UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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. )
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[ ] Soliciting Material Pursuant to Rule 14a-12
WASTE MANAGEMENT, INC.
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(Name of Registrant as Specified In Its Charter)
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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 16, 2003,
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.
For those stockholders with 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 detailed 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 16th.
SINCERELY YOURS,
(/S/ A. MAURICE MYERS)
A. MAURICE MYERS
Chairman of the Board,
President and CEO
April 4, 2003
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF WASTE MANAGEMENT, INC.
DATE AND TIME:
May 16, 2003 at 11:00 a.m., Central Time
PLACE:
The St. Regis Hotel
1919 Briar Oaks Lane
Houston, Texas 77027
PURPOSE:
- To elect nine directors;
- To ratify the appointment of Ernst & Young LLP ("Ernst & Young") as
our independent auditors for the fiscal year ending December 31, 2003;
- To vote on a proposal to amend our Employee Stock Purchase Plan (the
"ESPP") to increase the number of shares we can issue under the plan;
- To vote on a stockholder proposal relating to disclosure of our
strategy on opposition to privatization; and
- To conduct other business that is properly raised at the meeting.
Only stockholders of record on March 21, 2003 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- DAVID P. STEINER
DAVID P. STEINER
Senior Vice President, General Counsel
and Corporate Secretary
April 4, 2003
TABLE OF CONTENTS
PAGE
----
General Information......................................... 1
Board of Directors.......................................... 2
Director Nominees......................................... 3
Director Compensation..................................... 4
Meetings and Board Committees............................. 5
Director and Officer Stock Ownership........................ 7
Persons Owning More than 5% of Waste Management Stock....... 8
Section 16(a) Beneficial Ownership Reporting Compliance..... 8
Executive Officers.......................................... 8
Executive Compensation.................................... 10
Compensation Committee Report............................. 13
Compensation Committee Interlocks and Insider
Participation............................................. 15
Related Party Transactions.................................. 16
Stock Performance Graph..................................... 16
Audit Committee Report...................................... 16
Ratification of Independent Auditors........................ 17
Approval of Amendment to the ESPP........................... 19
Equity Compensation Plans Information....................... 20
Stockholder Proposal........................................ 21
Other Matters............................................... 22
Other Information........................................... 22
Appendices
Audit Committee Charter................................... A-1
Corporate Governance Guidelines........................... B-1
Employee Stock Purchase Plan.............................. 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 ("SEC") and that
is designed to assist you in voting your shares. On April 4, 2003 we began
mailing these proxy materials to all stockholders of record at the close of
business on March 21, 2003.
WHO MAY VOTE
Stockholders of Waste Management, as recorded in our stock register at the
close of business on March 21, 2003, may vote at the meeting. Each share of
Waste Management common stock is entitled to one vote. As of March 21, 2003,
there were 591,459,383 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, in which case your proxy will be revoked.
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. If you sign your proxy but do not give voting
instructions, we will vote your shares as follows:
- In favor of our director candidates;
- In favor of the ratification of the independent auditors;
- In favor of the amendment to the ESPP; and
- Against the stockholder proposal relating to disclosure of our strategy
on opposition to privatization.
For any other matters that may properly come before the meeting, your
shares will be voted at the discretion of the proxy holders. You may vote for
all, each or none of our director candidates. You may also vote for or against
the other proposals, or you may abstain from voting.
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 ESPP are
covered by separate proxy cards. If you hold shares through someone else, such
as a broker, you may also get material from them asking how you want to vote.
You should complete and return each proxy or other voting instruction request
provided to you.
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 our Corporate
Secretary in writing at the following address. Your most current vote is the one
that is counted unless you vote in person at the meeting.
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. 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 signs and 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 the nine nominees that receive the highest number of votes cast in favor
of their election will be elected.
The ratification of the independent auditors, the approval of the amendment
to the ESPP and the stockholder proposal require the favorable vote of a
majority of the shares present, either by proxy or in person, and entitled to
vote.
Abstentions have the same effect as a vote against a matter because they
are considered present and entitled to vote, but are not voted.
Broker non-votes will be considered present for quorum purposes but not
considered entitled to vote. Accordingly, broker non-votes will have no effect
on the vote.
ATTENDING IN PERSON
Only stockholders, their proxy holders and our invited guests may attend
the meeting. If you plan to attend, please bring identification and, if you hold
shares in street name, you should bring your bank or broker statement showing
your beneficial ownership of Waste Management stock in order to gain admittance
to the meeting.
BOARD OF DIRECTORS
The Board of Directors currently consists of nine directors who are elected
annually. No nominees will be recognized other than those that are nominated in
accordance with our By-laws. Under the By-laws, nominations for directors must
have been received between November 9, 2002 and December 9, 2002. No nominees,
other than those proposed by the Board, were presented for the 2003 Annual
Meeting. Consequently, no other nominees for director will be allowed at the
meeting.
H. Jesse Arnelle is currently a director; however, in accordance with the
tenure provisions of the Company's Corporate Governance Guidelines, he is not
standing for reelection.
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DIRECTOR NOMINEES
(ITEM 1 ON THE PROXY CARD)
The first proposal on the agenda will be to elect nine directors to serve
until the next Annual Meeting of Stockholders and until their respective
successors have been duly elected and qualified. The Board has nominated the
nine director candidates listed below, and recommends that you vote for their
election. All of the nominees are current directors except for Mr. Reum who is
standing for election for the first time at this Annual Meeting of Stockholders.
The nominees receiving the greatest number of votes for each of the nine
positions 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 7.
Pastora San Juan Cafferty is 62 years old. She has been a director of the
Company or one of its predecessors since 1994. 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,
Peoples' 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.
Frank M. Clark, Jr. is 57 years old. He has been a director of the Company
since October 2002. Mr. Clark has served as Senior Vice President, Exelon
Corporation, an energy holding company, Executive Vice President, Exelon Energy
Delivery, and President, ComEd, since 2001. He served as Executive Vice
President, ComEd from 2000 to 2001. Prior to joining Exelon Corporation, Mr.
Clark served in various management positions with UNICOM Corporation (which was
purchased by PECO in 2000 to form Exelon Corporation) from 1966 to 2000, serving
as Senior Vice President, Corporate and Governmental Affairs, Commonwealth
Edison Company, from 1999 to 2000.
Robert S. Miller is 61 years old. He has been a director of the Company or
one of its predecessors since 1997. He has been Chairman of the Board and Chief
Executive Officer of Bethlehem Steel Corporation, a steel manufacturing company,
since September 2001. He served as Chairman of Federal Mogul Corporation, an
automotive parts manufacturing firm, from September 2000 to October 2001, and
was CEO of Federal Mogul from September 2000 until January 2001. In October
2001, Bethlehem Steel and Federal Mogul both filed for bankruptcy. Mr. Miller
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 that filed for bankruptcy in June 2001. He served as
interim 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 is a director of Federal Mogul
Corporation, Pope & Talbot, Inc. and Symantec Corp.
A. Maurice Myers is 62 years old. He has been a director, Chairman of the
Board, President and CEO of the Company since November 1999. He served as
Chairman of the Board of Yellow Corporation, 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 a director of Tesoro Petroleum Corporation
and Hawaiian Electric Industries, Inc.
John C. Pope is 54 years old. He has been a director of the Company or one
of its predecessors since 1997. 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 a director of
Federal Mogul Corporation, Wallace Computer Services, Inc., Air Canada
Corporation, Per-Se Technologies, Inc., Dollar Thrifty Automotive Group, Inc.,
Kraft Foods, Inc. and CNF, Inc.
W. Robert Reum is 60 years old. Mr. Reum is standing for election for the
first time at this Annual Meeting of Stockholders. Mr. Reum has been Chairman,
President and CEO of Amsted Industries Incorporated, a diversified manufacturer
for the railroad, construction and building industries, since March
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2001. He served as Chairman, President and CEO of The Interlake Corporation, a
multinational manufacturer of engineered materials and handling/packaging
systems, from 1991 to 1999. Mr. Reum is Chairman of the Board of the Morton
Arboretum.
Steven G. Rothmeier is 56 years old. He has been a director of the Company
or one of its predecessors since 1997. 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. and Precision Castparts Inc.
Carl W. Vogt is 67 years old. He has been a director of the Company since
December 2001. Mr. Vogt is "Of Counsel" to Fulbright & Jaworski L.L.P., a
nationally and internationally based law firm, where he was formerly a senior
partner. He is currently a director of the Scudder Investments Mutual Funds, the
ISI Managed Funds, Yellow Corporation and American Science and Engineering Inc.
He was a director of the National Passenger Railroad Corporation (AMTRAK) from
1990 until 1992, and Chair of the U.S. National Transportation Safety Board from
1992 until 1994. He is a Trustee of Williams College, where he served as
President (interim) from 1999 until 2000, Chair of the Flight Safety Foundation
and a member of the American Council on Germany. Mr. Vogt is a Fellow of the
Royal Aeronautical Society, a Fellow of the American Bar Foundation and an
Industrial Fellow, Linacre College, Oxford University, England.
Ralph V. Whitworth is 47 years old. He has been a director of the Company
since 1998. He has been a principal of Relational Investors LLC, a private asset
management company, since March 1996. He has also been a partner in Relational
Advisors LLC, a financial advisory and investment-banking firm, 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 1999 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 Mattel, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NINE NOMINEE DIRECTORS.
DIRECTOR COMPENSATION
Mr. Myers is the only director who is also an employee of the Company and
receives no extra compensation for serving as a director. In 2002, non-employee
directors received an annual retainer of $35,000 per year, Board meeting fees of
$1,400 for each meeting attended, committee meeting fees of $1,250 for each
meeting attended and reimbursement of meeting expenses. In addition, committee
chairpersons received an additional $625 for each committee meeting chaired. In
2002, under our deferred compensation plan for non-employee directors, directors
could choose to defer their cash compensation by receiving all or a portion of
the cash that would otherwise be paid in 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 measured and credited to the directors' accounts at the
same time the 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. In 2002, pursuant to the 1996 Stock Option
Plan for Non-Employee Directors, each non-employee director also received 10,000
options to purchase the Company's common stock at the fair market value on the
date of grant.
