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 statment
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
PHELPS DODGE CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
----------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------
(3) Filing party:
----------------------------------------------------------------------------
(4) Date filed:
----------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
Phelps Dodge Corporation logo
2600 North Central Avenue, Phoenix, Arizona 85004-3014
------------------------------------------------------------------------------
Douglas C. Yearley
Chairman of the Board, President
and Chief Executive Officer
March 31, 1995
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 3,
1995, 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, please complete, date, sign and
return the enclosed proxy at your earliest convenience. Approximately
80.25% 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
---------------
Phelps Dodge Corporation logo
2600 North Central Avenue, Phoenix, Arizona 85004-3014
----------------------------------------------------------------------
Notice of Annual Meeting of Shareholders May 3, 1995
----------------------------------------------------------------------
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 3, 1995, 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 LLP as independent accountants for the Corporation
for the year 1995; 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 16, 1995, 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
March 31, 1995
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 3, 1995, 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 1995 annual
meeting are its Common Shares, of which 70,357,067 shares were outstanding on
March 16, 1995, each entitled to one vote. Only shareholders of record at the
close of business on March 16, 1995, 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
March 31, 1995.
1. ELECTION OF DIRECTORS
The Board of Directors of the Corporation currently consists of twelve
directors. The directors are divided into three classes, three in Class I, three
in Class II and four in Class III. Two directors currently are unclassified and
are nominees for Class I. The terms of office of the three Class I directors
expire at the 1995 annual meeting of shareholders. Mr. George C. Dillon, a Class
I director, and Mr. George L. Shinn, a Class III director, will retire on May 3,
1995 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 3, 1995.
The four nominees for election as Class I directors are listed below. The
nominees will be elected to serve for a term 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
------- -------------------------------------------------
Edward L. Addison Mr. Addison, 65, was Chairman of the Board of The
(Class I) Southern Company, Atlanta, Georgia, a holding
company of an electric utility system, from
January 1994 and was Chief Executive Officer from
1983, until his retirement on March 1, 1995. He
was President of 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 CSX
Corporation, Protective Life Corporation and
Wachovia Bank of Georgia, N.A. Mr. Addison has
served as a Phelps Dodge director since 1985.
Paul Hazen Mr. Hazen, 53, has been Chairman and Chief
(Class I) Executive Officer of Wells Fargo & Company, San
Francisco, California , a bank holding company,
and of Wells Fargo Bank, N.A., a national banking
association, since January 1, 1995. He was
President of Wells Fargo & Company and of Wells
Fargo, Bank N.A. from 1984 to 1994. He is a
director of Wells Fargo & Company, Wells Fargo
Bank, N.A., Air Touch Communications, Inc. and
Safeway, Inc. Mr. Hazen has served as a Phelps
Dodge director since 1988.
Marie L. Knowles Mrs. Knowles, 48, has been Senior Vice President
(Class I) of Atlantic Richfield Company, Los Angeles,
California, a diversified petroleum products
company, and President of ARCO Transportation
Company, a company engaged in the operation of
petroleum transportation and storage facilities,
since 1993. From 1990 to 1993 she was Vice
President and Controller of Atlantic Richfield Com
pany. Mrs. Knowles is a director of ARCO Chemical
Company. She has served as a Phelps Dodge
director since 1994.
Gordon R. Parker Mr. Parker, 59, was Chairman of Newmont Mining
(Class I) Corporation and Newmont Gold Company, Denver,
Colorado, a unified worldwide gold mining company,
from 1986 until his retirement at year-end 1994.
He was Chief Executive Officer of both companies
from 1986 until 1993. Mr. Parker is a director of
Caterpillar, Inc., Gold Fields of South Africa and
The Williams Companies, Inc. He was elected a
director of Phelps Dodge on February 1, 1995.
The six directors whose terms will continue after the annual meeting and
will expire at the 1996 annual meeting of shareholders (Class II) or the 1997
annual meeting of shareholders (Class III) are listed below.
AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
DIRECTOR ----------------------------------------------
-------- AND OTHER DIRECTORSHIPS HELD
Paul W. Douglas Mr. Douglas, 68, 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 Holmes
Protection Group, Inc., New York Life Insurance
Company, Philip Morris Incorporated, MacMillan
Bloedel Limited and U.S. Trust Corporation and a
trustee of U.S. Trust Corporation's subsidiary,
United States Trust Company of New York. He has
served as a Phelps Dodge director since 1983.
