DEF 14A
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h85784def14a.txt
WASTE MANAGEMENT INC
1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
WASTE MANAGEMENT, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[WASTE MANAGEMENT LOGO]
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
Dear Stockholder:
We invite you to attend our Annual Meeting of Stockholders on May 18, 2001,
in Houston, Texas. At the meeting, you will hear a report on our operations and
have a chance to meet your directors and executives.
This booklet includes the formal notice of meeting and the proxy statement.
The proxy statement tells you more about the agenda and procedures for the
meeting. It also describes how the Board operates and gives personal information
about our director candidates. Our proxy statement has a new look this year. We
hope you find it easy to read and understand.
For those stockholders with an e-mail account and access to the Internet,
we encourage you to access http://www.proxyvote.com to vote your shares over the
Internet. Also, we encourage you to elect to receive future annual reports,
proxy statements and other materials over the Internet, by following the
instructions in the proxy statement. This electronic means of communication is
quick and convenient and can save the Company a substantial amount of money in
printing and postage costs.
Even if you only own a few shares, we want your shares to be represented at
the meeting. Whether or not you attend the meeting, please vote your shares
either by returning your proxy card or by voting by telephone or Internet as
soon as possible (see the proxy card for instructions on how to vote by
telephone or Internet).
We hope you'll be able to attend the meeting and look forward to seeing you
on May 18th.
Sincerely yours,
/s/ A. MAURICE MYERS
A. Maurice Myers
Chairman of the Board,
President and CEO
April 5, 2001
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
WASTE MANAGEMENT, INC.
DATE AND TIME:
May 18, 2001 at 11:00 a.m., Central Time
PLACE:
The St. Regis Hotel
1919 Briar Oaks Lane
Houston, Texas 77027
PURPOSE:
- Elect three directors
- Ratify appointment of independent accountants
- Approve the Performance-Based Incentive Compensation Plan
- Vote on stockholder proposal to separate the offices of Chairman and CEO
- Conduct other business that is properly raised
Only stockholders of record on March 23, 2001 may vote at the meeting.
Your vote is important. Please complete, sign, date and return your proxy
card promptly in the enclosed envelope, or vote by telephone or over the
Internet by following the instructions on the proxy card.
/s/ LAWRENCE O'DONNELL, III
Lawrence O'Donnell, III
Executive Vice President, General
Counsel
and Corporate Secretary
April 5, 2001
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TABLE OF CONTENTS
PAGE
----
General Information......................................... 1
Board of Directors.......................................... 2
Director Nominees......................................... 2
Directors Continuing in Office............................ 3
Director Compensation..................................... 4
Meetings and Board Committees............................. 4
Director and Officer Stock Ownership........................ 6
Persons Owning More than 5% of Waste Management Stock....... 7
Section 16(a) Beneficial Ownership Reporting Compliance..... 7
Executive Compensation...................................... 8
Compensation Committee Report............................... 10
Compensation Committee Interlocks and Insider
Participation............................................. 13
Related Party Transactions.................................. 13
Stock Performance Graph..................................... 13
Audit Committee Report...................................... 14
Ratification of Independent Auditors........................ 15
Approval of Performance Based Incentive Compensation Plan... 15
Stockholder Proposal........................................ 16
Other Matters............................................... 18
Other Information........................................... 19
Exhibits
Audit Committee Charter................................... A-1
Performance-Based Incentive Compensation Plan............. B-1
Corporate Governance Guidelines........................... C-1
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GENERAL INFORMATION
ABOUT THIS PROXY STATEMENT
We sent you these proxy materials because Waste Management's Board of
Directors is soliciting your proxy to vote your shares at the Annual Meeting.
This Proxy Statement summarizes information that we are required to provide to
you under the rules of the Securities and Exchange Commission and that is
designed to assist you in voting your shares. On April 6, 2001, we began mailing
these proxy materials to all stockholders of record at the close of business on
March 23, 2001.
WHO MAY VOTE
Stockholders of Waste Management, as recorded in our stock register on
March 23, 2001, may vote at the meeting. Each share of Waste Management common
stock is entitled to one vote. As of March 23, 2001, there were 623,599,274
shares of common stock outstanding and entitled to vote.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
HOW PROXIES WORK
Waste Management's Board of Directors is asking for your proxy. There are
three ways to vote by proxy:
- By telephone -- You can vote by telephone by following the instructions
on the proxy card;
- By Internet -- You can vote on the Internet by following the instructions
on the proxy card; and
- By mail -- You can vote by mail by signing, dating and mailing the
enclosed proxy card.
Giving us your proxy means you authorize us to vote your shares at the
meeting in the manner you direct. You may vote for all, some or none of our
director candidates. You may also vote for or against the other proposals or
abstain from voting.
If you sign and return the enclosed proxy card but do not specify how to
vote, we will vote your shares in favor of our director candidates; in favor of
the approval of the Performance-Based Incentive Compensation Plan; in favor of
the ratification of the independent accountants; and against the stockholder
proposal.
You may receive more than one voting or proxy card depending on how you
hold your shares. Shares registered in your name and shares held in the
Retirement Savings Plan are covered by separate cards. If you hold shares
through someone else, such as a broker, you may get material from them asking
how you want to vote.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy with
a later date; by voting in person at the meeting; or by notifying Waste
Management's Corporate Secretary in writing at the following address. Your most
current proxy card or telephone or Internet vote is the one that is counted.
WASTE MANAGEMENT, INC.
Attn: Corporate Secretary
1001 Fannin Street, Suite 4000
Houston, Texas 77002
QUORUM
In order to carry on the business of the meeting, we must have a quorum.
This means that at least a majority of the outstanding shares eligible to vote
must be present at the meeting, either by proxy or in person.
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Abstentions and broker non-votes are counted as present at the meeting for
determining whether we have a quorum. A broker non-vote occurs when a broker
returns a proxy but does not vote on a particular proposal because the broker
does not have discretionary voting power for that particular item and has not
received voting instructions from the beneficial owner.
VOTES NEEDED
Directors are elected by a plurality of shares present at the meeting,
meaning that the director nominee with the most affirmative votes for a
particular slot is elected to that slot.
Approval of the other proposals requires the favorable vote of a majority
of the shares present at the meeting, either by proxy or in person. Abstentions
and broker non-votes have the same effect as a vote against matters other than
director elections, since they count in determining whether the shares are
present, but not as a vote for those matters.
ATTENDING IN PERSON
Only stockholders, their proxy holders and Waste Management's guests may
attend the meeting.
BOARD OF DIRECTORS
The Board of Directors consists of nine directors divided into three
classes (Class I, Class II and Class III) serving staggered three-year terms.
The Class III directors are up for election at the Annual Meeting, and the
nominees for election are all Class III directors.
DIRECTOR NOMINEES
(ITEM 1 ON THE PROXY CARD)
The first proposal on the agenda for the Annual Meeting will be electing
three directors to serve as Class III directors for three-year terms beginning
at this Annual Meeting and expiring at the 2004 annual meeting of stockholders.
The Board has nominated three current directors -- H. Jesse Arnelle, John C.
Pope and Ralph V. Whitworth -- for new, three-year terms (with the exception of
Mr. Arnelle whose term will expire at the 2003 annual meeting of stockholders in
accordance with the Company's Corporate Governance Guidelines) and recommends
that you vote for their reelection. The three nominees receiving the greatest
number of votes will be elected.
The following is a brief biography of each nominee. You will find
information on their holdings of Waste Management stock in the "Director and
Officer Stock Ownership" section on page 6.
H. Jesse Arnelle is 67 years old. He has been a director of the Company or
one of its predecessors since 1991, and his current term as a Class III director
expires in 2001. He currently serves as "Of Counsel" to Womble, Carlyle,
Sandridge and Rice, a law firm in Winston-Salem, North Carolina. He was senior
partner of Arnelle, Hastie, McGee, Willis and Greene, a San Francisco-based law
firm, until 1996. He is currently a director of Florida Power & Light ("FPL
Group"), Eastman Chemical Corporation, Textron Corporation, Gannett Corporation
and Armstrong World Industries, Inc. Mr. Arnelle will retire from the Board at
the 2003 annual meeting of stockholders, in accordance with the Company's
Corporate Governance Guidelines.
John C. Pope is 52 years old. He has been a director of the Company or one
of its predecessors since 1997, and his current term as a Class III director
expires in 2001. He serves as Chairman of the Board of PFI Group, a private
investment firm. He served as Chairman of the Board of MotivePower Industries,
Inc., a manufacturer and remanufacturer of locomotives and locomotive components
from January 1996 to November 1999. He is currently a director of Federal Mogul
Corporation, Wallace Computer Services, Inc., Air Canada Corporation, Per-Se
Technologies, Inc. and Dollar Thrifty Automotive Group, Inc.
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Ralph V. Whitworth is 45 years old. He has been a director of the Company
since 1998, and his current term as a Class III director expires in 2001. He has
been a principal and managing member of Relational Investors LLC, a private
asset management company, since March 1996. He has also been a partner in
Batchelder & Partners, Inc., a financial advisory and investment-banking firm
based in San Diego, California, since January 1997. He served as Acting Chairman
of the Board of Waste Management from July 1999 to August 1999 and as Chairman
of the Board from August until November 1999. He has served as Chairman of the
Board of Apria Healthcare Group Inc. since April 1998 and has been a director
since January 1998. He is also a director of Sirius Satellite Radio, Inc.,
Tektronix Inc. and Mattel, Inc.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF H. JESSE ARNELLE,
JOHN C. POPE AND RALPH V. WHITWORTH.
