The Sherwin-Williams Company DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
240.14a-12
THE SHERWIN-WILLIAMS COMPANY
(Name of Registrant as Specified
In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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The
Sherwin-Williams Company
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 16, 2008
The Annual Meeting of Shareholders of
The Sherwin-Williams
Company will be held in the Landmark Conference Center,
927 Midland Building, 101 Prospect Avenue, N.W., Cleveland, Ohio
on Wednesday, April 16, 2008 at 9:00 A.M., local time, for
the following purposes:
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To fix the number of directors of Sherwin-Williams at 11 and to
elect 11 directors to hold office until the next Annual
Meeting of Shareholders and until their successors are elected;
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2.
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To ratify the appointment of Ernst & Young LLP as
Sherwin-Williams independent registered public accounting
firm;
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3.
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To consider a shareholder proposal if presented at the Annual
Meeting; and
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To transact such other business as may properly come before the
Annual Meeting.
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Shareholders of record at the close of business on
February 29, 2008 are the only shareholders entitled to
notice of and to vote at the Annual Meeting.
Your vote is important. Whether or not you plan to attend the
Annual Meeting, please promptly vote by the Internet, by
telephone or by completing and returning the enclosed proxy
card. Voting early will help avoid additional solicitation costs
and will not prevent you from voting in person at the Annual
Meeting if you wish to do so.
L. E. Stellato
Secretary
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115-1075
March 5, 2008
ADMISSION
TO THE 2008 ANNUAL MEETING.
You are entitled to attend the Annual Meeting only if you were a
Sherwin-Williams shareholder at the close of business on
February 29, 2008, the record date. We may ask you to
present evidence of share ownership and valid photo
identification to enter the Annual Meeting. Please refer to the
section entitled How can I attend the Annual
Meeting? on page 3 for further information.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON
APRIL 16, 2008.
Our Proxy Statement and 2007 Annual Report to Shareholders are
available at http://proxymaterials.sherwin.com.
TABLE OF
CONTENTS
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A-1
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THE
SHERWIN-WILLIAMS COMPANY
101
Prospect Avenue, N.W.
Cleveland,
Ohio 44115-1075
PROXY
STATEMENT
March 5, 2008
PRELIMINARY
We are providing the enclosed proxy materials to you in
connection with the solicitation by the Board of Directors of
proxies to be voted at the Annual Meeting of Shareholders to be
held on April 16, 2008. We began mailing these proxy
materials to our shareholders on March 5, 2008. The use of
the terms we, us and our
throughout this Proxy Statement refers to
Sherwin-Williams
and/or its management.
ANNUAL
REPORT
We are enclosing our Annual Report to Shareholders for the year
ended December 31, 2007 with these proxy materials. We may
submit additional financial and other reports at the Annual
Meeting, but we do not intend to take any action relating to
those reports.
ABOUT THE
MEETING
What
is the purpose of the Annual Meeting?
At the Annual Meeting, shareholders will act upon the proposals
outlined in the Notice of Annual Meeting of Shareholders. These
proposals include:
the election of directors;
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the ratification of the appointment of Sherwin-Williams
independent registered public accounting firm; and
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the consideration of a shareholder proposal if presented at the
Annual Meeting.
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In addition, our management will report on
Sherwin-Williams performance and respond to questions from
shareholders. We are not aware of any other matters that will be
brought before the Annual Meeting for action.
Who is
entitled to vote?
Only record holders of our common stock and our ESOP serial
preferred stock at the close of business on February 29,
2008, the record date, are entitled to vote at the Annual
Meeting. At the close of business on the record date,
120,283,045 shares of common stock and 274,477 shares
of ESOP serial preferred stock were outstanding. Each share
owned on the record date is entitled to one vote.
How do
I vote?
Voting by mail. If you are a
shareholder of record, you may vote by signing, dating and
returning your proxy card in the enclosed prepaid envelope. The
proxy holders will vote your shares in accordance with your
directions. If you sign and return your proxy card, but do not
properly direct how your shares should be voted on a proposal,
the proxy holders will vote your shares FOR
Proposals 1 and 2 and AGAINST Proposal 3.
If you sign and return your proxy card, the proxy holders will
vote your shares according to their discretion on any other
proposals and other matters that may be brought before the
Annual Meeting.
If you hold shares in an account through a broker or other
nominee in street name, you should complete, sign
and date the voting instruction card provided to you by your
broker or nominee.
Voting on the Internet or by
Telephone. If you are a shareholder of
record, detailed instructions for Internet and telephone voting
are attached to your proxy card. Your Internet or telephone vote
authorizes the proxy holders to vote your shares in the same
manner as if you signed and returned your proxy card by mail. If
you are a shareholder of record and you vote by the Internet or
telephone, your vote
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must be received by 5:00 p.m. E.D.T. on April 15, 2008; you
should not return your proxy card.
If you hold shares through a broker or other nominee in
street name, you may be able to vote by the Internet
or telephone as permitted by your broker or nominee.
Voting in Person. All shareholders may vote in
person at the Annual Meeting. Shareholders of record may also be
represented by another person present at the Annual Meeting by
signing a proxy designating such person to act on your behalf.
If you hold shares through a broker or nominee, you may vote in
person at the Annual Meeting only if you have obtained a signed
proxy from your broker or nominee giving you the right to vote
your shares.
Who
tabulates the vote?
Representatives of The Bank of New York will tabulate the votes
and act as inspectors of election at the Annual Meeting.
How do
I vote if I am a participant in the Stock Ownership and
Automatic Dividend Reinvestment Plan or the Employee Stock
Purchase and Savings Plan?
If you are a participant in one of these plans, your proxy card
also serves as voting instructions for the number of shares
which you are entitled to direct the vote under each plan. You
may vote your shares in the same manner outlined above. If you
are a participant in our Employee Stock Purchase and Savings
Plan, your voting instructions must be received by the close of
business on April 11, 2008 in order to allow the trustee
sufficient time for voting.
If you are a participant in our Employee Stock Purchase and
Savings Plan and you do not timely provide your voting
instructions, the trustee will vote your shares in the same
proportion as the trustee votes those shares for which it
receives proper instructions. The trustee will vote any
unallocated shares held in our Employee Stock Purchase and
Savings Plan in the same proportion as the trustee votes those
shares for which it receives proper instructions.
What
are the voting recommendations of the Board of
Directors?
The Board of Directors recommends that you vote:
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FOR fixing the number of directors at
11 and electing the 11 nominees for directors
(Proposal 1);
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FOR ratifying the appointment of Ernst
& Young LLP as Sherwin-Williams independent
registered public accounting firm (Proposal 2); and
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AGAINST the shareholder proposal
(Proposal 3).
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What
constitutes a quorum for the Annual Meeting?
A quorum of shareholders is necessary for us to hold
a valid Annual Meeting. For a quorum, there must be present, in
person or by proxy, or by use of communications equipment,
shareholders of record entitled to exercise not less than fifty
percent of the voting power of Sherwin-Williams.
Proxy cards marked as withholding authority, as well as proxy
cards containing abstentions and broker non-votes,
will be treated as present for purposes of determining a quorum.
A broker non-vote occurs when a broker or other
nominee holding shares for a beneficial owner does not vote on a
particular non-routine proposal because the broker
or nominee does not have discretionary voting power for that
proposal and has not received voting instructions from the
beneficial owner. If you are a beneficial owner and a broker
holds your shares, it is expected that your broker will be
permitted to vote your shares on Proposals 1 and 2 even if
your broker does not receive voting instructions from you.
What
vote is required to approve each proposal?
Election of Directors
(Proposal 1). Proposal 1 to fix the
number of directors at 11 requires the affirmative vote of the
holders of a majority of the shares present, in person or by
proxy, and entitled to vote on this proposal. To be elected as a
director, a nominee must receive the affirmative vote of a
plurality of the votes
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cast. Under the plurality voting standard, the nominees
receiving the most for votes will be elected. A
proxy card marked as withholding authority with respect to the
election of one or more directors will be counted for quorum
purposes.
Under our Majority Voting Policy, in an uncontested election,
any nominee for director who receives a greater number of
withheld votes than for votes is
required to tender his or her resignation for consideration by
the Nominating and Corporate Governance Committee of the Board
of Directors. We have provided more information about our
Majority Voting Policy under the heading Corporate
Governance Majority Voting Policy.
Ratification of Independent Registered Public Accounting
Firm (Proposal 2). Proposal 2 to
ratify the appointment of Ernst & Young LLP as
Sherwin-Williams independent registered public accounting
firm requires the affirmative vote of a majority of the votes
cast. A proxy card marked as abstaining with respect to this
proposal will be counted for quorum purposes, but will not be
counted as a vote cast, and therefore will have no effect on the
vote.
Shareholder Proposal (Proposal
3). Proposal 3 requires the affirmative vote
of a majority of the votes cast. A proxy card marked as
abstaining with respect to this proposal and any broker
non-votes with respect to this proposal will be counted for
quorum purposes, but will not be counted as a vote cast, and
therefore will have no effect on the vote.
Other Items. All other proposals and
other business as may properly come before the Annual Meeting
require the affirmative vote of a majority of the votes cast,
except as otherwise required by statute or our Amended Articles
of Incorporation or Regulations.
Can I
revoke or change my vote after I submit my proxy?
Yes. You can revoke or change your vote before the proxy
holders vote your shares by timely:
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giving a revocation to our Vice President, General Counsel and
Secretary in writing, in a verifiable communication or at the
Annual Meeting;
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returning a later signed and dated proxy card;
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entering a new vote by the Internet or telephone; or
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voting in person at the Annual Meeting.
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How
can I attend the Annual Meeting?
You are entitled to attend the Annual Meeting only if you were a
shareholder at the close of business on February 29, 2008,
the record date. We may ask you to present evidence of share
ownership and valid photo identification to enter the Annual
Meeting.
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If you are a shareholder of record, or own your shares through
our Stock Ownership and Automatic Dividend Reinvestment Plan or
our Employee Stock Purchase and Savings Plan, an admission
ticket is attached to your proxy card. Simply tear it off and
bring it to the Annual Meeting.
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If you hold your shares through a broker or other nominee in
street name, we may ask you to provide proof of
beneficial ownership as of the record date, such as a bank or
brokerage account statement showing ownership on
February 29, 2008, a copy of the voting instruction card
provided by your broker or nominee, or similar evidence of
ownership.
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What
are the costs of this proxy solicitation?
The enclosed proxy is solicited by the Board of Directors, and
Sherwin-Williams will pay the entire cost of solicitation. We
have retained Georgeson Inc. to aid in the solicitation of
proxies, for which it will receive a fee estimated at $15,000
plus reasonable expenses.
In addition, we may reimburse banks, brokers and other nominees
for costs reasonably incurred by them in forwarding proxy
materials to beneficial owners of our common stock. Our officers
and other employees may also solicit the return of proxies.
Proxies will be solicited by personal contact, mail, telephone
and electronic means.
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How
can I access this Proxy Statement and the 2007 Annual Report to
Shareholders electronically?
This Proxy Statement and our 2007 Annual Report to Shareholders
are available at
http://proxymaterials.sherwin.com.
You may help us save money in the future by accessing your proxy
materials online, instead of receiving paper copies in the mail.
If you would like to access proxy materials on the Internet
beginning next year, please follow the instructions located
under Access Proxy Materials Online in the
Corporate Governance section of our website at
www.sherwin.com.
CORPORATE
GOVERNANCE
We have a long history of good corporate governance practices
that has greatly aided our long-term success. The Board of
Directors and management have recognized for many years the need
for sound corporate governance practices in fulfilling their
respective duties and responsibilities to shareholders.
Corporate Governance Guidelines. The Board of
Directors has adopted Corporate Governance Guidelines, which
provide the framework for the governance of our company. The
Board of Directors reviews our Corporate Governance Guidelines
at least annually. From time to time, the Board of Directors may
revise our Corporate Governance Guidelines to reflect new
regulatory requirements and evolving corporate governance
practices.
Business Ethics Policy. We have
operated under a Business Ethics Policy for many years and are
committed to conducting business in an ethical and legal manner
throughout the world. Our Business Ethics Policy applies to all
of our directors, officers and employees and outlines the broad
principles of ethical and legal conduct embraced by
Sherwin-Williams to guide our business related conduct. Under
our Business Ethics Policy, any director or employee who
reasonably believes or suspects that Sherwin-Williams or any
director or employee has engaged or is engaging in improper or
illegal activities, fraud or activities that appear to be
inconsistent with or in violation of the Business Ethics Policy
is responsible for reporting such activities. We do not permit
retaliation of any kind against any person who, in good faith,
reports any known or suspected improper activities pursuant to
our Business Ethics Policy.
Our Business Ethics Policy includes additional ethical
obligations for our senior financial management (which includes
our chief executive officer, our chief financial officer, and
the controller, treasurer and principal financial and accounting
personnel in our operating groups and corporate departments).
Our senior financial management is responsible for creating and
maintaining a culture of high ethical standards throughout our
company to ensure the fair and timely reporting of our financial
results and financial condition.
Communications with Directors. The
Board of Directors has adopted a process by which shareholders
and other interested parties may communicate with the
non-management directors or the chairperson of any of the
committees of the Board of Directors. You may send
communications by regular mail to the attention of the
Chairperson, Audit Committee; Chairperson, Compensation and
Management Development Committee; or Chairperson, Nominating and
Corporate Governance Committee; or to the non-management
directors as a group to the Non-Management Directors, each
c/o Corporate Secretary, The Sherwin-Williams Company, 101
Prospect Avenue, N.W., 12th Floor, Midland Building, Cleveland,
Ohio 44115.
Sherwin-Williams management will review all communications
received to determine whether the communication requires
immediate action. Management will pass on all communications
received, or a summary of such communications, to the
appropriate director or directors.
Complaint Procedures for Accounting, Auditing and
Financial Related Matters. The Audit
Committee has established procedures for receiving, retaining
and treating complaints from any source regarding accounting,
internal accounting controls and auditing matters. The Audit
Committee has also established procedures for the confidential,
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters. Interested parties
may communicate such complaints by following the procedures
described under the heading Communications with
Directors, above. Employees may report such
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complaints by following the procedures outlined in our Business
Ethics Policy. We do not permit any retaliation of any kind
against any person who, in good faith, submits a complaint or
concern under these procedures.
Independence of Directors. Under our
Director Independence Standards (a copy of which is attached as
Appendix A), 10 of our current 11 directors are
independent and 10 of our 11 director nominees are
independent. In addition, all members of the Audit Committee,
the Compensation and Management Development Committee, and the
Nominating and Corporate Governance Committee are independent.
Majority Voting Policy. The
Board of Directors has adopted a Majority Voting Policy. Any
nominee for director in an uncontested election who receives a
greater number of withheld votes than
for votes shall promptly tender his or her
resignation. The Nominating and Corporate Governance Committee
will promptly consider the tendered resignation and will
recommend to the Board of Directors whether to accept the
tendered resignation or to take some other action, such as
rejecting the tendered resignation and addressing the apparent
underlying causes of the withheld votes.
In making this recommendation, the Committee will consider all
factors deemed relevant by its members. These factors may
include the underlying reasons why shareholders
withheld votes for election from such director (if
ascertainable), the length of service and qualifications of the
director whose resignation has been tendered, the
directors contributions to Sherwin-Williams, whether by
accepting such resignation Sherwin-Williams will no longer be in
compliance with any applicable law, rule, regulation or
governing document, and whether or not accepting the resignation
is in the best interests of Sherwin-Williams and our
shareholders.
In considering the Committees recommendation, the Board of
Directors will consider the factors considered by the Committee
and such additional information and factors that the Board of
Directors believes to be relevant. We will promptly publicly
disclose the Board of Directors decision and process in a
periodic or current report filed with the SEC.
Executive Sessions. The non-management
members of the Board of Directors meet at least twice each year
in regularly scheduled executive sessions. Additional executive
sessions may be scheduled by the non-management directors. The
chairpersons of the Audit Committee, the Compensation and
Management Development Committee, and the Nominating and
Corporate Governance Committee rotate presiding over these
sessions.
Annual Board Self-Assessments. The
Board of Directors has instituted annual self-assessments of the
Board of Directors, as well as the Audit Committee, the
Compensation and Management Development Committee, and the
Nominating and Corporate Governance Committee, to assist in
determining whether the Board of Directors and its committees
are functioning effectively. In early 2008, the Board and each
of its committees completed self-evaluations and reviewed and
discussed the results. The Nominating and Corporate Governance
Committee oversees this evaluation process.
Board Committee Charters. The Board of
Directors has adopted written charters for the Audit Committee,
the Compensation and Management Development Committee, and the
Nominating and Corporate Governance Committee. Each committee
reviews and evaluates the adequacy of its charter at least
annually and recommends any proposed changes to the Board of
Directors for approval.
Stock Ownership Guidelines. The Board
of Directors has established a minimum share ownership
requirement for its directors, executive officers and operating
presidents. Each director who has served on the Board for at
least five years is expected to own a minimum of
10,000 shares of common stock. Each executive officer and
operating president who has served in such capacity for at least
five years is expected to own shares of common stock equal in
value to a multiple of his base salary ranging from a low of
three times to a high of five times for the Chairman and Chief
Executive Officer. For purposes of meeting this minimum share
ownership requirement, each equivalent share of common stock and
each share of restricted stock held under our benefit plans is
considered as a share of common stock.
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Stock options are not considered towards meeting this
requirement.
All directors, executive officers and operating presidents have
either met our stock ownership guidelines or are pursuing plans
to meet our guidelines within the time frames prescribed.
Executive Compensation Adjustment and Recapture
Policy. The Board of Directors has adopted a
policy regarding the adjustment and recapture of compensation
paid or payable to certain key employees and executives. Under
the policy, employees who participate in our 2007 Executive
Performance Bonus Plan are required to reimburse
Sherwin-Williams for any award paid under this plan in the event:
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The award was based upon the achievement of financial results
that were subsequently the subject of an accounting restatement
due to the material noncompliance with any financial reporting
requirement under the federal securities laws;
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The Board determines that the employee engaged in knowing or
intentional fraudulent or illegal conduct that caused or
partially caused the need for the restatement; and
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A lower amount would have been paid to the employee based upon
the restated financial results.
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The reimbursement will be equal to the difference in the amount
of the award prior to the restatement and the amount of the
award determined using the restated financial results.
In addition, under our 2006 Equity and Performance Incentive
Plan, (a) all outstanding stock awards will be cancelled
and (b) the employee will be required to reimburse
Sherwin-Williams for any economic gains received by the employee
pursuant to a stock award during the one-year period preceding
the Boards determination that the employee engaged in the
conduct described above.
Availability of Corporate Governance
Materials. You may access all committee
charters, our Corporate Governance Guidelines, our Director
Independence Standards, our Business Ethics Policy, our Majority
Voting Policy and other corporate governance materials in the
Corporate Governance section on the Investor
Relations page of our website at www.sherwin.com. You also
may receive copies without charge by writing to us at: The
Sherwin-Williams Company, 101 Prospect Avenue, N.W., Cleveland,
Ohio 44115, Attention: Investor Relations.
ELECTION
OF DIRECTORS (PROPOSAL 1)
At the Annual Meeting, the number of directors is to be fixed at
11, and 11 directors are to be elected to hold office until
the next Annual Meeting of Shareholders and until their
successors are elected.
Our Board of Directors currently has 11 members. All of
these directors are standing for re-election as nominees. All of
the nominees were elected by the shareholders at the 2007 Annual
Meeting. All of the nominees are independent except for
Mr. Connor. Mr. Connor is not considered to be independent
because of his position as Chairman and Chief Executive Officer
of Sherwin-Williams. There are no family relationships among any
of the directors and executive officers.
Each of the nominees has agreed to serve if elected. If any
nominee declines or is unable to accept such nomination or is
unable to serve, an event which we do not expect, the Board of
Directors reserves the right in its discretion to substitute
another person as a nominee or to reduce the number of nominees.
In this event, the proxy holders may vote in their discretion
for any substitute nominee proposed by the Board of Directors
unless you indicate otherwise.
The following is biographical information regarding each nominee:
Arthur F.
Anton
President and
Chief Executive Officer,
Swagelok Company
Director of Sherwin-Williams since 2006
Arthur F. Anton, 50, has served as President and Chief Executive
Officer of Swagelok Company (manufacturer and provider of fluid
system products and services) since January 2004. Mr. Anton
served as President and Chief Operating Officer of Swagelok from
January 2001 to January 2004, Executive Vice President of
Swagelok from July 2000 to January 2001, and Chief Financial
Officer of Swagelok from August 1998 to July 2000.
Mr. Anton is also a Director of University Hospitals Health
System and is Chairman of the Manufacturing Advocacy &
Growth Network.
James C.
Boland
Retired, Former Vice Chairman,
Cavaliers Operating Company, LLC
Director of Sherwin-Williams since 1998
James C. Boland, 68, prior to his retirement in June 2007,
served since 2003 as Vice Chairman of Cavaliers Operating
Company, LLC (formerly known as Cavaliers/Gund Arena Company).
Mr. Boland served as President and Chief Executive Officer
of CAVS/Gund Arena Company from January 1998 to January
2003. Prior to his time with the Cavaliers, Mr. Boland
served for 22 years as a partner of Ernst & Young LLP in
various roles including Vice Chairman and Regional Managing
Partner as well as a member of the firms Management
Committee from 1988 to 1996 and as Vice Chairman of National
Accounts from 1997 to his retirement from the firm in 1998.
