<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Johnson Controls, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(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> 2
[JOHNSON CONTROLS, INC. LOGO]
JOHNSON CONTROLS, INC.
5757 N. Green Bay Ave.
Milwaukee, Wisconsin 53209
ANNUAL SHAREHOLDERS MEETING
NOTICE AND PROXY STATEMENT
ANNUAL MEETING: January 24, 2001 Italian Community Center
2:00 p.m. 631 East Chicago
Milwaukee, WI 53202
RECORD DATE: November 16, 2000. If you were a shareholder at the
close of business on that date, then you may vote at
the meeting. If you hold the Company's Common Stock,
then you are entitled to one vote per share. If you
hold the Company's Preferred Stock (each share consists
of 10,000 units) you are entitled to two votes per
unit. There is no cumulative voting. On the record
date, 86,047,604 shares of our Common Stock were
outstanding and 250.5421 shares of our Preferred Stock
were outstanding.
AGENDA: The purpose of the meeting is to vote on the following
proposals:
1. The election of 4 directors.
2. The approval of PricewaterhouseCoopers LLP as our
independent auditors for 2001.
3. Consideration of a shareholder proposal to adopt
global corporate standards.
4. To transact such other business as may properly come
before the Meeting and any adjournment thereof.
Unless you tell us in your proxy to vote differently,
we will vote your returned telephone, Internet or
written proxies "FOR" the Board's nominees in agenda
item 1 and "FOR" agenda item 2. Unless you tell us in
your proxy to vote differently, we will vote your
returned telephone, Internet or written proxies
"AGAINST" the shareholder proposal referenced in agenda
item 3. The Board or proxy holders will use their
discretion on other matters that may arise at the
meeting. If a nominee cannot or will not serve as a
director, then the Board or proxy holders will vote for
a person whom they believe will carry on our present
policies.
PROXIES
SOLICITED BY: The Board of Directors.
<PAGE> 3
FIRST MAILING DATE: The Company anticipates first mailing this proxy
statement on December 1, 2000.
REVOKING YOUR PROXY: You may revoke your proxy before it is voted at the
meeting. To revoke:
Deliver a signed, written revocation letter, dated
later than the proxy, to John P. Kennedy, Secretary, at
our Milwaukee address listed on the first page;
Submit a telephone, Internet or written proxy with a
later date; or
Attend the meeting and vote in person or by proxy.
Attending the meeting alone will not revoke your proxy.
PROXY SOLICITATION: The Company will primarily solicit proxies by mail and
will cover the expense of such solicitation. D.F. King
& Co., Inc., will help us solicit proxies for all
brokers and nominees at a cost of $11,000 plus their
expenses. Our officers and employees may also solicit
proxies for no additional compensation. We may
reimburse brokers or other nominees for reasonable
expenses they incur in sending these proxy materials to
you if you are a beneficial holder of our shares.
ANNUAL REPORT: The Company's 2000 Annual Report is being mailed to you
with this proxy statement.
YOUR COMMENTS: Your comments about any aspects of our business are
welcome. You may use the space provided on the proxy
card or by calling 1-800-524-6220 (Option 4) for this
purpose, if desired.
PLEASE VOTE -- YOUR VOTE IS IMPORTANT
PROMPT RETURN OF YOUR PROXY WILL HELP REDUCE THE COST OF THIS SOLICITATION.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
*ELECTION OF DIRECTORS...................................... 3
*SELECTION OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2001..... 7
*CONSIDERATION OF SHAREHOLDER PROPOSAL...................... 8
BOARD INFORMATION........................................... 10
BOARD COMPENSATION.......................................... 12
COMPENSATION COMMITTEE REPORT............................... 13
PERFORMANCE GRAPH........................................... 18
EXECUTIVE COMPENSATION...................................... 19
EMPLOYMENT AGREEMENTS....................................... 24
JOHNSON CONTROLS SHARE OWNERSHIP............................ 25
VOTING PROCEDURES........................................... 26
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 27
SUBMISSION OF SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS............................................... 27
MAP TO ANNUAL MEETING....................................... 29
EXHIBIT A
EXHIBIT B
</TABLE>
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* Agenda items for the Annual Meeting
2
<PAGE> 5
ELECTION OF DIRECTORS
BOARD STRUCTURE: The Board of Directors consists of 12 members.
The directors are divided into three classes. At
each annual meeting, the term of one class
expires. Directors in each class serve for
three-year terms, or until the director's
earlier retirement pursuant to the Board of
Directors Retirement Policy.
BOARD NOMINEES
NOMINEES FOR TERMS TO EXPIRE AT THE 2004 ANNUAL MEETING:
<TABLE>
<S> <C>
[Andrews Photo] WILLIAM F. ANDREWS Director since 1991
Age 69
Chairman of Northwestern Steel and Wire Co., since 1999.
Chairman of Scovill Fasteners Inc., since 1995. Chairman,
Corrections Corporation of America, since 2000. Chairman,
President and Chief Executive Officer, Amdura Corporation
from 1993-1996. President and Chief Executive Officer, UNR
Industries Inc., Chicago, Illinois (diversified
manufacturer) from 1991-1993, President of Massey Investment
Co., Nashville, Tennessee (private investment company) from
1989-1990, and Chairman, CEO and President of Singer Sewing
Machine Company (SSMC) Inc., Shelton, Connecticut
(diversified manufacturer) from 1986-1989. Mr. Andrews is a
director of Black Box Corp., Corrections Corporation of
America, Katy Industries, Navistar International
Corporation, Northwestern Steel & Wire Co., and Trex Co. Mr.
Andrews is a member of the Compensation and Pension and
Benefits Committees.
[Barnett Photo] ROBERT L. BARNETT Director since 1986
Age 60
Executive Vice President and President, Commercial,
Government and Industrial Solutions Sector, Motorola, Inc.
(manufacturer of electronics products), Schaumburg,
Illinois, June 1998-present. Executive Vice President and
President, Motorola Inc., Land Mobile Products Sector,
Motorola Inc., March 1997 -- March 1998. Corporate Vice
President, iDen Group, Motorola Inc., May 1995 -- March
1997. Consultant in the field of international
communications 1992-1993. Vice-Chairman, Ameritech and
President, Ameritech Bell Group, American Information
Technologies Corporation, Chicago, Illinois
(telecommunications) 1989-1993 and President, Ameritech
Enterprise Group, 1987-1989. Mr. Barnett is a director of
USG Corp., Central Vermont Public Service. Mr. Barnett is a
member of the Executive and the Pension and Benefits
Committees and the Chairman of the Directors Committee.
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C>
[Davis Photo] WILLIE D. DAVIS Director since 1991
Age 66
President of All Pro Broadcasting Incorporated, Los
Angeles, California (radio broadcasting), since 1977. Mr.
Davis is a director of Alliance Bank Co., Dow Chemical
Company, Kmart Corporation, MGM Grand Inc., Sara Lee
Corporation, Strong Capital Management, MGM Inc., and
Wisconsin Energy, Inc. Mr. Davis is a member of the Audit
and the Directors Committees.
[Teerlink Photo] RICHARD F. TEERLINK Director since 1994
Age 64
Retired Chairman of the Board and President and Chief
Executive Officer of Harley-Davidson, Inc., Milwaukee,
Wisconsin, December 1998 and June 1997, respectively. Mr.
Teerlink served as President and Chief Operating Officer
of Harley-Davidson since March 1988. Mr. Teerlink remains
a member of the board of directors of Harley-Davidson,
Inc. Mr. Teerlink is a director of Snap-on, Incorporated.
He is a member of the Audit and the Executive Committees.
</TABLE>
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ITS NOMINEES
CONTINUING DIRECTORS
TERMS EXPIRE AT THE 2002 ANNUAL MEETING:
<TABLE>
<S> <C>
[BLACK PHOTO] NATALIE A. BLACK Director since 1998
Age 50
Sr. Vice President, Kohler Co., Kohler, Wisconsin
(manufacturer and marketer of plumbing products and
furniture) since 1986. Group President -- Interiors from
1986 through 2000 and Vice President from 1983 through
1986. Ms. Black has also served as General Counsel for
Kohler Co. since 1991. Ms. Black is a member of the
Directors Committee.
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
[CORNOG PHOTO] ROBERT A. CORNOG Director since 1992
Age 60
President, Chief Executive Officer and Chairman of the
Board of Directors of Snap-on, Incorporated, Kenosha,
Wisconsin (tool manufacturer) since 1991. Mr. Cornog is a
director of Snap-on Incorporated and Wisconsin Energy
Corporation. Mr. Cornog is a member of the Audit and the
Executive Committees.
