SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE CLOROX COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO]
THE CLOROX COMPANY
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NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
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ANNUAL MEETING OF
STOCKHOLDERS
NOVEMBER 19, 1997
[LOGO]
THE CLOROX COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1997
The Annual Meeting of Stockholders of The Clorox Company, a Delaware corporation
(the "Company"), will be held at 9:00 A.M. on Wednesday, November 19, 1997, at
the offices of the Company, 1221 Broadway, Oakland, California, for the
following purposes:
1. To elect a board of twelve directors to hold office until the next
annual election of directors;
2. To consider and vote upon an amendment of the Company's Certificate of
Incorporation to increase the number of shares of authorized Common Stock
of the Company;
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 1998; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The board of directors has fixed the close of business on September 22, 1997 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the meeting and any adjournment thereof. A list of such stockholders
will be available at the time and place of the meeting and, during the ten days
prior to the meeting, at the office of the Secretary of the Company at 1221
Broadway, Oakland, California.
A copy of the Company's Annual Report for the fiscal year ended June 30, 1997,
containing financial statements, is included with this mailing.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF YOU
PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN, DATE AND
RETURN THE ENCLOSED TWO-SIDED PROXY IN THE ENCLOSED ENVELOPE. THIS WILL NOT
LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
By Order of the Board of Directors
/s/ Edward A. Cutter
Edward A. Cutter,
SENIOR VICE PRESIDENT -- GENERAL
COUNSEL AND SECRETARY
September 29, 1997
THE CLOROX COMPANY
1221 BROADWAY
OAKLAND, CALIFORNIA 94612
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies
by the board of directors of The Clorox Company, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders of the Company, to be
held at 9:00 A.M. on November 19, 1997 at the above offices of the Company (the
"Annual Meeting").
THE PROXY
A stockholder giving the enclosed proxy may revoke it at any time before it is
used by giving written notice of revocation to the Secretary of the Company or
by voting in person at the Annual Meeting.
VOTING AT THE ANNUAL MEETING
All share numbers in this proxy statement give effect to the 2:1 stock split
declared July 15, 1997, effected in the form of a stock dividend payable
September 2, 1997 on all shares of the Company's common stock, $1.00 par value
(the "Common Stock"), outstanding as of the close of business on July 28, 1997.
The only voting securities of the Company are its shares of Common Stock, of
which 103,286,611 shares were outstanding and entitled to vote at the close of
business on September 22, 1997. Only stockholders of record at the close of
business on September 22, 1997 are entitled to vote at the Annual Meeting. The
holders of the Common Stock are entitled to one vote per share on each matter
submitted to a vote of stockholders.
The holders of a majority of the issued and outstanding Common Stock, present in
person or by proxy, will constitute a quorum for the transaction of business at
the Annual Meeting or any adjournment thereof. Abstentions and broker non-votes
are counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions are not counted as votes cast
on the proposed election of directors, but will have the same legal effect as a
vote against the adoption of the amendment to the Company's Certificate of
Incorporation and the ratification of the appointment of independent auditors.
Broker non-votes are not counted as votes cast on any matter to which they
relate.
This proxy statement and the accompanying proxy are first being sent or given to
stockholders on or about September 29, 1997.
PROPOSAL NO. 1:
NOMINEES FOR ELECTION AS DIRECTORS
At the Annual Meeting, twelve persons will be elected as members of the board of
directors, each for a one-year term. The Nominating Committee of the board of
directors has nominated the twelve persons listed below for election at the
Annual Meeting. All of such nominees were elected at the Company's Annual
Meeting of Stockholders held on November 20, 1996.
The proxies given to the proxyholders will be voted or not voted as directed
thereon and, if no direction is given, will be voted FOR these twelve nominees.
The board of directors knows of no reason why any of these nominees should be
unable or unwilling to serve. However, if for any reason any nominee should be
unable or unwilling to serve, the proxies will be voted for the election of such
other person to the office of director as the board of directors may nominate in
the place of such nominee. Directors will be elected by a plurality of the
shares represented and voting at the meeting.
1
Certain information with respect to each nominee appears on the following pages,
including age, period or periods served as a director, position (if any) with
the Company, business experience during at least the past five years and
directorships of other publicly-owned corporations.
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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WILLIAM F. AUSFAHL Group Vice President and Chief Financial 1984
Officer of the Company.
Mr. Ausfahl is the senior executive officer responsible for
the financial activities of the Company, which include
controllership, treasury, tax and audit, and for information
services, investor relations, and corporate communications.
He joined the Company in December 1982, and became Group Vice
President and Chief Financial Officer in Janu-
ary 1983. Age: 57. [PHOTO]
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DANIEL BOGGAN, JR. Chief Operating Officer, the National Col- 1990
legiate Athletic Association.
Mr. Boggan became the Chief Operating Officer of the National
Collegiate Athletic Association in 1996, after having been
Group Executive Director for Education Services for the
National Collegiate Athletic Association since November 1994.
Previously, he had been Vice Chancellor for business and
administrative services at the Univer-
sity of California at Berkeley since 1986. Age: 51. [PHOTO]
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JOHN W. COLLINS Former President and Chief Operating Officer 1993
of the Company.
Mr. Collins was President and Chief Operating Officer of the
Company from March 1986 through December 1989. He was also a
Director of the Company from July 1983 through October 1989.
Beginning January 1990, he was on a paid leave of absence
which extended until his retirement on December 31, 1993. He
was not active in the
Company's affairs from January 1990 until his reelection to [PHOTO]
the board of directors in January 1993. Age: 66.
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2
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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URSULA FAIRCHILD Professional Photographer. 1976
Mrs. Fairchild is a professional photographer, as well as a
member of the Supervisory Board of Henkel KGaA, Duesseldorf,
Germany (manufacturer of household products and chemicals).
She is a member of the Henkel family, which controls Henkel
KGaA, and is nominated pursuant to an understanding between
the Company and Henkel
KGaA (see Certain Relationships and Transactions, page 9 [PHOTO]
below). Age: 66.
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JUERGEN MANCHOT Vice-Chairman of the Shareholders' Commit- 1989
tee, Henkel KGaA.
Dr. Manchot is the Vice-Chairman of the Shareholders'
Committee of Henkel KGaA, Duesseldorf, Germany (manufacturer
of household products and chemicals). He is a member of the
Henkel family, which controls Henkel KGaA, and is nominated
pursuant to an understanding between the Company and Henkel
KGaA (See Certain Relation-
ships and Transactions, page 9 below). Dr. Manchot is a [PHOTO]
director of Transaction Network Services Inc. Age: 60.
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DEAN O. MORTON Retired Executive Vice President and Chief 1991
Operating Officer, Hewlett-Packard Company.
Mr. Morton was the Executive Vice President, Chief Operating
Officer and a Director of Hewlett-Packard Company until his
retirement in 1992. Mr. Morton is a director of ALZA
Corporation, Raychem Corporation, KLA-Tencor Inc., Centigram
Communications Corporation and BEA Systems Inc. He is a
trustee of The State Street
Research Group of Funds, The State Street Research
Portfolios, Inc. and The Metropolitan Series Fund Inc. Age: [PHOTO]
65.
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3
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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KLAUS MORWIND Executive Vice President and Personally Liable 1995
Associate, Henkel KGaA.
