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

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THE CLOROX COMPANY

 

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Notice of 2007 Annual Meeting, Proxy Statement and Annual Financial Statements

 

Annual Meeting of Stockholders

November 14, 2007

 

 

THE CLOROX COMPANY

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 14, 2007

 

The Annual Meeting of Stockholders of The Clorox Company, a Delaware corporation (“Clorox” or the “Company”), will be held at 9:00 a.m. Pacific time on Wednesday, November 14, 2007, at the offices of the Company, 1221 Broadway; Oakland, CA 94612-1888, for the following purposes:

 

1.  To elect a board of 11 directors to hold office until the next annual election of directors;

 

 

The board of directors has fixed the close of business on September 19, 2007, as the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment thereof. A list of such stockholders will be available at the Annual Meeting and, during the 10 days prior to the Annual Meeting, at the office of the Secretary of the Company at 1221 Broadway; Oakland, CA 94612-1888.

 

Only stockholders and people holding proxies from stockholders may attend the Annual Meeting. If your shares are registered in your name, you should bring a form of identification to the Annual Meeting. If your shares are held in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or letter from that broker, trust, bank or nominee that confirms you are the beneficial owner of those shares.

 

A copy of the Company’s Annual Report for the fiscal year ended June 30, 2007, is included with this mailing.

 

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE HOPE THAT YOU WILL READ THE ENCLOSED PROXY STATEMENT AND THE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, AND THEN VOTE (1) BY COMPLETING, SIGNING, DATING AND MAILING THE PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE, (2) VIA THE INTERNET AS INDICATED ON THE PROXY CARD, OR (3) BY CALLING THE TOLL-FREE NUMBER LISTED ON THE PROXY CARD. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE ANNUAL MEETING.

 

By Order of the Board of Directors

 

Angela C. Hilt

Vice President – Corporate Secretary
& Assistant General Counsel

October 5, 2007

 

THE CLOROX COMPANY
1221 Broadway
Oakland, CA 94612-1888

 

 

PROXY STATEMENT

 

This proxy statement is furnished in connection with the solicitation of proxies by the board of directors of The Clorox Company, a Delaware corporation (“Clorox” or the “Company”), for use at the Annual Meeting of Stockholders of the Company (the “Annual Meeting”), to be held at 9:00 a.m. Pacific time on Wednesday, November 14, 2007, at the above offices of the Company.

 

This proxy statement and the accompanying proxy card are first being sent or given to stockholders on or about October 5, 2007. The costs of this proxy solicitation, including the preparation, assembly, printing and mailing of proxy materials, are borne by the Company.

 

INFORMATION ABOUT VOTING

 

Who Can Vote

 

The only voting securities of the Company are its shares of common stock (“Common Stock”), of which 138,459,789 shares were outstanding and entitled to vote at the close of business on September 19, 2007. Only stockholders of record at the close of business on September 19, 2007, are entitled to vote at the Annual Meeting. The holders of the Common Stock are entitled to one vote per share on each matter submitted to a vote of stockholders.

 

Voting Procedures

 

Stockholders can vote their shares in one of two ways: either by proxy or in person at the Annual Meeting by written ballot. Stockholders who chose to vote by proxy may do so by mail, via the Internet or by telephone. Each of these procedures is explained below. Even if you plan to attend the Annual Meeting, the board of directors recommends that you vote by proxy. In this way, your shares of Common Stock will be voted as directed if you are unable to attend the Annual Meeting.

 

Voting by Proxy

 

Because many stockholders cannot attend the Annual Meeting in person, it is necessary that a large number of stockholders be represented by proxy. By signing and returning the proxy card by mail according to the enclosed instructions or by following the procedures for voting via the Internet or by telephone, you will enable Donald R. Knauss, Daniel J. Heinrich and Laura Stein, each of whom is named on the proxy card as a “proxy holder,” to vote your shares at the Annual Meeting in the manner indicated. Since the Company has adopted a Bylaw that provides for majority voting for directors, when you vote your proxy, you can specify whether your shares should be voted for or against each of the nominees for director identified in Proposal 1, or you can abstain from voting on the director nominees. You can also specify whether you approve, disapprove or abstain from voting on Proposal 2, which is described in this proxy statement. If you submit the proxy card, but do not provide voting instructions, your shares will be voted as follows:

 

 

Management of the Company is not aware of any matters other than those described in this proxy statement that may be presented for action at the Annual Meeting. If any other matters are properly presented at the Annual Meeting for consideration, the proxy holders will have discretion to vote for you on those matters.

Voting by Mail, via the Internet or by Telephone

 

If you hold your shares in your own name as a holder of record, you may vote your shares by mailing in a completed proxy card or by following the instructions for voting via the Internet or by telephone that are set forth on the proxy card. To vote by mailing a proxy card, sign and return the proxy card in the enclosed postage prepaid and addressed envelope, and your shares will be voted at the Annual Meeting in the manner you direct. The Internet and telephone voting procedures are designed to authenticate each stockholder’s identity and to allow stockholders to vote their shares and confirm that their voting instructions have been properly recorded. If you vote via the Internet or telephone, you do not need to return your proxy card.