[KEYES PHOTO] JAMES H. KEYES Director since 1985
Age 60
Chairman and Chief Executive Officer, Johnson Controls,
Inc., Milwaukee, Wisconsin. In 1985 Mr. Keyes was named
Executive Vice President and subsequently became Chief
Operating Officer and a member of the Board of Directors.
He became President of Johnson Controls, Inc., in 1986, its
Chief Executive Officer in 1988, and Chairman in 1993. Mr.
Keyes is a director of the Federal Reserve Bank of Chicago,
LSI Logic Corporation and Pitney Bowes, Inc. Mr. Keyes is
Chairman of the Executive Committee.
[LACY PHOTO] WILLIAM H. LACY Director since 1997
Age 55
President and Chief Executive Officer (1987 to 1996) and
Chairman and Chief Executive Officer (1996 to 1999) and
Chief Executive Officer (1996-1998) of Mortgage Guaranty
Insurance Corporation (MGIC), and Chairman and Chief
Executive Officer of its parent company, MGIC Investment
Corporation, Milwaukee, Wisconsin, since 1987. Mr. Lacy
also serves on the Board of Directors of C2, Inc., Pedestal,
Inc., and IMX Exchange. Mr. Lacy is a member of the
Compensation and the Pension and Benefits Committees.
</TABLE>
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<PAGE> 8
TERMS EXPIRE AT THE 2003 ANNUAL MEETING:
<TABLE>
<S> <C>
[BARTH PHOTO] JOHN M. BARTH Director since 1997
Age 54
President, Chief Operating Officer and member of the
Board of Directors, Johnson Controls, Inc., since
September 1998 and Executive Vice President since 1991.
In 1987, Mr. Barth was named Vice President and General
Manager of the Plastics Technology Group. In 1990, he
became Vice President and General Manager of the Plastics
Technology Group and the Automotive Systems Group. Mr.
Barth is a director of Handleman Company. Mr. Barth also
serves as a member of the Executive Committee.
[BRUNNER PHOTO] PAUL A. BRUNNER Director since 1983
Age 65
President and Chief Executive Officer, Spring Capital
Inc., Stamford, Connecticut (international investment
management), since 1985. President and Chief Executive
Officer, ASEA, Inc., 1982-1984. President and Chief
Executive Officer, Crouse Hinds Co., 1967-1982. Mr.
Brunner is the Chairman of the Audit Committee and member
of Compensation Committee.
[MORCOTT PHOTO] SOUTHWOOD J. MORCOTT Director since 1993
Age 62
Chairman (1990-2000), President (1986-1996), and Chief
Executive Officer from 1989-1999 of Dana Corporation,
Toledo, Ohio (vehicular and industrial systems
manufacturer). Mr. Morcott is a director of CSX
Corporation, Navistar Corporation and Phelps-Dodge
Corporation. Mr. Morcott is Chairman of the Compensation
Committee and member of the Directors Committee.
[WHITAKER JR. PHOTO] GILBERT R. WHITAKER JR. Director since 1986
Age 69
Dean and H.J. Nelson Professor of Business Economics,
Jesse Jones Graduate School of Management, Rice
University since June 1997. Professor of Business
Economics, University of Michigan, 1979 through 1997.
Provost and Executive Vice President for Academic
Affairs, University of Michigan, 1990-1996. Mr. Whitaker
served as Dean, School of Business Administration,
University of Michigan 1979-1990. Mr. Whitaker is a
director of Lincoln National Corporation and Structural
Dynamics Research Corp. Mr. Whitaker is Chairman of the
Pension and Benefits Committee.
</TABLE>
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<PAGE> 9
SELECTION OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2001
We ask that you approve the appointment of
PricewaterhouseCoopers LLP as our independent auditors:
PricewaterhouseCoopers LLP, formally known as Price
Waterhouse, has audited our accounts for many years. The
Board appointed them as independent auditors for 2001
upon recommendation of the Audit Committee.
We expect a representative of PricewaterhouseCoopers to
attend the meeting, respond to appropriate questions and
be given an opportunity to speak.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS JOHNSON CONTROLS'
INDEPENDENT AUDITORS FOR 2001.
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<PAGE> 10
SHAREHOLDER PROPOSAL FOR A GLOBAL SET OF CORPORATE STANDARDS
Two shareholders, the Benedictine Sisters, 530 Bandera Road, San Antonio, Texas,
78228, owner of 260 shares of Johnson Controls Common Stock, and the General
Board of Pension and Health Benefits of the United Methodist Church, 1201 Davis
Street, Evanston, Illinois, 60201, owner of 76,100 shares of Johnson Controls
Common Stock, have informed the Company that they intend to present jointly the
following proposal at the meeting:
Whereas, our company, as a global corporation, faces numerous complex problems
which also affect our interests as shareholders. The international context
within which our company operates is becoming increasingly diverse as we enter
the millennium.
Companies operating in the global economy are faced with important concerns
arising from diverse cultures, political and economic contexts. These concerns
require management to address issues beyond the traditional business focus.
These include human rights, workers' right to organize and bargain collectively,
non-discrimination in the workplace and sustainable community development.
Companies should find effective ways to eliminate the use of child labor and
forced labor.
We believe global companies need to operationalize comprehensive codes of
conduct, such as those found in the "Principles for Global Corporate
Responsibility: Bench Marks for Measuring Business Performance", developed by an
international group of religious investors. Companies need to formulate
policies, programs and practices to address the challenges they face in the
global marketplace.
A New York Times editorial stated, "[Corporations] should hold themselves to
some guidelines. Their own practices should not be abusive, even if local laws
allow it. This means giving workers wages they can live on and good working
conditions." ("Corporations and Conscience", Dec. 6, 1998).
Our company should be in a position to assure shareholders that its employees
are treated fairly and paid a sustainable living wage wherever they work in the
global economy. One important element of ensuring compliance is the utilization
of independent monitors consisting of respected local human rights, religious
and other non-governmental organizations. A number of global companies are
involved in the development of credible code enforcement mechanisms that include
independent monitoring.
Improving the quality of life for employees and their communities can lead to
productivity enhancing the bottom line for the company.
RESOLVED, the shareholders request the Board of Directors to review or amend,
where applicable, its code or standards for its international operations and to
report a summary of this review to shareholders by October 2001.
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SUPPORTING STATEMENT
We recommend the review include the following areas:
1. A description of policies which are designed to protect human rights --
civil, political, social, cultural and economic -- consistent with respect for
human dignity and international labor rights standards.
2. A report of efforts to ensure that the company does not employ children under
the age of fifteen, or younger than the age of completing compulsory education
in the country of manufacture where such age is higher than fifteen.
3. A report of company policies ensuring that there is no use of forced labor
(e.g. prison labor, indentured labor or bonded labor).
4. Establishment of consistent standards for workers' health and safety,
practices for handling hazardous wastes and protection of the environment, as
well as promoting a fair and dignified quality of life for workers and their
communities.
We believe a company poised to compete in the 21st Century needs comprehensive
global standards to guide them.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
THE PROPOSAL
Since 1990, the Company has implemented an Ethics Policy that directly addresses
the issues raised in this proposal, as well as other issues that the company
feels are essential to promote the well-being of our employees, shareholders,
and customers throughout the world. Specifically, it contains the company's
policies on promoting health, safety, equal opportunity and diversity. This
policy is attached as Exhibit "A" to this proxy statement.
The Company has extensive procedures in place to affect compliance with the
Ethics Policy. It is translated into 13 different languages and is distributed
to our employees around the globe. The policy is also made available through an
internal electronic database so that all employees may have instant access to
it. The Company maintains a "hotline" and encourages employees to report any
concerns or failures in compliance. Individuals who manage company functions or
employees are required to sign a Certificate of Compliance to show that they
received the policy and that they agree to abide by its terms. The Company's law
department conducts training sessions throughout the world to educate employees
on the policy and their responsibilities under it. The Company also has an
internal audit committee that monitors compliance on a yearly basis and provides
a summary of its activities and findings to the Board of Director's audit
committee.
The Company values its employees and believes that they are the foundation of
our strength and success. The Ethics Policy demonstrates our continuing
commitment to giving our employees the protection and support needed to be
successful. A similar proposal was submitted for a vote during the 2000 Annual
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Meeting. After consideration by the shareholders, 90.38% of them voted down that
proposal.
FOR THESE REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"AGAINST" THE PROPOSAL
An affirmative vote of the majority of votes cast by the shareholders is
required to approve the proposal.
BOARD INFORMATION
BOARD MEETINGS: In 2000, the Board held a total of six regular
quarterly and special meetings. All of the directors
attended at least 90% of his or her Board and committee
meetings.
