Schedule 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Material
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
PHILLIPS PETROLEUM COMPANY
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 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:
-------------------------------------------------
2) Aggregate number of securities to which transaction
applies:
-------------------------------------------------
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:
-------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------
[ ] 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>
PHILLIPS PETROLEUM COMPANY
NOTICE OF
1994 ANNUAL MEETING
MAY 9, 1994
and PROXY STATEMENT
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PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004
OFFICE OF THE CHAIRMAN
March 31, 1994
Dear Stockholder:
You are cordially invited to the Annual Meeting of Phillips Petroleum
Company to be held in the Adams Building, 4th Street and Keeler Avenue,
Bartlesville, Oklahoma, on Monday, May 9, 1994, commencing at 10 a.m. local
time. Your attendance will provide you with an opportunity to hear
management's report on the operations and meet the directors and
representatives of the Company.
The Secretary's formal notice of the meeting and the Proxy Statement
accompany this letter and describe the matters on which action will be taken.
In addition to the election of 14 directors, you are asked to vote on two
other proposals. Proposal 1 is by the Company to approve the independent
auditors. Proposal 2 is sponsored by four stockholders and asks the Company
to sign and implement the CERES Principles, an amended version of the Valdez
Principles. Our Board of Directors unanimously recommends that you vote For
Proposal 1 and Against Proposal 2.
It is important that your views be represented at the meeting whether or
not you are able to attend. Accordingly, we respectfully request that you
sign, date and promptly return your proxy in the enclosed postage-paid
envelope.
On behalf of the directors and employees of Phillips Petroleum Company,
we express our appreciation to you, the owners of this Company, for your
continued support and interest.
Sincerely,
C. J. Silas
- ------------------
C. J. Silas
Chairman and Chief Executive Officer
3
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<PAGE>
PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004
NOTICE OF ANNUAL MEETING to be held May 9, 1994
To the Stockholders:
The Annual Meeting of Stockholders will be held at the Adams Building,
4th Street and Keeler Avenue, Bartlesville, Oklahoma, on Monday, May 9, 1994,
at 10 a.m. local time, for the purposes of considering and voting on the
following matters as described in the attached Proxy Statement:
Election of 14 directors (pages 7 through 9);
Proposal of the Company:
------------------------
Proposal 1. To approve the designation of Ernst & Young as
independent auditors for 1994 (page 20);
Proposal of Stockholders:
-------------------------
Proposal 2. To sign and implement the CERES Principles, an amended
version of the Valdez Principles (pages 20 through 22); and
Any other matters that may properly come before the meeting (page 22).
Only stockholders of record at the close of business March 18, 1994, will
be entitled to vote at this meeting.
A copy of the Company's Annual Report containing financial data and a
summary of operations for 1993 is being mailed to the Company's stockholders
with this Proxy Statement.
By Order of the Board of Directors,
Dale J. Billam
---------------------
Dale J. Billam
Secretary
Dated March 31, 1994
5
<PAGE>
PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004
PROXY STATEMENT
March 31, 1994
SOLICITATION
Your proxy is solicited by the Board of Directors and all costs of
solicitation will be borne by the Company. Your proxy will be voted as you
direct and may be revoked by you at any time before it is voted by filing
with the Secretary an instrument revoking it, by executing a later-dated
proxy or by voting in person by ballot at the meeting. This Proxy Statement
and Proxy Card are first being mailed on or about March 31, 1994, to
stockholders of record as of March 18, 1994.
Georgeson & Co. Inc. has been engaged by the Company to solicit proxies
for this Annual Meeting from brokers, banks and other institutional holders,
and individual holders of record. The fee for this service, payable one-half
at the commencement of solicitation and the balance at its completion, is
$16,000, plus the reimbursement of certain out-of-pocket costs. In addition
to solicitation by mail, officers, directors and employees of the Company
may solicit proxies by telephone, facsimile or personal contact.
CONFIDENTIAL VOTING
It is the Company's policy that all proxies, ballots, and voting
tabulations that identify stockholders be kept confidential, except where
disclosure may be required by applicable law, where stockholders write
comments on their proxy cards, and where disclosure is expressly requested
by a stockholder, and in limited circumstances such as a proxy contest or
other solicitation of proxies based on an opposition proxy statement or any
matter requiring for stockholder approval more than the vote of a majority
of the shares present at any meeting. The Company has engaged Chemical Bank
as tabulators of all proxies and ballots, and has appointed two persons who
are employees of Chemical Bank to be Inspectors of Election.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Company's only class of voting securities is its $1.25 par value
common stock. There were 261,387,811 shares outstanding at the close of
business March 1, 1994. The record date for stockholders entitled to vote
at this meeting is March 18, 1994. Each share is entitled to one vote.
The number of shares of the Company's common stock beneficially owned
as of February 28, 1994, by any person or group known to own five percent
or more, and by each of the directors and nominees, and by all directors
and officers of the Company as a group, is shown in the tables "Security
Ownership of Certain Beneficial Owners," and "Security Ownership of
Management," respectively, on pages 10 and 11 after the information on
nominees for directors.
6
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
The number of directors to be elected is 14. The designated proxy
holders of the Company intend, unless otherwise instructed, to vote all
proxies for the election of the following 14 nominees, to hold office for
the ensuing year or until their successors are elected. The term of each
present director will expire concurrently with the election of directors at
the 1994 Annual Meeting. If any nominee is unable or unwilling to serve,
the Company, through the designated proxy holders, reserves
discretionary authority to vote for a substitute. The Company has no reason
to believe that any nominee will be unable or unwilling to serve if elected.
The following provides information about each nominee as of February 28,
1994, including data on the nominees' business backgrounds for the past
five years, and the names of public companies and other selected entities
for which they also serve as directors.
Photo of W. W. Allen, 57, is President and Chief Operating Officer
Mr. Allen of the Company, a position he assumed in December 1991.
appears in The Board of Directors has named Mr. Allen to become
this space. Chairman of the Board of Directors and Chief Executive
Officer effective May 1, 1994. He previously was a Senior
Vice President responsible for worldwide exploration and
production beginning in July 1989, Vice President of
International Exploration and Production beginning
January 1988. He is a director of the Federal Reserve
Bank of Kansas City, and Phillips Gas Company, a
subsidiary with a series of preferred stock registered
under the Securities Exchange Act of 1934 and listed on
the New York Stock Exchange. Mr. Allen became a director
in December 1989.
Photo of Norman R. Augustine, 58, is Chairman of the Board of
Mr. Augustine Directors and Chief Executive Officer of Martin Marietta
appears in Corporation, a position he has held since April 1988. He
this space. is a director of Riggs National Corporation and The
Procter & Gamble Company. Mr. Augustine became a director
in January 1989.
Photo of George B. Beitzel, 65, is a retired Senior Vice President
Mr. Beitzel and Director of International Business Machines
appears in Corporation. He is a director of Bankers Trust New York
this space. Corporation and its subsidiary, Bankers Trust Company;
FlightSafety International, Inc.; Rohm and Haas Company;
Roadway Services, Inc.; TIG Holdings; Computer Task
Group; and Phillips Gas Company. Mr. Beitzel became a
director in July 1980.
Photo of C. L. Bowerman, 54, is an Executive Vice President
Mr. Bowerman responsible for corporate strategic planning, corporate
appears in information technology and research and development, a
this space. position he assumed in April 1992. In his capacity as an
Executive Vice President he previously was responsible
for corporate engineering, corporate strategic planning
and research and development from December 1991 to
March 1992. He previously was a Senior Vice President
responsible for refining, marketing, supply and
transportation beginning in October 1988. Mr. Bowerman
became a director in December 1989.
7
<PAGE>
Photo of Robert E. Chappell, Jr., 57, is self employed as an
Mr. Chappell investment and management consultant. He previously was
appears in the Senior Executive Vice President and Chief Investment
this space. Officer of Metropolitan Life Insurance Company, a
position he held from October 1989 through December 1992.
