<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 Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE CLOROX COMPANY
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
THE CLOROX COMPANY
---------
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
-------------
ANNUAL MEETING OF
STOCKHOLDERS
NOVEMBER 18, 1998
<PAGE>
[LOGO]
THE CLOROX COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 1998
The Annual Meeting of Stockholders of The Clorox Company, a Delaware corporation
(the "Company"), will be held at 9:00 A.M. on Wednesday, November 18, 1998, at
the offices of the Company, 1221 Broadway, Oakland, California, for the
following purposes:
1. To elect a board of eleven directors to hold office until the next
annual election of directors;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 1999; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The board of directors has fixed the close of business on September 21, 1998 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the meeting and any adjournment thereof. A list of such stockholders
will be available at the time and place of the meeting and, during the ten days
prior to the meeting, at the office of the Secretary of the Company at 1221
Broadway, Oakland, California.
A copy of the Company's Annual Report for the fiscal year ended June 30, 1998,
containing financial statements, is included with this mailing.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF YOU
PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL READ THE ENCLOSED PROXY
STATEMENT AND THE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, AND THEN VOTE
(1) BY COMPLETING, SIGNING, DATING AND MAILING THE PROXY CARD IN THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE, OR (2) BY CALLING THE 800 TOLL-FREE NUMBER LISTED ON
THE PROXY CARD, OR (3) VIA THE INTERNET AS INDICATED ON THE PROXY CARD. THIS
WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
By Order of the Board of Directors
[LOGO]
Peter D. Bewley,
SENIOR VICE PRESIDENT -- GENERAL
COUNSEL AND SECRETARY
September 29, 1998
<PAGE>
THE CLOROX COMPANY
1221 BROADWAY
OAKLAND, CALIFORNIA 94612
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies
by the board of directors of The Clorox Company, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders of the Company, to be
held at 9:00 A.M. on November 18, 1998 at the above offices of the Company (the
"Annual Meeting").
THE PROXY
A stockholder giving the enclosed proxy may revoke it at any time before it is
used by giving written notice of revocation to the Secretary of the Company or
by voting in person at the Annual Meeting.
VOTING AT THE ANNUAL MEETING
The only voting securities of the Company are its shares of Common Stock, of
which 103,522,070 shares were outstanding and entitled to vote at the close of
business on September 21, 1998. Only stockholders of record at the close of
business on September 21, 1998 are entitled to vote at the Annual Meeting. The
holders of the Common Stock are entitled to one vote per share on each matter
submitted to a vote of stockholders.
The holders of a majority of the issued and outstanding Common Stock, present in
person or by proxy, will constitute a quorum for the transaction of business at
the Annual Meeting or any adjournment thereof. Abstentions and broker non-votes
are counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions are not counted as votes cast
on the proposed election of directors, but will have the same legal effect as a
vote against the ratification of the appointment of independent auditors. Broker
non-votes are not counted as votes cast on any matter to which they relate.
This proxy statement and the accompanying proxy are first being sent or given to
stockholders on or about September 29, 1998.
PROPOSAL NO. 1:
NOMINEES FOR ELECTION AS DIRECTORS
At the Annual Meeting, eleven persons will be elected as members of the board of
directors, each for a one-year term. The Nominating Committee of the board of
directors has nominated the eleven persons listed below for election at the
Annual Meeting. All of such nominees were elected at the Company's Annual
Meeting of Stockholders held on November 19, 1997, except Mr. Tully Friedman.
The proxies given to the proxyholders will be voted or not voted as directed
and, if no direction is given, will be voted FOR these eleven nominees. The
board of directors knows of no reason why any of these nominees should be unable
or unwilling to serve. However, if for any reason any nominee should be unable
or unwilling to serve, the proxies will be voted for the election of such other
person to the office of director as the board of directors may nominate in the
place of such nominee. Directors will be elected by a plurality of the shares
represented and voting at the meeting.
1
<PAGE>
Certain information with respect to each nominee appears on the following pages,
including age, period or periods served as a director, position (if any) with
the Company, business experience during at least the past five years and
directorships of other publicly-owned corporations.
<TABLE>
<CAPTION>
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<S> <C> <C>
NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
<CAPTION>
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<S> <C> <C>
DANIEL BOGGAN, JR. Senior Vice President, the National 1990
Collegiate Athletic Association.
Mr. Boggan became Senior Vice President of the National
Collegiate Athletic Association in 1996, after having been
Group Executive Director for Education Services for the
National Collegiate Athletic Association since November 1994.
Previously, he had been Vice Chancellor for business and
administrative services at the University of
California at Berkeley since 1986. Prior to that, he served
several cities and two counties as a senior manager. Mr. [PHOTO]
Boggan is a director of Payless Shoesource, Inc. and serves
on various local boards. Age: 52.
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JOHN W. COLLINS Former President and Chief Operating Officer 1993
of the Company.
Mr. Collins was President and Chief Operating Officer of the
Company from March 1986 through December 1989. He was also a
Director of the Company from July 1983 through October 1989.
Beginning January 1990, he was on a paid leave of absence
which extended until his retirement on December 31, 1993. He
was not active in the
Company's affairs from January 1990 until his reelection to [PHOTO]
the board of directors in January 1993. Age: 67.
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URSULA FAIRCHILD Professional Photographer and Member of the 1976
Supervisory Board of Henkel KGaA.
Mrs. Fairchild is a professional photographer, as well as a
member of the Supervisory Board of Henkel KGaA, Duesseldorf,
Germany (manufacturer of household products and chemicals).
She is a member of the Henkel family, which controls Henkel
KGaA, and is nominated pursuant to an understanding between
the Company and Henkel
KGaA (see Certain Relationships and Transactions, page 8 [PHOTO]
below). Age: 67.
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</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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<S> <C> <C>
TULLY M. FRIEDMAN Chairman and Chief Executive Officer, 1997
Friedman, Fleischer & Lowe, LLC.
Mr. Friedman is the Chairman and Chief Executive Officer of
Friedman, Fleischer & Lowe, LLC (a private investment firm).
Prior to that, Mr. Friedman was a founding partner of Hellman
& Friedman (a private investment firm) and a managing
director and general partner of Salomon Brothers, Inc. He is
a director of Levi Strauss & Co., Inc.,
Mattel, Inc., McKesson Corp. and on the advisory board of
Tevecap, S.A. Mr. Friedman is also a member of the executive
committee, a trustee, and the treasurer of the American [PHOTO]
Enterprise Institute and is a director of the Stanford
Management Company. Age: 56.
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JUERGEN MANCHOT Vice-Chairman of the Shareholders' Commit- 1989
tee, Henkel KGaA.
Dr. Manchot is the Vice-Chairman of the Shareholders'
Committee of Henkel KGaA, Duesseldorf, Germany (manufacturer
of household products and chemicals). He is a member of the
Henkel family, which controls Henkel KGaA, and is nominated
pursuant to an understanding between the Company and Henkel
KGaA (see Certain Relation-
ships and Transactions, page 8 below). Dr. Manchot is a [PHOTO]
director of Transaction Network Services Inc. Age: 61.
