SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant/X/
Filed by a Party other than the Registrant/ /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
CROMPTON CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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amount on which the filing fee is calculated and state how
it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
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(1) Amount Previously Paid:
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[LOGO]
CROMPTON CORPORATION
199 Benson Road
Middlebury, CT 06749
VINCENT A. CALARCO
Chairman, President and
Chief Executive Officer
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Crompton Corporation to be held at 11:15 a.m. on Tuesday, April 29, 2003, at the
Sheraton Stamford Hotel, 2701 Summer Street, Stamford, Connecticut.
Information about the business of the meeting and the nominees for election
as a member of the Board of Directors is set forth in the formal meeting notice
and Proxy Statement on the following pages. This year you are asked to elect
three directors, to ratify the Board of Directors' selection of an independent
auditor for the fiscal year ending December 31, 2003, and to vote on a
stockholder proposal.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend the session in person, we hope that you will vote on the
matters to be considered and sign, date and return your proxy in the enclosed
envelope as promptly as possible. Alternatively, you may choose to vote by
telephone or on the internet in accordance with the instructions found on your
proxy card.
The Company's fiscal year 2002 Annual Report is being mailed to stockholders
herewith, but it is not part of the proxy solicitation material.
Respectfully yours,
/s/ VINCENT A. CALARCO
Vincent A. Calarco
Chairman, President &
Chief Executive Officer
March 31, 2003
[LOGO]
CROMPTON CORPORATION
199 BENSON ROAD, MIDDLEBURY, CT 06749
NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, APRIL 29, 2003
11:15 A.M. EASTERN TIME
SHERATON STAMFORD HOTEL
2701 SUMMER STREET
STAMFORD, CONNECTICUT
AGENDA
1. To elect three directors for a term of three years expiring at the 2006
Annual Meeting of Stockholders and until their respective successors are
elected and qualified;
2. To ratify the appointment of KPMG LLP as the Company's independent
auditors for 2003;
3. To consider a stockholder proposal relating to amending the Company's
by-laws, if properly presented for action at the meeting; and
4. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on February 28, 2003, are
entitled to notice of the annual meeting and may vote at the meeting and any
adjournment thereof.
We urge you to date, sign and return the enclosed proxy promptly whether or
not you plan to attend the annual meeting. You may also vote by telephone or on
the internet in accordance with the instructions found on your proxy card. If
you attend the meeting, you may still vote your shares in person, if you wish.
By Order of the Board of Directors,
/s/ Barry J. Shainman
Barry J. Shainman
Secretary
March 31, 2003
TABLE OF CONTENTS
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Proxy Statement............................................. 1
About the Meeting........................................... 1
Election of Three Directors................................. 4
Board of Directors.......................................... 5
Corporate Governance........................................ 8
Principal Holders of Voting Securities...................... 11
Security Ownership of Management............................ 12
Report of the Organization, Compensation and Governance
Committee................................................. 13
Report of the Audit Committee............................... 15
Performance Graph........................................... 17
Officers' and Directors' Compensation....................... 18
Approval of Selection of Independent Auditor................ 23
Stockholder Proposal........................................ 24
Section 16(a) Beneficial Ownership Reporting Compliance..... 26
Other Matters............................................... 26
PROXY STATEMENT
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This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of the Company (the "Board" or the "Board of
Directors") for use at the annual meeting of the stockholders of the Company to
be held on April 29, 2003, at the Sheraton Stamford Hotel, 2701 Summer Street,
Stamford, Connecticut, and at any adjournment thereof.
The Company's annual report for the fiscal year ended December 31, 2002,
accompanies this Proxy Statement. It is not proxy soliciting material, nor is it
incorporated herein by reference.
This Proxy Statement and the enclosed form of proxy are first being sent to
stockholders on or about March 31, 2003.
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ABOUT THE MEETING
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Q: WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
A: At the Annual Meeting, the Company's stockholders will be
asked to vote on the matters listed in the accompanying
notice of annual meeting, namely:
* the election of Messrs. Vincent A. Calarco and Roger L.
Headrick and Dr. Patricia K. Woolf as directors;
* the ratification of KPMG LLP as the Company's independent
auditors for 2003; and
* a stockholder proposal requesting that the Board of
Directors amend the Company's by-laws, as set forth in
the Proxy Statement.
Stockholders will also transact other business that may
properly come before the meeting. The Company's management
will be present at the meeting to report on the Company's
performance during 2002, and will answer stockholder
questions.
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Q: WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on the record date,
February 28, 2003, are entitled to vote their shares of the
Company's common stock. Each outstanding share of common
stock is entitled to one vote. At the close of business on
the record date, there were 114,281,040 shares of the
Company's common stock outstanding. The Company has no other
voting securities issued and outstanding.
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1
Q: HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A: A quorum must be present at the meeting for business to be
conducted. A quorum is reached when there are present at the
meeting, in person or by proxy, the holders of a majority of
the shares of the Company's common stock outstanding on the
record date. Abstentions and withhold-authority votes will
be included for purposes of determining a quorum and for
purposes of calculating the vote, but will not be considered
to have been voted in favor of the item voted upon. Broker
non-votes will be included for purposes of determining a
quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote so they will
not affect the outcome of any proposal.
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Q: WHAT IF A QUORUM IS NOT PRESENT AT THE MEETING?
A: If a quorum is not present at the time of the meeting, the
stockholders who are represented may adjourn the meeting
until a quorum is present. The time and place of the
adjourned meeting will be announced at the time the
adjournment is taken, and no other notice will be given.
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Q: HOW DO I VOTE?
A: You may vote in any of three ways:
* YOU MAY VOTE BY MAIL if you complete, sign and date the
accompanying proxy card and return it in the prepaid
envelope. Your shares will be voted confidentially and in
accordance with your instructions;
* YOU MAY VOTE BY TELEPHONE OR INTERNET in accordance with
the instructions found on your proxy card; and
* YOU MAY VOTE IN PERSON if you are a registered
stockholder and attend the meeting and deliver your
completed proxy card in person. At the meeting, the
Company will also pass out written ballots to registered
stockholders who wish to vote in person at the meeting.
Beneficial owners of shares held in "street name" who
wish to vote at the meeting will need to obtain a proxy
form from the institution that holds their shares.
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Q: HOW MANY VOTES DOES IT TAKE TO APPROVE THE ITEMS TO BE VOTED
UPON?
A: Directors are elected by a plurality. This means that
assuming a quorum is present at the meeting, the directors
will be elected if each receives more affirmative votes cast
for director than any other person. The affirmative vote of
a majority of the shares having voting power present in
person or represented by proxy at the meeting is needed to
ratify the selection of KPMG LLP as the Company's
independent auditors for 2003, and to approve the
stockholder proposal.
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2
Q: CAN I REVOKE MY PROXY BEFORE IT IS EXERCISED?
A: Yes, you may revoke your proxy and change your vote at any
time before the polls close at the meeting:
* by signing another proxy with a later date;
* by voting by telephone or on the internet after the date
and time of your last telephone or internet vote; or
* if you are a registered stockholder, by giving written
notice of such revocation to the Secretary of the Company
prior to or at the meeting or by voting in person at the
meeting.