Dr. Morwind is a member of the Management Board of Henkel
KGaA, Duesseldorf, Germany (manufacturer of household
products and chemicals). He joined Henkel KGaA in 1969 and
held several management positions before assuming his current
responsibility. Dr. Morwind is nominated pursuant to an
understanding between the
Company and Henkel KGaA (see Certain Relationships and [PHOTO]
Transactions, page 9 below). Age: 54.
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EDWARD L. SCARFF Private Investor. 1986
Mr. Scarff has been a private investor for more than five
years. From 1983 through 1994, he was Chairman of the Board
and Chief Executive Officer of Arcata Corporation (commercial
printer and manufacturer of redwood lumber). Mr. Scarff is a
director of Ryder TRS, Inc., Ockham Personal Holdings PLC,
Unicon International Ltd. and is
General Partner of Questor Management Co. Age: 66. [PHOTO]
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LARY R. SCOTT Executive Vice President, Arkansas Best 1989
Corporation.
Mr. Scott was elected as Executive Vice President of Arkansas
Best Corporation in January 1996. Previously, he had been
Chairman and Chief Executive Officer of WorldWay Corporation
from May 1993 until January 1996. Prior to that, Mr. Scott
was President and Chief Executive Officer of Consolidated
Freightways, Inc., a worldwide
transportation company. Age: 61. [PHOTO]
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4
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NAME, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
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G. CRAIG SULLIVAN Chairman of the Board and Chief Executive 1992
Officer of the Company.
Mr. Sullivan has been Chairman of the Board and Chief
Executive Officer of the Company since July 1, 1992.
Previously, he was Vice Chairman and Chief Executive Officer
(May-June, 1992); Group Vice President (1989-1992); Vice
President--Household Products (1984-1989); and Vice
President-Food Service Products Division
(1981-1984). He joined the Company in 1971. Mr. Sullivan is a [PHOTO]
director of American President Companies, Ltd. Age: 57.
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JAMES A. VOHS Retired Chairman of Kaiser Foundation Health 1988
Plan, Inc. and Kaiser Foundation Hospitals.
Mr. Vohs retired as Chairman of the Board of Kaiser
Foundation Health Plan, Inc. and Kaiser Foundation Hospitals
in March 1992. Previously, he had served as President
(1975-1991) and Chief Executive Officer (1980-1991). Age: 68.
[PHOTO]
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C. A. (AL) WOLFE Retired President, U.S. Division, DDB 1991
Needham Worldwide and President, Al Wolfe Associates, Inc.
Mr. Wolfe is the President of Al Wolfe Associates, Inc., a
marketing and advertising consulting firm. He is the retired
President of the U.S. Division of DDB Needham Worldwide, a
major advertising agency. Previously, Mr. Wolfe had been
Executive Vice President of N.W. Ayer and Executive Vice
President and General Manager of Wells, Rich,
Greene advertising agencies. He is a director of Dolphin [PHOTO]
Software, Inc. Age: 65.
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ORGANIZATION OF THE BOARD OF DIRECTORS
The board of directors has established six standing committees: the Executive
Committee, the Finance Committee, the Audit Committee, the Nominating Committee,
the Employee Benefits and Management Compensation Committee, and the Board
Administration and Public Policy Committee. The Finance, Audit, Nominating,
Employee Benefits and Management Compensation, and the Board Administration and
Public Policy Committees consist only of non-management, independent directors,
with the exception of the Board Administration and Public Policy Committee on
which Mr. Sullivan serves as the Chairman and Secretary.
5
EXECUTIVE COMMITTEE. The Executive Committee, consisting of directors Collins,
Fairchild, Manchot, Morton, Morwind, Scarff, Sullivan, Vohs, and Mr. Forrest N.
Shumway is delegated all of the powers of the board of directors except certain
powers reserved by law to the full board. Mr. Shumway is retiring as a director
and his term on the board of directors, and all committees thereof, will expire
at the Annual Meeting. In addition to being available to meet between regular
board meetings on occasions when board action is required but the convening of a
full board is impracticable, the Executive Committee is authorized to handle
special assignments as requested from time to time by the board. The Executive
Committee held no meetings during fiscal year 1997.
FINANCE COMMITTEE. The Finance Committee consists of directors Boggan, Collins,
Manchot, Morton, Morwind, Scarff and Shumway and, working with the Company's
finance and operating personnel, considers and recommends to the board major
financial policies and actions of the Company. The Finance Committee held four
meetings during fiscal year 1997.
AUDIT COMMITTEE. The Audit Committee, composed of directors Fairchild, Morwind,
Scarff, Scott and Wolfe, is the principal link between the board and the
Company's independent public accountants. The Audit Committee makes
recommendations to the board regarding selection and employment of the Company's
independent auditors and, working with the Company's internal and external
auditors, monitors internal audit and control procedures. The Audit Committee
held three meetings during fiscal year 1997.
NOMINATING COMMITTEE. Directors Boggan, Fairchild, Scarff, Vohs and Wolfe are
members of the Nominating Committee. The Nominating Committee identifies and
recommends to the board of directors prospective candidates to be considered as
nominees for election to the board, including those recommended in writing by
any stockholder. The Nominating Committee held three meetings during fiscal year
1997.
COMPENSATION COMMITTEE. The Employee Benefits and Management Compensation
Committee (the "Compensation Committee") consists of directors Fairchild,
Manchot, Morton, Scott, Shumway and Vohs. The Compensation Committee establishes
and monitors the policies under which compensation is paid or awarded to the
Company's executive officers, determines executive compensation, grants stock
options, restricted stock, performance units and other cash or stock awards
under the Company's executive incentive compensation and stock incentive plans,
and reviews pension and other retirement plans for adequacy and compliance with
applicable regulations. The Compensation Committee held two meetings during
fiscal year 1997.
BOARD ADMINISTRATION AND PUBLIC POLICY COMMITTEE. The Board Administration and
Public Policy Committee consists of directors Boggan, Collins, Fairchild,
Manchot, Morton, Morwind, Scarff, Scott, Shumway, Sullivan, Vohs and Wolfe. The
Board Administration and Public Policy Committee establishes the rules and
procedures for board governance, is the principal link between the board and the
public community, and has oversight responsibility for environmental matters.
The Board Administration and Public Policy Committee held one meeting during
fiscal year 1997.
The board of directors held six meetings during fiscal year 1997. All directors
attended more than 75% of the meetings of the board and committees of which they
were members during fiscal year 1997, except for Ms. Fairchild and Dr. Manchot,
who attended 73% and 62% of such meetings, respectively.
Non-management directors received an annual fee of $27,500 for the 1997 fiscal
year. In addition, each non-management director received $1,000 for each meeting
of the board attended and $875 for each meeting of a board committee attended.
Directors may elect to defer all or a part of such compensation pursuant to the
terms of the Company's Independent Directors' Stock-Based Compensation Plan (the
"Directors' Stock-Based Compensation Plan"). The chairperson of each committee
received an additional $1,500 for each committee meeting attended. In addition,
each non-management director is entitled to receive $1,000 per day for any
special assignment requested of any such director by the board. No such special
assignment fees were paid in fiscal year 1997. Management directors receive no
extra compensation for their service as directors.
