<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
UNION CARBIDE CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF UNION CARBIDE APPEARS HERE] Union Carbide Corporation
Notice of Annual Meeting of Stockholders
to be held on April 26, 1995 and
Proxy Statement
March 13, 1995
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
Robert D. Kennedy
Chairman of the Board
March 13, 1995
To Our Stockholders:
It is my pleasure to invite you to our annual meeting. This year it will be
held on Wednesday, April 26, at 8:30 a.m., in the Grand Ballroom of the Danbury
Hilton and Towers, 18 Old Ridgebury Road, Danbury, Connecticut 06810. Please
note the earlier time for the meeting.
On the following pages, you will find the formal notice of the annual
meeting and our proxy statement. When you have finished reading the statement,
please promptly mark, sign, and return the enclosed proxy card, to insure that
your shares will be represented.
We hope that many of you will be able to attend our annual meeting in
person. If you plan to do so, please return the enclosed ticket request. We will
send your ticket to you promptly. Please bring it with you to the meeting.
We appreciate the continuing interest of stockholders in the business of
Union Carbide and I look forward to seeing many of you at the Danbury meeting.
Sincerely yours,
/s/ Robert D. Kennedy
Chairman of the Board
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[LOGO OF UNION CARBIDE Union Carbide Corporation
APPEARS HERE] 39 Old Ridgebury Road, Danbury, CT 06817-0001
NOTICE
of Annual Meeting of Stockholders
to be held on April 26, 1995
March 13, 1995
The annual meeting of the stockholders of Union Carbide Corporation will be
held at 8:30 a.m. on Wednesday, April 26, 1995, in the Grand Ballroom of the
Danbury Hilton and Towers, 18 Old Ridgebury Road, Danbury, Connecticut, 06810,
for the following purposes:
1. To elect a Board of 11 directors for the ensuing year.
2. To ratify KPMG Peat Marwick LLP as independent auditors for 1995.
3. To consider management's proposal to adopt the 1995 Union Carbide
Performance Incentive Plan.
4. To consider a stockholder proposal regarding Severance Compensation
Agreements, if such proposal is presented at the meeting.
5. To transact such other business as may properly come before the meeting.
So that your stock will be represented at the meeting in the event that you
do not attend, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
/s/ SIGNATURE APPEARS HERE
Vice-President, General Counsel and Secretary
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[LOGO OF UNION CARBIDE Union Carbide Corporation
APPEARS HERE] 39 Old Ridgebury Road, Danbury, CT 06817-0001
PROXY STATEMENT
Table of Contents
Page
General Information for Stockholders .................................. 7
Matters to be Considered at the Annual Meeting:
1. Election of Directors.............................................. 9
Committees of the Board:
Audit......................................................... 14
Compensation and Management Development....................... 14
Executive..................................................... 14
Finance and Pension........................................... 15
Health, Safety and Environmental Affairs...................... 15
Nominating.................................................... 15
Public Policy................................................. 16
Compensation of Directors......................................... 16
Stock Compensation Plan for Non-Employee Directors............ 16
Non-Employee Directors' Retirement Plan....................... 16
Other......................................................... 17
Compensation Committee Interlocks and
Insider Participation....................................... 17
Five Year Cumulative Total Return................................. 17
Report of Compensation and Management Development Committee....... 18
Summary Compensation Table........................................ 22
Stock Options/SARs Granted -- 1994................................ 23
Stock Options/SARs Exercised -- 1994.............................. 24
Retirement Program................................................ 24
Security Ownership of Management.................................. 25
Security Ownership of Certain Beneficial Owners................... 26
Change in Control Arrangements.................................... 26
2. Management Proposal to Ratify KPMG Peat Marwick LLP as
Independent Auditors for 1995...................................... 27
3. Management Proposal to Adopt the 1995 Union Carbide
Performance Incentive Plan ........................................ 28
4. Stockholder Proposal Regarding Severance Compensation Agreements... 30
5. Other Business..................................................... 32
Other Information......................................................... 32
Appendix A -- 1995 Union Carbide Performance Incentive Plan............... 33
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General Information for Stockholders
Proxies are solicited from stockholders by the Board of Directors of the
Corporation in order to provide every stockholder an opportunity to vote on all
matters scheduled to come before the meeting, whether or not he or she attends
in person. When the enclosed proxy card is properly executed and returned, the
shares represented will be voted by the proxyholders named on the card in
accordance with the stockholder's directions. Stockholders may vote on a matter
by marking the appropriate box on the card. If the card is executed and
returned, and no choice is specified for a matter, the shares will be voted as
recommended by the Board of Directors on that matter. If a stockholder is a
participant in the Corporation's Dividend Reinvestment and Stock Purchase Plan,
the proxy card will represent both the number of shares registered in the
participant's name and the number of whole shares credited to the participant's
Plan account, and all such shares will be voted in accordance with the
instructions on the proxy card.
It is Union Carbide's policy that all stockholder proxies, ballots and
voting tabulations that identify the votes of specific stockholders be kept
permanently confidential except as may be required by law or to carry out the
purpose of this policy or in the event of a contested proxy solicitation. Access
to proxies and other stockholder voting records will be limited to independent
inspectors of election and to certain Union Carbide employees engaged in the
receipt, count and tabulation of proxies. Such employees will be advised of this
policy, instructed to comply therewith, and will sign a statement specifying
such compliance. The independent inspectors of election, in their report to the
Board of Directors, will confirm that, to the best of their knowledge, the
Corporation's policy was followed in the tabulation of the votes. This policy
shall not operate to prohibit stockholders from disclosing the nature of their
votes to the Corporation or the Board of Directors if any stockholder so chooses
or to impair free and voluntary communication between the Corporation and its
stockholders.
Management knows of no matters other than those set forth on the proxy card
that will be presented for action at the meeting. Execution of a proxy, however,
confers on the designated proxyholders discretionary authority to vote the
shares represented in accordance with their best judgment on any other business
that may come before the meeting, including stockholder proposals excluded from
the Proxy Statement pursuant to SEC rule 14a-8. Stockholder proposals to be
included in the Corporation's Proxy Statement must comply with rule 14a-8. See
page 32.
Any stockholder executing a proxy may revoke that proxy or submit a revised
one at any time before it is voted. A stockholder may also vote by ballot at the
annual meeting, thereby canceling any proxy previously returned as to any matter
voted on by ballot. A stockholder wishing to name as his or her proxy someone
other than those designated on the proxy card may do so by crossing out the
names of the three designated proxies and inserting the name(s) of the person(s)
he or she wishes to have act as his or her proxy. No more than three individuals
should be so designated. In such a case, it will be necessary that the proxy be
delivered by the stockholder to the person(s) named, and that the person(s)
named be present and vote at the meeting. Proxy cards on which alternate proxies
have been named should not be mailed directly to the Corporation.
Stockholders of record at the close of business on March 7, 1995 are
entitled to notice of the meeting and to vote the shares held on that date at
the meeting. Each share of common stock and each share of ESOP Convertible
Preferred Stock ("ESOP Stock") of the Corporation is entitled to one vote. A
holder of ESOP Stock is entitled to notice of the meeting and to vote on all
matters submitted to a stockholder vote, voting together with the holders of
common stock as one class. As of January 31, 1995, 141,996,541 shares of common
stock of the Corporation were outstanding. Those shares were held by 54,884
stockholders of record.
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As of January 1, 1995, 16,440,954 shares of ESOP Stock were outstanding.
Those shares are held by State Street Bank and Trust Company as Trustee of the
Corporation's Employee Stock Ownership Plan ("ESOP"), which is part of the
Corporation's Savings Program, for the benefit of employees who participate in
the Savings Program. By the terms of a trust agreement, the ESOP Trustee will
vote ESOP Stock allocated to individual participants' accounts (4,772,142 shares
as of January 1, 1995) and any unallocated shares or any shares for which
directions were not received as directed by such participants.
The nominees receiving a plurality of the votes cast will be elected as
directors. An affirmative vote of a majority of the votes cast is required to
ratify the appointment of auditors, to adopt the 1995 Union Carbide Performance
Incentive Plan, and to approve the one stockholder proposal. Only those votes
cast for or against a proposal are used in determining the results of a vote.
Abstentions are counted for quorum purposes only. Broker non-votes have the same
effect as abstentions.
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Matters to be Considered at the Annual Meeting
1. Election of Directors
Unless individual stockholders specify otherwise, each returned proxy will
be voted for the election to the Board of Directors of the Corporation of the 11
nominees who are named on the following pages. These nominees were recommended
by the Nominating Committee and approved by the Board. Each director has
consented to being named as a nominee for director and agreed to serve if
elected. Each director, if elected, would serve for a term of one year. If any
of those named is not available for election at the time of the annual meeting,
discretionary authority will be exercised to vote for substitutes unless the
Board chooses to reduce the number of directors. Management is not aware of any
circumstances that would render any nominee named herein unavailable. All
nominees are currently serving on the Corporation's Board of Directors. The ages
of the nominees are as of March 1, 1995.
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[PHOTO OF JOHN J. CREEDON, age 70, Director since 1984, is Consultant and
JOHN J. Director of Various Corporations and Retired President and Chief
CREEDON Executive Officer of Metropolitan Life Insurance Company. Mr. Creedon
APPEARS attended New York University undergraduate and law schools, where he
HERE] was awarded a B.S. degree in 1952, an LL.B. in 1955 and an LL.M. in
1962. Mr. Creedon joined Metropolitan Life in 1942. He became an
officer of Metropolitan Life in 1962 and was appointed Senior Vice-
President and General Counsel in 1973. In 1976, Mr. Creedon became an
Executive Vice-President of Metropolitan Life. He was named President
and elected a director of Metropolitan Life in 1980 and became Chief
Executive Officer in 1983. He served as President and Chief Executive
Officer until retiring on September 1, 1989. Mr. Creedon is a
director of Melville Corporation, Metropolitan Life Insurance
Company, NYNEX, Praxair, Inc., Rockwell International and Sonat Inc.
He is also a director, trustee or member of a number of business,
educational and civic organizations. Mr. Creedon is Chairman of the
Audit Committee and a member of the Compensation and Management
Development, Executive and Health, Safety and Environmental Affairs
Committees of Union Carbide's Board.
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[PHOTO OF C. FRED FETTEROLF, age 66, Director since 1987, is Director of
C. FRED Various Corporations, Retired Director, President and Chief Operating
FETTEROLF Officer of Aluminum Company of America. Mr. Fetterolf is a graduate
APPEARS of Grove City (PA) College, where he received a B.S. in chemistry in
HERE] 1952. He joined the Aluminum Company of America that same year and,
following a number of sales and marketing assignments and service as
Vice-President -- Operations, Primary Products, he was named Vice-
President -- Science and Technology in February 1981 and Executive
Vice-President -- Mill Products later that year. Mr. Fetterolf became
President and a member of the Board of Directors in 1983 and in 1985
he assumed the additional responsibility of Chief Operating Officer
until retiring in 1991. Mr. Fetterolf is a director of Allegheny
Ludlum Corporation, Mellon National Bank, Praxair, Inc., Quaker State
Corporation and Urethane Technologies Inc., a trustee of Carnegie
Mellon University and serves on a number of non-profit boards. He is
Chairman of the Health, Safety and Environmental Affairs Committee
and a member of the Audit, Compensation and Management Development
and Nominating Committees of Union Carbide's Board.