Attendance at the meeting will not automatically revoke a
previously granted proxy.
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Q: WHO WILL COUNT THE VOTES?
A: The Company's transfer agent, Mellon Investor Services LLC,
will tabulate and certify the votes and act as inspector of
election at the meeting.
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Q: HOW ARE SHARES IN THE CROMPTON EMPLOYEE SAVINGS PLAN,
CROMPTON EMPLOYEE STOCK OWNERSHIP PLAN, CROMPTON EMPLOYEE
STOCK PURCHASE PLAN AND CROMPTON DIVIDEND REINVESTMENT PLAN
VOTED?
A: The shares of Company common stock held by the trustee under
the Crompton Employee Savings Plan and the Crompton Employee
Stock Ownership Plan and in each employee's account under
the Crompton Employee Stock Purchase Plan and Crompton
Dividend Reinvestment Plan will be voted according to each
employee's voting instructions. If no instructions are
received, the shares in the Crompton Employee Savings Plan,
Crompton Employee Stock Ownership Plan and Crompton Employee
Stock Purchase Plan will not be voted while an individual's
shares in the Crompton Dividend Reinvestment Plan will be
voted in the same manner that such person's shares held of
record are voted.
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Q: WHO IS SOLICITING MY VOTE AND WHO PAYS THE COST?
A: The Company has retained Mellon Investor Services LLC to
assist in the distribution of proxy materials and the
solicitation of votes for a fee of $9,500, excluding
out-of-pocket expenses. The Company will pay the entire cost
of the solicitation and will reimburse banks, brokerage
firms, custodians, nominees and fiduciaries for their
reasonable expenses in sending proxy materials to the
beneficial owners of the Company stock. Proxies may be
solicited personally, by mail, by telephone, by facsimile or
by telegraph, by the directors, officers or other employees
of the Company, without remuneration other than regular
compensation.
3
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Q: WHEN ARE THE YEAR 2004 STOCKHOLDER PROPOSALS DUE?
A: If a stockholder wants a proposal to be included in the
Company's proxy statement for the 2004 Annual Meeting of
Stockholders, the proposal, in writing and addressed to the
Company's Secretary, must be received by the Company no
later than December 1, 2003. If a stockholder wishes to
recommend nominees to the Board of Directors, or to bring
other business before an annual meeting, the proposal, in
writing and addressed to the Company's Secretary, must be
received by the Company no later than January 30, 2004, or
not later than ten days after notice of the date of the
annual meeting is given to stockholders, whichever date is
earlier.
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Q: WHAT OTHER INFORMATION ABOUT THE COMPANY IS AVAILABLE?
A: Interested parties may request a copy of the Company's
Annual Report on Form 10-K and our quarterly financial news
releases by fax or through the mail. This and other
important information about the Company is also available on
our web site at www.cromptoncorp.com.
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ELECTION OF THREE DIRECTORS
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The by-laws of the Company provide for a board of directors divided into
three classes. Directors of one class are elected each year for a term of three
years. There are currently seven directors in office, three of whom are standing
for election as Class III directors whose term will expire at the 2006 annual
meeting, three of whom are Class I directors whose term will expire at the 2004
annual meeting, and one is a Class II director whose term will expire at the
2005 annual meeting.
The Board has nominated the three persons named below to serve as Class III
directors whose term will expire at the 2006 annual meeting and until their
respective successors are elected and have qualified. The Class III nominees are
members of the present Board who have served as directors since the dates set
forth after their names. The three nominees and all of the incumbent directors
have previously been elected by the stockholders. If any of the nominees are not
available, an event not anticipated, the proxies will be voted for the other
nominees and for a substitute if any is designated by the Board of Directors.
4
BOARD OF DIRECTORS
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NOMINEES FOR DIRECTOR
CLASS III (TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2006)
VINCENT A. CALARCO, 60, is Chairman of the Board,
[PHOTO] President and Chief Executive Officer of the Company
and served a predecessor corporation in those same
capacities. Mr. Calarco has been a director of the
Company, or a predecessor company, since 1985. He also
serves as a director of Consolidated Edison, Inc. and
Newmont Mining Corporation.
ROGER L. HEADRICK, 66, is the Managing General Partner
[PHOTO] of HMCH Ventures, a private investment company,
Wayzata, MN, the President and Chief Executive Officer
of ProtaTek International, Inc., a biotechnical animal
vaccine company, St. Paul, MN and Chairman of New
Biotics, Inc., a cancer research and development
company, San Diego, CA. Mr. Headrick is the former
President and Chief Executive Officer of the Minnesota
Vikings Football Club, Inc., Eden Prairie, MN. Mr.
Headrick has been a director of the Company, or a
predecessor company, since 1988. He also serves as a
director of Caremark Rx, Inc.
PATRICIA K. WOOLF, PH.D., 68, is a private investor,
[PHOTO] and Lecturer in the Department of Molecular Biology,
Princeton University, Princeton, NJ. Dr. Woolf has
been a director of the Company, or a predecessor
company, since 1994. She also serves as a director of
the American Balanced Fund, Fundamental Investors, the
Growth Fund of America, Inc., the Income Fund of
America, Inc., Smallcap World Fund, Inc., First Energy
Corporation and the National Life Holding Co. Dr.
Woolf also serves as a trustee of the New Economy
Fund.
5
INCUMBENT DIRECTORS
CLASS I (TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2004)
LEO I. HIGDON, JR., 56, is the President of the
[PHOTO] College of Charleston, Charleston, SC. He is the
former President of Babson College, Babson Park, MA,
and former Dean of the Darden Graduate School of
Business Administration of the University of Virginia,
Charlottesville, VA. Mr. Higdon is also a former
Managing Director and member of the Executive
Committee of Salomon Brothers, an investment banking
firm, New York, NY. Mr. Higdon has been a director of
the Company, or a predecessor company, since 1993. He
also serves as a director of Newmont Mining
Corporation and Eaton Vance Corp.
C. A. (LANCE) PICCOLO, 62, is President and Chief
[PHOTO] Executive Officer of HealthPic Consultants, Inc., a
strategic health-care consulting firm, Lincolnshire,
IL. Prior to the merger of Caremark International Inc.
and MedPartners/Mullikin, Inc., he was the Chairman
and Chief Executive Officer of Caremark International
Inc., a provider of alternate-site health-care
services, North Brook, IL. He is former Executive Vice
President of Baxter International Inc., a supplier of
health-care products, Deerfield, IL. Mr. Piccolo has
been a director of the Company, or a predecessor
company, since 1988. He also serves as a director and
Vice Chairman of the Board of Caremark Rx, Inc. and as
a director of Novamed Eyecare, Inc.
BRUCE F. WESSON, 60, is President of Galen Associates,
[PHOTO] a health care venture firm, New York, NY and a General
Partner of Galen Partners, L.P., New York, NY. Prior
to January 1991, he was Senior Vice President and
Managing Director of Smith Barney, Harris Upham & Co.
Incorporated, an investment banking firm, New York,
NY. Mr. Wesson has been a director of the Company, or
a predecessor company, since 1980. He also serves as
Chairman of the Board of QMED and as a director of
Halsey Drug Co., Inc. and Encore Medical Corp.
