UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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P.H. GLATFELTER COMPANY

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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P. H. GLATFELTER COMPANY

96 South George Street, Suite 500

York, Pennsylvania 17401

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

TO BE HELD ON

 

May 1, 2008

 

TO THE SHAREHOLDERS:

 

The 2008 Annual Meeting of the Shareholders of P. H. Glatfelter Company, a Pennsylvania corporation, will be held at the York Expo Center, 334 Carlisle Avenue, York, Pennsylvania, in the White Rose Room, on Thursday, May 1, 2008, at 10:00 am, to consider and act upon the following items:

 

 

Only holders of record of the Company’s common stock at the close of business on March 6, 2008 will be entitled to notice of, and to vote at, the Annual Meeting.

 

It is important that your shares be represented and voted at the Annual Meeting. Whether or not you currently plan to attend the Meeting, please complete, date and sign the accompanying proxy card and return it promptly in the enclosed envelope (requiring no postage if mailed in the United States). If you choose, you may still vote in person at the Meeting, even though you had previously submitted a proxy card.

 

Jeffrey J. Norton
Vice President,
General Counsel and Corporate
Secretary

 

March 21, 2008

 

TABLE OF CONTENTS

 

P. H. GLATFELTER COMPANY

 

 

PROXY STATEMENT

 

The accompanying proxy is being solicited by the Board of Directors (the “Board”) of P. H. Glatfelter Company (the “Company”), 96 South George Street, Suite 500, York, Pennsylvania 17401, in connection with the 2008 Annual Meeting of the Shareholders of the Company (the “Annual Meeting” or “Meeting”) to be held on Thursday, May 1, 2008 at 10:00 a.m., 334 Carlisle Avenue, York, Pennsylvania, in the White Rose Room. This proxy statement and the accompanying proxy card are being mailed to the Company’s shareholders on or about March 21, 2008.

 

What is the purpose of the Annual Meeting?

 

At the Annual Meeting, shareholders will consider and act upon the following items:

 

 

Following the Meeting, the Company’s management will report on the Company’s business during the year ended December 31, 2007, and respond to questions from shareholders.

 

Who is entitled to vote at the Annual Meeting?

 

Only holders of record of the Company’s common stock at the close of business on the record date, March 6, 2008, are entitled to receive notice of, and to vote at, the Meeting. Each holder of the Company’s common stock is entitled to one vote per share owned of record on all business presented at the Meeting, except that shareholders have cumulative voting rights with respect to electing Directors. Cumulative voting means that each shareholder is entitled to as many votes in electing Directors as is equal to the number of his or her shares of common stock multiplied by the number of Directors to be elected. A shareholder may cast all such votes for a single nominee or may distribute them between two or more nominees as he or she sees fit. The persons named in the accompanying proxy card as proxy holders will vote the shares as designated by the shareholder, including any exercise of cumulative voting rights through the distribution of votes among the nominees as indicated on the proxy card. Absent such designation, the proxy holders may use their discretionary authority to vote as they see fit, including to vote cumulatively.

 

How do I vote?

 

If you complete and properly sign the accompanying proxy card and return it to the Company, it will be voted as you specify. If you are a holder of record of the Company’s common stock on the record date and attend the Meeting in person, you may deliver your completed proxy card or vote in person at the Meeting. Judges of election appointed by the Company will count the votes.

 

What constitutes a quorum?

 

A quorum is necessary to permit a particular matter to be considered and acted upon at the Meeting. The presence at the Meeting, in person or by proxy, of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter will constitute a quorum for the purposes of such matter. Abstentions and broker “non-votes” are counted as present and entitled to vote for purposes of determining a quorum. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.

 

The Company had 45,167,030 shares of common stock outstanding on the record date.

 

What vote is required to elect a Director and to approve a proposal assuming there is a quorum?

 

Election of Directors. The two nominees for Director receiving the highest number of votes cast by shareholders will be elected to serve on the Board. Votes withheld (or abstentions) with respect to the election of a Director will not be voted with respect to such Director. Broker non-votes are not counted for purposes of the election of Directors. As described in further detail under “Corporate Governance and Board of Directors — Does the Company have a Majority-Voting Policy?,” on March 5, 2008, the Company’s Board of Directors amended the Company’s Governance Principles to include a majority-voting policy for the election of Directors to be effective at the 2008 Annual Meeting. Pursuant to the majority-voting policy, in an uncontested election, if a nominee for Director who is an incumbent Director receives a greater number of votes “withheld” from his or her election than votes “for” such election, and no successor has been elected at such meeting, the Director shall promptly tender his or her resignation following certification of the shareholder vote.

Ratification of the appointment of Deloitte & Touche LLP. The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm requires the affirmative vote of a majority of the votes cast on this proposal. An abstention or a broker non-vote with respect to the ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm will not be counted for voting purposes on this proposal.

 

Amendment to By-Laws. The approval of the amendment of the Company’s By-Laws to phase out the Company’s classified Board structure requires the affirmative vote of a majority of the votes cast on this proposal. An abstention or a broker non-vote with respect to the amendment of the Company’s By-Laws to phase out the Company’s classified Board structure will not be counted for voting purposes on this proposal.

 

How does discretionary voting authority apply?

 

If you sign and return the accompanying proxy card, but do not make any selections, you give discretionary authority to the persons named as proxy holders on the proxy card. Your shares will then be voted as recommended by the Board.

 

What is the Board’s recommendation?

 

The Board recommends a vote:

 

 

Can I change my vote after I return my proxy card?

 

Yes. Even after you have submitted your proxy card, you may revoke your proxy and change your vote at any time before the proxy is exercised by filing with the Company’s Secretary, either a notice of revocation or a duly executed proxy bearing a later date. Your authorization of the proxy holders to vote your proxy will be revoked if you attend the Annual Meeting in person and request to change your vote, vote in person or revoke your proxy. Attendance at the Meeting will not by itself revoke a previously granted proxy.

 

Who bears the cost of solicitation of proxies?

 

The Company bears the cost of preparing, printing, assembling and mailing this proxy statement and other Board proxy solicitation materials. The Company will also reimburse brokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to the owners of the Company’s common stock. In addition to the solicitation of proxies by mail, some of the officers and other employees of the Company may solicit proxies personally, by telephone and by other means. These persons receive no special compensation for any solicitation activities.

 

When are shareholder proposals due for inclusion in the proxy statement for the 2009 Annual Meeting of Shareholders?

