UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
EMERSON ELECTRIC CO.
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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)
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/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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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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2
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
Emerson [logo]
St. Louis, Missouri
December 15, 2006
TO THE STOCKHOLDERS OF
EMERSON ELECTRIC CO.:
The Annual Meeting of the Stockholders of Emerson Electric Co. will be
held at the SHELDON CONCERT HALL, 3648 WASHINGTON BOULEVARD, ST. LOUIS,
MISSOURI 63108 on Tuesday, February 6, 2007, commencing at 10:00 a.m., at
which meeting only holders of the common stock of record at the close of
business on November 28, 2006 will be entitled to vote, for the following
purposes:
1. To elect four Directors;
2. To ratify the appointment of KPMG LLP as our independent registered
public accounting firm; and
3. To transact such other and further business, if any, as lawfully
may be brought before the meeting.
EMERSON ELECTRIC CO.
By /s/ David N Farr
Chairman of the Board,
Chief Executive Officer and
President
/s/ W. W. Withers
Secretary
EVEN THOUGH YOU MAY PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE BY
TELEPHONE OR THE INTERNET, OR EXECUTE THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY. A RETURN ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES) IS ENCLOSED FOR YOUR CONVENIENCE. TELEPHONE AND INTERNET VOTING
INFORMATION IS PROVIDED ON YOUR PROXY CARD. SHOULD YOU ATTEND THE MEETING IN
PERSON, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
IMPORTANT
PLEASE NOTE THAT A TICKET IS REQUIRED FOR ADMISSION TO THE MEETING. IF YOU
PLAN TO ATTEND IN PERSON AND ARE A STOCKHOLDER OF RECORD, PLEASE CHECK THE BOX
ON YOUR PROXY CARD AND BRING THE TEAR-OFF ADMISSION TICKET WITH YOU TO THE
MEETING. IF YOUR SHARES ARE HELD BY SOMEONE ELSE (SUCH AS A BROKER) PLEASE
BRING WITH YOU A LETTER FROM THAT FIRM OR AN ACCOUNT STATEMENT SHOWING YOU
WERE A BENEFICIAL HOLDER ON NOVEMBER 28, 2006.
EMERSON ELECTRIC CO.
8000 WEST FLORISSANT AVENUE, ST. LOUIS, MISSOURI 63136
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 6, 2007
This proxy statement is furnished to the stockholders of Emerson Electric
Co. in connection with the solicitation of proxies for use at the Annual
Meeting of Stockholders to be held February 6, 2007 at the Sheldon Concert
Hall, 3648 Washington Boulevard, St. Louis, Missouri 63108 and at all
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. This proxy statement and the enclosed form of
proxy are first being mailed to stockholders on or about December 15, 2006.
If you plan to attend and have a disability which requires accommodation
at the meeting, please call 314-553-2197; requests must be received by
January 17, 2007.
REGISTERED STOCKHOLDERS CAN SIMPLIFY THEIR VOTING AND SAVE EMERSON EXPENSE
BY CALLING 1-866-540-5760 AND VOTING BY TELEPHONE, OR VOTING BY INTERNET ON
THE WEBSITE OF OUR TRANSFER AGENT AT http://www.proxyvoting.com/emr. Telephone
and Internet voting information is provided on your proxy card. A Control
Number, located on the proxy card, is designed to verify your identity and
allow you to vote your shares and confirm that your voting instructions have
been properly recorded.
IF YOU VOTE BY TELEPHONE OR INTERNET, YOU NEED NOT MAIL BACK YOUR PROXY
CARD.
If your shares are held in the name of a bank or broker, follow the voting
instructions on the form you receive from that firm. The availability of
telephone or Internet voting will depend on that firm's voting processes.
If you choose not to vote by telephone or Internet, please return your
proxy card, properly signed, and the shares represented will be voted in
accordance with your directions. You can specify your choices by marking the
appropriate boxes on the proxy card. If your proxy card is signed and returned
without specifying choices, the shares will be voted FOR the nominees for
Director in Proposal 1, FOR the ratification of the appointment of KPMG LLP as
our independent registered public accounting firm in Proposal 2, and otherwise
in the discretion of the proxies. The Company knows of no reason why any of
the nominees for Director named herein would be unable to serve. In the event,
however, that any nominee named should, prior to the election, become unable
to serve as a Director, your proxy (unless designated to the contrary) will be
voted for such other person or persons as the Board of Directors of the
Company may recommend.
You may revoke your proxy at any time before it is voted (in the case of
proxy cards) by giving notice to the Secretary of the Company or by executing
and mailing a later-dated proxy. To revoke a proxy given, or change your vote
cast, by telephone or Internet, you must do so by telephone or Internet,
respectively (following the directions on your proxy card), by 11:59 p.m.
Eastern time on February 5, 2007.
The close of business on November 28, 2006 was fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
vote at the Annual Meeting of Stockholders. As of the record date, there were
outstanding and entitled to be voted at such meeting 400,336,632 shares of our
common stock, par value $0.50 per share. This share number, and the share
numbers presented throughout this Proxy Statement, do not reflect the
two-for-one stock split, effected in the form of a 100% stock dividend, which
was declared by the Board of Directors on November 6, 2006. The holders of the
common stock will be entitled on each matter to one vote for each share of
common stock held of record on the record date. There is no cumulative voting
with respect to the election of Directors.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended September 30, 2006 accompanies this proxy statement.
This proxy is solicited by the Board of Directors of the Company. The
solicitation will be by mail and the expense thereof will be paid by the
Company. The Company has retained Morrow & Co., Inc. to assist in the
solicitation of proxies at an estimated cost of $7,500 plus expenses. In
addition, solicitation of proxies may be made by telephone or electronic mail
by Directors, officers or regular employees of the Company.
2
I. ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending in successive years. Four Directors of the Company
are to be elected for terms ending at the Annual Meeting in 2010, or until
their respective successors have been elected and have qualified. Certain
information with respect to the nominees for election as Directors proposed by
the Company, as well as the other Directors whose terms of office as Directors
will continue after the Annual Meeting, is set forth below.
SHARES OF
EMERSON
SERVED AS COMMON STOCK
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY
OR POSITION, OTHER DIRECTORSHIPS SINCE OWNED(1)(2)(3)
-------------------------------- --------- --------------
NOMINEES FOR TERMS ENDING IN 2010
C. Fernandez G., 40......................................... 2001 16,069(4)
Chairman and Chief Executive Officer of Grupo Modelo, S.A.
de C. V., brewery
He is also a Director of Anheuser-Busch Companies, Inc.
and Grupo Televisa, S.A. de C.V.
W. J. Galvin, 60............................................ 2000 419,635(4)
Senior Executive Vice President and Chief Financial
Officer of Emerson
He is also a Director of Factory Mutual Insurance Company
R. L. Ridgway, 71........................................... 1995 10,563
Former Assistant Secretary of State for Europe and Canada
She is also a Director of The Boeing Company, Manpower,
Inc., Sara Lee Corporation and 3M Company and is a
Director of three funds in the American Funds complex
of mutual funds
R. L. Stephenson, 46........................................ 2006 752
Chief Operating Officer of AT&T Inc., telecommunications
provider
He is also a Director of AT&T Inc. and Cingular Wireless
TO CONTINUE IN OFFICE UNTIL 2009
A. A. Busch III, 69......................................... 1985 33,053(4)
Director and Former Chairman of the Board of
Anheuser-Busch Companies, Inc., brewery, container
manufacturer and theme park operator
He is also a Director of AT&T Inc.
A. F. Golden, 60............................................ 2000 8,846
Partner of Davis Polk & Wardwell, lawyers
V. R. Loucks, Jr., 72....................................... 1979(5) 13,103
Chairman of the Board of The Aethena Group, LLC, a
health-care merchant banking firm
He is also a Director of Affymetrix, Inc., Edwards
Lifesciences Corporation, Anheuser-Busch Companies,
Inc. and Pain Therapeutics, Inc.