6
CLASS III (TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2006)
ROBERT A. FOX, 65, is the Managing General Partner of
[PHOTO] Fox Investments L.P., an investment management
company, Palo Alto, CA, and Chairman of AgriCapital
Advisors, an advisory board to AgriCapital
Corporation, a New York, NY based firm providing
banking, financing and consulting services to the
agriculture industry. He is former President and Chief
Executive Officer of Foster Farms, a privately held,
integrated poultry company, Livingston, CA. Mr. Fox
has been a director of the Company, or a predecessor
company, since 1990. He also serves as a director of
the American Balanced Fund, Fundamental Investors, the
Growth Fund of America, Inc., the Income Fund of
America, Inc., the New Perspective Fund and the New
World Fund, Inc. He also serves as a trustee of the
Euro-Pacific Growth Fund.
The affirmative vote of the holders of a plurality of the shares that are
present in person or represented by proxy at the meeting is required to elect
directors.
The Board of Directors recommends a vote FOR the election as directors of
the persons named herein, and proxies will be so voted unless stockholders
specify to the contrary in their proxies or specifically withhold authority to
vote for any individual nominee.
7
CORPORATE GOVERNANCE
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ROLE OF THE BOARD OF DIRECTORS IN CORPORATE GOVERNANCE
The Board of Directors of the Company is elected by the stockholders with
the responsibility to oversee and direct the management of the Company so as to
enhance stockholder value. The Board works with management to select and approve
a corporate philosophy and mission and in connection therewith the Board
reviews, approves and monitors management's strategic and business plans and the
Company's financial objectives, plans and actions. The Board approves the
Company's material transactions, significant capital allocations and
expenditures and measures the performance of management in relation to the
performance of peer companies and the speciality chemical industry as a whole.
The Board also periodically reviews the performance of the Chief Executive
Officer.
The Board adopts policies of corporate conduct including compliance with
applicable laws and regulations, auditing and accounting principles and
financial controls, and the Company's own governing documents. The Board
assesses its own effectiveness in fulfilling these and other Board
responsibilities and performs such other functions as are prescribed by law, or
assigned to the Board in the Company's governing documents.
ROLE OF THE ORGANIZATION, COMPENSATION AND GOVERNANCE COMMITTEE IN CORPORATE
GOVERNANCE
The Organization, Compensation and Governance Committee makes
recommendations to the Board with respect to the organization, size and
composition of the Board, including the assignment of directors to committees
and committee chairmanships. The Committee identifies suitable candidates for
Board membership, reviews their qualifications and proposes a slate of directors
for election by the stockholders at each annual meeting.
The Organization, Compensation and Governance Committee makes an annual
assessment of the performance of the Board and reviews its corporate governance
principles, recommends its compensation and advises the Board with respect to
the selection and performance of the Chief Executive Officer. The Committee
assists the Board in providing for the orderly succession in the top management
of the Company.
BOARD MEETINGS HELD
The Board of Directors held five regular meetings and two special meetings
during 2002. All of the directors attended at least 75% of the aggregate number
of meetings of the Board and the committees on which they served in 2002.
8
BOARD COMMITTEES
The Board has established four committees to assist it in the discharge of
its responsibilities. Committee membership is limited to directors who are not
employees of the Company.
COMMITTEE MEMBERSHIP
ORGANIZATION,
FINANCE AND COMPENSATION AND SAFETY, HEALTH
NAME AUDIT PENSION GOVERNANCE AND ENVIRONMENT
--------------------- -- -- -- --
Robert A. Fox x x
Roger L. Headrick x *
Leo I. Higdon, Jr. * x
C.A. (Lance) Piccolo x x
Bruce F. Wesson * x
Patricia K. Woolf x *
No. of Mtgs. in 2002 7 2 4 2
* Chairman of the Committee
The Audit Committee meets periodically with the Company's management to
review the Company's major financial risk exposures and with the independent
auditor to review the scope of the annual audit and the policies relating to
internal auditing procedures and controls, provides general oversight with
respect to the adequacy and effectiveness of the Company's internal
administrative and business process controls and to the accounting principles
employed in the Company's financial reporting, and reviews the Company's
quarterly reports on Form 10-Q and annual report on Form 10-K prior to their
filing. The Audit Committee also selects the auditor after discussion with the
Board, evaluates the auditor's qualifications, independence and performance, has
responsibility for approving all audit and non-audit services provided by the
independent auditor, considers the possible effect of providing such non-audit
services on the auditor's independence, and reviews the range of fees of the
auditor for both audit and non-audit services. The Audit Committee also reviews
earnings press releases and financial information and earnings guidance provided
to analysts and rating agencies, establishes procedures for handling complaints
about accounting and auditing matters, and periodically reviews the Company's
Code of Business Conduct and Ethics.
The Organization, Compensation and Governance Committee is responsible for
the administration of the Company's compensation plans, including approval of
the level of compensation for senior executive officers named in the proxy
statement and adoption of bonus and deferred compensation plans and arrangements
for executive officers. The Committee reviews and approves the corporate goals
and objectives relevant to the Chief Executive Officer's compensation and sets
his compensation
9
based on this evaluation. The Committee also makes recommendations with respect
to the organization, size and composition of the Board, identifies suitable
candidates for Board membership and reviews their qualifications, proposes a
slate of directors for election by the stockholders at each annual meeting, and
assists the Board in providing for orderly succession in the top management of
the Company. The Committee makes an annual assessment of the performance of the
Board and reviews its corporate governance principles.
The Finance and Pension Committee has the authority, which it may exercise
when the Board is not in session, to approve certain debt financings and reviews
and makes recommendations to the Board regarding the issuance or reacquisition
of securities, major debt financings, capital expenditures, acquisitions,
divestitures and other expenditures, dividend policy, management of pension
assets, and risk management policy and strategy.
The Safety, Health and Environment Committee provides guidance to and
oversight of management with respect to safety, health and environmental matters
including the review of the Company's safety, health and environmental
performance, policies, standards, procedures, management systems and strategic
plans. The Committee also recommends actions and policies that will enable the
Company to achieve a high level of safety, health and environmental performance
compared with its peers in the chemical industry and to maintain good relations
with the Company's neighbors.
10
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PRINCIPAL HOLDERS OF VOTING SECURITIES
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The following persons were known to the Board of Directors to be the
beneficial owner of more than 5% of the Company's outstanding common stock as of
December 31, 2002:
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS
------------------------------------------ ----------------- ---------------
Lord, Abbett & Co. 11,125,173(1) 9.73%
90 Hudson Street
Jersey City, NJ 07302
Capital Research and Management Company 9,323,600(2) 8.16%
333 South Hope Street
Los Angeles, CA 90071
Barrow, Hanley, Mewhinney & Strauss, Inc. 8,431,424(3) 7.38%
3232 McKinney Avenue
Dallas, TX 75204
FMR Corp. 6,529,898(4) 5.71%
82 Devonshire Street
Boston, MA 02109
(1) Lord, Abbett & Co. has advised that they have sole voting power and sole
dispositive power for 11,125,173 shares.