Starting in 2003, the non-employee directors' annual cash retainer will be
$40,000 per year. Additionally, the automatic stock option grant of 10,000
shares of common stock per year has been eliminated and, in lieu of the option
grant, the non-employee directors will receive $70,000 per year in stock units.
The stock units are issued under the 2003 Non-Employee Directors' Deferred
Compensation Plan (the "2003 Directors' Deferred Plan"). They are valued as of
the determination date (generally January 15th and July 15th of each year) and
payable in shares of Waste Management common stock no earlier than one year
following termination of Board service. Board meeting fees in 2003 will be
$2,000 per meeting and Committee meeting fees will be $1,500 per meeting. Rather
than paying a higher per meeting fee to Committee chairpersons as in the past,
starting in 2003 the Committee chairs will receive an additional annual cash
retainer of $10,000. Starting in 2003, Audit Committee members will also receive
an additional annual cash retainer of $5,000. Non-
4
employee directors also receive reimbursement of meeting expenses. The 2003
Directors' Deferred Plan allows the non-employee directors to defer all or a
portion of their cash compensation and receive payment in shares of Waste
Management common stock upon termination of Board service, or upon such later
date that the director may choose.
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 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.
The Audit Committee currently consists of Ms. Cafferty, Mr. Clark, Mr. Pope
(Chairperson), Mr. Rothmeier and Mr. Vogt, all of whom served on the Audit
Committee in 2002, with the exception of Mr. Clark. Each member of the Audit
Committee is "independent" as defined in the New York Stock Exchange listing
standards. During 2002 the Audit Committee held 10 meetings. The duties of the
Audit Committee generally are:
- to review our annual audited financial statements with management and our
independent auditor and recommend to the Board whether those financial
statements should be included in our Annual Report on Form 10-K;
- to review with management and our independent auditor our quarterly
financial statements prior to the filing of the Form 10-Q;
- to review with management and our independent auditor press releases
relating to earnings, prior to release, as well as earnings guidance
provided to analysts and rating agencies;
- to review, on an annual and quarterly basis, the certifications by the
CEO and CFO as to the accuracy and completeness of our reports and
filings, related financial statements and disclosures under the federal
securities laws;
- to discuss with our independent auditor any material changes to our
accounting principles and any matters required to be communicated by our
independent auditor by Statement on Auditing Standards No. 61 relating to
the conduct of the audit;
- to retain, evaluate annually, and, if necessary, replace the independent
auditors to audit our books and records;
- to approve all services, including non-audit engagements, to be provided
by our independent auditor prior to the engagement;
- to be responsible for determining the compensation paid to our
independent auditors;
- to review the independence of our independent auditors;
- to establish clear hiring policies for employees or former employees of
our independent auditor;
- to review and evaluate the lead partner of our independent audit team;
- to obtain and review a report by our independent auditor, at least
annually, describing the firm's internal quality-control procedures;
- to review external and internal audit plans, staffing, reports and
activities;
5
- to review with management, our independent auditors and internal auditors
our financial reporting, accounting and auditing practices and the
adequacy and effectiveness of accounting and financial controls that
could affect our financial statements;
- to establish procedures for the receipt, retention and treatment of
complaints we receive regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters; and
- to report the results of its reviews to the Board.
The Audit Committee has a written charter, adopted by the Board, a copy of
which is attached as Appendix A to this Proxy Statement.
The Compensation Committee currently consists of Mr. Arnelle, Ms. Cafferty
(Chairperson), Mr. Clark, Mr. Miller, Mr. Rothmeier and Mr. Whitworth, all of
whom served on the Compensation Committee in 2002, with the exception of Mr.
Clark. During 2002 the Compensation Committee met 7 times. The duties of the
Compensation Committee generally are:
- to establish a philosophy and policies governing all executive
compensation and benefit programs;
- to approve compensation for our executive officers and senior management;
- to recommend to the Board new, and changes to existing, compensation and
benefit plans;
- to approve annual incentive compensation plan bonus goals for executive
officers and senior management and grant options under our stock option
plans;
- to review and consider the annual evaluation of the CEO prepared by the
Nominating and Governance Committee in determining the compensation of
the CEO;
- to annually review the Committee's performance relative to its Charter
and report the evaluation results to the Board; and
- to make regular reports to the Board.
The Nominating and Governance Committee currently consists of Mr. Arnelle,
Mr. Miller, Mr. Pope, Mr. Vogt and Mr. Whitworth (Chairperson), all of whom
served on the Nominating and Governance Committee in 2002. The Nominating and
Governance Committee met 5 times in 2002. The duties of the Nominating and
Governance Committee generally are:
- to review, and make recommendations to the Board regarding, the overall
effectiveness, organization, composition and structure of the Board and
its committees;
- 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 any stockholder proposal we receive for inclusion in our proxy
statement and make a recommendation to the Board to either object,
support or take no position with respect to such proposal;
- to review, and make recommendations to the Board regarding, corporate
governance matters;
- to annually review, and make recommendations to the Board with respect
to, compensation of the non-employee directors;
- to establish a director orientation program and monitor continuing
director education; and
- to make regular reports to the Board.
Additionally, our Corporate Governance Guidelines, attached hereto as
Appendix B, provide that the Chairman of the Nominating and Governance Committee
will preside over the executive sessions of the Board
6
of Directors and will act as presiding director. Mr. Whitworth, as Chairman of
the Nominating and Governance Committee, currently acts as presiding director in
executive sessions of the Board of Directors.
Stockholders can review our Corporate Governance Guidelines, charters of
the Audit, Nominating and Governance and Compensation Committees, and our Code
of Conduct by accessing our website at http://www.wm.com.
The Nominating and Governance Committee will consider stockholders'
suggestions for nominees for directors to be elected at the 2004 Annual Meeting.
To suggest a nominee, you should submit your candidate's name, together with
biographical information and his or her written consent to nomination to the
Corporate Secretary, Waste Management, Inc., 1001 Fannin, Suite 4000, Houston,
Texas 77002, between November 9, 2003 and December 9, 2003.
DIRECTOR AND OFFICER STOCK OWNERSHIP
This table shows how much common stock each director, director nominee and
executive officer named in the Summary Compensation Table on page 10 owned on
March 21, 2003. None of these individuals own more than 1% of our outstanding
shares, except for Mr. Whitworth, who owns 1.1%, as described in footnote 2 to
the table. Collectively, the directors and officers as a group owned
approximately 2.1% of our outstanding shares as of March 21, 2003.
SHARES OF COMMON
STOCK COVERED BY
SHARES OF COMMON OPTIONS EXERCISABLE
NAME STOCK OWNED WITHIN 60 DAYS
---- ---------------- -------------------
H. Jesse Arnelle...................................... 519 40,000
Pastora San Juan Cafferty............................. 3,625 50,875
Frank M. Clark, Jr. .................................. 1,000 0
Robert S. Miller...................................... 14,726 452,708
John C. Pope(1)....................................... 4,338 42,175
W. Robert Reum........................................ 0 0
Steven G. Rothmeier................................... 1,239 44,350
Carl W. Vogt.......................................... 56,455 10,000
Ralph V. Whitworth(2)................................. 6,369,800 310,000
A. Maurice Myers(3)................................... 187,840 1,391,805
William L. Trubeck(4)................................. 28,967 437,500
Lawrence O'Donnell, III(5)............................ 24,295 387,500
Robert P. Damico...................................... 8,345 351,854
Richard T. Felago..................................... 6,421 206,634
All directors and executive officers as a group (27 6,773,199 5,907,493
persons)............................................
---------------
(1) The number of shares owned by Mr. Pope includes 435 shares held in a trust
for the benefit of his children.
(2) The number of shares listed for Mr. Whitworth is held by limited
partnerships and managed accounts controlled by Relational Investors LLC, of
which Mr. Whitworth is a principal. Mr. Whitworth disclaims beneficial
ownership of these shares.
(3) 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.
7
(4) The number of shares owned by Mr. Trubeck includes 25,740 shares remaining
from a restricted stock award granted to Mr. Trubeck in the amount of 27,748
shares, of which 18,803 shares are vested. In 2002 the Company withheld
2,008 shares from the award in payment of Mr. Trubeck's taxes upon vesting
of a portion of the award.
(5) The number of shares owned by Mr. O'Donnell includes 21,239 shares granted
pursuant to a restricted stock award, of which 15,930 shares are vested.
PERSONS OWNING MORE THAN 5% OF WASTE MANAGEMENT COMMON STOCK
The table below shows the beneficial ownership of our common stock as of
March 21, 2003 for persons that we know own 5% or more of our common stock,
based on Schedules 13D and 13G filed with the SEC.
SHARES BENEFICIALLY
OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ---------- -------
Southeastern Asset Management, Inc. ........................ 31,749,348 5.2%
6410 Poplar Ave., Ste. 900
Memphis, TN 38119
Wellington Management Company, LLP.......................... 30,452,105 5.0%
75 State Street
Boston, MA 02109
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 common 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
us with copies of any forms they file.
After reviewing the copies of the forms and written representations from
the executive officers and directors, we believe that during the last fiscal
year, the executive officers and directors complied with all of their
requirements to report their stock ownership and any changes in their ownership,
with the exception of three executive officers. Each of these officers
participate in our Retirement Savings Restoration Plan ("RSRP"), which
supplements our 401(k) Plan and provides for contributions by regular
withholdings from paychecks. In August 2002, the filing deadlines for Forms 4
were generally changed to two business days after a change in ownership, rather
than ten days after the end of the month. The three officers failed to report
their contributions under the RSRP into a Waste Management deferred stock fund
on the first pay period after the filing deadlines were accelerated. The Forms 4
were filed as soon as practicable after the omission was realized. The three
individuals and the number of deferred stock units acquired and reported on the
late Forms 4 are William L. Trubeck, Executive Vice President, Operations
Support and Chief Administrative Officer -- 24.257 shares; Ronald H. Jones, Vice
President and Treasurer -- 8.6761 shares; and J. Drennan Lowell, President,
Wheelabrator Technologies Inc. -- 12.1838 shares.