 

If your shares are registered in the name of a bank or brokerage firm, you will receive instructions from your record holder that must be followed in order for the record holder to vote the shares in accordance with your instructions. Many banks and brokerage firms have a process for their beneficial holders to provide instructions over the telephone or via the Internet. If you are unable to provide instructions by telephone or via the Internet, please complete and return the voting instruction card in the addressed, postage-paid envelope that your bank or brokerage firm will provide to you.

 

Voting at the Annual Meeting

 

If you wish to attend the Annual Meeting and vote in person, you may vote by written ballot at the Annual Meeting. If your shares are held in the name of a bank or brokerage firm, you must bring a proxy executed in your favor from that bank or brokerage firm in order to vote at the Annual Meeting. If you vote by proxy and also attend the Annual Meeting, you do not need to vote again at the Annual Meeting unless you wish to change your vote.

 

Revocation of Proxies

 

You may revoke your proxy at any time before it is exercised at the Annual Meeting by taking any of the following actions:

 

 

Quorum

 

In order for the business of the Annual Meeting to be conducted, a minimum number of shares constituting a quorum must be present. The holders of a majority of the issued and outstanding shares of Common Stock entitled to vote at the Annual Meeting must be present in person or represented by proxy at the Annual Meeting in order to have a quorum. Abstentions and “broker non-votes” are counted as shares that are present and entitled to vote for purposes of determining whether there is a quorum.

 

Broker Non-Votes

 

A broker non-vote occurs when a stockholder who holds his or her shares through a bank or brokerage firm does not instruct that bank or brokerage firm how to vote the shares, and, as a result, the broker is prevented from voting the shares held in the stockholder’s account on certain proposals. Broker non-votes are not counted as votes against the proposals in question or as abstentions, nor are they counted to determine the number of votes present for a particular proposal.

 

Under the current rules of the New York Stock Exchange, if you hold your shares through a bank or brokerage firm and your broker delivers this proxy statement to you, the broker is entitled to vote your shares on Proposals 1 and 2 even if you do not provide voting instructions to your broker.

Required Vote

 

Proposal 1: The Company’s Bylaws provide for majority voting for directors in uncontested elections. Accordingly, each of the 11 nominees for director will be elected if he or she receives the majority of the votes cast with respect to that director. Abstentions will not have any effect on the election of directors.

 

Proposal 2: The affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 2 is required for its adoption. Abstentions on Proposal 2 will have the same effect as a vote against Proposal 2.

 

Recommendations of the Board of Directors

 

The board of directors recommends that you vote:

 

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

 

 

At the Annual Meeting, 11 people will be elected as members of the board of directors, each for a one-year term, or until their respective successors are duly elected and qualified or until their earlier resignation or removal. The Nominating and Governance Committee of the board of directors has nominated the 11 people listed below for election at the Annual Meeting. Each nominee is currently serving as a director of the Company.

 

Majority voting for directors. In September 2006, the board of directors approved an amendment to the Company’s Bylaws to require each director to be elected by a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted “for” a director must exceed the number of votes voted “against” that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee who is serving as a director is not elected at the Annual Meeting, under Delaware law, the director would continue to serve on the board of directors as a “holdover director.” However, under the Company’s Bylaws, any director who fails to be elected must offer to tender his or her resignation to the board of directors. The Nominating and Governance Committee would then make a recommendation to the board of directors whether to accept or reject the resignation, or whether other action should be taken. The board of directors will act on the Nominating and Governance Committee’s recommendation and will publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in the board of directors’ decision.

 

The proxies given to the proxy holders will be voted or not voted as directed and, if no direction is given, will be voted FOR the 11 director nominees. The board of directors knows of no reason why any of these nominees should be unable or unwilling to serve. However, if for any reason any nominee should be unable or unwilling to serve, the proxies will be voted for the election of such other person to the office of director as the board of directors may nominate in the place of such nominee. Michael Shannon, a current member of the board of directors, will be retiring from the board of directors at the Annual Meeting pursuant to the Company’s director retirement policy, which provides that a non-management director must retire at the annual meeting following his or her attainment of age 70.

 

Certain information with respect to each nominee appears on the following pages, including age, period served as a director, position (if any) with the Company, business experience and directorships of other publicly owned corporations (if any). Ages are as of July 31, 2007.

 

 

DIRECTOR INDEPENDENCE AND ORGANIZATION OF THE BOARD OF DIRECTORS

 

The board of directors has established five standing committees: the Executive Committee, the Finance Committee, the Audit Committee, the Nominating and Governance Committee, and the Management Development and Compensation Committee. The Finance, Audit, Nominating and Governance, and Management Development and Compensation Committees consist only of non-management directors whom the board of directors has determined are independent under the New York Stock Exchange listing standards and the board of directors’ independence standards set forth in the Company’s Governance Guidelines, which are discussed below. The charters for these committees are available in print to any stockholder who requests them and can be found in the Corporate Governance section of the Company’s Web site at http://www.TheCloroxCompany.com/company/charters.html.

 

Executive Committee. The Executive Committee, consisting of directors Boggan, Friedman, Knauss (chair), Matschullat and Shannon, is delegated all of the powers of the board of directors except certain powers reserved by law to the full board of directors. In addition to being available to meet between regular board meetings on occasions when board action is required but the convening of the full board of directors is impracticable, the Executive Committee is authorized to handle special assignments as requested from time to time by the board of directors. The Executive Committee held no meetings during fiscal year 2007. Effective November 14, 2007, the Executive Committee will be composed of directors Boggan, Harad, Friedman, Knauss (chair), Michael and Mueller.

