DEF 14A
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ddef14a.txt
DEFINITIVE PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
[Amendment No ]
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[_] Soliciting Material under (S)240.14a-12
United Technologies Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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United Technologies Corporation
One Financial Plaza
Hartford, CT 06103
[LOGO] United Technologies
February 22, 2002
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
Dear Fellow Shareowner:
You are cordially invited to attend the 2002 Annual Meeting of Shareowners of
United Technologies Corporation to be held on April 10, 2002 in the Celeste
Bartos Forum of The New York Public Library, Fifth Avenue & 42/nd Street, New
York, New York. The doors will open at 1:30 p.m. and the meeting will begin at
2:00 p.m. The meeting will address the following matters: /
1. Election of ten directors.
2. Appointment of independent accountants.
3. Shareowner proposals described in the accompanying Proxy Statement.
4. Other business if properly raised.
You may attend and vote at the meeting if you were an owner of record of the
Corporation's Common Stock or Series A ESOP Convertible Preferred Stock at the
close of business on February 12, 2002, the record date for the meeting. You
may also attend and vote at the meeting if you are the authorized
representative by proxy of a shareowner of record on that date.
Since seating is limited, we ask that you request a ticket in advance to
attend. Please refer to page 2 of the attached Proxy Statement for further
information concerning tickets.
YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT A PROXY OR VOTING INSTRUCTIONS AS
SOON AS POSSIBLE. Most shareowners have a choice of voting over the Internet,
by telephone or by using a traditional proxy card. Please refer to your proxy
materials or the information forwarded by your bank, broker or other holder of
record to see which voting methods are available to you.
George David
Chairman and Chief Executive Officer
PROXY STATEMENT
TABLE OF CONTENTS
Page
----
Questions and Answers............................................ 1
Summary of Business Matters to be Voted on....................... 3
General Information Concerning the Board of Directors............ 4
Nominees........................................................ 4
Committees...................................................... 7
Compensation of Directors....................................... 7
Security Ownership of Directors and Executive Officers........... 8
Report of the Audit Committee.................................... 9
Report of the Committee on Compensation and Executive Development 9
Compensation of Named Executive Officers......................... 11
Summary Compensation Table...................................... 11
Option Grants in Last Fiscal Year............................... 12
Aggregated Option/SAR Exercises and Values...................... 12
Performance Graph................................................ 13
Section 16(a) Beneficial Ownership Reporting Compliance.......... 13
Certain Business Relationships................................... 13
Employment Contracts............................................. 13
Pension Plan Table............................................... 14
Shareowner Proposals............................................. 14
Appendix: Audit Committee Charter................................ 18
UNITED TECHNOLOGIES CORPORATION
PROXY STATEMENT
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual
Meeting, please submit a proxy or voting instructions as soon as possible so
that your shares can be voted at the meeting in accordance with your
instructions. The Board of Directors is soliciting proxies for the 2002 Annual
Meeting of Shareowners of United Technologies Corporation to be held on April
10, 2002. This Proxy Statement is first being made available to shareowners on
or about February 22, 2002.
QUESTIONS AND ANSWERS
How does the Board of Directors recommend I vote on the matters to be
addressed? The Board recommends a vote FOR each of its nominees for election as
directors, FOR the appointment of PricewaterhouseCoopers LLP as independent
accountants, and AGAINST each of the shareowner proposals described on pages 14
through 17.
Who is entitled to vote? Owners of Common Stock or Series A ESOP Convertible
Preferred Stock of the Corporation at the close of business on February 12,
2002 and their authorized proxies are entitled to vote. This includes shares
you held on that date (1) directly in your name as the shareowner of record and
(2) through a broker, bank or other holder of record (including any shares held
through a UTC employee savings plan), where the shares were held for you as the
beneficial owner. A list of shareowners of record entitled to vote will be
available at the offices of the Corporation at One Financial Plaza, Hartford,
CT 06103 for 10 days prior to the meeting and at the meeting location during
the meeting.
How do I vote? We send proxy cards and offer electronic voting to all
shareowners of record to enable them to direct the voting of their shares.
Those shareowners of record who previously have elected to receive electronic
access to their proxy materials (rather than receiving mailed copies) and many
active employees who participate in the UTC employee savings plan will receive
e-mail notification as to how to submit their voting instructions. Brokers,
banks and nominees generally solicit voting instructions from the beneficial
owners of shares held by them and typically offer telephonic or electronic
means by which such instructions can be given, in addition to the traditional
mailed voting instruction cards.
How do I vote by telephone or via the Internet? Shareowners of record and
participants in a UTC employee savings plan in the United States or Canada may
submit voting instructions by telephone by dialing 1-877-PRX-VOTE or
1-877-779-8683, entering the voter control number found on their proxy card (or
in the e-mail message they receive with voting instructions) and following the
voice prompts. Shareowners of record and savings plan participants may also
submit voting instructions via the Internet by accessing the following website:
www.eproxyvote.com/utx, entering the voter control number on their proxy card
(or in the e-mail message they receive with voting instructions) and marking
the appropriate boxes to enter voting instructions. Please note that
shareowners who wish to exercise cumulative voting rights must do so by
submitting a written proxy or voting instructions.
Beneficial owners of shares held through a broker, bank or other nominee may
submit voting instructions by telephone or via the Internet if the firm holding
your shares offers these voting methods. Please refer to the voting
instructions provided by your bank, broker or nominee for information.
How will my proxy vote my shares? The designated proxy holders will vote
according to the instructions you submit on your proxy card, by telephone or
via the Internet. If you sign and return your card but do not indicate your
voting instructions on one or more of the matters listed, the proxy holders
will vote all uninstructed shares for each of the Corporation's nominees for
election as a director, for the appointment of PricewaterhouseCoopers LLP as
independent accountants, and against the other proposals.
How many shares can vote? As of the record date, 472,790,921 shares of Common
Stock and 11,228,141 shares of Series A ESOP Convertible Preferred Stock were
issued and outstanding. Owners of Common Stock are entitled to one vote for
each share held and owners of Series A ESOP Convertible Preferred Stock are
entitled to 5.2 votes for each share held. There are, therefore, a total of
531,177,254 votes entitled to be cast at the meeting. A quorum requires the
presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the votes entitled to be cast at the meeting.
How many votes are needed for matters to be adopted at the meeting? The ten
director nominees receiving the highest number of votes will be elected. Other
matters will be approved if they receive the affirmative vote of a majority of
the votes constituting the quorum at the Annual Meeting. If a shareowner
abstains from voting on a particular matter, or if a broker is not allowed
under stock exchange rules to vote shares for which a client has not given
voting instructions, the effect will be the same as a vote against the matter.
Is cumulative voting permitted? Yes. Each owner of Common Stock is entitled to
a number of votes equal to the number of shares of Common Stock owned
multiplied by the number of directors to be elected. Each owner of Series A
ESOP Convertible Preferred Stock is entitled to a number of votes equal to 5.2
times the number of shares of Series A ESOP Convertible Preferred Stock owned
multiplied by the number of directors to be elected. This number of votes may
be cast for a single nominee or distributed among any two or more nominees, in
the discretion of the shareowner. Cumulative voting rights can be exercised
only by submission of a written proxy or voting instruction. If no instruction
is given, the votes will be distributed by the proxy holders equally among the
nominees.
Who can attend the Annual Meeting and how do I get a ticket? All shareowners of
record on February 12, 2002 and their authorized proxies may attend. Since
seating is limited, we ask that you request a ticket in advance to attend. If
your shares are registered directly in your name on the records of the stock
transfer agent (EquiServe Trust Company, N.A. ("EquiServe")), or if you are a
UTC savings plan participant, you can request a ticket by mailing in the
Reservation Card you received with your mailed proxy materials. If you received
electronic access to your proxy materials, you can request a ticket by sending
an e-mail request to the Corporate Secretary at corpsec@corphq.utc.com. If you
forget to bring your ticket, you will be admitted to the meeting only if you
are a shareowner of record or savings plan participant as of February 12, 2002
and bring proof of identification. If you are the beneficial owner of shares
held through a broker, bank or nominee, and you would like to attend, you may
request a ticket by writing to the Corporate Secretary and include a copy of
your brokerage account statement or a legal proxy from your broker or bank, in
each case showing your ownership of shares as of the record date.
Who will count the vote? Is my vote confidential? Representatives of EquiServe
will receive and tabulate proxies, act as Inspectors of Election, supervise the
voting and decide the validity of proxies. EquiServe has been instructed that
the vote of any shareowner will be kept secret and will not be disclosed
(except in the event of legal proceedings or, in the event of a contested proxy
solicitation, to permit the solicitation of the votes of undecided shareowners).