EXECUTIVE OFFICERS
The following is a listing of our current executive officers, indicating
their names, ages and a summary of their business experience for the past five
years.
A. Maurice Myers is 62 years old. He has been a director, Chairman of the
Board, President and CEO since 1999. He served as Chairman of the Board of
Yellow Corporation from July 1996 until November 1999, and as a director,
President and CEO from April 1996 until November 1999.
Barry H. Caldwell is 42 years old. He has been Senior Vice
President -- Government Affairs and Corporate Communications since September
2002. He served as Vice President -- Government Relations for
8
CIGNA Corporation from October 2000 until September 2002, and as Vice
President -- Federal Affairs for the Pharmaceutical Research and Manufacturers
of America from October 1996 until September 2000.
Robert P. Damico is 54 years old. He has been Senior Vice
President -- Midwest Group since July 1998. He was District Manager, Division
Manager and then Region Manager of the Mountain Region for Waste Management
Holdings, Inc., one of our wholly-owned subsidiaries ("WM Holdings"), from 1980
until July 1998.
Robert E. Dees, Jr. is 52 years old. He has been Senior Vice
President -- People since May 2000. He was Senior Vice President -- Human
Resources of AutoNation, Inc. from 1997 until 2000.
Richard T. Felago is 55 years old. He has been Senior Vice
President -- Eastern Group since May 2001. He was President of Wheelabrator
Technologies Inc., one of our wholly-owned subsidiaries ("WTI"), from May 1999
until May 2001, and Vice President -- Marketing and Business Development of WTI
from 1996 until May 1999.
David R. Hopkins is 59 years old. He has been Senior Vice
President -- Southern Group since March 2000. He was Senior Vice
President -- International Operations and CEO of Waste Management International,
Inc., one of our wholly-owned subsidiaries, from November 1998 until March 2000.
Ronald H. Jones is 52 years old. He has been Vice President and Treasurer
since 1995.
J. Drennan Lowell is 46 years old. He has been President of WTI since May
2001. He was Vice President -- Finance of WTI from May 1999 until May 2001, and
a self-employed consultant from July 1998 until April 1999. He was Vice
President and CFO of U.S. Industrial Services, Inc. from September 1997 until
July 1998.
Lawrence O'Donnell, III is 45 years old. He has been Executive Vice
President -- Western Group since July 2001. He was Executive Vice President,
General Counsel and Corporate Secretary from March 2001 until July 2001, and
Senior Vice President, General Counsel and Corporate Secretary from February
2000 until March 2001. Mr. O'Donnell was Vice President and General Counsel of
Baker Hughes Incorporated from 1995 until February 2000.
Domenic Pio is 39 years old. He has been President of Canadian Waste
Services, Inc., one of our wholly-owned subsidiaries ("Canadian Waste"), since
April 2001. He was Area Controller of Canadian Waste from April 1998 until April
2001 and Division Vice President, South Western Ontario, Canadian Waste from
January 1997 until April 1998.
Steven T. Ragiel is 39 years old. He has been President of Recycle America
Alliance, LLC, one of our subsidiaries, since March 2003. He was Vice
President -- Recycling and Trading from 1997 until March 2003.
Robert G. Simpson is 51 years old. He has been Vice President and Chief
Accounting Officer since May 2002. He was Vice President -- Taxation from
November 1998 to May 2002, and Vice President and General Manager of Tenneco
Business Services from July 1997 until November 1998.
Thomas L. Smith is 64 years old. He has been Senior Vice
President -- Information Systems since November 1999. He was Vice President of
Information Systems of Yellow Services, Inc. from February 1997 until November
1999.
David P. Steiner is 42 years old. He has been Senior Vice President,
General Counsel and Corporate Secretary since July 2001. He was Vice President
and Deputy General Counsel from November 2000 until July 2001. He was with
Phelps Dunbar, L.L.P., a regional law firm, from 1990 to November 2000.
James E. Trevathan is 50 years old. He has been Senior Vice
President -- Sales and Marketing since May 2000. He was Vice President -- Sales
from July 1998 until May 2000 and Regional Vice President -- Industrial of WM
Holdings from 1997 until July 1998.
William L. Trubeck is 56 years old. He has been Executive Vice President,
Operations Support and Chief Administrative Officer and CFO since May 2002. He
was Executive Vice President and CFO from March
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2001 until May 2002 and Senior Vice President and CFO from March 2000 until
March 2001. He was Senior Vice President -- Finance and CFO of International
Multifoods, Inc. from 1997 until March 2000, and President, Latin American
Operation of International Multifoods, Inc. from 1998 until March 2000.
Charles A. Wilcox is 50 years old. He has been Senior Vice
President -- Market Planning and Development since May 2001. He was Senior Vice
President -- Eastern Area from July 1998 to May 2001 and Region Vice
President -- Central Region from August 1996 until July 1998.
Charles E. Williams is 53 years old. He has been Senior Vice
President -- Operations since May 2000. He was Vice President -- Environmental
Compliance/Engineering from 1996 until May 2000.
EXECUTIVE COMPENSATION
These tables show the compensation of our CEO and our other four most
highly paid executives. You can see the Compensation Committee's report starting
on page 13 for an explanation of our compensation philosophy.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------------------ RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARD(S)($) OPTIONS COMPENSATION($)(2)
--------------------------- ---- --------- --------- ------------------ ----------- ---------- ------------------
A. Maurice Myers............ 2002 936,538 907,531 -- -- 400,000 69,376
Chairman of the Board, 2001 850,000 496,300 65,063 -- 300,000 40,616
President and CEO 2000 850,000 1,010,700 -- -- 275,415 33,498
William L. Trubeck.......... 2002 539,423 359,215 -- -- 150,000 40,068
Executive Vice President, 2001 518,750 291,800 -- -- 200,000 28,454
Operations Support and 2000 411,538 445,894 -- 386,738(3) 400,000 7,829
Chief Administrative
Officer
Lawrence O'Donnell, III..... 2002 539,423 373,755 -- -- 150,000 40,524
Executive Vice
President -- 2001 511,250 324,800 -- -- 175,000 30,929
Western Group 2000 415,769 419,140 -- 311,948(4) 350,000 7,800
Robert P. Damico............ 2002 450,769 351,827 -- -- 135,000 32,454
Senior Vice President -- 2001 433,846 238,800 -- -- 115,000 24,232
Midwest Group 2000 414,615 648,660(5) -- -- 150,000 7,800
Richard T. Felago........... 2002 450,769 316,578 -- -- 135,000 32,874
Senior Vice President -- 2001 388,457 270,100 -- -- 115,000 20,256
Eastern Group 2000 286,538 370,868 -- -- 100,000 8,724
---------------
(1) In accordance with SEC rules, perquisites and other personal benefits that
total less than $50,000 have not been included. For 2001, Other Annual
Compensation for Mr. Myers included a payment of approximately $49,000 for
the purchase of life insurance.
(2) All Other Compensation includes Company contributions to the 401(k) Plan,
the RSRP and life insurance premiums. Amounts for fiscal year 2002 for the
persons named above are as follows:
401(K) RSRP LIFE
------ ------- ------
Myers..................................................... $4,029 $61,178 $4,169
Trubeck................................................... $7,466 $30,309 $2,293
O'Donnell................................................. $8,500 $29,731 $2,293
Damico.................................................... $8,500 $22,036 $1,918
Felago.................................................... $7,446 $23,510 $1,918
10
(3) Mr. Trubeck was awarded 27,748 shares of restricted stock, valued at
$386,738, on March 7, 2000. The shares of restricted stock vest in four
equal installments, beginning on the first anniversary of the date of grant.
At December 31, 2002, only 13,874 shares were still restricted, and were
valued at $317,992, based upon the closing price of $22.92 per share of
common stock on the New York Stock Exchange on December 31, 2002. Mr.
Trubeck receives dividends on the shares of restricted stock.
(4) Mr. O'Donnell was awarded 21,239 shares of restricted stock, valued at
$311,948, on February 14, 2000. The shares of restricted stock vest in four
equal installments, beginning on the first anniversary of the date of grant.
At December 31, 2002, only 10,619 shares were still restricted, and were
valued at $243,387, based upon the closing price of $22.92 per share of
common stock on the New York Stock Exchange on December 31, 2002. Mr.
O'Donnell receives dividends on the shares of restricted stock.
(5) As reported in our Proxy Statement for the 2000 Annual Meeting, Mr. Damico
was not included in our revised 1999 annual incentive compensation plan. In
May 2000 it was deemed appropriate to pay a bonus of $274,640 to Mr. Damico
because of his exclusion from the revised 1999 plan. This payment is
included in Mr. Damico's 2000 bonus payment shown in the table above.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(A)
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(B)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ -------------- ---------- ------------ -------------
A. Maurice Myers......... 400,000 3.8% $27.88 3/07/2012 $7,012,000 $17,772,000
William L. Trubeck....... 150,000 1.4% $27.88 3/07/2012 $2,629,500 $ 6,664,500
Lawrence O'Donnell,
III.................... 150,000 1.4% $27.88 3/07/2012 $2,629,500 $ 6,664,500
Robert P. Damico......... 135,000 1.3% $27.88 3/07/2012 $2,366,550 $ 5,998,050
Richard T. Felago........ 135,000 1.3% $27.88 3/07/2012 $2,366,550 $ 5,998,050
---------------
(a) The exercise price of the option is the market price of Waste Management
common stock on the grant date. Options granted to senior executives in
2002 become exercisable in 25% annual increments beginning one year after
the date of grant and expire 10 years from the date of grant.
(b) These columns show the gains the executives could realize if Waste
Management's common 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 our predictions.