William A. Franke Mr. Franke, 57, 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, 56, has been Chairman of the Board
(Class II) of Dana Corporation, Toledo, Ohio, 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. Morcott is a director of Dana Corporation,
Hayes-Dana Inc., CSX Corporation and Johnson
Controls, Inc. He has served as a Phelps Dodge
director since 1991.
Robert N. Burt Mr. Burt, 57, has been Chairman of the Board and
(Class III) Chief 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
and FMC Gold Company. Mr . Burt has served as a
Phelps Dodge director since 1993.
Robert D. Krebs Mr. Krebs, 52, has been Chairman, President and
(Class III) Chief Executive Officer of Santa Fe Pacific
Corporation, Schaumburg, Illinois, a holding
company engaged in transportation, 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. He is a director of Santa Fe Pacific
Corporation, Santa Fe Energy Resources, Inc.,
Santa Fe Pacific Gold Corporation, Santa Fe
Pacific Pipelines, Inc., The Atchison, Topeka and
Santa Fe Railway Company, Catellus Development
Corporation and Northern Trust Corporation. Mr.
Krebs has served as a Phelps Dodge director since
1987.
Douglas C. Yearley Mr. Yearley, 59, has been Chairman of the Board
(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 Martin
Corporation and USX Corporation. Mr. Yearley has
served as a Phelps Dodge director since 1986.
The Board of Directors met eight times during 1994. 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 98%. Each incumbent director attended at
least 90% of the meetings of the Board and the committees on which the director
served.
The Audit Committee of the Board of Directors, comprising Messrs. Addison,
Douglas, Franke, Hazen (Chairman), (Mrs.) Knowles, 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, and restricted stock under the Corporation's 1993 Stock Option and
Restricted Stock Plan (the "1993 Plan"), and administers the 1979 Stock Option
Plan and the 1987 Stock Option and Restricted Stock Plan (the "1987 Plan").
The Committee on Directors of the Board of Directors, comprising Messrs.
Dillon (Chairman), Franke, Krebs, Morcott, Parker 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, (Mrs.) Knowles and
Morcott, 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 $25,000 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.
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 in excess of five years 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 and have
not been 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
"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 of the Board of Directors during all or part of 1994:
Messrs. Burt, Dillon, Douglas, Hazen, Krebs (Chairman) and Morcott. None of
these directors is or has been an officer or employee of the Corporation or any
of its subsidiaries or has had any other relationship with the Corporation or
any of its subsidiaries requiring disclosure herein under the applicable rules
of the Securities and Exchange Commission.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table discloses the number of the Corporation's Common Shares
deemed beneficially owned as of February 1, 1995, 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 5,591 Southwood J. Morcott 2,751
Robert N. Burt 1,007 Gordon R. Parker (e) 1,000
George C. Dillon 5,791 Bernard G. Rethore 60,172
Paul W. Douglas 6,591 Patrick J. Ryan 52,496
William A. Franke 6,591 George L. Shinn 5,591
Paul Hazen 7,591 Thomas M. St. Clair 77,476
Manuel J. Iraola (d) 47,144 J. Steven Whisler 132,887
Marie L. Knowles 1,000 Douglas C. Yearley 366,083
Robert D. Krebs 5,136 Directors and current executive
officers as a group (16) 784,898
-------
(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, 1995; the percentage of Common Shares beneficially owned by
all directors and current executive officers as a group was 1.11 percent of
the Common Shares outstanding on February 1, 1995.
(b) Shares shown as beneficially owned: (i) include restricted shares acquired
under the 1993 Stock Option and Restricted Stock Plan as follows: Mr.
Iraola, 7,863 shares; Mr. Rethore, 0 shares; Dr. Ryan, 2,895 shares; Mr. St.
Clair, 2,652 shares; Mr. Whisler, 2,738 shares; and Mr. Yearley, 5,437
shares; all current executive officers as a group, 21,585 shares; and (ii)
include shares which may be acquired within 60 days by exercise of stock
options as follows: Mr. Burt, Mrs. Knowles and Mr. Parker, 0 shares; Mr.