J. B. Menzer, 55............................................ 2002 5,819
Vice Chairman of Wal-Mart Stores, Inc., international
retailer
3
SHARES OF
EMERSON
SERVED AS COMMON STOCK
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY
OR POSITION, OTHER DIRECTORSHIPS SINCE OWNED(1)(2)(3)
-------------------------------- --------- --------------
TO CONTINUE IN OFFICE UNTIL 2008
D. N. Farr, 51................................................ 2000 810,437(4)
Chairman of the Board, Chief Executive Officer and
President of Emerson
He is also a Director of Delphi Corp.
D. C. Farrell, 73............................................. 1989 23,259
Retired Chairman and Chief Executive Officer of The May
Department Stores Company
R. B. Horton, 67.............................................. 1987 11,965
Retired Chairman of The Sporting Exchange, Ltd., BP p.l.c.
and Railtrack Group PLC and Former Chairman of Chubb plc
C. A. Peters, 51.............................................. 2000 300,560
Senior Executive Vice President of Emerson
J. W. Prueher, 64............................................. 2001 6,035
Retired Admiral, U.S. Navy, and Former U.S. Ambassador to
The People's Republic of China
He is also a Director of Merrill Lynch & Company, Inc.,
The New York Life Insurance Company, Dyncorp
International, Inc. and Fluor Corporation
All Directors and Executive Officers as a Group (17 persons).. 1,948,528(6)(7)
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(1) Beneficial ownership of Emerson common stock is stated as of September 15,
2006, except in the cases of Messrs. Farr and Peters, for whom ownership
is stated as of September 26, 2006. Under rules of the Securities and
Exchange Commission, persons who have power to vote or dispose of
securities, either alone or jointly with others, are deemed to be the
beneficial owners of such securities. Each person reflected in the table
has both sole voting power and sole investment power with respect to the
shares included in the table, except as described in the footnotes below
and except that with respect to the following shares the person named has
no investment power: Mr. Farr-255,000; Mr. Galvin-75,000; Mr. Edward L.
Monser, Chief Operating Officer (who is an executive officer of the
Company named in the Summary Compensation Table)-20,000; Mr. W. Wayne
Withers, Executive Vice President, Secretary and General Counsel (who is
also an executive officer of the Company named in the Summary Compensation
Table)-10,000; Mr. Peters-50,000; Mr. Fernandez-5,503; Mr. Golden-5,697;
Mr. Menzer-3,819; Adm. Prueher-5,103; Mr. Stephenson-752; each other
non-management Director (including Mr. G.A. Lodge who was a Director as of
September 15, 2006, but is not standing for re-election)-9,453; and all
Directors and executive officers as a group-497,592 shares.
(2) Includes the following shares which such persons have or will have within
60 days after September 15, 2006 the right to acquire upon the exercise of
employee stock options: Mr. Farr-398,333; Mr. Galvin-226,666; Mr. Monser-
65,833; Mr. Withers-81,773; and Mr. Peters-143,333. In computing the
number of shares beneficially owned by a person, shares of common stock
subject to options held by that person that are currently exercisable or
that are exercisable within 60 days after September 15, 2006 are deemed to
be outstanding. Such shares, however, are not deemed outstanding for the
purposes of counting the percentage ownership of each other person.
(3) No person reflected in the table owns more than 0.5% of the outstanding
shares of Emerson common stock. To the Company's knowledge, no person or
group beneficially owns more than 5% of the Company's common stock.
(4) Includes 45,126 shares held by the spouse and/or children of Mr. Farr.
Includes 3,605 shares held in the Emerson Directors' and Officers'
Charitable Trust over which Mr. Farr exercises investment power but has no
financial interest. Includes 28,365 shares held by or in trust for the
spouse and/or children of Mr. Galvin, of which Mr. Galvin disclaims
beneficial ownership as to 4,839 shares. Includes 20,081 shares, and
options exercisable with respect to 36,878 of the shares referred to in
footnote 2, held by the Galvin Family Partnership, of which Mr. Galvin's
spouse is the general partner. Includes 600 shares held by Mr. Busch as
co-trustee of a trust, as to
4
which Mr. Busch shares voting and investment power and disclaims
beneficial ownership. Includes 64 shares held by LML Cariana S.A. de
C.V., in which Mr. Fernandez' spouse is a 98% shareholder, and 462
shares held by Lago Capital S.A. de C.V., in which Mr. Fernandez' spouse
is a 50% shareholder. Mr. Fernandez disclaims beneficial ownership with
respect to these shares.
(5) Mr. Loucks previously served as a Director from April 1974 to December
1975.
(6) Includes 931,271 shares of common stock which executive officers have, or
will have within 60 days after September 15, 2006 the right to acquire
upon exercise of employee stock options. Shares owned as a group represent
0.48% of the outstanding common stock of the Company. The shares issuable
upon exercise of options were deemed to be outstanding for purposes of
calculating the percentage of outstanding shares. Such shares, however,
are not deemed outstanding for the purposes of counting the ownership of
other persons.
(7) The total includes shares owned by E. L. Monser and W. W. Withers, the
only executive officers of the Company named in the Summary Compensation
Table not otherwise shown individually in this table, and shares owned by
G. A. Lodge, who was a Director on September 15, 2006 but is not standing
for re-election pursuant to the requirement in the Company's Bylaws that
an individual may not stand for election or re-election as a Director
after the age of 72. Mr. Monser beneficially owned 116,574 shares. Mr.
Withers beneficially owned 122,625 shares. Mr. Lodge beneficially owned
17,053 shares. Also includes 32,180 shares beneficially owned by one other
executive officer of the Company, of which 15,333 are shares of common
stock which the other executive officer has, or will have within 60 days
after September 15, 2006, the right to acquire upon exercise of employee
stock options.
Each of the nominees and continuing Directors has had the same position or
other executive positions with the same employer during the past five years,
except as follows:
* Sir Robert Horton retired as Chairman of Railtrack Group PLC in July
1999. He was named Deputy Chairman of Chubb plc in September 2002 and
Chairman in December 2002 (both are non-executive positions), and served
as Chairman of Chubb plc, which was acquired by United Technologies
Corp., until November 2003. He was appointed Chairman of The Sporting
Exchange, Ltd. in March 2004 and Executive Chairman in November 2005. He
retired from The Sporting Exchange in January 2006.
* Mr. Loucks also served as Chief Executive Officer of Segway LLC from
January 2003 to November 2003 and is the retired Chairman and Chief
Executive Officer of Baxter International, Inc.
* Admiral Prueher served as Ambassador to the People's Republic of China
from November 1999 to May 2001. Prior thereto he served as a Consulting
Professor and Senior Advisor to the Stanford-Harvard Preventive Defense
Program and a Senior Fellow at the Center for Naval Analysis. Admiral
Prueher completed 35 years of service in the United States Navy in May
1999, and was Commander-in-Chief of the U.S. Pacific Command from 1996
until his retirement.
* Mr. Farr was additionally elected as President of Emerson on November 1,
2005.
* Mr. Menzer served as Executive Vice President of Wal-Mart Stores, Inc.
and as President and Chief Executive Officer of Wal-Mart International
from 1999 to 2005.