BOARD COMMITTEES: EXECUTIVE COMMITTEE: The primary functions of the
committee are to exercise all the powers of the Board
when the Board is not in session, as permitted by law.
The Executive Committee held no meetings last year.
Members: Mr. Keyes, Chairman, and Messrs. Barnett,
Barth, Cornog and Teerlink.
AUDIT COMMITTEE: The primary functions of the committee
are to:
- Review the internal controls established by
management;
- Assess the financial reporting process and selection
of accounting policies;
- Review management's evaluation and proposed selection
of independent accountants;
- Review the audit plans prepared by internal audit and
independent accountants;
- Review significant issues concerning litigation,
contingent liabilities, tax and insurance as
reflected in periodic reports to the SEC;
- Review management information systems;
- Review and monitor compliance procedures; and
- Report the results of these activities to the Board
on a periodic basis.
The Audit Committee held four meetings last year. All
members are non-employee directors. Members: Mr.
Brunner, Chairman, and Messrs. Cornog, Davis and
Teerlink.
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COMPENSATION COMMITTEE: The primary functions of the
committee are to:
- Recommend to the Board the selection and retention of
officers and key employees;
- Recommend salary structures, officer gradings, and
salaries for elected officers;
- Administer and recommend amendments to the executive
compensation plans;
- Review and recommend salary adjustments of the Chief
Executive Officer;
- Recommend to the Board bonus awards, income and other
compensation to executive officers;
- Recommend officer compensation packages and the
approval of disclosure statements;
- Review the Company's executive compensation programs
with outside consultants; and
- Recommend management succession.
The Compensation Committee held four meetings last
year. Members: Mr. Morcott, Chairman, and Messrs.
Andrews, Brunner and Lacy.
DIRECTORS COMMITTEE: The primary functions of the
committee are to:
- Recommend to the Board nominees for directors;
- Consider shareholder nominated candidates for
election as directors;
- Recommend the size and composition of the Board;
- Develop guidelines and criteria for the
qualifications of directors;
- Recommend director compensation programs;
- Recommend committees and committee structure for the
Board;
- Recommend performance criteria for the Board and to
review its performance;
- Review and recommend corporate governance practices
and policies of the Company; and
- Review conflicts of interest that may affect
directors.
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<PAGE> 14
The Directors Committee held six meetings last year.
Members: Mr. Barnett, Chairman, Ms. Black and Messrs.
Davis and Morcott.
PENSION AND BENEFITS COMMITTEE: The primary functions
of the committee are to:
- Review actuarial assumptions and actuarial valuation
of the pension plans on an annual basis;
- Review investment policies of the funds of employee
benefit plans;
- Select and terminate investment managers as
appropriate;
- Review with investment advisors past performance and
current investment strategy;
- Review and approve the adoption of any new trust
agreements or master trusts implementing the plans;
- Monitor Company policies affecting employee benefit
plans; and
- Review plan provisions annually, and propose
amendments when necessary.
The Pension and Benefits Committee held five meetings
last year. Members: Mr. Whitaker, Chairman, and Messrs.
Andrews, Barnett and Lacy.
BOARD COMPENSATION
RETAINER AND FEES: Non-employee directors receive a $42,500 annual
retainer. To encourage such directors to own our
shares, they receive 50% of their retainer in our
Common Stock each year. The stock is priced as of the
date of the Annual Meeting. New Directors also receive
a grant of 400 shares of Common Stock upon election or
appointment and a pro rata share of the annual retainer
for the remainder of that year. This stock is priced as
of the date of the first meeting of the Board at which
the new director participates. Directors also receive
$1,500 for each Board or committee meeting they attend,
or $2,000 for each meeting they attend of which they
are the Chairperson. We also reimburse directors for
any related expenses.
RETIREMENT PLAN: The former Directors' Retirement Plan was discontinued
as of September 30, 1998 and was replaced by a Director
Share Unit Plan. Non-employee directors are eligible to
participate in the Director Share Unit Plan. The
Company
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<PAGE> 15
credits $25,000 worth of stock units annually into each
non-employee director's account at the then current
market price. Such units are accumulated and credited
with dividends until retirement at which time the units
will be paid out based upon the market price of the
Common Stock at that time.
MEDICAL PLAN: Current directors who are not covered by other
insurance and who are under 70 years of age may
purchase medical coverage on the same basis as Company
employees.
COMPENSATION COMMITTEE REPORT
THE COMMITTEE: The Compensation Committee is composed only of
independent directors. The committee exercises the
Board's powers in compensating executive officers of
our Company and its subsidiaries. We make every effort
to see that our compensation program is consistent with
the values of our Company and furthers its business
strategy.
OVERALL OBJECTIVES: The Company aligns executive compensation with its
values and business objectives. The objectives target
customer satisfaction, technology, growth, market
leadership and shareholder value. The Compensation
Committee has established a program to:
Attract and retain key executives critical to the
long-term success of the Company.
Reward executives for long-term strategic management
and the enhancement of shareholder value.
Integrate compensation programs, which can focus on
after-tax return on shareholders equity, return on
investment and growth.
Support a performance-oriented environment that rewards
performance not only with respect to Company goals but
also Company performance as compared to that of
industry performance levels.
Preserve the federal income tax deductibility of
compensation paid. Accordingly, the Company has taken
appropriate actions to preserve the deductibility of
annual incentives, long-term performance plan payments,
and stock option awards. However, the Committee may
authorize payments that may not be deductible if it
believes that this is in the best interests of the
Company and its shareholders.
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<PAGE> 16
EXECUTIVE
COMPENSATION
GENERALLY: The Compensation Committee reviews executive pay each
year. Compensation depends on many factors, including
individual performance and responsibilities, future
challenges and objectives, and how he or she might
contribute to our future success. We also look at the
Company's financial performance and the compensation
levels at comparable companies.
To meet the objectives, we studied competitive
compensation data based on surveys provided to the
Committee by an independent compensation consultant.
The survey for officers and senior managers involved 22
companies. We made adjustments to account for
differences in annual sales of our Company and those
companies in the survey.
TOTAL COMPENSATION: Annual executive compensation consists of a base salary
and incentive compensation.
Approximately 78% of the total compensation paid to the
executive officer group is performance related. This is
comparable to the average of the companies in the
executive compensation survey. Doing so helps encourage
performance that increases the value of your shares.
The Committee sets target minimum and maximum
performance levels for our annual and long-term
incentive plans substantially above the prior year's
target goals, and prior year's actual performance.
Doing so motivates the officers to encourage future
growth and keeps the goals challenging. The Company
continues to exceed its increased performance
objectives.
BASE SALARY: The Committee determines the levels of salary for key
executive officers and a salary range for other
executive officers. Factors considered are:
- Salary survey comparison results;
- Prior year salary;
- Changes in individual job responsibilities;
- Past performance of individuals; and most
importantly,
- Achievement or trends toward achievement of specified
Company goals.
ANNUAL INCENTIVES: The Committee sets an annual incentive award formula
under the Executive Incentive Compensation Plan (EICP).
The award is based on specific benchmarks that are
consistent with our annual and long-term strategic
planning objectives. These benchmarks are also based on
achievement of business plans that the Board has
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approved that include goals of improved performance
over the previous year and take into account industry
growth and cycles.
At the end of the fiscal year, the Committee applies
the formula to objective performance results to
determine the executive's award for the year.
LONG-TERM
INCENTIVES: All executive officers participate in the Long Term
Performance Plan (LTPP), which serves to motivate
executives to achieve longer-term objectives by
providing incentive compensation based on our
performance over a three-year period. Under the LTPP,
the Committee assigns an executive a contingent
performance award. The executive may earn this award
based upon the Company's return on shareholder equity
during the specified three-year period relative to the
Standard & Poor's Manufacturers Diversified Industrial
Index median return on shareholders' equity over the
same period. At the end of the period, the Committee
determines the Company's relative performance results
to determine the actual LTPP award amount.
STOCK OWNERSHIP
GUIDELINES: The Executive Stock Ownership Policy requires all
officers and senior managers in each business group,
within five years of becoming subject to the Policy, to
hold our Common Stock in an amount of one to three
times their annual salary.
The 1995 Common Stock Purchase Plan for Executives
(CSPPE) facilitates the acquisition of common stock by
executives subject to the Executive Stock Ownership
Policy. Participants in the CSPPE may deduct from their
pay up to $2,500 per month to purchase shares of Common
Stock. The price of each share is 100% of the average
price of shares purchased by Firstar Bank, N.A as agent
for the participants. No brokerage fees or commission
are charged and the Company bears the expense of
administering the CSPPE.