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[PHOTO OF JOSEPH E. GEOGHAN, age 57, Director since 1990, is Vice-President,
JOSEPH E. General Counsel and Secretary of Union Carbide Corporation. Mr.
GEOGHAN Geoghan was graduated from St. John's University where he received a
APPEARS B.B.A. degree in 1959 and from Fordham University's School of Law
HERE] where he received the degree of J.D. in 1964. He joined Union Carbide
in 1957, became a member of Union Carbide's Law Department in 1963,
and in 1973 was appointed Chief International Counsel. He was named
Senior Group Counsel in 1976, Assistant General Counsel in 1980 and,
in 1985, was appointed Deputy General Counsel. Mr. Geoghan was
elected Vice-President and General Counsel of the Corporation in 1987
and in 1990 was elected to the additional office of Corporate
Secretary. At that time, he also assumed responsibility for
government affairs. Mr. Geoghan is a director of various affiliate
companies of the Corporation. He is also a director of the Corporate
Bar Association of Westchester-Fairfield and a member of the American
Bar Association, the New York City Bar, the New York State Bar
Association and the Association of General Counsel. Mr. Geoghan is a
member of the Executive and the Public Policy Committees of Union
Carbide's Board.
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[PHOTO OF RAINER E. GUT, age 62, Director since 1994, is Chairman of the Board
RAINER E. of Directors of CS Holding, Zurich, since 1986 and of Credit Suisse,
GUT Zurich, since 1983. He was appointed Chairman of the Board of
APPEARS Directors of CS First Boston, Inc., New York, in 1988. Mr. Gut was
HERE] graduated from Cantonal School of Zug, Switzerland, and had
professional training in Switzerland, Paris and London. Mr. Gut was a
general partner of Lazard Freres & Co., New York, from 1968 to 1971
when he joined Credit Suisse as Chairman and Chief Executive Officer
of Swiss American Corporation, New York, Credit Suisse's investment
banking affiliate at that time. He was elected a member of the
Executive Board of Credit Suisse in 1975, Speaker of the Executive
Board in 1977, and President of the Executive Board in 1982. In 1983,
he was elected Chairman of the Board of Directors. Mr. Gut is Vice-
Chairman of the Board of Directors of Nestle S.A., Vevey, and Swiss
Reinsurance Company, Zurich, and is a Member of the Board of
Directors of Ciba-Geigy Ltd., Basle, Daimler-Benz Holding, Zurich,
Swissair, Zurich, and Sofina S.A., Brussels. Mr. Gut is a member of
the Finance and Pension and Nominating Committees of Union Carbide's
Board.
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[PHOTO OF JAMES M. HESTER, age 70, Director since 1963, is President, The Harry
JAMES M. Frank Guggenheim Foundation. Dr. Hester is a graduate of Princeton
HESTER University, where he received the degree of A.B. in 1945 and an
APPEARS honorary LL.D. in 1962. He was a Rhodes Scholar at Oxford University
HERE] in 1947 and received, from that institution, the degrees of B.A. in
1950 and D. Phil. in 1955. Dr. Hester joined New York University in
1960 and was elected its President two years later. He became Rector
of the United Nations University in Tokyo, Japan in 1975 and served
in that capacity until 1980. Dr. Hester served as President, The New
York Botanical Garden from 1980 to 1989, when he assumed his present
position. He is a director of The Alliance Fund, and associated
funds, and The Robert Lehman Foundation, Inc. Dr. Hester is Chairman
of the Public Policy Committee and a member of the Audit, Executive
and Nominating Committees of Union Carbide's Board.
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[PHOTO OF VERNON E. JORDAN, JR., age 59, Director since 1987, is Senior
VERNON E. Partner, Akin, Gump, Strauss, Hauer & Feld, LLP. Mr. Jordan is a
JORDAN graduate of DePauw University where he received the degree of B.A. in
APPEARS 1957. He received the degree of J.D. from Howard University Law
HERE] School in 1960 and a fellowship from the Institute of Politics, John
F. Kennedy School of Government of Harvard University in 1969. Mr.
Jordan has also received honorary degrees from numerous colleges and
universities. Mr. Jordan, former Executive Director of The United
Negro College Fund, was appointed President of the National Urban
League, Inc. in 1972, and became a partner in the law firm of Akin,
Gump, Strauss, Hauer & Feld, LLP in 1982. He is a member of the
Arkansas Bar, District of Columbia Bar, Georgia Bar, The U.S. Supreme
Court Bar, The American Bar Association, The National Bar Association
and The Council of Foreign Relations. He is a director of the
American Express Company, Bankers Trust Company, Bankers Trust New
York Corporation, The Brookings Institution, Corning Incorporated,
Dow Jones & Co., Inc., The Ford Foundation, Howard University, Joint
Center for Political and Economic Studies, J.C. Penney Company, Inc.,
Revlon Group, Inc., Ryder System Inc., Sara Lee Corporation and Xerox
Corporation. Mr. Jordan is Chairman of the Nominating Committee and a
member of the Compensation and Management Development, Finance and
Pension and Public Policy Committees of Union Carbide's Board.
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[PHOTO OF WILLIAM H. JOYCE, age 59, Director since 1992, is President and Chief
WILLIAM H. Operating Officer of Union Carbide Corporation. Dr. Joyce was
JOYCE graduated from Penn State University in 1957 with the degree of B.S.
APPEARS in chemical engineering and from New York University with the degree
HERE] of M.B.A. in 1971 and a Ph.D. in Business in 1984. He joined the
Chemicals and Plastics Division of Union Carbide in 1957 and has been
associated primarily with the Corporation's chemicals and plastics
business throughout his career. In 1974, Dr. Joyce was named
Operations Manager for High Density Polyethylene and became Director
of Polyolefins operations in 1976. In 1977, he was named Director of
Planning, Licensing and Financial Control for the Polyolefins
Division with responsibility to develop the new Unipol polyethylene
process. In 1978, he became Vice-President of Marketing/Licensing and
in 1979, he was appointed Vice-President -- Licensing/Technology for
the Polyolefins Division. Dr. Joyce became President of the Silicones
and Urethane Intermediates Division in 1982, and was appointed
President of the Polyolefins Division in 1985. Dr. Joyce became
Executive Vice-President, Union Carbide Chemicals and Plastics
Company Inc. in 1990, and that same year was elected a Vice-President
of the Corporation. Subsequent to the Corporation's restructuring in
1992, Dr. Joyce was elected Executive Vice-President of the
Corporation responsible for operations, and in 1993, was elected
President and Chief Operating Officer of the Corporation. Dr. Joyce
is a director of Melville Corporation, Reynolds Metals Company,
Chemical Manufacturers Association and American Plastics Council and
is a member of the Management Committee of UOP, a Union Carbide
Corporation, AlliedSignal Inc. partnership. Dr. Joyce is a member of
the Executive and Finance and Pension Committees of Union Carbide's
Board.
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[PHOTO OF ROBERT D. KENNEDY, age 62, Director since 1985, is Chairman of the
ROBERT D. Board and Chief Executive Officer of Union Carbide Corporation. Mr.
KENNEDY Kennedy is a graduate of Cornell University where he received a B.S.
APPEARS degree in Mechanical Engineering in 1955. He joined Union Carbide
HERE] that same year at the Niagara Falls operations of the National Carbon
Division, where he held various positions. In 1963 he became a
Product Manager and in 1971 he went to Geneva, Switzerland as
Marketing Director of Carbon Products for Union Carbide Europe. There
he became Product Director in 1973 and Senior Vice-President
responsible for gases, metals and carbons in 1975. Mr. Kennedy
returned to New York as President of the Linde Division in 1977. He
was elected a Senior Vice-President of the Corporation in 1981 and an
Executive Vice-President in 1982. In 1985, he was elected a Director
and President of Union Carbide Corporation, responsible for the
Chemicals and Plastics Group. In April 1986 he was elected President
and Chief Executive Officer of Union Carbide Corporation and
effective December 1986 he was elected Chairman of the Board. Mr.
Kennedy is a director of Union Camp Corporation, and Sun Company,
Inc., past Chairman and current member of the Chemical Manufacturers
Association, Chairman of the New Hampton School Trustees, past
Chairman of INROADS, Inc., past Board Member of the
Fairfield/Westchester County Chapter of INROADS, Inc., a member of
the Business Council and the Business Round Table, member of the
Business Round Table's Education Task Force and its Environmental
Task Force, past Chairman and member of the Connecticut Business For
Education Coalition (CBEC) and past member of the Commission on
Education Excellence for Connecticut. He is Chairman of the Executive
Committee of Union Carbide's Board.
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[PHOTO OF RONALD L. KUEHN, JR., age 59, Director since 1984, is Director,
RONALD L. Chairman, President and Chief Executive Officer of Sonat Inc. Mr.
KUEHN Kuehn received the degrees of B.S. in 1957 and LL.B. in 1964 from
APPEARS Fordham University. He joined Sonat's legal staff in 1970 and was
HERE] named Vice-President in 1979. He was elected Senior Vice-President in
1980 and Executive Vice-President in January 1981. In April 1981, he
was elected a director of the Company and was named President and
Chief Operating Officer in 1982, was appointed Chief Executive
Officer in 1984 and elected Chairman in 1986. Mr. Kuehn is a director
of various wholly-owned subsidiaries of Sonat Inc., AmSouth
Bancorporation, Praxair, Inc., Protective Life Corporation, Sonat
Offshore Drilling Inc., Interstate Natural Gas Association, Gas
Research Institute and a number of civic organizations and a member
of the Board of Trustees of Southern Research Institute, Birmingham-
Southern College and Tuskegee University. Mr. Kuehn is Chairman of
the Compensation and Management Development Committee and a member of
the Finance and Pension, Health, Safety and Environmental Affairs and
Nominating Committees of Union Carbide's Board.
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[PHOTO OF ROZANNE L. RIDGWAY, age 59, Director since 1990, is Co-Chair, The
ROZANNE L. Atlantic Council of the United States. A retired diplomat in the
RIDGWAY Foreign Service of the United States, Ambassador Ridgway's 32 year
APPEARS career included assignments as Ambassador to Finland, Ambassador to
HERE] the German Democratic Republic, Ambassador for Oceans and Fisheries
Affairs, Counselor of the United States State Department and Special
Assistant to the Secretary of the State for negotiations. She served
as Assistant Secretary of State for European and Canadian Affairs
from 1985 to 1989. She was President of the Atlantic Council from
1989 through 1992. Ambassador Ridgway is a director of Bell Atlantic
Corporation, The Boeing Company, Citicorp, Citibank N.A., Emerson
Electric Co., Minnesota Mining and Manufacturing Company, RJR Nabisco
and Sara Lee Corporation. She is a member of the International
Advisory Board of the New Perspective Fund and a trustee of The CNA
Corporation and the National Geographic Society. She is a trustee of
Hamline University, Vice Chairman of the American Academy of
Diplomacy, a member of the Council on Foreign Relations and of
several nonprofit institutions concerned with international affairs
and non-executive chairman of the Board of the Baltic-American
Enterprise Fund. Ambassador Ridgway is a member of the Audit, Health,
Safety and Environmental Affairs, Nominating and Public Policy
Committees of Union Carbide's Board.