 

Proposals that a shareholder would like to present at the 2009 meeting must be submitted to the Company prior to the preparation of the annual proxy statement. To be included in the proxy statement for the Company’s 2009 Annual Meeting, shareholder proposals must be submitted in writing to the Company’s Secretary no later than November 24, 2008. The Company’s By-Laws prescribe the procedures shareholders must follow to bring business before shareholder meetings. To bring matters before the 2009 Annual Meeting, under the terms of the Company’s By-Laws, and to include a matter in the Company’s proxy statement and proxy for that meeting, notice must be received by the Company within the time limit described above. Such notice must meet the Company’s By-Law requirements, and otherwise comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). No shareholder proposals were submitted to the Company for presentation at the 2008 Annual Meeting.

 

How can a shareholder nominate Director candidates?

 

You may recommend nominees for consideration by the Board’s Nominating and Corporate Governance Committee for nomination for election to the Board. Shareholder recommendations for Director nominees will receive the same consideration by the Board’s Nominating and Corporate Governance Committee that all other nominations receive. Shareholders wishing to recommend a nominee for Director should submit such recommendation in writing, along with any supporting materials the shareholder deems appropriate, to the Secretary of the Company.

 

You may nominate a person for election to the Board, provided the recommendation is made in accordance with the procedures described herein and the Company’s By-Laws. To nominate a candidate for Director at the 2009 Annual Meeting, your notice of the nomination must be received by the Company’s Secretary no later than November 24, 2008. The notice must describe various matters regarding the nominee, including name, address, occupation and Company shares held, all as provided by the Company’s By-Laws. Copies of the Company’s By-Laws may be obtained free of charge from the Secretary of the Company.

 

 

 

To the Company’s knowledge, the following table sets forth information regarding ownership of Glatfelter’s outstanding common stock as of March 6, 2008 (except as otherwise noted) by: (i) each person who is known by the Company to own beneficially more than 5% of the common stock of the Company; (ii) each Director and named executive officer; and (iii) all Directors and executive officers as a group. Except as otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment powers with respect to the securities listed. The number of shares beneficially owned by each person is determined under the rules of the Securities and Exchange Commission (“SEC”) and the information is not necessarily indicative of beneficial ownership for any other purpose. Under the rules of the SEC, all shares with respect to which a person has the right to acquire beneficial ownership within 60 days is considered beneficially owned by that person.

 

 

 

 

 

 

 

 

 

The following table provides certain information as of December 31, 2007 regarding the Company’s equity compensation plans.

 

 

 

 

 

 

Section 16(a) of the Exchange Act requires the Company’s Directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities (“10% Holders”), to file reports of holdings and transactions in the Company’s common stock with the SEC and the New York Stock Exchange (the “NYSE”). Based on the Company’s records and other information, the Company believes that, in 2007, its Directors, executive officers and 10% Holders filed all required reports of holdings and transactions in the Company’s common stock with the SEC and the NYSE. Filings for certain RSUs granted on March 7, 2007, were late because they were not made until March 14, 2007 for the following individuals, Timothy R. Hess-1,875 units; John P. Jacunski-2,188 units; Dante Parrini-2,500 units; Mark Sullivan-1,875 units and William T. Yanavitch II-1,563 units.

 

 

 

At the Annual Meeting, the Company’s shareholders will vote to fill two Director positions, each with three-year terms expiring on the date of the Company’s 2011 Annual Meeting of Shareholders and until their respective successors are elected and qualified. The Board proposes that Nicholas DeBenedictis and J. Robert Hall, who are currently serving as Directors of the Company, be re-elected as Directors for terms expiring in 2011. The nominees have consented to serve if elected to the Board.

 

If a nominee is unable to serve as a Director at the time of the Meeting, an event that the Board does not anticipate, the persons named in the accompanying proxy card will vote for such substitute nominee as may be designated by the Board, unless the Board reduces the number of Directors accordingly.

 

Board of Directors

 

The following table sets forth information as to the nominees and the other persons who are to continue as Directors of the Company after the Annual Meeting. The officers referred to in the table are officers of the Company unless otherwise indicated.

 

 

 

The Company’s Board of Directors, after careful consideration and upon recommendation by our Nominating and Corporate Governance Committee has adopted, and recommends shareholder approval of, a proposal to amend Section 2.1 of the Company’s By-Laws to phase out the Company’s classified Board structure.

 

Section 2.1 of the Company’s By-Laws divides the Board of Directors into three classes serving staggered three-year terms. One class, consisting of approximately one-third of the total membership of the Board, stands for election at each annual meeting of shareholders. The proposed amendments to this section will phase out the provisions classifying the Board into three classes and phase in a Board where all members are elected on an annual basis.

 

To ensure a smooth transition to the new system, and to reflect the three-year terms to which current Directors were elected, the amendments will not shorten the term of any Director elected before the Company’s 2009 annual meeting of shareholders. The new procedures will apply to all Directors elected at the 2009 annual meeting of shareholders and thereafter. This means that the Directors who were elected at the 2006 annual meeting for three-year terms expiring in 2009, or their successors, will stand for election at the 2009 annual meeting for one-year terms, the Directors who were elected at the 2007 annual meeting for three-year terms expiring in 2010, or their successors, will stand for election at the 2010 annual meeting for one-year terms and the Directors who are elected at the 2008 annual meeting for three-year terms expiring in 2011, or their successors, will stand for election at the 2011 annual meeting for one-year terms. At the 2011 annual meeting and thereafter, all Directors will be subject to annual election.

 

If Proposal 2 is approved, Section 2.1 of the Company’s By-Laws could thereafter be amended in the same manner as any other section of the Company’s By-Laws, which is as follows: the Company’s By-Laws may be amended or repealed and new By-Laws may be adopted by the action of the Directors or by action of the Company’s shareholders, provided, however, that new By-Laws may not be adopted and the current By-Laws may not be amended or repealed in any way that limits indemnification rights, increases the liability of Directors or changes the manner or vote required for any such adoption, amendment or repeal, except by action of the shareholders.

 

The resolution to be presented for shareholder approval regarding the amendment to the Company’s By-Laws pursuant to Proposal 2 is attached as Appendix A to this proxy statement.

 

The Board believes that the amendment to Section 2.1 of the Company’s By-Laws to phase out the Company’s classified Board structure is in the best interests of the Company and its shareholders and recommends a vote FOR the proposal.

 

The Audit Committee of the Board of Directors has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for the fiscal year 2008, subject to ratification by the Company’s shareholders. Deloitte audited the Company’s consolidated financial statements for the fiscal year ended December 31, 2007.