He previously served Metropolitan Life Insurance Company
as Executive Vice President from October 1986 to October
1989. He is also a director of First Colony Corporation.
Mr. Chappell became a director in December 1990.
Photo of Lawrence S. Eagleburger, 63, is Senior Foreign Policy
Mr. Eagleburger Advisor for Baker, Worthington, Crossley, Stansberry &
appears in Woolf, a Washington, D.C. law firm, a position he assumed
this space. in January 1993. He previously served as Secretary of
State from December 1992 through January 1993, Acting
Secretary of State from August 1992 to December 1992,
and Deputy Secretary of State from February 1989 to
August 1992. He is a director of Dresser Industries, the
Institute for Defense Analyses, Jefferson Bankshares, and
Universal Corporation. Mr. Eagleburger became a director
in February 1993.
Photo of James B. Edwards, 66, is President of the Medical
Mr. Edwards University of South Carolina. He is a director of
appears in The South Carolina National Bank, a subsidiary of
this space. The South Carolina Corporation which is owned by
Wachovia Corporation; Brendle's, Inc.; SCANA Corporation;
Chemical Waste Management, Inc.; Imo Industries Inc.;
Encyclopaedia Britannica, Inc.; COMSAT Corporation; and
National Data Corporation. He is a former U.S. Secretary
of Energy and Governor of South Carolina. Mr. Edwards
became a director in January 1983.
Photo of Larry D. Horner, 59, is a Managing Director of Arnhold
Mr. Horner and S. Bleichroeder, Inc., a position he assumed in
appears in April 1991. He previously was a partner in KPMG Peat
this space. Marwick and is a former Chairman and Chief Executive of
that firm. He became Chairman in October 1984. He is a
director of American General Corporation; Charterhouse
Group International Limited; First Eagle Fund
International; and the China Light Industry Fund.
Mr. Horner became a director in May 1991.
Photo of E. Douglas Kenna, 69, is Chairman of the Board of
Mr. Kenna Directors of Roper Industries. He previously was
appears in Chairman of Carlisle Companies, Inc. from August
this space. 1989 through December 1993. He is a director of
Fleet Financial Group and Harrow Corporation. Mr. Kenna
became a director in June 1977.
8
<PAGE>
Photo of J. J. Mulva, 47, is an Executive Vice President of the
Mr. Mulva Company and its Chief Financial Officer. The Board of
appears in Directors has named Mr. Mulva to become President and
this space. Chief Operating Officer effective May 1, 1994. He
previously was Senior Vice President and Chief Financial
Officer beginning in May 1993, Vice President and Chief
Financial Officer beginning in March 1993, Vice
President, Treasurer and Chief Financial Officer
beginning in March 1990, and Vice President and
Treasurer, beginning in September 1988. Mr. Mulva became
a director in January 1994.
Photo of D. J. Tippeconnic, 54, is an Executive Vice President of
Mr. Tippeconnic the Company responsible for refining, marketing,
appears in chemicals and plastics, a position he assumed in
this space. December 1991. He previously was a Senior Vice President
responsible for corporate strategic planning, corporate
engineering and research and development beginning in
November 1988. Mr. Tippeconnic became a director in
December 1989.
Photo of Randall L. Tobias, 51, is Chairman, President and Chief
Mr. Tobias Executive Officer of Eli Lilly and Company, a position he
appears in assumed in July 1993. He previously was Vice Chairman of
this space. American Telephone and Telegraph Company from September
1986 to June 1993. Mr. Tobias became a director in
July 1992.
Photo of Victoria J. Tschinkel, 46, is a Senior Consultant to
Mrs. Tschinkel Landers & Parsons, a Tallahassee, Florida law firm, a
appears in position she assumed in 1987. She previously served as
this space. Secretary of the Florida Department of Environmental
Regulation from 1981 to 1987. Mrs. Tschinkel became a
director in July 1993.
Photo of J. L. Whitmire, 53, is an Executive Vice President of
Mr. Whitmire the Company responsible for worldwide exploration and
appears in production. Previously he was Senior Vice President for
this space. worldwide exploration and production beginning in
December 1991, and Vice President of North America
Exploration and Production beginning January 1988.
Mr. Whitmire became a director in January 1994.
Mr. C. J. Silas, current Chairman of the Board of Directors and Chief
Executive Officer of the Company, will reach his intended retirement age
in April and is retiring from the Company and Board service effective
May 1, 1994.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
- -------------- ------------------- -------------------- ----------
Common Bankers Trust Company Direct (1) Indirect
P. O. Box 1855 ---------- --------
Church Street Station 62,143,404 -0- 23.77%
New York, New York,
10008
(1) 55,796,087 were held by the Bank as Trustee under the Company's Thrift
and Long-Term Stock Savings Plans with shared voting power; 2,427,554
were held in trust accounts for which the Bank possessed sole voting
and investment power; 12,596 were held in trust accounts for which the
Bank possessed voting and investment power shared with others;
3,907,167 were held in trust accounts for which the Bank possessed sole
investment power but no voting power; none were held in trust accounts
for which the Bank possessed sole voting power but no investment power;
and none were owned outright. The Bank has disclaimed beneficial
ownership of the shares it holds as record owner for the Thrift and
Long-Term Stock Savings Plans.
SECURITY OWNERSHIP OF MANAGEMENT
Phillips Petroleum Company
Securities
--------------------------------
Amount and Nature of
Beneficial Ownership
Title Name of --------------------
of Class Beneficial Owner Direct(1) Indirect Percent of Class
- -------- ----------------------- --------- ---------- -----------------
Directors and Nominees(2)
-------------------------
Common W. W. Allen 151,681 - less than 1%
Common Norman R. Augustine 5,200 - less than 1%
Common George B. Beitzel 69,961 62,143,404 (3) less than 1% (3)
Common C. L. Bowerman 122,923 654 less than 1%
Common Robert E. Chappell, Jr. 3,500 - less than 1%
Common Lawrence S. Eagleburger 1,110 - less than 1%
Common James B. Edwards 8,138 - less than 1%
Common Larry D. Horner 2,500 - less than 1%
Common E. Douglas Kenna 11,599 - less than 1%
Common J. J. Mulva 121,304 18 less than 1%
Common C. J. Silas 419,148 10,607 less than 1%
Common D. J. Tippeconnic 118,417 - less than 1%
Common Randall L. Tobias 3,000 - less than 1%
Common Victoria J. Tschinkel 1,000 - less than 1%
Common J. L. Whitmire 94,423 - less than 1%
Executive Officers
------------------
Common R. G. Ceconi 45,956 - less than 1%
Common W. G. Paul 166,098 1,579 less than 1%
Common Barbara J. Price 34,998 - less than 1%
Common J. B. Whitworth 128,479 - less than 1%
--------- ----------
All directors, nominees and
executive officers
as a group (19 in group) 1,509,435 62,156,262 less than 1%
direct, 23.78%
indirect (3)
(1) Direct ownership includes shares which may be acquired under options
within 60 days of the record date.
(2) The shares stated as being beneficially owned by each nominee do not
include shares beneficially owned by the other companies on whose
boards of directors the nominees, directors or officers serve. (The
list of nominees for directors on pages 7 through 9 contains the names
of the other companies for which the nominees serve as directors.) Each
nominee disclaims beneficial ownership of all such shares.