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[PHOTO OF WILLIAM S. SNEATH, age 68, Director since 1969, is Director of
WILLIAM S. Various Corporations; Retired Chairman of the Board and Chief
SNEATH Executive Officer of Union Carbide Corporation. Mr. Sneath joined
APPEARS Union Carbide in 1950 after graduating from Williams College with the
HERE] degree of B.A. and from the Harvard Graduate School of Business
Administration with the degree of M.B.A. He was elected Treasurer of
Union Carbide in 1961 and Vice-President and Chief Financial Officer
in 1965. Mr. Sneath was elected a director in 1969 and President and
Chief Operating Officer in 1971. He served as Chairman of the Board
and Chief Executive Officer from 1977 to 1982. He is a director of
Metropolitan Life Insurance Company, and Rockwell International
Corporation and is a member of The Business Council. Mr. Sneath is
Chairman of the Finance and Pension Committee and a member of the
Executive, Health, Safety and Environmental Affairs and Nominating
Committees of Union Carbide's Board.
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During 1994, there were eight regular meetings and three special meetings
of the Board of Directors. At present, there are 12 directors. C. Peter
McColough, a director for over 15 years, will not stand for reelection in
accordance with the retirement policy of the Board. Pursuant to action by the
Board, the number of directors to be elected at the annual meeting will be 11.
The retirement policy of the Board provides that non-employee directors are not
eligible for re-election after reaching age 72, and that employee directors,
except the Chief Executive Officer, will retire from the Board at the time of
their retirement from the Corporation. Of the 11 nominees for election at the
annual meeting of stockholders, three are currently officers of the Corporation.
Eight are non-employee directors, one of whom is a retired Chief Executive
Officer of the Corporation.
Each director is required to be a stockholder of the Corporation. Each
director serves on one or more committees of the Board that oversee such vital
matters as audits, compensation, finance, health, safety and environmental
affairs, nominations, and public policy. Average attendance by directors at
meetings of the Board and its committees during 1994 was 89%. Each director
attended 75% or more of the aggregate of the meetings of the Board and of the
Board committees on which he or she served, except Ambassador Ridgway and
Messrs. Gut and Jordan who attended 74%, 73% and 65% of the meetings,
respectively.
In addition to attending Board and committee meetings, the directors
devoted time during the year to conferring with officers regarding corporate
matters and to reviewing material submitted by management to the Board and Board
committees for consideration and action.
COMMITTEES OF THE BOARD -- The Board has seven standing committees. Their
functions are described below:
AUDIT -- The Audit Committee was established in 1972. The Committee
supports the independence of the Corporation's independent and internal
auditors and the objectivity of the Corporation's financial statements;
reviews the Corporation's principal policies for accounting, internal
control and financial reporting; recommends to the Board the engagement or
discharge of the independent auditors; reviews with the independent
auditors the plan, scope and timing of their audit; reviews the auditors'
fees and, after completion of the audit, reviews with management and the
independent auditors the auditors' report.
The Committee also reviews the annual financial statements of the
Corporation; management's recommendation for the selection of the
independent auditors; the Corporation's internal accounting control system;
and the procedures for monitoring compliance with the Corporation's
policies on business integrity and ethics and conflicts of interest. The
Committee also performs a number of other review functions related to
auditing the financial statements and internal controls. The Committee met
four times during 1994. Members of the Committee are: John J. Creedon,
Chairman; C. Fred Fetterolf; James M. Hester; and Rozanne L. Ridgway.
COMPENSATION AND MANAGEMENT DEVELOPMENT -- The Compensation and Management
Development Committee was established in 1972. The Committee reviews and
recommends to the Board the direct and indirect compensation and employee
benefits of the Chairman of the Board, and other elected officers of the
Corporation; reviews and recommends to the Board, and administers any
incentive plans and variable compensation plans that include elected
officers; and reviews the Corporation's policies relating to the
compensation of senior management and, generally, other employees. In
addition, the Committee reviews management's long-range planning for
executive development and succession; establishes and periodically reviews
policies on management perquisites; and performs certain other review
functions relating to management compensation and employee relations
policies. The Committee met six times during 1994. Members of the Committee
are: Ronald L. Kuehn, Jr., Chairman; John J. Creedon; C. Fred Fetterolf;
Vernon E. Jordan, Jr. and C. Peter McColough.
EXECUTIVE -- The Executive Committee was established in 1917. Subject to
any limitations prescribed by law or by the Board, the Executive Committee
has and may exercise, when the Board is not in session, all the
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powers of the Board. The Committee did not meet during 1994. Members of the
Committee are: Robert D. Kennedy, Chairman; John J. Creedon; Joseph E.
Geoghan; James M. Hester; William H. Joyce; C. Peter McColough and William
S. Sneath.
FINANCE AND PENSION -- The Finance and Pension Committee was established in
1980. The Committee reviews periodically the Corporation's financial
policies and objectives; monitors the Corporation's financial condition and
its requirements for funds; reviews management recommendations as to the
amounts, timing, types and terms of public stock issues and public and
private debt issues; and reviews periodically the Corporation's dividend
policy and foreign exchange operations. The Committee also reviews the
financial, investment and actuarial policies and objectives of the pension
program and, periodically, other employee benefit programs, and the
investment performance of the fund established for the pension program. The
Committee also performs certain other review functions related to finance
and pension matters. The Committee met three times during 1994. Members of
the Committee are: William S. Sneath, Chairman; Rainer E. Gut; Vernon E.
Jordan, Jr.; William H. Joyce; Ronald L. Kuehn, Jr. and C. Peter McColough.
HEALTH, SAFETY AND ENVIRONMENTAL AFFAIRS -- The Health, Safety and
Environmental Affairs Committee was established in 1985, for the purpose of
enabling the Board to expand its review functions with respect to health,
safety and environmental matters. Prior to January 1985, those matters were
reviewed by the Public Policy Committee. The Health, Safety and
Environmental Affairs Committee reviews the Corporation's policies for
health, safety and environmental affairs ("HS&EA"); reviews the
Corporation's HS&EA performance and its compliance with HS&EA policies and
legal requirements; reviews the Corporation's system for monitoring its
compliance with HS&EA policies and legal requirements; reviews any
significant HS&EA problem and management's response to the problem; and
reviews significant scientific, legislative, governmental and judicial
developments and their effect on corporate policies. The Committee met four
times during 1994. Members of the Committee are: C. Fred Fetterolf;
Chairman; John J. Creedon; Ronald L. Kuehn, Jr.; C. Peter McColough;
Rozanne L. Ridgway and William S. Sneath.
NOMINATING -- The Nominating Committee was established in 1977. The
Committee recommends to the Board nominees for election as directors, and
periodically reviews potential candidates, including incumbent directors.
The Committee reviews policies with respect to the composition,
organization and practices of the Board, and developments in corporate
governance matters generally. The Committee met twice during 1994. Members
of the Committee are: Vernon E. Jordan, Jr., Chairman; C. Fred Fetterolf;
Rainer E. Gut; James M. Hester; Ronald L. Kuehn, Jr.; Rozanne L. Ridgway
and William S. Sneath.
Candidates for nomination as director are considered on the basis of
their broad business, financial and public service experience; their
ability to represent the interests of all stockholders, rather than the
special interests of a particular group; their reputation, capability and
integrity within their fields or professions; and their ability and
willingness to devote the time required to serve effectively as a director
and as a member of one or more Board committees. In addition, candidates
are considered on the basis of their ability, as a group, to bring to the
Board familiarity with national and international business matters, an
appreciation of the appropriate role of the Corporation in today's society,
and diverse points of view regarding the many areas in which the
Corporation is involved. Nominees must also be free of any conflicts of
interest, legal impediments or other considerations that might preclude
service as a director of the Corporation.
The Committee will consider nominees recommended by stockholders. All
letters of nomination should be sent to the Secretary of the Corporation
and should include the nominee's name and qualifications and a statement
from the nominee that he or she consents to being named in the proxy
statement and will serve as a director if elected. In order for any nominee
to be considered by the Nominating Committee and, if accepted, to be
included in the proxy statement, such recommendation should be received by
the Secretary on or before November 1 preceding the annual meeting at which
directors will be elected by the stockholders.
15
<PAGE>
PUBLIC POLICY -- The Public Policy Committee was established in 1972. The
Committee reviews the Corporation's policies on and responses to important
social, political and public issues, including matters relating to
international operations, equal employment opportunity, charitable and
education contributions, and legislative issues, as well as policies on and
responses to important stockholder issues, including stockholder proposals
for the proxy statement. The Committee also performs various other
functions relating to public policy matters generally. The Committee met
twice during 1994. Members of the Committee are: James M. Hester, Chairman;
Joseph E. Geoghan; Vernon E. Jordan, Jr.; C. Peter McColough and Rozanne L.
Ridgway.
COMPENSATION OF DIRECTORS
No director who is an employee is compensated for service as a member of
the Board or any committee of the Board. Each non-employee director receives an
annual retainer of $26,000 plus an additional $2,000 annual retainer if the
director is a chairman of a Board committee. Each non-employee director receives
a $1,000 fee for each Board meeting attended, and a $1,000 fee for each
committee meeting attended. Non-employee directors who perform special services
at the request of the Chairman are compensated by a per diem fee of $1,000. No
per diem fees were paid in 1994. Reimbursement for travel expense is paid when
appropriate. Non-employee directors are not eligible to participate in the
Corporation's incentive compensation plans or employee benefit plans.
STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS -- This plan was approved
by the stockholders on April 22, 1992. The following description gives
retroactive effect to antidilution adjustments made as a result of the
spinoff of Praxair, Inc. in 1992. Each non-employee director on that date
received 479 shares for each year the director was eligible to serve as a
director between that date and December 31, 1996, generally five years.
Shares become non-forfeitable at the rate of 479 shares a year. Also, a
director's shares become non-forfeitable when the director retires, dies or
becomes disabled. All shares become non-forfeitable upon a Change in Control
of the Corporation.
Anyone who becomes a non-employee director after 1993 will receive 479
shares for each year between the date of election to the Board and December 31,
1996. A participant may vote and receive dividends on non-forfeitable shares.
The sale or transfer of shares is subject to certain restrictions. At the time
shares become non-forfeitable, a director receives a payment to cover the income
tax liability.