* Prior to becoming Chief Operating Officer of AT&T Inc. in November 2005,
Mr. Stephenson served as Chief Operating Officer of SBC Communications
Inc. from April 2004 to November 2005 and was Senior Executive Vice
President and Chief Financial Officer of SBC from August 2001 through
April 2004. SBC Communications Inc. acquired AT&T in November 2005.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
Mr. Golden, a Director, is a partner of the law firm of Davis Polk &
Wardwell, which firm the Company retained in fiscal 2006 and expects to retain
in fiscal 2007.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has determined that the following of its members
are independent, as that term is defined under the general independence
standards in the listing standards of the New York Stock Exchange: A. A. Busch
III, D. C. Farrell, C. Fernandez G., A. F. Golden, R. B. Horton, G. A. Lodge,
V. R. Loucks, Jr., J. B. Menzer, J. W. Prueher, R. L. Ridgway and R. L.
Stephenson. Mr. Lodge will not be standing for re-election in accordance with
the
5
requirement in the Company's Bylaws that an individual may not stand for
election or re-election as a Director after the age of 72. Further, the Board
has adopted its own categorical standards to assist it in making
determinations of Director independence. All Directors identified as
independent in this proxy statement meet these standards; a copy of these
standards is attached as Appendix A.
The members of the Board are elected to various committees. The standing
committees of the Board (and the respective Chairmen) are: Executive Committee
(Farr), Audit Committee (Busch), Compensation Committee (Loucks), Corporate
Governance and Nominating Committee (Farrell), Finance Committee (Horton), and
Pension Committee (Lodge).
The Audit Committee met six times in fiscal 2006. The members of the Audit
Committee are A. A. Busch III, Chairman, R. B. Horton, J. B. Menzer and R. L.
Ridgway, all of whom are independent. Mr. Fernandez was a member of the Audit
Committee through the February 2006 meeting, at which time Mr. Horton replaced
Mr. Fernandez. Mr. Fernandez was during his service on the Audit Committee,
and continues to be, independent. The functions of the Audit Committee are
described under "Report of the Audit Committee" at page 8 below. The Audit
Committee operates under a written charter, which was included in our proxy
statement for the 2006 Annual Meeting, adopted by the Board of Directors. The
Board has determined that all of the Audit Committee members (including Mr.
Fernandez during his service on the Audit Committee) are independent, as that
term is defined under the enhanced independence standards for audit committee
members in the Securities Exchange Act of 1934 (the "Exchange Act") and rules
thereunder, as incorporated into the listing standards of the New York Stock
Exchange. The Board has also determined that J. B. Menzer is an Audit
Committee Financial Expert as that term is defined in the rules issued
pursuant to the Sarbanes-Oxley Act of 2002. See the "Report of the Audit
Committee" at page 8 below.
The Compensation Committee discharges the Board's responsibilities related
to compensation of the Company's executives; administration of the Company's
stock option and incentive shares plans; determining if necessary when service
by officers and Directors with another entity is eligible for indemnification
under the Company's Bylaws; authorizing Company contributions to benefit plans
(other than qualified defined benefit plans); and adopting and terminating
benefit plans where such actions are not the prerogative of management. The
Committee met seven times in fiscal 2006. The members of the Compensation
Committee are V. R. Loucks, Jr., Chairman, D. C. Farrell, J. W. Prueher, and
R. L. Stephenson, all of whom are independent. See the "Report of the
Compensation Committee on Executive Compensation" at page 10 below.
The Corporate Governance and Nominating Committee reviews the Company's
corporate governance principles and independence standards; oversees the
annual self-evaluation by the Board and its committees; discharges the Board's
responsibilities related to compensation of Directors; identifies and
evaluates individuals for Board and committee membership and Chairs; makes
recommendations to the Board concerning the selection of Director nominees;
makes recommendations as to the size and composition of the Board and its
committees; and approves and/or reviews the Company's conflict of interest
policies, codes of ethics, political activities and compliance with laws and
regulations, and oversees management's implementation thereof. For a
description of the process used by the Committee in evaluating and
recommending Director nominees, see "Nomination Process" at page 8 below. The
Corporate Governance and Nominating Committee met six times in fiscal 2006.
The members of the Committee are D. C. Farrell, Chairman, A. F. Golden, G. A.
Lodge, V. R. Loucks, Jr. and R. L. Ridgway, all of whom are independent.
The Company's Corporate Governance Principles and Practices and the
charters of all Board Committees are available on the Company's Web site at
www.gotoemerson.com, Investor Relations, Corporate Governance. The foregoing
documents are available in print to stockholders upon written request
delivered to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, MO
63136, Attn: Secretary.
There were seven meetings of the Board of Directors during fiscal 2006.
All of the Directors attended at least 75% of the meetings of the Board and
committees on which they served. Directors are strongly encouraged to attend
the Annual Meeting of Stockholders unless extenuating circumstances prevent
them from attending, although the Company has no formal, written policy
requiring such attendance. In 2006, all Directors attended the Annual Meeting
of Stockholders.
The Board of Directors has appointed a Discussion Leader who will chair
regularly scheduled meetings of non-management Directors, as provided in the
Company's Corporate Governance Principles and Practices. The Discussion Leader
position will rotate annually among the Chairs of each of the independent
Board Committees in the
6
following order: Audit, Pension, Compensation, Corporate Governance and
Nominating, and Finance. Stockholders and other interested persons may contact
the Discussion Leader in writing c/o Emerson Electric Co., 8000 West
Florissant Avenue, St. Louis, MO 63136, Attn: Secretary. All such letters will
be forwarded promptly to the Discussion Leader.
Stockholders may communicate with any of our Directors by sending a letter
to the Director, c/o Emerson Electric Co., 8000 West Florissant Avenue, St.
Louis, MO 63136, Attn: Secretary. All such letters will be forwarded promptly
to the relevant Director.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive any compensation
for service as Directors. Each non-management Director is currently paid an
annual retainer of $140,000, a portion of which is paid in restricted stock,
and fees of $1,500 plus expenses for attendance at each Board meeting. The
percentage of the annual retainer paid in restricted stock each year is
determined by or upon the recommendation of the Corporate Governance and
Nominating Committee. Currently for fiscal 2007, $50,000 of the annual
retainer is paid in cash on a monthly basis, and $90,000 of the annual
retainer is to be paid in restricted stock on the date of the Company's Annual
Meeting to those non-management Directors who are elected or re-elected at, or
who continue in office after, such Annual Meeting. Such restricted stock does
not vest and cannot be sold until the Director's retirement or earlier death,
disability or a change of control of the Company. Non-management Directors
receive dividends with respect to such restricted stock. If a Director's
tenure on the Board ends for any other reason, the restrictions will lapse
unless it is determined that the participant has acted in a manner detrimental
to the Company or has failed to fulfill his or her responsibilities in a
satisfactory manner. If the restrictions on the shares do not lapse, such
shares will be forfeited to, and acquired at no cost by, the Company.
Each committee Chairman is currently paid an annual retainer of $8,000,
except the Chairman of the Audit Committee who is paid an annual retainer of
$12,000, and each committee member is paid $1,250 plus expenses for attendance
at each committee meeting.
Directors may elect to defer all or a part of such cash compensation; such
deferred amounts are credited with interest quarterly at the prime rate
charged by Bank of America, N.A. In the alternative, Directors may elect to
have deferred fees converted into units equivalent to shares of Emerson common
stock and their accounts credited with additional units representing dividend
equivalents. All deferred fees are payable only in cash.
The Company has eliminated its Continuing Compensation Plan for
Non-Management Directors who assumed office on or after June 4, 2002.
Non-management Directors in office on that date who are not fully vested
continue to vest in the plan. A non-management Director who assumed office
prior to June 4, 2002, and who serves as a Director for at least five years
will, after the later of termination of service as a Director or age 72,
receive for life a percentage of the annual $30,000 cash retainer for
non-management Directors in effect on June 4, 2002. Such percentage is 50% for
five years' service and increases by 10% for each additional year of service
to 100% for ten years' or more service. In the event that service as a covered
Director terminates because of death, the benefit will be paid to the
surviving spouse for five years.
