Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant þ | |
| Filed by a Party other than the Registrant o | |
| Check the appropriate box: |
| o Preliminary Proxy Statement | |
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| þ Definitive Proxy Statement | |
| o Definitive Additional Materials | |
| o Soliciting Material Pursuant to §240.14a-12 |
JOHNSON CONTROLS, INC.
(Name of Registrant as Specified In Its Charter)
JOHNSON CONTROLS, INC.
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| o No fee required. | |
| o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
| 1) Title of each class of securities to which transaction applies: |
| 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): |
| 4) Proposed maximum aggregate value of transaction: |
| 5) Total fee paid: |
| o Fee paid previously with preliminary materials. |
| o 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: |
| 2) Form, Schedule or Registration Statement No.: |
| 3) Filing Party: |
| 4) Date Filed: |
| SEC 1913 (02-02) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
Table of Contents
Table of Contents
1.
The election of four directors:
Dennis W. Archer
John M. Barth
Paul A. Brunner
Southwood J. Morcott
2.
Ratification of PricewaterhouseCoopers LLP as our independent
auditors for fiscal year 2006.
3.
Approval of the Johnson Controls, Inc. Annual and Long-Term
Incentive Performance Plan.
4.
To transact such other business as may properly come before the
Annual Meeting and any adjournment thereof.
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Johnson Controls, Inc.
5757 North Green Bay Avenue
Post Office Box 591
Milwaukee, WI 53201-0591
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| A-1 |
| * | Agenda items for the Annual Meeting |
2
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3
A:
You are voting on THREE proposals:
1.
Election of four directors for a term of three years:
2.
Ratification of PricewaterhouseCoopers LLP as our independent
auditors for fiscal year 2006.
3.
Approval of the Johnson Controls, Inc. Annual and Long-Term
Incentive Performance Plan.
A:
The Board of Directors is soliciting this proxy and recommends
the following votes:
•
FOR each of the directors;
•
FOR ratification of PricewaterhouseCoopers LLP as our
independent auditors for fiscal year 2006;
•
FOR approval of the Johnson Controls, Inc. Annual and Long-Term
Incentive Performance Plan.
A:
We are not aware of any other matters that you will be asked to
vote on at the Annual Meeting. If other matters are properly
brought before the Annual Meeting, the Board or proxy holders
will use their discretion on these matters as they may arise.
Furthermore, if a nominee cannot or will not serve as director,
then the Board or proxy holders will vote for a person whom they
believe will carry out our present policies.
A:
The Johnson Controls, Inc. Annual and Long-Term Incentive
Performance Plan (the “ALTIPP”) is a new compensation
plan that is intended to replace the Company’s two
Executive Incentive Compensation Plans (collectively,
“EICP”) and the Company’s Long-Term Performance
Plan (the “LTPP”). The Company will generally use the
ALTIPP to provide an incentive for selected employees to achieve
specified performance goals with a view toward enhancing
shareholder value. As was the case with awards under the EICP
and LTPP, awards granted under the ALTIPP can qualify as
“qualified performance-based compensation” for tax
purposes pursuant to Section 162(m) of the Internal Revenue
Code (“Section 162(m)”). We have included a
summary description of the ALTIPP in this proxy statement and
have attached the full text of the ALTIPP to this proxy
statement as Appendix A.
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4
A:
If you hold the Company’s Common stock, CUSIP
No. 478366107, as of the close of business on
November 17, 2005, then you are entitled to one vote per
share at the Annual Meeting. There is no cumulative voting.
A:
There are four ways to vote:
•
by Internet at http://www.eproxy.com/jci/. We encourage
you to vote this way as it is the most cost-effective method;
•
by toll-free telephone at 1-800-560-1965;
•
by completing and mailing your proxy card; or
•
by written ballot at the Annual Meeting.
A:
It will depend on how your share ownership is registered.
•
If shares you own are registered in your name and you do not
vote, your unvoted shares will not be represented at the meeting
and will not count toward the quorum requirement. If a quorum is
obtained, your unvoted shares will not affect whether a proposal
is approved or rejected.
•
If you own shares in “street name” through a broker
and do not vote, your broker may represent your shares at the
meeting for purposes of obtaining a quorum. In the absence of
your voting instructions, your broker may or may not vote your
shares at its discretion depending on the proposals before the
meeting. Your broker may vote your shares at its discretion and
your shares will count toward the quorum requirement on
“routine matters.” Regarding other proposals
determined to be “non-routine”, your broker may not
vote your shares. In those cases, the absence of voting
instructions results in a “broker non-vote.” Broker
non-vote shares are counted toward the quorum requirement but
they do not affect the determination of whether a non-routine
matter is approved or rejected. The Company believes that
Proposals One and Two are routine matters on which brokers will
be permitted to vote on behalf of their clients if no voting
instructions are furnished. Since the Company believes
Proposal Three is a non-routine matter, broker non-vote
shares will not affect the determination of whether it is
approved or rejected. Your broker can also authorize, and the
Company may also vote, at the discretion of the proxies, upon
such other matters that may properly come before the meeting or
any adjournments thereof.
•
If you own shares through a Johnson Controls retirement or
employee savings and investment plan [401(k)], and you do not
direct the trustee of the 401(k) plan to vote your shares, or if
the trustee does not receive your proxy card by January 20,
2006, then the trustee will vote the shares credited to your
account in the same proportion as the voting of shares for which
the trustee receives direction from other participants.
•
Further, if you sign and return a proxy card for your shares but
you do not indicate a voting direction, then the shares you hold
will be voted FOR all nominees listed in Proposal One, FOR
Proposal Two, FOR
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5
Proposal Three, and, in the discretion of the proxies, upon
such other matters that may properly come before the meeting or
any adjournments thereof.
A:
Yes. You can change your vote or revoke your proxy any time
before the Annual Meeting by:
•
entering a new vote by Internet or phone;
•
returning a later-dated proxy card;
•
notifying Jerome D. Okarma, Vice President, Secretary and
General Counsel, by written revocation letter addressed to the
Milwaukee address listed on the front page; or
•
completing a written ballot at the Annual Meeting.
A:
The four director nominees receiving the greatest number of
votes will be elected. Provided a quorum is present, the
ratification of PricewaterhouseCoopers LLP as the Company’s
independent auditors for fiscal year 2006 requires an
affirmative majority vote. An affirmative vote of the majority
of votes cast by the shareholders is required to approve and to
ratify the proposed Johnson Controls, Inc. Annual and Long-Term
Incentive Performance Plan.
A:
Yes. Only the election inspectors and certain individuals,
independent of the Company, who help with the processing and
counting of the vote have access to your vote. Directors and
employees of the Company may see your vote only if the Company
needs to defend itself against a claim or if there is a proxy
solicitation by someone other than the Company.
A:
Wells Fargo Bank, N.A. will count the vote. Its representatives
will serve as the inspectors of the election.
A:
The shares covered by your proxy card represent the shares of
Johnson Controls stock you own that are registered with the
Company and its transfer agent, Wells Fargo Bank, N.A.,
including those shares you own through the Company’s
dividend reinvestment plan and employee stock purchase plan.
Additionally, employees of the Company who have shares credited
to Johnson Controls employee retirement and savings and
investment plans [401(k)] are also covered by your proxy card.
The trustee of these plans will vote these shares as directed.
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6
A:
It means your shares are held in more than one account. You
should vote the shares on all your proxy cards. To provide
better shareholder services, we encourage you to have all your
non-broker account shares registered in the same name and
address. You may do this by contacting our transfer agent, Wells
Fargo Bank, N.A., toll-free at 1-877-602-7397.
A:
All shareholders of record as of the close of business on
November 17, 2005, can attend the meeting. Seating,
however, is limited. Attendance at the Annual Meeting will be on
a first arrival basis.
A:
To attend the Annual Meeting, please follow these instructions:
•
To enter the Annual Meeting, bring your proof of ownership of
Johnson Controls stock and a form of identification; or
•
If a broker or other nominee holds your shares, bring proof of
your ownership of Johnson Controls stock through such broker or
nominee and a form of identification.
A:
A brief management presentation will be given at the Annual
Meeting.
A:
Seating availability at the Annual Meeting is limited.
A:
A majority of the outstanding shares on November 17, 2005
constitutes a quorum for voting at the Annual Meeting. If you
vote, your shares will be part of the quorum. Abstentions and
broker non-votes will be counted in determining the quorum, but
neither will be counted as votes cast “FOR” or
“AGAINST” any of the proposals. On the record date,
193,511,283 shares of our Common stock were outstanding.
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7
A:
The Company will primarily solicit proxies by mail and will
cover the expense of such solicitation. Georgeson Shareholder
Communications Inc. will help us solicit proxies from all
brokers and nominees at a cost of $10,000 plus expenses. Our
officers and employees may also solicit proxies for no
additional compensation. We may reimburse brokers or other
nominees for reasonable expenses they incur in sending these
proxy materials to you if you are a beneficial holder of our
shares.
A:
You may recommend any person as a candidate for director by
writing to Jerome D. Okarma, Vice President, Secretary and
General Counsel of the Company. All submissions of
recommendations from shareholders are reviewed by the Corporate
Governance Committee. The Corporate Governance Committee will
determine whether the candidate is qualified to serve on the
Board of Directors of Johnson Controls, Inc. by evaluating the
candidate using the criteria contained under the “Director
Qualifications and Selection” section of the Company’s
Corporate Governance Guidelines, which is discussed under
“Proposal One: Election of Directors —
Nominating Committee Disclosure.” Alternatively, if you are
a shareholder of record and are entitled to vote at the Annual
Meeting, then you may nominate any person for director by
writing to Jerome D. Okarma. Your letter must include your
intention to nominate a person as a director and include the
candidate’s name, biographical data, and qualifications, as
well as the written consent of the person to be named in the
Company’s proxy statement as a nominee and to serve as a
director. To nominate a person as a director for the 2007 Annual
Meeting, the Company’s By-Laws require that shareholders
send written notice no sooner than September 28, 2006, and
no later than October 28, 2006. A copy of the Corporate
Governance Guidelines is provided at the Company’s website
at http://www.johnsoncontrols.com/governance or you may
request a copy of these materials by contacting Shareholder
Services at the address or phone number provided in the
Questions and Answers section of this proxy statement and they
will be mailed to you at no cost.
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8
A:
Shareholder proposals must be received by the Company, pursuant
to Rule 14a-8 of the Securities and Exchange Act of 1934,
by August 14, 2006, to be considered for inclusion in the
Company’s proxy materials for the 2007 Annual Meeting.
Meeting?
A:
A shareholder who intends to propose business at the 2007 Annual
Meeting other than pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, must comply with the requirements set
forth in the Company’s By-Laws. Among other things, a
shareholder must give written notice of the intent to propose
business before the Annual Meeting to the Company not less than
45 days and not more than 75 days prior to the month
and day in the current year corresponding to the date on which
the Company first mailed its proxy materials for the prior
year’s Annual Meeting. Therefore, since the Company
anticipates mailing its proxy statement on December 12,
2005, the Company must receive notice of shareholder intent to
propose business before the Annual Meeting, submitted other than
pursuant to Rule 14a-8 of the Securities Exchange Act of
1934, no sooner than September 28, 2006, and no later than
October 28, 2006.