Can I revoke my proxy? Yes. You may revoke your proxy before it is voted by
sending written notice to the Corporate Secretary that you are revoking your
proxy; by following the procedures given for revoking your proxy when voting by
telephone or via the Internet; by submitting a new proxy with a later date; or
by voting in person at the meeting.
How are shares held by the UTC employee savings plans voted? Participants in
the UTC Common Stock Fund or in the UTC Employee Stock Ownership Plan may
direct the voting of shares by Bankers Trust Company, the savings plan trustee,
by returning a proxy card or by voting by telephone or via the Internet. If you
do not provide voting instructions or if your instructions are incomplete or
unclear, the trustee will vote your shares with the plurality of shares for
which voting instructions have been received. The trustee will also vote
unallocated UTC stock in the ESOP Fund with the plurality of instructed shares.
Can I vote in person at the Annual Meeting? Persons who submit a proxy or
voting instructions need not vote at the Annual Meeting. However, we will pass
out written ballots to any shareowner of record or authorized representative of
a shareowner of record who wants to vote in person at the Annual Meeting rather
than by proxy. Voting in person will revoke any proxy previously given. If you
hold your shares through a broker, bank or nominee, you must obtain a legal
proxy from your broker, bank or nominee to vote in person.
How will voting on any other business be conducted? Although we do not know of
any business to be conducted at the meeting other than the matters described in
the Proxy Statement, the voting instructions you submit give authority to the
proxy holders to vote on other matters, if they arise, in accordance with their
best judgment.
When are shareowner proposals for the 2003 Annual Meeting due? Any shareowner
who wishes to have a shareowner proposal included in the Corporation's proxy
statement for the 2003 Annual Meeting must submit the proposal in writing to
the Corporate Secretary for receipt by October 25, 2002. A shareowner who
wishes to
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introduce a proposal to be voted on at the Corporation's 2003 Annual Meeting
must send advance written notice to the Corporate Secretary for receipt no
earlier than December 11, 2002 and no later than January 10, 2003, and must
provide the information specified by the Bylaws.
How are proxies solicited and how much did this proxy solicitation cost?
Georgeson & Company Inc. will assist in the distribution of proxy materials and
the solicitation of proxies for a fee estimated at $15,500, plus out-of-pocket
expenses. Proxies will be solicited on behalf of the Board of Directors by
mail, by e-mail, in person and by telephone. The Corporation will bear the cost
of soliciting proxies and reimburse brokers and other nominees for reasonable
out-of-pocket expenses for forwarding proxy materials to beneficial shareowners.
How can I obtain electronic access to the proxy materials, instead of receiving
mailed copies? Shareowners of record who contact EquiServe at
www.econsent.com/utx prior to the record date for future annual meetings can
sign up to receive electronic access to the materials rather than receiving
mailed copies. Many employees who participate in the UTC employee savings plan
will also be provided electronic access to these materials, rather than
receiving mailed copies. Shareowners who use this convenient and
environmentally-friendly method will receive e-mail notification when the
Annual Report, Proxy Statement and Proxy are available, with instructions and
electronic links to access the documents on a UTC website (in PDF and HTML
formats) and to vote their shares via the Internet. Your enrollment for
electronic access will remain in effect for subsequent years, unless you cancel
it prior to the record date for the annual meeting. Beneficial shareowners may
also be able to request electronic access to their proxy materials by
contacting their broker or other nominee, or by contacting ADP ICS at
www.utc.com/beneficial.
How can I reduce the number of copies of proxy materials delivered to my
household? Securities and Exchange Commission ("SEC") rules allow delivery of a
single annual report and proxy statement to households at which two or more
shareowners reside. Accordingly, beneficial shareowners sharing an address who
have been previously notified by their broker or its intermediary will receive
only one copy of the Annual Report and Proxy Statement, unless the beneficial
shareowner has provided contrary instructions. Individual proxy cards or voting
instruction forms (or electronic voting facilities) will, however, continue to
be provided for each beneficial shareowner account. We will also accommodate
requests for delivery of single copies from shareowners of record receiving
multiple copies.
Who are the largest shareowners? As of December 31, 2001, based on filings
with the SEC, the Corporation was not aware that there were any beneficial
owners holding more than five percent of the outstanding shares. While Bankers
Trust Company holds all of the shares of Series A ESOP Convertible Preferred
Stock as trustee for employees who participate in the Corporation's Employee
Stock Ownership Plan, Bankers Trust Company disclaims beneficial ownership of
those shares.
SUMMARY OF BUSINESS MATTERS TO BE VOTED ON
Item 1. Election of Directors. The Board of Directors is elected annually by
the shareowners at the Annual Meeting. The Board has selected ten nominees
based upon the recommendation of its Nominating Committee, which evaluates
candidates based upon their ability, integrity, experience in international
business and awareness of the appropriate role of the corporation in society.
Each nominee is currently serving as a director of the Corporation and was
elected a director at the 2001 Annual Meeting, with the exception of H. Patrick
Swygert who was named to the Board on July 26, 2001. If any of the nominees
becomes unavailable prior to the Annual Meeting to serve as a director, the
proxy holders will, in their discretion, vote the shares for which they serve
as proxy for another person nominated by the Board, unless the Board reduces
the number of directors to be elected.
Karl J. Krapek retired from the Board effective January 30, 2002 and Dr.
Antonia Handler Chayes is retiring from the Board effective April 10, 2002. The
Corporation expresses its utmost appreciation to both for their dedicated
service as Directors.
The Board of Directors recommends that you vote FOR each of the nominees.
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Item 2. Appointment of Independent Accountants. The Audit Committee has
nominated PricewaterhouseCoopers LLP to serve as Independent Accountants for
the Corporation until the next Annual Meeting in 2003. PricewaterhouseCoopers
LLP provided audit and other services during 2001 for fees totaling $34.9
million. This included the following fees:
Audit Fees: $9.1 million for the annual audit of the Corporation's consolidated
financial statements and review of interim financial statements in the
Corporation's Form 10-Q reports;
Financial Information Systems Design and Implementation Fees: $6.3 million; and
All Other Fees: $19.5 million. These services are principally domestic and
international tax return preparation and planning and business acquisition and
disposition-related services.
The Audit Committee reviews with PricewaterhouseCoopers LLP whether the
non-audit services provided by them are compatible with maintaining their
independence. Representatives of PricewaterhouseCoopers LLP will be present at
the Annual Meeting, will have an opportunity to make any statements they
desire, and will also be available to respond to appropriate questions from
shareowners.
The Board of Directors recommends that you vote FOR approval of
PricewaterhouseCoopers LLP as Independent Accountants for the Corporation.
Items 3-5. Shareowner Proposals. Three shareowner proposals and the responses
of the Board of Directors are included beginning on page 14.
The Board of Directors recommends that you vote AGAINST each of the shareowner
proposals for the reasons given on pages 14 through 17.
The Board of Directors is not aware of any other business matters to be
presented for action at the Annual Meeting. However, in the event that any
other matter properly comes before the meeting, the shareowners present at the
meeting and the proxy holders will have an opportunity to vote on the item.
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
Nominees
The following are brief biographical sketches for each person nominated for
election to the Board of Directors:
[PHOTO] GEORGE DAVID, Chairman and Chief Executive Officer, United Technologies
Corporation. Mr. David was elected Chief Executive Officer in 1994 and Chairman in
1997. He served as the Corporation's President from 1992 to 1999. Mr. David is a board
member of the Institute for International Economics and the National Academy
Foundation, and a member of The Business Council and The Business Roundtable. He is
also President of the Board of Trustees of the Wadsworth Atheneum Museum of Art in
Hartford, CT. Mr. David was awarded the Order of Friendship from the Russian
Federation in 1999. He is 59 and has been a director of the Corporation since 1992.
[PHOTO] JEAN-PIERRE GARNIER, Ph.D., has served as Chief Executive Officer and Executive
Member of the Board of Directors of GlaxoSmithKline plc (pharmaceuticals) since 2000.
Dr. Garnier served as Chief Executive Officer of SmithKline Beecham plc in 2000 and as
Chief Operating Officer and Executive Member of the Board of Directors of SmithKline
Beecham plc from 1996 to 2000. He served as Chairman, Pharmaceuticals, SmithKline
Beecham from 1994 to 1995. Dr. Garnier is a director of the Eisenhower Exchange
Fellowships. Dr. Garnier is 54 and has been a director of the Corporation since 1997.
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[PHOTO] JAMIE S. GORELICK has served as Vice Chair of Fannie Mae, a New York Stock
Exchange company and the nation's largest source of financing for home mortgages, since
1997. From 1994 to 1997, Ms. Gorelick was Deputy Attorney General of the United
States. In addition to serving on the Board of Fannie Mae, Ms. Gorelick serves on the
Harvard Board of Overseers and the Boards of America's Promise, the Carnegie
Endowment for International Peace, the John D. and Catherine T. MacArthur
Foundation, and the Washington Legal Clinic for the Homeless, as well as other civic
organizations. She is a member of the Council on Foreign Relations and the Central
Intelligence Agency's National Security Advisory Panel. She is 51 and has been a director
of the Corporation since 2000.