In 2006, the Company held an offsite strategy meeting and paid the
expenses of A. F. Golden and his spouse for attendance at such meeting. The
cost of these expenses, together with the related tax reimbursement, was
approximately $10,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's Directors and executive officers are required, pursuant to
Section 16(a) of the Exchange Act, to file statements of beneficial ownership
and changes in beneficial ownership of common stock of the Company with the
Securities and Exchange Commission and the New York Stock Exchange, and to
furnish copies of such statements to the Company. Based solely on a review of
the copies of such statements furnished to the Company and written
representations that no other such statements were required, the Company
believes that during fiscal year 2006 its Directors and executive officers
complied with all such requirements, except that Mr. Fernandez, a Director,
reported late two acquisitions of Emerson common stock (a total of 526 shares)
by entities in which his spouse is a shareholder.
7
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to the Company's
chief executive officer, chief financial officer, chief accounting officer,
and controller; has posted such Code of Ethics on its Web site; and intends to
satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting such
information on its Web site at www.gotoemerson.com, Investor Relations,
Corporate Governance. The Company has adopted a Code of Business Ethics for
Directors, officers and employees, which is available at the same location on
the Company's Web site. Printed copies of the foregoing documents are
available to stockholders upon written request delivered to Emerson Electric
Co., 8000 West Florissant Avenue, St. Louis, MO 63136, Attn: Secretary.
NOMINATION PROCESS
The Corporate Governance and Nominating Committee regularly reviews the
appropriate size and composition of the Board and anticipates future vacancies
and needs of the Board. In the event the Committee recommends an increase in
the size of the Board or a vacancy occurs, the Committee may consider nominees
submitted by several sources, including current Board members, management of
the Company, director search firms, stockholders or other persons.
In evaluating possible Director nominees, the Committee considers the
knowledge, experience, integrity and judgment of possible candidates, their
potential contribution to the diversity of backgrounds, experience and skills
of the Board, and their ability to devote sufficient time and effort to their
duties as Directors. The Company's Statement of Corporate Governance
Principles and Practices sets forth the minimum qualifications for Director
nominees which include, among other criteria determined by the Board, senior
management experience in business, government and/ or other relevant
organizations. Important experience includes the field of manufacturing,
international exposure and Board membership with major organizations. Pursuant
to the Company's Bylaws, no Director may stand for election or re-election as
a Director after attaining the age of 72.
The Committee evaluates Director nominees at regular or special Committee
meetings pursuant to the criteria described above and reviews qualified
Director nominees with the Board. The Committee evaluates candidates that meet
the Director criteria, and the Committee selects nominees that best suit the
Board's current needs and recommends one or more of such individuals for
election to the Board. Mr. Stephenson, who is standing for election to the
Board for the first time, was recommended to the Committee by the Chief
Executive Officer, a non-management Director, a security holder and a
third-party search firm. From time to time, the Company retains an independent
search firm to assist the Committee in identifying potential candidates for
Board membership and in evaluating their qualifications and availability.
The Committee will consider candidates recommended by stockholders,
provided the names of such nominees, accompanied by relevant biographical
information, are properly submitted in writing to the Secretary of the Company
in accordance with the manner described for stockholder nominations in "IV.
Stockholders' Proposals" at page 17 below. The Secretary will send properly
submitted stockholder recommendations to the Committee. Individuals
recommended by stockholders in accordance with these procedures will receive
the same consideration received by individuals identified to the Committee
through other means.
In addition, the Company's Bylaws permit stockholders to nominate
Directors at an annual meeting of stockholders or at a special meeting at
which Directors are to be elected in accordance with the notice of meeting.
The procedures for making such nominations are discussed in "IV. Stockholders'
Proposals" at page 17 below.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board in providing oversight of the
systems and procedures relating to the integrity of the Company's financial
statements, the Company's financial reporting process, its systems of internal
accounting and financial controls, the internal audit process, the annual
independent audit process of the Company's annual financial statements, the
Company's compliance with legal and regulatory requirements and the
qualification and independence of the Company's independent registered public
accounting firm. Management has the responsibility for the implementation of
these activities. In fulfilling its oversight responsibilities, the Committee
reviewed and discussed the audited financial statements in the Annual Report
on Form 10-K with management, including a discussion of the quality and the
acceptability of the Company's financial reporting and controls.
8
The Company's independent registered public accounting firm is responsible
for expressing an opinion on the conformity of those audited financial
statements with U.S. generally accepted accounting principles and on
management's assessment of the effectiveness of the Company's internal control
over financial reporting. In addition, the independent registered public
accounting firm will express its own opinion on the effectiveness of the
Company's internal control over financial reporting. The Committee reviewed
with the independent registered public accounting firm the firm's judgments as
to the quality and the acceptability of the Company's financial reporting and
such other matters as are required to be discussed with the Committee under
auditing standards of the Public Company Accounting Oversight Board (United
States), including the matters required to be discussed by Statement on
Auditing Standards No. 61, as may be modified or supplemented. In addition,
the Committee has discussed with the independent registered public accounting
firm the firm's independence from management and the Company, including the
impact of non-audit-related services provided to the Company and the matters
in the independent registered public accounting firm's written disclosures
required by Standard No. 1 of the Independence Standards Board, as may be
modified or supplemented.
The Committee also discussed with the Company's internal auditors and the
independent registered public accounting firm in advance the overall scope and
plans for their respective audits. The Committee meets regularly with the
internal auditor and the independent registered public accounting firm, with
and without management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls, and the overall quality
of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year
ended September 30, 2006 for filing with the Securities and Exchange
Commission. The Committee also reappointed KPMG LLP as the Company's
independent registered public accounting firm for fiscal 2007.
Audit Committee
A. A. Busch III, Chairman J. B. Menzer
R. B. Horton R. L. Ridgway
9
FEES PAID TO KPMG LLP
The following are the fees of KPMG LLP, the Company's independent
registered public accounting firm, for services rendered in 2005 and 2006
($ in Millions):
2005 2006
----- -----
Audit Fees.............................................. $16.7 $19.7
Audit-Related Fees...................................... 2.3 3.9
Tax Fees................................................ 3.0 3.1
All Other Fees.......................................... 0 0
----- -----
Total KPMG LLP Fees................................. $22.0 $26.7
===== =====
Audit Fees primarily represent the cost for the audit of the Company's
annual financial statements, reviews of Securities and Exchange Commission
Forms 10-Q and 10-K and statutory audit requirements at certain non-U.S.
locations.
Audit-Related Fees are primarily related to audits of employee benefit
plans, acquisition/divestiture due diligence and certification of statutory
filings.
Tax Fees are primarily related to tax compliance services, which
represented $3.0 million and $2.8 million in 2006 and 2005, respectively. The
remaining tax fees related to tax consulting services and represented $0.1
million and $0.2 million in 2006 and 2005, respectively.
The Audit Committee approved in advance all services provided by KPMG LLP.
The Audit Committee's pre-approval policies and procedures are included within
the Audit Committee Charter, which was filed as an exhibit to the Company's
proxy statement for the 2006 Annual Meeting and can be found on the Company's
Web site at www.gotoemerson.com, Investor Relations, Corporate Governance.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee, composed of four independent Directors,
establishes and administers the executive compensation program for the
Company's top executives. The program supports the Company's commitment to
enhancing stockholder value. It is designed to attract and retain high-quality
executives, to encourage them to make career commitments to the Company, and
to accomplish the Company's short- and long-term objectives. The executive
compensation program has uniquely served the Company's stockholders since 1977
by rewarding and motivating executives for the accomplishment of the Company's
objectives. The executive compensation program is a focused, well-defined
management tool that reinforces the Company's culture and commitment to
stockholders.
The Committee has historically viewed compensation as a total package that
includes base salary and variable short- and long-term (performance-based)
compensation. The total program is structured to deliver a significant
percentage of pay through at-risk pay programs which reward executives if the
performance of the Company warrants. Basic principles underlying the pay
programs are the following:
* Maximize stockholder value.