6
Under the Directors' Stock-Based Compensation Plan, a director may annually
elect to receive all or a portion of her or his annual retainer and meeting fees
in the form of cash, Common Stock, deferred cash or deferred stock units. In
addition, each non-employee director also receives an annual grant of $10,000 of
deferred stock units. Interest accrues on deferred amounts at an annual interest
rate equal to Wells Fargo Bank's prime lending rate in effect on January 1 of
each year (8.25% at January 1, 1997). Each deferred stock unit represents a
hypothetical share of Common Stock and a participant's deferred stock unit
account is increased by Common Stock dividends paid by the Company. Upon
termination of service as a director, the amounts accrued for the director under
the Directors' Stock-Based Compensation Plan are paid out in cash and Common
Stock in five annual installments or, at the director's election, in one such
lump sum payment of cash and Common Stock.
Accrual of benefits under the Company's Directors' Retirement Plan ceased in
July 1996. Non-employee directors who were accruing retirement benefits pursuant
to the terms of that plan when it was terminated received in lieu of accrued
benefits under the plan, deferred stock units under the Directors' Stock-Based
Compensation Plan having a value equal to the present value of their accrued
retirement benefits under the Directors' Retirement Plan. As a result, a total
of 20,353 deferred stock units were issued to the non-employee directors.
Pursuant to the Company's 1993 Directors' Stock Option Plan, each non-management
director received a grant of stock options covering 1,000 shares of Common Stock
during fiscal year 1997 and will receive a grant covering 1,000 shares of Common
Stock in subsequent fiscal years. Such stock options vest in two equal
installments on each of the first two anniversary dates of the grant date and
have an exercise price equal to the fair market value on the grant date.
Other than the non-management director fees, the deferred stock unit grants
under the Directors' Stock-Based Compensation Plan, and the stock grants under
the Directors' Stock Option Plan, directors who are not employees of the Company
do not receive any additional form of direct compensation, nor do they
participate in any of the Company's employee plans.
7
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table shows, as of July 31, 1997, the holdings of the Common Stock
by (i) any entity or person known to the Company to be the beneficial owner of
more than 5% of the Common Stock, (ii) each director and each of the five
executive officers named in the Summary Compensation Table on page 13 (the
"Named Officers"), and (iii) all directors and executive officers of the Company
as a group:
AMOUNT AND NATURE OF
NAME OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS(3)
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HC Investments, Inc. (4) 30,856,200 29.9%
William F. Ausfahl 250,840 *
Daniel Boggan, Jr. 3,074 *
John W. Collins 30,500 *
Ursula Fairchild 12,500 *
Gerald E. Johnston 108,132 *
Peter N. Louras 193,256 *
Juergen Manchot 8,500 *
Dean O. Morton 10,500 *
Klaus Morwind 3,300 *
Donald C. Murray 130,710 *
Edward L. Scarff 16,500 *
Lary R. Scott 13,216 *
Forrest N. Shumway 16,500 *
G. Craig Sullivan 615,326 *
James O. Vohs 8,500 *
C. A. (Al) Wolfe 8,500 *
All directors and executive officers as a group
(31 persons)(5) 2,644,866 2.6%
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Notes:
* Does not exceed 1% of the outstanding shares.
(1) Correspondence to all executive officers and directors of the Company may be
mailed to 1221 Broadway, Oakland, California 94612. The address of HC
Investments, Inc. is 1100 North Market Street, Suite 780, Wilmington,
Delaware 19801.
(2) Each beneficial owner listed has sole voting and dispositive power (or
shares such power with her or his spouse) concerning the shares indicated.
These totals include the following number of shares of Common Stock which
such persons have the right to acquire through stock options exercisable
within 60 days of July 31, 1997: Mr. Sullivan -- 569,346; Mr. Ausfahl --
167,462; Mr. Louras -- 165,470; Mr. Murray -- 115,742; Mr. Johnston --
100,790; each of Mr. Boggan and Dr. Morwind -- 2,500; Mr. Wolfe -- 4,500;
each of the other directors -- 6,500; and all directors, Named Officers and
other executive officers as a group (31 persons) -- 2,169,244. The numbers
above do not include the following number of shares of Common Stock which
such persons have the right to acquire on or after December 31, 1997 through
deferred stock units granted in December 1995 in exchange for the
cancellation of certain restricted stock, and through deferred stock unit
dividends thereon: Mr. Sullivan -- 41,558; Mr. Ausfahl -- 12,466; Mr. Louras
-- 13,752; Mr. Murray -- 11,628; Mr. Johnston -- 7,762; and all Named
Officers and other executive officers as a group (31 persons) -- 160,662.
The numbers above do not include the following number of shares of Common
Stock which the non-employee directors have the right to acquire upon the
termination of their service as directors pursuant to deferred stock units
granted under the Directors' Stock-Based Compensation Plan: Mr. Boggan --
1,655; Mr. Collins -- 1,537; Ms. Fairchild -- 6,301; Dr. Manchot -- 1,651;
Mr. Morton
8
-- 1,980; Dr. Morwind -- 1,570; Mr. Scarff -- 13,611; Mr. Scott -- 2,078;
Mr. Shumway -- 4,037; Mr. Vohs -- 5,315; and Mr. Wolfe -- 1,674.
(3) On July 31, 1997, there were 103,195,984 shares of Common Stock issued and
outstanding.
(4) Indirect wholly-owned United States subsidiary of Henkel KGaA of
Duesseldorf, Germany (manufacturer of household products and chemicals).
(5) Executive officers include the Named Officers and all the vice presidents of
the Company.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company and Henkel KGaA are parties to a June 1981 letter agreement (as
amended in July 1986 and March 1987, the "Letter Agreement"), relating to
ownership by Henkel KGaA of Common Stock and representation on the Company's
board of directors. The Letter Agreement assures Henkel KGaA of the right to
nominate for election to the board a minimum of two representatives so long as
Henkel KGaA beneficially owns at least 5% of the outstanding shares of Common
Stock. Under the Letter Agreement, Henkel KGaA's maximum permitted ownership of
Common Stock without consultation with the Company is limited to 30%, and Henkel
KGaA has affirmed that it considers its investment in the Company as long-term
and its role in the Company as that of a significant minority stockholder
without an active role in the management of the Company.
The Company and Henkel KGaA have entered into certain joint manufacturing,
marketing and product development arrangements in the United States and
internationally, either directly or through affiliates or joint venture
collaboration. No such arrangements, either individually or in the aggregate,
were material to the Company or Henkel KGaA during fiscal year 1997.
During fiscal year 1995, in connection with joining the Company, Frank A.
Tataseo, Vice President -- Sales of the Company, received a five-year $150,000
mortgage loan without interest from the Company, which loan remained outstanding
during fiscal year 1997.
EMPLOYEE BENEFITS AND MANAGEMENT COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The membership of the Compensation Committee consists entirely of directors who
have never been employees of the Company (see page 6).
COMPENSATION PHILOSOPHY.
The Compensation Committee determines executive compensation levels and policies
designed to:
- Motivate each executive toward the achievement of the Company's short and
long-term goals, as reflected in its strategic business plans and its
statement of principles and values.
- Be competitive with comparable organizations and be based on both Company
performance and the individual's contributions to the Company's results.
- Make a significant proportion of each executive's total compensation be
at-risk incentive compensation in order to emphasize the relationship
between pay and performance.
- Align the interests of executives with those of stockholders through the
use of equity-based incentive awards.
COMPENSATION OF EXECUTIVE OFFICERS.