Krebs, 3,443 shares; Mr. Morcott, 1,147 shares; Mr. Iraola, 30,199 shares;
Mr. Rethore, 45,909 shares; Dr. Ryan, 40,513 shares; Mr. St. Clair, 56,194
shares; Mr. Whisler, 107,139 shares; and Mr. Yearley, 249,101 shares; each
nonemployee director (except Mrs. Knowles, Messrs. Burt, Krebs, Morcott and
Parker), 4,591 shares; all directors and current executive officers as a
group, 561,191 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, 1,148 shares; Mrs. Knowles and Mr.
Parker, 0 shares; Mr. Iraola, 43,501 shares; Mr. Rethore, 0 shares; Dr.
Ryan, 67,668 shares; Mr. St. Clair, 50,334 shares; Mr. Whisler, 89,594
shares; and Mr. Yearley, 184,100 shares; each outside director (except Mr.
Burt, Mrs. Knowles and Mr. Parker), 2,297 shares; all directors and current
executive officers as a group, 454,721 shares.
(c) Each director and named executive officer has sole voting and investment
power over the shares shown as beneficially owned except: (i) the restricted
shares acquired under the 1993 Stock Option and Restricted Stock Plan 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; and (iii) 14,263 shares as to
which Mr. Rethore has shared voting and investment power and 110,545 shares
as to which Mr. Yearley has shared voting and investment power.
(d) Effective January 6, 1995, Mr. Iraola was elected Senior Vice President of
the Corporation and President of Phelps Dodge Industries, a division of the
Corporation.
(e) Mr. Parker was elected a director of the Corporation on February 1, 1995.
<TABLE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Corporation for
1994, 1993 and 1992 to each of the five named individuals who were executive
officers of the Corporation in 1994:
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION(b) LONG TERM COMPENSATION
-----------------------------------------------------------------------------------------------------------------------------------
AWARDS PAYOUTS
-------------------------- -------------
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 1994 560,000 560,000 24,580 -0- 190,615(a) 203,651(f) 56,000
Chairman of the Board 1993 560,000 300,000 34,026 -0- 135,622(a) 207,000(f) 88,756
President, Chief Executive 1992 525,000 525,000 13,061 -0- 297,435(a) 225,000 62,076
Officer and Director
J. Steven Whisler 1994 300,000 241,100 -0- -0- 55,594(a) 109,563(f) 30,000
Senior Vice President 1993 300,000 185,300 4,914 -0- 37,612(a) 93,150(f) 39,021
1992 285,000 222,700 4,852 -0- 33,202(a) 105,000 31,260
Patrick J. Ryan 1994 293,000 235,300 -0- -0- 44,426(a) 107,458(f) 29,300
Senior Vice President 1993 293,000 186,800 -0- -0- 32,000 111,780(f) 34,970
1992 282,000 211,800 513 -0- 27,000(a) 130,000 31,115
Bernard G. Rethore (h) 1994 290,000 213,400 2,155 -0- 11,909(a) 106,468(f) 29,000
Senior Vice President 1993 290,000 203,800 1,702 -0- 47,319(a) 109,710(f) 38,945
1992 280,000 179,000 1,538 -0- 31,348(a) 127,500 30,681
Thomas M. St. Clair 1994 270,000 187,200 213 -0- 56,987(a) 99,040(f) 27,000
Senior Vice President and 1993 270,000 101,000 1,196 -0- 47,304(a) 101,430(f) 37,802
Chief Financial Officer 1992 260,000 175,600 680 -0- 30,170(a) 117,500 28,120
-------
(a) The option grants denoted by "(a)" include reload options, as well as normal
compensatory options (except that Mr. Rethore's 1994 grants are all reload
options).
(b) During October 1993, in response to falling copper prices at that time, all
merit salary increases for the five named executive officers were suspended
until January 1, 1995. 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").
(c) Tax payment reimbursements.
(d) This column does not reflect restricted stock paid as Long-Term Performance
Plan awards. See Note (f) below. On December 31, 1994, the named executives
held the following numbers of shares of restricted stock which had the
following aggregate values on such date: Mr. Yearley, 5,437 shares worth
$334,715; Mr. Whisler, 2,738 shares worth $168,558; Dr. Ryan, 2,895 shares
worth $178,223; Mr. Rethore, 1,128 shares worth $69,443; Mr. St. Clair,
2,652 shares worth $163,264.