(3) The shares shown as indirectly owned by Mr. Beitzel include shares
directly owned by Bankers Trust Company on whose Board Mr. Beitzel
serves and whose ownership is set forth in the table at the top of this
page. Mr. Beitzel disclaims beneficial ownership of all such shares.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
Phillips Gas Company
Securities (1)
--------------------------------
Amount of Nature
of Beneficial
Ownership (1)
Name of -------------------- Percent
Title of Class Beneficial Owner Direct Indirect of Class
- ------------------ ------------------ -------- --------- ------------
Directors and
Nominees
------------------
Series A Preferred W. W. Allen - 500 (2) less than 1%
Series A Preferred George B. Beitzel 1,000 - less than 1%
Series A Preferred J. J. Mulva 475 1,070 less than 1%
Series A Preferred C. J. Silas 5,000 - less than 1%
Series A Preferred J. L. Whitmire 400 - less than 1%
Executive Officers
------------------
Series A Preferred R. G. Ceconi - 1,000 less than 1%
Series A Preferred W. G. Paul 1,000 - less than 1%
Series A Preferred J. B. Whitworth - 300 less than 1%
-------- -------
All directors, nominees and
executive officers
as a group (8 in group) 7,875 2,870 less than 1%
(1) Table shows only those directors, nominees and executive officers who
own shares.
(2) Mr. Allen has disclaimed beneficial ownership of all such shares.
OTHER INFORMATION ABOUT AND TRANSACTIONS
WITH DIRECTORS, NOMINEES AND OFFICERS
The Company is required to provide information about certain types of
legal proceedings and transactions involving directors, nominees and
officers.
Mr. Kenna, a current director and nominee, is Chairman of the Board of
Bertram-Trojan, Inc. (now called Martreb, Inc.), a non-public company, and
a maker of luxury yachts which filed for reorganization under Chapter 11 of
the Federal Bankruptcy Code in March 1992. The operating assets of the
Company were sold in the proceeding and a liquidating plan is in the process
of being prepared for submission to the Court and the creditors.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Mr. Horner, a current director, nominee and a member of the Audit,
Compensation and Executive Committees, is a Managing Director of Arnhold
and S. Bleichroeder, Inc. in New York ("A&SB") which entered into a letter
agreement in August 1992 with the Company and Provesta Corporation, a
wholly owned subsidiary of the Company. Under the agreement, A&SB would
advise the Company and Provesta on strategic alternatives for Provesta,
including parties who might be interested in acquiring, joint venturing or
entering into other corporate relationships involving Provesta's business.
The Company agreed to pay A&SB an engagement fee and to reimburse its
reasonable out-of-pocket expenses. Upon successful completion of a sale,
joint venture or licensing agreement involving all or part of Provesta's
food and feed ingredients and aquaculture business and yeast expression
vector technology and related research and patents, A&SB would be entitled
to a success fee. The engagement fee is to be credited against any success
fee. A&SB was paid $523,250 in 1993 as engagement fees and reimbursable
expenses. Of that amount, $141,500 was paid for work performed and expenses
incurred during 1992. In addition, AS&B received $30,000 in January 1994
for work performed in 1993 on Provesta.
Other members of the Compensation Committee are Norman R. Augustine,
George B. Beitzel, James B. Edwards and Victoria J. Tschinkel.
The Company had no interlocking relationship during the last fiscal
year.
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GENERAL INFORMATION
RELATING TO THE BOARD OF DIRECTORS
The Board of Directors
The business and affairs of the Company are managed under the direction
of the Board of Directors. To assist it in carrying out its duties, the
Board has delegated certain authority to five committees. The Board of
Directors held eight meetings in 1993. Attendance by the current directors
at meetings of the Board and of the Committees on which they served averaged
over 94 percent, except for Mr. Tobias who attended 65 percent of all such
meetings.
Committees of the Board
The Audit Committee, the Compensation Committee, the Executive
Committee, the Nominating Committee and the Public Policy Committee are the
standing committees of the Board of Directors. Membership is as follows:
Audit Compensation Executive Nominating Public Policy
- -------------- -------------- -------------- -------------- --------------
Horner* Augustine* Silas* Kenna* Chappell*
Chappell Beitzel Allen Beitzel Augustine
Eagleburger Edwards Augustine Edwards Eagleburger
Kenna Horner Horner Tobias
Tobias Tschinkel Kenna Tschinkel
__________
* Chairman
The Audit Committee recommends to the Board the independent auditors to
be engaged by the Company, reviews the scope of their engagement, including
the remuneration to be paid, and reviews on a continuing basis the
independence of the auditors. The Committee reviews with the independent
auditors, the Controller, the General Auditor, the General Counsel and other
appropriate Company personnel: (1) the Company's general policies and
procedures with respect to audits and accounting and financial controls;
(2) the general accounting and reporting principles and practices applied
in preparing the Company's financial statements and conducting financial
audits; (3) the interim and year-end financial statements and any
certification, report or opinion which the independent auditors propose to
render in connection with such statements; (4) the extent to which the
Company has implemented changes suggested by the internal audit staff, the
independent auditors or the Committee; and (5) the adequacy of the Company's
accounting practices and internal control structure. The Committee may
direct the General Counsel, the independent auditors and the internal audit
staff to inquire into and report to it on any matter having to do with the
Company's business affairs. The Committee also monitors compliance with the
Company's Code of Business Ethics, Conduct and Responsibility and oversees
the activities of the Corporate Compliance and Ethics Committee. The Audit
Committee held six meetings in 1993.
The Compensation Committee recommends for Board approval the salaries
for the Chairman of the Board of Directors and Chief Executive Officer, and
the President, and approves salaries for other officers who are members of
the Board of Directors, and for employees who earn $200,000 or above. The
Committee makes recommendations to the Board with respect to proposals for
the application of new benefits, incentive plans or programs to officers
who are also directors and the application of amendments to existing plans
or programs which would significantly increase such officers' compensation.
The Compensation Committee held seven meetings in 1993.
The Executive Committee, when the Board is not in session, may exercise
all power and authority of the Board in the management and business of the
Company, subject to the limitations imposed by the Bylaws. The Committee
has the authority to review and approve proposed corporate action when the
Board is not in session and may advise the Board of any recommendations of
the Committee regarding any proposed corporate action presented to the
Board. The Executive Committee held four meetings in 1993.
The Nominating Committee recommends to the Board qualified candidates
for election as directors. The Committee welcomes suggestions from
stockholders about qualified candidates. A stockholder wishing to submit a
recommendation to the Committee may do so by writing Dale J. Billam,
Secretary, Phillips Petroleum Company, Bartlesville, Oklahoma 74004. The
Nominating Committee held five meetings in 1993.
The Public Policy Committee advises management and the Board of
Directors (i) in response to current and emerging public policy issues,
and (ii) in the development and review of policies and budgets in respect
of contributions, including, but not limited to, contributions to
organizations whose primary purpose is charitable, civic, cultural or
educational. In order to carry out these duties, the Committee
(a) identifies, evaluates and monitors the social, political, environmental,
occupational, safety and health trends, issues and concerns, domestic and
foreign, which affect or could affect the Company's business activities and
performance; (b) reviews information from management and approves
recommendations to assist in the formulation and adoption of policies,
programs and practices concerning the matters set forth in (a) above,
including, but not limited to ecological and environmental protection,
employee safety, ethical business conduct, consumer affairs, alcohol and
drug abuse, equal opportunity matters and government relations; and
(c) monitors and evaluates on an on-going basis the Company's compliance
with such policies, programs and practices. The Committee also has the
authority to authorize the use of Company funds for political contributions
on behalf of the Company, if and to the extent permitted by law. The Public
Policy Committee held three meetings in 1993.
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COMPENSATION OF DIRECTORS AND NOMINEES
Compensation of non-employee directors consists of $10,000 and 1,000
shares of Phillips common stock per year, plus $2,000 per year for each
Board committee membership, $950 for each Board meeting attended, and $700
for the committee chairman or $500 for a committee member for each committee
meeting attended. Non-employee directors may elect to defer all or part of
their cash compensation. The future payment of this deferred compensation
has been pre-funded in a special trust designated for this purpose.