During 1994, under a predecessor stock compensation plan, 3,832 shares
became non-forfeitable for all nonemployee directors as a group and the
Corporation paid $56,371 to such directors to cover their income tax
liability on those shares.
NON-EMPLOYEE DIRECTORS' RETIREMENT PLAN -- The Plan provides a retirement
benefit for non-employee directors who have completed at least five years of
service. The annual benefit equals the annual base retainer in effect when
the director's service ends. Currently, the annual base retainer is $26,000.
The benefit period is for the director's life commencing at the later of age
65 or termination of service. The present value of the benefit is paid in a
lump sum at termination of service. If a director dies while in service,
after having completed five years of service as a director, then the
director's surviving spouse receives a benefit equal to 50% of the annual
retainer for ten years. The present value of the surviving spouse's benefit
is paid in a lump sum at the time of the director's death. If a director
becomes disabled or dies before completing five years of service, the
Nominating Committee may authorize payment of a benefit to the director or
the surviving spouse. Payments are made by the Corporation or through a
grantor trust adopted by the Corporation.
16
<PAGE>
OTHER -- The Union Carbide Corporation Group Life Insurance Plan for
Non-Employee Directors extends group life insurance coverage of $50,000 to
each non-employee director. Costs of premiums are shared by the participating
directors and the Corporation. The Corporation's share of such premiums in
1994 was $1,538.
Effective March 1, 1995, the Corporation purchased Director's and
Officer's liability insurance from Corporate Officers and Directors Assurance
Ltd., X.L. Insurance Company, Ltd., and ACE Limited to provide continuing
coverage for the individual directors and officers of the Corporation and its
subsidiaries at an annual cost of approximately $565,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION -- The members of
the Compensation and Management Development Committee are: Ronald L. Kuehn,
Jr., Chairman; John J. Creedon; C. Fred Fetterolf; Vernon E. Jordan, Jr. and
C. Peter McColough. Mr. Jordan is a partner of the law firm of Akin, Gump,
Strauss, Hauer & Feld LLP. That law firm was retained by and rendered services
to the Corporation in 1994.
Five Year Cumulative Total Return/(1)/
[CHART APPEARS HERE]
/(1)/ For fiscal years ending December 31. Total return assumes that the value
of an investment in UCC common stock and each index was $100.00 on
December 31, 1989 and that all dividends, including the distribution of
Praxair, Inc. stock, were reinvested. Past performance is not necessarily
an indicator of future results.
<TABLE>
<CAPTION>
Graph Dollar Values 1990 1991 1992 1993 1994
- ------------------- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
UCC 73.96 96.31 198.85 278.57 382.04
S&P 500 96.87 126.31 135.90 149.55 151.49
S&P Chemicals 84.82 110.61 121.15 135.49 156.84
</TABLE>
17
<PAGE>
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE ON EXECUTIVE COMPENSATION
UCC compensation programs are approved and administered by the Compensation
and Management Development Committee of the Board of Directors (the Committee),
composed since its inception only of non-employee ("outside") Directors. The
programs have three fundamental objectives: to set compensation at levels
sufficient to attract and retain experienced, highly competent executives; to
provide incentives to improve the Corporation's financial performance and
performance against other strategic and operational goals (comprising corporate
metrics and `measures of performance' or `MOPs' as discussed in detail below);
and to evaluate and recognize individual contributions to corporate measures of
performance and attainment of individual measures of performance.
Programs that meet these objectives help ensure that the Corporation is
well managed, and provide substantial assurance that management's interests in
building value are closely aligned with those of shareholders, as we believe
they are at Union Carbide.
The Committee has a strong role in approving corporate goals and reviewing
performance in conjunction with the full Board. The Committee meets early each
year to review the Corporation's prior year performance against goals set at the
start of the year, to review executive compensation in light of performance, and
to consider goals for the new year in conjunction with the full Board. It meets
again later in the year with the Chairman/CEO and non-employee Directors to
evaluate executive performance and review management development and succession
planning, and meets several times during the year with independent consultants
well acquainted with industry practice to review executive compensation, and to
consider revisions or improvements to programs that may be useful in linking
compensation more closely to performance. The Committee met six times during
1994.
The Corporation surveys compensation data for a limited number of companies
to establish ranges by pay grade for base salary and total compensation which
are competitive with industry generally. Competitive compensation data for
executive level positions are also obtained through consultants. The data base
thus obtained includes both chemical companies and the chemicals and plastics
segments of major oil companies. The Corporation believes these companies
represent an appropriate benchmark group, whose executive positions require
talents and capabilities similar to UCC's own executive positions.
For financial performance comparisons, the Corporation looks at a subset of
the surveyed companies, which includes about half of the companies in the S&P
Chemicals Index. These companies best approximate both UCC's businesses and the
product markets in which the Corporation competes. The Committee believes that
comparison with these companies for financial results is more appropriate than
the current representation of the S&P Chemicals Index.
The compensation package for the Corporation's executives has three
components: base salary, which reflects the executive's pay grade and level of
responsibility; variable compensation, typically paid in cash, which reflects
both corporate and individual performance; and stock options, covering longer
term performance, which create value only if the price of the Corporation's
shares appreciates.
The Corporation also has a profit sharing plan that covers virtually all
employees. *Participants in the plan have the opportunity to earn extra pay
every quarter in which return on invested capital for the Corporation exceeds a
predetermined level. Profit sharing returned 24.5 days pay for 1994 performance.
* The Profit Sharing Plan for 1993 and 1992 excluded the corporate officers who
were not officers in the Corporation's chemicals and plastics business when
the Plan was introduced. These officers are now included. The Plan currently
excludes employees in non-participating subsidiaries and joint venture
companies.
18
<PAGE>
Profit sharing is designed to place a small percentage of pay "at risk".
To accomplish this, the Corporation has set base salaries for all jobs at
about 5% below the average of the surveyed companies. Through profit sharing,
the 5% can be earned back to restore base pay to competitive levels, and in
exceptional years, to better the competitive average by 10%.
BASE SALARY -- At least once a year, the Committee reviews the base salary of
the Chairman/CEO, and in consultation with the CEO, reviews the base salaries
of corporate officers, evaluating their individual performance to determine
if adjustments are warranted. As noted, the Committee also compares base
salary levels with the average of those in the companies surveyed to make
sure they remain competitive. The Company's objective is to approximate the
market norm for a given position, after taking into consideration the effect
of profit sharing factored in at the amount earned when the Corporation's
return on capital equals its average cost of capital.
For the past several years, the CEO's base salary has been somewhat higher
than the average of the salaries of CEO's in companies surveyed (primarily a
consequence of the previous corporate structure which included the industrial
gases and carbon businesses). Because of this difference, the Committee elected
not to grant the CEO a salary increase during the last three years. The
executive officers as a group are within the survey average range for their
respective levels.
VARIABLE COMPENSATION -- Because earnings in the chemicals and plastics industry
are significantly affected by the chemical business cycle, the Corporation's
variable compensation program is largely based on relative performance against
the peer group of financial comparison companies, most of which are similarly
affected by the cycle. Variable compensation is also based on the degree of
success in achieving individual as well as corporate measures of performance.
Given the Corporation's policy to "pay for performance", when performance
exceeds the competitive group average, the combination of base salary, profit
sharing and variable compensation should also exceed the competitive group
average.
In December 1994, the Board of Directors affirmed the basic design of the
variable compensation program and specific corporate metrics (measures) which
are assessed in determining the size of the Corporation's variable compensation
pool. Their intent was to more closely tie the award decision to specific
measurable criteria. The key metrics include:
Relative Profitability -- Return on Capital (ROC) vs. financial comparison
companies over a 12 month fiscal year ending 9/30.
Relative Shareholder Value -- Market to Book Ratio vs. financial comparison
companies
Growth -- as measured by growth in sales volume
Productivity -- as measured by fixed cost per pound of product
Of these metrics, relative profitability is given the single greatest
weight (50% of the total). The remaining three metrics collectively represent
30% of the award value, leaving 20% consideration for other key non-financial
corporate "measures of performance", known as "MOPs". There are no specific
weights required for a single MOP, as distinguished from the Corporate Metrics,
which each have an assigned weight. In any given year, the weighting of one
performance measure over another may vary.
The 1994 corporate measures of performance included a number of ambitious
short term goals. These included continued improvement in Health, Safety and
Environmental performance and risk management; "people excellence", with an
emphasis on diversity awareness and performance management; attainment of
corporate financial targets, as well as profit enhancement and capital program
goals; strategic plan implementation and technology leadership, including laying
the groundwork for additional future petrochemicals joint ventures which rely on
the corporation's competitively advantaged technology; attainment of preferred
supplier status; and improved internal and external communications with our
critical constituencies.
19
<PAGE>
At its January 1995 meeting, the Committee took special note of the
following:
- ROC performance improvement was exceptional (both in absolute and
relative terms -- nearly four percentage points better than the average
of the financial comparison companies).
- The Corporation exceeded the performance goal for volume growth, and
dramatically exceeded the goal for productivity. The Corporation's 25%
improvement in market to book ratio was the highest among the comparison
companies, moving UCC to the top of the second quartile, close to its
goal of moving into and staying in the first quartile.
- The Corporation met or exceeded performance goals in each of the stated
MOPs. Exceptional mention was made of the profit enhancement program and
cost reduction achievements, as well as progress on the attainment of key
elements of the strategic plan for growth through ventures in Europe and
the Middle East.
Based on the above assessment, the Committee determined that the variable
compensation pool should be set at a level approaching twice the standard award
level. In the case of the Chairman/CEO, the Committee rewarded his leadership in
advancing the Corporation's strategic plan and elected to award variable
compensation at $900,000, 110% of his December 1994 base salary. Consistent with
similar award practices in the U.S. chemical industry, standard individual
awards under the variable compensation program range from 5 to 60% of annual
base salary, depending on pay grade, but can be considerably greater (up to 150%
of annual salary, at the Chairman/CEO level) in years of exceptional
performance. Awards may also be withheld entirely when corporate performance
falls short of goals, as happened in the case of senior executive officers for
1991 performance.
To date, the Committee has preferred a plan design which reserves to them
discretionary judgment about company and individual performance. While payments
from the Variable Compensation Plan are primarily a function of performance, the
plan is not completely formulaic and therefore will not meet the requirements of
OBRA (Omnibus Budget Reconciliation Act of 1993) to permit deductibility of
compensation paid over $1 million in 1995.
The Committee has reviewed and approved a new Performance Incentive Plan
for corporate officers effective January 1, 1995, subject to approval of
shareholders. The Plan is based on the Corporation's relative ROC performance
against financial comparison companies (see Management Proposal to adopt the
Performance Incentive Plan on page 28 and the full plan text in Appendix A on
page 33). If approved by shareholders, payouts under this Plan would qualify as
"performance based" and therefore would be deductible by the Corporation. The
Committee would retain discretion to reduce payouts calculated by formula under
this Plan, but would have no discretionary authority to increase individual
awards above the maximum specified under the Plan. Awards under the Plan would
replace the portion of award for relative profitability under the Corporation's
Variable Compensation Plan. The covered corporate officers would still be
eligible for consideration under the Variable Compensation Plan for performance
against corporate metrics (excluding ROC performance) and corporate measures of
performance. Their total award in the future would be delivered through these
two complementary plans instead of one.