 

Finance Committee. The Finance Committee is composed of directors Boggan, Carmona, Friedman (chair), Harad, Matschullat and Thomas-Graham and, working with the Company’s finance and operating personnel, considers and recommends to the board of directors major financial policies and actions of the Company. The Finance Committee held three meetings during fiscal year 2007. Effective November 14, 2007, the Finance Committee will be composed of directors Boggan, Carmona, Friedman (chair), Harad and Matschullat.

 

Audit Committee. The Audit Committee is composed of directors Matschullat (chair), Michael, Mueller, Murley and Shannon, and is the principal link between the board of directors and the Company’s independent registered public accounting firm. Mr. Matschullat was appointed Chair of the Audit Committee effective October 2, 2006 and did not serve on the Audit Committee while he was the interim chairman and interim chief executive officer of the Company. The Audit Committee operates in accordance with its charter and has the duties set out therein. The duties include assisting the board of directors in overseeing (a) the integrity of the Company’s financial statements, (b) the independent registered public accounting firm’s qualifications, independence and performance, (c) the performance of the Company’s internal audit function, (d) the Company’s system of disclosure controls and procedures and system of internal control over financial reporting, and (e) the Company’s compliance with legal and regulatory requirements relating to accounting and financial reporting matters. The Audit Committee’s duties also include preparing the report required by the Securities and Exchange Commission (“SEC”) proxy rules to be included in the Company’s annual proxy statement. The Audit Committee held eight meetings during fiscal year 2007. Effective November 14, 2007, the Audit Committee will be composed of directors Michael, Mueller (chair), Murley and Thomas-Graham. The board of directors has determined that Mr. Michael is an audit committee financial expert, as defined by SEC rules.

 

Nominating and Governance Committee. The Nominating and Governance Committee is composed of directors Boggan (chair), Michael, Murley and Ticknor. The Nominating and Governance Committee has the functions set forth in its charter, including identifying and recruiting individuals qualified to become board members, recommending to the board of directors individuals to be selected as director nominees for the next annual meeting of stockholders and reviewing and recommending to the board of directors changes in the Governance Guidelines applicable to the Company, including changes relating to the board of directors. The Nominating and Governance Committee held six meetings during fiscal year 2007.

 

The Company’s Governance Guidelines, which are explained below, describe the attributes that the board of directors seeks in nominees, but the board of directors has not established any specific minimum qualifications that a potential nominee must possess. The Nominating and Governance Committee considers recommendations from many sources, including stockholders, regarding possible candidates for director. Such recommendations, together with biographical and business experience information regarding the candidate, should be submitted to The Clorox Company, c/o Secretary; 1221 Broadway; Oakland, CA 94612-1888. The Nominating and Governance Committee evaluates candidates suggested by stockholders in the same manner as other candidates.

During fiscal year 2007, the Nominating and Governance Committee retained a third-party search firm, Spencer Stuart, to assist it in identifying potential director candidates. All nominees for election as directors currently serve on the board of directors.

 

Management Development and Compensation Committee. The Management Development and Compensation Committee consists of directors Friedman, Harad, Shannon (chair) and Ticknor. The Management Development and Compensation Committee establishes and monitors the policies under which compensation is paid or awarded to the Company’s executive officers, determines executive compensation, grants stock options, restricted stock, performance units and other cash or stock awards under the Company’s executive incentive compensation and stock incentive plans, and reviews pension and other retirement plans. In addition, the Management Development and Compensation Committee oversees the Company’s management development and succession planning processes. The Management Development and Compensation Committee held nine meetings during fiscal year 2007. Effective November 14, 2007, the Management Development and Compensation Committee will be composed of directors Friedman, Harad (chair), Matschullat and Ticknor.

 

CEO Search Committee. In May 2006, following the health-related retirement of Gerald E. Johnston from his positions as chairman and chief executive officer of the Company, the board of directors formed a CEO Search Committee and retained executive search firm Spencer Stuart to conduct a search for a new chief executive officer. The CEO Search Committee consisted of directors Friedman, Harad, Matschullat (chair), Michael and Shannon. The duties of the CEO Search Committee concluded in August 2006 following the announcement that Donald R. Knauss had been named as the Company’s chairman and chief executive officer, effective October 2, 2006.

 

Board Committee and Meeting Attendance

 

The board of directors held seven meetings during fiscal year 2007. All current directors attended at least 75% of the meetings of the board of directors and committees of which they were members during fiscal year 2007.

 

Annual Meeting Attendance

 

The policy of the Company is that all board members are expected to attend the annual meeting of stockholders. Each member of the board of directors as of November 15, 2006, attended the Company’s 2006 annual meeting of stockholders on that date.

 

The Clorox Company Governance Guidelines and Director Independence

 

The board of directors has adopted Governance Guidelines, which can be found in the Corporate Governance section on the Company’s Web site http://www.TheCloroxCompany.com/governanceguidelines.html, are attached hereto as Appendix B and are available in print to any stockholder who requests it.