 

A Deloitte representative is expected to attend the Annual Meeting, will be given the opportunity to make a statement if he or she chooses to do so, and will be available to respond to appropriate shareholder questions.

 

Why is the appointment of Deloitte being submitted for shareholder ratification?

 

On March 5, 2008, the Company’s Board of Directors amended the Company’s Governance Principles to include a requirement that the Audit Committee’s appointment of the Company’s independent registered public accounting firm shall be submitted to the Company’s shareholders for ratification each year. If the shareholders fail to ratify the Audit Committee’s selection, the Audit Committee will reconsider its selection of the independent auditors at such time and in such manner as the Audit Committee may determine in its sole discretion.

 

What did the Company pay its auditors in 2007 and 2006?

 

For the years ended December 31, 2007 and 2006, the aggregate fees billed to the Company by Deloitte were as follows:

 

 

All services rendered for the Company by Deloitte in 2007 were permissible under applicable laws and regulations, and were pre-approved by the Audit Committee. The Audit Committee’s Audit and Non-Audit Services Pre-Approval Policy provides for the pre-approval of audit and non-audit services performed by our independent registered public accounting firm. Under the policy, the Audit Committee may pre-approve specific services, including fee levels, by the independent registered public accounting firm in a designated category (audit, audit-related, tax services and all other services). The Audit Committee may delegate, in writing, this authority to one or more of its members, provided that the member or members to whom

such authority is delegated must report their decisions to the Audit Committee at its next scheduled meeting.

 

 

The Board unanimously recommends a vote FOR the ratification of the appointment of Deloitte & Touche LLP as independent registered public accounting firm for the fiscal year 2008.

 

 

 

The Board of Directors and management of the Company are dedicated to effective corporate governance. The Board has adopted Governance Principles to provide a framework for governance of the Company. These Governance Principles are set forth in full on the Company’s website at www.glatfelter.com/about_us/corporate_governance/principles.aspx and available in print upon request directed to the Corporate Secretary’s Office, 96 South George Street, Suite 500, York, PA 17401-1434.

 

What is the composition of the Board?

 

The Board currently consists of eight members. In the Company’s Governance Principles, the Board has adopted the NYSE standards for determining the independence of Directors, which requires that a Director does not have a material relationship with the Company.

 

The Board has determined the following Directors to be independent and not to have any material relationship with the Company: Ms. Dahlberg and Messrs. DeBenedictis, Hall, Ill, Naples, Smoot and Stewart. The Board determined that Mr. Glatfelter II has a material relationship with the Company because he is the Chairman and Chief Executive Officer of the Company. Thus, Mr. Glatfelter is deemed not to be an independent Director by NYSE standards and the Company’s Governance Principles.

 

What committees has the Board established?

 

The Company’s Board of Directors has four standing committees: the Audit Committee, the Compensation Committee, the Finance Committee, and the Nominating and Corporate Governance Committee. The Board appoints the members of all of these standing committees and their Chairpersons at its organizational meeting following the Company’s Annual Meeting.

 

The Board has adopted a written charter for each of its standing committees, all of which are posted on the Company’s website at www.glatfelter.com/about_us/corporate_governance/committees.aspx, and available in print upon request directed to the Corporate Secretary’s Office, 96 South George Street, Suite 500, York, PA 17401-1434.

 

Audit Committee. The Audit Committee currently consists of four Directors: Messrs. Hall (Chair), DeBenedictis, Ill and Naples. In the opinion of the Board, all four Audit Committee members meet the Director independence requirements set forth in the listing standards of the NYSE and the applicable rules and regulations of the SEC in effect on the date this proxy statement is first mailed to shareholders. The Board has determined that, based on their experience, Messrs. DeBenedictis, Hall, Ill and Naples are audit committee financial experts, as that term is defined in the applicable SEC regulations, and that all members of the Audit Committee are financially literate within the meaning of the NYSE listing standards. The Audit Committee held 7 meetings during 2007.

 

In accordance with its Board-approved Charter, the Audit Committee:

 

 

 

The Audit Committee has the authority to retain special legal, accounting, or other experts as it deems necessary to carry out its duties, and the Company makes funds available to the Committee for such retention.

 

Compensation Committee. The Compensation Committee currently consists of five Directors: Ms. Dahlberg (Chair), and Messrs. DeBenedictis, Naples, Smoot and Stewart. In the opinion of the Board, all five Compensation Committee members meet the Director independence requirements set forth in the NYSE listing standards in effect on the date this proxy statement is first mailed to shareholders. The Compensation Committee held 9 meetings during 2007.

 

In accordance with its Board-approved charter, the Compensation Committee is responsible for discharging the Board’s duties related to compensation of the Company’s executives and also reviews, recommends for approval by the Board and oversees the Company’s management incentive and equity-based incentive compensation plans, defined benefit and contribution plans, and other welfare benefit plans. In addition to, or in furtherance of, the Compensation Committee’s functions described above, the Compensation Committee:

 

 

The Compensation Committee has the authority to engage independent compensation consultants, legal counsel or advisors, as it may deem appropriate in its sole discretion, and to approve related fees and retention terms of such consultants, counsel, or advisors, and routinely holds executive sessions without management.

 

The Chair of the Compensation Committee is responsible for leadership of the Committee and sets meeting agendas. The Committee may form subcommittees and delegate authority to them, as it deems appropriate. The meetings of the Compensation Committee are regularly attended by the CEO and the Committee’s independent compensation consultant, but the Committee usually meets in executive session at each meeting.

 

The CEO gives performance assessments and compensation recommendations for each executive officer of the Company (other than himself). The Compensation Committee considers the CEO’s recommendations with the assistance of a compensation consultant and approves the compensation of the executive officers (other than the CEO) based on such deliberations. In the case of the CEO, the Committee develops its own recommendation in executive session without the CEO, or any other member of management, present and then provides this

recommendation to the independent members of the Board for approval in executive session. The CEO, the Vice President of Human Resources & Administration, and the Vice President, General Counsel & Secretary generally attend, and the Senior Vice President & Chief Financial Officer occasionally attends, Compensation Committee meetings but none are present for executive sessions or any discussion of their own compensation.

 

The Committee has engaged Compensation Strategies, Inc., an independent executive compensation consulting firm, to provide advice and assistance to the Committee and to management in the area of executive and non-employee Director compensation for the Company. The consultant reports directly to the Committee but has been authorized by the Committee to work with certain executive officers of the Company as well as other employees in the Company’s human resources, legal, and finance departments. The consultant conducts regular reviews of total compensation of the Company’s executive group, based on the process described in the Compensation Discussion & Analysis contained elsewhere in this proxy statement, for review by management, and by the Committee, in determining the appropriate levels of compensation for each executive.