STOCK OPTIONS -- Stock options are generally granted annually, at the New
York Stock Exchange closing price of Union Carbide's common stock composite
transactions on the date of the grant. Since 1989, they have specified a
holding period of at least two years from the grant date. Options expire
after ten years. Except for adjustments to reflect major changes in the
Corporation's capital base, as occurred after the industrial gases spin-off
in 1992, the Corporation has neither adjusted the price nor amended the
financial terms of outstanding options. This means executives cannot benefit
from stock price appreciation until and unless shareholders also benefit.
The 1988 Union Carbide Long Term Incentive Plan expired on December 31,
1993, replaced by the 1994 Union Carbide Long Term Incentive Plan approved by
shareholders at the last annual meeting. Grants are normally authorized at the
last Compensation and Management Development Committee Meeting of the calendar
year.
The Committee regularly reviews the competitiveness of the Corporation's
long-term incentives and may in the future consider other forms of long-term
compensation. For 1994, stock options were the Corporation's only incentive
tied to long-term performance. This is a departure from most of the surveyed
companies, which have multiple
20
<PAGE>
incentive programs tied to long-term results. To keep total compensation
competitive, the Committee has granted more stock options than would be the
case if Union Carbide had multiple programs tied to long-term performance.
Stock options are valued with formulas which predict the value over the
option's 10 year life when granted at fair market value today. At any point
in time, the predicted value may vary based on the stock's volatility, price
and dividend levels. To manage the fluctuation, the Committee will base stock
option grants on rolling three year averages of predicted values. Thus, the
value of options granted to recipients will remain relatively constant from
grant to grant. As a consequence of both the stock's predicted value and
fewer eligible participants due to cost reduction efforts, the Committee
authorized over 600,000 fewer shares for grant in November 1994 than for the
previous grant.
Given the strong 1994 performance of both the Corporation and the
Chairman/CEO, the Committee awarded him 130,000 stock options in November 1994.
The size of the grant to the CEO as well as to the other executive officers was
approximately at the median of the surveyed companies for comparable positions.
The Committee has been advised that grants under the 1994 Plan will not be
subject to the $1 million cap on tax deductibility under the Omnibus Budget
Reconciliation Act of 1993.
UPDATE ON STOCK OWNERSHIP GUIDELINES -- The Board of Directors announced in
January 1993, that to ensure the continuing close alignment of management and
shareholder interests, senior management would be expected to own substantial
amounts of Union Carbide stock. Under the guidelines, management would be
expected to own stock valued at four times the annual base salary for the
Chairman/CEO; three times annual base salary for the President/COO; and amounts
equal to annual base salary for the remaining corporate officers. Management has
a period of five years to acquire any additional stock over their present
holdings to achieve these guidelines. Most members of the senior management
group already exceed their guideline amount by a wide margin. Those who have not
yet achieved the full guideline level increased their holdings nearly 50% since
the beginning of the year. In October 1993, the Committee endorsed the extension
of these ownership guidelines to a broader group of managers (approximately 120)
who are expected to own stock valued at either one times annual base salary or
at one third of annual base salary, depending on position level. They also have
five years to achieve these stock ownership levels. At year end 1994, over 85%
of the group had attained their guideline level of ownership.
DEFERRED COMPENSATION PROGRAM -- In July 1994, the Board approved an unfunded,
nonqualified Deferred Compensation Program effective January 1995, permitting
deferral of up to 25% of base salary and up to 100% of variable compensation
with payout generally commencing at or after retirement. Participants may
allocate their deferral dollars among several indices and have their account
credited based on the performance of their "investment" selection. Amounts
deferred are free of federal and most state taxes until paid out.
SUMMARY -- The Compensation and Management Development Committee believes that
the objectives of the compensation and incentive programs at Union Carbide
Corporation are consistent with programs maintained by comparable industrial
companies and serve to keep shareholder and management interests in building
value closely aligned. The Corporation's senior executives have moved
aggressively to position the organization for global competition. Their efforts
during 1994 have strengthened the company and greatly expanded its worldwide
opportunities for growth.
Compensation and Management Development Committee
Ronald L. Kuehn, Jr., Chairman C. Fred Fetterolf C. Peter McColough
John J. Creedon Vernon E. Jordan, Jr.
21
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term All Other
Annual Compensation Compensation Compensation/(3)/
------------------------------------------ -------------- -----------------
Number of
Securities
Other Underlying
Variable Annual Options/SARs
Name and Principal Position Year Salary Compensation Compensation/(1)/ Granted
- ------------------------------------- ---- ------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Kennedy 1994 $815,000 $900,000 $122,581 130,000 $ 81,252
Chairman and 1993 815,000 590,000 4,350 300,000/(2)/ 103,479
Chief Executive Officer 1992 815,000 750,000 11,677 150,000 114,787
William H. Joyce 1994 $445,833 $465,000 $ 42,404 90,000 $ 44,902
President and Chief Operating 1993 393,333 340,000 145,466 220,000/(2)/ 37,436
Officer 1992 320,000 300,000 3,077 51,000 40,917
Joseph E. Geoghan 1994 $350,000 $265,000 $ 42,436 41,000 $ 25,980
Vice-President, General Counsel 1993 343,750 195,000 6,936 140,000/(2)/ 34,370
and Secretary 1992 325,000 212,000 4,500 45,000 37,078
Joseph C. Soviero 1994 $303,333 $200,000 $ 30,154 29,000 $ 17,687
Vice-President, Corporate 1993 293,340 145,000 122,645 80,000/(2)/ 26,278
Ventures & Purchasing 1992 280,020 137,750 2,692 39,000 27,849
Roger B. Staub 1994 $255,000 $215,000 $ 24,500 29,000 $ 38,058
Vice-President 1993 238,755 155,000 91,664 80,000/(2)/ 40,613
General Manager - UNIPOL 1992 220,020 152,000 2,116 39,000 45,412
John K. Wulff 1994 $264,167 $180,000 $ 25,442 25,000 $ 8,777
Vice-President, Controller and 1993 258,750 145,000 -0- 60,000/(2)/ 16,241
Principal Accounting Officer 1992 245,000 150,000 -0- 30,000 17,037
</TABLE>
/(1)/Other Annual Compensation in 1992, 1993 and 1994 for Messrs. Kennedy and
Geoghan includes financial planning and related tax advice and service. In
1994 for both individuals it also includes profit sharing. Mr. Kennedy's
total for 1994 also includes $32,613 for personal transportation expenses.
The 1992, 1993 and 1994 amounts for Dr. Joyce, Mr. Soviero and Mr. Staub
include profit sharing and in 1993, reimbursement for liabilities on
annuity purchases to fund the Corporation's obligations for certain
nonqualified retirement benefits ("tax liabilities") of $140,851 for Dr.
Joyce, $119,183 for Mr. Soviero and $88,837 for Mr. Staub. The 1994 amount
for Mr. Wulff is profit sharing.
/(2)/Stock Options Granted in 1993
<TABLE>
Date of Grant R.D. Kennedy W.H. Joyce J.E. Geoghan J. C. Soviero R. B. Staub J.K. Wulff
------------- ------------ ---------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jan. 26, 1993 150,000 110,000 50,000 40,000 40,000 30,000
Dec. 10, 1993 150,000 110,000 90,000 40,000 40,000 30,000
</TABLE>
The normal annual stock option grant timing has been adjusted from January
to November/December of the preceding calendar year. The year 1993 was the
first year of that adjustment, therefore two grants appear for the calendar
year 1993.
/(3)/All Other Compensation includes annual life insurance premiums paid to
split dollar life insurance contracts and employer contributions to the
Savings Program. The amount of the whole life insurance portion reported as
paid for the named executive officer is the entire premium minus that
portion of the premium actually paid by the executive officer. For 1994,
life insurance premiums were $75,627 for Mr. Kennedy; $39,277 for Dr.
Joyce; $20,355 for Mr. Geoghan; $12,062 for Mr. Soviero; $32,433 for Mr.
Staub and $3,152 for Mr. Wulff. Employer contributions to the Savings
Program were $5,625 for Messrs. Kennedy, Geoghan, Soviero, Staub, Wulff and
Dr. Joyce. This matching contribution was made in the form of ESOP
preferred stock. Under the Omnibus Budget Reconciliation Act of 1993
(OBRA), the maximum amount of compensation that may be recognized for
employer matching contributions is limited to $150,000 per year (a
reduction from the 1993 limit of $235,840.)
Messrs. Kennedy, Geoghan, Soviero and Wulff also received income from the
exercise of certain options to purchase the stock of Praxair, Inc. which
were granted in connection with the spinoff of Praxair, Inc. to
stockholders on June 30, 1992. On that date, each holder of UCC options
received an equal number of Praxair options and the exercise prices of the
UCC options were reduced. Immediately after the spinoff, the combined
exercise prices of the UCC options and the Praxair options equaled the
exercise prices of the UCC options prior to the spinoff. For years prior to
1994, any income received in connection with the exercise of Praxair
options was reported as income from Praxair, Inc. For 1994, the Internal
Revenue Service determined that this income must be treated for tax
purposes as paid to the reporting persons by UCC. The amount of income
received by Messrs. Kennedy, Geoghan, Soviero and Wulff in 1994 as a result
of the exercise of the Praxair options was $1,296,560, $33,830, $111,033
and $230,920, respectively.
22
<PAGE>
<TABLE>
<CAPTION>
Stock Options/SARs Granted -- 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term/(1)/
--------------------------------------------- -------------------------------------------------
5% 10%
------------------------- --------------------
Number of
Securities % of Total
Underlying Options/SARs Assumed Potential Assumed Potential
Options/SARs Granted to Exercise Expiration Stock Realizable Stock Realizable
Name Granted Employees Price Date Price Value Price Value
- ------------------------- ------------ ------------ -------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert D. Kennedy
Chairman and
Chief Executive Officer 130,000 6.7% $28.625 11/30/04 $46.627 $2,340,260 $74.246 $5,930,730
William H. Joyce
President and
Chief Operating Officer 90,000 4.7% $28.625 11/30/04 $46.627 $1,620,180 $74.246 $4,105,890
Joseph E. Geoghan
Vice-President, General
Counsel and Secretary 41,000 2.1% $28.625 11/30/04 $46.627 $ 738,082 $74.246 $1,870,461
Joseph C. Soviero
Vice-President, Corporate
Ventures & Purchasing 29,000 1.5% $28.625 11/30/04 $46.627 $ 522,058 $74.246 $1,323,009
Roger B. Staub
Vice-President
General Manager - UNIPOL 29,000 1.5% $28.625 11/30/04 $46.627 $ 522,058 $74.246 $1,323,009
John K. Wulff
Vice-President,
Controller and Principal 25,000 1.3% $28.625 11/30/04 $46.627 $ 450,050 $74.246 $1,140,525
Accounting Officer
Gain of All Recipients
of 1994 Stock Options as
% of All Shareholders Gain -- -- -- -- $46.627 1.3%/(2)/ $74.246 1.3%/(2)/
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/The assumed annual rates of stock price appreciation of 5% and 10% are set
by the SEC rule and are not intended as a forecast of possible future
appreciation in stock prices.