 

The Governance Guidelines set forth the Company’s principles concerning overall governance practices and independence standards. The board of directors has determined that each director is independent under the New York Stock Exchange listing standards and the independence standards set forth in the Governance Guidelines except Mr. Knauss as a result of his service as the Company’s chief executive officer.

 

Code of Conduct

 

The Company has adopted a Code of Conduct, which can be found in the Governance section under Company Information on the Company’s Web site, http://www.TheCloroxCompany.com/company/ codeofconduct.html, and is available in print to any stockholder who requests it. The Code of Conduct applies to all of the Company’s employees, contractors and non-employee directors.

 

Presiding Director and Executive Sessions

 

The Company’s presiding director is Mr. Michael. The duties of the Presiding Director are set forth in the Company’s Governance Guidelines. They include coordinating the activities of the independent directors and serving as a liaison between the chairman and the independent directors. In addition, the presiding director: (1) assists the board of directors and the Company’s officers in promoting compliance with and the implementation

of the Governance Guidelines; (2) moderates the executive sessions of the independent directors and has the authority to call additional executive sessions as appropriate; (3) presides at meetings of the board of directors in the chairman’s absence; (4) oversees information sent to the board of directors; (5) consults with the chairman on meeting agendas and schedules for the board of directors; (6) is available for consultation and communication with major stockholders as appropriate; and (7) evaluates, along with the members of the Management Development and Compensation Committee, the performance of the chief executive officer. The independent directors generally meet in executive session at each regularly scheduled board meeting without the presence of management directors or employees of the Company to discuss various matters related to the oversight of the Company, the management of board affairs and the chief executive officer’s performance.

 

Stock Ownership Guidelines. The board of directors believes that the alignment of directors’ interests with those of stockholders is strengthened when board members are also stockholders. The board of directors therefore requires that directors, within three years of first being elected, own Common Stock or deferred stock units having a market value of at least two times their annual retainer. Deferred stock units acquired by each director are accumulated on each director’s behalf until they no longer serve on the board of directors. This program ensures that directors acquire a meaningful and significant ownership interest in the Company during their tenure on the board of directors.

 

BENEFICIAL OWNERSHIP OF VOTING SECURITIES

 

The following table shows, as of July 31, 2007, the holdings of Common Stock by (i) any entity or person known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director and nominee for director and each of the six individuals named in the Summary Compensation Table on page 25 (the “named executive officers”), and (iii) all current directors and executive officers of the Company as a group:

 

 

 

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets out the number of shares of Common Stock to be issued upon exercise of outstanding options, warrants and rights, the weighted-average exercise price of outstanding options, warrants and rights, and the number of securities available for future issuance under equity compensation plans as of June 30, 2007.

 

 

Column [a] includes the following (in thousands):

 

 

Column [b] reflects the weighted-average exercise price of the outstanding options.

 

AUDIT COMMITTEE REPORT

 

The Audit Committee assists the board of directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company. The Audit Committee operates in accordance with a written charter, which was adopted by the board of directors. A copy of that charter is available on the Internet at http://www.TheCloroxCompany.com/company/charters.html and is available in print to any stockholder who requests it. Each member of the Audit Committee is “independent,” as required by the applicable listing standards of the New York Stock Exchange and the rules of the SEC.

 

The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the Company’s independent registered public accounting firm. The Audit Committee oversees the Company’s financial reporting process on behalf of the board of directors. The Company’s management has primary responsibility for the financial statements and reporting process, including the Company’s internal control over financial reporting. The independent registered public accounting firm is responsible for performing an integrated audit of the Company’s financial statements and internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board.

 

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2007. This review included a discussion of the quality and the acceptability of the Company’s financial reporting and control, including the clarity of disclosures in the financial statements. The Audit Committee also reviewed and discussed the audited financial statements of the Company for the fiscal year ended June 30, 2007 with the Company’s independent registered public accounting firm, their judgments as to the quality and acceptability of the Company’s financial reporting, and such other matters as are required to be discussed by Statement on Auditing Standards No. 61, as amended, Communication with Audit Committees.

 

The Audit Committee obtained from the independent registered public accounting firm a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence,

consistent with Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and discussed with the auditors any relationship that may impact their objectivity and independence. The Audit Committee meets periodically with the independent registered public accounting firm, with and without management present, to discuss the results of the independent registered public accounting firm’s examinations and evaluations of the Company’s internal control and the overall quality of the Company’s financial reporting.

 

Based upon the review and discussions referred to above, the Audit Committee recommended to the board of directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, for filing with the SEC.

 

 

The table below includes fees billed or expected to be billed by the Company’s independent registered public accounting firm, Ernst & Young LLP, in fiscal years 2007 and 2006:

 

 

 

 

The Audit Committee has established a policy to require that it approve all services provided by its independent registered public accounting firm before services are provided. The Audit Committee has pre-approved the engagement of the independent registered public accounting firm for audit services, and certain specified audit-related services and tax services within defined limits. The Audit Committee has not pre-approved engagement of the independent registered public accounting firm for any other non-audit services.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis provides information about the overall objectives of our executive compensation program for our current chairman and chief executive officer (“CEO”), our interim chairman and interim chief executive officer (“interim CEO”) who served through October 2, 2006, and our chief financial officer (“CFO”), as well as our executive vice president & chief operating officer – North America, our executive vice president - functional operations, and our senior vice president – general counsel, our three other most highly compensated executive officers. For purposes of this proxy statement, we refer to these six officers as our “named executive officers.” This section includes information about the overall objectives of our executive compensation program and each element of compensation that we provide to our named executive officers. The programs discussed here are applicable to all of our executive officers (a total of eight individuals). This section should be read in conjunction with the Summary Compensation Table and the other tables and narratives described in this proxy statement.