The key components of the executive compensation program are base annual salary,
annual short-term incentive awards in the form of stock or cash under the
Company's 1996 Executive Incentive Compensation Plan (the "EIC Plan"), and
long-term incentive awards in the form of stock options, restricted stock, and
performance units under the Company's 1996 Stock Incentive Plan and the 1987
Long-Term Compensation Program. The compensation guidelines are determined by
the Compensation Committee based upon competitive data collected from the
comparator peer group discussed below and internal ranking
9
within the executive officer group. General targeted competitive levels for base
annual salary and annual short-term incentive awards are the 50th percentile of
such comparator peer group. General targeted competitive levels for at-risk,
long-term compensation are also the 50th percentile with opportunities at the
75th percentile of such comparator peer group for superior financial
performance. There is opportunity for the executive officers to earn more than
the targeted levels if the Company's performance exceeds the measures discussed
in this report and less when performance falls below the targeted levels.
BASE ANNUAL SALARY. Base annual salaries for executive officers are determined
by the following factors: (1) parity to market; (2) the individual's
performance; (3) promotions resulting in increases in responsibility; and (4)
equity in relationship to other executive positions within the Company. With the
assistance of the Company's compensation consulting firm, surveys are conducted
of benchmark positions in 19 other peer companies (the "Peer Companies"), most
of which compete with the Company in one or more of its primary businesses or
compete with the Company for management talent. Those which are not direct
competitors are in closely-related fields. The Compensation Committee takes into
account both the size and performance of the Company relative to the size and
performance of the Peer Companies. It also considers the competitiveness of the
entire compensation package of the Company's executive officers compared to the
Peer Companies. The Compensation Committee reviews which peer companies are
selected for compensation analysis and updates the composition of the Peer
Companies periodically. For fiscal year 1997, the Compensation Committee
established salary ranges for executive officer positions with midpoints which
approximate the 50th percentile or median level of the comparable, benchmarked
positions. An individual executive officer's position within a salary range
depends upon the executive officer's performance, as judged by her or his
immediate superior and the chief executive officer. The chief executive
officer's performance is judged by the Compensation Committee. The performance
of the other five executive officers who serve as members of the management
executive committee is judged by the chief executive officer and the
Compensation Committee together.
EXECUTIVE INCENTIVE COMPENSATION PLAN. For fiscal year 1997, the EIC Plan, as
it applied to executive officers, established a linkage between the annual bonus
awards and both the Company's performance and the performance of the executive
officers. The Compensation Committee believes that awards under the EIC Plan
should include a reward for superior performance and an element of adverse
consequences for poor financial results, including no EIC Plan award funding for
the Company's financial performance component described below unless the Company
achieves an earnings before taxes target previously established by the
Compensation Committee. That earnings before taxes target was exceeded in fiscal
year 1997.
In keeping with the Company's desire to have executive officers build their
holdings of the Company's stock, in fiscal year 1997 executive officers
continued to be able to elect to receive all or a portion of their EIC Plan
award in the Company's stock rather than cash. Those participants electing stock
received a premium equal to 10% of the bonus amount elected to be paid in the
Company's stock based on the fair market value on the date of issuance. Those
premium shares will be forfeited if the officer transfers the EIC Plan stock
within two years of the date of issuance or leaves the Company, other than by
death, disability or retirement, before that date.
For the EIC Plan, the Compensation Committee divided the executive officer group
into two subcategories: the executive officers who serve as members of the
management executive committee and the other executive officers. As of June 30,
1997, the six executive officers serving as members of the management executive
committee are the Named Officers plus Mr. Edward A. Cutter, Senior Vice
President -- General Counsel and Secretary. For the management executive
committee officers, 75% of the EIC Plan award was determined by achieving
corporate financial performance measures previously established by the
Compensation Committee based on a computation consisting of targeted operating
margin level, asset turnover rate and volume growth. In the computation, the
targeted operating margin level and asset turnover rate were given equal weight
and counted approximately 75% in the determination of the financial measures.
Volume growth was weighted at approximately 25%. The targeted corporate
financial measures were exceeded as measured at the end of fiscal year 1997.
10
The remaining 25% of the EIC Plan award was based on achieving pre-established
individual objectives related to goals that may not be measured by traditional
accounting tools, including an organizational effectiveness review aimed at
improving the operations of the Company, and projects to achieve corporate
growth and administrative cost savings. Individual objectives and the weight
given each individual objective were the same for the members of the management
executive committee.
The target EIC Plan award for the management executive committee members ranged
from 50-55% of base annual salary at June 30, 1997 (70% for the chief executive
officer) if the corporate financial performance and individual objectives were
achieved. The maximum EIC Plan award was 100-110% of base annual salary at June
30, 1997 (140% for the chief executive officer) if the goals were substantially
exceeded, and the minimum EIC Plan award was 0 if the goals came in
substantially lower than the targets. All EIC Plan awards are determined by the
chief executive officer and the Compensation Committee or, in the chief
executive officer's case, by the Compensation Committee. The EIC Plan awards to
members of the executive officer group, other than the management executive
committee members, were determined based on (i) the same corporate financial
performance measures; and (ii) achieving individual objectives, including, for
operating division officers, operating division financial performance measures
and other individual objectives, and for staff executive officers, individual
objectives, such as the achievement of selected strategic goals and the
successful development of human resources. Individual objectives and the weight
given each individual objective varied from person to person depending on job
responsibilities. The target EIC Plan award for the other members of the
executive officer group was 40-45% of base annual salary at June 30, 1997 if
goals were achieved up to a maximum of 80-90% if the goals were substantially
exceeded and down to a minimum of 0 if the goals came in substantially lower
than the targets.
LONG-TERM COMPENSATION PROGRAM. A major goal of the Compensation Committee is
to create strong alignment between the executive officers and stockholders. This
alignment is achieved through the design of incentive plans and through actual
stock ownership. In furtherance of this goal, in April 1996, the Compensation
Committee made a 3-year grant of stock options and performance units to all
executive officers. In light of the fiscal year 1996 long-term grant, no
long-term compensation was awarded during fiscal year 1997, except to Gerald E.
Johnston, Group Vice President, and Carlos T. Alcantara, Vice-President -- Latin
America, in connection with promotions they received.
The Compensation Committee has endorsed target stock ownership levels by
executive officers to be achieved by fiscal year 1999, based on the fair market
value of the Common Stock at that time. The levels are the equivalent of four
times base annual salary for the chief executive officer, three times base
annual salary for the other executive officers who serve as members of the
management executive committee, and two times base annual salary for other
executive officers. No stock options will be counted in determining ownership
levels, which will be based on shares of Common Stock held, including restricted
stock, performance shares and performance units, if payable only in stock, and
shares held via the Company's Value Sharing Plan, a profit sharing plan which
includes 401(k) features.
BENEFITS. The Company provides various employee benefit programs to its
executive officers, including medical and life insurance benefits, retirement
benefits, an employee stock purchase plan and the Value Sharing Plan. Except for
the Supplemental Executive Retirement Plan and the Non-Qualified Deferred
Compensation Plan described on page 18 and some immaterial perquisites given to
executive officers, these benefit programs are generally available to all
employees of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION.
The Compensation Committee increased Mr. Sullivan's base annual salary on
October 1, 1996 from $690,000 to $725,000. In determining the amount of Mr.
Sullivan's salary increase for fiscal year 1997, the Compensation Committee took
into consideration the Company's overall performance for the 1996 fiscal year.
