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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-12
USG CORPORATION
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(Name of Registrant as Specified in Its Charter)
USG CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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USG CORPORATION
[USG LOGO] -------------------------------------------
125 South Franklin Street
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Chicago, IL 60606-4678
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312 606-4000
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April 6, 2001
Dear Fellow Stockholder:
You are cordially invited to attend USG Corporation's annual meeting of
stockholders to be held at 9:15 a.m. on Wednesday, May 9, 2001, in the Sixth
Floor Auditorium, The Northern Trust Building, 50 South LaSalle Street, Chicago,
Illinois. The attached Notice of Annual Meeting and proxy statement describe all
known items to be acted upon by stockholders.
It is important that your shares are represented at the Annual Meeting
whether or not you plan to attend. To ensure that you will be represented, we
ask you to sign, date and return the enclosed proxy card or proxy voting
instruction form as soon as possible. If your bank or broker offers telephone or
Internet voting and you choose to use one of those forms of voting, it is not
necessary for you to return your proxy card. In any event, please vote as soon
as possible. If you then attend the meeting, you may, in your discretion,
withdraw your proxy and vote in person. This is your meeting, and your
participation is important to us.
Sincerely,
/s/ William C. Foote
WILLIAM C. FOOTE
Chairman of the Board
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125 South Franklin Street USG CORPORATION Chicago, IL 60606-4678
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
The annual meeting of stockholders of USG Corporation will be held in the
Sixth Floor Auditorium, The Northern Trust Building, 50 South LaSalle Street,
Chicago, Illinois, on Wednesday, May 9, 2001, at 9:15 a.m., Central Daylight
Time, for the following purposes:
1. To elect three directors for a term of three years, pursuant to the
Corporation's by-laws.
2. To consider ratification of the appointment of Arthur Andersen LLP as
independent public accountants for the year ending December 31, 2001.
3. To transact such other business as may properly come before the meeting.
Pursuant to the Corporation's by-laws, any matter to be presented at the
meeting for consideration and with a view to obtaining a vote thereon must have
satisfied the procedural and legal requirements referred to in the accompanying
proxy statement and must be introduced by a motion, which motion must be
seconded before consideration of it may begin or before a vote on it may be
obtained.
The Board of Directors has fixed the close of business on March 14, 2001,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournment thereof.
A list of stockholders entitled to vote at the meeting and the number of
shares registered in the name of each will be available for examination by any
stockholder at the office of the Corporate Secretary of the Corporation, 125
South Franklin Street, Chicago, Illinois, during ordinary business hours
beginning April 25, 2001, and running throughout the course of the meeting.
By order of the Board of Directors
/s/ Dean H. Goossen
DEAN H. GOOSSEN
Corporate Secretary
Chicago, April 6, 2001
IMPORTANT -- PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE.
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PROXY STATEMENT AND PROXY
This proxy statement has been prepared by the management of USG Corporation
(the "Corporation"). It is being furnished to stockholders in connection with
the solicitation of proxies by the Board of Directors for use at the annual
meeting of stockholders of the Corporation to be held on May 9, 2001, and any
adjournment thereof. The notice of the meeting accompanies this proxy statement.
The Corporation intends to commence distribution of this proxy statement
together with notice, proxy, and other accompanying materials, on or about April
6, 2001.
The Board of Directors has selected the close of business on March 14, 2001
(the "Record Date"), as the time for determining the holders of record of the
Corporation's common stock, par value $0.10 per share ("Common Stock"), entitled
to notice of and to vote at the annual meeting or any adjournment thereof. On
the Record Date, the Corporation had outstanding 43,409,119 shares of Common
Stock, and those are the only securities of the Corporation entitled to vote at
the annual meeting or any adjournment thereof. A majority of the shares entitled
to vote at the meeting will constitute a quorum for the transaction of business.
Each share of Common Stock outstanding on the Record Date is entitled to
one vote on each proposal. In the election of directors, each stockholder has
the right to vote the number of shares owned by such stockholder for as many
persons as there are directors to be elected. The affirmative vote of the
holders of a majority of the stock entitled to vote and present in person or
represented by proxy is required for election of directors and for ratification
of the appointment of independent public accountants. Broker non-votes (i.e.,
the failure to vote shares held of record by nominees due to a lack of both
discretionary authority and instructions from the beneficial owners) with
respect to any matter are not considered part of the "voting power present" with
respect to such matter and will not affect the outcome of the vote on such
matter. Abstentions are not treated as votes cast for or against the election of
directors or a particular matter, as the case may be, but they are treated as
part of the "voting power present" with respect to such matter and therefore
have the same legal effect as a vote against such matter.
Any person giving a proxy may revoke it at any time before it has been
voted by (i) giving written notice of revocation to the Corporate Secretary of
the Corporation, (ii) submitting to the Corporation a valid proxy voting the
same shares and having a later date, or (iii) voting by ballot at the annual
meeting.
All proxies received (and not revoked) pursuant to this solicitation will
be voted by the individuals named in the proxy as indicated below, except as to
matters where authority to vote is specifically withheld and except as to
matters on which the person solicited specifies a choice, in which case the
proxy will be voted in accordance with such specification. If no instructions
are given and authority is not withheld, the individuals named in the proxy
solicited by the Board of Directors intend to vote FOR the nominees for election
as directors named below, and FOR ratification of the appointment of Arthur
Andersen LLP as independent public accountants for the year ending December 31,
2001.
The Northern Trust Company, as trustee of the USG Corporation Investment
Plan, held of record 743,198 shares of Common Stock as of the Record Date, or
approximately 1.7% of the total of such shares outstanding. All shares so held
by the Trustee on the Record Date will be voted in accordance
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with instructions given by Plan participants. Shares as to which no instructions
are received will be voted by the Trustee in the same proportions as those
shares for which instructions are received.
Except as otherwise expressly indicated, all information in this proxy
statement is provided as of March 14, 2001.
PRINCIPAL STOCKHOLDERS
The following table lists the beneficial ownership of Common Stock, with
respect to all persons known by the Corporation to be the beneficial owner of
more than 5% of the Common Stock outstanding on the Record Date. The information
shown was provided by the respective persons pursuant to Schedules 13D or 13G
filed with the Securities and Exchange Commission ("SEC").
NAME AND ADDRESS AMOUNT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
Berkshire Hathaway, Inc.(a)............ 6,500,000 14.98%
1440 Kiewit Plaza
Omaha, NE 68131
Southeastern Asset Management,
Inc.(b).............................. 6,415,000 14.78%
6410 Poplar Avenue
Memphis, TN 38119
Knauf International GmbH(c)............ 4,300,878 9.91%
Am Bahnhof 7
97346 Iphofen
Federal Republic of Germany
Barclays Global Investors, N.A.(d)..... 3,270,612 7.54%
45 Fremont Street
San Francisco, CA 94105
John R. Simplot
Self-Declaration of Revocable
Trust(e)............................. 2,460,000 5.67%
999 Main Street
Boise, ID 83702
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(a) Berkshire Hathaway, Inc., a Delaware corporation, reported in a group filing
with Warren E. Buffett, an individual who reported that he may be deemed to
control Berkshire Hathaway, Inc., OBH, Inc., a Delaware corporation, and
National Indemnity Company, a Nebraska insurance corporation, the beneficial
ownership of 6,500,000 shares, each with shared voting and dispositive power
with respect to all such shares.
(b) Southeastern Asset Management, Inc., an investment adviser to Longleaf
Partners Small-Cap Fund, a series of Longleaf Partners Funds Trust, reported
in a group filing that it was the beneficial owner of 6,415,000 shares,
having shared voting and dispositive power with Longleaf Partners Small-Cap
Fund with respect to 3,061,900 shares and no voting power with respect to
980,000 shares. Mr. O. Mason Hawkins, Chairman of the Board and CEO of
Southeastern Asset Management, Inc., joined in the filing solely in the
event he could be deemed to be a controlling person of that firm, which
control he disclaimed.
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(c) Knauf International GmbH, a corporation organized under the laws of the
German Federal Republic, reported in an initial Schedule 13D filing that it
was the beneficial owner of 4,300,878 shares, with sole voting and
dispositive power with respect to all such shares.
(d) Barclays Global Investors, N.A., a national banking association, reported
that it and affiliated banks held 3,270,612 shares in trust accounts for the
economic benefit of the beneficiaries of those accounts, with sole voting
power with respect to 2,909,645 such shares and sole dispositive power with
respect to all such shares.