DIRECTORS CONTINUING IN OFFICE
The Class I and Class II directors will continue in office following the
Annual Meeting, and their terms will expire in 2002 (Class I) or 2003 (Class
II). The following are brief biographies of each of these directors.
Pastora San Juan Cafferty is 60 years old. She has been a director of the
Company or one of its predecessors since 1994, and her current term as a Class I
director expires in 2002. She has been a Professor since 1985 at the University
of Chicago, where she has been a member of the faculty since 1971. She currently
serves as a director of Kimberly-Clark Corporation, People's Energy Corporation,
Bankmont Financial Corporation and its subsidiaries, Harris Bankcorp, Inc. and
Harris Trust and Savings Bank. She is also a Trustee of Rush-Presbyterian St.
Luke's Medical Center and the Lyric Opera of Chicago.
Ralph F. Cox is 68 years old. He has been a director of the Company or one
of its predecessors since 1993, and his current term as a Class I director
expires in 2002. He has been a management consultant for the past five years. He
currently serves as a director of Abraxas Petroleum Corp. and CH2M Hill, a
consulting engineering firm. He also serves as an Independent Trustee for The
Fidelity Group of funds.
Steven G. Rothmeier is 54 years old. He has been a director of the Company
or one of its predecessors since 1997, and his current term as a Class I
director expires in 2002. He has been Chairman and CEO of Great Northern
Capital, a private investment management, consulting and merchant banking firm,
since March 1993. He is a director of GenCorp., Inc., Department 56, Inc., EW
Blanch Holdings, Inc. and Precision Castparts Inc.
Robert S. Miller is 59 years old. He has been a director of the Company or
one of its predecessors since 1997, and his current term as a Class II director
expires in 2003. He has been Chairman of Federal Mogul Corporation, an
automotive parts manufacturing firm, since September 2000 and was CEO of Federal
Mogul from September 2000 until January 2001. He served as special advisor to
Aetna, Inc., a health insurer, from February 2000 until September 2000. From
November 1999 until February 2000, Mr. Miller served as President and a director
of Reliance Group Holdings, Inc., a property and casualty insurance company. He
served as President and Chief Executive Officer of Waste Management from August
1999 until November 1999 and as non-executive Chairman of the Board of the
Company from July 1998 until May 1999. Mr. Miller serves as a director and Vice
Chairman of Washington Group, Inc., an engineering and construction firm. He is
also a director of Pope & Talbot, Inc. and Symantec Corp.
Paul M. Montrone is 59 years old. He has been a director of the Company or
one of its predecessors since 1989, and his current term as a Class II director
expires in 2003. He has been CEO and a director of Fisher Scientific
International Inc., a manufacturer and distributor of laboratory equipment and
supplies, since December 1991 and Chairman of the Board since January 1998. He
serves as Chairman of the General Chemical Group, Inc., a producer of industrial
chemicals and Chairman of GenTek, Inc., a leading provider of telecommunication
technologies, automotive components and performance chemicals. He is a member of
the Business Roundtable (serving on its Health and Retirement Task Force). He
serves as an advisory director of Sintokogio Ltd., and as President and CEO of
the Metropolitan Opera and on the boards of various other non-profit
institutions, including the Wang Center for the Performing Arts, the Foundation
for the National
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Institute of Health and the Columbia University Graduate School of Business. He
also serves as Chairman and Managing Director of Latona Associates, Inc., a
private merchant bank.
A. Maurice Myers is 60 years old. He has been a director of the Company
since November 1999, and his current term as a Class II director expires in
2003. He has been Chairman of the Board, CEO and President of the Company since
November 1999. He served as Chairman of the Board of Yellow Corp., a freight
transportation company, from July 1996 until November 1999 and as a director,
President and CEO from April 1996 until November 1999. He is on the board of
directors of Cheap Tickets, Inc. and Hawaiian Electric Industries, Inc.
DIRECTOR COMPENSATION
Waste Management employees receive no extra compensation for serving as
directors. In 2000, nonemployee directors received a base fee of $20,000 per
year and reimbursement of meeting expenses. Under the Company's deferred
compensation plan, they could choose to receive the $20,000 in cash, in phantom
stock, or in a combination of cash and phantom stock. Each phantom stock unit is
equal in value to a share of Waste Management stock and is ultimately paid in
cash. These units are credited to the directors' accounts at the same time the
$20,000 annual retainer would otherwise be paid. Any fees that are deferred are
held in the general funds of the Company. In general, deferred amounts are not
paid until after the director retires from the Board. The amounts are then paid
in a lump sum.
We also pay a portion of director compensation in stock. Every year, each
nonemployee director receives 10,000 options to purchase the Company's stock.
Starting in 2001, the nonemployee directors' annual retainer has been
increased to $30,000 per year, plus the reimbursement of meeting expenses. Also
starting in 2001, members of the Board receive $1,250 for each Board and
committee meeting attended. Committee Chairmen receive an additional $625 for
each committee meeting they chair.
MEETINGS AND BOARD COMMITTEES
Last year, the Board held 7 meetings. Each member of the Board of Directors
attended at least 75% of the meetings of the Board and the committees on which
he or she served.
The Board appoints committees to help carry out its duties. In particular,
Board committees work on key issues in greater detail than would be possible at
full Board meetings. Each committee reviews the results of its meetings with the
full Board, and all members of the Board are invited to attend all Committee
meetings. The Board has three standing committees: the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee.
Additionally, the Board has the power to appoint additional committees, as it
deems necessary, and in 1999 appointed the Special Committee I and the Special
Committee II.
The Audit Committee consists of Mr. Montrone, Mr. Pope (Chairman) and Mr.
Rothmeier. During 2000, the Audit Committee held 6 meetings. The Audit
Committee's duties generally are:
- to review the annual audited financial statements with management and
recommend to the Board whether those financial statements should be
included in the Company's Annual Report on Form 10-K;
- to review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of the Company's Form
10-Q;
- to recommend to the Board independent auditors to annually audit the
Company's books and records;
- to approve the fees to be paid to the independent auditors;
- to review the independence of the independent auditors;
- to review external and internal audit plans, staffing, reports and
activities;
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- to review with management, the independent auditors and internal auditors
the Company's financial reporting, accounting and auditing practices and
the adequacy and effectiveness of accounting and financial controls that
could affect the Company's financial statements; and
- to report the results of its reviews to the Board.
A copy of the Audit Committee's charter is attached to this Proxy Statement
as Exhibit A.
The Compensation Committee consists of Ms. Cafferty, Mr. Montrone
(Chairman) and Mr. Whitworth. During 2000, the Compensation Committee met 4
times. The duties of the Compensation Committee generally are:
- to review and recommend to the Board compensation for the Company's
executive officers and senior management;
- to recommend to the Board new, and changes to existing, compensation and
benefit plans;
- to recommend to the Board annual incentive compensation plan bonus goals
for executive officers and senior management and grant options under the
Company's stock option plans;
- to review and consider the annual evaluation of the CEO prepared by the
Nominating and Governance Committee and recommend to the Board the
compensation of the CEO;
- to annually review, and make recommendations to the Board with respect
to, compensation of the non-employee directors; and
- to make regular reports to the Board.
The Nominating and Governance Committee consists of Mr. Arnelle, Mr. Cox,
Mr. Miller and Mr. Whitworth (Chairman). The Nominating and Governance
Committee met 4 times in 2000. The duties of the Nominating and Governance
Committee generally are:
- to review, and make recommendations to the Board regarding, the overall
effectiveness, organization and structure of the Board and its
committees;
- to establish criteria for membership on the Board and its committees and
identify and propose to the Board nominees to fill Board vacancies as
they occur;
- to coordinate an annual evaluation of the CEO by non-employee directors
and provide the results of such evaluation to the Compensation Committee;
- to coordinate an annual evaluation by the directors of the Board's
performance and procedures;
- to review, and make recommendations to the Board regarding, corporate
governance matters; and
- to make regular reports to the Board.
Additionally, the Nominating and Governance Committee will consider
stockholders' suggestions for nominees for directors. To suggest a nominee, you
should submit your suggestion in writing to the Nominating and Governance
Committee at the Company's executive offices between November 6, 2001 and
December 6, 2001.
The Special Committee I consists of Mr. Montrone, Mr. Pope (Chairman) and
Mr. Rothmeier. In 2000, the Special Committee I met 7 times. The Special
Committee I's general duties are:
- to conduct a full investigation and evaluation of all matters relating
to:
- the reporting of the Company's first and second quarter 1999 operating
results;
- the sales of Waste Management stock by certain corporate officials; and
- the allegations made in certain pending litigation about these matters.
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- to report its findings and recommendations to the members of the Board
that it finds are disinterested enough to act on the findings and
recommendations.
The Special Committee I completed its investigation and reported its
findings and recommendations to the Board in 2000.
The Special Committee II consists of Mr. Myers. The Special Committee II's
general duties are:
- to make decisions about the Company's response to allegations in certain
stockholder derivative lawsuits;
- to investigate the conduct of the board of Waste Management Holdings,
Inc. (formerly known as "Waste Management, Inc.") in connection with the
merger between Waste Management Holdings, Inc. and the Company in July
1998; and
- to investigate the conduct of the Board in connection with the
acquisition of Eastern Environmental Services in December 1998.
The Special Committee II completed its investigation and reported its
findings and recommendations to the Board in 2000.
DIRECTOR AND OFFICER STOCK OWNERSHIP
These tables show how much common stock each executive named in the Summary
Compensation Table on page 8 and each nonemployee director and nominee owned on
March 23, 2001. None of these individuals owns more than 1% of the Company's
outstanding shares.