Mr. Boland is also a Director of The Goodyear
Tire & Rubber Company and Invacare Corporation and is
a Trustee of Bluecoats, Inc. and The Harvard Business School
Club of Cleveland.
Christopher M.
Connor
Chairman and
Chief Executive Officer,
Sherwin-Williams
Director of Sherwin-Williams since 1999
Christopher M. Connor, 51, has served as Chairman of
Sherwin-Williams since April 2000 and Chief Executive Officer of
Sherwin-Williams since October 1999. Mr. Connor served
as President of Sherwin-Williams from July 2005 to October 2006,
Vice Chairman of Sherwin-Williams from October 1999 to April
2000, and President, Paint Stores Group of Sherwin-Williams from
August 1997 to October 1999. Mr. Connor has been
with Sherwin-Williams since 1983 in roles of increasing
responsibility. Mr. Connor is also a Director of Eaton
Corporation and National City Corporation.
Daniel E.
Evans
Retired, Former Chairman, Chief
Executive Officer and Secretary,
Bob Evans Farms, Inc.
Director of Sherwin-Williams since 1990
Daniel E. Evans, 71, prior to his retirement in April 2001,
served as Chairman of Bob Evans Farms, Inc. (food products and
restaurants) since 1971. Mr. Evans served as Chief
Executive
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Officer and Secretary of Bob Evans Farms from 1971 to April
2000. Mr. Evans is also a Director of Evans Enterprises,
Inc. and Motorists Mutual Insurance Company.
David F.
Hodnik
Retired, Former President and
Chief Executive Officer,
Ace Hardware Corporation
Director of Sherwin-Williams since 2005
David F. Hodnik, 60, prior to his retirement in April 2005,
served as Chief Executive Officer of Ace Hardware Corporation
(cooperative of independent hardware retail stores) since
January 1997. Mr. Hodnik also served as President of Ace
from January 1996 through December 2004. Mr. Hodnik joined
Ace in October 1972 and held various financial, accounting and
operating positions at Ace.
Susan J.
Kropf
Retired, Former President and
Chief Operating Officer,
Avon Products, Inc.
Director of Sherwin-Williams since 2003
Susan J. Kropf, 59, prior to her retirement in January 2007,
served as President and Chief Operating Officer of Avon
Products, Inc. (global manufacturer and marketer of beauty and
related products) since January 2001. Mrs. Kropf served as
Executive Vice President and Chief Operating Officer, North
America and Global Business Operations, of Avon from December
1999 to January 2001 and Executive Vice President and President,
North America, of Avon from March 1997 to December 1999.
Mrs. Kropf joined Avon in 1970 and held various positions
in manufacturing, marketing and product development.
Mrs. Kropf is also a Director of Coach, Inc., MeadWestvaco
Corporation, The Kroger Co. and the Wallace Foundation.
Robert W.
Mahoney
Retired, Former Chairman, Chief
Executive Officer and President,
Diebold, Incorporated
Director of Sherwin-Williams since 1995
Robert W. Mahoney, 71, prior to his retirement in April 2000,
served as Chairman of Diebold, Incorporated (manufacturer of
financial self-service transaction systems and security
products) since April 1988. Mr. Mahoney served as Chief
Executive Officer of Diebold from April 1988 to November 1999
and President of Diebold from July 1993 to
November 1996. Mr. Mahoney is also a Director of
Cincinnati Bell Inc. and The Timken Company, is Retired Chairman
of the Federal Reserve Bank of Cleveland, Chairman of Ignite
Sales, Inc. and Retired Chairman of Mercy Medical Center
(Canton, Ohio), is a Trustee of the Professional Football Hall
of Fame, is a Member of the Stark (County, Ohio) Development
Board, Inc., and is Co-chair of the Ohio Business Alliance for
Higher Education and the Economy, Ohio Business Roundtable.
Gary E.
McCullough
President and
Chief Executive Officer,
Career Education Corporation
Director of Sherwin-Williams since 2002
Gary E. McCullough, 49, has served as President and Chief
Executive Officer of Career Education Corporation (provider of
post secondary education) since March 2007. Mr. McCullough
served as Senior Vice President of Abbott Laboratories and
President of its Ross Products Division from December 2003
to March 2007. Immediately prior to joining Abbott Laboratories,
Mr. McCullough served as Senior Vice President
Americas of Wm. Wrigley Jr. Company from March 2000 to
December 2003. Mr. McCullough also spent 13 years
at the Procter & Gamble Company where he served in a
variety of marketing and management positions. Mr. McCullough is
also a Director of Career Education Corporation.
A. Malachi Mixon,
III
Chairman and Chief Executive Officer,
Invacare Corporation
Director of Sherwin-Williams since 1993
A. Malachi Mixon, III, 67, has served as Chief Executive Officer
of Invacare Corporation (manufacturer and distributor of home
health care products) since January 1980 and Chairman of
Invacare since September 1983. Mr. Mixon served as President of
Invacare from January 1980 to November 1996. Mr. Mixon is
also Chairman of The Cleveland Clinic Foundation and Cleveland
Institute of Music and is a Director of the Harvard School of
Business Administration.
8
Curtis E.
Moll
Chairman and Chief Executive Officer,
MTD Holdings Inc
Director of Sherwin-Williams since 1997
Curtis E. Moll, 68, has served as Chairman and Chief Executive
Officer of MTD Holdings Inc (manufacturer of outdoor power
equipment and tools, dies and stampings for the automotive
industry) since October 1980. Mr. Moll is also
a Director of AGCO Corporation and is Chairman of the Board
of Directors of Shiloh Industries, Inc.
Richard K.
Smucker
President and Co-Chief Executive Officer,
The J.M. Smucker Company
Director of Sherwin-Williams since 1991
Richard K. Smucker, 59, has served as Co-Chief Executive Officer
of The J.M. Smucker Company (makers of food products) since
February 2001 and President of J.M. Smucker since January 1987.
Mr. Smucker served as Chief Financial Officer of J.M.
Smucker from June 2003 to January 2005. Mr. Smucker is also a
Director of J.M. Smucker and Wm. Wrigley Jr. Company and is a
Trustee of Miami University of Ohio and the Musical Arts
Association (The Cleveland Orchestra).
The Board of Directors unanimously recommends that you
vote FOR Proposal 1 relating to the election of
directors.
INDEPENDENCE
OF DIRECTORS
The Board of Directors has adopted categorical Director
Independence Standards to assist the Board of Directors in
determining the independence of each director. To be considered
independent, the Board of Directors must affirmatively determine
that the director has no material relationship with
Sherwin-Williams. In each case, the Board of Directors broadly
considers all relevant facts and circumstances, including the
directors commercial, industrial, banking, consulting,
legal, accounting, charitable and familial relationships, and
such other criteria as the Board of Directors may determine from
time to time.
During the Board of Directors annual review of director
independence, the Board of Directors considers transactions,
relationships and arrangements between each director or an
immediate family member of the director and Sherwin-Williams.
The Board of Directors also considers transactions,
relationships and arrangements between each director or an
immediate family member of the director and
Sherwin-Williams senior management.
The following relationships will not be considered to be
material relationships that would impair a directors
independence:
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if the director is an executive officer or employee of another
company that, during any of the past three years, made payments
to, or receives payments from, Sherwin-Williams for property or
services in an amount which, in any year, is less than
$1 million or two percent, whichever is greater, of such
other companys annual gross revenues;
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if an immediate family member of the director is an executive
officer of another company that, during any of the past three
years, made payments to, or receives payments from,
Sherwin-Williams for property or services in an amount which, in
any year, is less than $1 million or two percent, whichever
is greater, of such other companys annual gross revenues;
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if the director, or an immediate family member of the director,
is an executive officer of another company which is indebted to
Sherwin-Williams in an amount which is less than five percent of
such other companys total assets; and
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if the director, or an immediate family member of the director,
serves as an officer, director or trustee of a not for profit
organization, and Sherwin-Williams discretionary
charitable contributions (excluding matching contributions) to
the organization are less than $250,000 or five percent,
whichever is greater, of that organizations annual gross
revenues.
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A complete copy of our Director Independence Standards is
attached as Appendix A.
Early this year, the Board of Directors performed its annual
director independence review for 2008. As part of this review,
the Board of Directors considered club memberships
9
common among our directors, including Messrs. Anton,
Boland, Connor, Mixon and Smucker. The Board of Directors also
considered common public, private and charitable board
memberships among our executive officers and directors,
including Messrs. Anton, Boland, Connor, Mixon and Moll.
The Board of Directors does not believe that any of these common
club and board memberships impair the independence of our
directors.
As a result of this review, the Board of Directors determined
that 10 of our 11 current directors and director nominees
are independent, and all members of the Audit Committee, the
Compensation and Management Development Committee, and the
Nominating and Corporate Governance Committee are independent.
The Board of Directors determined that Mrs. Kropf and
Messrs. Anton, Boland, Evans, Hodnik, Mahoney, McCullough,
Mixon, Moll and Smucker meet these standards and are independent
and, in addition, satisfy the independence requirements of the
New York Stock Exchange. Mr. Connor is not considered to be
independent because of his position as Chairman and Chief
Executive Officer of Sherwin-Williams.
10
2007
DIRECTOR COMPENSATION TABLE
The following table sets forth information regarding the
compensation of our nonemployee directors for 2007.
Mr. Connor, who is our Chairman and Chief Executive
Officer, does not receive any additional compensation for
services as a director.
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Fees Earned
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Option
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All Other
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or Paid in
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Stock Awards
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Awards
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Compensation
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Total
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Name
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Cash
($)(4)
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($)(5,6,7)
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($)(8)
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($)(9,10)
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($)
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A. F. Anton
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76,750
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53,814
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-0-
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-0-
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130,564
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J. C.
Boland(1)
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89,500
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73,507
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-0-
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5,000
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168,007
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D. E. Evans
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76,750
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73,507
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-0-
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-0-
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150,257
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D. F. Hodnik
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80,250
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74,454
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-0-
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-0-
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154,704
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S. J. Kropf
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80,250
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73,507
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-0-
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-0-
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153,757
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R. W.
Mahoney(2)
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90,250
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73,507
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-0-
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-0-
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163,757
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G. E. McCullough
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82,000
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73,507
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-0-
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-0-
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155,507
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A. M. Mixon, III
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80,250
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73,507
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-0-
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5,000
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158,757
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C. E. Moll
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82,000
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73,507
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-0-
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-0-
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155,507
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R. K.
Smucker(3)
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92,750
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73,507
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-0-
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1,000
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167,257
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1
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Mr. Boland served as Chair of the Nominating and Corporate
Governance Committee.
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2
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Mr. Mahoney served as Chair of the Compensation and
Management Development Committee.
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3
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Mr. Smucker served as Chair of the Audit Committee.
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4
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The amounts set forth in this column reflect the annual
retainer, the annual retainer for committee chairs, and meeting
fees. Messrs. Boland, Kropf, McCullough, Mixon and Moll
elected to defer payments of all or a portion of their fees
under our Director Deferred Fee Plan. Cash amounts deferred
during 2007 were as follows: Mr. Boland ($89,500),
Mrs. Kropf ($75,000), Mr. McCullough ($82,000),
Mr. Mixon ($80,250) and Mr. Moll ($82,000). These
amounts were credited to either a common stock account or a
shadow stock account under our Director Deferred Fee Plan. The
number of shares of common stock (which includes shares acquired
through the reinvestment of dividends) held by the nonemployee
directors under our Director Deferred Fee Plan at
December 31, 2007 was as follows: Mr. McCullough
(9,221), Mr. Moll (18,549) and Mr. Smucker (11,685). The
number of shares of shadow stock (which includes shares acquired
through the reinvestment of dividend equivalents) held by the
nonemployee directors under our Director Deferred Fee Plan at
December 31, 2007 was as follows: Mr. Boland (17,613),
Mrs. Kropf (6,242) and Mr. Mixon (27,110).
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The amounts set forth in this column reflect shares of
restricted stock granted during 2007 and previous years under
our 2006 Stock Plan for Nonemployee Directors and our 1997 Stock
Plan for Nonemployee Directors (the predecessor plan). The
amounts listed are equal to the compensation cost recognized by
Sherwin-Williams during 2007 for financial statement purposes in
accordance with Statement of Financial Accounting Standards
No. 123R (FAS 123R), except no assumptions
for forfeitures were included. Additional information related to
the calculation of the compensation cost is set forth in
Note 12 of the Notes to Consolidated Financial Statements
of our 2007 Annual Report to Shareholders.
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Each of the nonemployee directors received 1,333 shares of
restricted stock during 2007 under our 2006 Stock Plan for
Nonemployee Directors. The aggregate grant date fair value
computed in accordance with FAS 123R for the shares of
restricted stock granted to the nonemployee directors during
2007 was $93,677 for each of Mrs. Kropf and Messrs. Anton,
Boland, Evans, Hodnik, Mahoney, McCullough, Mixon, Moll and
Smucker. Additional information related to the calculation
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of the grant date fair value is set forth in Note 12 of the
Notes to Consolidated Financial Statements of our 2007 Annual
Report to Shareholders.
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The number of shares of restricted stock held by the nonemployee
directors at December 31, 2007 was as follows:
Mr. Anton (2,333), Mr. Boland (2,833), Mr. Evans
(2,833), Mr. Hodnik (2,833), Mrs. Kropf (2,833),
Mr. Mahoney (2,833), Mr. McCullough (2,833),
Mr. Mixon (2,833), Mr. Moll (2,833) and
Mr. Smucker (2,833). Dividends are paid on shares of
restricted stock at the same rate as paid on our common stock.
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The number of stock options held by the nonemployee directors at
December 31, 2007 was as follows: Mr. Evans (17,000),
Mrs. Kropf (7,000), Mr. Mahoney (15,000),
Mr. McCullough (9,000), Mr. Mixon (17,000),
Mr. Moll (1,167) and Mr. Smucker (3,500). No stock
options have been granted to the nonemployee directors since
2003, and our director compensation program no longer includes
the granting of stock options.
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The amounts set forth in this column reflect charitable matching
gifts under our matching gifts to education program and our
matching gifts for volunteer leaders program. These programs are
available to all full-time employees and directors and are
described on the next page.
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10 |
The amounts set forth in this column do not include the
incremental cost of our Business Travel Accident Insurance Plan.
Coverage under this plan is provided to all directors, executive
officers and full-time salaried employees. We pay an aggregate
premium for the insurance policy underlying this plan. The total
aggregate premium in 2007 for this plan for all directors,
executive officers and employees was $33,030.
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DIRECTOR
COMPENSATION PROGRAM
The Compensation and Management Development Committee is
responsible for annually reviewing and approving the
compensation for the nonemployee directors. All of the
nonemployee directors are paid under the same compensation
program. Officers of Sherwin-Williams who also serve as
directors do not receive any additional compensation for
services as a director.
We use a combination of cash and equity-based compensation to
attract and retain our nonemployee directors. Compensation for
the nonemployee directors consists of an annual cash retainer;
an additional annual cash retainer for chairs of the Audit
Committee, the Compensation and Management Development
Committee, and the Nominating and Corporate Governance
Committee; meeting fees; an annual grant of restricted stock;
and other benefits.
Stock options are not currently a part of the nonemployee
director compensation program. In addition, we do not provide
retirement benefits to our nonemployee directors.
2008 Director Fees. For 2008, the cash
and equity compensation payable to the nonemployee directors is
as follows:
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An annual cash retainer of $85,000;
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An additional annual cash retainer of $15,000 for the chair of
the Audit Committee;
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An additional annual cash retainer of $11,500 for the chair of
the Compensation and Management Development Committee;
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An additional annual cash retainer of $8,500 for the chair of
the Nominating and Corporate Governance Committee;
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A meeting fee of $1,750 for each Board or committee meeting
attended in excess of twelve meetings during the calendar year.
For purposes of calculating the number of meetings during the
calendar year, any Board and committee meetings held on the same
date shall constitute one meeting; and
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An annual grant of restricted stock valued at approximately
$85,000 at the time of the grant under our 2006 Stock Plan for
Nonemployee Directors.
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Shares of restricted stock vest in annual increments of
one-third of the shares granted over a period of three years.
The shares will immediately vest in the event of the death or
disability of the director or in the event of a change in
control of Sherwin-Williams. In the event of the retirement of
the director, the shares will continue to vest in accordance
with the original three-year vesting schedule.
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We reimburse all directors for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at
meetings of the Board of Directors and its committees. This
includes travel expenses of spouses if they are invited for a
specific business purpose.
2007 Director Fees. During 2007, the
annual cash retainer payable to the nonemployee directors was
$75,000. In addition, the chair of the Audit Committee received
an additional annual cash retainer of $12,500, the chair of the
Compensation and Management Development Committee received an
additional annual cash retainer of $10,000, and the chair of the
Nominating and Corporate Governance Committee received an
additional annual cash retainer of $7,500. Nonemployee directors
were also eligible to receive a meeting fee of $1,750 for each
Board or Committee meeting attended in excess of seven meetings.
During 2007, each nonemployee director received a grant of 1,333
shares of restricted stock.
Other Benefits. We also pay the
premiums for liability insurance and business travel accident
insurance for all directors, including $225,000 accidental death
and dismemberment coverage and $225,000 permanent total
disability coverage, while the directors are traveling on
Sherwin-Williams business.
Directors may also receive the same discounts as our employees
on the purchase of products at Sherwin-Williams stores and
are eligible to participate in our matching gifts programs on
the same basis as employees. These programs provide for annual
matches in an equal amount of up to $5,000 under the matching
gifts to education program and $1,000 under the matching gifts
for volunteer leaders program, as well as annual grants of up to
$200 under the grants for volunteers program.
Amounts received by the directors for these other benefits are
included in the All Other Compensation column of the
2007 Director Compensation Table.
Deferral of Director Fees. Directors
may elect to defer all or a part of their retainer and meeting
fees under our Director Deferred Fee Plan. Deferred fees may be
credited to a common stock account, a shadow stock account or an
interest bearing cash account. The value of the shadow stock
account reflects changes in the market price of our common stock
and the payment of dividend equivalents at the same rate as
dividends are paid on our common stock. Amounts deferred may be
distributed either in annual installments over a period up to
ten years or in a lump sum on the date chosen by the director.
Amounts credited to a shadow stock account are distributed in
cash.
13
BOARD
MEETINGS AND COMMITTEE MEMBERSHIP
The Board of Directors held seven meetings during 2007. Each
director attended at least 75% of the meetings of the Board of
Directors and committees on which he or she served. Each
director is expected to attend, absent unusual circumstances,
all annual and special meetings of shareholders. All directors
except one attended the 2007 Annual Meeting of Shareholders.
The Board of Directors has established an Audit Committee, a
Compensation and Management Development Committee, and a
Nominating and Corporate Governance Committee. The Board of
Directors has adopted a written charter for each of these
committees. You can find a complete copy of each committee
charter in the Corporate Governance section on the
Investor Relations page of our website at
www.sherwin.com. The following table sets forth the current
membership of these committees.
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Compensation and
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Nominating and
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Management
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Corporate
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Name
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Audit
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Development
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Governance
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A. F. Anton
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x
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J. C. Boland
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x
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x
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*
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D. E. Evans
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x
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D. F. Hodnik
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x
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S. J. Kropf
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x
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R. W. Mahoney
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x
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*
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x
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G. E. McCullough
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x
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A. M. Mixon, III
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x
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x
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C. E. Moll
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x
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x
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R. K. Smucker
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x
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*
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x
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* Committee Chair
Audit Committee. The purpose of the Audit
Committee is to assist the Board of Directors in fulfilling the
Board of Directors oversight responsibilities on matters
relating to:
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the integrity of our financial statements;
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the independent registered public accounting firms
qualifications and independence;
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the performance of our internal audit function and independent
registered public accounting firm;
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our compliance with legal and regulatory requirements;
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preparing the report required by the rules of the SEC to be
included in our annual proxy statement; and
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engaging in such other matters as may from time to time be
specifically delegated to the Committee by the Board of
Directors.
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The Committee met five times during 2007. Each member of the
Committee is independent as defined in the corporate governance
listing standards of the New York Stock Exchange, SEC
regulations and our Director Independence Standards. The Board
of Directors has determined that Messrs. Boland, Hodnik and
Smucker are audit committee financial experts, as
that term is defined by SEC regulations. No member of the
Committee serves on the audit committees of three other public
companies.
Compensation and Management Development
Committee. The purpose of the Compensation and
Management Development Committee is to assist the Board of
Directors in fulfilling the Board of Directors oversight
responsibilities on matters relating to:
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compensating our management, which includes our executive
officers;
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overseeing our management succession planning;
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producing a compensation committee report required by the rules
of the SEC to be included in our annual proxy statement; and
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engaging in such other matters as may from time to time be
specifically delegated to the Committee by the Board of
Directors.
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The Committee met four times during 2007. Each member of the
Committee is independent as defined in the corporate governance
listing standards of the New York Stock Exchange and our
Director Independence Standards.
Process for Determining Director and Executive
Compensation. The Committee reports to the Board
of Directors on all compensation matters regarding our
directors, executives and other key salaried employees. The
Committee annually reviews and approves the compensation for our
directors, executives and other key salaried employees. The
Committee does not generally delegate any of its authority to
other persons, although it has the power to delegate authority
to subcommittees. The Committee relies upon our executives and
other employees and an outside compensation consultant in order
to assist the Committee in performing its duties.