 

The consultant also conducts regular reviews of total compensation of the Company’s non-employee Directors and assists the Committee in the development of recommended changes in such compensation for approval by the Board of Directors. The consultant also provides advice to the Committee and management with respect to other executive and Board compensation issues that might arise throughout the year. During 2007, the scope of the consultant’s assignment included advising the Committee on the design of the MIP and long-term incentive programs for 2007 and for 2008, as discussed in the Compensation Discussion & Analysis; Section 409A reviews; and participation in the review and revision of the change in control employment agreements with certain of the Company’s officers.

 

Finance Committee. The Finance Committee currently consists of three Directors: Messrs. Stewart (Chair), Glatfelter and Hall. The Finance Committee provides advice to the Board on the financial policies of the Company and has oversight over matters of financial significance to the Company. Specifically, the Finance Committee is charged with:

 

 

The Finance Committee held 5 meetings during 2007.

 

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee currently consists of five Directors: Mr. Smoot (Chair), Ms. Dahlberg, and Messrs. DeBenedictis, Hall and Stewart. In the opinion of the Board, all five members of the Nominating and Corporate Governance Committee meet the Director independence requirements as set forth in the NYSE listing standards in effect on the date this proxy statement is first mailed to shareholders. The Nominating and Corporate Governance Committee:

 

The Nominating and Corporate Governance Committee considers candidates for Board membership suggested by its members, other Board members, management and shareholders. When evaluating whether to recommend an individual for election or re-election to the Board, the Nominating and Corporate Governance Committee will consider, at a minimum and in accordance with the Company’s Governance Principles, the nominee’s independence, availability of sufficient time to serve on the Company’s Board and the possession of such knowledge, experience, skills, expertise, wisdom, integrity, business acumen, understanding of the Company’s business environment and diversity so as to enhance the Board’s ability to manage and direct the affairs and business of the Company. Shareholders wishing to recommend a nominee for election to the Board should follow the procedures set forth on page 2 of this proxy statement.

 

The Committee periodically reviews and oversees orientation programs for newly elected Directors and continuing education programs for incumbent Directors. The Committee also reviews shareholder proposals and Director nominations submitted for presentation at the annual meeting and proposed responses from the Board, and makes recommendations to the Board concerning Board procedures. The Nominating and Corporate Governance Committee is charged with developing and recommending corporate governance principles to the Board and reviewing these principles for appropriateness and compliance with SEC and NYSE requirements. The Nominating and Corporate Governance Committee reviews the senior management organization and succession plan and makes nominations to the Board for election of officers.

 

The Nominating and Corporate Governance Committee has the authority to retain Director search consultants, outside counsel or other experts as it deems necessary to carry out its duties, and the Company makes funds available to the Committee for such retention. No third party Director search firms were engaged in 2007. The Nominating and Corporate Governance Committee held 3 meetings during 2007.

 

How may shareholders communicate with the Company’s Board or the non-management Directors of the Company?

 

You may submit any written correspondence to the Board or any individual Director (whether management or non-management), c/o Corporate Secretary’s Office, 96 South George Street, Suite 500, York, PA 17401-1434. You can also call the Company’s Integrity Helpline (1-800-346-1676).

 

The Company’s Board has approved a process whereby the Office of the Corporate Secretary will regularly forward any and all communications received on behalf of the Board or individual Directors to the Board or the respective Director and the Chair of the Committee responsible for the matter addressed in the communication. All communication that relates to concerns regarding accounting, internal controls or auditing matters will be forwarded to the Chair of the Audit Committee promptly upon receipt with a copy to the addressee.

 

Does the Company have a majority-voting policy?

 

On March 5, 2008, the Company’s Board of Directors amended the Company’s Governance Principles to include a majority-voting policy for the election of Directors, effective at the 2008 Annual Meeting. Pursuant to the majority-voting policy, in an uncontested election, if a nominee for Director who is an incumbent Director receives a greater number of votes “withheld” from his or her election than votes “for” such election (a “Majority Withheld Vote”), and no successor has been elected at such meeting, the Director shall promptly tender his or her resignation following certification of the shareholder vote. In an uncontested election, if a nominee for Director who is not an incumbent Director receives at any meeting for the election of Directors at which a quorum is present a Majority Withheld Vote (but does receive the requisite plurality vote), the nominee will be deemed to have been elected to the Board and to have immediately resigned. To be eligible to stand for election, each person who agrees to be nominated must also agree, in writing, to be bound by this provision.

 

In the event of a Majority Withheld Vote, the Nominating and Corporate Governance Committee will consider the tendered resignation and make a recommendation to the Board as to whether or not to accept it. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following certification of the shareholder vote. In making their determinations, the Nominating and Corporate Governance Committee and the Board may consider any factors or other information that they consider appropriate or relevant. Thereafter, the Board will promptly disclose its decision whether or not to accept the Director’s resignation (and the reasons for rejecting the resignation, if applicable) in a press release or filing with the SEC. Any Director who tenders his or her resignation pursuant to this provision shall not participate in the Nominating and Corporate Governance Committee’s recommendation or Board action regarding whether or not to accept the resignation. However, if each member of the Nominating and Corporate Governance Committee received a Majority Withheld Vote at the same meeting, then the remaining independent Directors who did not receive a Majority Withheld Vote shall consider the resignations and determine whether or not to accept them. If the Directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer Directors, all Directors may participate in the action regarding whether to accept the resignations, provided, however, that each Director’s resignation will be acted upon separately and no Director may participate in the Board action regarding whether or not to accept his or her

resignation. A Director whose resignation is not accepted by the Board shall continue to serve until the next annual meeting at which he or she is up for election and until his or her successor is duly elected, or until his or her earlier resignation or removal. If a Director’s resignation is accepted by the Board, or if a nominee for Director who is not an incumbent Director is deemed to have been elected and to have immediately resigned, then the Board, in its sole discretion, may fill any resulting vacancy pursuant to the Company’s By-Laws or may amend the Company’s By-Laws to decrease the size of the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board as to whether or not it should fill the vacancy or amend the Company’s By-Laws to reduce the size of Board.

 

What is the Company’s policy regarding Director attendance at the Annual Meeting?

 

While the Company does not have a formal policy regarding Director attendance at the Annual Meeting of Shareholders, the Company’s Directors, including persons nominated for election at the Annual Meeting, generally attend the Annual Meeting.