If the notice is received after October 28, 2006, then the
notice will be considered untimely and the Company is not
required to present the shareholder information at the 2007
Annual Meeting. If the Board of Directors chooses to present any
information submitted, other than pursuant to Rule 14a-8 of
the Securities Exchange Act of 1934, after October 28,
2006, at the 2007 Annual Meeting, then the persons named in
proxies solicited by the Board of Directors for the 2007 Annual
Meeting may exercise discretionary voting power with respect to
such information.
A:
The Company’s Ethics Policy, Corporate Governance
Guidelines, Disclosure Policy, Communication Policy, Securities
Exchange Commission Filings (including the Company’s
Form 10-K and Section 16 insider trading
transactions), and the Charters for the Audit, Executive,
Pension and Benefits, Qualified Legal Compliance, Compensation,
Disclosure and Corporate Governance Committees of the
Company’s Board of Directors are provided at the Company
website at http://www.johnsoncontrols.com/governance or
you may request a copy of these materials by contacting
Shareholder Services at the address or phone number provided in
the Questions and Answers section of this proxy statement.
Materials you request will be sent free of charge. The Ethics
Policy applies to all employees, including the chief executive
officer, the chief operating officer, the chief financial
officer and chief accounting officers, as well as the Board of
Directors. Any amendments to, or waivers of, the Ethics Policy,
as approved by the Board of Directors, will be promptly
disclosed on the Company’s website.
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9
A:
You may receive a copy of Johnson Controls Corporate Governance
materials free of charge by:
•
contacting the Manager of Shareholder Services at
1-800-524-6220; or
•
writing to:
Johnson Controls, Inc.
Attn: Shareholder Services X-32
5757 North Green Bay Ave.
Post Office Box 591
Milwaukee, WI 53201-0591
A:
Employees may anonymously report a possible violation of Johnson
Controls’ policies by calling 1-866-444-1313 in the U.S.
and Canada, or 678-250-7578 if located elsewhere. Reports of
possible violations of the Ethics Policy may also be made to
Jerome D. Okarma, Vice President, Secretary and General Counsel,
at Jerome.D.Okarma@jci.com or to the attention of
Mr. Okarma at 5757 North Green Bay Avenue, P.O.
Box 591, Milwaukee, Wisconsin, 53201-0591. Reports of
possible violations of financial or accounting policies may be
made to the Chairman of the Audit Committee. Paul A. Brunner
will serve as Chairman of the Audit Committee until January 2006
and reports of possible violations may be sent to
Paul.Brunner@jci.com or to the attention of
Mr. Brunner at 5757 North Green Bay Avenue, P.O.
Box 591, Milwaukee, Wisconsin, 53201-0591. Thereafter,
Robert A. Cornog will become Chairman of the Audit Committee. At
that point, reports of possible violations may be sent to
Robert.A.Cornog@jci.com or to the attention of
Mr. Cornog at 5757 North Green Bay Avenue, P.O.
Box 591, Milwaukee, Wisconsin, 53201-0591. Reports of
possible violations of the Ethics Policy that the complainant
wishes to go directly to the Board may be addressed to the
Chairman of the Corporate Governance Committee, Robert L.
Barnett, at Robert.L.Barnett@jci.com or to the attention
of Mr. Barnett at 5757 North Green Bay Avenue, P.O.
Box 591, Milwaukee, Wisconsin, 53201-0591.
The Company’s Ethics Policy is applicable to the members of
the Board of Directors and to all of the Company’s
employees, including, but not limited to, the principal
executive officer, principal financial officer, principal
accounting officer or controller, or any person performing
similar functions.
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10
A:
To obtain additional information about the Company you may
contact Shareholder Services by:
•
calling the Manager of Shareholder Services, at 1-800-524-6220;
•
visiting the website at www.johnsoncontrols.com; or
•
writing to:
Johnson Controls, Inc.
Attn: Shareholder Services X-32
5757 North Green Bay Ave.
Post Office Box 591
Milwaukee, WI 53201-0591
A:
Pursuant to the rules of the Securities Exchange Commission,
services that deliver the Company’s communications to
shareholders who hold their stock through a bank, broker, or
other holder of record may deliver to multiple shareholders
sharing the same address a single copy of the Company’s
proxy statement. Upon written or oral request, the Company will
mail a separate copy of the proxy statement to any shareholder
at a shared address to which a single copy of each document was
delivered. You may contact the Company with your request by
calling or writing to Shareholder Services at the address or
phone number provided above. Materials you request will be
mailed to you at no cost.
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11
Appointment of Eugenio Clariond Reyes-Retana:
Pursuant to the Company’s By-Laws and Corporate Governance
Guidelines, the Board of Directors has appointed Eugenio
Clariond Reyes-Retana as a director. Mr. Clariond was
nominated for director by the Corporate Governance Committee and
evaluated pursuant to the process described in the
“Nominating Committee Disclosure” section of this
proxy. The Board has determined that Mr. Clariond is
qualified to serve as a director based upon the standards
outlined in the “Director Qualifications and
Selection” section of the Corporate Governance Guidelines.
Board Structure:
The Board of Directors consists of 13 members. The directors are
divided into three classes. At each Annual Meeting, the term of
one class expires. Directors in each class serve three-year
terms, or until the director’s earlier retirement pursuant
to the Board of Directors Retirement Policy, or until his or her
successor is duly qualified and elected.
Shareholder Communication with the Board:
We encourage shareholder communication with directors. General
communication with any member of the board may be sent to his or
her attention at 5757 North Green Bay Avenue, P.O. Box 591,
Milwaukee, Wisconsin, 53201-0591. Communications regarding
financial or accounting policies may be made to the Chairman of
the Audit Committee. Paul A. Brunner will serve as Chairman of
the Audit Committee until January 2006 and communications may be
sent to Paul.Brunner@jci.com or to the attention of
Mr. Brunner at 5757 North Green Bay Avenue,
P.O. Box 591, Milwaukee, Wisconsin, 53201-0591.
Thereafter, Robert A. Cornog will become Chairman of the Audit
Committee. At that point, communications may be sent to
Robert.A.Cornog@jci.com or to the attention of
Mr. Cornog at 5757 North Green Bay Avenue,
P.O. Box 591, Milwaukee, Wisconsin, 53201-0591. Other
communications may be made to the Chairman of the Corporate
Governance Committee, Robert L. Barnett, at
Robert.L.Barnett@jci.com or to the attention of
Mr. Barnett at the address noted above. The Company does
not screen emails to these individuals. The Company does,
however, screen regular mail for security purposes.
Director Attendance at the Annual Meeting:
The Company has a long-standing policy of director attendance at
the Annual Meeting. All of the directors except Mr. Davis
attended the 2005 Annual Meeting of Shareholders.
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12
Nominating Committee Disclosure:
The Corporate Governance Committee (the “Committee”)
serves the nominating committee role. The material terms of this
role are described in the Committee’s Charter, a
description of which is located under the “Board
Committees” section of this proxy. The Committee’s
entire Charter, the Corporate Governance Guidelines, and the
Committee’s procedures are published on the Company’s
website. The “Committee Independence” section of the
Corporate Governance Guidelines requires that all members of the
Committee be independent, as defined by the New York Stock
Exchange listing standards and the Company’s Corporate
Governance Guidelines. The Committee has a process under which
all director candidates, regardless of whether nominated as
required by the By-laws, or recommended, are identified and
evaluated. In order to identify director candidates, the
Committee maintains a file of recommended potential director
nominees (including those recommended by shareholders), solicits
candidates from current directors, evaluates recommendations and
nominations by shareholders, and will, if deemed appropriate,
retain, for a fee, recruiting professionals to identify and
evaluate candidates. The Committee uses the following criteria,
among others, to evaluate any candidate’s capabilities to
serve as a member of the Board: attendance, independence, time
commitments, conflicts of interest, ability to contribute to the
oversight and governance of the Company and experience with a
business of similar size, scope and multinational involvement as
the Company. Further, the Committee reviews the qualifications
of any candidate with those of current directors to determine
coverage and gaps in experience in related industries, such as
automotive and electronics, and in functional areas, such as
financial, manufacturing, technology, labor, employment and
investing areas. The Committee will also evaluate each candidate
who may stand for reelection based upon the preceding criteria
before nominating such director for reelection. Therefore, all
director candidates will be evaluated in a similar matter
regardless of how each director was identified, recommended, or
nominated. No director candidates were nominated by third
parties during the year. One director candidate was recommended
during the year.
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Dennis W. Archer Director since 2002
Chairman, Dickinson Wright PLLC, Detroit, Michigan since 2002
(law firm). Mr. Archer served as president of the American
Bar Association from 2003 to 2004. Mr. Archer served as
Mayor of Detroit from 1994 to 2001. Mr. Archer is also a
director of Compuware Corp. and Masco Corp. Mr. Archer
serves on the Audit Committee of Masco Corp.
Age 63 |
|
 |
John M. Barth Director since 1997
Chairman of the Board of Directors since 2004, Chief Executive
Officer and President, Johnson Controls, Inc. Mr. Barth
became Chief Executive Officer on October 1, 2002 and
President on September 28, 1998. Previously, Mr. Barth
served as Chief Operating Officer and has been a member of the
Board of Directors of Johnson Controls, Inc. since 1997.
Age 59 |
|
 |
Paul A. Brunner Director since 1983
President and Chief Executive Officer, Spring Capital, Inc.,
Stamford, Connecticut, since 1985 (international investment
management). President and Chief Executive Officer, ASEA, Inc.,
1982 to 1984. President and Chief Executive Officer, Crouse
Hinds Co., 1967 to 1982. From 1959 to 1967, he worked for
Coopers & Lybrand, an accounting firm, as an audit
supervisor, New York office. Mr. Brunner also serves as
Chairman of the Audit Committee and financial expert of Trex
Company, Inc.
Age 70 |
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Southwood J. Morcott Director since 1993
Retired Chairman of the Board, President, and Chief Executive
Officer, Dana Corp., Toledo, Ohio (vehicular and industrial
systems manufacturer). Mr. Morcott is a director of CSX
Corp. and Navistar International Corp. Mr. Morcott serves
as the Chairman of the Compensation Committee of Navistar
International Corp.
Age 67 |
 |
Robert L. Barnett Director since 1986
Retired Executive Vice President, Motorola, Inc., Schaumburg,
Illinois (manufacturer of electronics products).
Mr. Barnett served as Executive Vice President of Motorola
from 2003 to 2005. Prior to that, he served as President and
Chief Executive Officer, Commercial, Government and Industrial
Solutions Sector, Motorola, Inc., from 1998 to 2002.
Mr. Barnett is a director of Central Vermont Public Service
and USG Corp. Mr. Barnett serves on the Compensation
Committee of Central Vermont Public Service and is Chairman of
the Audit Committee of USG Corp.