These directors also participate in the Non-Employee Director Retirement
Plan. This plan provides for monthly payments to each non-employee director
who retires from Board service. Each monthly payment is equal to one-twelfth
of the annual cash retainer paid for Board service (currently $10,000) plus
the average, calculated on a formula which includes daily and monthly
computations, of the fair market value of the 1,000 shares of stock during
the twelve months immediately prior to the non-employee director's
retirement. These payments continue for the number of years equal to each
director's years of Board service. If a retired non-employee director should
die prior to the completion of the payment period, the director's surviving
spouse will receive the remainder of the payments unless such spouse dies
prior to the end of the payment period. Plan payments have been pre-funded
by the Company in a special trust designated for this purpose. Prior to
retirement the Company also provides $200,000 of life insurance for each
non-employee director.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth compensation
information for services performed in 1993, 1992 and 1991 for those persons
who were at December 31, 1993, the Chief Executive Officer and the four
most highly compensated officers of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------
Other Annual
Name and Salary Bonus Compensation
Principal Position Year ($) ($) ($)
- ------------------ ---- -------- ------- ------------
C. J. Silas 1993 935,000 612,514 0
Chairman of the 1992 865,000 437,488 0
Board & CEO 1991 825,000 0 0
W. W. Allen 1993 448,250 275,235 0
President & 1992 392,000 180,000 0
COO 1991 315,250 0 0
C. L. Bowerman 1993 325,250 155,876 0
Executive Vice 1992 307,000 98,180 0
President 1991 272,500 0 0
W. G. Paul 1993 388,000 152,736 0
Sr. Vice President 1992 369,000 127,730 0
& General Counsel 1991 358,500 0 0
D. J. Tippeconnic 1993 352,500 146,993 0
Executive Vice 1992 332,500 113,670 0
President 1991 284,500 0 0
SUMMARY COMPENSATION TABLE (Cont.)
Long-Term Compensation
--------------------------------------
Awards Payouts
------------------------- -----------
Restricted Securities Long-Term All Other
Stock Underlying Incentive Compen-
Name and Award(s) Options/SARs Payout sation
Principal Position Year (1)($) (#) ($) (2) ($)
- ------------------ ---- ---------- ------------ ----------- ----------
C. J. Silas 1993 0 127,044 - (3) 5,499
Chairman of the 1992 0 0 453,720 (4) 8,343
Board & CEO 1991 0 0 0 (5) 11,764
W. W. Allen 1993 0 54,154 - (3) 5,499
President & 1992 0 0 119,430 (4) 8,820
COO 1991 0 0 0 (5) 12,259
C. L. Bowerman 1993 0 31,467 - (3) 5,499
Executive Vice 1992 0 0 82,380 (4) 8,820
President 1991 0 0 0 (5) 12,831
W. G. Paul 1993 0 35,229 - (3) 5,475
Sr. Vice President 1992 0 0 137,970 (4) 8,677
& General Counsel 1991 0 0 0 (5) 12,084
D. J. Tippeconnic 1993 0 36,194 - (3) 5,499
Executive Vice 1992 0 0 131,970 (4) 8,820
President 1991 0 0 0 (5) 12,351
(1) The Company has not made any outright grants of restricted stock to any
executive officer during any of the periods covered by the table. The
Company settled awards under its 1985 and 1987 annual incentive plans
and under all long-term incentive plans since 1986 by distributing to
award recipients shares of restricted stock which are not transferrable
prior to death, disability or retirement at age 62 for corporate
officers, unless restrictions are earlier lapsed by the Committee. The
aggregate number of such restricted shares held at December 31, 1993,
and the market value of such shares on that date (calculated according
to SEC regulation without regard to the restrictions and the resulting
inability of the named executives to realize such values at such time)
were: Mr. Silas, 197,360 shares, $5,772,780; Mr. Allen, 29,228 shares,
$854,919; Mr. Bowerman, 38,756 shares, $1,133,613; Mr. Paul, 82,896
shares, $2,424,708; and Mr. Tippeconnic, 39,419 shares, $1,153,006.
(2) Includes Company contributions to the Thrift Plan for the benefit of
participants and the value of the shares allocated to Long-Term Stock
Savings Plan participants as of the respective valuation dates.
(3) No decision has been made on awards for performance under the Strategic
Incentive Plan Performance Period from 1990-1993.
(4) The value of the restricted stock on the date of the award for
performance under the Strategic Incentive Plan Performance Period from
1989-1992.
(5) No awards were paid for performance under the Strategic Incentive Plan
Performance Period from 1988-1991.
13
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Stock options granted during 1993 to the Chief Executive Officer and the
four most highly compensated officers of the Company are reflected in the
following Option/SAR Grants in Last Fiscal Year table.
Individual Grants
- -----------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Sh) Date
- ------------------ ------------ ------------ -------- ----------
C. J. Silas 127,044 7.66% 25.07 01/10/03
W. W. Allen 54,154 3.27% 25.07 01/10/03
C. L. Bowermen 31,467 1.90% 25.07 01/10/03
W. G. Paul 35,229 2.12% 25.07 01/10/03
D. J. Tippeconnic 36,194 2.18% 25.07 01/10/03
- ------------------ ------------ ------------ -------- ----------
Stockholders (2) N/A N/A N/A N/A
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR (Cont.)
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option Term (1)
---------------------------------------------
Name 0% ($) 5% ($) 10% ($)
- ------------------ ------------ ------------- --------------
C. J. Silas 0 2,003,484 5,076,678
W. W. Allen 0 854,009 2,163,994
C. L. Bowermen 0 496,235 1,257,421
W. G. Paul 0 555,561 1,407,751
D. J. Tippeconnic 0 570,779 1,446,312
- ------------------ ------------ ------------- --------------
Total Stockholders (2) 0 4,099,868,830 10,388,760,840
(1) "Potential realizable value" is disclosed in response to SEC rules
which require such disclosure for illustration only. The values
disclosed are not intended to be, and should not be interpreted by
stockholders as representations or projections of future value of the
Company's stock or of the stock price.
(2) To lend perspective to the illustrative "potential realizable value,"
if the Company's stock price increased 5 percent or 10 percent per year
for 10 years from January 1, 1993 (disregarding dividends and assuming
for purpose of the calculation a constant number of shares outstanding),
the total increase in the value of all shares outstanding at January 1,
1993, is shown above as "potential realizable value" for Total
Stockholders.
TEN-YEAR OPTION/SAR REPRICING
There have been no options or stock appreciation right repricings during
the last 10 years for the Chief Executive Officer or for any of the other
four most highly compensated officers of the Company as reflected in the
following Ten-Year Option/SAR Repricing table.
Number of Market Length of
Securities Price Exercise Original
Underlying of Stock Price Option
Options/ at Time At Time Term
SARs of of New Remaining
Repriced Repricing Repricing Exercise at Date of
or Amended or Amend- or Amend- Price Repricing of
Name Date (#) ment ($) ment ($) ($) Amendment
- ----------------- ---- ---------- --------- --------- -------- ------------
C. J. Silas - 0 - - - -
W. W. Allen - 0 - - - -
C. L. Bowerman - 0 - - - -
W. G. Paul - 0 - - - -
D. J. Tippeconnic - 0 - - - -
14
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUE
The following table shows the number of shares acquired and the net
value realized from exercising stock options during 1993 and the number and
value of exercisable and unexercisable stock options granted under the 1986
Stock Plan and the 1990 Stock Plan at fiscal year-end 1993 for the Chief
Executive Officer and the four most highly compensated executive officers
of the Company.
Number of Value of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Number of Year-End Year-End($)(2)
Shares Net Value
Acquired Realized Exercisable/ Exercisable/
Name on Exercise ($) (1) Unexercisable Unexercisable
- ----------------- ----------- --------- ------------- --------------
156,444 1,414,777
C. J. Silas 24,351 $437,885 159,411 665,896
65,379 753,033
W. W. Allen 0 0 64,246 268,425
36,903 305,183
C. L. Bowerman 3,000 $48,750 40,564 169,502
26,930 154,051
W. G. Paul 20,962 $311,979 46,492 194,307
27,038 167,206
D. J. Tippeconnic 43,987 $711,080 45,728 191,085
(1) Net value realized is the market price on the date of exercise less the
option price times the number of shares exercised under the option.