STOCK OPTION
PROGRAM: The Committee grants stock options and stock
appreciation rights (SARs) under the 2000 Stock Option
Plan. The Committee determines which individuals are
awarded stock options and SARs, the terms at which
option grants shall be made, the terms of the options,
and the number of shares subject to each option. In
2000, compensation to executives through stock options
and SARs and the LTPP, taken together, was targeted at
the 50th percentile of such compensation granted by
similar companies as identified in the survey.
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SAVINGS AND
INVESTMENT PLAN
401(K) Executive officers may participate in the Company's
Savings and Investment Plan, which includes Company
contributions to the plan, and an Equalization Benefit
Plan under which certain executives are entitled to
additional benefits that cannot be paid under qualified
plans due to Internal Revenue Code limitations.
Employee and Company contributions in excess of
qualified plan limits are accounted for as if invested
in various accounts.
CEO COMPENSATION: Mr. Keyes' total compensation is based on our Company's
outstanding performance, his individual performance,
executive compensation levels at other companies, the
desire to retain his services and terms of his
employment agreement. His salary and incentives reflect
the leadership, vision and focus he has provided to our
Company.
Mr. Keyes' base salary increased to $1,100,000.00 in
2000 from $1,030,000 in 1999. This salary approximated
the average base salary for other chief executive
officers for the 22 companies reviewed.
Approximately 84% of Mr. Keyes' compensation is tied to
performance goals. Mr. Keyes fiscal 2000 EICP award of
$2,260,000 is based upon the return on shareholder's
equity and operating income growth for the Company for
fiscal 2000 and represents 90% of the maximum amount
available under the criteria set forth by the
Committee. In fiscal 2000, Mr. Keyes received payment
under the LTPP of $972,000, which is based upon the
Company's return on shareholder equity over the past
three fiscal years and represents 100% of the maximum
amount available under the criteria established by the
Committee. Mr. Keyes received an option award of
150,000 shares on November 17, 1999.
Southwood J. Morcott, Chairman
William F. Andrews
Paul A. Brunner
William H. Lacy
Members, Compensation Committee
16
<PAGE> 19
AUDIT COMMITTEE REPORT
The Board of Directors appoints an audit committee each year to review the
Company's financial matters. Each member of the Company's audit committee meets
the independence requirements set by the New York Stock Exchange. The audit
committee members reviewed and discussed the audited financial statements for
the fiscal year ending September 30, 2000, with management. The committee also
discussed all the matters required to be discussed by Statement of Auditing
Standard No. 61 with the company's independent auditors, PricewaterhouseCoopers
LLP. The audit committee received a written disclosure and letter from
PricewaterhouseCoopers LLP as required by Independence Standards Board Standard
No. 1. Based on their review and discussions, the audit committee recommended to
the Board of Directors that the audited financial statements be included in the
company's Annual Report to shareholders and Form 10-K to be filed with the
Securities and Exchange Commission.
The Board of Directors has adopted a written charter to govern the audit
committee. A copy of the Company's audit committee charter has been included as
Exhibit B to this proxy statement.
Paul A. Brunner, Chairman
Robert A. Cornog
Willie D. Davis
Richard F. Teerlink
Members, Audit Committee
17
<PAGE> 20
PERFORMANCE GRAPH
EXPLANATION OF THE
GRAPH: The line graph below compares the cumulative total
shareholder return on our Common Stock with the
cumulative total return of companies on the Standard &
Poor's 500 Stock Index and the S&P Manufacturers
(Diversified Industrial) Index. This graph is based on
the market price of the Common Stock and assumes the
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG S&P 500 INDEX,
S&P MANUFACTURERS (DIVERSIFIED INDUSTRIAL)
INDEX AND JOHNSON CONTROLS, INC.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
INDEXED RETURN
----------------------------------------------------------------------------------------------
COMPANY/INDEX 9/95 9/96 9/97 9/98 9/99 9/00
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Johnson Controls Inc. 100 121.33 163.61 156.22 226.28 185.30
----------------------------------------------------------------------------------------------
S&P Manufacturers
(Diversified Industrial) 100 128.86 179.38 161.73 253.49 250.60
----------------------------------------------------------------------------------------------
S&P 500 Comp-Ltd 100 120.33 168.97 184.27 235.49 266.74
----------------------------------------------------------------------------------------------
</TABLE>
[PERFORMANCE GRAPH]
Assumes $100 invested on September 30, 1995 in S&P 500 Index, S&P Manufacturers
(Diversified Industrial) Index and Johnson Controls, Inc., and dividends are
reinvested at the end of month in which they are paid.
18
<PAGE> 21
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid for the past three
fiscal years to each of the six most highly compensated executive officers,
including the Chief Executive Officer.
SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL OPTIONS/ LONG-TERM ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION SARS INCENTIVE COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) PAYOUTS($) ($)(2)
------------------ ------ ------ ----- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James H. Keyes 2000 1,082,505 2,260,000 -- 150,000 972,000 160,714
Chairman and 1999 1,016,256 1,844,000 -- 175,000 864,000 89,344
Chief Executive 1998 956,250 826,000 -- 120,000 810,000 78,064
Officer
John Barth 2000 681,258 1,199,000 -- 75,000 420,000 85,837
President and 1999 606,255 910,000 90,000 378,000 50,004
Chief Operating 1998 537,498 458,000 -- 60,000 299,000 42,791
Officer
Stephen A. Roell 2000 452,508 683,000 -- 44,000 256,000 55,025
Senior Vice 1999 417,507 554,000 45,000 238,000 32,245
President and 1998 373,752 270,000 -- 40,000 223,000 26,526
Chief Financial
Officer
Giovanni Fiori 2000 432,504 586,000 -- 44,000 144,000 --
Vice President 1999 397,503 492,000 -- 45,000 148,000 --
Automotive 1998 324,458 310,000 -- 24,000 138,000 --
Systems Group
Michael F. Johnston (3) 2000 432,504 485,000 -- 44,000 205,000 48,147
Vice President 1999 397,503 451,000 -- 45,000 130,000 31,790
Automotive 1998 318,330 310,000 -- 24,000 118,000 23,913
Systems Group
John Kennedy 2000 368,751 493,000 -- 25,000 205,000 38,808
Vice President and 1999 345,003 344,000 -- 28,000 192,000 26,391
Corporate Secretary 1998 324,999 202,000 -- 27,000 167,000 24,761
</TABLE>
-------------------------
(1) The aggregate amount of "Other Annual Compensation" which includes
perquisites and personal benefits was less than the required reporting
threshold (the lesser of $50,000 or 10% of the officer's annual salary and
bonus for the year).
(2) "All Other Compensation" consists of contributions by the Company on behalf
of the named individuals to the Company's Savings and Investment plan.
(3) Mr. Johnston resigned from the Company effective at the end of the 2000
fiscal year.
19
<PAGE> 22
STOCK OPTIONS AND
STOCK APPRECIATION
GRANTS: The following table lists our grants during 2000 of
stock options and tandem SARs to the officers named in
the Summary Compensation Table.
OPTIONS/SAR GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
OPTIONS/SARS RATES OF STOCK PRICE
GRANTED TO EXERCISE OR APPRECIATION FOR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION FULL OPTION TERM
NAME GRANTED FISCAL 2000 ($/SHARE) DATE 5%/10%
---- ------------ ------------ ----------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
James H. Keyes....... 150,000 11.51% $58.41 11/17/09 $5,509,711/$13,962,690
John M. Barth........ 75,000 5.75% $58.41 11/17/09 $2,754,856/$6,981,345
Stephen A. Roell..... 44,000 3.38% $58.41 11/17/09 $1,616,182/$4,095,722
Giovanni Fiori....... 44,000 3.38% $58.41 11/17/09 $1,616,182/$4,095,722
Michael F.
Johnston........... 44,000 3.38% $58.41 9/16/00 $1,616,182/$4,095,722
John Kennedy......... 25,000 1.92% $58.41 11/17/09 $918,285/$2,327,115
</TABLE>
The Company has an employee Stock Option Plan under
which options to purchase Common Stock and SARs are
granted to officers and other key employees of the
Company and its subsidiaries. The per share option/SAR
prices are the fair market value of the Company's
Common Stock on the date of the grant and the term of
the option is 10 years. Fifty percent of each award is
exercisable two years after the grant date and the
remainder is exercisable three years after the grant
date.
The amounts shown above as potential realizable values
rely on arbitrarily assumed rates of share price
appreciation prescribed by the Securities and Exchange
Commission. In assessing those values, please note that
the ultimate value of the options, as well as your
shares, depends on actual future share values. Market
conditions and the efforts of the directors, the
officers and others to foster the future success of our
Company can influence those future share values.