* Retain, reward and motivate key executives.
* Compensate for performance rather than create a sense of entitlement.
* Reward team results.
* Build executive ownership of Company stock.
COMPONENTS OF EXECUTIVE COMPENSATION
To determine the competitive level of total compensation (including total
annual cash and long-term incentives), the Committee sets the total pay target
in a competitive compensation range as benchmarked against published survey
data and data derived through special studies of comparable industries,
including those shown in the peer group performance graph.
10
TOTAL ANNUAL CASH COMPENSATION: Cash compensation consists of base salary
and annual cash incentive (bonus), with the sum of the two referred to as
"Total Cash Compensation." Currently, approximately 1,200 key executives
participate in the Total Cash Compensation program. A Total Cash Compensation
target, including base salary and incentive, is established for each executive
officer position using benchmark survey comparisons. Annual increases, if any,
are based on individual merit and Company affordability. The annual incentive
(at-risk) opportunities generally represent from 25% to 60% of Total Cash
Compensation. Payment of the annual cash incentive portion is based on the
financial performance of the Company against pre-established targets. The
Committee each year establishes and approves annual financial targets which
are important to the Company and its stockholders. Typical targets include
sales, earnings per share, earnings before interest and taxes, net profits,
return on total capital, return on equity, and asset management. The relative
importance of each target is determined each year by the Committee, and may
vary depending upon the Company's financial objectives for that year.
LONG-TERM COMPENSATION INCENTIVES: Long-term incentive awards, consisting
of performance shares, stock options and restricted stock, are a substantial
portion of the total compensation packages of certain key senior executives
and are specifically focused on the Company's longer-term strategic
objectives. Long-term plan participation and size of awards are determined by
the individual's potential to make significant contributions to the Company's
financial results, level of management responsibility and individual
performance and potential. Long-term programs are paid primarily in stock. The
Company's continuing philosophy is that executives are expected to hold stock
earned under the Company's programs. The value of current executive stock
holdings is significant, in absolute terms and in relation to base pay, though
the Company does not establish specific ownership targets.
PERFORMANCE SHARES: The performance shares program reinforces the
Company's long-term objectives and rewards executives for achieving those
objectives. The Company has had an effective performance shares program since
1977. Participation in this program is limited, and only executives who can
most directly influence the Company's long-term financial success are
included. Awards are denominated in share units with cash dividend-equivalent
payments on 40% of the share units awarded during the performance period. The
Committee approves the performance measures and evaluates the performance of
the Company against those measures. Historically, the Company's plans have
targeted earnings per share growth objectives and other financial measures
deemed appropriate to accomplish the Company's performance targets. The final
payout can range from 0% to 100% of the target award, depending upon the level
of achievement of the established financial targets. The payout is paid
primarily in stock and partially in cash (generally to cover income taxes).
STOCK OPTIONS: The stock option program provides the long-term focus for a
larger group of key employees. Currently, approximately 2,500 key employees
are eligible to be considered for participation in the stock option program.
Awards are intended to be made approximately every three years and generally
vest one-third each year. Options are granted at 100% of the fair market value
of the Company's common stock on the date of grant and expire ten years after
the date of grant. In fiscal 2003 the Company began expensing stock options
for grants awarded on or after October 1, 2002.
RESTRICTED STOCK: The restricted stock program is designed primarily to
retain key executives and potential top management of the Company while
building stock ownership and long-term equity and linking pay directly with
stockholder return. Participation has been highly selective and limited to a
very small group of executives. The Committee views this program as an
important management succession planning and retention tool. The restriction
period for awards is three to ten years.
The Company's incentive compensation programs are designed to reward
executives for achievement of the Company's performance objectives. The plans,
as approved by stockholders, are designed to comply with Internal Revenue Code
Section 162(m) to ensure tax deductibility. The Committee considers it
important to retain the flexibility to design compensation programs that are
in the best interest of the Company and the stockholders.
CEO COMPENSATION
The Company had an outstanding year in 2006 and achieved a number of
significant milestones. Sales growth was exceptional and the Company's revenue
for the first time exceeded $20.1 billion, an increase of 16.3% from 2005. It
was also the 50th consecutive year of dividend increases. Earnings per share
rose 31.8% to $4.48 in fiscal 2006. Growth was strong throughout the year,
with underlying sales growth of 12.5% (which excludes an approximate 4%
favorable impact from acquisitions and divestitures and a slightly unfavorable
impact from foreign currency translation), as the Company generally grew
faster than its end markets. The Company also achieved record operating cash
flow of $2.5 billion. Strong cash generation provides the ability to create
real value for stockholders,
11
and the Company returned approximately $1.6 billion of cash through dividends
and share repurchases during fiscal 2006. Further, the ability to generate
cash creates opportunity for growth through strategic acquisitions and allows
continued strong investment in the Company's core businesses. Return on total
capital, a key measure of stockholder value, increased 2.9 points over fiscal
2005 to 18.4%. Total stockholder return, based on stock price appreciation and
assuming dividend reinvestment, was 19.3% for fiscal 2006, driven by the
Company's strong financial performance.
The Committee agreed that David N. Farr has shown outstanding leadership
in delivering these results and further positioning the Company for future
growth. In reviewing Mr. Farr's performance in fiscal 2006, the Committee
determined that he and the Emerson management team he leads have continued to
build on a strong foundation of solid financial results, global growth
programs, industry innovation and technology leadership. Mr. Farr continued to
infuse into the organization the importance of expanding and strengthening
customer relationships, with success evident in the Company's 2006 sales and
improved market positions. He continued to make operational excellence a high
priority. The Company again delivered outstanding operating and capital
efficiencies, and achieved beneficial cost positions while challenged by
significant price and competitive pressure around the world. He directed a
number of strategic acquisitions in fiscal 2006 that leveraged the Company's
technology and market leadership, and strengthened product, service and
solution offerings for customers. Again, Mr. Farr continued his emphasis on
developing an outstanding global management team and a strong bench of future
leaders.
As a result of his performance, the Committee awarded Mr. Farr a fiscal
year 2006 bonus of $2,200,000. He received a base salary of $1,100,000. As
discussed on page 11 of the proxy statement, the Company's performance shares
program, in place since 1977, reinforces the Company's long-term objectives
and rewards executives for achieving those objectives. Awards are made every
three years, and earned at the end of a four-year performance period. In
October 2006, as part of the award cycle for the four-year performance period
beginning October 1, 2006 and ending September 30, 2010, Mr. Farr was awarded
230,000 performance shares, which must be earned based on the Company's
performance for that period. Mr. Farr does not have an employment agreement
with the Company.