(2) Based on $29.25, the fair market value of the Company's common stock on
December 31, 1993.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table shows Long-Term Incentive Plan awards established
under the Omnibus Securities Plan during 1993 for the Chief Executive
Officer and the four most highly compensated executive officers of the
Company.
Estimated Future Payouts Under
Performance Non-Stock Price--Based Plans
or Other ------------------------------
Period Number of Shares (1)
Until
Number of Maturation Threshold Target Maximum
Name Shares (#) or Payout (#) (2) (#) (#)
- ----------------- ---------- ----------- --------- ------ --------
C. J. Silas 21,840 (3) 12/31/95 10,920 21,840 43,680
W. W. Allen 9,137 12/31/95 4,568 9,137 18,274
C. L. Bowerman 5,409 12/31/95 2,704 5,409 10,818
W. G. Paul 5,836 12/31/95 2,918 5,836 11,672
D. J. Tippeconnic 6,282 12/31/95 3,141 6,282 12,564
(1) At the end of the three-year performance period, from January 1, 1993,
through December 31, 1995, the Compensation Committee will evaluate the
Company's performance to determine the extent to which target awards
have been earned. The Company's performance will be measured by total
stockholder return compared to the total stockholder return of the peer
group of eight integrated oil companies used in the Performance Graph.
(2) The Company's total stockholder return must be above the bottom quartile
when compared to the peer group (threshold performance) before any
award can be approved. If the threshold performance is achieved, the
Committee expects to approve awards at the threshold level which is
fifty percent of the target number of shares established for the
performance period. The actual awards earned can range from 0 percent
to 200 percent of the target awards.
(3) The target award for C. J. Silas will be prorated based on the number of
months he was an employee during the performance period.
15
<PAGE>
COMPENSATION COMMITTEE REPORT
TO STOCKHOLDERS
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee is composed of the directors named below, all of whom qualify
as disinterested persons for purposes of Rule 16b-3 adopted under the
Securities Exchange Act of 1934.
The executive compensation programs are designed to motivate all
executives to work as a team to maximize long-term stockholder value and
achieve industry safety leadership.
Executive compensation decisions made by the Committee are based on a
combination of quantitative and qualitative measures. During 1993, the
quantitative measures employed included: relative total return to
stockholders; improved safety performance through reduced rates of
recordable injuries and chargeable vehicle accidents; relative return on
equity; relative return on assets; performance against pre-established
financial measures; targets for finding and development costs; for reserve
replacement; as well as internal performance objectives. The Committee also
uses qualitative measures of performance such as experience, ability to
develop and implement strategic plans, leadership in the industry and
community, and social responsibility.
The Committee recognizes that the Company's businesses are extremely
capital intensive, requiring large investments, in most cases over a number
of years, before tangible financial returns are achieved. In addition, in
the short-term, the Company's prospects and performance as measured by its
share price can be significantly affected by commodity price movements and
geopolitical factors over which the Company and its management have no
control. Therefore, the Committee evaluates the quantitative and qualitative
measures, but may use discretion in recognizing performance achievements and
value enhancement.
Section 162(m) of the Internal Revenue Code requires, effective in 1994,
the establishment of performance-based standards for the deduction of
certain compensation to any covered employee in excess of $1 million per
year. The stock options granted by the Committee under stockholder approved
plans are exempt from this provision. No officer of the Company is expected
to receive compensation in 1994 which will result in non-deductibility of
such compensation expense to the Company. The Committee has elected to defer
a decision to qualify other elements of compensation under Section 162(m) of
the Internal Revenue Code.
By design, the executive compensation program is variable, based on
performance, and results in earnings by performance over a longer term. The
Company's objective in so doing is to provide a greater percentage of the
total compensation of its executives through variable or "at-risk"
compensation arrangements under the Annual Incentive Compensation Plan
("AICP"), stock options and awards under the Long-Term Incentive Plan.
Executive Compensation Actions for 1993
Salaries
- --------
Executive salary decisions are made primarily on the basis of individual
performance reviews. Executive salaries were adjusted in October 1993 as
part of a Company-wide merit salary program affecting approximately 7,300
domestic dollar payroll salaried employees. The Committee determines
salaries for all employees with salaries of $200,000 or above except for the
Chairman of the Board of Directors and the President. The Committee
recommends their salaries to the Board of Directors for consideration. In
determining executive salaries, without assigning relative weight to any
factor, the Committee considers the responsibilities of their position, the
relative success with which the executive employee carries out those
responsibilities, and their salary within the range for their job grade
classification. The Committee's recommendation for Mr. Silas' salary, which
was adopted unanimously by the non-employee members of the Board of
Directors, was based on, without assigning relative weight to any of the
factors, (i) a comparison of Mr. Silas' salary to those of chief executives
of other companies in the petroleum industry, including those in the peer
group by which the Company evaluates its stockholder return performance,
(ii) Mr. Silas' tenure as the Company's chief executive (which is among the
longest of current petroleum industry chief executive officers), (iii) the
Committee's endorsement of his leadership in directing key strategic
corporate decisions, and (iv) his industry and national public service
which, in the Committee's opinion, effectively and substantially benefitted
the Company's business and enhanced its stature among peers and the public.
The Committee believes based on the data available, that Mr. Silas' salary
ranks fourth in the peer group.
Annual Incentive Compensation Program
- -------------------------------------
The Committee administers the AICP, which provides an opportunity for
the award of annual bonuses. Under the AICP, a threshold of Company
financial performance must be met before awards are approved. For 1993, this
threshold was generation of not less than $1 billion in cash from operating
activities. The AICP also employs annual objectives, which the Committee
establishes each year. For 1993, the Committee set three Company-wide
objectives: (i) total stockholder return for 1993 greater than the median
stockholder return of the oil industry peer group used by the Company to
measure its stockholder return performance as listed in the Performance
Graph; (ii) generation of $1.5 billion cash from operating activities plus
asset sales; and ( iii) a reduction of five percent in recordable injury
rates and chargeable accidents involving Company vehicles from the average
of the last three years.
The Committee establishes targets each year for individual AICP awards
on the basis of a percentage of salary which varies according to the
employee's job grade classification under the Company's job evaluation
system. The target awards
16
<PAGE>
are established using internally generated data and data obtained from
independent third party consultants, and are intended to be at the mean of
the peer companies if performance objectives are met. For 1993, the target
percentages varied from 12 percent of salary for entry-level AICP
participants to 65 percent of salary for the Chairman of the Board of
Directors. The Committee is authorized under the terms of the AICP to
approve individual awards from 0 percent to 200 percent of target for the
award year.
Mr. Silas' and Mr. Allen's AICP awards are based on overall corporate
performance. Awards to all other AICP participants reflect the performance
of business units or staff groups with which they are related, as well as
corporate performance. In February 1994, the Committee approved cash
incentive compensation awards from 70 percent to 108.50 percent of target,
based on a review of the Company's 1993 corporate and business unit
performance. In determining the amount of the incentive compensation award
paid to Mr. Silas and the other named executive officers, the Compensation
Committee considered that the cash generated from operating activities
exceeded the threshold. The objective for cash from operating activities
plus asset sales was also exceeded. The Company's total return to
stockholders for the year was 19.8 percent, which placed the Company third
compared to the eight peer companies; and one of the two safety objectives
was met. For Mr. Silas and the other executive officers, the awards are set
forth in the Summary Compensation Table.
Stock Options
- -------------
It is the Committee's practice to consider the grant of stock options in
January of each year. All grants to date have been made at the fair market
value of the Company's stock on the date of the grant. It is the Committee's
policy not to reprice any stock option grants. The number of shares subject
to options at the date of each grant is set using internally generated
information and information from independent third party consultants to be
at the mean of those granted by peer companies to persons in corresponding
positions. The number of shares subject to option grants varies based on job
grade classification and salary. Grants in January 1993 ranged from
75 percent of annual salary for the lowest level of eligibility to
350 percent of annual salary for the Chairman and Chief Executive Officer.