SHARES OF COMMON
STOCK COVERED BY
SHARES OF COMMON OPTIONS EXERCISABLE
NAMED EXECUTIVE OFFICER STOCK OWNED WITHIN 60 DAYS
----------------------- ---------------- -------------------
A. Maurice Myers(1)......................................... 238,985 327,778
Robert P. Damico............................................ 7,470 120,157
David R. Hopkins............................................ 145 87,500
Douglas G. Sobey............................................ 80,175 284,800
Charles A. Wilcox........................................... 2,746 249,781
---------------
(1) The number of shares owned represents shares of restricted stock, of which
62,319 are vested. The number of shares covered by options includes 100,260
options owned by a trust for the benefit of Mr. Myers' children, for which
Mr. Myers serves as trustee. Mr. Myers has disclaimed beneficial ownership
of those securities.
SHARES OF COMMON
SHARES OF STOCK COVERED BY SHARES COVERED BY
COMMON STOCK OPTIONS EXERCISABLE PHANTOM STOCK UNITS
NONEMPLOYEE DIRECTOR/NOMINEE OWNED WITHIN 60 DAYS (1)
---------------------------- ------------ ------------------- -------------------
H. Jesse Arnelle............................ 1,126 30,875 1,576
Pastora San Juan Cafferty................... 3,625 30,875 --
Ralph F. Cox................................ 8,500 80,000 2,206
Robert S. Miller............................ 14,726 432,708 2,678
Paul M. Montrone............................ 3,262 24,350 --
John C. Pope................................ 4,338(2) 22,175 2,109
Steven G. Rothmeier......................... 1,239 24,350 244
Ralph V. Whitworth.......................... 1,186,000(3) 280,000 1,216
---------------
(1) The phantom stock units are paid through the Company's deferred compensation
plan, as discussed under the section "Director Compensation" on page 4. A
phantom stock unit is a fictitious share of the Company's common stock that
is credited to the director's account. The phantom stock unit has the same
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value as a share of Company common stock on the day it is credited, and
receives dividends in the same amount and at the same time as if it were a
real share of the Company's common stock. The value of the phantom stock
unit plus any accrued dividends is paid out on a future date as elected by
the director.
(2) Includes 435 shares held in a trust for the benefit of Mr. Pope's children.
(3) All of these shares are held by limited partnerships and managed accounts
controlled by Relational Investors, LLC, of which Mr. Whitworth is a
principal and managing member. Mr. Whitworth disclaims beneficial ownership
of these shares.
On March 23, 2001, Waste Management's directors and executive officers (23
people) together owned 1,688,061 shares of Waste Management stock and 2,575,823
shares covered by options exercisable within 60 days, representing less than one
percent of the outstanding shares.
PERSONS OWNING MORE THAN 5% OF WASTE MANAGEMENT STOCK
The table below shows the beneficial ownership of the Company's common
stock as of March 23, 2001, for persons that we know, based on Schedules 13D and
13G filed with the SEC, own 5% or more of our common stock.
SHARES BENEFICIALLY OWNED
-------------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ----------- --------
Barrow, Hanley, Mewhinney & Strauss, Inc. .................. 36,407,042 5.80%
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, Texas 75204
Legg Mason, Inc. ........................................... 46,814,752 7.53%
100 Light Street
Baltimore, Maryland 21202
Southeastern Asset Management, Inc. ........................ 42,720,409 6.90%
6410 Poplar Ave., Suite 900
Memphis, Tennessee 38119
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, executive officers, directors and
stockholders who own more than 10% of Waste Management stock are required to
file reports of their ownership, as well as any changes in their ownership, with
the SEC and the New York Stock Exchange. They are also required to provide the
Company with copies of any forms they file.
After reviewing the copies of the forms given to the Company and written
representations from the executive officers and directors, the Company believes
that during the last fiscal year, the executive officers and directors complied
with all of their requirements to report their ownership, except Mr. Hopkins'
Annual Statement of Changes in Beneficial Ownership on Form 5 was filed late,
due to an administrative error.
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EXECUTIVE COMPENSATION
These tables show the compensation of Waste Management's CEO and the four
most highly paid executives other than the CEO. You can see the Compensation
Committee's report starting on page 10 for an explanation of the Company's
compensation philosophy.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION OTHER RESTRICTED SECURITIES
NAME AND ---------------------------- ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION* AWARD(S)(1) OPTIONS COMPENSATION(2)
------------------ ---- -------- ---------- ------------- ----------- ---------- ---------------
A. Maurice Myers.......... 2000 $850,000 $1,010,700 -- -- 275,415 $33,498
President, CEO and 1999 124,230 650,000 -- $4,124,063 1,500,000 25,698
Chairman of the Board 1998 -- -- -- -- -- --
Robert P. Damico.......... 2000 $414,615 $ 648,660(3) -- -- 150,000 $ 7,800
Senior Vice President -- 1999 400,000 0 -- -- 0 7,200
Midwest Area 1998 310,499 612,334 -- -- 186,965 5,375
David R. Hopkins.......... 2000 $378,173 $1,289,200(4) -- -- 150,000 $ 0
Senior Vice President -- 1999 275,000 220,000 -- -- 0 0
Southern Area(4) 1998 129,038 50,000 -- -- 125,000 0
Douglas G. Sobey.......... 2000 $414,615 $ 663,200(3) -- -- 150,000 $ 7,800
Senior Vice President -- 1999 415,385 0 -- -- 0 3,384
Western Area 1998 343,269 657,600 -- -- 200,000 5,000
Charles A. Wilcox......... 2000 $415,000 $ 820,693(3)(5) -- -- 150,000 $ 7,800
Senior Vice President -- 1999 400,000 0 -- -- 0 7,200
Eastern Area(5) 1998 365,537 786,800 -- -- 200,000 5,000
---------------
* In accordance with SEC rules, perquisites and other personal benefits that
total less than $50,000 of the executive's total annual salary and bonus
have not been included.
(1) Market value of restricted stock on the date of grant. Mr. Myers received
265,000 shares of restricted stock, which vest in equal increments over
three years.
(2) Includes contributions by the Company under its 401(k) plan and, in the case
of Mr. Myers, includes premium payments made by the Company for Mr. Myers'
life insurance in the amount of $25,698 in 1999 and 2000.
(3) As reported in the Company's proxy statement for the 2000 annual meeting,
Mr. Damico, Mr. Sobey and Mr. Wilcox were not included in the Company's
revised 1999 annual incentive compensation plan. Because these executives
were not included in the revised 1999 annual incentive compensation plan and
received no bonus under that plan, in May 2000 it was determined appropriate
to pay bonuses of $274,640, $292,400 and $374,393 to Mr. Damico, Mr. Sobey
and Mr. Wilcox, respectively. These payments are included in the 2000 bonus
payments shown in the table above.
(4) Mr. Hopkins served as Senior Vice President -- International Operations and
CEO of Waste Management International, Inc. from July 1998 through March
2000, at which time he became Senior Vice President -- Southern Area. Mr.
Hopkins' bonus includes a payment of $323,700 under the 2000 annual
incentive compensation plan and $965,500 under the International Divestiture
Incentive Plan, reflecting compensation for Mr. Hopkins' involvement in 2000
in the Company's divestiture of substantially all of its international
operations.
(5) In November 1999, the Company's Atlantic Area and Eastern Area both became
Mr. Wilcox's responsibility. Mr. Wilcox's bonus reflects a payment under the
2000 annual incentive compensation plan of $341,200 for his management of
the Eastern Area plus an additional $105,000 for his management of the
Atlantic Area during 2000.
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OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (#) FISCAL YEAR (PER SHARE) DATE 5% 10%
---- ---------- ------------ ----------- ---------- ---------- ----------
A. Maurice Myers.............. 275,415 3.8% $16.6875 1/03/2010 $2,890,392 $7,324,821
Robert P. Damico.............. 150,000 2.1% $14.8125 2/28/2010 $1,397,325 $3,541,097
David R. Hopkins.............. 150,000 2.1% $14.8125 2/28/2010 $1,397,325 $3,541,097
Douglas G. Sobey.............. 150,000 2.1% $14.8125 2/28/2010 $1,397,325 $3,541,097
Charles A. Wilcox............. 150,000 2.1% $14.8125 2/28/2010 $1,397,325 $3,541,097
---------------
(1) The exercise price of the option is the market price of Waste Management
stock on the grant date. Options granted to senior executives generally
become exercisable in 25% annual increments beginning one year after the
date of grant. The maximum option term is 10 years after grant.
(2) These columns show the gains the executives could realize if Waste
Management's stock appreciates at a 5% or 10% rate over the ten-year term
of the options. These growth rates are arbitrary assumptions specified by
the SEC, not Waste Management's predictions.
OPTION EXERCISES AND VALUES AT FISCAL YEAR END
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END(#) AT FISCAL YEAR END*
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
A. Maurice Myers(1)......... -- -- 327,778 1,447,637 $3,994,795 $17,333,234
Robert P. Damico............ -- -- 78,668 258,989 $ 0 $ 1,940,625
David R. Hopkins............ -- -- 50,000 225,000 $ 0 $ 1,940,625
Douglas G. Sobey............ 15,000 $71,139 247,300 282,000 $1,866,605 $ 1,941,875
Charles A. Wilcox........... -- -- 207,281 323,719 $ 680,579 $ 1,991,616
---------------
* The difference between the option exercise price and the market value of
Waste Management stock at year-end, which was $27.75 based on the closing
price on the NYSE on December 29, 2000. The actual gain, if any, an
executive realizes will depend on the market price of Waste Management stock
at the time of exercise. "In-the-money" means the market price of the stock
is higher than the exercise price of the option on the date specified.
