||||
|
Daniel M.
Dickinson
|
$
|
90,000
|
$
|
30,860
|
$
|
40,316
|
$
|
3,814
|
$
|
164,990
|
||||||
|
John T.
Dillon
|
$
|
91,674
|
$
|
111,094
|
$
|
—
|
$
|
6,862
|
$
|
209,630
|
||||||
|
Eugene V.
Fife
|
$
|
115,008
|
$
|
30,860
|
$
|
93,952
|
$
|
34,879
|
$
|
274,699
|
||||||
|
Gail D.
Fosler
|
$
|
90,000
|
$
|
30,860
|
$
|
93,952
|
$
|
—
|
$
|
214,812
|
||||||
|
Juan
Gallardo
|
$
|
90,000
|
$
|
111,094
|
$
|
20,158
|
$
|
33,839
|
$
|
255,091
|
||||||
|
David R.
Goode
|
$
|
100,008
|
$
|
111,094
|
$
|
—
|
$
|
68,207
|
$
|
279,309
|
||||||
|
Peter A.
Magowan
|
$
|
90,000
|
$
|
111,094
|
$
|
—
|
$
|
32,358
|
$
|
233,452
|
||||||
|
William A.
Osborn
|
$
|
100,008
|
$
|
33,665
|
$
|
93,952
|
$
|
26,307
|
$
|
253,932
|
||||||
|
Charles D.
Powell
|
$
|
99,340
|
$
|
30,860
|
$
|
93,952
|
$
|
36,163
|
$
|
260,315
|
||||||
|
Edward B. Rust,
Jr.
|
$
|
90,000
|
$
|
30,860
|
$
|
93,952
|
$
|
44,413
|
$
|
259,225
|
||||||
|
Joshua I.
Smith
|
$
|
90,000
|
$
|
111,094
|
$
|
—
|
$
|
11,916
|
$
|
213,010
|
||||||
|
1
|
Each
non-employee director was awarded 1,606 restricted stock units on March 3,
2008. The grant date fair market value for each RSU was
$69.1745, or $111,094 for the 1,606 RSUs awarded to each non-employee
director. The amounts shown do not reflect realized
compensation by the named director. The amounts shown are the
expense recognized for financial reporting purposes in accordance with
FAS123R. Assumptions made in the calculation of these amounts
are included in Note 2 to the company’s financial statements for the
fiscal year ended December 31, 2008 included in Form 10-K filed with the
SEC on February 20, 2009. As of December 31, 2008, the number
of shares of stock / vested and non-vested options held by each
non-employee director was: Mr. Blount: 17,571/ 70,439 which
consists of (56,000 NQs, 12,833 SARs and 1,606 RSUs); Mr. Brazil: 8,803/
38,439 which consists of (24,000 NQs, 12,833 SARs and 1,606 RSUs); Mr.
Dickinson: 783/ 7,439 which consists of (5,833 SARs and 1,606 RSUs); Mr.
Dillon: 18,625/ 66,439 which consists of (52,000 NQs, 12,833 SARs and
1,606 RSUs); Mr. Fife: 22,000/ 38,439 which consists of (24,000 NQs,
12,833 SARs and 1,606 RSUs); Ms. Fosler: 4,515/ 34,439 which
consists of (20,000 NQs, 12,833 SARs and 1,606 RSUs); Mr.
Gallardo: 212,110/ 70,439 which consists of (56,000 NQs, 12,833 SARs and
1,606 RSUs); Mr. Goode: 44,531/ 70,439 which consists of
(56,000 NQs, 12,833 SARs and 1,606 RSUs); Mr. Magowan: 273,002/
70,439 which consists of (56,000 NQs, 12,833 SARs and 1,606
RSUs); Mr. Osborn: 24,657/ 38,439 which consists of (24,000
NQs, 12,833 SARs and 1,606 RSUs); Mr. Powell: 5,400/ 54,439
which consists of (40,000 NQs, 12,833 SARs and 1,606 RSUs); Mr.