OPTION EXERCISES AND VALUES AT FISCAL YEAR END
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END*
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
A. Maurice Myers(1)..... -- -- 1,216,805 1,258,610 $8,297,550 $4,455,224
William L. Trubeck...... -- -- 250,000 500,000 $1,746,500 $1,746,500
Lawrence O'Donnell,
III................... -- -- 218,750 456,250 $1,112,563 $1,112,563
Robert P. Damico........ -- -- 251,854 331,250 $ 608,063 $ 608,063
Richard T. Felago....... -- -- 117,134 290,250 $ 423,525 $ 417,475
---------------
* The difference between the option exercise price and the market value of
Waste Management common stock at year-end, which was $22.92 based on the
closing price on the New York Stock Exchange on December 31, 2002. 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.
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(1) Included in Mr. Myers' calculations are the number and value of 100,260
options owned by a trust for the benefit of his children, for which Mr.
Myers serves as trustee. Mr. Myers has disclaimed beneficial ownership of
these options.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of the executive
officers named in the Summary Compensation Table under the section titled
"Executive Compensation" on page 10. The employment agreements are for three to
five-year terms, and continuously renew for one to 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 payments and benefits in
the case of termination of employment or in the event of a change in control of
Waste Management. If employment ends because of death or total disability,
generally salary is paid for two years, although for Mr. Damico, salary is paid
through the remaining term of his agreement, which is three years. Additionally,
all options vest and must be exercised within one year. Benefits are paid in
accordance with the terms of our benefit plans.
If we terminate the executive's employment for "cause," as defined in the
employment agreements, we will pay any accrued but unpaid salary, expenses
required to be reimbursed, vacation and any earned but unpaid bonuses for prior
periods. Benefits will be paid in accordance with the terms of our benefit plans
and all vested and unvested options or other awards will be cancelled on the
date of termination. If the executive decides to terminate his employment 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 we terminate the executive's employment without cause or the executive
leaves with "good reason," as defined in the employment agreements, we 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 generally have two years and six months from the date of
termination to exercise any of the awards other than Mr. Damico, whose agreement
provides for one year after termination. In no event can an option be exercised
after its term.
The agreements also provide for certain severance payments and benefits if
there is a "change in control," as defined in the employment agreements, of
Waste Management and the executive (i) terminates his employment 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 generally will be
three times the base salary and target annual bonus instead of two times and the
benefits generally will continue for three years instead of two years. The stock
options and other awards will become fully vested and generally 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 termination of employment, as well as confidentiality
provisions as are customary, in nature and scope, for such agreements.
Additionally, under his agreement, Mr. Myers receives supplemental
retirement benefits in the amount of $600,000 annually, provided he remains
employed by us until the fifth anniversary of his employment. In the event Mr.
Myers' employment is terminated before the fifth anniversary, annual payments
are pro-rated as follows: $500,000 on and after the fourth anniversary; $400,000
on and after the third anniversary; and
12
$100,000 on and after the 18-month anniversary. Mr. Myers is currently eligible
to receive a retirement benefit of $400,000 per year.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has prepared the
following report regarding 2002 executive compensation. The Compensation
Committee is composed entirely of non-employee, independent directors as
required by the New York Stock Exchange and is responsible for establishing and
administering the Company's policies governing annual compensation, long-term
incentive awards, executive stock ownership, employment agreements, severance
programs and other special executive benefits and perquisites. The Committee
periodically evaluates the Company's compensation programs and compares them
with those of other companies. 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 policy of the Company and the Committee that all compensation
programs should (i) link pay to the 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. The Company also focuses on compensation linked to stock price
performance to provide the strongest link to enhanced stockholder value. The
Committee regularly works with independent 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 survey data for companies with revenues comparable to the Company.
The Company's compensation for executives includes base salaries, annual
performance-based incentives, long-term incentives, and certain executive
benefits and perquisites.
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 if
it determines that such action would be in the best interests of the Company and
its stockholders.
BASE SALARIES
Base salaries for the Company's executives in 2002 were determined after
reviews of the competitive market data described above. In determining base
salaries, 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 reviews executives' individual performance in making base salary
increase decisions. The Company's policy is to target base salary at the 50th
percentile of the competitive market. Salary actions taken by the Compensation
Committee in 2002, with respect to the executive officers, were consistent with
the policies and practices described above.
PERFORMANCE-BASED ANNUAL INCENTIVE COMPENSATION
The Company's Performance-Based Incentive Compensation Plan links incentive
compensation to the Company's achievement of specific performance goals. These
goals are established at the beginning of each year by the Compensation
Committee based upon corporate objectives determined by the Board. For 2002 the
corporate objective was earnings before interest, taxes, depreciation and
amortization (EBITDA). The
13
Compensation Committee used its discretion and reduced the maximum incentive
payments authorized under the Performance-Based Incentive Compensation Plan
based on the executive officers' achievement of the following goals:
(1) Return on Capital Employed (measured against internal objectives);
(2) Earnings Per Share (measured against internal year-over-year
continuous improvement targets) ;
(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 115% 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 2002, the Company targeted annual incentive compensation at the 75th
percentile of the market for comparable performance. Actual bonus awards are
determined based on the Company's and the individual executive's achievement of
the performance goals and can range from 0% to 200% of bonus target. Targeted
bonuses for the named executive officers in 2002 generally fell between the
market 50th and 75th percentiles. Actual bonuses for 2002 were less than target
since Waste Management's performance was below the established goals.
LONG-TERM INCENTIVE COMPENSATION
The Company believes that its executives should have an ongoing stake in
the long-term success of the Company. We also believe these key employees should
have a considerable portion of their total compensation tied to the Company's
stock price performance, which is directly linked 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 link 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 reviews competitive market data to determine appropriate stock awards
to executives. All stock options in 2002 were granted with exercise prices at
100% of fair market value of the Company's common stock at the time of grant.
The aggregate 2002 stock option grants for named officers approximated the 75th
percentile of the competitive compensation data. Restricted stock is used
periodically for attraction and retention purposes.
2002 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 or in 2001. The Committee
increased Mr. Myers' base salary to $1,000,000 during 2002, bringing Mr. Myers'
base salary to the competitive market 50th percentile.
ANNUAL BONUS
Mr. Myers received a bonus of $907,531 for 2002, based on the achievement
of performance goals described above, under "Performance-Based Annual Incentive
Compensation."
14
LONG-TERM INCENTIVES
Mr. Myers received an option grant of 400,000 options in March 2002 under
the Company's annual stock option grant process. The grant of these stock
options was made pursuant to his performance as evaluated by the Board of
Directors. The options were granted with exercise prices at 100% of fair market
value of the Company's common stock on the date of grant.
STOCK OWNERSHIP POLICY
The Company adopted a stock ownership policy during 2002. Executives at the
Senior Vice President level and above, as well as select executives at the Vice
President level, are subject to the ownership policy. The objectives of the
ownership policy are to ensure that Company executives (1) hold a meaningful
amount of Company stock, and (2) retain shares acquired from the Company's
equity compensation programs for a period of time. To achieve these objectives,
the Company implemented stock ownership guidelines that vary by level and are
expressed as a fixed number of shares. The Chief Executive Officer is expected
to own approximately 166,000 shares. Executives at the Senior Vice President
level and above have five years to meet the guidelines and Vice Presidents have
seven years. Shares owned outright, deferred stock units in the RSRP and shares
held in the 401(k) plan count towards meeting the guideline. Executives are
required to hold 100% of the after-tax profit shares from Company equity
compensation programs for one year after exercise or vesting. At the end of the
holding period, executives who have not met their ownership guidelines are
required to continue to hold 50% of the net profit shares.
SUMMARY
The Compensation Committee believes that executive compensation for 2002
adequately reflects its policy to align compensation with overall business
strategy, values and management initiatives and to ensure the Company's goals
and performance are consistent with the interests of its stockholders.
The Compensation Committee of the
Board
of Directors
Pastora San Juan Cafferty, Chairperson
H. Jesse Arnelle
Frank M. Clark, Jr.
Robert S. Miller
Steven G. Rothmeier
Ralph V. Whitworth
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002 Ms. Cafferty and Messrs. Arnelle, Miller, Rothmeier and
Whitworth served on the Compensation Committee. During 2002 no member of the
Compensation Committee was an officer or employee of Waste Management; however,
Mr. Miller served as interim President and Chief Executive Officer from August
1999 until November 1999.
During 2002 none of our executive officers served as:
- a member of a compensation committee of another company, one of whose
executive officers served on our Compensation Committee;
- a director of another company, one of whose executive officers served on
our Compensation Committee; or
- a member of a compensation committee of another company, one of whose
executive officers served as one of our directors.
15
RELATED PARTY TRANSACTIONS
Mr. Carl Vogt, a member of the Board of Directors, is "Of Counsel" to
Fulbright & Jaworski L.L.P., a nationally and internationally based law firm.
During 2002 we retained Fulbright & Jaworski L.L.P. to provide legal services.
The amount of legal fees paid to Fulbright & Jaworski L.L.P. did not exceed 5%
of the law firm's gross revenues for its last fiscal year, and is, therefore,
not considered material.
STOCK PERFORMANCE GRAPH
The graph below shows the relative investment performance of Waste
Management common stock, the Dow Jones Pollution Control Index and the S&P 500
for the last five years, assuming reinvestment of dividends at date of payment
into the common stock. The following graph is presented pursuant to SEC rules.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
(PERFORMANCE GRAPH)
-------------------------------------------------------------------------------------------------
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------------------------------------------------------------------------------------------------
Waste Management $100 $119 $ 44 $ 71 $ 82 $ 59
Dow Jones Pollution
Control Index $100 $104 $ 58 $ 81 $ 91 $ 71
S&P 500 $100 $128 $155 $141 $124 $ 97
AUDIT COMMITTEE REPORT
The role of the Audit Committee is, among other things, to oversee the
Company's financial reporting process on behalf of the Board of Directors, to
recommend to the Board whether the Company's financial statements should be
included in the Company's Annual Report on Form 10-K and to select the
independent auditor for ratification by stockholders. Company management is
responsible for the Company's financial statements as well as for its financial
reporting process, accounting principles and internal controls. The Company's
independent auditors are responsible for performing an audit of the Company's
financial statements and expressing an opinion as to the conformity of such
financial statements with generally accepted accounting principles.