Compensation Committee
V. R. Loucks, Jr., Chairman
D. C. Farrell
J. W. Prueher
R. L. Stephenson
12
EXECUTIVE COMPENSATION
The following information relates to compensation received or earned by
the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company for the last fiscal year of the
Company (the "named executive officers") and the compensation received or
earned by them for the two prior fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION(1)
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUT
---------------------------------------------------------------------------------------------------
SECURITIES LONG-
OTHER UNDERLYING TERM ALL
ANNUAL RESTRICTED OPTIONS/ INCENTIVE OTHER
NAME AND FISCAL COMPEN- STOCK SARS PLAN COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($)(2) AWARD(S)($)(3) (#) PAYOUTS($)(4) SATION($)(5)
------------------ ------ --------- -------- ------------ -------------- ---------- ------------- ------------
D. N. Farr 2006 1,100,000 2,200,000 224,445 -- -- -- 80,272
Chairman of the Board, 2005 1,050,000 2,000,000 147,641 3,887,950 125,000 6,938,500 66,980
Chief Executive Officer 2004 1,000,000 1,500,000 149,099 3,162,750 -- -- 50,409
and President(6)
W. J. Galvin 2006 645,000 875,000 -- -- -- -- 33,784
Senior Executive Vice 2005 620,000 675,000 -- 1,767,250 85,000 3,122,325 32,133
President and Chief 2004 600,000 560,000 -- -- -- -- 27,099
Financial Officer
E. L. Monser 2006 525,000 600,000 -- -- -- -- 28,285
Chief Operating Officer 2005 475,000 450,000 -- -- 50,000 2,081,550 24,587
2004 460,000 350,000 -- -- -- -- 18,645
W. W. Withers 2006 500,000 600,000 -- -- -- -- 29,682
Executive Vice President, 2005 480,000 500,000 -- -- 50,000 2,081,550 27,203
Secretary and General 2004 465,000 420,000 -- -- -- -- 22,430
Counsel
C. A. Peters 2006 485,000 615,000 -- -- -- -- 27,337
Senior Executive Vice 2005 465,000 500,000 -- 1,413,800 50,000 2,081,550 24,124
President 2004 450,000 410,000 -- -- -- -- 20,034
--------
(1) The Company's stock option plans, incentive shares plans and supplemental
executive retirement and savings investment plans generally provide for
acceleration of vesting in the event of a change in control of the
Company.
(2) Consistent with applicable regulations, certain non-cash compensation for
a named executive officer need not be reported, the aggregate of which
does not exceed the lesser of $50,000 or 10% of that officer's salary and
bonus. Pursuant to the Company's security program established by the Board
of Directors, the Chairman and Chief Executive Officer is required to use
Company aircraft for all travel. While these security procedures,
including personal use of Company aircraft, are required for the benefit
of the Company, the Company is reporting the valuation of the personal use
of this benefit by the Chairman and Chief Executive Officer in fiscal
years 2006, 2005 and 2004 in the amounts of $131,264, $67,852 and $65,949
and related tax gross-up of $54,644, $34,030 and $45,829, respectively.
The amounts for 2006 and 2005 represent the incremental cost to the
Company, calculated based on the variable operating costs per hour of
operation, which include fuel costs, maintenance, and associated travel
costs for the crew. The amount for 2004 was previously reported and
calculated in accordance with Internal Revenue Service guidelines for
imputed income for personal use of corporate aircraft.
(3) The number of shares of restricted stock held by the named executive
officers at September 30, 2006 (the end of fiscal 2006), and the aggregate
value of such shares, are as follows: D. N. Farr, 255,000 shares having a
value of $21,384,300; W. J. Galvin, 75,000 shares having a value of
$6,289,500; E. L. Monser, 20,000 shares having a value of $1,677,200; W.
W. Withers, 10,000 shares having a value of $838,600; and C. A. Peters,
50,000 shares having a value of $4,193,000. E.L. Monser was awarded 10,000
shares of restricted stock on November 7, 2006 having an award date value
of $870,200, and W.W. Withers was awarded 25,000 shares of restricted
stock on October 2, 2006 having an award date value of $2,096,375; these
awards were made after the end of fiscal 2006, and are not included in
the amounts for fiscal 2006, but will be included in the amounts for
fiscal 2007. The Company pays dividends on restricted stock. The
restricted stock awards have a restriction period and are earned over a
period
13
of up to ten years and vest at the end of such period; the shares
are payable if the executive is employed with the Company and in good
standing at the end of the restriction period. The amounts shown in the
table represent the dollar value based on the stock price per share at
award date and do not reflect any payment to the individual.
(4) Long-term performance awards earned in fiscal 2005 were based on the
achievement of performance objectives over a four-year period.
(5) The table includes for fiscal 2006: (a) the value of premiums paid by the
Company on behalf of the named executive officers for fiscal 2006 for term
life insurance in the following amounts: D. N. Farr-$2,824; W. J. Galvin-
$810; E. L. Monser-$3,962; W. W. Withers-$4,703; and C. A. Peters-$2,733;
and (b) contributions by the Company on behalf of the named executive
officers to the Company's matched savings plans in the following amounts:
D. N. Farr-$77,448; W. J. Galvin-$32,974; E. L. Monser-$24,323; W. W.
Withers-$24,979; and C. A. Peters-$24,604.
(6) Mr. Farr was elected Chairman of the Board of Directors on September 17,
2004 and President on November 1, 2005.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- ------ ------ -------
D. N. Farr............... n/a n/a n/a n/a n/a n/a n/a
W. J. Galvin............. n/a n/a n/a n/a n/a n/a n/a
E. L. Monser............. n/a n/a n/a n/a n/a n/a n/a
W. W. Withers............ n/a n/a n/a n/a n/a n/a n/a
C. A. Peters............. n/a n/a n/a n/a n/a n/a n/a
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
VALUE OPTIONS AT FY-END(#) AT FY-END($)(1)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
D. N. Farr................ 17,444 632,781 356,666 83,334 9,433,074 1,727,514
W. J. Galvin.............. -- -- 198,333 56,667 6,003,930 1,174,707
E. L. Monser.............. 9,180 285,269 49,166 33,334 1,413,008 691,014
W. W. Withers............. 47,649 1,573,804 65,106 33,334 1,647,508 691,014
C. A. Peters.............. 17,672 641,052 126,666 33,334 3,514,367 691,014
-------
(1) The values represent the difference between the exercise price of the
options and the market price of the Company's common stock at exercise or
at fiscal year end, respectively.
14
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE
PAYOUTS UNDER
PERFORMANCE OR NON-STOCK
NUMBER OF OTHER PERIOD PRICE-BASED PLANS
PERFORMANCE UNTIL MATURATION TARGET/MAXIMUM
NAME UNITS OR PAYOUT (# OF SHARES)
---- ----------- ---------------- -----------------
D. N. Farr...................................... n/a n/a n/a
W. J. Galvin.................................... n/a n/a n/a
E. L. Monser.................................... n/a n/a n/a
W. W. Withers................................... n/a n/a n/a
C. A. Peters.................................... n/a n/a n/a
PENSION PLAN TABLE
The following table shows the annual benefits payable upon retirement at
age 65 for various compensation and years of service combinations under the
Emerson Electric Co. Retirement Plan and a related supplemental executive
retirement plan.
ANNUAL RETIREMENT BENEFIT AT AGE 65 AFTER
------------------------------------------------------------------------------------------
10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE ANNUAL OF OF OF OF OF OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
-------------- -------- -------- -------- -------- -------- --------
$ 900,000............... $132,437 $198,656 $ 264,875 $ 331,094 $ 397,312 $ 463,531
$1,200,000.............. $177,437 $266,156 $ 354,875 $ 443,594 $ 532,312 $ 621,031
$1,500,000.............. $222,437 $333,656 $ 444,875 $ 556,094 $ 667,312 $ 778,531
$1,800,000.............. $267,437 $401,156 $ 534,875 $ 668,594 $ 802,312 $ 936,031
$2,100,000.............. $312,437 $468,656 $ 624,875 $ 781,094 $ 937,312 $1,093,531
$2,400,000.............. $357,437 $536,156 $ 714,875 $ 893,594 $1,072,312 $1,251,031
$2,700,000.............. $402,437 $603,656 $ 804,875 $1,006,094 $1,207,312 $1,408,531
$3,000,000.............. $447,437 $671,156 $ 894,875 $1,118,594 $1,342,312 $1,566,031
$3,300,000.............. $492,437 $738,656 $ 984,875 $1,231,094 $1,477,312 $1,723,531
$3,600,000.............. $537,437 $806,156 $1,074,875 $1,343,594 $1,612,312 $1,881,031
$3,900,000.............. $582,437 $873,656 $1,164,875 $1,456,094 $1,747,312 $2,038,531
$4,200,000.............. $627,437 $941,156 $1,254,875 $1,568,594 $1,882,312 $2,196,031
Retirement benefits under the plans are computed on the basis of an
annuity with five years certain, unless the participant elects another method
of payment. The benefit amounts in the Pension Plan Table above have already
been adjusted for Social Security (or any other benefits). The dollar amounts
in the salary and bonus columns of the Summary Compensation Table above are
substantially the same as the compensation covered by the plans, but deferred
bonuses may cause such amounts to vary from the amounts set forth in the
Summary Compensation Table.