Rust: 4,933/ 38,439 which consists of (24,000 NQs, 12,833 SARs and 1,606
RSUs); and Mr. Smith: 16,345/ 34,439 which consists of (20,000 NQs, 12,833
SARs and 1,606 RSUs). In addition, Mr. Owens, the only employee
director serving on the board held the following number of shares of stock
/ vested and non-vested options at December 31, 2008: 319,537 / 2,404,917
which consists of (1,398,000 NQs, 968,486 SARs and 28,431
RSUs).
|
|||||||||||||||
|
2
|
All
Other Compensation represents reinvested earning for assets held in DDCP
and premium plus administrative
costs associated with the Directors’ Charitable
Award Program.
|
|||||||||||||||
Page 59
|
2008 All Other Director
Compensation Table
|
||||||||||
|
Director
|
Earnings on the
Director’s Deferred Compensation Plan 1 |
Director’s Charitable
Award
Program – Insurance Premiums and Administrative Costs 2 |
Total
|
|||||||
|
W. Frank
Blount
|
$
|
9,608
|
$
|
1,500
|
$
|
11,108
|
||||
|
John R.
Brazil
|
$
|
3,973
|
$
|
1,500
|
$
|
5,473
|
||||
|
Daniel M.
Dickinson
|
$
|
2,814
|
$
|
1,000
|
$
|
3,814
|
||||
|
John T.
Dillon
|
$
|
5,362
|
$
|
1,500
|
$
|
6,862
|
||||
|
Eugene V. Fife
|
$
|
—
|
$
|
34,879
|
$
|
34,879
|
||||
|
Gail D.
Fosler
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Juan Gallardo
|
$
|
8,815
|
$
|
25,024
|
$
|
33,839
|
||||
|
David R.
Goode
|
$
|
66,707
|
$
|
1,500
|
$
|
68,207
|
||||
|
Peter A.
Magowan
|
$
|
30,858
|
$
|
1,500
|
$
|
32,358
|
||||
|
William A.
Osborn
|
$
|
1,284
|
$
|
25,023
|
$
|
26,307
|
||||
|
Charles D.
Powell
|
$
|
1,284
|
$
|
34,879
|
$
|
36,163
|
||||
|
Edward B. Rust,
Jr.
|
$
|
11,562
|
$
|
32,851
|
$
|
44,413
|
||||
|
Joshua I.
Smith
|
$
|
10,416
|
$
|
1,500
|
$
|
11,916
|
||||
|
1
|
Represents dividends on equivalent
shares held in DDCP.
|
|||||||||
|
2
|
The amounts listed represent the
named
directors’ year 2008 insurance premium and
administrative fee. For those directors whose policy premiums
are fully paid up, the amount shown represents only the administrative fee
of $1,500. Mr. Dickinson’s administrative fee included an
initial account set-up
cost.
|
|||||||||
The Compensation Committee has reviewed
and discussed the CD&A included in this proxy statement with
management. The Compensation Committee is satisfied that the CD&A
fairly and completely represents the philosophy, intent and actions of the
Compensation Committee with regard to executive
compensation. We recommend to the board that the CD&A be included
in this proxy statement for filing with the SEC.
|
By the current members of the
Compensation Committee consisting
of:
|
||||
|
David R. Goode
(Chairman)
|
||||
|
John R.
Brazil
|
||||
|
Edward B. Rust,
Jr.
|
Based upon a review of our records, all
reports required to be filed pursuant to Section 16(a) of the Securities
Exchange Act of 1934 were
filed on a timely basis.
We do not know of any matters to be
acted upon at the meeting other than those discussed in this
statement. If any other matter is properly presented, proxy holders
will vote on the matter in
their discretion.
Under Caterpillar bylaws, a stockholder
may bring a matter to vote at the annual meeting by giving adequate notice to
Caterpillar Inc. by mail c/o the Corporate Secretary at 100 NE Adams Street,
Peoria, Illinois 61629. To qualify as adequate, the notice must
contain information specified in our bylaws and be received by us not less than
45 days nor more than 90 days prior to the annual meeting. However,
if less than 60 days notice of the annual meeting date is given to stockholders,
notice of a matter to be brought before the annual meeting may be provided to us
up to the 15th day
following the date notice of the annual meeting was
provided.
