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
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
PHELPS DODGE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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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: (1)
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] 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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(4) Date Filed:
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<PAGE>
[PHELPS DODGE
CORPORATION LOGO] 2600 North Central Avenue, Phoenix, Arizona 85004-3014
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Douglas C. Yearley
Chairman of the Board, President
and Chief Executive Officer
April 1, 1994
Dear Shareholder:
You are cordially invited to attend the annual meeting of
shareholders of Phelps Dodge Corporation to be held at 11:00 a.m. on
Wednesday, May 4, 1994, at the Arizona Biltmore Hotel, 24th Street
and Missouri Avenue, Phoenix, Arizona. We hope that you will be able
to attend the meeting, at which the business and operations of the
Corporation will be reviewed.
The formal notice of annual meeting and proxy statement are
attached to this letter. This material contains information
concerning the business to be conducted at the meeting and the
nominees for election as directors.
Even if you are unable to attend the meeting in person, it is
important that your shares be represented. Therefore, would you
please complete, date, sign and return the enclosed proxy at your
earliest convenience. Approximately 84.9% of the outstanding shares
were represented at last year's meeting, and we would like even
greater shareholder participation this year. If you choose to attend
the annual meeting, you may, of course, revoke your proxy and cast
your votes personally at the meeting.
Sincerely,
/s/ D. C. Yearley
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<PAGE>
[PHELPS DODGE
CORPORATION LOGO] 2600 North Central Avenue, Phoenix, Arizona 85004-3014
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Notice of Annual Meeting of Shareholders May 4, 1994
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To the Shareholders of Phelps Dodge Corporation:
The annual meeting of shareholders of Phelps Dodge Corporation
(the "Corporation") will be held at the Arizona Biltmore Hotel, 24th
Street and Missouri Avenue, Phoenix, Arizona, on Wednesday, May 4,
1994, at 11:00 a.m., for the following purposes:
1. To elect four directors;
2. To consider and act upon a proposal to ratify the appointment
of Price Waterhouse as independent accountants for the Corporation for
the year 1994; and
3. To transact such other business as may properly be brought
before the meeting or any adjournments thereof.
Only holders of record of the Corporation's Common Shares at the
close of business on March 17, 1994, will be entitled to vote at the
meeting.
Shareholders who do not expect to attend the meeting in person are
asked to date, sign and complete the enclosed proxy and return it
without delay in the enclosed envelope, which requires no postage
stamp if mailed in the United States.
By order of the Board of Directors,
William C. Tubman
Vice President and Secretary
Phoenix, Arizona
April 1, 1994
<PAGE>
PHELPS DODGE CORPORATION
2600 NORTH CENTRAL AVENUE, PHOENIX, ARIZONA 85004-3014
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors of
Phelps Dodge Corporation (the "Corporation") for use at the annual meeting of
shareholders to be held on May 4, 1994, and any adjournments thereof. The
shareholder giving the proxy may revoke it at any time before it is exercised
at the meeting by delivering to the Secretary of the Corporation a written
instrument of revocation or a duly executed proxy bearing a later date.
The only securities of the Corporation entitled to vote at the 1994 annual
meeting are its Common Shares, of which 70,584,798 shares were outstanding on
March 17, 1994, each entitled to one vote. Only shareholders of record at the
close of business on March 17, 1994, will be entitled to vote at the annual
meeting. The proxy of any shareholder participating in the Automatic Dividend
Investment Service for Phelps Dodge Common Shares, administered by Chemical
Bank, will also serve as instructions for the voting of all shares held for
the shareholder's account under that service. This proxy statement and the
accompanying form of proxy are being first sent to shareholders on or about
April 1, 1994.
1. ELECTION OF DIRECTORS
The Board of Directors of the Corporation currently consists of twelve
directors. The directors are divided into three classes, four in Class I,
three in Class II and four in Class III. One director currently is
unclassified and is a nominee for Class III. The terms of office of the four
Class III directors expire at the 1994 annual meeting of shareholders. Mr.
Cleveland E. Dodge, Jr., a Class I director, and Mr. George B. Munroe, a Class
III director, will retire on May 4, 1994 in accordance with the Corporation's
Policy on Retirement of Directors. The directors have voted to decrease the
size of the Board from 12 members to 10 members effective upon the election of
directors at the annual meeting of shareholders to be held on May 4, 1994.
The four nominees for election as Class III directors are listed below.
The nominees will be elected to serve terms of three years. The directors'
terms will continue until their successors are elected and qualify. Unless
otherwise instructed, the persons named in the accompanying proxy will vote
FOR the election of such nominees. If for any reason any nominee should not be
available for election or able to serve as a director, the accompanying proxy
may be voted for the election of a substitute nominee designated by the Board
of Directors.
A plurality of the votes cast at the annual meeting is required for the
election of directors. Abstentions and broker non-votes therefore have no
effect on the election of directors.
AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NOMINEE AND OTHER DIRECTORSHIPS HELD
Robert N. Burt Mr. Burt, 56, has been Chairman of the Board and Chief
(Class III) Executive Officer of FMC Corporation, Chicago,
Illinois, a producer of chemicals and machinery
for industry, agriculture and government, since
1991. From 1990 to 1993 he was President of FMC
Corporation and Executive Vice President from 1988
to 1990. From 1989 to 1991 he was Chairman and
Chief Executive Officer of FMC Gold Company. He
is a director of FMC Corporation. Mr. Burt has
served as a Phelps Dodge director since 1993.
Robert D. Krebs Mr. Krebs, 51, has been Chairman, President and Chief
(Class III) Executive Officer of Santa Fe Pacific Corporation,
a holding company engaged in transportation and
natural resources, since 1988. He has been
Chairman, President and Chief Executive Officer of
The Atchison, Topeka and Santa Fe Railway Company,
a transportation company, since 1991. From 1987
to 1988 he was President and Chief Executive
Officer, and from 1983 to 1987 he was President
and Chief Operating Officer, of Santa Fe Southern
Pacific Corporation. Mr. Krebs was President of
Southern Pacific Transportation Company and St.
Louis Southwestern Railway Company from 1982 to
1983. He is a director of Catellus Development
Corporation, Northern Trust Corporation, Santa Fe
Pacific Corporation, Santa Fe Energy Resources,
Inc., Santa Fe Pacific Pipelines, Inc. and The
Atchison, Topeka and Santa Fe Railway Company.
Mr. Krebs has served as a Phelps Dodge director
since 1987.
George L. Shinn Mr. Shinn, 71, was Chairman of the Executive Committee
(Class III) of the Board of Directors of First Boston, Inc.,
New York, N.Y., a holding company, from 1983 to
1988. He was Chairman of the Board and Chief
Executive Officer of First Boston, Inc., and of
The First Boston Corporation, an investment
banking firm, from 1975 until his retirement in
1983. He is a director of New York Life Insurance
Company and The New York Times Company. Mr. Shinn
has been a Phelps Dodge director since 1983.
Douglas C. Yearley Mr. Yearley, 58, has been Chairman of the Board and
(Class III) and Chief Executive Officer of the Corporation
since 1989 and President of the Corporation since
1991. He was President of Phelps Dodge Industries,
a division of the Corporation, from 1988 until
1990, Executive Vice President of the Corporation
from 1987 until 1989 and Senior Vice President of
the Corporation from 1982 through 1986. He is a
director of J.P. Morgan & Co., Incorporated and
its principal banking subsidiary, Morgan Guaranty
Trust Company of New York, Lockheed Corporation
and USX Corporation. Mr. Yearley has served as a
Phelps Dodge director since 1986.
The six directors whose terms will continue after the annual meeting and
will expire at the 1995 annual meeting of shareholders (Class I) or the 1996
annual meeting of shareholders (Class II) are listed below.
AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
DIRECTOR AND OTHER DIRECTORSHIPS HELD
Edward L. Addison Mr. Addison, 64, has been Chairman of the Board of The
(Class I) Southern Company, Atlanta, Georgia, a holding
company of an electric utility system, since
since January 1994, and has been Chief Executive
Officer since 1983. He was President of the
The Southern Company from 1983 to 1993. From 1978
to 1983 he was President and Chief Executive
Officer of Gulf Power Company, an electric
utility. He is a director of Alabama Power
Company, CSX Corporation, Georgia Power Company,
Protective Life Corporation, The Southern Company,
Wachovia Bank of Georgia, N.A., and Wachovia
Corporation of Georgia. Mr. Addison has served as
a Phelps Dodge director since 1985.
George C. Dillon Mr. Dillon, 71, was Chairman of the Executive
(Class I) Committee of Manville Corporation, a manufacturer
of fiber glass insulations, forest products and
industrial specialty products, from 1990 until
his retirement at year-end 1991. He was Chairman
of the Board of Manville Corporation from 1986 to
1990. He was Chairman of the Board and Chief
Executive Officer of Butler Manufacturing Company,
Kansas City, Missouri, a manufacturer of buildings
and equipment for industry and agriculture, from
1978 to 1986. He is a director of Astec
Industries, Incorporated and Newhall Land &
Farming Co. Mr. Dillon has served as a Phelps
Dodge director since 1974.
Paul Hazen Mr. Hazen, 52, has been President of Wells Fargo &
(Class I) Company, a bank holding company, and of Wells
Fargo Bank, N.A., a national banking association,
since 1984. He is a director of Pacific Telesis
Group, Safeway, Inc., Wells Fargo & Company and
Wells Fargo Bank, N.A. Mr. Hazen has served as a
as a Phelps Dodge director since 1988.
Paul W. Douglas Mr. Douglas, 67, was Chairman and Chief Executive
(Class II) Officer of The Pittston Company, Greenwich,
Connecticut, a diversified firm engaged in coal
mining and transportation services, from 1984
until his retirement in 1991. He was President,
Chief Executive Officer and Chairman of the
Executive Committee of Freeport-McMoRan Inc., from
1981 to 1983 and of Freeport Minerals Company from
1975 to 1981. Mr. Douglas is a director of New
York Life Insurance Company, Philip Morris
Incorporated, MacMillan Bloedel Limited and U.S.
Trust Corporation and a trustee of its subsidiary,
United States Trust Company of New York. He has
served as a Phelps Dodge director since 1983.
William A. Franke Mr. Franke, 56, has been President of Franke &
(Class II) Company, Inc., Phoenix, Arizona, an investment
firm, since 1987. He has been Chairman of the
Board of America West Airlines, Inc., an airline
carrier, since 1992 and Chief Executive Officer
since December 1993. He was Chairman of the
Executive Committee of America West Airlines,
Inc., from 1992 to 1993. During 1989 and 1990 he
performed certain executive duties for Circle K
Corporation, an international convenience store
chain, as Chairman of its Executive Committee, and
from 1990 to 1993 acted as Chairman of its Special
Committee of Directors. He is a director of
America West Airlines, Inc., and Central
Newspapers, Inc. Mr. Franke has served as a
Phelps Dodge director since 1980.
Southwood J. Morcott Mr. Morcott, 55, has been Chairman of the Board of
(Class II) Dana Corporation, a worldwide manufacturer and
distributor of parts for the vehicular, industrial
and mobile off-highway markets, since 1990. He
was appointed Chief Executive Officer of Dana
Corporation in 1989 and President and Chief
Operating Officer in 1986. Since 1987 he has been
Chairman of Hayes-Dana Inc. Mr. Marcott is a
director of CSX Corporation, Dana Corporation,
Hayes-Dana Inc., and Johnson Controls, Inc. He
has served as a Phelps Dodge director since 1991.
The Board of Directors met nine times during 1993. Various committees of
the Board also met during the year, including the Audit Committee, four
meetings; the Compensation and Management Development Committee, four
meetings; the Committee on Directors (nominating committee), three meetings;
and the Environmental, Health and Safety Committee, three meetings. Average
attendance at all Board and committee meetings was 96%. Each incumbent
director attended at least 75% of the meetings of the Board and the committees
on which he served.
The Audit Committee of the Board of Directors, comprising Messrs. Addison,
Douglas, Franke, Hazen (Chairman), Krebs and Shinn, among other functions:
(i) reviews and recommends the engagement of the Corporation's independent
accountants, including the approval of their fee and the scope and timing of
their audit of the Corporation's financial statements; (ii) reviews, with the
Corporation's Director of Corporate Audit, the scope and results of the
Corporation's internal audit activity; (iii) reviews, with the independent
accountants, the Director of Corporate Audit and the Corporation's management,
policies and procedures with respect to internal auditing and financial and
accounting controls; (iv) reviews, with the independent accountants, the
accountants' report on the Corporation's financial statements, their
perception of the Corporation's financial and accounting personnel, and their
recommendations, if any, for improvements in the Corporation's internal
controls and the implementation of such recommendations; and (v) reviews the
adequacy and appropriateness of the Corporation's code of business ethics and
policies.
The Compensation and Management Development Committee of the Board of
Directors, comprising Messrs. Burt, Dillon, Douglas, Hazen, Krebs (Chairman)
and Morcott, recommends to the Board the compensation of the Corporation's
senior officers, reviews recommendations by management as to the compensation
of other officers and key personnel and reviews management's program for the
development of individuals to assume positions of responsibility in the
Corporation. In addition, the Committee reviews and recommends to the Board
incentive compensation awards, administers the Phelps Dodge Long-Term
Performance Plan, administers and grants options, which may be in tandem with
stock appreciation rights, under the Corporation's 1987 Stock Option and
Restricted Stock Plan (the "1987 Plan") and 1993 Stock Option and Restricted
Stock Plan (the "1993 Plan"), administers the 1979 Stock Option Plan and
administers and grants restricted stock under the 1987 Plan and the 1993 Plan.
The Committee on Directors of the Board of Directors, comprising Messrs.
Dillon (Chairman), Franke, Krebs, Morcott, Munroe and Yearley, studies, and
makes recommendations concerning, the composition of the Board of Directors
and the committees thereof and reviews the compensation of Board and committee
members. The Committee also reviews the qualifications of potential candidates
for director of the Corporation and recommends to the Board of Directors
nominees for election as directors. The Committee will consider as nominees
for director persons recommended by shareholders. Such recommendations should
be sent to the Secretary of the Corporation and should include the address of
the person and a brief description of his or her qualifications.
The Environmental, Health and Safety Committee of the Board of Directors,
comprising Messrs. Addison (Chairman), Burt, Dillon, Douglas, Morcott and
Munroe, reviews, among other things, the Corporation's policies with respect
to environmental, health and safety matters and the adequacy of management's
programs for implementing those policies and reports on such reviews and makes
recommendations with respect to those policies to the Board of Directors.
Directors who are not employees of the Corporation currently receive an
annual retainer of $20,000 and a fee of $1,000 for each Board or committee
meeting attended or, on a per diem basis, for rendering other special services
to the Corporation. As an employee director, Mr. Yearley does not receive the
annual retainer or any meeting fees. Under an unfunded plan, a director may
elect to defer receipt of his retainer or meeting fees or both to future years
and to receive interest thereon at prevailing market rates or to have such
amounts deemed invested in the Corporation's Common Shares.
During 1993, Mr. Dillon, Chairman of the Committee on Directors of the
Board of Directors, was requested by the Corporation to perform certain
additional services related to recruitment of new directors for the Board. Mr.
Dillon was paid a total of $3,000 (and reimbursed for his expenses) in return
for undertaking that additional work.
Directors who have served for at least five years and who have not been
employees of the Corporation or any of its subsidiaries are entitled to
receive an annual retirement benefit beginning at age 65 (or at their later
retirement from the Board) equal to 50% of the annual retainer paid from time
to time to active directors and prorated for each year served thereafter up to
100% for retired directors who have served for at least ten years. The plan
providing for these payments is unfunded, and payments under it are made
directly by the Corporation.
The Corporation provides life insurance for directors who are not
employees of the Corporation or any of its subsidiaries. The amounts of such
insurance are $50,000 for active directors and $25,000 for directors who have
retired in accordance with the Corporation's Policy on Retirement of
Directors.