We generally pay our directors and executives compensation that
is competitive in the marketplace. In order to assist the
Committee in determining compensation that is competitive, the
Committee has engaged Towers Perrin, an outside consulting firm,
as its compensation consultant. Towers Perrin annually compiles
information regarding the compensation that similar companies
are paying to their directors and executives. Our Senior Vice
President HR and his staff usually work directly
with Towers Perrin to compile the market compensation
information. We use that information as a starting point to set
compensation levels for our directors and executives.
Role of the Compensation Consultant. Towers
Perrin serves as an advisor to the Committee on compensation
matters relating to our directors and executives. Towers Perrin
generally provides the Committee with market compensation data
and makes recommendations with regard to the form and amount of
director and executive compensation based on the market data.
Towers Perrin typically makes recommendations with regard to the
base salary, annual cash incentive compensation and long-term
equity incentive compensation for our Chief Executive Officer.
Towers Perrin also from time to time identifies peer companies
for benchmarking director and executive compensation, provides
other market compensation information and analysis, assists with
the development of, and changes to, compensation plans and
programs, and attends Committee meetings.
Role of Management. The Committee relies upon
our Senior Vice President HR and his staff for input
in determining director and executive compensation levels.
Towers Perrin typically provides the requested market
compensation information to our Senior Vice
President HR, and our Senior Vice
President HR typically meets with Towers Perrin to
discuss this information. Our Chief Executive Officer does not
meet with Towers Perrin on an individual basis. With regard to
director compensation, Towers Perrin also typically provides the
Committee with recommendations of any changes to director
compensation. Our Senior Vice President HR may also
make recommendations to the Committee of changes to director
compensation based upon the market compensation information.
With regard to executive compensation, management generally
makes recommendations to the Committee and plays a more active
role in the compensation process. Management makes
recommendations relating to the development of compensation
plans and programs and changes to existing plans and programs.
Management also makes recommendations with respect to:
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the evaluation of executive performance;
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merit salary increases;
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the performance goals (and weightings) for annual cash incentive
compensation;
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the financial performance goals for grants of restricted stock;
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the results attained with respect to performance goals; and
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the number of stock options and shares of restricted stock
granted.
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Prior to providing recommendations to the Committee at its
formal meetings, our Senior
15
Vice President HR generally will meet with our Chief
Executive Officer to review the recommendations, except for
recommendations concerning our Chief Executive Officers
compensation. Our Chief Executive Officer and our Senior Vice
President HR also will meet with the chair of the
Committee prior to Committee meetings to review the agenda for
the meetings and the compensation recommendations. Our Chief
Executive Officer and our Senior Vice President HR
generally attend all Committee meetings. Our Chief Executive
Officer does not have the ability to call Committee meetings.
Our Senior Vice President HR serves as secretary for
the Committee at its meetings. Our Chief Executive Officer is
excused from that part of the meeting during which the Committee
discusses his annual performance evaluation and compensation.
Nominating and Corporate Governance
Committee. The purpose of the Nominating and
Corporate Governance Committee is to assist the Board of
Directors in fulfilling the Board of Directors oversight
responsibilities on matters relating to:
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identifying individuals qualified to become members of the Board
of Directors;
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recommending to the Board of Directors the director nominees for
election as directors;
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recommending to the Board of Directors the director nominees for
each committee of the Board of Directors;
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reviewing, developing and recommending to the Board of Directors
a set of corporate governance guidelines;
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guiding the Board of Directors in its annual evaluation of the
Board of Directors performance; and
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engaging in such other matters as may from time to time be
specifically delegated to the Committee by the Board of
Directors.
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The Committee met twice in 2007. Each member of the Committee is
independent as defined in the corporate governance listing
standards of the New York Stock Exchange and our Director
Independence Standards.
Director Qualifications. The Committee seeks a
diverse group of candidates who possess the appropriate
characteristics, skills, experience and time to make a
significant contribution to the Board of Directors,
Sherwin-Williams and our shareholders. Each candidate will be
evaluated in the context of the Board of Directors as a whole,
with the objective that the Board of Directors can best
perpetuate Sherwin-Williams success and represent
shareholders interests through the exercise of sound
business judgment using the directors diversity of
experiences. Each candidate shall have the highest personal and
professional character and integrity, and shall have
demonstrated exceptional ability and judgment in their
respective endeavors. Candidates must possess sufficient time to
effectively carry out their duties and responsibilities.
In considering the composition of the Board of Directors as a
whole, the Board of Directors considers the following
characteristics, skills and experiences of each individual
candidate:
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Management;
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Financial Expertise;
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Manufacturing, Distribution;
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Technical, Research & Development;
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International Operations;
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Marketing, Sales;
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Retail Operations;
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Independence; and
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Diversity.
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In addition, the Board of Directors considers such other skills
and experiences as it deems appropriate given the then-current
needs of the Board of Directors and Sherwin-Williams.
The Committee may employ professional search firms (for which it
would pay a fee) to assist it in identifying potential members
of the Board of Directors with the desired skills and
disciplines.
Consideration of Candidates Recommended by
Shareholders. The Committees policy with
respect to the consideration of director candidates recommended
by shareholders is that the Committee will consider such
candidates on the same basis and in the same manner as it
considers all director candidates.
16
Recommendations are required to include the following
information:
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the name and address of the shareholder;
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the number of shares of common stock that are owned by the
shareholder;
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a description of all arrangements or understandings between or
among any of (a) the shareholder, (b) each candidate
and (c) any other person or persons pursuant to which the
recommendation is being made;
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the candidates full name, address and telephone numbers;
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a statement of the candidates qualifications and
experiences, and any other relevant qualities;
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the information that would be required under the rules of the
SEC in a proxy statement soliciting proxies for the election of
the candidate as a director;
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a statement, signed by both the shareholder and the candidate
(a) that the shareholder and the candidate currently do not
have, and in the prior three years have not had, directly or
indirectly, any business, professional or other relationship
with each other, and that the shareholder and the candidate do
not have any agreement, arrangement or understanding with each
other with respect to the candidates proposed service as a
director, or (b) if either of the foregoing statements is
incorrect in any manner, describing in detail the relationship,
agreement, arrangement or understanding;
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the candidates resume, a list of other boards of
directors of public companies on which the candidate currently
serves or has served in the past five years, educational
information and at least three references; and
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a written statement signed by the candidate agreeing that if he
or she is nominated by the Board of Directors, he or she will
(a) be a nominee for election to the Board of Directors,
(b) provide all information necessary to be include in
Sherwin-Williams proxy statement under applicable SEC or
NYSE rules, and (c) serve as director if he or she is
elected by shareholders.
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You may find a complete description of these requirements under
Procedures for Shareholders to Recommend Director
Candidates in the Corporate Governance section
on the Investor Relations page of our website at
www.sherwin.com. Shareholders may submit recommendations, along
with proof of shareholder status, in writing to Chairperson,
Nominating and Corporate Governance Committee,
c/o
Corporate Secretary, The
Sherwin-Williams
Company, 101 Prospect Avenue, N.W., 12th Floor,
Midland Building, Cleveland, Ohio 44115.
17
AUDIT
COMMITTEE REPORT
Management has the primary responsibility for the integrity of
Sherwin-Williams financial information and the financial
reporting process, including the system of internal control over
financial reporting. Ernst & Young LLP,
Sherwin-Williams independent registered public accounting
firm, is responsible for conducting independent audits of
Sherwin-Williams financial statements and
managements assessment of the effectiveness of internal
control over financial reporting in accordance with the
standards of the Public Company Accounting Oversight Board
(United States) and expressing an opinion on the financial
statements and managements assessment based upon those
audits. The Audit Committee is responsible for overseeing the
conduct of these activities by management and Ernst &
Young LLP.
As part of its oversight responsibility, the Committee has
reviewed and discussed the audited financial statements, the
adequacy of financial controls and the effectiveness of
Sherwin-Williams internal control over financial reporting
with management and Ernst & Young LLP. The Committee
also has discussed with Ernst & Young LLP the matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Committee
has received the written disclosures and the letter from Ernst
& Young LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit
Committees) and has discussed with Ernst & Young LLP that
firms independence.
Based upon these reviews and discussions, the Committee
recommended to the Board of Directors that the audited financial
statements be included in Sherwin-Williams Annual Report
on
Form 10-K
for the year ended December 31, 2007 for filing with the
Securities and Exchange Commission.
AUDIT
COMMITTEE
R. K. Smucker, Chairman
J. C. Boland
D. F. Hodnik
G. E. McCullough
C. E. Moll
COMPENSATION
COMMITTEE REPORT
The Compensation and Management Development Committee has
reviewed and discussed with management the Compensation
Discussion and Analysis contained in this Proxy Statement. Based
upon this review and discussions, the Committee recommended to
the Board of Directors that the Compensation Discussion and
Analysis be included in Sherwin-Williams Annual Report on
Form 10-K for the year ended December 31, 2007 and
this Proxy Statement.
COMPENSATION
AND MANAGEMENT
DEVELOPMENT COMMITTEE
R. W. Mahoney, Chairman
A. F. Anton
D. E. Evans
S. J. Kropf
A. M. Mixon, III
18
COMPENSATION
DISCUSSION AND ANALYSIS
Executive Summary.
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The major components of our executive compensation program are
base salary, annual cash incentive compensation, long-term
equity incentive compensation through stock options and
restricted stock, and other employee and executive benefits.
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We review compensation paid at similar chemical, building
product manufacturing and retail companies to ensure that our
compensation program is competitive in comparison with our peers.
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For our annual cash incentive compensation, we assign
performance goals for our executives at the beginning of each
year.
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We annually grant stock options and performance-based restricted
stock to our executives to help us retain our executives and
encourage our executives to improve the long-term performance of
our company.
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We provide our executives with various retirement and savings
programs, health and welfare programs, and employee benefit
plans, programs and arrangements generally available to all
employees.
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We provide our executives with other executive benefit programs
and benefits as part of providing a competitive executive
compensation program and for employee retention.
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We prepare and use tally sheets when approving changes in
compensation for our named executives to allow us to review how
a change in the amount of each compensation component affects
total compensation and to review each named executives
total compensation in the aggregate.
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Effective August 2007, we eliminated the following perquisites
for our executives: parking, annual physical, personal liability
insurance, basic financial planning, home security system and
club memberships for personal use.
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In February 2008, we adopted a policy providing for the
recapture of compensation from key employees who knowingly
engage in fraudulent or illegal conduct that causes a financial
restatement.
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Objectives. We design and manage our
company-wide compensation programs to maintain a performance and
achievement-oriented environment in order to attract, hire,
retain and motivate talented and skilled individuals at all
levels of our company.
The Compensation Committee. The
Compensation and Management Development Committee assists our
Board of Directors in fulfilling our Boards oversight
responsibilities to administer our executive compensation
program. Each member of the Compensation Committee is
independent as defined in the corporate governance listing
standards of the New York Stock Exchange and our director
independence standards.
The Compensation Committee reports to the Board of Directors on
all compensation matters regarding our executives and other key
salaried employees. You may learn more about the Compensation
Committees responsibilities by reading the Compensation
Committees Charter, which is available in the
Corporate Governance section on the Investor
Relations page of our website at www.sherwin.com. We have
also included additional information about the Compensation
Committee, including the role of compensation consultant and
management in the compensation setting process, under the
heading Board Meetings and Committee
Membership Compensation and Management Development
Committee.
Components of Compensation. The major
components of our executive compensation program, the primary
purpose of each component and the form of compensation for each
component are described in the following table.
19
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Component
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Primary Purpose
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Form of Compensation
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Base Salary
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Provides base compensation for the day-to-day performance of job
responsibilities
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Cash
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Annual Cash Incentive Compensation
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Rewards performance during the year based on the achievement of
annual performance goals
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Cash
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Long-Term Equity Incentive Compensation
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Encourages improvement in the long-term performance of our
company, thereby aligning the interests of our executives with
the interests of our shareholders
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Stock options, which vest over a three-year period, and
performance-based restricted stock, which vests at the end of a
four-year period based upon the achievement of financial
performance goals
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Other Employee And Executive Benefits, Including
Perquisites
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Provides a broad-based executive compensation program for
employee retention, retirement, health and financial security
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Retirement and savings programs, health and welfare programs,
and employee benefit plans, programs and arrangements generally
available to all employees; perquisites, executive life
insurance program, executive long-term disability program and
grantor trust program
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The Summary Compensation Table sets forth amounts for these
components that we paid to our Chairman and Chief Executive
Officer, our Senior Vice President Finance and Chief
Financial Officer and our three other highest paid executives
for 2007. We refer to these five executives as our named
executives. Our named executives are:
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Christopher M. Connor, Chairman and Chief Executive Officer;
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John G. Morikis, President and Chief Operating Officer;
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Sean P. Hennessy, Senior Vice President Finance and
Chief Financial Officer;
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Steven J. Oberfeld, President, Stores Group; and
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Thomas W. Seitz, Senior Vice President Strategic
Excellence Initiatives.
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We compensate our executives principally by using a combination
of short-term compensation (salary and annual cash incentive
compensation) and long-term compensation (stock options and
restricted stock). We determine the mix of short-term and
long-term compensation by reviewing the mix available at the
peer companies listed on the next page. Accordingly, we do not
have a specific policy for the allocation of compensation
between short-term and long-term compensation or cash and equity
compensation.
The policies we use to make compensation decisions and the
decisions we make are materially similar for all executives.
These policies and decisions result in higher compensation
levels for our Chairman and Chief Executive Officer primarily
based upon the higher median compensation that is available for
chief executive officers at the peer companies.
We tie our annual cash incentive compensation to the achievement
of performance goals, and we tie our long-term equity incentive
compensation to the achievement of performance goals or to the
value of our common stock. We believe it is important that a
portion of our executives incentive compensation is
dependent upon the price of our common stock in order to align
the interests of our executives with the interests of our
shareholders. However, since the price of our common stock is
subject to some factors outside the control of our company and
our executives, we believe it is also
20
important that a portion of our executives incentive
compensation be tied to performance goals relating to the
operations of our company. We select performance goals that we
believe help to drive our business and create value for our
shareholders.
Our Starting Point. We offer our
executives compensation that is intended to be competitive with
compensation offered at similar chemical, building product
manufacturing and retail companies with comparable sales. The
Compensation Committee has retained Towers Perrin, an outside
compensation consultant, to identify annually the minimum,
median and maximum compensation paid to executives holding
equivalent positions or having similar responsibilities at these
peer companies. These peer companies are regularly reviewed and
changed from time to time, and the information is updated
annually.
We review compensation paid at these peer companies because
their size and business make them most comparable to us. We also
believe these companies likely compete with us for executive
talent. We use this information only as a starting point, not as
a determining factor, in setting compensation.
We generally benchmark the compensation that we pay to our
executives against the median compensation that these peer
companies pay to their executives. We benchmark against median
compensation because it allows us to attract and retain
employees, provides an incentive for employees to strive for
better than average performance to earn better than average
compensation, and helps us to manage the overall cost of our
compensation program. For compensation earned in 2007, these
peer companies included the companies listed in the following
table.
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Akzo Nobel, N.V.
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Engelhard Corporation
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Owens Corning
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American Standard Companies, Inc.
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Fortune Brands Inc.
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PPG Industries, Inc.
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Armstrong Holdings Inc.
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Imperial Chemical Industries PLC
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Rohm and Haas Company
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Ashland Inc.
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Leggett & Platt Inc.
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RPM International Inc.
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Avery Dennison Corporation
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Lennox International Inc.
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The Stanley Works
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The Black & Decker Corporation
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Louisiana-Pacific Corporation
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USG Corporation
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Chemtura Corporation
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Masco Corporation
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The Valspar Corporation
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Eastman Chemical Co.
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Newell Rubbermaid Inc.
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Weyerhaeuser Company
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For compensation to be earned in 2008, we deleted eight
companies (Armstrong, Chemtura, Engelhard, Imperial Chemical,
Lennox, Louisiana-Pacific, RPM and Valspar) and added four
companies (Air Products & Chemicals, Inc., Mohawk
Industries, Inc., Celanese Corporation and The Lubrizol
Corporation). These changes were made so that the median size of
the group (measured in total sales) more closely approximates
Sherwin-Williams size while still encompassing similar
businesses.
The compensation information for the peer companies provided by
Towers Perrin includes median base salary, annual cash incentive
compensation, long-term equity incentive compensation and total
direct compensation. Total direct compensation is the sum of
base salary, annual cash incentive compensation and long-term
incentive compensation. We review total direct compensation in
order to help us determine whether the principal compensation
components that we pay to our executives are competitive in the
aggregate.
The following table sets forth the projected total direct
compensation for our named executives as a percent of the median
total direct compensation paid by the peer companies. For
purposes of this table, projected total direct compensation
includes 2008 base salary, 2008 targeted annual cash incentive
compensation, stock options granted in October 2007 and the
targeted value of shares of restricted stock granted in February
2008.
21
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Projected Targeted
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Total Direct
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Compensation as a %
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Named Executive
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of Peer Companies (%)
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C.M. Connor
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101.8
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J.G. Morikis
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105.6
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S.P. Hennessy
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104.6
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S.J. Oberfeld
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105.5
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T.W. Seitz
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109.0
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The median total direct compensation paid by the peer companies
(as set forth in the table above) reflects 2006 compensation
because more current compensation amounts were not available at
the time the Compensation Committee reviewed the information.
Consequently, because peer compensation amounts were two years
old, we expected the projected targeted total direct
compensation for our named executives (as set forth in the table
above) to exceed 100% of peer compensation.
No targeted compensation component amount for any of our named
executives materially varied from the median component amount
for the peer companies. The Compensation Committee did not
increase or decrease the amount of any compensation component
based upon the amount of any other compensation component or its
review of projected targeted total direct compensation.
Base Salary. Each salaried position at
our company is assigned a salary grade that corresponds to a
salary range. We review the salary ranges against median base
salaries at the peer companies based upon the position and level
of responsibility. The midpoint of the range generally
approximates the median salary paid for an equivalent or similar
position at the peer companies. The Compensation Committee
reviews salary ranges for our executives annually. The
Compensation Committee reviews and approves the base salary of
each executive annually and at other times in connection with
any promotion or other change in responsibility. Annual base
salary increases are effective in March.
Annual salary increases are based, in part, on the overall
annual salary budget guidelines for our company. In addition,
each executive undergoes an annual performance review. The
executives performance for the prior year is reviewed by
his direct supervisor. With regard to the evaluation of our
Chairman and Chief Executive Officer, each director provides
ratings and comments for performance areas that include company
strategy, manpower needs, and leadership in growing sales,
earnings per share and total shareholder return. The results are
reviewed by the Compensation Committee and by the non-management
directors in executive session.
As part of this annual performance review, all salaried
employees, including our executives, are assigned a performance
rating that corresponds with a range of potential merit
increases. Increases are based upon the executives
performance, responsibilities, experience and tenure in his
particular position and our company-wide performance. These
factors are not quantified or weighted in any objective manner.
Instead, the Compensation Committee exercises its discretion and
subjective judgment in assessing those factors and in approving
a specific merit increase within the range.
During 2007, the Compensation Committee reviewed the perquisites
that Sherwin-Williams has provided to its executives and
eliminated most of those perquisites. Effective August 2007, the
Compensation Committee eliminated the following perquisites:
parking, annual physical, personal liability insurance, basic
financial planning, home security system and club memberships
for personal use. Accordingly, the Compensation Committee
approved a salary adjustment to compensate executives for the
elimination of these perquisites. The annual base salaries were
increased $25,000 for Messrs. Connor, Morikis and Hennessy
and $20,000 for Messrs. Oberfeld and Seitz.
We adopt budget salary guidelines for all of our employees. For
2007, we adopted an overall 3.75% merit budget for annual salary
increases with possible merit increases ranging from 0% to
8.25%. For 2008, we adopted an overall 3.25% merit budget for
annual salary increases with possible merit increases ranging
from 0% to 7.75%. The following table sets forth the 2007 and
2008 base salaries for our named executives and the percentage
increase.
22
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2007 Base
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%
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2008 Base
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Named Executive
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Salary ($)
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Increase
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Salary ($)
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C.M. Connor
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1,183,522
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3.25
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1,221,987
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J.G. Morikis
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683,356
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3.25
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705,566
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S.P. Hennessy
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522,157
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3.25
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539,127
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S.J. Oberfeld
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474,575
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3.25
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489,999
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T.W. Seitz
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436,713
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3.25
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450,907
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Annual Cash Incentive Compensation. We
pay annual cash incentive compensation to our executives under
our 2007 Executive Performance Bonus Plan, which was approved by
our shareholders at our 2007 Annual Meeting of Shareholders. The
amount of annual cash incentive compensation earned by our named
executives in 2007 is set forth in the Non-Equity
Incentive Plan Compensation column of the Summary
Compensation Table. We paid these amounts in February 2008. All
of our executives participate in our Executive Performance Bonus
Plan. Our Executive Performance Bonus Plan is designed so that
our executives may earn higher than average annual cash
incentive compensation for above average performance and lower
than average annual cash incentive compensation for below
average performance.
The Compensation Committee annually reviews target and maximum
annual cash incentive compensation levels for our executives as
a percent of their salary. Target incentive awards are
determined by using the median annual cash incentive
compensation available at the peer companies, which generally
equals the amount an executive could receive under our Executive
Performance Bonus Plan if he achieves a 100% average of his
goals. The maximum incentive awards are determined by using the
maximum annual cash incentive compensation available at the peer
companies, which generally equals the amount an executive could
receive if he achieves a 125% average of his goals.