[PHOTO] CHARLES R. LEE has served as Chairman and Co-Chief Executive Officer of Verizon
Communications (telecommunications) since 2000. Mr. Lee served as Chairman and Chief
Executive Officer of GTE Corporation from 1992 to 2000. He is a director of The
Procter & Gamble Company, United States Steel Corporation and Marathon Oil
Corporation. He is a member of the President's National Security Telecommunications
Advisory Committee, the Advisory Committee to the President's Commission on Critical
Infrastructure Protection and a member of the New American Realities Committee of the
National Policy Association. He is also a member of The Business Roundtable and The
Business Council, a Cornell University Presidential Councilor and an Emeritus Trustee of
the Board of Trustees of Cornell University, a director of the New American Schools
Corporation, a member of the Conference Board, and a director of the Stamford Hospital
Foundation. He is 62 and has been a director of the Corporation since 1994.
[PHOTO] RICHARD D. MCCORMICK has served as President of the International Chamber of
Commerce since January 2001. Mr. McCormick served as Chairman of the Board of U S
WEST, Inc. (telecommunications) from June 1998 until his retirement in May 1999. He
was Chairman, President and Chief Executive Officer of U S WEST, Inc. from 1992 until
1998. He is also a director of United Airlines, Wells Fargo and Company and HealthTrio
Inc. In addition, he is Vice Chairman of the United States Council for International
Business, a director of Creighton University, a member of The Business Council and a
trustee of the Denver Art Museum. Mr. McCormick is 61 and has been a director of the
Corporation since 1999.
[PHOTO] FRANK P. POPOFF is the Retired Chairman and Chief Executive Officer of The Dow
Chemical Company, Midland, Michigan. Mr. Popoff served as Chairman of The Dow
Chemical Company from 1992 to 2000 and as its Chief Executive Officer from 1987 to
1995. Mr. Popoff is also a director of American Express Company, Qwest
Communications International Inc., Chemical Financial Corporation, Shin-Etsu Chemical
Co. Ltd. and Michigan Molecular Institute. He is a past chairman of the Chemical
Manufacturers Association and a founder of The Business Council for Sustainable
Development. He is also a member of The Business Council, the American Chemical
Society and Director Emeritus of The Dow Chemical Company and the Indiana
University Foundation. Mr. Popoff is 66 and has been a director of the Corporation since
1996.
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[PHOTO] H. PATRICK SWYGERT has served as President of Howard University since 1995. Mr.
Swygert served as president of the State University of New York at Albany from 1990 to
1995, and as executive vice president of Temple University from 1987 to 1990. He also
serves on the boards of directors or trustees for Fannie Mae, Hartford Financial Services
Group Inc., and the University of South Florida. Until recently, he was chairman of the
Greater Washington Board of Trade's Community Business Partnership. Mr. Swygert is 58
and has been a director of the Corporation since 2001.
[PHOTO] ANDRE VILLENEUVE has served as Chairman of Instinet Corporation since 2000.
Instinet Corporation is an international electronic agency stockbroker based in New York,
NY, and an independently managed subsidiary of Reuters Holdings PLC. Mr. Villeneuve
served as Executive Director of Reuters Holdings PLC, London, England (worldwide
news information and services business) from 1988 to 2000. He is also Chairman of
Promethee, a French research institute, and a director of CGNU. Mr. Villeneuve is 57 and
has been a director of the Corporation since 1997.
[PHOTO] H. A. WAGNER has served as Chairman (non-executive) of Agere Systems Inc.
(communications components) since 2001. Mr. Wagner served as Chairman and Chief
Executive Officer of Air Products and Chemicals, Inc. from 1992 to 2000 and as its
Chairman, President and Chief Executive Officer from 1992 to 1998. He is a director of
CIGNA Corporation, PACCAR Inc., and Arsenal Digital Solutions Worldwide, Inc. Mr.
Wagner also serves on the Business Advisory Council of Maersk Inc., the Board of
Trustees of Lehigh University, the board and executive committees of the Eisenhower
Exchange Fellowships, and is chairman of the board of the Dorothy Rider Pool
Healthcare Trust. He is a member of The Business Roundtable and the KidsPeace(R)
National Council for Kids. Mr. Wagner is 66 and has been a director of the Corporation
since 1994.
[PHOTO] SANFORD I. WEILL has served as Chairman and Chief Executive Officer of Citigroup
Inc. (financial services) since 2000. He served as Chairman and Co-Chief Executive
Officer of Citigroup Inc. from 1998 to 2000. Prior to the 1998 merger of Travelers Group
Inc. and Citicorp, Mr. Weill was Chairman and Chief Executive Officer of Travelers
Group Inc. from 1993 to 1998. Mr. Weill is also a member of the Board of Directors of
AT&T Corporation, E.I. duPont de Nemours & Company and the Federal Reserve Bank
of New York. He is Chairman of the Board of Trustees of Carnegie Hall and a member of
The Business Roundtable, The Business Council, the Board of Directors of the Baltimore
Symphony, the Board of Governors of New York Presbyterian Hospital, the Board of
Overseers of the Weill Medical College and Graduate School of Medical Sciences of
Cornell University and other civic organizations. He is 68 and has been a director of the
Corporation since 1999.
The Board met seven times during 2001 with an average attendance of 97.50%. All
incumbent directors attended more than 75% of the aggregate number of meetings
of the Board and Committees on which he or she served.
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Committees
The Board has established the following committees of the Board:
The Audit Committee recommends to the Board an accounting firm to serve as
independent accountants for the Corporation and performs the additional
responsibilities described in its Report on page 9. A copy of the Charter
adopted by the Committee is included as an Appendix to this Proxy Statement.
During 2001, the Committee held four meetings and Directors Chayes, Gorelick,
McCormick, Popoff (Chairman), Villeneuve and Wagner were members of the
Committee. The Board has determined that all Committee members are independent,
in accordance with the listing standards of the New York Stock Exchange.
The Committee on Compensation and Executive Development approves compensation
actions for senior executives, including long term incentive awards;
administers incentive compensation, long term incentive and other compensation
plans of the Corporation; and reviews management development policies and
programs. During 2001, the Committee held four meetings and Directors Garnier,
Lee, McCormick, Popoff and Wagner (Chairman) were members of the Committee.
The Finance Committee reviews and makes recommendations to the Board on the
management of the financial resources of the Corporation and major financial
strategies and transactions. During 2001, the Committee held four meetings and
Directors David, Gorelick, Krapek, Lee (Chairman), Popoff, Swygert, Villeneuve
and Weill were members of the Committee.
The Nominating Committee makes recommendations on candidates for the Board,
director compensation and corporate governance. The Committee considers
nominees recommended to it in writing by shareowners. During 2001, the
Committee held three meetings and Directors Garnier, Lee, McCormick (Chairman),
Swygert, Wagner and Weill were members of the Committee.
The Public Issues Review Committee reviews the Corporation's contributions
program, political action committees, and its response to public issues such as
equal employment opportunity, the environment, and safety in the workplace.
During 2001, the Committee held four meetings and Directors Chayes (Chair),
Garnier, Gorelick, Swygert, Villeneuve and Weill were members of the Committee.
Compensation of Directors
Nonemployee directors are paid an annual retainer of $70,000 ($75,000 for
committee chairpersons), which they may elect to receive in one of the
following forms: (a) 60% in deferred stock units and 40% in cash; (b) 100% in
deferred stock units; (c) 60% in non-qualified options to purchase Common Stock
and 40% in cash; or (d) 100% in non-qualified options to purchase Common Stock.
Each stock unit has a value equal to one share of Common Stock. Following
termination of a director's service, the value of the accumulated units is paid
in cash as a lump sum or in installments, at the election of the director. Each
stock unit balance is credited with additional stock units equivalent in value
to the dividend paid on the corresponding number of shares of Common Stock.
Each year on the date of the annual meeting, nonemployee directors also receive
a grant of stock options valued at $70,000.
All nonemployee director stock options are valued at issuance using the
Black-Scholes option valuation model, have an exercise price equal to the
closing price of Common Stock on the date of issuance, become exercisable after
three years, have a ten-year term and are subject to the terms of the
Nonemployee Director Stock Option Plan.