 

How often did the Board meet during 2007?

 

The Board held 7 meetings during 2007. The standing committees established by the Board held a total of 24 meetings in 2007. Each of the incumbent Directors attended at least 75% of the aggregate of the meetings of the Board and Board committees on which he or she served in 2007. Non-management Directors meet in regularly scheduled executive sessions (without management), at which the Chair of the Nominating and Corporate Governance Committee presides.

 

Where can additional Corporate Governance and related information be obtained?

 

Our corporate website (www.glatfelter.com) includes a Corporate Governance page consisting of, among others, our Governance Principles and Code of Business Conduct, a listing of our Board of Directors and Executive Officers, Nominating, Audit and Compensation Committees of the Board of Directors and their respective Charters, Code of Business Ethics for the CEO and Senior Financial Officers of Glatfelter, our “whistle-blower” policy and other related material. We intend to satisfy the disclosure requirement for any future amendments to, or waivers from, our Code of Business Conduct or Code of Business Ethics for the CEO and Senior Financial Officers by posting such information on our website. We will provide a copy of the Code of Business Conduct or Code of Business Ethics for the CEO and Senior Financial Officers, without charge, to any person who requests one, by calling (717) 225-2724.

 

DIRECTOR COMPENSATION

 

How are Directors compensated?

 

Base Compensation. Effective May 1, 2006, non-employee Directors received an annual retainer fee of $27,000, two thirds of which consisted of shares of the Company’s common stock with an equivalent market value on the grant date, with the balance paid in cash. In addition to the annual retainer, non-employee Directors were paid in cash $2,000 for attendance at the annual Board retreat, $1,500 for each Board meeting and $1,000 for each committee meeting they attended. Non-employee Directors serving as committee chairpersons were paid an additional $5,000 (in cash) annually for their service. In addition, each non-employee Director received an annual restricted stock unit award valued at $15,500, rounded to the nearest whole share, on the grant date that will vest over a three-year period. The Company’s non-employee Directors compensation policy was revised on May 1, 2007. Directors currently receive an annual retainer fee of $35,000, two thirds of which consists of shares of the Company’s common stock with a market value on the grant date, with the balance paid in cash. In addition to the annual retainer, non-employee Directors are paid $2,000 for attendance at the annual Board retreat, $1,500 for Board meetings and $1,500 for committee meetings they attend. Non-employee Directors serving as committee chairpersons are paid an additional $5,000 (paid in cash) annually for their service, with the exception of the Audit Committee and Compensation Committee chairpersons who receive $10,000 annually for their service. In addition, each non-employee Director receives an annual restricted stock unit award valued at $30,000 on the grant date that will vest over a three-year period. As with the prior Director compensation program, all accrued, but unpaid, Director cash compensation payments are made on each May 1st and November 1st.

 

Deferred Compensation. Pursuant to the Company’s Deferred Compensation Plan for Directors (the Deferred Compensation Plan), every year each Director may elect to defer 50%, 75% or 100% of his or her annual retainer paid to such Director for serving on the Board, but not including any fees paid to a Director for attending meetings of the Board or any committee of the Board or for serving as a chairperson of a committee of the Board. No such elections were made with respect to fees earned in 2007.

 

For previous deferral elections, the Company has credited a deferred fee account with phantom shares of the Company’s common stock (stock units) on the date the retainer would otherwise have been paid. The number of stock units credited to a Director’s deferred account is the amount of the deferred fee divided by the fair market value of the Company’s common stock on such date. Additional stock units are credited to each Director’s account when dividends are paid on the Company’s common stock as of

any such dividend payment date. Generally speaking, the Deferred Compensation Plan provides that a Director will be entitled to receive a cash payment equal to the value of the stock units credited to his or her account following termination of such Director’s service on the Board. Directors also have the option to elect, at the time of deferral, payment in five annual installments following termination of service as a Director. In accordance with transition rules with respect to tax law changes under Section 409A of the Internal Revenue Code of 1986, as amended (the “IRC”), Directors were given a one-time opportunity to make new distribution elections in 2007, including to elect payment of their accounts as of a designated date prior to termination of service as a Director.

 

Benefits.  Each non-employee Director is covered by the Company’s Directors’ and officers’ liability insurance, as well as the Company’s travel accident insurance.

 

 

 

 

 

 

Overview of Compensation Program Objectives and Design

 

The Company’s compensation program for the Named Executive Officers (“NEOs”) is designed to attract, retain, and motivate highly qualified executives. In order to accomplish these objectives, the program consists of several forms of compensation, including base salary, annual incentives, long-term incentives, limited perquisites, and benefits. The Company believes that structuring total compensation opportunities that are competitive and that target the 50th percentile of market levels will allow these objectives to be attained. A significant portion of each NEO’s compensation opportunity consists of annual and long-term variable compensation that is contingent on the achievement of specific Company financial goals, reflects individual performance, and is designed to align the NEOs’ interests with those of the Company’s shareholders. Variable compensation opportunity differs among the NEOs and generally increases with increased responsibility within the Company. In addition, the mix of annual and long-term incentive compensation varies among the NEOs in that the relative weighting of long-term incentive compensation is greater for greater levels of responsibility. The Company’s annual compensation is cash-based, while long-term compensation is intended to consist of both cash and equity-based awards (for fiscal year 2007, however, long-term incentive awards were entirely equity-based, as discussed below). The Company does not have specific allocation goals between cash and equity-based compensation or between annual and long-term incentive compensation; instead, the Company relies on the process described below in its determination of compensation levels for each NEO.

 

In order to determine competitive market levels, the Compensation Committee reviews total compensation levels for similarly situated executives of a group of peer companies and with reference to certain broader-based market data, compiled by Compensation Strategies, Inc., the Committee’s independent compensation consultant. This review is performed annually with respect to the CEO and CFO positions and every other year with respect to other executives. However, if market compensation levels with respect to the CEO or CFO are found to have changed substantially in the off-years, a full review of all positions is conducted. A review of CEO and CFO compensation only was conducted for fiscal year 2007. Consistent with standard practices, statistical analysis is used to adjust all market compensation data to reflect the current annual revenues of the Company given the variation in size of the companies from which compensation data is collected. Each element of compensation as well as total compensation are quantified and reviewed to determine the Company’s competitiveness compared to the market. In determining appropriate individual compensation levels for the NEOs, the Committee considers this competitive market compensation data, including information ranging from the 25th to the 75th percentiles, as well as the individual’s tenure, experience, and particular set of skills as well as individual and Company performance. Compensation levels for all NEOs, except the CEO, are approved by the Committee based on the recommendation of the CEO. In the case of the CEO, the Committee develops its own recommendation in executive session without the CEO, or any other member of management, present and then provides this recommendation to the independent members of the Board for approval in executive session. All subsequent references to action by the Compensation Committee assume without further reference that the independent members of the Board act with respect to CEO compensation in accordance with the recommendation of the Committee.