(1) Included in Mr. Myers' calculations are the number and value of 100,260
options owned by a trust for the benefit of Mr. Myers' children, for which
Mr. Myers serves as trustee. Mr. Myers has disclaimed beneficial ownership
of these options.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of the
executive officers named in the Summary Compensation Table under the section
"Executive Compensation" on page 8. Each of the employment agreements is for a
five-year term, and continuously renews for additional five-year periods. The
agreements provide for the payment of minimum annual base salaries, a target
annual bonus and participation in all Waste Management benefit plans and
programs.
The agreements also provide for certain severance in the case of
termination of employment or in the event of a change in control of the Company.
If employment ends because of death or total disability, generally salary is
paid for two years, all options vest and there is one year in which the options
may be exercised, and Company benefits are paid in accordance with the terms of
the Company's benefit plans relating to those circumstances.
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If the Company terminates the executive's employment for "cause" (as
defined in the employment agreements), the Company will pay any accrued but
unpaid salary, expenses required to be reimbursed, vacation and any earned but
unpaid bonuses for prior periods. Company benefits will be paid in accordance
with the terms of the Company's benefit plans and all unvested options or other
awards will be cancelled on the date of termination. If the executive decides to
leave the Company other than for "good reason" (as defined in the employment
agreements), the severance is the same, except the executive will generally have
90 days after terminating his employment to exercise any already vested options.
If the Company terminates the executive's employment without cause or the
executive leaves the Company with good reason, the Company will pay to the
executive all accrued or earned but unpaid amounts due to him as of the date of
termination plus an amount equal to two times the sum of his base salary plus
his target annual bonus. Generally, all benefits will continue for two years and
all stock options and other awards will continue to vest over the two year
period, to the extent the vesting is not accelerated as of the date of
termination in accordance with the terms of the employment agreement. The
executive will have two years and six months from the date of termination to
exercise any of the awards, but not to exceed the term of the option.
The agreements also provide for certain severance if there is a "change in
control" (as defined in the agreements) of the Company and the executive (i)
leaves the Company for good reason thereafter, (ii) is terminated without cause
thereafter or (iii) the termination of employment in (i) or (ii) occurs "in
contemplation" of a change in control. In these cases, the executive will
receive the same severance as described in the preceding paragraph, except the
severance will be three times the base salary and target annual bonus instead of
two times and the benefits will continue for three years instead of two years.
The stock options and other awards will become fully vested and will remain
exercisable for three years after termination, but not to exceed the term of the
option. The executive shall also receive a prorated bonus at the maximum bonus
level. Additionally, if there are any payments under the agreements due to a
change in control, the executives will receive certain gross-up payments such
that the net amount received by the executive pursuant to the agreement will not
be reduced by any excise taxes.
The employment agreements also include covenants not to compete and not to
solicit employees after leaving the Company, as well as confidentiality
provisions as are customary, in nature and scope, for such agreements.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has prepared the
following report regarding 2000 executive compensation. The Compensation
Committee is composed entirely of non-employee directors and is responsible for
the Company's compensation programs, as described in the "Meetings and Board
Committees" section of the Proxy Statement. This report provides specific
information regarding compensation for the Company's CEO as well as compensation
information for all executives of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES OF EXECUTIVE COMPENSATION
Programs
It is the philosophy of the Company and the Committee that all compensation
programs should (i) link pay to individual's and the Company's performance and
(ii) be competitive in the market to enable the Company to attract, motivate,
reward and retain the executive talent required to achieve corporate objectives.
Waste Management also focuses strongly on compensation tied to stock price
performance, which provides the clearest link to enhanced stockholder value.
From time to time, the Committee works with compensation consultants to assist
with the design, implementation and communication of various compensation plans.
The Company determines competitive levels of compensation by looking at
compensation data for companies with revenues comparable to the Company and
information obtained from compensation consultants. The Company's compensation
for executives include base salaries, annual performance-based incentives,
certain executive benefits and long-term incentives.
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In designing Waste Management's compensation programs, the Compensation
Committee's primary consideration is the Company's achievement of strategic
business goals that serve to enhance stockholder value. Section 162(m) of the
Internal Revenue Code, as amended, limits a company's ability to deduct
compensation paid in excess of $1 million during any fiscal year to the Chief
Executive Officer and the four highest paid officers other than the CEO, unless
such compensation meets certain performance-based requirements. The Company's
stock option grants currently meet the performance-based requirements under
Section 162(m). The Company's Performance-Based Incentive Compensation Plan has
been designed to meet the performance-based requirements under Section 162(m).
The Committee may, however, authorize payment of non-deductible compensation in
the future if it determines that such action would be in the best interests of
the Company's stockholders.
Base Salaries
Base salaries for the Company's executives in 2000 were reviewed through
comparisons with the competitive market data described above. In determining
salary increases, the Committee, using its discretion, considers market base
salary rates, average annual salary increases for executives in companies of
relative size across the country, and overall corporate financial performance.
The Committee also makes a subjective review of executives' individual
performance in making base salary increase decisions. The Company's philosophy
is to target base salary at the 50th percentile of the competitive market. The
current base salary levels for named executives officers are generally
consistent with the 50th percentile.
Performance-Based Annual Incentive Compensation
The Company's Performance-Based Incentive Compensation Plan links incentive
compensation to the Company's and the executive's achievement of specific
performance goals. These goals are established at the beginning of each period
by the Compensation Committee based upon corporate objectives determined by the
Board, and for 2000 included:
(1) Return on Capital Employed (measured against internal objectives);
(2) Earnings Before Income Tax, Depreciation, and Amortization
(measured against internal objectives); and
(3) Individual performance (measured against specific personal
performance objectives).
Each performance goal, including the specific criteria for such goal, is
weighted based upon the relative importance of each goal as determined by the
Compensation Committee.
A bonus target, ranging up to 100% of base salary, is established for each
of the Company's executives under the Company's Performance-Based Incentive
Compensation Plan. These bonus targets are based upon individual position, level
of responsibility and each individual's ability to impact the Company's success.
In 2000, the Company targeted annual incentive compensation at the 50th
percentile of the market. Actual bonus awards are adjusted based on the
Company's and the executive's achievement of the performance goals and can range
from 0% to 200% of bonus target.
Long-Term Incentive Compensation
The Company believes that its executives should have an ongoing stake in
the long-term success of the Company. The Company also believes these key
employees should have a considerable portion of their total compensation tied to
the Company's stock price performance, since stock-related compensation is
directly tied to stockholder value. The Company targets long-term incentive
compensation to be between the 50th and 75th percentile of the competitive
compensation data described above.
The Company primarily uses stock options to deliver long-term incentives to
executive officers. Stock options provide a strong tie between pay and
performance, since executives only realize value from stock options if the
Company's share price rises after the date of grant. The Compensation Committee
annually
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reviews competitive market data to determine appropriate stock awards to
executives. All stock options in 2000 were granted at 100% of fair market value
at the time of grant.
Other Executive Benefits and Perquisites
The Company also provides certain benefits and perquisites to its
executives. These benefits and perquisites are not tied to any formal
performance criteria and are intended to serve as part of a competitive total
compensation package. These benefits and perquisites include such things as
supplemental retirement plans and change-in-control arrangements. Levels of
Company benefits and perquisites for executives were in line with market 50th to
75th percentile levels in 2000.
2000 CHIEF EXECUTIVE OFFICER COMPENSATION
Base Salary
The Committee established Mr. Myers' annualized base salary at $850,000 in
November 1999 when he joined the Company. This base salary was set below the
1999 competitive market 50th percentile in recognition of the stock-based
compensation awards provided to Mr. Myers when he was hired. Mr. Myers did not
receive an adjustment to his base salary in 2000.
Annual Bonus
Mr. Myers received a bonus of $1,010,700 for 2000, based on the achievement
of performance goals described above under "Annual Incentive Compensation."
Long-Term Incentives
Mr. Myers received a long-term incentive award of 275,415 stock options on
January 1, 2001. The grant of these stock options was made pursuant to a formula
contained in Mr. Myers' employment agreement which entitled him to stock options
subject to an increase in the market value of the Company's stock between the
time Mr. Myers joined the Company and January 1, 2000. The options were granted
at 100% of fair market value on the date of grant.
The Compensation Committee of the Board of Directors
Paul M. Montrone, Chairman
Pastora San Juan Cafferty
Ralph V. Whitworth
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, Mr. Montrone, Ms. Cafferty and Mr. Whitworth served on the
Compensation Committee. During 2000, none of the Company's executive officers
served as:
- a member of a compensation committee of another company, one of whose
executive officers served on Waste Management's Compensation Committee;
- a director of another company, one of whose executive officers served on
Waste Management's Compensation Committee; or
- a member of a compensation committee of another company, one of whose
executive officers served as a director of Waste Management.
RELATED PARTY TRANSACTIONS
The Company is not aware of any related party transactions that would
require disclosure.
STOCK PERFORMANCE GRAPH
The graph below shows the relative investment performance of Waste
Management stock, the Dow Jones Pollution Control Index and the S&P 500 for the
last five years.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
[PERFORMANCE GRAPH]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
Waste Management.................... $100 $169 $208 $247 $ 91 $147
Dow Jones Pollution Control Index... $100 $111 $122 $127 $ 71 $ 99
S&P 500............................. $100 $123 $164 $211 $255 $232
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AUDIT COMMITTEE REPORT
Each year the Board of Directors appoints an Audit Committee to review the
Company's financial matters. Each member of the Audit Committee meets the
independence requirements set by the New York Stock Exchange. The
responsibilities of the Audit Committee include recommending to the Board an
accounting firm to be hired as the Company's independent accountants. The Audit
Committee is also responsible for recommending to the Board that the Company's
financial statements be included in its annual report.