Directors who are not, and have not for one year been, employees of the
Corporation or its subsidiaries or are not otherwise eligible to participate
in any plan of the Corporation or its subsidiaries entitling participants to
acquire stock, stock options or stock appreciation rights, are eligible for
option grants under the Phelps Dodge 1989 Directors Stock Option Plan. The
number of such eligible directors currently is eleven. Up to 171,232 Common
Shares may be sold pursuant to options under the Plan. On the first business
day following each annual meeting of shareholders, and in no event later than
the following June 1, each eligible director will be granted an option to
purchase 1,148 Common Shares. The option price is the fair market value of the
Common Shares on the day the option is granted and is payable in cash or in
Common Shares having a market value equal to the option price or in a
combination of cash and Common Shares. Options become exercisable in three
equal annual installments beginning on the first anniversary of the date of
grant. Exercisable options expire no later than three years after a director
terminates his service, unless his service terminates as a result of removal
by the shareholders for cause, in which case the options will be cancelled on
the date of termination. Options that are not exercisable on the date a
director terminates his service will be cancelled on that date unless his
service terminates (i) at or after he reaches age 65, having served at least
ten years, (ii) on account of his death or disability or (iii) in compliance
with any applicable law or rule of the New York Stock Exchange. In the latter
cases, all of a director's outstanding options are immediately and fully
exercisable at the time of his termination of service. Each option outstanding
at such time as the Corporation's shareholders approve a merger or similar
transaction in which the Corporation will not survive as a publicly held
corporation or the Corporation's Common Shares are first purchased pursuant to
a third party tender offer will be cancelled in exchange for a cash payment
equal to the excess of the fair market value of the Common Shares on such date
over the exercise price of such option multiplied by the number of shares
subject to such option. The Plan terminates on the third day following the
annual meeting of shareholders to be held in the year 1999. The termination of
the Plan will not affect options outstanding at that time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served on the Compensation and Management
Development Committee during all or part of 1993: Messrs. Addison, Burt,
Dillon, Douglas (former Chairman), Franke, Hazen, Krebs (current Chairman) and
Morcott.
The Corporation is the holder of a $456,000 unsecured promissory note of
America West Airlines, Inc., which is presently operating in Chapter 11 under
the federal bankruptcy laws. The note, which bears interest at a rate of 3.5%
in excess of the London Interbank Offered Rate, is due on June 30, 1994. Mr.
Franke is Chairman of the Board and Chief Executive Officer of America West
Airlines, Inc.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table discloses the number of the Corporation's Common
Shares deemed beneficially owned as of February 1, 1994 by each director and
each named executive officer of the Corporation and by all directors and
current executive officers of the Corporation as a group(a):
Number of Number of
Shares Shares
Name (b)(c) Name (b)(c)
Edward L. Addison 4,443 George B. Munroe 18,058
Robert N. Burt 1,000 (d) Bernard G. Rethore 28,937
George C. Dillon 4,443 Patrick J. Ryan 20,908
Cleveland E. Dodge, Jr. 4,382 George L. Shinn 4,443
Paul W. Douglas 5,443 Thomas M. St. Clair 46,538
William A. Franke 5,443 J. Steven Whisler 118,032
Paul Hazen 6,443 Douglas C. Yearley 276,333
Robert D. Krebs 3,982 Directors and current executive
Southwood J. Morcott 1,986 officers as a group (16) 550,814
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(a) The percentage of Common Shares beneficially owned by any director and any
named executive was less than one percent of the Common Shares outstanding
on February 1, 1994; the percentage of Common Shares beneficially owned by
all directors and current executive officers as a group was 0.8 percent of
the Common Shares outstanding on February 1, 1994.
(b) Shares shown as beneficially owned: (i) include restricted shares acquired
under the 1987 and 1993 Stock Option and Restricted Stock Plans as
follows: Mr. Rethore, 4,128 shares; Dr. Ryan, 4,149 shares; Mr. St. Clair,
3,643 shares; Mr. Whisler, 3,958 shares; and Mr. Yearley, 9,129 shares;
all current executive officers as a group, 25,007 shares; and (ii) include
shares which may be acquired within 60 days by exercise of stock options
as follows: Mr. Burt, 0 shares; Mr. Dodge, 382 shares; Mr. Krebs, 2,295
shares; Mr. Morcott, 382 shares; Mr. Munroe, 382 shares; Mr. Rethore,
12,900 shares; Dr. Ryan, 10,333 shares; Mr. St. Clair, 26,883 shares; Mr.
Whisler, 101,480 shares; and Mr. Yearley, 167,075 shares; each nonemployee
director (except Messrs. Burt, Dodge, Krebs, Morcott and Munroe), 3,443
shares; all directors and current executive officers as a group, 342,770
shares. In addition to the shares in the table shown as beneficially
owned, which include shares which may be acquired within 60 days by
exercise of stock options, the individuals and group hold additional stock
options as follows: Mr. Burt, 0 shares; Mr. Morcott, 1,914 shares; Mr.
Rethore, 79,101 shares; Dr. Ryan, 62,001 shares; Mr. St. Clair, 60,591
shares; Mr. Whisler, 69,334 shares; and Mr. Yearley, 197,553 shares; each
outside director (except Mr. Burt and Mr. Morcott), 2,297 shares; all
directors and current executive officers as a group, 491,167 shares.
(c) Each director and named executive officer has sole voting and investment
power over his shares shown as beneficially owned except: (i) the
restricted shares acquired under the 1987 and 1993 Stock Option and
Restricted Stock Plans as to which each holder has sole voting but no
investment power; (ii) shares which may be acquired within 60 days by
exercise of stock options as to which each holder has no voting or
investment power; (iii) 106,555 shares as to which Mr. Yearley has shared
voting and investment power; and (iv) 11,909 shares held in a family trust
as to which Mr. Rethore has shared voting and investment power.
(d) Acquired on February 22, 1994.
To the knowledge of the Corporation, the following entities beneficially
owned in excess of five percent of the Corporation's Common Shares as of
December 31, 1993:
NUMBER PERCENT OF
NAME AND ADDRESS OF SHARES OUTSTANDING
---------------- --------- -----------
The Capital Group, Inc. (a) 3,540,000 5.03%
333 South Hope Street
Los Angeles, CA 90071
J. P. Morgan & Co., Incorporated (b) 4,006,788 5.60%
60 Wall Street
New York, NY 10260
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(a) A report on Schedule 13G, dated February 11, 1994, disclosed that The
Capital Group, Inc., as a parent holding company, had sole voting power
over 195,000 shares and sole dispositive power over 3,540,000 shares.
(b) A report on Schedule 13G, dated December 31, 1993, disclosed that J. P.
Morgan & Co., Incorporated, as a parent holding company, had sole voting
power over 2,120,776 shares, shared voting power over 129,100 shares, sole
dispositive power over 3,857,688 shares and shared dispositive power over
149,100 shares.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Corporation
for 1993, 1992 and 1991 to each of the five named individuals who were
executive officers of the Corporation in 1993:
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(B) LONG TERM COMPENSATION
- -----------------------------------------------------------------------------------------------------------------------------------
AWARDS PAYOUTS
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<CAPTION> LONG
OTHER TERM ALL
NAME ANNUAL RESTRICTED PERFORMANCE OTHER
AND BASE COMPEN- STOCK OPTIONS PLAN COMPEN-
PRINCIPAL SALARY BONUS SATION(C) AWARDS(D) GRANTED(E) PAYOUTS SATION(G)
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------------------- ------ --------- --------- --------- ------------ ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas C. Yearley 1993 560,000 300,000 34,026 -0- 135,622(a) 207,000(f) 88,756
Chairman of the Board 1992 525,000 525,000 13,061 -0- 297,435(a) 225,000 62,076
President, Chief Executive 1991 500,000 500,000 -- 234,938 192,406(a) 305,000 --
Officer and Director
J. Steven Whisler 1993 300,000 185,300 4,914 -0- 37,612(a) 93,150(f) 39,021
Senior Vice President 1992 285,000 222,700 4,852 -0- 33,202(a) 105,000 31,260
1991 225,000 146,500 -- 100,688 40,000 142,000 --
Patrick J. Ryan 1993 293,000 186,800 -0- -0- 32,000 111,780(f) 34,970
Senior Vice President 1992 282,000 211,800 513 -0- 27,000(a) 130,000 31,115
1991 270,000 190,900 -- 100,688 40,000 246,800 --
Bernard G. Rethore 1993 290,000 203,800 1,702 -0- 47,319(a) 109,710(f) 38,945
Senior Vice President 1992 280,000 179,000 1,538 -0- 31,348(a) 127,500 30,681
1991 265,000 165,000 -- 100,688 40,000 200,000 --
Thomas M. St. Clair 1993 270,000 101,000 1,196 -0- 47,304(a) 101,430(f) 37,802
Senior Vice President and 1992 260,000 175,600 680 -0- 30,170(a) 117,500 28,120
Chief Financial Officer 1991 245,000 158,500 -- 87,263 30,000 208,900 --
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(a) The option grants denoted by "(a)" include reload options, as well as normal compensatory options.