For Mr. Silas and the other executive officers, this formula yielded the
grants set out in the Options/SAR Grants In The Last Fiscal Year table.
Long-Term Incentive Program
- ---------------------------
The Committee is currently administering two different forms of long-
term incentive arrangements. Both the former stock plans and the Omnibus
Securities Plan were approved by stockholders. It has been the Committee's
practice to establish each year a three- or four-year performance period,
at the end of which performance for the period is measured against
predetermined objectives and awards, if any, are made. Under the Strategic
Incentive Plan portions of the Company's former stock plans, there are two
remaining performance periods (1990-1993 and 1991-1994) with respect to
which the Committee will make decisions about payouts. The former stock
plans have been discontinued and no further performance periods will be
created under them.
At the beginning of Strategic Plan Performance Period IV, which covered
the four years 1989-1992 ("SIP IV"), a target award was established based
on a percentage of salary varying according to job grade classification.
Target awards were increased for individuals who were promoted during the
performance period to positions with higher job grade classifications. For
SIP IV, target awards were based upon 22 percent of salary for the lowest
level of eligibility up to 65 percent of salary for the Chairman and Chief
Executive Officer.
In 1993, the Committee approved long-term awards at 25 percent below
the target award levels which had been established for SIP IV. The awards
for SIP IV were based on the Company's ranking in the second quartile of
its peer group for total stockholder return, in the top quartile for return
on equity, and in the second quartile for return on assets. These rankings
were made for the purposes of SIP IV on the Company's position within the
range of returns for the peer group, and not on the market capitalization
weighted basis required in the Performance Graph presented in this Proxy
Statement. Also, the peer group for awards under the Strategic Incentive
Plan included one additional company not in the peer group used in the
Performance Graph in this Proxy Statement for evaluation of the Company's
stockholder return performance. This additional company ceased to be an
integrated oil and gas company, and was removed from the peer group for
purposes of the Proxy Statement Performance Graph and for measurement of
future performance under the Long-Term Incentive Plan.
The Committee also employed internal performance measures with
predetermined objectives for SIP IV. Those objectives met included
replacement of 100 percent of hydrocarbon reserves produced during the
performance period; maintenance of finding costs for hydrocarbon reserves
in the lowest quartile of a peer group (which includes three additional
companies as well as those companies in the stockholder return peer group);
and completion of the new ethylene processing plant at the Company's
Sweeny, Texas, refinery. In addition, the Committee evaluated performance
against certain internal performance measures which it does not disclose in
this report because of its view that the standards and the Company's
performance involve confidential commercial or business information the
disclosure of which would have an adverse effect on the Company's
competitiveness.
The value of the awards, which were settled in restricted stock for
Mr. Silas and the other executive officers under the SIP IV in 1993, are
set forth on the line for 1992, in the Summary Compensation Table.
Upon completion of the remaining Performance Periods
17
<PAGE>
under the former stock plans, the only form of long-term incentive
arrangement will be the Long-Term Incentive Plan under the Company's Omnibus
Securities Plan. The Committee established the first performance period of
the new plan, which extends from January 1, 1993, through December 31, 1995.
Target awards for Mr. Silas and the other executive officers were
established as presented in Long-Term Incentive Plan Award Last Fiscal Year
table, and were based on a percentage of salary varying according to job
grade classification and the price of the Company's stock at the beginning
of the performance period. Actual awards, if any, will be determined by the
Committee at the end of the performance period based on the single
measurement of the Company's relative total stockholder return as compared
to the peer group by which the Company evaluates its stockholder return
performance. The Committee is authorized under the terms of the Long-Term
Incentive Plan to approved individual awards from 0 percent to 200 percent
of the target awards established for the performance period. Before awards
may be granted, the Company's total stockholder return must be above the
bottom quartile when compared to the industry peer group.
THE COMPENSATION COMMITTEE
Norman R. Augustine, Chairman
George B. Beitzel
James B. Edwards
Larry D. Horner
Victoria J. Tschinkel
PERFORMANCE GRAPH
The following graph shows the Company's total return to stockholders
compared to the S & P Composite 500 and a peer group of eight integrated
oil companies over the five-year period from December 31, 1988 through
December 31, 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN*
Among Phillips Petroleum, S&P 500 Index, and Peer Group Index **
* Total return assumes dividend reinvestment
** Amoco, Chevron, Exxon, Mobil, Texaco,
Amerada Hess, ARCO, Unocal
[Proxy Graph appears in this space]
Assumes $100 Invested on 12/31/88 in Phillips Common Stock, S&P 500 Index
and Peer Group Index.
A table of the data points used in the graph:
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
(1) PHILLIPS PETROLEUM $135 $145 $139 $152 $183
(2) S&P 500 INDEX 132 127 166 178 195
(3) PEER GROUP INDEX 137 145 160 167 190
18
<PAGE>
The Retirement Income Plan, in which all active eligible employees
(including executive officers) participate, does not require participant
contributions. Benefits are computed in accordance with several formulas.
Officers, including executive officers, generally receive benefits under
a final average earnings formula. Benefits are based on length of service,
a participant's annual salary and awards paid under the Annual Incentive
Compensation Plan. Normal retirement age is 65. A participant may retire as
early as age 55 and receive a reduced benefit. Benefits for a retiring
employee are paid in the form of a straight-life annuity or one of several
other forms of equivalent actuarial value. One executive officer of the
Company has elected to be covered by a supplemental plan which provides for
retirement after age 62 but before age 65. It supplements retirement by
calculating benefits as if the retiring officer had continued to be employed
until age 65. All other executive officers have indicated to the Company an
intention to retire at age 62.
The following table shows the maximum estimated straight-life annual
benefits payable at normal retirement age to employees in the higher salary
classifications, prior to reductions required by the plan for Social
Security benefits.
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
Under Final Average Earnings Formula (1) (2)
Annual Average of
Highest 3 Consecutive
Calendar Years' Salary Years of Credited Service at Normal Retirement
and AICP Awards in 10 Years ------------------------------------------------
Preceding Retirement(3) 10 15 20 25 30
- --------------------------- -------- -------- -------- -------- --------
$ 450,000 72,000 108,000 144,000 180,000 216,000
650,000 104,000 156,000 208,000 260,000 312,000
850,000 136,000 204,000 272,000 340,000 408,000
1,150,000 184,000 276,000 368,000 460,000 552,000
1,450,000 232,000 348,000 464,000 580,000 696,000
1,750,000 280,000 420,000 560,000 700,000 840,000
1,950,000 312,000 468,000 624,000 780,000 936,000
PENSION PLAN TABLE (Cont.)
Estimated Annual Retirement Benefits
Under Final Average Earnings Formula (1) (2)
Annual Average of
Highest 3 Consecutive Years of Credited Service
Calendar Years' Salary at Normal Retirement
and AICP Awards in 10 Years ------------------------------------
Preceding Retirement(3) 35 40 45
- --------------------------- ---------- ---------- ----------
$ 450,000 252,000 288,000 324,000
650,000 364,000 416,000 468,000
850,000 476,000 544,000 612,000
1,150,000 644,000 736,000 828,000
1,450,000 812,000 928,000 1,044,000
1,750,000 980,000 1,120,000 1,260,000
1,950,000 1,092,000 1,248,000 1,404,000
(1) As required by the Internal Revenue Code of 1986, as amended, the
retirement plan's payments may not provide annual benefits exceeding a
maximum amount, or include in benefit computations, compensation in
excess of the amount specified in the Internal Revenue Code. Also,
participation in the Company's AICP deferral program may cause a
reduction in retirement plan benefits. Additional amounts, if required
to provide the total benefits indicated in the table, would be made by
supplemental Company payments. The Company also maintains, as a
recruiting tool, a supplemental plan under which officers and other
executives who are hired during mid-career may receive retirement income
in excess of that which their shorter Credited Service would provide
under the retirement plan. However, total benefits under this
supplemental plan and the retirement plan will not exceed benefits
obtainable under the retirement plan by a full career employee at
similar salary levels. These supplemental benefits have been partially
pre-funded by the Company in a special trust designated for this
purpose.