The credited years of service covered by the plans for each of the persons
named in the Summary Compensation Table above are as follows: D. N. Farr, 26;
W. J. Galvin, 34; E. L. Monser, 5; W. W. Withers, 17; and C. A. Peters, 27.
Payment of the specified retirement benefits is contingent upon continuation
of the plans in their present forms until the employee retires.
The benefits of certain employees may be reduced under the Emerson
Electric Co. Retirement Plan to meet the limits of the Internal Revenue Code.
An employee who is subject to a reduction of benefits under the Internal
Revenue Code may be selected to participate in a non-qualified supplemental
executive retirement plan not subject to Internal Revenue Code limitations.
Participation in the supplemental plan is by award, subject to the sole
approval of the Compensation Committee. D. N. Farr, W. J. Galvin and W. W.
Withers have been selected to participate in the supplemental plan. The
estimated annual retirement benefits payable upon retirement at age 65 to
D. N. Farr, W. J. Galvin, E. L. Monser, W. W. Withers and C. A. Peters are 53%,
48%, 4%, 19% and 13%, respectively, of the dollar amounts shown in the salary
and bonus columns of the Summary Compensation Table for fiscal year 2006.
15
PERFORMANCE GRAPH
The following graph compares cumulative total returns (assuming
reinvestment of dividends) on the Company's common stock against the Standard
& Poor's Composite 500 Stock Index (S&P 500) and the Dow Jones Electrical
Components and Equipment Index (DJEE) for the five-year period ended September
30, 2006 and the Compound Annual Growth Rate (CAGR).
[PERFORMANCE GRAPH]
*$100 invested on 9/30/01 in stock or index-including reinvestment of
dividends. Fiscal year ending September 30.
Copyright (C)2006, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/ S&P.htm
2001 2002 2003 2004 2005 2006 CAGR
---- ---- ---- ---- ---- ---- ----
EMERSON $100 $ 96 $119 $143 $170 $204 15.3%
S&P 500 100 80 99 113 126 140 7.0%
DJEE 100 64 101 103 112 129 5.2%
The information above in the Report of the Audit Committee, the Report of
the Compensation Committee on Executive Compensation, and the Performance
Graph shall not be deemed to be "soliciting material" or to be "filed" with
the Securities and Exchange Commission or subject to Regulation 14A or 14C or
to the liabilities of Section 18 of the Exchange Act, nor shall it be deemed
to be incorporated by reference into any filing under the Securities Act of
1933 or the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The functions and members of the Compensation Committee are set forth
above under "Board of Directors and Committees." All Committee members are
independent and none of the Committee members has served as an officer or
employee of the Company or a subsidiary of the Company.
16
II. RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In accordance with its charter, the Audit Committee has selected KPMG LLP,
independent registered public accounting firm, to audit the Company's
consolidated financial statements for fiscal 2007. KPMG LLP served as the
Company's independent registered public accounting firm for fiscal 2006. The
Audit Committee is asking the stockholders to ratify the appointment of KPMG
LLP as the Company's independent registered public accounting firm for the
fiscal year ending September 30, 2007.
The Audit Committee is not required to take any action as a result of the
outcome of the vote on this proposal. In the event stockholders fail to ratify
the appointment, the Audit Committee may reconsider this appointment. Even if
the appointment is ratified, the Audit Committee, in its discretion, may
direct the appointment of a different independent accounting firm at any time
during the year if the Audit Committee determines that such a change would be
in the Company's and the stockholders' best interests.
The Audit Committee has approved in advance all services provided by KPMG
LLP. A member of KPMG LLP will be present at the meeting with the opportunity
to make a statement and respond to appropriate questions from stockholders.
BOARD AND AUDIT COMMITTEE RECOMMENDATION. THE BOARD OF DIRECTORS AND THE
----------------------------------------
AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE FOR THE RATIFICATION OF THE
---
APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
III. VOTING
Shares may be represented by proxy at the meeting by completing and
returning the proxy card or voting by telephone or by Internet. If a quorum is
present, the affirmative vote of a majority of the shares entitled to vote
which are present in person or represented by proxy at the 2007 Annual Meeting
is required to elect Directors, to ratify the appointment of KPMG LLP as the
Company's independent registered public accounting firm for fiscal 2007, and
to act on any other matters properly brought before the meeting. Shares
represented by proxies which are marked or voted "withhold authority" with
respect to the election of any one or more nominees for election as Directors,
proxies which are marked or voted "abstain" on the proposal to ratify the
appointment of KPMG LLP as the Company's independent registered public
accounting firm for fiscal 2007, and proxies which are marked or voted to deny
discretionary authority on other matters will be counted for the purpose of
determining the number of shares represented by proxy at the meeting. Such
proxies will thus have the same effect as if the shares represented thereby
were voted against such nominee or nominees, against the proposal to ratify
the appointment of KPMG LLP as the Company's independent registered public
accounting firm for fiscal 2007 and against such other matters, respectively.
If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect to that
matter.
The Company knows of no other matters to come before the meeting. If any
other matters properly come before the meeting, the proxies solicited hereby
will be voted on such matters in the discretion of the persons voting such
proxies, except proxies which are marked to deny discretionary authority.
IV. STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the 2008 Annual
Meeting scheduled to be held on February 5, 2008, must be received by the
Company by August 17, 2007 for inclusion in the Company's proxy statement and
proxy relating to that meeting. Upon receipt of any such proposal, the Company
will determine whether or not to include such proposal in the proxy statement
and proxy in accordance with regulations governing the solicitation of
proxies.
In order for a stockholder to nominate a candidate for Director, under the
Company's Bylaws timely notice of the nomination must be received by the
Company in advance of the meeting. Ordinarily, such notice must be received
not less than 90 nor more than 120 days before the meeting, i.e., between
October 8 and November 7, 2007 for the 2008 Annual Meeting (but if the Company
gives less than 100 days' (1) notice of the meeting or (2) prior public
disclosure of the date of the meeting, then such notice must be received
within 10 days after notice of the meeting is mailed or other public
disclosure of the meeting is made). The stockholder filing the notice of
nomination must describe various matters regarding the nominee, including, but
not limited to, such information as name, address, occupation and shares held.
17
In order for a stockholder to bring other business before a stockholder
meeting, timely notice must be received by the Company within the time limits
described in the preceding paragraph. Such notice must include a description
of the proposed business, the reasons therefor, and other specified matters.
These requirements are separate from the requirements a stockholder must meet
to have a proposal included in the Company's proxy statement. The foregoing
time limits also apply in determining whether notice is timely for purposes of
rules adopted by the Securities and Exchange Commission relating to the
exercise of discretionary voting authority.
In each case the notice must be given to the Secretary of the Company,
whose address is 8000 West Florissant Avenue, St. Louis, Missouri 63136. Any
stockholder desiring a copy of the Company's Bylaws will be furnished one
without charge upon written request to the Secretary. A copy of the Bylaws is
available on the Company's Web site at www.gotoemerson.com, Investor
Relations, Corporate Governance, Bylaws.
V. MISCELLANEOUS
HOUSEHOLDING OF PROXIES
The Securities and Exchange Commission has adopted rules that permit
companies and intermediaries such as brokers to satisfy delivery requirements
for annual reports and proxy statements with respect to two or more
stockholders sharing the same address by delivering a single annual report
and/or proxy statement addressed to those stockholders. This process, which is
commonly referred to as "householding," potentially provides extra convenience
for stockholders and cost savings for companies. The Company and some brokers
household annual reports and proxy materials, delivering a single annual
report and/or proxy statement to multiple stockholders sharing an address
unless contrary instructions have been received from the affected
stockholders.