The following table sets forth the minimum, target and maximum
cash incentive amount levels, as a percent of salary, for each
named executive based upon the executive achieving an average of
75%, 100% and 125%, respectively, of his performance goals.
These levels are effective for annual cash incentive amounts
earned in 2008 and payable in February 2009. In February 2008,
we increased the maximum annual cash incentive level that may be
earned in 2008 for Messrs. Oberfeld and Seitz (from 95% to
120%). We increased these levels for Messrs. Oberfeld and
Seitz to align their maximum annual cash incentive compensation
with the maximum annual cash incentive compensation available
for similar positions at the peer companies.
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2008 Incentive Amount as a
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Percentage of Salary
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Named Executive
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Minimum
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Target
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Maximum
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C.M. Connor
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40
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95
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190
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J.G. Morikis
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40
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75
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150
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S.P. Hennessy
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40
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75
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150
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S.J. Oberfeld
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30
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60
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120
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T.W. Seitz
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30
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60
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120
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At its February meeting, the Compensation Committee reviews and
approves each named executives achievement of performance
goals for the prior year and approves new performance goals for
the current year.
We annually establish a threshold goal to increase company
earnings. 75% of this earnings increase must be met before we
pay annual incentive compensation, subject to the Compensation
Committees discretion to pay amounts for individual
performance and to make adjustments for nonrecurring or unusual
items. For 2007, the threshold earnings goal was to increase
2007 earnings before taxes $68.2 million over 2006
earnings. In 2007, our earnings before taxes increased
$78.6 million compared to 2006. Accordingly, we exceeded
the 2007 threshold earnings goal. We did not make any
adjustments for nonrecurring or unusual items.
The Compensation Committee approves the performance goals of all
of our named executives. Our Chairman and Chief Executive
Officer also approves the goals of our other named executives.
Performance goals vary by executive and usually relate to the
business unit or function for which such person has
responsibility. Performance goals are weighted between 10% and
30%. Financial performance goals are generally weighted more
heavily.
Target levels for financial performance goals are generally set
at a level that show improvement over the prior year. The
following table shows for each named executive the 2007
performance goals, the weightings for each goal and the
corresponding percentage achievement for each goal.
23
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Percentage
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Named Executive
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2007 Performance Goals
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Achievement
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C.M. Connor
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Earnings per share of $4.60 (weighted 30%)
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125
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J.G. Morikis
S.P. Hennessy
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Earnings before interest, taxes, depreciation and amortization
of $1.126 billion (weighted 20%)
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125
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Net sales of $8.3 billion (weighted 20%, 20% and 10%,
respectively)
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75
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Free cash flow of $444.6 million (weighted 10%, 10% and 20%,
respectively)
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125
|
|
|
After tax return on equity of 31.1% (weighted 10%)
|
|
125
|
|
|
Consolidated working capital as a % of sales of 11.62% (weighted
10%)
|
|
75
|
S.J. Oberfeld
|
|
Paints Stores Group sales of $5.3 billion (weighted 20%)
|
|
75
|
|
|
Paint Stores Group profit before taxes (weighted 20%)
|
|
108
|
|
|
Paint Stores Group return on sales (weighted 20%)
|
|
125
|
|
|
Paint Stores Group return on net assets employed of 52.1%
(weighted 15%)
|
|
125
|
|
|
Paint Stores Group gallons sold (weighted 15%)
|
|
50
|
|
|
Paint Stores Group new store openings of 143 (weighted 10%)
|
|
75
|
T.W. Seitz
|
|
Net sales of $8.3 billion (weighted 20%)
|
|
75
|
|
|
Total savings from operations management projects of $24 million
(weighted 20%)
|
|
125
|
|
|
Development of domestic supply chain strategy (weighted 20%)
|
|
125
|
|
|
Earnings per share of $4.60 (weighted 10%)
|
|
125
|
|
|
Return on net assets employed of 28.6% (weighted 10%)
|
|
125
|
|
|
Creation of a global sourcing strategy (weighted 10%)
|
|
125
|
|
|
Adoption of excellence initiatives in acquisitions (weighted 10%)
|
|
120
|
We have not disclosed target levels for three of Mr.
Oberfelds performance goals because we believe such
disclosure will cause competitive harm to Sherwin-Williams with
regard to product pricing. These three goals relate to Paint
Stores Group profit before taxes, return on sales and gallons
sold. The target levels for each of these goals were set at
amounts that exceeded 2006 results. Mr. Oberfelds
percentage achievement for each of these goals is set forth in
the table above.
In February 2008, the Compensation Committee reviewed each named
executives achievement of his 2007 performance goals. The
following table sets forth for each named executive the average
percentage of performance goals achieved, the amount of annual
cash incentive compensation earned and the percentage of their
2007 salary that the amount represented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average % of
|
|
Amount of
|
|
|
|
|
Performance
|
|
Annual Cash
|
|
|
|
|
Goals
|
|
Incentive
|
|
% of 2007
|
Named Executive
|
|
Achieved
|
|
Earned ($)
|
|
Salary
|
|
C.M. Connor
|
|
|
110.0
|
|
|
|
1,544,000
|
|
|
|
133
|
|
J.G. Morikis
|
|
|
110.0
|
|
|
|
697,000
|
|
|
|
105
|
|
S.P. Hennessy
|
|
|
115.0
|
|
|
|
604,000
|
|
|
|
120
|
|
S. J. Oberfeld
|
|
|
100.0
|
|
|
|
276,000
|
|
|
|
60
|
|
T.W. Seitz
|
|
|
114.5
|
|
|
|
339,000
|
|
|
|
80
|
|
Tax and Accounting Considerations. From
time to time, we review the accounting and tax laws, rules and
regulations that may affect our compensation programs. However,
tax and accounting considerations have not significantly
impacted the compensation programs we offer to our executives.
Section 162(m) of the Internal Revenue Code generally
provides that certain compensation in excess of $1 million
per year paid to a companys chief executive officer and
any of its four other highest paid executive officers is not
deductible by a company unless the compensation qualifies for an
exception. Section 162(m) provides an exception to the
deductibility limit for performance-based compensation if
certain procedural requirements, including shareholder approval
of the material terms of the performance goal, are satisfied.
Under our Executive Performance Bonus Plan, we have the ability
to pay non-discretionary annual cash incentive compensation to
our named executives that will qualify for deductibility.
Independent of the Executive Performance Bonus Plan, the
Compensation Committee retains the discretion to reward strong
individual performance by paying
24
executive compensation that may not be deductible under
Section 162(m). The Compensation Committee believes that
its ability to exercise such discretion is in the best interests
of Sherwin-Williams and our shareholders. The Compensation
Committee did not make any such discretionary payments for 2007
to our executives.
Long-term Equity Incentive
Compensation. We grant long-term equity
incentive compensation in the form of stock options and
restricted stock annually to our executives under our 2006
Equity and Performance Incentive Plan. We begin by determining
the median market value of long-term equity incentive
compensation that the peer companies grant to their executives,
and then we allocate that compensation between stock options and
restricted stock. When making awards of stock options and
restricted stock to executives, we target comparable values for
stock options and restricted stock. We allocate the mix of stock
options and restricted stock in this way because we want to
equally reward the growth in the value of our common stock and
the achievement of financial performance goals.
We have used a consistent approach in granting stock options and
restricted stock over the years. We grant stock options and
restricted stock on an annual basis at regularly scheduled
Compensation Committee meetings. We schedule the dates of these
meetings approximately one year in advance. We typically grant
restricted stock in February and stock options in October. We
grant restricted stock and stock options in February and October
so that our annual grants are made at different times of the
year. Information relating to the stock options and shares of
restricted stock granted to our named executives is set forth in
the Summary Compensation Table and the 2007 Grants of Plan-Based
Awards Table.
At each October Compensation Committee meeting, we grant stock
options to all eligible employees. These grants are made
typically on the same day that the Audit Committee approves our
earnings release for the third quarter and a day or so before we
release our third quarter earnings results. At each February
Compensation Committee meeting, we grant restricted stock. This
meeting typically occurs in the third week of February,
approximately three or four weeks after we release our annual
earnings results. We may also grant restricted stock and stock
options at other regularly scheduled Compensation Committee
meetings in connection with an employees promotion and
other events. The dates of these grants may occur shortly before
we release our quarterly earnings results. We do not take into
account our earnings results when determining the number of
stock options or shares of restricted stock to be granted.
Stock Options. The number of stock options
granted to an executive is based upon the executives
position and level of responsibility using comparable positions
at the peer companies. We determine the specific number of stock
options to be granted by calculating the Black-Scholes-Merton
value of the stock options over a prior
90-day
period. Black-Scholes-Merton is a generally accepted model used
in estimating the value of stock options. We identify the
minimum, median and maximum values of stock options granted by
the peer companies. The Compensation Committee generally grants
stock options at approximately median value.
In accordance with the terms of our stock plans, the option
exercise price for all stock options is equal to the average of
the high and low market price of our common stock on the date
options are granted. Accordingly, the exercise price may be
higher or lower than the closing price of our common stock on
that day. We do not reprice stock options, and our stock plans
do not contain reload features. Stock options typically vest at
the rate of one-third per year for three years (beginning one
year from the date of grant) and expire ten years from the date
of grant. In October 2007, we granted stock options to all
executives.
Restricted Stock. We determine the granting of
restricted stock in a manner similar to how we determine the
granting of stock options. We identify the minimum, median and
maximum values of restricted stock granted by the peer
companies. The Compensation Committee generally grants
restricted stock with a value higher than the median to allow
our executives the opportunity to earn above average
compensation for above average performance. In 2007, the
Compensation Committee granted shares of
25
restricted stock at approximately 125% of the median value.
Shares of restricted stock are subject to a substantial
risk of forfeiture and vest in accordance with performance
and time restrictions. The number of shares of restricted stock
that will vest at the end of the restriction period is based
upon the achievement of one or more performance goals. Up to
100% of the number of shares of restricted stock may be
forfeited if the performance goals are not achieved. The shares
of restricted stock vest at the end of four years. During the
four-year period, executives beneficially own the shares of
restricted stock and possess all voting and dividend rights.
The number of shares of restricted stock that will actually vest
will range from 0% to 100% based upon our companys
achievement of specified financial performance goals. These
goals measure average return on average equity and cumulative
earnings before interest, taxes, depreciation and amortization
over four years. We refer to this second measure as EBITDA. We
explain how we calculate EBITDA on page 36 of our 2007
Annual Report to Shareholders. The Compensation Committee
selected these two performance measures because they reward our
executives in achieving two important business
objectives earnings growth and working capital
management. The Compensation Committee believes these objectives
help us improve our long-term financial results.
At the end of the vesting period, the Compensation Committee
will review performance against the goals and determine the
number of shares of restricted stock that will vest. For the
2007 grant of restricted stock:
|
|
|
|
|
100% of the shares of restricted stock will vest in the event we
achieve at least a 17% average return on average equity and at
least an 8% cumulative growth in EBITDA;
|
|
|
|
No shares will vest in the event we achieve below 13% average
return on average equity or below 3% cumulative growth in
EBITDA; and
|
|
|
|
Between 0% and 100% of the restricted stock will vest in the
event we achieve between 13% and 17% average return on average
equity and between 3% and 8% cumulative growth in EBITDA.
|
At each February meeting, the Compensation Committee grants
shares of performance-based restricted stock to all executives
and approves the vesting of restricted stock granted four years
earlier. In February 2007 and 2008, the Compensation Committee
approved the vesting of 100% of the shares of restricted stock
granted in February 2003 and 2004, respectively. During each
four-year period, Sherwin-Williams achieved at least a 17%
average return on average equity and at least an 8% cumulative
growth in EBITDA.
Long-term incentive opportunities are intended to be competitive
with market long-term incentive opportunities. Therefore, we do
not consider the amount of outstanding stock options and shares
of restricted stock currently held by an executive when making
awards of stock options and restricted stock.
Other Benefits. We provide our named
executives with various retirement and savings programs, health
and welfare programs, employee benefit plans, programs and
arrangements generally available to all employees and other
executive benefits. We annually review these items in connection
with our preparation and review of the overall compensation
packages of our named executives and in connection with our
review of tally sheets.
Other executive benefit programs include an executive life
insurance program, an executive long-term disability program, a
grantor trust program and perquisites. The 2007 amounts for
these programs, including the incremental costs of perquisites,
are set forth in separate tables that are included in a footnote
to the All Other Compensation column of the Summary
Compensation Table.
The life insurance and long term disability programs are
designed to provide our named executives with life and
disability benefits greater than the life and disability
benefits available under the broad-based life insurance and
long-term disability programs that we offer to other employees
due to benefit limitations within the broad-based programs.
We initiated our grantor trust program in 2003 to replace our
non-qualified deferred
26
compensation plan in order to provide financial security to
those executives who have accumulated a significant retirement
benefit in our non-qualified deferred compensation plan. All
salaried employees are eligible to participate in funded
retirement plans. The Internal Revenue Code contains limits on
the amount of benefits that can be contributed to
and/or paid
from a qualified retirement plan. Employees whose retirement
benefits are limited are eligible to participate in the
nonqualified deferred compensation plan to provide such
employees with the retirement benefits they would have received
under our qualified retirement plans but for those limitations.
Executives who are eligible to participate in our grantor trust
program are not eligible to participate in our deferred
compensation plan.
All of our named executives participate in our grantor trust
program. Under this program, supplemental compensation amounts
are paid to our named executives to fund individual grantor
trusts established by the executives. It is intended that these
amounts provide our named executives with the same after-tax
amount at retirement age as would have been provided under our
non-qualified deferred compensation plan.
Internal Pay Equity. The Compensation
Committee has no specific policy and follows no established
guidelines when considering internal pay equity. In connection
with grants of stock options and restricted stock, the
Compensation Committee generally grants the same number of stock
options and shares of restricted stock to employees who are in
similar pay grades.
Use of Tally Sheets. When approving
changes in compensation for our named executives, our human
resources department prepares a tally sheet for each named
executive. Tally sheets set forth the dollar amounts of all
components of each named executives current compensation,
including salary, annual cash incentive compensation, long-term
incentive compensation, retirement and savings programs, health
and welfare programs and other executive benefits, including
perquisites.
Tally sheets allow the Compensation Committee and management to
review, in one place, how a change in the amount of each
compensation component affects each named executives total
compensation and to review each named executives total
compensation in the aggregate. Based upon its most recent
review, the Compensation Committee determined that total
compensation, in the aggregate, for our named executives to be
consistent with the Compensation Committees expectations.
The Compensation Committee did not increase or decrease the
amount of compensation to be awarded to our named executives
solely based upon the review of tally sheets.
The Compensation Committee and management also reviewed
potential payments to our named executives under termination and
change in control scenarios including:
|
|
|
|
|
normal and early retirement;
|
|
|
|
death and disability;
|
|
|
|
voluntary termination;
|
|
|
|
involuntary (not for cause) termination;
|
|
|
|
termination for cause; and
|
|
|
|
termination following a change in control.
|
This review included potential severance payment obligations,
potential values of accelerated shares of restricted stock and
stock options, and projected payment obligations in connection
with our retirement and savings programs, health and welfare
plans, and other executive benefits. The Compensation Committee
determined that the total potential payments, in the aggregate,
for our named executives under each scenario to be reasonable
and not excessive.
Executive Compensation Adjustment and Recapture
Policy. In February 2008, the Board of
Directors and the Compensation Committee adopted a policy
regarding the adjustment and recapture of compensation paid or
payable to key employees and executives. Under the policy,
employees who receive an award under our 2007 Executive
Performance Bonus Plan are required to reimburse
Sherwin-Williams in the event:
|
|
|
|
|
The amount was based upon the achievement of financial results
that were subsequently the subject of an accounting restatement
due to the material noncompliance with any financial reporting
|
27
|
|
|
|
|
requirement under the federal securities laws;
|
|
|
|
|
|
The employee engaged in knowing or intentional fraudulent or
illegal conduct that caused or partially caused the need for the
restatement; and
|
|
|
|
A lower amount would have been made to the employee based upon
the restated financial results.
|
The reimbursement will be equal to the difference in the amount
of the award prior to the restatement and the amount of the
award determined using the restated financial results.
In addition, under our 2006 Equity and Performance Incentive
Plan, (a) all stock awards will be cancelled and
(b) the employee will be required to reimburse
Sherwin-Williams for any economic gains received by the employee
pursuant to a stock award during the one-year period preceding
the Board of Directors determination that the employee
engaged in such conduct.
Severance Pay Agreements. To ensure
continuity and the continued dedication of our executives during
any period of uncertainty caused by the possible threat of a
takeover, we have entered into severance pay agreements with our
executives, including each of our named executives. These
severance pay agreements have not been a significant factor in
setting compensation levels and have not affected the
Compensation Committees decisions with respect to the
compensation components.
In 2006, the Compensation Committee engaged Towers Perrin to
evaluate our then existing severance pay agreements in order to
determine how these agreements compared to market practices.
Towers Perrins evaluation included a review of material
terms of the agreements, including the change in control trigger
threshold, severance pay single versus double triggers,
severance pay multiples, continuation of retirement, health and
welfare benefits, excise tax
gross-ups,
and the impact of Section 409A of the Internal Revenue
Code. Based upon this evaluation, the Compensation Committee
approved a new form of severance agreement in February 2007, and
we entered into new severance agreements with each of our
executives. The Compensation Committee believes that the
material terms of the severance agreements are consistent with
market practices.
Potential cash severance payments are based upon a multiplier of
base salary and annual cash incentive pay. Because
Mr. Connors base salary and annual cash incentive pay
are higher than that of our other named executives,
Mr. Connors potential cash severance payment is
correspondingly higher than that of our other named executives.
Additional information regarding the severance agreements,
including the estimated amounts payable to each named executive,
is set forth under the heading Potential Payments upon
Termination or Change in Control.
Stock Ownership Guidelines. We have
established a minimum share ownership requirement for our
directors, executive officers and operating presidents. We
require each director who has served on the Board of Directors
for at least five years to own a minimum of 10,000 shares
of common stock. We require each executive and operating
president who has served in such capacity for at least five
years to own shares of common stock equal in value to a multiple
of his base salary ranging from a low of three times to a high
of five times for the Chief Executive Officer. The requirements
for the executives and operating presidents are as follows.
|
|
|
|
|
|
|
Minimum share
|
|
|
Ownership as
|
|
|
Multiple of
|
Title
|
|
Base Salary
|
|
Chief Executive Officer
|
|
|
5 times
|
|
Chief Operating Officer
|
|
|
4 times
|
|
Other Executives and Operating Presidents
|
|
|
3 times
|
|
For purposes of meeting this requirement, each equivalent share
of common stock and each share of restricted stock held under
our benefit plans is considered as a share of common stock.
Stock options are not considered towards meeting the
requirement. The Compensation Committee reviews compliance with
these guidelines annually. All directors, executive officers and
operating presidents have either met the guidelines or are
pursuing plans to meet the guidelines within the time frames
prescribed.