The Audit Committee has reviewed and discussed the Company's audited
financial statements as of and for the year ended December 31, 2002 with
management and the independent auditors, and has taken the
16
following steps in making its recommendation that the Company's financial
statements be included in its annual report:
- First, the Audit Committee discussed with Ernst & Young, the Company's
independent accountants for fiscal year 2002, 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 Ernst & Young its independence
and received from Ernst & Young 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 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 Ernst & Young, the Company's audited consolidated balance
sheets at December 31, 2002, and consolidated statements of income, cash
flows and stockholders' equity for the fiscal year ended December 31,
2002, including the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments and
the clarity of the disclosure.
The Committee has also discussed with the Company's internal and
independent auditors the overall scope and plans of their respective audits. The
Committee meets periodically with both the internal and independent auditors,
with and without management present, to discuss the results of their
examinations and their evaluations of the Company's internal audit.
The members of the Audit Committee are not engaged in the accounting or
auditing profession and, consequently, are not experts in matters involving
auditing or accounting. In the performance of their oversight function, the
members of the Audit Committee necessarily relied upon the information,
opinions, reports and statements presented to them by Company management and by
the independent auditors.
Based on the reviews and discussions explained above (and without other
independent verification), the Audit Committee recommended to the Board (and the
Board has approved) that the Company's financial statements be included in its
annual report for its fiscal year ended December 31, 2002. The Committee and the
Board have also recommended the selection of Ernst & Young as the Company's
independent auditors for fiscal year 2003.
The Audit Committee of the Board of
Directors
John C. Pope, Chairperson
Pastora San Juan Cafferty
Frank M. Clark, Jr.
Steven G. Rothmeier
Carl W. Vogt
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 2 ON THE PROXY CARD)
The next proposal on the agenda for the Annual Meeting will be a proposal
to ratify the Board's appointment of Ernst & Young as our independent auditors
for fiscal year 2003.
On March 21, 2002 we dismissed Arthur Andersen LLP as our independent
auditors and determined to appoint Ernst & Young as our new independent
auditors. This determination followed our decision to seek proposals from
independent accountants to audit our financial statements and was approved by
the Board upon the recommendation of the Audit Committee.
17
Arthur Andersen's report on our consolidated financial statements for the
year ended December 31, 2001 did not contain an adverse opinion or disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope or
accounting principles. For the fiscal years ended December 31, 2001 and 2000 and
through the date of dismissal, there were no disagreements with Arthur Andersen
on any matter of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure which, if not resolved to Arthur
Andersen's satisfaction, would have caused them to make reference to the subject
matter in connection with their report on our consolidated financial statements
for fiscal years 2001 and 2000.
For the fiscal years ended December 31, 2001 and 2000 and through the date
of dismissal, we did not consult Ernst & Young with respect to the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on our
consolidated financial statements, or any other matters or reportable events as
set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
Representatives of Ernst & Young will be at the Annual Meeting. They will
be able to make a statement if they want, and will be available to answer any
appropriate questions stockholders may have.
AUDIT FEES
Ernst & Young's fees for our 2002 audit and the reviews of our quarterly
financial statements were approximately $8.3 million.
AUDIT-RELATED FEES
Ernst & Young's fees for audit-related services during 2002 were
approximately $0.7 million, which was comprised of approximately $0.6 million of
subsidiary audits required by contracts and approximately $0.1 million of
employee benefit plan audits.
TAX FEES
Ernst & Young's fees for tax services during 2002 were approximately $0.1
million. These services were for certain tax assistance in foreign
jurisdictions.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees paid to Ernst & Young in 2002 for professional services
with respect to financial information systems design and implementation.
ALL OTHER FEES
There were no fees paid to Ernst & Young in 2002 for any other professional
services.
As set forth in the Audit Committee Report on page 16, the Audit Committee
has considered whether the provision of these non-audit services is compatible
with maintaining auditor independence.
In January 2003, the SEC adopted new auditor independence rules that amend
the fee categories and disclosure requirements for fees paid to independent
auditors. Although the new disclosure requirements are not required until our
2004 Proxy Statement, we have presented the audit fees and provided supplemental
disclosure of the audit-related and tax fees based on the guidance in the new
disclosure requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 2003.
18
PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
(ITEM 3 ON THE PROXY CARD)
DESCRIPTION OF THE AMENDMENT
The Board of Directors believes it is in our best interests to encourage
stock ownership by our employees. Accordingly, the Board of Directors
established the Employee Stock Purchase Plan, which was approved by stockholders
at our 1997 Annual Meeting. An aggregate of 1,000,000 shares of common stock was
originally authorized for issuance under the ESPP. Stockholders approved an
increase in the number of shares authorized for issuance under the ESPP to
2,250,000 at the 2000 Annual Meeting. As of March 21, 2003, approximately 45,000
employees were eligible to participate in the ESPP. As of March 21, 2003, less
than 90,000 shares remained available for issuance. Therefore, the Board of
Directors will present a proposal to increase the number of shares authorized
for issuance by an additional 2,000,000 shares of common stock by amending the
ESPP.
DESCRIPTION OF THE ESPP
The ESPP permits eligible employees that enroll in the ESPP to purchase
shares of common stock at a discount. On the last day of each six month period
between January 1 and June 30 and July 1 and December 31 (each, an "Offering
Period"), each employee who is enrolled in the ESPP will automatically purchase
a number of shares of common stock determined by dividing such employee's
payroll deductions accumulated in the ESPP during such Offering Period by the
Offering Price. The Offering Price of each of the shares purchased in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of common stock on the first day of the Offering Period, or (ii) 85% of
the fair market value of a share of common stock on the last day of the Offering
Period. If an employee withdraws from participation during an Offering Period,
the monies contributed to the Plan are refunded immediately without interest. On
March 21, 2003, the fair market value of our common stock was approximately
$22.60.
The ESPP is administered by the Administrative Committee of the Waste
Management Employee Benefit Plans, a committee appointed by the Board of
Directors. The Administrative Committee has the authority to interpret all
provisions of the ESPP. Generally, all full-time employees who have been
employed for at least 30 days prior to an enrollment date are eligible to
participate in the ESPP.
Eligible employees may elect to participate in the ESPP by completing an
enrollment agreement we provide that authorizes payroll deductions from the
employee's pay. The payroll deduction may not exceed ten percent of the
employee's gross pay. In addition, an employee cannot contribute more than any
amount which would generally (a) result in the employee owning common stock
and/or options to purchase common stock making up five percent or more of our
outstanding capital stock, or (b) permit such employee to purchase more than
$25,000 of common stock in that year.
All payroll deductions for the ESPP are placed in our general corporate
account. No interest accrues on the payroll deductions, and an employee
participating in the ESPP may not make any additional payments into the account.
Employees may purchase common stock under the ESPP only through payroll
deductions.
The Board of Directors may amend the ESPP at any time. However, the ESPP
may not be amended in any way that will cause rights issued thereunder to fail
to meet the requirements for employee stock purchase plans as defined in Section
423 of the Internal Revenue Code of 1986, as amended (the "Code"), including
stockholder approval if required.
The ESPP will terminate on (i) the date that participating employees become
entitled to purchase an aggregate number of shares greater than the number of
shares remaining available for purchase, or (ii) the date on which the ESPP is
terminated by the Board of Directors.
Participation in the ESPP is discretionary, and participants can contribute
up to ten percent of their gross pay, subject to the limitations described
above. Additionally, the value of the common stock purchased will vary based on
the fair market value of our common stock on the first and last days of the
Offering Period. Accordingly, the number of shares that may be purchased by the
five most highly compensated executive
19
officers listed in this Proxy Statement, the executive officers as a group, the
non-executive directors as a group and the non-executive officers as a group in
the future is not currently determinable. Non-employee directors of the Company
are not eligible to participate in the ESPP.
FEDERAL INCOME TAX CONSEQUENCES
The ESPP is intended to be an "employee stock purchase plan" as defined in
Section 423 of the Code, which provides that an employee does not have to pay
any federal income tax when he elects to participate in the ESPP or when he
purchases shares of common stock in accordance with the terms of the ESPP. The
employee is, however, required to pay federal income tax on the difference, if
any, between the price at which he sells the shares received under the ESPP and
the price paid for them.
The foregoing does not constitute a complete statement of the federal
income tax effects under the ESPP, and each participant in the ESPP should
consult with his or her own tax advisor to determine the particular tax effects
of participation in the ESPP and transactions in shares received thereunder.
The foregoing description of the ESPP is qualified in its entirety by, and
should be read in conjunction with, the text of the ESPP, a copy of which, as
proposed to be amended, is attached hereto as Appendix C.
The affirmative vote of the holders of a majority of the shares of Waste
Management common stock present or represented by proxy and entitled to vote at
the Annual Meeting of Stockholders is required for approval of the amendment to
the ESPP.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
EQUITY COMPENSATION PLANS INFORMATION
The following is a summary of all of our equity compensation plans,
including plans that were assumed through acquisitions and individual
arrangements that provide for the issuance of equity securities as compensation,
as of December 31, 2002.
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION PLANS
NUMBER OF SECURITIES (EXCLUDING SECURITIES
TO BE ISSUED UPON WEIGHTED-AVERAGE TO BE ISSUED UPON
EXERCISE OF EXERCISE PRICE OF EXERCISE OF
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS WARRANTS AND RIGHTS WARRANTS AND RIGHTS)
--------------------- --------------------- --------------------------
Equity compensation plans approved by
security holders................... 39,042,062 $28.00 18,562,865
Equity compensation plans not
approved by security holders (1)... 2,497,964 $17.96 269,487
---------- ------ ----------
Total................................ 41,540,026 $27.40 18,832,352
========== ====== ==========
---------------
(1) Includes our 2000 Broad-Based Employee Plan under which options to purchase
an aggregate of 3.0 million shares can be granted to any non-officer
employees. The exercise prices for options granted under the Broad-Based
Plan are at least equal to the fair market value of common stock on the date
of grant, may vest over various periods and expire up to 10 years from the
date of grant.