The Company's fiscal year 1996 achievements included total stockholder return in
the 80th percentile of both the S&P 500 and the Peer Companies; volume growth of
10%; an increase in net earnings of 11%; maintenance of a net profit margin of
10%; an all-time record high 23.8% return on equity from continuing operations;
and a continued increase in net asset productivity, as net assets in fiscal year
1996 grew only 9% compared with the 10% volume and 11% profit gains. Mr.
Sullivan's salary increase was also
11
determined based on parity to the median level of comparable positions in the
Peer Companies and his tenure as chief executive officer.
Mr. Sullivan's EIC Plan award for fiscal year 1997 was based upon the weighted
corporate financial performance measures (75%) and individual objectives (25%)
established by the Compensation Committee as described above. The targets were
exceeded, and Mr. Sullivan's EIC Plan award formula called for a payment of
$939,100.
As described above, Mr. Sullivan did not receive any long-term compensation
awards during fiscal year 1997. Other than making awards at a higher percentage
of his base annual salary, the Compensation Committee did not treat Mr.
Sullivan's Long-Term Compensation Program or EIC Plan awards differently from
other members of the management executive committee.
ONGOING REVIEW OF COMPENSATION.
The Company's compensation consulting firm conducts an ongoing review of the
Company's existing executive compensation programs for the Compensation
Committee to continue to ensure the programs support the future direction of the
Company and the principles on which executive compensation is based. The
Compensation Committee reserves the right to select and/or meet independently
with any consultant at its discretion. The Compensation Committee has access to
and reviews independent compensation data relating to executive compensation at
other companies. The Compensation Committee has developed performance goals,
which have been approved by the Company's stockholders, in order to qualify for
exclusion the bulk of the EIC Plan awards and all stock-based long-term
compensation to the five highest paid executive officers for the federal $1
million tax deductibility limit pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended. The Compensation Committee's policy seeks to
balance the interests of the Company in maintaining flexible incentive plans and
how the Company benefits from the compensation package paid to any executive
officer against the possible loss of a tax deduction when taxable compensation
for any of the five highest paid executive officers exceeds $1 million per year.
Dean O. Morton, Chair Lary R. Scott
Ursula Fairchild Forrest N. Shumway
Juergen Manchot James A. Vohs
(Members of the Compensation Committee)
12
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for the prior fiscal year were
directors Fairchild, Manchot, Morton, Scott, Shumway and Vohs. None of these
persons is or has been an officer or employee of the Company or any of its
subsidiaries. In addition, there are no Compensation Committee interlocks
between the Company and other entities involving the Company's executive
officers and board members who serve as executive officers of such entities.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the last three
fiscal years earned by or paid or awarded to the chief executive officer of the
Company and the four other most highly compensated executive officers of the
Company (the "Named Officers").
LONG-TERM COMPENSATION
-------------------------------------
AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES PAYOUTS
----------------------------------- STOCK UNDERLYING -----------
OTHER ANNUAL AWARD(S) OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION ($)(1)(2) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(1) (3)(4)(5) (#)(3)(6) ($)(5)(6) ($)(7)
- ----------------------------- --------- --------- --------- ------------- ----------- ----------- ----------- -------------
G. Craig Sullivan............ 1997 $ 716,250 $ 939,100 -- -- -- $ 103,618 $ 155,820
Chairman of the Board and 1996 $ 673,750 $ 571,520 -- $ 90,629 581,412 $ 34,684 $ 145,125
Chief Executive Officer 1995 $ 615,000 $ 541,900 -- $ 93,466 -- $ 206,600 $ 119,242
William F. Ausfahl........... 1997 $ 324,000 $ 332,900 -- $ 33,234 -- $ 28,422 $ 66,427
Group Vice President and 1996 $ 307,500 $ 217,550 -- $ 43,255 141,398 $ 9,797 $ 63,831
Chief Financial Officer 1995 $ 302,500 $ 222,300 -- $ 44,501 -- $ 87,971 $ 62,698
Peter N. Louras.............. 1997 $ 301,250 $ 310,500 -- -- -- $ 13,962 $ 61,593
Group Vice President 1996 $ 285,000 $ 200,300 -- $ 33,611 141,398 $ 3,190 $ 57,452
1995 $ 267,500 $ 201,600 -- $ 30,348 -- $ 68,422 $ 51,688
Donald C. Murray............. 1997 $ 290,000 $ 295,300 -- -- -- $ 11,711 $ 55,066
Group Vice President 1996 $ 265,500 $ 157,340 -- $ 31,177 119,618 $ 2,675 $ 52,742
1995 $ 247,000 $ 171,500 -- $ 34,332 -- $ 71,680 $ 47,232
Gerald E. Johnston........... 1997 $ 277,500 $ 285,100 -- $ 23,796 25,414 $ 10,547 $ 47,130
Group Vice President 1996 $ 211,250 $ 103,830 -- $ 20,223 82,014 $ 2,069 $ 38,894
1995 $ 196,750 $ 124,400 -- -- -- $ 36,729 $ 32,072
- ------------
(1) Pursuant to the Company's Management Incentive Compensation Plan ("MIC
Plan") and the EIC Plan, executive officers were able to elect all or a
portion of their annual bonus plan awards in Common Stock rather than cash.
For fiscal years 1996 and 1995, those participants electing stock received a
premium equal to 20% of the gross bonus amount elected to be paid in Common
Stock based on the fair market value on August 30, 1996 and 1995,
respectively. For fiscal year 1997, the premium was equal to 10% of the
gross amount elected to be paid in Common Stock based on the fair market
value on September 2, 1997. Such stock awards are subject to transfer
restrictions for two years from the date of grant or the premium will be
forfeited. The premium received with such stock award elections is included
in the Restricted Stock Awards column in the Long-Term Compensation portion
of this table. The net number of shares and value of the MIC Plan and EIC
Plan annual bonus amounts paid in Common Stock awards, after deductions to
the base awards made for income tax purposes, were as follows: for fiscal
year 1997, -- 0 shares ($0) for Messrs. Sullivan, Louras and Murray; base
award --3,230 shares ($214,694) and premium --500 shares ($33,234) for Mr.
Ausfahl; and base award --2,315 shares ($153,875) and premium -- 358 shares
($23,796) for Mr. Johnston; for fiscal year 1996, base award -- 6,250 shares
($292,578) and premium -- 1,936 shares ($90,629) for Mr. Sullivan; base
award -- 2,984 shares ($139,689) and premium -- 924 shares ($43,255) for Mr.
Ausfahl; base award -- 2,322 shares ($108,699) and premium--718 shares
($33,611) for Mr. Louras; base award -- 2,152 shares ($100,741) and premium
-- 666 shares ($31,177) for Mr. Murray; and base award -- 1,394 shares
($65,257) and premium -- 432 shares ($20,223) for Mr. Johnston; and for
fiscal year 1995, base award -- 8,104 shares ($275,050) and premium -- 2,754
shares ($93,466) for Mr. Sullivan; base award -- 4,232 shares ($143,627) and
premium -- 1,312 shares ($44,501) for Mr. Ausfahl; base award -- 2,364
shares ($80,207) and premium -- 894 shares ($30,348) for Mr. Louras; base
award -- 3,265 shares ($110,805) and premium -- 1,012 shares ($34,332) for
Mr. Murray; and 0 shares ($0) for Mr. Johnston. The fiscal year 1996 and
1997 bonus amounts include a holiday bonus of $200 per person.