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DEAN O. MORTON Retired Executive Vice President and Chief 1991
Operating Officer, Hewlett-Packard Company.
Mr. Morton was the Executive Vice President, Chief Operating
Officer and a Director of Hewlett-Packard Company
(manufacturer of computer systems and test and measurement
instruments) until his retirement in 1992. Mr. Morton is a
director of ALZA Corporation, Raychem Corporation, KLA-Tencor
Inc., Centigram Communications
Corporation and BEA Systems Inc. He is a trustee of The State
Street Research Group of Funds, The State Street Research [PHOTO]
Portfolios, Inc. and The Metropolitan Series Fund Inc. Age:
66.
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</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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<S> <C> <C>
KLAUS MORWIND Executive Vice President, Personally Liable 1995
Associate, and Member of Management Board, Henkel KGaA.
Dr. Morwind is Executive Vice President, Personally Liable
Associate and a member of the Management Board of Henkel
KGaA, Duesseldorf, Germany (manufacturer of household
products and chemicals). He joined Henkel KGaA in 1969 and
held several management positions before assuming his current
responsibility. Dr. Morwind is
nominated pursuant to an understanding between the Company
and Henkel KGaA (see Certain Relationships and Transactions, [PHOTO]
page 8 below). Age: 55.
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EDWARD L. SCARFF Private Investor. 1986
Mr. Scarff has been a private investor for more than five
years. From 1983 through 1994, he was Chairman of the Board
and Chief Executive Officer of Arcata Corporation (commercial
printer and manufacturer of redwood lumber). Mr. Scarff is a
director of Unicon International Ltd., Channel Master LLC,
IMPCO Technologies and is
General Partner of Questor Management Co. Age: 67. [PHOTO]
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LARY R. SCOTT Executive Vice President, Arkansas Best 1989
Corporation.
Mr. Scott was elected as Executive Vice President of Arkansas
Best Corporation (holding company with a multi-industry
composition) in January 1996. Previously, he had been
Chairman and Chief Executive Officer of WorldWay Corporation
from May 1993 until January 1996. Prior to that, Mr. Scott
was President and Chief Executive Officer of
Consolidated Freightways, Inc. (a worldwide transportation [PHOTO]
company). Age: 62.
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</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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<S> <C> <C>
G. CRAIG SULLIVAN Chairman of the Board and Chief Executive 1992
Officer of the Company.
Mr. Sullivan has been Chairman of the Board and Chief
Executive Officer of the Company since July 1, 1992.
Previously, he was Vice Chairman and Chief Executive Officer
(May-June, 1992); Group Vice President (1989-1992); Vice
President -- Household Products (1984-1989); and Vice
President -- Food Service Products
(1981-1984). He joined the Company in 1971. Mr. Sullivan is a [PHOTO]
director of Levi Strauss & Co., Inc. Age: 58.
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C. A. (AL) WOLFE Retired President, U.S. Division, DDB 1991
Needham Worldwide, and President, Al Wolfe Associates, Inc.
Mr. Wolfe is the President of Al Wolfe Associates, Inc., a
marketing and advertising consulting firm. He is the retired
President of the U.S. Division of DDB Needham Worldwide, a
major advertising agency. Previously, Mr. Wolfe had been
Executive Vice President of N.W. Ayer and Executive Vice
President and General Manager of Wells, Rich,
Greene advertising agencies. He is a director of Dolphin [PHOTO]
Software, Inc. Age: 66.
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</TABLE>
ORGANIZATION OF THE BOARD OF DIRECTORS
The board of directors has established five standing committees: the Executive
Committee, the Finance Committee, the Audit Committee, the Nominating Committee,
and the Employee Benefits and Management Compensation Committee. The Finance,
Audit, Nominating, and Employee Benefits and Management Compensation Committees
consist only of non-management, independent directors.
EXECUTIVE COMMITTEE. The Executive Committee, consisting of directors Collins,
Fairchild, Friedman, Manchot, Morton, Scarff, Sullivan, and Mr. James A. Vohs is
delegated all of the powers of the board of directors except certain powers
reserved by law to the full board. Mr. Vohs is retiring as a director, and his
term on the board of directors, and all committees thereof, will expire at the
Annual Meeting. In addition to being available to meet between regular board
meetings on occasions when board action is required but the convening of a full
board is impracticable, the Executive Committee is authorized to handle special
assignments as requested from time to time by the board. The Executive Committee
held no meetings during fiscal year 1998.
FINANCE COMMITTEE. The Finance Committee consists of directors Boggan, Collins,
Friedman, Manchot, Morton, Morwind and Scarff and, working with the Company's
finance and operating personnel, considers and recommends to the board major
financial policies and actions of the Company. The Finance Committee held four
meetings during fiscal year 1998.
5
<PAGE>
AUDIT COMMITTEE. The Audit Committee, composed of directors Fairchild, Morwind,
Scarff, Scott and Wolfe, is the principal link between the board and the
Company's independent public accountants. The Audit Committee makes
recommendations to the board regarding selection and employment of the Company's
independent auditors and, working with the Company's internal and external
auditors, monitors internal audit and control procedures. The Audit Committee
held three meetings during fiscal year 1998.
NOMINATING COMMITTEE. Directors Boggan, Fairchild, Scarff, Vohs and Wolfe are
members of the Nominating Committee. The Nominating Committee identifies and
recommends to the board of directors prospective candidates to be considered as
nominees for election to the board, including those recommended in writing by
any stockholder. The Nominating Committee held two meetings during fiscal year
1998.
COMPENSATION COMMITTEE. The Employee Benefits and Management Compensation
Committee (the "Compensation Committee") consists of directors Fairchild,
Friedman, Manchot, Morton, Scott, and Vohs. The Compensation Committee
establishes and monitors the policies under which compensation is paid or
awarded to the Company's executive officers, determines executive compensation,
grants stock options, restricted stock, performance units and other cash or
stock awards under the Company's executive incentive compensation and stock
incentive plans, and reviews pension and other retirement plans for adequacy and
compliance with applicable regulations. The Compensation Committee held two
meetings during fiscal year 1998.
The board of directors held seven meetings during fiscal year 1998. All
directors attended more than 75% of the meetings of the board and committees of
which they were members during fiscal year 1998.
Non-management directors received an annual fee of $27,500 for the 1998 fiscal
year. In addition, each non-management director received $1,000 for each meeting
of the board attended and $875 for each meeting of a board committee attended.