/(2)/Assumes that the number of shares of common stock outstanding at
December 31, 1994 is the same number outstanding at the relevant
future date.
Note: Stock Options are generally exercisable two years from the date of grant.
In the event of a Change in Control of the Corporation, all outstanding stock
options become immediately exercisable. Options also become immediately
exercisable upon the death of the participant. Refer to Change in Control
discussion on page 26 for further provisions regarding Change in Control.
23
<PAGE>
<TABLE>
<CAPTION>
Stock Options/SARs Exercised in 1994 and Stock Option/SAR Values at 12/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
Shares Held at 12/31/94 Held at 12/31/94/(1)/
Acquired Value -------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Kennedy
Chairman and Chief Executive Officer 183,200 $2,831,981 420,000 430,000 $8,120,660 $3,153,750
William H. Joyce
President and Chief Operating Officer 20,500 340,349 106,000 310,000 $2,094,317 $2,308,750
Joseph E. Geoghan
Vice-President, General Counsel and
Secretary 24,600 343,353 85,000 181,000 $1,712,290 $1,359,500
Joseph C. Soviero
Vice-President, Corporate
Ventures & Purchasing - 0 - - 0 - 78,000 109,000 $1,508,117 $ 836,750
Roger B. Staub
Vice-President
General Manager - UNIPOL - 0 - - 0 - 84,800 109,000 $1,715,755 $ 836,750
John K. Wulff
Vice-President, Controller and
Principal Accounting Officer 30,000 514,100 42,000 85,000 $ 811,104 $ 630,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/Based on a closing price of $29.375 per share on December 31, 1994 as
reported on NYSE-Composite Transactions. No stock appreciation rights
(SARs) were exercised during 1994 and none are outstanding.
There were no transactions that require disclosure in a table for long-term
incentive plan awards.
<TABLE>
<CAPTION>
Retirement Program
- ------------------------------------------------------------------------------------------------------------------------------------
Average
Annual Compensation Estimated Annual Retirement Benefits at Age 65
Used for for Years of Service Indicated
Calculating -------------------------------------------------------------------------------------------------
Retirement Benefits/(1)/ 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs. 40 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
150,000 33,750 45,000 56,250 67,500 78,750 90,000
250,000 56,250 75,000 93,750 112,500 131,250 150,000
500,000 112,500 150,000 187,500 225,000 262,500 300,000
750,000 168,750 225,000 281,250 337,500 393,750 450,000
1,000,000 225,000 300,000 375,000 450,000 525,000 600,000
1,500,000 337,500 450,000 562,500 675,000 787,500 900,000
2,000,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000
2,500,000 562,500 750,000 937,500 1,125,000 1,312,500 1,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/The compensation covered by the Retirement Program includes base salary,
annual variable compensation and eligible profit sharing. Benefits are
determined by average final compensation, are computed on a straight-life
annuity basis, and are subject to an offset for Social Security. The table
reflects the combination of qualified and nonqualified pension benefits. As
of December 31, 1994, Robert D. Kennedy, age 62 was credited with 39 years
of service; William H. Joyce, age 59, 37 years; Joseph E. Geoghan, age 57,
37 years; Joseph C. Soviero, age 56, 29 years; Roger B. Staub, age 59, 38
years and John K. Wulff, age 46, 7 years.
24
<PAGE>
Security Ownership of Management
At February 1, 1995, all directors and officers as a group (23 persons)
beneficially owned 2,550,045 shares (1.77%) of the Corporation's common stock.
As required by SEC rule, the number of shares of common stock beneficially owned
includes shares as to which a right to acquire ownership exists, such as through
the exercise of employee stock options and conversion of convertible securities.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Shares Title of
Name Position Beneficially Owned/(l)/ Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
R. D. Kennedy Director, Chairman and 256,988/(2)/ Common Stock
Chief Executive Officer 3,043 ESOP Convertible Preferred Stock
570,000 Exercisable Stock Options
------- --------------------------------
830,031 Total
W. H. Joyce Director, President and 201,370/(3)/ Common Stock
Chief Operating Officer 2,818 ESOP Convertible Preferred Stock
216,000 Exercisable Stock Options
------- --------------------------------
420,188 Total
J. E. Geoghan Director, Vice-President, 24,835 Common Stock
General Counsel and Secretary 2,794 ESOP Convertible Preferred Stock
135,000 Exercisable Stock Options
------- --------------------------------
162,629 Total
J. C. Soviero Vice-President, Corporate 10,000 Common Stock
Ventures and Purchasing 2,759 ESOP Convertible Preferred Stock
118,000 Exercisable Stock Options
------- --------------------------------
130,759 Total
Roger B. Staub Vice-President 14,080 Common Stock
General Manager - UNIPOL 2,656 ESOP Convertible Preferred Stock
124,800 Exercisable Stock Options
------- --------------------------------
141,563 Total
J. K. Wulff Vice-President, Controller 36,934 Common Stock
and Principal Accounting Officer 2,703 ESOP Convertible Preferred Stock
72,000 Exercisable Stock Options
------- --------------------------------
111,637 Total
J. J. Creedon Director 8,316 Common Stock
C. F. Fetterolf Director 3,977 Common Stock
R. E. Gut Director 5,000 Common Stock
J. M. Hester Director 4,224 Common Stock
V. E. Jordan, Jr. Director 3,870 Common Stock
R. L. Kuehn, Jr. Director 4,096 Common Stock
C. P. McColough Director 3,816 Common Stock
R. L. Ridgway Director 2,896 Common Stock
W. S. Sneath Director 17,865/(4)/ Common Stock
All Officers and 746,338 Common Stock
Directors (23 persons) 34,637 ESOP Convertible Preferred Stock
1,769,070 Exercisable Stock Options
--------- --------------------------------
2,550,045 Total
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/Except as noted in the footnotes below, the beneficial owners of the shares
shown above had sole voting power and sole investment power with respect to
the shares of common stock and shared voting power and shared investment
power with respect to the shares of ESOP Stock.
/(2)/The shares of common stock listed as beneficially owned by Mr. Kennedy
include 50,000 shares that are held by The Arnold F. Baggins Foundation in
which Mr. and Mrs. Kennedy have shared investment and voting power and
disclaim beneficial ownership.
/(3)/The shares of common stock listed as beneficially owned by Dr. Joyce
include 2,000 shares that are owned by his children as to which beneficial
ownership is disclaimed.
/(4)/The shares of common stock listed as beneficially owned by Mr. Sneath
include 873 shares that are owned by his spouse as to which beneficial
ownership is disclaimed.
25
<PAGE>
<TABLE>
<CAPTION>
Security Ownership of Certain Beneficial Owners
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Shares Title of Percent of
Name and Address Beneficially Owned Class Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 18,436,076/(1)/ Common Stock 12.72%
State Street Bank and Trust Company 16,447,317/(2)/ ESOP Convertible 100.00%
as Trustee of the Union Carbide Corporation Preferred Stock
Employee Stock Ownership Plan
200 Newport Avenue
Quincy, Massachusetts 02171
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/In a Schedule 13G dated February 13, 1995, FMR Corp. stated that it
beneficially owned 18,436,076 shares of the common stock of the Corporation
at December 31, 1994. As to such shares, FMR Corp. has sole voting power
for 1,477,241 shares and sole investment power for 18,436,076 shares.
/(2)/As of December 31, 1994, the ESOP Trustee held 16,447,317 shares of ESOP
Stock representing 100% of that class of stock. Each such share has the
same voting rights as, and is convertible into, one share of common stock.
As of that date, the ESOP Stock represents 10.2% of the total of common
stock and ESOP Stock outstanding. The Trustee has shared voting power and
shared investment power with respect to the ESOP Stock. The shares shown
above include the ESOP Stock shown in the preceding table. In a Schedule
13G dated February 13, 1994, State Street Bank and Trust Company stated
that as of December 31, 1994, in its capacity as trustee for various
collective investment funds, index accounts and personal trusts, it also
beneficially owned 1,304,074 shares (0.9%) of the Corporation's common
stock. As to such shares, State Street Bank and Trust Company has sole
voting power for 1,053,483 shares, shared voting power for 11,395 shares,
sole investment power for 1,263,354 shares and shared investment power for
3,150 shares.
CHANGE IN CONTROL ARRANGEMENTS
The Corporation has severance compensation agreements with the officers
named in the Summary Compensation Table and certain other officers and
employees. If a Change in Control of the Corporation, as defined in the
severance compensation agreements, occurs, and one or more of the following
events occurs within a period of up to 24 months thereafter, an executive may
resign and receive a lump sum payment and other benefits. The events include:
(1) a change or diminution of the executive's responsibilities or compensation,
(2) relocation, (3) discontinuance of compensation plans in which the executive
participated, (4) reduction of life insurance, medical, health and accident,
disability and certain other benefits for the executive, (5) failure by a
successor corporation to assume the severance compensation agreement, and (6)
termination of the executive's employment contrary to the terms of the severance
compensation agreement.
If an executive resigns because of one of the foregoing after a Change in
Control, the executive will receive: (1) a lump sum severance payment equal to
2.99 times the executive's average annual compensation (including base salary,
variable compensation, profit sharing, ordinary income from stock option
exercises and other "fringe" compensation, which amounts may differ from amounts
shown in the Summary Compensation Table), for the five calendar years preceding
the Change in Control and (2) enhanced life, disability, accidental and health
insurance and enhanced pension benefits. Payments will be made by the
Corporation or through a grantor trust adopted by the Corporation.
The severance compensation agreements terminate if the executive's
employment by the Corporation is terminated by the executive or the Corporation
prior to a Change in Control. In September 1993, each executive covered by a
severance compensation agreement signed an amendment allowing the Corporation to
terminate the agreement at any time prior to a Change in Control with five days
prior written notice.
In the event of a Change in Control of the Corporation, all outstanding
stock options become exercisable.
A "Change in Control" for these purposes means the occurrence of any of the
following events: (i) a change in control for purposes of SEC Form 8-K; (ii) a
consolidation or merger where the Corporation is not the surviving company or
where the Corporation's common stock is converted, other than a merger in which
shareholders retain the same proportion of ownership; (iii) a sale or other
transfer of all or substantially all of the Corporation's assets; (iv)
acquisition by a person or group of more than 20% of the Corporation's
outstanding voting stock, except as approved by the Board of Directors; (v)
acquisition by a person or group of the right to vote more than 20% of the
Corporation's outstanding voting stock for (a) the election of directors, (b) a
merger or consolidation of the Corporation, or (c) any other matter, except as
approved by the Board of Directors; or (vi) in a 24 consecutive month period,
present directors and/or new directors approved by at least two-thirds of the
directors, cease to constitute a majority of the Board of Directors.