Age 65 |
|
 |
Eugenio Clariond Reyes-Retana Director since 2005
Chairman of the Board and Chief Executive Officer, Grupo IMSA
S.A., Nuevo Leon, Mexico, since 2003 (industrial conglomerate
specializing in steel, aluminium and plastic products). Prior to
that time he was the Chief Executive Officer of Grupo IMSA, S.A.
Mr. Clariond serves as a director of Chaparral Steel, Grupo
Financiero Banorte S.A., Grupo Industrial Saltillo S.A., and
Navistar International Corp. Mr. Clariond serves on the
Audit Committee of Grupo Industrial Saltillo, S.A. and on the
Compensation Committees of Chaparral Steel and Navistar
International Corp.
Age 62 |
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Willie D. Davis Director since 1991
President, All Pro Broadcasting Inc., Los Angeles, California,
since 1977 (radio broadcasting). Mr. Davis is a director of
Alliance Bank Co., Checkers Drive-In Restaurants, Inc., Dow
Chemical Co., Manpower, Inc., MGM Grand Inc., and Sara Lee Corp.
Mr. Davis serves on the Audit Committees of Checkers
Drive-In Restaurants, Inc. and Sara Lee Corp. and is a member of
the Compensation Committee of Dow Chemical Co.
Age 71 |
|
 |
Jeffrey A. Joerres Director since 2001
Chief Executive Officer, President and Director since 1999, and
Chairman of the Board since 2001, Manpower, Inc., Milwaukee,
Wisconsin (provider of staffing services). Mr. Joerres
served as Senior Vice President of European Operations from 1998
to 1999, and Senior Vice President of Major
Account Development from 1995 to 1998. Mr. Joerres is
a director of Artisan Funds and the National Association of
Manufacturers and serves on the board of trustees for the
Committee for Economic Development. Mr. Joerres serves on
the Audit Committee of Artisan Funds.
Age 46 |
|
 |
Richard F. Teerlink Director since 1994
Retired Chairman of the Board and President and Chief Executive
Officer, Harley-Davidson, Inc., Milwaukee, Wisconsin, 1998 and
1997, respectively (manufacturer of motorcycles).
Mr. Teerlink was a member of the board of directors of
Harley-Davidson, Inc. from 1987 to 2002. Mr. Teerlink is a
director of Snap-on, Inc. Mr. Teerlink serves as Chairman
of the Audit Committee of Snap-On, Inc.
Age 69 |
|
 |
Natalie A. Black Director since 1998
Senior Vice President, General Counsel and Corporate Secretary,
Kohler Co., Kohler, Wisconsin since 2001 (manufacturer and
marketer of plumbing products, power systems and furniture).
Ms. Black also served as Group President for Kohler Co.
from 1998 to 2001.
Age 55 |
|
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Robert A. Cornog Director since 1992
Retired Chairman of the Board of Directors, Chief Executive
Officer and President, Snap-on, Inc., Kenosha, Wisconsin (tool
manufacturer). He served as Chief Executive Officer and
President from 1991 to 2001 and as Chairman from 1991 to 2002.
Mr. Cornog is a director of Oshkosh Truck Corp. and
Wisconsin Energy Corp. (“We Energies”).
Mr. Cornog serves on the Audit Committee of We Energies.
Age 65 |
|
 |
William H. Lacy Director since 1997
Former Chairman and Chief Executive Officer, MGIC Investment
Corp., Milwaukee, Wisconsin (provider of private mortgage
insurance). Mr. Lacy retired at the end of 1999 after a
28-year career at MGIC Investment and its principal subsidiary,
Mortgage Guaranty Insurance Corp. (MGIC), the nation’s
leading private mortgage insurer. Mr. Lacy is a Director of
American Capital Access (ACA Capital) and Ocwen Financial Corp.
He serves on the Risk Management Committee of ACA Capital and on
the Audit Committee of Ocwen Financial Corp.
Age 60 |
|
 |
Stephen A. Roell Director since 2004
Vice Chairman of the Board of Directors and Executive Vice
President, Johnson Controls, Inc. Mr. Roell was elected
Vice Chairman in 2005 and Executive Vice President in 2004. He
served as Chief Financial Officer of Johnson Controls, Inc. from
1991 to 2005.
Age 55 |
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|
* Basic earnings per common
share for the Company on a consolidated basis * Product quality * Total shareholder return * Net sales * Cost of sales * Selling, general and administrative expenses * Diluted earnings per common share for the Company on a consolidated basis |
* Operating income * Income before interest and/or the provision for income taxes * Net income * Accounts receivable * Inventories * Return on equity * Return on assets |
* Return on capital * Economic value added, or other measure of profitability that considers the cost of capital employed * Net cash provided by operating activities * Net increase (decrease) in cash and cash equivalents * Customer satisfaction * Market share * Gross profit |
19
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20
Table of Contents
| Target Amount — | ||||||||||
| Long-Term | ||||||||||
| Target Amount — | Awards | |||||||||
| Annual Award | Fiscal Years | |||||||||
| Name and Position | Fiscal 2006 | 2006-2008 | ||||||||
|
John M. Barth,
|
$ | 1,440,000 | $ | 1,872,000 | ||||||
| Chairman, Chief Executive Officer and President | ||||||||||
|
Stephen A. Roell,
|
$ | 810,000 | $ | 765,000 | ||||||
| Vice Chairman and Executive Vice President | ||||||||||
|
Keith E. Wandell,
|
$ | 680,000 | $ | 723,000 | ||||||
| Executive Vice President and President, Automotive Group | ||||||||||
|
Giovanni Fiori,
|
$ | 540,000 | $ | 574,000 | ||||||
| Executive Vice President, International | ||||||||||
|
John P. Kennedy,
|
$ | 426,000 | $ | 426,000 | ||||||
| Executive Vice President and President, Controls Group | ||||||||||
|
Executive Group(1)
|
$ | 3,959,000 | $ | 3,522,000 | ||||||
|
Non-Executive Officer Employee Group
|
$ | 40,945,000 | $ | 3,594,000 | ||||||
| (1) | Note that the “Executive Group” refers to all of the Company’s current executive officers as a group, excluding Messrs. Barth, Roell, Wandell, Fiori and Kennedy. |
21
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22
Board Meetings:
In 2005, the Board held a total of six regular meetings and one
special meeting. Each director of the Company attended at least
92% of the aggregate number of meetings of the Board and the
total number of meetings of all committees of the Board on which
such director served during the time each such director was a
member of the Board. The Board has a presiding director
position. The presiding director is a rotational assignment held
in turn by the independent Chairman of the Audit, Corporate
Governance, Compensation, and Pension and Benefits Committees.
In addition, the Board requires executive sessions of the
independent directors. During these executive sessions, and when
the chairman is unavailable for regular Board meetings, the
presiding director has the power to lead the meeting, set the
agenda, and determine the information to be provided.
Board Independence:
The Board of Directors has established a categorical standard to
assist it in making determinations of director independence.
Under this standard, if a director is or was an executive
officer, employee or director of, or has or had any other
relationship with, another company that makes payments to, or
receives payments from, the Company for property or services in
an amount which, in its last fiscal year, does not exceed the
greater of $1 million or 2% of such other company’s
consolidated gross revenues, then that relationship will not be
considered to be a material relationship that would impair a
director’s independence. The Board of Directors has
affirmatively determined by resolution that none of the
directors or director nominees (with the exception of John M.
Barth, Eugenio Clariond Reyes-Retana and Stephen A. Roell) has
any other material relationship with the Company. Accordingly,
subject to the three exceptions noted, the Board of Directors
has determined that the director nominees and remaining
directors are independent.
Board Succession Plan:
The Board Succession Plan is designed to maintain effective
shareholder representation and has three important elements.
First, the mandatory retirement age for directors is
72 years of age. Second, no director shall serve as a
committee chair after reaching his or her 70th birthday.
One year prior to a committee chair’s 70th birthday, a
transition process will be implemented in which the new chair
will work collaboratively with the retiring chair as duties and
responsibilities are transitioned. Both the current chair and
the successor will receive $5,000 per meeting. Third, at
the time a Chief Executive Officer shall either resign or retire
from the Company, he or she shall resign and retire from the
Board as well, following a transition period which is mutually
agreed upon between the Chief Executive Officer and the
Compensation Committee.
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23
In accordance with the Board Succession Plan, Mr. Brunner
worked collaboratively with Mr. Cornog throughout fiscal
year 2005 to transition chairmanship of the Audit Committee to
Mr. Cornog. Effective January 2006, Mr. Cornog will
become Chair of the Audit Committee. Mr. Brunner will
remain a member of the committee.
The Corporate Governance Guidelines and Corporate Governance
Committee Charter are provided at the Company website:
http://www.johnsoncontrols.com/governance or you may
request a copy of these materials by contacting Shareholder
Services at the address or phone number provided in the
Questions and Answers section of this proxy statement.
Board Evaluation:
Every year the Board conducts an evaluation of the directors,
the committees, and the Board to determine the effectiveness of
the Board. The manner of this evaluation is determined annually
in order to ensure the procurement of accurate and insightful
information. During the Company’s 2005 fiscal year, each
director completed a self-assessment questionnaire as a means to
evaluate the effectiveness of the Board and its committees.
Based upon the input of each director, a list was compiled which
identified potential areas for improvement. As a result of the
quality of the information obtained through this evaluation
process, the Board was able to objectively evaluate its
processes and enhance its procedures to allow for greater
director, committee, and Board effectiveness.
Board Committees:
Executive Committee: The primary functions of the
committee are to exercise all the powers of the Board when the
Board is not in session, as permitted by law. The Executive
Committee held one meeting last year.
Audit Committee: The primary functions of the
committee are to:
• Review and discuss the audited financial statements
with management for inclusion of the financial statements and
related disclosures in the Company’s Annual Report to
Shareholders;
• Review annually the internal audit and other
controls established by management;
• Review the results of management’s and the
independent accountant’s assessment of the design and
operating effectiveness of the Company’s internal controls
in accordance with the Sarbanes-Oxley Act of 2002;
• Review the financial reporting process and selection
of accounting policies;
• Review management’s evaluation and proposed
selection of independent accountants;
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24
• Review the audit plans prepared by internal audit
and independent accountants;
• Review applicable confidential reporting of possible
concerns regarding internal accounting controls,
accounting and
auditing matters;
• Pre-approve all auditing services and permitted
non-audit services to be performed by the Company’s
independent accountants;
• Review significant issues concerning litigation,
contingent liabilities, tax and insurance as reflected in
periodic reports to the Securities and Exchange Commission;
• Report the results or findings of all activities to
the Board on a periodic basis; and
• Review annually the Committee’s performance and
report its findings and recommendations to the
Board.
The Audit Committee held eight regular meetings last year. All
members are independent as defined by the New York Stock
Exchange listing standards.
Compensation Committee: The primary functions of
the committee are to:
• Recommend to the Board the selection and retention
of officers and key employees;
• Review and approve compensation for the Chief
Executive Officer and senior executives;
• Administer and recommend amendments to the executive
compensation plans;
• Establish objectives, determine performance, and
approve salary adjustments of the Chief Executive
Officer;
• Approve disclosure statements of executive
compensation;
• Approve the retention and termination of outside
compensation consultants;
• Review the Company’s executive compensation
programs with outside consultants and recommend
such programs to
the Board;
• Review annually the Committee’s performance and
report its findings and recommendations to the
Board;
• Review a management succession plan and recommend
management succession decisions;
• Review and approve employment related agreements for
the Chief Executive Officer and senior
executives; and
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25
• Report the results or findings of these activities
to the Board on a periodic basis.