(e) The John R. Simplot Self-Declaration of Revocable Trust reported that it was
the beneficial owner of 2,460,000 shares. As trustee of the Trust, Mr.
Simplot has sole voting and dispositive power with respect to 2,360,000
shares owned by the Trust and shared voting and dispositive power with
Donald J. and Scott R. Simplot with respect to 100,000 shares held by the
J.R. Simplot Foundation, in which the Messrs. Simplot disclaim any
beneficial interest. The filing also indicates that S-Sixteen Limited
Partnership, an Idaho partnership of which the J.R. Simplot Foundation is a
general partner, beneficially owns 170,000 shares with sole voting and
dispositive power with respect to all such shares.
ITEM NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Corporation currently is composed of 11
directors, divided into three classes, two of which currently have four members
each, the other having three members. Each class is elected for a three-year
term. One class of three directors will be elected at the annual meeting of
stockholders on May 9, 2001. The remaining classes will be elected in 2002 and
2003, respectively.
The three candidates nominated by the Board of Directors for election as
directors at the annual meeting of stockholders on May 9, 2001, are identified
below. If any nominee identified below should for any reason become unavailable
prior to the meeting, which the Board of Directors does not anticipate, the
Board of Directors prior to the meeting will either (i) reduce the size of the
Board to eliminate the position for which that person was nominated, or (ii)
nominate a new candidate in place of any such person and vote in favor of the
new candidate all shares represented by proxies received by the Board, unless
authority to vote for all candidates nominated by the Board is withheld.
A provision in the Corporation's by-laws requires that a person serving
both as a director and an officer shall not continue to serve as a director
beyond the date such person ceases to be an officer. Another by-law provision
requires that a director who is not an officer or employee retire from Board
service at the end of the first annual meeting of stockholders following such
director's 70th birthday.
Information shown for nominees and directors has been furnished to the
Corporation by such nominees and directors.
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM TO EXPIRE IN 2004
LAWRENCE M. CRUTCHER, 58, Managing Director (since 1990) of Veronis Suhler,
investment bankers. Mr. Crutcher has been a director of the Corporation since
May 1993 and is a member of the Board's Finance and Corporate Affairs
Committees.
WILLIAM C. FOOTE, 50, Chairman (since April 1996), President (since August
1999) and Chief Executive Officer (since January 1996); President and Chief
Operating Officer (January 1994-December 1995); President (January 1996-June
1997). He joined the Corporation in January 1984. Mr. Foote is a director of
GATX Corporation and Walgreen Co. He also serves as a director of Northwestern
Memorial Hospital and as a trustee of the Museum of Science and Industry. He has
been a director of the Corporation since March 1994, and chairs the Board's
Executive Committee.
JUDITH A. SPRIESER, 47, Chief Executive Officer (since September 2000) of
Transora, Inc., business-to-business transaction site for the global consumer
products industry. Ms. Sprieser was with Sara Lee Corporation, packaged food and
consumer products, from 1987 to 2000 and served as its Executive Vice President
and the chief executive officer of its foods and foodservice segments (1999-
2000), Executive Vice President and Chief Financial Officer (1998-1999), and
Senior Vice President and Chief Financial Officer (1994-1998). She also is a
director of Transora, Inc., the Chicago Network, and Allstate Insurance Company,
and a trustee of Northwestern University. Ms. Sprieser has been a director of
the Corporation since February 1994, and is a member of the Board's Compensation
and Organization and Finance Committees and chairs its Audit Committee.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES LISTED
ABOVE.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
ROBERT L. BARNETT, 60, President, Commercial Governmental and Industrial
Solutions Sector, Motorola Corporation (since July 1998); President, Land Mobile
Products Sector, Motorola Corporation (1997-1998); Vice President and General
Manager, iDEN Group, Motorola Corporation (1995-1997). He is a director of
Johnson Controls, Inc. and Central Vermont Public Service Corporation, and is a
member of the Advisory Council of the Robert R. McCormick School of Engineering
and Applied Science at Northwestern University and of the Illinois University
Electrical Engineering and Computer Science Industrial Advisory Board. He is
affiliated with the Institute of Electrical and Electronics Engineers. Mr.
Barnett has been a director of the Corporation since May 1990, is a member of
the Board's Audit Committee and Committee on Directors, and chairs its Corporate
Affairs Committee.
DAVID W. FOX, 69, retired Chairman and Chief Executive Officer (1990-1995)
and President (1987-1993) of Northern Trust Corporation and The Northern Trust
Company, banking and financial services. Mr. Fox is a past director of The
Federal Reserve Bank of Chicago and the Chicago Central Area Committee, a past
Governor and Chairman of the Chicago Stock Exchange, a director and past
Chairman of Northwestern Memorial Hospital, and a trustee of the Adler
Planetarium, The Orchestral
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Association, and DePaul University. Mr. Fox has been a director of the
Corporation since May 1987, is a member of the Board's Executive and Finance
Committees and its Committee on Directors, and chairs its Compensation and
Organization Committee.
VALERIE B. JARRETT, 44, Executive Vice President (since 1995) of The
Habitat Company. Ms. Jarrett is the Chair of the Board of Directors of the
Chicago Transit Authority and a director of the Regional Transportation
Authority (Illinois). She is a Governor of the Chicago Stock Exchange and a
director of the Metropolitan Planning Council, The German Marshall Fund, The
University of Chicago Laboratory Schools, the Southeast Chicago Commission, and
The Fund for Community Redevelopment and Revitalization. Ms. Jarrett is a
trustee of the Museum of Science and Industry, the University of Chicago,
University of Chicago Hospitals, Windows to the World Communications, Inc., and
Harris Insight Funds. She is also a member of the Visiting Committee of the
University of Chicago School of Public Policy. Ms. Jarrett has been a director
of the Corporation since August 1998, and is a member of the Board's
Compensation and Organization and Corporate Affairs Committees and its Committee
on Directors.
MARVIN E. LESSER, 59, Managing Partner (since 1993) of Sigma Partners,
L.P., a private investment partnership. He is President (since 2000) of Alpina
Management, L.L.C., an investment advisor, and a director of St. Moritz 2000
Fund, Ltd. Mr. Lesser also has been a private consultant since 1992. He is a
Trustee and past Chair of the Seacoast Area Chapter (New Hampshire and Maine) of
the American Red Cross. Mr. Lesser has been a director of the Corporation since
May 1993, and is a member of the Board's Audit and Finance Committees and its
Committee on Directors.
DIRECTORS WHOSE TERMS EXPIRE IN 2003
KEITH A. BROWN, 49, President (since 1987) of Chimera Corporation, a
private management holding company. He is a director of Myers Industries, Inc.
Mr. Brown has been a director of the Corporation since May 1993, and is a member
of the Board's Audit, Finance and Corporate Affairs Committees and chairs its
Committee on Directors.
JAMES C. COTTING, 67, retired Chairman (1987-1996) and Chief Executive
Officer (1987-1995) of Navistar International Corporation, truck and diesel
engine manufacturing and financial services. Mr. Cotting is a member of the
Board of Governors of the Chicago Stock Exchange. Mr. Cotting has been a
director of the Corporation since 1987, is a member of the Board's Executive and
Corporate Affairs Committees and its Committee on Directors and chairs its
Finance Committee.
W. DOUGLAS FORD, 57, Chief Executive, Refining & Marketing, of BP Amoco
p.l.c. (since 1999); Executive Vice President of BP Amoco p.l.c. and its
predecessor, Amoco Corporation (1993-1999). He is also a managing director of BP
Amoco p.l.c. Mr. Ford was elected a director of the Corporation in November
1996, and is a member of the Board's Executive, Compensation and Organization
and Corporate Affairs Committees and its Committee on Directors.
JOHN B. SCHWEMM, 66, retired Chairman (1983-1989) and Chief Executive
Officer (1983-1988) of R.R. Donnelley & Sons Company, commercial and financial
printing. He is a director of
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Walgreen Co. and William Blair Mutual Funds and a Life Trustee of Northwestern
University. Mr. Schwemm has been a director of the Corporation since May 1988,
and is a member of the Board's Executive, Audit and Compensation and
Organization Committees and its Committee on Directors.
The Board of Directors held seven meetings during 2000, and the standing
committees of the Board of Directors held an aggregate of 19 meetings during the
year. Each director attended at least 75% of the aggregate number of meetings in
2000 of the Board of Directors and the Board committees on which he or she
served.