(b) During October 1993, in response to falling copper prices at that time, consideration of all merit
salary increases that had not already been implemented for the Corporation's salaried employees,
including the five named executive officers, was suspended until further notice. Amounts shown under
"Bonus" were paid under the Annual Incentive Compensation Plan. Amounts shown under "Base Salary" and
"Bonus" include any salary or bonus deferred by the executive under the Phelps Dodge Employee Savings
Plan (the "Savings Plan") and the Comprehensive Executive Nonqualified Retirement and Savings Plan of
Phelps Dodge Corporation (the "Comprehensive Nonqualified Plan"). Amounts shown for 1991 differ from
amounts shown in the 1992 proxy statement due to changes in the applicable reporting rules of the
Securities and Exchange Commission.
(c) Tax payment reimbursements. No disclosure is required in this column for fiscal years ended before
December 15, 1992.
(d) On December 31, 1993, the named executives held the following numbers of shares of restricted stock
which had the following aggregate values on such date: Mr. Yearley, 9,129 shares worth $443,898; Mr.
Whisler, 3,958 shares worth $192,458; Dr. Ryan, 4,149 shares worth $201,745; Mr. Rethore, 4,128
shares worth $200,724; Mr. St. Clair, 3,643 shares worth $177,141. These numbers have been adjusted
to reflect the 2-for-1 stock split which occurred in 1992.
While shares of restricted stock generally require three years of post-grant service to vest, such
shares may vest in less than three years in certain circumstances, such as on the holder's death,
disability or normal retirement, upon the achievement of specified performance goals or otherwise in
the discretion of the Compensation and Management Development Committee. Dividends on restricted
stock are paid to the holder.
(e) The numbers of shares covered by options granted prior to May 18, 1992, have been doubled to reflect
the 2-for-1 stock split which became effective on that date.
(f) The 1991-1993 Long-Term Performance Plan award was paid one-half in cash and one-half in the
Corporation's Common Shares restricted as to transferability for a period of two years following the
end of the performance review period.
(g) Amounts shown include the following contributions and accruals by the Corporation for 1993 to the
Savings Plan and 1993 accruals under the Comprehensive Nonqualified Plan, respectively, for the
benefit of the named executives: Mr. Yearley, $20,874 and $67,882; Mr. Whisler, $20,874 and $18,147;
Dr. Ryan, $20,874 and $14,906; Mr. Rethore, $20,874 and $18,071; Mr. St. Clair, $20,874 and $16,928.
No disclosure is required in this column for fiscal years ended before December 15, 1992.
</TABLE>
STOCK OPTIONS
Each of the named executives was eligible to receive two types of option
grants during 1993: normal option grants and reload option grants. The first
type of grant is a compensatory award normally made on an annual basis which
is intended to reward each named executive based on the Corporation's future
performance.
The second type of grant, a reload option, is granted to an employee who
exercises an option with already-owned shares. It replaces the opportunity for
future appreciation that the employee would otherwise lose by exercising the
original option, while encouraging the employee to increase his share
ownership. Reload options provide only limited incremental value to the
employee as compared to the options they replace.
The following table contains information with respect to the normal
compensatory option grants and reload option grants made to each named
executive during 1993 and the hypothetical value at the time of grant based on
a variation of the Black-Scholes model (see footnote (c) on page 10). The
Corporation is not aware of any option pricing model, other than the actual
market, which can provide a true assessment of the value of the options. Over
their lives, the options could have a greater or a lesser value than that
shown in the table, and under some circumstances they could have zero value.
<TABLE>
OPTION GRANTS IN 1993
<CAPTION>
NORMAL % OF TOTAL
AND RELOAD OPTIONS GRANTED
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
GRANTED(A) IN 1993(B) PRICE DATE PRESENT VALUE(C)
NAME -------------- ------------------- ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
Douglas C. Yearley 90,000 16.5% $44.1875 12/1/03 $696,000
12,936 54.6250 2/7/00 108,000
14,421 49.0000 12/5/00 108,000
18,265 49.0000 12/4/01 137,000
J. Steven Whisler 36,000 4.6% 44.1875 12/1/03 278,000
1,612 54.5000 12/7/98 13,000
Patrick J. Ryan 32,000 3.9% 44.1875 12/1/03 247,000
Bernard G. Rethore 36,000 5.8% 44.1875 12/1/03 278,000
1,552 54.6250 2/7/00 13,000
2,556 49.0000 12/4/01 19,000
7,211 49.0000 12/5/00 54,000
Thomas M. St. Clair 25,000 5.8% 44.1875 12/1/03 193,000
1,393 54.6250 2/7/00 12,000
1,207 54.6250 12/5/00 10,000
7,447 45.0625 12/4/01 51,000
5,408 49.0000 12/5/00 41,000
6,849 49.0000 12/4/01 51,000
- -------
(a) During 1993, normal options were granted in the following amounts to the five named executive
officers: Mr. Yearley, 90,000; Mr. Whisler, 36,000; Dr. Ryan, 32,000; Mr. Rethore, 36,000; and Mr.
St. Clair, 25,000. The remaining grants disclosed in the table on page 9 are reload options.
Options expire no later than the tenth anniversary of the date of grant, plus one day. If an employee
retires on his normal retirement date or dies, his exercisable options terminate no later than the
fifth anniversary of his retirement or death. If an optionee's employment terminates for any reason
other than retirement or death, his exercisable options terminate no later than 30 days following the
termination of his employment.
Options generally become exercisable in three substantially equal annual installments beginning on
the first anniversary of the date of grant or earlier (but not earlier than six months from the date
of grant except in the case of death) on (i) an employee's normal retirement date or death, (ii) the
date an employee ceases to be employed if his employment ceases within two years following a change
of control of the Corporation, and (iii) the date the Corporation's Common Shares are purchased
pursuant to a third party tender offer or the Corporation's shareholders approve a merger or similar
transaction which the Corporation will not survive as a publicly held corporation.
Options include limited rights exercisable only in the event the Corporation's Common Shares are
purchased pursuant to a third party tender offer or the Corporation's shareholders approve a merger
or similar transaction which the Corporation will not survive as a publicly held corporation. Under
these limited rights, an optionee may elect, in lieu of purchasing shares, to relinquish the option
with respect to all or any of such shares and to receive a payment equal to (i) the price paid for a
Common Share in such merger or similar transaction multiplied by the number of Common Shares the
optionee could have purchased less (ii) the total purchase price for that number of Common Shares
under the terms of the option.
Options include the right to receive reload options in the event the optionee exercises an option
with already-owned shares. Reload options contain the same expiration dates and other terms as the
options they replace except that they have an exercise price per share equal to the fair market value
of a Common Share on the date the reload option is granted and become exercisable in full six months
after they are granted. Reload options include the right to receive additional reload options.
(b) Illustrates the total number of normal and reload options granted as a percent of the aggregate
number of 1993 normal options (720,200 shares) and 1993 reload options (100,216 shares) granted to
all employees.