The Compensation Committee held five meetings last year. All
members are independent as defined by the New York Stock
Exchange listing standards. In addition, no member of the
Compensation Committee has served as one of the Company’s
officers or employees at any time. Further, none of the
Company’s executive officers serves as a member of the
board of directors or compensation committee of any other
company that has one or more executive officers serving as a
member of the Company’s Board of Directors or Compensation
Committee.
Corporate Governance Committee: The primary
functions of the committee are to:
• Recommend to the Board nominees for directors;
• Consider shareholder nominated candidates for
election as directors;
• Recommend the size and composition of the Board;
• Develop guidelines and criteria for the
qualifications of directors for Board approval;
• Approve director compensation programs;
• Approve committees, committees’ rotational
assignments, and committee structure for the Board;
• Approve and review performance criteria for the
Board;
• Review annually the Committee’s performance and
report its findings and recommendations to the
Board;
• Review and recommend corporate governance practices
and policies of the Company;
• Review and decide on conflicts of interest that may
affect directors; and
• Report the results or findings of these activities
to the Board on a periodic basis.
The Corporate Governance Committee held five meetings last year.
All members are independent as defined by the New York Stock
Exchange listing standards.
Pension and Benefits Committee: The primary
functions of the committee are to:
• Review actuarial assumptions and actuarial valuation
of the pension plans on an annual basis;
• Review investment policies of the funds of employee
benefit plans;
Table of Contents
26
• Select and terminate investment managers as
appropriate;
• Review with investment advisors past performance and
current investment strategy;
• Monitor Company policies affecting employee benefit
plans;
• Review plan provisions annually, and propose
amendments when necessary; and
• Review annually the Committee’s performance and
report its findings and recommendations to the
Board.
The Pension and Benefits Committee held five meetings last year.
All members are independent as defined by the New York Stock
Exchange listing standards.
Table of Contents
| Pension | ||||||||||||||||||||
| Corporate | and | |||||||||||||||||||
| Audit | Executive | Compensation | Governance | Benefits | ||||||||||||||||
|
Dennis W. Archer
|
ü | ü | ||||||||||||||||||
|
Robert L. Barnett
|
ü | * | ü | |||||||||||||||||
|
John M. Barth
|
* | |||||||||||||||||||
|
Natalie A. Black
|
ü | ü | ||||||||||||||||||
|
Paul A. Brunner
|
* | ü | ||||||||||||||||||
|
Robert A. Cornog
|
ü | ü | ||||||||||||||||||
|
Willie D. Davis
|
ü | ü | ||||||||||||||||||
|
Jeffrey A. Joerres
|
ü | ü | ||||||||||||||||||
|
William H. Lacy
|
ü | * | ||||||||||||||||||
|
Southwood J. Morcott
|
* | ü | ||||||||||||||||||
|
Eugenio Clariond Reyes-Retana
|
||||||||||||||||||||
|
Stephen A. Roell
|
||||||||||||||||||||
|
Richard F. Teerlink
|
ü | ü | ||||||||||||||||||
| Retainer and Fees: | Non-employee directors receive a $90,000 annual retainer. To encourage such directors to own our shares, they receive 50% of their retainer in our Common stock each year. The stock is priced as of the date of the Annual Meeting. New directors also receive a grant of 800 shares of Common stock upon election or appointment and a pro rata share of the annual retainer for the remainder of the year. This stock is priced as of the 1st working day of the month after appointment as a new director. The Common stock portion of the annual retainer and the initial grant have been provided pursuant the 2003 Stock Plan for Outside Directors. | |
| Directors also receive $1,500 for each Board or committee meeting they attend, or $5,000 for each meeting they attend of which they are the Chairperson or for which they are the successor to the Chairperson under the Board Succession Plan. Non-employee directors are also reimbursed for any related expenses. |
27
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28
Non-employee directors are permitted to defer all or any part of
their retainer and fees under the Deferred Compensation Plan for
Certain Directors. The amount deferred may be invested in any of
the accounts available under the Company’s qualified
Savings and Investment Plan [401(k)], as the director elects.
The deferred amount plus earnings, or gain and dividends, as
applicable, are paid to the board member after the director
retires or otherwise ceases service on the Board.
Other Compensation:
Non-employee directors are eligible to participate in a Director
Share Unit Plan. The Company credits $35,000 worth of stock
units annually into each non-employee director’s account at
the then current market price. Such units are accumulated and
credited with dividends until retirement at which time the units
will be paid out based upon the market price of the Common stock
at that time.
The Committee:
The Compensation Committee is composed only of independent
directors as defined by the requirements of the New York Stock
Exchange and the Company’s Corporate Governance Guidelines.
The committee exercises the Board’s powers in compensating
the Company’s executives and the executive officers of our
Company and its subsidiaries. We make every effort to see that
our compensation program is consistent with the values of our
Company and furthers its business strategy.
Overall Objectives:
The Company aligns compensation with its values and business
objectives. The objectives target customer satisfaction,
technology, growth, market leadership and shareholder value. The
Compensation Committee has established a program to:
• Attract and retain key executives critical to the
long-term success of the Company;
• Reward executives for long-term strategic management
and the enhancement of shareholder value;
• Integrate compensation programs, which can focus on
pre-tax return on shareholders’ equity, return on
investment and growth;
• Support a performance-oriented environment that
rewards performance not only with respect to
Company goals but
also Company performance as compared to that of industry
performance levels; and
• Preserve the federal income tax deductibility of
compensation paid. Accordingly, the Company has
taken
appropriate actions to preserve the deductibility of annual
incentives, long-term performance
plan payments, and stock
option awards. However, the Committee may authorize payments
that may
not be deductible if it believes that this is in the
best interests of the Company and its shareholders.
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29
Executive Compensation Generally:
The Compensation Committee reviews executive pay each year.
Compensation depends on many factors, including individual
performance and responsibilities, future challenges and
objectives, and how he or she might contribute to the
company’s future success. We also look at the
Company’s financial performance and the compensation levels
at comparable companies.
To meet the objectives, we studied competitive compensation data
based on surveys provided to the Committee by an independent
compensation consultant. The survey for officers and senior
managers involved 21 companies. We made adjustments to
account for differences in annual sales of our Company and those
companies in the survey.
Total Compensation:
Annual executive compensation consists of a base salary and
incentive compensation.
Approximately 83% of the total compensation paid to the
executive officer group is tied to company performance. This is
comparable to the average of the companies in the executive
compensation survey. Doing so helps encourage performance that
increases the value of your shares.
The Committee sets target minimum and maximum performance
levels. Goals are established above the prior year’s goals
and prior year’s actual performance. Doing so motivates the
officers to encourage future growth and keeps the goals
challenging.
Base Salary:
The Committee determines the levels of salary for key executive
officers and a salary range for other executives. Factors
considered are:
• Salary survey comparison results;
• Prior year salary;
• Changes in individual job responsibilities;
• Past performance of individuals; and, most
importantly,
• Achievement or trends toward achievement of
specified Company goals.
Annual Incentives:
The Committee sets an annual incentive award formula under the
Executive Incentive Compensation Plan (EICP). The award is based
on specific benchmarks that are consistent with our annual and
long-term strategic planning objectives. These benchmarks are
also based on achievement of business plans that the Board has
approved that include goals of improved performance over the
previous year and take into account industry growth and cycles.
At the end of the fiscal year, the Committee applies the formula
to objective performance results to determine each
executive’s award for the year.
Long-Term Incentives:
All executive officers participate in the Long-Term Performance
Plan (LTPP), which serves to motivate executives to achieve
longer-term objectives by providing incentive
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30
compensation based on our performance over a three-year period.
Under the LTPP, the Committee assigns an executive a contingent
performance award. The executive may earn this award based upon
the Company’s return on shareholder equity during the
specified three-year period relative to the Standard &
Poor’s 500 Index (less transportation, financials and
utilities sectors) median return on shareholders’ equity
over the same period. For prior awards, relative performance was
measured using a “step” scale. For awards paid in 2005
and after, the Committee has determined to measure relative
performance using a linear scale. At the end of the period, the
Committee determines the Company’s relative performance
results to determine the actual LTPP award amount.
The Company is seeking shareholder approval for a new plan,
called the Johnson Controls, Inc. Annual and Long-Term Incentive
Performance Plan, that will replace both the EICP and LTPP.
Restricted Stock Plan:
The Committee grants restricted stock under the 2001 Restricted
Stock Plan, as amended. The Committee determines the
participants, the size of the award, and its terms and
conditions.
Executive Deferred Compensation Plan:
Executive officers are permitted to defer all or any part of
their compensation received under the EICP, the LTPP and the
2001 Restricted Stock Plan under and pursuant to the terms of
the Executive Deferred Compensation Plan. The Executive Deferred
Compensation Plan amends, consolidates, and implements the
various deferral options contained in the above-mentioned
benefit plans. Each individual for whom a deferral account is
maintained under the above-mentioned benefit plans is
automatically enrolled in the Executive Deferred Compensation
Plan.
Stock Option Program:
The Committee grants stock options under the 2000 Stock Option
Plan. The Committee determines which individuals are awarded
stock options, the terms at which option grants shall be made,
the terms of the options, and the number of shares subject to
each option.
Savings and Investment Plan [401(k)]:
Executive officers may participate in the Company’s Savings
and Investment Plan [401(k)], which includes Company
contributions to the plan, and an Equalization Benefit Plan
under which certain executives are entitled to additional
benefits that cannot be paid under qualified plans due to
Internal Revenue Code limitations. Employee and Company
contributions in excess of qualified plan limits are accounted
for as if invested in various accounts.
Stock Ownership Guidelines:
The Executive Stock Ownership Policy requires all officers and
senior executives in each business group, within five years of
becoming subject to the policy, to hold the Company’s
Common stock in an amount of one to five times their annual
salary, depending on his or her position.
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31
The 2001 Common Stock Purchase Plan for Executives, as amended
(CSPPE), facilitates the acquisition of Common stock by
executives subject to the Executive Stock Ownership Policy.
Participants in the CSPPE may deduct from their pay up to
$2,500 per month to purchase shares of Common stock. The
price of each share is 100% of the average price of shares
purchased by Wells Fargo Bank, N.A. as agent for the
participants. Participants are charged nominal brokerage fees or
commissions.
CEO Compensation:
Mr. Barth’s total compensation is based on the
Company’s outstanding performance, his individual
performance, executive compensation levels at other companies,
the desire to retain his services, and the terms of his
employment agreement. His salary and incentives reflect the
leadership, vision and focus he has provided to the Company.
Mr. Barth’s base salary increased to $1,390,000 on
January 1, 2005, from $1,350,000 in 2004. This increase was
due to his outstanding performance during the year. His salary
approximated the average base salary for other chief executive
officers of the 21 comparable companies reviewed.