(2) With respect to the executive officers named in the Summary Compensation
Table, their years of credited service as of February 28, 1994, for
retirement purposes are: W. W. Allen, 34 years; W. G. Paul, 14 years;
C. J. Silas, 42 years; C. L. Bowerman, 32 years; and D. J. Tippeconnic,
32 years. See the Summary Compensation Table for their current covered
compensation.
(3) AICP Awards are shown under the heading "Bonus" in the Summary
Compensation Table.
EMPLOYMENT CONTRACTS
and
TERMINATION OF EMPLOYMENT
and
CHANGE-IN-CONTROL ARRANGEMENTS
In anticipation of the retirement of C. J. Silas as the Company's
Chairman and Chief Executive Officer on May 1, 1994, the Compensation
Committee authorized the lapsing of restrictions on 246,700 shares of
restricted common stock of the Company, ratably during each of the months
December 1993-April 1994. The shares were received in prior years under
various Company compensation plans. The lapsing dates are December 13, 1993,
and the last trading days of each of January, February, March and
April 1994. Mr. Silas elected to receive in cash the value of the shares
lapsed on December 13, 1993, and to defer the value of the shares as to
which restrictions are lapsed during January-April 1994, which election
was accepted by the Compensation Committee. Mr. Silas may elect a lump sum
distribution of benefits under the Company's non-qualified retirement plans,
and full or partial deferral of such benefits under the terms of the
Company's Key Employee's Deferred Compensation Plan. The non-employee
members of the Board of Directors, with Mr. Silas and the other employee
directors abstaining, approved the recommendation of the Compensation
Committee to enter a letter agreement with Mr. Silas reflecting these
arrangements, which agreement was entered into in December 1993.
19
<PAGE>
The Work Force Stabilization Plan authorized on April 26, 1988, provides
that all employees of the Company, including executive officers, who are
laid off (as defined in the plan) within two years following a change of
control of the Company will be en d to severance benefits equal to four
weeks' pay for each year of service, subject to a maximum of 104 weeks.
"Pay" is determined by adding the employee's current base salary, regularly
scheduled overtime pay and most recent Annual Incentive Compensation Plan
award (or target award, if greater).
Company-sponsored medical, dental and life insurance programs would be
continued for affected employees. The period of time which severance
benefits cover would be added to service for purposes of retirement plan
calculations, and all affected employees would be immediately vested and
entitled to lump-sum distributions. In addition, affected employees would be
entitled to require the Company to purchase their principal residences under
a formula-pricing arrangement intended to protect them from loss of value,
and would be entitled to reimbursement of legal expenses incurred in
connection with any claim for benefits under the plan.
A change of control would take place if there is either (i) an
acquisition (other than directly from the Company) of 20 percent or more of
the beneficial interest in the Company's voting stock by a party other than
the Company, a subsidiary or a Company-sponsored benefit plan, or (ii) a
change in the Board of Directors as a result of which the current directors
(together with the successors which they nominate or approve for nomination)
cease to be a majority of the Board.
PROPOSAL 1 BY THE COMPANY
The Board of Directors unanimously recommends a vote FOR adoption of the
following resolution, which will be presented at the meeting:
---------------------------------------
RESOLVED, that the Board of Directors' designation of Ernst & Young to
serve as the independent auditors to audit the books, records and accounts
of the Company for the 1994 fiscal year be and hereby is approved.
---------------------------------------
Upon the recommendation of the Audit Committee, the Board of Directors
has designated Ernst & Young, Certified Public Accountants, for the purpose
stated above and, in accordance with the Bylaws of the Company, has directed
that a vote of stockholders be taken to determine their approval or
disapproval.
As provided in the Company's Bylaws, in the event of stockholder
disapproval, the Board must then determine whether to replace the
independent auditors before the end of the current year and shall designate
other independent auditors for the following year.
Ernst & Young, which has served as the Company's independent auditors
since 1949, is familiar with the Company's operations, accounting policies
and procedures and is, in the Company's opinion, well-qualified to act in
this capacity. Representatives of Ernst & Young will be present at the
meeting to make any statement they desire and to answer questions directed
to them.
PROPOSAL 2 BY STOCKHOLDERS
The General Board of Church and Society of the United Methodist Church,
100 Maryland Avenue, N.E., Washington, D.C. 20002, which states it is the
owner of 3,400 shares, has given notice through Thom White Wolf Fassett,
General Secretary, of its intention to present the following resolution at
the meeting which is co-sponsored by the Franciscan Health System of the
Sisters of St. Francis of Philadelphia, One MacIntyre Drive, Aston,
Pennsylvania 19014, which states that it is the owner of 600 shares:
ENDORSEMENT OF THE CERES PRINCIPLES
FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS, WE BELIEVE:
The responsible implementation of sound environmental policy increases
long-term stockholder value by increasing efficiency, decreasing clean-up
costs, reducing litigation, and enhancing public image and product
attractiveness;
Adherence to public standards for environmental performance gives a
company greater public credibility than is achieved by following standards
created by industry for itself. In order to be publicly credible and useful,
such standards need to be created independently of industry and they need to
reflect what investors and other stakeholders want to know about the
environmental records of their companies;
Standardized environmental reports will provide stockholders with useful
information which allows comparisons of performance against uniform
standards and comparisons of progress over time. Companies can also attract
new capital from investors seeking investments that are environmentally
responsible, responsive, progressive, and which minimize the risk of
environmental liability.
AND WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES), which
comprises large institutional investors with $150 billion in stockholdings
(including stockholders of this Company), public interest representatives,
and environmental experts, after consulting with dozens of corporations,
has produced comprehensive public standards for both environmental
performance and reporting. Hundreds of companies have been invited to
support these "CERES Principles" (originally issued in 1989 as the
"Valdez Principles" and revised in 1992), as a sign of their commitment
to environmental excellence.
20
<PAGE>
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere
2. Sustainable use of natural resources
3. Waste reduction & disposal
4. Energy conservation
5. Risk reduction
6. Safe products and services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports
Management has received the complete text of the CERES Principles and
the accompanying CERES Report Form (available from CERES, 711 Atlantic
Avenue, Boston MA 92110, tel: 617/451-0927), and has officially been asked
to endorse them.
---------------------------------------
RESOLVED: Stockholders request the Company to endorse the CERES
Principles for corporate environmental accountability.
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SUPPORTING STATEMENT
The potential impact of environmental issues concerns many investors
who are now calling for company commitments to public accountability. We
believe this is best achieved by public standards which have received
scrutiny and input from corporate, environmental, investor, and community
sources. We believe that the environmental policies and reports produced by
companies to date--commendable as they are--lack the critical component of
commitment to standards set not only by themselves but also by "stakeholders"
in the company, including investors in this Company and environmentally
concerned customers.
We invite the Company to endorse the CERES Principles by (1) stating its
endorsement in a letter signed by a senior officer; (2) committing to
implement the Principles; and (3) annually completing the CERES Report.
Endorsement will entail a fee for CERES' analysis and processing of the
Report. Endorsing these Principles complements internal corporate
environmental policies and procedures.
Most importantly, endorsement will allow our Company to participate in
the elaboration of publicly acceptable environmental performance and
reporting standards. We invite all stockholders to encourage our Company to
demonstrate environmental leadership and account for its environmental
impact. Please support this resolution.