2000 OPTIONS,
SAR HOLDINGS AND
EXERCISES: The following table lists the number of shares acquired
and the value realized as a result of option exercises
during fiscal 2000 for the listed officers. It also
includes the
20
<PAGE> 23
number and value of their exercisable and
non-exercisable options and SARs as of September 30,
2000.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
NUMBER OF AT FY-END AT FY-END
SHARES/SARS --------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- --------------- --------------------
<S> <C> <C> <C> <C>
James H. Keyes.............. 0 0 564,000/385,000 $13,093,076/$453,750
John M. Barth............... 0 0 102,000/195,000 $1,480,877/$226,875
Stephen A. Roell............ 0 0 54,000/109,000 $685,689/$151,250
Giovanni Fiori.............. 0 0 72,000/101,000 $1,317,876/ $90,750
Michael F. Johnston......... 32,000 $402,625.20 0/0 $0/$0
John Kennedy................ 0 0 75,500/66,500 $1,370,845/102,094
</TABLE>
LONG-TERM INCENTIVE
COMPENSATION: As noted above in the Compensation Committee's report,
the Long-Term Performance Plan (LTPP) rewards
executives for helping us achieve sustained performance
goals and encourages their continued efforts on our
behalf. Payouts of awards granted for fiscal 2000 are
tied to our Company's weighted average return on
shareholders' equity for fiscal years 2000, 2001, 2002
compared with the median return on shareholders' equity
of the Standard & Poor's Manufacturers (Diversified
Industrial) Index (S&P Index) during the same
three-year period. To establish a weighted average,
performance in the third year of the award is
multiplied by 3/6, performance in the second year is
multiplied by 2/6, and performance in the first year is
multiplied by 1/6. If the Company's average level of
return is:
- Less than the 45th percentile of the return for
companies in the S&P Index, no award is earned;
- Equal or greater than the 45th percentile, the
threshold amount is earned;
- Equal to or greater than the 50th percentile, the
target amount is earned;
- Equal to or greater than the 55th percentile, 110% of
the target amount is earned; and
- Equal to or greater than the 60th percentile, the
maximum amount is earned.
21
<PAGE> 24
In fiscal 2000, based upon the data available at this
time, LTPP participants were granted 100% of the target
available under the criteria established by the
Compensation Committee. When the remaining comparison
companies have reported, these awards could increase or
decrease.
LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL 2000(1)
<TABLE>
<CAPTION>
AMOUNT OF PERFORMANCE
CONTINGENT PERIOD UNTIL
PERFORMANCE MATURATION OR THRESHOLD TARGET MAXIMUM
NAME AWARD($) PAYOUT ($) ($) ($)
---- ----------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
James H. Keyes 1,560,000 2000- 1,248,000 1,560,000 1,872,000
John M. Barth 720,000 2002 576,000 720,000 864,000
Stephen A. Roell 425,000 fiscal 340,000 425,000 510,000
Giovanni Fiori 400,000 years 320,000 400,000 480,000
Michael F. Johnston -- -- -- --
John P. Kennedy 323,000 258,000 323,000 388,000
</TABLE>
-------------------------
(1) The values in this table were calculated based on each executive's salary
that will be effective January 1, 2001. Actual values at the time of payout
will be calculated using each executive's base salary on the last day of the
performance period, and therefore, the values in the table could increase or
decrease. The maximum values in the table may not be increased higher than
the maximum of $3 million under the LTPP.
RETIREMENT PLANS: The following table shows the maximum annual retirement
benefits payable under the Company's plans, including
amounts attributable to the Company's Equalization
Benefit Plan. Under the Johnson Controls Pension Plan
(the Plan), participants become entitled to benefits
after five years of service with the Company or any of
its subsidiaries, and the normal retirement date is a
participant's 65th birthday.
The Internal Revenue Code places maximum limitations on
the amount of benefits that may be paid under the Plan.
The Company has adopted an Equalization Benefit Plan
under which certain executives are entitled to pension
benefits that cannot be paid under the qualified Plan
due to these limitations.
22
<PAGE> 25
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION IN
HIGHEST 5
CONSECUTIVE YEARS
OF LAST 10 YEARS
BEFORE RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
300,000 76,500 102,000 127,500 153,000 170,250 187,500
600,000 153,000 204,000 255,000 306,000 340,500 375,000
900,000 229,500 306,000 382,500 459,000 510,750 562,500
1,200,000 306,000 408,000 510,000 612,000 681,000 750,000
1,500,000 382,500 510,000 637,500 765,000 851,250 937,500
1,800,000 459,000 612,000 765,000 918,000 1,021,500 1,125,000
2,100,000 535,500 714,000 892,500 1,071,000 1,191,750 1,312,500
2,400,000 612,000 816,000 1,020,000 1,224,000 1,362,000 1,500,000
2,700,000 688,500 918,000 1,147,500 1,377,000 1,532,250 1,687,500
3,000,000 765,000 1,020,000 1,275,000 1,530,000 1,702,500 1,875,000
3,300,000 841,500 1,122,000 1,402,500 1,683,000 1,872,750 2,062,500
3,600,000 918,000 1,224,000 1,530,000 1,836,000 2,043,000 2,250,000
</TABLE>
-------------------------
* Assuming normal retirement age and years of service under provisions in effect
on September 30, 2000 and assuming retirement on that date.
YEARS OF SERVICE: As of September 30, 2000, the persons named in the
Summary Compensation table were credited with the
following years of service under the Plan: Mr. Keyes,
31 years, Mr. Barth, 30 years, Mr. Roell, 17 years, Mr.
Johnston, 10 years, and Mr. Kennedy, 15 years. Mr.
Fiori is not a participant in the Plan.
BENEFITS ACCRUAL: Pension plans of the Company apply to all regular
employees, including officers of the Company. The Plan
covers all salaried and non-union hourly employees of
the Company. Under the Plan, benefits are accrued
according to the following formula: 1.15% of
Participant's Average Monthly Compensation multiplied
by the Participant's years of Benefit Service plus
0.55% of Average Monthly Compensation in excess of the
Participant's Covered Compensation multiplied by the
Participant's years of Benefit Service. The amounts
payable may be adjusted to reflect the Participant's
decision on survivor benefits, early retirement or
termination, and in some instances age.
DEFINITIONS: "Average Monthly Compensation" is defined as the
average monthly compensation, including salary and
bonus, for the highest five consecutive years in the
last 10 years.
"Covered Compensation" means the average of
compensation subject to Social Security taxes
(including salary and bonus) for the 35-year period
ending in the year the Participant attains Social
Security Retirement Age; i.e., the
23
<PAGE> 26
age at which the Participant will be entitled to full
Social Security payments.
EMPLOYMENT AGREEMENTS
EMPLOYMENT
AGREEMENTS
GENERALLY: We have employment agreements with each of the named
executive officers of the Company. These agreements
provide that employment shall continue unless
terminated by either the Company or the employee. Such
agreements do not automatically extend after the
employee reaches age 65.
TERMINATION: The agreements provide for termination by the Company
for cause, for death or disability and under certain
circumstances without cause. If terminated without
cause, the employee is entitled to receive pay in an
amount equal to or greater than two times the Company's
termination allowance policy or an amount equal to 52
weeks' earnings of the employee. If terminated with
cause, the employee's compensation is terminated
immediately.
CHANGE OF CONTROL: We also have change of control agreements with each of
these officers. In the event of a change of control,
the agreements provide for a severance payment equal to
three times the executive's annual compensation plus a
lump sum payment equal to lost benefits under the
retirement plan if the executive is terminated other
than for cause or has a good reason to terminate
employment. If the amount paid upon termination exceeds
amounts established under the Internal Revenue Code,
which results in payment of additional federal taxes,
the executive will receive an additional payment so
that the executive will retain the full amount to which
he is entitled under the agreement. The executive also
has 30 days at the end of the first year after a change
of control to terminate his employment for any reason
and still receive this benefit. The EICP provides that,
in the event of a change of control of our Company,
certain participants, including the named executive
officers, may re-elect to receive early payment of
deferred amounts, and the participant may direct the
Company to cause a letter of credit to be issued in an
amount sufficient to provide for all payments due to
such participant under the Plan.
The LTPP also provides that, in the event of a change
of control of our Company, certain participants,
including the named executives, shall be entitled to
receive early payment of deferred amounts.
24
<PAGE> 27
EXECUTIVE SURVIVOR
BENEFITS PROGRAM: The Company has in effect an Executive Survivor
Benefits Plan for certain executives. Coverage under
this plan is in lieu of the Company's regular group
life insurance coverage. If a participating executive
dies while he is employed by the Company, his
beneficiary is entitled to payments of between 90% and
100% (depending on the executive's age) of the
executive's final base annual salary for a period of 10
years.