The Audit Committee has taken the following steps in making its
recommendation that the Company's financial statements be included in it annual
report:
- First, the Audit Committee discussed with Arthur Andersen LLP, the
Company's independent accountants for fiscal year 2000, those matters
required to be discussed by Statement on Auditing Standards No. 61,
including information regarding the scope and results of the audit. These
communications and discussions are intended to assist the Audit Committee
in overseeing the financial reporting and disclosure process.
- Second, the Audit Committee discussed with Arthur Andersen LLP its
independence and received from Arthur Andersen LLP a letter concerning
independence as required under applicable independence standards for
auditors of public companies. This discussion and disclosure helped the
Audit Committee in evaluating such independence. The Audit Committee also
considered whether the provision of financial information systems design
and implementation services and other non-audit services to the Company
is compatible with the auditor's independence.
- Finally, the Audit Committee reviewed and discussed, with the Company's
management and Arthur Andersen LLP, the Company's audited consolidated
balance sheets at December 31, 2000, and consolidated statements of
income, cash flows and stockholders' equity for the fiscal year ended
December 31, 2000.
Based on the reviews and discussions explained above, the Audit Committee
recommended to the Board that the Company's financial statements be included in
its annual report for its fiscal year ended December 31, 2000.
The Audit Committee of the Board of Directors
John C. Pope, Chairman
Paul M. Montrone
Steven G. Rothmeier
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RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 2 ON THE PROXY CARD)
The next proposal on the agenda for the Annual Meeting will be ratifying
the Board's appointment of Arthur Andersen LLP as the Company's independent
auditors for fiscal year 2001.
Arthur Andersen LLP served in this capacity for fiscal 2000, and has
reported on the Company's 2000 consolidated financial statements. The Audit
Committee recommended to the Board that Arthur Andersen LLP be reappointed for
fiscal year 2001.
Representatives of Arthur Andersen LLP will be at the meeting. They will be
able to make a statement if they want, and will be available to answer any
proper questions stockholders may have.
AUDIT FEES
Arthur Andersen LLP's fees for our 2000 audit and the reviews of our
quarterly financial statements were approximately $48 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees paid to Arthur Andersen LLP in 2000 for professional
services with respect to financial information systems design and
implementation.
ALL OTHER FEES
Arthur Andersen LLP's fees for all other professional services rendered to
us during 2000 were approximately $31 million. This includes consulting services
of approximately $22 million primarily related to advising management with
respect to improvements in the Company's systems, processes and controls over
its accounting and financial reporting; approximately $6 million related to
tax-related services and approximately $3 million related to other services. As
set forth in the Audit Committee Report on page 14, the Audit Committee has
considered whether the provision of these non-audit services is compatible with
maintaining auditor independence.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF ARTHUR ANDERSEN
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 2001.
APPROVAL OF PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN
(ITEM 3 ON THE PROXY CARD)
The next proposal on the agenda for the Annual Meeting will be approving
the Board's adoption of the Performance-Based Incentive Compensation Plan. The
purpose of the plan is to advance the Company's interests by providing for
annual cash bonuses in an effort to attract and keep key employees, make their
compensation competitive and give them an incentive to strive to reach Waste
Management's financial and other business goals. All employees of Waste
Management are eligible to be considered for the grant of awards under the plan.
The following is a short summary of the proposed plan. The complete plan is
attached to this proxy statement as Exhibit B.
For participation by executive officers of the Company, the plan will be
administered by the Company's Compensation Committee. (You can find information
about the Compensation Committee on page 5 of the "Meetings and Board
Committees" section.) The CEO will appoint a committee to administer the plan
for those employees who participate in the plan who are not executive officers.
At the beginning of each year, the committees administering the plan will have
complete and final authority to select the people who will be given awards, to
give such awards, and to decide the terms, conditions and amounts of the awards.
Each year, the committees establish target bonuses for each employee
participating in the plan, which are equal to a percentage of the employee's
yearly salary. The maximum amount of any bonus is 200% of the
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target bonus. The actual bonuses are decided on the basis of whether and to what
extent performance goals were met. These performance goals are established by
the committee in writing based on corporate objectives determined by the Board.
The goals are stated in terms of meeting certain levels of or increases in
various financial and/or business measurements. The committee will also create a
formula fixing the extent to which the bonus will be earned based on the level
of meeting the goals. For employees participating in the plan who are not
executive officers, the committee can also choose any other factors to serve as
performance goals. For these employees, the committee has the power to award,
increase or decrease any bonuses even when the performance goals were or were
not met, as the case may be.
For any employee participating in the plan who is an executive officer, the
bonus will have to be based only on the achievement of performance goals
established by the committee and won't be payable unless there is a written
certification by the committee that the performance goals were met. The maximum
bonus award payable to any executive officer under the plan will be $3,000,000.
If there is a change-in-control of Waste Management, the plan year will end
on that date. The definition of the term "change-in-control" can be found in the
Company's 1996 Stock Option Plan for Non-Employee Directors, which was filed as
an exhibit to the Company's Proxy Statement for the 2000 Annual Meeting. You may
obtain a copy of that plan from the Company's Corporate Secretary. The committee
will then calculate and pay bonus awards as soon as practicable. When they
consider the bonuses payable, the committee is allowed to take into
consideration such things as the shorter year due to the change in control and
any other adjustments or formula the committee thinks is fair.
This plan originally became effective in May 1996, after adoption by the
Board and approval by the stockholders at the Company's 1996 Annual Meeting. The
Board made certain minor changes to the plan and adopted it, in its revised
form, in January 2001. The Company is required to resubmit the plan to
stockholders for their approval every five years under IRS Regulations with
respect to Section 162(m) of the Internal Revenue Code. The plan is perpetual in
duration, but the Board can terminate or amend the plan. However, even if the
Board does terminate or amend the plan, any bonus that has been awarded but not
yet paid cannot be affected.
The amounts that will be awarded to each employee participating in the plan
will depend on the performance goals set for each participant and whether or not
those goals were met. Therefore, it is impossible to now determine the amounts
that will be awarded.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN.
STOCKHOLDER PROPOSAL
(ITEM 4 ON THE PROXY CARD)
The following proposal was submitted by the International Brotherhood of
the Teamsters and Gordon V. Smith, individually and as President of the Gordon
V. Smith and Helen C. Smith Foundation, and his wife, Helen C. Smith. The
Company will promptly provide information regarding these stockholders'
addresses, as well as the number of shares of common stock they own upon
receiving an oral or written request to the Company's Corporate Secretary at
1001 Fannin Street, Suite 4000, Houston, Texas 77002, phone number (713)
512-6200.
Stockholder Proposal
That the shareholders of Waste Management, Inc. (WMI) urge the
Board of Directors to adopt a policy that, effective at the end of the
current Chief Executive Officer's employment agreement, the Chairman
of the Board and Chief Executive Officer (CEO) be two different
individuals and that the Chairman be an independent, outside director,
elected by the directors.
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Stockholder Supporting Statements
In support of this proposal, the International Brotherhood of the
Teamsters submitted the following statement:
The primary purpose of the Board of Directors is to protect
shareholders' interest by providing independent oversight of
management, including oversight of the CEO. This is particularly
important in light of the performance of WMI's stock under its series
of CEOs over the past five years. A clear delineation between the role
of Chairman and CEO will promote greater management accountability to
shareholders at WMI.
Corporate governance experts have questioned how one person
serving as both Chairman and CEO can effectively monitor and evaluate
his or her own performance. The NASD Blue Ribbon Commission on
Director Professionalism has recommended that an independent director
should be charged with "organizing the Board's evaluation of the CEO
and providing continuous ongoing feedback; chairing executive sessions
of the Board; setting the agenda with the CEO, and leading the Board
in anticipating and responding to crises."
Separating the positions of Chairman and CEO will enhance
independent Board leadership at WMI. Many institutional investors have
found that a strong, objective Board leader can best provide the
necessary oversight of management. For example, CalPERS Corporate
Governance Core Principles and Guidelines states that "the
independence of a majority of the Board is not enough" and that "the
leadership of the Board must embrace independence, and it must
ultimately change the way in which directors interact with
management."
In recent years, WMI has suffered under several scandals, many of
which could have been nipped in the bud by a Board Chair independent
from the CEO. While WMI is clearly back on track, it still has a long
way to go to reach the post -- USA Waste merger of nearly $58.00 per
share.
We urge fellow shareholders to vote FOR this proposal.
In support of this proposal, Gordon V. and Helen C. Smith
submitted the following statement:
Academicians' studies indicate that the ideal setup for Boards
of Directors is to have a chairman who is an independent outside
director and not to have a CEO who also serves as chairman. The
Harvard Business School so intones in its "Making Corporate Boards
More Effective" executive education course.
I currently serve on a Board so structured and find that
arrangement both useful in protecting shareholder interest and
constructive in that it gives the CEO a sounding board and mentor.
It also frees the CEO's time to attend to other responsibilities. I
therefore submit the foregoing shareholder proposal for action at
the 2001 annual meeting of the shareholders.
Waste Management Response to Stockholder Proposal
The Board of Directors of Waste Management consists entirely of outside,
independent directors, with the exception of Mr. Myers, who joined the Company
in November 1999 as its Chairman of the Board, President and CEO. Mr. Myers was
hired by the Board of Directors to help turn the Company around following the
Company's announcement of the earnings shortfall in the second quarter of 1999,
and the subsequent departure of the Company's corporate senior management,
including the Company's Chairman, CEO, President, CFO, and General Counsel. Mr.
Myers has assembled a new senior management team to run the Company and is in
the process of implementing the Company's strategic plan.