The chairperson of each committee received an additional $625 for each committee
meeting attended. In addition, each non-management director is entitled to
receive $1,000 per day for any special assignment requested of any such director
by the board. Special assignment fees in the amount of $1,000 each were paid in
fiscal year 1998 to directors Boggan, Collins, Fairchild and Wolfe. Directors
may elect to defer all or a part of such compensation pursuant to the terms of
the Company's Independent Directors' Stock-Based Compensation Plan (the
"Directors' Stock-Based Compensation Plan"). Management directors receive no
extra compensation for their service as directors.
Under the Directors' Stock-Based Compensation Plan, a director may annually
elect to receive all or a portion of her or his annual retainer and meeting fees
in the form of cash, Common Stock, deferred cash or deferred stock units. In
addition, each non-employee director also receives an annual grant of $10,000 of
deferred stock units. Interest accrues on deferred amounts at an annual interest
rate equal to Wells Fargo Bank's prime lending rate in effect on January 1 of
each year (8.5% at January 1, 1998). Each deferred stock unit represents a
hypothetical share of Common Stock, and a participant's deferred stock unit
account is increased by Common Stock dividends paid by the Company. Upon
termination of service as a director, the amounts accrued for the director under
the Directors' Stock-Based Compensation Plan are paid out in cash and/or Common
Stock in five annual installments or, at the director's election, in one lump
sum payment of cash and/or Common Stock.
Pursuant to the Company's 1993 Directors' Stock Option Plan, each non-management
director received a grant of stock options covering 1,000 shares of Common Stock
during fiscal year 1998 and will receive a grant covering 1,000 shares of Common
Stock in subsequent fiscal years. In addition, Mr. Tully Friedman received an
initial grant of stock options covering 4,000 shares of Common Stock during
fiscal year 1998 in connection with joining the board of directors. Such stock
options vest in two equal installments on each of the first two anniversary
dates of the grant date and have an exercise price equal to the fair market
value on the grant date.
6
<PAGE>
Other than the non-management director fees, the deferred stock unit grants
under the Directors' Stock-Based Compensation Plan, and the stock option grants
under the Directors' Stock Option Plan, directors who are not employees of the
Company do not receive any additional form of direct compensation, nor do they
participate in any of the Company's employee benefit plans.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table shows, as of July 31, 1998, the holdings of the Common Stock
by (i) any entity or person known to the Company to be the beneficial owner of
more than 5% of the Common Stock, (ii) each director and each of the five
executive officers named in the Summary Compensation Table on page 12 (the
"Named Officers"), and (iii) all directors and executive officers of the Company
as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS(3)
- ------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
HC Investments, Inc.(4) 30,856,200 29.8%
Daniel Boggan, Jr. 3,574 *
John W. Collins 31,494 *
Ursula Fairchild 13,500 *
Tully M. Friedman 0 *
Gerald E. Johnston 130,401 *
Peter N. Louras 212,731 *
Juergen Manchot 9,500 *
Dean O. Morton 11,500 *
Klaus Morwind 6,300 *
Donald C. Murray 135,484 *
Lawrence S. Peiros 63,943 *
Edward L. Scarff 17,500 *
Lary R. Scott 14,457 *
G. Craig Sullivan 695,597 *
James O. Vohs 9,500 *
C. A. (Al) Wolfe 9,500 *
All directors and executive officers as a group
(32 persons)(5) 2,276,228 2.2%
</TABLE>
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Notes:
* Does not exceed 1% of the outstanding shares.
(1) Correspondence to all executive officers and directors of the Company may be
mailed c/o the Company to 1221 Broadway, Oakland, California 94612. The
address of HC Investments, Inc. is 1100 North Market Street, Suite 780,
Wilmington, Delaware 19801.
(2) Each beneficial owner listed has sole voting and dispositive power (or
shares such power with her or his spouse) concerning the shares indicated.
These totals include the following number of shares of Common Stock which
such persons have the right to acquire through stock options exercisable
within 60 days of July 31, 1998: Mr. Sullivan -- 653,386; Mr. Louras --
182,632; Mr. Johnston -- 120,526; Mr. Murray -- 119,618; Mr. Peiros --
53,144; Mr. Boggan -- 3,000; Mr. Friedman -- 0; each of Dr. Morwind and Mr.
Wolfe -- 5,500; each of the other directors -- 7,500; and all directors,
Named Officers and other executive officers as a group (32 persons) --
1,953,483. The numbers above do not include the following numbers of shares
of Common Stock which the executive officers have the right to acquire upon
the termination of their service as employees pursuant to deferred stock
units granted
7
<PAGE>
in December 1995 in exchange for the cancellation of certain restricted
stock, and through deferred stock unit dividends thereon: Mr. Sullivan --
41,558; Mr. Louras -- 13,986; Mr. Johnston -- 7,894; Mr. Murray -- 9,462;
Mr. Peiros -- 5,385; and all Named Officers and other executive officers as
a group (32 persons) -- 118,249. The numbers above do not include the
following number of shares of Common Stock which the non-employee directors
have the right to acquire upon the termination of their service as directors
pursuant to deferred stock units granted under the Directors' Stock-Based
Compensation Plan: Mr. Boggan -- 2,011; Mr. Collins -- 1,693; Mrs. Fairchild
-- 7,049; Mr. Friedman -- 445; Dr. Manchot -- 1,808; Mr. Morton -- 2,394;
Dr. Morwind -- 2,209; Mr. Scarff -- 14,553; Mr. Scott -- 2,719; Mr. Vohs --
5,535; and Mr. Wolfe -- 1,832.
(3) On July 31, 1998, there were 103,684,744 shares of Common Stock issued and
outstanding.
(4) Indirect wholly-owned U.S. subsidiary of Henkel KGaA of Duesseldorf, Germany
(manufacturer of household products and chemicals).
(5) Pursuant to Rule 3b-7 under the Securities Exchange Act of 1934, executive
officers include the Named Officers and all the vice presidents of the
Company.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company and Henkel KGaA are parties to a June 1981 letter agreement (as
amended in July 1986 and March 1987, the "Letter Agreement"), relating to
ownership by Henkel KGaA of Common Stock and representation on the Company's
board of directors. The Letter Agreement assures Henkel KGaA of the right to
nominate for election to the board a minimum of two representatives so long as
Henkel KGaA beneficially owns at least 5% of the outstanding shares of Common
Stock. Under the Letter Agreement, Henkel KGaA's maximum permitted ownership of
Common Stock without consultation with the Company is limited to 30%, and Henkel
KGaA has affirmed that it considers its investment in the Company as long-term
and its role in the Company as that of a significant minority stockholder
without an active role in the management of the Company.
The Company and Henkel KGaA have entered into certain joint manufacturing,
marketing and product development arrangements in the United States and
internationally, either directly or through affiliates or joint venture
collaboration. No such arrangements, either individually or in the aggregate,
were material to the Company or Henkel KGaA during fiscal year 1998.
During fiscal year 1995, in connection with joining the Company, Frank A.
Tataseo, Vice President -- Sales of the Company, received a five-year $150,000
mortgage loan without interest from the Company, which loan remained outstanding
during fiscal year 1998.