Also includes 372,000 shares issuable upon exercise of outstanding, fully
vested warrants issued between 1994 and 1997 as compensation for goods or
services, with exercise prices ranging from $10.00 to $42.25 and expiring
through 2007.
20
STOCKHOLDER PROPOSAL
(ITEM 4 ON THE PROXY CARD)
The following proposal was submitted by the AFSCME Employees Pension Plan,
1625 L Street, N.W., Washington, D.C. 20036, which owns 7,107 shares of Waste
Management common stock. The proposal is co-sponsored by the New York City
Employees' Retirement System, c/o Comptroller of the City of New York, 1 Centre
Street, New York, NY 10007-2341, which owns 965,123 shares of Waste Management
common stock.
STOCKHOLDER PROPOSAL
RESOLVED that shareholders of Waste Management, Inc. ("WMI" or the
"Company") request that the Board of Directors report to shareholders on the
effect on WMI's business strategy of measures to oppose privatization of the
provision of waste collection, disposal, transfer and recycling services. For
purposes of this proposal, "privatization" means the shift from provision of
such services by governmental entities to provision by private companies.
Measures to oppose privatization should include initiatives, including "living
wage" requirements, whose purpose or effect is to prohibit privatization or make
the provision of privatized services more expensive for private service
providers.
STOCKHOLDER SUPPORTING STATEMENTS
Our Company provides solid waste services to commercial, industrial and
residential customers. As explained in WMI's most recent filing on Form 10-K,
residential services are provided under a contract with, or franchise granted
by, a municipality or regional authority giving WMI the exclusive right to
service all or a portion of the homes in that jurisdiction.
According to a June 28, 2001 industry report by Salomon Smith Barney, the
municipal segment makes up 20% of WMI's core solid waste business. The report
characterizes the municipal segment, which offers "less attractive economics,"
as the "most competitive." We are concerned that measures to oppose
privatization may make this segment even less attractive from a financial
perspective.
In recent years, there has been significant opposition to privatization.
States have imposed requirements designed to ensure accurate cost comparisons,
require a minimum level of cost savings before services can be contracted out,
require contractors to provide "prevailing" wages and benefits and assistance to
displaced public employees, and limit contract terms. Some states have even
prohibited outright the privatization of certain kinds of services: for example,
Illinois prohibits the privatization of correctional services.
Similarly, "living wage" laws, which require employers who accept service
contracts, operating grants, or tax abatements from local governments to pay
more than the federal minimum wage, have proliferated. According to the
community organization ACORN, 91 municipalities and counties have adopted living
wage ordinances, and campaigns are underway in 75 additional locations. The
Employment Policy Foundation states that "[t]he high monetary and potential
legal costs imposed by [living wage] ordinances serve to make municipal
contracting more risky and less attractive."
We believe that opposition to privatization will likely increase. The Wall
Street Journal reported on November 20, 2001, that such opposition had begun to
increase as a result of the September 11th terrorist attacks, although it noted
that the "beginnings of a backlash were stirring" before the attacks. The
article pointed to the decision to federalize airport security workers and the
postponement of planned privatizations of certain Pentagon back-office and
mapping operations. In October 2002, the city of New Orleans shelved a planned
privatization of its water and sewer operations, which would have provided
inadequate cost savings.
We believe shareholders should be better informed regarding the risks
created by measures to oppose privatization and the way WMI weighs those risks
when establishing business strategy. We urge shareholders to vote FOR this
proposal.
21
WASTE MANAGEMENT RESPONSE TO STOCKHOLDER PROPOSAL
The proponent is the AFSCME Employees Pension Plan ("AFSCME"), which is the
pension plan for the American Federation of State, County and Municipal
Employees (the "Union"). The proposal is co-sponsored by the New York City
Employees' Retirement System. The AFSCME submitted this same stockholder
proposal last year, and it was included in our Proxy Statement last year. At
last year's Annual Meeting, the proposal received only 3.2% of the total shares
represented at the meeting and entitled to vote and, in accordance with proxy
rules, is included in this year's Proxy Statement because it received more than
3.0% of the shares represented at the meeting and entitled to vote.
The Union is a union that represents state, county and municipal employees.
Obviously, to the extent that a municipality decides to privatize, members of
the Union may lose their jobs, and the Union loses members. The Union website
contains extensive resources relating to efforts and strategies of the Union to
oppose privatization of governmental services, including waste collection and
disposal. Included among these resources are excerpts from several articles
maligning us and our activities in the municipal sector. Thus, although the
proposal is drafted in such a way that it appears to relate to matters of
general interest to all stockholders, we believe the proponent is using the
proposal as one of many tactics designed to assist the Union in its opposition
to our efforts to enter into municipal contracts.
We believe the proponent is acting on behalf of the Union in seeking to
compel us to report on our business strategy to enable the Union to gain our
private strategic business information for its own ends. Although the proponent
claims that it is not an affiliate of the Union, we believe that the distinction
is legalistic rather than actual. We do not believe that the motivation for the
proposal has any connection to what is fair and equitable for our stockholders.
Instead, we believe the proposal was lodged in direct support of, and to gain
additional publicity in connection with, the Union's own efforts to oppose such
privatization.
We believe that forcing us to report on the effect on our business strategy
of measures to oppose privatization would not benefit any group other than the
Union. Such information would provide the Union with insights into our strategic
planning that in turn would assist the Union in its efforts to oppose
privatization of the provision of waste collection and disposal services. We
believe that such a proposal would be of no benefit to our stockholders at large
and, indeed, would disadvantage us and our stockholders. Consequently, we
believe that the information requested would not be of significance to any
persons other than a group attempting to damage such portion of our business. We
believe the Union is such a group.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE ADOPTION OF
THIS PROPOSAL.
OTHER MATTERS
Neither we nor our directors intend to bring any matters before the Annual
Meeting other than:
- the election of nine directors;
- the ratification of our independent auditors; and
- the proposal to amend the ESPP.
Also, we 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 2004 ANNUAL MEETING
Eligible stockholders who want to have proposals considered for inclusion
in the Proxy Statement for our 2004 Annual Meeting should notify our Corporate
Secretary. The written proposal must be received at our
22
offices no later than December 9, 2003 and no earlier than November 9, 2003. 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 $2,000 for at least
one year before submitting the proposal. Also, the stockholder must continue to
own the stock through the date that the 2004 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 Internet, 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 materials to
their customers or principals. Also, Mellon Investor Services has been hired to
help in the solicitation of proxies for the 2003 Annual Meeting for a fee of
approximately $7,000 plus associated costs and expenses.
ANNUAL REPORT
A copy of our 2002 Annual Report to Stockholders, including our Annual
Report on Form 10-K, which includes our financial statements for fiscal year
2002, 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 2003 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 shares, 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 2004 become available, you will receive an
email notice instructing you on how to access them over the Internet.
23
APPENDIX A
WASTE MANAGEMENT, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board of Directors to oversee the
accounting and financial reporting processes of the Company and audits of the
financial statements of the Company. The Audit Committee shall 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, (3) the
independent auditor's qualifications, performance and independence, and (4) the
performance of the Company's internal auditor function. The Audit Committee
shall prepare the report required by the rules of the Securities and Exchange
Commission (the "Commission") to be included in the Company's annual proxy
statement. 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
Audit Committee. The Audit Committee is directly responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditor (including resolution of disagreements between management
and such auditor). In fulfilling that responsibility, the Audit Committee has
the ultimate authority and responsibility to select, evaluate, and, where
appropriate, replace the independent auditors (and to nominate the independent
auditor for stockholder approval). The Audit Committee shall also have the
ultimate authority to approve all audit engagement fees and terms, as well as
all significant non-audit engagements of the Company's independent auditor. The
Audit Committee also has the responsibility for evaluating and determining that
the audit engagement team has the competence necessary to conduct the audit
engagement in accordance with Generally Accepted Auditing Standards ("GAAS").
The Audit Committee shall be elected by the Board of Directors and may be
removed by the Board of Directors. The Audit Committee shall consist of not less
than three, nor more than five, members of the Board of Directors. The members
of the Audit Committee shall receive no compensation from the Company other than
fees and other remuneration paid in their capacity as a director, committee
member or committee chair. Without limiting the foregoing, no Audit Committee
member may accept any consulting, advisory or other compensatory fee from the
Company or its affiliates. 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, experience and other
requirements of, and as determined in accordance with, the New York Stock
Exchange and any current or subsequently adopted Federal legislation, rule or
regulation (the "Applicable Rules and Regulations"). In particular, each member
shall be (1) independent, as defined by and in accordance with the Applicable
Rules and Regulations, 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 be an "audit committee financial expert" as
defined by the Commission. The following directors will be barred from serving
on the Committee: (i) any former employee (excluding any person that serves on
an interim basis) until 5 years after the employment has ended; (ii) anyone
either affiliated with or employed by a present or former auditor of the Company
until 5 years after the affiliation has ended; (iii) anyone that in the past 5
years has been part of an interlocking directorate in which an executive officer
of the Company serves or served on the compensation committee of another company
that employs or employed such director as an officer; and (iv) directors with
immediate family members in the foregoing categories.
The Audit Committee shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
- Review the annual audited financial statements with management and the
independent auditor, including major issues regarding accounting and
auditing principles, practices, and judgments, as well
A-1
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.
- Review with management and the independent auditor press releases
relating to earnings, prior to release, as well as earnings guidance
provided to analysts and ratings agencies.
- 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.
- Periodically discuss and review the Company's approach to risk assessment
and risk management.
- Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors
or management.
- Review such other matters with the independent auditor as are required by
GAAS or the Applicable Rules and Regulations.
- Review on an annual or quarterly basis the certifications by the CEO and
CFO as to the accuracy and completeness of the Company's reports and
filings under the Securities Exchange Act of 1934, related financial
statements and disclosures.
- 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).
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
- Retain, evaluate on an annual basis, and, if necessary, replace the
independent auditor.