(2) Capital Research and Management Company has advised that they have sole
dispositive power for 9,323,600 shares. Capital Research and Management
Company acts as investment advisor for Washington Mutual Investors
Fund, Inc. with respect to 5,800,001 of the shares listed above. Capital
Research and Management Company disclaims beneficial ownership of all shares
pursuant to Rule 13d-4.
(3) Barrow, Hanley, Mewhinney & Strauss, Inc. has advised that they have sole
voting power for 1,139,719 shares, shared voting power for 7,291,705 shares
and sole dispositive power for 8,431,424 shares. Barrow, Hanley,
Mewhinney & Strauss, Inc. acts as investment advisor for Vanguard Windsor
Funds Windsor II Fund with respect to 6,238,569 of the shares listed above.
(4) FMR Corp. has advised that they have sole voting power for 447 shares and
sole dispositive power for 6,529,898 shares. Fidelity Management and
Research Company, a wholly owned subsidiary of FMR Corp., acts as investment
advisor to various investment companies with respect to 6,529,451 of the
shares listed above. .
11
SECURITY OWNERSHIP OF
MANAGEMENT
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The directors and the executive officers of the Company have advised that
they were directly or indirectly the beneficial owners of outstanding Common
Stock of the Company at the close of business on February 28, 2003, as set forth
below, in each case representing less than one percent of such shares
outstanding except as otherwise indicated. The table also shows the number of
shares credited to the individual's account under the Directors Deferred
Compensation Plan ("Deferred Compensation Plan"), Directors Restricted Stock
Plan ("Restricted Stock Plan"), the Dividend Reinvestment Plan ("DRIP") and
stock options exercisable within 60 days of February 28, 2003 ("Exercisable
Options").
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
----------------------------
DEFERRED
EXERCISABLE COMPENSATION RESTRICTED
NAME COMMON STOCK OPTIONS PLAN DRIP STOCK PLAN
----------------------- --------- --------- ------- ------ ------
Vincent A. Calarco 1,302,972(2) 2,588,000 -- 45,126 --
Robert A. Fox 48,562 69,585 22,134 1,101 13,952
Roger L. Headrick 44,000 69,585 24,641 2,218 15,677
Leo I. Higdon, Jr. 7,000 68,743 24,276 253 2,727
C.A. (Lance) Piccolo 2,400 69,585 19,519 1,977 14,139
Bruce F. Wesson 3,235 44,419 32,617 -- --
Patricia K. Woolf 4,875 67,810 19,482 866 6,288
Alfred F. Ingulli 172,849(3) 588,967 -- -- --
Peter Barna 244,670(4) 514,105 -- -- --
William A. Stephenson 128,616(5) 449,618 -- -- --
John T. Ferguson II 123,600(6) 517,500 -- -- --
Directors and Executive
Officers as a Group
(21 persons)......... 2,869,071(7) 7,529,676 142,669 56,283 52,783
(1) Except as noted below, the executive officers and directors have both sole
voting and sole investment power over the shares reflected in this table.
(2) Includes 461,911 shares held under the 1988 Long Term Incentive Plan (the
"1988 Plan") and the Crompton Corporation Employee Stock Ownership Plan (the
"ESOP"), as to which he has voting but, except with respect to 50,671 shares
in the ESOP, no investment power; 12,406 shares acquired through the Benefit
Equalization Plan Trust (the "BEP"); 58,872 shares owned by his wife and
33,833 shares held in trust for their children, as to which he disclaims
beneficial ownership. Mr. Calarco is deemed to be the beneficial owner of
3.4% of the outstanding shares of the Company's Common Stock.
(3) Includes 29,750 shares held under the 1988 Plan and the ESOP as to which he
has voting but, except with respect to 2,570 shares in the ESOP, no
investment power.
12
(4) Includes 141,937 shares held under the 1988 Plan and the ESOP as to which he
has voting but, except with respect to 58,449 shares in the ESOP, no
investment power and 5,183 shares acquired through the BEP.
(5) Includes 78,478 shares held under the 1988 Plan and the ESOP as to which he
has voting but, except with respect to 2,620 shares in the ESOP, no
investment power.
(6) Includes 8,621 shares held under the 1988 Plan as to which he has voting but
no investment power and 24,389 shares acquired through the BEP.
(7) Includes 900,454 shares held under the 1988 Plan and the ESOP, as to which
they have voting but, except with respect to 125,823 shares in the ESOP, no
investment power; 41,978 shares held through the BEP; 13,768 shares held
through the Crompton Corporation Employee Stock Purchase Plan; and 95,306
shares owned by wives and in trusts for children, as to which beneficial
ownership is disclaimed. Directors and Executive Officers as a group are
deemed to be the beneficial owner of 8.7% of the outstanding shares of the
Company's Common Stock.
--------------------------------------------------------------------------------
REPORT OF THE ORGANIZATION,
COMPENSATION AND GOVERNANCE COMMITTEE
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION PHILOSOPHY
The compensation program for the Company's executive officers is
administered in accordance with a pay for performance philosophy to link
executive compensation with the values, objectives, business strategy,
management initiatives and financial performance of the Company. In addition, a
significant portion of each executive officer's compensation is contingent upon
the creation of shareholder value.
The Organization, Compensation and Governance Committee of the Board (the
"Committee") believes that stock ownership by management and restricted stock-
based performance compensation plans serve to align the interests of management
and other stockholders in the enhancement of shareholder value. To that end,
executive officers are encouraged to retain the shares they earn through the
compensation programs and are given the opportunity to defer receipt of the
shares of common stock.
The compensation of the Company's executive officers comprises cash and
equity components and is designed to be competitive and highly leveraged based
upon corporate financial performance and shareholder returns. The compensation
program provides an opportunity to earn compensation in the third quartile
within the chemical industry as well as within a broader group of companies of
comparable size and complexity. Actual compensation levels may be greater or
less than competitive levels in surveyed companies based upon annual and
long-term performance of the Company as well as individual performance. Several
performance measures are used for compensation purposes for the Company's
executive officers and heads of the businesses. Primary measures used in the
annual and long-term incentive programs include earnings growth, debt reduction
and market cap growth, with executives also linked to shareholder return through
stock options and restricted performance share awards.
13
BASE SALARIES
Base salary ranges at the median to 75th percentile levels for executive
officers are determined after reviewing data from several national surveys on
salaries for executives at companies within the chemical industry as well as
within a broader group of companies of similar size and complexity.
MANAGEMENT INCENTIVE PLAN
Annual incentives may be earned under the Company's Management Incentive
Plan. Target and maximum incentives (currently at 175% of target) are set by
formula to offer executive officers an opportunity to earn annual compensation
at the 75th percentile levels if high levels of performance are met.
STOCK OPTIONS AND PERFORMANCE SHARES
Long-term incentives at the Company consist of annual grants of stock
options and periodic grants of restricted performance shares that can be earned
over a multi-year period based on goals selected by the Committee out of those
approved under the 1998 Long-Term Incentive Plan. Awards are divided evenly in
value between stock options and restricted performance shares and are set at
levels designed to offer opportunities at the 75thpercentile.