(2) Amounts include awards earned for the years indicated, consistent with past
practice. In support of the goal of increasing the level of ownership of the
Company's stock by the executive officer group, in fiscal years 1994 and
1996 significantly larger grants of stock options and restricted stock were
made to all executive officers. Because of the sizes of the fiscal year 1994
and 1996
13
grants, no Named Officer received any grants of stock options or restricted
stock during fiscal year 1995 or 1997 except for shares of restricted stock
awarded to Named Officers who elected to receive some or all of their
respective MIC Plan or EIC Plan awards in stock rather than cash or to
reflect promotions. Other Annual Compensation did not exceed the lesser of
either $50,000 or 10% of the total of annual salary and bonus reported for
any Named Officer.
(3) Performance shares awarded to executive officers in fiscal year 1994 vested
on October 1, 1996 based on the Company's total stockholder return
comparison with the Standard & Poor's 500 Stock Index and the comparator
companies at the end of fiscal year 1996. In December 1995, the Company
offered executive officers the opportunity to exchange some or all of those
performance shares for deferred stock units which are redeemable in an equal
number of shares of the Company's stock. Conversion of the deferred stock
units into unrestricted shares of stock is deferred until the officer's
retirement or termination from the Company. Deferred stock units received in
the exchange are subject to a risk of forfeiture if the officer voluntarily
terminates her or his employment, other than by retirement, prior to
December 31, 1997, or if the officer is terminated for "Cause," as that term
is defined in the officer's employment agreement, prior to that date. As an
incentive for executive officers to make the exchange, the officer received
additional deferred stock units equal to 10% of the number of performance
shares exchanged.
(4) The value of all restricted stock awards set forth in the table above was
determined by multiplying the fair market value of the Common Stock on the
date of grant by the number of shares awarded. As of June 30, 1997, the
number and value of aggregate restricted stock award holdings, based on fair
market value on June 30, 1997, were as follows: 7,560 shares ($499,669) for
Mr. Sullivan; 3,532 shares ($233,443) for Mr. Ausfahl; 2,520 shares
($166,556) for Mr. Louras; 2,628 shares ($173,694) for Mr. Murray; and 962
shares ($63,582) for Mr. Johnston. Dividends are paid on shares of
restricted stock awarded commencing from the date of grant.
(5) In the event of a "change of control," all restrictions on restricted stock
and performance units end and all stock options become exercisable. A change
of control will be deemed to occur if any person or entity becomes the
beneficial owner, directly or indirectly, of a specified percentage of the
then outstanding shares of Common Stock or has, directly or indirectly, a
specified percentage of the combined voting power of the then outstanding
securities entitled to vote for directors. For all persons or entities other
than Henkel KGaA, the specified percentage is 20%. For Henkel KGaA, the
specified percentage is that agreed to between the Company and Henkel KGaA
pursuant to the Letter Agreement. The current agreed percentage for Henkel
KGaA is 30%. See "Certain Relationships and Transactions". A feature of the
Restricted Stock Plan and the 1987 and 1977 Stock Option Plans is the stock
withholding election, pursuant to which a recipient may elect to have the
Company withhold shares of Common Stock to pay any withholding tax liability
that arises when the restrictions on the restricted stock are released or
when non-qualified stock options are exercised, respectively. In both cases,
the value of shares which may be withheld is based on the per share price of
the Common Stock on the Composite Transactions Report for the New York Stock
Exchange on the last business day before the withholding is made.
(6) The amounts for fiscal years 1997 and 1996 reflect dividends received from
deferred stock units granted in December 1995 in exchange for the
cancellation of certain restricted stock and from performance units granted
in April 1996.
(7) Except for amounts received under the Nonqualified Deferred Compensation
Plan, the amounts shown in the column are pursuant to programs provided to
salaried employees generally and represent actual Company contributions
under the Company's Value Sharing Plan and the Nonqualified Deferred
Compensation Plan and term life insurance premiums paid by the Company for
the benefit of each respective Named Officer.
14
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables show options and stock appreciation rights ("SARs") granted
or exercised during fiscal year 1997 to or by the Named Officers, and the value
of the options and SARs held by the Named Officers at the end of fiscal year
1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE)(1) DATE 0%(3) 5%(3)(4) 10%(3)(4)
- -------------------------------- ------------- ----------------- ----------- ----------- ----------- ---------- ------------
Gerald E. Johnston (4).......... 2,156 .3% $ 44.281 7/01/06 $ 0 $ 60,041 $ 152,155
2,156 .3% $ 48.709 7/01/06 $ 0 $ 66,045 $ 167,370
2,156 .3% $ 53.138 7/01/06 $ 0 $ 72,049 $ 182,586
18,946 3.0% $ 44.281 7/01/06 $ 0 $ 527,613 $ 1,337,074
- ---------
(1) The options in the first three rows in the table above will vest on June 30,
1998, June 30, 1999 and June 30, 2000, respectively. The options in the
fourth row in the table above vested on July 28, 1997. In the event of a
"change of control" (as described in footnote (5) to the Summary
Compensation Table on page 14), all stock options become exercisable.
(2) The total number of options granted to employees of the Company in fiscal
year 1997 represented 634,230 shares of Common Stock.
(3) The 5% and 10% assumed rates of appreciation are shown in response to
requirements of the rules of the Securities and Exchange Commission. There
can be no assurance that the market value of the Common Stock will
appreciate in the assumed manner. The column reflecting no appreciation in
market value is intended for illustrative purposes only. The market value of
the Common Stock on July 1, 1996, the date of grant of the above options,
was $44.281 per share.
(4) Mr. Johnston was the only Named Officer to receive stock options in fiscal
year 1997. These options were granted in connection with a promotion.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY-END IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED VALUE (#) EXERCISABLE/ AT FY-END ($) EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(1)(2)
- ----------------------------- --------------- ------------ ---------------------- --------------------------
G. Craig Sullivan............ 24,114 $ 965,218 293,766/581,412 $ 11,387,228/$13,642,847
William F. Ausfahl........... 38,034 $ 1,421,963 97,366/141,398 $ 3,866,476/$3,307,036
Peter N. Louras.............. 3,780 $ 150,964 101,136/141,398 $ 3,957,869/$3,307,036
Donald C. Murray............. 43,812 $ 1,355,703 62,424/119,618 $ 2,306,437/$2,793,165
Gerald E. Johnston........... 4,626 $ 204,012 52,570/107,428 $ 2,029,110/$2,410,521
- ---------
(1) The number of shares covered and the value of the unexercisable options
listed were all granted under the 1987 Stock Option Plan. In the event of a
"change of control" (as described in footnote (5) to the Summary
Compensation Table on page 14), all stock options become exercisable.
(2) The value of the unexercised options was determined by multiplying the
number of shares subject to unexercised options on the fiscal year end, June
30, 1997, by $66.0625, the fair market value of the Common Stock on such
date, minus the exercise price of each unexercised option.
15
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The table below reflects awards to the Named Officers during fiscal year 1997
under The Clorox Company 1987 Long-Term Compensation Program. If objectives are
met, such awards are redeemable in shares of Common Stock.