28
SUMMARY
COMPENSATION TABLE
The following table sets forth information regarding the
compensation of our Chairman and Chief Executive Officer, our
Senior Vice President Finance and Chief Financial
Officer and our other three highest paid executive officers (our
named executives).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
All
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
Other
|
|
|
|
|
Principal
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(2,3)
|
|
|
($)(3,4)
|
|
|
($)(5)
|
|
|
($)(6)
|
|
|
($)(7)
|
|
|
($)
|
|
|
C. M. Connor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman and
|
|
|
2007
|
|
|
|
1,161,047
|
|
|
|
-0-
|
|
|
|
2,730,500
|
|
|
|
1,609,818
|
|
|
|
1,544,000
|
|
|
|
-0-
|
|
|
|
540,064
|
|
|
|
7,585,429
|
|
Chief Executive Officer
|
|
|
2006
|
|
|
|
1,113,742
|
|
|
|
-0-
|
|
|
|
2,657,568
|
|
|
|
1,311,425
|
|
|
|
1,816,000
|
|
|
|
-0-
|
|
|
|
454,283
|
|
|
|
7,353,018
|
|
J. G. Morikis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and
|
|
|
2007
|
|
|
|
663,481
|
|
|
|
-0-
|
|
|
|
950,199
|
|
|
|
477,558
|
|
|
|
697,000
|
|
|
|
-0-
|
|
|
|
254,948
|
|
|
|
3,043,186
|
|
Chief Operating Officer
|
|
|
2006
|
|
|
|
479,036
|
|
|
|
-0-
|
|
|
|
803,983
|
|
|
|
315,980
|
|
|
|
577,000
|
|
|
|
-0-
|
|
|
|
194,016
|
|
|
|
2,370,015
|
|
S. P. Hennessy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President Finance and
|
|
|
2007
|
|
|
|
503,617
|
|
|
|
-0-
|
|
|
|
661,186
|
|
|
|
382,116
|
|
|
|
604,000
|
|
|
|
-0-
|
|
|
|
193,997
|
|
|
|
2,344,916
|
|
Chief Financial Officer
|
|
|
2006
|
|
|
|
472,572
|
|
|
|
-0-
|
|
|
|
670,774
|
|
|
|
298,841
|
|
|
|
634,000
|
|
|
|
-0-
|
|
|
|
174,650
|
|
|
|
2,250,837
|
|
S. J.
Oberfeld(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paint Stores Group
|
|
|
2007
|
|
|
|
459,272
|
|
|
|
-0-
|
|
|
|
474,603
|
|
|
|
729,311
|
|
|
|
276,000
|
|
|
|
-0-
|
|
|
|
249,720
|
|
|
|
2,188,906
|
|
T. W. Seitz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President Strategic Excellence
|
|
|
2007
|
|
|
|
422,093
|
|
|
|
-0-
|
|
|
|
531,201
|
|
|
|
412,697
|
|
|
|
339,000
|
|
|
|
85,979
|
|
|
|
258,036
|
|
|
|
2,049,006
|
|
Initiatives
|
|
|
2006
|
|
|
|
399,642
|
|
|
|
-0-
|
|
|
|
444,052
|
|
|
|
583,737
|
|
|
|
327,000
|
|
|
|
53,816
|
|
|
|
356,401
|
|
|
|
2,164,648
|
|
|
|
1
|
Mr. Oberfeld first became a named executive in 2007.
|
|
2
|
The amounts set forth in this column reflect shares of
restricted stock granted to our named executives. The amounts
listed are equal to the compensation cost recognized by
Sherwin-Williams during the indicated year for financial
statement purposes in accordance with FAS 123R, except no
assumptions for forfeitures were included. This valuation method
values restricted stock granted during the indicated year and
previous years. A discussion of the assumptions used in
calculating the compensation cost is set forth in Note 12
of the Notes to Consolidated Financial Statements of our 2007
Annual Report to Shareholders.
|
|
3
|
Information regarding the shares of restricted stock and stock
options granted to our named executives during 2007 is set forth
in the 2007 Grants of Plan-Based Awards Table. The 2007 Grants
of Plan-Based Awards Table also sets forth the aggregate grant
date fair value of the restricted stock and stock options
granted during 2007 computed in accordance with FAS 123R.
|
|
4
|
The amounts set forth in this column reflect stock options
granted to our named executives. The amounts listed are equal to
the compensation cost recognized by
Sherwin-Williams
during the indicated year for financial statement purposes in
accordance with FAS 123R, except no assumptions for forfeitures
were included. This valuation method values stock options
granted during the indicated year and previous years. A
discussion of the assumptions used in calculating the
compensation cost is set forth in Note 12 of the Notes to
Consolidated Financial Statements of our 2007 Annual Report to
Shareholders.
|
|
5
|
The amounts set forth in this column for 2007 were earned under
our 2007 Executive Performance Bonus Plan.
|
|
6
|
The amount set forth in this column for Mr. Seitz reflects the
aggregate increase in the present value of his accumulated
benefit in our Salaried Employees Pension Investment Plan.
|
29
|
|
7 |
The amounts set forth in this column for 2007 include:
|
|
|
|
|
|
company contributions under our Salaried Employees Revised
Pension Investment Plan, a defined contribution plan, or our
Salaried Employees Pension Investment Plan, a defined
benefit plan;
|
|
|
|
company matching contributions under our Employee Stock Purchase
and Savings Plan, a defined contribution plan;
|
|
|
|
company supplemental compensation payments pursuant to
Individual Grantor Trust Participation Agreements between
Sherwin-Williams and our named executives;
|
|
|
|
the dollar value of non-compensatory split-dollar life insurance
benefits under our Executive Life Insurance Plan;
|
|
|
|
company payments for premiums under our Executive Disability
Income Plan;
|
|
|
|
tax reimbursements (which primarily consists of tax gross-up
payments relating to our Grantor Trust Program and, for Mr.
Oberfeld, relating to relocation expenses);
|
|
|
|
company charitable matching contributions under our matching
gifts programs; and
|
|
|
|
perquisites and other personal benefits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.M. Connor
|
|
J.G. Morikis
|
|
S.P. Hennessy
|
|
S.J. Oberfeld
|
|
T.W. Seitz
|
Company Contributions Pension Plans ($)
|
|
|
13,200
|
|
|
|
13,200
|
|
|
|
13,200
|
|
|
|
13,200
|
|
|
|
2,250
|
|
Company Match Employee Stock Plan ($)
|
|
|
13,500
|
|
|
|
13,500
|
|
|
|
13,500
|
|
|
|
13,500
|
|
|
|
13,500
|
|
Supplemental Payments Grantor Trust ($)
|
|
|
309,047
|
|
|
|
99,751
|
|
|
|
101,051
|
|
|
|
55,431
|
|
|
|
150,847
|
|
Value Executive Life Insurance Plan ($)
|
|
|
85,800
|
|
|
|
45,050
|
|
|
|
22,800
|
|
|
|
17,675
|
|
|
|
52,000
|
|
Premiums Executive Disability Plan ($)
|
|
|
2,372
|
|
|
|
2,283
|
|
|
|
2,620
|
|
|
|
2,643
|
|
|
|
3,362
|
|
Tax Reimbursements ($)
|
|
|
55,032
|
|
|
|
14,662
|
|
|
|
12,515
|
|
|
|
58,569
|
|
|
|
10,819
|
|
Company Charitable Matching Gifts ($)
|
|
|
1,000
|
|
|
|
-0-
|
|
|
|
5,000
|
|
|
|
-0-
|
|
|
|
5,000
|
|
Perquisites ($)
|
|
|
60,113
|
|
|
|
66,502
|
|
|
|
23,311
|
|
|
|
88,702
|
|
|
|
20,258
|
|
TOTAL ($)
|
|
|
540,064
|
|
|
|
254,948
|
|
|
|
193,997
|
|
|
|
249,720
|
|
|
|
258,036
|
|
Amounts do not include the incremental cost of our Business
Travel Accident Insurance Plan, which provides coverage for all
of our directors, executive officers and full-time salaried
employees. The total aggregate premium in 2007 for this plan for
all directors, executives and employees was $33,030.
Perquisites. We provide our executives with
perquisites and other personal benefits as part of providing a
competitive executive compensation program and for employee
retention. Effective August 2007, we eliminated the following
perquisites for our executives: parking, personal liability
insurance, an annual physical, club memberships for personal
use, reimbursement for basic financial planning and a home
security system. The incremental costs of all perquisites
provided to our named executives during 2007 are listed in the
following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.M. Connor
|
|
J.G. Morikis
|
|
S.P. Hennessy
|
|
S.J. Oberfeld
|
|
T.W. Seitz
|
Executive Automobile Program ($)
|
|
|
30,787
|
|
|
|
36,397
|
|
|
|
20,412
|
|
|
|
14,368
|
|
|
|
13,681
|
|
Parking ($)
|
|
|
1,096
|
|
|
|
1,096
|
|
|
|
1,021
|
|
|
|
1,096
|
|
|
|
1,021
|
|
Personal Use of Corporate Aircraft ($)
|
|
|
12,643
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Personal Liability Insurance ($)
|
|
|
2,901
|
|
|
|
3,056
|
|
|
|
-0-
|
|
|
|
1,411
|
|
|
|
660
|
|
Annual Physical ($)
|
|
|
-0-
|
|
|
|
1,770
|
|
|
|
-0-
|
|
|
|
2,664
|
|
|
|
-0-
|
|
Club Memberships ($)
|
|
|
6,611
|
|
|
|
6,051
|
|
|
|
933
|
|
|
|
-0-
|
|
|
|
4,896
|
|
Basic Financial Planning ($)
|
|
|
4,735
|
|
|
|
4,807
|
|
|
|
-0-
|
|
|
|
5,811
|
|
|
|
-0-
|
|
Home Security System ($)
|
|
|
1,340
|
|
|
|
13,325
|
|
|
|
945
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Relocation Expenses ($)
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
63,352
|
|
|
|
-0-
|
|
TOTAL ($)
|
|
|
60,113
|
|
|
|
66,502
|
|
|
|
23,311
|
|
|
|
88,702
|
|
|
|
20,258
|
|
30
Narrative Information Regarding the Summary Compensation
Table.
Employment Agreements. None of our named
executives have entered into employment agreements with
Sherwin-Williams.
Salary. The salary amounts disclosed in the
table are the amounts earned by our named executives during the
year.
For 2007, salaries earned by our named executives accounted for
the following percentages of their total compensation:
Mr. Connor (15.3%), Mr. Morikis (21.8%),
Mr. Hennessy (21.5%), Mr. Oberfeld (21.0%) and
Mr. Seitz (20.6%).
Mr. Morikis 2007 salary and annual incentive compensation
were higher than 2006 primarily because of his promotion to
President and Chief Operating Officer in October 2006.
Prior to October 2006, Mr. Morikis was President, Paint
Stores Group.
Bonus. We did not award a discretionary bonus
to any of our named executives for 2006 or 2007. Annual cash
incentive compensation is included in the Non-Equity
Incentive Plan Compensation column of the table.
Pension Investment Plan. Mr. Seitz is the only
named executive who participates in our Salaried Employees
Pension Investment Plan.
Perquisites. The value of perquisites
disclosed in the table is based upon the incremental cost of
providing the benefit to the executive.
|
|
|
|
|
The incremental cost of the executive automobile program is
determined by adding all of the costs of the program, including
lease costs and costs of maintenance, fuel, license and taxes.
|
|
|
|
The incremental cost of personal use of corporate aircraft is
determined based upon the variable operating costs of the
aircraft, which includes fuel costs, maintenance and repair
costs, landing fees, engine reserve fees, catering costs and
travel costs for the pilots. The incremental cost includes the
cost of dead head flights, which are return or
pick-up flights without passengers flown for personal use. An
average hourly rate is calculated by dividing the total variable
operating costs for the year by the number of hours the aircraft
is flown. The average hourly rate is then multiplied by the
number of hours of the executives personal use to derive
the total incremental cost. Fixed operating costs, such as pilot
salaries, depreciation and insurance, that do not change based
upon usage are not included.
|
|
|
|
The incremental cost of personal use of club memberships is
comprised of all dues and costs for the membership multiplied by
the percentage that the club was utilized for personal use.
|
|
|
|
The incremental cost of relocation expenses for Mr. Oberfeld was
incurred in connection with his promotion to President, Paint
Stores Group. These expenses reflect all costs of the program,
including temporary living and commuting expenses.
|
In addition, we purchase tickets to sporting and cultural events
for business purposes. If not used for business purposes, the
tickets are made available to our executives and other employees
for personal use.
31
2007
GRANTS OF PLAN-BASED AWARDS TABLE
The following table sets forth information regarding the grants
of annual cash incentive compensation, stock options and
restricted stock during 2007 to our named executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Exercise
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards;
|
|
of
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Base
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
|
|
Price
|
|
of
|
|
|
|
|
Estimated Future Payouts Under Non-
|
|
Estimated Future Payouts Under
|
|
Securities
|
|
of
|
|
Stock
|
|
|
|
|
Equity Incentive Plan
Awards(1)
|
|
Equity Incentive Plan
Awards(2)
|
|
Underlying
|
|
Option
|
|
and
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards
|
|
Option
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(3)
|
|
($/Sh)(4)
|
|
Awards($)(5)
|
|
C. M. Connor
|
|
02/21/2007
|
|
|
464,419
|
|
|
|
1,102,994
|
|
|
|
2,205,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
43,375
|
|
|
|
43,375
|
|
|
|
|
|
|
|
|
|
|
|
3,048,178
|
|
|
|
10/19/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
63.44
|
|
|
|
1,621,870
|
|
J. G. Morikis
|
|
02/21/2007
|
|
|
265,393
|
|
|
|
497,611
|
|
|
|
995,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
14,250
|
|
|
|
14,250
|
|
|
|
|
|
|
|
|
|
|
|
1,001,419
|
|
|
|
10/19/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
63.44
|
|
|
|
648,748
|
|
S. P. Hennessy
|
|
02/21/2007
|
|
|
201,447
|
|
|
|
377,712
|
|
|
|
755,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
702,750
|
|
|
|
10/19/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
63.44
|
|
|
|
486,561
|
|
S. J. Oberfeld
|
|
02/21/2007
|
|
|
137,782
|
|
|
|
275,563
|
|
|
|
436,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
702,750
|
|
|
|
10/19/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
63.44
|
|
|
|
486,561
|
|
T. W. Seitz
|
|
02/21/2007
|
|
|
126,628
|
|
|
|
253,256
|
|
|
|
400,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
527,063
|
|
|
|
10/19/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
63.44
|
|
|
|
291,937
|
|
|
|
1
|
The amounts set forth in these columns reflect the annual cash
incentive compensation amounts that potentially could have been
earned during 2007 based upon the achievement of performance
goals under our 2007 Executive Performance Bonus Plan. The grant
date of February 21, 2007 is the date that the performance goals
were approved by the Compensation and Management Development
Committee. The amounts of annual cash incentive compensation
earned in 2007 by our named executives under our 2007 Executive
Performance Bonus Plan have been determined and were paid in
February 2008. The amounts paid are included in the
Non-Equity Incentive Plan Compensation column of the
Summary Compensation Table.
|
|
2
|
The amounts set forth in these columns reflect the number of
shares of restricted stock granted on February 21, 2007
under our 2006 Equity and Performance Incentive Plan. These
shares vest in February 2011 based upon the achievement of
performance goals.
|
|
3
|
The amounts set forth in this column reflect the number of stock
options granted on October 19, 2007 under our 2006 Equity
and Performance Incentive Plan. These stock options vest at the
rate of one-third per year and expire on October 18, 2017.
|
|
4
|
The exercise price ($63.44) equals the average of the highest
and lowest sale prices of our common stock on the date of grant,
October 19, 2007. The closing price of our common stock on
the date of grant was $63.34.
|
|
5
|
The dollar values of restricted stock and stock options
disclosed in this column are equal to the aggregate grant date
fair value computed in accordance with FAS 123R, except no
assumptions for forfeitures were included. A discussion of the
assumptions used in calculating the grant date fair value is set
forth in Note 12 of the Notes to Consolidated Financial
Statements of our 2007 Annual Report to Shareholders.
|
32
Narrative Information Regarding the 2007 Grants of
Plan-Based Awards Table.
Non-equity Incentive Plan Awards. The
non-equity incentive plan awards set forth in the table reflect
annual cash incentive compensation that could have been earned
by our named executives during 2007 under our 2007 Executive
Performance Bonus Plan. Annual cash incentive compensation is
earned based upon the achievement of a threshold company
earnings goal and the accomplishment by the executive of
performance goals. Annual cash incentive compensation is payable
as a percentage of salary. These percentages vary by named
executive. The performance goals and the percentages of salary
are set forth under the heading Compensation Discussion
and Analysis.
The threshold, target and maximum amounts set forth in the table
correspond to the named executive achieving an average of 75%,
100% and 125% of his performance goals, respectively.
Restricted Stock. We grant restricted stock
pursuant to our 2006 Equity and Performance Incentive Plan. The
shares of restricted stock granted vest at the end of a
four-year period based upon the achievement of specified
financial performance goals. The number of shares of restricted
stock that will actually vest at the end of the vesting period
will range from 0% to 100% based upon achievement of the
specified financial performance goals. The threshold, target and
maximum amounts set forth in the table correspond to achievement
of 0%, 100% and 100% of the financial performance goals,
respectively. We have included more information about these
performance goals under the heading Compensation
Discussion and Analysis.
Shares of restricted stock will vest immediately upon the death
or disability of the named executive or upon a change in control
of Sherwin-Williams.
During the vesting period, the executives are the beneficial
owners of the shares of restricted stock and possess all voting
and dividend rights. Dividends are payable at the same rate as
is paid on Sherwin-Williams common stock generally. During 2007,
the quarterly dividend rate was $0.315 per share. In
February 2008, the Board of Directors announced an increase
in the quarterly dividend rate to $0.35 per share payable on
March 14, 2008.
Stock Options. We grant stock options pursuant
to our 2006 Equity and Performance Incentive Plan. The option
exercise price is equal to the market value of our common stock
on the date options are granted. In accordance with the terms of
the plan, the market value is equal to the average of the
highest and lowest reported sale prices of our common stock on
the date of grant during normal trading hours on the New York
Stock Exchange.
Stock options vest in approximately three equal installments on
the first, second and third anniversary dates of the date of
grant and have a term of ten years. Stock options become
immediately exercisable in the event of the death or disability
of the executive or in the event of a change in control of
Sherwin-Williams. Stock options are not transferable other than
by will or the laws of descent and distribution.
33
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2007 TABLE
The following table sets forth information regarding the number
of unexercised stock options and the number of shares and value
of unvested restricted stock outstanding on December 31,
2007 for our named executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
Option Awards
|
|
Plan Awards:
|
|
Equity Incentive
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Plan Awards:
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Unearned
|
|
Market or Payout
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares,
|
|
Value of Unearned
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Units or Other
|
|
Shares, Units or
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Rights That Have
|
|
Other Rights That
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Not Vested
|
|
Have Not Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)(1)
|
|
C. M. Connor
|
|
|
86,010
|
|
|
|
-0-
|
|
|
|
20.25
|
|
|
|
10/21/2009
|
|
|
|
88,000
|
(2)
|
|
|
5,107,520
|
|
|
|
|
250,000
|
|
|
|
-0-
|
|
|
|
24.305
|
|
|
|
10/16/2011
|
|
|
|
53,750
|
(3)
|
|
|
3,119,650
|
|
|
|
|
250,000
|
|
|
|
-0-
|
|
|
|
25.425
|
|
|
|
10/17/2012
|
|
|
|
59,000
|
(4)
|
|
|
3,424,360
|
|
|
|
|
200,000
|
|
|
|
-0-
|
|
|
|
31.20
|
|
|
|
10/23/2013
|
|
|
|
43,375
|
(5)
|
|
|
2,517,485
|
|
|
|
|
135,000
|
|
|
|
-0-
|
|
|
|
41.725
|
|
|
|
10/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
116,667
|
|
|
|
58,333
|
(6)
|
|
|
43.595
|
|
|
|
10/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
46,667
|
|
|
|
93,333
|
(7)
|
|
|
59.435
|
|
|
|
10/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
100,000
|
(8)
|
|
|
63.44
|
|
|
|
10/18/2017
|
|
|
|
|
|
|
|
|
|
J. G. Morikis
|
|
|
10,000
|
|
|
|
-0-
|
|
|
|
41.725
|
|
|
|
10/19/2014
|
|
|
|
20,000
|
(2)
|
|
|
1,160,800
|
|
|
|
|
26,667
|
|
|
|
13,333
|
(6)
|
|
|
43.595
|
|
|
|
10/20/2015
|
|
|
|
11,500
|
(3)
|
|
|
667,460
|
|
|
|
|
16,667
|
|
|
|
33,333
|
(9)
|
|
|
59.435
|
|
|
|
10/17/2016
|
|
|
|
28,700
|
(4)
|
|
|
1,665,748
|
|
|
|
|
-0-
|
|
|
|
40,000
|
(10)
|
|
|
63.44
|
|
|
|
10/18/2017
|
|
|
|
14,250
|
(5)
|
|
|
827,070
|
|
S. P. Hennessy
|
|
|
41,795
|
|
|
|
-0-
|
|
|
|
31.20
|
|
|
|
10/23/2013
|
|
|
|
20,000
|
(2)
|
|
|
1,160,800
|
|
|
|
|
30,000
|
|
|
|
-0-
|
|
|
|
41.725
|
|
|
|
10/19/2014
|
|
|
|
13,750
|
(3)
|
|
|
798,050
|
|
|
|
|
26,667
|
|
|
|
13,333
|
(6)
|
|
|
43.595
|
|
|
|
10/20/2015
|
|
|
|
15,000
|
(4)
|
|
|
870,600
|
|
|
|
|
11,000
|
|
|
|
22,000
|
(11)
|
|
|
59.435
|
|
|
|
10/17/2016
|
|
|
|
10,000
|
(5)
|
|
|
580,400
|
|
|
|
|
-0-
|
|
|
|
30,000
|
(12)
|
|
|
63.44
|
|
|
|
10/18/2017
|
|
|
|
|
|
|
|
|
|
S. J. Oberfeld
|
|
|
3,444
|
|
|
|
-0-
|
|
|
|
29.0313
|
|
|
|
02/03/2008
|
|
|
|
7,000
|
(2)
|
|
|
406,280
|
|
|
|
|
3,990
|
|
|
|
-0-
|
|
|
|
25.0625
|
|
|
|
02/02/2009
|
|
|
|
5,000
|
(3)
|
|
|
290,200
|
|
|
|
|
5,095
|
|
|
|
-0-
|
|
|
|
19.625
|
|
|
|
10/18/2010
|
|
|
|
13,500
|
(4)
|
|
|
783,540
|
|
|
|
|
7,181
|
|
|
|
-0-
|
|
|
|
24.305
|
|
|
|
10/16/2011
|
|
|
|
10,000
|
(5)
|
|
|
580,400
|
|
|
|
|
3,933
|
|
|
|
-0-
|
|
|
|
25.425
|
|
|
|
10/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
-0-
|
|
|
|
31.20
|
|
|
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
13,500
|
|
|
|
-0-
|
|
|
|
41.725
|
|
|
|
10/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
10,667
|
|
|
|
5,333
|
(6)
|
|
|
43.595
|
|
|
|
10/20/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
|
22,000
|
(11)
|
|
|
59.435
|
|
|
|
10/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
-0-
|
|
|
|
30,000
|
(12)
|
|
|
63.44
|
|
|
|
10/18/2017
|
|
|
|
|
|
|
|
|
|
T. W. Seitz
|
|
|
3,795
|
|
|
|
-0-
|
|
|
|
31.20
|
|
|
|
10/23/2013
|
|
|
|
11,000
|
(2)
|
|
|
638,440
|
|
|
|
|
13,604
|
|
|
|
-0-
|
|
|
|
41.725
|
|
|
|
10/19/2014
|
|
|
|
6,250
|
(3)
|
|
|
362,750
|
|
|
|
|
20,000
|
|
|
|
10,000
|
(6)
|
|
|
43.595
|
|
|
|
10/20/2015
|
|
|
|
17,500
|
(4)
|
|
|
1,015,700
|
|
|
|
|
9,334
|
|
|
|
18,666
|
(13)
|
|
|
59.435
|
|
|
|
10/17/2016
|
|
|
|
7,500
|
(5)
|
|
|
435,300
|
|
|
|
|
-0-
|
|
|
|
18,000
|
(14)
|
|
|
63.44
|
|
|
|
10/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The amounts set forth in this column equal the number of shares
of restricted stock indicated multiplied by the closing price of
our common stock ($58.04) on December 31, 2007. The amounts
assume the maximum percentage of shares of restricted stock will
vest based upon the achievement of the specified performance
goals. Shares of restricted stock vest at the end of four years
from the date of grant. The amounts indicated are not
necessarily indicative of the amounts that may be realized by
our named executives.