Each nonemployee director receives a one-time grant of restricted stock units
valued at $100,000, based on the closing price of Common Stock on the date of
election to the Board. Dividend equivalents are paid on the units. The units
vest ratably over five years, but may not be sold or otherwise transferred
until the director retires or resigns from the Board. If a director leaves the
Board before all of the units vest, the non-vested units will be forfeited,
except that, in the event of death or disability, a change in control of the
Corporation, or if a director retires or resigns to accept full-time employment
in public or charitable service, all units not previously vested will vest
immediately.
As part of its support for charitable institutions, the Corporation maintains a
Directors' Charitable Gift Program funded by life insurance on the lives of the
members of the Board of Directors. Under this program, the Corporation will
make charitable contributions totaling up to $1 million following the death of
a director, allocated among up to four charities recommended by the director.
Beneficiaries must be tax-exempt under Section 501(c)(3) of the Internal
Revenue Code. Donations paid by the Corporation are expected to be deductible
from taxable income for federal and other income tax purposes. Directors derive
no financial benefit from the program since all insurance proceeds and tax
deductions accrue solely to the Corporation.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of February 1, 2002, the UTC equity securities
beneficially owned by each current director and each of the five executive
officers named in the Summary Compensation Table on page 11 (the "Named
Executive Officers") and all of the directors and executive officers as a
group. As of February 1, 2002, each of the directors and executive officers
beneficially owned or had the right to acquire beneficial ownership of (upon
the exercise of stock options exercisable within 60 days) less than 1% of the
Corporation's Common Stock and less than 1% of the Corporation's Series A
Convertible ESOP Preferred Stock. The directors and executive officers as a
group beneficially owned or had the right to acquire beneficial ownership of
(upon the exercise of stock options exercisable within 60 days) approximately
2% of the Common Stock and less than 1% of the Series A Convertible ESOP
Preferred Stock.
Shares Beneficially
Name Class of Securities Owned(1)
---- ------------------- -------------------
Antonia Handler Chayes........................ Common(2) 4,080
George David.................................. Common 4,558,161
ESOP Preferred 1,069
Jean-Pierre Garnier........................... Common(2) 11,200
Jamie S. Gorelick............................. Common(2) 3,800
Karl J. Krapek(3)............................. Common 2,398,463
ESOP Preferred 1,081
Charles R. Lee................................ Common(2) 24,900
Richard D. McCormick.......................... Common(2) 13,000
Frank P. Popoff............................... Common(2) 12,000
H. Patrick Swygert............................ Common 0
Andre Villeneuve.............................. Common(2) 6,400
H. A. Wagner.................................. Common(2) 19,412
Sanford I. Weill.............................. Common(2) 10,400
Stephen F. Page............................... Common 813,245
ESOP Preferred 430
Louis Chenevert............................... Common 158,481
ESOP Preferred 153
David J. FitzPatrick.......................... Common 298,547
ESOP Preferred 76
Directors & Executive Officers as a Group (29) Common 10,126,374
ESOP Preferred 9,471
--------
(1) Included in the number of shares beneficially owned by Messrs. David,
Krapek, Page, Chenevert and FitzPatrick and all directors and executive
officers as a group are 4,010,000; 2,103,000; 768,000; 148,000; 280,000;
and 8,939,394 shares, respectively, which such persons have the right to
acquire within 60 days pursuant to the exercise of employee stock options
and stock appreciation rights; 489,629; 261,923; 38,861; 8,995; 13,000 and
984,938 shares, respectively, as to which such persons have sole voting and
investment power; and 58,532; 33,540; 6,384; 1,486; 5,547 and 202,042
shares, respectively, as to which such persons have sole voting but no
investment power. Each person and group shown as beneficially owning shares
of ESOP Preferred Stock has sole voting and sole investment power as to
such shares. Each of the following directors has sole voting power but no
investment power with respect to the following shares of restricted Common
Stock:
Antonia Handler Chayes 4,000 Frank P. Popoff. 4,000
Jean-Pierre Garnier... 3,200 Andre Villeneuve 2,400
Jamie S. Gorelick..... 2,000 H. A. Wagner.... 4,000
Charles R. Lee........ 4,000 Sanford I. Weill 400
Richard D. McCormick.. 1,600
Dr. Chayes, Ms. Gorelick, and Messrs. Lee, McCormick, Popoff, Wagner and
Weill have sole voting and investment power with respect to the balance of
their holdings of Common Stock.
(2) In addition to shares shown as beneficially owned at February 1, 2002,
nonemployee directors held the following amounts of vested, non-voting
deferred stock units acquired under the Directors Deferred Stock Unit Plan.
Each unit is valued by reference to one share of Common Stock.
Antonia Handler Chayes 19,156 Frank P. Popoff... 8,499
Jean-Pierre Garnier... 7,500 H. Patrick Swygert 963
Jamie S. Gorelick..... 1,204 Andre Villeneuve.. 5,914
Charles R. Lee........ 11,882 H. A. Wagner...... 8,562
Richard D. McCormick.. 5,572 Sanford I. Weill.. 2,622
Mr. Swygert also holds 1,376 non-voting restricted stock units granted under
the Directors' Restricted Stock Unit Plan.
(3) Mr. Krapek retired from his positions as a Director and as President and
Chief Operating Officer effective January 30, 2002.
8
REPORT OF THE AUDIT COMMITTEE
In accordance with its Charter (a copy of which is included as an Appendix to
this Proxy Statement), the Audit Committee reviews and makes recommendations to
the Board of Directors concerning the reliability and integrity of the
Corporation's financial reporting practices; the adequacy of the Corporation's
system of internal controls; the independence and performance of the
Corporation's internal and external auditors; and the adequacy of processes to
assure compliance with the Corporation's policies and procedures, financial
controls, Code of Ethics and applicable laws and regulations.
The Audit Committee has met with management and the Corporation's independent
accountants and has reviewed and discussed the Corporation's audited financial
statements as of and for the year ended December 31, 2001. The Audit Committee
discussed with the Corporation's internal and independent accountants the
overall scope and plans for their respective audits. The Audit Committee meets
with the internal and independent auditors, with and without management
present, to discuss the results of their examination, the evaluation of the
Corporation's internal controls, and the overall quality of the Corporation's
financial reporting. The Audit Committee has discussed with the Corporation's
independent accountants the matters required to be discussed by Statement on
Auditing Standards, No. 61, Communication with Audit Committees, as amended.
The Audit Committee has discussed with the independent auditors the auditors'
independence from the Corporation and its management, including the written
disclosures and letter from the Corporation's independent accountants required
by Independence Standards Board, Standard No. 1, Independence Discussions with
Audit Committees, as amended.
The Corporation's independent auditors represented to the Audit Committee that
the Corporation's audited financial statements were prepared in accordance with
generally accepted accounting principles in the United States of America.
Based on the reviews and discussions referred to above, the Audit Committee has
recommended to the Board of Directors that the audited financial statements
referred to above be included in the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2001 for filing with the SEC.
AUDIT COMMITTEE
Frank P. Popoff, Chairman
Richard D. McCormick
Antonia Handler Chayes
Andre Villeneuve
Jamie S. Gorelick
H. A. Wagner
REPORT OF THE COMMITTEE ON
COMPENSATION AND EXECUTIVE DEVELOPMENT
Program Structure and Objectives
The Committee on Compensation and Executive Development is responsible for the
Corporation's executive compensation program. Program goals are to support
recruitment and retention and to align management and shareowner interests by
emphasizing long term, at risk and variable compensation. Performance based
executive compensation generally will not be subject to the $1 million
deduction limit imposed by Section 162(m) of the Internal Revenue Code.
The Committee uses benchmark data from a peer group consisting of 18 Dow Jones
Industrial and 18 other comparable companies. Compensation is targeted at
approximately the median of this compensation peer group. Actual values vary
with individual and corporate performance.
Bonuses are based on performance against annual objectives for the Corporation
and the business units and assessments of individual performance. For 2001, the
Corporate Headquarters' objectives were earnings per share growth and available
cash flow as a percentage of net income. Business unit objectives were growth
in operating income, available cash flow as a percentage of net income, and
working capital turnover improvement. Consistent with these objectives and
assessed performance against them, the Committee determines the total amount
available for bonuses at the Corporate Headquarters, and the Chief Executive
Officer ("CEO") determines the business unit amounts.
9
Bonuses for the five Named Executive Officers may not exceed 0.75% of the
Corporation's adjusted net income. The CEO may receive no more than 30% of this
amount, and each of the other four Named Executive Officers no more than 17.5%.
Subject to these limits, the Committee determines the actual amount of each
award.
2001 Long Term Incentive Plan awards consisted of non-qualified stock options
and dividend equivalent awards ("DEs"). Stock options are priced at market on
the date of grant, vest after three years, and remain exercisable for seven
years. DEs are granted in tandem with stock options and vest subject to
achievement of specific financial performance targets. A DE is the right to
receive payments equal to the common stock dividend for up to seven years or
until the associated stock option is exercised.