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 1992-1994 Long-Term Performance Plan award was paid 100% in the
Corporation's Common Shares restricted as to transferability for a period of
two years following the end of the performance review period (with the
exception of Mr. Rethore whose award was paid in cash). 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 1994 to the Savings Plan and 1994 accruals under the savings
portion of the Comprehensive Nonqualified Plan, respectively, for the
benefit of the named executives: Mr. Yearley, $15,000 and $41,000; Mr.
Whisler, $15,000 and $15,000; Dr. Ryan, $15,000 and $14,300; Mr. Rethore,
$15,000 and $14,000; Mr. St. Clair, $15,000 and $12,000. For 1993 and 1992,
the figures include earnings on certain amounts accrued for the named
executives. Such earnings are not included for 1994.
(h) Effective January 6, 1995, Mr. Rethore resigned his position as Senior Vice
President of the Corporation and President of Phelps Dodge Industries, a
division of the Corporation, and effective January 27, 1995, he resigned all
officer and director positions he held with subsidiaries of the Corporation.
</TABLE>
STOCK OPTIONS
Each of the named executives was eligible to receive two types of option
grants during 1994: 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. Normal option grants customarily include the right to receive
reload options.
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. Reload option grants customarily include the right to receive
additional reload options.
The following table contains information with respect to the normal
compensatory option grants and reload option grants made to each named executive
during 1994 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 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 1994
<CAPTION>
NORMAL % OF TOTAL
AND RELOAD OPTIONS GRANTED
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(a) IN 1994(b) PRICE DATE PRESENT VALUE(c)
---- -------------- ------------------- ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
Douglas C. Yearley 100,000 20.1% $57.8750 12/7/04 $1,071,000
9,790 62.4375 12/7/98 57,000
22,632 62.4375 2/7/00 133,000
18,189 62.4375 12/2/02 107,000
22,634 62.4375 12/5/00 133,000
17,370 62.4375 12/4/01 102,000
J. Steven Whisler 43,000 5.9% 57.8750 12/7/04 460,000
12,594 62.4375 2/7/00 74,000
Patrick J. Ryan 38,000 4.7% 57.8750 12/7/04 407,000
4,965 62.4375 12/2/02 29,000
1,461 62.4375 12/5/00 9,000
Bernard G. Rethore 11,909 1.3% 61.8750 2/27/95 69,000
Thomas M. St. Clair 27,000 6.0% 57.8750 12/7/04 289,000
8,194 56.6250 12/5/00 44,000
5,926 56.6250 12/4/01 32,000
5,031 62.4375 12/2/02 30,000
1,218 62.4375 2/7/00 7,000
4,244 62.4375 12/5/00 25,000
5,374 62.4375 12/4/01 32,000
-------
(a) During 1994, normal options were granted in the following amounts to the
named executive officers: Mr. Yearley, 100,000; Mr. Whisler, 43,000; Dr.
Ryan, 38,000; and Mr. St. Clair, 27,000. The remaining grants disclosed in
the table 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 customarily 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 customarily 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 1994 normal options (746,150 shares) and
1994 reload options (204,605 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 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, the time it is expected to be outstanding 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 .2299, dividend yield of 3.64%, and
interest rates of 7.64% for regular options and 5.16% 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 three
years at time of exercise and reload options for one year. 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 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.
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.
<TABLE>
The following table provides information concerning options exercised in
1994 by the named executives and the options held by them at the end of 1994:
AGGREGATED OPTION EXERCISES IN 1994 AND DECEMBER 31, 1994 OPTION VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
12/31/94 12/31/94
Shares Acquired Value (Exercisable/ (Exercisable/
Name on Exercise(a) Realized Unexercisable) Unexercisable)(b)
---- ------------------- -------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
Douglas C. Yearley 122,042 $1,961,995 158,486/274,715 $2,397,532/1,759,194
J. Steven Whisler 29,675 1,066,445 107,139/89,594 2,740,736/719,937
Patrick J. Ryan 8,579 134,366 34,087/74,094 704,305/631,125
Bernard G. Rethore 15,419 217,101 42,582/45,909 808,550/561,375
Thomas M. St. Clair 37,933 475,635 40,327/66,201 599,132/485,406
-------
(a) All of the named executives, used shares already owned by them to pay the
exercise price of some or all of the options they exercised in 1994. Mr.
Yearley exercised all of the options he exercised in 1994 in this manner.