 

The group of peer companies used in the review of total compensation levels consists of publicly traded companies with annual revenues ranging from approximately $250 million to $6.5 billion that compete against the Company’s products, are from the broader paper and packaging industries, or compete for the same executive talent, including other companies headquartered in south central Pennsylvania. The group was developed by the Committee’s compensation consultant and approved by the Committee. The Committee reviews the make-up of the group on an annual basis with the assistance of its compensation consultant. Since the Company competes for executive talent with a broad range of companies and industries, the companies in this group are not necessarily the same as those appearing in the peer group that is included in the Company’s performance graph in the Company’s Annual Report to shareholders. Each company included in the group, and whether it also appears in the performance graph, is shown below:

 

 

 

For 2008, the Committee has continued to target the 50th percentile of market levels for the NEOs in order to continue to attract, retain, and motivate highly qualified executives. The NEOs’ 2007 levels of compensation were below the 50th percentile of the market as a group. The Committee has approved certain increases to compensation levels for the NEOs for 2008, as described below. Given the increase in annual revenues of the Company associated with the recent acquisitions, the Committee has taken steps over the past two years to bring compensation levels closer to the 50th percentile of the market.

 

Base Salary

 

The Committee’s policy is to set salaries for the NEOs at levels that are sufficient to attract and retain high-caliber individuals, based on the relative value of each position as measured against the market, as discussed above. The Committee targets NEOs’ base salaries at the 50th percentile of the market for their respective assignments, with the ability to set actual base salaries based on an assessment of each NEO’s tenure, experience, and skill set as well as individual and Company performance and competitive and internal equitable considerations. Base salaries are reviewed and approved annually (typically in the first quarter of the calendar year) by the Committee.

 

For 2007, base salary increases for the Company’s NEOs ranging from 3.0% to 20.0% were approved by the Committee and became effective as of February 1, 2007. Such adjustments reflect the Committee’s assessment of individual performance, achievement of business objectives, a market analysis conducted by the Committee’s independent compensation consultant for the executive’s position, and the Committee’s desire to retain leadership skills necessary to execute the Company’s business strategy. As a group, the NEOs’ adjusted base salaries were somewhat below the 50th percentile of the market for 2007.

 

For 2008, base salary increases for the Company’s NEOs also ranging from 3.0% to 20.0% were approved by the Committee and became effective as of February 1, 2008. As with the prior year, the adjustments reflect the Committee’s assessment of individual performance, achievement of business objectives, a market analysis conducted by the Committee’s independent compensation consultant for the executive’s position, and the Committee’s desire to retain leadership skills necessary to execute the Company’s business strategy. As a group, the NEOs’ adjusted base salaries remained somewhat below the 50th percentile of the market.

 

Annual Incentives

 

The Committee currently provides an annual incentive opportunity to the NEOs under the Company’s Management Incentive Plan (“MIP”). The MIP is designed to encourage the NEOs, as well as other eligible executives and key employees, to increase the performance of the Company through annual cash incentive bonuses. The Committee targets annual incentive bonus opportunities under the MIP at the 50th percentile of the market for the NEOs, with the ability to set actual opportunities based on an assessment of each NEO’s tenure, experience and skill set, as well as individual and Company performance and competitive and internal equitable considerations. The objectives of the MIP are to assure that incentive bonus awards represent at-risk compensation, to reward the NEOs and other eligible employees on the basis of corporate financial results on an annual basis, and to provide an incentive bonus award that is competitive with the market for each position. Incentive bonus opportunities are set annually and potentially represent a significant portion of total compensation.

 

For 2007, the Committee established Operating Net Income (which consists of net income excluding after-tax pension income and gains from the sale of timberlands as well as certain unusual, non-recurring items) as the single performance metric for payment of bonuses under the MIP. The Committee established threshold, target, and maximum Operating Net Income performance levels for the MIP. The amount actually received by the participants is dependent on the extent of achievement of such performance levels. Under this design, no payments will be made under the MIP if the threshold Operating Net Income is not attained. The target level of Operating Net Income (the level at which target bonuses would be paid) for 2007 was consistent with the target level used for 2006 (which was not achieved) and was based on the level of Operating Net Income needed to reach certain ten-year historical performance levels of competitor companies, many of which were in the Compensation Peer Group described above. Therefore, the Company believes the Operating Net Income performance levels were set at realistic, yet aggressive, levels. For the NEOs, target bonus opportunities for 2007 ranged from 45% to 75% of base salary. Based on advice received from the Committee’s

compensation consultant regarding market practices, payments for achievement of the threshold performance level would result in payments equal to 50% of the target opportunities, or 22.5% to 37.5% of base salary, and achievement of the maximum performance level would result in payments equal to 200% of the target opportunities, or 90% to 150% of base salary. In addition, all payments to the NEOs under the MIP are based entirely on Operating Net Income performance of the Company; no portion of the MIP payment is based on individual performance of each NEO. However, the Committee has the authority to reduce payments under the MIP based on the Committee’s assessment of individual performance during the year, with the approval of the independent members of the Board of Directors in the case of the CEO. No such reductions were made for 2007.

 

Based on 2007 results (which excluded certain increases to the Company’s reserves relating to environmental matters at Fox River and the benefits of an international tax law change), bonuses were paid to the NEOs at 67% of target under the MIP. The NEOs’ target bonuses, as a percentage of base salary, were approximately equivalent to the 50th percentile of the market; however, given the below-market base salaries described above, target bonus opportunities, as a dollar amount, were also somewhat below the 50th percentile of the market.

 

For 2008, the Company has continued to use Operating Net Income as the performance metric for the MIP, although the Company is considering the possible use of additional metrics with respect to certain officers of the Company. However, the target performance level of Operating Net Income has been set at a level consistent with the Company’s business plan and represents a double-digit percentage increase in the target level over 2007. Target bonus percentages for the NEOs remain unchanged from 2007, with the exception of the CEO, whose target bonus percentage was increased to 80% of base salary. Payment amounts for achievement of the threshold performance level have also remained at 50% of the target opportunities, and achievement of the maximum performance level would result in payments equal to 200% of the target opportunities.