EMPLOYEE BENEFITS AND MANAGEMENT COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The membership of the Compensation Committee consists entirely of directors who
have never been employees of the Company (see page 6).
COMPENSATION PHILOSOPHY.
The Compensation Committee determines executive compensation levels and policies
designed to:
- Motivate each executive toward the achievement of the Company's short and
long-term goals, as reflected in its strategic business plans and its
statement of principles and values.
- Be competitive with comparable organizations.
- Be based on both Company performance and the individual's contributions to
the Company's results.
8
<PAGE>
- Ensure that a significant proportion of each executive's total
compensation be at-risk incentive compensation in order to emphasize the
relationship between pay and performance.
- Align the interests of executives with those of stockholders through the
use of equity-based incentive awards.
COMPENSATION OF EXECUTIVE OFFICERS.
The key components of the executive compensation program are base annual salary,
annual short-term incentive awards in the form of stock or cash under the
Company's 1996 Executive Incentive Compensation Plan (the "EIC Plan"), and
long-term incentive awards in the form of stock options and performance units
under the Company's 1996 Stock Incentive Plan. The compensation guidelines are
determined by the Compensation Committee based upon competitive data collected
from the comparator peer group discussed below and internal ranking within the
executive officer group. General targeted competitive levels for base annual
salary and annual, at-risk short-term incentive awards are the 50th percentile
of such comparator peer group. General targeted competitive levels for at-risk,
long-term compensation are also the 50th percentile with opportunities at the
75th percentile of such comparator peer groups for superior financial
performance. There is opportunity for the executive officers to earn more than
the targeted levels if the Company's performance exceeds the measures discussed
in this report and less when performance falls below the targeted levels.
BASE ANNUAL SALARY. Base annual salaries for executive officers are determined
by the following factors: (1) parity to market; (2) the individual's
performance; (3) promotions resulting in increases in responsibility; and (4)
equity in relationship to other executive positions within the Company. With the
assistance of the Company's compensation consulting firm, surveys are conducted
of benchmark positions in 19 other peer companies (the "Peer Companies"), most
of which compete with the Company in one or more of its primary businesses or
compete with the Company for management talent. Those which are not direct
competitors are in closely-related fields. The Compensation Committee takes into
account both the size and performance of the Company relative to the size and
performance of the Peer Companies. It also considers the competitiveness of the
entire compensation package of the Company's executive officers compared to the
Peer Companies. The Compensation Committee reviews which peer companies are
selected for compensation analysis and updates the composition of the Peer
Companies periodically. For fiscal year 1998, the Compensation Committee
established target salaries for executive officers which approximated the 50th
percentile or median level of benchmarked positions with the Peer Companies. An
individual executive officer's actual salary versus the established target
salary depends upon the executive officer's performance, as judged by her or his
immediate superior and the chief executive officer. The chief executive
officer's performance is judged by the Compensation Committee. The performance
of the other five executive officers who serve as members of the management
executive committee is judged by the chief executive officer and the
Compensation Committee together.
EXECUTIVE INCENTIVE COMPENSATION PLAN. For fiscal year 1998, the EIC Plan, as
it applied to executive officers, established a linkage between the annual bonus
awards and both the Company's performance and the performance of the executive
officers. The Compensation Committee believes that awards under the EIC Plan
should include a reward for superior performance and an element of adverse
consequences for poor financial results, including no EIC Plan award funding for
the Company's financial performance component described below unless the Company
achieves corporate financial performance measures previously established by the
Compensation Committee. Those targets were exceeded in fiscal year 1998.
In keeping with the Company's desire to have executive officers build their
holdings of the Company's stock, in fiscal year 1998 executive officers
continued to be able to elect to receive all or a portion of their EIC Plan
award in the Company's stock rather than cash. Those participants electing stock
received a premium equal to 10% of the bonus amount elected to be paid in the
Company's stock based on the fair market value on the date of issuance. Those
premium shares will be forfeited if the officer transfers the
9
<PAGE>
EIC Plan stock within two years of date of issuance or leaves the Company, other
than by death, disability, retirement or change of control, before that date.
For the EIC Plan, the Compensation Committee divided the executive officer group
into two subcategories: the executive officers who serve as members of the
management executive committee and the other executive officers. As of June 30,
1998, the six executive officers serving as members of the management executive
committee were the Named Officers in the Summary Compensation Table on page 12
(except for Lawrence S. Peiros, Vice-President -- Household Products), plus
Peter D. Bewley and Karen M. Rose. For the management executive committee
officers, 75% of the EIC Plan award was determined by achieving corporate
financial performance measures previously established by the Compensation
Committee based on a computation consisting of targeted operating margin level,
asset turnover rate and volume growth. The targeted corporate financial measures
were exceeded as measured at the end of fiscal year 1998.
The remaining 25% of the EIC Plan award was based on achieving pre-established
individual objectives related to goals that may not be measured by traditional
accounting tools, including projects aimed at improving the capability of the
Company to grow, the effectiveness of the Company's processes and people and
cost savings projects. Individual objectives and the weight given each
individual objective were the same for the members of the management executive
committee.
The target EIC Plan award for the management executive committee members ranged
from 50-60% of base annual salary at June 30, 1998 (80% for the chief executive
officer) if the corporate financial performance and individual objectives were
achieved. The maximum EIC Plan award was 100-120% of base annual salary at June
30, 1998 (160% for the chief executive officer) if the goals were substantially
exceeded, and the minimum EIC Plan award was 0 if the goals came in
substantially lower than the targets. All EIC Plan awards are determined by the
chief executive officer and the Compensation Committee or, in the chief
executive officer's case, by the Compensation Committee. The EIC Plan awards to
members of the executive officer group, other than the management executive
committee members, were determined based on (i) the same corporate financial
performance measures; and (ii) achieving individual objectives, including, for
operating division officers, operating division financial performance measures
and other individual objectives, and for staff executive officers, individual
objectives, such as the achievement of selected strategic goals and the
successful development of human resources. Individual objectives and the weight
given each individual objective varied from person to person depending on job
responsibilities. The target EIC Plan award for these other members of the
executive officer group was 40-50% of base annual salary at June 30, 1998 if
goals were achieved up to a maximum of 80-100% if the goals were substantially
exceeded and down to a minimum of 0 if the goals came in substantially lower
than the targets.
LONG-TERM COMPENSATION. A major goal of the Compensation Committee is to create
strong alignment between the executive officers and stockholders. This alignment
is achieved through the design of incentive plans and through actual stock
ownership. In furtherance of this goal, in April 1996, the Compensation
Committee made a 3-year grant of stock options and performance units to all
executive officers. In light of the fiscal year 1996 long-term grant, no
long-term compensation was awarded during fiscal year 1998 to any of the Named
Officers in the Summary Compensation Table on page 12.