Committees of the Board of Directors
The Board of Directors has established an Executive Committee, consisting
of Mr. Foote, as Chairman, and Messrs. Cotting, Ford, Fox and Schwemm, which, to
the extent permitted by law, is authorized to exercise the power of the Board
with respect to the management of the business and affairs of the Corporation
between board meetings. The Executive Committee did not meet in 2000. The other
standing committees of the Board of Directors are the Audit, Compensation and
Organization, Finance and Corporate Affairs Committees, and the Committee on
Directors.
The Audit Committee has ongoing responsibilities to assist the Board of
Directors in monitoring the integrity of the financial statements of the
Corporation, the Corporation's compliance with financial reporting, legal and
statutory requirements, and the independence and performance of the
Corporation's internal and external auditors. The Committee selects and employs
on behalf of the Corporation, subject to ratification by the stockholders, a
firm of independent public accountants to audit the Corporation's books and
accounts for the applicable year, which firm is ultimately accountable to the
Committee and the Board of Directors. The Committee's charter as adopted by the
Board of Directors is set forth in full as Annex A. The Committee members are
Judith A. Sprieser, Chair, Robert L. Barnett, Keith A. Brown, Marvin E. Lesser,
and John B. Schwemm, each of whom meets the independence requirements of the New
York Stock Exchange ("NYSE"), on which the Common Stock is listed. The Audit
Committee held four meetings during 2000.
The Compensation and Organization Committee reviews and makes
recommendations to the Board of Directors with respect to management
organization, succession and development programs, and the election of
Corporation officers. The Committee reviews and approves Corporation officers'
salaries, incentive compensation, and bonus awards. The Committee, or a
subcommittee thereof, also makes the decisions required by a committee of the
Board of Directors under all stock option and restricted and deferred stock
plans which the Corporation has adopted or may adopt and approves and reports to
the Board of Directors changes in salary ranges for all major position
categories and changes in Corporation retirement plans, group insurance plans,
investment plans, and management incentive compensation, bonus, and other
benefit plans. The members of the Committee are David W. Fox, Chair, W. Douglas
Ford, Valerie B. Jarrett, John B. Schwemm and Judith A. Sprieser. The
Compensation and Organization Committee held three meetings during 2000.
The Finance Committee provides review and oversight of and makes
recommendations to the Board of Directors on the Corporation's financing
requirements and programs to obtain funds; forecasting procedures on revenues,
expenses, earnings, and cash flow; operating and capital expendi-
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tures budgets; relationships and communications with banks, other lenders and
creditors, and stockholders; dividend policy; and acquisitions, divestitures,
and significant transactions affecting the Corporation's capital structure and
ownership. The Committee reports periodically to the Board on the funding and
investment performance of qualified pension plans of the Corporation and its
subsidiaries and authorizes necessary or desirable changes in actuarial
assumptions for funding those pension plans. The Committee also considers such
other matters as may be referred to it from time to time by the Board. The
Committee members are James C. Cotting, Chair, Keith A. Brown, Lawrence M.
Crutcher, David W. Fox, Marvin E. Lesser and Judith A. Sprieser. The Finance
Committee held six meetings during 2000.
The Corporate Affairs Committee reviews and recommends policies and
programs important to the Corporation's position with those various
constituencies whose understanding and goodwill are necessary to the
Corporation's success. It reports periodically to the Board on the Corporation's
activities in fulfilling its social responsibilities and complying with public
policy. The members of the Committee are Robert L. Barnett, Chair, Keith A.
Brown, James C. Cotting, Lawrence M. Crutcher, W. Douglas Ford and Valerie B.
Jarrett. The Committee held two meetings in 2000.
The Committee on Directors makes recommendations to the Board of Directors
concerning the size and composition of the Board and committees of the Board,
recommends nominees for election or reelection as directors, and considers other
matters pertaining to Board membership such as benefits and compensation of
non-employee directors. The members of the Committee are Keith A. Brown, Chair,
Robert L. Barnett, James C. Cotting, W. Douglas Ford, David W. Fox, Valerie B.
Jarrett, and Marvin E. Lesser. The Committee held four meetings during 2000.
The Committee on Directors will consider recommendations from Corporation
stockholders of director nominee candidates. Such recommendations must be in
writing and must include a brief account of the individual's business experience
during the past five years, including principal occupations and employment
during that period and the name and principal business of any corporation or
other organization in which that individual is a director. Such recommendations
should be sent to the Committee on Directors, attention of the Corporate
Secretary, at the principal office of the Corporation. Recommendations may be
submitted at any time but will not be considered by the Committee in connection
with the annual meeting of a given year unless received on or before December 1
of the prior year.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information known to the Corporation
regarding the beneficial ownership of Common Stock as of the Record Date by each
current director and each of the five most highly compensated executive officers
of the Corporation in 2000, and by all current directors and executive officers
of the Corporation as a group (26 persons). Such information is derived from the
filings made with the SEC by such persons under Section 16(a) of the Securities
Exchange Act of 1934, as amended, and subsequent information received by the
Corporation. The totals include any shares that such individuals have the right
to acquire within 60 days of the Record Date through the exercise of stock
options, restricted stock subject to risk of forfeiture, and any shares
allocated to the accounts of those individuals under the USG Corporation
Investment Plan.
SHARES BENEFICIALLY OPTION SHARES TOTAL AND
OWNED, EXCLUDING EXERCISABLE PERCENT OF
NAME OPTIONS(A)(B) WITHIN 60 DAYS CLASS(F)
---- ------------------- -------------- ----------
Robert L. Barnett............................ 4,880 -- 4,880
Edward M. Bosowski........................... 36,731 57,500 94,231
Keith A. Brown(c)............................ 139,546 -- 139,546
James C. Cotting............................. 4,542 -- 4,542
Lawrence M. Crutcher(d)...................... 11,832 -- 11,832
Richard H. Fleming........................... 64,615 126,000 190,615
William C. Foote(e).......................... 122,360 175,000 297,360
W. Douglas Ford.............................. 2,661 -- 2,661
David W. Fox................................. 6,778 -- 6,778
Valerie B. Jarrett........................... 3,551 -- 3,551
Marvin E. Lesser............................. 5,661 -- 5,661
John H. Meister.............................. 43,237 56,500 99,737
Daniel N. Nootens............................ 18,812 61,000 79,812
John B. Schwemm.............................. 5,163 -- 5,163
Judith A. Sprieser........................... 3,725 -- 3,725
All directors and executive officers as a
group (26 persons), including those directors
and executives named above................... 677,245 678,000 1,355,245
- ---------------
(a) Includes restricted stock grants to executive officers subject to risk of
forfeiture, as follows: Mr. Bosowski, 28,000 shares; Mr. Fleming, 40,000
shares; Mr. Foote, 70,000 shares; Mr. Meister, 31,000 shares; Mr. Nootens,
15,000 shares; all executive officers as a group: 359,000 shares.
(b) Includes deferred stock units under the Stock Compensation Program for
Non-Employee Directors, as follows: Mr. Cotting, 1,538 units; Ms. Jarrett,
3,100 units, and Mr. Lesser, 2,830 units. See "Director Compensation" below.
(c) Includes 135,715 shares held by trusts of which Mr. Brown is a trustee.
(d) Includes 5,990 shares held by Mr. Crutcher as trustee for the benefit of his
adult children in which shares he disclaims beneficial ownership.
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(e) Includes 5,000 shares held by Mr. Foote's spouse, Kari H. Foote, and 400
shares held for the benefit of his minor children, in which shares he
disclaims beneficial ownership.
(f) Total beneficial ownership of 1,355,245 shares of Common Stock by members
of the group identified above represents approximately 3.1% of total
outstanding shares of Common Stock; no individual holding within such group
exceeded approximately 0.7% of total outstanding shares.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's executive officers, directors and 10% owners file reports of
ownership and changes of ownership of Common Stock with the SEC and the New York
Stock Exchange. Based on a review of copies of such reports provided to the
Corporation during 2000, the Corporation believes that all filing requirements
were met during such year.
COMPENSATION OF EXECUTIVE OFFICERS
The discussion that follows has been prepared based on the actual
compensation paid and benefits provided by the Corporation to the five most
highly compensated executive officers of the Corporation (collectively, the
"Named Executives" ), for services performed during 2000 and the other periods
indicated. This historical data is not necessarily indicative of the
compensation and benefits that may be provided to such persons in the future.
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SUMMARY COMPENSATION TABLE
The following table summarizes for the years indicated the compensation
awarded to, earned by or paid to the Named Executives for services rendered in
all capacities to the Corporation and its subsidiaries.