 

Executive Compensation Program Philosophy. Our executive compensation philosophy is designed to maintain strong alignment between the Company’s named executive officers and our stockholders. We believe applying this philosophy on a consistent, long-term basis will support the Company’s business strategy while building stockholder value over the long term. Consistent with this philosophy, we design our executive compensation programs to accomplish the following:

 

 

Compensation Methodology. The Management Development and Compensation Committee of our board of directors (the “Committee”) is responsible for the design, implementation and oversight of the executive compensation programs for our CEO and other named executive officers. The Committee regularly provides the full board of directors a report of its discussions and actions. The Committee has retained and regularly meets with an independent compensation consultant, Frederic W. Cook & Co., Inc. which the Committee has instructed to provide it with advice and guidance on executive compensation at other comparable consumer products companies, as well as relevant information about other market practices and trends and the consistency of proposed individual compensation amounts and awards with such practices and trends. Frederic W. Cook & Co., Inc. is retained directly by the Committee and works with management only under the direction of the Committee on projects in which the Committee has direct oversight responsibility. Frederic W. Cook & Co., Inc. has no other economic relationships with the Company other than providing advice to the Committee. Frederic W. Cook & Co., Inc. attends, in person or telephonically, all regularly scheduled meetings of the Committee, reviews Committee materials prepared by management in advance of the meeting on behalf of the Committee, and provides comments and guidance to the

Committee in advance of the meetings on compensation proposals including changes to named executive officers’ compensation levels, the design of incentive plans, the setting of performance goals, and the design of indirect compensation programs such as change in control policies, employment agreements, SERPs, perquisites and other executive benefit plans.

 

The Committee reviews and approves performance goals and objectives for our CEO and other named executive officers, determines the extent to which such performance goals are met, and determines the CEO and other named executive officers’ compensation based on performance. Our CEO and our senior vice president - human resources and corporate affairs assist the Committee in reaching compensation decisions with respect to the named executive officers, other than the CEO, and make recommendations to the Committee regarding the compensation package for each of the named executive officers, other than the CEO, based upon the level of achievement of target goals and individual performance. The Committee has instructed the independent compensation consultant to provide perspective and advice to the Committee on all compensation actions for the CEO. Other named executive officers do not have a role in their own compensation determination other than discussing individual performance objectives with the CEO. The Committee approves compensation for the CEO and other named executive officers based on its review of the peer group information described below, individual performance (taking into account input from the CEO with respect to the other named executive officers), input from the independent compensation consultant and other factors such as prevailing industry trends.

 

Additionally, the Committee is responsible for the review and approval of recommendations by the CEO with respect to executive compensation for all other executive officers of the Company, replacement or creation of new executive positions and any amendments to plans or programs applicable to executive officers and named executive officers of the Company. Each member of the Committee is independent as determined by the board of directors in accordance with the Clorox independence standards and as defined in the corporate governance listing standards of the New York Stock Exchange. None of the Committee members has ever been an employee of the Company.

 

With the assistance of its independent compensation consultant, the Committee has established a compensation peer group (our “compensation peer group”) and annually surveys the executive compensation practices of this group to determine competitive compensation levels for our named executive officers. Our compensation peer group is composed of the following consumer products companies:

 

 

In determining the composition of the compensation peer group, the Committee considers companies that hold leadership positions in branded consumer products, are of reasonably similar revenue size, compete with the Company for executive talent and have executive positions similar in breadth, complexity and scope of responsibility. The size of the group has been determined with the goal of providing sufficient benchmarking data across the range of named executive officer positions at the Company. Each year, the Committee reviews the peer companies to ensure that they continue to meet the relevant criteria and may make adjustments to the compensation peer group, as appropriate.

 

In general, we target our executive compensation package to the median of our compensation peer group. Target compensation for individual named executive officers may vary above or below the median based on a variety of factors, such as the incumbent’s skill set relative to industry peers, experience and time in the position, criticality of

the role and difficulty of replacement, individual performance and expected future contributions, readiness for promotion to a higher level, equity position relative to that of other executive officers and, in the case of externally-recruited named executive officers, compensation earned at a prior employer. Actual incentive plan payouts, and, in turn, total compensation, may vary above or below the targeted level based on the Company’s performance relative to its internal goals as well as the Company’s overall stockholder return.

 

Elements of the Executive Compensation Program. Our executive compensation program includes a combination of annual short-term cash and long-term stock-based incentive compensation. Annual cash compensation for named executive officers is comprised of base salary plus annual short-term cash incentives. Annual long-term incentives currently consist of stock option grants and a three-year stock-based performance share grant. Time-based restricted stock or restricted stock units as well as stock options are used on a selective basis for special circumstances, such as retention, recognition or recruitment.