The Compensation Committee has endorsed target stock ownership levels by
executive officers to be achieved by fiscal year 1999, based on the fair market
value of the Common Stock at that time. The levels are the equivalent of four
times base annual salary for the chief executive officer, three times base
annual salary for the other executive officers who serve as members of the
management executive committee, and two times base annual salary for other
executive officers. No stock options will be counted in determining ownership
levels, which will be based on shares of Common Stock held, including restricted
stock, performance shares and performance units, if payable only in stock, and
shares held via the Company's Value Sharing Plan, a profit sharing plan which
includes 401(k) features.
BENEFITS. The Company provides various employee benefit programs to its
executive officers, including medical and life insurance benefits, retirement
benefits, an employee stock purchase plan and the Value
10
<PAGE>
Sharing Plan. Except for the Supplemental Executive Retirement Plan and the
Non-Qualified Deferred Compensation Plan described on page 16 and some
non-material perquisites given to executive officers, these benefit programs are
generally available to all employees of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION.
The Compensation Committee increased Mr. Sullivan's base annual salary on
October 1, 1997 from $725,000 to $800,000. In determining the amount of Mr.
Sullivan's salary increase for fiscal year 1998, the Compensation Committee took
into consideration the Company's overall performance for the 1997 fiscal year.
The Company's achievements for fiscal year 1997 included a total shareholder
return of 52%, placing Clorox well above the total shareholder return of the S&P
500 and in the 66th percentile of the Peer Companies; volume growth of 14%; an
increase in net earnings of 12%; maintenance of a net profit margin of close to
10%; and an all-time record high 25.4% return on equity from continuing
operations. Mr. Sullivan's salary increase was also determined based on parity
to the median level of comparable positions in the Peer Companies and his tenure
as chief executive officer.
Mr. Sullivan's EIC Plan award for fiscal year 1998 was based upon the weighted
corporate financial performance measures (75%) and individual objectives (25%)
established by the Compensation Committee as described above. The targets were
exceeded, and Mr. Sullivan's EIC Plan award formula called for a payment of
$1,116,800.
As described above, Mr. Sullivan did not receive any long-term compensation
awards during fiscal year 1998. Other than making awards at a higher percentage
of his base annual salary, the Compensation Committee did not treat Mr.
Sullivan's Stock Incentive Plan or EIC Plan awards differently from other
members of the management executive committee.
ONGOING REVIEW OF COMPENSATION.
The Company's compensation consulting firm conducts an ongoing review of the
Company's existing executive compensation programs for the Compensation
Committee to continue to ensure the programs support the future direction of the
Company and the principles on which executive compensation is based. The
Compensation Committee reserves the right to select and/or to meet independently
with any consultant at its discretion. The Compensation Committee has access to
and reviews independent compensation data relating to executive compensation at
other companies. The Compensation Committee has developed performance goals,
which have been approved by the Company's stockholders, in order to qualify for
exclusion the bulk of the EIC Plan awards and all stock-based long-term
compensation to the five highest paid executive officers from the federal $1
million tax deductibility limit pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended. The Compensation Committee's policy seeks to
balance the interests of the Company in maintaining flexible incentive plans and
how the Company benefits from the compensation package paid to any executive
officer against the possible loss of a tax deduction when taxable compensation
for any of the five highest paid executive officers exceeds $1 million per year.
Dean O. Morton, Chair Juergen Manchot
Ursula Fairchild Lary R. Scott
Tully M. Friedman James A. Vohs
(Members of the Compensation Committee)
11
<PAGE>
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for the prior fiscal year were
directors Fairchild, Friedman, Manchot, Morton, Scott, and Vohs, and retired
director Forrest N. Shumway. None of these persons is or has been an officer or
employee of the Company or any of its subsidiaries. In addition, there are no
Compensation Committee interlocks between the Company and other entities
involving the Company's executive officers and board members who serve as
executive officers of such entities.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the last three
fiscal years earned by or paid or awarded to the chief executive officer of the
Company and the four other most highly compensated executive officers of the
Company (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES PAYOUTS
------------------------------------ STOCK UNDERLYING ---------
OTHER ANNUAL AWARD(S) OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION ($)(1)(2) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) (3)(4) (#)(2)(4) ($)(4)(5) ($)(6)
- ------------------------------ ---- ---------- ---------- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Craig Sullivan ............ 1998 $ 781,250 $1,117,000 -- -- -- $114,337 $200,761
Chairman of the Board and 1997 $ 716,250 $ 939,100 -- -- -- $103,618 $155,820
Chief Executive Officer 1996 $ 673,750 $ 571,520 -- $90,629 581,412 $ 34,684 $145,125
Peter N. Louras .............. 1998 $ 320,000 $ 340,400 -- -- -- $ 15,406 $ 74,376
Group Vice President 1997 $ 301,250 $ 310,500 -- -- -- $ 13,962 $ 61,593
1996 $ 285,000 $ 200,300 -- $33,611 141,398 $ 3,190 $ 57,452
Gerald E. Johnston ........... 1998 $ 313,750 $ 340,400 -- -- -- $ 11,638 $ 70,705
Group Vice President 1997 $ 277,500 $ 285,100 -- $23,796 25,414 $ 10,547 $ 47,130
1996 $ 211,250 $ 103,830 -- $20,223 82,014 $ 2,069 $ 38,894
Donald C. Murray ............. 1998 $ 301,250 $ 319,500 -- -- -- $ 12,923 $ 70,408
Group Vice President(7) 1997 $ 290,000 $ 295,300 -- -- -- $ 11,711 $ 55,066
1996 $ 265,500 $ 157,340 -- $31,177 119,618 $ 2,675 $ 52,742
Lawrence S. Peiros ........... 1998 $ 234,750 $ 255,000 -- $24,830 -- $ 9,062 $ 50,190
Vice President -- Household 1997 $ 213,500 $ 187,900 -- $18,545 -- $ 8,213 $ 40,503
Products 1996 $ 200,000 $ 114,000 -- $22,282 73,922 $ 1,876 $ 32,325
</TABLE>
- ------------
(1) Pursuant to the EIC Plan, executive officers are able to elect some or all
of their annual bonus plan awards in Common Stock rather than cash. Those
executive officers electing stock received a premium equal to 10% (20% in
fiscal year 1996) of the gross amount elected to be paid in Common Stock
based on the fair market value on September 1, 1998, September 2, 1997 and
August 30, 1996, respectively. Such stock awards are subject to transfer
restrictions for two years from the date of grant or the premium will be
forfeited. The premium is included in the Restricted Stock Awards column in
the Long-Term Compensation portion of this table. The net number of shares
and value of the EIC Plan annual bonus amounts paid in Common Stock awards,
after deductions to the base awards made for income tax purposes, were as
follows: for fiscal year 1998, -- 0 shares ($0) for Messrs. Sullivan,
Louras, Johnston, and Murray; and base award -- 1,681 shares ($160,535) and
premium -- 260 shares ($24,830) for Mr. Peiros; for fiscal year 1997, -- 0
shares ($0) for Messrs. Sullivan, Louras and Murray; base award -- 2,315
shares ($153,875) and premium -- 358 shares ($23,796) for Mr. Johnston; and
base award -- 1,802 shares ($119,777) and premium -- 279 shares ($18,545)
for Mr. Peiros; and for fiscal year 1996, base award -- 6,250 shares
($292,578) and premium -- 1,936 shares ($90,629) for Mr. Sullivan; base
award -- 2,322 shares ($108,699) and premium -- 718 shares ($33,611) for Mr.