Chief Executive Officer Compensation
Compensation actions affecting the CEO are based on assessments of corporate
and individual performance. Specific formulas are not used. The Committee also
considers data from the compensation peer group.
Mr. David's bonus for 2001 was 25% reduced from the prior year, reflecting
2001's below target earnings. However, the Committee continues to assess Mr.
David's performance as exceptional and recognizes the impact of global economic
conditions and September 11th on UTC's results in 2001. His base salary and
incentive compensation remain approximately at the median of CEOs in the
compensation peer group. Mr. David was granted 300,000 stock options and
associated DEs.
The Corporation faced challenges in 2001. Earnings per share through the third
quarter had improved 16%. However, the events of September 11th pushed the U.S.
economy further into recession, with particularly adverse impacts on commercial
aviation worldwide. Fourth quarter earnings declined 18% to 69 cents per share
(although earnings increased before a restructuring charge related to September
11th). Notwithstanding these fourth quarter impacts, earnings per share
increased 8% for the year. Available cash flow was $1.9 billion, 98% of net
income. Revenues increased 5% to $27.9 billion. The balance sheet remained
strong with a debt-to-capital ratio of 37%. The Corporation completed $525
million in acquisitions and repurchased $599 million of its shares in 2001.
Total Shareowner Return for 2001 was -17%, compared with -5% for the Dow Jones
Industrials and -12% for the S&P 500. Over the last five years, UTC's annual
return has averaged 16%, compared with 11% for the Dow Jones Industrials and
11% for the S&P 500.
COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT
H. A. Wagner, Chairman
Charles R. Lee
Jean-Pierre Garnier
Richard D. McCormick
Frank P. Popoff
10
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following tables summarize the compensation earned by the CEO and the other
four most highly compensated executive officers for services performed in all
capacities during the last three fiscal years.
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
---------------------------------- -----------------------
Restricted Securities
Other Annual Stock Underlying All Other
Bonus($) Compensation Awards Options Compensation
Name & Principal Position Year Salary ($) (1) ($) (2) ($) (3) (#) ($) (4)
------------------------- ---- ---------- ---------- ------------ ---------- ---------- ------------
George David 2001 $1,200,000 $1,800,000 $82,546 $0 300,000 $52,571
Chairman and Chief 2000 $1,200,000 $2,400,000 $87,985 $499,375(5) 325,000 $48,119
Executive Officer 1999 $1,200,000 $2,200,000 $109,290 $0 700,000 $43,727
Karl J. Krapek 2001 $865,000 $900,000 $69,020 $0 160,000 $28,480
Former President and 2000 $829,167 $1,250,000 $72,899 $0 175,000 $26,707
Chief OperatingOfficer (6) 1999 $783,333 $1,250,000 $61,196 $0 470,000 $24,240
Stephen F. Page 2001 $640,000 $850,000 $59,842 $0 78,000 $39,620
Executive Vice President 2000 $627,500 $700,000 $68,248 $0 90,000 $53,520
& President, Otis 1999 $602,500 $600,000 $66,594 $0 110,000 $62,500
Louis Chenevert 2001 $500,000 $475,000 $53,286 $0 272,000 $35,520
President, Pratt & 2000 $463,333 $550,000 $44,581 $0 75,000 $34,660
Whitney 1999 $386,667 $480,000 $45,297 $0 130,000 $33,383
David J. FitzPatrick 2001 $483,333 $475,000 $56,481 $0 265,000 $37,350
Senior Vice President & 2000 $451,667 $500,000 $51,742 $0 65,000 $37,360
Chief Financial Officer 1999 $417,500 $450,000 $60,939 $0 80,000 $39,218
--------
(1) Incentive compensation shown in the Bonus column for the Named Executive
Officers was paid under the Annual Incentive Compensation Plan, which is
discussed in the Compensation Committee Report on pages 9 and 10.
(2) The amounts shown in this column for 2001 include: $22,104 for personal use
of corporate aircraft for security reasons for Mr. David; perquisite
allowances for each of Messrs. David, Krapek, Page, Chenevert and
FitzPatrick of $37,738, $47,105, $36,808, $35,713 and $40,607,
respectively; and leased vehicle payments for each of Messrs. David,
Krapek, Page, Chenevert and FitzPatrick of $22,705, $10,413, $18,424,
$12,063 and $14,243, respectively.
(3) At the close of business on December 31, 2001, the following Named
Executive Officers held non-vested restricted shares of Common Stock as
follows: Mr. David: 10,000 shares valued at $646,300; and Mr. FitzPatrick:
5,000 shares valued at $323,150. The foregoing values were calculated by
multiplying the closing market price of the Common Stock on December 31,
2001 by the number of restricted shares held. Regular quarterly dividends
are paid on all shares of restricted stock.
(4) For 2001, consisted of employer matching contributions in the Employee
Savings Plan of $6,120 for each of the five Named Executive Officers and
life insurance premium payments by the Corporation of $46,451, $22,360,
$33,500, $29,400 and $31,230, respectively, for Messrs. David, Krapek,
Page, Chenevert and FitzPatrick.
(5) Consists of a grant of 10,000 shares of time-based restricted stock to Mr.
David, valued at the market price of Common Stock as of the date of grant
and scheduled to vest March 14, 2002.
(6) Mr. Krapek retired on January 30, 2002.
11
Option Grants in the Last Fiscal Year
Individual Grants (1)
- -----------------------------------------------------------
% of Total
Options
Number of Shares Granted to Grant Date
Underlying Options Employees in Exercise Present Value
Name Granted (#) Fiscal Year Price($/Sh) Expiration Date ($) (2)
---- ------------------ ------------ ----------- --------------- -------------
G. David 300,000 (3) 3.6% $75.25 1/1/2011 $7,932,000
K. Krapek 160,000 (3) 1.9% $75.25 1/1/2011 $4,230,400
S. Page 78,000 (3) 0.9% $75.25 1/1/2011 $2,062,320
L. Chenevert 72,000 (3) 0.9% $75.25 1/1/2011 $1,903,680
200,000 (4) 2.4% $77.00 4/25/2011 $5,412,000
D. FitzPatrick 65,000 (3) 0.8% $75.25 1/1/2011 $1,718,600
200,000 (4) 2.4% $77.00 4/25/2011 $5,412,000
--------
(1) Under certain circumstances, including a change of control of the
Corporation, the Board of Directors, under the terms of the Corporation's
Long Term Incentive Plan, may accelerate the vesting of option grants,
purchase an outstanding grant for the cash value thereof, or provide for
other adjustments or modifications to the outstanding grants. All stock
options were granted with an exercise price equal to the market price of
the Common Stock on the date of grant.
(2) The estimated values listed in this column are based on the Black-Scholes
pricing model and a number of variables. The following assumptions are used
in determining the estimated values of the grants: risk free interest rate
of 4.8%, stock price volatility of 36%, dividend yield of 1.3% and holding
period of 5 years. The estimated values are not intended as a forecast of
the future appreciation in the price of the Common Stock. If the Common
Stock does not increase in value above the exercise price of the stock
options, then the grants described in the table will have no value. There
is no assurance that the value realized by an executive will be at or near
the values estimated.
(3) These stock options were granted on January 2, 2001 and will vest and
become exercisable on January 2, 2004. These stock options include an equal
number of Dividend Equivalents, which will vest and be payable solely on
the basis of achievement of previously established performance targets
measured over the three-year vesting period.
(4) These stock options were granted on April 26, 2001 and will vest and become
exercisable at the end of the three-year vesting period on April 26, 2004.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised in-the-
Options/SARs at Fiscal Year- Money Options/SARs at Fiscal
End (#) Year-End ($) (1)
---------------------------- ----------------------------
Shares Acquired Value Realized
Name On Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ------------ -------------
G. David 280,000 $19,553,906 3,610,000 1,325,000 $150,991,160 $4,944,250
K. Krapek 108,000 $5,932,228 1,298,000 805,000 $51,343,359 $2,179,850
S. Page 0 $0 658,000 278,000 $22,817,661 $1,361,000
L. Chenevert 12,000 $802,634 98,000 477,000 $3,234,177 $691,250
D. FitzPatrick 0 $0 200,000 410,000 $4,363,500 $988,850
--------
(1) The value reported is based either on the closing price of the Common Stock
on the date of exercise or on December 31, 2001, as applicable, and is
calculated by subtracting the exercise price per share from the applicable
closing price.
12
Performance Graph
The following graph presents the cumulative total shareowner return for the
five years ending December 31, 2001 for the Corporation's Common Stock, as
compared to the Standard & Poor's 500 Stock Index and to the Dow Jones 30
Industrial Average. The Common Stock price is a component of both indices.