Approximately 91% of Mr. Barth’s compensation was tied
to Company performance. Mr. Barth’s fiscal 2005 EICP
award of $2,725,000 was based upon the return on
shareholder’s equity and operating income growth for the
Company for fiscal 2005 and represented 78% of the maximum
amount available under the criteria set forth by the Committee.
In fiscal 2005 Mr. Barth received payment under the LTPP of
$2,317,000, which is based upon the Company’s return on
shareholder equity over the past three fiscal years and
represents 71% of the maximum amount available under the
criteria established by the Committee. Mr. Barth also
received an option award of 400,000 shares on
November 17, 2004.
Southwood
J. Morcott, Chairman
Dennis
W. Archer
Paul
A. Brunner
Jeffrey
A. Joerres
Willam
H. Lacy
Members,
Compensation Committee
Table of Contents
| Fiscal Year | Fiscal Year | |||||||
| 2004 | 2005 | |||||||
|
Audit Service Fees
|
$ | 7,987,000 | $ | 13,678,000 | ||||
|
Audit-Related Fees
|
$ | 2,240,000 | $ | 930,000 | ||||
|
Tax Fees
|
$ | 2,868,000 | $ | 2,256,000 | ||||
|
All Other Fees
|
$ | 378,000 | $ | 145,000 | ||||
32
Table of Contents
33
Paul A. Brunner, Chairman
Robert A. Cornog
Willie D. Davis
Richard F. Teerlink
Members, Audit Committee
Table of Contents
Explanation of the Graph:
The line graph below compares the cumulative total shareholder
return on our Common stock with the cumulative total return of
companies on the Standard & Poor’s 500 Stock Index
and companies formerly on the S&P’s Manufacturers
(Diversified Industrials) Index.* This graph assumes the
reinvestment of dividends.
| COMPANY/INDEX | 9/00 | 9/01 | 9/02 | 9/03 | 9/04 | 9/05 | |||||||||||||||||||||||||
|
Johnson Controls, Inc.
|
100 | 125.13 | 149.73 | 187.63 | 228.95 | 254.32 | |||||||||||||||||||||||||
|
Manufacturers (Diversified
Industrials)*
|
100 | 89.81 | 68.38 | 89.05 | 118.96 | 120.89 | |||||||||||||||||||||||||
|
S&P 500 Comp-Ltd.
|
100 | 73.39 | 58.37 | 72.60 | 82.66 | 92.78 | |||||||||||||||||||||||||
| * | The Manufacturers (Diversified Industrials) Index was discontinued as a formal index of Standard & Poor’s effective December 31, 2001. The Company has replicated the index using return data for the 14 companies that comprised the Manufacturers (Diversified Industrials) Index as of that date. |
34
Table of Contents
| Long-Term Compensation | |||||||||||||||||||||||||||||||||
| Awards | Payouts | ||||||||||||||||||||||||||||||||
| Annual Compensation | |||||||||||||||||||||||||||||||||
| Restricted Stock/ | Long-Term | ||||||||||||||||||||||||||||||||
| Other Annual | Options/ | Or Restricted | Incentive | All Other | |||||||||||||||||||||||||||||
| Name and | Fiscal | Compensation | SARs | Share unit Value | Payouts | Compensation | |||||||||||||||||||||||||||
| Principal Position | Year | Salary($) | Bonus($) | ($)(1) | (#)(2) | ($)(3) | ($)(4) | ($)(5) | |||||||||||||||||||||||||
|
John M. Barth
|
2005 | 1,373,750 | 2,725,000 | — | 400,000 | — | 2,317,000 | 145,555 | |||||||||||||||||||||||||
|
Chairman of the
|
2004 | 1,281,250 | 2,665,000 | 110,017 | 400,000 | 4,766,400 | 2,584,000 | 239,110 | |||||||||||||||||||||||||
|
Board, Chief Executive
|
2003 | 1,150,000 | 1,791,000 | — | 350,000 | — | 2,243,000 | 115,892 | |||||||||||||||||||||||||
|
Officer and President
|
|||||||||||||||||||||||||||||||||
|
Stephen A. Roell
|
2005 | 708,583 | 1,255,000 | — | 100,000 | — | 872,000 | 57,237 | |||||||||||||||||||||||||
| Vice Chairman of the | 2004 | 587,000 | 968,000 | — | 104,000 | 1,849,600 | 766,000 | 96,018 | |||||||||||||||||||||||||
| Board and Executive | 2003 | 510,000 | 753,000 | — | 110,000 | — | 695,000 | 66,690 | |||||||||||||||||||||||||
| Vice President | |||||||||||||||||||||||||||||||||
|
Keith E. Wandell
|
2005 | 713,583 | 1,315,000 | — | 100,000 | — | 718,000 | 49,212 | |||||||||||||||||||||||||
| Executive Vice | 2004 | 615,750 | 728,000 | — | 140,000 | 2,080,800 | 652,000 | 104,081 | |||||||||||||||||||||||||
| President and | 2003 | 441,670 | 791,000 | — | 84,000 | — | 630,000 | 48,334 | |||||||||||||||||||||||||
| President, | |||||||||||||||||||||||||||||||||
| Automotive Group | |||||||||||||||||||||||||||||||||
|
Giovanni Fiori(6)
|
2005 | 642,750 | 779,000 | — | 100,000 | — | 707,000 | — | |||||||||||||||||||||||||
| Executive Vice | 2004 | 618,000 | 646,000 | — | 108,000 | — | 796,000 | — | |||||||||||||||||||||||||
| President and | 2003 | 600,000 | 658,000 | — | 120,000 | — | 557,000 | — | |||||||||||||||||||||||||
| President, | |||||||||||||||||||||||||||||||||
| International | |||||||||||||||||||||||||||||||||
|
John P. Kennedy
|
2005 | 539,500 | 803,000 | — | 100,000 | — | 525,000 | 47,606 | |||||||||||||||||||||||||
| Executive Vice | 2004 | 513,750 | 785,000 | — | 80,000 | 1,387,200 | 585,000 | 84,148 | |||||||||||||||||||||||||
| President and | 2003 | 495,000 | 540,000 | — | 74,000 | — | 765,000 | 55,974 | |||||||||||||||||||||||||
| President, Controls Group | |||||||||||||||||||||||||||||||||
| (1) | The aggregate amount of “Other Annual Compensation”, which includes perquisites and personal benefits was less than the required reporting threshold (the lesser of $50,000 or 10% of the officer’s annual salary and bonus for the year). |
| (2) | The Company did not grant SARs to any of the five most highly-compensated executive officers for the past three years. In addition, the figures are stated to reflect a 2 for 1 stock split which took place on January 2, 2004. |
| (3) | The executive officers are eligible to receive restricted stock and restricted share unit awards under and pursuant to the 2001 Restricted Stock Plan, as amended. There were no restricted stock or restricted share unit awards during fiscal years 2003 and 2005. There were restricted stock or restricted share unit awards during fiscal years 2002 and 2004. The shares awarded to individuals for the 2002 and 2004 awards are subject to restriction periods that expire on 50% of the shares awarded in January 2004 and January 2006, respectively, and 50% of the remainder of the shares awarded in January 2006 and January 2008, respectively; the shares are subject to forfeiture until |
35
Table of Contents
36
vested. However, earlier vesting may occur due to termination of
employment by death or disability, a change in control of the
Company, or action by the Compensation Committee. Dividends are
paid on shares of restricted stock at the same rate as on
unrestricted shares and will be subject to the same terms and
conditions (including risk of forfeiture) as the restricted
shares to which they relate. For the 2002 awards, the dollar
values for these shares is $40.35 per share (adjusted to
represent the 2 for 1 stock split that became effective on
January 2, 2004) based on the closing price on the grant
dates for Messrs. Barth, Roell, Wandell, Fiori and Kennedy.
For the 2004 awards, the dollar values shown for these shares
are $59.58 per share for Mr. Barth and $57.80 per
share for Mr. Roell, Mr. Wandell, and Mr. Kennedy
based on the closing price on the grant dates. For all unvested
grants, as of September 30, 2005, the named executive
officers held the following number of shares of restricted stock
and/or restricted units, with the values noted (based on a
closing price of $62.05 per share on September 30,
2005): Mr. Barth — 105,000 shares
($6,515,250), Mr. Roell — 47,000 shares
($2,916,350), Mr. Fiori — 14,000 shares
($868,700), Mr. Kennedy — 34,000 shares
($2,109,700), and Mr. Wandell —
45,000 shares ($2,792,250).
(4)
In fiscal 2005, based upon the data available at this time, LTPP
participants were granted 71% of the target available under the
criteria established by the Compensation Committee.
(5)
“All Other Compensation” consists of contributions by
the Company on behalf of the named individuals to the
Company’s Savings and Investment Plan [401(k)] and an
Equalization Benefit Plan
(6)
Mr. Fiori’s salary and other cash compensation are
paid in Euros. For purposes of disclosure in the table, the
Company assumes a conversion of Euros into US Dollars using
a fixed exchange rate of .9038 Euros to $1.00 Dollar to avoid
distorting reported compensation due to fluctuations in exchange
rates.
Stock Options and Stock Appreciation Rights (SARs) Grants:
The Company has an employee Stock Option Plan under which
options to purchase Common stock and SARs are granted to
officers and other key employees of the Company and its
subsidiaries. The per share option/ SAR prices are the fair
market value of the Company’s Common stock on the date of
the grant; the term of the option is 10 years. Fifty
percent of each award is exercisable two years after the grant
date and the remainder is exercisable three years after the
grant date.