He acquired 31,427 shares on exercise of these options in excess of the
shares used to pay the exercise price and received reload options to
purchase 90,615 shares. Options for 29,675, 8,579, 15,419 and 37,933 were
exercised by Mr. Whisler, Dr. Ryan, 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 17,081, 2,153, 3,510 and 7,946, 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 30, 1994 ($61.5625).
</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 or 1994.
<TABLE>
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:
PENSION PLAN TABLE
<CAPTION>
Final Average
Salary and
Incentive Estimated Annual Benefits for Years of Benefit Service Indicated(c)
Compensation ------------------------------------------------------------------------------------------------
(a)(b) 10 15 20 25 30 35 40
-------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 316,750 $ 48,880 $ 73,320 $ 97,760 $122,200 $146,640 $171,090 $195,530
$ 526,000 $ 82,360 $123,540 $164,720 $205,900 $247,080 $288,270 $329,450
$ 722,000 $113,720 $170,580 $227,440 $284,300 $341,160 $398,030 $454,890
$ 819,000 $129,240 $193,860 $258,480 $323,100 $387,720 $452,350 $516,970
$ 910,000 $143,800 $215,700 $287,600 $359,500 $431,400 $503,310 $575,210
$1,001,000 $158,360 $237,540 $316,720 $395,900 $475,080 $554,270 $633,450
$1,092,000 $172,920 $259,380 $345,840 $432,300 $518,760 $605,230 $691,690
$1,163,000 $184,280 $276,420 $368,560 $460,700 $552,840 $644,990 $737,130
$1,234,000 $195,640 $293,460 $391,280 $489,100 $586,920 $684,750 $782,570
$1,376,000 $218,360 $327,540 $436,720 $545,900 $655,080 $764,270 $873,450
-------
(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 plus the average annual incentive compensation
for any consecutive 60-month period during a member's last 120 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 1995.
(b) Amounts of annual incentive compensation have been estimated based on the
five-year average annual incentive compensation awarded to participating
employees for 1990 through 1994. The actual amount of incentive
compensation for an individual at any level of Final Average Salary could
vary.
(c) 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, 43 years; Dr. Ryan, 31 years; Mr. Iraola, 30 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.
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.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
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
managers 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 managers participating in these
programs by:
* Emphasizing the relationship between pay and performance by rewarding
managers 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 periodically retained respected independent
compensation consultants to advise and assist it in connection with various
compensation matters.
EXECUTIVE OFFICER COMPENSATION
The executive officers are compensated by salaries, annual incentive awards
and long-term incentive compensation. Each element focuses on performance in a
different but complementary way. Salaries focus on individual performance as
well as competence. Annual incentives relate to individual, corporate and, if
appropriate, unit performance. Long-term incentive awards, which are now paid in
the form of stock options, create a long-term identity of interest with the
shareholders based on the Corporation's performance and related growth of
shareholder value.
The Committee believes that the Corporation competes for its executive
talent primarily with similarly sized industrial companies located in the United
States. Accordingly, where possible, the Committee compares executive officer
compensation to the compensation paid to executives holding similar positions at
other publicly-held industrial corporations of a size, measured by revenues,
similar to that of the Corporation (referred to below as the "comparison
group"). Information concerning a significant number of such companies is
provided by independent consultants and, based on the consultants' advice, is
believed by the Committee to be generally representative of the compensation
paid by all such companies in the United States. Thus, the companies used for
comparison purposes in connection with the compensation paid to the
Corporation's executive officers are different from, and substantially more
numerous than, the three nonferrous metals companies included in the Peer Group
used in the performance graph on page 19 to compare shareholder returns.
Salaries. Individual salaries for executive officers are generally
established by the Board of Directors, on the recommendation of the Committee,
to reflect the officer's performance and competence, which is generally defined
as his progress in responsibilities, experience and length of service in the
position. Salaries are targeted at the median levels for sustained and expected
performance and competence. Salary targets are set above and below the median
level for performance and competency levels above and below those expected for
each position. These general practices were not, however, followed during 1994;
in response to falling copper prices late in 1993, all merit salary increases
for executive officers were suspended until January 1, 1995. Based on available
information, the Committee believes salaries in 1994 for the executive officers
were at or slightly below the averages of the companies in the comparison group
for employees holding similar positions.