LONG-TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------- --------------------- -------------------
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARDS SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($)(A) ($)(B) ($)(C) (#) ($) ($)(D)
- --------------------------- ---- -------- -------- ------- ---------- -------- ------- ---------
William C. Foote 2000 808,334 193,463 69,729 -- 20,000 -- 21,759
Chairman, President 1999 712,500 779,773 60,628 1,541,250 20,000 -- 98,722
and CEO 1998 637,500 524,615 50,997 724,687 35,000 -- 75,259
Richard H. Fleming 2000 370,000 62,813 -- -- 8,000 -- 8,588
Executive Vice President 1999 340,833 265,046 -- 616,500 8,000 -- 43,835
and Chief Financial 1998 316,667 208,480 -- 883,812 15,000 -- 32,525
Officer
John H. Meister 2000 309,170 117,825 -- -- 6,000 -- 5,805
Senior Vice President; 1999 253,333 137,022 -- 582,625 4,000 -- 31,303
President, Building 1998 216,667 138,937 -- 386,500 7,000 -- 21,285
Systems
Edward M. Bosowski 2000 320,000 55,275 -- -- 6,000 -- 6,796
Senior Vice President, 1999 258,333 192,257 -- 582,625 4,000 -- 31,012
Marketing and Corporate 1998 221,667 130,299 -- 386,500 7,000 -- 21,623
Strategy; President,
International
Daniel J. Nootens 2000 271,675 41,205 -- -- 4,000 -- 5,854
Senior Vice President and 1999 247,500 165,262 -- 308,250 4,000 -- 29,564
Chief Technology Officer 1998 233,167 122,988 -- 347,000 8,000 -- 21,757
- ---------------
(a) Reflects payments arising from cash award opportunities under the
Corporation's Annual Management Incentive Program. The amounts shown are
taken into account for purposes of computing benefits under the
Corporation's retirement plans.
(b) Mr. Foote's Other Annual Compensation included $14,400 in automobile
allowance in 1998; no other Named Executive had perquisites and other
personal benefits aggregating the lesser of either $50,000 or 10 percent of
salary and bonus for 2000, 1999, or 1998.
(c) Indicated amounts arise from performance-based restricted stock awards to
each of the Named Executives on January 2, 1999 and January 2, 1998,
respectively, the grant of a time-vested restricted stock award of 10,000
shares to Mr. Fleming on February 11, 1998, the grant of time-vested
restricted stock awards of 5,000 shares each to Messrs. Meister and Bosowski
on February 10, 1999, and January 2, 1998, respectively, and the grant of a
time-vested restricted stock award of 3,000 shares to Mr. Nootens on June
11, 1998. Performance-based restricted stock awards to the Named Executives
on January 2, 2000, are described in the chart below titled "Long-Term
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Incentive Plans-Awards in Last Fiscal Year." The aggregate restricted stock
holdings of each of the Named Executives as of December 31, 2000, and the
value of such holdings on such date, are as follows: Mr. Foote, 75,000
shares, $1,687,500; Mr. Fleming, 41,000 shares, $922,500; Mr. Meister,
29,000 shares, $652,500; Mr. Bosowski, 29,000 shares, $652,500; and Mr.
Nootens, 19,000 shares, $427,500. Such restricted stock is eligible for any
dividend paid on shares of Common Stock. In addition to such restricted
stock awards, the Named Executives were granted the nonqualified stock
options described in the chart below titled "Option/SAR Grants in Last
Fiscal Year" on January 2, 2000. Performance-based restricted stock awards
made on January 2, 1998, were not earned as the result of non-attainment of
requisite performance criteria (cumulative USG shareholder return in
relation to a group of 15 building material companies for the three fiscal
years ended December 31, 2000), and resulted in forfeitures on February 13,
2001, as follows: Mr. Foote, 15,000 shares; Mr. Fleming, 7,000 shares; Mr.
Meister, 3,000 shares; Mr. Bosowski, 3,000 shares; Mr. Nootens, 4,000
shares; and all executive officers as a group (16 persons), 46,000 shares.
(d) All other Compensation for the Named Executives for each year consisted
solely of matching contributions from the Corporation to defined
contribution plans.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(a)
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
INDIVIDUAL GRANTS OF STOCK PRICE
--------------------------------------------------- APPRECIATION FOR
SECURITIES % OF TOTAL OPTION TERM(c)
UNDERLYING OPTIONS/SARS -------------------
OPTIONS/SARS GRANTED TO EXERCISE
GRANTED EMPLOYEES PRICE EXPIRATION
NAME (#)(B) IN 2000 ($/SH) DATE 5%($) 10%($)
- --------------------------------- ------------ ------------ -------- ---------- ------- ---------
William C. Foote................. 20,000 6.17 46.14 1/2/10 580,344 1,470,706
Richard H. Fleming............... 8,000 2.47 46.14 1/2/10 232,138 588,282
John H. Meister.................. 6,000 1.85 46.14 1/2/10 174,103 441,212
Edward M. Bosowski............... 6,000 1.85 46.14 1/2/10 174,103 441,212
Daniel J. Nootens................ 4,000 1.23 46.14 1/2/10 116,069 294,141
- ---------------
(a) No SARs were granted in 2000, and no SARs have been granted or are
outstanding under any of the Corporation's long-term equity plans with
outstanding awards.
(b) Options granted on January 2, 2000, at an exercise price equal to the
average of the closing prices of a share of Common Stock on the NYSE
composite tape during the ten trading day period beginning five trading days
prior to the date of grant and ending on the fourth trading day after the
date of grant. These options become exercisable on the second anniversary of
the date of the grant and expire on the tenth anniversary of the date of
grant except in the case of retirement, death, disability termination
without cause, in which case they expire on the earlier of the fifth
anniversary of such event or the expiration of the original option term.
(c) Assumes appreciation in value from the date of grant to the end of the
option term, at the indicated annual rate compounded.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES(a)
NUMBER OF SECURITIES
NUMBER OF UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
UNDERLYING AT FISCAL YEAR-END AT FISCAL YEAR-END
OPTIONS VALUE --------------------------- ---------------------------
EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- --------------------------------- ---------- ---------- ----------- ------------- ----------- -------------
William C. Foote................. 0 0 155,000 40,000 15,625 0
Richard H. Fleming............... 0 0 118,000 16,000 439,063 0
John H. Meister.................. 0 0 52,500 10,000 5,625 0
Edward M. Bosowski............... 0 0 53,500 10,000 6,250 0
Daniel J. Nootens................ 0 0 57,000 8,000 253,125 0
- ---------------
(a) No SARs were outstanding as of December 31, 2000.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK
PRICE-BASED PLANS
PERFORMANCE ------------------------------
NUMBER OF PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME SHARES(A) PAYOUT (#) (#) (#)
- ---- --------- ------------ --------- ------ -------
William C. Foote........................... 30,000 12/31/02 15,000 22,500 30,000
Richard H. Fleming......................... 12,000 12/31/02 6,000 9,000 12,000
John H. Meister............................ 10,000 12/31/02 5,000 7,500 10,000
Edward M. Bosowski......................... 10,000 12/31/02 5,000 7,500 10,000
Daniel J. Nootens.......................... 6,000 12/31/02 3,000 4,500 6,000
- ---------------
(a) Performance-based restricted stock awards on January 2, 2000, up to 100% of
which may be earned after three fiscal years based on cumulative shareholder
return (including reinvestment of dividends) of the Corporation in relation
to a peer group of 12 building materials companies. A threshold return at
the 50th percentile is required for a 50% payout, at the 60th percentile for
a 75% payout, and at the 70th percentile or better for a 100% payout. The
awards provide for pro rata vesting in the event of death, disability,
retirement, or discharge without cause. Such restricted stock is eligible
for any dividend paid on shares of Common Stock.
Employment Agreements
In order to assure continued availability of services of the Named
Executives, the Corporation has entered into employment agreements (the
"Employment Agreements") with such Named Executives that have a current term
expiring on December 31, 2002, and which will automatically renew for successive
two-year terms unless the Corporation elects not to renew not less than 120 days
before the expiration of the then current term.