(c) The hypothetical present value of the options at the date of grant was determined using a variation
of the Black-Scholes option pricing model. The Black-Scholes model is a complicated mathematical
formula which is widely used to value options traded on the stock exchanges. However, executive stock
options differ from exchange-traded options in several key respects. Executive options are long-term,
nontransferable and subject to vesting restrictions, whereas exchange-traded options are short-term
and can be exercised or sold immediately in a liquid market. The model used here is adapted to
estimate the present value of an executive option and it considers a number of factors, including the
grant price of the option, the volatility of the Corporation's Common Shares, the dividend rate, the
term of the option and interest rates. The Black-Scholes values were derived using as assumptions the
following financial factors which existed at essentially the time that the options were granted:
volatility of .2463, dividend yield of 4.05%, and interest rates of 4.99% for regular options and
4.6% for reload options. In view of the Corporation's historic exercise experience and the inherent
motivation to exercise options early in their terms because of the reload option feature, normal
options were assumed to be outstanding for four years at time of exercise and reload options for
three years. No downward adjustments were made to the resulting grant-date option values to account
for potential forfeiture or nontransferability of the options in question. Because the model is
adapted to value executive options and is assumption-based, it only values the options in theory.
</TABLE>
Reload option grants are part of the Corporation's overall program to
increase the number of Common Shares owned by its executive officers and other
key employees. Traditional option programs generally do not encourage
optionees to exercise options prior to the end of their term or to hold the
shares received upon such exercise. The Compensation and Management
Development Committee (the "Committee") adopted the reload option program,
with shareholder approval, to encourage option exercises and stock retention
by permitting an optionee to exercise an option with already-owned Common
Shares and to be restored to the same economic opportunity available
immediately prior to such exercise. Accordingly, all options, including reload
options, have been granted with the reload feature.
Under the reload program, an employee who exercises an option (the
"Original Option") with already owned shares prior to the end of the option
term will receive an additional option (the "Reload Option") covering a number
of shares equal to the number used to exercise the Original Option. The Reload
Option will be exercisable, beginning six months after grant and continuing
for the remaining term of the Original Option, at a price equal to the fair
market value of the shares on the date the Original Option is exercised. As a
result of the exercise of the Original Option with already-owned shares, the
net number of Common Shares held by the employee will increase by the number
of shares that has an aggregate market value equal to the "spread" on the
option (the "spread" equals the aggregate market price of the option shares on
the day of exercise less the aggregate exercise price). Thus, the number of
shares covered by the Reload Option plus the number of additional shares
received on the exercise of the Original Option will equal the number of
shares covered by the Original Option. The program thereby serves to replace
the opportunity for future appreciation that an optionee would otherwise lose
by exercising an option using already-owned shares. In addition, by inducing
option exercises and stock retention, the reload feature offers optionees the
opportunity to receive dividends on a greater number of shares than would be
the case without such a feature.
An employee will also benefit from the use of the reload feature if the
market price of the underlying shares declines between the date he exercises
the Original Option and the expiration date of that option. By encouraging an
employee to exercise options with shares, the reload feature enables an
employee to protect against a decline in the market price of the Common Shares
without losing the potential benefit of a price increase.
The following table provides information concerning options exercised in
1993 by the named executives and the options held by them at the end of 1993:
<TABLE>
AGGREGATED OPTION EXERCISES IN 1993 AND DECEMBER 31, 1993 OPTION VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
12/31/93 12/31/93
Shares Acquired Value (Exercisable/ (Exercisable/
on Exercise(a) Realized Unexercisable) Unexercisable)(b)
Name ------------------- -------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Douglas C. Yearley 80,001 $1,761,689 167,075/197,553 $ 283,149/873,346
J. Steven Whisler 34,476 1,030,746 101,480/69,334 1,751,561/390,594
Patrick J. Ryan 63,224 1,234,211 10,333/62,001 18,500/367,843
Bernard G. Rethore 40,001 880,862 12,900/79,101 15,000/390,593
Thomas M. St. Clair 42,490 845,656 26,883/60,591 67,039/281,563
- -------
(a) All of the named executives, except Dr. Ryan, used shares already owned by them to pay the exercise
price of some or all of the options they exercised in 1993. Mr. Yearley exercised all of the options
he exercised in 1993 in this manner. He acquired 34,379 shares on exercise of these options in excess
of the shares used to pay the exercise price and received reload options to purchase 45,622 shares.
Options for 4,142, 20,267 and 35,362 were exercised by Mr. Whisler, Mr. Rethore and Mr. St. Clair,
respectively, in this manner. The numbers of Common Shares acquired on exercise of these options in
excess of the shares used to pay the exercise price were 2,530, 8,948 and 13,058, respectively.
(b) Value is based on the mean of the high and low prices of the Common Shares on the Consolidated
Trading Tape on December 31, 1993 ($48.625).
</TABLE>
LONG-TERM PERFORMANCE PLAN
Prior to 1993, the Board of Directors had for several years adopted Long-
Term Performance Plans covering three-year cycles. Plan participants were
selected in the first year of the cycle. Payments were based primarily on the
achievement of corporate objectives over the three-year period.
A Long-Term Performance Plan was not implemented in 1993, and none will be
implemented in 1994.
PENSION AND OTHER RETIREMENT BENEFITS
The following pension table shows the estimated aggregate annual benefits
payable in the form of a straight life annuity commencing at age 65 (i) under
the Phelps Dodge Retirement Plan for Salaried Employees (the "Retirement
Plan") as supplemented by the supplementary retirement provisions of the
Comprehensive Nonqualified Plan that make up amounts limited by the Internal
Revenue Code (the "Code") and (ii) under the supplementary retirement
provisions of the Comprehensive Nonqualified Plan based on incentive
compensation under the Annual Incentive Compensation Plan:
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Final Average
Salary and
Incentive Estimated Annual Benefits for Years of Benefit Service Indicated(d)
Compensation ------------------------------------------------------------------------------------------------
(a)(b)(c) 10 15 20 25 30 35 40
- -------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 316,750 $ 48,960 $ 73,440 $ 97,920 $122,400 $146,880 $171,360 $195,840
$ 526,000 $ 82,440 $123,660 $164,880 $206,100 $247,320 $288,540 $329,760
$ 722,000 $113,800 $170,700 $227,600 $284,500 $341,400 $398,300 $455,200
$ 819,000 $129,320 $193,980 $258,640 $323,300 $387,960 $452,620 $517,280
$ 910,000 $143,880 $215,820 $287,760 $359,700 $431,640 $503,580 $575,520
$1,001,000 $158,440 $237,660 $316,880 $396,100 $475,320 $554,540 $633,760
$1,092,000 $173,000 $259,500 $346,000 $432,500 $519,000 $605,500 $692,000
$1,163,000 $184,360 $276,540 $368,720 $460,900 $553,080 $645,260 $737,440
$1,234,000 $195,720 $293,580 $391,440 $489,300 $587,160 $685,020 $782,880
- -------
(a) The Retirement Plan provides a member upon retirement at age 65 with a pension for life in a defined
amount based upon final average salary and length of benefit service. Under the Retirement Plan,
final average salary ("Final Average Salary") is the highest average annual base salary for any
consecutive 36-month period during a member's last 60 months of employment. Benefit service includes
all periods of employment with the Corporation or its participating subsidiaries. Benefits under the
Retirement Plan are subject to certain limitations under the Code, and to the extent the result of
such limitations would be a benefit less than would otherwise be paid under such Plan, the difference
is provided under the supplementary retirement provisions of the Comprehensive Nonqualified Plan. The
formula for determining benefits payable under the Retirement Plan takes into account estimated
social security benefits payable. The amounts set forth in the table assume maximum social security
benefits payable in 1994.
(b) The supplementary retirement provisions of the Comprehensive Nonqualified Plan provide an employee
eligible to participate in the Annual Incentive Compensation Plan with a benefit upon retirement
based on: (i) a percentage of average annual incentive compensation under the Annual Incentive
Compensation Plan for the highest 60 consecutive months during an employee's last 120 months prior to
retirement ("Final Average Incentive Compensation") and (ii) the employee's years of benefit service
determined on the same basis as under the Retirement Plan plus any period, as determined by the
Corporation's Senior Management Committee, used to compute the amount of deferred compensation or
supplemental retirement income payable to a participant pursuant to a contractual arrangement or
agreement with the Corporation. The value of the benefit will be 1.6% of Final Average Incentive
Compensation for each year of benefit service; provided that the maximum annual benefit when added to
the annual Retirement Plan benefit as supplemented by the supplementary retirement provisions and any
social security benefits payable and, in the case of Dr. Ryan, payments under his deferred
compensation arrangement, may not exceed an amount equal to 65% of the sum of Final Average Incentive
Compensation and Final Average Salary determined under the Retirement Plan.