 

Below are the primary elements of our executive compensation program:

 

 

Annual payouts under the short-term and long-term incentive plans are determined based on the achievement of pre-established objectives that are set and approved by the Committee at the beginning of the performance period. The performance period is one year for the short-term cash incentive plan and three years for the performance shares awarded under the long-term stock-based incentive plan. Specific financial goals cannot be changed during the performance period, except according to principles set forth by the Committee that allow for adjustments in rare instances including, among other things, acquisitions, restructuring charges or significant changes to accounting policy and only if these changes reach a minimum financial impact.

 

In setting total compensation, we apply a consistent approach for all named executive officers. The Committee also exercises business judgment in how it applies facts and circumstances associated with each named executive officer. Additional detail about each pay element and how it is determined is presented below.

 

Base Salary. Each year, data on salaries and overall compensation paid to comparable positions in our compensation peer group is gathered by management’s compensation consultant, Hewitt Associates. The Committee’s

independent compensation consultant, Frederic W. Cook & Co., Inc., reviews this data and also performs a compensation analysis which it uses to advise the Committee on potential compensation actions, including the CEO’s compensation. The Committee takes this input into account in considering salary levels and approves the salaries for the CEO and other named executive officers, adjusted as appropriate. The Committee generally seeks to establish base salaries for the CEO and other named executive officers at the median of our compensation peer group. The actual amount of salary earned by our named executive officers in fiscal year 2007 is set forth in the Salary column of the Summary Compensation Table.

 

Annual Short-Term Cash Incentive Awards. On an annual basis, short-term cash incentive awards earned for the year by the CEO and other named executive officers are paid under the terms of the Company’s Executive Incentive Compensation (“EIC”) Plan and are designed to promote the achievement of the Board-approved annual corporate financial and strategic performance goals, as well as the achievement of individual objectives.

 

To help ensure that the compensation paid to the named executive officers is within the tax deductibility limitations of Section 162(m) of the IRC, maximum annual incentive award levels are based on the level of earnings before income taxes achieved by the Company (“Company earnings”). The EIC Plan has a maximum award limit of 0.6 percent of Company earnings for named executive officers, other than the CEO, and 1.0 percent of Company earnings for the CEO. The Committee has discretion to reduce, but not to increase, incentive payments under the EIC Plan. The Committee’s practice has been to pay substantially lower amounts than the maximum award levels. The Committee reduces the maximum awards to the amount actually paid based on three factors – the target award opportunity for each named executive officer, the performance against predetermined Company financial and strategic performance goals and, to a lesser extent, the named executive officer’s individual performance, based primarily on the performance of the operations under the individual’s responsibility. These factors are discussed below.

 

Each year, the Committee sets annual short-term cash incentive target levels for our named executive officers as a percent of their salary based upon the median short-term cash incentive targets of our compensation peer group. At the beginning of each fiscal year, the Committee also sets financial and strategic objectives for the plan based on the operating plan and strategic initiatives approved by the board of directors. At the end of the year, the Committee assesses the Company’s performance based on a quantitative and qualitative review of the financial and strategic achievements versus the goals set at the beginning of the year. This assessment takes into account financial results relative to the Company’s annual operating plan as well as progress versus key strategic metrics.

 

For fiscal year 2007, the Committee established key financial goals that focused on increasing net sales, increasing earnings per share from continuing operations, and improving our working capital as a percent of sales. The Committee also established strategic goals that align with our business strategy and support consumer, customer, cost, people, process and partnership objectives. The Committee and management agreed that focusing on the financial objectives of sales growth, profit growth and asset utilization, as well as key strategic metrics, are expected to drive sustainable growth in stockholder return.

Committee Assessment of 2007 Performance:

In 2007, the key financial goals, the potential percentage of target award payouts for achieving those goals, and the actual 2007 results as determined by the Committee were as follows:

 

 

 

 

Based on these financial results, and by mathematically calculating the weighted average of the metrics, the Committee determined that the actual Company financial payout was 100%.

 

The Committee also assessed performance against the strategic goals and individual performance. The strategic goals were intended to further align compensation with achieving the goals of our business strategy and included several metrics related to consumer, customer, cost, people, process and partnership objectives. Based on this evaluation, the Committee may choose to adjust the financial objectives payout up or down, but not to an amount that would exceed the maximum permitted award level for each named executive officer as a percent of Company earnings (as discussed above). For fiscal year 2007, the Committee determined that the majority of the strategic goals were successfully achieved and, as a result, determined that the overall financial and strategic payout would be 100%, adjusted for any individual factors as appropriate.

 

Following the health-related retirement of Gerald E. Johnston from his positions as chairman and CEO in May 2006, the Committee approved a one-time increase to the target annual short-term cash incentive level of 30 percentage points for named executive officers, other than the CEO, for fiscal year 2007 only. The higher target awards for fiscal year 2007 were intended to retain named executive officers to continue leading the business during the critical period of the transition to a new CEO. The table below sets forth the targets (expressed as a percentage of base salary) for the short-term cash incentive awards and the one-time 30 percentage points increase to the short-term cash incentive targets for fiscal year 2007. Mr. Knauss, who became CEO on October 2, 2006, was not eligible for this adjustment; his fiscal year 2007 target is shown in the table below:

 

 

 

The actual amount of short-term cash incentive compensation earned by our named executive officers in 2007 is set forth in the Bonus and Non-Equity Incentive Plan Compensation columns of the Summary Compensation Table and includes the impact of the one-time target increase.