STOCK OWNERSHIP
The Company has adopted stock ownership goals for its executive officers,
which range from five times salary for the CEO to three or two times salary for
the remaining officers. Total stock ownership for this group as of February 28,
2003, was 2,808,868 shares.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee's policy on the tax deductibility of compensation is to
maximize deductibility to the extent possible without abdicating all of its
discretionary power. To this end, the Committee has submitted complying plans to
stockholders; however, the Committee has occasionally taken actions that result
in non-deductible compensation and may do so again in the future when it
determines that such actions are in the Company's best interests.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee reviews and approves the corporate goals and objectives
relevant to the Chief Executive Officer's compensation and annually evaluates
the Chief Executive Officer's performance in light of those goals and
objectives. In 2002, the base salary, incentive compensation, stock option and
restricted stock awards for the Chief Executive Officer were determined by the
Board of Directors based on the recommendations of the Committee using the
principles outlined above. The Committee increased Mr. Calarco's base salary
from $865,000 to $890,000 during fiscal year 2002 and granted him a stock option
award of 225,000 shares.
14
ORGANIZATION, COMPENSATION AND GOVERNANCE COMMITTEE
Decisions on compensation of the Company's executive officers are made by
the Organization, Compensation and Governance Committee, a committee of the
Board of Directors composed of the persons listed below, all of whom are
non-employee directors. The Committee has retained an independent executive
compensation consultant who has access to independent compensation data to
evaluate the Company's executive compensation program.
The Organization, Compensation and Governance Committee also plays a
significant role in the corporate governance of the Company. The Committee's
role in corporate governance is described on page 8 above.
The Organization, Compensation and Governance Committee:
Roger L. Headrick, Chairman
Leo I. Higdon, Jr.
C. A. Piccolo
--------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
--------------------------------------------------------------------------------
The Audit Committee has a written charter which has been adopted by the
Board of Directors. The Company's Audit Committee consists of four independent
members of the Board as defined in Sections 303.01(B)(2)(a) and (3) of the New
York Stock Exchange's listing standards.
The Audit Committee has reviewed and discussed the audited financial
statements for the fiscal year ended December 31, 2002, with management. The
Audit Committee has also discussed with the Company's independent auditors, KPMG
LLP, the matters required to be discussed by SAS 61. In addition, the Audit
Committee has received the written disclosure and the letter from KPMG LLP
required by Independence Standards Board Standard No. 1 and has discussed with
KPMG LLP such auditing firm's independence. Based upon these reviews and
discussions, the Audit Committee recommended that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the last
fiscal year for filing such report with the U.S. Securities and Exchange
Commission.
The Audit Committee:
Bruce F. Wesson, Chairman
Robert A. Fox
C. A. Piccolo
Patricia K. Woolf, Ph.D.
15
AUDIT FEES
The aggregate fees billed for professional services rendered by KPMG LLP for
the audit of the Company's annual financial statements for the most recent
fiscal year and the review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q for the fiscal year were $2.4 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed for professional services rendered by KPMG LLP for
financial information systems design and implementation for the most recent
fiscal year were less than $100,000.
ALL OTHER FEES
The aggregate fees billed for professional services rendered by KPMG LLP
other than audit fees and financial information systems design and
implementation fees for the most recent fiscal year were $3.3 million, of which
$1.5 million were audit-related services and $1.8 million were tax-related
services.
The Audit Committee has considered whether the providing of financial
information systems design and implementation and all other services by KPMG LLP
to the Company is compatible with maintaining the independence of KPMG LLP and
concluded that the independence of KPMG LLP is not compromised by the providing
of such services.
16
PERFORMANCE GRAPH
----------------------------------------------------------------------------
The following graph compares the cumulative total return on the Common Stock
of the Company for the last five fiscal years with the returns on the
Standard & Poor's 500 Stock Index and the Chemicals (Specialty)-500 Index,
assuming the investment of $100 in the Company's Common Stock, the S&P 500 Index
and the Chemicals (Specialty)-500 Index on December 31, 1997, and the
reinvestment of all dividends.
COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN AMONG CROMPTON CORP.,
S&P 500 AND S&P 500 SPECIALTY CHEMICALS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
CROMPTON CORPORATION $100.00 $78.90 $50.90 $40.80 $35.70 $24.10
S&P 500 $100.00 $128.60 $155.60 $141.50 $124.70 $97.10
CHEMICALS (SPECIALTY)-500 $100.00 $85.20 $94.30 $83.90 $78.60 $88.30
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------ ------ ------ ------ ------ -----
CROMPTON CORP.................................. $100.0 $ 78.9 $ 50.9 $ 40.8 $ 35.7 $24.1
S&P 500........................................ $100.0 $128.6 $155.6 $141.5 $124.7 $97.1
S&P 500 SPECIALTY CHEMICALS.................... $100.0 $ 85.2 $ 94.3 $ 83.9 $ 78.6 $88.3
Note: Assumes an initial investment of $100 on December 31, 1997. Total return
includes reinvestment of dividends.
The Chemicals (Specialty)-500 Index companies are as follows: Ecolab Inc., Great
Lakes Chemical Corporation, International Flavors & Fragrances Inc., Rohm & Haas
Company and Sigma-Aldrich Corporation. In 2002, Rohm & Haas Company replaced
Hercules, Inc. in the Index and the graph represents the results of Hercules,
Inc. for
17
the four year period ended December 31, 2001, and the results of Rohm & Haas
Company for the one year period ended December 31, 2002.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 (the "Exchange Act") that might incorporate future filings, including
this Proxy Statement, in whole or in part, the foregoing Report of the
Organization, Compensation and Governance Committee, the Report of the Audit
Committee and the Performance Graph shall not be deemed incorporated by
reference into any such filings.
--------------------------------------------------------------------------------
OFFICERS' AND DIRECTORS' COMPENSATION
--------------------------------------------------------------------------------
The following tables set forth information concerning compensation paid or
to be paid to the chief executive officer of the Company and each of the four
most highly compensated executive officers of the Company other than the chief
executive officer, for services to the Company in all capacities during 2000,
2001 and 2002, except as noted, and options granted to and exercised by the same
individuals during the period indicated.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- --------------------
RESTRICTED
OTHER STOCK SECURITIES
NAME AND SALARY BONUS COMPENSATION AWARDS UNDERLYING
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2)(3) OPTIONS(#)
------------------------------ ---- ------- ------- ------- -------- -------
Vincent A. Calarco 2002 887,917 -- 116,642 -- 225,000
Chairman of the Board, 2001 861,667 -- 116,959 -- 350,000
President and CEO 2000 823,750 500,000 176,502 -- 375,000
Alfred F. Ingulli 2002 387,500 -- 45,974 -- 45,000
Executive Vice President, 2001 371,667 170,000 70,304 -- 60,000
Crop Protection 2000 325,000 186,000 47,635 -- 75,000
Peter Barna 2002 352,500 -- 51,613 -- 50,000
Senior Vice President and 2001 337,500 -- 57,583 -- 60,000
Chief Financial Officer 2000 318,333 125,000 66,927 -- 75,000
William A. Stephenson 2002 346,667 -- 42,494 -- 50,000
Executive Vice President, 2001 316,667 115,000 58,012 -- 60,000
Plastics & Petroleum
Additives 2000 286,667 235,000 42,022 -- 75,000
John T. Ferguson II 2002 330,027 -- 44,880 -- 50,000
Senior Vice President 2001 314,997 -- 45,952 -- 60,000
and General Counsel 2000 299,995 110,000 57,447 -- 75,000
18
(1) Includes the following amounts paid during 2002 under the Company's
Supplemental Medical and Dental Reimbursement Plans (the "SMD"), The
Uniroyal Age Supplement (the "AS"), the Uniroyal Chemical split dollar life
insurance plan (the "SDP"), the Uniroyal Excess Cap Program (the "ECAP") or
as employer contributions under the Company's Employee Stock Ownership Plan
(the "ESOP") and Crompton Employee Savings Plan (the "CESP") (with that
portion of the ESOP and CESP contributions in excess of the Section 401(k)
and Section 415 limitations having been paid into the Company's Benefit
Equalization Plan): Mr. Calarco, $6,288 (SMD), $35,517 (ESOP), $39,956
(CESP); Mr. Ingulli, $12,618 (AS), $1,108 (SDP), $17,206 (ECAP), $1,250
(ESOP), $1,406 (CESP); Mr. Barna, $3,679 (SMD), $14,100 (ESOP), $15,863
(CESP); Mr. Stephenson, $5,692 (AS), $2,614 (SDP), $4,744 (ECAP), $3,400
(ESOP), $3,825 (CESP); and Mr. Ferguson, $997 (SMD), $13,201 (ESOP), $14,851
(CESP).