Page 60
Admission
Admission is limited
to
stockholders of record on April 13, 2009 and one immediate family member, or one
individual designated as a stockholder’s authorized proxy
holder or one representative designated in writing to present a stockholder
proposal. In each case, the individual must have an
admission ticket and valid government issued photo identification to be admitted
to the meeting. In addition, share ownership will be
verified.
Ticket Request
Deadline
Ticket requests must
include all information specified in the applicable table below and
be submitted in writing and received by Caterpillar on or before May 29,
2009. No requests will be processed after that
date.
To Submit
Request
Submit ticket requests
by mail to James B. Buda, Corporate Secretary, 100 NE Adams Street,
Peoria,
Illinois 61629 or by facsimile to (309) 494-1467. Ticket requests by
telephone will not be accepted.
Authorized Proxy
Representative
A stockholder may
appoint a representative to attend the meeting and/or vote on his/her
behalf. The admission ticket must be requested by
the stockholder but will be issued in the name of the authorized
representative. Individuals holding admission tickets that are not
issued in their name will not be admitted to the meeting. Stockholder
information specified below and a written proxy
authorization must accompany the ticket
request.
Proponent of
Stockholder Proposal
For each stockholder
proposal included in this proxy statement, the stockholder sponsor should notify
the company in writing of the individual authorized to present the
proposal on behalf of the stockholder at the annual meeting. One
admission ticket will be issued for the designated
representative.
Press
Members of the press
must register with the company prior to the annual meeting. To
register, please contact Jim Dugan
by phone (309) 494-4100 or e-mail
(Dugan_Jim@CAT.com).
Analysts
Analysts must register
with the company prior to the annual meeting. To register, please
contact Mike DeWalt by phone (309) 675-4549 or e-mail
(CATir@CAT.com).
|
Registered
Stockholders
|
|
For ownership
verification provide:
|
|
ØName(s) of
stockholder
ØAddress
ØPhone
number
ØSocial security
number and/or stockholder account key; or
ØA copy of your
proxy card or notice showing
stockholder name and address
|
|
Also
include:
|
|
ØName of immediate
family member guest, if other than stockholder
ØName of
authorized proxy representative, if one appointed
ØAddress where
tickets should be mailed and phone
number
|
|
Beneficial
Holders
|
|
For ownership
verification provide:
|
|
ØA copy of your
April brokerage account statement showing Caterpillar stock ownership as
of the record date (4/13/09);
ØA letter from
your broker, bank or other nominee verifying your record date (4/13/09)
ownership;
or
ØA copy of your
brokerage account voting instruction card showing stockholder name and
address
|
|
Also
include:
|
|
ØName of immediate
family member guest if other than stockholder
ØName of
authorized proxy representative, if one
appointed
ØAddress where
tickets should be mailed and phone
number
|
Page 61
Proxy Card
PROXY
AND VOTING INSTRUCTION
ANNUAL MEETING OF STOCKHOLDERS—JUNE 10,
2009
This
proxy is solicited on behalf of the Board of Directors
At the Annual
Meeting of Stockholders of Caterpillar Inc. (the Company) on June 10, 2009, or
at any adjournments thereof, the undersigned hereby (i) appoints C.C. SPEARS and
J.J. FUNK, and each of them, proxies with power of substitution to vote the
common stock of the undersigned and/or (ii) directs THE NORTHERN TRUST COMPANY,
CIBC MELLON TRUST COMPANY or RELIANCE TRUST COMPANY, as Trustee, to appoint C.C.
SPEARS and J.J. FUNK, and each of them, proxies with power of substitution to
vote all shares of the Company’s stock credited to the accounts of the
undersigned under any Caterpillar Inc. or subsidiary employee benefit plan at
the close of business on April 13, 2009, as directed hereon on the following
matters, and, in their discretion, on any other matters that may come before the
meeting. For employee benefit plan participants, if the trustees have not
received directions from the undersigned by 8:00 a.m. Eastern Time, on June 8,
2009, the trustees will act in accordance with the employee benefit plan
documents.
You
are encouraged to specify your choices by marking the appropriate boxes.
However, if you wish to vote in accordance with the Board of Directors’
recommendations, simply sign and return this card.
|
SEE
REVERSE SIDE
|
||
|
^TO VOTE BY MAIL, PLEASE DETACH
HERE^
|
PLEASE
VOTE TODAY!