 

Long-Term Incentives

 

The Company’s approved long-term incentive program with respect to the NEOs and other executives includes restricted stock units (RSUs), a cash-based long-term incentive plan (cash LTIP), and stock-only stock appreciation rights (SOSARs). The program is designed to retain the NEOs and other executives and to focus their attention on the long-term performance of the business. The Committee targets the value of the long-term incentive awards at the 50th percentile of the market for the NEOs, with the ability to set actual award levels based on an assessment of each NEO’s tenure, experience, and skill set, as well as individual and Company performance and competitive and internal equitable considerations. Under this long-term incentive program, RSUs are designed to represent approximately 20% of each NEO’s total long-term incentive, the cash LTIP represents approximately 40%, and SOSARs represent approximately 40%. RSUs are intended to create strong incentives for the NEOs and other executives to maximize shareholder value and, at the same time, provide an incentive to remain through the full vesting date of the awards. In order to provide additional cash payments to NEOs and other executives during the vesting period, those who have been awarded RSUs receive cash payments equal to the dividends paid on an equivalent number of shares of Company common stock. The reduced weighting for RSUs relative to prior years (from 2/3 of total long-term incentive value) is intended to reflect a shift toward a more performance-based focus and to address current retention concerns given expected market and industry conditions, while still providing an appropriate level of retention within the program. The RSUs were granted on March 7, 2007, ranged from 1,600 to 7,300 for the NEOs, and vest ratably, with one-third of the units vesting on the third, fourth, and fifth anniversaries of grant, with all shares being delivered at the time of final vesting.

 

The introduction of SOSARs in 2007 provides a direct linkage to shareholders through awards the value of which is entirely dependent on appreciation in the Company’s stock price from the date the awards are granted. The SOSARs were granted on March 7, 2007, ranged from 12,400 to 51,400, have an exercise price equal to the Company’s closing common stock price on the date of grant, have a ten-year expiration term, and vest ratably, with one-third of the SOSARs vesting on the first, second, and third anniversaries of the date of grant. This vesting schedule ensures that recipients remain employed with the Company for an appropriate length of time prior to being able to exercise the SOSARs. Upon exercise of a vested SOSAR, the recipient will receive shares of Company common stock with a value equal to the appreciation of the Company’s common stock from the date of grant. The re-pricing of SOSARs is not permitted under the Company’s 2005 Long-Term Incentive Plan. The cash LTIP is intended to provide performance-based cash awards to participants if the Company achieves preset financial targets by the end of a specified multi-year period and also to reduce the annual share usage and dilution under the Company’s 2005 Long-Term Incentive Plan. The Company believes this combination of long-term incentive vehicles and their weightings provides the appropriate balance of performance-based and retention-based grants as well as stock-based and cash-based grants. However, due to the timing of the completion of a long-term strategic review, the implementation of the cash LTIP was postponed until 2008 and an additional grant of SOSARs was made to the NEOs (ranging from 14,400 to 59,600) and the other executives on December 19, 2007, equal to the 40% of total long-term incentive value that was intended to be

delivered under the cash LTIP award. The value of the NEO’s long-term incentive compensation awards for 2007 was approximately equivalent to the 50th percentile of the market. In addition, on March 7, 2007, the Committee granted discretionary awards in the form of RSUs under the Company’s 2005 Long-Term Incentive Plan for 2006 performance to three of the NEOs ranging from 2,188 to 3,750. These awards were in addition to the Company’s long-term incentive program (as described above), vest ratably, with one-third of the units vesting on the first, second, and third anniversaries of the date of grant, and are intended to provide additional retention as well as to provide additional incentives to maximize shareholder value.

 

For 2008, grants ranging from 2,170 to 9,100 RSUs and from 15,390 to 64,500 SOSARs were made to the NEOs on March 5, 2008, with terms consistent to those described above. The 2008 cash LTIP will provide cash payments following the close of a three-year period ending with fiscal year 2010 if certain pre-set Operating Net Income and Return on Capital Employed goals are reached. The Operating Net Income portion of the cash LTIP represents 40% of the total award, while the remaining 60% is dependent on Return on Capital Employed performance. The target performance goals are consistent with the Company’s long-term strategic objectives and are intended to represent realistic, yet aggressive, performance levels. Target opportunities for the NEOs range from $76,230 to $319,000. Payment amounts for achievement of the threshold performance levels will equal 50% of the target opportunities, and achievement of the maximum performance levels would result in payments equal to 150% of the target opportunities. The value of the NEO’s long-term incentive compensation awards for 2008 is also approximately equivalent to the 50th percentile of the market.

 

It has been the Company’s practice to make grants under the long-term incentive program at the Committee and Board meetings that occur in March of each year. With respect to recently hired individuals, grants are made at the next Committee and/or Board meeting following hire.

 

Share Ownership Guidelines

 

The Company has established share ownership guidelines for its NEOs and certain other executives in order to further enhance alignment with shareholders. The share ownership guidelines require the CEO to own shares of Company stock with a market value between three and four times the CEO’s base salary. The other NEOs are required to own shares with a market value between one and three times their base salaries, depending on their position. The guidelines give executives up to five years to reach their respective level of share ownership. Shares owned directly by the executive, unvested RSUs, shares held in a Section 401(k) or deferred compensation account, and 50% of any appreciation on unexercised vested options are counted toward meeting the guidelines.

 

Other Benefits

 

The Company has entered into Change-in-Control Employment Agreements with each of the NEOs, as well as certain other executives of the Company, the terms of which are discussed on pages 33 through 36 of this proxy statement. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of these executives despite the possibility, threat, or occurrence of a change in control of the Company. These agreements are intended to diminish the inevitable distraction of the executive due to the uncertainties and risks created by a threatened or pending change in control and to provide the executive with compensation arrangements upon a change in control that provide the executive with financial security and which are competitive with those of other comparably situated companies.

 

In order to allow recipients to participate in a change in control along with shareholders, upon a change in control of the Company (as defined in the agreements), all outstanding RSUs that have been held for at least 6 months will become immediately and unconditionally vested, and the restrictions with respect to such RSUs shall lapse. All outstanding stock options and SOSARs will become immediately exercisable upon a change in control of the Company (as defined in the agreements).