Louras; base award -- 1,394 shares ($65,257) and premium -- 432 shares
($20,223) for Mr. Johnston; base award -- 2,152 shares ($100,741) and
premium -- 666 shares ($31,177) for Mr. Murray; and base award -- 1,540
shares ($72,091) and premium -- 476 shares ($22,282) for Mr. Peiros. The
bonus amounts include a holiday bonus of $200 per person in each year.
(2) Amounts include awards earned for the years indicated. To support the goal
of increasing the level of Company stock ownership by the executive officer
group, in fiscal year 1996 larger grants of stock options and restricted
stock were made to all executive officers. Because of the size of the fiscal
year 1996 grants, no Named Officer received any grants of stock options or
restricted stock during fiscal years 1997 and 1998 except for shares of
restricted stock awarded to Named Officers who elected to receive
12
<PAGE>
some or all of their respective EIC Plan awards in stock rather than cash or
to reflect promotions. Other Annual Compensation did not exceed the lesser
of either $50,000 or 10% of the total of annual salary and bonus reported
for any Named Officer.
(3) The value of all restricted stock awards set forth in the table above was
determined by multiplying the fair market value of the Common Stock on the
date of grant by the number of shares awarded. As of June 30, 1998, the
number and value of aggregate restricted stock award holdings, based on fair
market value on June 30, 1998, were as follows: 1,936 shares ($185,130) for
Mr. Sullivan; 718 shares ($68,659) for Mr. Louras; 790 shares ($75,544) for
Mr. Johnston; 666 shares ($63,686) for Mr. Murray; and 755 shares ($72,197)
for Mr. Peiros. Dividends are paid on shares of restricted stock awarded
commencing from the date of grant.
(4) In the event of a "change of control," "business combination," or complete
liquidation or dissolution of the Company, all restrictions on restricted
stock and performance units end and all stock options become exercisable. A
change of control generally will be deemed to occur if any person or entity
becomes the beneficial owner, directly or indirectly, of a specified
percentage of the then outstanding shares of Common Stock or has, directly
or indirectly, a specified percentage of the combined voting power of the
then outstanding securities entitled to vote for directors. For all persons
or entities other than Henkel KGaA, the specified percentage is 20%. For
Henkel KGaA, the specified percentage is that agreed to between the Company
and Henkel KGaA pursuant to the Letter Agreement, which currently is 30%.
See "Certain Relationships and Transactions" on page 8. A business
combination generally will be deemed to occur in the event of a
reorganization, merger or sale of substantially all of the assets of the
Company, subject to certain exceptions. A feature of the Stock Incentive
Plan is the stock withholding election, pursuant to which a recipient may
elect to have the Company withhold shares of Common Stock to pay any
withholding tax liability that arises when the restrictions on the
restricted stock are released or when non-qualified stock options are
exercised, respectively. In both cases, the value of shares which may be
withheld is based on the per share price of the Common Stock on the
Composite Transactions Report for the New York Stock Exchange on the last
business day before the withholding is made.
(5) The amounts reflect dividends received from deferred stock units granted in
December 1995 in exchange for the cancellation of certain restricted stock
and from performance units granted in April 1996.
(6) Except for amounts received under the Nonqualified Deferred Compensation
Plan, the amounts shown in the column are pursuant to programs provided to
salaried employees generally and represent actual Company contributions
under the Company's Value Sharing Plan and the Nonqualified Deferred
Compensation Plan and term life insurance premiums paid by the Company for
the benefit of each respective Named Officer.
(7) Mr. Murray retired from the Company on August 1, 1998.
13
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table shows options and stock appreciation rights ("SARs")
exercised during fiscal year 1998 by the Named Officers, and the value of the
options and SARs held by the Named Officers at the end of fiscal year 1998. No
options or SARs were granted to the Named Officers in fiscal year 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY-END IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED VALUE (#) EXERCISABLE/ AT FY-END ($) EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(1)(2)
- ----------------------------- --------------- ------------ ---------------------- --------------------------
<S> <C> <C> <C> <C>
G. Craig Sullivan............ 17,904 $ 1,197,896 653,386/203,888 $ 39,619,623/$10,039,889
Peter N. Louras.............. 8,526 $ 581,064 182,632/51,376 $ 11,284,782/$2,529,866
Gerald E. Johnston........... 0 0 120,526/39,472 $ 7,269,790/$1,924,782
Donald C. Murray(3).......... 62,424 $ 2,558,467 75,418/44,200 $ 4,171,558/$2,176,504
Lawrence S. Peiros........... 23,708 $ 1,428,558 53,144/30,220 $ 3,021,850/$1,488,099
</TABLE>
- ---------
(1) The number of shares covered and the value of the unexercisable options
listed relate to stock options granted under the 1987 Stock Option Plan or
the 1996 Stock Incentive Plan. In the event of a "change of control,"
"business combination" or complete liquidation or dissolution of the Company
(as described in footnote (4) to the Summary Compensation Table on page 12),
all stock options become exercisable.
(2) The value of the unexercised options was determined by multiplying the
number of shares subject to unexercised options on the fiscal year end, June
30, 1998, by $95.78125, the fair market value of the Common Stock on such
date, minus the exercise price of each unexercised option.
(3) Mr. Murray retired from the Company on August 1, 1998.
14
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return of the Common
Stock for the last five fiscal years with the cumulative total return of the
Standard & Poor's 500 Stock Index and a composite index composed of the Standard
& Poor's Household Products Index and the Standard & Poor's Housewares Index for
a five-year period ending June 30, 1998. The composite index is weighted based
on market capitalization as of the end of each quarter during each of the last
five years. The graph lines merely connect the prices on the dates indicated and
do not reflect fluctuations between those dates.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLOROX S&P 500 COMBINED INDEX
<S> <C> <C> <C>
June 1993 $100.00 $100.00 $100.00
June 1994 $97.08 $101.44 $102.94
June 1995 $133.90 $127.81 $140.53
June 1996 $186.82 $160.95 $177.04
June 1997 $284.65 $216.70 $262.76
June 1998 $418.22 $281.90 $323.03
</TABLE>
The foregoing report of the Compensation Committee of the board of directors on
executive compensation and the performance graph that appears immediately above
shall not be deemed to be soliciting material or to be filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934, or incorporated
by reference in any document so filed.