(2) Total restricted stock outstanding for the persons shown in the table at the
end of fiscal year 2002: Vincent A. Calarco, 605,412 shares valued at
$3,650,634, of which 461,412 shares valued at $2,782,314 are forfeitable;
Alfred F. Ingulli, 73,583 shares valued at $443,705, all of which shares are
forfeitable; Peter Barna, 128,028 shares valued at $772,009, of which
107,028 shares valued at $645,379 are forfeitable; William A. Stephenson,
64,233 shares valued at $387,325, all of which shares are forfeitable; and
John T. Ferguson II, 91,628 shares valued at $552,517, all of which shares
are forfeitable.
(3) Under the terms and conditions of the Crompton Corporation Long Term
Incentive Plan for the period 2001-2002 a portion of the award vested on
December 31, 2002. Total Restricted Stock vesting for the persons shown in
the table at the end of fiscal 2002: Vincent A. Calarco, 127,500 shares;
Alfred F. Ingulli, 29,750 shares; Peter Barna, 29,750 shares; William A.
Stephenson, 20,400 shares; and John T. Ferguson II, 21,250 shares. These
shares are included in the totals above in footnote (2).
OPTION GRANTS IN LAST FISCAL YEAR(1)
Individual Grants
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
------------------------------- ----------- -------------- --------- -------- --------- ---------
Vincent A. Calarco 211,207(2) 16.62% 7.25 11/21/12 962,995 2,440,419
13,793(3) 1.09% 7.25 10/22/12 62,889 159,373
Alfred F. Ingulli 31,207(2) 2.46% 7.25 11/21/12 142,288 360,585
13,793(3) 1.09% 7.25 10/22/12 62,889 159,373
Peter Barna 36,207(2) 2.85% 7.25 11/21/12 165,085 418,359
13,793(3) 1.09% 7.25 10/22/12 62,889 159,373
William A. Stephenson 36,207(2) 2.85% 7.25 11/21/12 165,085 418,359
13,793(3) 1.09% 7.25 10/22/12 62,889 159,373
John T. Ferguson II 36,207(2) 2.85% 7.25 11/21/12 165,085 418,359
13,793(3) 1.09% 7.25 10/22/12 62,889 159,373
(1) An option entitles the holder to purchase one share of the Common Stock of
the Company at a purchase price equal to the fair market value of the
Company's Common Stock on the date of grant of all of the options shown in
the table. All options are subject to expiration prior to the dates shown in
the table in case of death or termination of employment. The purchase price
for stock on the exercise of options may be paid in cash or in shares of the
Company's Common Stock already owned by the option holder, or by a
combination thereof. In the event of a change in control of the Company, all
of the options shown in the table will immediately become exercisable.
19
(2) Non-qualified options. Vest on 10/22/2003 and 10/22/2004.
(3) Incentive Stock options. Vest on 10/22/2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
ACQUIRED UNDERLYING UNEXERCISED AT FY-END ($)
ON VALUE OPTIONS AT FY-END (#) 12/31/02--FMV $6.03
EXERCISE REALIZED ---------------------- ---------------------
NAME (#) $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------- ---------- -------- --------- ---------- -------- ----------
Vincent A. Calarco 0 0 2,588,000 400,000 0 0
Alfred F. Ingulli 3,077 4,890 588,967 75,000 0 0
Peter Barna 0 0 514,105 80,000 0 0
William A. Stephenson 1,026 1,446 449,618 80,000 0 0
John T. Ferguson II 0 0 517,500 80,000 0 0
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Higdon, Jr. and Piccolo served as members and Mr. Headrick served as
Chairman of the Organization, Compensation and Governance Committee during the
last completed fiscal year. No member of the Organization, Compensation and
Governance Committee is a current or former officer or employee of the Company
or any of its subsidiaries.
RETIREMENT PLANS
Each of the persons shown in the Summary Compensation Table on page 18 above
is covered by a supplemental retirement agreement with the Company.
SUPPLEMENTAL RETIREMENT AGREEMENTS WITH VINCENT A. CALARCO, PETER BARNA AND
JOHN T. FERGUSON II. In the case of Messrs. Calarco, Barna and Ferguson, the
executive's total annual benefit payable under the supplemental retirement
agreement to the executive for life will be 60%, 50% and 50%, respectively, of
the average total compensation (including salary and bonus) paid to the
executive during the highest five years of the last ten years prior to the
executive's normal retirement age.
SUPPLEMENTAL RETIREMENT AGREEMENTS WITH ALFRED F. INGULLI AND WILLIAM A.
STEPHENSON. In the case of Messrs. Ingulli and Stephenson, the executive's
retirement benefits under each supplemental agreement supplement the benefit
paid to the executive under a Uniroyal Chemical Company, Inc. ("Uniroyal")
defined benefit pension plan so that the total annual benefit payable to the
executive will be 55% of the average total compensation (including salary and
bonus) paid to the executive during the highest five years of the last ten years
prior to the executive's retirement or, at his election, Mr. Ingulli may receive
a lump sum payment earned under a previous supplemental retirement agreement
with Uniroyal.
20
PROVISIONS FOR REDUCED PAYMENTS UNDER THE SUPPLEMENTAL RETIREMENT
AGREEMENTS. A supplemental benefit in a reduced amount may be payable in the
event of termination of employment prior to normal retirement age. At any time
after the date on which benefit payments commence, the executive may elect to
receive a single lump sum equal to 90% of the actuarial equivalent of the
benefit otherwise payable to the executive. An executive may elect to have the
executive's supplemental benefit under the agreement paid in a form which will
provide for the continuation of benefits, to a beneficiary selected by the
executive, upon the executive's death after retirement. Each agreement also
provides for the payment of a reduced benefit to the executive's beneficiary in
the event of the executive's death prior to normal retirement age and for the
payment of disability benefits in addition to those available under the
Company's regular disability insurance program. Benefits under each agreement
are not payable if the executive voluntarily terminates the executive's
employment, unless such termination is the result of the executive's retirement
(in the case of Mr. Calarco, on or after reaching age 62) or is with approval of
the Board, and meets certain other conditions set forth in the agreement.