 

In May 2007, the Committee approved new financial metrics for fiscal year 2008 consisting of net customer sales and economic profit, defined as net operating profit after taxes less a capital charge. These metrics are more closely aligned with the Company’s recently updated corporate strategy and are expected to continue to drive long-term stockholder value.

 

Long-Term Stock-Based Incentive Awards – General Overview. A key objective of the Company is to create strong alignment between the interests of our named executive officers and those of our stockholders. We believe this alignment is provided through the use of stock-based incentive plans and actual stock ownership. Long-term stock-based incentive awards granted to the CEO and other named executive officers are designed to support the achievement of the Company’s long-term corporate financial goals and stock price appreciation through annual awards and to provide compensation opportunities necessary to attract and retain highly skilled named executive officers.

 

To ensure that the costs and dilutive impact of the long-term stock-based incentive program are financially efficient, the Committee annually engages its independent consultant to analyze the long-term incentive program costs, share usage and potential dilution versus that of our compensation peer group. The findings from this study are used to help establish our annual budget for long-term incentive awards. The Committee also evaluates the Company’s annual long-term stock-based incentive program design to ensure the program has an appropriate mix of stock options and performance-based stock awards. In determining the total value of the long-term incentive opportunity for each named executive officer, the Committee reviews the peer group data presented by both management and its independent compensation consultant on a position-by-position basis and then determines the long-term incentive awards for each of the named executive officers, taking into account recommendations by the CEO for all named executive officers other than himself.

 

The Committee establishes long-term incentive award targets to be competitive with the median of the compensation peer group. Actual long-term incentive award target levels for individual named executive officers may vary above or below the median based on a variety of factors, such as the named executive officer’s experience, criticality of the role, individual performance and expected future contributions. Like the EIC Plan awards, actual payouts under the long-term stock-based incentive plan will vary around target based on whether the Company underperforms or outperforms its target goals. The value of actual payouts will also vary based on changes in stock price. For fiscal year 2007, long-term incentive award targets for the named executive officers were targeted at the median.

 

For fiscal year 2007, the Committee determined that the named executive officers would receive 50% of the value of their total annual long-term incentive awards in stock options and 50% in performance shares. This mix of equity awards supports several important objectives, including compensating named executive officers for achievement of long-term goals tied to the business strategy through the use of performance shares, rewarding named executive officers for sustained increases in the Company’s stock price, enhancing the overall retention impact associated with the awards by mitigating the impact of uncontrollable market volatility on the overall compensation opportunity, and calibrating the overall cost of the program with compensation realized by named executive officers and performance delivered to stockholders. Annual grants of long-term stock-based incentive awards are intended to be competitive with those of our compensation peer group. Therefore, the Committee does not consider the amount of outstanding stock options, performance shares and restricted stock currently held by a named executive officer when making annual awards of stock options and performance shares.

 

The following provides details on the types of long-term incentives awarded to our named executive officers:

 

Performance Shares. Performance shares align the interests of our named executive officers with the interests of our stockholders because the shares’ potential value is tied to the achievement of the Company’s long-term financial goals. Performance shares are subject to a time-based performance period and only vest (i.e., are paid out) if the pre-determined financial performance goals are met by the Company. The performance period for these grants is a three-year period.

For grants made in fiscal years 2006 and 2007, performance share payouts are determined based on the achievement of cumulative operating profit growth and an average return on invested capital (“ROIC”) goal for a three-year period. ROIC is defined by the Company as adjusted operating profit after taxes, excluding certain costs and expenses, divided by average invested capital. For additional information regarding ROIC, refer to Exhibit 99.3 of the Company’s Form 10-K. A minimum level of financial performance must be achieved or no payout of performance shares will occur. If the minimum level of performance is achieved or exceeded, performance share payouts can range from 50% to 150% of the target number of shares allocated to each individual at grant date. Over the three-year period, if the Company achieves its cumulative operating profit growth target, the awards will fund at the maximum payout, though the Committee can then apply negative discretion to reduce the actual payout to reflect performance against the ROIC target established at the beginning of the period. If the cumulative operating profit growth goal is not met, no awards will be paid out under the plan. For the fiscal year 2007 grant made in September 2006, the Company established an ROIC target goal that aligns with its internal long-term financial goals and is intended to be a realistic, yet challenging, goal that should drive stockholder growth over the long-term.

 

Prior to fiscal year 2006, our named executive officers received performance share grants linked to achievement of total stockholder return (“TSR”) relative to a group of consumer products companies the Company benchmarks itself against for financial performance purposes over a three-year cycle. The Company’s TSR relative to peers for the three-year period had to be at least at the 40^th percentile for a payout to occur. If that level of TSR was achieved or exceeded, the performance shares had a payout ranging from 50% to 125% of the target number of shares. If the Company TSR versus the financial peer group was at or above the 50^th percentile, but less than the 75^th percentile, the performance shares would pay out at target. For the three-year period from September 2003 through September 2006, the Company’s TSR relative to the financial peer group was at the 73^rd percentile, and as a result, the performance shares paid out at 100%. Information regarding the vesting of these performance share awards is set forth in the Option Exercises and Stock Vested Table.