(B)
NUMBER OF SHARES, (C)
(A) UNITS OR OTHER PERFORMANCE OR OTHER PERIOD
NAME RIGHTS(#)(1) UNTIL MATURATION OR PAYMENT(2)
- ----------------------------------------- ------------------- -------------------------------
Gerald E. Johnston....................... 1,284 6/30/99, 6/30/00 or Forfeited
- ---------
(1) In connection with a promotion, Mr. Johnston received a grant of performance
units in July 1996. The July 1996 grant could vest as early as June 30, 1999
based on the relative total stockholder return (stock price appreciation
plus dividends paid) of the Common Stock measured against two comparator
groups: first, the total stockholder return of the Standard & Poor's 500
Stock Index and second, the total stockholder return of an index of stocks
of the Peer Companies. Each comparator group will have an equal weight of
50%. If, on average, the Company's total stockholder return is at or above
the 60th percentile relative to the stockholder returns of the two groups as
measured at the end of fiscal year 1999, the restrictions on the performance
units will lapse on that date. If the restrictions do not lapse on that date
and the Company's total stockholder return is at or above the 50th
percentile at the end of fiscal year 2000, the performance units will vest
at that time. If, at the end of fiscal year 2000, the Company's total
stockholder return is at or above the 40th percentile, but below the 50th
percentile, half of the performance units will vest and the other half will
be forfeited. If, at the end of fiscal year 2000, the Company's total
stockholder return is below the 40th percentile, all of the performance
units will be forfeited. The performance units are redeemable in an equal
number of shares of Common Stock.
(2) In the event of a "change of control" (as described in footnote (5) to the
Summary Compensation Table on page 14), all performance units become
exercisable.
16
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return of the Common
Stock for the last five fiscal years with the cumulative total return of the
Standard & Poor's 500 Stock Index and a composite index composed of the Standard
& Poor's Household Products Index and the Standard & Poor's Housewares Index for
a five-year period ending June 30, 1997. The composite index is weighted based
on market capitalization as of the end of each quarter during each of the last
five years. The graph lines merely connect the prices on the dates indicated and
do not reflect fluctuations between those dates.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMBINED INDEX OF S&P HOUSEHOLD
Clorox S&P 500 Products and Housewares Indices
June 1992 $100.00 $100.00 $100.00
June 1993 $119.01 $113.57 $110.35
June 1994 $115.54 $115.20 $113.60
June 1995 $159.36 $145.14 $154.94
June 1996 $222.34 $182.78 $195.35
June 1997 $338.78 $246.08 $289.93
The foregoing report of the Compensation Committee of the board of directors on
executive compensation and the performance graph that appears immediately above
shall not be deemed to be soliciting material or to be filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934, or incorporated
by reference in any document so filed.
17
PENSION BENEFITS
Pension benefits are paid to executive officers under three different plans: the
Pension Plan, the Nonqualified Deferred Compensation Plan and the Supplemental
Executive Retirement Plan ("SERP").
The Company's Pension Plan is a noncontributory "cash balance" defined benefit
plan qualified under pertinent income tax laws. Essentially all salaried
employees as well as nonunion hourly employees with at least one year of service
participate in the Pension Plan. Prior to July 1, 1996, benefits were calculated
based on career average compensation. Effective July 1, 1996, participants in
the plan accrue benefits equal to 3% of qualified earnings each year. Qualified
earnings include base annual salary and bonus. Participants' benefits are
adjusted each quarter by an interest factor. Participants meeting certain age
and years of service levels will receive the greater of the benefits calculated
under the career average compensation formula and the new cash balance formula.
Each of the Named Officers met the age and years of service levels and will
receive the greater of the benefits under the current and prior formulas. A
participant is fully vested in her or his benefit after 5 years of service.
The Nonqualified Deferred Compensation Plan provides additional benefits equal
to the employer-provided benefits that plan participants do not receive under
the Pension Plan because of Internal Revenue Code limits. This plan has the same
five-year vesting provision as the Pension Plan.
The purpose of the SERP is to provide executive officers a fixed objective of
55% of the average annual compensation for the three consecutive years of
highest compensation. Compensation consists of base annual salary and the EIC
Plan bonus. For the Named Officers, those amounts are shown in salary and bonus
columns (c) and (d) of the Summary Compensation Table on page 13. There is a
minimum service requirement of ten years. SERP benefits are offset by the
annuity value of amounts received from primary social security, the Pension Plan
and Company contributions to the Value Sharing Plan and Nonqualified Deferred
Compensation Plan.
Assuming retirement at age 65, fiscal year 1997 annual base salary and bonus and
no future increase in such compensation and an interest rate of 8%, the SERP
benefits for the Named Officers will exceed benefits under the other plans. The
retirement benefits shown in the table below are based on the SERP, calculated
for an unmarried person, on a straight life annuity basis, based on retirement
at age 65 with 15 or more years of service with the Company. They would be
proportionately reduced for early retirement or for shorter years of service to
a minimum of 10 years. Thus, the table below shows what would be received by the
Named Officers under the three plans for pension benefits, taken collectively.
15 OR MORE
YEARS OF
COMPENSATION(1) SERVICE
- ------------------------------------------------------------------------------ --------------
$ 500,000..................................................................... $ 275,000
$ 600,000..................................................................... $ 330,000
$ 700,000..................................................................... $ 385,000
$ 800,000..................................................................... $ 440,000
$ 900,000..................................................................... $ 495,000
$1,000,000.................................................................... $ 550,000
$1,100,000.................................................................... $ 605,000
$1,200,000.................................................................... $ 660,000
$1,300,000.................................................................... $ 715,000
$1,400,000.................................................................... $ 770,000
$1,500,000.................................................................... $ 825,000
$1,600,000.................................................................... $ 880,000
$1,700,000.................................................................... $ 935,000
$1,800,000.................................................................... $ 990,000
$1,900,000.................................................................... $ 1,045,000
$2,000,000.................................................................... $ 1,100,000
- ---------
(1) The number of years of credited service for each of the Named Officers are:
Mr. Sullivan, 26; Mr. Ausfahl, 15; Mr. Louras, 17; Mr. Murray, 19; and Mr.
Johnston, 15.
18
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has entered into employment agreements with each of the Named
Officers named in the Summary Compensation Table on page 13 above. The term of
the employment agreement for Mr. Sullivan is five years and for each of the
other Named Officers is three years. Such agreement terms are "evergreen" in
that they maintain a five-year term, in the case of the chief executive officer,
or a three-year term, in the case of the other Named Officers, unless either
party gives five-years' notice of termination, in the case of the chief
executive officer's employment agreement, and three-years' notice of
termination, in the case of the other Named Officers' employment agreements. The
employment agreements are also terminable at any time by the Company either for
"Cause," as that term is defined in them, or "at will" by either the Named
Officer or the Company. In the case of an "at will" termination by the Company,
a Named Officer is entitled to receive annually severance benefits of his then
current base salary, plus 75% of his target MIC Plan or EIC Plan award for the
previous fiscal year, for the length of the remaining term of his employment
agreement, subject to offset for other earned income. He is also entitled to
continue to participate in the Company's medical and dental insurance programs
for the same period. In addition, the Named Officer would receive a pro-rated
EIC Plan award for the year in which termination occurs.