Table of Contents
| Potential realizable value | ||||||||||||||||||||||||
| % of Total | at assumed annual rates | |||||||||||||||||||||||
| Options/SARs | of stock price appreciation | |||||||||||||||||||||||
| Granted to | Exercise or | for option term | ||||||||||||||||||||||
| Options | Employees in | Base Price | Expiration | |||||||||||||||||||||
| Name | Granted | Fiscal 2005 | ($/Share) | Date | 5%($) | 10%($) | ||||||||||||||||||
|
John M. Barth
|
400,000 | 14.28% | $ | 61.69 | 11/17/2014 | $ | 15,518,604 | $ | 39,327,189 | |||||||||||||||
|
Stephen A. Roell
|
100,000 | 3.57% | $ | 61.69 | 11/17/2014 | $ | 3,879,651 | $ | 9,831,797 | |||||||||||||||
|
Keith E. Wandell
|
100,000 | 3.57% | $ | 61.69 | 11/17/2014 | $ | 3,879,651 | $ | 9,831,797 | |||||||||||||||
|
Giovanni Fiori
|
100,000 | 3.57% | $ | 61.69 | 11/17/2014 | $ | 3,879,651 | $ | 9,831,797 | |||||||||||||||
|
John P. Kennedy
|
100,000 | 3.57% | $ | 61.69 | 11/17/2014 | $ | 3,879,651 | $ | 9,831,797 | |||||||||||||||
| Options, SAR Holdings and Exercises: | The following table lists the number of shares acquired and the value realized as a result of option exercises during fiscal 2005 for the listed officers. It also includes the number and value of their exercisable and non-exercisable options and SARs as of September 30, 2005. |
| Number of | ||||||||||||||||
| Unexercised | Value of Unexercised | |||||||||||||||
| Number of | Options/SARs as | In-The-Money | ||||||||||||||
| Shares | of 9/30/05 | Options/SARs | ||||||||||||||
| Acquired on | Value | Exercisable/ | Exercisable/ | |||||||||||||
| Name | Exercise | Realized | Unexercisable | Unexercisable | ||||||||||||
|
John M. Barth
|
0 | $ | — | 525,000/ 975,000 | $ | 13,167,028/ $7,619,063 | ||||||||||
|
Stephen A. Roell
|
100,000 | $ | 3,081,810 | 135,000/ 259,000 | $ | 2,932,963/ $2,185,423 | ||||||||||
|
Keith E. Wandell
|
0 | $ | — | 149,000/ 282,000 | $ | 4,016,003/ $2,241,535 | ||||||||||
|
Giovanni Fiori
|
0 | $ | — | 343,000/ 268,000 | $ | 9,876,606/ $2,330,970 | ||||||||||
|
John P. Kennedy
|
0 | $ | — | 147,000/ 217,000 | $ | 3,899,434/ $1,571,548 | ||||||||||
37
Table of Contents
Long-Term Incentive Compensation:
The values in this table were calculated based on each
executive’s salary that will be effective January 1,
2006.
| Amount of | Performance | |||||||||||||||||||
| Contingent | Period Until | |||||||||||||||||||
| Performance | Maturation or | Threshold | Target | Maximum | ||||||||||||||||
| Name | Awards($) | Payout | ($) | ($) | ($) | |||||||||||||||
|
John M. Barth
|
1,872,000 | Fiscal Years 2005-2007 | 936,000 | 1,872,000 | 3,744,000 | |||||||||||||||
|
Stephen A. Roell
|
765,000 | Fiscal Years 2005-2007 | 383,000 | 765,000 | 1,530,000 | |||||||||||||||
|
Keith E. Wandell
|
723,000 | Fiscal Years 2005-2007 | 362,000 | 723,000 | 1,446,000 | |||||||||||||||
|
Giovanni Fiori
|
574,000 | Fiscal Years 2005-2007 | 287,000 | 574,000 | 1,148,000 | |||||||||||||||
|
John P. Kennedy
|
426,000 | Fiscal Years 2005-2007 | 213,000 | 426,000 | 852,000 | |||||||||||||||
| (1) | Actual values at the time of payout will be calculated using each executive’s base salary on the last day of the performance period, and therefore, the values in the table could increase or decrease. An executive may earn this award based upon the Company’s return on shareholders equity during the specified three-year period relative to the Standard & Poor’s 500 Index (less transportation, financials and utilities sectors) median return on shareholders’ equity over the same period. The maximum values in the table may not be increased higher than the maximum of $4 million under the LTPP. If the ALTIPP is approved by shareholders, then the awards set forth in the table will be terminated and replaced by awards granted under the ALTIPP in November 2005 for the same performance period. The awards under the ALTIPP will have the same target and estimated future payout amounts, and an executive will be able to earn the award based upon a combined measure of planned return on invested capital and earnings growth. |
| Retirement Plans: | The following table shows the maximum annual retirement benefits payable to participants under the Company’s plans, including amounts attributable to the Company’s Equalization Benefit Plan. Under the Johnson Controls Pension Plan (the “Plan”), participants become entitled to benefits after five years of service with the Company or any of its subsidiaries, and a participant’s normal retirement date on his or her 65th birthday. | |
| The Internal Revenue Code places maximum limitations on the amount of benefits that may be paid under the Plan. The Company has adopted an Equalization Benefit Plan under which certain executives are entitled to pension benefits that cannot be paid under the qualified Plan due to these limitations. |
38
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| Average Annual | ||||||||||||||||||||||||||
| Compensation in | ||||||||||||||||||||||||||
| Highest 5 | ||||||||||||||||||||||||||
| Consecutive Years | ||||||||||||||||||||||||||
| of Last 10 Years | ||||||||||||||||||||||||||
| Before Retirement | 15 Years | 20 Years | 25 Years | 30 Years | 35 Years | 40 Years | ||||||||||||||||||||
| 300,000 | 76,500 | 102,000 | 127,500 | 153,000 | 170,250 | 187,500 | ||||||||||||||||||||
| 600,000 | 153,000 | 204,000 | 255,000 | 306,000 | 340,500 | 375,000 | ||||||||||||||||||||
| 900,000 | 229,500 | 306,000 | 382,500 | 459,000 | 510,750 | 562,500 | ||||||||||||||||||||
| 1,200,000 | 306,000 | 408,000 | 510,000 | 612,000 | 681,000 | 750,000 | ||||||||||||||||||||
| 1,500,000 | 382,500 | 510,000 | 637,500 | 765,000 | 851,250 | 937,500 | ||||||||||||||||||||
| 1,800,000 | 459,000 | 612,000 | 765,000 | 918,000 | 1,021,500 | 1,125,000 | ||||||||||||||||||||
| 2,100,000 | 535,500 | 714,000 | 892,500 | 1,071,000 | 1,191,750 | 1,312,500 | ||||||||||||||||||||
| 2,400,000 | 612,000 | 816,000 | 1,020,000 | 1,224,000 | 1,362,000 | 1,500,000 | ||||||||||||||||||||
| 2,700,000 | 688,500 | 918,000 | 1,147,500 | 1,377,000 | 1,532,250 | 1,687,500 | ||||||||||||||||||||
| 3,000,000 | 765,000 | 1,020,000 | 1,275,000 | 1,530,000 | 1,702,500 | 1,875,000 | ||||||||||||||||||||
| 3,300,000 | 841,500 | 1,122,000 | 1,402,500 | 1,683,000 | 1,872,750 | 2,062,500 | ||||||||||||||||||||
| 3,600,000 | 918,000 | 1,224,000 | 1,530,000 | 1,836,000 | 2,043,000 | 2,250,000 | ||||||||||||||||||||
| 3,900,000 | 994,500 | 1,326,000 | 1,657,500 | 1,989,000 | 2,213,250 | 2,437,500 | ||||||||||||||||||||
| 4,200,000 | 1,071,000 | 1,428,000 | 1,785,000 | 2,142,000 | 2,383,500 | 2,625,000 | ||||||||||||||||||||
| 4,500,000 | 1,147,500 | 1,530,000 | 1,912,500 | 2,295,000 | 2,553,750 | 2,812,500 | ||||||||||||||||||||
| * | Assuming normal retirement age and years of service under provisions in effect on September 30, 2005, and assuming retirement on that date. |
| Years of Service: | As of September 30, 2005, the executive officers named in the Summary of Compensation Table were credited with the following years of service under the Plan: Mr. Barth, 35 years, Mr. Roell, 22 years, Mr. Wandell, 17 years, and Mr. Kennedy, 21 years. Mr. Fiori is not a participant in the Plan, however, he is party to a letter agreement with the Company under which he would receive certain retirement-related payments, based on the normal retirement date of his 65th birthday. | |
| Benefits Accrual: | Pension plans of the Company apply to certain salaried and non-union hourly employees of the Company, including officers of the Company. Under the Plan, benefits are accrued according to the following formula: 1.15% of participant’s average monthly compensation multiplied by the participant’s years of benefit service plus 0.55% of average monthly compensation in excess of the participant’s covered compensation multiplied by the participant’s years of benefit service. The amounts payable may be adjusted to reflect the participant’s decision on survivor benefits, early retirement or termination, and in some instances, age. | |
| Definitions: | “Average Monthly Compensation” is defined as the average monthly compensation, including salary and bonus, for the highest five consecutive years in the last 10 years. | |
| “Covered Compensation” means the average of compensation subject to Social Security taxes (including salary and bonus) for the 35-year period ending in the year the participant attains Social Security Retirement Age; i.e., the age at which the participant may be entitled to full Social Security payments. |
39
Table of Contents
40
Employment Agreements Generally:
We have employment agreements with each of the named executive
officers of the Company. These agreements provide that
employment shall continue unless terminated by either the
Company or the employee.
Termination:
The agreements provide for termination by the Company for cause,
for death or disability and, under certain circumstances,
without cause. If terminated without cause, the employee is
entitled to receive pay in an amount equal to or greater than
two times the Company’s termination allowance policy or an
amount equal to 52 weeks’ earnings of the employee. If
terminated for cause, the employee’s compensation is
terminated immediately.
Change of Control:
We also have change of control agreements with each of these
officers. In the event of a change of control, as defined in the
agreements, the agreements provide for (i) the
executive’s continued employment by the Company for a
minimum employment period of two years after the change of
control and (ii) a severance payment equal to three times
the executive’s annual compensation plus a lump sum payment
equal to lost benefits under retirement plans and continued
medical and welfare benefits for the remainder of the employment
period if the executive’s employment is terminated by the
Company, other than for cause, or terminated by the executive
for good reason during the employment period. The executive also
has the right, exercisable during a 30-day period following the
first anniversary of a change of control, to terminate his or
her employment with the Company for any reason and still receive
the severance payments and benefits. Additionally, the executive
is entitled to the severance payments and benefits in connection
with certain terminations of his or her employment that occur in
anticipation of a change of control. Each agreement also
provides that if the payments under the agreements exceed
amounts established under the Internal Revenue Code, which
result in payment of additional federal taxes, the executive
will receive the amount necessary to offset the taxes that the
Internal Revenue Service imposes and any additional taxes on
this payment.
The EICP, LTPP, 2000 Stock Option Plan, 2001 Restricted Stock
Plan, all as amended, the Deferred Compensation Plan for Certain
Directors and the proposed ALTIPP provide that, in the event of
a change of control of our Company, participants, including the
named executives, shall be entitled to receive early payment of
deferred amounts and immediate payout of current amounts
attributable to participants.
Executive Survivor Benefits Program:
The Company has in effect an Executive Survivor Benefits Plan
for certain executives. Coverage under this plan is in lieu of
the Company’s regular group life insurance coverage. If a
participating executive dies while he or she is employed by the
Company, his or her beneficiary is entitled to payments of
between 90% and 100% (depending on the executive’s age) of
the executive’s final base annual salary for a period of
10 years.
Table of Contents
Directors and Officers:
The following table lists our Common stock ownership as of
October 31, 2005 for the persons or groups specified.
