NOTICE OF ANNUAL MEETING
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant
þ
Filed by a Party other than the Registrant
o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to §240.14a-12
The Chubb
Corporation
(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):
þ No
fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
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(3)
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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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(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o Fee
paid previously with preliminary materials.
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o
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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) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NOTICE OF
2008 ANNUAL MEETING OF SHAREHOLDERS
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DATE AND TIME |
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Tuesday, April 29, 2008 at 10:00 a.m., local time |
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PLACE |
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Amphitheater
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059 |
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ITEMS OF BUSINESS |
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(1) To elect 12 directors to serve until the next
annual meeting of shareholders and until their respective
successors are elected and qualified. |
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(2) To ratify the appointment of Ernst & Young
LLP as independent auditor. |
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(3) To transact such other business as may be properly
brought before the meeting or at any adjournment or postponement
thereof. |
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RECORD DATE |
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You are entitled to vote at the annual meeting and at any
adjournment or postponement thereof if you were a shareholder of
record at the close of business on March 10, 2008. |
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ADJOURNMENTS AND POSTPONEMENTS |
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Any action on the items of business described above may be
considered at the annual meeting at the time and on the date
specified above or at any time and date to which the annual
meeting may be properly adjourned or postponed. |
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VOTING BY PROXY |
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The notice you received providing instructions on accessing our
annual meeting materials via the internet includes instructions
for voting via the internet or by telephone. Also, in the event
that you affirmatively request paper copies of our annual
meeting materials, you may complete, sign, date and return the
accompanying proxy card in the enclosed addressed envelope. The
giving of a proxy will not affect your right to revoke the proxy
by appropriate written notice or to vote in person should you
later decide to attend the annual meeting. |
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ADMISSION TO THE MEETING |
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You are entitled to attend the annual meeting if you were a
shareholder as of the close of business on March 10, 2008.
For admittance to the meeting, please be prepared to present a
valid, government-issued photo identification (federal, state or
local), such as a drivers license or passport, and proof
of beneficial ownership if you hold your shares through a
broker, bank or other nominee. The annual meeting will begin
promptly at 10:00 a.m., local time. Please allow yourself
ample time for the check-in procedures. Video and audio
recording devices and other electronic devices will not be
permitted at the meeting, and attendees may be subject to
security inspections. |
By order of the Board of Directors,
W. Andrew Macan
Vice President and Secretary
March 20, 2008
2008
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
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A-1
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PROXY
STATEMENT
PROXY AND
VOTING INFORMATION
Our Board of Directors (our Board) has provided you with these
proxy materials in connection with its solicitation of proxies
to be voted at the 2008 Annual Meeting of Shareholders (the 2008
Annual Meeting). We will hold the 2008 Annual Meeting on
Tuesday, April 29, 2008 in the Amphitheater at The Chubb
Corporation, 15 Mountain View Road, Warren, New Jersey
07059, beginning at 10:00 a.m., local time. Please note
that throughout these proxy materials we may refer to The Chubb
Corporation as Chubb, we, us
or our. We mailed the instructions for accessing our
annual meeting materials, which include this proxy statement and
our 2007 Annual Report, on or before March 20, 2008.
Information
About the Delivery of our Annual Meeting Materials
As permitted by rules recently adopted by the Securities and
Exchange Commission (the SEC), we have made our annual meeting
materials available to our shareholders electronically via the
internet. On or before March 20, 2008, we mailed to our
shareholders a notice containing instructions on how to access
our annual meeting materials, how to request written copies of
these materials and how to vote online or by telephone. Unless
you affirmatively request a paper copy of our annual meeting
materials by following the instructions set forth in the notice,
you will not receive a paper copy of our annual meeting
materials in the mail. However, due to an ambiguity in the
regulations promulgated under the Employee Retirement Income
Security Act of 1974, as amended (ERISA), unless we have
previously received a written consent to deliver our annual
meeting materials electronically, we have assumed that
participants in the Capital Accumulation Plan of The Chubb
Corporation (the CCAP) have affirmatively requested paper copies
of our annual meeting materials and, therefore, will be mailing
copies of the annual meeting materials to such participants in
the CCAP.
The SECs rules also permit us to deliver a single notice
or set of annual meeting materials to one address shared by two
or more of our shareholders. This delivery method is referred to
as householding and can result in significant cost
savings. To take advantage of this opportunity, we have
delivered only one notice or set of annual meeting materials to
multiple shareholders who share an address, unless we received
contrary instructions from such impacted shareholders prior to
our mailing date. We agree to deliver promptly, upon written or
oral request, a separate copy of the notice or set of annual
meeting materials, as requested, to any shareholder at the
shared address to which a single copy of those documents was
delivered. For future meetings, if you prefer to receive
separate copies of our annual meeting materials, please contact
Broadridge Financial Solutions, Inc. at
800-542-1061
or in writing at Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. If you are currently a
shareholder sharing an address with another shareholder and wish
to receive only one copy of future notices, proxy statements and
annual reports for your household, please contact Broadridge at
the above phone number or address.
Who Can
Vote
Our Board has set March 10, 2008 as the record date for the
2008 Annual Meeting. Shareholders of record of our common stock
at the close of business on March 10, 2008 may vote at
the 2008 Annual Meeting.
How Many
Shares Can Be Voted
Each shareholder has one vote for each share of common stock
owned at the close of business on the record date. On the record
date, 367,582,648 shares of our common stock were outstanding.
How You
Can Vote
Record
Holders
If your shares are registered in your name with BNY Mellon
Shareowner Services, our dividend agent, transfer agent and
registrar, you are considered a shareholder of record, and the
notice containing instructions on accessing our annual meeting
materials online or requesting a paper copy thereof is being
sent directly to you by us. Shareholders of record can vote in
person at the 2008 Annual Meeting or give their proxy to be
voted at the 2008 Annual Meeting in any one of the following
ways:
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over the internet;
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by telephone; or
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for shareholders requesting a paper copy of our annual
meeting materials, by completing, signing, dating and returning
the proxy card accompanying the paper copy.
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CCAP
Participants
If you are a participant in the CCAP, your proxy will include
all shares allocated to you in the CCAP (Plan Shares), which you
may vote in person at the 2008 Annual Meeting or over the
internet, by telephone or, provided that you have not delivered
a written consent to receive our annual meeting materials
electronically, by completing and mailing the proxy card
accompanying your paper copy of the annual meeting materials.
Your proxy will serve as a voting instruction for the trustee of
the CCAP. If your voting instructions are not received by
April 25, 2008, any Plan Shares you hold will be voted in
proportion to the way the other participants in the CCAP vote
their shares.
Brokerage
and Other Account Holders
You are considered to be the beneficial owner of shares held for
you in an account by a broker, bank or other nominee.
Instructions for accessing, or requesting paper copies of, our
annual meeting materials are being forwarded to you with respect
to those shares by your broker, bank or nominee who is the
shareholder of record. You have the right to direct your broker,
bank or nominee on how to vote, and you may also attend the 2008
Annual Meeting. Your broker, bank or nominee has enclosed a
voting instruction card. Beneficial owners of shares who wish to
vote at the 2008 Annual Meeting must obtain a legal proxy from
their broker, bank or nominee and present it at the 2008 Annual
Meeting. The availability of telephone and internet voting for
beneficial owners will depend on the voting processes of the
broker, bank or nominee. Please refer to the voting instructions
of your broker, bank or nominee for directions as to how to vote
shares that you beneficially own.
Voting
Whether you vote over the internet, by telephone or by mail, you
can specify whether you vote your shares for or against each of
the nominees for election as a director (Proposal 1 on the
proxy card). You can also specify whether you vote for or
against or abstain from the ratification of Ernst &
Young LLP as independent auditor (Proposal 2 on the proxy
card).
If you duly execute the proxy card but do not specify how you
want to vote, your shares will be voted as our Board recommends,
which is FOR the election of each of the nominees
for director as set forth under Proposal 1 below and
FOR ratification of the appointment of
Ernst & Young LLP as independent auditor as described
in Proposal 2 below.
2
Revocation
of Proxies
If you are a shareholder of record or a holder of Plan Shares,
you may revoke your proxy at any time before it is exercised in
any of four ways:
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by notifying our Corporate Secretary of the revocation in
writing;
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by delivering a duly executed proxy card bearing a later
date;
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by properly submitting a new timely and valid proxy via
the internet or by telephone after the date of the revoked
proxy; or
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by voting in person at the 2008 Annual Meeting.
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You will not revoke a proxy merely by attending the 2008 Annual
Meeting. To revoke a proxy, you must take one of the actions
described above.
If you hold your shares in a brokerage or other account, you may
submit new voting instructions by contacting your broker, bank
or nominee.
Required
Votes
The presence, in person or by proxy, of the holders of a
majority of all outstanding shares of our common stock entitled
to vote at the 2008 Annual Meeting is necessary to constitute a
quorum. Both of the proposals to be voted upon at the 2008
Annual Meeting requires the affirmative vote of a majority of
the votes cast on the proposal at the 2008 Annual Meeting.
Abstentions are counted as shares present at the 2008 Annual
Meeting for purposes of determining a quorum. Similarly, shares
which brokers do not have the authority to vote in the absence
of timely instructions from beneficial owners (broker non-votes)
also are counted as shares present at the 2008 Annual Meeting
for purposes of determining a quorum. Abstentions and broker
non-votes are not considered votes cast and will not be counted
either for or against these proposals and, accordingly, will
have no effect on the outcome of the vote for Proposals 1
and 2.
Other
Matters to be Acted upon at the Annual Meeting
Our Board currently is not aware of any matters other than those
specifically stated in the Notice of 2008 Annual Meeting of
Shareholders to be presented for action at the 2008 Annual
Meeting. If any matter other than those stated in the Notice of
2008 Annual Meeting of Shareholders is presented at the 2008
Annual Meeting on which a vote may properly be taken, the shares
represented by proxies will be voted in accordance with the
judgment of the person or persons voting those shares.
Adjournments
and Postponements
Any action on the items of business described above may be
considered at the 2008 Annual Meeting at the time and on the
date specified above or at any time and date to which the 2008
Annual Meeting may be properly adjourned or postponed.
Combined
Form 10-K
and Annual Report
We have prepared a combined
Form 10-K
for the year ended December 31, 2007 and 2007 Annual Report
to Shareholders (the 2007 Annual Report) in accordance with the
rules of the SEC. The 2007 Annual Report is not a part of the
proxy soliciting materials. However, the instructions for
accessing the 2007 Annual Report online and for requesting a
paper copy are included in the notice you received regarding our
annual meeting materials. The 2007 Annual Report is available
on our website at www.chubb.com/investors, as well as on
a website maintained by Broadridge at www.proxyvote.com.
It also is available without charge by sending a written request
to our Corporate Secretary at 15 Mountain View Road, Warren, New
Jersey 07059.
3
Important
Notice about Security
All 2008 Annual Meeting attendees may be asked to present a
valid, government-issued photo identification (federal, state or
local), such as a drivers license or passport, and proof
of beneficial ownership if you hold your shares through a
broker, bank or other nominee before entering the 2008 Annual
Meeting. Attendees may be subject to security inspections. Video
and audio recording devices and other electronic devices will
not be permitted at the 2008 Annual Meeting.
4
CORPORATE
GOVERNANCE
Commitment
to Corporate Governance
Our Board and management have a strong commitment to effective
corporate governance. We have in place a comprehensive corporate
governance framework for our operations which, among other
things, takes into account the requirements of the
Sarbanes-Oxley Act of 2002, the SEC and the New York Stock
Exchange (NYSE). The key components of this framework are set
forth in the following documents:
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our Restated Certificate of Incorporation;
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our By-Laws;
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our Audit Committee Charter;
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our Corporate Governance & Nominating Committee
Charter;
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our Organization & Compensation Committee
Charter;
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our Corporate Governance Guidelines;
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our Code of Business Conduct; and
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our Code of Ethics for CEO and Senior Financial Officers.
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Copies of these documents are available on our website at
www.chubb.com/investors. Copies also are available
without charge by sending a written request to our Corporate
Secretary.
Corporate
Governance Guidelines
Our Corporate Governance Guidelines address a number of policies
and principles employed in the operation of our Board and our
business generally, including our policies with respect to:
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the size of our Board;
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director independence and minimum qualifications;
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factors to be considered in selecting candidates to serve
on our Board;
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director nominating procedures, including the procedures
by which shareholders may propose director candidates;
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incumbent directors who do not receive a majority of the
votes cast in uncontested elections;
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term limits, director retirement, director resignations
upon job change and Board vacancies;
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directors outside directorships and outside audit
committee service;
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the role and responsibilities of the independent Lead
Director;
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director responsibilities;
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director attendance at Board meetings, committee meetings
and the annual meeting of shareholders;
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executive sessions of our independent directors;
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director access to management and our Boards ability
to retain outside consultants;
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director compensation;
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stock ownership guidelines for directors and certain
employees;
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administration of our legal compliance and ethics program;
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director orientation and continuing education;
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management succession and evaluation of our Chief
Executive Officer;
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annual self-assessments of our Board and each of our Audit
Committee, our Corporate Governance & Nominating
Committee (our Governance Committee) and our
Organization & Compensation Committee (our
Compensation Committee); and
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shareholder access to our Board and Audit Committee.
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Director
Qualifications and Candidate Considerations
Our Board has established our Governance Committee which is
comprised solely of directors satisfying the independence
requirements of the NYSE. A copy of the charter of our
Governance Committee is available on our website at
www.chubb.com/investors. Copies also are available by
sending a written request to our Corporate Secretary. Our
Governance Committee is responsible, among other things, for:
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recruiting qualified independent directors, consisting of
persons with diverse backgrounds and skills who have the time
and ability to exercise independent judgment and perform our
Boards function effectively and who meet the needs of our
Board; and
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identifying the respective qualifications needed for
directors serving on our Board committees and serving as
chairmen of such committees, recommending to our Board the
nomination of persons meeting such respective qualifications to
the appropriate committees of our Board and as chairmen of such
committees and taking a leadership role in shaping our corporate
governance policies.
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We require that a majority of the directors on our Board meet
the criteria for independence under applicable law and the
requirements of the NYSE. We believe that variety in the lengths
of service among the directors benefits us and our shareholders.
Accordingly, we do not have term limits for service on our
Board. As an alternative to term limits, all director
nominations are considered annually by our Governance Committee.
Individuals who would be age 72 or older at the time of
election are ineligible for nomination to serve on our Board.
While our Board does not require that in every instance
directors who retire or change from the position they held when
they were elected to our Board resign, it does require that our
Governance Committee consider the desirability of continued
Board membership under the circumstances.
Our Governance Committee considers a number of factors in
selecting director candidates, including:
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the personal and professional ethics, integrity and values
of the candidate;
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the independence of the candidate under legal, regulatory
and other applicable standards, including the ability of the
candidate to represent all of our shareholders without any
conflicting relationship with any particular constituency;
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the diversity of the existing Board, so that we maintain a
diverse body of directors, with diversity reflecting gender,
ethnic background and geographic and professional experience;
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whether the professional experience and industry expertise
of the candidate will complement that of the existing Board;
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the compatibility of the candidate with the existing Board;
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the length of tenure of the members of the existing Board;
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the number of other public company boards of directors on
which the candidate serves or intends to serve, with the general
expectation that the candidate would not serve on the boards of
directors of more than four other public companies;
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the number of public company audit committees on which the
candidate serves or intends to serve, with the general
expectation that, if the candidate is to be considered for
service on our Audit Committee, the candidate would not serve on
the audit committees of more than two other public companies;
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6
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the candidates service on the boards of directors of
other for-profit companies, not-for-profit organizations, trade
associations or industry associations;
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the ability and willingness of the candidate to devote
sufficient time to carrying out his or her Board duties and
responsibilities effectively;
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the commitment of the candidate to serve on our Board for
an extended period of time; and
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such other attributes of the candidate and external
factors as our Governance Committee deems appropriate.
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Our Governance Committee has the discretion to weight these
factors as it deems appropriate. The importance of these factors
may vary from candidate to candidate.
Nominating
Procedures
The primary purpose of our nominating procedures is to identify
and recruit outstanding individuals to serve on our Board. Our
Board has delegated responsibility for identifying director
candidates to our Governance Committee, which meets periodically
to consider the slate of nominees for election at our next
annual meeting of shareholders. If appropriate, our Governance
Committee schedules
follow-up
meetings and interviews with potential candidates. Our
Governance Committee submits its recommended nominee slate to
our Board for approval.
Our Governance Committee will consider candidates recommended by
directors, members of management and our shareholders. In
addition, as it did during 2007 in connection with the
recruitment of Messrs. McGuinn and Søderberg, our
Governance Committee is authorized to engage one or more search
firms to assist in the recruitment of director candidates.
The procedures for shareholders to propose director candidates
are set forth in Article I, Section 10 of our By-Laws.
For a shareholder proposed candidate to be considered, in
addition to complying with the notice period described in our
By-Laws, the shareholder must provide:
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all information relating to each person whom the
shareholder proposes to nominate for election as a director as
would be required to be disclosed in a solicitation of proxies
for the election of such person as a director pursuant to
Regulation 14A under the Securities Exchange Act of 1934
(Exchange Act), including such persons written consent to
being named in the proxy statement as a nominee and to serving
as a director if so elected;
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the name and address of the shareholder giving the notice,
as they appear on our books, and of the beneficial owner of
those shares; and
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the class and number of shares which are owned
beneficially and of record by the shareholder and the beneficial
owner.
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Our Governance Committee may make such additional inquiries of
the candidate or the proposing shareholder as our Governance
Committee deems appropriate. This information is necessary to
allow our Governance Committee to evaluate the
shareholders proposed candidate on the same basis as those
candidates referred through directors, members of management or
by consultants retained by our Governance Committee.
Shareholders wishing to propose a candidate for consideration
should refer to Article I, Section 10 of our By-Laws,
the information set forth under the heading
2008 Shareholder Proposals and Nominations and
the SEC rules applicable to shareholder proposal submission
procedures.
Director
Election Procedures
In uncontested elections, our directors are elected by the
affirmative vote of a majority of the votes cast. In the event
that an incumbent director receives less than the affirmative
vote of a majority of the votes cast and the director would
otherwise remain in office by operation of New Jersey law, the
affected director is required to tender
7
his or her resignation. Our Governance Committee is required to
promptly consider the resignation and make a recommendation to
our Board as to whether or not to accept such resignation. Our
Board is required to take action with respect to our Governance
Committees recommendation within 90 days after the
date of the election. These procedures are described in full in
our Corporate Governance Guidelines.
Director
Independence
Our Governance Committee reviews each directors
independence annually in accordance with the standards set forth
in our Corporate Governance Guidelines and the requirements of
the NYSE. No member of our Board will be considered independent
unless our Governance Committee determines that the director has
no material relationship with us that would affect the
directors independence and that the director satisfies the
independence requirements of all applicable laws, rules and
regulations. To facilitate the analysis of whether a director
has a relationship with us that could affect his or her
independence, our Board has identified in our Corporate
Governance Guidelines the following categories of relationships
which should not affect a directors independence or are
deemed immaterial and, therefore, are not considered by our
Governance Committee in determining director independence:
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charitable contributions made by us to any organization:
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pursuant to our Matching Gifts Program on terms of general
applicability to employees and directors;
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in amounts that do not exceed $25,000 per year; or
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that have been approved by our Governance Committee;
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commercial relationships with any entity or organization
where the annual sales to, or purchases from, us are less than
two percent of our annual revenue and less than two percent of
the annual revenue of the other entity or organization; and
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insurance, reinsurance and other risk transfer
arrangements entered into in the ordinary course of business on
an arms length basis.
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Our Board reviewed director independence in 2007 based on the
assessment of our Governance Committee. As a result of this
review, our Board determined that each of our directors, other
than John D. Finnegan, who is our Chairman, President and Chief
Executive Officer, was independent as defined in the listing
standards of the NYSE and, in the case of the members of our
Audit Committee, Section 10A(m)(3) of the Exchange Act.
Related
Person Transactions
Our Governance Committee has adopted a written policy governing
the review and approval of transactions in which we are a
participant and in which any of our officers, our directors,
holders of five percent or more of our common stock or any of
their respective immediate family members (as defined by the
SEC) has a material direct or indirect interest. These
individuals collectively are referred to as related persons.
This policy prohibits us from participating in any transaction
in which a related person has a direct or indirect material
interest unless:
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the transaction is a permitted transaction (as defined
below);
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in the case of our executive officers and holders of five
percent or more of our common stock, the transaction is reported
to and approved by our Board, our Governance Committee or
another Board committee comprised of disinterested directors; or
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in the case of our directors and nominees for director,
the transaction is reported to and approved by a majority of the
disinterested members of our Governance Committee or, if less
than a majority of our Governance Committee is disinterested, a
majority of the disinterested members of our Board.
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In the event that a related person inadvertently fails to obtain
the appropriate approvals prior to engaging in a transaction in
which the related person has a material direct or indirect
interest and in which we are a participant, the
8
related person is required to seek ratification of the
transaction by the appropriate decision maker referenced above
as soon as reasonably practicable after discovery of such
failure.
Our Governance Committee has identified categories of
transactions that are appropriate and generally do not give rise
to conflicts of interest or the appearance of impropriety,
which, accordingly, do not require approval or ratification.
These categories of transactions, referred to as permitted
transactions under the policy, are:
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the purchase of insurance products or services from us on
an arms length basis in the ordinary course of business
and on terms and conditions generally available to other
insureds;
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claims activity relating to insurance policies
administered on an arms length basis in the ordinary
course of business and consistent with the administration of the
claims of other insureds;
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any transaction or series of transactions with an
aggregate dollar amount involved of $100,000 or less;
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transactions within the scope of a related persons
ordinary business duties to us, where the benefits inuring to
the related person relate solely to our performance review
process (and resulting compensation and advancement decisions);
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our payment or reimbursement of a related persons
expenses incurred in performing his or her Chubb-related
responsibilities;
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the receipt of compensation and benefits from us, provided
that such arrangements are approved in accordance with the
policies and procedures established by our Board or a committee
thereof;
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the purchase or sale of our securities in the open market
or pursuant to any equity compensation plan approved by our
Board and our shareholders;
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any transaction with an entity or organization with whom
the related person is serving or affiliated solely at our
request;
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any transaction in which the related persons
interest arises only: (i) from the related persons
position as a director of another corporation or organization
that is a party to the transaction; (ii) from the direct or
indirect ownership by the related person and all other related
persons, in the aggregate, of less than a ten percent equity
interest in another person (other than a partnership) which is a
party to the transaction; or (iii) from both such position
and ownership; and
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any transaction in which the related persons
interest arises only from the related persons position as
a limited partner in a partnership in which the related person
and all other related persons have an interest of less than ten
percent and the person is not a general partner of and does not
have another position in the partnership.
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Related person transactions during 2007 are discussed under the
heading Certain Transactions and Other Matters.
Lead
Director
Our Board annually elects an independent director to serve as
Lead Director to ensure our Boards independence and proper
functioning when, as is currently the case, the offices of Chief
Executive Officer and Chairman of the Board are combined. The
Lead Director has the following authority:
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to act as a liaison between the Chairman and the
independent directors;
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to call special meetings of our Board;
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to call special meetings of any committee of our Board;
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with the consent of a majority of the members of our
Executive Committee, to call special meetings of our
shareholders;
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in the absence of the Chairman of the Board, to preside at
meetings of our Board;
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9
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to preside at all executive sessions of the non-employee
directors and the independent directors;
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in the absence of the Chairman of the Board, to preside at
meetings of our shareholders;
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to provide direction regarding the meeting schedule,
information to be sent to our Board and the agenda for our Board
meetings to assure that there is sufficient time for discussion
of all agenda items;
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at the Lead Directors discretion, to attend meetings
of any committee on which he or she is not otherwise a member;
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to hire independent legal, financial or other advisors as
he or she deems desirable or appropriate, without consulting or
obtaining the approval of any member of management in advance;
and
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to exercise such additional powers as may be conferred
upon the office of Lead Director by resolution of our Board or
our Governance Committee from time to time.
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The Lead Director serves on our Executive Committee and is
eligible to serve on any or all other committees of our Board.
The office of Lead Director is not subject to term limits. Joel
J. Cohen has served as our Lead Director since December 2003
when Mr. Finnegan succeeded Mr. Cohen as Chairman of
the Board.
Contacting
our Board and Audit Committee
Director
Communications
Parties interested in contacting our Board, the Chairman of the
Board, the Lead Director, the independent directors as a group
or any individual director are invited to do so by writing to
them in care of our Corporate Secretary at:
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
Complaints and concerns relating to our accounting, internal
controls over financial reporting or auditing matters should be
communicated to our Audit Committee using the procedures
described below. Communications addressed to a particular
director will be referred to that director. All other
communications addressed to our Board will be referred to our
Lead Director and tracked by the Corporate Secretary.
Audit
Committee Communications
Complaints and concerns relating to our accounting, internal
controls over financial reporting or auditing matters should be
communicated to our Audit Committee, which consists solely of
non-employee directors. Any such communication may be anonymous
and may be reported to our Audit Committee through our General
Counsel by writing to:
Executive Vice President and General Counsel
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
GeneralCounsel@chubb.com
All such concerns will be reviewed under our Audit
Committees direction and oversight by the General Counsel,
our Internal Audit Department or such other persons as our Audit
Committee determines to be appropriate. Confidentiality will be
maintained to the fullest extent possible, consistent with the
need to conduct an adequate review. Prompt and appropriate
corrective action will be taken when and as warranted in the
judgment of our Audit Committee. The General Counsel will
prepare a periodic summary report of all such communications for
our Audit Committee.
10
Our Code of Business Conduct provides that we will not
discharge, demote, suspend, threaten, harass or in any manner
discriminate against any employee in the terms and conditions of
employment based upon any lawful actions of such employee with
respect to good faith reporting of complaints regarding
accounting matters or otherwise as specified in Section 806
of the Sarbanes-Oxley Act of 2002.