JOHNSON CONTROLS SHARE OWNERSHIP
DIRECTORS AND
OFFICERS: The following table lists our Common Stock ownership as
of October 31, 2000, for the persons or groups
specified. Ownership includes direct and indirect
(beneficial) ownership as defined by the Securities and
Exchange Commission rules. To our knowledge, each
person, along with his or her spouse, has sole voting
and investment power over the shares unless otherwise
noted. None of these persons beneficially owns more
than 1% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND UNITS REPRESENTING
NATURE(1) OF DEFERRED
NAME OF BENEFICIAL OWNER STOCK OWNERSHIP COMPENSATION(3)
------------------------ --------------- ------------------
<S> <C> <C>
James H. Keyes................................ 775,735(2) 64,317 units
John M. Barth................................. 231,801(2) 28,805 units
Stephen A. Roell.............................. 147,559(2) 4,090 units
Michael F. Johnston........................... 12,954(2) 6,137 units
Giovanni Fiori................................ 119,550(2) 13,162 units
John P. Kennedy............................... 110,165(2) 24,346 units
William F. Andrews............................ 6,778 6,525 units
Robert Barnett................................ 3,119 23,352 units
Natalie Black................................. 882 1,610 units
Paul A. Brunner............................... 13,635 6,006 units
Robert A. Cornog.............................. 5,788 8,514 units
Willie D. Davis............................... 4,035 5,903 units
William H. Lacy............................... 6,500 4,457 units
Southwood J. Morcott.......................... 2,188 9,624 units
Richard F. Teerlink........................... 4,091 3,621 units
Gilbert R. Whitaker, Jr....................... 5,918 13,392 units
All Directors and Executive Officers as a
group (not including deferred shares
referred to in footnote (3))................ Total: 2,069,288(2)
TOTAL PERCENT OF CLASS OF COMMON STOCK
EQUIVALENTS................................. 2.34%
</TABLE>
-------------------------
(1) Includes all shares for each officer or director which directly has or
shares the power to vote or to direct the vote of such shares, or to dispose
of or direct disposition of such shares.
25
<PAGE> 28
(2) Includes shares of Common Stock, which, as of October 31, 2000, were subject
to outstanding stock options exercisable within 60 days as follows: Mr.
Keyes, 711,500, Mr. Barth, 177,000, Mr. Roell, 96,500, Mr. Fiori, 106,500,
Mr. Johnston, 0 and Mr. Kennedy, 103,000. This also reflects common stock
equivalents of Preferred Units that are owned by these officers.
(3) Includes deferred shares under the EICP, LTPP, and Deferred Compensation
Plan for certain Directors. Units will not be distributed in the form of
Common Stock.
SCHEDULE 13G FILINGS: The Company believes that the following table is an
accurate representation of beneficial owners of more
than 5% of any class of the Company's securities. The
table is based upon reports on Schedules 13G filed with
the Securities and Exchange Commission or other
information believed to be reliable.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- --------------------- ---------- ----------
<S> <C> <C> <C>
Common Stock Capital Research and 4,332,400(1) 5.1%
$0.16 2/3 Par Value Management Company
333 South Hope Street
Los Angeles, CA 90071
Series D Convertible Fidelity Management 250.8492(2) 100%
Preferred Stock Trust Company
$1.00 Par Value 82 Devonshire Street
Boston, MA 02109
</TABLE>
-------------------------
(1) Capital Research and Management Company reported as of December 31, 1999,
sole dispositive power with respect to 4,332,400 shares.
(2) As of October 31, 2000, Fidelity Management Trust Company reported that it
held shared voting power and sole dispositive power with respect to the
shares indicated above in its capability as trustee of the Johnson Controls,
Inc. Employee Stock Ownership Trust.
VOTING PROCEDURES
ELECTION OF DIRECTORS: To be elected, directors must receive a plurality of
the shares present and voting in person or by proxy,
provided a quorum exists. A quorum is present if at
least a majority of the outstanding shares on the
record date are present in person or by proxy.
Plurality means that the number of directors who
receive the largest number of votes cast are elected as
directors, up to the maximum number of directors to be
chosen at the meeting. Consequently, any shares not
voted (whether by abstention, broker non-vote or
otherwise) have no impact in the election of directors
except to the extent the failure to vote for an
individual results in another individual receiving a
larger number of votes.
26
<PAGE> 29
OTHER PROPOSALS: To be approved, each of the proposals: (a) to ratify
the election of PricewaterhouseCoopers LLP as our
independent auditors for 2001, and (b) to consider the
shareholder proposal to adopt global corporate
standards, must receive more votes "FOR" the proposal
than "AGAINST." For purposes of determining the vote
with respect to these proposals, any shares not voted
(whether by abstention, broker non-vote or otherwise)
will have no impact.
The proxies received will be voted in accordance with
the instructions you provide. Unless otherwise
instructed by you, all shares represented by your
returned telephone, Internet or written proxy will be
voted as the Board recommends on each proposal noted on
the first page of this proxy statement. Proxies may be
revoked as noted on that page.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(A) Based on a review of reports filed by our directors,
executive officers and of beneficial holders of 5% or
more of our shares, and upon representations from those
persons, all reports required to be filed during 2000
with the Securities and Exchange Commission under
Section 16(a) of the Securities Exchange Act of 1934
were timely made.
SUBMISSION OF SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
SHAREHOLDER
PROPOSALS: Proposals of shareholders which are intended to be
presented at the 2002 Annual Meeting pursuant to
Security and Exchange Commission Rule 14a-8, must be
received by the Company no later than August 2, 2001 to
be included in the Company's proxy materials for that
meeting.
A shareholder that intends to present business at the
2002 Annual Meeting other than pursuant to Rule 14a-8
must comply with the requirements set forth in the
Company's By-Laws. Among other things, to bring
business before an annual meeting, a shareholder must
give written notice to the Company, pursuant to the
By-Laws, not less than 45 days and not more than 75
days prior to the month and day in the current year
corresponding to the date on which the Company first
mailed its proxy materials for the prior year's annual
meeting of shareholders. Therefore, since the Company
anticipates mailing its proxy statement on December 1,
2000, the Company must receive notice of a
27
<PAGE> 30
shareholder proposal submitted other than pursuant to
Rule 14a-8 no sooner than September 17, 2001, and no
later than October 17, 2001.
If the notice is received after October 17, 2001, then
the notice will be considered untimely and the Company
is not required to present such proposal at the 2002
Annual Meeting. If the Board of Directors chooses to
present a proposal submitted after October 17, 2001 at
the 2002 Annual Meeting, then the persons named in
proxies solicited by the Board of Directors for the
2002 Annual Meeting may exercise discretionary voting
power with respect to such proposal.
DIRECTOR NOMINATIONS: Shareholders wishing to propose direct candidates for
consideration by the Directors Committee may do so by
writing to the Secretary of the Company, giving the
candidate's name, biographical data and qualifications.
The Company's By-Laws set forth additional requirements
for shareholders wishing to nominate director
candidates for consideration by shareholders. For
elections of directors at an annual meeting, the
requirements include written notice by the shareholder
of an intent to make such a nomination that complies
with the By-Laws to the Secretary of the Company not
less than 45 days and not more than 75 days prior to
the month and day in the current year corresponding to
the date on which the Company first mailed its proxy
materials for the prior year's meeting of shareholders.
By order of the Board of Directors.
JOHN P. KENNEDY
John P. Kennedy, Secretary
December 1, 2000
28
<PAGE> 31
[MAP]
29
<PAGE> 32
EXHIBIT A
ETHICS POLICY
See brochure entitled "Ethics Policy" that has been included with this
proxy.
<PAGE> 33
ETHICS POLICY
THE CORNERSTONE OF CUSTOMER SATISFACTION
OUR CREED
We believe in the free enterprise system. We shall consistently treat our
customers, employees, shareholders, suppliers and the community with honesty,
dignity, fairness and respect. We will conduct our business with the highest
ethical standards.
INTRODUCTION
TO ALL JOHNSON CONTROLS EMPLOYEES:
Johnson Controls has a long proud history of being a good company -- one that
has always done its best to exceed the expectations of its customers, its
employees, its suppliers and its communities. We are known as a company with
integrity, that always tries to do the right thing. Since 1885 the products and
services we deliver have changed, but the kind of company we are and the way we
do business have not.
Throughout the decades, our people, the employees of Johnson Controls, have
stood firm when our beliefs and values have been tested. Today, each one of us
is charged with the responsibility to uphold and extend our standards for
ethical behavior.