The Employment Agreements provide for minimum annual salaries at the then
current rate to be paid at normal pay periods and at normal intervals to such
Named Executives, with the minimum annual salaries deemed increased concurrently
with salary increases authorized by the Compensation
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and Organization Committee of the Board of Directors. The Employment Agreements
require that each such Named Executive devotes full attention and best efforts
during the term of such agreement to the performance of assigned duties. A Named
Executive discharged without cause or constructively discharged by the
Corporation during the term of an Employment Agreement may elect to be treated
as a continuing employee under such agreement, with salary continuing at the
minimum rate specified in such agreement or at the rate in effect at the time of
discharge, if greater, for the balance of the term of the Employment Agreement
or for a period of two years, whichever is greater. In the event of any such
salary continuation, certain benefits will be continued at corresponding levels
and for the same period of time. The Corporation is obligated to reimburse a
Named Executive for all reasonable legal fees incurred in order to enforce an
Employment Agreement for a right or benefit wrongfully denied by the
Corporation. If a Named Executive becomes disabled during the term of an
Employment Agreement, compensation continues for the unexpired term of the
Employment Agreement at the rate in effect at the inception of the disability.
In the event of a Named Executive's death during the term of an Employment
Agreement, one-half of the full rate of compensation in effect at the time of
death will be paid to the Named Executive's beneficiary for the remainder of the
unexpired term of the Employment Agreement.
Each such Named Executive has undertaken, during the term of such
Employment Agreement and for a period of 18 months thereafter, not to (i)
participate, directly or indirectly, in any enterprise that competes with the
Corporation or any of its subsidiaries in any line of products in any region of
the United States, or (ii) interfere in any way with the relationship between
the Corporation and any of its employees or any person or entity doing business
with it. Each such Named Executive has also agreed not to, at any time, use for
personal benefit or the benefit of others or disclose to others any of the
Corporation's confidential information except as required by the performance of
duties under an Employment Agreement.
Termination Compensation Agreements
The Corporation is a party to termination compensation agreements with the
Named Executives that have a current term expiring on December 31, 2002, and
which will automatically renew for successive two-year terms unless the
Corporation elects not to renew not less than 120 days before the expiration of
the then current term. A Named Executive's agreement terminates upon retirement.
The agreements provide certain benefits in the event of a "change in
control" and termination of employment within three years thereafter or prior to
the Named Executive attaining age 65, whichever is earlier, but only if such
termination occurs under one of several sets of identified circumstances. Such
circumstances include termination by the Corporation other than for "cause" and
termination by the Named Executive for "good reason." Each "change in control"
will begin a new three-year period for the foregoing purposes. For purposes of
the agreements: (i) a "change in control" is deemed to have occurred, in
general, if any person or group of persons acquires beneficial ownership of 20%
or more of the combined voting power of the Corporation's then outstanding
voting securities, if there is a change in a majority of the members of the
Board within a two-year period and in certain other events; (ii) the term
"cause" is defined as, in general, the willful and continued failure by the
Named Executive substantially to perform his or her duties after a demand for
substantial performance has been delivered
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or the willful engaging of the Named Executive in misconduct which is materially
injurious to the Corporation; and (iii) "good reason" for termination by a Named
Executive means, in general, termination subsequent to a change in control based
on specified changes in the Named Executive's duties, responsibilities, titles,
offices or office location, compensation levels and benefit levels or
participation.
The benefits include payment of full base salary through the date of
termination at the rate in effect at the time of notice of termination, payment
of any unpaid bonus for a past fiscal year and pro rata payment of bonus for the
then current fiscal year, and continuation through the date of termination of
all stock ownership, purchase and option plans and insurance and other benefit
plans. In the event of a termination giving rise to benefits under the
agreements, the applicable Named Executive will be entitled to payment of a lump
sum amount equal to 2.99 times the sum of (i) the then annual base salary,
computed at 12 times the then current monthly pay and (ii) the full year
position par bonus for the then current fiscal year, subject to all applicable
federal and state income taxes. In the event such lump sum payment would
constitute a "parachute payment" under the Internal Revenue Code, it may be
decreased by the smallest amount that would eliminate such parachute payment
unless the decrease would be 10% or more of the payment, in which case it shall
not be decreased but rather increased by a gross-up amount to provide for
applicable federal excise taxes related to such payment. The Corporation is
required to maintain in full force and effect until the earlier of (i) three
years after the date of any termination that gives rise to benefits under any of
the agreements and (ii) commencement by the Named Executive of full-time
employment with a new employer, all employee welfare plans and arrangements in
which the Named Executive was entitled to participate immediately prior to
termination in a manner which would give rise to benefits under the agreements,
provided that if such participation is barred, the Corporation will be obligated
to provide substantially similar benefits. In the event of any termination
giving rise to benefits under the agreements, the Corporation is required to
credit the applicable Named Executive with three years of benefit and credited
service in addition to the total number of years of benefit and credited service
the Named Executive accrued under the USG Corporation Retirement Plan. See
"Retirement Plans" below. A Named Executive with a total of less than five years
of credited service following such crediting will nonetheless be treated as if
fully vested under that Plan, but with benefits calculated solely on the basis
of such total benefit service.
The Corporation is obligated to reimburse all legal fees and expenses
incurred by a Named Executive as a result of a termination that gives rise to
benefits under an agreement, including all fees and expenses incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided under such agreement. No amounts are payable under
such agreements if the Named Executive's employment is terminated by the
Corporation for "cause" or if the Named Executive terminates his employment, and
"good reason" does not exist.
Immediately upon any change in control, the Corporation will establish a
so-called "rabbi trust" to provide a source of payment for benefits payable
under such agreements and will immediately thereafter deposit with the trustee
under such trust an amount reasonably estimated to be potentially payable under
all such agreements. In the event that the assets of such trust prove
insufficient to provide for benefits payable under all such agreements, the
shortfall would be paid directly by the Corporation from its general assets.
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Retirement Plans
The following table shows the annual pension benefits on a straight-life
annuity basis for retirement at normal retirement age under the terms of the
Corporation's contributory retirement plan (the "Retirement Plan"), before the
applicable offset of one-half of the primary Social Security benefits at time of
retirement. The table has been prepared for various compensation classifications
and representative years of benefit service under the Plan. Each participating
employee contributes towards the cost of his or her retirement benefit.
Retirement benefits are based on the average rate of annual covered compensation
during the three consecutive years of highest annual compensation in the 15
years of employment immediately preceding retirement. Participants become fully
vested after five years of continuous credited service.
RETIREMENT PLAN TABLE
YEARS OF BENEFIT SERVICE
COVERED ----------------------------------------------------------
COMPENSATION 20 25 30 35 40
------------ -------- -------- -------- -------- ----------
$ 200,000............. $ 64,000 $ 80,000 $ 96,000 $112,000 $ 128,000
400,000............ 128,000 160,000 192,000 224,000 256,000
600,000............ 192,000 240,000 288,000 336,000 384,000
800,000............ 256,000 320,000 384,000 448,000 512,000
1,000,000............ 320,000 400,000 480,000 560,000 640,000
1,200,000............ 384,000 480,000 576,000 672,000 768,000
1,400,000............ 448,000 560,000 672,000 784,000 896,000
1,600,000............ 512,000 640,000 768,000 896,000 1,024,000
The Named Executives participate in the Retirement Plan. The full years of
continuous credited service of the Named Executives at December 31, 2000, were
as follows: Mr. Foote, 17; Mr. Fleming, 27; Mr. Meister, 19; Mr. Bosowski, 24;
and Mr. Nootens, 38. Compensation under the Retirement Plan includes salary and
cash incentive compensation for the year in which payments are made.
Pursuant to a supplemental retirement plan, the Corporation has undertaken
to pay any retirement benefits otherwise payable to certain individuals,
including the Named Executives, under the terms of the Corporation's
contributory Retirement Plan but for provisions of the Internal Revenue Code
limiting amounts payable under tax-qualified retirement plans in certain
circumstances. The Corporation has established a so-called "rabbi trust" to
provide a source of payment for benefits under this supplemental plan. Amounts
are deposited in this trust from time to time to provide a source of payments to
participants as they retire, as well as for periodic payments to certain other
retirees. In addition, the Corporation has authorized establishment by certain
individuals, including the Named Executives, of grantor trusts owned by such
individuals to hold accrued benefits under the supplemental plan as a means of
securitizing such benefits.