- Approve all services, including non-audit engagements, to be provided by
the independent auditor prior to the engagement; provided that any such
non-audit services must be of a type permitted to be provided by the
independent auditor under the Applicable Rules and Regulations. The Audit
Committee may delegate the authority to pre-approve non-audit services to
one or more members of the Audit Committee, but any such approval shall
be reported to the Audit Committee at or prior to its next regularly
scheduled meeting.
- Be responsible for determining the compensation paid to the independent
auditor for both audit and non-audit related services.
- Establish clear hiring policies for employees or former employees of the
independent auditor in accordance with the Applicable Rules and
Regulations.
- 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
A-2
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 compliance with the
Applicable Rules and Regulations; and, if so determined by the Audit
Committee, recommend that the Board take appropriate action to satisfy
itself of the independence of the auditor.
- Review and evaluate the lead partner of the independent auditor team.
- Obtain and review a report by the independent auditor, at least annually,
describing the firm's internal quality-control procedures; any material
issues raised by the most recent internal quality-control review, or peer
review of the firm or by any inquiry or investigation by governmental or
professional authorities within the preceding five years respecting one
or more independent audits carried out by the firm and any steps taken to
deal with any such issues and all relationships between the independent
auditor and the Company; and report conclusions to the Board.
- Meet with the independent auditor and the senior internal auditing
executive prior to the annual audit to review and approve the planning,
scope, adequacy, and staffing of the annual audit.
- Review with the internal auditor and the 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.
- The level of satisfaction by the independent auditor that it has had
timely access to all relevant data and information.
- Any changes required in the planned scope of the internal and external
audit.
- The internal audit department responsibilities, budget and staffing.
OVERSIGHT OF THE COMPANY'S INTERNAL AUDIT FUNCTION
- 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.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
- Obtain from the independent auditor assurance that Section 10A(b) of the
Securities Exchange Act of 1934 has not been implicated.
- Obtain reports from management and the Company's senior internal auditing
executive that the Company's subsidiaries and foreign affiliated entities
are in conformity with applicable legal requirements and the Company's
Code of Ethical Conduct.
- Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
- 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.
- Review with the Company's chief compliance officer and 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, as well as actions taken to maintain an
effective compliance program, including developments in compliance law
and best practices.
A-3
- 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 quarterly with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
GENERAL/ADMINISTRATIVE RESPONSIBILITIES
- Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
- Report to the Board, at least annually, all public company audit
committee memberships by members of the Committee.
- Perform a self-evaluation of the Committee's performance on an annual
basis.
- Adopt an orientation program for new Committee members. All Committee
members are encouraged to attend educational programs to enhance their
Audit Committee membership, as they feel appropriate, and the costs of
such program will be paid by the Company.
- Perform any other activities consistent with this Charter, the Company's
By-laws, governing law and the Applicable Rules and Regulations, 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 and
the Applicable Rules and Regulations. These are the responsibilities of
management and the independent auditor. It is also not the duty of the Audit
Committee to conduct investigations, or to assure compliance with laws and
regulations and the Company's Code of Ethical Conduct.
The Audit Committee shall have the authority to engage outside advisors,
including legal, accounting or other consultants to advise the Audit Committee
or as it determines necessary to carry out its duties. 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 four 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.
A-4
APPENDIX B
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. The Board shall
have responsibility for determining any qualifications of committee members,
including whether any member of the Audit Committee is an "Audit Committee
Financial Expert".
NON-EMPLOYEE DIRECTOR
"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 and who meets the independence requirements and such other
qualifications as imposed by the New York Stock Exchange or under applicable
rules or regulations (collectively, the "Applicable Rules and Regulations"). 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, and
otherwise in accordance with the Applicable Rules and Regulations.
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DIRECTORS
NOMINEES FOR ELECTION TO THE BOARD
The Nominating and Governance Committee shall recommend nominees to the
full Board for annual elections of directors.
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
Nominating and Governance 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
Each director shall have the right to make recommendations for items to be
placed on the 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.
With regard to investigations approved by resolution of the Board and in
which the Board believes there may be a potential conflict of interest, the
Board shall select independent outside counsel, accountants and other advisors
it determines are independent of the Company and management, and the cost of
such advisors will be paid by the Company.
BUSINESS TRANSACTIONS
Any transaction (excluding Board approved compensation and normal expense
reimbursement) between or involving the Company or any of its affiliates and a
member of the Board or member of the Company's
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senior leadership team or any member of their immediate family sharing the same
household, including any entity (whether for profit or not for profit) at which
they serve as an officer, director or employee, or in which they hold more than
an aggregate 5% equity stake (in each case a "Covered Person"), whether acting
on their own behalf or on behalf of a third party, must be approved in advance
by the Board. Such approval shall be required during the relevant Board member
or senior leadership team member's service at the Company and for a period of
two years after such service is terminated. Board approval shall not be required
for deminimis transactions executed in the ordinary course of business without
the involvement of the relevant Covered Person.
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 and act as presiding director.
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.
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 and
committees' 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.
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MEDIA RELATIONS
Management speaks for the Company.
DIRECTOR ORIENTATION
The Board shall adopt an orientation program for new directors, that
includes an orientation module for new members of the Audit Committee. All
directors are encouraged to attend programs on Board governance and service, as
they feel appropriate, and the costs of such programs shall be paid by the
Company.
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APPENDIX C
WASTE MANAGEMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE MAY 16, 2003)
The Waste Management, Inc. Employee Stock Purchase Plan (the "Plan") has
been established for the benefit of its eligible employees. The terms of the
Plan are set forth below.
1. Definitions.
As used in the Plan the following terms shall have the meanings set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended, and
the regulations issued thereunder.
(c) "Committee" means the Administrative Committee of the Waste
Management Employee Benefit Plans appointed by the Board to administer the
Plan as described in Section 4 below.
(d) "Common Stock" means the common stock, $0.01 par value, of the
Company.
(e) "Company" means Waste Management, Inc., a Delaware corporation, or
any successor corporation by merger, reorganization, consolidation or
otherwise.
(f) "Continuous Employment" means the absence of any interruption or
termination of service as an Eligible Employee with the Company and/or its
Participating Subsidiaries. For purposes of the preceding sentence, an
authorized leave of absence shall not be considered an interruption or
termination of service, provided that such leave is for a period of not
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "Eligible Compensation" means, with respect to each Participant
for each pay period, the regular base earnings, commissions, overtime and,
for employees on an Involuntary Military Leave of Absence, pay
differential, paid to the Participant by the Company and/or one or more
Participating Subsidiaries during the Offering Period before reductions are
made to Code Section 125 and Section 401(k) plans maintained by the Company
and/or its Participating Subsidiaries. However, any incentive compensation
or other bonus amounts shall be excluded for purposes of determining
Eligible Compensation.
(h) "Eligible Employee" means an employee of the Company or one of its
Participating Subsidiaries who is customarily employed for at least 20
hours per week and more than five months in a calendar year, or are absent
from active employment while on an Involuntary Military Leave of Absence.
For purposes of the preceding sentence, employees who are members of a
collective bargaining unit shall be excluded as eligible employees under
the Plan, unless their applicable collective bargaining agreement provides
for participation in the Plan.
(i) "Enrollment Date" means the first business day of each Offering
Period.
(j) "Exercise Date" means the last business day of each Offering
Period.
(k) "Exercise Price" means the price per share of Common Stock offered
in a given Offering Period, which shall be the lower of: (i) 85% of the
Fair Market Value of a share of the Common Stock on the Enrollment Date of
such Offering Period, or (ii) 85% of the Fair Market Value of a share of
the Common Stock on the Exercise Date of such Offering Period.
(l) "Fair Market Value" means, with respect to a share of Common Stock
as of any Enrollment Date or Exercise Date, the closing price of such
Common Stock on the New York Stock Exchange on such date, as reported in
The Wall Street Journal. In the event that such a closing price is not
available
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for an Enrollment Date or an Exercise Date, the Fair Market Value of a
share of Common Stock on such date shall be the closing price of a share of
the Common Stock on the New York Stock Exchange on the last business day
prior to such date or such other amount as may be determined by the
Committee by any fair and reasonable means.
(m) "Involuntary Military Leave of Absence" means an employee's leave
from employment pursuant to the Company's Paid Leave of Absence Policy to
perform military service obligations in the United States Air Force, Army,
Navy, Marines, Coast Guard, Public Health Service Corps or National Guard,
and the employee is either drafted or a member of the Reserves called to
active duty.
(n) "Offering Period" means each six-month period that begins and ends
on the business days that coincide with January 1 through June 30, or July
1 through December 31, or such other period or periods as the Committee may
establish. However, if the first and/or last day of an Offering Period
begins or ends (as applicable) on a Saturday, Sunday or holiday, then (i)
the first day of the Offering Period will begin on the immediately
following business day, and/or (ii) the last day of an Offering Period will
end on the immediately preceding business day.
(o) "Participant" means an Eligible Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company
as provided below in Section 6.
(p) "Participating Subsidiary" means any Subsidiary not excluded from
participation in the Plan by the Committee, in its sole discretion.
(q) "Subsidiary" means any domestic or foreign corporation of which
the Company owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock or other equity interests and that
otherwise qualifies as a "subsidiary corporation" within the meaning of
Section 424(f) of the Code or any successor thereto.
2. Purpose of the Plan.
The purpose of the Plan is to provide an incentive for present and future
employees of the Company and its Participating Subsidiaries to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. The Company intends that the Plan
qualify as an "employee stock purchase plan" under Section 423 of the Code, and
that the Plan shall be administered, interpreted and construed in a manner
consistent with the requirements of Section 423 of the Code.
3. Shares Reserved for the Plan.
The Company shall reserve for issuance and purchase by Participants under
the Plan an aggregate of 4,250,000 shares of Common Stock, subject to adjustment
as provided below in Section 13. Shares of Common Stock subject to the Plan may
be newly issued shares or treasury shares. If and to the extent that any option
to purchase shares of Common Stock shall not be exercised for any reason, or if
such right to purchase shares shall terminate as provided herein, the shares
that have not been so purchased hereunder shall again become available for the
purposes of the Plan, unless the Plan shall have been terminated.