The Company has entered into change of control agreements with each of the Named
Officers. Within a three-year period of a "change of control" (as described in
footnote (5) to the Summary Compensation Table on page 14), a Named Officer may
terminate his employment in the event of a reduction or elimination in rank,
responsibilities, compensation or benefits, and he may also terminate his
employment absent such reasons within a 30-day period following the first
anniversary of the change of control. In the event of such termination, the
Named Officer will receive a lump sum amount equal to his then current base
salary, plus 100% of his target MIC Plan or EIC Plan award for the then current
fiscal year, multiplied by the change of control benefit multiple under the
change of control agreements. For the Named Officers, such multiple is three. In
addition, a Named Officer is entitled to continue to participate in the
Company's medical and dental insurance programs for the remaining term of his
change of control agreement. The Named Officer would also receive a pro-rated
EIC Plan award for the year in which termination occurs. If payments received
under the change of control agreements are subject to tax under Section 4999 of
the Internal Revenue Code (which deals with certain payments contingent on a
change of control), the Company will make an additional payment to the Named
Officer in respect of such tax.
The Company has also entered into employment agreements and change of control
agreements on similar terms with each of the other executive officers of the
Company. The termination notice periods for these agreements range from three
years to one year depending upon the executive officer's level in the
organization and her or his tenure as an executive officer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and Securities and Exchange
Commission regulations require the Company's directors, certain officers and
greater than ten percent stockholders to file reports of ownership on Form 3 and
changes in ownership on Forms 4 or 5 with the Securities and Exchange
Commission. The Company undertakes to file such forms on behalf of the reporting
person pursuant to a power of attorney given to certain attorneys-in-fact. Such
reporting officers, directors and ten percent stockholders are also required by
Securities and Exchange Commission rules to furnish the Company with copies of
all Section 16(a) reports they file.
Based solely on its review of copies of such reports received or written
representations from such executive officers, directors and ten percent
stockholders, the Company believes that all Section 16(a) filing requirements
applicable to its directors, executive officers and ten percent stockholders
were complied with during fiscal year 1997, except the following officers and
directors inadvertently omitted reporting the following transactions: Dr. Klaus
Morwind had a purchase transaction which occurred in February 1996, which was
disclosed in a Form 4 filing in January 1997, and Mr. Frank Tataseo received
stock option grants in October 1994, which were disclosed in a Form 4 filing in
January 1997, and the non-employee directors received deferred stock unit grants
under the new Directors' Stock-Based Compensation Plan during fiscal year 1997,
which were disclosed in a Form 5 filing in September 1997.
19
PROPOSAL NO. 2:
ADOPTION OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation currently authorizes 175,000,000
shares of Common Stock, par value $1.00 per share, and 5,000,000 shares of
Preferred Stock, par value $1.00 per share. On July 15, 1997, the board of
directors declared a two-for-one stock split of the Company's Common Stock on
all shares held of record as of the close of business on July 28, 1997. After
giving effect to the stock split, the Company had 103,195,984 shares of Common
Stock outstanding on July 31, 1997, and options to purchase 5,930,184 shares of
Common Stock were outstanding on such date.
The board of directors has adopted, subject to approval by stockholders at the
Annual Meeting, an amendment of the Company's Certificate of Incorporation
("Amendment") to increase the authorized capital of the Company. The proposed
Amendment provides that the Company's authorized stock would consist of
375,000,000 shares of Common Stock, with a par value of $1.00 per share, and
5,000,000 shares of Preferred Stock, with a par value of $1.00 per share. Thus,
the Amendment does not increase or otherwise affect the number of authorized
shares of Preferred Stock which may be issued by the Company. The provisions of
Article Four of the Certificate of Incorporation as proposed to be amended are
set forth in Appendix A to this proxy statement.
The board of directors believes that as a result of the stock split and taking
into account outstanding options, deferred stock units and performance units, it
would be advisable for the Company to have additional authorized shares
available for use in future transactions involving the issuance of shares of the
Company's Common Stock. The additional shares, if so authorized, could be issued
at the discretion of the board of directors without any further action by the
stockholders, except as required by applicable law or regulation, in connection
with acquisitions, efforts to raise additional capital for the Company, and
other corporate purposes. Except for its existing director and employee
stock-based compensation plans, the Company currently has no plans or
commitments that would involve the issuance of additional shares of Common
Stock.
Authorizing the Company to issue more shares than currently authorized by the
Certificate of Incorporation will not affect materially any substantive rights,
powers or privileges of holders of outstanding Common Stock.
This proposal is not the result of management's knowledge of any specific effort
to accumulate the Company's securities or to obtain control of the Company by
means of a merger, tender offer, proxy solicitation in opposition to management
or otherwise. The Company is not submitting this proposal to enable it to
frustrate any efforts by another party to acquire a controlling interest. The
submission of this proposal is not a part of any plan by the Company's
management to render the takeover of the Company more difficult.
The affirmative vote of a majority of the outstanding shares of Common Stock is
required to approve the amendment of the Company's Certificate of Incorporation.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION AND UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF SHARES OF COMMON STOCK VOTE "FOR" PROPOSAL NO. 2.
PROPOSAL NO. 3:
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the board of directors has recommended, and the board of
directors has selected, Deloitte & Touche LLP as independent auditors for the
fiscal year ending June 30, 1998. Deloitte & Touche LLP has been so engaged
since 1957. During fiscal year 1997, Deloitte & Touche LLP examined the
Company's consolidated financial statements, made limited reviews of the interim
financial reports, reviewed filings with the Securities and Exchange Commission
and provided general advice regarding related accounting matters.
20
Ratification of the selection of Deloitte & Touche LLP by stockholders is not
required by law. However, as a matter of policy, such selection is being
submitted to the stockholders for ratification at the Annual Meeting (and it is
the present intention of the board of directors to continue this policy). The
board of directors recommends the adoption of the following resolution which
will be presented to the Annual Meeting:
RESOLVED, that the stockholders of The Clorox Company hereby
ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 1998.
The persons designated in the enclosed proxy will vote your shares FOR
ratification unless instructions to the contrary are indicated in the enclosed
proxy. If the stockholders fail to ratify the selection of this firm, the board
of directors will reconsider the matter. The affirmative vote of a majority of
the shares of Common Stock represented and voted at the Annual Meeting is
required to ratify the selection of Deloitte & Touche LLP.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and to make a statement
should they desire to do so.
OTHER BUSINESS
The board of directors is not aware of any other matters to come before the
Annual Meeting. If any matter not mentioned herein is properly brought before
the Annual Meeting, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
SOLICITATION OF PROXIES
The Company has not retained an outside firm in connection with the solicitation
of the enclosed proxy. However, executive officers, directors and regular
employees of the Company, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegraph, facsimile or personal
call.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the Company's
proxy material and for consideration at the 1998 annual meeting must submit such
proposals in writing to the Secretary at the address shown on the top of the
notice accompanying this proxy statement not later than June 1, 1998.
By Order of the Board of Directors
/s/ Edward A. Cutter
Edward A. Cutter,
SENIOR VICE PRESIDENT -- GENERAL
COUNSEL AND SECRETARY
September 29, 1997
21
APPENDIX A
AMENDMENT TO CERTIFICATE OF INCORPORATION
The first paragraph and sentence of ARTICLE FOUR of the Certificate of
Incorporation of The Clorox Company is hereby amended to read as follows:
The total number of shares of stock which the corporation shall
have authority to issue is 380,000,000 shares, consisting of
375,000,000 shares of Common Stock having a par value of $1.00 per
share and 5,000,000 shares of Preferred Stock having a par value
of $1.00 per share.
A-1
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