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 median of the annual incentive compensation paid by
the comparison group to individuals holding comparable positions. Lower
threshold awards and higher maximum awards are also established. Corporate goals
are set using return on equity and net cash flow return on investment, both of
which are fundamental indicators of the Corporation's performance. The goals are
equally weighted and determine 70% of the CEO's total annual incentive
compensation, and 60% and 15% of the CFO's and operation executives' awards,
respectively. In 1994, return on equity and net cash flow return on investment
were both near the maximum goals. Based on these results and the Committee's
evaluation of performance to individual and, where appropriate, unit goals, the
Committee recommended, and the Board approved, Annual Incentive Compensation
awards for 1994 above the targeted amounts for the listed executives.
Stock Options. The Committee uses stock options to provide 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. To further the identity of interest with the shareholders, the executive
officers are expected to acquire and own significant numbers of the
Corporation's shares.
The Board of Directors and the Committee have determined that to focus the
executives' attention to an appropriate extent on the long-term growth of
shareholder value, the targeted compensation levels with respect to the present
value of stock options should be approximately midway between the fiftieth and
seventy-fifth percentiles of the long-term incentive awards made to executives
holding similar positions in companies in the comparison group. Adjustments are
made from these levels based on the performance, career potential, critical
skills and prior grant history of the executive officer. Stock options granted
to executive officers in 1994 were at or above the targeted levels. All of the
Committee's option grants for 1994 were approved by the Board.
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 1994 was stated as a variable percentage, from 0% to 50%, of the
officer's average base salary during the three-year period, depending on the
Corporation's actual performance compared to targeted objectives, and was paid
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 approximately equal to target and produced awards equal to
approximately 37.1% of each participant's average 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, in advance, to establish 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 made with respect to the 1992-94 cycle will be the
last payments under this program.
Restricted Stock. In past years, the Committee also has 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 for 1994, except for grants made in payment of part of the Long-Term
Performance Plan award for the 1992-1994 cycle.
IRS Limit on Deductibility of Compensation. The Committee has decided that,
for 1995, 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," excluding
for this purpose deferred compensation and, in general, compensation
constituting "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 1995 salaries and incentive compensation subject to Section
162(m), not including any deferred compensation, are not expected to exceed $1
million for any individual employee. The Committee intends to review this matter
during 1995.
CEO COMPENSATION
Douglas C. Yearley, the Chief Executive Officer of the Corporation, received
a base salary of $560,000 in 1994, an Annual Incentive Compensation Plan award
of $560,000 for 1994 performance to stated goals, a Long-Term Performance Plan
grant for the 1992-94 cycle of 3,308 shares of common stock restricted from sale
for two years, and a compensatory option grant in 1994 to purchase 100,000
Common Shares. As discussed above under "Stock Options," Mr. Yearley also
received in 1994, under a program available to all optionees, 90,615 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.
All executive merit salary increases were suspended during 1994 (for reasons
stated under "Salaries") and therefore Mr. Yearley's salary was unchanged from
the amount paid to him in 1993. The Committee believes that Mr. Yearley's 1994
salary is below the 1994 median paid by comparable companies to their CEOs.
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 goals set at the beginning of
the year. The Corporation's performance was near the maximum goals for return on
average equity and 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 individual goals pertaining to the positioning of
Phelps Dodge Mining Company for future growth, the growth and enhancement of
Phelps Dodge Industries' assets and the overall management of Phelps Dodge
Corporation during an anticipated difficult earnings year. 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, which was above the targeted level,
was based on the policy discussed above under "Stock Options," including the
Committee's evaluation of Mr. Yearley's overall performance during 1994, 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
(The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T)
COMPARATIVE FIVE-YEAR TOTAL RETURNS
INCLUDING REINVESTMENT OF DIVIDENDS
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
Phelps Dodge 100 101 125 188 195 255
S&P 500 100 97 126 136 150 152
Peer Group 100 91 103 148 145 187
----------
Assumes $100 invested at 12/31/89 in Phelps Dodge common stock, the S&P 500 and
a Peer Group represented by the Dow Jones "Other Nonferrous Metals." (This
published index includes Phelps Dodge, Asarco Incorporated, Brush Wellman Inc.,
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 LLP as independent accountants for the Corporation
for the year 1995, subject to ratification by the shareholders at the annual
meeting. Price Waterhouse LLP or a predecessor firm has been the independent
accountants for the Corporation since 1915. A representative of Price Waterhouse
LLP 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 LLP 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, 1994, 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, Federal Insurance Company and XL Insurance Company, each for a one-year
term ending June 1, 1995, at premiums of $569,596, $174,095, $58,425, $65,300
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 1, 1995. Proposals should be sent to
the Secretary of the Corporation, 2600 North Central Avenue, Phoenix, Arizona
85004-3014.