Required
Certifications
As of the mailing date of this proxy statement, our Chief
Executive Officer and Chief Financial Officer have timely
delivered the certifications required under applicable rules of
the SEC and the NYSE.
Meeting
Attendance and Related Matters
Our directors are expected to attend all Board meetings,
meetings of committees on which they serve and the annual
meeting of shareholders. Nine of our directors attended the 2007
Annual Meeting of Shareholders. Directors also are expected to
spend the time needed and to meet as frequently as necessary to
properly discharge their responsibilities. In 2007, our Board
met 10 times. All of our incumbent directors attended at least
75% of the meetings of our Board and the committees on which
they serve.
Audit
Committee
Our Audit Committee is directly responsible for the appointment,
compensation and retention (or termination) of our independent
auditor. Our Audit Committee also is responsible for the
oversight of the integrity of our financial statements, our
compliance with legal and regulatory requirements, the
independence and qualifications of our independent auditor, the
performance of our internal audit function and independent
auditor and other significant financial matters. For 2007, our
Board designated Joel J. Cohen and Daniel E. Somers as our audit
committee financial experts (as defined by SEC rules). In 2007,
our Audit Committee met eight times. The Audit Committee Report
for 2007 is set forth under the heading Audit Committee
Report.
Compensation
Committee
Composition;
Scope of Authority
Each member of our Compensation Committee satisfies the
independence requirements of the NYSE and the independence
standards set forth in our Corporate Governance Guidelines. Our
Compensation Committees primary responsibilities include
establishing our general compensation philosophy and overseeing
the development, implementation and administration of our
compensation, benefit and perquisite programs. It also evaluates
the performance and sets all aspects of the compensation paid to
our Chief Executive Officer and reviews and approves the
compensation paid to our other executive officers. In addition,
our Compensation Committee is responsible for recommending the
form and amount of compensation for our non-employee directors
to our Governance Committee. The principle duties and
responsibilities of our Compensation Committee are set forth in
its charter, which is available on our website at
www.chubb.com/investors.
Processes
and Procedures
In 2007, our Compensation Committee met five times.
During the first quarter of each year, our Compensation
Committee evaluates our performance relative to the
pre-established goals under The Chubb Corporation Annual
Incentive Compensation Plan (2006) (the Annual Incentive Plan),
in the case of annual incentive compensation, The Chubb
Corporation Long-Term Stock Incentive Plan (2004) (the 2004
Employee Plan), in the case of long-term incentive awards, and
for certain other plans in which our named executive officers
identified under the heading Executive
CompensationSummary Compensation Table (our NEOs) do
not participate. In addition, our Compensation Committee
evaluates our Chief Executive Officers overall individual
performance and contributions over the prior year. Our Chief
Executive Officer presents our Compensation Committee with his
evaluation of each of the other NEOs, which includes a review of
contributions and performance during the prior year, strengths,
weaknesses, development plans,
11
succession potential and compensation recommendations. Our
Compensation Committee then makes a final determination of
compensation amounts for each NEO with respect to each of the
elements of the executive compensation program for both
compensation based on prior year performance and target
compensation for the current year.
Mid-year, typically in June, our Compensation Committee
considers each NEOs total compensation as compared with
that of the named executive officers of a peer group of
companies. Information regarding this peer group analysis is set
forth under the heading Compensation Discussion and
AnalysisSetting of Executive Compensation. This peer
group review provides our Compensation Committee with an
external basis to evaluate our overall compensation program,
including an assessment of its pay to performance relationship.
Following this presentation of competitive market data, our
Compensation Committee makes decisions, in consultation with our
Chief Executive Officer regarding the other NEOs, assessing the
need for any modifications to executive compensation
opportunities and overall program design for implementation in
the following year. Final approval of any program or individual
changes typically occurs in the first quarter of the following
year, at or around the same time that our Compensation Committee
is evaluating overall performance for the just-completed year to
determine actual award amounts payable under our incentive-based
plans.
Role
of Executive Officers
Our Compensation Committee, and through it our Board, retains
final authority with respect to our compensation, benefit and
perquisite programs and all actions taken thereunder. However,
as noted above, our Chief Executive Officer recommends to our
Compensation Committee compensation actions for each of the
other NEOs. Our Vice Chairmen evaluate the performance of and
recommend compensation actions for other members of our senior
management team to our Chief Executive Officer. Our Chief
Executive Officer, after making any adjustments he deems
appropriate, presents these recommendations to our Compensation
Committee for consideration and compensation action.
Compensation actions for the rest of our employees are
determined by management, with our Compensation Committee
receiving and approving aggregate statistics (e.g., aggregate
incentive compensation and equity awards) by employee level with
respect to such actions. None of our employees has a role in
determining or recommending the amount or form of non-employee
director compensation.
Delegation
of Authority
Subject to an aggregate limit of 400,000 shares of our
common stock, our Compensation Committee has delegated authority
to our Chief Executive Officer to make equity grants to
employees at or below the level of Senior Vice President. In
accordance with the terms of this delegation of authority, our
Compensation Committee reviews all such awards. If our
Compensation Committee ratifies the awards, the number of shares
so ratified is restored to our Chief Executive Officers
pool of awardable shares. Our Chief Executive Officer uses this
authority to grant performance, promotion, retention and new
hire awards. Our Compensation Committee has retained exclusive
authority for granting equity awards to employees at or above
the level of Senior Vice President, as well as for any of our
Senior Vice Presidents subject to the reporting requirements of
Section 16 of the Exchange Act.
Role
of Executive Compensation Consultant
In 2007, as permitted by its charter, our Compensation Committee
retained the services of a compensation consulting firm, Mercer
(US) Inc.s Executive Remuneration Services group (the
Consultant), to assist our Compensation Committee in reviewing
our compensation strategy and each of our NEOs total
compensation package. At the request of our Compensation
Committee, the Consultant provided input on the competitive
market for executive talent, evolving executive compensation
market practices, program design and regulatory compliance.
Our Compensation Committee determined that there was substantial
overlap between the structuring of our compensation programs by
our Compensation Committee and their implementation and
administration by certain members of management pursuant to the
direction and oversight of our Compensation Committee. Our
Compensation Committee also determined that requiring management
to utilize a separate consultant to assist in such
implementation and administration would result in an inefficient
use of corporate financial resources. Accordingly,
12
our Compensation Committee authorized our management to utilize
the services of the Consultant. However, the Chairman of our
Compensation Committee periodically considers the objectivity of
the Consultant by reviewing the nature of the services rendered,
together with the Consultants fees for such services.
Pursuant to its charter, our Compensation Committee has the sole
authority to retain and terminate any compensation consultant to
be used to assist in the evaluation of executive compensation
and to approve the Consultants fees and retention terms.
Other groups within Mercer (US) Inc. provide consulting services
to management in connection with our medical, prescription and
dental benefit plans, as well as pension consulting services to
management in connection with our qualified and nonqualified
retirement plans. These consulting services include providing
actuarial calculations for incurred but not reported claims for
our voluntary employees beneficiary association and
serving as the actuary for our qualified and nonqualified
defined benefit pension plans.
Executive
Committee
Our Executive Committee, which consists of the Chairman of the
Board, our Lead Director and the Chairmen of our Audit,
Compensation and Governance Committees, is responsible for
overseeing our business, property and affairs during the
intervals between the meetings of our Board, if necessary. Our
Executive Committee met three times during 2007.
Finance
Committee
Our Finance Committee oversees and regularly reviews the
purchase and sale of securities in our investment portfolio. In
2007, our Finance Committee met four times.
Governance
Committee
Our Governance Committee assists our Board in identifying
individuals qualified to become members of our Board and
oversees the annual evaluation of our Board and each committee.
As provided in its charter, our Governance Committee also makes
recommendations to our Board on a variety of corporate
governance and nominating matters, including recommending
standards of independence, director nominees, appointments to
committees of our Board, designees for chairmen of each of our
Board committees, non-employee director compensation and
corporate governance guidelines. In 2007, our Governance
Committee met eight times.
Pension &
Profit Sharing Committee
Our Pension & Profit Sharing Committee oversees and
regularly reviews our retirement and profit sharing plans. In
2007, our Pension & Profit Sharing Committee met three
times.
Compensation
Committee Interlocks and Insider Participation
During our 2007 fiscal year, each of Sheila P. Burke,
Martin G. McGuinn, Lawrence M. Small, Daniel E.
Somers, Karen Hastie Williams and Alfred W. Zollar served
on our Compensation Committee. None of these individuals has at
any time been an officer or employee of Chubb. During our 2007
fiscal year, none of our executive officers served as a member
of the board of directors or compensation committee of any
entity for which a member of our Board or Compensation Committee
served as an executive officer.
Directors
Compensation
Our Governance Committee, with the assistance of our
Compensation Committee, is responsible for establishing and
overseeing non-employee director compensation. The Compensation
and Governance Committees consult periodically with the
Consultant to evaluate and, if appropriate, adjust non-employee
director compensation. To benchmark the competitiveness of our
non-employee director compensation, the Compensation and
Governance Committees utilize the same peer group of companies
described below under the heading Compensation Discussion
and AnalysisSetting of Executive Compensation.
Consistent with our compensation philosophy for our NEOs, our
non-employee director compensation program is designed to target
total non-employee director compensation in the second quartile
of the compensation paid to non-employee directors in this peer
group.
13
Director
Compensation Table
The following table sets forth the compensation we paid to our
non-employee directors in 2007:
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Change
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in Pension
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Value and
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Fees
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Non-Equity
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Nonqualified
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Earned
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Incentive
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Deferred
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or Paid
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Stock
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Option
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Plan
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Compensation
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name(1)
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($)
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($)(2)
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($)(3)
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($)
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($)
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($)(4)
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($)
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Zoë Baird
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$
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115,000
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$
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94,056
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$
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9,603
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$
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218,659
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Sheila P. Burke
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114,500
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94,056
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208,556
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James I. Cash, Jr.
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110,000
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94,056
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204,056
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Joel J. Cohen
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189,000
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94,056
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283,056
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Klaus J. Mangold
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93,000
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94,056
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187,056
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Martin G.
McGuinn(5)
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59,917
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86,420
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(5)
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146,337
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David G. Scholey
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95,000
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|
94,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,056
|
|
Raymond G.H.
Seitz(6)
|
|
|
31,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,667
|
|
Lawrence M. Small
|
|
|
91,500
|
|
|
|
94,056
|
|
|
$
|
289,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474,618
|
|
Jess
Søderberg(7)
|
|
|
29,667
|
|
|
|
62,157
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,824
|
|
Daniel E. Somers
|
|
|
128,000
|
|
|
|
94,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,395
|
|
|
|
229,451
|
|
Karen Hastie Williams
|
|
|
109,000
|
|
|
|
94,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,603
|
|
|
|
212,659
|
|
Alfred W. Zollar
|
|
|
114,500
|
|
|
|
94,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,556
|
|
|
|
|
(1) |
|
Compensation for Mr. Finnegan is not included in this table
because he does not receive compensation for services that he
renders as a member of our Board. Information regarding
Mr. Finnegans compensation is set forth below under
the headings Compensation Discussion and Analysis
and Executive Compensation. |
|
(2) |
|
Pursuant to The Chubb Corporation Long-Term Stock Incentive Plan
for Non-Employee Directors (2004) (the 2004 Director Plan),
on April 24, 2007, each non-employee director other than
Messrs. McGuinn and Søderberg received a target award
of 1,239 performance shares valued at $57.75 per share. These
awards vested immediately upon grant. Accordingly, the grant
date fair value of each of these awards, calculated in
accordance with Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 123 (revised 2004)
Share Based Payment (FAS 123R), is the same as the
amount of compensation expense we reflected in our financial
statements with respect to each of these awards ($71,552 per
non-employee director). The grant date fair value of each of
these awards is estimated based on the fair market value of our
common stock on the date of grant adjusted to reflect (i) the
anticipated appreciation of our common stock over the
performance period and (ii) that these awards do not receive
dividend equivalents during the performance period. In addition,
on April 24, 2007, each non-employee director other than
Messrs. McGuinn and Søderberg received stock units
representing the right to receive 413 shares of our common
stock valued at $54.49 per share. These awards vested
immediately upon grant. Accordingly, the grant date fair value
of each of these awards, calculated in accordance with
FAS 123R, is the same as the amount of compensation expense
we reflected in our financial statements with respect to each of
these awards ($22,504 per non-employee director). The grant date
fair value of each of these awards is estimated based on the
fair market value of our common stock on the date of grant. |
14
|
|
|
|
|
Including the 2007 stock unit and performance share awards
described in the preceding paragraph, as of December 31,
2007, each non-employee director other than Messrs. McGuinn
and Søderberg had three outstanding stock unit awards and
two outstanding performance share awards. The following table
sets forth these awards for each non-employee director other
than Messrs. McGuinn and Søderberg as of
December 31, 2007: |
|
|
|
|
|
|
|
|
|
Grant Date
|
|
Stock
Units(a)
|
|
|
Performance
Shares(a)(b)
|
|
|
April 26, 2005
|
|
|
574
|
|
|
|
|
|
April 25, 2006
|
|
|
445
|
|
|
|
1,333
|
|
April 24, 2007
|
|
|
413
|
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,432
|
|
|
|
2,572
|
|
|
|
|
(a) |
|
Each stock unit and each performance share has the equivalent
value of one share of our common stock. |
|
(b) |
|
Represents target award. Actual payout may range from 0% to 200%
of target. Additional information regarding non-employee
director performance shares is set forth under the heading
Directors CompensationStock Awards.
Excludes the April 26, 2005 performance share awards that
were earned as of December 31, 2007. The actual payment of
these awards was made on February 6, 2008, with each
non-employee director other than Messrs. McGuinn and
Søderberg receiving, or being entitled to receive,
2,352 shares of our common stock. |
|
|
|
(3) |
|
Represents a restoration stock option award to purchase shares
of our common stock acquired upon exercise of the original stock
option grant pursuant to a predecessor plan to the
2004 Director Plan. This award vested immediately upon
grant. Accordingly, the grant date fair value of this award,
calculated in accordance with FAS 123R, is the same as the
amount of compensation expense we reflected in our financial
statements with respect to this award ($289,062). The fair value
of this award was estimated on the grant date using the
Black-Scholes option pricing model. |
|
|
|
|
|
The following table sets forth the option awards outstanding for
each non-employee director at December 31, 2007: |
|
|
|
|
|
|
|
Aggregate Number of
|
|
|
|
Shares Subject to
|
|
Name
|
|
Option
Awards(a)
|
|
|
Zoë Baird
|
|
|
40,000
|
|
Sheila P. Burke
|
|
|
56,000
|
|
James I. Cash, Jr.
|
|
|
8,000
|
|
Joel J. Cohen
|
|
|
111,371
|
|
Klaus J. Mangold
|
|
|
16,000
|
|
Martin G. McGuinn
|
|
|
|
|
David G. Scholey
|
|
|
48,000
|
|
Lawrence M. Small
|
|
|
41,943
|
(b)
|
Jess Søderberg
|
|
|
|
|
Daniel E. Somers
|
|
|
2,000
|
|
Karen Hastie Williams
|
|
|
24,000
|
|
Alfred W. Zollar
|
|
|
14,400
|
|
|
|
|
(a) |
|
All outstanding options are fully vested. |
|
(b) |
|
Includes the 2007 restoration stock option award to purchase
17,943 shares of our common stock, the dollar value of
which is reflected in the Option Awards column of
the Director Compensation Table set forth under the heading
Corporate GovernanceDirectors
Compensation. |
|
|
|
(4) |
|
Represents premiums paid in 2007 for life insurance policies
through which we will fund three of our non-employee
directors charitable contributions under the
Directors Charitable Award Program. See below under
Directors CompensationAll Other
Compensation. At December 31, 2007, five of our other
non-employee |
15
|
|
|
|
|
directors also participated in this program. However, the life
insurance premiums relating to their participation in the
Directors Charitable Award Program were fully paid prior
to 2007. |
|
(5) |
|
Mr. McGuinn was elected to our Board on June 8, 2007.
During 2007, Mr. McGuinn received
pro-rated
Board and committee retainers and meeting fees in the aggregate
amount of $59,917 and, on the date of his election, an equity
grant of 1,157 performance shares valued at $56.93 per share and
stock units representing the right to receive 384 shares of
our common stock valued at $53.52 per share. These awards have
the same general terms as those described in footnote (2) above.
The performance share award vested immediately upon grant.
Accordingly, the grant date fair value of this award, calculated
in accordance with FAS 123R, is the same as the amount of
compensation expense we reflected in our financial statements
with respect to this award ($65,868). The grant date fair value
of this award is estimated based on the fair market value of our
common stock on the date of grant adjusted to reflect the
anticipated appreciation of our common stock over the
performance period and to reflect that this award does not
receive dividend equivalents during the performance period. The
stock unit award vested immediately upon grant. Accordingly, the
grant date fair value of this award, calculated in accordance
with FAS 123R, is the same as the amount of compensation
expense we reflected in our financial statements with respect to
this award ($20,552). The grant date fair value of this award is
estimated based on the fair market value of our common stock on
the date of grant. Additional information regarding non-employee
director cash compensation is set forth under the heading
Directors CompensationFees Earned or Paid in
Cash and addition information regarding non-employee
director equity compensation is set forth under the heading
Directors CompensationStock Awards. |
|
(6) |
|
Mr. Seitz retired from our Board effective as of
April 24, 2007. |
|
(7) |
|
Mr. Søderberg was elected to our Board on
September 6, 2007. During 2007, Mr. Søderberg
received pro-rated Board and committee retainers and meeting
fees in the aggregate amount of $29,667 and, on the date of his
election, an equity grant of 885 performance shares valued at
$53.30 per share and stock units representing the right to
receive 295 shares of our common stock valued at $50.80 per
share. These awards have the same general terms as those
described in footnote (2) above. The performance share
award vested immediately upon grant. Accordingly, the grant date
fair value of this award, calculated in accordance with
FAS 123R, is the same as the amount of compensation expense
we reflected in our financial statements with respect to this
award ($47,171). The grant date fair value of this award is
estimated based on the fair market value of our common stock on
the date of grant adjusted to reflect the anticipated
appreciation of our common stock over the performance period and
to reflect that this award does not receive dividend equivalents
during the performance period. Accordingly, the grant date fair
value of this award, calculated in accordance with
FAS 123R, is the same as the amount of compensation expense
we reflected in our financial statements with respect to this
award ($14,986). The grant date fair value of this award is
estimated based on the fair market value of our common stock on
the date of grant. Additional information regarding non-employee
director cash compensation is set forth under the heading
Directors CompensationFees Earned or Paid in
Cash and addition information regarding non-employee
director equity compensation is set forth under the heading
Directors CompensationStock Awards. |
16
Fees
Earned or Paid in Cash
The following table summarizes the cash components of our 2007
non-employee director compensation program:
|
|
|
|
|
Item
|
|
Amount
|
|
|
Annual Director Retainer
|
|
$
|
50,000
|
|
Lead Director Annual Supplemental Retainer
|
|
|
50,000
|
|
Audit Committee Chairman Retainer
|
|
|
20,000
|
|
Audit Committee Member Retainer
|
|
|
7,500
|
|
Compensation Committee Chairman Retainer
|
|
|
15,000
|
|
Compensation Committee Member Retainer
|
|
|
7,500
|
|
Executive Committee Retainer
|
|
|
7,500
|
|
Finance Committee Member Retainer
|
|
|
7,500
|
|
Governance Committee Chairman Retainer
|
|
|
12,500
|
|
Governance Committee Member Retainer
|
|
|
7,500
|
|
Pension & Profit Sharing Committee Member Retainer
|
|
|
7,500
|
|
Board Meeting Fee
|
|
|
2,000
|
|
Committee Meeting Fee
|
|
|
2,000
|
|
Stock
Awards
Background. The
2004 Director Plan is administered by our Governance
Committee with the assistance of our Compensation Committee.
Subject to adjustment upon the occurrence of certain events
described below, a maximum of 500,000 shares of our common
stock may be issued under the 2004 Director Plan.
Pursuant to the 2004 Director Plan, each non-employee
director receives an annual equity grant valued at approximately
$90,000 (or such higher amount as our Governance Committee may
determine, not to exceed the value of 3,000 shares of our
common stock). Each annual award consists of performance shares
and stock units, with performance shares comprising 75% of the
award and stock units comprising the remaining 25% of the award.
The 2004 Director Plan also authorizes our Governance
Committee to make grants to non-employee directors in addition
to the annual grants described in the preceding paragraph. We
anticipate that discretionary grants will be made only to
address special circumstances, such as when a director is
elected to our Board mid-term or when one or more non-employee
directors are called upon to provide services to us above and
beyond those services required of non-employee directors
generally. In 2007, the Governance Committee exercised this
discretionary authority in making grants to Mr. McGuinn,
who was elected to our Board in June 2007, and
Mr. Søderberg, who was elected to our Board in
September 2007.
2007 Stock Awards. Following
our 2007 Annual Meeting of Shareholders on April 24, 2007,
each of our non-employee directors other than
Messrs. McGuinn and Søderberg received an equity grant
of 1,239 performance shares and stock units representing the
right to receive 413 shares of our common stock.
Mr. McGuinn was elected to our Board on June 8, 2007
and received an equity grant of 1,157 performance shares and
stock units representing the right to receive 384 shares of
our common stock on that date. Mr. Søderberg was
elected to our Board on September 6, 2007 and received an
equity grant of 885 performance shares and stock units
representing the right to receive 295 shares of our common
stock on that date.
As with performance shares awarded to our NEOs under the 2004
Employee Plan described under the heading Compensation
Discussion and AnalysisComponents of Executive
Compensation, the actual number of shares payable to each
of our non-employee directors can vary from 0% to 200% of the
original target performance share award based on our total
shareholder return relative to total shareholder returns over a
three-year performance period for the other companies in the
S&P 500 Index. For information regarding the actual number
of performance shares that a non-employee director can earn over
the performance period, see the table set forth under the
heading
17
Compensation Discussion and AnalysisComponents of
Executive Compensation. The performance period for all
performance shares granted to our non-employee directors in 2007
commenced on January 1, 2007 and ends on December 31,
2009. The ultimate value of the performance share awards also
will depend on the value of our common stock at the end of the
performance period. Unlike the performance shares awarded to our
NEOs, non-employee directors vested immediately in their
performance share awards. Accordingly, a non-employee director
whose service as a member of our Board terminates during a
performance period will be entitled to receive the same payment
in respect of performance shares without proration that would
have been payable had his or her service continued until the end
of the applicable performance period. Any amount payable to a
former non-employee director generally would be paid at the same
time as amounts in respect of similar awards are paid to other
participants in the 2004 Director Plan. However, if a
non-employee director is removed from our Board for cause (or
resigns in anticipation of such removal), the non-employee
director will forfeit all rights to receive any payment in
respect of his or her outstanding performance shares.
The stock units vested immediately upon grant and will settle at
the earlier of the third anniversary of the grant date or
termination of the recipients Board service. However, if a
non-employee director is removed from our Board for cause (or
resigns in anticipation of such removal), the non-employee
director will forfeit all rights to receive any payment in
respect of his or her outstanding stock units.
Option
Awards
Since the adoption of the 2004 Director Plan, the practice
of our Governance Committee has been to refrain from granting
stock options to non-employee directors. The stock options
granted to Mr. Small in 2007 were not granted on a
discretionary basis, but rather pursuant to a restoration stock
option feature that was included in the terms of stock options
granted under predecessor plans to the 2004 Director Plan.
The restoration stock option feature provides for an automatic
grant of a new stock option if, upon exercise of the original
stock option, shares are exchanged in a stock-for-stock
exercise. The restoration stock option feature only applies if
the original stock option is exercised within seven years of the
grant date and if the fair value market of our common stock on
the date of exercise is at least 25% higher than the exercise
price of the original stock option. The grant date of the
restoration stock option is the date of exercise of the original
option and the exercise price is the average of the high and low
prices of our common stock on the date that the original option
is exercised.
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
Cash Compensation. Under the
Director Deferred Compensation Program, non-employee directors
may defer receipt of all or a portion of their cash
compensation. Amounts of deferred compensation are payable at
the option of the non-employee director either upon the
non-employee directors termination of service or at a
specified date chosen by the non-employee director at the time
the deferral election is made. The Director Deferred
Compensation Program provides that amounts deferred may be
invested in:
|
|
|
|
|
an interest bearing account;
|
|
|
|
a market value account; or
|
|
|
|
a shareholders equity account.
|
A non-employee director participating in the Director Deferred
Compensation Program may elect to receive the compensation
deferred in either a lump sum or in annual installments. All
amounts are paid in cash, except for the market value accounts
which we pay in shares of our common stock. Deferred
compensation represents an unsecured obligation payable out of
our general corporate assets.
Cash Accounts. Interest
bearing accounts (cash accounts) bear interest at the lesser of
120% of the applicable long-term federal interest rate and
Citibank, N.A.s prime rate in effect on the first day of
each January, April, July and October during the deferral
period. At December 31, 2007, we maintained cash accounts
for three non-employee directors, two of whom deferred 2007
compensation into a cash account pursuant to the Director
Deferred Compensation Program.
18
Market Value
Accounts. Market value accounts, which are
denominated in units with one unit having the equivalent value
of one share of our common stock, track the value of shares of
our common stock. On each date compensation otherwise would have
been paid in accordance with our normal practice (the credit
date), non-employee directors deferring cash compensation into
market value accounts are credited with the number of market
value units equal to the quotient of:
|
|
|
|
|
the amount of compensation deferred by the non-employee
director, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
credit date or on the trading day preceding the credit date if
the credit date is not a trading day.
|
When we pay cash dividends on our common stock, the market value
account of each participating non-employee director is credited
with the number of market value units equal to:
|
|
|
|
|
the product of (i) the amount of the dividend per share,
multiplied by (ii) the number of units in the non-employee
directors market value account on the dividend payment
date, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
dividend payment date or on the trading day preceding the
dividend payment date if the dividend payment date is not a
trading day.
|
At December 31, 2007, we maintained market value accounts
for nine non-employee directors, six of whom deferred 2007
compensation into a market value account pursuant to the
Director Deferred Compensation Program.