(c) Amounts included as Final Average Incentive Compensation have been estimated based on the five-year
average annual incentive compensation awarded to participating employees for 1988 through 1992. The
actual amount of Final Average Incentive Compensation for an individual at any level of Final Average
Salary could vary from the amount shown.
(d) The expected credited years of benefit service at normal retirement for the Corporation's five
executive officers are as follows: Mr. Yearley, 41 years; Mr. Whisler, 42 years; Dr. Ryan, 32 years;
Mr. Rethore, 17 years and Mr. St. Clair, 11 years. For Dr. Ryan, the years of service include years
of benefit service credit under an agreement between him and the Corporation. The years of service
are based on normal retirement for all executive officers under the Retirement Plan and the
applicable provisions of the Comprehensive Nonqualified Plan.
</TABLE>
SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
The Corporation has severance agreements with each of its five executive
officers under which the executive would receive a lump sum payment equal to
his annual base salary in the event the Corporation terminates his employment,
other than for cause or mandatory retirement, or the executive voluntarily
terminates his employment because of material reductions in his salary or his
position, duties and responsibilities. The terminated executive would also
receive (i) outplacement services at a cost up to 15% of his base salary and
(ii) the cost of continued coverage for a limited period under the
Corporation's group health, life insurance and disability plans.
The Corporation also has agreements with such executives under which each
executive would receive, in the event he ceases to be employed by the
Corporation (for a reason other than death, disability, willful misconduct,
normal retirement or under certain circumstances a voluntary termination of
employment by the executive) within two years following a change of control of
the Corporation, a lump sum equal to two times (i) the executive's highest
base salary during that year and the prior two years and (ii) the executive's
target bonus under the Annual Incentive Compensation Plan for the year in
which the change of control occurs. The amount of such payment is subject to
reduction if the date an executive ceases to be employed by the Corporation is
within 24 months of his normal retirement date or if such amount, plus any
other payments that are contingent on such change of control, constitutes an
"excess parachute payment" as defined in the Code and the reduction results in
a greater net after-tax benefit to the executive. Except under certain
circumstances, these change of control agreements expire on November 3, 1997.
Although normal compensatory options granted by the Corporation generally
become exercisable in three substantially equally annual installments
beginning on the first anniversary of the date of grant, they also become
exercisable in certain change of control situations. Specifically, such
options are exercisable (but not earlier than six months from the date of
grant) on the date the Corporation's Common Shares are purchased pursuant to a
third party tender offer or the Corporation's shareholders approve a merger or
similar transaction which the Corporation will not survive as a publicly held
corporation or, in the case of the five executive officers and certain other
employees, the date the employee ceases to be employed if he ceases to be
employed within two years following a change of control of the Corporation. In
addition, such options include limited rights exercisable only in the event
the Corporation's Common Shares are purchased pursuant to a third party tender
offer or the Corporation's shareholders approve a merger or similar
transaction which the Corporation will not survive as a publicly held
corporation. Under these limited rights, an optionee may elect, in lieu of
purchasing shares, to relinquish the option with respect to all or any of such
shares and to receive a payment equal to (i) the price paid for a Common Share
in such merger or similar transaction multiplied by the number of Common
Shares the optionee could have purchased less (ii) the total purchase price
for that number of Common Shares under the terms of the option.
Under the Long-Term Performance Plan for the 1992-94 period, if a change
of control of the Corporation occurs, the Committee may accelerate payment of
awards and the successor organization is required to pay an award based on the
target award level (less any accelerated payments) to any participating
employee whose employment continues to completion of the cycle.
The Retirement Plan and the Comprehensive Nonqualified Plan provide for
the payment of unreduced benefits to employees who meet liberalized age and
length of service requirements and whose employment is terminated by the
Corporation or any of its subsidiaries within two years following a change of
control of the Corporation.
REPORT ON EXECUTIVE COMPENSATION OF THE
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
The Corporation's goal is to be the leader in each of the domestic and
international mining and manufacturing activities in which it competes. It
thereby seeks to achieve and sustain progressive increases in value for its
shareholders, while balancing appropriately the short- and long-term
opportunities for the Corporation.
To meet these objectives, the Corporation employs high caliber, dedicated
people who are well trained and results oriented. The Board of Directors
established the Compensation and Management Development Committee to provide
oversight of the Corporation's compensation and management development
programs and to ensure that these programs maximize the Corporation's ability
to attract, retain and motivate employees to meet these stated objectives.
The Committee believes it can motivate employees participating in these
programs by:
* Emphasizing and strengthening the relationship between pay and
performance by rewarding employees who bring about solid achievement
with regard to key business strategies and specific operational
objectives and by increasing the relative amount of compensation at risk
as management responsibilities increase.
* Assuring that the elements of variable compensation are linked as
directly as practicable to measurable financial and other forms of
performance achievement.
* Encouraging stock ownership by executives.
* Tying pay for performance as closely as possible to success in
maximizing the value of the Corporation's stock over the long term.
The Committee is composed of directors (currently six) who are not
employees of the Corporation. It has retained respected independent
compensation consultants to advise and assist it in connection with various
compensation matters.
EXECUTIVE OFFICER COMPENSATION
The executive officers (the five individuals listed in the summary
compensation table) are compensated by salaries, annual incentive bonuses and
long-term incentive compensation. Each element focuses on performance in a
different but complementary way. Salaries focus on individual performance and
experience, annual incentives relate to individual, corporate and unit
performance and, beginning in 1993, long-term incentives center exclusively on
shareholder value growth. So long as the Corporation and the executive
officers achieve periodically targeted performance goals, the Board of
Directors and the Committee believe that the compensation of the executive
officers should generally be at least equal to the median compensation paid
to executives holding similar positions in other comparable companies. Should
performance surpass these goals, compensation is expected to exceed these
guideline levels; should performance fall short of these goals, compensation
is expected to decline below these guideline amounts.
Salaries. Individual salaries for executive officers are established by
the Board of Directors, on the recommendation of the Committee, to reflect the
officer's performance, progress in responsibilities, experience and length of
service in the position. The Committee's recommendations for 1993 were adopted
by the Board. During October 1993, in response to falling copper prices at
that time, consideration of all merit salary increases that had not already
been implemented was suspended until further notice. Based on information
available to us, we believe these salaries in 1993 were at or slightly below
the averages of the salaries paid by a large number of other companies to
employees holding similar positions. The comparisons of Phelps Dodge executive
salaries, and of annual incentive compensation discussed below, to other
companies' salaries and incentive compensation involve the use of a large data
base provided by a compensation consultant which is deemed representative of
U.S. industry generally and is therefore not equivalent to the peer group of
companies referred to in the graph on page 18 of this proxy statement.
Annual Incentive Compensation. The Annual Incentive Compensation Plan
provides the executive officers and certain other officers and managers with
compensation based on success in achieving annual individual, corporate and,
where appropriate, unit goals. For each executive officer, a target award is
determined approximating the mid-point of the annual incentive compensation
paid by a large number of other companies to individuals holding comparable
positions. Lower threshold awards and higher maximum awards are also
established. The aggregate annual incentive compensation as well as the
individual awards for executive officers paid for a year are determined by the
Board of Directors on the recommendation of the Committee. The Committee's
recommendations for 1993 were adopted by the Board. Awards for 1993 ranged
from slightly above to slightly below the target amounts.
Stock Options. The Committee intends to use stock options as the customary
vehicle for providing variable long-term incentive compensation primarily
because employees benefit from options, if at all, only to the extent of
increases in the value of the Corporation's Common Shares. Options thereby
provide an identity of interest between the Corporation's stockholders and its
key employees. To further such identity of interest, the executive officers
are expected to acquire and own significant numbers of the Corporation's
shares. Achievement of such ownership levels is facilitated by reload options
which are designed to encourage early exercise of stock options and retention
of the underlying shares.