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Director Compensation
Directors who are not employees of the Corporation are currently entitled
to receive a retainer of $6,500 per quarter plus a fee of $1,200 for each Board
or Board committee meeting attended, together with reimbursement for
out-of-pocket expenses incurred in connection with attendance at meetings. A
non-employee director chairing a committee is entitled to receive an additional
retainer of $1,000 per quarter for each such chair. The third quarter retainer
is paid in common stock of the Corporation having a value of $6,500. Directors
may elect to receive some or all of the retainers for the other three quarters,
as well as meeting fees and chair retainers, in cash or in the form of deferred
stock units which will increase or decrease in value in direct relation to
shares of Common Stock and be paid in cash upon termination of Board service
("Deferred Stock Units"). Additional fees for pre-meeting consultations may be
paid as applicable to non-employee directors, with the amount of such fees to
bear a reasonable relationship to the regular meeting fee of $1,200 and the
customary length of a meeting of the Board committee involved. Non-employee
directors also receive an annual grant of 500 shares of common stock (prorated
in the event of less than one year's service) on July 1 each year. Directors may
elect to defer such annual grants into Deferred Stock Units. No director of the
Corporation has received any compensation of any kind for serving as a director
while also serving as an officer or other employee of the Corporation or any of
its subsidiaries.
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation and Organization Committee of the Board of Directors (the
"Committee"), which is composed entirely of independent, non-employee directors,
has overall responsibility for the Corporation's executive compensation
programs. The Committee approves the policy and design of all compensation plans
covering executive officers and approves performance goals, position values,
base salary ranges and increases, incentive opportunity awards and payouts,
stock-based awards and related executive compensation issues.
The Corporation's executive compensation strategy has been designed to
reward executives who plan and lead the Corporation in achieving its financial
and strategic business objectives. Accordingly, executive compensation programs
are developed and administered to promote the linkage of pay to corporate
performance and the alignment of the interests of the Corporation's executives
with that of its stockholders. This philosophy encompasses the following guiding
principles:
1. A significant portion of the total compensation opportunity is
variable and dependent upon the Corporation's annual and long-term
business and financial performance.
2. Compensation programs are designed to drive and reinforce the
attainment of short-term operational objectives through annual
incentive cash awards and longer-range strategic initiatives through
a long-term equity program. Compensation levels are increased when
established performance goals are exceeded and reduced when
established targets are not achieved.
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3. The programs provide overall compensation opportunities that are at
competitive levels with comparably sized industrial companies.
The components of the Corporation's executive compensation program comprise
base salary, annual incentive cash awards, and a long-term equity program.
Each year, the Committee conducts a comprehensive evaluation of the
Corporation's executive compensation programs. For 2000, the Committee compared
the Corporation's salary incentive programs with participant information from
five national compensation surveys with survey populations of 400 to 1300
companies (of which 65 to 170 were industrial companies with similar annual
revenues of approximately $3 billion). The Committee also reviewed annualized
option grant values and cash incentive programs of a peer group of over 500
organizations. (The peer groups reviewed for compensation purposes are
significantly broader than the Building Materials Group used in the graph of
cumulative stockholder return included in this proxy statement, with any
overlapping coincidental. The former groups are utilized to assess compensation
practices and trends among other corporations generally, and comparably sized
companies specifically, with which the Corporation competes for executive
talent, while the latter group was selected to reflect business compatibility in
stockholder return comparisons.) In addition, the Committee considers
recommendations from the Corporation's Human Resources Department, which works
closely with independent compensation consultants. In reviewing the compensation
of executives other than the Chief Executive Officer, the Committee also
considers the Chief Executive Officer's counsel and recommendations.
Base Salaries
Except for the 17 most senior positions, salary ranges are established for
each managerial position, and the amount and timing of individual manager salary
increases vary based upon performance rating and contribution, current salary
relative to midpoint for the established salary range, career progress and the
annual salary budget allotment.
Internal market rates, in lieu of salary ranges, are utilized as managing
points for the base salaries of the 17 most senior executive positions. The
Committee believes that the use of internal market rates, given the uniqueness
of the applicable positions, enhances flexibility in executive salary
administration. External market rates for each of the positions at the
approximate 60th percentile of salaries for comparable positions were determined
using survey data from independent compensation consultants. An internal market
rate is then established for each position either at, below or above the
external rate based on relevant internal factors including impact on the
Corporation and relative scope of the position. Internal market rates for all
applicable positions are reviewed by the Committee annually and adjusted, if
warranted by personal performance, job description and external market rates, as
of a common date.
Annual Incentive Cash Awards
The Corporation's executive officers are eligible for annual incentive cash
awards under the provisions of the Annual Management Incentive Program.
Approximately 250 officers and managers with position values above a specified
threshold were eligible to participate in the program in 2000. The program
provides for cash awards based upon the achievement of established, quantifiable
operational
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and financial objectives designed to enhance the Corporation's overall
performance. A lesser incentive award is paid for goal achievement above
threshold but below target and an increased incentive award is paid for goal
achievement above target. Each Named Executive has an annual incentive
opportunity (target) which is expressed as a percentage of annualized salary and
varies with the participant's level of management accountability. Program
measurements for 2000 were based upon an income goal and the attainment of
strategic focus objectives derived from the formal planning process. Actual
income goal achievement may result in an upward or downward adjustment to the
portion of the award based on goal income. A third step in the award calculation
provides for an adjustment, either upward or downward, for personal performance
(except in the case of 17 senior positions, including the Named Executives), to
determine an annual management incentive award. Maximum awards are capped at
200% of target. Annual goals are reviewed and approved by the Committee. Awards
are approved by the Committee following its written certification of goal
attainment and are payable in cash. Corporate goal achievement for 2000 resulted
in awards averaging 39% of target to the Named Executives.
Long-Term Equity Program
Non-qualified stock options for 324,000 shares were granted in 2000 to 194
executives and senior managers, in each case at an exercise price equal to
market value on the date of grant (determined as described in the chart above
titled "Option/SAR Grants in Last Fiscal Year"). These options generally become
exercisable in full on the second anniversary of the date of the grant. In
determining individual award levels of such grants to executive officers, the
Committee considered a number of objective factors, such as survey data with
respect to award multiples among comparably sized corporations, and a number of
subjective factors, including the individual's assigned position value,
anticipated career path and performance rating. The Committee also considered
survey data indicating that annualized option grant values overall as a multiple
of base salary ranked in the approximate 50th percentile of surveyed companies.
The 17 most senior executives and managers received a portion approximating
75% of their 2000 long-term equity grants in the form of performance-based
restricted stock which is subject to risk of forfeiture after three years based
on performance in relation to the cumulative shareholder returns of a peer group
of 12 building materials companies. A shareholder return (including reinvestment
of dividends) for the Corporation at the 70th percentile or better of the peer
group is required for a 100% pay-out, with smaller percentile returns resulting
in lower pay-outs and no pay-out for shareholder return below the 50th
percentile.
Limitations On Compensation Deductibility
The Committee has reviewed the effect on the Corporation's executive
compensation programs of provisions of the Internal Revenue Code limiting the
deductibility of annual compensation that is not deemed performance-based in
excess of $1 million in any year by the Corporation paid to its chief executive
officer and the four other most highly compensated executive officers for such
year. As noted elsewhere in this report, the Committee believes in promoting the
linkage of pay to corporate performance, with the parallel effect of promoting
the deductibility of such performance-based compensation. Based upon such
review, the Committee believes that compensation to any such
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executive officer in 2000 from (i) annual incentive cash awards for that year,
or (ii) in connection with exercises of stock options or shares deemed earned
under any award of performance-based restricted stock, will be deemed
performance-based and exempt from the calculation of covered compensation
subject to the deductibility limitation. It is the view of the Committee that
there is no practicable action that could be taken to qualify regular salaries
or other annual compensation, other than the aforementioned performance-based
compensation, for such exemption under the applicable provision of the Internal
Revenue Code as currently in effect.
THE CHIEF EXECUTIVE OFFICER'S 2000 COMPENSATION
In 2000, the compensation for William C. Foote consisted principally of (i)
salary of $808,334; (ii) a 2000 annual incentive cash award of $193,463; and
(iii) long-term incentive compensation consisting of (a) a grant of a
non-qualified stock option for 20,000 shares of Common Stock, and (b) an award
of 30,000 shares of performance-based restricted stock.
Base Salary
Mr. Foote's base salary as of March 1, 2000, was approved by the Committee
in February 2000. The Committee set Mr. Foote's base salary at an annual rate of
$825,000, an increase of $100,000 over the base salary effective on March 1,
1999, the date of his last increase. Following such increase, Mr. Foote's base
salary ranked in the 56th percentile of the survey group. In determining Mr.