15
<PAGE>
PENSION BENEFITS
Pension benefits are paid to executive officers under three different plans: the
Pension Plan, the Nonqualified Deferred Compensation Plan and the Supplemental
Executive Retirement Plan ("SERP").
The Company's Pension Plan is a noncontributory "cash balance" defined benefit
plan qualified under pertinent income tax laws. Essentially all salaried
employees as well as nonunion hourly employees with at least one year of service
participate in the Pension Plan. Prior to July 1, 1996, benefits were calculated
based on career average compensation. Effective July 1, 1996, participants in
the plan accrue benefits equal to 3% of qualified earnings each year. Qualified
earnings include base annual salary and bonus. Participants' benefits are
adjusted each quarter by an interest factor. Participants meeting certain age
and years of service levels will receive the greater of the benefits calculated
under the career average compensation formula and the new cash balance formula.
Each of the Named Officers met the age and years of service levels and will
receive the greater of the benefits under the current and prior formulas. A
participant is fully vested in her or his benefit after 5 years of service.
The Nonqualified Deferred Compensation Plan provides additional benefits equal
to the employer-provided benefits that plan participants do not receive under
the Pension Plan because of Internal Revenue Code limits. This plan has the same
five-year vesting provision as the Pension Plan.
The purpose of the SERP is to provide executive officers a fixed objective of
55% of the average annual compensation for the three consecutive years of
highest compensation. Compensation consists of base annual salary and the EIC
Plan bonus. For the Named Officers, those amounts are shown in the salary and
bonus columns of the Summary Compensation Table on page 12. There is a minimum
service requirement of ten years. SERP benefits are offset by the annuity value
of amounts received from primary social security, the Pension Plan and Company
contributions to the Value Sharing Plan and Nonqualified Deferred Compensation
Plan.
Assuming retirement at age 65, fiscal year 1998 annual base salary and bonus and
no future increase in such compensation and an interest rate of 8%, the SERP
benefits for the Named Officers will exceed benefits under the other plans. The
retirement benefits shown in the table below are based on the SERP, calculated
for an unmarried person, on a straight life annuity basis, based on retirement
at age 65 with 15 or more years of service with the Company. They would be
proportionately reduced for early retirement or for shorter years of service to
a minimum of 10 years. Thus, the table below shows what would be received by the
Named Officers under the three plans for pension benefits, taken collectively.
<TABLE>
<CAPTION>
15 OR MORE
YEARS OF
COMPENSATION(1) SERVICE
- ------------------------------------------------------------------------------ --------------
<S> <C>
$ 500,000..................................................................... $ 275,000
$ 600,000..................................................................... $ 330,000
$ 700,000..................................................................... $ 385,000
$ 800,000..................................................................... $ 440,000
$ 900,000..................................................................... $ 495,000
$1,000,000.................................................................... $ 550,000
$1,100,000.................................................................... $ 605,000
$1,200,000.................................................................... $ 660,000
$1,300,000.................................................................... $ 715,000
$1,400,000.................................................................... $ 770,000
$1,500,000.................................................................... $ 825,000
$1,600,000.................................................................... $ 880,000
$1,700,000.................................................................... $ 935,000
$1,800,000.................................................................... $ 990,000
$1,900,000.................................................................... $ 1,045,000
$2,000,000.................................................................... $ 1,100,000
</TABLE>
- ---------
(1) The number of years of credited service for each of the Named Officers are:
Mr. Sullivan, 27; Mr. Louras, 18; Mr. Johnston, 16; Mr. Murray, 20; and Mr.
Peiros, 18.
16
<PAGE>
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has entered into employment agreements with each of the Named
Officers named in the Summary Compensation Table on page 12 above. The term of
the employment agreement for Mr. Sullivan is five years, for Mr. Peiros is two
years, and for each of the other Named Officers is three years. Such agreement
terms are "evergreen" in that they maintain a five-year term, in the case of the
chief executive officer, a two-year term, in the case of Mr. Peiros, or a
three-year term, in the case of the other Named Officers, unless either party
gives five-years' notice of termination, in the case of the chief executive
officer's employment agreement, two-years' notice of termination in the case of
Mr. Peiros, and three-years' notice of termination, in the case of the other
Named Officers' employment agreements. The employment agreements are also
terminable at any time by the Company either for "Cause," as that term is
defined in them, or "at will" by either the Named Officer or the Company. In the
case of an "at will" termination by the Company, a Named Officer is entitled to
receive annually severance benefits of his then current base salary, plus 75% of
his target EIC Plan award for the previous fiscal year, for the length of the
remaining term of his employment agreement, subject to offset for other earned
income. He is also entitled to continue to participate in the Company's medical
and dental insurance programs for the same period. In addition, the Named
Officer would receive a pro-rated EIC Plan award for the year in which
termination occurs.
The Company has entered into change of control agreements with each of the Named
Officers. Within a three-year period of a "change of control," "business
combination" or complete dissolution or liquidation of the Company (as described
in footnote (4) to the Summary Compensation Table on page 12), a Named Officer
may terminate his employment in the event of a reduction or elimination in rank,
responsibilities, compensation or benefits, and he may also terminate his
employment absent such reasons within a 30-day period following the first
anniversary of the change of control. In the event of such termination, the
Named Officer will receive a lump sum amount equal to his then current base
salary, plus 100% of his target EIC Plan award for the then current fiscal year,
multiplied by the change of control benefit multiple under the change of control
agreements. For Mr. Peiros, such multiple is two, and for the other Named
Officers, such multiple is three. In addition, a Named Officer is entitled to
continue to participate in the Company's medical and dental insurance programs
for the remaining term of his change of control agreement. The Named Officer
would also receive a pro-rated EIC Plan award for the year in which termination
occurs. If payments received under the change of control agreements are subject
to tax under Section 4999 of the Internal Revenue Code of 1986, as amended
(which deals with certain payments contingent on a change of control), the
Company will make an additional payment to the Named Officer in respect of such
tax.
The Company has also entered into employment agreements and change of control
agreements on similar terms with each of the other executive officers of the
Company. The termination notice periods for these agreements range from three
years to one year depending upon the executive officer's level in the
organization and her or his tenure as an executive officer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and Securities and Exchange
Commission regulations require the Company's directors, certain officers and
greater than ten percent stockholders to file reports of ownership on Form 3 and
changes in ownership on Forms 4 or 5 with the Securities and Exchange
Commission. The Company undertakes to file such forms on behalf of the reporting
directors or officers pursuant to a power of attorney given to certain
attorneys-in-fact. The reporting officers, directors and ten percent
stockholders are also required by Securities and Exchange Commission rules to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of copies of such reports received or written
representations from such executive officers, directors and ten percent
stockholders, the Company believes that all Section 16(a) filing requirements
applicable to its directors, executive officers and ten percent stockholders
were complied with during fiscal year 1998, except that Mr. Lary R. Scott filed
an amended Form 5 in September 1998 to disclose dividend reinvestment
acquisitions over the past two years.