Normal compensatory option grants are intended to produce, on a present
value basis, compensation to the executive officers equal to approximately the
long-term compensation paid by appropriate mining and other industry companies
to executives in similar positions, with appropriate variations based on the
performance, career potential, critical skills that the Corporation wishes to
retain and prior grant history of the executive officers including restricted
stock.
Long-Term Performance Awards. In years prior to 1993, executive officers
and other senior officers who were identified as having the potential to have
a significant impact on overall corporate results were eligible to participate
in long-term performance plans. Plan awards were based upon specified
corporate performance objectives over three-year performance cycles. The award
for the plan ending in 1993 was stated as a variable percentage of the
officer's base salary (i.e., a target award of 35% and a maximum award of 50%
of the officer's base salary at the beginning of the cycle) depending on the
Corporation's actual performance compared to targeted objectives, and was paid
one-half in cash and one-half in Common Shares restricted as to
transferability for a period of two years following the end of the performance
cycle. The performance objective for this plan was cash flow return on
capital. The three-year average cash flow return on capital was midway between
target and maximum, thereby producing awards equal to approximately 41% of
each participant's base salary.
The Committee determined not to implement a long-term performance plan in
1993 or subsequent years in part because the fluctuations in copper prices
make it difficult to establish in advance corporate financial performance
objectives which reflect objectively the results of the performance of senior
management. In addition, the Committee believes that over time an expanded
stock option program may best align the long-term interests of stockholders
with those of management. Thus, payments, if any, made with respect to the
1992-94 cycle will be the last payments under this program.
Restricted Stock. In past years, the Committee has also made grants of
restricted stock to executive officers and a limited number of other key
employees under the Corporation's Stock Option and Restricted Stock Plan.
Consistent with its intention to use stock options as the customary form of
long-term incentive compensation, the Committee made no such grants to
executive officers in 1993, except for grants made in payment of part of the
Long-Term Performance Plan award for the 1991-1993 cycle.
IRS Limit on Deductibility of Compensation. The Committee has decided
that, for 1994, it is not necessary to amend any of the Corporation's existing
compensation plans in light of Section 162(m) of the Internal Revenue Code.
Section 162(m) generally places a $1 million per person limit on the deduction
a publicly-held corporation may take for compensation paid to its chief
executive officer and its four other highest compensated "covered employees,"
unless, in general, the compensation constitutes "performance-based"
compensation. The Corporation understands that stock options and Long-Term
Performance Plan payments will not be included in the compensation subject to
the $1 million deductibility limit. The Corporation's 1994 salaries and
incentive compensation subject to Section 162(m) are not expected to exceed $1
million for any individual employee. The Committee intends to review this
matter again after final IRS regulations are issued.
CEO COMPENSATION
Douglas C. Yearley, the Chief Executive Officer of the Corporation,
received a base salary of $560,000 in 1993, an Annual Incentive Compensation
Plan award of $300,000 for 1993 services, a Long-Term Performance Plan payment
for the 1991-93 cycle of $207,000 and a normal compensatory option grant in
1993 to purchase 90,000 Common Shares. As discussed above under "Stock
Options," Mr. Yearley also received in 1993, under a program available to all
optionees, 45,622 reload options in connection with his use of already-owned
shares to pay the exercise price of other options. The number of reload
options granted to employees is equivalent to the number of shares that they
turn in to the Corporation, i.e., exchange to exercise their existing options.
The first 70% of Mr. Yearley's Annual Incentive Compensation Plan award
was determined on the basis of the actual return on average equity and net
operating cash flow return on average capital as compared to targets set at
the beginning of the year. The Corporation's performance met the performance
threshold for return on average equity and was slightly below the target level
of performance for net operating cash flow return on average capital. The
remaining 30% of Mr. Yearley's award was based on the Committee's judgment as
to his performance with regard to selective growth of both Phelps Dodge Mining
Company and Phelps Dodge Industries, particular strategy questions,
underperforming or non-strategic assets, development of employees and control
of overhead and with regard to his general strategy and operational
performance with respect to the Corporation. Based on its judgment as to Mr.
Yearley's performance in these respects, the Committee made an above-target
award to him as to this part of his incentive compensation. Mr. Yearley's
compensatory stock option grant was based on the policy discussed above under
"Stock Options" including the Committee's evaluation of Mr. Yearley's overall
performance during 1993, his potential and critical skills, and the number of
stock options and the number of shares of restricted stock that had been
previously granted to him.
CONCLUSION
The Committee will continue to evaluate the Corporation's compensation
programs to best enable the Corporation to employ and motivate high caliber,
dedicated people. Such employees, properly motivated, are believed to be key
to achievement of the Corporation's goal to be the international leader in the
mining and manufacturing activities in which it competes and the related
enhancement of shareholder value over the long term.
THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
Robert D. Krebs, Chairman
Robert N. Burt
George C. Dillon
Paul W. Douglas
Paul Hazen
Southwood J. Morcott
PERFORMANCE CHART
-----------------
COMPARATIVE FIVE-YEAR TOTAL RETURNS
INCLUDING REINVESTMENT OF DIVIDENDS
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1988 1989 1990 1991 1992 1993
------ ------ ------ ------ ------ ------
Phelps Dodge $100 $134 $136 $168 $252 $262
Standard & Poor's $100 $132 $128 $166 $179 $197
Peer Group $100 $117 $107 $120 $173 $169
Assumes $100 invested at 12/31/88 in Phelps Dodge common stock, the S&P 500
and a Peer Group represented by the Dow Jones "Other Nonferrous Metals" and
assumes the reinvestment of all dividends. (This published index includes
Phelps Dodge Corporation, Asarco Incorporated, Brush Wellman Incorporated and
Magma Copper Company.)
2. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
appointed Price Waterhouse as independent accountants for the Corporation for
the year 1994, subject to ratification by the shareholders at the annual
meeting. Price Waterhouse or a predecessor firm has been the independent
accountants for the Corporation since 1915. A representative of Price
Waterhouse will be present at the annual meeting of shareholders with the
opportunity to make a statement if he so desires and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented
at the annual meeting. If any other matter proper for action at the meeting
should be presented, the holders of the accompanying proxy will vote the
shares represented by the proxy on such matter in accordance with their best
judgment. If any matter not proper for action at the meeting should be
presented, the holders of the proxy will vote against consideration thereof or
action thereon.
All shares represented by the accompanying proxy, if the proxy is duly
executed and received by the Corporation at or prior to the meeting, will be
voted at the meeting in accordance with any instructions specified on such
proxy and, where no instruction is specified, as indicated on such proxy.
It is the policy of the Corporation that, except under limited
circumstances, each shareholder proxy card, ballot and voting tabulation that
identifies any shareholder will be kept confidential and that the receipt and
tabulation of such votes will be conducted by independent third parties,
including the Corporation's transfer agent and its proxy solicitation firm,
and not by employees of the Corporation.
The cost of soliciting proxies for the meeting will be borne by the
Corporation. The Corporation has retained Morrow & Co., Inc., 909 Third
Avenue, New York, N.Y. 10022-4799 to assist in soliciting proxies for a fee
estimated at $12,500 plus reasonable expenses. Morrow & Co., Inc. and some
officers and other employees of the Corporation may solicit proxies in person
and by telephone or otherwise. The Corporation may also reimburse brokers and
others who are record holders of the Corporation's shares for their reasonable
expenses incurred in obtaining voting instructions from beneficial owners of
such shares.
On June 1, 1993, the Corporation purchased directors' and officers'
liability insurance policies from National Union Fire Insurance Company of
Pittsburgh, Pa., Aetna Casualty and Surety Company, Continental Casualty
Company, CIGNA Insurance Company and XL Insurance Company, each for a one-year
term ending June 1, 1994, at premiums of $555,596, $169,025, $57,000, $65,000
and $50,000, respectively. The policies insure (i) directors, officers,
division presidents and vice presidents of the Corporation and its
subsidiaries, and employees who are fiduciaries of employee benefit plans of
the Corporation and its subsidiaries, against certain liabilities they may
incur in the performance of their duties and (ii) the Corporation against any
obligation to indemnify such persons against such liabilities.