26
<PAGE>
2. Management Proposal to Ratify KPMG Peat Marwick LLP as Independent
Auditors for 1995
The Board of Directors, on the recommendation of the Audit Committee,
has selected the firm of KPMG Peat Marwick LLP, as independent auditors to
examine the financial statements of the Corporation and its consolidated
subsidiaries for the year 1995.
KPMG Peat Marwick LLP is a member of the SEC Practice Section of the
American Institute of Certified Public Accountants and has submitted a copy of
each of their peer review results to date. The peer review consists of a review
and evaluation of the quality of a firm's accounting and auditing services by
partners and managers from another CPA firm or from several CPA firms.
KPMG Peat Marwick LLP and its predecessor firms have been serving the
Corporation in the capacity of independent auditors for many years. KPMG Peat
Marwick LLP states that no partner or professional employee of that firm has
any direct financial interest or any material indirect financial interest in
the Corporation or in any of its subsidiaries.
Accordingly, the following resolution will be offered at the meeting:
RESOLVED: That the selection by the Board of Directors of KPMG Peat Marwick
LLP as independent auditors of this Corporation and its consolidated
subsidiaries for the year 1995 is ratified.
The Board of Directors Recommends a Vote FOR this Proposal.
Representatives of KPMG Peat Marwick LLP will be present at the meeting,
will have an opportunity to make a statement if they wish to do so, and will
be available to respond to appropriate questions from stockholders.
27
<PAGE>
3. Management Proposal to Adopt the 1995 Union Carbide Performance Incentive
Plan
The Board of Directors believes the Corporation's success depends, in large
measure, on its ability to attract, retain and motivate key employees of
superior competence. The Corporation's compensation programs must, therefore,
compare favorably with those of major competitors. Those programs should also
provide incentives for promoting the growth and profitability of the
Corporation, and payouts should be based on performance against established
objectively determined measures. The Board believes that, in order for the
Corporation's compensation programs to be competitive and provide incentive for
top performance, a significant part of the total compensation of key executives
should be related to the Corporation's return on capital (ROC) and other such
objective financial criteria. Therefore, the Board recommends that the
shareholders adopt the 1995 Union Carbide Performance Incentive Plan (the
"Plan").
Based on the recommendations of the Compensation and Management Development
Committee of the Board of Directors (the "Committee"), the Board of Directors
believes that the Corporation should adopt the Plan. The Corporation's current
Variable Compensation Plan (the "1994 Plan") pays a portion of compensation
based upon relative performance in a number of financial measures of growth,
profitability, and productivity. Performance against other non-financial
critical measures, where some subjective evaluation is made, also affects
compensation under the 1994 Plan. This Plan would measure relative ROC
performance only, as compared to the peer group average. High absolute ROC
performance would not generate maximum payouts unless the relative ROC
performance was above average. Awards under the Plan would replace the portion
of award for relative profitability under the Corporation's Variable
Compensation Plan. The covered corporate officers would still be eligible for
consideration under the Variable Compensation Plan for performance against
corporate metrics (excluding ROC performance) and corporate measures of
performance. Their total award in the future would be delivered through these
two complementary plans instead of one.
The Plan would be administered by the Committee, which is composed
entirely of non-employee directors. Prior to the beginning of each calendar
year, the Committee may designate employees who will be eligible for awards
under the Plan. The Committee will be authorized to specify awards for
eligible participants, specify the terms and conditions of such awards,
interpret the Plan, establish administrative regulations and take any other
action necessary to the proper operation of the Plan. The Committee may also
make adjustments in the performance goals established for a calendar year to
reflect any extraordinary accounting or other changes which might alter the
basis upon which performance levels were determined. The Committee may delegate
its authority under the Plan, provided the delegation doesn't jeopardize
requirements under Section 162 (m) of the Internal Revenue Code for
"disinterested" administration of the Plan.
Each year the Committee will adopt in writing objective performance goals
for the calendar year based on UCC's return on capital compared to a peer group
of companies or other such relative financial criteria the Committee may
determine. The Committee will establish an award schedule based on achievement
of these goals in the calendar year. The schedule and performance goals will be
approved by the Committee not later than 90 days after the start of the calendar
year.
An individual award to the Chairman or CEO cannot exceed $1,500,000 and
to all others cannot exceed $800,000 for any Award Year. The Committee may
reduce (or not pay) awards, but may not increase them above the maximum.
The Committee must certify that performance goals have been satisfied
before payment will be made.
The Plan shall be effective January 1, 1995 and does not have an expiration
date. No payments may be made under the Plan until its material terms have been
approved by shareholders. All payments under the Plan would be made in cash. The
employees who would be eligible participants under the Plan at present are the
UCC Corporate officers (currently 14). If a participant terminates employment
during a calendar year, the Committee will determine whether a payment should be
made and the amount of any such award.
28
<PAGE>
The Plan is considered an unfunded incentive compensation arrangement for a
select group of key executives. Participants' rights to payment are the same as
those of any unsecured general creditor of UCC. Payments would be made from
general UCC funds, not from segregated assets or a trust fund.
The grant of an award will result in ordinary income for the participant
and all applicable tax liabilities (federal, state, local, Social Security
and Medicare). It is intended that the Plan qualifies for the performance
based exemption from Section 162(m) of the Internal Revenue Code, so that the
Corporation will receive a tax deduction for amounts paid under the Plan.
The Board of Directors may amend, suspend, or terminate the Plan at any
time, but any amendment, suspension or termination shall not adversely affect
the rights of participants (or beneficiaries) to receive awards granted prior
to such action.
Subject to the limitations described above, no determination has been made
as to the amount of awards which will be made under the Plan in the future. As
the provisions of the Plan allow the Committee to exercise its discretion to
reduce awards (for reasons such as maintaining appropriate competitive
compensation levels), it is impossible to determine what the payout would have
been had the Plan been in effect for 1994.
Resolution
Accordingly, the following resolution will be offered at the meeting:
"RESOLVED: That the 1995 Union Carbide Performance Incentive Plan as
presented in the Proxy Statement for this meeting is hereby approved."
The Board of Directors Recommends a Vote FOR this Proposal.
29
<PAGE>
4. Stockholder Proposal Regarding Severance Compensation Agreements
The Corporation has been informed that the Laborers' District Council
and Contractors' Pension Fund of Ohio, Worthington, OH (4,800 shares) intends
to present the following resolution for action at the Annual Meeting:
BE IT RESOLVED: That the shareholders of Union Carbide Corporation
("Company") request that the Board of Directors refrain from entering into or
extending existing employment agreements which provide executive compensation
after a change in control of the Company unless such agreements or arrangements
are specifically submitted to the shareholders for approval. Additionally, we
request that the Board, if allowable under the terms of the agreements, provide
written notice of termination of existing agreements or present them to
shareholders for approval.
PROPONENT'S STATEMENT IN SUPPORT OF THE PROPOSAL
Golden parachutes are one of the lucrative executive benefits which have
contributed to the public perception that many senior executive officers of
major, publicly-traded companies are more concerned with cashing in on a
system designed to their advantage than the effective operation of companies.
Our Company currently has lucrative severance agreements, commonly
referred to as golden parachutes, with officers of the Company which provide
for compensation payments of 2.99 times average annual compensation over the
past five years and enhance insurance and pension benefits in the event
employment is terminated after a change in control of the Company as defined
compensation agreement.
We believe that these agreements are not in the best interest of
shareholders because they reduce shareholder value and financially reward
mismanagement. Our concerns over shareholder value are based on a 1990 study by
the United Shareholders Association of 1,000 major U.S. corporations which found
that the average annualized two-year return was 20 percent higher for the 559
companies whose management did not hold golden parachutes.
Our concerns regarding rewarding mismanagment is based on the following
logic. We believe a change in control of the Company will most likely occur
if the Company is not managed in a way that realizes the full value of its
assets. If this type of mismanagement occurs and shareholders seek to protect
the value of their investment by voting a new Board of Directors or tendering
their shares for an above market price, the very managers who failed to
maximize shareholder value will receive a lucrative financial reward of 2.99
times average annual compensation.
The fact that Union Carbide Corporation is currently performing well
does not justify adoption of policies that we believe diminish accountability
to shareholders. As shareholders, we must not allow ourselves to become
complacent in light of the current good performance of the Company.
We believe that the issue of whether the Company should, in the future,
provide management with golden parachutes is of such importance that
shareholders should be given the opportunity to approve or reject these
lucrative severance agreements.
The Board of Directors Recommends a Vote AGAINST this Proposal
As the proponent's supporting statement points out, Union Carbide is
indeed performing well. The results are in large part due to the willingness
of management to take bold initiatives. The Board of Directors strongly
believes that severance compensation agreements are an appropriate support
for management in pursuing the business strategies of the Corporation.
30
<PAGE>
Severance compensation agreements serve a very important purpose. In the
case of a hostile attempt to change control of the Corporation, the agreements
encourage management to aggressively pursue all opportunities to increase
shareholder value without the distraction of concern over their own financial
security, including totally objective consideration of the hostile offer.
All severance compensation agreements are authorized by the Board of
Directors and individually approved by the Compensation and Management
Development Committee of the Board, which is composed entirely of outside
directors. The agreements may be terminated by the Corporation upon five days'
notice to the employee. The severance compensation agreements also terminate if
the executive's employment by the Corporation is terminated by either the
executive or the Corporation before a change in control.
The Board believes that providing executives with a reasonable measure of
financial security in the event of termination without cause after a change in
control also helps to retain key executives. Severance compensation agreements
are commonly included in executive compensation programs and Union Carbide
believes that, in addition to being beneficial to shareholders, they help ensure
that Union Carbide's compensation programs remain competitive.
A similar proposal was rejected by 60 percent of stockholders voting at
the 1993 annual meeting. The Board of Directors urges stockholders to reject
it again in 1995.
If this Stockholder Proposal is presented at the meeting and the
Corporation receives your proxy, it will be voted thereon as you specify, or
if you do not specify a choice, it will be voted AGAINST the proposal.
31
<PAGE>
5. Other Business
As of the date of delivery of the text of this Proxy Statement to the
printer, management knew of no other business that will be presented for action
at the meeting. In the event that any other business should come before the
meeting, including proposals excluded from the Proxy Statement pursuant to SEC
rule 14a-8, it is the intention of the proxyholders named in the proxy card to
take such action as shall be in accordance with their best judgment.
Other Information
Certain matters are required to be considered at the annual meeting of
stockholders, such as the election of directors. From time to time, the Board of
Directors may wish to submit to the stockholders other matters for
consideration, such as the ratification of the selection of auditors, management
proposals regarding new incentive programs, and most changes in the Certificate
of Incorporation. Additionally, stockholders may be asked to consider and take
action on proposals submitted by stockholders who are not members of management
that cover matters deemed proper under regulations of the Securities and
Exchange Commission and applicable state laws.