Shareholders Equity
Accounts. Shareholders equity accounts,
which are denominated in units, track the book value per share
of our common stock. On each date compensation otherwise would
have been paid in accordance with our normal practice,
non-employee directors deferring cash compensation into
shareholders equity accounts are credited with the number
of shareholders equity units equal to the quotient of:
|
|
|
|
|
the amount of compensation deferred by the non-employee
director, divided by
|
|
|
|
the shareholders equity per share as reported in our
annual report to shareholders for the immediately preceding year.
|
When we pay cash dividends on our common stock, the
shareholders equity account of each participating
non-employee director is credited with the number of
shareholders equity units equal to:
|
|
|
|
|
the product of (i) the amount of the dividend per share,
multiplied by (ii) the number of units in the non-employee
directors shareholders equity account on the
dividend payment date, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
dividend payment date or on the trading day preceding the
dividend payment date if the dividend payment date is not a
trading day.
|
At December 31, 2007, we did not maintain
shareholders equity accounts for any of our non-employee
directors.
Equity Compensation. We
offer non-employee directors the option of deferring receipt of
all or a portion of their equity compensation. Amounts of
voluntarily deferred equity are payable at the option of the
non-employee director either upon the non-employee
directors termination of service or at a specified date
chosen by the non-employee director at the time the deferral
election is made. Non-employee directors receive current payment
of dividend equivalents on their deferred equity. We declare and
pay dividend equivalents on equity held in director deferral
accounts at the same rate and at the same time as we declare and
pay dividends on our common stock generally. At
December 31, 2007, we maintained deferred equity accounts
for 10 non-employee directors, seven of whom deferred 2007
equity compensation.
All
Other Compensation
Directors Charitable Award
Program. Effective January 1, 1992, we
established the Directors Charitable Award Program. Under
this program, each non-employee director, following his or her
first election to our Board by our shareholders, may request
that we direct one or more charitable contributions totaling up
to $500,000 to eligible
19
tax exempt organizations. We have elected to fund the
Directors Charitable Award Program through the proceeds of
second-to-die life insurance policies that we have
purchased on the lives of the participating non-employee
directors. We are the owner and beneficiary of these policies.
Non-employee directors have no rights in these policies or the
benefits thereunder.
Under the terms of these policies, participating non-employee
directors are paired and, upon the death of the second paired
non-employee director, we use the proceeds of these policies to
fund the contributions to the organizations selected by the
non-employee directors. At December 31, 2007, eight
non-employee directors were participating in the program. For
five of these non-employee directors, we paid the full premium
on the life insurance policies through which we fund the program
prior to 2007. For the remaining three non-employee directors
who were participating in this program as of December 31,
2007, the premiums paid in 2007, which also are reflected in the
All Other Compensation column of the Director
Compensation Table set forth under the heading Corporate
GovernanceDirectors Compensation, are as
follows:
|
|
|
|
|
Name
|
|
Amount
|
|
|
Zoë Baird
|
|
$
|
9,603
|
|
Daniel E. Somers
|
|
|
7,395
|
|
Karen Hastie Williams
|
|
|
9,603
|
|
As described in Directors CompensationChanges
in Director Compensation Policies for 2008, our Board
voted to make changes to the Directors Charitable Award
Program in March 2008. In addition, we may further amend or
terminate the Directors Charitable Award Program at our
election at any time. Participating non-employee directors are
entitled to change their designated charities at any time.
Changes
in Director Compensation Policies for 2008
In March 2008, after a comprehensive review of our non-employee
director compensation program by the Compensation and Governance
Committees, with the assistance of the Consultant, our Board
voted to make the following changes:
|
|
|
|
|
to increase the annual non-employee director retainer by $10,000
to $60,000;
|
|
|
|
to increase the value of the annual non-employee director equity
award by $10,000 to $100,000; and
|
|
|
|
to close the Directors Charitable Award Program to future
participants, with currently eligible participants under the
Directors Charitable Award Program being grandfathered).
|
20
OUR BOARD
OF DIRECTORS
Our Board oversees our business operations, assets, affairs and
performance. In accordance with our long-standing practice, each
of our directors other than our Chief Executive Officer is
independent. Our Corporate Governance Guidelines provide that no
director may be nominated to a new term if the director would be
age 72 or older at the time of election.
The name, age, length of service on our Board and principal
occupation of each director nominee, together with certain other
biographical information, are set forth below. Unless otherwise
indicated, each nominee has served for at least five years in
the business position currently or most recently held. The age
of each director is as of April 29, 2008, the date of the
2008 Annual Meeting.
|
|
|
|
|
ZOË BAIRD (Age 55)
Director since 1998
Zoë Baird is President of the Markle Foundation, a
private philanthropy that focuses on using information and
communications technologies to address critical public needs,
particularly in the areas of health care and national security.
Ms. Bairds career spans business, government and academia.
She has been Senior Vice President and General Counsel of Aetna,
Inc., a senior visiting scholar at Yale Law School, counselor
and staff executive at General Electric Co., and a partner in
the law firm of OMelveny and Myers. She was Associate
General Counsel to President Jimmy Carter and an attorney in the
Office of Legal Counsel of the Department of Justice. She served
on President Clintons Foreign Intelligence Advisory Board
from 1993 - 2001 and on the International Competition
Policy Advisory Committee to the Attorney General.
Ms. Baird served on the Technology & Privacy
Advisory Committee to the Secretary of Defense in
2003 - 2004, which advised on the use of technology to
counter terrorism. She is on a number of non-profit and
corporate boards, including the Convergys Corporation, Boston
Properties, and Brookings Institution, among others.
|
|
|
|
|
|
SHEILA P. BURKE (Age 56)
Director since 1997
Faculty Research Fellow, Malcolm Wiener Center for Social
Policy, Member of Faculty, J.F. Kennedy School of
Government, Harvard University. From 2004 - 2007 Deputy
Secretary and Chief Operating Officer, Smithsonian Institution.
Ms. Burke previously was Under Secretary for American
Museums and National Programs, Smithsonian Institution, from
June 2000 to December 2003 and Executive Dean and Lecturer in
Public Policy of the John F. Kennedy School of Government,
Harvard University, from November 1996 until June 2000.
Ms. Burke also serves on the boards of Wellpoint Inc., the
Kaiser Commission on the Future of Medicaid and Uninsured, the
Georgetown University School of Nursing and Health Studies and
the Partnership for Public Service. Ms. Burke also serves as
Chair of the Kaiser Family Foundation.
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JAMES I. CASH, JR. (Age 60)
Director since 1996
The James E. Robison Emeritus Professor of Business
Administration, Harvard University. Dr. Cash was a member
of the Harvard Business School faculty from July 1976 to October
2003. He also serves on the boards of General Electric Company,
Microsoft Corporation,
Wal-Mart and
Phase Forward Inc. Dr. Cash also serves on the boards of
the National Association of Basketball Coaches Foundation and
the Bert King Foundation.
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JOEL J. COHEN (Age 70)
Director since 1984
Chairman and Co-Chief Executive Officer of Sagent Advisors
Inc., a financial advisory firm, since September 2003.
Mr. Cohen has been Lead Director of Chubbs Board
since December 2003 and was Chairman of the Board
(non-executive) from December 2002 to December 2003.
Mr. Cohen previously was Managing Director and co-head of
Global Mergers and Acquisitions at Donaldson, Lufkin &
Jenrette Securities Corporation (DLJ), a leading investment and
merchant bank, until his retirement in November 2000. He had
been associated with DLJ since October 1989. He had previously
served as General Counsel to the Presidential Task Force on
Market Mechanisms and as a partner of the law firm Davis
Polk & Wardwell. Mr. Cohen also serves on the
boards of Borders Group, Inc. and Maersk, Inc.
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JOHN D. FINNEGAN (Age 59)
Director since 2002
President and Chief Executive Officer of The Chubb
Corporation since December 2002 and Chairman since December
2003. Mr. Finnegan previously had been Executive Vice
President of General Motors Corporation, which is primarily
engaged in the development, manufacture and sale of automotive
vehicles, and Chairman and President of General Motors
Acceptance Corporation, a finance company and subsidiary of
General Motors Corporation, from May 1999 to December 2002. He
was Vice President and Group Executive of General Motors and
also President of General Motors Acceptance Corporation from
November 1997 to April 1999. Mr. Finnegan was associated
with General Motors Corporation from 1976 to December 2002.
Mr. Finnegan also serves on the Board of Directors of
Merrill Lynch & Co., Inc.
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KLAUS J. MANGOLD (Age 64)
Director since 2001
Chairman of the Supervisory Board of Rothschild & Cie,
Frankfurt and Vice Chairman of Rothschild & Cie,
London/Paris. Dr. Mangold previously served as a member of
the Board of Management of DaimlerChrysler AG and as
Chairman of the Board of Management of DaimlerChrysler
Services AG, a provider of financial services and a
subsidiary of DaimlerChrysler AG, until December 2003.
Daimler AG is primarily engaged in the development, manufacture,
distribution, sale and financing of a wide range of automotive
products. Dr. Mangold also serves on the Boards of
Metro AG, Magna International Inc., Canada and Alstom S.A.,
Paris.
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MARTIN G. McGUINN (Age 65)
Director since 2007
Chairman and Chief Executive Officer of Mellon Financial
Corporation from January 1999 until February 2006.
Mr. McGuinn held a number of positions during his
25 years at Mellon. Mr. McGuinn recently concluded a
one-year term as Chairman of the Financial Services Roundtable.
He served as the 2005 President of the Federal Reserve
Boards Advisory Council. Mr. McGuinn serves on the
Board of Celanese Corporation and is a member of the Advisory
Board of CapGen Financial. Mr. McGuinn also serves on
several nonprofit boards, including the Carnegie Museums of
Pittsburgh and the University of Pittsburgh Medical Center.
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LAWRENCE M. SMALL (Age 66)
Director since 1989
Former Secretary of the Smithsonian Institution, a position
he held from January 2000 until March 2007. The Smithsonian
Institution is the worlds largest museum and research
complex, with 19 museums and galleries, the National Zoo,
and several research facilities around the world.
Mr. Small previously had been President and Chief Operating
Officer of Fannie Mae, a shareholder-owned, New York Stock
Exchange listed company and the nations largest source of
financing for home mortgages, from 1991 to 2000. Mr. Small
also serves on the boards of Marriott International, Inc. and
New York Citys Spanish Repertory Theatre.
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JESS SØDERBERG (Age 63)
Director since 2007
Retired from A.P. Moller-Maersk in November 2007.
Mr. Søderberg was Partner and Group CEO of A.P.
Moller-Maersk since 1994. He joined the company after
graduating with an MBA from the Copenhagen Business School in
1969, and has since held a number of senior financial positions
in both the USA and Denmark. Mr. Søderberg was a
member of JP Morgan Chases International Council until
recently, is a member of Danske Banks Advisory Board and
he is honored as a
Knight 1st
Degree of the Order of Dannebrog and the Chilean Order of
Bernardo OHiggins.
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DANIEL E. SOMERS (Age 60)
Director since 2003
Vice Chairman of Blaylock and Partners LP, an investment
banking firm, from January 2002 until September 2007. Mr. Somers
previously had been President and Chief Executive Officer of
AT&T Broadband, a provider of cable and broadband services,
from December 1999 to October 2001 and Senior Executive Vice
President and Chief Financial Officer at AT&T Corp., a
telecommunications company, from May 1997 to December 1999. Mr.
Somers served on the board of The Lubrizol Corporation until
February 2007. He is also Vice Chairman of the Board of Trustees
of Stonehill College.
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KAREN HASTIE WILLIAMS (Age 63)
Director since 2000
Partner, Crowell & Moring LLP, attorneys, from 1982
until her retirement in January 2005. Ms. Williams also serves
on the boards of Continental Airlines Inc., Gannett Company,
Inc., SunTrust Banks, Inc. and Washington Gas Light Holdings,
Inc. She is also a Trustee of Amherst College, the Black Student
Fund and the NAACP Legal Defense and Education Fund.
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ALFRED W. ZOLLAR (Age 53)
Director since 2001
General Manager, Tivoli Software, IBM Corporation, which
manufactures and sells computer services, hardware and software,
since July 2004. Mr. Zollar previously had been General
Manager, eServer iSeries, IBM Corporation, from January 2003 to
July 2004; General Manager, Lotus Software, which designs and
develops business software and was a subsidiary of IBM
Corporation, from January 2000 to January 2003; General Manager,
Network Computing Software Division, IBM Corporation from 1998
to 2000 and General Manager, Network Software, IBM Corporation,
from 1996 to 1998. Mr. Zollar also serves on the board of
the Executive Leadership Council.
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23
COMMITTEE
ASSIGNMENTS
Our Board has established the six committees described above
under the headings Corporate GovernanceAudit
Committee, Compensation Committee,
Executive Committee, Finance
Committee, Governance Committee and
Pension & Profit Sharing Committee
to assist our Board in fulfilling its responsibilities. The
charter for each of our Audit, Compensation and Governance
Committees, which are available on our website at
www.chubb.com/investors, requires that all members
satisfy the independence requirements of the NYSE. Our
Governance Committee annually considers committee assignments,
with appointments being effective as of the date of the annual
meeting of shareholders. Current members of our committees are
identified below:
Audit Committee
Joel J. Cohen (Chair)
Zoë Baird
Martin G. McGuinn
Daniel E. Somers
Alfred W. Zollar
Compensation Committee
Daniel E. Somers (Chair)
Sheila P. Burke
Martin G. McGuinn
Karen Hastie Williams
Alfred W. Zollar
Executive Committee
John D. Finnegan (Chair)
James I. Cash, Jr.
Joel J. Cohen
Daniel E. Somers
Finance Committee
John D. Finnegan (Chair)
Sheila P. Burke
Klaus J. Mangold
David G. Scholey
Jess Søderberg
Governance Committee
James I. Cash, Jr. (Chair)
Zoë Baird
Joel J. Cohen
Lawrence M. Small
Karen Hastie Williams
Pension & Profit Sharing Committee
Sheila P. Burke
Klaus J. Mangold
David G. Scholey
Jess Søderberg
24
AUDIT
COMMITTEE REPORT
Purpose
Our Board has formed our Audit Committee to assist our Board in
monitoring:
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the integrity of our financial statements;
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our compliance with legal and regulatory requirements;
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the independence and qualifications of our independent auditor;
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the performance of our internal auditors and independent
auditor; and
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other significant financial matters.
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Composition
and Meetings
At December 31, 2007, our Audit Committee was comprised of
five directors, each of whom our Board determined to be
independent and each of whom satisfied the applicable legal and
regulatory independence requirements. Mr. Cohen served as
the Chairman of our Audit Committee during 2007 and our Board
designated him, together with Mr. Somers, as the audit
committee financial experts. Information regarding the
respective experience of Messrs. Cohen and Somers is set
forth under the heading Our Board of Directors.
Our Governance Committee and the full Board consider Audit
Committee membership annually. Committee appointments are
effective as of the date of the annual meeting of shareholders.
In addition to Messrs. Cohen and Somers, Ms. Baird and
Messrs. McGuinn and Zollar currently serve on our Audit
Committee. Our Audit Committee met eight times during 2007.
Charter
and Self-Assessment
Our Audit Committee operates pursuant to its written charter,
which is available on our website at
www.chubb.com/investors. The Audit Committee Charter has
been approved by our Audit Committee and our Board and it is
subject to review at least annually. It was last revised in
February 2006.
Pursuant to its charter, our Audit Committee performs an annual
self-assessment. For 2007, our Audit Committee concluded that,
in all material respects, it had fulfilled its responsibilities
and satisfied the requirements of its charter and applicable
laws and regulations.
Appointment
of Independent Auditor
Under its charter, our Audit Committee, among other things, is
directly responsible for the appointment, compensation,
retention and oversight of the work of the independent auditor
engaged for the purpose of preparing or issuing an audit report
or related work or performing other audit, review or attest
services for us. Our Audit Committee has appointed
Ernst & Young LLP to serve as independent auditor. Our
Audit Committee has recommended to our Board that
Ernst & Youngs appointment as independent
auditor be submitted for ratification by our shareholders. This
matter is described under the heading
Proposal 2Ratification of Appointment of
Independent Auditor.
Review of
Financial Information
Management is responsible for our internal controls over the
financial reporting process and the independent auditor is
responsible for performing an independent audit of our
consolidated financial statements in accordance with generally
accepted auditing standards and for issuing a report on its
audit. Our Audit Committee is charged with overseeing and
monitoring these activities on behalf of our Board. During 2007
and the first quarter of 2008, our Audit Committee reviewed and
discussed with management and the independent auditor our
quarterly financial statements and our audited consolidated
financial statements for the year ended December 31, 2007.
Our Audit Committee discussed with the independent auditor the
matters required to be discussed by the statement on
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Auditing Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1. AU section 380), as adopted by the
Public Company Accounting Oversight Board in Rule 3200T.
Auditor
Independence
The Audit Committee has received the written disclosures and the
letter from the independent accountant required by Independence
Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees), as adopted by the Public Company Accounting
Oversight Board in Rule 3600T, and has discussed with the
independent accountant the independent accountants
independence.
Inclusion
of Consolidated Financial Statements in
Form 10-K
Based on the foregoing, our Audit Committee recommended to our
Board that the audited consolidated financial statements be
included in our Annual Report on
Form 10-K
for the year ended December 31, 2007 filed with the SEC.
The foregoing report has been furnished by the following members
of our Board who comprise our Audit Committee:
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Joel J. Cohen (Chair)
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Daniel E. Somers
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Zoë Baird
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Alfred W. Zollar
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Martin G. McGuinn
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This Audit Committee Report shall not be deemed to be
soliciting material, to be filed with
the SEC, subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that we specifically request that the information be
treated as soliciting material, nor shall it be incorporated by
reference into any document filed under the Securities Act of
1933, as amended (Securities Act), or the Exchange Act unless we
specifically incorporate it by reference.
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COMPENSATION
COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis included
under the heading Compensation Discussion and
Analysis pursuant to Item 402(b) of SEC
Regulation S-K.
Based upon the review and discussion described in the preceding
paragraph, our Compensation Committee recommended to our Board
that the Compensation Discussion and Analysis be
included in our proxy statement on Schedule 14A prepared in
connection with the 2008 Annual Meeting and that the
Compensation Discussion and Analysis be incorporated
by reference into our Annual Report on
Form 10-K
for the year ended December 31, 2007.
The foregoing report has been furnished by the following members
of our Board who comprise our Compensation Committee:
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Daniel E. Somers (Chair)
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Karen Hastie Williams
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Sheila P. Burke
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Alfred W. Zollar
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Martin G. McGuinn
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This Compensation Committee Report shall not be deemed to be
soliciting material, to be filed with
the SEC, subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that we specifically request that the information be
treated as soliciting material, nor shall it be incorporated by
reference into any document filed under the Securities Act or
the Exchange Act unless we specifically incorporate it by
reference.
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COMPENSATION
DISCUSSION AND ANALYSIS
Overall
Executive Compensation Philosophy and Objectives
The property and casualty insurance industry is comprised of
hundreds of companies vying for part of the multibillion-dollar
market for personal, commercial and specialty lines of insurance
coverage. Within this competitive environment, we are considered
to be one of the worlds preeminent insurers, offering
extensive business and personal insurance solutions globally. We
distinguish ourselves with an approach that focuses on providing
premier customer service, quality underwriting and highly
disciplined cost management. It is imperative to our success and
long-term viability that our business continues to be managed by
highly experienced, focused and capable executives who possess
the dedication to oversee our global organization on a
day-to-day basis and the vision to anticipate and respond to
market developments. It is also important that we concentrate on
retaining and developing the capabilities of our emerging
leaders to ensure that we continue to have an appropriate depth
of executive talent.
Our executive compensation program is intended to attract,
reward and retain a management team with the collective and
individual abilities that fit our profile described above. With
this philosophy in mind, our executive compensation program is
intended to motivate our employees to achieve the following
objectives:
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enhance our market reputation as a provider of the highest
quality customer service;
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attain financial performance, in both the short- and long-term,
superior to our peers in the property and casualty insurance
industry;
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take accountability for the performance of the business units
and functions for which they are responsible; and
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make decisions about our business that will maximize long-term
shareholder value.
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As discussed more fully below, a substantial portion of an
executives compensation incorporates performance criteria
that support and reward achievement of our annual operating plan
and long-term business goals. Specifically, compensation
decisions for our NEOs are linked to corporate goals based on
financial results (annual incentive plan awards), absolute stock
price appreciation (restricted stock unit (RSU) and performance
share awards) and total shareholder return relative to companies
in the S&P 500 Index (performance share awards). For 2007,
approximately 70% of Mr. Finnegans total target
compensation was performance-based. The percentage of
performance-based pay relative to total target compensation for
the other NEOs was, on average, 66%.
Setting
of Executive Compensation
Our Compensation Committee is responsible for establishing the
philosophy and objectives that underlie our executive
compensation program and guiding its design and administration.
Additional information on the structure, scope of authority and
operation of our Compensation Committee and the role of the
Consultant and management in determining compensation is set
forth under the heading Corporate
GovernanceCompensation Committee.
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Market
Data
Our Compensation Committee, with the assistance of the
Consultant, reviews the compensation of similarly situated
officers of a representative peer group of companies on an
annual basis to ensure that our executive compensation program
is competitive with the companies with which we believe we
compete for executive talent. The peer group is comprised of
companies similar in size and scope to us within the property
and casualty and broader insurance industries, as well as the
financial services industry. In 2007, the 21 companies
comprising our peer group were:
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ACE Ltd.
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Cigna Corp.
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Progressive Corp.
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Aetna, Inc.
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CNA Financial Corp.
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Prudential Financial, Inc.
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Aflac, Inc.
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Genworth Financial, Inc.
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Principal Financial Group, Inc.
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Allstate Corp.
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Hartford Financial Services Group Inc.
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Safeco Corp.
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American International Group Inc.
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Lincoln National Corp.
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State Street Corp.
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Bank of New York Mellon Corp.
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MetLife, Inc.
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The Travelers Companies, Inc.
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BB&T Corp.
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PNC Financial Svcs Grp, Inc.
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XL Capital Ltd.
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Our Compensation Committee has established what it believes to
be challenging performance goalsboth on an absolute basis
and relative to our peers. Accordingly, total compensation for
our NEOs is targeted between the
50th and
75th percentiles
of our peer group of companies, combined salary and annual
incentive compensation is targeted at the median of our peer
group and long-term incentive awards are targeted between the
50th and
75th percentiles.
Our emphasis on long-term performance-based compensation
supports our need for executives to maintain a longer-term focus
on our business, while merit-based salary increases and annual
incentive compensation reward the delivery of strong annual
results. For 2007, approximately 71% of Mr. Finnegans
total target compensation represented long-term equity incentive
awards. The percentage of long-term equity incentive awards
relative to total target compensation for the other NEOs was, on
average, 61%.
Individual
Performance
Our executive compensation program provides our Compensation
Committee with the flexibility to make annual compensation
decisions based on individual performance. Specifically, our
program was designed to provide our Compensation Committee with
the ability to increase or decrease individual compensation,
significantly in some cases, to the extent the executive
achieves individual annual performance goals and strengthens his
or her competencies, performance and potential over a longer
period. Our Compensation Committee believes that this
flexibility is imperative to reward and recognize the key
skills, talents and contributions to annual performance
improvements and overall long-term company success. Each year,
our Compensation Committee evaluates Mr. Finnegans
performance. Mr. Finnegan, in turn, presents our
Compensation Committee with his evaluation of each of the other
NEOs, which includes a review of contributions and performance
over the prior year, strengths, weaknesses, development plans,
succession potential and compensation recommendations. Our
Compensation Committee then makes a final determination of
compensation amounts for each NEO with respect to each of the
elements of the executive compensation program for actual
compensation relative to the preceding year and target
compensation for the current year.
Tally
Sheets
Our Compensation Committee reviews tally sheets prepared by
management and the Consultant on an annual basis. The tally
sheets set forth all components of the NEOs compensation,
including base salary, annual incentive compensation, equity
incentive awards, benefits and perquisites, retirement plan
accruals and total payments upon various termination scenarios.
Our Compensation Committee uses these tally sheets to confirm
that it has a full understanding of our NEOs comprehensive
compensation packages.
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Tax
Policies
Section 162(m) of the Internal Revenue Code limits to
$1 million per year the federal income tax deduction to
public corporations for compensation paid for any fiscal year to
any individual who is identified as a named executive officer as
of the end of the fiscal year in accordance with the Exchange
Act. This limitation does not apply to qualifying
performance-based compensation. Our Compensation
Committee has designed our annual incentive compensation awards
(which permit our Compensation Committee to recognize individual
performance through the exercise of negative discretion, as it
did in 2007) and performance share awards to qualify for
the performance-based compensation exception to the
$1 million limit. In addition, our NEOs (other than
Mr. OReilly) generally are required to defer
compensation that would not otherwise be deductible. Due to
guidance issued in 2007 by the Internal Revenue Service (IRS),
the compensation of Mr. OReilly, our Principal
Financial Officer, is not subject to the Section 162(m)
limitation on deductibility.
Our Compensation Committee believes that our shareholders are
best served by not restricting our Compensation Committees
discretion and flexibility in crafting compensation plans and
arrangements, such as annual salaries, restricted stock and RSU
awards, even though such plans and arrangements may result in
certain non-deductible compensation expenses. Accordingly, our
Compensation Committee may from time to time approve elements of
compensation for certain executive officers that are not fully
deductible and reserves the right to do so in the future, in
appropriate circumstances.
Components
of Executive Compensation
Our executive compensation program consists of annual and
long-term compensation and company-sponsored benefit plans. Each
component is designed for a specific purpose and contributes to
an overall total compensation package that is competitive,
predominantly performance-based and valued by our executives.