SEE
REVERSE SIDE FOR THREE EASY WAYS TO VOTE.
ELECTRONIC
DELIVERY OF PROXY MATERIALS
Sign up to receive
next year’s proxy materials via the Internet. To sign up for this optional
service, visit https://www.proxyvotenow.com/cat.
Please note you must type an “s” after “http”.
|
X
|
Please mark
your vote as in this example
|
|
This Proxy, when
properly executed, will be voted in the manner you have directed. If you return
a signed proxy with no direction given, it will be voted in accordance with the
Board of Directors' recommendations.
|
Directors
recommend a vote "FOR"
|
|
1.
|
Election
of Class II - Directors nominated for election this year
|
|||||||
|
FOR
|
WITHHOLD
|
|||||||
|
|
|
|||||||
|
Nominees:
01. Daniel
M. Dickinson
02. David
R. Goode
03. James
W. Owens
04. Charles
D. Powell
05. Joshua
I. Smith
|
||||||||
|
For, except
vote withheld from the following
nominee(s):
|
||||||||
|
FOR
|
AGAINST
|
ABSTAIN
|
|||||
|
2.
|
Ratify
Auditors
|
|
|
|
|
Directors
recommend a vote "AGAINST"
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|||||
|
3.
|
Stockholder
Proposal—Annual
Election of Directors
|
|
|
|
|||
|
4.
|
Stockholder
Proposal—Director
Election Majority Vote Standard
|
|
|
|
|
|
|
|
5.
|
Stockholder
Proposal—Foreign
Military Sales
|
|
|
|
|||
|
6.
|
Stockholder
Proposal—Simple
Majority Vote
|
|
|
|
|||
|
7.
|
Stockholder
Proposal—Independent
Compensation Consultant
|
|
|
|
|
|
|
|
8.
|
Stockholder
Proposal—Independent
Chairman of the Board
|
|
|
|
|||
|
9.
|
Stockholder
Proposal—Lobbying
Priorities
|
|
|
|
|
DATE
|
2009
|
|||
|
|
||||
|
SIGNATURE
|
||||
|
|
||||
|
SIGNATURE
|
||||
|
|
||||
|
NOTE: Please
sign exactly as name appears hereon. If more than one owner,
each must sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as
such.
|
||||
|
^TO VOTE BY MAIL, PLEASE DETACH
HERE^
|
YOUR
VOTE IS IMPORTANT.
Please take a
moment now to vote your shares of Caterpillar Inc.
common stock for
the upcoming Annual Meeting of Stockholders.
YOU
CAN VOTE TODAY IN ONE OF THREE WAYS:
|
1.
|
Vote
by Telephone—Please call
toll-free at 1-888-216-1363 on a touch-tone telephone and follow
the simple recorded instructions. Then, if you wish to vote as recommended
by the Board of Directors, simply press 1. If you do not wish to vote as
the Board recommends, you need only respond to a few simple prompts. Your
vote will be confirmed and cast as you directed. (Telephone voting is
available for residents of the U.S. and Canada
only.)
|
|
|
|
|
|
OR
|
|
2.
|
Vote
by Internet—Please access https://www.proxyvotenow.com/cat
and follow the simple instructions on the screen. Please note you
must type an “s” after
“http”.
|
|
[Control
Number]
|
|
You may vote by telephone or
Internet 24 hours a day, 7 days a week.
Your telephone or Internet vote authorizes the named proxies in the same manner as if you had executed a proxy card. |
|
|
OR
|
|
3.
|
Vote
by Mail—If you do not wish to vote by telephone or over the
Internet, please complete, sign, date and return the proxy card in the
envelope provided to: Caterpillar Inc., c/o Innisfree M&A
Incorporated, FDR Station, P.O. Box 5156, New York, NY
10150-5156.
|
Notice Card
Important
Notice Regarding the Availability of
Proxy
Materials for the Caterpillar Inc.
Annual
Meeting of Stockholders to Be Held on June 10, 2009
As allowed under
U.S. Securities and Exchange Commission rules, you are receiving this notice
that the proxy materials, including the 2009 proxy statement and 2008 general
and financial information, for the Caterpillar Inc. 2009 Annual Meeting of
Stockholders are available on the Internet. Follow the instructions below to
view the proxy materials and vote online or request paper or e-mail copies.