Stockholders' eligibility to submit proposals for inclusion in the
Corporation's Proxy Statement, proper subjects for such proposals and the form
of stockholder proposals are regulated by Rule 14a-8 under Section 14(a) of the
Securities Exchange Act of 1934. Each proposal submitted should be sent to the
Secretary of the Corporation, 39 Old Ridgebury Road, Danbury, CT 06817-0001. The
stockholder or his or her representative must appear in person at the annual
meeting and must present the proposal, unless he or she can show good cause for
not doing so.
Stockholder proposals for the 1996 Proxy Statement must be received at
the Corporation's principal executive office on or before November 14, 1995.
The Corporation plans to hold the 1996 annual meeting in Danbury, Connecticut
on April 24, 1996.
Management carefully considers all proposals and suggestions from
stockholders. When adoption of a suggestion or proposal is clearly in the best
interests of the Corporation and the stockholders generally, and does not
require stockholder approval, it is usually adopted by the Board, if
appropriate, rather than being included in the Proxy Statement.
In addition to the solicitation of proxies by mail, officers or other
employees of the Corporation, without extra remuneration, may solicit proxies
by telephone or personal contact. The Corporation also will request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material
to beneficial owners of stock held of record and will pay such persons for
forwarding the material. All costs for the solicitation of proxies by the
Board of Directors will be borne by the Corporation.
32
<PAGE>
APPENDIX A
1995 UNION CARBIDE PERFORMANCE INCENTIVE PLAN
Section 1: Purpose
The purpose of the Plan is to provide incentive compensation to certain
designated employees of the Corporation who hold senior management positions
with the Corporation, based upon the achievement of preestablished performance
goals to assure that such compensation is deductible by the Corporation under
Section 162(m) of the Internal Revenue Code.
Section 2: Definitions
2.1 "Award" shall mean the amount payable to a Participant under
the Plan determined in accordance with the terms of the Plan.
2.2 "Award Year" shall mean each calendar year with respect to
which Awards are payable under the Plan.
2.3 "Beneficiary" shall mean a Participant's deemed beneficiary
pursuant to Section 9 hereof.
2.4 "Board" shall mean the Board of Directors of Union Carbide
Corporation.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any and all regulations promulgated thereunder.
2.6 "Committee" shall mean the Compensation and Management
Development Committee of the Board. Each member of the Committee shall at all
times be an "outside director" as defined in Section 162(m) of the Code.
2.7 "Corporation" shall mean Union Carbide Corporation and such
of its subsidiary companies as shall be designated by the Board to participate
in the Plan.
2.8 "Participant" shall mean an employee of the Corporation
designated by the Committee under Section 4 to participate in the Plan.
2.9 "Plan" shall mean this 1995 Union Carbide Performance
Incentive Plan.
2.10 "Savings Program" shall mean the Savings Program for
Employees of Union Carbide Corporation and Participating Subsidiary Companies.
Section 3: Administration
3.1 The Plan shall be administered by the Committee, who shall
have full power and authority to administer, construe and interpret the Plan,
establish and amend administrative regulations to further the purpose of the
Plan, and take any other action necessary to administer the plan, provided,
however, that notwithstanding any other provision of the Plan to the contrary,
the Plan shall be operated such that Awards paid pursuant to the Plan shall be
deductible by the Corporation pursuant to Section 162(m) of the Code. The
Committee's decision, actions, and interpretations regarding the Plan shall be
final and binding upon all Participants and Beneficiaries.
3.2 The Committee may, to the extent permitted by law, delegate
its authority as described hereunder; provided, however, that the Committee may
not delegate its responsibilities hereunder if such delegation would jeopardize
compliance with the "outside directors" requirement (or any other applicable
requirement) under Section 162(m) of the Code.
33
<PAGE>
Section 4: Eligibility
4.1 The Chief Executive Officer and the Chief Operating Officer
of the Corporation shall be the Participants eligible for awards under the Plan.
Prior to the beginning of each Award Year, the Committee may designate other
employees of the Corporation who may be the Participants eligible for Awards
under the Plan.
Section 5: Awards
5.1 The Committee may adopt in writing objective performance
goals for an Award Year which shall be based upon the Corporation's return on
capital relative to a peer group of companies or such other financial criteria
as the Committee shall determine. The Committee may then establish an award
schedule based upon achievement during such Award Year of such performance
goals. Such award schedule and performance goals shall be approved by the
Committee prior to or after the start of the Award Year, except that the award
schedule and performance goals may not be approved after the start of the Award
Year unless the Awards made pursuant thereto would be deductible by the
Corporation under Section 162(m) of the Code.
5.2 An individual award to the Chairman or CEO cannot exceed
$1,500,000 and to all others cannot exceed $800,000 for any Award Year.
5.3 The Committee may determine to reduce any Award determined
under the Plan (including no Award) but the Committee shall be precluded from
increasing such Award.
5.4 The Committee shall certify that the performance goals have
been satisfied prior to the determination and payment of any Award.
Section 6: Payment of Awards
6.1 Awards shall be paid in cash in the first quarter of the
calendar year following the Award Year.
6.2 The Committee reserves the right to accelerate payment of
some or all of an Award into an Award Year if such acceleration does not result
in loss of deductibility of the Award to the Corporation pursuant to Section
162(m) of the Code.
6.3 The Corporation shall have the right to deduct from any
Award to be paid under the Plan any federal, state or local taxes required by
law to be withheld with respect to such payment.
Section 7: Termination of Employment
7.1 If a Participant's employment with the Corporation is
terminated during an Award Year, the Committee shall determine whether the
Participant shall be entitled to any Award for such Award Year and the amount
of any such Award.
7.2 A Participant whose employment with the Corporation is
terminated for any reason shall be deemed to have terminated employment with
the Corporation on the last day of the month in which the termination occurs.
Section 8: Adjustments
8.1 In order to assure the incentive features of the Plan and
to avoid distortion in the operation of the Plan, the Committee shall make
adjustments in the performance goals established for any Award Year, whether
before or after the end of the Award Year to compensate for or reflect any
extraordinary changes which may have occurred during the Award Year which
alter the basis upon which performance levels were determined. Such changes
include the following: extraordinary items, accounting changes, income from
discontinued operations, and the impact of material events that have been
publicly disclosed.
34
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Notwithstanding anything to the contrary, the Committee may
forego all or a portion of any of the above adjustments, to the extent it deems
appropriate, if in doing so the Awards would be deductible to the Corporation
under Section 162(m) of the Code.
Section 9: Beneficiary Designation
9.1 The beneficiary or beneficiaries designated by the
Participant or deemed to have been designated by the Participant under the
Savings Program shall be deemed to be the Participant's Beneficiary. If a
Participant does not participate in the Savings Program or if a Participant does
participate in the Savings Program and has not designated or been deemed to have
designated a beneficiary thereunder, and such Participant dies without
designating a Beneficiary under this Plan, or if a Beneficiary does not survive
the Participant, then any Awards to which the Participant is entitled that have
not been paid prior to the Participant's death shall be distributed to the
Participant's estate. If the Beneficiary of a deceased Participant survives the
Participant, and dies before such Participant's Award is distributed, then such
Award shall be distributed to the Beneficiary's estate.
Section 10: General Provisions
10.1 A Participant may not assign an Award without the Committee's
prior written consent. Any attempted assignment without such consent shall be
null and void. For purposes of this paragraph, any designation of, or payment
to, a Beneficiary shall not be deemed an assignment.
10.2 The Plan is intended to constitute an unfunded incentive
compensation arrangement for a select group of key management. Nothing contained
in the Plan, and no action taken pursuant to the Plan, shall create or be
construed to create a trust of any kind. A Participant's right to receive an
Award shall be no greater than the right of an unsecured general creditor of the
Corporation. All Awards shall be paid from the general funds of the Corporation,
and no special or separate fund shall be established and no segregation of
assets shall be made to assure payment of such Awards.
10.3 Nothing contained in the Plan shall give any Participant the
right to continue in the employment of the Corporation, or affect the right of
the Corporation to discharge a Participant.
10.4 No person shall have any claim to be granted an Award under
the Plan and there is no obligation for uniformity of treatment of eligible
employees under the Plan.
10.5 The Plan shall be construed and governed in accordance with
the laws of the State of New York.
Section 11: Amendment, Suspension, or Termination
The Board reserves the right to amend, suspend, or terminate the Plan
at any time; provided, however, that any amendment, suspension or termination
shall not adversely affect the rights of Participants or Beneficiaries to
receive Awards granted prior to such action.
Section 12: Effective Date and Duration of Plan
The Plan shall be effective for services to the Corporation performed
by Participants for years beginning on or after January 1, 1995. No payments
shall be made under the Plan until the material terms of the Plan have been
approved by the shareholders of the Corporation.
UNION CARBIDE CORPORATION
By:
-------------------------------------
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PRINTED ON RECYCLED PAPER [RECYCLED PAPER LOGO APPEARS HERE] PRINTED IN U.S.A.
<PAGE>
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 26, 1995
I or we authorize V. E. Jordan Jr., R. D. Kennedy, and J. E. Geoghan, and any
one or more of them, as proxies, to vote all stock of mine or ours in Union
Carbide Corporation on any matters that come before its 1995 Annual Meeting
of Stockholders or any adjournment of the meeting. Each proxy may substitute
another to act for him. Each item of business listed on the back of this card
is described in the Proxy Statement.
THE PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THIS CARD, (2) AS THE BOARD OF
DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY A CHOICE, AND (3) AS THE PROXIES
DECIDE ON ANY OTHER MATTER.
TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS, JUST SIGN, DATE AND
RETURN THIS CARD.
------------------------------------------------------------
Signature(s)
------------------------------------------------------------
(Please add your title if signing as agent, administrator,
executor, or trustee.)
_____________________________________________________, 1995
Date
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MANAGEMENT PROPOSALS 1, 2 AND 3.
1. Election of Directors
[ ] FOR all Nominees
[ ] WITHHELD from all Nominees
[ ] FOR, except for the following Nominee(s)
------------------------------------------------------------------------
2. Ratification of KPMG Peat Marwick LLP as Independent Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Adoption of 1995 Union Carbide Performance Incentive Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST STOCKHOLDER PROPOSAL 4.
4. Proposal Regarding Severance Compensation Agreements
FOR [ ] AGAINST [ ] ABSTAIN [ ]
- --------------------------------------------------------------------------------
If you wish to vote as the Board of Directors' recommends, you need not mark
this card. Just sign and date this card and return it promptly in the
enclosed envelope.
YOUR VOTE IS IMPORTANT -- PLEASE VOTE TODAY.
Nominees for
Director of
Union Carbide
Corporation
John J. Creedon
C. Fred Fetterolf
Joseph E. Geoghan
Rainer E. Gut
James M. Hester
Vernon E. Jordan, Jr.
William H. Joyce
Robert D. Kennedy
Ronald L. Kuehn, Jr.
Rozanne L. Ridgway
William S. Sneath