Annual
Salary
Annual salary is designed to provide a fixed level of
compensation to our NEOs based on their skill and background, as
well as to retain their services. Annual salaries are generally
targeted at the median of our peer group because we want to
provide attractive and competitive base compensation to ensure
our ability to attract and retain superior talent. In addition
to considering peer group data, individual performance and
contributions, our Compensation Committee determines annual
salaries based upon the skills, knowledge and competencies of
each NEO, as reviewed and recommended annually by
Mr. Finnegan (for all NEOs other than himself). Setting of
annual salaries is important because each NEOs target
annual incentive compensation is then developed based on annual
salary levels.
Our Compensation Committee reviewed annual salaries for each of
our NEOs in March 2007. Based upon the above factors (in
particular, the achievement of our fifth consecutive year of
record performance), our NEOs, other than Mr. Finnegan,
received a 5% increase in 2007 annual salary, on average.
Mr. Finnegans employment agreement provides for a
minimum annual salary of $1,200,000 per year. In 2005,
Mr. Finnegans annual salary was increased to
$1,275,000, which became his new minimum annual salary pursuant
to the terms of his employment agreement. As reflected in
Mr. Finnegans 2007 performance-based compensation
payouts, our Compensation Committee determined that
Mr. Finnegans performance placed him at the top of
our peer group. However, our Compensation Committee also
determined that his existing annual salary was competitive with
annual salaries paid to other chief executive officers in our
peer group. Accordingly, his 2007 annual salary remained at
$1,275,000.
Annual
Incentive Compensation
Our Annual Incentive Plan was designed to support our
compensation strategy by linking a significant portion of total
annual cash compensation to the achievement of critical business
goals on an annual basis. All of our salaried employees,
including our NEOs, are eligible to participate in the Annual
Incentive Plan.
Incentive Opportunity. As
discussed under the heading Compensation Discussion and
AnalysisSetting of Executive Compensation, target
annual incentive compensation awards (combined with salary) are
generally set at
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the median for executives with commensurate positions at our
peer group of companies. Our Compensation Committee establishes
the range of potential payments for Mr. Finnegans
annual incentive compensation based upon its analysis of market
data from our peer group of companies and subject to the minimum
annual incentive compensation award target of 125% of annual
salary provided for in his employment agreement. For the other
NEOs, our Compensation Committee establishes the annual
incentive compensation payment range after taking into
consideration Mr. Finnegans recommendations and
market data from our peer group of companies. For information
regarding the potential ranges of awards under the Annual
Incentive Plan for our NEOs in 2007, see the information set
forth under the heading Executive CompensationGrants
of Plan-Based Awards.
Performance Goals. For 2007,
our Compensation Committee determined that the annual incentive
compensation award pool would not be funded unless we achieved
2007 adjusted operating income (net income excluding after-tax
realized investment gains and adjusted to account for the loss
of investment income attributable to our buyback of shares of
our common stock during 2007) greater than 50% of our 2006
adjusted operating income. Our Compensation Committee generally
determined 2007 actual incentive compensation awards for our
NEOs by applying a performance multiplier (established pursuant
to a predetermined formula described below) to the NEOs
target awards. In March 2007, our Compensation Committee
determined that the performance multiplier for our NEOs would be
calculated in two steps.
First, our Compensation Committee determined that 2007 adjusted
operating income would be the performance goal utilized in
determining the 2007 annual incentive compensation award pool
for all participants covered by the Annual Incentive Plan. This
was a change from the use of operating income per share as the
performance goal utilized in determining annual incentive
compensation awards for 2006. The investment income adjustment
was premised on the notion that our employees should not be
impacted by our continuing commitment to return capital to
shareholders through the share buyback program. Our Compensation
Committee established adjusted operating income as the
performance goal for Messrs. Finnegan, OReilly,
Motamed and Degnan because our Compensation Committee believed
that tying annual incentive compensation awards to an operating
income goal provided an effective means of directly linking
executive compensation to our shareholders interests.
Under the performance goal established by our Compensation
Committee, each percentage increase or decrease in 2007 adjusted
operating income relative to 2006 operating income resulted in a
proportional increase or decrease in the 2007 annual incentive
compensation award pool. For example, if 2007 adjusted operating
income was $2,485.4 million (5% higher than the operating
income in 2006), the actual incentive compensation award pool
would be 5% higher than in 2006. Conversely, if 2007 adjusted
operating income was $2,248.7 million (5% lower than the
operating income in 2006), the actual incentive compensation
award pool would be 5% lower than the annual incentive
compensation award pool in 2006.
Second, our Compensation Committee determined that the
performance multiplier for calculating the 2007 annual incentive
awards for Messrs. Finnegan, OReilly, Motamed and
Degnan (up to the maximum permitted award) would be derived by
dividing the 2007 annual incentive compensation award pool
described in the preceding paragraph by the total target awards
for all participants covered by the Annual Incentive Plan,
including the NEOs (whose target awards for this purpose were
adjusted for anticipated negative discretion by our Compensation
Committee).
Because Mr. Krump is a business unit executive, his
performance multiplier is calculated in the manner described
above but further modified by our Compensation Committee to
reflect additional goals approved by Mr. Finnegan. These
additional goals included his individual performance and results
of his business unit relative to the other business units.
Incentive Payouts. Actual
adjusted operating income in 2007 of $2.6 billion was 10%
higher than the operating income in 2006. As a result, awards to
Messrs. Finnegan, OReilly, Motamed and Degnan were
set at $3,569,900, $1,494,300, $1,764,000 and $1,438,500,
respectively. Our Compensation Committee recognized
Mr. Krumps individual performance and results of his
business unit relative to the other business units. As a result,
Mr. Krumps annual incentive compensation award was
set at $725,000.
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Long-Term
Equity Incentive Awards
Equity Incentive
Awards. Long-term equity incentive awards
made pursuant to the 2004 Employee Plan were designed to support
several of our compensation objectives, including:
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placing a significant portion of total compensation at risk;
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linking long-term performance-based awards with shareholder
value; and
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retaining our highly-skilled and valued senior management.
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All employees at or above the level of Assistant Vice President
(approximately 1,700 employees), including our NEOs,
participate in our long-term equity incentive award program.
Target long-term equity incentive awards were designed to
achieve our desired competitive market position of being between
the
50th and
75th percentiles
of our peer group of companies and are commensurate with the
individuals level within our organization. For 2007, the
target long-term equity incentive award for Mr. Finnegan
was $7,600,000. The target long-term equity incentive awards for
the other NEOs averaged $2,066,000. These target levels were
determined based on analysis of data from our peer group of
companies.
Annual equity incentive awards to our NEOs are in the form of
performance shares and RSUs. Consistent with our emphasis on
performance-based compensation, for officers at or above the
level of Senior Vice President, including our NEOs, performance
shares generally constitute 75% of the annual equity award,
while RSUs generally constitute the remaining 25%. Our 75%/25%
mixture of performance shares and RSUs aligns with the practice
of our peer group of companies.
Our Compensation Committee manages the potential dilutive effect
of equity incentive awards by monitoring our annual run
ratethe number of shares granted as a percentage of
our fully diluted common shares outstandingrelative to the
peer companies. Our Compensation Committee also evaluates
guidelines used by certain institutional advisory services and
considers advice from the Consultant. Our annual run rate
remained less than 0.5% in 2007. This decrease is primarily
attributable to the fact that fewer full-value shares are needed
to provide a target award value in the form of performance
shares and RSUs than would be required for an award of stock
options as well as the reduction in the number of participants
in the 2004 Employee Plan.
Performance
Shares. Performance shares are intended to
motivate our senior officers to achieve superior total
shareholder returnshare price appreciation plus reinvested
dividends (TSR)versus companies in the
Standard & Poor 500 Index
(S&P 500) over a three-year performance period.
We view the 499 other companies in the S&P 500 as the
competition for our shareholders investment dollars. The
value of performance shares is directly linked to the total
return delivered to our investors, thus motivating our senior
officers to deliver superior returns over an extended
performance period. Performance shares also support retention,
as they are subject to forfeiture if the recipients
employment terminates before the shares are settled for any
reason other than death, disability, retirement or with the
consent of our Compensation Committee.
The number of performance shares earned for each three-year
performance period can vary from 0% to 200% of the original
target award based on our relative TSR versus S&P
500 companies as follows:
|
|
|
|
|
TSR
|
|
|
|
Percentile
|
|
Shares Earned
|
|
Ranking
|
|
(% of Target)
|
|
|
85th &
above
|
|
|
200
|
%
|
75th
|
|
|
150
|
%
|
50th
|
|
|
100
|
%
|
25th
|
|
|
50
|
%
|
Below
25th
|
|
|
0
|
%
|
For relative performance between these levels, the number of
shares earned is interpolated. The final dollar value of each
recipients performance share award is also dependent on
the price of our common stock at the end of
32
the three-year performance period, thus providing an additional
link to shareholders interests and providing our senior
officers with significant earnings potential based on our
results.
The performance period for the performance shares granted in
March 2005 ended on December 31, 2007. Our TSR over the
performance period was 50.9%, which positioned us at the
68.3rd percentile
of companies in the S&P 500. Based on the performance scale
above, our NEOs, like all recipients of 2005 performance shares
who did not forfeit such shares due to termination of their
employment, received payouts in February 2008 equivalent to
136.6% of the target number of performance shares granted in
2005. Information regarding the vesting of each NEOs
respective 2005 performance share award is set forth under the
heading Executive CompensationOption Exercises and
Stock Vested.
The number and grant date value of performance shares granted to
our NEOs in 2007 for the performance period running from
January 1, 2007 to December 31, 2009 is set forth
under the heading Executive CompensationGrants of
Plan-Based Awards.
RSUs. RSUs are intended to
align managements interests with those of our shareholders
and serve as a strong retention tool for key employees. Like
performance shares, RSUs support retention because they
generally vest in full on the third anniversary of the date of
grant, provided the recipient remains employed by us over that
period. The number and grant date value of RSUs granted to NEOs
in 2007 is set forth under the heading Executive
CompensationGrants of Plan-Based Awards.
Restoration Stock
Options. We discontinued the use of stock
options as part of our core long-term equity incentive awards in
2004. However, we still utilize stock option grants as a means
of providing tax-efficient equity awards to certain
internationally-based employees. In addition, stock options
granted to all participants, including our NEOs, under
predecessor plans to the 2004 Employee Plan included a
restoration option feature that provides the optionee with the
right to receive a restoration stock option upon exercise of the
original option if shares are exchanged in a stock-for-stock
exercise within seven years of the grant date and our stock
price is at least 25% above the exercise price on the exercise
date. Restoration stock options are granted on the same date the
original stock option award is exercised, have an exercise price
equal to the average of the high and low prices of our common
stock on the grant date and have a term equal to the remaining
term of the original option.
Equity Grant Practices. Our
Compensation Committee approves and grants annual equity awards
at its regularly scheduled meeting in March based on market data
from our peer group of companies and recommendations from
Mr. Finnegan for the other NEOs. There is no relationship
between the timing of equity incentive award grants and our
release of material, non-public information. Although our
Compensation Committee has the discretion to do so under the
2004 Employee Plan, our Compensation Committee generally does
not make interim equity award grants to employees at or above
the level of Executive Vice President, including our NEOs.
As discussed under the heading Corporate
GovernanceCompensation Committee, our Compensation
Committee has delegated authority to Mr. Finnegan to grant
equity awards under the 2004 Employee Plan to employees at or
below the level of Senior Vice President pursuant to guidelines
which specify the range of award values an employee could
receive based on his or her level within our organization. These
guidelines are adjusted on a periodic basis as warranted by
competitive market conditions. Grants made by Mr. Finnegan
pursuant to this authority are effective on the last business
day of the month, with the number of shares awarded determined
by dividing the award value by the average of the high and low
prices of our common stock on the grant date.
Non-Compete and Clawback
Provisions. To protect our competitive
position, since 2005, individual equity award agreements for
each of our employees, including our NEOs, have contained
non-disclosure, non-solicitation and invention assignment
covenants. In addition, the NEO equity award agreements and
those of certain other senior officers contain non-competition
provisions. Failure to comply with these provisions, among other
potential consequences, results in the forfeiture of unsettled
awards. Our Compensation Committee also may require repayment of
any awards that are settled within one year prior to the breach
of the applicable covenant and within one year after termination
of employment. Additionally, we may seek an injunction,
restraining order or such other equitable relief restraining the
officer from committing any violation of the covenants.
33
Perquisites
We provide certain executives, including each of our NEOs, with
a limited range of perquisites. The incremental cost and
valuation of these perquisites for the NEOs is set forth under
the heading Executive CompensationSummary
Compensation Table.
Corporate Aircraft. During
2007, we owned two corporate aircraft and leased a third. Senior
executives use these aircraft to minimize and more efficiently
utilize their travel time, protect the confidentiality of their
travel and our business and enhance their personal security. Our
Board also permits Messrs. Finnegan, OReilly, Motamed
and Degnan limited use of the corporate aircraft for personal
travel. The annual personal use of the corporate aircraft for
Mr. Finnegan is limited to 35 hours and for
Messrs. OReilly, Motamed and Degnan to 20 hours
each.
Automobile Use. We provide
Mr. Finnegan with a car and driver for all of his business
travel needs to minimize and more efficiently utilize his travel
time and enhance his personal security. Mr. Finnegans
personal use of the car and driver is primarily for his commute
to and from the office. We provide all domestic employees at or
above the level of Vice President, including our NEOs other than
Mr. Finnegan, a monthly automobile allowance of $500.
Recipients of this benefit bear the applicable income taxes with
respect thereto.
Financial Counseling. We offer all of our
employees at or above the level of Senior Vice President,
including our NEOs, financial counseling services. These
services include income tax preparation, portfolio management
and estate planning. Recipients of this benefit bear the
applicable income taxes with respect thereto.
Company-Sponsored
Benefit Plans
We maintain company-sponsored retirement and deferred
compensation plans for the benefit of all of our salaried
employees, including our NEOs. These benefits are designed to
assist employees, including our NEOs, in providing for their
financial security and personal needs in a manner that
recognizes individual goals and preferences.
Retirement Plans. We maintain the Pension
Plan of The Chubb Corporation (the Pension Plan), which is our
tax-qualified defined benefit plan, and the Pension Excess
Benefit Plan of The Chubb Corporation (the Pension Excess
Benefit Plan), which is our nonqualified excess defined benefit
plan, to help us attract and retain our employees. Our NEOs
participate in the Pension Plan on the same terms and conditions
as other employees. Our NEOs participate in the Pension Excess
Benefit Plan on the same terms and conditions as other highly
compensated employees, except that Mr. Finnegan is entitled
to a supplemental pension benefit under his employment agreement
(the Pension SERP). Information about our retirement plans is
set forth under the heading Executive
CompensationPension Benefits.
We also maintain the CCAP, which is a qualified 401(k) savings
plan, for all eligible employees. The CCAP provides employees
with an opportunity to voluntarily defer pre-tax or after-tax
dollars into a 401(k) account. Chubb provides matching
contributions on an annual basis equal to the lesser of 4% or
the actual percentage deferred by the participant.
Nonqualified Defined Contribution and Deferred Compensation
Plans. We maintain The Chubb Corporation Key
Employee Deferred Compensation Plan (2005) (the 2005
Deferred Compensation Plan) and The Chubb Corporation Executive
Deferred Compensation Plan (collectively, the Deferred
Compensation Plans), which are our nonqualified deferred
compensation plans for our employees at or above the level of
Vice President, including our NEOs, to provide them with
additional tools to enhance their retirement planning and wealth
management. These plans allow participants to defer receipt, and
thus the tax liability, of income (salary, annual incentive
compensation and equity compensation) to retirement or a later
specified date. We also maintain the Defined Contribution Excess
Benefit Plan of The Chubb Corporation (the CCAP Excess Benefit
Plan), which is our nonqualified excess defined contribution
plan, and the CCAP-related supplemental executive retirement
plan for Mr. Finnegan pursuant to his employment agreement
(the CCAP SERP). None of these plans provide for above-market
returns. Information about our nonqualified defined contribution
and deferred compensation plans is set forth under the heading
Executive CompensationNonqualified Defined
Contribution and Deferred Compensation Plans.
34
Employment
and Severance Agreements
In general, it is our Boards policy not to enter into
employment agreements with, or provide executive severance
benefits to, our executive officers beyond those generally
available to our salaried employees, other than the change in
control agreements discussed below. As a result, our NEOs serve
at the will of our Board. The only exception to this policy is
the employment agreement with Mr. Finnegan that we entered
into when he was hired in 2002. Our Compensation Committee
believed, and continues to believe, that it is in our best
interest and the best interests of our shareholders to have a
specific compensation package with incentives and guarantees in
order to retain his services. A description of, and the amount
of the estimated payments and benefits payable to
Mr. Finnegan upon a termination of employment under, his
employment agreement is set forth under the heading
Executive CompensationPotential Payments upon
Termination.
Change in
Control Agreements
Our Board has determined that it is in our best interest and the
best interests of our shareholders to assure that we will have
the continued dedication of Messrs. Finnegan,
OReilly, Motamed and Degnan in the event of a threat or
occurrence of a change in control. Our Board continues to
believe that change in control agreements diminish the
inevitable distraction of these NEOs by virtue of the personal
uncertainties and risks created by a pending or threatened
change in control and encourage their full attention and
dedication to our business in the event of any pending or
threatened change in control. As such, we have individual change
in control agreements with Messrs. Finnegan, OReilly,
Motamed and Degnan. The change in control agreements for
Messrs. OReilly, Motamed and Degnan require both a
change in control event as well as a termination event to
trigger benefits. A description of, and the amount of the
estimated payments and benefits payable upon a change in control
under, these agreements is set forth under the heading
Executive CompensationPotential Payments upon
Termination.
Stock
Ownership Guidelines
Our Board, based upon our Compensation Committees
recommendation, adopted executive stock ownership guidelines in
2004. Our Compensation Committee believes that these guidelines
promote our objective of increasing shareholder value by
encouraging senior officers to acquire and maintain a meaningful
equity stake in Chubb.
The guidelines were designed to maintain stock ownership at
levels high enough to assure our shareholders of our senior
officers commitment to value creation, while taking into
account each individual officers need for portfolio
diversification. Under these guidelines, senior officers,
including each of our NEOs, are expected, over time, to acquire
and hold shares of our common stock equal in value to a multiple
of their annual salaries. Owned shares, unvested restricted
stock, unvested RSUs, shares allocated in our retirement plans
and shares deferred until termination of employment count toward
satisfying the guidelines. Unexercised stock options and
unearned performance shares do not count toward satisfaction of
the guidelines. There is a five-year phase-in period beginning
on the later of becoming an officer subject to the stock
ownership guidelines and the date the guidelines were adopted.
Our current stock ownership guidelines are as follows:
|
|
|
|
|
|
|
Pay Band
|
|
Officer Titles Included
|
|
Ownership Level
|
|
|
15
|
|
Chief Executive Officer
|
|
|
5x Salary
|
|
14
|
|
Vice Chairman
|
|
|
3x Salary
|
|
13
|
|
Executive Vice President/Senior Vice President
|
|
|
2x Salary
|
|
12
|
|
Senior Vice President
|
|
|
1x Salary
|
|
35
Our Compensation Committee reviews the guidelines on a periodic
basis and monitors the officers progress toward meeting
their target ownerships levels. The stock ownership of our NEOs
as of the end of 2007 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
Target Number
|
|
|
Number of Shares
|
|
Name
|
|
Ownership Level
|
|
|
of Shares*
|
|
|
Deemed Owned
|
|
|
John D. Finnegan
|
|
|
5x Salary
|
|
|
|
116,801
|
|
|
|
484,264
|
|
Michael OReilly
|
|
|
3x Salary
|
|
|
|
38,668
|
|
|
|
188,827
|
|
Thomas F. Motamed
|
|
|
3x Salary
|
|
|
|
41,842
|
|
|
|
157,344
|
|
John J. Degnan
|
|
|
3x Salary
|
|
|
|
37,225
|
|
|
|
198,507
|
|
Paul J. Krump
|
|
|
2x Salary
|
|
|
|
16,531
|
|
|
|
63,694
|
|
|
|
|
|
*
|
Based on a per share price of $54.58, which was the closing
price of our common stock on December 31, 2007, and the
respective salaries of our NEOs as of that date.
|
As shown in the above table, each of our NEOs has met his
required number of shares, well ahead of the initial 2009
deadline.
36
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth information regarding NEO
compensation during 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Name and
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Principal Position
|
|
Year
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)(6)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
|
2007
|
|
|
$
|
1,275,000
|
|
|
|
|
|
|
$
|
7,572,126
|
|
|
|
|
|
|
$
|
3,569,900
|
|
|
$
|
3,542,642
|
|
|
$
|
189,248
|
|
|
$
|
16,148,916
|
|
Chairman, President and CEO
|
|
|
2006
|
|
|
|
1,275,000
|
|
|
|
|
|
|
|
7,136,716
|
|
|
$
|
1,928,732
|
|
|
|
3,242,900
|
|
|
|
3,024,142
|
|
|
|
154,864
|
|
|
|
16,762,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael OReilly
|
|
|
2007
|
|
|
|
695,126
|
|
|
|
|
|
|
|
3,302,743
|
|
|
|
30,868
|
|
|
|
1,494,300
|
|
|
|
1,665,161
|
|
|
|
104,912
|
|
|
|
7,293,110
|
|
Vice Chairman and CFO
|
|
|
2006
|
|
|
|
661,251
|
|
|
|
|
|
|
|
3,702,421
|
|
|
|
|
|
|
|
1,262,300
|
|
|
|
1,157,421
|
|
|
|
103,467
|
|
|
|
6,886,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Motamed
|
|
|
2007
|
|
|
|
752,188
|
|
|
|
|
|
|
|
3,986,772
|
|
|
|
|
|
|
|
1,764,000
|
|
|
|
2,056,766
|
|
|
|
109,200
|
|
|
|
8,668,926
|
|
Vice Chairman and COO
|
|
|
2006
|
|
|
|
715,001
|
|
|
|
|
|
|
|
4,438,189
|
|
|
|
|
|
|
|
1,502,500
|
|
|
|
1,389,173
|
|
|
|
137,546
|
|
|
|
8,182,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
2007
|
|
|
|
669,188
|
|
|
|
|
|
|
|
3,211,058
|
|
|
|
|
|
|
|
1,438,500
|
|
|
|
941,587
|
|
|
|
100,947
|
|
|
|
6,361,280
|
|
Vice Chairman and CAO
|
|
|
2006
|
|
|
|
636,250
|
|
|
|
|
|
|
|
3,586,370
|
|
|
|
|
|
|
|
1,215,200
|
|
|
|
657,610
|
|
|
|
118,503
|
|
|
|
6,213,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Krump
|
|
|
2007
|
|
|
|
447,855
|
|
|
|
|
|
|
|
413,186
|
|
|
|
86,683
|
|
|
|
725,000
|
|
|
|
425,293
|
|
|
|
50,704
|
|
|
|
2,148,721
|
|
Executive Vice President
|
|
|
2006
|
|
|
|
432,875
|
|
|
|
|
|
|
|
411,572
|
|
|
|
281,637
|
|
|
|
659,800
|
|
|
|
368,979
|
|
|
|
49,759
|
|
|
|
2,204,622
|
|
|
|
|
(1) |
|
$275,000 of Mr. Finnegans salary for 2007 and 2006
was deferred under the 2005 Deferred Compensation Plan.