The following table sets forth the estimated aggregate annual benefit
payable to each of the executives named in the table under the executive's
supplemental retirement agreement and from Uniroyal's defined benefit pension
plan upon retirement at or after normal retirement age based on each executive's
compensation history to date and assuming payment of such benefit in the form of
a life annuity:
ESTIMATED ANNUAL
RETIREMENT
NAME OF INDIVIDUAL BENEFIT
------------------------------------------ --------
Vincent A. Calarco $846,500
Alfred F. Ingulli 270,848
Peter Barna 193,850
William A. Stephenson 241,025
John T. Ferguson II 186,508
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT WITH VINCENT A. CALARCO. Mr. Calarco is employed
pursuant to an employment agreement which was amended and restated in May 1999.
The agreement provides for Mr. Calarco's employment as Chairman of the Board,
President and Chief Executive Officer for a term of three years, with automatic
annual one-year extensions of the term unless the Company gives notice at least
60 days prior to the anniversary of the date of the agreement that the term will
not be extended.
The amended agreement calls for a base salary of not less than $750,000 and
for Mr. Calarco's continued participation in employee benefit plans and other
fringe benefit arrangements substantially as in the past. In the event
Mr. Calarco's employment is terminated by the Company other than for cause,
disability, or death
21
or by Mr. Calarco for good reason (as defined in the agreement), the Company is
obligated to pay Mr. Calarco his salary to the date of termination, incentive
compensation in an amount no less than the bonus paid to him for the prior year
pro-rated to that date, and a lump sum termination payment equal to three times
the sum of his then current salary and the highest bonus paid to him during the
three years preceding his termination, to continue certain employee and fringe
benefits provided under the agreement for a period of three years or until he
obtains other employment and certain other benefits for the life of Mr. Calarco
and his spouse, and to make certain additional payments to cover any excise tax
imposed under the Internal Revenue Code on the amounts payable as a result of
his termination and any legal fees incurred by Mr. Calarco in enforcing the
Company's obligations under the agreement.
EMPLOYMENT AGREEMENTS WITH ALFRED F. INGULLI, WILLIAM A. STEPHENSON, PETER
BARNA AND JOHN T. FERGUSON. The Company has entered into employment agreements
with certain other key management employees, including Messrs. Ingulli,
Stephenson, Barna and Ferguson. Each agreement is operative upon the occurrence
of a change in control (as defined in the agreement) and is intended to
encourage the executive to remain in the employ of the Company by providing the
executive with greater security. Absent a change in control, the agreements do
not require the Company to retain the executive or to pay the executive any
specified level of compensation or benefits except that Messrs. Ingulli and
Stephenson have agreements that require that they be paid severance payments in
the event that they are terminated without cause or they resign for good reason
(as defined in the agreements) during an annually renewable two-year period.
In the event of a change in control, the agreements provide that there will
be no change, without the executive's consent, in the salary, bonus opportunity,
benefits, duties, and location of employment of the executive for a period of
two or three years after the change in control. If, during such period, the
executive's employment is terminated by the Company other than for cause,
disability, or death or the executive resigns for good reason (as defined in the
agreements), the Company will pay the executive his salary to the date of
termination, incentive compensation in an amount no less than the bonus paid to
the executive for the prior year pro-rated to that date, and a lump sum
severance payment equal to three times the sum of the executive's base salary
and the highest bonus paid to the executive during the three years preceding the
executive's termination and will continue other employee benefits similar to
those provided to the executive prior to the executive's termination for a
period of three years or until the executive's earlier employment with another
employer.
22
COMPENSATION OF DIRECTORS
Members of the Board who are not employees of the Company receive the
following for their services:
* an annual retainer of $35,000 (committee chairmen receive an additional
retainer of $5,000); and
* a fee of $12,000 for Board and committee meeting service.
Directors are reimbursed for expenses incurred in attending meetings. In
addition, the Company provides accidental death and travel insurance coverage
for each non-employee director.
Each year non-employee directors may elect to defer all or any portion of
their retainers and fees in the form of shares of the Company's Common Stock
pursuant to the Directors Deferred Compensation Plan. Directors may also choose
to receive all or a one-half ( 1/2) portion of their annual retainer fee in
non-qualified stock options of the Company's common stock on the basis of $3.00
of underlying stock for each $1.00 of foregone cash, provided that the number of
stock options issued to a director pursuant to this program and/or under the
Crompton Corporation 1998 Long Term Incentive Plan (the "1998 Plan") during each
year shall not exceed an aggregate of stock options to purchase in excess of
20,000 shares of the Company's Common Stock.
The 1998 Plan provides for the issuance to non-employee directors on the
date of the first meeting of the Board in the fourth quarter of each year of an
option to purchase up to 20,000 shares of the Company's Common Stock. The
exercise price of the options may not be less than the fair market value of the
Company's Common Stock on the grant date. The options to be granted under the
1998 Plan are non-qualified options not intended to qualify as incentive stock
options under the Internal Revenue Code of 1986, and may not be exercisable more
than 10 years and one month after the date of grant.
Directors who are employees of the Company receive no additional
compensation for services on the Board of Directors.
--------------------------------------------------------------------------------
APPROVAL OF SELECTION
OF INDEPENDENT AUDITOR
--------------------------------------------------------------------------------
The Board of Directors has, subject to approval by the stockholders,
selected the firm of KPMG LLP to act as auditor for the fiscal year 2003. The
Board of Directors recommends a vote FOR approval, and unless otherwise
directed, proxies will be voted in favor of this selection. The affirmative vote
of the holders of a majority of the shares of the Company represented and
entitled to vote at the meeting is required for such approval.
23
Representatives of KPMG LLP will be present at the annual meeting, with the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions raised at the meeting.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSAL
--------------------------------------------------------------------------------
The Plumbers and Pipefitters National Pension Fund, 103 Oronoco Street,
Alexandria, Virginia 22314, the beneficial owner of 57,800 shares of the
Company's Common Stock, has advised the Company that it intends to introduce the
following resolution at this year's annual meeting:
"Resolved: The shareholders of Crompton Corporation ("Company") urge the
Board of Directors to amend the Company's by laws to require that an independent
director--as defined by the rules of the New York Stock Exchange "NYSE")--who
has not served as an officer of the Company be its Chairman of the Board of
Directors.
"Supporting Statement: The recent wave of corporate scandals at such
companies as Enron, WorldCom and Tyco has resulted in renewed emphasis on the
importance of independent directors. For example, both the NYSE and NASDAQ have
proposed new rules that would require corporations that wish to be traded on
them to have a majority of independent directors.
"Unfortunately, having a majority of independent directors alone is clearly
not enough to prevent the type of scandals that have afflicted Enron, WorldCom
and Tyco. All of these corporations had a majority of independent directors on
their boards when the scandals occurred.