Ownership includes direct and indirect (beneficial) ownership as
defined by the Securities and Exchange Commission rules. To our
knowledge, each person, along with his or her spouse, has sole
voting and investment power over the shares unless otherwise
noted. None of these persons beneficially owns more than 1% of
the outstanding Common stock.
| Shares of | Options | |||||||||||
| Common Stock | Exercisable | Units Representing | ||||||||||
| Beneficially | within | Deferred | ||||||||||
| Name of Beneficial Owner | Owned(1) | 60 Days(2) | Compensation(3) | |||||||||
|
John M. Barth
|
251,625 | 900,000 | 222,242 Units | |||||||||
|
Stephen A. Roell
|
187,464 | 242,000 | 49,123 Units | |||||||||
|
Keith E. Wandell
|
70,578 | 261,000 | 23,496 Units | |||||||||
|
Giovanni Fiori
|
62,100 | 457,000 | 35,084 Units | |||||||||
|
John P. Kennedy
|
9,202 | 224,000 | 104,445 Units | |||||||||
|
Dennis W. Archer
|
800 | 5,675 Units | ||||||||||
|
Robert L. Barnett
|
2,944 | 64,301 Units | ||||||||||
|
Natalie A. Black
|
1,764 | 11,265 Units | ||||||||||
|
Paul A. Brunner
|
30,967 | 16,977 Units | ||||||||||
|
Eugenio Clariond Reyes-Retana
|
1,125 | 203 Units | ||||||||||
|
Robert A. Cornog
|
9,709 | 31,479 Units | ||||||||||
|
Willie D. Davis
|
11,767 | 16,751 Units | ||||||||||
|
Jeffrey A. Joerres
|
1,584 | 10,775 Units | ||||||||||
|
William H. Lacy
|
15,307 | 18,152 Units | ||||||||||
|
Southwood J. Morcott
|
8,073 | 24,863 Units | ||||||||||
|
Richard F. Teerlink
|
11,879 | 11,778 Units | ||||||||||
|
All Directors and Executive
Officers as a group [not including deferred shares referred to
in footnote(3)]
|
935,043 | 2,700,695 | ||||||||||
|
TOTAL PERCENT OF CLASS OF COMMON
STOCK EQUIVALENTS
|
0.48 | % | 1.4 | % | ||||||||
| (1) | Includes all shares for each officer or director that directly has or shares the power to vote or direct the vote of such shares, or to dispose of or direct disposition of such shares. |
| (2) | Reflects Common stock equivalents of stock options exercisable within 60 days that are owned by these officers. |
| (3) | Reflects Common stock equivalents under the deferred and equity based compensation plans that are owned by these officers and directors. Units will not be distributed in the form of Common stock. |
| Schedule 13G Filings: | The Company believes that there are no beneficial owners of more than 5% of the Company’s Common stock. The Company’s conclusion is based upon the absence of reports on Schedules 13G filed with the Securities and Exchange Commission and upon other information believed to be reliable. |
41
Table of Contents
| (a) | (b) | (c) | |||||||||||
| Number of | |||||||||||||
| Securities | |||||||||||||
| Weighted | Remaining Available | ||||||||||||
| Average | for Future Issuance | ||||||||||||
| Number of Securities | Exercise Price of | Under Equity | |||||||||||
| to be Issued upon | Outstanding | Compensation | |||||||||||
| Exercise of | Options, | Plans (Excluding | |||||||||||
| Outstanding Options, | Warrants and | Securities Reflects | |||||||||||
| Plan Category | Warrants and Rights | Rights | in Column (a)) | ||||||||||
|
Approved by
Shareholders
|
|||||||||||||
|
Stock Option Plan
|
10,524,494 | $ | 45.62 | 7,293,262 | |||||||||
|
Restricted Stock Plan
|
934,000 | ||||||||||||
|
Directors’ Stock Plan
|
71,049 | ||||||||||||
|
Approved by
Shareholders — Total
|
8,298,311 | ||||||||||||
|
Not Approved by Shareholders
|
0 | ||||||||||||
|
TOTAL
|
8,298,311 | ||||||||||||
| Election of Directors: | To be elected, directors must receive a plurality of the shares present and voting in person or by proxy, provided a quorum exists. A quorum is present if at least a majority of the outstanding shares on the record date are present in person or by proxy. Plurality means that the number of directors who receive the largest number of votes cast are elected as directors, up to the maximum number of directors to be chosen at the meeting. Consequently, any shares not voted (whether by abstention, broker non-vote or otherwise) have no impact in the election of directors except to the extent the failure to vote for an individual results in another individual receiving a larger number of votes. | |
| Other Proposals: | To be approved, the proposal to ratify the election of PricewaterhouseCoopers LLP as our independent auditors for 2006 must receive more votes “FOR” such proposal than “AGAINST.” For purposes of determining the vote with respect to this proposal, any shares not voted (whether by abstention, broker non-vote or otherwise) will have no impact. | |
| An affirmative vote of the majority of votes cast by the shareholders is required to approve and to ratify the proposed Johnson Controls, Inc. Annual and Long-Term Incentive Performance Plan. |
42
Table of Contents
43
The enclosed proxies will be voted in accordance with the
instructions you place on the proxy card. Unless otherwise
stated, all shares represented by your returned, signed proxy
will be voted as the Board recommends for each proposal as noted
in the Notice of this proxy statement. Proxies may be revoked as
indicated in the corresponding “Questions and Answers”
section.
Section 16(a):
Based on a review of reports filed by our directors, executive
officers and of beneficial holders of 5% or more of our shares,
and upon representations from those persons, all reports
required to be filed during 2005 with the Securities and
Exchange Commission under Section 16(a) of the Securities
Exchange Act of 1934 were timely made.
By order of the Board of Directors.
Jerome D. Okarma
Vice President, Secretary
and General Counsel
December 12, 2005
Table of Contents
A-1
(a)
“Administrator” means, with respect to executive
officers of the Company, the Committee, and with respect to all
other key employees, the Chief Executive Officer of the Company.
(b)
“Affiliate” has the meaning ascribed to such term in
Rule 12b-2 promulgated under the Exchange Act, or any
successor rule or regulation thereto.
(c)
“Annual Performance Award” means a Performance Award
with a Performance Period of no more than one fiscal year of the
Company or an Affiliate, as applicable.
(d)
“Base Salary” of a Participant means the annual rate
of base pay in effect for such Participant as of the last day of
the Performance Period (or such other date as the Administrator
may specify by action taken at the time of grant of a
Performance Award).
(e)
“Board” means the Board of Directors of the Company.
(f)
“Beneficiary” means the person or persons entitled to
receive any amounts due to a Participant in the event of the
Participant’s death as provided in Article 8.
(g)
“Cause” means: (1) if the Participant is subject
to an employment agreement that contains a definition of
“cause”, such definition, or
Table of Contents
A-2
(2) otherwise, any of the following as determined by the
Administrator: (A) violation of the provisions of any
employment agreement, non-competition agreement, confidentiality
agreement, or similar agreement with the Company or an
Affiliate, or the Company’s or an Affiliate’s code of
ethics, as then in effect, (B) conduct rising to the level
of gross negligence or willful misconduct in the course of
employment with the Company or an Affiliate, (C) commission
of an act of dishonesty or disloyalty involving the Company or
an Affiliate, (D) violation of any federal, state or local
law in connection with the Participant’s employment, or
(E) breach of any fiduciary duty to the Company or an
Affiliate.
(h)
“Code” means the Internal Revenue Code of 1986, as
amended. Any reference to a particular provision of the Code
shall be deemed to include any successor provision thereto.
(i)
“Company” means Johnson Controls, Inc., a Wisconsin
corporation, and any successor thereto as provided in
Article 14.
(j)
“Committee” means the Compensation Committee of the
Board, which shall consist of not less than two (2) members
of the Board each of whom is a “non-employee director”
as defined in Securities and Exchange Commission
Rule 16b-3(b)(3), or as such term may be defined in any
successor regulation under Section 16 of the Securities
Exchange Act of 1934, as amended. In addition, each member of
the Committee shall be an outside director within the meaning of
Code Section 162(m).
(k)
“Exchange Act” means the Securities Exchange Act of
1934, as amended. Any reference to a particular provision of the
Exchange Act shall be deemed to include any successor provision
thereto.
(l)
“Excluded Items” means any gains or losses from the
sale of assets outside the ordinary course of business, any
gains or losses from discontinued operations, any extraordinary
gains or losses, the effects of accounting changes, any unusual,
nonrecurring, transition, one-time or similar items or charges,
the diluted impact of goodwill on acquisitions, and any other
items that the Administrator determines; provided that,
for Performance Awards intended to qualify as performance-based
compensation under Code Section 162(m), the Administrator
shall specify the Excluded Items in writing at the time the
Performance Award is made.
(m)
“Inimical Conduct” means any act or omission that is
inimical to the best interests of the Company or any Affiliate,
as determined by the Administrator in its sole discretion,
including but not limited to: (1) violation of any
employment, noncompete, confidentiality or other agreement in
effect with the Company or any Affiliate, (2) taking any
steps or doing anything which would damage or negatively reflect
on the reputation of the Company or an Affiliate, or
(3) failure to comply with applicable laws relating to
trade secrets, confidential information or unfair competition.
(n)
“Long Term Performance Award” means a Performance
Award with a Performance Period of more than one fiscal year of
the Company or an Affiliate, as applicable.
(o)
“Participant” means a key employee of the Company or
an Affiliate who has been approved for participation in the Plan.
(p)
“Performance Award” means an opportunity granted to a
Participant to receive a payment of cash based in whole or part
on the extent to which
Table of Contents
A-3
one or more Performance Goals for one or more Performance
Measures are achieved for the Performance Period, subject to the
conditions described in the Plan and that the Administrator
otherwise imposes.
(q)
“Performance Measures” means the following categories
(in all cases after taking into account any Excluded Items, as
applicable), including in each case any measure based on such
category:
(1)
Basic earnings per common share for the Company on a
consolidated basis.
(2)
Diluted earnings per common share for the Company on a
consolidated basis.
(3)
Total shareholder return.
(4)
Net sales.
(5)
Cost of sales.
(6)
Gross profit.
(7)
Selling, general and administrative expenses.
(8)
Operating income.
(9)
Income before interest and/or the provision for income taxes.
(10)
Net income.
(11)
Accounts receivables.
(12)
Inventories.
(13)
Return on equity.
(14)
Return on assets.
(15)
Return on capital.
(16)
Economic value added, or other measure of profitability that
considers the cost of capital employed.
(17)
Net cash provided by operating activities.
(18)
Net increase (decrease) in cash and cash equivalents.
(19)
Customer satisfaction.
(20)
Market share.
(21)
Product quality.
Table of Contents
A-4
(r)
“Performance Goal” means the level(s) of performance
for a Performance Measure that must be attained in order for a
payment to be made under an award, and/or for the amount of
payment to be determined based on the Performance Scale.
(s)
“Performance Period” means:
(1)
for an Annual Performance Award, a period of one fiscal year or
less of the Company or an Affiliate as selected by the
Administrator, and
(2)
for a Long-Term Performance Award, a period of more than one
fiscal year of the Company or an Affiliate as selected by the
Administrator.
(t)
“Performance Scale” means, with respect to a
Performance Measure, a scale from which the level of achievement
may be calculated for any given level of actual performance for
such Performance Measure. The Performance Scale may be a linear
function, a step function, a combination of the two, or any
other manner of measurement as determined by the Administrator.
(u)
“Plan” means the arrangement described herein, as from
time amended and in effect.
(v)
“Retirement” means termination of employment from the
Company and its Affiliates (without Cause) on or after
attainment of age 55 with at least ten years of vesting
service or age 65 with at least five years of vesting
service (such vesting service to be determined within the
meaning of the Johnson Controls Pension Plan or such other plan
or methodology prescribed by the Administrator).