Additional information regarding the 2005 Deferred Compensation
Plan is set forth under the heading Executive
CompensationNonqualified Defined Contribution and Deferred
Compensation Plans. For 2007, salaries earned by our NEOs
account for the following percentages of their total
compensation: Mr. Finnegan (7.9%), Mr. O Reilly (9.5%),
Mr. Motamed (8.7%), Mr. Degnan (10.5%), and Mr. Krump (20.8%). |
37
|
|
|
(2)
|
Reflects the dollar amount recognized for financial statement
reporting purposes during 2007 and 2006 for each NEO, as
computed pursuant to FAS 123R, disregarding any estimates
relating to service-based vesting conditions, in respect of all
outstanding RSU, restricted stock and performance share awards
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Equity Award Expensing
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Recognized
|
|
|
Recognized
|
|
|
|
|
|
Grant
|
|
|
|
|
Fair Value
|
|
|
2007
|
|
|
2006
|
|
Name
|
|
Stock Award Type
|
|
Date
|
|
Shares
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
RSUs
|
|
04/27/2004
|
|
|
54,284
|
|
|
$
|
35.00
|
|
|
$
|
211,105
|
|
|
$
|
633,313
|
|
|
|
RSUs
|
|
03/03/2005
|
|
|
48,094
|
|
|
|
39.51
|
|
|
|
633,398
|
|
|
|
633,398
|
|
|
|
RSUs
|
|
03/02/2006
|
|
|
39,892
|
|
|
|
47.63
|
|
|
|
633,352
|
|
|
|
527,793
|
|
|
|
RSUs
|
|
03/01/2007
|
|
|
37,773
|
|
|
|
50.30
|
|
|
|
527,773
|
|
|
|
0
|
|
|
|
Performance Shares
|
|
04/27/2004
|
|
|
162,858
|
|
|
|
32.74
|
|
|
|
0
|
|
|
|
1,777,324
|
|
|
|
Performance Shares
|
|
03/03/2005
|
|
|
144,286
|
|
|
|
37.02
|
|
|
|
1,780,490
|
|
|
|
1,780,489
|
|
|
|
Performance Shares
|
|
03/02/2006
|
|
|
119,678
|
|
|
|
44.73
|
|
|
|
1,784,399
|
|
|
|
1,784,399
|
|
|
|
Performance Shares
|
|
03/01/2007
|
|
|
113,320
|
|
|
|
52.99
|
|
|
|
2,001,609
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael OReilly
|
|
RSUs
|
|
04/27/2004
|
|
|
19,678
|
|
|
|
35.00
|
|
|
|
76,525
|
|
|
|
229,577
|
|
|
|
RSUs
|
|
03/03/2005
|
|
|
15,820
|
|
|
|
39.51
|
|
|
|
208,349
|
|
|
|
208,349
|
|
|
|
RSUs
|
|
03/02/2006
|
|
|
13,122
|
|
|
|
47.63
|
|
|
|
208,334
|
|
|
|
173,611
|
|
|
|
RSUs
|
|
03/01/2007
|
|
|
12,425
|
|
|
|
50.30
|
|
|
|
173,605
|
|
|
|
0
|
|
|
|
Restricted Stock
|
|
11/29/2002
|
|
|
17,116
|
|
|
|
29.21
|
|
|
|
74,994
|
|
|
|
99,992
|
|
|
|
Performance Shares
|
|
04/27/2004
|
|
|
59,036
|
|
|
|
32.74
|
|
|
|
0
|
|
|
|
644,280
|
|
|
|
Performance Shares
|
|
03/03/2005
|
|
|
47,462
|
|
|
|
37.02
|
|
|
|
585,681
|
|
|
|
585,681
|
|
|
|
Performance Shares
|
|
03/02/2006
|
|
|
39,368
|
|
|
|
44.73
|
|
|
|
0
|
|
|
|
1,760,931
|
|
|
|
Performance Shares
|
|
03/01/2007
|
|
|
37,276
|
|
|
|
52.99
|
|
|
|
1,975,255
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Motamed
|
|
RSUs
|
|
04/27/2004
|
|
|
22,320
|
|
|
|
35.00
|
|
|
|
86,800
|
|
|
|
260,400
|
|
|
|
RSUs
|
|
03/03/2005
|
|
|
18,826
|
|
|
|
39.51
|
|
|
|
247,938
|
|
|
|
247,938
|
|
|
|
RSUs
|
|
03/02/2006
|
|
|
15,614
|
|
|
|
47.63
|
|
|
|
247,898
|
|
|
|
206,582
|
|
|
|
RSUs
|
|
03/01/2007
|
|
|
14,786
|
|
|
|
50.30
|
|
|
|
206,593
|
|
|
|
0
|
|
|
|
Restricted Stock
|
|
11/29/2002
|
|
|
34,234
|
|
|
|
29.21
|
|
|
|
149,996
|
|
|
|
199,995
|
|
|
|
Performance Shares
|
|
04/27/2004
|
|
|
66,964
|
|
|
|
32.74
|
|
|
|
0
|
|
|
|
730,800
|
|
|
|
Performance Shares
|
|
03/03/2005
|
|
|
56,480
|
|
|
|
37.02
|
|
|
|
696,964
|
|
|
|
696,963
|
|
|
|
Performance Shares
|
|
03/02/2006
|
|
|
46,848
|
|
|
|
44.73
|
|
|
|
0
|
|
|
|
2,095,511
|
|
|
|
Performance Shares
|
|
03/01/2007
|
|
|
44,359
|
|
|
|
52.99
|
|
|
|
2,350,583
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
RSUs
|
|
04/27/2004
|
|
|
18,784
|
|
|
|
35.00
|
|
|
|
73,048
|
|
|
|
219,147
|
|
|
|
RSUs
|
|
03/03/2005
|
|
|
15,376
|
|
|
|
39.51
|
|
|
|
202,502
|
|
|
|
202,502
|
|
|
|
RSUs
|
|
03/02/2006
|
|
|
12,754
|
|
|
|
47.63
|
|
|
|
202,491
|
|
|
|
168,743
|
|
|
|
RSUs
|
|
03/01/2007
|
|
|
12,077
|
|
|
|
50.30
|
|
|
|
168,743
|
|
|
|
0
|
|
|
|
Restricted Stock
|
|
11/29/2002
|
|
|
17,116
|
|
|
|
29.21
|
|
|
|
74,994
|
|
|
|
99,992
|
|
|
|
Performance Shares
|
|
04/27/2004
|
|
|
56,358
|
|
|
|
32.74
|
|
|
|
0
|
|
|
|
615,054
|
|
|
|
Performance Shares
|
|
03/03/2005
|
|
|
46,134
|
|
|
|
37.02
|
|
|
|
569,293
|
|
|
|
569,294
|
|
|
|
Performance Shares
|
|
03/02/2006
|
|
|
38,266
|
|
|
|
44.73
|
|
|
|
0
|
|
|
|
1,711,638
|
|
|
|
Performance Shares
|
|
03/01/2007
|
|
|
36,233
|
|
|
|
52.99
|
|
|
|
1,919,987
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Krump
|
|
RSUs
|
|
04/27/2004
|
|
|
2,856
|
|
|
|
35.00
|
|
|
|
11,107
|
|
|
|
33,320
|
|
|
|
RSUs
|
|
03/03/2005
|
|
|
2,530
|
|
|
|
39.51
|
|
|
|
33,320
|
|
|
|
33,320
|
|
|
|
RSUs
|
|
03/02/2006
|
|
|
2,204
|
|
|
|
47.63
|
|
|
|
34,992
|
|
|
|
29,160
|
|
|
|
RSUs
|
|
03/01/2007
|
|
|
2,112
|
|
|
|
50.30
|
|
|
|
29,509
|
|
|
|
0
|
|
|
|
Restricted Stock
|
|
12/06/2001
|
|
|
6,000
|
|
|
|
33.22
|
|
|
|
0
|
|
|
|
29,898
|
|
|
|
Performance Shares
|
|
04/27/2004
|
|
|
8,572
|
|
|
|
32.74
|
|
|
|
0
|
|
|
|
93,549
|
|
|
|
Performance Shares
|
|
03/03/2005
|
|
|
7,594
|
|
|
|
37.02
|
|
|
|
93,710
|
|
|
|
93,710
|
|
|
|
Performance Shares
|
|
03/02/2006
|
|
|
6,614
|
|
|
|
44.73
|
|
|
|
98,615
|
|
|
|
98,615
|
|
|
|
Performance Shares
|
|
03/01/2007
|
|
|
6,337
|
|
|
|
52.99
|
|
|
|
111,933
|
|
|
|
0
|
|
The grant date fair values of the RSUs, restricted stock and
performance share awards are estimated based on the fair market
value of our common stock on the date of grant. The fair value
of the performance share awards is adjusted to reflect (i) the
anticipated appreciation of our common stock over the
performance period and (ii) that these awards do not receive
dividend equivalents during such period. For the 2007 and 2006
performance share awards granted to our retirement-eligible NEOs
(Messrs. OReilly, Motamed and Degnan), amounts
38
recognized equal the full grant date fair value for the grants
made to such NEOs, as required pursuant to FAS 123R.
Information regarding our FAS 123R calculations is set
forth in footnote 13 to the financial statements included in the
2007 Annual Report.
|
|
|
(3) |
|
In 2004, we eliminated stock options from our core long-term
equity incentive program. Amounts in this column reflect the
dollar amount recognized for financial statement reporting
purposes during 2007 and 2006 for each of Messrs. Finnegan,
OReilly and Krump, as computed pursuant to FAS 123R,
in respect of non-discretionary restoration stock options
granted to Messrs. Finnegan, OReilly and Krump,
respectively, upon their exercises in either 2007 and/or 2006 of
vested stock options. The restoration stock option feature is
described under the heading Compensation Discussion and
AnalysisComponents of Executive Compensation.
Restoration stock options are fully vested on the grant date.
Accordingly, the grant date fair value of these awards is the
same as the amount of compensation expense we reflect in our
financial statements with respect to these awards. The grant
date fair value of each restoration stock option was estimated
using the Black-Scholes option pricing model. Information
regarding our FAS 123R calculations is set forth in
footnote 13 to the financial statements included in the 2007
Annual Report. |
|
(4) |
|
Reflects 2007 and 2006 incentive compensation paid in March 2008
and March 2007, respectively, under our Annual Incentive Plan.
Additional information regarding annual incentive compensation
is set forth under the headings Compensation Discussion
and AnalysisComponents of Executive Compensation and
Executive CompensationGrants of Plan-Based
Awards. |
|
(5) |
|
Reflects solely the aggregate change in pension value for 2007
under our defined benefit plans as follows:
Mr. Finnegans benefits under the Pension Plan,
Pension Excess Benefit Plan and Pension SERP, $45,858, $735,296
and $2,761,488, respectively; Mr. OReillys
benefits under the Pension Plan and Pension Excess Benefit Plan,
$911 and $1,664,250, respectively; Mr. Motameds
benefits under the Pension Plan and Pension Excess Benefit Plan,
$86,833 and $1,969,933, respectively; Mr. Degnans
benefits under the Pension Plan and Pension Excess Benefit Plan,
$63,723 and $877,864, respectively; and Mr. Krumps
benefits under the Pension Plan and Pension Excess Benefit Plan,
$30,690 and $394,603, respectively. Information regarding our
calculations of pension values is set forth in footnote 14 to
the financial statements included in the 2007 Annual Report. |
|
(6) |
|
The following table reflects the components for the All
Other Compensation column for 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
Registrant
|
|
|
|
|
|
|
and Other
|
|
|
Contributions
|
|
|
|
|
|
|
Personal
|
|
|
to Defined
|
|
|
|
|
|
|
Benefits
|
|
|
Contribution
|
|
|
Total
|
|
Name
|
|
($)(a)
|
|
|
Plans
($)(b)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
$
|
48,740
|
|
|
$
|
140,508
|
|
|
$
|
189,248
|
|
Michael OReilly
|
|
|
45,442
|
|
|
|
59,470
|
|
|
|
104,912
|
|
Thomas F. Motamed
|
|
|
44,416
|
|
|
|
64,784
|
|
|
|
109,200
|
|
John J. Degnan
|
|
|
43,777
|
|
|
|
57,170
|
|
|
|
100,947
|
|
Paul J. Krump
|
|
|
15,241
|
|
|
|
35,463
|
|
|
|
50,704
|
|
|
|
|
|
(a)
|
Except in the case of Mr. Krumps use of the corporate
aircraft, amounts represent the incremental cost to us for each
of the respective benefits. In 2007, Mr. Krump traveled on
one of our corporate aircraft to ensure his availability at a
business function at which his presence was mandatory. Although
this was business usage and therefore not a perquisite, a
portion of the trip was classified as personal use for federal
income tax purposes. We have reflected the amount of income
imputed to Mr. Krump in 2007 in connection with this trip
in the table above.
|
The incremental cost of the personal use of corporate aircraft
expense for each of the other NEOs is calculated by multiplying
the direct operating cost per hour by the NEOs personal
use hours. Direct operating cost of the aircraft is comprised of
fuel, landing/parking fees, crew fees and expenses, custom fees,
flight services/charts, variable maintenance costs, catering,
aircraft supplies and other miscellaneous expenses.
39
The incremental cost of financial planning represents the actual
cost incurred by us.
The incremental cost to us relating to automobiles is the
amount of the automobile allowance provided to our NEOs (other
than Mr. Finnegan). The incremental cost of
Mr. Finnegans automobile and driver was calculated by
multiplying the variable expenses of owning and operating the
car that Mr. Finnegan uses by the personal use percentage
of the total vehicle miles in 2007. The variable expenses are
comprised of gas, maintenance, driver overtime and miscellaneous
driving expenses. Mr. Finnegans personal use
percentage for 2007 was approximately 16% of the total vehicle
miles.
As stipulated in Mr. Finnegans employment agreement,
we pay the club dues and membership fees associated with his
country club membership but do not recognize any incremental
cost due to his personal use because club dues and membership
fees are generally fixed. For 2007, the club dues and membership
fees were $10,695. Mr. Finnegan paid income tax on his
personal use of the country club and any additional costs
resulting from his personal use were paid directly by him.
Additional information regarding perquisites is set forth under
the heading Compensation Discussion and
AnalysisComponents of Executive Compensation.
Details regarding the amounts included in Perquisites and
Other Personal Benefits column are set forth in the
following table for 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
Personal Use
|
|
|
|
|
|
|
|
|
Provided
|
|
|
|
|
|
|
of Corporate
|
|
|
Financial
|
|
|
Automobile
|
|
|
Automobile
|
|
|
|
|
|
|
Aircraft
|
|
|
Planning
|
|
|
Allowance
|
|
|
and Driver
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
$
|
25,971
|
|
|
$
|
13,006
|
|
|
|
|
|
|
$
|
9,763
|
|
|
$
|
48,740
|
|
Michael OReilly
|
|
|
35,442
|
|
|
|
4,000
|
|
|
$
|
6,000
|
|
|
|
|
|
|
|
45,442
|
|
Thomas F. Motamed
|
|
|
32,416
|
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
|
|
|
|
44,416
|
|
John J. Degnan
|
|
|
25,627
|
|
|
|
12,150
|
|
|
|
6,000
|
|
|
|
|
|
|
|
43,777
|
|
Paul J. Krump
|
|
|
2,381
|
|
|
|
6,860
|
|
|
|
6,000
|
|
|
|
|
|
|
|
15,241
|
|
|
|
|
|
(b)
|
Reflects 2007 matching contributions under the CCAP and the CCAP
Excess Benefit Plan.
|
40
Grants of
Plan-Based Awards
The following table sets forth information regarding 2007 grants
to our NEOs under our Annual Incentive Plan and 2004 Employee
Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
Number
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Fair Value
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
Under Equity Incentive
|
|
|
of Shares
|
|
|
Securities
|
|
|
Base Price
|
|
|
of Stock
|
|
|
|
|
|
|
Incentive Plan
Awards(1)
|
|
|
Plan
Awards(3)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
of Option
|
|
|
and Option
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Grant Date
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)(4)
|
|
|
(#)(5)
|
|
|
($/Sh)(6)
|
|
|
($)(7)
|
|
|
John D. Finnegan
|
|
|
03/01/2007
|
|
|
$
|
1,623,200
|
|
|
$
|
1,848,800
|
|
|
$
|
4,335,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,660
|
|
|
|
113,320
|
|
|
|
226,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,004,827
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,773
|
|
|
|
|
|
|
|
|
|
|
|
1,899,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael OReilly
|
|
|
03/01/2007
|
|
|
|
679,400
|
|
|
|
773,900
|
|
|
|
1,899,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,638
|
|
|
|
37,276
|
|
|
|
74,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,975,255
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,425
|
|
|
|
|
|
|
|
|
|
|
|
624,978
|
|
|
|
|
02/22/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,684
|
|
|
$
|
53.345
|
|
|
|
30,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Motamed
|
|
|
03/01/2007
|
|
|
|
802,100
|
|
|
|
913,500
|
|
|
|
2,207,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,180
|
|
|
|
44,359
|
|
|
|
88,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,350,583
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,786
|
|
|
|
|
|
|
|
|
|
|
|
743,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
03/01/2007
|
|
|
|
654,100
|
|
|
|
745,000
|
|
|
|
1,828,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,117
|
|
|
|
36,233
|
|
|
|
72,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,919,987
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,077
|
|
|
|
|
|
|
|
|
|
|
|
607,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Krump
|
|
|
03/01/2007
|
|
|
|
277,300
|
|
|
|
315,800
|
|
|
|
857,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,169
|
|
|
|
6,337
|
|
|
|
12,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
335,798
|
|
|
|
|
03/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,112
|
|
|
|
|
|
|
|
|
|
|
|
106,234
|
|
|
|
|
02/09/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,295
|
|
|
|
52.725
|
|
|
|
86,683
|
|
|
|
|
(1) |
|
Represents the range of potential awards to each NEO under our
Annual Incentive Plan. The plan is designed so that the
Compensation Committee can apply negative discretion to annual
awards of each NEO. Accordingly, the amounts represented above
reflect the target awards after application of negative
discretion by our Compensation Committee. Maximum awards reflect
the maximum annual incentive compensation awards established by
our Compensation Committee pursuant to Section 162(m) of
the Internal Revenue Code. Information regarding the actual
payouts under the Annual Incentive Plan is set forth in the
Non-Equity Incentive Plan Compensation column of the
table included under the heading Executive
CompensationSummary Compensation Table. Information
regarding the structure of the Annual Incentive Plan is set
forth under the heading Compensation Discussion and
AnalysisComponents of Executive Compensation. |
|
(2) |
|
Represents payouts under the Annual Incentive Plan assuming that
2007 adjusted operating income was 50% of 2006 operating income.
No payouts would have been awarded if 2007 adjusted operating
income had been less than 50% of 2006 operating income. |
|
(3) |
|
Represents grants to each NEO during 2007 of performance shares
under our 2004 Employee Plan. Performance shares are earned, if
at all, based on our TSR over a three-year performance period
relative to the TSR over the same period for the companies in
the S&P 500 Index. No dividend equivalents are paid on
performance share awards during the performance period.
Information regarding performance targets, vesting and
additional performance share award details are set forth under
the heading Executive CompensationComponents of
Executive Compensation. |
|
(4) |
|
Represents RSU grants to each NEO during 2007. The RSUs will
vest, subject to continued employment, on the third anniversary
of the grant date. RSUs pay dividend equivalents at the same
time and in the same amount as dividends are paid on our common
stock. Additional information regarding RSUs is set forth under
the heading Executive CompensationComponents of
Executive Compensation. |
|
(5) |
|
Represents restoration stock option grants to
Mr. OReilly and Mr. Krump during 2007. The
restoration stock options were fully vested on the grant date.
Additional information regarding restoration stock option grants
is set forth under the heading Executive
CompensationComponents of Executive Compensation. |
41
|
|
|
(6) |
|
Pursuant to the terms of the predecessor plans to the 2004
Employee Plan under which these restoration stock options were
granted, the exercise price is calculated based on the average
of the high and low prices on the date of grant. For both
Mr. OReilly and Mr. Krump, the average of the
high and low prices resulted in higher exercise prices than if
we had used the closing price of our common stock on the date of
grant. |
|
(7) |
|
Represents full grant date fair value of stock awards and
restoration stock option awards granted to each NEO in 2007, as
computed in accordance with FAS 123R. The grant date fair
value of each stock award is estimated based on the fair market
value of our common stock on the date of grant adjusted, in the
case of performance shares, to reflect (i) the anticipated
appreciation of our common stock over the performance period and
(ii) that these awards do not receive dividend equivalents
during the performance period. The grant date fair value of each
restoration stock option was estimated using the Black-Scholes
option pricing model. Information regarding our FAS 123R
calculations is set forth in footnote 13 to the financial
statements included in the 2007 Annual Report. |
42
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information regarding our
NEOs equity holdings as of December 31, 2007. The
market value of unvested and unearned stock awards is based on
the closing price of our common stock on December 31, 2007
of $54.58 per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Value
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
or Units
|
|
|
of Shares
|
|
|
Shares,
|
|
|
Shares, Units
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
or Units
|
|
|
Units or
|
|
|
or Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
that
|
|
|
of Stock
|
|
|
Other Rights
|
|
|
Rights that
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
that Have
|
|
|
that Have
|
|
|
Have Not
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Vested
|
|
Name
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)(1)
|
|
|
($)
|
|
|
(#)(2)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
|
40,650
|
|
|
|
|
|
|
|
|
|
|
$
|
39.7125
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,554
|
|
|
|
|
|
|
|
|
|
|
|
45.8750
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,750
|
|
|
|
|
|
|
|
|
|
|
|
51.4550
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,826
|
|
|
|
|
|
|
|
|
|
|
|
53.5100
|
|
|
|
12/02/2012
|
|
|
|
125,759
|
|
|
$
|
6,863,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,996
|
|
|
$
|
25,434,062
|
|
Michael OReilly
|
|
|
92,014
|
|
|
|
|
|
|
|
|
|
|
|
35.4250
|
|
|
|
03/01/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,810
|
|
|
|
|
|
|
|
|
|
|
|
36.8400
|
|
|
|
03/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,810
|
|
|
|
|
|
|
|
|
|
|
|
53.3450
|
|
|
|
03/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,874
|
|
|
|
|
|
|
|
|
|
|
|
53.3450
|
|
|
|
03/01/2011
|
|
|
|
41,367
|
|
|
|
2,257,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,288
|
|
|
|
8,366,459
|
|
Thomas F. Motamed
|
|
|
1,192
|
|
|
|
|
|
|
|
|
|
|
|
41.9219
|
|
|
|
03/10/2009
|
|
|
|
49,226
|
|
|
|
2,686,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182,414
|
|
|
|
9,956,156
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,207
|
|
|
|
2,194,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,998
|
|
|
|
8,132,311
|
|
Paul J. Krump
|
|
|
15,682
|
|
|
|
|
|
|
|
|
|
|
|
36.8400
|
|
|
|
03/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,840
|
|
|
|
|
|
|
|
|
|
|
|
41.5975
|
|
|
|
03/06/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,104
|
|
|
|
|
|
|
|
|
|
|
|
47.5000
|
|
|
|
03/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,100
|
|
|
|
|
|
|
|
|
|
|
|
52.0200
|
|
|
|
11/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,663
|
|
|
|
|
|
|
|
|
|
|
|
52.0200
|
|
|
|
03/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,295
|
|
|
|
|
|
|
|
|
|
|
|
52.7250
|
|
|
|
03/01/2011
|
|
|
|
6,846
|
|
|
|
373,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,902
|
|
|
|
1,413,731
|
|
|
|
|
(1) |
|
Represents unvested RSUs for Mr. Finnegan, of which 48,094
RSUs vested on March 3, 2008, 39,892 RSUs will vest on
March 2, 2009 and 37,773 RSUs will vest on March 1,
2010. Represents unvested RSUs for Mr. OReilly, of
which 15,820 RSUs vested on March 3, 2008, 13,122 RSUs will
vest on March 2, 2009 and 12,425 RSUs will vest on
March 1, 2010. Represents unvested RSUs for
Mr. Motamed, of which 18,826 RSUs vested on March 3,
2008, 15,614 RSUs will vest on March 2, 2009 and 14,786
RSUs will vest on March 1, 2010. Represents unvested RSUs
for Mr. Degnan, of which 15,376 RSUs vested on
March 3, 2008, 12,754 RSUs will vest on March 2, 2009
and 12,077 RSUs will vest on March 1, 2010. Represents
unvested RSUs for Mr. Krump, of which 2,530 RSUs vested on
March 3, 2008, 2,204 RSUs will vest on March 2, 2009
and 2,112 RSUs will vest on March 1, 2010. Dividend
equivalents are paid on RSUs during the restricted period. |
|
(2) |
|
Represents outstanding performance share awards for the
2006-2008
performance period assuming maximum performance (performance was
above target as of December 31, 2007) for
Messrs. Finnegan, OReilly, Motamed, Degnan and Krump
in the amounts of 239,356, 78,736, 93,696, 76,532 and
13,228 shares, respectively. Such awards will vest, if at
all, on December 31, 2008. Also represents outstanding
performance share awards for the
2007-2009
performance period assuming maximum performance (performance was
above target as of December 31, 2007) for
Messrs. Finnegan, OReilly, Motamed, Degnan and Krump
in the amounts of 226,640, 74,552, 88,718, 72,466 and
12,674 shares, respectively. Such awards will vest, if at
all, on December 31, 2009. Performance shares awarded in
2005 vested on December 31, 2007. Information regarding the
vesting of the NEOs respective 2005 performance shares is
set forth under the heading Executive
CompensationOption Exercises and Stock Vested. The
actual value of awards at the end of the performance period may
vary from the valuations indicated above. No dividend
equivalents are paid on performance share awards during the
performance period. |
43
Option
Exercises and Stock Vested
The following table sets forth the value realized by our NEOs
with respect to stock option exercises and stock awards that
vested in 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized
|
|
|
|
on Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
(#)(3)
|
|
|
($)(4)
|
|
|
John D. Finnegan
|
|
|
|
|
|
|
|
|
|
|
251,379
|
|
|
$
|
13,265,085
|
|
Michael OReilly
|
|
|
151,738
|
|
|
$
|
1,556,296
|
|
|
|
101,627
|
|
|
|
5,384,926
|
|
Thomas F. Motamed
|
|
|
160,064
|
|
|
|
1,235,030
|
|
|
|
133,706
|
|
|
|
7,102,902
|
|
John J. Degnan
|
|
|
153,624
|
|
|
|
1,404,839
|
|
|
|
98,919
|
|
|
|
5,244,745
|
|
Paul J. Krump
|
|
|
28,744
|
|
|
|
453,638
|
|
|
|
13,229
|
|
|
|
698,083
|
|
|
|
|
(1) |
|
Represents the exercise of the following stock options by
Mr. OReilly: (a) 91,810 shares at an
exercise price of $52.0526, (b) 14,950 shares at an
exercise price of $53.345, and (c) 44,978 shares at an
exercise price of $54.1035. Represents the exercise of the
following stock options by Mr. Motamed:
(a) 112,554 shares at an exercise price of $52.0528,
and (b) 47,510 shares at an exercise price of
$51.0516. Represents the exercise of the following stock options
by Mr. Degnan: (a) 99,156 shares at an exercise
price of $52.0704, and (b) 54,468 shares at an
exercise price of $54.3166. Represents the exercise of the
following stock options by Mr. Krump:
(a) 8,868 shares at an exercise price of $53.0232, and
(b) 19,876 shares at an exercise price of $52.725. |
|
(2) |
|
For stock-swap option exercises, value realized is based on the
excess of the average of the high and low prices of our common
stock on the date of exercise over the exercise price. In the
case of stock options exercised through a cashless-sell-all
transaction, value realized is based on the market price at the
time of the exercise. |
|
(3) |
|
For Mr. Finnegan, represents the vesting of 54,284 RSUs
granted in 2004 and the vesting of 197,095 shares in
respect of the performance share award granted in 2005. For
Mr. OReilly, represents the vesting of
17,116 shares of restricted stock granted in 2002, 19,678
RSUs granted in 2004 and 64,833 shares in respect of the
performance share award granted in 2005. For Mr. Motamed,
represents the vesting of 34,234 shares of restricted stock
granted in 2002, 22,320 RSUs granted in 2004 and
77,152 shares in respect of the performance share award
granted in 2005. For Mr. Degnan, represents the vesting of
17,116 shares of restricted stock granted in 2002, 18,784
RSUs granted in 2004 and 63,019 shares in respect of the
performance share award granted in 2005. For Mr. Krump,
represents the vesting of 2,856 RSUs granted in 2004 and
10,373 shares in respect of the performance share award
granted in 2005. Receipt of the 54,284 RSUs for
Mr. Finnegan, the 22,320 RSUs for Mr. Motamed and the
18,784 RSUs for Mr. Degnan have been deferred until their
respective retirements. Information regarding performance share
awards is set forth under the heading Compensation
Discussion and AnalysisComponents of Executive
Compensation. |
|
(4) |
|
For stock awards, the value realized is based on the average of
the high and low prices of our common stock on the vesting date. |
Pension
Benefits
Pension
Plan
Our eligible employees, and certain eligible employees of our
subsidiaries, participate in the Pension Plan. Our NEOs
participate on the same terms and conditions as other eligible
employees, except as noted below. The Pension Plan, as in effect
during 2007, provides each eligible employee with annual
retirement income beginning at age 65 equal to the product
of:
|
|
|
|
|
the total number of years of participation in the Pension Plan;
and
|
44
|
|
|
|
|
13/4%
of average compensation for the highest five years in the last
ten years of participation prior to retirement during which the
employee was most highly paid or, if higher, the last 60
consecutive months (final average earnings).
|
Average compensation under the Pension Plan includes salary and
annual incentive compensation. A social security offset is
subtracted from this benefit. The social security offset is
equal to the product of:
|
|
|
|
|
the total number of years of participation in the Pension Plan
(for years prior to February 1, 2008, this number was
capped at 35 years); and
|
|
|
|
an amount related to the participants primary social
security benefit.
|
Benefits can commence as early as age 55. However, if
pension benefits commence prior to age 65, they may be
actuarially reduced. The reduction in the gross benefit (prior
to offset for social security benefits) is based on the
participants age at retirement and years of Pension Plan
participation as follows:
|
|
|
|
|
If the participant has at least 25 years of Pension Plan
participation, benefits are unreduced at age 62. They are
reduced 2.5% per year from 62 to 60 (5% reduction at
60) and 5% per year from 60 to 55 (30% reduction at 55).
|
|
|
|
If the participant has at least 15 but less than 25 years
of Pension Plan participation, benefits are unreduced at
age 65. They are reduced 2% per year from 65 to 62 (6%
reduction at 62) and 4% per year from 62 to 61 (10%
reduction at 61) and 5% per year from 61 to 55 (40%
reduction at 55).
|
|
|
|
If the participant has less than 15 years of Pension Plan
participation, or if the participant terminates employment with
us before age 55, benefits are unreduced at age 65.