|
|
2
|
100% of these shares of restricted stock vested in February 2008
based upon the achievement of the performance goals.
|
|
3
|
Shares of restricted stock vest in February 2009 following the
date that the Board of Directors determines the level of
achievement of the performance goals.
|
34
|
|
4
|
Shares of restricted stock vest in February 2010 following the
date that the Board of Directors determines the level of
achievement of the performance goals.
|
|
5
|
Shares of restricted stock vest in February 2011 following the
date that the Board of Directors determines the level of
achievement of the performance goals.
|
|
6
|
Options vest on October 21, 2008.
|
|
7
|
46,666 and 46,667 options vest on October 18, 2008 and
2009, respectively.
|
|
8
|
33,334, 33,333 and 33,333 options vest on October 19, 2008,
2009 and 2010, respectively.
|
|
9
|
16,666 and 16,667 options vest on October 18, 2008 and
2009, respectively.
|
|
|
10
|
13,334, 13,333 and 13,333 options vest on October 19, 2008,
2009 and 2010, respectively.
|
|
11
|
11,000 options vest on October 18, 2008 and 2009.
|
|
12
|
10,000 options vest on October 19, 2008, 2009 and 2010.
|
|
13
|
9,333 options vest on October 18, 2008 and 2009.
|
|
14
|
6,000 options vest on October 19, 2008, 2009 and 2010.
|
2007
OPTION EXERCISES AND STOCK VESTED TABLE
The following table sets forth information regarding the number
and value of stock options exercised and restricted stock vested
during 2007 for our named executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares Acquired
|
|
Value Realized
|
|
Shares Acquired
|
|
Value Realized
|
|
|
on Exercise
|
|
on Exercise
|
|
on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)(1)
|
|
(#)
|
|
($)(2)
|
|
C. M. Connor
|
|
|
200,000
|
|
|
|
8,764,827
|
|
|
|
110,000
|
|
|
|
7,730,250
|
|
J. G. Morikis
|
|
|
68,933
|
|
|
|
2,436,922
|
|
|
|
27,000
|
|
|
|
1,897,425
|
|
S. P. Hennessy
|
|
|
63,205
|
|
|
|
2,545,494
|
|
|
|
30,000
|
|
|
|
2,108,250
|
|
S. J. Oberfeld
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
12,000
|
|
|
|
843,300
|
|
T. W. Seitz
|
|
|
20,601
|
|
|
|
734,870
|
|
|
|
13,000
|
|
|
|
913,575
|
|
|
|
1
|
The value realized on the exercise of stock options is based on
the difference between the exercise price and the market price
(used for tax purposes) of our common stock on the date of
exercise.
|
|
2
|
The value realized on the vesting of restricted stock is equal
to the number of shares of restricted stock vested multiplied by
the market price ($70.275) of our common stock on the vesting
date.
|
2007
PENSION BENEFITS TABLE
The following table sets forth information relating to The
Sherwin-Williams Company Salaried Employees Pension
Investment Plan for 2007. Mr. Seitz is the only named
executive who participates in our Salaried Employees
Pension Investment Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Present Value
|
|
Payments During
|
|
|
|
|
Years Credited
|
|
of Accumulated
|
|
Last Fiscal
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
Benefit ($)
|
|
Year ($)
|
|
C. M. Connor
|
|
N/A
|
|
|
-0-
|
|
|
-0-
|
|
-0-
|
J. G. Morikis
|
|
N/A
|
|
|
-0-
|
|
|
-0-
|
|
-0-
|
S. P. Hennessy
|
|
N/A
|
|
|
-0-
|
|
|
-0-
|
|
-0-
|
S. J. Oberfeld
|
|
N/A
|
|
|
-0-
|
|
|
-0-
|
|
-0-
|
T. W. Seitz
|
|
Salaried Employees Pension
Investment Plan
|
|
|
32
|
|
|
664,703
|
|
-0-
|
35
Material Features of our Salaried Employees Pension
Investment Plan. Our Salaried Employees
Pension Investment Plan is a qualified noncontributory defined
benefit pension plan. The benefit formula with respect to active
participants hired prior to January 1, 2002, including
Mr. Seitz, consists of the sum of two components:
(a) a traditional pension-type retirement benefit that is
determined based upon the greater of two formulas; and
(b) a contribution credit equal to 1% of the
participants earnings for periods after January 1,
2002.
The pension-type retirement benefit is determined based upon the
greater of the following two formulas:
|
|
|
|
|
Average annual earnings are divided by 12 then multiplied by the
accrued benefit service (determined according to plan
provisions, up to a maximum of 40 years). The result is
then multiplied by 1%. For purposes of this formula, average
annual earnings are the average of earnings during the five
consecutive calendar years in which the participant earned the
most money during the 10 years prior to retirement.
Earnings include annual salary, overtime, bonuses and
commissions, but not moving expenses, tuition aid or any pay
designated as not creditable as earnings at the time it is
received, all subject to the applicable IRS limitations on
earnings. For purposes of this calculation, our Salaried
Employees Pension Investment Plan disregards the one year
out of the 10 in which earnings were the lowest and closes the
gap so that the remaining nine years are considered
consecutive; or
|
|
|
|
Years and months of accrued benefit service are multiplied by
$14 to determine a monthly benefit amount; an additional medical
allowance of $15 is added.
|
Pension benefits may be collected upon attainment of normal
retirement age (age 65) or upon satisfying the criteria for
early retirement (age 55-59 with at least 20 years of
vesting service or age 60 or older if the participants
combination of age and years of vesting service equal at least
75). If otherwise eligible for early retirement, a participant
can elect to retire from
Sherwin-Williams
at age 62 with unreduced benefits. All other early retirement
benefit payments are actuarially reduced to reflect the longer
expected payout period. Pension benefits commence on the first
day of the calendar month following the month in which the
Pension Administration Committee approves the retirement
election.
The normal form of benefit for a married participant is a 60%
joint and survivor annuity, which provides reduced monthly
payments during the participants lifetime and lifetime
payments to the spouse following the participants death in
the amount of 60% of the reduced payments. With the
spouses consent, a married participant may alternatively
elect to receive benefits in the form of a single life annuity,
a 100% joint and survivor annuity, a five-year certain annuity,
a 10-year certain annuity or in a lump sum. Our Salaried
Employees Pension Investment Plan provides guarantees that
at least the first 12 monthly payments will be paid to
either the participant or his beneficiary if the participant
dies during the 12-month period following retirement. We do not
normally grant additional years of service credit.
The 1% contribution credit is converted into units to account
for the participants benefit attributable to this portion
of the retirement benefit. The participants benefit is
determined based upon hypothetical returns achieved on the
allocation of units among investments in various mutual fund
alternatives as directed by the participant.
For purposes of determining the present value of
Mr. Seitzs accumulated benefit, the following
assumptions were used:
|
|
|
|
|
Mortality Table: RP2000;
|
|
|
|
Interest Rate: 6% (2008), 5.60% (2007);
|
|
|
|
Age at 1/1/2008: 59 years and 1 month;
|
|
|
|
2007 pay: $749,093;
|
|
|
|
Benefit Commencement at age 62 (earliest unreduced);
|
|
|
|
25% elect lump sum option/75% elect annuity;
|
|
|
|
Lump Sum Mortality Table: GAM-94 Basic Table Projected to 2002
Using Scale AA (50% Male/50% Female); and
|
|
|
|
Lump Sum Interest Rate: 6% (2008), 4.60% (2007).
|
Both the RP2000 and the GAM-94 Basic Table are commonly accepted
actuarial tables published by the IRS for purposes of
determining mortality in connection with the determination of
retirement benefits, among other things.
36
2007
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table sets forth information relating to The
Sherwin-Williams Company Revised Key Management Deferred
Compensation Plan for 2007. Mr. Morikis was the only named
executive who participated in our Key Management Plan during
2007. Mr. Morikis took a scheduled withdrawal from the Key
Management Plan during 2007 and is no longer a participant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings
|
|
|
|
Balance
|
|
|
in
|
|
in
|
|
in
|
|
Aggregate
|
|
at
|
|
|
Last
|
|
Last
|
|
Last
|
|
Withdrawals/
|
|
Last
|
|
|
FY
|
|
FY
|
|
FY
|
|
Distributions
|
|
FYE
|
Name
|
|
($)(1)
|
|
($)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
C. M. Connor
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
J. G. Morikis
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
115
|
|
|
|
43,361
|
|
|
|
-0-
|
|
S. P. Hennessy
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
S. J. Oberfeld
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
T. W. Seitz
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
1 |
No amounts reported in these columns are reported as
compensation in the Summary Compensation Table.
|
Material Features of our Key Management
Plan. Our Key Management Plan is a
nonqualified deferred compensation plan pursuant which employees
who participate in our 2007 Executive Performance Bonus Plan or
other identified employee groups may elect to defer on a pre-tax
basis up to 100% of their base salary and bonus. Our Key
Management Plan is unfunded for tax purposes;
account balances are merely bookkeeping entries that measure our
obligation to the participant.
Amounts deferred are credited with any associated earnings in
accordance with hypothetical investment options elected by the
participant from a variety of investment funds. All benefits are
100% vested at all times. Amounts deferred may be distributed
in-service only pursuant to the election of scheduled in-service
withdrawals, which may commence no sooner than four years
following the time of initial deferral. All such scheduled
payments are made in January.
Upon retirement (or sooner if elected), participants may receive
a distribution in the form of a single lump sum payment or in
annual installments made once each year over a fixed period not
to exceed 15 years. Upon termination of employment prior to
retirement, any deferred amounts are automatically payable as a
single lump sum, generally within 90 days from date of
separation from service. As a result of the American Jobs
Creation Act of 2004, our Key Management Plan was frozen to all
further participation and contributions effective
December 31, 2004.
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information about our common stock
that may be issued under our equity compensation plans at
December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
Securities Remaining
|
|
|
Securities to
|
|
|
|
Available for
|
|
|
Be Issued
|
|
|
|
Future Issuance under
|
|
|
upon Exercise
|
|
Weighted-Average Exercise
|
|
Equity Compensation
|
|
|
of Outstanding
|
|
Price of
|
|
Plans (Excluding Securities
|
|
|
Options, Warrants
|
|
Outstanding Options, Warrants
|
|
Reflected in
|
Plan Category
|
|
and Rights
|
|
and Rights
|
|
Column (a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by security holders (1, 2)
|
|
|
9,806,292
|
|
|
$
|
42.95
|
|
|
|
6,671,510
|
|
Equity compensation plans not approved by security holders
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,806,292
|
|
|
$
|
42.95
|
|
|
|
6,671,510
|
|
|
|
1
|
Column (a) represents the number of shares of common stock
that may be issued in connection with the exercise of
outstanding stock options granted under The Sherwin-Williams
Company 1994 Stock Plan, The Sherwin-Williams Company 1997 Stock
Plan for Nonemployee Directors, The Sherwin-Williams Company
2003 Stock Plan and The Sherwin-Williams Company 2006 Equity and
Performance Incentive Plan. Our 1994 Stock Plan, 1997 Stock Plan
and 2003 Stock Plan have expired or have been terminated,
although outstanding stock options and restricted stock continue
in force in accordance with their terms.
|
|
2
|
Column (c) includes 6,484,840 shares of common stock
remaining available for future awards under our 2006 Equity and
Performance Incentive Plan and 186,670 shares of common
stock remaining available for future awards under our 2006 Stock
Plan for Nonemployee Directors.
|
38
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following information and table set forth the amount of
payments to each of our named executives in the event of a
termination of employment as a result of normal and early
retirement, involuntary termination, death, disability,
voluntary termination (not for cause), termination for cause,
and termination following a change in control. The table also
sets forth the amount of payments to each of our named
executives in the event of a change in control without a
termination of employment.
We do not have employment agreements with any of our named
executives and do not have a formal severance policy or
arrangement that provides for payments to a named executive in
the event of a termination of employment (other than with
respect to a termination of employment following a change in
control as described below). The Compensation and Management
Development Committee has sole discretion to determine the
amount, if any, of severance payments and benefits that will be
offered to a named executive in the event of a termination. The
Committee believes that it is in the best interests of
Sherwin-Williams and our shareholders that executives are
treated fairly and equitably on a termination of employment.
Assumptions and General
Principles. The following assumptions
and general principles apply with respect to the following table
and any termination of employment of a named executive.
|
|
|
|
|
The amounts shown in the table assume that each named executive
was terminated on December 31, 2007. Accordingly, the table
reflects amounts earned as of December 31, 2007 and
includes estimates of amounts that would be paid to the named
executive upon the occurrence of a termination or change in
control. The actual amounts to be paid to a named executive can
only be determined at the time of the termination or change in
control.
|
|
|
|
A named executive is entitled to receive amounts earned during
his term of employment regardless of the manner in which the
named executives employment is terminated. These amounts
include base salary, unused vacation pay and annual cash
incentive compensation. These amounts are not shown in the
table, except for potential prorated annual cash incentive
compensation as described below.
|
|
|
|
A named executive must be employed on December 31 to be entitled
to receive annual cash incentive compensation pursuant to our
2007 Executive Performance Bonus Plan. In the event a
termination occurs on a date other than December 31, the
Committee has discretion to award the named executive an annual
cash incentive compensation payment. Typically this payment
would approximate a prorated amount of the payment the named
executive would have received under the plan and takes into
consideration the named executives performance and
contributions to achieving the performance criteria under the
plan to the date of termination. Discretionary annual cash
incentive compensation payments are not typically awarded in the
event of a voluntary termination or a termination for cause.
|
Because we have assumed a December 31, 2007 termination date,
each of our named executives is entitled to receive the annual
cash incentive compensation payment earned under the plan for
2007. Therefore, the amount set forth in the table for prorated
annual cash incentive compensation is the actual annual
incentive compensation earned by each named executive during
2007. This amount is also the amount set forth in the
Non-Equity Incentive Plan Compensation column of the
Summary Compensation Table.
|
|
|
|
|
A named executive may exercise any stock options that are
exercisable prior to the date of termination and is entitled to
receive unrestricted shares of common stock with respect to any
restricted stock awards for which the vesting period has expired
prior to the date of termination. The number of unrestricted
shares to be received by a named executive will be determined by
the Committee pursuant to the applicable plan. Any payments
related to these stock options and
|
39
|
|
|
|
|
restricted stock awards are not included in the table because
they are not severance payments.
|
|
|
|
|
|
A named executive will be entitled to receive all amounts
accrued and vested under our retirement and savings programs
including our Employee Stock Purchase and Savings Plan and any
pension plans and deferred compensation plans in which the named
executive participates. These amounts will be determined and
paid in accordance with the applicable plan and are not included
in the table because they are not severance payments.
|
Normal Retirement. A named executive is
eligible to elect normal retirement at age 65. All of our
full-time salaried employees hired prior to January 1, 1993
are eligible for health care and life insurance benefits upon
normal retirement subject to the terms of the plans. In
addition, all outstanding stock options will continue to vest in
accordance with their terms, and all outstanding restricted
stock awards will continue to vest as if the named executive had
continued employment throughout the restriction period. The
number of unrestricted shares that the named executive will be
entitled to receive will be determined in accordance with the
plan as if the named executive had remained employed throughout
the restriction period.
At December 31, 2007, none of our named executives were
eligible for normal retirement.
Early Retirement. A named executive is
eligible to elect early retirement upon satisfying the criteria
for early retirement (age 55-59 with at least 20 years of
vesting service or age 60 or older if the executives
combination of age and years of vesting service equal at least
75). In the event of early retirement, all outstanding stock
options will continue to vest in accordance with their terms.
The Committee has the discretion to cancel all of the named
executives rights to outstanding restricted stock,
continue all rights in full, or prorate the number of shares of
restricted stock for the portions of the restricted periods
completed as of the date of retirement. The number of
unrestricted shares that the named executive will be entitled to
receive if the named executives rights continue in full or
prorata will be determined in accordance with the plan as if the
named executive had remained employed throughout the restriction
period.
At December 31, 2007, Messrs. Oberfeld and Seitz were
eligible for early retirement.
Involuntary Termination. In the event
of an involuntary termination not for cause, the Committee has
the sole discretion to determine the amount, if any, of
severance payments and benefits that will be offered to a named
executive. In making this determination, the Committee may
consider a number of factors including the reasons for the
termination, the named executives tenure and performance,
the named executives personal circumstances and the amount
of severance payments, if any, generally offered to executives
at other companies in similar positions. Because we do not have
sufficient experience with involuntary terminations of
executives at the positions of the named executives, we cannot
reasonably estimate the amount or range of amounts of severance
payments and benefits that would be offered to our named
executives. Therefore, although it is reasonably likely that we
will offer a severance payment and benefits to a named executive
in the event of an involuntary termination not for cause, these
amounts are not included in the table.
Death and Disability. In the
event of the death or disability of a named executive, all
outstanding stock options will immediately vest and become
exercisable and all shares of restricted stock will immediately
vest and become unrestricted. The amounts set forth in the table
for stock options reflect the difference between the average of
the high and low market price of our common stock ($57.97) on
December 31, 2007 and the exercise prices for each option
for which vesting accelerated. The amounts set forth in the
table for restricted stock reflect the number of shares of
restricted stock for which the vesting accelerated multiplied by
the average of the high and low market price of our common stock
($57.97) on December 31, 2007.
In addition, each named executive participates in our executive
life insurance program. Under our executive life insurance
program, the beneficiary of a named executive is entitled to
receive a death benefit based upon the following formulas:
(a) if the event occurs prior to age 62,
40
then the death benefit will equal 4.0 times (for Messrs.
Connor, Morikis and Hennessy) or 3.5 times (for Messrs. Oberfeld
and Seitz) the named executives base salary; (b) if
the event occurs on or after age 62 and before age 65, then the
death benefit will equal 4.0 times (for Messrs. Connor, Morikis
and Hennessy) or 3.5 times (for Messrs. Oberfeld and Seitz) the
named executives base salary at age 62; and (c) if
the event occurs at age 65 or older, then the death benefit will
equal 2.5 times (for Messrs. Connor, Morikis and Hennessy)
or 2.0 times (for Messrs. Oberfeld and Seitz) the named
executives base salary at age 62. All of our named
executives were less than 62 years of age on
December 31, 2007.
Each named executive also participates in our executive
long-term disability program. Upon the occurrence of a
disability under the program, a named executive will receive an
annual benefit equal to 60% of base salary until the earlier of:
(a) age 65; (b) recovery from the disability;
(c) the date the named executive begins receiving
retirement plan benefits; or (d) death. The amounts set
forth in the table reflect the amount of the first annual
payment (60% multiplied by the named executives current
base salary) under the program.
Voluntary Termination and Termination for
Cause. A named executive is not entitled to
receive any additional forms of severance payments or benefits
upon his voluntary decision to terminate employment with
Sherwin-Williams prior to being eligible for retirement or upon
termination for cause.
Change in Control. Upon the occurrence
of a change in control, as generally defined below, all
outstanding stock options will immediately vest and become
exercisable and all shares of restricted stock will immediately
vest and become unrestricted. The amounts set forth in the table
for stock options reflect the difference between the average of
the high and low market price of our common stock ($57.97) on
December 31, 2007 and the exercise prices for each option
for which vesting accelerated. The amounts set forth in the
table for restricted stock reflect the number of shares of
restricted stock for which vesting accelerated multiplied by the
average of the high and low market price of our common stock
($57.97) on December 31, 2007. In addition, each named
executive who participates in our executive automobile program
will receive the automobile provided to him under such program
paid in full. Mr. Connor does not participate in the
executive automobile program.
We have also entered into change in control severance agreements
with each of our named executives. Forms of these agreements
have been filed as Exhibit 10(b) to our Current Report on
Form 8-K
dated February 21, 2007. Generally, pursuant to these
agreements, a change in control occurs:
(a) if any person becomes the beneficial owner of 20% or
more of Sherwin-Williams then-outstanding voting
securities (other than acquisitions of voting securities
(i) directly from Sherwin-Williams and approved by the
Board of Directors, (ii) by Sherwin-Williams or any
subsidiary, (iii) by the trustee or other fiduciary holding
securities under any employee benefit plan (or related trust)
sponsored or maintained by Sherwin-Williams or any subsidiary,
and (iv) in connection with a business transaction as
proscribed in the agreement);
(b) if a majority of members of Sherwin-Williams
incumbent Board of Directors during any two year period are
replaced other than in specific circumstances;
(c) upon the consummation of any reorganization, merger or
consolidation of Sherwin-Williams, or the sale or other
disposition of all or substantially all of the assets of
Sherwin-Williams, other than any transaction in which,
immediately following the transaction, (i) the voting
securities of Sherwin-Williams immediately prior to the
transaction represent more than 50% of the combined voting power
of the then-outstanding voting securities of the entity
resulting from the transaction, (ii) no person beneficially
owns, directly or indirectly, 20% or more of the combined voting
power of the then-outstanding voting securities of the entity
resulting from the transaction, and (iii) at least a
majority of the members of the board of directors of the entity
resulting from the transaction were members of
Sherwin-Williams incumbent Board of Directors at the time
of initiating the transaction; or
41
(d) upon the liquidation or dissolution of Sherwin-Williams
(other than pursuant to a transaction that complies with clauses
(c)(i), (c)(ii) and (c)(iii) above).