These figures assume that all dividends paid over the five-year period were
reinvested, and that the starting value of each index and the investment in the
Corporation's Common Stock was $100.00 on December 31, 1996.
[CHART]
United Technologies S&P 500 Dow Jones Industrials
Dec-96 $100.00 $100.00 $100.00
Dec-97 $111.66 $133.32 $124.88
Dec-98 $169.34 $171.33 $147.54
Dec-99 $204.79 $207.33 $187.70
Dec-00 $250.78 $188.42 $178.95
Dec-01 $209.14 $166.12 $169.36
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01
------- ------- ------- ------- ------- -------
United Technologies.. $100.00 $111.66 $169.34 $204.79 $250.78 $209.14
S&P 500.............. $100.00 $133.32 $171.33 $207.33 $188.42 $166.12
Dow Jones Industrials $100.00 $124.88 $147.54 $187.70 $178.95 $169.36
Section 16(a) Beneficial Ownership Reporting Compliance
The Corporation believes, based upon a review of the forms filed and written
confirmation provided by its officers and directors, that during 2001 all of
its officers and directors filed on a timely basis the reports required by
Section 16(a) of the Securities Exchange Act of 1934.
Certain Business Relationships
Citigroup Inc., of which Mr. Weill is Chairman and Chief Executive Officer,
provides banking services to the Corporation. Salomon Smith Barney Holdings
Inc., a subsidiary of Citigroup Inc., provides securities underwriting and
financial advisory services to the Corporation, for which it receives customary
compensation. The Corporation and its subsidiaries have had, and expect in the
future to have, transactions in the ordinary course of business with these and
other companies of which certain of the nonemployee directors are officers or
directors. In the past, the amounts involved have not been material in relation
to the business of the Corporation and the Corporation believes that such
amounts were not material in relation to the businesses of such other companies
or the interests, if any, of the directors involved.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
In 1981, the Board of Directors adopted the Senior Executive Severance Plan
(the "Severance Plan"). The Committee on Compensation and Executive Development
and the CEO have the authority to select the participants under the Severance
Plan. As of December 31, 2001, 25 key executives, including the Named Executive
Officers, were covered under the Severance Plan. The Severance Plan provides
that in the event the participant's employment with the Corporation terminates
for any reason (other than death, disability or retirement at or after the
normal retirement date) within two years after any change of control of the
Corporation (as defined in the Severance Plan) the participant will receive:
(i) a cash payment equal to three times the participant's highest annual
compensation (including base salary and incentive compensation) during the
preceding three years; (ii) accelerated vesting of all awards outstanding under
the Corporation's Long Term Incentive Plan; (iii) special supplemental
retirement benefits determined as if the participant had three years additional
credited service under the Corporation's pension plans as of the date of
termination; and (iv) continuation of other fringe benefits or equivalent
benefits for a period of three years. The Severance Plan provides for a
supplemental cash payment to the extent necessary to preserve the level of
benefits in the event of the imposition of excise taxes payable by a
participant in respect of "excess parachute payments" under the Internal
Revenue Code.
13
In addition to the Severance Plan, 24 key executives, including the Named
Executive Officers, are eligible to receive separation benefits at the time of
their termination from employment with the Corporation, subject to certain
limited exceptions. The value of such separation benefits under this program is
2.5 times base salary at the date of separation. Benefits are subject to offset
against any amounts paid pursuant to the Severance Plan, as described above.
Pension Plan Table
Years of Service
- -----------------------------------------------------------------
Remuneration 15 20 25 30 35 40
------------ ---------- ---------- ---------- ---------- ---------- ----------
$ 100,000 $ 25,500 $ 34,000 $ 37,500 $ 41,000 $ 45,000 $ 50,000
250,000 70,500 94,000 105,000 116,000 127,500 140,000
500,000 145,500 194,000 217,500 241,000 265,000 290,000
1,000,000 295,500 394,000 442,500 492,000 540,000 590,000
1,500,000 445,500 594,000 667,500 741,000 815,000 890,000
2,000,000 595,500 794,000 892,500 991,000 1,090,000 1,190,000
2,500,000 745,500 994,000 1,117,500 1,241,000 1,365,000 1,490,000
3,000,000 895,500 1,194,000 1,342,500 1,491,000 1,640,000 1,790,000
3,500,000 1,045,500 1,394,000 1,567,500 1,741,000 1,915,000 2,090,000
4,000,000 1,195,500 1,594,000 1,792,500 1,991,000 2,190,000 2,390,000
4,500,000 1,345,500 1,794,000 2,017,500 2,241,000 2,465,000 2,690,000
The above table sets forth estimated annual benefits payable upon retirement at
age 65 under the Corporation's defined benefit pension plans. Compensation
covered by the pension plans consists of total cash remuneration in the form of
salaries, including awards paid under the Annual Executive Incentive
Compensation Plan (shown in the Bonus column of the Summary Compensation
Table), but excluding awards paid under the Long Term Incentive Plan (shown in
the Long Term Compensation columns of the Summary Compensation Table). Benefits
are computed as a single life annuity payable at age 65. The benefit amount
equals a percentage of final average earnings during the highest five
consecutive years out of the last ten years worked, less a portion of the
participant's social security benefit. As a result of Internal Revenue Code
limitations, a substantial portion of senior executives' pension benefits are
excluded from the Corporation's tax qualified retirement plan and trust and
instead are provided through a supplemental plan that restores the excluded
portion of the benefits. Pension benefits paid from the supplemental plan are
paid in the same form of annuity applicable under the qualified plan or,
subject to certain conditions, in a lump sum or annual installments. Benefits
under the supplemental plan are generally not funded in advance except in the
event of a change of control as defined by the plan.
As of December 31, 2001, the Named Executive Officers had the following full
years of credited service for determining benefits: G. David, 26 years; K.
Krapek, 19 years; S. Page, 8 years; L. Chenevert, 8 years; and D. FitzPatrick,
3 years.
SHAREOWNER PROPOSALS
Shareowner Proposal Concerning Disclosure of Political Contributions
Mrs. Evelyn Y. Davis, Watergate Office Building, Suite 215, 2600 Virginia
Avenue, N.W., Washington, D.C. 20037, a holder of 200 shares of Common Stock,
intends to introduce the following proposal at the Annual Meeting:
RESOLVED: "That the stockholders recommend that the Board direct management
that within five days after approval by the shareholders of this proposal, the
management shall publish in newspapers of general circulation in the cities of
New York, Washington, D.C., Detroit, Chicago, San Francisco, Los Angeles,
Dallas, Houston and Miami, and in the Wall Street Journal and U.S.A Today and
the Hartford Courant, a detailed statement of each contribution made by the
Company, either directly or indirectly, within the immediately preceding fiscal
year, in respect of a political campaign, political party, referendum or
citizens' initiative, or attempts to influence legislation, specifying the date
and amount of each such contribution, and the person or organization to whom
the contribution was made. Subsequent to this initial disclosure, the
management shall cause like data to be included in each succeeding report to
shareholders." "And if no such disbursements were made, to have that fact
publicized in the same manner."
REASONS: "This proposal, if adopted, would require the management to advise the
shareholders how many corporate dollars are being spent for political purposes
and to specify what political causes the management seeks to
14
promote with those funds. It is therefore no more than a requirement that the
shareholders be given a more detailed accounting of these special purpose
expenditures that they now receive. These political contributions are made with
dollars that belong to the shareholders as a group and they are entitled to
know how they are being spent."
"Last year the owners of 12,983,693 shares, representing approximately 3.5% of
shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
The Board of Directors' Statement in Opposition
Federal and state laws restrict the amount and types of contributions that may
be made to political parties and candidates. Contributions to national and
state political parties must also be disclosed by the recipients under
applicable federal law and the laws of certain states. The Corporation complies
with all applicable federal and state laws concerning political contributions.
Legally permitted contributions to national and state political parties have
been made from time to time in furtherance of the business interests of the
Corporation. The aggregate amount contributed by the Corporation to national
and state political parties is, however, not a material amount for financial
reporting purposes.
The Board of Directors therefore believes disclosure in addition to that
required by current law is unnecessary and recommends that Shareowners vote
AGAINST this proposal concerning disclosure of political contributions.
Shareowner Proposal Concerning Weaponization of Space
The Sisters of St. Joseph, Mount Saint Joseph Convent, 9701 Germantown Avenue,
Philadelphia, PA 19118, beneficial owners of 3,000 shares of Common Stock, and
Trinity Health, 29000 Eleven Mile Road, Farmington Hills, MI 48336, beneficial
owners of 4,999 shares of Common Stock, intend to introduce the following
proposal at the Annual Meeting:
WHEREAS:
The United States military's plans to develop technologies with the potential
to wage war from space are intended to enhance our collective security. In
light of the September 11, 2001 tragedy, we believe that these plans will not
achieve that end;
Vision for 2020 explicitly articulates such plans of the US Space Command which
coordinates the use of Army, Naval and Air Force Space Forces;
This Report, "serves as a vector for the evolution of military space strategy
into the 21/st/ century," when "space power will, evolve into a separate and
equal medium of warfare." The Report also speaks of "dominating the space
dimension of military operations to protect US interests and investment
[estimated at $500 billion by 2010] integrating space forces into warfighting
capabilities across the full spectrum of conflict."