Foote's base salary, the Committee considered the base salaries of chief
executive officers of comparably sized industrial companies, the Corporation's
strong operating performance in 1999, and Mr. Foote's tenure and individual
performance as Chief Executive Officer, including execution of the Corporation's
principal executive assignment and leadership in development of strategic and
financial plans and legal affairs.
Annual Management Incentive Plan
Mr. Foote's 2000 Annual Management Incentive Program award was determined
on the basis of the Corporation's overall achievement versus previously
determined goals described earlier in this report. Mr. Foote's 2000 annual
incentive opportunity (target) was expressed as 70%, or $577,500, of the
annualized salary for his position ($825,000) determined as discussed above. The
corporate goal achievement for 2000 described earlier in this report resulted in
an award of 34%, or $193,463, of target to Mr. Foote.
Long-Term Compensation
Mr. Foote's long-term compensation in 2000 was provided by: (a) the grant
of a non-qualified stock option for 20,000 shares of Common Stock; and (b) the
award of 30,000 shares of performance-based restricted stock described earlier.
These grants were upon the same terms, and involved the Committee's
consideration of the same factors, described earlier in this report with respect
to all 2000 grants.
The Committee believes that the Corporation's executive compensation
program provides competitive opportunities for executives who contribute to the
success of the Corporation in achieving its
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financial and strategic business objectives. In 2000, the Named Executives
received approximately two-thirds of their compensation from corporate
performance-based variable elements. The Committee intends to continue the
policy of linking executive compensation to corporate performance and to monitor
the effectiveness of the program, and the Committee will institute changes as it
deems appropriate to promote policy goals.
This report is submitted by the members of the Compensation and
Organization Committee:
David W. Fox, Chair
W. Douglas Ford
Valerie B. Jarrett
John B. Schwemm
Judith A. Sprieser
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has:
- Reviewed and discussed the audited financial statements with management;
- Discussed with Arthur Andersen LLP, the Corporation's independent public
accountants, the matters required to be discussed by Statement on
Auditing Standards No. 61; and
- Received the written disclosures and the letter from Arthur Andersen LLP
required by Independence Standards Board Standard No. 1, and has
discussed with Arthur Andersen LLP its independence and has considered
whether the provision of non-audit services by Arthur Andersen LLP is
compatible with maintaining its independence.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2000.
Judith A. Sprieser, Chair
Robert L. Barnett
Keith A. Brown
Marvin E. Lesser
John B. Schwemm
The Audit Committee Report shall not be deemed to be incorporated by
reference into any filing made by the Corporation under the Securities Act of
1933 or the Securities Exchange Act of 1934, notwithstanding any general
statement contained in any such filing incorporating this proxy statement by
reference, except to the extent the Corporation incorporates such Report by
specific reference.
21
24
AUDIT AND NON-AUDIT FEES
For the year ended December 31, 2000, the following fees were billed by
Arthur Andersen LLP to the Corporation for the indicated services:
- - Audit Fees: $ 964,000
- - Financial Information Systems Design and Implementation
Fees: $ 0
- - All Other Fees: $1,537,000
22
25
PERFORMANCE GRAPH
The following graph and table compare the cumulative total stockholder
return on the Corporation's Common Stock with the Standard and Poor's 500 Index
(the "S&P 500") and a peer group of companies in the building materials industry
selected by the Corporation for purposes of comparison and described more fully
below (the "Building Materials Group"), in each case assuming an initial
investment of $100 and full dividend reinvestment, for the five-year period
ended December 31, 2000.
[PERFORMANCE GRAPH]
USG CORPORATION S&P 500 BUILDING MATERIALS GROUP
--------------- ------- ------------------------
1995 100.00 100.00 100.00
1996 113.00 123.00 116.00
1997 163.00 164.00 121.00
1998 170.00 211.00 131.00
1999 159.00 255.00 123.00
2000 77.00 232.00 107.00
- ------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2000
- ------------------------------------------------------------------------------------------------------------------------
USG Corporation $100 $113 $163 $170 $159 $ 77
S&P 500 100 123 164 211 255 232
Building Materials
Group 100 116 121 131 123 107
All amounts rounded to nearest dollar.
The Building Materials Group comprises the following 21 publicly traded
companies in the building materials industry for all periods reflected in the
performance graph, except as noted: Ameron, Inc., Apogee Enterprises, Inc.,
Armstrong World Industries, Inc., Bird Corp. (through 1997), Butler
Manufacturing Co., Crane Co., Elcor Corp., Fluor Corp., International Aluminum
Corp., Jannock, Ltd. (through 1999), Johns-Manville Corp., Justin Industries,
Masco Corp., Morgan Products, Ltd. (through 1998), Morrison Knudsen Corp. (from
mid-1996 through 1999; prior periods reflect returns of merger partner
Washington Construction Group, Inc.), Owens-Corning, Perini Corp., Ply-Gem
Industries (through 1996), PPG Industries, Inc., Thomas Industries, Inc., and TJ
International, Inc. (through 1999).
23
26
ITEM NO. 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, Chicago, Illinois, has examined the
financial statements of the Corporation for many years. The following resolution
will be presented at the meeting to ratify the appointment by the Audit
Committee of the firm of Arthur Andersen LLP, as independent public accountants,
to examine the financial statements of the Corporation for the current year
ending December 31, 2001, and to perform other related accounting services.
RESOLVED: That the appointment by the Audit Committee of the Board of
Directors of Arthur Andersen LLP as independent public accountants of
the Corporation for the current year ending December 31, 2001, is hereby
ratified, approved, and confirmed.
The Corporation has been advised by Arthur Andersen LLP that no member of
the firm has any financial interest, either direct or indirect, in the
Corporation, or has any connection with the Corporation in any capacity other
than that of public accountants. A member of Arthur Andersen LLP will be present
at the meeting to answer questions by stockholders and will have the opportunity
to make a statement if he or she so desires.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS RESOLUTION.
The affirmative vote of the holders of a majority of the shares represented
at the meeting is required for adoption of this resolution. If the stockholders
do not ratify the appointment of Arthur Andersen LLP, the selection of
independent public accountants will be reconsidered by the Audit Committee.
ADDITIONAL INFORMATION
The Corporation will bear the cost of the annual meeting and the cost of
this proxy solicitation, including mailing costs. In addition to solicitation by
mail, directors, officers, and regular employees of the Corporation may solicit
proxies by telephone or otherwise, with no specific additional compensation to
be paid for such services. The Corporation has retained Georgeson Shareholder
Communications Corporation to assist in this solicitation at a fee of $9,500,
plus reimbursement of normal expenses. The Corporation also will reimburse upon
request all brokers and other persons holding shares for the benefit of others
for their reasonable expenses in forwarding management's proxies and
accompanying material to the beneficial owners of such shares and in obtaining
authorization from such beneficial owners to give proxies.
The Board of Directors does not know of any matter that will be presented
for action at the annual meeting other than the matters identified in this proxy
statement. If any other matter is presented for such action, the individuals
named in the proxy solicited by the Board of Directors intend to vote on it on
behalf of the stockholders they represent in accordance with their best
judgment.
24
27
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder proposals and nominations for directors intended for inclusion
in the Corporation's proxy statement relating to the next annual meeting in May
2002 must be received not later than December 11, 2001. Any such proposal must
comply with Rule 14a-8 of Regulation 14A of the proxy rules of the Securities
and Exchange Commission. Under the Corporation's by-laws, proposals of
stockholders not intended for inclusion in the proxy statement, but intended to
be raised at the Corporation's May 2002 annual meeting, including nominations
for election as directors of persons other than nominees of the Board of
Directors, must be received no earlier than February 8, 2002, nor later than
March 10, 2002, and must comply with the procedures outlined in the
Corporation's by-laws, a copy of which is available upon request from the
Corporate Secretary, 125 South Franklin Street, Chicago, Illinois 60606-4678.