The severance agreements provide that upon a termination of
employment following a change in control (other than termination
for cause or by reason of death or disability) or if the named
executive terminates his employment in certain circumstances
defined in the agreement which constitutes good reason, in
addition to the accelerated vesting of stock options and
restricted stock described above, each will receive:
|
|
|
|
|
a lump sum severance payment in an amount equal to 3 times (with
respect to Messrs. Connor, Morikis and Hennessy) or 2.5 times
(with respect to Messrs. Oberfeld and Seitz) the sum of
(a) the named executives highest rate of base salary
during the three-year period prior to termination and
(b) an amount equal to the greater of (i) the average
of the annual cash incentive pay received by the named executive
for each of the three years prior to the date of termination or
(ii) the named executives target incentive pay for
the year in which the termination occurs;
|
|
|
|
a lump sum amount equal to the prorata portion of any annual
cash incentive compensation earned by the named executive
through the date of termination, assuming achievement of the
target level of the performance goals;
|
|
|
|
eighteen months of continued health care benefits;
|
|
|
|
outplacement services in an amount not to exceed 10% of the
named executives then-current base salary; and
|
|
|
|
an amount equal to the excise tax and taxes thereon charged, if
any, to the named executive as a result of any change in control
payments (provided, however, in the event the aggregate change
in control payments do not exceed 115% of the amount which would
cause the excise tax to be assessed, the severance payments
shall be reduced to a level which would cause no excise tax to
apply).
|
42
ESTIMATED
PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event
|
|
C.M. Connor
|
|
J.G. Morikis
|
|
S.P. Hennessy
|
|
S.J. Oberfeld
|
|
T.W. Seitz
|
|
Normal and Early Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual cash incentive
compensation
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual cash incentive
compensation
|
|
$
|
1,544,000
|
|
|
$
|
697,000
|
|
|
$
|
604,000
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,544,000
|
|
|
$
|
697,000
|
|
|
$
|
604,000
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual cash incentive
compensation
|
|
$
|
1,544,000
|
|
|
$
|
697,000
|
|
|
$
|
604,000
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
Accelerated stock options
|
|
|
838,537
|
|
|
|
191,662
|
|
|
|
191,662
|
|
|
|
76,662
|
|
|
|
143,750
|
|
Accelerated restricted stock
|
|
|
14,151,926
|
|
|
|
4,315,867
|
|
|
|
3,405,738
|
|
|
|
2,057,935
|
|
|
|
2,449,233
|
|
Life insurance proceeds
|
|
|
4,734,089
|
|
|
|
2,733,426
|
|
|
|
2,088,627
|
|
|
|
1,661,012
|
|
|
|
1,528,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,268,552
|
|
|
$
|
7,937,955
|
|
|
$
|
6,290,027
|
|
|
$
|
4,071,609
|
|
|
$
|
4,460,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual cash incentive
compensation
|
|
$
|
1,544,000
|
|
|
$
|
697,000
|
|
|
$
|
604,000
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
Accelerated stock options
|
|
|
838,537
|
|
|
|
191,662
|
|
|
|
191,662
|
|
|
|
76,662
|
|
|
|
143,750
|
|
Accelerated restricted stock
|
|
|
14,151,926
|
|
|
|
4,315,867
|
|
|
|
3,405,738
|
|
|
|
2,057,935
|
|
|
|
2,449,233
|
|
Disability benefits
|
|
|
710,113
|
|
|
|
410,014
|
|
|
|
313,294
|
|
|
|
284,745
|
|
|
|
262,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,244,576
|
|
|
$
|
5,614,543
|
|
|
$
|
4,514,694
|
|
|
$
|
2,695,342
|
|
|
$
|
3,194,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination and
Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No payments
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated stock options
|
|
$
|
838,537
|
|
|
$
|
191,662
|
|
|
$
|
191,662
|
|
|
$
|
76,662
|
|
|
$
|
143,750
|
|
Accelerated restricted stock
|
|
|
14,151,926
|
|
|
|
4,315,867
|
|
|
|
3,405,738
|
|
|
|
2,057,935
|
|
|
|
2,449,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,990,463
|
|
|
$
|
4,507,529
|
|
|
$
|
3,597,400
|
|
|
$
|
2,134,597
|
|
|
$
|
2,592,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control with
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual cash incentive
compensation
|
|
$
|
1,544,000
|
|
|
$
|
697,000
|
|
|
$
|
604,000
|
|
|
$
|
276,000
|
|
|
$
|
339,000
|
|
Accelerated stock options
|
|
|
838,537
|
|
|
|
191,662
|
|
|
|
191,662
|
|
|
|
76,662
|
|
|
|
143,750
|
|
Accelerated restricted stock
|
|
|
14,151,926
|
|
|
|
4,315,867
|
|
|
|
3,405,738
|
|
|
|
2,057,935
|
|
|
|
2,449,233
|
|
Cash severance payment
|
|
|
8,415,567
|
|
|
|
3,689,069
|
|
|
|
3,323,470
|
|
|
|
1,896,437
|
|
|
|
1,796,784
|
|
Continued health care benefits
|
|
|
15,615
|
|
|
|
17,864
|
|
|
|
17,864
|
|
|
|
16,514
|
|
|
|
11,566
|
|
Outplacement services
|
|
|
118,352
|
|
|
|
68,336
|
|
|
|
52,216
|
|
|
|
47,457
|
|
|
|
43,671
|
|
Automobile transfer
|
|
|
-0-
|
|
|
|
55,926
|
|
|
|
33,147
|
|
|
|
19,901
|
|
|
|
22,780
|
|
Excise tax
|
|
|
8,993,520
|
|
|
|
3,118,634
|
|
|
|
2,634,086
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,077,517
|
|
|
$
|
12,154,358
|
|
|
$
|
10,262,183
|
|
|
$
|
4,390,906
|
|
|
$
|
4,806,784
|
|
43
RATIFICATION
OF APPOINTMENT
OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
(PROPOSAL 2)
The Audit Committee has appointed Ernst & Young LLP as our
independent registered public accounting firm to audit our
consolidated financial statements for the fiscal year ending
December 31, 2008. Ernst & Young LLP acted as our
independent registered public accounting firm for the fiscal
year ended December 31, 2007. Additional information
regarding the services provided to us by Ernst & Young LLP
during 2007 is set forth under the caption entitled
Matters Relating to the Independent Registered Public
Accounting Firm.
Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting and will have an opportunity to
make a statement if they wish and to respond to appropriate
shareholder questions.
Although shareholder ratification is not required under the laws
of the State of Ohio, we are submitting the appointment of Ernst
& Young LLP to our shareholders for ratification at the
Annual Meeting as a matter of good corporate practice in order
to provide a means by which our shareholders may communicate
their opinion to the Audit Committee. If our shareholders do not
ratify the appointment of Ernst & Young LLP, the Audit
Committee will reconsider the appointment.
The Board of Directors unanimously recommends that you
vote FOR Proposal 2 relating to the
ratification of the appointment of Ernst & Young LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2008.
MATTERS
RELATING TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Fees Paid to Ernst & Young
LLP. The following table sets forth the fees
for services provided by Ernst & Young LLP during the
fiscal years ended December 31, 2006 and December 31,
2007.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
Audit Fees
|
|
$
|
1,747,400
|
|
|
$
|
1,752,600
|
|
Audit-Related Fees
|
|
|
120,000
|
|
|
|
114,400
|
|
Tax Fees
|
|
|
5,000
|
|
|
|
19,400
|
|
All Other Fees
|
|
|
-0-
|
|
|
|
14,700
|
|
Total
|
|
$
|
1,872,400
|
|
|
$
|
1,901,100
|
|
The following is a description of the nature of the services
comprising the fees disclosed in the table above for each of the
four categories of services. The Audit Committee has considered
whether providing non-audit services is compatible with
maintaining Ernst & Young LLPs independence.
Audit Fees. These are fees for professional
services rendered by Ernst & Young LLP for the integrated
audit of our annual consolidated financial statements
and the effectiveness of internal control over financial
reporting; the review of financial statements included in our
Quarterly Reports on
Form 10-Q;
audits of foreign subsidiary financial statements required by
local statutes; and services that are typically rendered in
connection with statutory and regulatory filings or engagements.
Audit-Related Fees. These are fees for
assurance and related services rendered by Ernst & Young
LLP that are reasonably related to the performance of the audit
or the review of our financial statements that are not included
as audit fees. These services include employee benefit plan
audits, consultation on accounting matters in foreign
jurisdictions, and consultation on financial accounting and
reporting.
Tax Fees. These are fees for professional
services rendered by Ernst & Young LLP with respect to tax
compliance, tax advice and tax planning. These services include
the review of certain tax returns, tax audit assistance in
foreign jurisdictions, and consulting on tax planning matters.
All Other Fees. These are fees for other
services rendered by Ernst & Young LLP that do not meet the
above category descriptions and are permissible under applicable
laws and regulations.
Audit Committee Pre-approval
Policy. The Audit Committee is responsible
for pre-
44
approving all audit services and permitted non-audit services
(including the fees and retention terms) to be performed for us
by Ernst & Young LLP prior to their engagement for such
services. The Audit Committee has adopted a pre-approval policy
pursuant to which the Audit Committee establishes detailed
pre-approved categories of non-audit services that may be
performed by Ernst & Young LLP during the fiscal year,
subject to dollar limitations set by the Audit Committee. The
Audit Committee has also delegated to the Chairman of the Audit
Committee the authority to pre-approve all audit and non-audit
services when the entire Audit Committee is unable to
pre-approve services. The Chairman must report to the Audit
Committee at its next meeting all such services pre-approved
since the last meeting.
None of the fees paid to Ernst & Young LLP under the
categories Audit-Related, Tax and All Other were approved by the
Audit Committee after the services were rendered pursuant to the
deminimis exception established by the Securities and Exchange
Commission.
SHAREHOLDER
PROPOSAL RELATING TO MAJORITY VOTING
(PROPOSAL 3)
The United Brotherhood of Carpenters Pension Fund, 101
Constitution Avenue, N.W., Washington, D.C. 20001,
beneficial owner of 1,742 shares of Sherwin-Williams common
stock, has submitted the following proposal. The Board of
Directors recommends a vote AGAINST this
proposal.
Director
Election Majority Vote Standard Proposal
Resolved: That the shareholders of The
Sherwin-Williams Company (Company) hereby request
that the Board of Directors initiate the appropriate process to
amend the Companys articles of incorporation to provide
that director nominees shall be elected by the affirmative vote
of the majority of votes cast at an annual meeting of
shareholders, with a plurality vote standard retained for
contested director elections, that is, when the number of
director nominees exceeds the number of board seats.
Supporting Statement: In order to
provide shareholders a meaningful role in director elections,
our Companys director election vote standard should be
changed to a majority vote standard. A majority vote standard
would require that a nominee receive a majority of the votes
cast in order to be elected. The standard is particularly
well-suited for the vast majority of director elections in which
only board nominated candidates are on the ballot. We believe
that a majority vote standard in board elections would establish
a challenging vote standard for board nominees and improve the
performance of individual directors and entire boards. Our
Company presently uses a plurality vote standard in all director
elections. Under the plurality vote standard, a nominee for the
board can be elected with as little as a single affirmative
vote, even if a substantial majority of the votes cast are
withheld from the nominee.
In response to strong shareholder support for a majority vote
standard in director elections, an increasing number of the
nations leading companies, including Intel, General
Electric, Motorola, Hewlett-Packard, Morgan Stanley, Wal-Mart,
Home Depot, Gannett, Marathon Oil, and Safeway have adopted a
majority vote standard in company bylaws or articles of
incorporation. Additionally, these companies have adopted
director resignation policies in their bylaws or corporate
governance policies to address post-election issues related to
the status of director nominees that fail to win election. Other
companies, including our Company, have responded only partially
to the call for change by simply adopting post-election director
resignation policies that set procedures for addressing the
status of director nominees that receive more
withhold votes than for votes.
We believe that a post-election director resignation policy
without a majority vote standard in company articles is an
inadequate reform. The critical first step in establishing a
meaningful majority vote policy is the adoption of a majority
vote standard. With a majority vote standard in place, the board
can then consider action on developing post-election procedures
to address the status of directors that fail to win election. A
majority vote standard combined with a post-election director
resignation policy would establish a meaningful right for
shareholders to elect directors, and reserve for the board an
important post-election role in determining the continued status
of an unelected director. We feel that this combination of the
45
majority vote standard with a post-election policy represents a
true majority vote standard.
SHERWIN-WILLIAMS
RESPONSE
This proposal requests that we adopt a voting standard for
director elections that differs from the plurality voting
standard, the current default standard under Ohio law. The
plurality voting standard provides that the nominees who receive
the most affirmative votes are elected to serve as directors.
After careful consideration, the Board of Directors recommends a
vote against this proposal because:
|
|
|
|
|
we have already implemented a policy that addresses the
proponents concerns;
|
|
|
|
our current corporate governance practices already ensure that
our directors are highly qualified;
|
|
|
|
the shareholder proposal creates uncertainty; and
|
|
|
|
the shareholder proposal is premature given the current state of
director election practices.
|
We Have Already Implemented a Majority Voting Policy
Like a number of other large public companies facing this issue,
in order to address concerns relating to director candidates who
do not receive a majority of the votes cast, we have adopted a
majority voting policy. Our policy was adopted on July 19,
2006 and is posted in the Corporate Governance
section on the Investor Relations page of our
website at www.sherwin.com.
Our policy provides that, in an uncontested election, any
director nominee who receives a greater number of
withheld votes than for votes is
required promptly to submit his resignation to the Board. In
addition:
|
|
|
|
|
The Nominating and Corporate Governance Committee will promptly
consider the tendered resignation and will recommend to the
Board whether to accept the tendered resignation or take some
other action.
|
|
|
|
The Board will act on the Committees recommendation no
later than the next scheduled Committee meeting (within
120 days from the shareholder vote).
|
|
|
|
The director who tendered his resignation will not participate
in the Committees recommendation or the Boards
consideration of the tendered resignation.
|
|
|
|
We will promptly disclose publicly the Boards decision and
process in a report filed with the SEC.
|
We believe our policy strikes an appropriate balance in ensuring
that our shareholders continue to have a meaningful role in
electing directors while preserving the ability of the Board to
exercise its independent judgment and to consider all relevant
factors in accepting the resignation of a director opposed by
shareholders.
Our Current Process Elects Highly Qualified Directors
We have a strong corporate governance process designed to
identify and propose director nominees who will best serve the
interests of Sherwin-Williams and our shareholders. The Board
maintains a Nominating and Corporate Governance Committee that
is composed entirely of independent directors, and all of the
members of the Board, other than the Chairman and Chief
Executive Officer, are independent.
The Nominating and Corporate Governance Committee applies a
rigorous set of criteria in identifying director nominees and
has established procedures to consider and evaluate persons
recommended by shareholders. Our strong corporate governance has
been recognized by Institutional Shareholder Services. According
to its February 1, 2008 rankings, ISS has ranked
Sherwin-Williams ahead of 94.7% of the companies in the
Retailing group, as measured by the ISS Corporate Governance
Quotient.
As a result of these practices, our shareholders have
consistently elected, by a plurality, highly qualified directors
from diverse business backgrounds, substantially all of whom
have been independent within standards adopted by
the New York Stock Exchange. Adoption of a strict majority
voting standard seems especially unwarranted in our case.
Changing our current voting system to majority voting would have
46
had no effect on director elections during the past ten years.
The Board believes that the votes over this period reflect our
shareholders confidence in the Board and in the governance
protections the Board has implemented.
The
Proposal Causes Uncertainty
In contrast to our majority voting policy, the majority voting
standard requested by the proposal causes uncertainty. Under
Ohio law, an incumbent director who is not re-elected
holds over and continues to serve with the same
voting rights and powers until his or her successor is elected
and qualified. Therefore, even if the proposal were adopted, we
could not force a director who failed to receive a majority vote
to leave the Board until his or her successor is elected at a
subsequent shareholder meeting.
In contrast, under our existing majority voting policy, a
director who receives more withhold votes than
for votes is required promptly to tender his or her
resignation. The Board in turn will act on the tendered
resignation after considering all relevant facts and
circumstances in a process that will be completed and publicly
disclosed promptly.
The
Proposal is Premature
Ohio law requires the plurality voting standard in director
elections unless the corporations articles of
incorporation provide otherwise. Our Board cannot adopt majority
voting in our Code of Regulations, an approach that other
companies have recently taken. We can adopt majority voting only
through shareholder approval of an amendment to our Articles of
Incorporation. We believe that it is premature to ask our
shareholders to amend our Articles of Incorporation to adopt
majority voting in light of the on-going discussions and debates
in this developing area.
The legal community, shareholder advocates, governance experts,
public companies and other groups continue to evaluate and
debate the benefits, disadvantages and consequences of plurality
and majority voting and whether some modified model of plurality
voting might be preferable. Plurality voting has long been the
accepted standard, and the rules governing plurality voting are
well established and widely understood. Any change in voting
standards should be undertaken with full understanding of the
consequences. We do not believe that our shareholders should be
asked to approve a proposal relating to a voting system without
the benefit of a consensus in this area and a greater
understanding of the full ramifications of its adoption.
We have been monitoring, and we will continue to monitor,
developments on this topic. If a consensus emerges that majority
voting for directors as implemented through amendments to the
charter is the best corporate governance practice in this area,
we will take appropriate steps consistent with our commitment to
act in the best interests of our shareholders. We do not believe
that our interests, or our shareholders interests, would
be best served by prematurely adopting such a change until there
is greater clarity and consensus on this issue.
The Board of Directors unanimously recommends that you vote
AGAINST Proposal 3 relating to majority
voting.
47
SECURITY
OWNERSHIP OF MANAGEMENT
The following table sets forth, as to each director and nominee,
each named executive and all directors and executive officers as
a group, information regarding the amount and nature of shares
of our common stock beneficially owned at December 31,
2007. All of the directors, nominees and executive officers have
sole voting and investment power over the shares of common stock
listed or share voting and investment power with his or her
spouse, except as otherwise provided below. No director, nominee
or executive officer beneficially owns any shares of serial
preferred stock.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
Nature of
|
|
Percent of
|
|
|
Common Stock
|
|
Common Stock
|
Name of Beneficial Owner
|
|
Beneficially
Owned(1,2,3,4,5)
|
|
Beneficially Owned
|
|
A. F. Anton
|
|
|
3,333
|
|
|
|
*
|
|
J. C. Boland
|
|
|
8,947
|
|
|
|
*
|
|
C. M. Connor
|
|
|
1,531,385
|
|
|
|
1.24
|
%
|
D. E. Evans
|
|
|
27,399
|
|
|
|
*
|
|
S. P. Hennessy
|
|
|
208,409
|
|
|
|
*
|
|
D. F. Hodnik
|
|
|
6,333
|
|
|
|
*
|
|
S. J. Kropf
|
|
|
13,083
|
|
|
|
*
|
|
R. W. Mahoney
|
|
|
25,833
|
|
|
|
*
|
|
G. E. McCullough
|
|
|
24,385
|
|
|
|
*
|
|
A. M. Mixon, III
|
|
|
44,015
|
|
|
|
*
|
|
C. E.
Moll(6)
|
|
|
27,889
|
|
|
|
*
|
|
J. G. Morikis
|
|
|
186,000
|
|
|
|
*
|
|
S. J. Oberfeld
|
|
|
140,502
|
|
|
|
*
|
|
T. W. Seitz
|
|
|
134,415
|
|
|
|
*
|
|
R. K. Smucker
|
|
|
23,182
|
|
|
|
*
|
|
All directors and executive officers as a group
|
|
|
2,875,390
|
|
|
|
2.31
|
%
|
|
|
* |
Represents less than 1% of the total number of shares of
common stock outstanding.
|
|
|
1
|
The amounts listed include shares of common stock held under
plans offered by Sherwin-Williams for which the directors and
executive officers have the right to direct the vote, including
the following approximate number of shares included in units
held under our Employee Stock Purchase and Savings Plan:
Mr. Connor (42,996), Mr. Hennessy (15,644),
Mr. Morikis (14,065), Mr. Oberfeld (23,238),
Mr. Seitz (11,855), and all executive officers as a group
(176,104). Shares of common stock held under our Employee Stock
Purchase and Savings Plan are not directly allocated to
individual participants of the plan, but instead are held in a
separate fund. Participants acquire units of this fund. The fund
also holds short-term investments, the amount of which
fluctuates on a daily basis. The number of shares of common
stock shown as being held by the executive officers in the plan
is the approximate number of shares in the fund allocable to
each of the executive officers. The number of shares allocable
to each of the executive officers fluctuates on a daily basis
based upon the amount of short-term investments held in the fund
and the market value of our common stock.
|
|
2
|
The amounts listed include the following number of shares of
common stock owned by immediate family members of the directors
and executive officers, for which each such person disclaims
beneficial ownership: Mr. Moll (340) and all directors and
executive officers as a group (340).
|
|
3
|
The amounts listed include shares of restricted stock owned.
|
|
|
4 |
The amounts listed include the following number of shares of
common stock for which the directors and executive officers have
the right to acquire beneficial ownership, within
sixty days from December 31, 2007, through the
exercise of stock options: Mr. Connor (1,084,344),
Mr. Evans (17,000), Mr. Hennessy (109,462),
Mrs. Kropf (7,000), Mr. Mahoney (15,000),
Mr. McCullough (9,000), Mr. Mixon (17,000),
|
48
Mr. Moll (1,167), Mr. Morikis (53,334),
Mr. Oberfeld (73,810), Mr. Seitz (46,733),
Mr. Smucker (3,500), and all directors and executive
officers as a group (1,681,025).
|
|
5
|
The amounts listed do not include the following approximate
number of shares of shadow stock owned by directors under our
Director Deferred Fee Plan: Mr. Boland (17,613),
Mrs. Kropf (6,242), Mr. Mixon (27,110), and all
directors as a group (50,965). Under our Director Deferred Fee
Plan, nonemployee directors may defer payment of all or a
portion of their directors fees into a shadow stock
account. Shares of shadow stock are credited to a separate
account in which directors acquire units. Units are payable only
in cash. The number of shares of shadow stock allocable to the
directors fluctuates on a daily basis based upon the market
value of our common stock. Directors have no voting rights
associated with shadow stock, and ownership of shadow stock does
not result in any beneficial ownership of common stock.
|
|
6
|
Includes 2,000 shares owned by the MTD Holdings Inc pension
fund, of which Mr. Moll is a trustee.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as to each beneficial owner
known to us to own more than five percent of each class of
voting securities, information regarding shares owned by each as
of the most recent practicable date.