They are reduced 6.67% per year from 65 to 60 (33.3% reduction
at 60) and 3.33% per year from 60 to 55 (50% reduction at
55).
|
The participants social security benefit is reduced based
on factors relating to the participants year of birth and
age at retirement.
Benefits are generally paid in the form of an annuity. If a
participant retires and elects a joint and survivor annuity, the
Pension Plan provides a 10% subsidy. The portion of the
benefit attributable to the cash balance account, as described
in the following paragraph, may be paid in the form of a lump
sum upon termination of employment.
Effective January 1, 2001, we amended the Pension Plan to
provide a cash balance benefit, in lieu of the benefit described
above, to reduce the rate of increase in the Pension Plan costs.
This benefit provides for a participant to receive a credit to
his or her cash balance account every six months. The amount of
the cash balance credit increases as the sum of a
participants age and years of service credit increases
from 2.5% to 5% of compensation. The maximum credit of 5% of
compensation (subject to the maximum limitation on compensation
permitted by the Internal Revenue Code) earned over the
preceding six months is made when the sum of a
participants age and years of service credit equals or
exceeds 55 (which is the case for each NEO). Amounts credited to
a participants cash balance account earn interest at a
rate based on the
30-year
U.S. treasury bond rate. Participants who were hired by us
prior to January 1, 2001 (including
Messrs. OReilly, Motamed, Degnan and Krump) will
receive a benefit under the Pension Plan equal to the greater of
the pension benefit described in the preceding paragraphs or the
amount calculated under the cash balance formula.
ERISA and the Internal Revenue Code impose maximum limitations
on the recognized compensation and the amount of a pension which
may be paid under a funded defined benefit plan such as the
Pension Plan. The Pension Plan complies with these limitations.
Pension
Excess Benefit Plan
We also maintain the Pension Excess Benefit Plan, which is a
supplemental, nonqualified, unfunded plan. The Pension Excess
Benefit Plan uses essentially the same benefit formula, early
retirement reduction factors and other features as the Pension
Plan, except that the Pension Excess Benefit Plan recognizes
compensation (salary and annual incentive plan compensation)
above IRS compensation limits. The Pension Excess Benefit Plan
also
45
recognizes deferred compensation for purposes of determining
applicable retirement benefits. Benefits under both the Pension
Plan and the Pension Excess Benefit Plan are provided by us on a
noncontributory basis.
Benefits payable under the Pension Excess Benefit Plan are
generally paid in the form of a lump sum, calculated using an
interest discount rate of 5%. However, the portion of the
benefit that was earned and vested as of December 31,
2004 may be payable in certain other forms, including
installment payments and life annuities, if properly elected by
the participant and if the participant satisfies the
requirements of the Pension Excess Benefit Plan.
Pension
SERPMr. Finnegan
Under the terms of Mr. Finnegans employment
agreement, he is entitled to a Pension SERP, which provides a
nonqualified and unfunded benefit in addition to those provided
under the Pension Plan and the Pension Excess Benefit Plan. The
benefit will equal 6% of his final average compensation for each
full year of service up to a maximum of 60% of final average
compensation offset by benefits under the Pension Plan and
Pension Excess Benefit Plan, previous employer pension benefits
and social security benefits. The Pension Plan provisions
described above with respect to the early retirement discount
and joint and survivor benefits apply to the Pension SERP. Under
the Pension SERP, Mr. Finnegans compensation means
the sum of his annual salary plus annual incentive compensation
earned for the relevant year (whether or not any such
compensation is deferred).
Pension
Benefits Table
The following table sets forth information regarding
participation by our NEOs in our pension plans as of
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present Value
|
|
|
|
|
|
|
|
|
Years
|
|
|
of
|
|
|
Payments During
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
Last
|
|
|
|
|
|
Service
|
|
|
Benefit
|
|
|
Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)(1)(2)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
Pension Plan
|
|
|
4
|
|
|
$
|
45,858
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
4
|
|
|
|
735,296
|
|
|
|
|
|
|
|
Pension SERP
|
|
|
5
|
|
|
|
10,958,920
|
|
|
|
|
|
Michael OReilly
|
|
Pension Plan
|
|
|
37
|
|
|
|
1,405,580
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
37
|
|
|
|
9,370,760
|
|
|
|
|
|
Thomas F. Motamed
|
|
Pension Plan
|
|
|
30
|
|
|
|
942,436
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
30
|
|
|
|
7,094,158
|
|
|
|
|
|
John J. Degnan
|
|
Pension Plan
|
|
|
16
|
|
|
|
525,815
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
16
|
|
|
|
3,497,730
|
|
|
|
|
|
Paul J. Krump
|
|
Pension Plan
|
|
|
25
|
|
|
|
401,237
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
25
|
|
|
|
1,623,813
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the present value of the NEOs accumulated
pension benefit computed as of the same Pension Plan measurement
date we used for 2007 financial statement reporting. The
following actuarial assumptions were used:
Interest discount rate:
6.00%; |
Future interest crediting
rate on cash balance accounts: 5.00%;
Mortality table: RP 2000
projected to 2007; and
Pension Plan50% take
cash balance account as a lump sum;
Pension Excess Benefit
Plan80% take benefit as a lump sum; and
Pension SERPlump sum.
46
|
|
|
(2) |
|
The figures shown in the table above assume retirement benefits
commence at the earliest unreduced retirement age, reflecting
the assumptions described in the preceding footnote. However, if
the NEOs employment terminated or he retired on
December 31, 2007 (which is the assumption underlying the
figures set forth in the Voluntary
Resignation/Retirement column in the tables under the
heading Executive CompensationPotential Payments
upon Termination), and plan benefits were immediately
payable as lump sums (calculated using the 5% discount rate
specified in the plans), the Pension Excess Benefit Plan and
Pension SERP benefits, as applicable, would have been as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum
|
|
Name
|
|
Plan Name
|
|
|
Amount
|
|
|
John D. Finnegan
|
|
|
Pension Excess Benefit Plan
|
|
|
$
|
757,101
|
|
|
|
|
Pension SERP
|
|
|
|
12,810,046
|
|
Michael OReilly
|
|
|
Pension Excess Benefit Plan
|
|
|
|
9,575,328
|
|
Thomas F. Motamed
|
|
|
Pension Excess Benefit Plan
|
|
|
|
8,404,143
|
|
John J. Degnan
|
|
|
Pension Excess Benefit Plan
|
|
|
|
4,006,742
|
|
Paul Krump
|
|
|
Pension Excess Benefit Plan
|
|
|
|
1,511,672
|
|
Nonqualified
Defined Contribution and Deferred Compensation Plans
Deferred
Compensation Plans
Pursuant to the Deferred Compensation Plans, we provide certain
of our employees, including our NEOs, with the opportunity to
electively defer the payment of certain components of
compensation (annual salary, annual incentive compensation, RSUs
and performance share awards) that would otherwise be payable to
them. Deferred RSUs and performance share awards are deemed to
be invested in our common stock. Deferred annual salary and
annual incentive compensation are credited with earnings based
on the deemed returns that would have been received had such
amounts been invested in one of the investment options available
under the Deferred Compensation Plans that are generally
available for investment in the marketplace and as selected by
the participant. Dividends on deferred RSUs and performance
share awards are treated the same as an annual salary or annual
incentive compensation deferral. The investment options
available under the Deferred Compensation Plans are the same as
those investment alternatives that are available under the CCAP
Plan except for the Chubb Stock Fund. Investment elections may
be changed by the participant at any time, at his or her
discretion.
CCAP
Excess Benefit Plan
We also maintain the CCAP Excess Benefit Plan which is a
supplemental, nonqualified, unfunded excess defined contribution
plan. The CCAP Excess Benefit Plan recognizes compensation in
excess of IRS limits for the CCAP and provides the participants
with the applicable company match on eligible compensation.
Matching contributions for each of the NEOs equal 4% of plan
compensation. Each of our NEOs has elected to defer receipt of
matching contribution amounts attributable to the CCAP Excess
Benefit Plan. Balances are invested in the Fidelity Stable Value
Fund, which is one of the investment funds available under the
CCAP. For 2007, the Fidelity Stable Value Fund had a 4.71%
return.
CCAP
SERPMr. Finnegan
Mr. Finnegans employment agreement also provides that
he is entitled to the CCAP SERP. The CCAP Excess Benefit Plan,
like the CCAP, requires a one-year waiting period before a
participant becomes eligible for our company matching
contributions and has a six-year graded vesting schedule.
Mr. Finnegans employment agreement, however, provides
that he is entitled to the matching contributions for eligible
deferrals from his employment date and provides that the CCAP
SERP will pay any otherwise unvested company match dollars
forfeited under the CCAP and CCAP Excess Benefit Plan if his
employment with us terminates prior to his becoming being 100%
vested. Amounts credited to the CCAP SERP account earn 5%
interest per annum.
47
ESOP
Excess Benefit Plan
In 2004, the company merged the Employee Stock Ownership Plan
(the ESOP) and the ESOP Excess Benefit Plan into the respective
CCAP and CCAP Excess Plans. No new shares or contributions are
credited to balances under the ESOP and the ESOP Excess Benefit
Plan. Annual earnings for the ESOP Excess Benefit Plan include
only the change in account balance attributable to change in
stock price and any dividends.
ESOP
SERPMr. Finnegan
Mr. Finnegans employment agreement also provides that
he is entitled to the ESOP SERP. The ESOP and ESOP Excess
Benefit Plan included a one-year waiting period prior to entry
as well as five years of vesting service.
Mr. Finnegans employment agreement, however, provides
that he was credited with an amount equal to the stock that he
would have been entitled under the ESOP and ESOP Excess Benefit
Plan from his date of employment and provides that the ESOP SERP
account is immediately vested and the balance credited
thereunder earns 5% interest per annum.
Nonqualified
Defined Contribution and Deferred Compensation
Table
The following table sets forth information regarding
participation by our NEOs in our nonqualified defined
contribution and deferred compensation plans as of
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last
|
|
|
in Last
|
|
|
Last
|
|
|
Withdrawals/
|
|
|
Last Fiscal
|
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Distributions
|
|
|
Year-End
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
$
|
3,212,307
|
|
|
$
|
131,708
|
|
|
$
|
342,106
|
|
|
$
|
100,495
|
|
|
$
|
8,983,322
|
|
Michael OReilly
|
|
|
|
|
|
|
50,670
|
|
|
|
67,947
|
|
|
|
|
|
|
|
1,406,231
|
|
Thomas F. Motamed
|
|
|
1,207,735
|
|
|
|
58,984
|
|
|
|
68,654
|
|
|
|
12,946
|
|
|
|
2,161,350
|
|
John J. Degnan
|
|
|
1,016,402
|
|
|
|
48,370
|
|
|
|
78,298
|
|
|
|
10,895
|
|
|
|
2,233,388
|
|
Paul J. Krump
|
|
|
|
|
|
|
26,663
|
|
|
|
40,179
|
|
|
|
|
|
|
|
917,115
|
|
|
|
|
(1) |
|
Represents RSU deferrals for Messrs. Finnegan, Motamed and
Degnan in the amounts of $2,937,307, $1,207,735 and $1,016,402,
respectively. Mr. Finnegans amount also includes the
deferral of $275,000 of his 2007 annual salary. This amount is
included in the Salary column of the table set forth
under the heading Executive CompensationSummary
Compensation Table. All of these deferrals were made under
the 2005 Deferred Compensation Plan. For 2006, the only deferral
amount reported was Mr. Finnegans salary deferral of
$275,000. |
|
(2) |
|
Represents the company match for the CCAP Excess Benefit Plan. |
|
(3) |
|
The following table reflects the components for the
Aggregate Earnings in Last Fiscal Year column: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCAP Excess
|
|
|
|
|
|
|
|
|
ESOP Excess
|
|
|
|
|
|
|
Benefit Plan and
|
|
|
Deferred
|
|
|
Appreciation and
|
|
|
Benefit Plan and
|
|
|
|
|
|
|
CCAP SERP
|
|
|
Compensation
|
|
|
Dividends on
|
|
|
ESOP SERP
|
|
|
|
|
|
|
Earnings
|
|
|
Earnings
|
|
|
Deferred RSUs
|
|
|
Earnings
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
$
|
21,007
|
|
|
$
|
79,970
|
|
|
$
|
228,907
|
|
|
$
|
12,222
|
|
|
$
|
342,106
|
|
Michael OReilly
|
|
|
22,613
|
|
|
|
|
|
|
|
|
|
|
|
45,334
|
|
|
|
67,947
|
|
Thomas F. Motamed
|
|
|
15,940
|
|
|
|
|
|
|
|
23,436
|
|
|
|
29,278
|
|
|
|
68,654
|
|
John J. Degnan
|
|
|
14,334
|
|
|
|
3,221
|
|
|
|
19,723
|
|
|
|
41,020
|
|
|
|
78,298
|
|
Paul J. Krump
|
|
|
7,013
|
|
|
|
21,591
|
|
|
|
|
|
|
|
11,575
|
|
|
|
40,179
|
|
|
|
|
(4) |
|
Represents dividends paid on deferred vested RSUs for
Messrs. Finnegan, Motamed and Degnan. |
48
Potential
Payments upon Termination
Accrued
Compensation and Benefits
As of December 31, 2007, each of our NEOs was fully
entitled to the amounts set forth under the heading
Executive CompensationPension Benefits and the
amounts set forth under the heading Executive
CompensationNonqualified Defined Contribution and Deferred
Compensation Plans. In addition, at that date, each NEO
was entitled to receive all earned but unpaid salary, other
vested long-term equity awards (as set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End and the other applicable tables set forth
under the heading Executive Compensation), amounts
held in his account under the CCAP and employee welfare plans.
Termination
Events
Disability or Death. With the exception of
Mr. Finnegan, a termination of employment due to disability
or death does not entitle our NEOs to payments or benefits that
are not generally available to salaried employees.
Equity Awards. With respect to equity
awards, under the terms of the 2004 Employee Plan, upon the
disability or death of a participant, including each of our
NEOs, the participant or the participants estate, as
applicable, would receive pro-rata vesting of the unvested
portion of outstanding RSUs and continuation of the exercise
period within which the participant or the participants
estate may exercise outstanding options through the stated
expiration date of such options. With respect to performance
share awards, if a participants employment terminates due
to disability or death on or after the completion of the first
calendar year of any performance period, the participant or the
participants estate, as applicable, would receive all of
the performance shares for the performance period that would
have been earned had the participant continued employment for
the full period (with payments contingent on our relative TSR
over the performance period).
Mr. Finnegan. In addition to the
equity vesting provisions described in the preceding paragraph,
Mr. Finnegans employment agreement calls for us to
provide him with a death benefit equal to fives times his annual
salary as of the time of his death. We provide all of our
salaried employees, including Mr. Finnegan, with life
insurance coverage under our group life plan in an amount equal
to the employees annual salary. The remainder of
Mr. Finnegans death benefit (four times his annual
salary) is in the form of an unsecured, uninsured claim against
our general corporate assets. In the event of
Mr. Finnegans disability, his employment agreement
provides that he is entitled to receive a disability benefit
equal to 60% of his annual salary as of the date of disability
until he reaches age 65. We provide this coverage in the
form of an unsecured, uninsured disability benefit.
Mr. Finnegans employment agreement also provides that
he or his estate, as applicable, would be entitled to a pro-rata
portion of the annual incentive compensation award he would have
received for the year of his disability or death. For purposes
of Mr. Finnegans employment agreement, disability
means Mr. Finnegans inability to perform his duties
on a full-time basis for six consecutive months as a result of
incapacity due to mental or physical illness.
Retirement. Each of
Messrs. OReilly, Motamed and Degnan is eligible for
retirement under many of our compensation and benefit plans and
arrangements. Accordingly, other than in connection with a
termination for cause or a change in control, the termination of
employment of any of these individuals would be treated as a
retirement, as is the case for all of our retirement-eligible
salaried employees. As such, pursuant to the terms of the 2004
Employee Plan and its predecessor plans, upon termination of his
employment, other than for cause or in connection with a change
in control, each of Messrs. OReilly, Motamed and
Degnan would receive pro-rata vesting of the unvested portion of
outstanding RSUs, continued vesting of all performance shares
for which the first calendar year of the performance period has
been completed (with payments contingent on actual performance
for the performance period) and continuation of the exercise
period within which he may exercise his outstanding options
through the stated expiration date of such options.
49
For Cause Termination. None of our NEOs is
entitled to any additional payments or benefits in the event we
terminate his employment for cause. Under the 2004 Employee
Plan, cause means:
|
|
|
|
|
the willful failure of a participant to perform his or her
employment-related duties or gross negligence in the performance
of such duties;
|
|
|
|
a participants willful or serious misconduct that has
caused or could reasonably be expected to result in material
injury to our business or reputation;
|
|
|
|
a participants indictment for a crime constituting a
felony; or
|
|
|
|
a material breach by a participant of any written covenant or
agreement with us or any of our written policies.
|
The 2004 Employee Plan provides that the definition of cause in
an employment or severance agreement will govern in lieu of the
foregoing definition. Accordingly, the definition of cause in
Mr. Finnegans employment agreement applies for
purposes of the 2004 Employee Plan. Therefore, in his case,
cause means:
|
|
|
|
|
Mr. Finnegans willful and continued failure to
perform his duties under the terms of his employment agreement;
|
|
|
|
Mr. Finnegans willful engagement in any malfeasance,
fraud, dishonesty or gross misconduct in connection with his
position as our President and Chief Executive Officer or as a
member of our Board that causes us material damage;
|
|
|
|
Mr. Finnegans conviction of, or plea of guilty or
nolo contendere to, a felony; or
|
|
|
|
Mr. Finnegans breach of certain representations,
warranties and covenants contained in his employment agreement
that materially damage or could reasonably be expected to
materially damage us.
|
Voluntary Resignation. Mr. Krump is
not entitled to any payments or benefits that are not available
to salaried employees generally upon voluntary resignation. As
discussed above, Messrs. OReilly, Motamed and Degnan
are retirement-eligible for purposes of many of our plans.
Accordingly, a resignation by any of them would be treated as a
retirement under such plans. Under Mr. Finnegans
employment agreement, in the event of his voluntary resignation,
he is entitled to receive retiree health benefits pursuant to
our retiree health plans that would be available to an employee
with 32 years of service with us.
Involuntary Termination without
Cause. Except for Mr. Finnegan and as
discussed below for Messrs. OReilly, Motamed and
Degnan in connection with a change in control, neither a
termination of employment by us without cause nor a demotion or
other constructive termination would entitle our NEOs to any
payments or benefits that are not available to salaried
employees generally. The severance policy applicable to all of
our salaried employees generally provides two weeks of severance
pay for each year of service up to a maximum of 52 weeks.
As discussed above, Messrs. OReilly, Motamed and
Degnan are all retirement-eligible for purposes of many of our
plans. Accordingly, for any of them, an involuntary termination
without cause would be treated as a retirement under such plans.
Mr. Finnegans employment agreement provides that,
upon the termination of his employment without cause, his
constructive termination or in the event we elect not to renew
his employment agreement in accordance with its terms, he is
entitled to receive the following benefits beyond those
generally available to our salaried employees:
|
|
|
|
|
current annual salary (without proration)
|
|
|
|
pro-rated annual incentive compensation for the year of his
termination;
|
|
|
|
a severance payment equal to the sum of up to 2.5 times (with
the 2.5 multiple being subject to reduction as described below)
the sum of his then-current annual salary and the average amount
of his annual incentive compensation paid in the preceding three
years;
|
|
|
|
up to 2.5 years of additional age and service credit for
purposes of his supplemental retirement benefits (with the 2.5
multiple being subject to reduction as described below);
|
50
|
|
|
|
|
up to 2.5 years of continued health and welfare benefits
(with the 2.5 multiple being subject to reduction as described
below) under our employee welfare plans and then retiree
benefits; and
|
|
|
|
if any payments or benefits that Mr. Finnegan receives are
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code on golden parachute payments, an
additional payment to him to restore him to the after-tax
position that he would have been in if the excise tax had not
been imposed.
|
In addition, any outstanding equity awards would accelerate and
vest in full (subject to the achievement of the performance
goals in the case of performance shares) and his stock options
would continue to be exercisable until the earlier of the fifth
anniversary of the date of termination of his employment or the
expiration of the option term.
In the case of our non-renewal of his employment agreement only,
the 2.5 multiplier decreases by 0.5 when Mr. Finnegan
attains age 58 and decreases by an additional 0.5 on each
of anniversary of such date so that when Mr. Finnegan turns
62, this multiplier will be zero. In addition, the obligation to
continue to provide health and welfare benefits would cease if
Mr. Finnegan receives such benefits from a new employer. As
of December 31, 2007, Mr. Finnegans severance
multiplier was equal to 2.5.
Under Mr. Finnegans employment agreement,
constructive termination means his voluntary termination of
employment following:
|
|
|
|
|
a reduction in Mr. Finnegans annual salary or target
annual incentive compensation;
|
|
|
|
our failure to appoint Mr. Finnegan as our President and
Chief Executive Officer and as a member of our Board or his
removal from any of these positions;
|
|
|
|
a material diminution in Mr. Finnegans duties or
responsibilities or the assignment to him of duties or
responsibilities materially inconsistent with his position and
status as our President and Chief Executive Officer;
|
|
|
|
a material change in Mr. Finnegans reporting
relationship so that he no longer reports solely to our Board in
his positions as President and Chief Executive Officer;
|
|
|
|
our breach of any of material obligations to Mr. Finnegan
under the terms of his employment agreement;
|
|
|
|
our breach of certain representations, warranties and covenants
set forth in Mr. Finnegans employment agreement; or
|
|
|
|
our requiring that Mr. Finnegans principal location
of employment to be at any office or location more than
50 miles from our corporate headquarters in Warren, New
Jersey.
|
Mr. Finnegans employment agreement requires
Mr. Finnegan to comply with confidentiality,
non-competition and non-solicitation covenants. The
non-competition and non-solicitation provisions run during the
term of Mr. Finnegans employment through the second
anniversary of the termination thereof.
Change
in Control
Equity Awards. Under the terms of the 2004
Employee Plan, if outstanding equity awards are assumed by an
acquirer in accordance with the terms of the 2004 Employee Plan,
the awards would remain outstanding and vesting would not
accelerate. In the event of a change in control in which the
acquirer did not assume outstanding equity awards in accordance
with the 2004 Employee Plan, RSUs would vest in full and
performance share awards would become earned and payable at 100%
of the applicable target award. These provisions would apply to
the outstanding RSUs and performance share awards held by
Messrs. OReilly, Motamed, Degnan and Krump as of
December 31, 2007. The impact of a change in control on
Mr. Finnegans equity awards is discussed below. For
purposes of the 2004 Employee Plan, change in control is defined
as:
|
|
|
|
|
the acquisition of 20% or more of our shares by any person;
|
|
|
|
a change in a majority of the members of our Board due to a
proxy contest or tender or exchange offer; or
|
51
|
|
|
|
|
a merger, reorganization or similar transaction (including a
sale of substantially all assets), where our shareholders
immediately prior to such transaction do not control more than
50% of the surviving entity immediately after the transaction.
|
Mr. Finnegan. Upon the occurrence
of a change in control (as defined below),
Mr. Finnegans employment agreement would be
superseded by his change in control employment agreement with
us. Mr. Finnegans change in control employment
agreement provides generally that the terms and conditions of
his employment (including position, location and benefits) may
not be adversely changed during the three-year period after a
change in control. The change in control employment agreement
contains a double trigger mechanism such that (i) if a
change in control occurs, and (ii) Mr. Finnegans
employment is terminated (other than for cause, death or
disability), or constructively terminated, during the three-year
period following a change in control, Mr. Finnegan would be
entitled to receive:
|
|
|
|
|
pro-rated annual incentive compensation through the date of
termination for the year in which the termination of employment
occurs;
|
|
|
|
three times the sum of his then-current annual salary and
highest annual bonus over the past three years, including any
bonus payable for the current year;
|
|
|
|
three years of additional age and service credit for purposes of
the supplemental retirement benefits;
|
|
|
|
three years of continued health and welfare benefits (or, if
shorter, until a new employer provides these benefits) under our
employee welfare plans and thereafter retiree benefits;
|
|
|
|
up to $100,000 of outplacement services; and
|
|
|
|
if any payments or benefits that Mr. Finnegan receives are
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code on golden parachute payments, an
additional payment to him to restore him to the after-tax
position that he would have been in if the excise tax had not
been imposed.
|
In addition, any outstanding equity awards would vest and his
stock options would continue to be exercisable until the earlier
of the fifth anniversary of the date of termination of his
employment or the expiration of the option term.