Former head of US Space Command, General Joseph Ashy said, "We're going to
fight from space and we're going to fight into space."
The 2001 Rumsfield "Space Commission Report" urges the President to "have the
option to deploy weapons in space;"
The US Space Command believes that "accelerating rates of technological
development will be increasingly driven by the commercial sector, not the
military." Commercial space launches started to outnumber military ones in 1998;
A Senate Armed Forces Committee member has stated that space weaponization is
"a mistake of historic proportions" that would trigger an arms race in space;
In 2000, 163 nations supported the UN resolution, "Prevention of An Arms Race
in Outer Space", which reaffirmed The 1967 Outer Space Treaty, specifically its
provision reserving space "for peaceful purposes".
Therefore Be It Resolved:
Shareholders request the Board of Directors to provide a comprehensive report
describing our Company's involvement in space-based weaponization and an
assessment of the potential financial, legal and public relations
15
liabilities involved. The report would be made available to shareholders on
request by October 2002 (withholding proprietary information and prepared at
reasonable cost).
Supporting Statement of the Proponents
The proponents of this resolution believe that outer space is the common
heritage of all and should be used for peaceful purposes and the well-being of
all peoples. We believe that present space-based research and project
development, such as the Minuteman rocket motors, will lead to the
weaponization of space and further contribute to the insecurity of governments
worldwide. We believe that shareholders deserve company transparency concerning
our Company's involvement in research, development and promotion of weapons for
space. The report could include the following:
. Current value of outstanding contracts to develop components of the
Space Command's programs;
. Amount of the company's own money (versus government funding) spent on
in-house research and development for the Space Command program, in
comparison to non-military contracts in this segment of its business;
. The ethical and financial reasons for being involved in the Space
Command program.
We urge shareholder support of this resolution.
The Board of Directors' Statement in Opposition
The Corporation's Pratt & Whitney Space Propulsion division provides rocket
motors for a variety of commercial and military applications, including space
exploration, commercial space launch vehicles, satellite applications and
missile defense systems. Hamilton Sundstrand provides space suits and other
systems for NASA's space exploration missions and is developing space suits and
other equipment for the International Space Station. UTC Fuel Cells has
provided fuel cells for NASA missions beginning with the Apollo program and
including the Space Shuttle Orbiter.
The Board of Directors believes that the executive and legislative branches of
the U.S. Government are the proper forums to consider public policy concerning
activities in space. The Corporation makes its research, development and
production capabilities available under contracts with the U.S. Government only
after decisions are reached within the Government that it is in the interest of
our society to undertake those activities.
The Corporation provides extensive reports to shareowners on significant
matters affecting the Corporation, in accordance with reporting requirements
established by the SEC. Information on space-related activities is included in
these reports and other public statements by the Corporation. For these
reasons, the Board of Directors does not believe a special report would be
beneficial.
The Board of Directors recommends that shareowners vote AGAINST this proposal.
Shareowner Proposal Concerning Measures of Human Capital
Mrs. Donna Benson, 27 Fair Street, Meriden, CT 06451, a holder of 200 shares of
Common Stock, intends to introduce the following proposal at the Annual Meeting:
"RESOLVED, that the stockholders of UTC (the "Company") request that the
Compensation and Compensation Administration Committees of the Board of
Directors, in establishing and administering standards for use in awarding
performance-based executive compensation, incorporate measures of human capital
such as contributions to employee training, morale and safety, in addition to
traditional measures of the Company's financial performance, such as stock
price."
Supporting Statement of the Proponent
At present the process for compensating the Company's senior executive officers
does not take into account any performance measures relating to our most
important resource -- human capital. The loyalty and productivity of the
Company's workforce has demonstrably improved the Company's long-term financial
success. Recent downsizing and layoffs not related to loss of sales threaten to
destroy that loyalty and productivity.
A growing body of evidence links "high-performance workplace" practices, which
emphasize employee training, participation and feedback, with better overall
management, higher productivity and, ultimately, greater value for
shareholders. In light of that evidence, companies have begun to implement
compensation programs that incorporate measures of employee satisfaction and
development in the formula for determining executive pay. For example, UAL,
16
Eastman Kodak and Sears, Roebuck & Co. base certain executive compensation on,
among other factors, objective measures of employee satisfaction.
I believe that UTC's ability to attract, develop and retain good employees is
critical to its success, and that senior executives' compensation should be
based, in part, on the Company's progress toward attaining that goal. To that
end, I request that the Compensation and Compensation Administration Committees
of the Company's Board of Directors formulate employment practice performance
criteria to be used in determining compensation for its senior executive
officers and in bonus, stock option and long-term incentive plans in which
those executives participate. These measures should constitute a significant
component in determining the overall amount of performance-based compensation.
Further, the employee satisfaction component of executive compensation should
include both affirmative and negative components. On the affirmative side, an
increase in measures of employee satisfaction should result, all other factors
remaining the same, in a higher overall performance rating for the executive
and thus a larger amount of performance-based compensation. Employee
satisfaction should be measured using objective surveys and interviews
conducted on at least an annual basis. On the negative side, an executive's
performance rating would decline when, through the use of employment
satisfaction measures, the officer does not contribute positively to employment
security, training, morale and safety.
The Board of Directors' Statement in Opposition
The Board of Director's Committee on Compensation and Executive Development is
responsible for the Corporation's executive compensation programs, which are
designed to align management's interests with those of shareowners. The Board
is confident that, in fact, the Corporation's employment and executive
compensation practices already incorporate appropriate employee training,
motivation and safety criteria.
The Corporation has long placed a high priority on the development, growth and
retention of employees, consistent with business considerations. As part of its
incentive compensation program, the Corporation already requires that business
unit presidents take on non-financial objectives related to the environment,
health and safety of employees and employee participation in training and
development programs. Significant results have been achieved through these
initiatives. For example, UTC's safety programs have reduced lost time injuries
by 83% since 1992. The Corporation also offers and encourages participation in
a wide range of programs to promote the health, safety and development of
employees. A noteworthy example is the Corporation's groundbreaking and highly
regarded Employee Scholar Program. Funded at a cost of over $230 million since
1996, this program not only pre-pays tuition and fees for college courses, but
also rewards employees with company stock upon graduation. Over 7,500 UTC
employees have received stock awards and surveys show that these employees are
twice as likely to remain with the Corporation.
The Corporation has provided retraining and educational opportunities,
including extensions of the Employee Scholar Program to eligible laid off or
displaced employees.
The Corporation has also implemented extensive quality and continuous
improvement programs, which emphasize employee training, participation and
feedback. In addition to the thousands of employees who have participated in
quality training at their work facility, over 6,500 employees have completed
courses at the Corporation's quality training center known as Ito University.
The Corporation also conducts and takes actions based on employee surveys that
seek feedback on issues related to employment with UTC. The Board of Directors
believes these initiatives demonstrate that the Corporation has already
established and incorporated in its executive compensation practices
substantial programs and criteria to improve productivity, enhance
competitiveness and develop employee capabilities.
The Board of Directors therefore recommends a vote AGAINST this proposal.
William H. Trachsel
Senior Vice President, General Counsel
and Secretary
Hartford, Connecticut
17
APPENDIX
Charter of the Audit Committee of the Board of Directors
I. PURPOSE
The Audit Committee ("Committee") shall review and make recommendations to the
Board of Directors concerning the reliability and integrity of the
Corporation's financial reporting practices; the adequacy of the Corporation's
system of internal controls; the independence and performance of the
Corporation's internal and external auditors; and the adequacy of processes to
assure compliance with the Corporation's policies and procedures, financial
controls, Code of Ethics and applicable laws and regulations. The Committee
provides the opportunity for an open and candid dialog on these issues among
the Independent Accountant (as described in Section 6.4 of the Bylaws of the
Corporation), management, and Internal Audit.
II. COMPOSITION
The Committee shall be composed of not less than three directors appointed by
the Board of Directors. Members of the Committee shall have no relationship
with the Corporation that may interfere with the exercise of their independence
from management and the Corporation, and be financially literate or become
financially literate, as determined by the Board, within a reasonable period of
time after appointment to the Committee. At least one member of the Committee
shall have accounting or related financial management expertise as determined
by the Board.