The Board of Directors believes that having Mr. Myers serve as both
Chairman of the Board and CEO enables the Company and the Board to operate
effectively and efficiently. The Board believes that the proposal would unduly
restrict the flexibility of the Board to provide the Company with the most
effective leadership possible. While in some circumstances it may be appropriate
to separate the roles of Chairman and CEO, the
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Board believes that vesting the responsibilities and authority of the Chairman
and the CEO in one person given the current circumstances is in the best
interest of the Company and its stockholders.
The Board is committed to high standards of corporate governance. The Board
has adopted Corporate Governance Guidelines, which are attached to this Proxy
Statement as Exhibit C. The Board currently follows the policies and procedures
set forth in those guidelines, which were in part designed to ensure Board
independence and that the performance of the CEO is actively reviewed and
evaluated by the rest of the Board.
The guidelines further provide that an executive meeting of the
non-employee directors should be held before each regularly scheduled Board
meeting, without the Chairman and CEO present. This executive meeting is chaired
by the chairman of the Nominating and Governance Committee.
The Board's corporate governance also includes a formal process for the
evaluation and review of the CEO. This process involves the Nominating and
Governance Committee coordinating an evaluation of the CEO, a discussion of such
evaluation jointly with the Compensation Committee and the full Board (without
the CEO present) and the Chairman of the Nominating and Governance Committee
serving as a liaison to the CEO.
As set forth in the Company's Corporate Governance Guidelines, all members,
including the committee chairman, of each of the principal standing committees
of the Board, consisting of the Audit Committee, the Compensation Committee, and
the Nominating and Governance Committee, are non-employee directors. Therefore,
Mr. Myers, as Chairman of the Board and CEO, is not a member of any of these
committees. These committees receive authority exclusively through delegation
from the Board, and the Board must ratify all committee actions, unless pursuant
to an express delegation of authority. All members of the Board are invited to
attend all meetings of these committees.
The Audit Committee assists the Board in fulfilling its responsibilities
for the Company's accounting and financial reporting practices and provides a
channel of communication between the Board and the Company's internal and
external auditors. The Audit Committee routinely meets in executive session
separately with the internal and external auditors to inquire whether there are
any matters that should be brought to the attention of the Audit Committee
without management present.
The Compensation Committee is responsible for reviewing and evaluating the
performance of executive officers, and recommending the compensation for
executive officers, including the CEO. The Nominating and Governance Committee
monitors and makes recommendations regarding corporate governance matters and
makes recommendations to the full Board regarding the composition of the Board.
The Company's Corporate Governance Guidelines also provide that each of the
directors is free to contact members of senior management directly.
The Board believes that the Company's corporate governance structure, with
its emphasis on independence and accountability, makes it unnecessary to have an
absolute requirement that the Chairman of the Board be a non-executive of the
Company, and believes adopting such a rule would only serve to limit governance
options available to the Board.
The Board believes that the interests of the Company and its stockholders
are best served by giving the Board the flexibility to determine on a case by
case basis whether the roles of Chairman of the Board and CEO should be served
by a single person or separated.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE ADOPTION OF
THIS PROPOSAL.
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OTHER MATTERS
Neither the Company nor its directors intend to bring any matters before
the Annual Meeting other than the election of the three directors, the approval
of the Performance-Based Incentive Compensation Plan and the ratification of the
Company's auditors. Also, they have no present knowledge that any other matters
will be presented by others for action at the meeting, other than the
stockholder proposal described above. If any other matters are properly
presented, your proxy card authorizes the people named as proxies to vote as
they think best.
OTHER INFORMATION
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Eligible stockholders who want to have proposals considered at the annual
meeting in 2002 or considered for inclusion in the proxy statement for our 2002
annual meeting should notify the Corporate Secretary of the Company. The written
proposal must be received at our offices no later than December 7, 2001 and no
earlier than November 7, 2001. A stockholder must have been the registered or
beneficial owner of at least 1% of our outstanding common stock or stock with a
market value of $1,000 for at least one year before submitting the proposal.
Also, the stockholder must continue to own the stock through the date the 2002
annual meeting is held.
EXPENSES OF SOLICITATION
We pay the cost of preparing, assembling and mailing this proxy-soliciting
material. In addition to the use of the mail, proxies may be solicited
personally, by telephone or telegraph, or by Waste Management officers and
employees without additional compensation. We pay all costs of solicitation,
including certain expenses of brokers and nominees who mail proxy material to
their customers or principals. Also, Corporate Investor Communications has been
hired to help in the solicitation of proxies for the 2001 Annual Meeting for a
fee of approximately $7,500 plus associated costs and expenses.
ANNUAL REPORT
A copy of our 2000 Annual Report to Stockholders, including our Annual
Report on Form 10-K, which includes our financial statements for fiscal year
2000, is enclosed with this Proxy Statement. Neither the Annual Report to
Stockholders nor the Annual Report on Form 10-K is incorporated by reference
into this Proxy Statement or deemed to be a part of the materials for the
solicitation of proxies.
HOW TO RECEIVE NEXT YEAR'S PROXY STATEMENT AND ANNUAL REPORT ON-LINE
You can elect to receive future Waste Management proxy statements and
annual reports over the Internet, instead of receiving paper copies in the mail.
You can do this by going directly to http://www.icsdelivery.com/wm and following
the instructions given, or by going to our website at http://www.wm.com, and
clicking on the link that says "To enroll for electronic delivery of your annual
report & proxy statement, click here."
Additionally, most stockholders who vote their shares for the 2001 Annual
Meeting over the Internet will be given the opportunity to consent to future
Internet delivery of our documents when voting. If you are not given an
opportunity to consent to electronic delivery when you vote your proxy, you may
contact the holder of record through which you hold your shares and ask about
the availability of Internet delivery. If you do consent to Internet delivery, a
notation will be made in your account. When the proxy statement and annual
report for our annual meeting in 2002 become available, you will receive an
email notice instructing you on how to access them over the Internet.
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24
EXHIBIT A
WASTE MANAGEMENT, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board of Directors to assist the
Board in monitoring (1) the integrity of the financial statements of the
Company, (2) the compliance by the Company with legal and regulatory
requirements and (3) the independence and performance of the Company's internal
and external auditors. The Audit Committee shall have and may exercise all the
powers of the Board with respect to the specific authority delegated to the
Audit Committee in this Charter or hereafter specifically delegated to the Audit
Committee by the Board of Directors, except as may be prohibited by law.
The independent auditors of the Company are ultimately accountable to the
Board of Directors and the Audit Committee. The Board of Directors and the Audit
Committee have the ultimate authority and responsibility to select, evaluate,
and, where appropriate, replace the independent auditors (or to nominate the
independent auditor to be proposed for stockholder approval).
The Audit Committee shall be elected by the Board of Directors and shall
consist of not less than three, nor more than five, members of the Board of
Directors. The members of the Audit Committee shall be appointed by the Board on
the recommendation of the Nominating and Governance Committee. The Board of
Directors shall also elect a chairman of the Audit Committee. The members of the
Audit Committee shall meet the independence and experience requirements of the
New York Stock Exchange. In particular, each member shall be (1) independent, as
defined for purposes of the rules of the New York Stock Exchange, and (2)
financially literate, as interpreted by the Board of Directors in its business
judgment, or must become financially literate within a reasonable period of time
after his or her appointment. At least one member of the Audit Committee shall
have accounting or related financial management expertise, as interpreted by the
Board of Directors in its business judgment.
The Audit Committee shall:
- Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
- Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles, practices, and
judgments, as well as the adequacy and effectiveness of accounting and
financial internal controls that could significantly affect the Company's
financial statements.
- Recommend to the Board of Directors whether the Company's annual audited
financial statements and accompanying notes should be included in the
Company's Annual Report on Form 10-K.
- Review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
- Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Form 10-Q;
provided however, that the Chairman of the Audit Committee may represent
the entire Audit Committee for purposes of conducting such review.
- Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures, including a review of the adequacy of reserves.
- Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors
or management.
- Recommend to the Board the appointment of the independent auditor.
- Approve the fees to be paid to the independent auditor for both audit and
non-audit related services.
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- Review the independence of the independent auditors, giving consideration
to the range of audit and non-audit services performed by them. In this
connection, the Audit Committee is responsible for ensuring the
independent auditors furnish at least annually a formal written statement
delineating all relationships with the Company. To evaluate the
independence of the independent auditors, the Audit Committee shall
review the statement; conduct an active discussion with the independent
auditors with respect to any disclosed relationships or services that may
affect the objectivity and independence of the auditors; take any other
appropriate action in response to the independent auditors' statement or
other communications to satisfy itself of the independence of the
independent auditors; and, if so determined by the Audit Committee,
recommend that the Board take appropriate action to satisfy itself of the
independence of the auditor.
- Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that the
Board replace the independent auditor.
- Review the appointment and replacement of the senior internal auditing
executive, and the structure of the internal audit staff.
- Review the significant reports to management prepared by the internal
auditing department and management's responses.
- Meet with the independent auditor and the senior internal auditing
executive prior to the annual audit to review the planning, scope,
adequacy, and staffing of the annual audit.
- Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
- Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company's subsidiaries and
foreign affiliated entities are in conformity with applicable legal
requirements and the Company's Code of Ethical Conduct.
- Discuss with the independent auditor any material changes to the
Company's accounting principles and any matters required to be
communicated by the independent auditor by Statement on Auditing
Standards No. 61 relating to the conduct of the audit (including the
independent auditor's judgments about the quality of the Company's
accounting principals and estimates); provided that the Chairman of the
Audit Committee may represent the entire Audit Committee with respect to
any such discussions in connection with the Company's quarterly financial
statements.