Mr. Finnegan also is entitled to reimbursement for legal
fees he incurs as a result of the termination of his employment.
For purposes of Mr. Finnegans change in control
employment agreement, change in control means:
|
|
|
|
|
the acquisition of 20% or more of our outstanding common stock
by any person;
|
|
|
|
continuing directors (or their approved successors) ceasing to
constitute a majority of our Board;
|
|
|
|
a merger, reorganization or similar transaction (including a
sale of substantially all assets), where our shareholders
immediately prior to such transaction do not control more than
50% of the surviving entity immediately after the transaction; or
|
|
|
|
shareholder approval of any plan or proposal for our liquidation
or dissolution.
|
Mr. Finnegans change in control employment agreement
requires Mr. Finnegan to comply with confidentiality,
non-competition and non-solicitation covenants. The
non-competition and non-solicitation provisions run during the
term of Mr. Finnegans employment through the second
anniversary of the termination thereof.
Vice Chairmen Change in Control
Agreements. In addition to the above terms
with respect to equity awards, we have entered into change in
control agreements with Messrs. OReilly, Motamed and
Degnan. These agreements come into effect in the event that the
employment of any of these individuals is terminated (other than
as a result of death, disability, retirement, voluntary
termination by the individual or for cause) or is constructively
terminated within two years after the effective date of the
change in control (as defined below). Upon actual or
constructive termination following a change in control, the
affected individual is entitled to receive a severance payment
equal to two times the sum of:
|
|
|
|
|
the individuals then-current annual salary; and
|
52
|
|
|
|
|
the average amount of the individuals annual incentive
compensation for the last three years;
|
provided that the amount of the severance payment cannot exceed
the amount the individual would have received had he remained in
our employment until his normal retirement age under the Pension
Plan. In addition to severance, the individual also is entitled
to reimbursement for legal fees incurred by the individual as a
result of the termination and continuation of health and other
welfare benefits for a period of two years after the date of
termination. The agreements do not provide for a
gross-up of
any excise taxes that might be triggered by these payments.
For purposes of these agreements, change in control means:
|
|
|
|
|
following a tender or exchange offer, a proxy contest or a
merger, consolidation or sale of substantially all of our
business or our assets, the members of our Board immediately
prior to the event do not constitute a majority of our Board
following such event and for one year thereafter; or
|
|
|
|
any person acquires more than 25% of our outstanding common
stock.
|
For purposes of these agreements, cause means:
|
|
|
|
|
the individuals willful and continued failure to perform
his duties;
|
|
|
|
the individuals willful engagement in misconduct which is
materially injurious to us.
|
For purposes of these agreements, constructive termination means
the individuals voluntary termination of employment
following the occurrence of certain events, including:
|
|
|
|
|
the assignment to the individual, without his express written
consent, of any duties inconsistent with his positions, duties,
responsibilities, authority and status immediately prior to the
change in control;
|
|
|
|
a change in reporting responsibilities, titles or offices as in
effect immediately prior to the change in control or any removal
of, or any failure to re-elect, the individual to any of such
positions, except in limited circumstances;
|
|
|
|
a reduction in the individuals annual salary as in effect
at the time of the change in control;
|
|
|
|
our failure to continue the individuals participation in
certain compensation plans in effect at the time of the change
in control; or
|
|
|
|
our requiring the individual to maintain his principal office or
conduct his principal activities anywhere other than our
corporate headquarters located within the New York Metropolitan
area (including Warren, New Jersey).
|
Mr. Krump. Mr. Krump is not
entitled to any payments or benefits beyond those available to
salaried employees generally upon a change in control.
53
Estimate
of Incremental Potential Payment
The following tables quantify the additional payments and
benefits under the compensation and benefit plans and
arrangements to which our NEOs would be entitled upon
termination of employment under the termination scenarios
described above that are beyond those generally available to our
salaried employees. Because the payments to be made to an NEO
depend on several factors, the actual amounts to be paid out
upon a triggering event can only be determined at the time of
the triggering event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Finnegan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
Termination
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
after Change in
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Control ($)
|
|
|
Cash
Payment(1)(2)
|
|
|
$5,100,000
|
|
|
|
$4,034,854
|
|
|
|
|
|
|
|
$9,427,167
|
|
|
|
$14,534,700
|
|
RSUs(3)
|
|
|
4,248,998
|
|
|
|
4,248,998
|
|
|
|
|
|
|
|
6,863,926
|
|
|
|
6,863,926
|
|
Performance
Shares(4)
|
|
|
25,434,062
|
|
|
|
25,434,062
|
|
|
|
|
|
|
|
25,434,062
|
|
|
|
12,717,031
|
|
Retirement
Benefits(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,256,456
|
|
|
|
11,154,109
|
|
Retiree Medical
Benefits(6)
|
|
|
106,600
|
|
|
|
191,129
|
|
|
|
$191,129
|
|
|
|
191,129
|
|
|
|
191,129
|
|
Other
Benefits(7)
|
|
|
26,012
|
|
|
|
26,012
|
|
|
|
|
|
|
|
26,012
|
|
|
|
126,012
|
|
Gross-up on
Excise
Tax(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,639,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$34,915,672
|
|
|
|
$33,935,055
|
|
|
|
$191,129
|
|
|
|
$51,198,752
|
|
|
|
$64,226,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the event of death, reflects an incremental death benefit of
four times annual salary as of December 31, 2007
($1,275,000). In the event of disability, reflects the present
value of payments equal to 60% of annual salary until
age 65. In the event of a termination without cause,
reflects a multiple of annual salary as of December 31,
2007 and the average of Mr. Finnegans last three
annual incentive compensation awards ($2,495,867). In the event
of a termination without cause or a constructive termination in
connection with a change in control, reflects a multiple of
annual salary and the highest of his last three annual incentive
compensation awards ($3,569,900). |
|
(2) |
|
Except for the amount listed under Involuntary Termination or
Constructive Termination after Change in Control, these amounts
do not include any amounts attributable to
Mr. Finnegans 2007 annual incentive compensation
award to be paid in March 2008 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $54.58 per share on December 31,
2007. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
shares based on our closing stock price of $54.58 per share on
December 31, 2007. In the case of a termination of
Mr. Finnegans employment without cause or due to
death or disability, the number of performance shares that vest
would be based on our actual performance at the end of the
performance period and, for purposes of this calculation,
reflects the same performance assumptions used for
Mr. Finnegans outstanding performance share awards
set forth under the heading Executive
CompensationOutstanding Equity Awards at Fiscal
Year-End. In the event of an involuntary termination or
constructive termination after a change in control, the number
of performance shares that vest would be based on target
performance. |
|
(5) |
|
Reflects the value attributable to additional age and service
credit under Mr. Finnegans Pension SERP. |
|
(6) |
|
Mr. Finnegans employment agreement provides for
retiree medical benefits assuming that Mr. Finnegan had
32 years of service at retirement. None of our other
employees hired on or after January 1, 1999 receives
company-subsidized retiree medical benefits. The present value
of these benefits is calculated based on the assumptions used
for financial reporting purposes at year-end 2007, including a
discount rate of 6.0%, medical |
54
|
|
|
|
|
trend of 8.75% in 2008 grading down to 5% per year in 2014 and
later and assuming retirement at December 31, 2007. |
|
(7) |
|
Represents outplacement benefits (in the case of a termination
in connection with a change in control) and executive financial
counseling. |
|
(8) |
|
This calculation is an estimate for proxy disclosure purposes
only. Payments upon a change in control may differ based on
factors such as transaction price, timing of employment
termination and payments, changes in compensation and reasonable
compensation analyses. For purposes of this calculation, no
portion of the performance shares that would accelerate upon a
change in control have been treated as reasonable compensation
for services rendered prior to the change in control or no value
has been attributed to non-competition covenants. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael OReilly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,008,664
|
|
RSUs(4)
|
|
$
|
1,397,685
|
|
|
$
|
1,397,685
|
|
|
$
|
1,397,685
|
|
|
$
|
1,397,685
|
|
|
|
2,257,811
|
|
Performance
Shares(5)
|
|
|
8,366,459
|
|
|
|
8,366,459
|
|
|
|
8,366,459
|
|
|
|
8,366,459
|
|
|
|
4,183,230
|
|
Other
Benefits(6)
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
18,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,776,144
|
|
|
$
|
9,776,144
|
|
|
$
|
9,776,144
|
|
|
$
|
9,776,144
|
|
|
$
|
7,467,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. OReilly was eligible for retirement as of
December 31, 2007. |
|
(2) |
|
Figure reflected in the Involuntary Termination or
Constructive Termination after Change in Control column
represents two years of compensation (reduced as described in
the next sentence) based on Mr. OReillys annual
salary as of December 31, 2007 ($703,500) and the average
of his last three annual incentive compensation award payments
($963,533). Since Mr. OReilly will reach normal
retirement age during the two-year period, his cash payments
cease as of his normal retirement age. |
|
(3) |
|
Does not include any amounts attributable to
Mr. OReillys 2007 annual incentive compensation
award to be paid in March 2008 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(4) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $54.58 per share on December 31,
2007. |
|
(5) |
|
Reflects fair market value of accelerated unearned performance
shares based on our closing stock price of $54.58 per share on
December 31, 2007. In the case of a termination of
Mr. OReillys employment due to death,
disability, retirement or termination without cause, the number
of performance shares that vest would be based on our actual
performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. OReillys outstanding
performance share awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an involuntary
termination or constructive termination after a change in
control, performance shares would become payable at 100% of the
applicable target award. |
|
(6) |
|
Represents the value attributable to two years of executive
financial counseling ($12,000) and, in the case of a termination
in connection with a change in control, two years of life
insurance premiums ($6,200). |
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas F. Motamed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,819,900
|
|
RSUs(4)
|
|
$
|
1,663,162
|
|
|
$
|
1,663,162
|
|
|
$
|
1,663,162
|
|
|
$
|
1,663,162
|
|
|
|
2,686,755
|
|
Performance
Shares(5)
|
|
|
9,956,156
|
|
|
|
9,956,156
|
|
|
|
9,956,156
|
|
|
|
9,956,156
|
|
|
|
4,978,078
|
|
Other
Benefits(6)
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
16,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,631,318
|
|
|
$
|
11,631,318
|
|
|
$
|
11,631,318
|
|
|
$
|
11,631,318
|
|
|
$
|
11,501,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Motamed was eligible for retirement as of
December 31, 2007. |
|
(2) |
|
Figure reflected in the Involuntary Termination or
Constructive Termination after Change in Control column
represents two times the sum of Mr. Motameds annual
salary as of December 31, 2007 ($761,250) and the average
of his last three annual incentive compensation award payments
($1,148,700). |
|
(3) |
|
Does not include any amounts attributable to
Mr. Motameds 2007 annual incentive compensation award
to be paid in March 2008 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(4) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $54.58 per share on December 31,
2007. |
|
(5) |
|
Reflects fair market value of accelerated unearned performance
shares based on our closing stock price of $54.58 per share on
December 31, 2007. In the case of a termination of
Mr. Motameds employment due to death, disability,
retirement or termination without cause, the number of
performance shares that vest would be based on our actual
performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Motameds outstanding
performance share awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an involuntary
termination or constructive termination after a change in
control, performance shares would become earned and payable at
100% of the applicable target award. |
|
(6) |
|
Represents the value attributable to two years of executive
financial counseling ($12,000) and, in the case of a termination
in connection with a change in control, two years of life
insurance premiums ($4,370). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,834,393
|
|
RSUs(4)
|
|
$
|
1,358,496
|
|
|
$
|
1,358,496
|
|
|
$
|
1,358,496
|
|
|
$
|
1,358,496
|
|
|
|
2,194,498
|
|
Performance
Shares(5)
|
|
|
8,132,311
|
|
|
|
8,132,311
|
|
|
|
8,132,311
|
|
|
|
8,132,311
|
|
|
|
4,066,155
|
|
Other
Benefits(6)
|
|
|
24,300
|
|
|
|
24,300
|
|
|
|
24,300
|
|
|
|
24,300
|
|
|
|
45,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,515,107
|
|
|
$
|
9,515,107
|
|
|
$
|
9,515,107
|
|
|
$
|
9,515,107
|
|
|
$
|
9,140,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Degnan was eligible for retirement as of
December 31, 2007 under all plans except our retiree
medical plan. |
|
(2) |
|
Figure reflected in the Involuntary Termination or
Constructive Termination after Change in Control column
represents two years of compensation (reduced as described in
the next sentence) based on Mr. Degnans annual |
56
|
|
|
|
|
salary as of December 31, 2007 ($677,250) and the average
of his last three annual incentive compensation award payments
($930,300). Since Mr. Degnan will reach normal retirement
age during the two-year period, his cash payments will cease as
of his normal retirement age. |
|
(3) |
|
Does not include any amounts attributable to
Mr. Degnans 2007 annual incentive compensation award
to be paid in March 2008 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(4) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $54.58 per share on December 31,
2007. |
|
(5) |
|
Reflects fair market value of accelerated unearned performance
shares based on our closing stock price of $54.58 per share on
December 31, 2007. In the case of a termination of
Mr. Degnans employment due to death, disability,
retirement or termination without cause, the number of
performance shares that vest would be based on our actual
performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Degnans outstanding
performance share awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an involuntary
termination or constructive termination after a change in
control, performance shares would become earned and payable at
100% of the applicable target award. |
|
(6) |
|
Represents the value attributable to two years of executive
financial counseling ($24,300) and, in the case of a termination
in connection with a change in control, two years of
(i) life insurance premiums ($5,970) and (ii) medical
and dental coverage ($15,260). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Krump
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(3)
|
|
$
|
228,799
|
|
|
$
|
228,799
|
|
|
|
|
|
|
|
|
|
|
$
|
373,655
|
|
Performance
Shares(4)
|
|
|
1,413,731
|
|
|
|
1,413,731
|
|
|
|
|
|
|
|
|
|
|
|
706,866
|
|
Retirement
Benefits(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(6)
|
|
|
13,720
|
|
|
|
13,720
|
|
|
|
|
|
|
|
13,720
|
|
|
|
13,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,656,250
|
|
|
$
|
1,656,250
|
|
|
|
|
|
|
$
|
13,720
|
|
|
$
|
1,094,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Krump was not eligible for retirement as of
December 31, 2007. |
|
(2) |
|
Does not include any amounts attributable to
Mr. Krumps 2007 annual incentive compensation award
to be paid in March 2008 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $54.58 per share on December 31,
2007. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
shares based on our closing stock price of $54.58 per share on
December 31, 2007. In the case of a termination of
Mr. Krumps employment due to death, disability or
without cause, the number of performance shares that vest would
be based on our actual performance at the end of the performance
period and, for purposes of this calculation, reflects the same
performance assumptions used for Mr. Krumps
outstanding performance share awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an involuntary
termination or constructive termination after a change in
control, performance shares would become earned and payable at
100% of the applicable target award. |
57
|
|
|
(5) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $2,258,069. For
Mr. Krump, the pre-retirement survivors benefit is
more valuable than the benefits that he would have received in
the event of a voluntary termination due to his commencement of
employment prior to January 1, 2001. |
|
(6) |
|
Represents the value attributable to continuation of two years
of executive financial counseling. |
58
The following table shows certain information with respect to
our equity compensation plans as of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
Securities Remaining
|
|
|
|
Securities
|
|
|
|
|
|
Available for Future
|
|
|
|
to Be Issued
|
|
|
Weighted-Average
|
|
|
Issuance under
|
|
|
|
upon Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Plans (excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
securities reflected
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
in column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
15,757,272
|
(2)
|
|
$
|
33.81
|
(4)
|
|
|
24,061,558
|
(6)
|
Equity compensation plans not approved by security
holders(1)
|
|
|
275,853
|
(3)
|
|
$
|
52.02
|
(5)
|
|
|
373,522
|
|
Total
|
|
|
16,033,125
|
|
|
$
|
33.84
|
(4)(5)
|
|
|
24,435,080
|
|
|
|
|
(1) |
|
These plans are the CCAP Excess Benefit Plan and the Director
Deferred Compensation Program, under which 153,004 shares
of common stock and 220,518 shares of common stock,
respectively, are available for future issuance. |
|
|
|
The CCAP Excess Benefit Plan is a nonqualified, defined
contribution plan and covers those participants in the CCAP and
the ESOP whose total benefits under those plans are limited by
certain provisions of the Internal Revenue Code. A participant
in the CCAP Excess Benefit Plan is entitled to a benefit
equaling the difference between the participants benefits
under the CCAP and the ESOP, without considering the applicable
limitations of the Internal Revenue Code, and the
participants actual benefits under such plans. A
participants excess ESOP benefit is expressed as shares of
our common stock. Payments under the CCAP Excess Benefit Plan
are generally made: (i) for excess benefits related to the
CCAP in cash annually as soon as practical after the amount of
excess benefit can be determined; and (ii) for excess
benefits related to the ESOP, in common stock as soon as
practicable after the earlier of the participants 65th
birthday or termination of employment. The ESOP expired in 2004.
Accordingly, other than dividends, no new contributions are made
to the ESOP or the CCAP Excess Benefit Plan with respect to
excess ESOP benefits. Additional information regarding the CCAP
and the CCAP Excess Benefit Plan is set forth under the heading
Compensation Discussion and
AnalysisCompany-Sponsored Benefit Plans. |
|
|
|
The material terms of the Director Deferred Compensation Program
are described under the heading Corporate
GovernanceDirectors Compensation. |
|
(2) |
|
Includes 3,682,319 shares, representing 200% of the
aggregate target for the performance share awards for the
three-year performance periods ending December 31, 2008 and
December 31, 2009, which is the maximum number of shares
issuable under these awards and 1,069,457 shares for the
performance period ended December 31, 2007. The
December 31, 2007 performance shares are shown at the
actual payout percentage of 136.6% of target. Shortly after the
end of each performance period, our Compensation Committee will
determine the actual number of shares to be received by 2004
Employee Plan participants for the awards which vest on
December 31, 2008 and December 31, 2009. |
|
(3) |
|
Includes an aggregate of 16,681 shares issuable upon
exercise of the special option grants awarded to two independent
directors in 2002 as individual compensation for their service
on our CEO search committee. |
|
(4) |
|
Weighted average exercise price excludes shares issuable under
outstanding performance share awards, RSU awards and director
stock unit awards. |
|
(5) |
|
Weighted average exercise price consists of exercise price of
special option grants described in note (3) above, and
excludes shares issuable in connection with the CCAP Excess
Benefit Plan and the Director Deferred Compensation Program. |
|
(6) |
|
Includes 14,139,932 shares available for issuance under the
Global Employee Stock Purchase Plan (2001),
9,575,399 shares available for issuance under the 2004
Employee Plan (which includes 496,355 shares previously
reserved for issuance in connection with the 2005 performance
share awards) and 346,227 shares available for issuance
under the 2004 Director Plan. |
59
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning
the only persons or entities known to us to be beneficial owners
of more than 5% of our outstanding common stock. The information
below is as reported by that entity in statements filed with the
SEC.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
|
|
Ownership of
|
|
|
|
|
Name and Address
|
|
Common Stock
|
|
|
Percent of
Class(3)
|
|
|
Dodge & Cox
|
|
|
19,934,285
|
(1)
|
|
|
5.2
|
%
|
Morgan Stanley
|
|
|
23,740,226
|
(2)
|
|
|
6.2
|
%
|
|
|
|
(1) |
|
Reflects ownership as of December 31, 2007 as reported on
an amendment to Schedule 13G filed with the SEC by
Dodge & Cox, located at 555 California Street,
40th
Floor, San Francisco, CA 94104. Dodge & Cox
reports sole voting power over 18,810,785 of the reported
shares, shared voting power over 50,300 of the reported shares
and sole dispositive power over 19,934,285 of the reported
shares. Dodge & Cox has certified that these shares of
our common stock were acquired in the ordinary course of
business and were not acquired for the purpose of, and do not
have the effect of, changing or influencing the control of Chubb
and were not acquired in connection with or as a participant in
any transaction having such purpose or effect. |
|
(2) |
|
Reflects ownership as of December 31, 2007 as reported on a
Schedule 13G filed with the SEC by Morgan Stanley, located
at 1585 Broadway, New York, NY 10036. Morgan Stanley reports
sole voting power over 22,808,008 of the reported shares, shared
voting power over 9,053 of the reported shares and sole
dispositive power over 23,740,226 of the reported shares. Morgan
Stanley has certified that these shares of our common stock were
acquired in the ordinary course of business and were not
acquired for the purpose of, and do not have the effect of,
changing or influencing the control of Chubb and were not
acquired in connection with or as a participant in any
transaction having such purpose or effect. |
|
(3) |
|
As reported in the applicable statement filed with the SEC. |
60
The following table sets forth certain information regarding the
beneficial ownership of our common stock and common stock-based
holdings by each of our directors and nominees for director, by
each of our NEOs and by our directors and executive officers as
a group as of March 10, 2008.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
|
|
Ownership of
|
|
|
|
|
Name and
Address(1)
|
|
Common
Stock(2)
|
|
|
Percent of
Class(3)
|
|
|
Zoë
Baird(4)(7)
|
|
|
55,710
|
|
|
|
|
*
|
Sheila P.
Burke(4)(8)
|
|
|
65,904
|
|
|
|
|
*
|
James I. Cash,
Jr.(4)(9)
|
|
|
21,586
|
|
|
|
|
*
|
Joel J.
Cohen(4)(10)
|
|
|
186,105
|
|
|
|
|
*
|
John D.
Finnegan(11)
|
|
|
884,334
|
|
|
|
|
*
|
Klaus J.
Mangold(4)(12)
|
|
|
26,900
|
|
|
|
|
*
|
Martin G.
McGuinn(5)
|
|
|
10,384
|
|
|
|
|
*
|
David G.
Scholey(4)(13)
|
|
|
68,117
|
|
|
|
|
*
|
Lawrence M.
Small(4)(14)
|
|
|
94,166
|
|
|
|
|
*
|
Jess
Søderberg(6)(15)
|
|
|
572
|
|
|
|
|
*
|
Daniel E.
Somers(4)(16)
|
|
|
13,555
|
|
|
|
|
*
|
Karen Hastie
Williams(4)(17)
|
|
|
31,388
|
|
|
|
|
*
|
Alfred W.
Zollar(4)(18)
|
|
|
22,430
|
|
|
|
|
*
|
John J.
Degnan(19)
|
|
|
199,495
|
|
|
|
|
*
|
Paul J.
Krump(20)
|
|
|
151,219
|
|
|
|
|
*
|
Thomas F.