ANNUAL REPORT FOR 1994
The annual report of the Corporation for the year 1994, including financial
statements, is being furnished concurrently with this proxy statement to persons
who were shareholders of record as of March 16, 1995, 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
March 31, 1995
phelps
dodge
corporation
Notice of
Annual Meeting
of Shareholders
and Proxy
Statement
May 3, 1995
<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 3,
1995, 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 16, 1995,
WILL NOT BE VOTED AT THE MEETING.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
------------ Please mark
SP SHARES /X/ your votes
as this
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. Addison, Hazen, (Mrs.) Knowles and Parker
FOR all WITHHELD WITHHELD for the following
nominees / / for all nominees / / only (write name(s) of
nominees(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.
<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
EDWARD L. ADDISON, PAUL W. DOUGLAS, WILLIAM A. FRANKE 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 Wednesday, May 3,
1995 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
------------- ---------------------------------- Please mark
COMMON SHARES DIVIDEND INVESTMENT SERVICE SHARES /X/ your votes
as this
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. Addison, Hazen, (Mrs.) Knowles and Parker
FOR all WITHHELD WITHHELD for the following
nominees / / for all nominees / / only (write name(s) of
nominees(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.
<PAGE>
PHELPS DODGE CORPORATION
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION
The undersigned shareholder of Phelps Dodge Corporation hereby appoints
Edward L. Addison, Paul W. Douglas, William A. Franke 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 3,
1995, 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. Addison,
Hazen, (Mrs.) Knowles and Parker
FOR all WITHHELD WITHHELD for the following only
nominees for all nominees (write name(s) of nominees(s) below)
/ / / /
-----------------------------------
PLEASE SIGN ON REVERSE SIDE
AND RETURN PROMPTLY
P R O X Y
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
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION
The undersigned shareholder of PHELPS DODGE CORPORATION hereby appoints
EDWARD L. ADDISON, PAUL W. DOUGLAS, WILLIAM A. FRANKE 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 3,
1995, 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. Addison, Hazen, (Mrs.) Knowles and
Parker.
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:
----------------------------
<PAGE>
PHELPS DODGE CORPORATION
2600 North Central Avenue
Phoenix, Arizona 85004-3014
March 31, 1995
TO MEMBERS OF THE PHELPS DODGE
EMPLOYEE SAVINGS PLAN
Enclosed for your information are copies of Phelps Dodge Corporation's
1994 Annual Report to Shareholders and 1995 Proxy Statement.
Very truly yours,
John C. Replogle
Chairman
Benefits Administration Committee
PHELPS DODGE CORPORATION
2600 North Central Avenue
Phoenix, Arizona 85004-3014
March 31, 1995
TO MEMBERS OF THE PHELPS DODGE
EMPLOYEE SAVINGS PLAN
In connection with the annual meeting of shareholders of Phelps Dodge
Corporation to be held on May 3, 1995, we enclose:
(a) Notice of Annual Meeting of Shareholders and Proxy Statement
dated March 31, 1995.
(b) Card entitled "Confidential Proxy."
Because it is important that the shares in your account under the Plan
be represented at the annual meeting, please complete and sign the enclosed card
and return it in the enclosed stamped addressed envelope before April 21, 1995.
Very truly yours,
William C. Tubman
Vice President and Secretary
March 31, 1995
TO HOLDERS OF RESTRICTED COMMON SHARES
ISSUED UNDER THE PHELPS DODGE 1993
STOCK OPTION AND RESTRICTED STOCK PLAN
In connection with the annual meeting of shareholders of Phelps Dodge
Corporation to be held on May 3, 1995, we enclose:
(a) Notice of Annual Meeting of Shareholders and Proxy Statement
dated March 31, 1995.
(b) Proxy
Because it is important that your restricted shares issued under the
Plan be represented at the annual meeting, please complete and sign the enclosed
proxy and return it in the enclosed stamped addressed envelope before April 21,
1995.
Very truly yours,
William C. Tubman
Vice President and Secretary