(w)
“Total and Permanent Disability” means the
Participant’s inability to perform the material duties of
his or her occupation as a result of a medically-determinable
physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a
period of at least 12 months, as determined by the
Administrator. The Participant will be required to submit such
medical evidence or to undergo a medical examination by a doctor
selected by the Administrator as the Administrator determines is
necessary in order to make a determination hereunder.
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A-5
(a)
Notwithstanding Section 3.1, for a key employee who is
hired or promoted into a position that is eligible for a
Performance Award, the Administrator may (1) select such
key employee as a Participant at any time during the course of a
Performance Period, (2) take action as a result of which
there is an additional Performance Award made to a key employee
who, as to a Performance Period that is in progress, is already
a Participant and as to whom a Performance Award is already in
effect where the additional Performance Award relates to the
same Performance Period, or (3) change the Performance
Goals, Performance Measures, Performance Scale or potential
award amount under a Performance Award that is already in
effect. In such event, the Administrator may, but is not
required to, prorate the amount that would otherwise be payable
under such Performance Award if the Participant had been
employed during the entire Performance Period to reflect the
period of actual employment during the Performance Period.
(b)
If a Participant is demoted during a Performance Period, the
Administrator may decrease the potential award amount of any
Performance Award, or revise the Performance Goals, Performance
Measures or Performance Scale, as determined by the
Administrator to reflect the demotion, or may withdraw its
approval for participation in accordance with Section 3.2.
(c)
If a Participant is transferred from employment by the Company
to the employment of an Affiliate, or vice versa, the
Administrator may revise the Participant’s Performance
Award to reflect the transfer, including but not limited to,
changing the potential award amount, Performance Measures,
Performance Goals and Performance Scale.
(a)
Except as otherwise provided under the terms of an employment or
severance agreement between a Participant and the Company, no
Participant shall earn an incentive award for a Performance
Period unless the Participant is employed by the Company or an
Affiliate (or is on an approved leave of absence) on the last
day of such Performance Period, unless employment was terminated
during the year as a result of Retirement, Total and Permanent
Disability or death at a time when the Participant could not
have been terminated for Cause, or unless payment is approved by
the Administrator after considering the cause of termination.
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(b)
If a Participant’s employment is terminated as a result of
death, Total and Permanent Disability or Retirement, at a time
when the Participant could not have been terminated for Cause,
then unless otherwise determined by the Administrator, the
Participant (or the Participant’s Beneficiary or estate in
the event of his or her death) shall be entitled to receive an
amount equal to the product of (x) the award amount
calculated under Section 5.1 and (y) a fraction, the
numerator of which is the number of the Participant’s whole
calendar months of employment during the Performance Period for
such award and the denominator of which is the number of
calendar months in the Performance Period for such award.
Payment shall be made in accordance with Section 5.2,
subject to Section 5.3.
(a)
As soon as practicable following the close of a Performance
Period, the Administrator shall determine and certify whether
and to what extent the Performance Goals and other material
terms of the Performance Award issued for such period were
satisfied, and shall determine whether any discretionary
adjustments under Subsection (b) shall be made. Based
on such certification, the Administrator (or its delegee) shall
determine the award amount payable to a Participant under the
Performance Award for that Performance Period, provided
that the maximum award amount for any Participant shall be:
(1)
with respect to any and all Annual Performance Awards of such
Participant with Performance Periods covering (or ending within)
the same fiscal year of the Company, six million dollars
($6,000,000); and
(2)
with respect to any and all Long-Term Performance Awards of such
Participant with Performance Periods ending on the last day of,
or at any time within, the same fiscal year of the Company, six
million dollars ($6,000,000).
(b)
The Administrator may adjust each Participant’s potential
award amount under any Annual Performance Award, based upon
overall individual performance and attainment of goals, as
follows:
(1)
With respect to Participants who are subject to Code
Section 162(m), by as much as minus twenty percent
(-20%); and
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(2)
With respect to all other Participants, based upon the
recommendation of the Participant’s supervisor and approval
by the Chief Executive Officer of the Company, up to a maximum
of plus twenty percent (+20%) or down to a maximum of minus
twenty percent (-20%).
(a)
The acquisition, other than from the Company, by any individual,
entity or group of beneficial ownership (within the meaning of
Rule l3d-3 promulgated under the Exchange Act), including in
connection with a merger, consolidation or reorganization, of
more than either:
(1)
Fifty percent (50%) of the then outstanding shares of common
stock of the Company (the “Outstanding Company Common
Stock”) or
(2)
Thirty-five (35%) of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Company Voting
Securities”),
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(b)
Individuals who, as of October 1, 2005, constitute the
Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board during any 12-month
period, provided that any individual becoming a director
subsequent to October 1, 2005, whose election or nomination
for election by the Company’s shareholders was approved by
a vote of at least a majority of the directors then comprising
the Incumbent Board, shall be considered as though such
individual were a member of the Incumbent Board; or
(c)
A complete liquidation or dissolution of the Company or sale or
other disposition of all or substantially all of the assets of
the Company other than to a corporation with respect to which,
following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors is then owned beneficially, directly or indirectly, by
all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately
prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Company Common
Stock and Company Voting Securities, as the case may be,
immediately prior to such sale or disposition. For purposes
hereof, “a sale or other disposition of all or
substantially all of the assets of the Company” will not be
deemed to have occurred if the sale involves assets having a
total gross fair market value of less than forty percent (40%)
of the total gross fair market value of all assets of the
Company immediately prior to the acquisition. For this purpose,
“gross fair market value” means the value of the
assets without regard to any liabilities associated with such
assets.
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(a)
Give any employee or Participant any right to receive any award
other than in the sole discretion of the Administrator;
(b)
Limit in any way the right of the Company or an Affiliate to
terminate a Participant’s employment at any time; or
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(c)
Be evidence of any agreement or understanding, express or
implied, that a Participant will be retained in any particular
position or at any particular rate of remuneration.
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(a)
The Committee may terminate the Plan within twelve
(12) months of a corporate dissolution taxed under Code
Section 331, or with the approval of a bankruptcy court
pursuant to 11 U.S.C. §503(b)(1)(A), provided
that the amounts accrued under the Plan are distributed to
the Participants or Beneficiaries, as applicable, in a single
sum payment in the later of: (A) the calendar year in which
the Plan termination occurs or (B) the first calendar year
in which payment is administratively practicable.
(b)
The Committee may terminate the Plan upon or within twelve
(12) months following a Change of Control, provided
that all substantially similar arrangements (within the
meaning of Code Section 409A) sponsored by the Company are
terminated.
(c)
The Committee may terminate the Plan at any other time. In such
event, all amounts accrued to the date of termination will be
distributed to all Participants or Beneficiaries, as applicable,
in a single sum payment as soon as practicable after the date of
termination (but not more than twenty-four (24) months
after the date of termination), regardless of any distribution
election then in effect. This provision shall not be effective
unless all other plans required to be aggregated with this Plan
under Code Section 409A are also terminated.
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(a)
Application. Notwithstanding any employee agreement in
effect between a Participant and the Company or any Affiliate
employer, if a Participant or Beneficiary (the
“claimant”) brings a claim that relates to benefits
under this Plan, regardless of the basis of the claim (including
but not limited to, actions under Title VII, wrongful
discharge, breach of employment agreement, etc.), such claim
shall be settled by final binding arbitration in accordance with
the rules of the American Arbitration Association
(“AAA”) and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof.
(b)
Initiation of Action. Arbitration must be initiated by
serving or mailing a written notice of the complaint to the
other party. Normally, such written notice should be provided
the other party within one year (365 days) after the day
the complaining party first knew or should have known of the
events giving rise to the complaint. However, this time frame
may be extended if the applicable statute of limitation provides
for a longer period of time. If the complaint is not properly
submitted within the appropriate time frame, all rights and
claims that the complaining party has or may have against the
other party shall be waived and void. Any notice sent to the
Company shall be delivered to:
Office of General Counsel
Johnson Controls, Inc.
5757 North Green Bay Avenue
P.O. Box 591
Milwaukee, WI 53201-0591
(c)
Compliance with Personnel Policies. Before proceeding to
arbitration on a complaint, the claimant must initiate and
participate in any complaint resolution procedure identified in
the Company’s or Affiliate’s personnel policies. If
the claimant has not initiated the complaint resolution procedure
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before initiating arbitration on a complaint, the initiation of
the arbitration shall be deemed to begin the complaint
resolution procedure. No arbitration hearing shall be held on a
complaint until any applicable Company or Affiliate complaint
resolution procedure has been completed.
(d)
Rules of Arbitration. All arbitration will be conducted
by a single arbitrator according to the Employment Dispute
Arbitration Rules of the AAA. The arbitrator will have authority
to award any remedy or relief that a court of competent
jurisdiction could order or grant including, without limitation,
specific performance of any obligation created under policy, the
awarding of punitive damages, the issuance of any injunction,
costs and attorney’s fees to the extent permitted by law,
or the imposition of sanctions for abuse of the arbitration
process. The arbitrator’s award must be rendered in a
writing that sets forth the essential findings and conclusions
on which the arbitrator’s award is based.
(e)
Representation and Costs. Each party may be represented
in the arbitration by an attorney or other representative
selected by the party. The Company or Affiliate shall be
responsible for its own costs, the AAA filing fee and all other
fees, costs and expenses of the arbitrator and AAA for
administering the arbitration. The claimant shall be responsible
for his attorney’s or representative’s fees, if any.
However, if any party prevails on a statutory claim which allows
the prevailing party costs and/or attorneys’ fees, the
arbitrator may award costs and reasonable attorneys’ fees
as provided by such statute.
(f)
Discovery; Location; Rules of Evidence. Discovery will be
allowed to the same extent afforded under the Federal Rules of
Civil Procedure. Arbitration will be held at a location selected
by the Company. AAA rules notwithstanding, the admissibility of
evidence offered at the arbitration shall be determined by the
arbitrator who shall be the judge of its materiality and
relevance. Legal rules of evidence will not be controlling, and
the standard for admissibility of evidence will generally be
whether it is the type of information that responsible people
rely upon in making important decisions.
(g)
Confidentiality. The existence, content or results of any
arbitration may not be disclosed by a party or arbitrator
without the prior written consent of both parties. Witnesses who
are not a party to the arbitration shall be excluded from the
hearing except to testify.
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2006 Annual Meeting — January 25, 2006
|
 |
| FOR ALL | WITHHOLD FROM ALL | |||||
1.
|
Election of Directors 01 Dennis W. Archer |
o | o | |||
| 02 John M. Barth | ||||||
| 03 Paul A. Brunner | ||||||
| 04 Southwood J. Morcott |
| FOR | AGAINST | ABSTAIN | ||||||
2.
|
Ratification of PriceWaterhouseCoopers as independent auditors for 2006. |
o | o | o |
| FOR | AGAINST | ABSTAIN | ||||||
3.
|
Approval of the Johnson Controls, Inc. Annual and Long-Term Incentive |
o | o | o | ||||
| Performance Plan (ALTIPP). |
Dated: |
||
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