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
Nature of
|
|
Percent of
|
Name of Beneficial Owner
|
|
Beneficial Ownership
|
|
Class
|
Barrow, Hanley, Mewhinney & Strauss, Inc.
2200 Ross Avenue, 31st Floor
Dallas, Texas 75201-2761
|
|
|
9,904,450(1)
|
|
|
|
7.88%
|
|
Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 2100
San Francisco, California 94111
|
|
|
6,437,500(2)
|
|
|
|
5.24%
|
|
The Sherwin-Williams Company
Employee Stock Purchase and Savings Plan
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
|
|
|
18,639,347(3)
|
|
|
|
15.18%
|
|
Vanguard Windsor Funds Vanguard Windsor II Fund
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
|
|
|
8,633,900(4)
|
|
|
|
6.87%
|
|
Serial
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
Percent of
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Name of Beneficial Owner
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Beneficial Ownership
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Class
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The Sherwin-Williams Company
Employee Stock Purchase and Savings Plan
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324,733(5)
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100%
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101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
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1 |
Based on a Schedule 13G filed on February 13, 2008, Barrow,
Hanley, Mewhinney & Strauss, Inc., an investment advisor,
beneficially owned 9,904,450 shares of common stock at
December 31, 2007. Of the total shares, Barrow, Hanley,
Mewhinney & Strauss had sole voting power over
292,150 shares, shared voting power over
9,612,300 shares, sole dispositive power over all of the
shares, and shared dispositive power over none of the shares.
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2
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Based on a Schedule 13D filed on February 4, 2008, at
January 25, 2008, the following reporting persons, as
managing members of Farallon Capital Management, L.L.C. and
Farallon Partners, L.L.C., had shared voting and shared
dispositive power over 6,437,500 shares of common stock:
William F. Duhamel, Richard B. Fried, Monica R. Landry, Douglas
M. MacMahon, William F. Mellin, Stephen L. Millham, Jason E.
Moment, Ashish H. Pant, Rajiv A. Patel, Derek C. Schrier, Andrew
J. M. Spokes, Thomas F. Steyer and Mark C. Wehrly. Of such
shares, Farallon Capital Partners, L.P. had shared voting and
shared dispositive power over 773,400 shares, Farallon
Capital Institutional Partners, L.P. had shared voting and
shared dispositive power over 774,100 shares, Farallon
Capital Institutional Partners II, L.P. had shared voting and
shared dispositive power over 50,600 shares, Farallon
Capital Institutional Partners III, L.P. had shared voting and
shared dispositive power over 59,900 shares, Tinicum
Partners, L.P. had shared voting and shared dispositive power
over 33,000 shares, Farallon Capital Offshore Investors II,
L.P. had shared voting and shared dispositive power over
1,371,400 shares, Farallon Capital Management, L.L.C. had
shared voting and shared dispositive power over
3,375,100 shares, and Farallon Partners, L.L.C. had shared
voting and shared dispositive power over 3,062,400 shares.
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3
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The shares of common stock reflected in the table are owned at
December 31, 2007. Shares of common stock owned pursuant to
our Employee Stock Purchase and Savings Plan are voted by the
trustee in accordance with written instructions of plan
participants. If no instructions are received by the trustee,
the trustee votes such shares (along with any unallocated shares
held in the plan) in the same proportion as it votes those
shares for which it receives proper instructions.
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4
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Based on a Schedule 13G/A filed on February 27, 2008,
Vanguard Windsor Funds Vanguard Windsor II
Fund, an investment company, beneficially owned
8,633,900 shares of common stock at December 31, 2007.
Of the total shares, Vanguard Windsor Funds Vanguard
Windsor II Fund had sole voting power over all of the shares and
had shared voting power, sole dispositive power and shared
dispositive power over none of the shares.
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5
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The shares of ESOP Serial Preferred Stock reflected in the table
are owned at December 31, 2007. Shares of ESOP Serial
Preferred Stock are held in an unallocated suspense account in
our Employee Stock Purchase and Savings Plan. Shares are voted
by the trustee in the same proportion as unallocated shares of
common stock are voted, as described in footnote 3 above.
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50
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
our directors and executive officers to file reports of
ownership and changes in ownership of our equity securities with
the Securities and Exchange Commission and the New York Stock
Exchange. To our knowledge, based solely on information
furnished to us and written representations by such persons, all
of our directors and executive officers complied with their
filing requirements in 2007, except that due to administrative
errors, Mr. Oberfeld inadvertently filed a late Form 4 to
report one transaction for a sale of common stock, and Messrs.
Boland and Mixon inadvertently filed a late Form 4 to
report one transaction for the acquisition of common stock under
our Director Deferred Fee Plan.
CERTAIN
RELATIONSHIPS
AND TRANSACTIONS
WITH RELATED PERSONS
We have operated under a Business Ethics Policy for many years.
As part of our Business Ethics Policy, directors and employees
are expected to make business decisions and take actions based
upon the best interests of Sherwin-Williams and not based upon
personal relationships or benefits.
The Board of Directors has recognized that some transactions,
arrangements and relationships present a heightened risk of an
actual or perceived conflict of interest and has adopted a
written policy governing these transactions. This policy governs
any transaction, arrangement or relationship (or any series of
similar transactions, arrangements or relationships) in which
Sherwin-Williams was, is or will be a participant and the amount
involved exceeds $120,000, and in which any of the following
persons had, has or will have a direct or indirect material
interest:
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Our directors, nominees for director or executive officers;
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any person who is known to be the beneficial owner of more than
5% of any class of our voting securities;
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any immediate family member of any of the foregoing persons; and
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any entity in which any of the foregoing persons is employed or
is a partner or principal or in a similar position or in which
such person has a 5% or greater beneficial ownership interest.
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The Nominating and Corporate Governance Committee of the Board
of Directors is responsible to review and approve these
transactions. No such transactions existed during 2007, and
there are currently no proposed transactions.
Directors and executive officers are required to submit to the
Committee a description of any current or proposed transaction
on an annual basis and provide updates during the year. In
addition, we will provide any similar available information with
respect to any known transactions with beneficial owners of 5%
or more of our voting securities. At each calendar years
first regularly scheduled Committee meeting, management shall
provide to the Committee information regarding transactions to
be entered into by Sherwin-Williams for that calendar year.
If management becomes aware of any transactions subsequent to
that meeting, such transactions may be presented for approval at
the next Committee meeting, or where it is not practicable or
desirable to wait until the next Committee meeting, to the Chair
of the Committee (who will possess delegated authority to act
between Committee meetings) subject to ratification by the
Committee at its next meeting. In the event management becomes
aware of any transaction that was not approved under the policy,
management will present the transaction to the Committee for its
action, which may include termination, amendment or ratification
of the transaction.
The Committee (or the Chair) will approve only those
transactions that are in, or are not inconsistent with, the best
interests of Sherwin-Williams and our shareholders, as the
Committee (or the Chair) determines in good faith in accordance
with its business judgment. In addition, the transaction must be
on terms comparable to those that could be obtained in
arms length dealings with an unrelated third party.
51
SHAREHOLDER
PROPOSALS FOR
THE 2009 ANNUAL MEETING
Proposals to Be Included in the Proxy
Statement. Under SEC rules, shareholder
proposals must be received at our principal executive offices,
101 Prospect Avenue, N.W., 12th Floor, Midland
Building, Cleveland, Ohio
44115-1075,
Attention: Corporate Secretary, on or before November 5,
2008 in order to be considered for inclusion in the proxy
materials relating to the 2009 Annual Meeting of Shareholders.
Upon timely receipt of any such proposal, we will determine
whether or not to include such proposal in the proxy materials
in accordance with applicable regulations governing the
solicitation of proxies.
Proposals Not to Be Included in the Proxy
Statement. Under our Regulations,
shareholders must follow certain procedures to nominate a person
for election as a director or to introduce an item of business
at an Annual Meeting of Shareholders, which is not intended to
be included in our proxy materials. These procedures provide
that nominations for director nominees and/or an item of
business to be introduced at an Annual Meeting must be timely
submitted in writing to us at our principal executive offices at
101 Prospect Avenue, N.W., 12th Floor, Midland Building,
Cleveland, Ohio
44115-1075,
Attention: Corporate Secretary.
To be timely, a shareholders notice must be delivered to
or mailed and received at our principal executive offices not
fewer than 60 nor more than 90 calendar days prior to the
Annual Meeting. In the event that public announcement of the
date of the Annual Meeting is not made at least 75 calendar
days prior to the date of the Annual Meeting and the Annual
Meeting is held on a date more than ten calendar days before or
after the first anniversary of the date on which the prior
years Annual Meeting was held, notice by the shareholder,
to be timely, must be received not later than the close of
business on the 10th calendar day following the day on which
public announcement is first made of the date of the Annual
Meeting.
These time limits also apply in determining whether notice is
timely for purposes of SEC rules relating to the exercise of
discretionary voting authority. If we do not receive timely
notice, or if we meet other SEC requirements, the persons named
as proxies in the proxy materials for that meeting will use
their discretion in voting at the meeting.
Our Regulations set forth specific requirements for the notice.
You can access a copy of our Regulations in the Corporate
Governance section on the Investor Relations
page of our website at www.sherwin.com. You may also receive a
copy of our Regulations by writing to us at: The
Sherwin-Williams Company, 101 Prospect Avenue, N.W., 12th
Floor, Cleveland, Ohio
44115-1075,
Attention: Investor Relations.
HOUSEHOLDING
INFORMATION
Some banks, brokers and other nominees are participating in the
practice of householding proxy statements and annual
reports. This means that beneficial holders of our common stock
who share the same address or household may not receive separate
copies of this proxy statement and our 2007 Annual Report. We
will promptly deliver an additional copy of either document to
you if you write or call us at: The Sherwin-Williams Company,
101 Prospect Avenue, N.W., 12th Floor, Cleveland,
Ohio
44115-1075,
Attention: Investor Relations,
(216) 566-2000.
ANNUAL
REPORT ON FORM 10-K
We will provide to each shareholder who is solicited to vote
at the 2008 Annual Meeting of Shareholders, upon the request of
such person and without charge, a copy of our 2007 Annual Report
on Form 10-K. Please write or call us at: The
Sherwin-
Williams Company, 101 Prospect Avenue, N.W., 12th Floor,
Cleveland, Ohio
44115-1075,
Attention: Investor Relations,
(216) 566-2000.
52
APPENDIX
A
THE SHERWIN-WILLIAMS COMPANY
Board of Directors
Director Independence Standards
The Board of Directors of The Sherwin-Williams Company has
adopted the following Director Independence Standards to assist
the Board in determining the independence of a director. To be
considered independent, the Board must affirmatively
determine that the director has no material relationship with
the Company. In each case, the Board shall broadly consider all
relevant facts and circumstances, including the directors
commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships. The Board shall also
consider such other criteria as the Board may determine from
time to time.
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1.
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In no event will a director be considered
independent if such director fails to qualify as an
independent director under Rule 303A.02(b) of
the New York Stock Exchange Listed Company Manual. In addition,
a director will not be independent if, within the preceding
three years: (i) the director was employed by the Company;
(ii) an immediate family member of the director was
employed by the Company; (iii) the director receives, or an
immediate family member receives, more than $100,000 per year in
direct compensation from the Company, other than director and
committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is
not contingent in any way on continued service); (iv) the
director was employed by or affiliated with the Companys
independent auditor; (v) an immediate family member of the
director was employed as a partner, principal or manager, or
employed in any other professional capacity, by the
Companys independent auditor; or (vi) a Company
executive officer served on the compensation committee of a
company which employed the director, or which employed an
immediate family member of the director, as an executive officer.
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2.
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In addition to the relationships described in paragraph 1, audit
committee members may not (i) directly or indirectly accept
any consulting, advisory or other compensatory fee from the
Company or any of its subsidiaries or (ii) be an affiliated
person of the Company or any of its subsidiaries. Audit
committee members may receive directors fees, in the form
of cash, stock, stock units, stock options or other
consideration ordinarily available to directors, as well as
regular benefits that other directors receive.
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3.
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The following commercial and charitable relationships will not
be considered to be material relationships that would impair a
directors independence: (i) if a Company director is
an executive officer or employee of another company that, during
any of the past three years, made payments to, or receives
payments from, the Company for property or services in an amount
which, in any single fiscal year, is less than $1 million
or two percent, whichever is greater, of such other
companys annual consolidated gross revenues; (ii) if
an immediate family member of a Company director is an executive
officer of another company that, during any of the past three
years, made payments to, or receives payments from, the Company
for property or services in an amount which, in any single
fiscal year, is less than $1 million or two percent,
whichever is greater, of such other companys annual
consolidated gross revenues; (iii) if a Company director,
or an immediate family member of such director, is an executive
officer of another company which is indebted to the Company in
an amount which is less than five percent of such other
companys total consolidated assets; and (iv) if a
Company director, or an immediate family member of such
director, serves as an officer, director or trustee of a
foundation, university, charitable or other not for profit
organization, and the Companys, or the Companys
Foundations discretionary charitable contributions (the
Companys Foundation matching of employee charitable
contributions will not be included in the amount of the
Foundations contributions for this purpose) to the
organization, in the
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A-1
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aggregate, are less than $250,000 or five percent, whichever is
greater, of that organizations latest publicly available
annual consolidated gross revenues.
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4.
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For relationships not covered by the categorical standards in
paragraphs 1 and 3, the determination of whether the
relationship is material or not, and therefore whether the
director would be independent or not, shall be made by the
directors who satisfy the standards set forth in paragraphs 1
and 3. The Company will explain in the next proxy statement the
basis for any board determination that a relationship is
immaterial despite the fact that it does not meet the
categorical standards set forth in paragraphs 1 and/or 3 above.
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5.
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The Board shall undertake an annual review of the independence
of all directors. In advance of the meeting at which this review
occurs, each director shall be asked to provide the Board with
full information regarding the directors (including
immediate family members) business, charitable and other
relationships with the Company to enable the Board to evaluate
the directors independence.
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6.
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Directors have an affirmative obligation to inform the Board of
any material changes in their circumstances or relationships
that may impact their designation by the Board as
independent. This obligation includes all business,
charitable and other relationships between directors (including
immediate family members) and the Company and its affiliates.
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For purposes of these Director Independence Standards,
immediate family member includes a persons
spouse, parents, children, siblings, mothers and fathers-in-law,
sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than domestic employees) who shares such
persons home.
A-2
2008 ANNUAL MEETING ADMISSION TICKET
2008 ANNUAL MEETING OF SHAREHOLDERS
THE SHERWIN-WILLIAMS COMPANY
Wednesday, April 16, 2008
9:00 A.M.
Landmark Conference Center
927 Midland Building
101 Prospect Avenue, N.W.
Cleveland, Ohio
At the Annual Meeting, shareholders will act upon the proposals outlined in the
Notice of Annual Meeting of Shareholders, including the election of directors, the
ratification of the appointment of Sherwin-Williams independent registered public
accounting firm, the consideration of a shareholder proposal relating to majority
voting if presented at the Annual Meeting, and the consideration of such other
business as may properly come before the Annual Meeting.
This Admission Ticket only admits the shareholder identified on the reverse side and
is non-transferable. We may also ask you to present valid photo identification to
enter the Annual Meeting.
6 DETACH ADMISSION TICKET HERE 6
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THE SHERWIN-WILLIAMS COMPANY
PROXY/VOTING INSTRUCTION CARD
ANNUAL MEETING OF SHAREHOLDERS APRIL 16, 2008
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The undersigned authorizes C.M. CONNOR, S.P. HENNESSY and L.E. STELLATO, and each of them,
with power of substitution, to vote and otherwise represent all of the shares of common stock
and ESOP serial preferred stock of The Sherwin-Williams Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders on April 16, 2008, and any adjournment(s)
thereof, as indicated on the reverse side, and in their discretion on all other matters as may
properly come before the Annual Meeting. This card also provides voting instructions for shares
of common stock, if any, held for the account of the undersigned by The Bank of New York, as
agent of the Stock Ownership and Automatic Dividend Reinvestment Plan, and by Fidelity
Management Trust Company, as trustee of the Employee Stock Purchase and Savings Plan.
This card is solicited jointly by the Board of Directors, The Bank of New York (with
respect to shares held under the Dividend Reinvestment Plan) and Fidelity (with respect to
shares held under the Stock Purchase and Savings Plan). You are encouraged to specify your vote
by completing the reverse side of this card. When properly completed and signed, your shares
will be voted in accordance with your directions. To vote in accordance with the Board of
Directors recommendations, simply sign, date and return this card; no boxes need be marked. If
you sign and return this card without specifying your vote, your shares will be voted FOR
Proposals 1 and 2 and AGAINST Proposal 3 and in the proxy holders discretion upon all other
matters as may properly come before the Annual Meeting. If you do not timely sign and return
this card, the proxy holders cannot vote your shares (or, in the case of the Stock Purchase and
Savings Plan, if you do not sign and return this card by the close of business on April 11,
2008, your shares will be voted in the same proportion as Fidelity votes those shares for which
it receives proper instructions).
THE SHERWIN-WILLIAMS COMPANY
PROXY PROCESSING
P.O. BOX 3550
S HACKENSACK NJ 07606-9250
(Continued and to be dated and signed on reverse side.)
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YOUR VOTE IS IMPORTANT
VOTE BY INTERNET /TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK |
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INTERNET
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TELEPHONE
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MAIL
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https://www.proxypush.com/shw
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1-866-416-3853
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Go to the website address listed above.
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OR
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Use any touch-tone telephone.
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OR
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Mark, sign and date your proxy card. |
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Have your proxy card ready.
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Have your proxy card ready.
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Detach your proxy card. |
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Follow the simple instructions that
appear on your computer screen.
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Follow the simple recorded instructions.
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Return your proxy card in the postage-paid envelope provided. |
Your Internet or telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card. If you have submitted
your proxy by the Internet or telephone there is no need for you to mail back your proxy
card.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON
APRIL 16, 2008.
The proxy statement and annual report
to shareholders are available at
http://proxymaterials.sherwin.com
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1-866-416-3853 CALL TOLL-FREE TO VOTE |
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6 DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET 6 |
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Sign, Date and Return this
Card Promptly Using the
Enclosed Envelope.
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x
Votes must be indicated
(x) in Black or Blue ink. |
A vote FOR Proposal 1 is recommended by the Board of Directors.
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ELECTION OF 11 DIRECTORS: 01-A.F. ANTON, 02-J.C. BOLAND, 03-C.M. CONNOR, 04-D.E. EVANS,
05-D.F. HODNIK, 06-S.J. KROPF, 07-R.W. MAHONEY, 08-G.E. MCCULLOUGH, 09-A.M. MIXON, III,
10-C.E. MOLL, 11-R.K. SMUCKER |
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FOR
ALL
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WITHHOLD
FOR ALL
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EXCEPTIONS
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(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the
Exceptions box and write that nominees name on the line below).
A vote FOR Proposal 2 is recommended by the Board of Directors.
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FOR
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AGAINST
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ABSTAIN |
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2.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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A vote AGAINST Proposal 3 is recommended by the Board of Directors.
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FOR
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AGAINST
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ABSTAIN |
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3.
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SHAREHOLDER PROPOSAL RELATING TO
MAJORITY VOTING
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In their discretion, the proxy holders are authorized to vote upon all other matters as may
properly come before the Annual Meeting or any adjournment thereof.
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Mark this box if you have included a change of address. o
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Mark this box if you have included comments. o |
S C A N L I N E |
Please sign exactly as your name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee, guardian or in other representative capacity,
please give your full title. |
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Date Shareholder sign here
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Co-Owner sign here |