 

The Company has a Supplemental Executive Retirement Plan (SERP) consisting of two benefits for certain NEOs and certain other executives who have been selected by the Compensation Committee for participation. The first benefit, known as the “Restoration Pension,” provides an additional pension benefit based on the participant’s pension benefit earned under the terms of the Pension Plan, which is intended to restore that portion of the Pension Plan’s benefit that cannot be paid from that Plan due to legal limitations on the compensation and total benefits payable thereunder. Participants may receive the Restoration Pension in a single sum or in any form permitted under the Pension Plan, as elected by the participant at the time he or she first becomes a participant. The second benefit, known as the “FAC Pension,” pays a monthly pension benefit equal to a designated percentage of the participant’s final average compensation (as defined below), offset by the actuarially equivalent value of the participant’s benefits under the Pension Plan and certain Company-sponsored nonqualified defined benefit pension arrangements, including (if applicable) the Restoration Pension. The designated percentage is 2% multiplied by the participant’s years of credited service under the Pension Plan, but not in excess of 55%. The FAC Pension is payable following the participant’s retirement at or after age 62 in the form of a joint and 75% survivor annuity with the participant’s

spouse or, if so requested by the participant and approved by the Company’s Compensation Committee, as a single sum. The FAC Pension can also be paid on an early retirement basis as early as age 55, but reduced by 2.5% for each year by which the early benefit commencement precedes the participant’s attainment of age 62. A survivor benefit is also payable under the FAC Pension to the participant’s surviving spouse if the participant dies before his or her benefit commencement date. Final average compensation means the annualized average of the participant’s eligible compensation for the sixty (60) calendar months immediately preceding his or her retirement, which generally includes salary as listed on the Summary Compensation Table plus paid bonus.

 

The Company has a Supplemental Management Pension Plan (“SMPP”) consisting of two benefits. The first benefit is known as the MIP Adjustment Supplement. In prior years, the terms of the Company’s Management Incentive Plan, which was adopted as of January 1, 1994, and amended as of January 1, 2000 (the “Former MIP”) permitted a participant to defer a portion of his or her MIP bonus. Such deferred MIP bonus is not included in determining the participant’s final average compensation under the Pension Plan. However, for eligible executives a pension supplement (the “MIP Adjustment Supplement”) is paid from the Company’s Supplemental Management Pension Plan. The MIP Adjustment Supplement is, generally speaking, equal to the difference between the participant’s Pension Plan benefit and his or her Pension Plan benefit if it had been determined by taking into account a deferred MIP bonus. Executives who participate in the Company’s SERP, described above, are not eligible for the MIP Adjustment Supplement. The second benefit, known as the Early Retirement Supplement, is available to certain management and executive employees, who are not eligible for the FAC Pension under the SERP, who retire from employment with the Company on or after age 55 but prior to age 65, normal retirement age under the Company’s tax-qualified Pension Plan. The Pension Plan permits a participant who retires early to receive a reduced monthly early retirement pension that begins immediately following retirement, or to postpone commencement of the pension until a later date, but not later than normal retirement age. If the participant agrees to postpone commencement of his or her Pension Plan pension until at least 36 months following early retirement (or, if earlier, until his or her normal retirement date following attainment of age 65) (the “Deferred Pension Plan Commencement Date”), then the Early Retirement Supplement will pay a supplemental benefit during the postponement period. The Early Retirement Supplement is equal to the monthly amount of the Pension Plan pension (or the sum of the Pension Plan pension and the Restoration Pension under the SERP, if applicable) payable on the Deferred Pension Plan Commencement Date in the form of a single life annuity. The benefit begins on the first day of the month on or next following early retirement and continues for 36 months (or until normal retirement date) when the deferred Pension Plan pension begins to be paid. There is a limited benefit payable for the surviving spouse if the participant dies before the end of the 36-month payment period.

 

Certain NEOs and other executives are eligible for limited executive perquisites. These perquisites include annual physicals and dining and country club dues and are offered in order to be minimally competitive with the market and to continue to attract and retain highly qualified executive talent.

 

Deductibility of Executive Compensation

 

Certain awards made under the Company’s 2005 Long-Term Incentive Plan and the 2005 Management Incentive Plan will qualify as performance-based compensation that will be exempt from the federal income tax $1 million deduction limitation imposed under Section 162(m) of the Internal Revenue Code. However, while the Company has put in place procedures to help maximize tax deductibility, in order to design compensation programs that address the Company’s needs, the Company has not established a policy that mandates that all compensation must be exempt from the Section 162(m) deduction limitation. The Company expects that any amounts to be paid pursuant to the 2007 awards under the 2005 Management Incentive Plan or received from the exercise of options or SOSARs will be exempt from the Section 162(m) deduction limitation as performance-based compensation.

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth on pages 16 through 20 of this proxy statement (the “Compensation Discussion and Analysis”) with the management of the Company.

 

Based on the review and discussions describe above, the Compensation Committee has recommended to the Company’s Board that the Company’s Compensation Discussion and Analysis be included in the Company’s proxy statement for the Annual Meeting.

 

The information disclosed in the Company’s Report of the Compensation Committee shall not be deemed to be “soliciting material,” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act.

 

Kathleen A. Dahlberg (Chair)

Nicholas DeBenedictis

Ronald J. Naples

Richard L. Smoot

Lee C. Stewart

 

 

The following table sets forth certain information concerning compensation of the Chief Executive Officer of the Company, the Chief Financial Officer of the Company and the Company’s three most highly compensated executive officers in 2007 other than the Chief Executive Officer and the Chief Financial Officer.

 

 

 

 

 

 

 

The amount included in the “Perquisites” column for Mr. Parrini represents country and dining club dues paid in 2007 and 2006 by the Company. The amount included in the “Perquisites” column for Mr. Rapp for 2007 and 2006 represents a car allowance.

 

The amount included in the “Other” column for Mr. Glatfelter is an annual $25 payment for membership in Glatfelter’s Quarter Century Club. The amount included in the “Other” column for Mr. Rapp for 2007 represents life insurance policy premiums paid by the Company on his behalf.

 

 

 

The following table sets forth information concerning grants of plan-based awards in 2007:

 

 

 

 

The following table sets forth information concerning outstanding equity awards as of December 31, 2007:

 

 

 

 

The following table sets forth information concerning options exercised and stock vested during fiscal 2007:

 

 

 

PENSION BENEFITS

 

The following table sets forth information concerning pension benefits during fiscal year 2007.

 

 

 

As of December 31, 2007, Mr. Jacunski was not eligible for the FAC Pension and therefore is entitled to receive a pension determined under the Pension Plan, together with, as applicable, the Restoration Pension and the MIP Adjustment Supplement. However, on December 31, 2007, he had not yet fulfilled the five year vesting requirement under the Company’s pension plans. A description of the various plans follows.

 

What employee retirement plans has the Company established for Directors and Executive Officers?