- Review with the internal auditor and the external independent auditor any
problems or difficulties the auditor may have encountered and any
management letter provided by the auditor and the Company's response to
that letter. Such review should include:
- Any difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities or access to required
information.
- Any changes required in the planned scope of the internal and external
audit.
- The internal audit department responsibilities, budget and staffing.
- Prepare the report of the Audit Committee required by the rules of the
Securities and Exchange Commission to be included in the Company's annual
proxy statement.
- Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Ethical Conduct.
- Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.
- Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
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- Perform any other activities consistent with this Charter, the Company's
By-laws, and governing law, with respect to the financial affairs of the
Company, as the Audit Committee deems appropriate, and report such other
activities to the Board at their next meeting.
- Make regular reports to the Board.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles. It
is also not the duty of the Audit Committee to conduct investigations, to
resolve any disagreements between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Ethical
Conduct.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Audit Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Audit
Committee or to meet with any members of, or consultants to, the Audit
Committee.
The Audit Committee will meet as often as the members shall determine to be
necessary or appropriate but at least three times during each year. In addition,
the Audit Committee will make itself available to the independent auditors and
the internal auditors of the Company as requested. Reports of meetings of the
Audit Committee shall be made to the Board of Directors at its next regularly
scheduled meeting following the Audit Committee meeting, accompanied by any
recommendations to the Board of Directors approved by the Audit Committee.
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EXHIBIT B
WASTE MANAGEMENT, INC.
PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 2001)
1. PURPOSE. The principal purpose of the Waste Management, Inc.
Performance-Based Incentive Compensation Plan (the "Plan") is to advance the
interests of Waste Management, Inc. (the "Company") by providing for annual or
other periodic bonuses for key employees of the Company and its subsidiaries who
are designated as participants in the Plan in the manner hereinafter provided,
so as to attract and retain such individuals, make their compensation
competitive with other opportunities and provide them with an incentive to
strive to achieve the Company's financial and other business objectives.
2. ADMINISTRATION. With respect to participation in the Plan by
individuals who are executive officers of the Company ("Key Participants"), the
Plan shall be administered by the Compensation Committee (the "Committee") of
the Board of Directors of the Company (the "Board"). With respect to
participation in the Plan by individuals who are not Key Participants, the Plan
shall be administered by a committee appointed by the Company's Chief Executive
Officer, and all references herein to the "Committee" shall be deemed to mean
such committee as to matters involving the participation in the Plan of such
individuals who are not Key Participants.
3. ELIGIBILITY.
(a) Participants in the Plan for a calendar year (a "Plan Year") shall
be selected by the Committee at the beginning of such Plan Year from among
the key employees of the Company and its subsidiaries.
(b) Notwithstanding the foregoing, individuals who become eligible to
participate in the Plan after the beginning of a Plan Year shall, subject
to selection and approval by the Committee, be entitled to a bonus prorated
to reflect such participant's number of months of participation during the
Plan Year or for any longer period determined by the Committee.
(c) A participant whose employment terminates during the Plan Year
shall not be entitled to the payment of a bonus under the Plan, except,
with respect to a non-Key Participant, as the Committee may otherwise
determine in its sole discretion. The Committee, in its discretion, may
also award all or part of a target bonus to a Key Participant whose
employment terminates due to his disability, death or other circumstances
of cessation of employment as determined appropriate by the Committee.
4. BONUSES. (a) Each participant in the Plan shall be eligible to receive
such bonus, if any, for each Plan Year as may be payable pursuant to the
performance criteria described below. Except as provided in Section 7 below, the
Committee shall establish each Plan Year a "target bonus" for each participant
equal to a percentage of such participant's annual base salary as of the last
day of such Plan Year, and the maximum amount of a target bonus that may be
awarded to a participant for a Plan Year shall be 200% thereof or as limited by
Section 6(c).
(b) Participants shall have their bonuses, if any, determined on the
basis of the degree of achievement of performance goals which shall be
established by the Committee in writing, based on corporate objectives
determined by the Board, and which goals shall be stated in terms of the
attainment of specified levels of or percentage changes (as compared to a
prior measurement period or the current year's budget) in any one or more
of the following measurements: the Company's revenue, earnings per share of
common stock (the "Common Stock"), pretax income, cash flow from
operations, total cash flow, return on equity, return on capital, return on
assets, net operating profits after taxes, economic value added, total
stockholder return, strategic growth, return on sales, or other financial
metrics or individual performance objectives which are measured solely in
terms of the attainment of quantitative targets related to the Company's
business, or any combination thereof. The Committee shall for each Plan
Year establish the performance goal or goals from among the foregoing to
apply to each participant and a formula or matrix prescribing the extent to
which such participant's target bonus shall be earned based upon the degree
of achievement of such performance goal or goals. Except as provided in
Section 7
B-1
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below, the Committee may also designate, with respect to a non-Key
Participant, any other factor or factors to serve as performance goals. The
Committee may determine that the bonus payable to any participant shall be
based upon the attainment of the above-specified performance goals but
applied in whole or in part to the results of a subsidiary, business unit,
division or department of the Company for which such participant has
substantial management responsibility.
(c) Except as provided in Section 7 below, a non-Key Participant whose
target bonus or performance goals are changed by the Committee during the
Plan Year to reflect a change in responsibilities or otherwise shall have
his or her bonus award, if any, based on the amount of base salary earned
and the performance goals applicable while in each target bonus category
during the Plan Year.
(d) The earnings per share of the Company's Common Stock for any year
shall be as determined by the Company's independent public accountants or a
primary, rather than fully-diluted, basis, and all other financial
measurements which are used as the performance goals set forth in this
Section 4 (or as a component of such performance goals) shall be determined
in accordance with generally accepted accounting principles, excluding as
to both such earnings and other measurements the effects of changes in
accounting standards or methods and special, unusual or nonrecurring events
as determined appropriate by the Committee.
(e) Except as provided in Section 6 below, the Committee may, in its
sole discretion, (i) award or increase the amount of bonuses payable to one
or more non-Key Participants even though not earned in accordance with the
performance goals established pursuant to this Section 4, or (ii) decrease
the amount of bonuses otherwise payable to one or more participants even
though earned in accordance with the performance goals established pursuant
to this Section 4.
5. PAYMENT. Payment of bonuses for any Plan Year shall be made in cash as
soon as reasonably practicable after the end of such Plan Year.
6. PARTICIPATION BY CERTAIN OFFICERS. Notwithstanding any other provisions
of the Plan to the contrary, the following provisions shall be applicable to
participation in the Plan by Key Participants:
(a) Each such participant's target bonus under this Plan for such Plan
Year shall be based solely on achievement of one or more of the performance
goals as established by the Committee pursuant to Section 4 above.
(b) With respect to each such participant, no bonus shall be payable
hereunder except upon written certification by the Committee that the
performance goals have been satisfied to a particular extent and that any
other material terms and conditions precedent to payment of a bonus
pursuant to the Plan have been satisfied.
(c) The maximum bonus award payable to any such participant for any
Plan Year shall be $3,000,000.
7. ADJUSTMENTS FOR CHANGES IN STOCK, MERGERS, ETC. In the event of
dividends payable in Common Stock or in the case of the subdivision or
combination of Common Stock, appropriate revision shall be made in any earnings
per share criteria established by the Committee pursuant to Section 4 above. In
the event of a Change in Control (as such term is defined in the Company's 1996
Stock Option Plan for Non-Employee Directors, as may be amended from time to
time) of the Company (i) the Plan Year shall end as of the date of such Change
in Control, (ii) the Committee shall cause any bonus awards payable to
participants for the current Plan Year to be promptly calculated (without any
discretionary decrease pursuant to Section 4(e)(ii)) and (iii) the Company shall
pay such bonus awards to participants (determined as of the date of the Change
in Control without regard to any subsequent termination of employment) as
promptly as practicable following the Committee's determination, notwithstanding
any other Plan provision to the contrary. In calculating the amount, timing,
eligibility and other factors affecting bonuses payable to participant in
connection with the Change in Control, the Committee, as constituted prior to
the Change in Control, is authorized to take into consideration such factors as
the shortened Plan Year, seasonal fluctuations
B-2
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in results of the criteria established under Section 4(b) hereof and any other
equitable adjustments to the formulae or matrices established by the Committee
pursuant to Section 4 as it deems appropriate.
8. PARTICIPANT'S INTERESTS. A participant's interest in any bonus awards
hereunder shall at all times be reflected on the Company's books as a general
unsecured and unfunded obligation to the Company subject to the terms and
conditions of the Plan. The Plan shall not give any person any right or security
interest in any asset of the Company or any fund in which any deferred payment
is deemed invested. Neither the Company, the Board nor the Committee shall be
responsible for the adequacy of the general assets of the Company to discharge
the payment of its obligations hereunder nor shall the Company be required to
reserve or set aside funds therefor.
9. NON-ALIENATION OF BENEFITS: BENEFICIARY DESIGNATION. All rights and
benefits under the Plan are personal to the participant and neither the Plan nor
any right or interest of a participant or any other person arising under the
Plan is subject to voluntary or involuntary alienation, sale, transfer, or
assignment without the Committee's consent, which may be withheld in its
discretion. Subject to the foregoing, the Company shall establish such
procedures as it deems necessary for a participant to designate one or more
beneficiaries to whom any bonus payment the Committee determines to make and any
deferred amounts would be payable in the event of the participant's death.
Absent such a designation, payment shall be made to the participant's estate.
10. WITHHOLDING FOR TAXES. Notwithstanding any other provisions of this
Plan, the Company may withhold from any payment made by it under the Plan such
amount or amounts as may be required for purposes of complying with the tax
withholding or other provisions of the Code or the Social Security Act or any
state's income tax act or for purposes of paying any estate, inheritance or
other tax attributable to any amounts payable hereunder.