"All of these corporations also had a Chairman of the Board who was also an
insider, usually the Chief Executive Officer ("CEO"), or a former CEO, or some
other officer. Obviously, no matter how many independent directors there are on
a board, that board is less likely to protect shareholder interests by providing
independent oversight of the officers if the Chairman of that board is also the
CEO, former CEO or some other officer of the company.
"We respectfully urge the board of our Company to dramatically change its
corporate governance structure and the public's perception of it by having an
independent director serve as its Chairman who is not a former CEO.
"Although this change would be dramatic, it would hardly be radical. In the
United Kingdom it is common to separate the offices of Chairman and CEO. In
1996, a blue ribbon commission on Director Professionalism of the National
Association of Corporate Directors recommended that an independent director
should be charged with "organizing the board's evaluation of the CEO and
providing continuous
24
feedback; chairing executive sessions of the board; setting the agenda with the
CEO, and leading the board in anticipating and responding to crises."'
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors believes that it is not in the best interest of the
Company and its stockholders to adopt a by-law provision to require that an
independent director serve as Chairman of the Board. The Board believes that it
should have the flexibility to choose its leader depending on then current
circumstances and it should be free to make this choice in a manner best for the
Company and without constraint at any point in time. The Company's by-laws do
not preclude the Board from selecting different individuals to hold the
positions of Chairman and Chief Executive Officer, if, at some future time, the
Board believes that such a selection is in the best interest of the Company and
its stockholders. The Board will continue to periodically review the situation
and will take such action as may be warranted.
Independent oversight of management is effectively conducted and maintained
through the Board of which six of seven directors are independent. In addition
to the Board, various committees of the Board perform independent management
oversight. The charters of each Board committee provide that no member of that
committee may be an employee of the Company. All directors of the Company,
including the Chairman, are bound by fiduciary obligations, imposed by law, to
serve the best interests of the stockholders. Separating the offices of the
Chairman and Chief Executive Officer would not serve to enhance or diminish the
fiduciary duties of any director of the Company.
The Board believes that the Company and its stockholders benefit from the
experienced leadership and full-time attention of Mr. Vincent A. Calarco, the
Company's Chairman and Chief Executive Officer, who has spent more than
seventeen years with the Company. Mr. Calarco serves as a bridge between
management and the Board, ensuring that both act with a common purpose. The
Board believes that it needs the ability to balance board structure with the
flexibility to determine board leadership.
THE BOARD BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE AGAINST APPROVAL, AND UNLESS
OTHERWISE DIRECTED, PROXIES WILL BE VOTED AGAINST THIS SELECTION.
The affirmative vote of the holders of a majority of the shares of the
Company represented and entitled to vote at the meeting is required for
approval.
25
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Exchange Act requires the Company's officers and
directors, and stockholders who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Officers, directors and stockholders who own more than ten percent of
such of the Company's securities are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal year 2002,
all filings required of its officers, directors and covered stockholders were
made in compliance with applicable SEC regulations.
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OTHER MATTERS
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As of the date of this statement, the Board of Directors does not know of
any matter other than those referred to in this Proxy Statement as to which
action is expected to be taken at the annual meeting of stockholders.
The shares represented by proxies in the form solicited by the Board of
Directors will be voted at the meeting. Where a choice is specified on the proxy
with respect to a matter to be voted upon, the shares represented by the proxy
will be voted in accordance with the specification so made. If no choice is
specified, such shares will be voted (i) for the election as directors of the
three nominees for directorships named herein, (ii) in favor of the selection of
KPMG LLP as auditor for fiscal year 2003, and (iii) against the stockholder
proposal.
If any business not referred to in this Proxy Statement shall properly come
before the meeting, it is intended that those persons named as proxies will vote
the proxies in accordance with their judgment of the best interests of the
Company and its stockholders.
By Order of the Board of Directors,
[LOGO]
Barry J. Shainman
Secretary
Dated: March 31, 2003
26
CROMPTON CORPORATION Please
Mark Here
for Address |_|
Change or
Comments
SEE REVERSE SIDE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Election of directors: 01 Vincent A. Calarco, 02 Roger L. Headrick and 03
Patricia K. Woolf to serve as Class III directors for a term expiring in
2006.
FOR ALL NOMINEES WITHHOLD AUTHORITY
with exceptions noted FOR ALL NOMINEES
|_| |_|
(To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below)
________________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
FOR AGAINST ABSTAIN
2. Approval of the selection by the Board of |_| |_| |_|
KPMG LLP as independent auditors for 2003.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
FOR AGAINST ABSTAIN
3. Shareholder proposal to require that an |_| |_| |_|
independent director serve as Chairman of
the Board.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
By checking the box to the right, I consent to future delivery of
annual reports, proxy statements, prospectuses and other materials and |_|
shareholder communications electronically via the Internet at a
webpage which will be disclosed to me. I understand that the Company
may no longer distribute printed materials to me from any future
shareholder meeting until such consent is revoked. I understand that I
may revoke my consent at any time by contacting the Company's transfer
agent, Mellon Investor Services LLC, Ridgefield Park, NJ and that
costs normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing
documents, will be my responsibility.
Signature______________________Signature______________________ Date ____________
NOTE: Signature should agree with name stenciled hereon. When signing as
executor, administrator, trustee, or attorney, please give full title as
such. For joint accounts or co-fiduciaries, all joint owners or
co-fiduciaries should sign.
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Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11PM Eastern Time the day
prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
------------------------------- ----------------------------- ---------------------
Internet Telephone Mail
http://www.eproxy.com/ck 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone Mark, sign and date
proxy. Have your proxy card in to vote your proxy. Have your your proxy card
hand when you access the web proxy card in hand when you OR and
site. You will be prompted to OR call. You will be prompted to return it in the
enter your control number, enter your control number, enclosed postage-paid
located in the box below, to located in the box below, and envelope.
create and submit an then follow the directions
electronic ballot. given.
------------------------------- ----------------------------- ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
CROMPTON CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
For Annual Meeting on April 29, 2003, at Sheraton Stamford Hotel,
2701 Summer Street, Stamford, Connecticut, 11:15 A.M.
The undersigned appoints VINCENT A. CALARCO, JOHN T. FERGUSON II and BARRY
J. SHAINMAN or each of them, with power of substitution, proxy and attorney for
the undersigned to vote all shares of stock of Crompton Corporation that the
undersigned is entitled to vote at the Annual Meeting of the Stockholders of
said Corporation to be held on Tuesday, April 29, 2003, at 11:15 a.m. and any
adjournments thereof, with all powers the undersigned would have if present,
upon the proposals set forth on the reverse side and in their discretion on all
matters properly coming before the meeting, including those described in the
Notice and Proxy Statement thereof, receipt of which is acknowledged.
This Proxy will be voted as directed, or where no direction is given, will
be voted "FOR" Proposals Nos. 1 and 2 and against 3. If any nominee for the
Board of Directors named in the Proxy Statement is unavailable to serve, this
Proxy will be voted for such substitute nominee as may be recommended by the
Board of Directors. The Board of Directors is not aware of other matters to come
before the meeting.
CONTINUED, AND TO BE VOTED, SIGNED AND DATED ON THE REVERSE SIDE
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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