By order of the Board of Directors
DEAN H. GOOSSEN
DEAN H. GOOSSEN
Corporate Secretary
Dated: April 6, 2001
25
28
ANNEX A
USG CORPORATION
AUDIT COMMITTEE CHARTER
BOARD OF DIRECTORS MEETING
MAY 10, 2000
BE IT RESOLVED: That, as recommended by the Audit Committee, Article IV,
Section 1(c) of the by-laws be and it hereby is amended to read in its entirety
as follows:
"[The corporation shall have the following standing committees:. . .](c) An
Audit Committee which shall have ongoing responsibilities to assist the Board of
Directors in monitoring the integrity of the financial statements of the
Corporation, the Corporation's compliance with financial reporting, legal and
statutory requirements, and the independence and performance of the
Corporation's internal and external auditors. The Audit Committee additionally
shall select and employ on behalf of the Corporation, subject to ratification by
the stockholders, and approve the fees of, a firm of certified public
accountants whose duty shall be to audit the books and accounts of the
Corporation and its subsidiaries and affiliates for the fiscal year for which it
is appointed, and which firm shall ultimately be accountable to the Committee
and the Board of Directors. Such Committee shall also retain special legal,
accounting or other consultants to advise it as it shall determine, and may
request any officer or employee of the Corporation or its outside counsel or
independent auditor to meet with it, individually or jointly, or any of its
consultants. The Committee periodically shall report and make appropriate
recommendations to the Board of Directors. It shall consist of not less than
three members of the Board of Directors who are not officers or employees of the
Corporation and who meet the independence, financial literacy and experience
requirements of the New York Stock Exchange and the Securities and Exchange
Commission. Such members shall be appointed by the Board of Directors on the
recommendation of the Committee on Directors."
BE IT FURTHER RESOLVED: That, as recommended by the Audit Committee, to
implement the provision of the Corporation's by-laws defining the duties of the
Audit Committee, said Committee be and it hereby is charged with the following
specific responsibilities (herein, collectively with such by-law
responsibilities, referred to as said Committee's "Charter"):
1. to review and reassess the adequacy of its Charter annually.
2. to ensure that the Charter is published as required by the
Securities and Exchange Commission.
3. to review with management and the independent auditor, upon
completion of their audit, the annual audited financial statements,
and to request that the independent auditor report on matters
required to be communicated to the Committee in accordance with
current auditing standards.
4. to engage the independent auditor to perform quarterly reviews in
accordance with current auditing standards and review with
management and the independent auditor, either jointly or by its
Chair, the results of such review of the Corporation's quarterly
A-1
29
financial statements prior to the filing of its quarterly reports
on Form 10-Q and its annual report on Form 10-K.
5. to meet periodically with management to review the Corporation's
major financial risk exposures and the steps management has taken
to monitor and control such exposures.
6. to review major changes to the Corporation's accounting principles
and practices with the independent auditor, internal auditors or
management.
7. to require the independent auditor to summarize audit and non-audit
services fees annually and to submit a formal written statement
disclosing all relationships between the independent auditor and
the Corporation in accordance with current independence rules; to
be responsible for actively engaging in a dialogue with the
independent auditor with respect to any disclosed relationships or
services that impact the objectivity and independence of the
independent auditor and to recommend that the Board of Directors
take appropriate action to insure the independence of the auditor.
8. to evaluate the performance of the independent auditor and, if so
determined by the Committee, recommend that the Board of Directors
replace the independent auditor.
9. to meet with the independent auditor prior to the annual audit to
review the planning, staffing and conduct of the audit, and to
review with the independent auditor any problems or difficulties
the auditor may have encountered in the conduct of the audit.
10. to provide guidance and oversight to the internal auditors, and to
review the organization, audit plans and results of such
activities.
11. to be responsible for the preparation of the report required by the
rules of the Securities and Exchange Commission to be included in
the Corporation's annual proxy statement.
12. to review with the Corporation's senior internal legal counsel and
advise the Board of Directors with respect to the financial
reporting of (i) legal matters that may have a material impact on
the financial statements, (ii) the Corporation's compliance
policies and (iii) any material reports or inquires received from
regulators or governmental agencies.
13. to meet periodically, as the Committee shall deem necessary or
appropriate, with the chief financial officer, the senior internal
auditing executive and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Corporation's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles,
which is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor, or to
assure compliance with laws and regulations and the Corporation's internal
policies.
A-2
30
Attachment E
Proxy Form #1
USG CORPORATION
PLEASE MARK VOTES IN OVALS IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
---
1. Consider election of three USG Corporation directors to serve for a three
year term:
For Withheld For All
All All Except
/ / / / / /
01 - Lawrence M. Crutcher, 02 - William C. Foote,
03 - Judith A. Sprieser.
- ---------------------------------------------
USG Director Nominee Exception(s), if any.
2. Ratification of the appointment of Arthur Andersen LLP as independent
public accountants for the year ending December 31, 2001.
For Against Abstain
/ / / / / /
In their discretion, on any other matter that may properly come before the
meeting.
For Against Abstain
/ / / / / /
I plan to attend the Annual Meeting.
Yes!
/ /
Dated:
------------------------------------
- --------------------------------------------
Signature
- --------------------------------------------
Signature
The signature(s) should conform to the name(s) shown on this proxy. Where stock
is owned by more than one person, all owners should sign the proxy. This proxy
will then be voted as directed or, if no direction is indicated, it will be
voted for Items 1 and 2.
Control Number - Fold and Detach Here - USG CORPORATION
[insert control # here]
Below are instructions to allow you to vote your shares for the election of
directors and all other proposals TOLL FREE BY TELEPHONE and VIA THE INTERNET.
Please consider using these voting options. In both instances, your vote is
recorded and authorizes the named proxies to vote your shares in the same manner
as if you marked, signed, and returned your proxy card!
VOTE BY TELEPHONE Call FREE OF CHARGE from the United States or Canada by Touch Tone Phone
at 877-587-0756 - 24 HOURS A DAY.
Please note that if voting by telephone, you will be asked to enter the 6-DIGIT CONTROL NUMBER
located above.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals, Press 1.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OPTION #2: If you choose to vote on each proposal separately, press 0. You will hear these
instructions:
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and listen to the instructions.
31
Attachment E
Proxy Form #1
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
If you vote by telephone, please DO NOT also mail your proxy.
THANK YOU FOR VOTING!
VOTE VIA THE INTERNET Locate www.computershare.com/us/proxy.
Enter the information requested on your computer screen, including your 6-DIGIT CONTROL NUMBER
located above.
Follow the instructions provided on the screen.
If you vote via the internet, please DO NOT also mail your proxy.
THANK YOU FOR VOTING!
32
Attachment E
Proxy Form #1
PROXY USG CORPORATION PROXY
This proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Stockholders on May 9, 2001
The undersigned hereby appoints William C. Foote and Dean H. Goossen and each or
any of them, attorneys, with power of substitution and with powers the
undersigned would possess if personally present, to vote all stock of the
undersigned in USG CORPORATION at the annual meeting of stockholders of said
Corporation in the Sixth Floor Auditorium, The Northern Trust Building, 50 South
LaSalle Street, Chicago, Illinois on May 9, 2001, and any adjournment thereof,
on the matters shown below and as set forth in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE - EXCEPT IF YOU VOTE BY TELEPHONE OR THE INTERNET
Please indicate any change in address.
(Continued and to be signed on reverse side.)
33
Attachment G
Proxy Form #3
USG CORPORATION
PLEASE MARK VOTES IN OVALS IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Consider election of three USG Corporation directors to serve for a three
year term:
For Withheld For All
All All Except
/ / / / / /
01 - Lawrence M. Crutcher, 02 - William C. Foote,
03 - Judith A. Sprieser.
- ---------------------------------------------
USG Director Nominee Exception(s), if any.
2. Ratification of the appointment of Arthur Andersen LLP as independent
public accountants for the year ending December 31, 2001.
For Against Abstain
/ / / / / /
In their discretion, on any other matter that may properly come before the
meeting.
For Against Abstain
/ / / / / /
I plan to attend the Annual Meeting.
Yes!
/ /
Dated:
------------------------------------
- --------------------------------------------
Signature
- --------------------------------------------
Signature
The signature(s) should conform to the name(s) shown on this proxy. Where stock
is owned by more than one person, all owners should sign the proxy. This proxy
will then be voted as directed or, if no direction is indicated, it will be
voted for Items 1 and 2.
PROXY USG CORPORATION PROXY
This proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Stockholders on May 9, 2001
The undersigned hereby appoints William C. Foote and Dean H. Goossen and each or
any of them, attorneys, with power of substitution and with powers the
undersigned would possess if personally present, to vote all stock of the
undersigned in USG CORPORATION at the annual meeting of stockholders of said
Corporation in the Sixth Floor Auditorium, The Northern Trust Building, 50 South
LaSalle Street, Chicago, Illinois on May 9, 2001, and any adjournment thereof,
on the matters shown below and as set forth in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE - EXCEPT IF YOU VOTE BY TELEPHONE OR THE INTERNET
Please indicate any change in address.
(Continued and to be signed on reverse side.)