11. NO EMPLOYMENT RIGHTS. Nothing contained in the Plan shall confer upon
any participant any right to be continued in the employ of the Company or any of
its subsidiaries or interfere in any way with the right of the Company or any of
its subsidiaries to terminate a participant's employment at any time.
12. GENDER AND NUMBER. Where the context admits, words denoting men
include women, the plural includes the singular, and the singular includes the
plural.
13. COMMITTEE OR COMPANY DETERMINATIONS FINAL. Each determination provided
for in the Plan shall be made by the Committee or the Company, as the case may
be, under such procedures as may from time to time be prescribed by the
Committee or the Company and shall be made in the sole discretion of the
Committee or the Company, as the case may be. As such determination shall be
conclusive on all parties.
14. AMENDMENT OR TERMINATION. The Board may in its sole discretion
terminate or amend the Plan from time to time. No such termination or amendment
shall alter a participant's right to receive a distribution as awarded but
unpaid to such participant, as to which this Plan shall remain in effect
following its termination until all such amounts have been paid.
15. SUCCESSORS. The Plan is binding on and will inure to the benefit of
any successor to the Company, whether by way of merger, consolidation, purchase
or otherwise.
16. CONTROLLING LAW. The Plan shall be construed in accordance with the
laws of the State of Texas.
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EXHIBIT C
WASTE MANAGEMENT, INC.
CORPORATE GOVERNANCE GUIDELINES
BOARD MISSION AND RESPONSIBILITIES
Mission Statement
The Company's primary objective is to maximize stockholder value, while
adhering to the laws of the jurisdictions within which it operates and observing
the highest ethical standards.
Corporate Authority & Responsibility
All corporate authority resides in the Board of Directors as the
representative of the stockholders. The Board delegates authority to management
to pursue the Company's mission. Management, not the Board, is responsible for
managing the Company. The Board retains responsibility to recommend candidates
to the stockholders for elections to the Board of Directors. The Board retains
responsibility for selection and evaluation of the Chief Executive Officer (the
"CEO"), oversight of succession plans, determination of senior management
compensation, approval of the annual budget, and review of systems, procedures
and controls. The Board also advises management with respect to strategic plans.
BOARD STRUCTURE
Board Composition
Non-Employee Directors shall constitute a substantial majority of the
Board.
Number of Directors
The Board shall have an objective to maintain its size at nine directors.
Committees
The standing Board committees shall be the Audit Committee, the
Compensation Committee, and the Nominating and Governance Committee. All
standing committees shall be made up of Non-Employee Directors. Committees shall
receive authority exclusively through delegation from the Board. The Board must
ratify all committee actions unless taken pursuant to an express delegation of
authority. A Director may attend any Board committee meeting.
Non-Employee Directors
"Non-Employee Director" means a person who is independent of management and
free from any relationship with the Company or otherwise that, in the opinion of
the Board of Directors, would interfere in the exercise of independent judgment
as a director. No officer or employee of the Company or its subsidiaries shall
be qualified as a "Non-Employee Director." It is also presumed that no former
officer or employee of the Company may qualify as a "Non-Employee Director,"
provided that this presumption is rebuttable upon an affirmative determination
by the Board.
DIRECTORS
Nominees for Election to the Board
The Nominating and Governance Committee shall recommend nominees to the
full Board for annual elections of directors.
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Retirement
Directors shall submit their resignation due to retirement effective at the
Annual Meeting of stockholders immediately preceding their 70th birthday.
Changes in Professional Responsibility
The Board should consider whether a change in an individual's professional
responsibilities directly or indirectly impacts that person's ability to fulfill
directorship obligations. To facilitate the Board's consideration, (i) the CEO
and other employee directors shall submit a resignation as a matter of course
upon retirement, resignation, or other significant change in professional roles,
and (ii) all Non-Employee Directors shall submit a resignation as a matter of
course upon retirement, a change in employer, or other significant change in
their professional roles and responsibilities.
Director Compensation
From time to time the compensation of directors shall be reviewed by the
Compensation Committee, which shall make recommendations to the full Board. The
Board's philosophy is that a substantial portion of director compensation shall
be equity-based.
Outside Board Memberships
The CEO and other senior management members of the Board shall seek the
approval of the Board before accepting outside board memberships.
BOARD OPERATIONS
Board Agenda
The Chairman shall set the agenda for each Board meeting, taking into
account input and suggestions from members of the Board.
Strategic Planning
The Board shall hold an annual strategic planning session. The timing and
agenda for this meeting is to be suggested by the CEO.
Independent Advice
The Board may seek legal or other expert advice from a source independent
of management. Generally this would be with the knowledge of the CEO.
Access to Top Management
Board members are free to contact members of senior management and are
encouraged to coordinate their contacts with the CEO, President, Chief Financial
Officer or General Counsel.
Executive Meetings of Non-Employee Directors
An executive meeting of Non-Employee Directors should be held before each
Board meeting. The Chairman of the Nominating and Governance Committee shall
lead these sessions.
Mailing Board Meeting Materials
Directors should receive materials for regular Board meetings at least
three calendar days before the meeting. It is recommended that directors receive
three days notice of Special Board Meetings. If necessary, the Company's By-laws
allow for as little as 24 hours formal notice for a Special Board Meeting.
Materials for Special Board Meetings shall be distributed as promptly as
practicable.
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Guidelines Regarding Field Board Meetings or Director Visits to Operational
Sites
Board meetings shall periodically include operational site visits.
Management shall determine appropriate sites and scheduling for such meetings.
Board Evaluation
The Nominating and Governance Committee shall be responsible for evaluating
directors as part of its process for recommending director nominees to the
Board.
The Nominating and Governance Committee shall be responsible for
coordinating an annual evaluation by the directors of the Board's performance
and procedures.
CEO Evaluation
The Nominating and Governance Committee shall be responsible for
coordinating an annual evaluation of the CEO by the Non-Employee Directors. The
Non-Employee Directors will also determine guidance for the Compensation
Committee with respect to CEO compensation. The Chairman of the Nominating and
Governance Committee shall be the liaison with the CEO.
Management Succession
The Board shall coordinate with the CEO to ensure that a successor for
emergencies is designated at all times and that a formalized process governs
long-term management development and succession. The CEO shall report to the
Board annually about development of senior management personnel and succession
plans.
Media Relations
Management speaks for the Company.
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[WASTE MANAGEMENT LOGO] VOTE BY INTERNET - www.proxyvote.com
C/O PROXY SERVICES Use the Internet to transmit your voting
P.O. BOX 9142 instructions and for electronic delivery
FARMINGDALE, NY 11735 of information up until 11:59 P.M.
Eastern Time the day before the cut-off
date or meeting date. Have your proxy
card in hand when you access the web
site. You will be prompted to enter your
12-digit Control Number which is located
below to obtain your records and to
create an electronic voting instruction
form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until 11:59
P.M. Eastern Time the day before the
cut-off date or meeting date. Have your
proxy card in hand when you call. You
will be prompted to enter your 12-digit
Control Number which is located below and
then follow the simple instructions the
Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and
return it in the postage-paid envelope we
have provided or return it to Waste
Management, Inc., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: WASTE1 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
====================================================================================================================================
WASTE MANAGEMENT, INC.
VOTE ON DIRECTORS
FOR WITHHOLD FOR ALL To withhold authority to vote, mark "For All
1. Proposal to elect ALL ALL EXCEPT Except" and write the nominee's number on the
01) H. Jesse Arnelle, line below.
02) John C. Pope and [ ] [ ] [ ]
03) Ralph V. Whitworth ------------------------------------------------
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
2. Proposal to ratify the
appointment of Arthur [ ] [ ] [ ]
Andersen LLP as
independent auditors for
2001.
3. Proposal to approve Note: In their discretion, upon such other matters that may properly
adoption of [ ] [ ] [ ] come before the meeting or any adjournment or adjournments thereof.
Performance-Based
Incentive Compensation The shares represented by this proxy when properly executed will be
Plan. voted in the manner directed herein by the undersigned stockholder(s).
If no direction is made, this proxy will be voted FOR items 1, 2 and 3.
THE DIRECTORS RECOMMEND A VOTE If any other matters properly come before the meeting, the persons named
"AGAINST" PROPOSAL 4 in this proxy will vote in their discretion.
4. Proposal to separate the
offices of Chairman and [ ] [ ] [ ]
CEO.
-------------------------------------------------- --------------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
====================================================================================================================================
34
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WASTE MANAGEMENT, INC.
Annual Meeting of Stockholders - May 18, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Waste Management, Inc., a Delaware
corporation, hereby acknowledge(s) receipt of the Proxy Statement dated April 5,
2001, and hereby appoint(s) A. Maurice Myers and Lawrence O'Donnell, III, and
each of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Stockholders of Waste Management, Inc., to
be held May 18, 2001 at 11:00 a.m., Central time, at The St. Regis, Houston,
Texas 77027, and at any adjournment(s) thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on all matters set forth on the reverse side.
ATTENTION PARTICIPANTS IN 401(k) PLANS: If you have an interest in the Common
Stock of Waste Management, Inc. through participation in the Waste Management
Retirement Savings Plan or the Waste Management Retirement Savings Plan for
Collectively Bargained Employees, you may confidentially instruct the Trustee(s)
of the respective plan on how to vote the shares representing your proportionate
interest in such plan's assets. The Trustee(s) shall vote shares in accordance
with any instructions received. Any shares for which the Trustee(s) has not
received timely voting instructions shall be voted by the Trustee(s) in its sole
discretion.
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