Information about the annual meeting, including the items to be voted on, is
provided on the reverse side of this notice.
THIS
IS NOT A PROXY CARD. If you wish to cast your vote on a traditional proxy card,
you must request that a paper copy of the proxy materials be mailed to you by
following the instructions at the bottom of this page.
This
communication presents only an overview of the more complete proxy materials
that are available to you on the Internet. We encourage you to access and review
all of the important information contained in the proxy materials before
voting.
|
[Control
Number]
|
To
view the proxy materials, please have this notice available and visit:
www.eproxyaccess.com/cat2009
Please
have this notice available when you access the voting website. Follow the
instructions on the screen to log into the website to vote. Your Internet vote
authorizes the named proxies to vote your shares in the same manner as if you
marked, signed and returned a proxy card.
If
you want to receive a paper or e-mail copy of the proxy materials, you must
request one by following the instructions below:
|
§
|
Internet
– Access the
Internet and go to
www.eproxyaccess.com/cat2009.
|
|
§
|
Telephone
– Call us free
of charge at 1-888-216-1280 from within the United States or
Canada.
|
|
§
|
E-mail
– Send us an
e-mail at cat@eproxyaccess.com, using the number in the box above as the
subject line, and state whether you wish to receive a paper or e-mail copy
of the proxy materials and whether your request is for this meeting only
or all future meetings.
|
There
is no charge to you for requesting a copy. Please make your request for a copy
as instructed above on or before June 1, 2009 to facilitate timely
delivery.
Caterpillar
Inc.
Notice
of Annual Meeting of Stockholders
The
annual meeting of stockholders of Caterpillar Inc. will be held on Wednesday,
June 10, 2009 at 1:30 p.m., Central Daylight Time, at the Northern Trust
Building, 50 South LaSalle Street, Chicago, Illinois.
The
matters intended to be acted upon at the meeting are listed below:
|
1.
|
Election of
directors: Daniel M. Dickinson, David R. Goode, James W. Owens, Charles D.
Powell, Joshua I. Smith.
|
|
2.
|
Proposal to
ratify the appointment of the independent registered public accounting
firm for the 2009 fiscal year.
|
|
3.
|
Stockholder
Proposal - Annual Election of
Directors.
|
|
4.
|
Stockholder
Proposal - Director Election Majority Vote
Standard.
|
|
5.
|
Stockholder
Proposal - Foreign Military Sales.
|
|
6.
|
Stockholder
Proposal - Simple Majority Vote.
|
|
7.
|
Stockholder
Proposal - Independent Compensation
Consultant.
|
|
8.
|
Stockholder
Proposal - Independent Chairman of the
Board.
|
|
9.
|
Stockholder
Proposal - Lobbying Priorities.
|
|
10.
|
To consider
such other business as may properly come before the
meeting.
|
The
Board of Directors recommends that you vote FOR the election of each of the
nominees for director and FOR the ratification of the appointment of the
independent registered public accounting firm for the 2009 fiscal year, and
AGAINST the seven stockholder proposals.
THIS IS NOT A PROXY
CARD. If you wish to cast your vote on a traditional proxy card, you must
request that a paper copy of the proxy materials be mailed to you by following
the instructions on the reverse side of this notice.
These items of
business are more fully described in the proxy materials relating to the annual
meeting. Follow the instructions on the reverse side of this notice to view the
proxy materials and vote via the Internet or to request a paper or e-mail copy
of the proxy materials. Any action on the items of business described above may
be considered at the annual meeting at the time and on the date specified above
or at any time and date to which the annual meeting may be properly adjourned or
postponed.
You are entitled to
vote at the annual meeting only if you were a stockholder of Caterpillar Inc. as
of the close of business on April 13, 2009, which is the record date for the
annual meeting.
If you are a
stockholder as of the record date, you are invited to attend the annual meeting
and you may vote in person.
You must have an
admission ticket to attend. Procedures for requesting the admission ticket are
included in the proxy materials. Directions to attend the meeting will be
provided along with any issued admission tickets.