PROPOSALS FOR 1995
The Corporation will review for inclusion in next year's proxy statement
shareholder proposals received by December 2, 1994. Proposals should be sent
to the Secretary of the Corporation, 2600 North Central Avenue, Phoenix,
Arizona 85004-3014.
ANNUAL REPORT FOR 1993
The annual report of the Corporation for the year 1993, including
financial statements, is being furnished concurrently with this proxy
statement to persons who were shareholders of record as of March 17, 1994, the
record date for the annual meeting. The annual report does not form part of
the material for the solicitation of proxies.
By order of the Board of Directors,
William C. Tubman
Vice President and Secretary
Phoenix, Arizona
April 1, 1994
<PAGE>
PROXY
PHELPS DODGE CORPORATION
Solicited on Behalf of the Board of Directors of Phelps Dodge Corporation
The undersigned shareholder of PHELPS DODGE CORPORATION hereby appoints
GEORGE C. DILLON, PAUL W. DOUGLAS, GEORGE L. SHINN and DOUGLAS C. YEARLEY,
or any of them, proxies of the undersigned, each with power of substitution,
at the annual meeting of shareholders of the Corporation to be held at the
Arizona Biltmore Hotel, 24th Street and Missouri Avenue, Phoenix, Arizona,
on May 4, 1994 at 11:00 a.m., and at any adjournments thereof, to vote all
Common Shares of the Corporation held or owned by the undersigned, including
any which may be held for the undersigned's account under the Automatic
Dividend Investment Service for Phelps Dodge Common Shares administered by
Chemical Bank.
THE PROXIES ARE INSTRUCTED TO VOTE AS DIRECTED BELOW, AND IN THEIR
DISCRETION ON ALL OTHER MATTERS. WHERE NO DIRECTION IS SPECIFIED, THIS
PROXY WILL BE VOTED FOR MANAGEMENT PROPOSALS 1 AND 2 AS RECOMMENDED BY THE
BOARD OF DIRECTORS.
MANAGEMENT PROPOSALS:
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR MANAGEMENT PROPOSALS 1 AND 2.
PROPOSAL 1: Election of Directors for the respective terms specified in the
Proxy Statement: Messrs. Burt, Krebs, Shinn and Yearley.
FOR all WITHHELD WITHHELD for the following only
nominees for all nominees (write name(s) of nominee(s) below)
/ / / / ___________________________________
PLEASE SIGN ON REVERSE SIDE
AND RETURN PROMPTLY
PROXY
PROPOSAL 2: Ratification of independent public accountants.
FOR / / AGAINST / / ABSTAIN / /
Dated: ______________________________
Signature ___________________________
Signature ___________________________
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
<PAGE>
PROXY
PHELPS DODGE CORPORATION
Solicited on Behalf of the Board of Directors of Phelps Dodge Corporation
The undersigned shareholder of PHELPS DODGE CORPORATION hereby appoints
GEORGE C. DILLON, PAUL W. DOUGLAS, GEORGE L. SHINN and DOUGLAS C. YEARLEY,
or any of them, proxies of the undersigned, each with power of substitution,
at the meeting of shareholders of the Corporation to be held at the Arizona
Biltmore Hotel, 24th Street and Missouri Avenue, Phoenix, Arizona, on May 4,
1994 at 11:00 a.m., and at any adjournments thereof, to vote all Common
Shares of the Corporation held or owned by the undersigned, including any
which may be held for the undersigned's account under the Automatic Dividend
Investment Service for Phelps Dodge Common Shares administered by Chemical
Bank.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
- ----------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your votes as this / X /
--------------------- ----------------------------------
COMMON SHARES DIVIDEND INVESTMENT SERVICE SHARES
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR MANAGEMENT PROPOSALS 1 AND 2.
PROPOSAL 1: Election of Directors for the term specified in the Proxy
Statement: Messrs. Burt, Krebs, Shinn and Yearley
FOR all WITHHELD WITHHELD for the following only
nominees / / for all nominees / / (write name(s) of nominee(s) below)
PROPOSAL 2: Ratification of independent public accountants
/ / FOR / / AGAINST / / ABSTAIN
- ----------------------------------------------------------------------------
THE PROXIES ARE INSTRUCTED TO VOTE AS DIRECTED ABOVE, AND IN THEIR
DISCRETION ON ALL OTHER MATTERS. WHERE NO DIRECTION IS SPECIFIED, THIS PROXY
WILL BE VOTED FOR MANAGEMENT PROPOSALS 1 AND 2 AS RECOMMENDED BY THE BOARD
OF DIRECTORS.
Signature(s) ______________________________________________ Date __________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- ----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
CONFIDENTIAL PROXY
PHELPS DODGE EMPLOYEE SAVINGS PLAN
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION
To M & I Marshall & Ilsley Trust Company of Arizona, Trustee:
I hereby acknowledge receipt of the Notice of Annual Meeting of
Shareholders of Phelps Dodge Corporation to be held on Wednesday, May 4,
1994, and accompanying Proxy Statement. I hereby instruct you to vote in
person or by proxy, at such meeting and at any adjournments thereof all the
Phelps Dodge Corporation Common Shares credited to my account under the
Phelps Dodge Employee Savings Plan ("SP") as indicated below, and in your
or your proxies' discretion on all other matters.
You are instructed to vote the shares credited to my account as
directed on the reverse side.
UNLESS WE RECEIVE INSTRUCTIONS FROM YOU THE NUMBER OF SHARES CREDITED TO
YOUR ACCOUNT AS OF THE RECORD DATE, MARCH 17, 1994, WILL NOT BE VOTED AT THE
MEETING.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
- ----------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your votes as this / X /
-----------------
SP SHARES
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR MANAGEMENT PROPOSALS 1 AND 2.
PROPOSAL 1: Election of Directors for the term specified in the Proxy
Statement: Messrs. Burt, Krebs, Shinn and Yearley
FOR all WITHHELD WITHHELD for the following only
nominees / / for all nominees / / (write name(s) of nominee(s) below)
PROPOSAL 2: Ratification of independent public accountants
/ / FOR / / AGAINST / / ABSTAIN
- ----------------------------------------------------------------------------
THE PROXIES ARE INSTRUCTED TO VOTE AS DIRECTED ABOVE, AND IN THEIR
DISCRETION ON ALL OTHER MATTERS. WHERE NO DIRECTION IS SPECIFIED, THIS PROXY
WILL BE VOTED FOR MANAGEMENT PROPOSALS 1 AND 2 AS RECOMMENDED BY THE BOARD
OF DIRECTORS.
Signature(s) ______________________________________________ Date __________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- ----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION
The undersigned shareholder of PHELPS DODGE CORPORATION hereby appoints
GEORGE C. DILLON, PAUL W. DOUGLAS, GEORGE L. SHINN and DOUGLAS C. YEARLEY,
or any of them, proxies of the undersigned, each with power of substitution,
at the annual meeting of shareholders of the Corporation to be held at the
Arizona Biltmore Hotel, 24th Street and Missouri Avenue, Phoenix, Arizona,
May 4, 1994 at 11:00 a.m., and at any adjournments thereof, to vote all
Restricted Common Shares of the Corporation held or owned by the
undersigned.
The proxies are instructed to vote as directed below, and in their
discretion on all other matters. Where no direction is specified, the proxy
will be voted FOR Management Proposals 1 and 2.
The Board of Directors recommends you vote FOR Management Proposals 1 and 2.
PROPOSAL 1: Election of Directors for the respective terms specified in
the Proxy Statement: Messrs. Burt, Krebs, Shinn and Yearley
FOR all WITHHELD WITHHELD for the following only
nominees / / for all nominees / / (write name(s) of nominee(s) below)
-----------------------------------
PROPOSAL 2: Ratification of independent public accountants
/ / FOR / / AGAINST / / ABSTAIN
Dated: _______________
Signature: ____________________