Our corporate creed, together with our statement of values, set forth our
beliefs. Our ethics policy is designed to provide additional guidance as to what
practices are appropriate for Johnson Controls employees.
We urge you to regularly review these beliefs and discuss them with your
co-workers. Agreement among our employees of what is right and what is wrong,
and the resolve to always choose the proper course of action is vital to our
future and the fulfillment of our mission.
Sincerely,
James H. Keyes
Chairman and Chief Executive Officer
John M. Barth
President and Chief Operating Officer
Stephen A. Roell
Senior Vice President and Chief Financial Officer
<PAGE> 34
WHAT WE VALUE
INTEGRITY: Honesty and fairness are essential to the way we do business and how
we interact with people. We are a company that keeps its promises. We do what we
say we will do, and we will conduct ourselves in accordance with our code of
ethics.
CUSTOMER SATISFACTION: Customer satisfaction is the source of employee,
shareholder, supplier and community benefits. We will exceed customer
expectations through continuous improvement in quality, service, productivity
and time compression.
OUR EMPLOYEES: The diversity and involvement of our people is the foundation of
our strength. We are committed to their fair and effective selection,
development, motivation and recognition. We will provide employees with the
tools, training and support to achieve excellence in customer satisfaction.
IMPROVEMENT AND INNOVATION: We seek improvement and innovation in every element
of our business.
SAFETY AND THE ENVIRONMENT: Our products, services and workplaces reflect our
belief that what is good for the environment and the safety and health of all
people is good for Johnson Controls.
1 REPORTING OF RISKS
Johnson Controls is committed to providing quality products and services that
meet or exceed the expectations of our customers. Deficiencies that put the
financial security of our company at risk or, more importantly, threaten the
physical well-being of any person, should be reported immediately to management.
Deficiencies may involve product quality, safety, design, installation or
maintenance.
2 PROMOTING HEALTH AND SAFETY
The health and safety of Johnson Controls' employees throughout the world is of
utmost importance. Our work processes and policies are designed to minimize
risk. We all must routinely review and improve workplace conditions to ensure a
safe and healthful workplace and report unsafe working conditions to supervisors
and management anywhere in the world.
3 EQUAL OPPORTUNITY AND DIVERSITY
We value and respect the diversity of our employees, suppliers, customers and
communities. Our company is committed to providing equal opportunity in all of
our employment and purchasing practices. Only in valuing diversity and
committing to equal opportunity practices will we be able to fully utilize the
human and business resources available to us in our pursuit of customer
satisfaction. At the same time, we believe that by valuing diversity we enable
all to fully realize their potential. We are committed to providing a workplace
that is free of harassment or any other behavior that diminishes a person's
integrity and self esteem.
<PAGE> 35
Harassment, in any form or degree, will not be tolerated. The use of child labor
or forced labor is strictly prohibited.
4 PROTECTING THE ENVIRONMENT
We respect the needs and concerns of the communities in which we live and work.
This is exemplified in the company's long tradition of caring about the quality
of the environment. Our products, services and manufacturing methods reflect
this concern and our belief that what is good for the environment is good for
Johnson Controls. Sound waste management and source reduction practices,
recycling and energy conservation are legal, ethical, and business requirements.
5 PROTECTING THE COMPANY'S INFORMATION
Protecting information about Johnson Controls' products, activities, performance
or plans is critical to our company's competitive position and reputation. Good
judgment is needed to determine what information can or cannot be disclosed to
others. Should there be any question as to whether certain information is
confidential, employees should consult their supervisor. To limit the potential
for important information being used improperly, employees should use "need to
know" guidelines even with other Johnson Controls employees.
The use of confidential company information for the personal gain of an employee
or anyone else is contrary to Johnson Controls' policies and, in many cases
unlawful. Buying or selling Johnson Controls stock on the basis of material
nonpublic information is prohibited.
It is also unlawful to communicate this information to other persons who may
trade in our stock. Material information is defined as anything a prudent
investor should know before investing in a company. This type of information
includes, but is not limited to, financial results, new products and acquisition
plans that have not already been disclosed to the public.
6 AVOIDING CONFLICTS OF INTEREST
The best interests of Johnson Controls are expected to be foremost in the minds
of our employees as they perform their duties. When we become employees of the
company, and receive pay and benefits, we make this commitment. It is wrong to
seek any other economic gain by virtue of being a Johnson Controls employee.
Giving or receiving anything of enough value to influence sound business
judgment is prohibited. This also applies to family, friends and business
associates. In addition, discussions of future employment with government
officials with whom Johnson Controls seeks to do business must be approved in
advance.
Johnson Controls trusts its employees with information about company activities
and with company funds and property. Use of any of these in a way that conflicts
with company interests is strictly prohibited. Situations or arrangements which
may conflict with company interests must be approved in advance by the
employee's respective business group General Manager.
<PAGE> 36
We must also take care that our actions cannot be perceived as serving other
interests. While mutually beneficial relationships with customers and suppliers
are encouraged, we should avoid situations that offer the potential for
problems. Examples include having a significant stake in, or serving as a
director of, a firm that sells to or purchases from Johnson Controls. Employees
should also not work for a customer or a supplier. All these examples apply to
involvement with our competitors as well.
7 PROPER USE OF COMPANY FUNDS
Employees are personally accountable for any form of company funds such as
credit cards, tickets, cash and checks. Those who authorize the use of funds
must ensure that the company has received proper value in return. Johnson
Controls may be obligated to notify appropriate civil authorities should funds
be used for any improper or illegal purpose and will take appropriate
disciplinary action in any event.
8 PROPER USE OF COMPANY INFORMATION AND COMPANY PROPERTY
Johnson Controls trusts its employees with information about company activities
and with company property. Use of these in a way that conflicts with company
interests, or in any manner that may reasonably be considered offensive or
disruptive to another employee, is strictly prohibited.
9 APPROPRIATE USE OF E-MAIL, INTERNET AND OTHER COMPUTING RESOURCES
Electronic commerce, electronic mail, and other Internet-related systems are
intended to be used for Company business. Additionally, all information on
Company computer systems, including electronic mail, is the property of Johnson
Controls. Therefore, to ensure that computing resources are used in accordance
with expectations, management may inspect and disclose the contents of
electronic messages if such inspection and disclosure is made for legitimate
business purposes or as necessary to protect the rights and property of Johnson
Controls.
The Company is careful to ensure that all employees, customers, suppliers, and
the public in general, are treated with dignity and respect. Use of computing
resources to offend or harass others is prohibited. Employees who use the
Internet to access sites that contain offensive materials related to sex, race,
or other protected categories, or who otherwise violate these prohibitions, will
be subject to discharge.
10 INTEGRITY OF RECORDKEEPING/ACCOUNTING
Johnson Controls documents a wide range of its activities. The integrity of
these records is relied upon to make important business decisions and take
actions. Therefore, it is essential that all records are accurate and complete.
This responsibility prohibits false or misleading entries regarding both the
amount or
<PAGE> 37
purpose of transactions. Some examples include vouchers, bills, financial data,
expense reports and performance records.
11 POLITICAL/GOVERNMENTAL AND NON-GOVERNMENTAL CONTRIBUTIONS
Within the U.S., no contributions of funds or services are to be made to, or on
behalf of, any political organization or candidate by Johnson Controls or any of
our subsidiary companies without advance approval by the Law Department. Within
the U.S., offering anything of value, directly or indirectly, to government
officials in connection with their government duties is prohibited and includes
gifts or other things of value offered to their family members. Throughout the
world, direct or indirect contributions to any government officials (including
their representatives or family members) that are intended to gain preferential
treatment for our company are always prohibited.
Johnson Controls recognizes that in some countries outside the U.S. it is legal
and customary for companies to make certain contributions to political parties
and government officials. Nevertheless, no such contributions or payments can be
made by Johnson Controls or its subsidiaries, employees or agents with the
intent to obtain or retain business. In addition, contributions or payments must
be approved by the Law Department and must be completely and accurately
documented in our company's books and records.
12 RULE OF LAW
Any employee involved in court or other similar proceedings arising out of his
or her employment with Johnson Controls shall abide by the rules of that forum,
cooperate with the orders of that forum, and not in any way commit perjury or
obstruction of justice.
13 DEFENSE SECURITY
Johnson Controls and some of its businesses have Top Secret security clearances.
Strict care must be taken to comply with the laws on the protection and
disclosure of classified information relating to such businesses.
All visits to certain hostile countries, or meetings with their officials
anywhere, must be formally reported to the Law Department.