The CERES Principles were also proposed by the Women's Division, The
General Board of Global Ministries, The United Methodist Church, 15th
Floor, 475 Riverside Drive, New York, New York 10115, and the Saint Anthony
Shrine, Franciscan Friars, 100 Arch Street, PO Box 2228, Boston,
Massachusetts 02107-2278, each of whom has advised the Company that they
were the owner of at least $1,000 worth of the Company's common stock, held
for at least one year.
STATEMENT IN OPPOSITION
The Company recommends a vote AGAINST adoption of this proposal by
stockholders.
The Company shares the proponents' belief that responsible
implementation of a sound environmental policy increases long-term
stockholder value by increasing efficiency, decreasing clean-up costs,
reducing litigation, and enhancing the Company's public image and product
attractiveness. However, the Company believes that it is neither necessary
nor prudent to adopt the CERES Principles. The CERES Principles are an
amended version of the Valdez Principles submitted to the Company's
stockholders for consideration in 1992 but not approved. The Company
believes its adopted and operational Principles of Performance,
environmental programs, policies and procedures (discussed below) provide a
more balanced approach to the concerns of the CERES Principles proponents.
A principal goal of the proponents of the CERES Principles is to develop
standards for disclosure and a format for public reporting by which
comparison can be made among companies. The Company is committed to public
environmental reporting. In November 1993, the Company released its first
public report on environmental stewardship. The report follows the
guidelines for the Public Environmental Reporting Initiative ("PERI"),
a voluntary effort by ten large companies, including the Company, which
represent a diverse group of business activities. The PERI guidelines were
developed after discussions with environmental groups, investor groups,
other companies and CERES representatives.
The PERI report is a cooperative effort in which the Company can
contribute to the final result. In contrast, even if the Company were to
agree with the standards and format of the CERES report at the time of
committing to the CERES Principles, there is no assurance that they will not
be changed in the future without the consent of the Company. In other words
it is an open-ended commitment the substance of which is determined by
others. The Board of Directors does not believe that entering into such a
commitment is a prudent course of action. The Board of Directors has a duty
to represent all stockholders of the Company and not just those who have a
special interest or concern.
The Company is committed to implementation of a sound environmental
policy. In 1990, the Company adopted a set of environmental goals called
the Principles of Performance, which complement its health, environmental
and safety policies and provide for the diversity of our business. In
addition to the Company's own standards, the Principles of Performance
reflect various governmental agency regulations and recommended management
practices from several major industrial organizations, including The
Chemical Manufacturers
21
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Association's Responsible Care Initiative, The American Petroleum
Institute's STEP (Strategies for Today's Environmental Partnership) program,
The National Petroleum Refiners' Association BEST (Building Environmental
Stewardship Tools) program, and the International Chamber of Commerce's
Charter For Sustainable Development. The Company believes these policy
commitments cover the important elements of environmental stewardship and
represent the interests of all stockholders.
Responsibility for oversight for the Company's environmental policies
and programs, as well as those for health and safety, runs from the Board
of Directors down through each employee. It begins with the Public Policy
Committee, a committee of the Board of Directors, which is comprised
entirely of outside directors. The Committee's mandate is found on page 12
of this Proxy Statement. The Company's Management Committee, composed of
Senior Management executives, and assisted by the Health, Safety and
Environmental Policy Committee is the primary body within the management of
the Company responsible for health, safety and environmental policy. The
Company's corporate-level staff, led by the Vice President Health,
Environment and Safety, is responsible for formulating and recommending
policy and implementing plans, as well as providing expert assistance to the
operating units. Approximately 170 employees in staff and operational
organizations, whose time is devoted solely to environmental matters,
provide such assistance. Further, it is the policy and philosophy of the
Company that all employees, as a part of their work assignments, have the
responsibility to protect the environment.
Accordingly, the Board of Directors unanimously recommends a vote
AGAINST this proposal.
VOTE REQUIRED FOR ELECTION OF DIRECTORS AND
ADOPTION OF COMPANY AND STOCKHOLDER PROPOSALS
Under the Company's Bylaws, the holders of a majority of the issued and
outstanding shares of the common stock, present in person or represented by
proxy at the Annual Meeting, will constitute the quorum for all purposes
unless otherwise provided by law. Where a quorum is present, the affirmative
vote of a majority of the stock represented at the meeting is required for
the election of the directors, and the adoption of Proposals 1 and 2. For
purposes of determining whether the directors have been elected or a
proposal has received a majority vote, abstentions are the equivalent of a
negative vote.
OTHER MATTERS
The Company knows of no matters to be presented at the meeting other
than those included in the Notice preceding this Proxy Statement. If other
matters should come before the meeting which require a stockholder vote, it
is intended that the proxy holders will use their own discretion in voting
on such other matters.
Information included in this Proxy Statement is as of the date of
preparation, approximately February 28, 1994, unless otherwise stated.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1995 Annual
Meeting must be received at the Company's executive offices in Bartlesville,
Oklahoma, no later than November 30, 1994, for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting.
By Order of the Board of Directors,
Dale J. Billam
- -----------------------
Dale J. Billam
Secretary
Bartlesville, Oklahoma 74004
March 31, 1994
Please sign, date and promptly mail the enclosed proxy in the accompanying
postage-paid envelope. If you wish to vote in accordance with the Company's
recommendations, it is not necessary to specify your choice but your proxy
must be signed and returned. In any event, your prompt response is requested
and your cooperation will be appreciated.
Stockholders are encouraged to keep their account address up to date and
promptly deposit their dividend checks to avoid surrender of these funds
and related stock to their respective states under unclaimed property laws.
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Printed on recycled paper
<PAGE>
APPENDIX
Photographs of Director candidates appear on pages 7 through 9.
<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PHILLIPS PETROLEUM COMPANY
Annual Meeting May 9, 1994
The undersigned hereby appoints W. ALLEN, L. EAGLEBURGER and E. KENNA as
proxy holders with power of substitution, or, if all do not act on a matter,
those who do act, to vote all stock which the undersigned could vote at the
Company's annual stockholders' meeting to be held at the Adams Building,
4th Street and Keeler Avenue, Bartlesville, Oklahoma, on May 9, 1994, at
10 a.m., and at any adjournment thereof, in the manner stated herein as to
the following matters and in their discretion on any other matters that come
before the meeting, all as described in the Notice and Proxy Statement.
This Proxy is Continued on the Reverse Side
Please Sign on the Reverse Side and Return Promptly
<PAGE>
This Proxy will be voted or not voted as you direct below. In the absence
of such direction, it will be voted FOR Directors, and FOR Proposal 1 and
AGAINST Proposal 2.
--- Please mark
| X | your votes
--- as this
Company recommends a vote FOR: ELECTION OF DIRECTORS: Nominees: W. Allen,
N. Augustine, G. Beitzel, C. Bowerman, R. Chappell, Jr., L. Eagleburger,
J. Edwards, L. Horner, E. Kenna, J. Mulva, D. Tippeconnic, R. Tobias,
V. Tschinkel, and J. Whitmire.
__ VOTE FOR __ VOTE WITHHELD
|__| all nominees |__| from all nominees
listed above* listed above
*To withhold authority to vote for any nominee write the nominee's name on
the space below.
----------------------------------------
FOR AGAINST ABSTAIN
Proposal 1 to approve the __ __ __
designation of the independent |__| |__| |__|
auditors, Ernst & Young.
__ __ __
Proposal 2 to sign and implement |__| |__| |__|
the CERES Principles.
__
I PLAN TO ATTEND THE ANNUAL MEETING |__|
Please mark, date, sign and return this proxy card promptly. To vote in
accordance with the Company's recommendations no boxes need be checked.
Your signature(s) on this proxy form should be exactly the same as the
name(s) imprinted hereon. Persons signing as executors, administrators,
trustees, or in similar capacities, should so indicate.
Dated:______________________, 1994
__________________________________
__________________________________
Signature(s) of Stockholder(s)