4. Administration of the Plan.
(a) A Committee appointed by the Board shall administer the Plan. The
Committee shall have the authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, to correct any defect or
rectify any omission in the Plan, or to reconcile any inconsistency in this Plan
and any option to purchase shares granted hereunder, and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee's actions and determinations with respect to the foregoing shall be
final, conclusive and binding on all persons. The act or determination of a
majority of the members of the Committee shall be deemed to be the act or
determination of the entire Committee.
(b) The Committee may, in its discretion, request advice or assistance, or
employ such other persons as it deems necessary or appropriate for the proper
administration of the Plan, including, but not limited to employing a brokerage
firm, bank or other financial institution to assist in the purchase of shares,
delivery of reports or other administrative aspects of the Plan.
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5. Eligibility to Participate in the Plan.
Subject to limitations imposed by Section 423(b) of the Code, each Eligible
Employee who is employed by the Company or a Participating Subsidiary for 30
days prior to an Enrollment Date shall be eligible to participate in the Plan
for the Offering Period beginning on that Enrollment Date.
6. Election to Participate in the Plan.
(a) Each Eligible Employee may elect to participate in the Plan by
completing an enrollment agreement in the form provided by the Company and
filing such enrollment agreement with the Company prior to the applicable
Enrollment Date, unless the Committee establishes another deadline for filing
the enrollment agreement with respect to a given Offering Period.
(b) Unless a Participant withdraws from participation in the Plan as
provided in Section 10 or authorizes a different payroll deduction by filing a
new enrollment agreement prior to the Enrollment Date of a succeeding Offering
Period, a Participant who is participating in an Offering Period as of the
Exercise Date of such Offering Period shall be deemed to have (i) elected to
participate in the immediately succeeding Offering Period and (ii) authorized
the same payroll deduction percentage for such immediately succeeding Offering
Period as was in effect for such Participant immediately prior to such
succeeding Offering Period.
7. Payroll Deductions.
(a) All Participant contributions to the Plan shall be made only by payroll
deductions. Each time a Participant files the enrollment agreement with respect
to an Offering Period, the Participant shall authorize payroll deductions to be
made during the Offering Period in an amount from 1% to 10% (in whole
percentages) of the Eligible Compensation that the Participant receives on each
payroll date during such Offering Period. Payroll deductions for a Participant
shall commence on the first payroll date following the Enrollment Date and shall
end on the last payroll date in the Offering Period to which such authorization
is applicable, unless sooner terminated by the Participant as provided below in
Section 10.
(b) All payroll deductions made for a Participant shall be deposited in the
Company's general corporate account and shall be credited to the Participant's
account under the Plan. No interest shall accrue on or be credited with respect
to the payroll deductions of a Participant under the Plan. A Participant may not
make any additional contributions into such account. All payroll deductions
received or held by the Company under the Plan may be used by the Company for
any corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(c) Except as provided in Section 10, a Participant may not change his
contribution election during an Offering Period.
(d) Notwithstanding the foregoing provisions of this Section 7, no
Participant may make payroll deductions during any calendar year in excess of
$21,250, or such other limit as may be established by the Committee, in its
discretion.
8. Grant of Options.
(a) On the Enrollment Date of each Offering Period, subject to the
limitations set forth in Sections 3 and 8(b) hereof, each Eligible Employee
shall be granted an option to purchase on the Exercise Date for such Offering
Period a number of whole and fractional shares of the Company's Common Stock
determined by dividing such Eligible Employee's payroll deductions accumulated
during the Offering Period by the Exercise Price established for such Offering
Period.
(b) Notwithstanding any provision of the Plan to the contrary, no Eligible
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Eligible Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary of the Company, or (ii) which permits such Eligible
Employee's rights to purchase stock under all employee stock purchase plans of
the Company and its
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Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
9. Automatic Purchase.
Unless a Participant withdraws from the Plan as provided below in Section
10, the Participant's option for the purchase of shares will be exercised
automatically on each Exercise Date for which an enrollment agreement has been
filed, and the maximum number of whole and fractional shares subject to the
option will be purchased for the Participant at the Exercise Price established
for that Offering Period, as provided above in Section 8.
10. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all of the payroll deductions credited to
the Participant's account for a given Offering Period by providing written
notice to the Company no later than 45 days prior to the last day of such
Offering Period. A Participant shall not be permitted to make a partial
withdrawal of the payroll deductions credited to his account. All of the
Participant's payroll deductions credited to the Participant's account will be
paid to him promptly after receipt of the Participant's notice of withdrawal,
the Participant's participation in the Plan will be automatically terminated,
and no further payroll deductions for the purchase of shares hereunder will be
made. Payroll deductions will not resume on behalf of a Participant who has
withdrawn from the Plan, unless written notice is delivered to the Company
within the enrollment period preceding the commencement of a new Offering Period
directing the Company to resume payroll deductions.
(b) Upon termination of the Participant's Continuous Employment prior to
the Exercise Date of the Offering Period for any reason, including retirement or
death, the payroll deductions credited to the Participant's account will be
returned to the Participant or, in the case of death, to the Participant's
estate, and the Participant's options to purchase shares under the Plan will be
automatically terminated.
(c) In the event a Participant ceases to be an Eligible Employee during an
Offering Period, the Participant will be deemed to have elected to withdraw all
payroll deductions credited to his account from the Plan. In such circumstance,
the payroll deductions credited to the Participant's account will be returned to
the Participant, and the Participant's options to purchase shares under the Plan
will be terminated.
11. Transferability.
Options to purchase Common Stock granted under the Plan are not
transferable, in any manner, by a Participant and are exercisable only by the
Participant.
12. Reports.
Individual accounts will be maintained for each Participant in the Plan.
Following each Exercise Date, statements of account will be given to
Participants who have purchased shares under Section 9. Such statements will set
forth the amounts of payroll deductions, the per share purchase price, the
number of shares purchased and the remaining cash balance, if any.
13. Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are increased or decreased,
or are changed into or are exchanged for a different number or kind of shares,
as a result of one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Committee, appropriate adjustments shall be made
in the number and/or kind of shares, and the per share purchase price thereof,
which may be issued in the aggregate and to any Participant upon exercise of
options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the Company,
each Offering Period will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor
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corporation, unless the Committee determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, that the Participant
shall have the right to exercise the option as to all of the optioned stock,
including shares as to which the option would not otherwise be exercisable. If
the Committee makes an option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Committee shall
notify the Participant that the option shall be fully exercisable for a stated
period, which shall not be less than 10 days from the date of such notice, and
the option will terminate upon the expiration of such period.
(c) In all cases, the Committee shall have full discretion to exercise any
of the powers and authority provided under this Section 13, and the Committee's
actions hereunder shall be final and binding on all Participants. No fractional
shares of stock shall be issued under the Plan pursuant to any adjustment
authorized under the provisions of this Section 13.
14. Amendment of the Plan.
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code or any
successor thereto, including, without limitation, shareholder approval, if
required.
15. Termination of the Plan.
The Plan and all rights of Eligible Employees hereunder shall terminate:
(a) on the Exercise Date that Participants become entitled to purchase
a number of shares greater than the number of reserved shares remaining
available for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
In the event that the Plan terminates under circumstances described in
Section 15(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.
16. Notices.
All notices or other communications by a Participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
17. Shareholder Approval.
The Plan shall be subject to approval by the shareholders of the Company
within twelve months after the date the Plan is adopted by the Board of
Directors. If such shareholder approval is not obtained prior to the first
Exercise Date, the Plan shall be null and void and all Participants shall be
deemed to have withdrawn all payroll deductions credited to their accounts on
such Exercise Date pursuant to Section 10.
18. Conditions upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase shares of
Common Stock under the Plan, and the Company's obligation to sell and deliver
shares upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required. Notwithstanding anything in the Plan to
the contrary, share certificates shall not be delivered to Participants until
the later of (i) the date on which the applicable holding period to avoid a
disqualifying disposition (within the meaning of Code Section 421) expires, or
(ii) the date that a Participant specifically requests a certificate for shares
purchased pursuant to the Plan.
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(b) The Company may make such provisions, as it deems appropriate, for
withholding by the Company pursuant to all applicable tax laws of such amounts
as the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: WSTMNG KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
WASTE MANAGEMENT, INC.
VOTE ON DIRECTORS
1. Proposal to elect
01) Pastora San Juan Cafferty 05) John C. Pope FOR WITHHOLD FOR ALL To withhold authority to vote, mark
02) Frank M. Clark, Jr. 06) W. Robert Reum ALL ALL EXCEPT "For All Except" and write the
03) Robert S. Miller 07) Steven G. Rothmeier nominee's number on the line below:
04) A. Maurice Myers 08) Carl W. Vogt [ ] [ ] [ ]
09) Ralph V. Whitworth -------------------------------------
VOTE ON PROPOSALS FOR AGAINST ABSTAIN Note: In their discretion, upon such
other matters that may properly come
2. Proposal to ratify the appointment of Ernst & Young LLP [ ] [ ] [ ] before the meeting or any adjournment
as the independent auditors for 2003. or adjournments thereof.
3. Proposal to amend Employee Stock Purchase Plan to [ ] [ ] [ ] The shares represented by this proxy,
increase the number of shares the Company can issue. when properly executed, will be voted
in the manner directed herein by the
THE DIRECTORS RECOMMEND A VOTE "AGAINST" PROPOSAL 4 FOR AGAINST ABSTAIN undersigned stockholder(s). If no
direction is made, this proxy will be
4. Proposal relating to the Company's disclosure of its [ ] [ ] [ ] voted FOR items 1, 2 and 3, and
strategy on opposition to privatization. AGAINST item 4. If any other matters
properly come before the meeting, the
persons named in this proxy will vote
in their discretion.
----------------------------------- -------------- ----------------------------------- --------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
WASTE MANAGEMENT, INC.
Annual Meeting of Stockholders - May 16, 2003
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 4,
2003, and hereby appoint(s) A. Maurice Myers and David P. Steiner, 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 16,
2003 at 11:00 a.m., Central time, at The St. Regis Hotel, 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.