14 ANTITRUST
Planning or acting together with any competitor to fix prices or to agree about
the nature, extent or means of competition in any market is against company
policy and in violation of antitrust laws. Antitrust laws may also in some
circumstances prohibit agreements to boycott, to allocate products, territories,
or markets, and to limit the production or sale of products. Using illegal or
unethical means to obtain competitive information or gain a competitive
advantage over a competitor is prohibited.
<PAGE> 38
15 INTERNATIONAL BUSINESS
There are several laws which restrict where we can do business, what information
or products we can supply to certain countries and what information we can
provide to a foreign government (e.g., boycott-related requests or U.S. national
security concerns). For these reasons, business entry into any new foreign
country must be in compliance with these restrictions.
16 RESPONSIBILITIES
Each employee of Johnson Controls is expected to carry out his or her work in
accordance with the business standards of conduct of Johnson Controls. Further,
all employees are urged to direct any questions or concerns about the company's
activities or these standards to their supervisors or the divisional or
corporate human resources departments without delay. Any employee who suspects
that a violation of the Ethics Policy has occurred is obligated to report it,
and such employees shall be protected from retaliation.
This Ethics Policy supersedes all previous Ethics Policies. Employees should
also be aware that these standards are greater than those that may be required
by local law. Adherence to these standards is a condition of employment with
Johnson Controls. Violations are serious matters and will result in disciplinary
action. Managers and supervisors are responsible for distributing copies of the
Ethics Policy to employees and for making them aware of the importance and
specific requirements of the policy.
The Ethics Policy is not all-encompassing, and questions about situations not
discussed in the Ethics Policy should be addressed to the Law Department, the
Internal Audit Department, the Human Resources Department, or your supervisor.
Questions or information concerning possible violations of the Ethics Policy can
be provided anonymously by calling 1-800-333-2222, ext. 2211. Outside the U.S.
and Canada call 414-228-2211.
Johnson Controls, Inc.
5757 North Green Bay Avenue
Milwaukee, WI 53201-0591
FORM NO. 8813 (9/99)
PRINTED IN U.S.A.
<PAGE> 39
EXHIBIT B
AUDIT COMMITTEE CHARTER
MISSION STATEMENT
The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities. The Committee will review the financial reporting
process, internal control system, audit process, and the company's process for
monitoring compliance with laws and regulations and the company's ethics policy.
In performing its duties, the Committee will maintain an effective independent
working relationship with the Board of Directors, management, the internal
auditors and independent accountants.
ORGANIZATION
The Audit Committee will consist of at least four independent directors. An
independent director should be free of any relationship that could influence
his/her judgment as a Committee member. Each member shall posses a detailed
understanding of the responsibilities of Committee membership as well as the
company's business, operations and risks. The Board of Directors shall designate
one of the Committee members as chairperson. The Committee will meet at least
four times per year.
ROLES AND RESPONSIBILITIES
INTERNAL CONTROL
- Encourage management to communicate the importance of internal control
and to ensure that all individuals possess an understanding of their
roles and responsibilities.
- Review and discuss with management the implementation of internal control
recommendations made by internal auditors and independent accountants.
- Periodically review with management the status of major information
technology plans and their potential effect on the internal control
environment.
FINANCIAL REPORTING
GENERAL
- Review significant accounting and reporting developments, including
recent professional and regulatory pronouncements, and understand their
impact on the company's financial statements.
<PAGE> 40
ANNUAL FINANCIAL STATEMENTS
- Review the company's annual financial statements and determine whether
they are complete and consistent with the information known to Committee
members, and assess whether they are based upon appropriate accounting
principles.
- Meet with management and the independent accountants to review the
financial statements and the results of the audit.
- Review the MD&A section of the annual report before its release and
consider whether the information is adequate and consistent with members'
knowledge about the company and its operations.
- Review and approve the report required by the rules of the Securities and
Exchange Commission to be included triennially in the company's annual
proxy statement.
QUARTERLY FINANCIAL STATEMENTS
- Meet with management, either by telephone or in person, to review the
quarterly operating results and discuss any significant variances from the
financial plan prior to the public release of the results. The committee
chairperson or the entire committee may do this.
COMPLIANCE WITH LAWS AND REGULATIONS
- Review the effectiveness of the system for monitoring compliance with laws and
regulations.
- Periodically obtain updates from management, general counsel, and tax director
regarding compliance.
COMPLIANCE WITH COMPANY ETHICS POLICY
- Ensure that an ethics policy is formalized in writing and that management
takes the necessary actions to disseminate the information and educate all
employees.
- Periodically review the program for monitoring compliance and obtain updates
from management and general counsel.
INTERNAL AUDIT
- Approve internal auditors' proposed audit schedule and plans.
- Review activities and organizational structure of the internal audit function.
<PAGE> 41
INDEPENDENT ACCOUNTANTS
The independent accountants are accountable to the Board of Directors and Audit
Committee as representatives of the shareholders, and as such, the Committee:
- Approves the independent accountants' proposed audit scope and fees.
- Assesses the performance of the independent accountants and recommends to the
Board of Directors the appointment of the independent accountants.
- Reviews report from independent accountants regarding their independence and,
if necessary, recommends Board action to satisfy itself of the accountants'
independence.
- Obtains assurance from the independent accountants that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been implicated.
- Discusses with the independent accountant matters related to the conduct of
the audit as required in Statement on Auditing Standards No. 61.
OTHER RESPONSIBILITIES
- Meet with the independent accountants, director of internal audit, and
management in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately.
- Ensure that significant findings and recommendations made by the internal
auditors and independent accountants are addressed by management in a timely
manner.
Adopted January 25, 2000
<PAGE> 42
PROXY [JOHNSON CONTROLS LOGO]
VOTE BY TELEPHONE, INTERNET OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
TELEPHONE
[PICTURE]
toll-free in U.S. and Canada:
877-265-9608
Use any touch-tone telephone to vote your proxy. Have your Proxy Form in hand
when you call. You will be prompted to enter your control number, located in the
telephone box below, and then follow the simple directions.
or
INTERNET
[PICTURE]
HTTP://WWW.VOTEYOURPROXY.COM
Use the Internet to vote your proxy. Have your Proxy Form in hand when you
access the website. You will be prompted to enter your control number, located
in the Internet box below, to create an electronic ballot.
or
MAIL
[PICTURE]
Mark, sign and date your Proxy Form and return it in the postage-paid envelope
we have provided.
--------------------------------------------------------------------------------
The undersigned, having received the Notice of Meeting and Proxy Statement dated
December 1, 2000, and Annual Report for 2000, hereby appoints J.P. Kennedy and
J.H. Keyes, and each of them, proxies with power of substitution to vote for the
undersigned at the annual shareholders' meeting of Johnson Controls, Inc., on
January 24, 2001, and at any adjournments thereof, hereby revoking any proxy
heretofore given by the undersigned for such meeting.
This proxy when properly executed will be voted in the manner directed therein
by the undersigned. Your telephone or Internet vote authorizes the named proxies
to vote your shares in the same manner as if you marked, signed and mailed your
Proxy Form. IF YOU SUBMIT YOUR PROXY BY TELEPHONE OR INTERNET, THERE IS NO NEED
FOR YOU TO MAIL BACK YOUR PROXY FORM.
CONTROL NUMBER
FOR TELEPHONE/INTERNET VOTING
When you vote on-line, sign up to access next year's annual report and proxy via
the Internet. Register at WWW.VOTEYOURPROXY.COM
<PAGE> 43
[JOHNSON CONTROLS LOGO]
2001 ANNUAL MEETING -- JANUARY 24, 2001
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<CAPTION>
FOR WITHHOLD
ALL FROM ALL
<S> <C> <C> <C>
1. Election of Directors [ ] [ ]
01 William F. Andrews
02 Robert L. Barnett
03 Willie D. Davis
04 Richard F. Teerlink
</TABLE>
EXCEPTIONS
To withhold authority to vote for any individual nominee(s), mark the
exceptions box and write the number code(s) as listed above.
[ ] Check this box if address change, and indicate correction below:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Approval of PriceWaterhouseCoopers as independent [ ] [ ] [ ]
auditors for 2001.
</TABLE>
AS THE COMPANY ALREADY HAS ITS OWN STANDARDS, THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST ITEM 3.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Proposal for a global set of corporate standards [ ] [ ] [ ]
</TABLE>
If no direction is made, this proxy will be voted FOR all nominees listed in
items 1 and 2, and AGAINST item 3. And in the discretion of the proxies, upon
other such matters which may properly come before the meeting or any
adjournments thereof.
PLEASE SIGN IN BOX ABOVE.
Please sign name exactly as it appears hereon. When signing as attorney,
executor, administrator, trustee, or guardian, give full title. For joint
accounts, each owner must sign.
Dated:
------------------------------