III. MEETINGS
The Committee shall meet at least four times annually. The Committee may meet
more frequently, and, as the Committee may require in fulfilling its
responsibilities, it may meet privately with the Independent Accountant,
Internal Audit, members of management and others.
IV. RESPONSIBILITY AND DUTIES
The Committee shall:
1. Review with management and the Independent Accountant the Corporation's
annual audited financial statements, including issues regarding the
accounting principles, practices and judgments that could significantly
affect the financial statements. The Committee, through its Chairman or the
Committee as a whole, shall review with management and the Independent
Accountant the Corporation's quarterly financial statements prior to the
Corporation filing Form 10-Q;
2. Review with management and the Independent Accountant significant
developments in accounting rules and changes in the Corporation's methods of
accounting;
3. Meet periodically with the Independent Accountant to:
(a) ascertain that the Independent Accountant has received all explanations
and had access to all information considered necessary to conduct the
audit, including a review of any difficulties encountered in the course
of audit work;
(b) discuss with the Independent Accountant the adequacy of internal
accounting controls and any matters the Independent Accountant considers
desirable or necessary under generally accepted auditing standards;
(c) review the scope of the audit proposed by the Independent Accountant for
the forthcoming year;
(d) review and discuss with the Independent Accountant all significant
services and relationships between the Independent Accountant and the
Corporation to confirm the objectivity and independence of the
Independent Accountant; and
18
(e) obtain from the Independent Accountant, a written statement delineating
all relationships between the Independent Accountant and the Corporation
as contemplated by Independence Standards Board, Standard No. 1,
"Independence Discussions with Audit Committees";
4. Recommend to the Board of Directors a firm to be nominated as the
Corporation's Independent Accountant for the succeeding year. The
Independent Accountant shall be accountable to the Committee and the Board
of Directors. The Committee shall review the performance of the Independent
Accountant and recommend to the Board any actions the Committee deems
appropriate to ensure the independence and objectivity of the Independent
Accountant. The Committee shall review the compensation arrangements for the
Independent Accountant;
5. Review and concur with the appointment, reassignment or dismissal of the
Director of Internal Audit. Review the Internal Audit Department's budget,
staffing, audit plan and scope of work;
6. Meet periodically with Internal Audit to review the adequacy of internal
accounting controls, compliance with the Corporation's policies and
procedures, financial controls and applicable statutes and regulations;
7. Review periodically the Corporation's tax policies and any pending audits or
assessments;
8. Meet periodically with the Corporation's Business Practices Officer to
review issues of business ethics and compliance, including adherence to the
Corporation's policies and procedures and Code of Ethics and applicable laws
and regulations;
9. Meet periodically with the Corporation's General Counsel to review
litigation and other legal matters;
10. Prepare and approve, acting on the advice of counsel, an annual report of
the Committee for inclusion in the Corporation's annual proxy statement;
11. Undertake such other matters as shall be assigned to the Committee from
time to time by the Board; and
12. Review this Charter annually and recommend changes, if any, to the Board.
The Committee shall have the authority to commit sufficient resources,
including the use of outside experts, to carry out its responsibilities. The
Committee shall report to the Board on the results of its activities and
recommend to the Board any actions it deems appropriate.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits, to
determine that the Company's financial statements are complete and accurate or
to determine that such statements are in accordance with generally accepted
accounting principles. It is also not the duty of the Committee to conduct
investigations or to assure compliance with laws and regulations and the
Corporation's policies and procedures. These are the responsibility of
management or the Independent Accountant.
19
[LOGO] United Technologies
[LOGO] United Technologies
One Financial Plaza
Hartford, CT 06103
PROXY Proxy Solicited on Behalf of the Board of Directors of
the Corporation for Annual Meeting, April 10, 2002
The undersigned hereby appoints Charles R. Lee, Frank P. Popoff and H.
A. Wagner, and each of them with power of substitution to each,
proxies for the undersigned to act and vote at the Annual Meeting of
the Shareowners of United Technologies Corporation to be held April
10, 2002 at 2:00 p.m., and at any adjournment thereof, as directed on
this card, upon the matters set forth on the reverse side hereof, all
as described in the Proxy Statement, and, in their discretion, upon
any other business which may properly come before said meeting.
This card also constitutes voting instructions to the Trustee under
each of the United Technologies Corporation employee savings plans to
vote, in person or by proxy, (i) the proportionate interest of the
undersigned in the shares of Common Stock of United Technologies
Corporation held by the Trustee under any such plan(s), and (ii) the
proportionate interest of the undersigned in the shares of Series A
ESOP Convertible Preferred Stock of United Technologies Corporation
held by the Trustee under any such plan(s), in each case as described
in the Proxy Statement. To withhold a vote for any individual, insert
the nominee's name (or the number provided below) in the blank
provided in Item 1 on the reverse of this proxy card.
Election of Directors, Nominees:
01 George David 04 Charles R. Lee 08 Andre Villeneuve
02 Jean-Pierre Garnier 05 Richard D. McCormick 09 H. A. Wagner
03 Jamie S. Gorelick 06 Frank P. Popoff 10 Sanford I. Weill
07 H. Patrick Swygert
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The proxy holders cannot vote your
shares unless you sign and return this card.
----------------
SEE REVERSE
SIDE
----------------
--------------------------------------------------------------------------------
/|\ FOLD AND DETACH HERE /|\
United Technologies Corporation
Notice Of
Annual Meeting of Shareowners
Wednesday, April 10, 2002
2:00 p.m.
Celeste Bartos Forum
The New York Public Library
5th Avenue & 42nd Street
(Please use entrance on 42nd Street)
New York, New York
|
Please mark your |
X votes as in the | 1787
example. ----------
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR all of the Board of
Directors nominees, FOR proposal 2 and AGAINST proposals 3, 4 and 5, or if this
card constitutes voting instructions to a Savings Plan Trustee, such Trustee
will vote as described in the Proxy Statement.
--------------------------------------------------------------------------------
FOR WITHHELD
1. Election of
Directors.
(see reverse)
Vote for nominees except:
-----------------------------------------------------
The Board of Directors recommends a vote FOR the election of directors.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Appointment of
Independent
Accountants
The Board of Directors recommends a vote FOR proposal 2.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Shareowner Proposal
Concerning Disclosure
of Political Contributions
4. Shareowner Proposal
Concerning Weapon-
ization of Space
5. Shareowner Proposal
Concerning Measures
of Human Capital
The Board of Directors recommends a vote AGAINST proposals 3, 4 and 5.
--------------------------------------------------------------------------------
SIGNATURE(S) _____________________________________________ Date _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
--------------------------------------------------------------------------------
/|\ FOLD AND DETACH HERE /|\
-----------------------
VOTER CONTROL NUMBER:
-----------------------
VOTE BY MAIL, TELEPHONE OR VIA THE INTERNET
You may return your Proxy Card by mail, or you may use the telephone or Internet
to vote your shares electronically. You may access the telephone or Internet
voting systems 24 hours a day, 7 days a week by using the voter control number
indicated above just below the perforation.
TO VOTE BY MAIL: TO VOTE BY TELEPHONE: TO VOTE VIA THE INTERNET:
--------------- -------------------- ------------------------
Return your signed If you are calling from the Log on to the Internet
and dated proxy in United States or Canada and go to the web site
the envelope provided. and using a touch-tone http://www.eproxyvote.com/utx
telephone, call
1-877-PRX-VOTE
(1-877-779-8683)
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the Proxy Card. If you choose to vote your
shares electronically, there is no need for you to mail back your Proxy Card.
Please note that if you wish to attend the Annual Meeting you must still return
your yellow or blue Ticket Request Card.
ONLINE ACCESS TO PROXY MATERIALS. Shareowners of record may sign up at the
following website for online access to future annual reports and proxy
materials, rather than receiving mailed copies: http://www.econsent.com/utx
THE DIRECT REGISTRATION SYSTEM offers shareowners the ability to register their
shares in "book entry" form without having a physical certificate issued. For
information, call UTC's Shareholder Direct information line at 1-800-881-1914.
UTC'S SHAREOWNER DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN provides eligible
holders of the Corporation's Common Stock with a simple and convenient method of
investing cash dividends and voluntary cash payments in additional shares of
Common Stock without payment of any brokerage commission or service charge.
Shareowners should carefully review the Plan Prospectus before investing. For a
Plan Prospectus contact EquiServe at 1-800-519-3111.
FOR COMPANY INFORMATION call our 24-hour-a-day toll-free Shareholder Direct
information line, which provides recorded summaries of UTC's quarterly earnings
information and other company news. Callers also may request copies of quarterly
earnings and news releases, by either fax or mail, and obtain copies of the UTC
Annual Report and Form 10-K. To access the service, dial 1-800-881-1914.
Additional information about UTC can be found at: http://www.utc.com