Motamed(21)
|
|
|
146,030
|
|
|
|
|
*
|
Michael
OReilly(22)
|
|
|
354,087
|
|
|
|
|
*
|
All directors and executive officers as a
group(23)
|
|
|
2,573,560
|
|
|
|
|
*
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
The business address of each director and executive officer
named in this table is
c/o The
Chubb Corporation, 15 Mountain View Road, New Jersey 07059. |
|
(2) |
|
Unless otherwise indicated, share amounts are as of
March 10, 2008 and each person has sole voting and
investment power with respect to the shares listed. |
|
(3) |
|
Based upon 367,582,648 shares of our common stock
outstanding as of March 10, 2008. |
|
(4) |
|
This amount includes 1,432 fully vested stock units granted
under the 2004 Director Plan but does not include
performance shares representing a target of 1,333 shares
for the performance period ending December 31, 2008 and
1,239 shares for the performance period ending
December 31, 2009 granted under the 2004 Director
Plan. Payment of such performance shares will range from 0% to
200% depending on actual performance measured against the stated
performance goals for the applicable performance period. |
|
(5) |
|
This amount includes 384 fully vested stock units granted under
the 2004 Director Plan but does not include performance
shares representing a target of 1,157 shares for the
performance period ending December 31, 2009 granted under
the 2004 Director Plan. Payment of such performance shares
will range from 0% to 200% depending on actual performance
measured against the stated performance goals for the applicable
performance period. |
|
(6) |
|
This amount includes 295 fully vested stock units granted under
the 2004 Director Plan but does not include performance
shares representing a target of 885 shares for the
performance period ending December 31, 2009 granted under
the 2004 Director Plan. Payment of such performance shares
will range from 0% to 200% depending on actual performance
measured against the stated performance goals for the applicable
performance period. |
61
|
|
|
(7) |
|
Includes 40,000 shares that may be purchased within
60 days pursuant to The Chubb Corporation Stock Option Plan
for Non-Employee Directors (2001) (the 2001 Director Plan)
and our predecessor non-employee director equity plans; 7,522
market value units which Ms. Baird has elected to defer her
receipt of until retirement pursuant to the Director Deferred
Compensation Program; and 2,996 vested stock units which
Ms. Baird has elected to defer her receipt of until
retirement pursuant to the 2004 Director Plan. |
|
(8) |
|
Includes 56,000 shares that may be purchased within
60 days pursuant to the 2001 Director Plan and our
predecessor non-employee director equity plans; 2,186 market
value units which Ms. Burke has elected to defer her
receipt of until retirement pursuant to the Director Deferred
Compensation Program; and 5,112 vested stock units which
Ms. Burke has elected to defer her receipt of until
retirement pursuant to the 2004 Director Plan. |
|
(9) |
|
Includes 8,000 shares that may be purchased within
60 days pursuant to the 2001 Director Plan and our
predecessor non-employee director equity plans; 2,158 market
value units which Dr. Cash has elected to defer his receipt
of until retirement pursuant to the Director Deferred
Compensation Program; and 644 vested stock units which
Dr. Cash has elected to defer his receipt of until
retirement pursuant to the 2004 Director Plan. |
|
(10) |
|
Includes 98,708 shares that may be purchased within
60 days pursuant to the 2001 Director Plan and our
predecessor non-employee director equity plans;
12,663 shares that may be purchased within 60 days
pursuant to a restoration stock option awarded pursuant to
exercising a special stock option grant; and 33,752 market value
units which Mr. Cohen has elected to defer his receipt of
until retirement pursuant to the Director Deferred Compensation
Program. |
|
(11) |
|
Includes 80,000 shares held by a family-owned limited
liability company; 364,780 shares that may be purchased
within 60 days pursuant to The Chubb Corporation Long-Term
Stock Incentive Plan (2000) (the 2000 Employee Plan); 39,892
RSUs that will vest on March 2, 2009; 37,773 RSUs that will
vest on March 1, 2010 pursuant to the 2004 Employee Plan;
186 shares that were allocated to Mr. Finnegan
pursuant to the ESOP; and 163,994 RSUs that are fully vested
which Mr. Finnegan has elected to defer receipt of until
retirement. This amount does not include performance shares
representing a target of 119,678 shares for the performance
period ending December 31, 2008 and 113,320 shares for
the performance period ending December 31, 2009. Payment of
such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
|
(12) |
|
Includes 16,000 shares that may be purchased within
60 days pursuant to the 2001 Director Plan; 2,511
market value units which Dr. Mangold has elected to defer
his receipt of until retirement pursuant to the Director
Deferred Compensation Program; and 5,112 vested stock units
which Dr. Mangold has elected to defer his receipt of until
retirement pursuant to the 2004 Director Plan. |
|
(13) |
|
Includes 48,000 shares that may be purchased within
60 days pursuant to the 2001 Director Plan and our
predecessor non-employee director equity plans; 10,929 market
value units which Sir David Scholey has elected to defer his
receipt of until retirement pursuant to the Director Deferred
Compensation Program; and 5,756 vested stock units which Sir
David Scholey has elected to defer his receipt of until
retirement pursuant to the 2004 Director Plan. |
|
(14) |
|
Includes 37,925 that may be purchased within 60 days
pursuant to the 2001 Director Plan and our predecessor
non-employee director equity plans; 4,018 shares that may
be purchased within 60 days pursuant to a restoration stock
option awarded pursuant to exercising a special stock option
grant; 21,399 market value units which Mr. Small has
elected to defer his receipt of until retirement pursuant to the
Director Deferred Compensation Program; and 5,756 vested stock
units which Mr. Small has elected to defer his receipt of
until retirement pursuant to the 2004 Director Plan. |
|
(15) |
|
Includes 277 market value units which Mr. Søderberg
has elected to defer his receipt of until April 1, 2008
pursuant to the Director Deferred Compensation Program. |
|
(16) |
|
Includes 2,000 shares that may be purchased within
60 days pursuant to the 2001 Director Plan; 2,318
market value units which Mr. Somers has elected to defer
his receipt of until retirement pursuant to the Director
Deferred Compensation Program; and 5,756 vested stock units
which Mr. Somers has elected to defer his receipt of until
retirement pursuant to the 2004 Director Plan. |
62
|
|
|
(17) |
|
Includes 24,000 shares that may be purchased within
60 days pursuant to the 2001 Director Plan and our
predecessor non-employee director equity plans; and 3,732 vested
stock units which Ms. Hastie Williams has elected to defer
her receipt of until retirement pursuant to the
2004 Director Plan. |
|
(18) |
|
Includes 14,400 shares that may be purchased within
60 days pursuant to the 2001 Director Plan and our
predecessor non-employee director equity plans; and 322 vested
stock units which Mr. Zollar has elected to defer his
receipt of until retirement pursuant to the 2004 Director
Plan. |
|
(19) |
|
Includes 12,754 RSUs that will vest on March 2, 2009 and
12,077 RSUs that will vest on March 1, 2010 pursuant to the
2004 Employee Plan; 30,128 RSUs that are fully vested which
Mr. Degnan has elected to defer receipt of until retirement
and 6,222 shares that were allocated to Mr. Degnan
pursuant to the ESOP. This amount does not include performance
shares representing a target of 38,266 shares for the
performance period ending December 31, 2008 and
36,233 shares for the performance period ending
December 31, 2009. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(20) |
|
Includes 85,684 shares which Mr. Krump has the right
to purchase within 60 days under the 2000 Employee Plan and
our predecessor employee long-term stock incentive plans; 2,204
RSUs that will vest on March 2, 2009 and 2,112 RSUs that
will vest on March 1, 2010 pursuant to the 2004 Employee
Plan; and 6,104 shares that were allocated to
Mr. Krump pursuant to the ESOP. This amount does not
include performance shares representing a target of
6,614 shares for the performance period ending
December 31, 2008 and 6,337 shares for the performance
period ending December 31, 2009. Payment of such shares
will range from 0% to 200% depending on actual performance
measured against the stated performance goals for the applicable
performance period. |
|
(21) |
|
Includes 15,614 RSUs that will vest on March 2, 2009 and
14,786 RSUs that will vest on March 1, 2010 pursuant to the
2004 Employee Plan; 39,126 RSUs that are fully vested which
Mr. Motamed has elected to defer receipt of until
retirement; 1,936 shares in the Chubb Stock Fund of the
CCAP; and 6,811 shares that were allocated to
Mr. Motamed pursuant to the ESOP. This amount does not
include performance shares representing a target of
46,848 shares for the performance period ending
December 31, 2008 and 44,359 shares for the
performance period ending December 31, 2009. Payment of
such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
|
(22) |
|
Includes 170,625 shares which Mr. OReilly has
the right to purchase within 60 days under the 2000
Employee Plan and our predecessor employee long-term stock
incentive plans; and 13,122 RSUs that will vest on March 2,
2009 and 12,425 RSUs that will vest on March 1, 2010
pursuant to the 2004 Employee Plan. This amount does not include
performance shares representing a target of 39,368 shares
for the performance period ending December 31, 2008 and
37,276 shares for the performance period ending
December 31, 2009. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(23) |
|
Includes 1,162 shares which executive officers other than
those listed in the table above disclaim beneficial ownership;
8,653 shares which were allocated to executive officers
other than those listed in the table above pursuant to the ESOP;
117,243 shares which executive officers other than those
listed in the table above have the right to purchase within
60 days under the 2000 Employee Plan and our predecessor
employee long-term stock incentive plans; and 1,960 RSUs
that will vest on October 31, 2008, 10,196 RSUs that
will vest on March 2, 2009 and 9,964 RSUs that will vest on
March 1, 2010 pursuant to the 2004 Employee Plan. This
amount does not include performance shares awarded to executive
officers other than those listed in the table above representing
a target of 30,594 shares for the performance period ending
December 31, 2008 and 29,895 shares for the
performance period ending December 31, 2009. Payment of
such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
63
CERTAIN
TRANSACTIONS AND OTHER MATTERS
At December 31, 2007, Dodge & Cox was the
beneficial owner of more than 5% of our outstanding common
stock. As of December 31, 2007, Dodge & Cox
managed approximately $269 million of assets in our Pension
Plan and approximately $37 million of assets funded for
other post-retirement benefits. Dodge & Cox also
managed one of the funds offered to participants in the CCAP. In
addition, Dodge & Cox purchased insurance policies
from one of our property and casualty insurance subsidiaries
with an aggregate net written premium of approximately $360,000.
At December 31, 2007, Morgan Stanley was the beneficial
owner of more than 5% of our outstanding common stock. As of
December 31, 2007, an affiliate of Morgan Stanley managed
approximately $209 million of assets in our Pension Plan.
In addition, a Morgan Stanley affiliate manages one of the funds
offered to participants in the CCAP. In 2007, a subsidiary of
Morgan Stanley purchased insurance policies from one of our
property and casualty insurance subsidiaries with an aggregate
net written premium of approximately $1.1 million.
Effective December 1, 2002, we entered into an employment
agreement with Mr. Finnegan. This employment agreement
covers Mr. Finnegans roles and responsibilities, his
compensation and benefits and the results of the termination of
his employment under various circumstances. The employment
agreement contains an automatic renewal clause, providing that
the employment agreement will have a perpetual two-year term
unless Mr. Finnegan or we deliver a notice of non-renewal.
Additional information regarding Mr. Finnegans
employment agreement is set forth under the headings
Compensation Discussion and AnalysisEmployment and
Severance Agreements, Compensation Discussion and
AnalysisChange in Control Agreements and
Executive CompensationPotential Payments upon
Termination.
We have entered into change in control agreements with each of
our Vice Chairmen. Information regarding these change in control
agreements is set forth under the headings Compensation
Discussion and AnalysisChange in Control Agreements
and Executive CompensationPotential Payments upon
Termination.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers and persons who beneficially own more
than 10% of our common stock to file reports of securities
ownership and changes in such ownership with the SEC. Based
solely upon a review of copies of such reports or written
representations that all such reports were timely filed, we
believe that each of our directors, executive officers and
greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during
2007, except for Sheila Burke, who filed a Form 4 due on
February 9, 2007 on May 16, 2007, Mr. McGuinn,
who filed a Form 4 due on July 30, 2007 on
August 23, 2007, Mr. Small, who filed a Form 4
due on February 9, 2007 on May 16, 2007,
Mr. Zollar, who filed a Form 4 due on
February 20, 2007 on February 27, 2007,
Mr. OReilly, who filed a Form 4 due on
July 2, 2007 on November 6, 2007 and Mr. Schram, who
filed a Form 4 due on October 31, 2007 on March 11, 2008.
In each case, the late filing was due to inadvertent
administrative error.
64
PROPOSAL 1
ELECTION OF DIRECTORS
Upon the recommendation of the Governance Committee, our Board
has nominated the following individuals for election to our
Board this year:
|
|
|
Zoë Baird
|
|
Martin G. McGuinn
|
Sheila P. Burke
|
|
Lawrence M. Small
|
James I. Cash, Jr.
|
|
Jess Søderberg
|
Joel J. Cohen
|
|
Daniel E. Somers
|
John D. Finnegan
|
|
Karen Hastie Williams
|
Klaus J. Mangold
|
|
Alfred W. Zollar
|
Information regarding the business experience of each nominee is
provided under the heading Our Board of Directors.
Each director is elected annually to serve until the next annual
meeting of shareholders and until his or her successor is
elected and qualified. There are no family relationships among
our executive officers and directors. Each director nominee
other than Mr. Finnegan satisfies the independence
requirements set forth in the NYSE listing standards and, with
respect to the nominees expected to serve on our Audit
Committee, Section 10A(m)(3) of the Exchange Act.
Our Board expects that each of the nominees named in this proxy
statement will be available for election and, if elected, will
be willing to serve as a director. If any nominee is not
available, then the proxies may vote for a substitute as may be
designated by our Board, unless our Board reduces the number of
directors. Our Board has, in accordance with our By-Laws, fixed
the number of directors to be elected at 12. If elected, each
director will serve until the next annual meeting of
shareholders and until his or her successor is duly elected and
qualified.
Director nominees will be elected by a majority of the votes
cast by shareholders entitled to vote at the 2008 Annual
Meeting. If you sign your proxy card but do not give
instructions with respect to the voting of directors, your
shares will be voted for the 12 individuals recommended by
our Board. If you wish to give specific instructions with
respect to the voting of directors, you may do so by indicating
your instructions on your proxy card.
Our Board unanimously recommends that you vote
FOR each of the foregoing nominees for director.
Proxies solicited by our Board will be voted FOR
this proposal unless a shareholder has indicated otherwise on
the proxy card.
65
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
Our Audit Committee, acting pursuant to the authority granted to
it in its charter, has retained Ernst & Young LLP as
our independent auditor. The appointment of Ernst &
Young is being submitted to our shareholders for ratification.
Ernst & Young has acted as our independent auditor for
many years. The following summarizes the fees billed to us by
Ernst & Young for professional services rendered in
2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit
Fees(1)
|
|
$
|
7,018,000
|
|
|
$
|
6,428,000
|
|
Audit-Related
Fees(2)
|
|
|
802,000
|
|
|
|
962,000
|
|
Tax
Fees(3)
|
|
|
|
|
|
|
|
|
All Other
Fees(4)
|
|
|
166,000
|
|
|
|
79,000
|
|
|
|
|
(1) |
|
Audit Fees primarily relate to the audit of our annual financial
statements, review of our financial statements included in our
quarterly reports on
Form 10-Q,
statutory audits for our insurance subsidiaries and review of
SEC registration statements. |
|
(2) |
|
Audit-Related Fees primarily relate to SAS 70 internal control
reports, employee benefit plan audits and certain non-insurance
related statutory audits. |
|
(3) |
|
Tax Fees primarily relate to tax compliance, tax advice and tax
planning. |
|
(4) |
|
All Other Fees relate to other services not described in notes
(1), (2), and (3) above, including special actuarial
reports filed with regulators, technical training and an online
information service. |
Our Audit Committee determined that the provision of these
services is compatible with maintaining Ernst &
Youngs independence.
In 2007, our Audit Committee pre-approved all services performed
for us by Ernst & Young. Our policy on pre-approval of
independent auditor services is attached to this proxy statement
as Annex A.
Representatives of Ernst & Young are expected to be
present at the 2008 Annual Meeting and to have the opportunity
to make a statement should they desire to do so and to be
available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast by
shareholders entitled to vote at the 2008 Annual Meeting is
required to ratify the appointment of Ernst & Young as
our independent auditor. If our shareholders do not ratify the
appointment of Ernst & Young, our Audit Committee will
reconsider the appointment.
Our Board unanimously recommends that you vote
FOR ratification of the appointment of
Ernst & Young LLP as our independent auditor. Proxies
solicited by our Board will be voted FOR this
proposal unless a shareholder has indicated otherwise on the
proxy card.
66
SOLICITATION
OF PROXIES
We will pay the cost of this solicitation of proxies. In
addition to the solicitation of proxies by use of the internet
and mail, we may use the services of one or more of our
directors, officers or other regular employees (who will receive
no additional compensation for their services in such
solicitation) to solicit proxies personally, by telephone or by
other electronic means. Arrangements will be made with brokerage
firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held
on the record date by such persons and we will reimburse them
for reasonable expenses actually incurred by them in so doing.
In addition, we have entered into an agreement with Georgeson
Inc., pursuant to which it will assist us in the solicitation of
proxies by mail, in person and by telephone for a fee, which is
estimated not to exceed $13,500 plus out-of-pocket expenses.
2009
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any proposal that a shareholder intends to be included in our
proxy statement and form of proxy card for our 2009 Annual
Meeting of Shareholders must be in writing and be received by
our Corporate Secretary at The Chubb Corporation, 15 Mountain
View Road, New Jersey 07059 no later than November 20, 2008 and
must otherwise comply with the rules promulgated by the SEC in
order to be eligible for inclusion in our proxy materials for
the 2009 Annual Meeting of Shareholders.
Under our By-Laws, if a shareholder desires to bring a matter
before the annual meeting of shareholders or if a shareholder
wants to nominate a person for election to our Board, the
shareholder must follow the procedures outlined in our By-Laws.
A copy of Article I, Section 10, of our By-Laws, which
covers those matters, is available without charge to
shareholders of record upon written request to our Corporate
Secretary. Our By-Laws also are available on our website at
www.chubb.com/investors. Our By-Law procedures are
separate from the SECs requirements that a shareholder
must meet in order to have a shareholder proposal included in
our proxy statement.
One of the procedural requirements in our By-Laws is timely
notice in writing of any business the shareholder proposes to
bring before the annual meeting of shareholders
and/or the
nomination any shareholder proposes to make at the annual
meeting of shareholders. Notice of business proposed to be
brought before the 2009 Annual Meeting of Shareholders
and/or
director nominations proposed to be made at the 2009 Annual
Meeting of Shareholders must be received by our Corporate
Secretary no earlier than December 30, 2008 and no later than
January 29, 2009.
The notice for business that the shareholder proposes to bring
before the annual meeting of shareholders must be a proper
matter for shareholder action and must describe:
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the business proposed to be brought before the annual meeting of
shareholders;
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the reasons for conducting the proposed business at the annual
meeting of shareholders;
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any material interest of the shareholder in the proposed
business;
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the beneficial owner, if any, on whose behalf the proposal is
made;
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the name and address of the shareholder giving the notice, as
they appear on our books, and of the beneficial owner of those
shares; and
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the class and number of shares which are owned beneficially and
of record by the shareholder and the beneficial owner.
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The notice for a nomination the shareholder proposes to make at
the annual meeting of shareholders must describe:
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all information relating to each person whom the shareholder
proposes to nominate for election as a director as would be
required to be disclosed in a solicitation of proxies for the
election of such person as a director pursuant to
Regulation 14A under the Exchange Act, including such
persons written consent to being named in the proxy
statement as a nominee and to serving as a director if so
elected;
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the name and address of the shareholder giving the notice, as
they appear on our books, and of the beneficial owner of those
shares; and
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the class and number of shares which are owned beneficially and
of record by the shareholder and the beneficial owner.
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By Order of the Board of Directors,
W. Andrew Macan
Vice President and Secretary
March 20, 2008
68
ANNEX A
THE CHUBB
CORPORATION
POLICY ON
PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
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I.
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Statement
of Principles
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The Audit Committee of the Board of Directors is responsible for
the appointment, compensation, retention, and oversight of the
work of the independent auditor. The Chubb Corporation and the
Audit Committee are committed to ensuring the independence of
the auditor, both in appearance and in fact. Accordingly,
significant attention is directed toward ensuring that services
provided by the auditor are consistent with the SECs rules
on auditor independence.
The Audit Committee is required to pre-approve the audit and
non-audit services performed by the independent auditor or its
affiliates on behalf of The Chubb Corporation or any of its
subsidiaries (collectively, the Corporation) in
order to assure that the provision of such services does not
impair the auditors independence from the Corporation. In
the case of audit services, pre-approval by the Audit Committee
is required for such services provided to all consolidated
subsidiaries of the Corporation, whether provided by the
principal independent auditor or other firms.
The Audit Committee has delegated to the Chairman of the Audit
Committee authority to pre-approve specific services not to
exceed $25,000 per engagement. Any services pre-approved by the
Chairman shall be reported to the Audit Committee at its next
scheduled meeting.
The Audit Committee may consult with management but does not
delegate its responsibilities to pre-approve services performed
by the independent auditor to management.
Audit services include all services to be performed to comply
with generally accepted auditing standards and those services
that generally only the Corporations independent auditor
can provide, such as comfort letters, statutory audits, attest
services, consents and assistance with and review of documents
filed with the SEC.
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IV.
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Audit-Related
Services
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Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review
of the Corporations financial statements and that are
traditionally performed by the independent auditor. The Audit
Committee believes that the provision of audit-related services
does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence.
Audit-related services include, among other services, audits of
employee benefit plans; due diligence related to mergers and
acquisitions; internal control reviews; attest services that are
not required by statute or regulation; and consultations related
to financial accounting or reporting standards.
The Audit Committee believes that the provision of tax services
to the Corporation including tax planning, compliance, and
advice does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence.
Tax services include tax planning, compliance, and advice;
preparation and review of original and amended tax returns;
assistance with claims for refund and tax payment-planning
services, tax audits and appeals before the IRS and similar
state, local and foreign agencies; and advice related to mergers
and acquisitions, employee benefit plans and requests for
rulings or technical advice for taxing authorities. The
Corporation shall not record a transaction or transactions, the
primary business purpose of which may be tax avoidance and the
tax treatment of which may not be supported in the Internal
Revenue Code and related
A-1
regulations; the rendering of services to the Corporation, its
executive officers and its directors by the independent auditor
in connection with the auditors recommendation of such
transaction or transactions is prohibited.
The Audit Committee believes that certain specific non-audit
services do not impair the auditors independence.
Accordingly, the Audit Committee may grant pre-approval to
specific, permissible non-audit services classified as All
Other Services that it believes are routine and recurring
services that would not impair the independence of the auditor.
All Other Services may include preparation of
actuarial reports in accordance with regulatory requirements
provided that the Audit Committee reasonably concludes that the
results of these services will not be subject to audit
procedures during an audit of the Corporations financial
statements.
Requests for services to be rendered by the independent auditor
will be provided annually to the Audit Committee for specific
pre-approval. The requests will include a description of the
particular services to be rendered and the expected fee range.
On a periodic basis at subsequent Audit Committee meetings, an
update on independent auditor services and all other audit
services will be provided to the Audit Committee and any
proposed new services, increases in engagement scope, and
increases in engagement fees will be provided for specific
pre-approval by the Audit Committee. Requests for pre-approval
will be submitted to the Audit Committee by both the independent
auditor and management and must include a written statement by
the independent auditor as to whether, in its view, the request
is consistent with the SECs rules on auditor independence.
The Audit Committee will consider whether such service requests
are consistent with the SEC rules on auditor independence. The
Audit Committee will also consider whether the independent
auditor is best positioned to provide the most effective and
efficient service, for reasons such as its familiarity with the
Corporations business, people, culture, accounting
systems, risk profile and other factors.
The term of any pre-approval is the period beginning on the date
of pre-approval and ending on the last day of the first full
calendar year after the date of pre-approval, unless the
Corporation specifically provides for a different period.
The Audit Committee is also mindful of the overall relationship
of fees for audit and non-audit services in determining whether
to pre-approve any such services. For each fiscal year, the
Audit Committee may determine the appropriate ratio between the
total amount of fees for Audit, Audit-related, Tax, and All
Other Services.
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VIII.
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Prohibited
Non-Audit Services
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Provision of the following non-audit services by the independent
auditor is prohibited in accordance with the SECs rules.
The SECs rules and relevant guidance should be consulted
to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
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Bookkeeping or other services related to the accounting records
or financial statements of the Corporation;
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Financial information systems design and implementation;
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Appraisal or valuation services, fairness opinions or
contribution-in-kind
reports;
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Actuarial services;
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Internal audit outsourcing services;
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Management functions or human resources;
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Broker-dealer, investment adviser, or investment banking
services;
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Legal services and expert services unrelated to the audit; and
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Any other service that the Public Company Accounting Oversight
Board determines, by regulation, is impermissible.
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A-2
VOTE BY INTERNET www.proxyvote.com Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time on April 28, 2008. Have
your proxy card in hand when you access the web site and follow the instructions to obtain your
records and to create an electronic voting instruction form. 15 MOUNTAIN VIEW ROAD ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by The
Chubb Corporation in WARREN, NJ 07059 mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet.
To sign up for electronic delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access shareholder communications
electronically in future years. VOTE BY PHONE 1-800-690-6903 Use any touch-tone telephone to
transmit your voting instructions up until 11:59 P.M. Eastern Time on April 28, 2008. Have your
proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date
your proxy card and return it in the postage-paid envelope we have provided or return it to The
Chubb Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS: CHUBB1 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS
PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Chubb Corporation 2008
Annual Meeting of Shareholders Proxy Card A Election of Directors 1. Our Board of Directors
recommends a vote For Against FOR the listed nominees 1a 1l. 0 0 For Against 1a Zoë Baird 0 0
1i Jess Søderberg 0 0 1b Sheila P. Burke 1c James I. Cash, Jr. 0 0 1j Daniel E. Somers 0 0
0 0 1k Karen Hastie Williams 0 0 1d Joel J. Cohen 0 0 1l Alfred W. Zollar 0 0 1e John D.
Finnegan 1f Klaus J. Mangold 0 0 0 0 B Other Matters 1g Martin G. McGuinn Our Board of
Directors recommends a vote FOR For Against Abstain 1h Lawrence M. Small 0 0 Proposal 2. Change
of Address Please check this box and write the changes where 0 2. To ratify the appointment of
Ernst & Young LLP as 0 0 0 indicated on the reverse side. independent auditor. C Authorized
Signatures This section must be completed for your vote to be counted. Date and Sign Below
Please sign exactly as name(s) appear(s) hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give
full title. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date |
Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7
days a week! Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern
Time, on April 28, 2008. Important Notice Regarding Internet Availability of Proxy Materials: The
2008 Notice and Proxy Statement and 2007 Annual Report are available at www.proxyvote.com. IF YOU
HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy The Chubb Corporation THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF THE CHUBB CORPORATION FOR THE ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON APRIL 29, 2008 The undersigned shareholder of THE CHUBB CORPORATION (the Corporation)
acknowledges receipt of the Notice of 2008 Annual Meeting of Shareholders and Proxy Statement each
dated March 20, 2008, and the undersigned revokes all prior proxies and appoints JOHN D. FINNEGAN,
W. ANDREW MACAN and DOUGLAS A. NORDSTROM, and each of them, with full power of substitution, as
proxies for the undersigned to vote all shares of Common Stock of the Corporation, which the
undersigned would be entitled to vote at the 2008 Annual Meeting of Shareholders to be held at 15
Mountain View Road, Warren, New Jersey 07059 at 10:00 a.m., local time, on April 29, 2008 and any
adjournment or postponement thereof, on all matters coming properly before said meeting. This card
also provides voting instructions for any shares of Common Stock of the Corporation allocated to
and held on the undersigneds behalf in The Chubb Corporation Capital Accumulation Plan (the Plan).
When properly executed, this proxy will be voted in the manner directed herein by the undersigned
shareholder. If the undersigned has voting rights with respect to shares of Common Stock under the
Plan, the trustees of the Plan will vote those shares as directed. If this proxy is validly
executed and dated, but no direction is made, this proxy will be voted FOR Proposals 1 and 2. In
their discretion, the proxies are authorized to vote upon such other business as may properly come
before the 2008 Annual Meeting of Shareholders. Change of Address Please print new address below.
(If you noted a Change of Address above, please mark corresponding box on the reverse side.) |