17
<PAGE>
PROPOSAL NO. 2:
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the board of directors has recommended, and the board of
directors has selected, Deloitte & Touche LLP as independent auditors for the
fiscal year ending June 30, 1999. Deloitte & Touche LLP has been so engaged
since 1957. During fiscal year 1998, Deloitte & Touche LLP examined the
Company's consolidated financial statements, made limited reviews of the interim
financial reports, reviewed filings with the Securities and Exchange Commission
and provided general advice regarding related accounting matters.
Ratification of the selection of Deloitte & Touche LLP by stockholders is not
required by law. However, as a matter of policy, such selection is being
submitted to the stockholders for ratification at the Annual Meeting (and it is
the present intention of the board of directors to continue this policy). The
board of directors recommends the adoption of the following resolution which
will be presented to the Annual Meeting:
RESOLVED, that the stockholders of The Clorox Company hereby
ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 1999.
The persons designated in the enclosed proxy will vote your shares FOR
ratification unless instructions to the contrary are indicated in the enclosed
proxy. If the stockholders fail to ratify the selection of this firm, the board
of directors will reconsider the matter. The affirmative vote of a majority of
the shares of Common Stock represented and voted at the Annual Meeting is
required to ratify the selection of Deloitte & Touche LLP.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and to make a statement
should they desire to do so.
OTHER BUSINESS
The board of directors is not aware of any other matters to come before the
Annual Meeting. If any matter not mentioned herein is properly brought before
the Annual Meeting, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment and Rule 14a-4 under the Securities Exchange Act of 1934.
SOLICITATION OF PROXIES
The Company has not retained an outside firm in connection with the solicitation
of the enclosed proxy. However, executive officers, directors and regular
employees of the Company, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegraph, facsimile or personal
call.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the Company's
proxy material and for consideration at the 1999 annual meeting must submit such
proposals in writing to the Secretary at the address shown on the top of the
notice accompanying this proxy statement not later than June 1, 1999. Any
proposal submitted with respect to the Company's 1999 Annual Meeting of
Stockholders later than June 1, 1999 will be considered untimely for purposes of
Rules 14a-4 and 14a-5 under the Securities Exchange Act of 1934 if notice
thereof is received by the Company later than September 9, 1999.
By Order of the Board of Directors
[LOGO]
Peter D. Bewley,
SENIOR VICE PRESIDENT -- GENERAL
COUNSEL AND SECRETARY
September 29, 1998
18
<PAGE>
Recycle Logo
Printed on Recycled Paper
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE CLOROX COMPANY
The undersigned, whose signature appears on the reverse, hereby appoints G.
C. SULLIVAN, P. D. BEWLEY and K. M. ROSE, and each of them, proxies with full
power of substitution for and in the name of the undersigned to vote all the
shares of Common Stock of The Clorox Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
to be held on November 18, 1998, and at any and all adjournments thereof, on
all matters that may properly come before the meeting.
Your shares will be voted as directed on this card. If signed and no
direction is given for any item, it will be voted in favor of Items 1 and 2.
To vote by telephone or Internet, please see the reverse of this card. To
vote by mail, please sign and date this card on the reverse, tear off at the
perforation, and mail promptly in the enclosed postage-paid envelope.
If you have any comments or a change of address, mark the appropriate box on
---------------------------
the reverse side and use the following space:
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YOUR VOTE IS IMPORTANT. BY RETURNING YOUR VOTING INSTRUCTIONS PROMPTLY, YOU CAN
AVOID THE INCONVENIENCE OF RECEIVING FOLLOW-UP MAILINGS PLUS HELP
THE COMPANY AVOID ADDITIONAL EXPENSES.
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DETACH PROXY CARD HERE IF YOU ARE VOTING BY MAIL AND RETURN IN ENCLOSED ENVELOPE
Get the latest Clorox news and information
24 hours a day, 7 days a week.
Call 1-888-CLX-NYSE (1-888-259-6973) to listen to
the most recent earnings and news releases or to
request information via fax or mail.
Log onto our web site at http://www.clorox.com
for more comprehensive information!
[LOGO]
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<PAGE>
/X/ PLEASE MARK 0129
CHOICES IN BLUE OR
BLACK INK AS IN
THIS SAMPLE.
The Board of Directors unanimously recommends a vote FOR the election
of the nominees for director and FOR proposal 2.
<TABLE>
<S> <C> <C> <C> <C>
FOR WITHHELD
Nominees
- -------- 1. Election of Directors / / / /
01 Daniel Boggan, Jr. 05 Juergen Manchot 09 Lary R. Scott (See list to the left.)
02 John W. Collins 06 Dean O. Morton 10 G. Craig Sullivan
03 Ursula Fairchild 07 Klaus Morwind 11 C. A. (Al) Wolfe For, except vote withheld
04 Tully M. Friedman 08 Edward L. Scarff from the following
nominee(s):
----------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the / / / / / /
selection of Deloitte
& Touche LLP as independent
auditors for the fiscal
year ending June 30, 1999.
Check this box if you have / /
comments or a change of
address and use the back of
this card.
Check this box if you wish / /
to attend and vote at the
meeting.
</TABLE>
SIGNATURE(S) DATE
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NOTE: Your signature should conform with your name as printed above. If signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If stock is owned by a partnership or corporation, please indicate your
capacity in signing the proxy. If stock is held in joint partnership, all
co-owners must sign. Please sign, date and return promptly.
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DETACH PROXY CARD HERE IF YOU ARE VOTING BY MAIL AND RETURN IN ENCLOSED ENVELOPE
THE CLOROX COMPANY--ANNUAL MEETING--NOVEMBER 18, 1998 [LOGO]
CLOROX NOW OFFERS PHONE OR INTERNET VOTING
24 hours a day, 7 days a week
ON A TOUCH-TONE PHONE, CALL TOLL-FREE 1-800-OK2-VOTE (OUTSIDE THE US AND CANADA,
CALL 201-324-0377). YOU WILL HEAR THESE INSTRUCTIONS:
- - Enter the last four digits from your social security number.
- - Enter the control number from the box above, just below the perforation.
- - You will then have two options:
OPTION 1: To vote as the Board of Directors recommends on both proposals;
or
OPTION 2: To vote on each proposal separately.
- - Your vote will be repeated to you and you will be asked to confirm it.
LOG ONTO THE INTERNET AND TYPE: HTTP://WWW.VOTE-BY-NET.COM
- - Have your proxy card ready and follow the instructions.
- - You will be able to elect to receive future mailings via the Internet.
Your electronic vote authorizes the proxies named on the reverse of this card to
vote your shares to the same extent as if you marked, signed, dated and returned
the proxy card.
IF YOU HAVE VOTED BY PHONE OR INTERNET, PLEASE DO NOT RETURN THE PROXY CARD.
THANK YOU FOR VOTING!
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