Once you have received notice from your broker or the Company that your
broker or the Company will be householding materials to your address,
householding will continue until you are notified otherwise or until you
revoke your consent. You may request to receive at any time a separate copy of
our annual report or proxy statement, by sending a written request to Emerson
Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn:
Investor Relations, or by telephoning 314-553-2197 or by visiting our Web
site.
If, at any time, you no longer wish to participate in householding and
would prefer to receive a separate annual report and/or proxy statement in the
future, please notify your broker if your shares are held in a brokerage
account or the Company if you hold registered shares. You can notify the
Company by sending a written request to Emerson Electric Co., 8000 West
Florissant Avenue, St. Louis, Missouri 63136, Attn: Investor Relations, or by
telephoning 314-553-2197.
If, at any time, you and another stockholder sharing the same address wish
to participate in householding and prefer to receive a single copy of the
Company's annual report and/or proxy statement, please notify your broker if
your shares are held in a brokerage account or the Company if you hold
registered shares. You can notify the Company by sending a written request to
Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136,
Attn: Investor Relations, or by telephoning 314-553-2197.
ADDITIONAL FILINGS
The Company's Forms 10-K, 10-Q, 8-K and all amendments to those reports
are available without charge through the Company's Web site on the Internet as
soon as reasonably practicable after they are electronically filed with, or
furnished to, the Securities and Exchange Commission. They may be accessed as
follows: www.gotoemerson.com, Investor Relations, SEC filings.
18
APPENDIX A
EMERSON DIRECTOR INDEPENDENCE STANDARDS
In order to be considered independent under the rules of the New York
Stock Exchange, the Board must determine that a director does not have any
direct or indirect material relationship with Emerson Electric Co.
("Emerson"). The Board has established the following guidelines to assist it
in determining director independence under the NYSE rules. Any Director who
meets the following standards will be deemed independent by the Board:
1. The Director was not employed by Emerson, and no immediate family
member of the Director was employed by Emerson as an executive officer, within
the preceding three years;
2. The Director is not a partner or employee of Emerson's independent
auditor, and no immediate family member of the Director is a partner of, or
employed in the audit, assurance or tax compliance practices of Emerson's
independent auditor, and neither the Director nor any immediate family member
has been within the preceding three years a partner of or employed by
Emerson's independent auditor and personally worked on Emerson's audit;
3. The Director was not employed by, and no immediate family member of
the Director was employed as an executive officer by, any company at the same
time any Emerson executive officer served as a member of such company's
compensation committee within the preceding three years;
4. Neither the Director, nor any member of the Director's immediate
family received in any twelve-month period during any of Emerson's last three
fiscal years direct compensation in excess of $100,000 from Emerson other than
regular director compensation, pension and other deferred payments that are
not in any way contingent on continued service to Emerson, and compensation
received by an immediate family member for service as a non-executive officer
of Emerson;
5. If the Director is an executive officer or an employee of, or if any
immediate family member is an executive officer of, another organization that
does business with Emerson, the annual sales to, or purchases from, Emerson by
such company in each of the last three fiscal years were less than the greater
of two percent of the annual revenues of such company or $1,000,000;
6. If the Director is an executive officer of another organization which
is indebted to Emerson, or to which Emerson is indebted, the total amount of
either company's indebtedness to the other is less than two percent of the
total consolidated assets of the company the Director serves as an executive
officer;
7. If the Director is, or is a director, executive officer or greater
than 10% owner of an entity that is, a paid advisor, paid consultant or paid
provider of professional services to Emerson, any member of Emerson's senior
management or any immediate family member of a member of Emerson's senior
management, the amount of such payments is less than the greater of 2% of such
firm's annual revenues or $1,000,000 during Emerson's current fiscal year;
8. If the Director is a partner, principal or counsel in a law firm that
provides professional services to Emerson, the amount of payments for such
services is less than the greater of 2% of such law firm's annual revenues or
$1,000,000 during Emerson's current fiscal year;
9. If the Director serves as an officer, director or trustee of a
charitable organization to which Emerson makes contributions: (i) Emerson's
discretionary contributions to such organization are less than the greater of
two percent of such organization's total annual charitable receipts or $1
million; (ii) Emerson's contributions are normal matching charitable gifts and
similar programs available to all employees and independent directors; or
(iii) the charitable donation goes through the normal corporate charitable
donation approval processes, and is not made "on behalf of" a Director;
10. The Director's ownership of Emerson stock, direct or indirect, is less
than 1% of the total outstanding Emerson stock;
11. If the Director is affiliated with, or provides services to, an entity
in which Emerson has an ownership interest, such ownership interest is less
than 20%; and
12. Any other relationship between the Director and Emerson not covered by
the standards set forth above is an arrangement that is usually and
customarily offered to customers of Emerson.
If any relationship exists between Emerson and any Director that is not
addressed by the standards set forth above, the Directors meeting these
standards shall determine whether such relationship impairs the independence
of such Director.
A-1
Emerson [logo]
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION Please
IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES IN Mark Here
PROPOSAL 1 AND FOR PROPOSAL 2. for Address
Change or / /
Comments
SEE REVERSE SIDE
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
---
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD AUTHORITY
listed below to vote for the
(except as marked nominees
to the contrary) listed below
/ / / /
01 C. Fernandez G. 03 R. L. Ridgway
02 W. J. Galvin 04 R. L. Stephenson
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR I PLAN
ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE TO ATTEND THE
NOMINEE'S NAME IN THE LIST ABOVE.) ANNUAL MEETING / /
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
---
2. Ratification of KPMG LLP as Independent Registered FOR AGAINST ABSTAIN
Public Accounting Firm / / / / / /
The undersigned hereby acknowledges receipt of Notice of Annual Meeting and
accompanying Proxy Statement.
SIGNATURE SIGNATURE DATE
------------------------ ------------------------- --------
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
-------------------------------------------------------------------------------
FOLD AND DETACH HERE
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM 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.proxyvoting.com/emr 1-866-540-5760 Mark, sign and date
Use the Internet to vote your proxy. Use any touch-tone telephone to your proxy card
Have your proxy card in hand when OR vote your proxy. Have your proxy OR and return it in the
you access the web site. card in hand when you call. enclosed postage-paid
envelope.
------------------------------------ -------------------------------- ---------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE, YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
PLEASE ADMIT:
[EMERSON logo]
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, does hereby appoint D. N.
FARR, W. W. WITHERS, and T. G. WESTMAN, or any of them, with full powers
of substitution, the true and lawful attorneys in fact, agents and
proxies of the undersigned to represent the undersigned at the Annual
Meeting of the Stockholders of EMERSON ELECTRIC CO., to be held on
February 6, 2007, commencing at 10:00 A.M., St. Louis Time, at the
Sheldon Concert Hall, 3648 Washington Boulevard, St. Louis, Missouri,
and at any and all adjournments of said meeting, and to vote all the
shares of Common Stock of the Company standing on the books of
the Company in the name of the undersigned as specified and in their
discretion on such other business as may properly come before the
meeting. The matters stated on the reverse side were proposed by the
Company, except as indicated.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
--------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
--------------------------------------------------------------------------
------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
[EMERSON logo]
ADMISSION TICKET
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, FEBRUARY 6, 2007
10:00 A.M.
SHELDON CONCERT HALL
3648 WASHINGTON BOULEVARD
ST. LOUIS, MO 63108
==========================
--------------------------
PLEASE PRESENT THIS
NON-TRANSFERABLE TICKET
AT THE REGISTRATION DESK
UPON ARRIVAL
--------------------------
==========================
APPENDIX
Page 16 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.