 

In May 2007, the Committee approved using economic profit, defined as net operating profit after taxes less a capital charge, instead of ROIC for the fiscal year 2008 performance share grant. Economic profit is more closely aligned with the Company’s recently updated corporate strategy.

 

Stock Options. Stock options align the interests of named executive officers with those of stockholders because options only have value if the price of the Company’s stock increases after the options are granted. Stock options vest at the rate of one-fourth per year over four years (beginning one year from the date of grant) and expire 10 years from the date of grant. In fiscal year 2007, the Committee awarded options to our named executive officers as part of our annual long-term stock-based incentive plan. In addition, the Committee granted an award of stock options in connection with the promotion of one of our named executive officers and the hiring of our CEO. The option exercise price for these options was equal to the closing price of the Company’s stock price on the date of grant. Information on all stock option grants is set forth in the Grants of Plan-Based Awards Table.

 

Restricted Stock and Restricted Stock Units. In addition to the stock option and performance share grants described above, awards of restricted stock and/or restricted stock units are made from time to time to recognize, retain or recruit a named executive officer. Grants of restricted shares or units vest over time, typically over a three- or four-year period. On October 2, 2006, Mr. Knauss received a grant of restricted stock units in connection with the start of his service with the Company. For fiscal year 2007, the fair market value of restricted shares or units granted was based on the closing price of our Common Stock on the date of grant. Information about this grant is set forth below and in the Grants of Plan-Based Awards Table.

 

Retirement Plans. The named executive officers participate in the same defined-benefit pension and defined-contribution benefit programs as all other U.S.-based salaried and non-union hourly employees. The Company’s retirement plans are designed to provide replacement income upon retirement and to be competitive with programs offered by our peers. We balance the effectiveness of these plans as a compensation and retention tool with the cost to the Company of providing them. The Company provides these retirement benefits under The Clorox Company Pension Plan and The Clorox Company 401(k) Plan, which includes a profit sharing provision known as Value Sharing.

 

In addition, because the IRC limits the amount of benefits that can be contributed to and paid from a tax-qualified retirement plan, the Company also provides our executive officers, including our named executive officers, with

additional retirement benefits intended to restore amounts that would otherwise be payable under the Company’s tax-qualified retirement plans if the IRC did not have limits on includable compensation and maximum benefits. We call these “restoration plans” because they restore executive benefits to the same percentage level provided to our salaried employees who are not limited by IRC restrictions. These plans use the same benefit formulas, the same types of compensation to determine benefits, and the same vesting requirements as our tax-qualified retirement plans. These restoration retirement benefits, which include the cash balance restoration and the Value Sharing restoration benefits, are an unfunded, unsecured obligation of the Company and are part of the Nonqualified Deferred Compensation Plan described below.

 

The Company also offers the SERP to our executive officers, including our named executive officers. Benefits are determined based on age and years of service and are offset by the accumulated value of Company contributions to the tax-qualified retirement plans and by Social Security. The benefit formula under this plan is described in the narrative accompanying the Pension Benefits Table. We believe the SERP is a strong retention tool because participants are not eligible for a full benefit if they leave the Company prior to reaching age 65 with at least 15 years of service. Participants attaining age 55 with at least 10 years of service may receive a benefit that is actuarially reduced from that available upon retirement at age 65. Mr. Knauss, our CEO, participates in an additional SERP as part of his employment agreement with the Company to compensate for the loss of retirement benefits at his prior employer (the “replacement SERP”). Information regarding the SERP and the replacement SERP for our CEO is described in the Pension Benefits section.

 

Nonqualified Deferred Compensation. To help executive officers, including our named executive officers, save for retirement and to be competitive with general market practice, our named executive officers may voluntarily defer the receipt of salary and short-term cash incentive awards under the Nonqualified Deferred Compensation Plan (“NQDC”). The NQDC allows participants an opportunity to defer up to 50% of base salary and 100% of annual short-term cash incentive awards. Deferred amounts can be invested into accounts that mirror the gains or losses of the S&P 500 index and/or the 30-year Treasury Bond yield, or the rate specified by the IRS for use where the 30-year bond rate would otherwise apply. In addition, as noted above, the NQDC permits the Company to contribute amounts that exceed the IRC compensation limits in the tax-qualified plans through the cash balance restoration and Value Sharing restoration provisions. The NQDC is an unfunded and unsecured obligation of the Company. In addition, the Clorox Company Interim Executive Officer Deferred Compensation Plan permits an interim CEO to defer receipt of all or a portion of base salary and bonus. Details about the plans and accumulated balances are described under the Pension Benefits and Nonqualified Deferred Compensation sections beginning on page 32.

 

Post-Termination Compensation. Executive officers of the Company, including our named executive officers, are covered by employment agreements that specify payments in the event the executive’s employment is terminated under certain specific circumstances. The type and amount of payments vary by executive level and the nature of the termination. These severance benefits, which are designed to be competitive with our compensation peer group and general industry practices, are payable if and only if the executive’s employment terminates as specified in the applicable plan document or employment agreement. These benefits support several important objectives. By mitigating the economic hardship associated with unexpected termination, these benefits aid in attracting and retaining named executive officers and encouraging management to take reasonable amounts of risk. For more information, please refer to the Potential Payments Upon Termination or Change in Control section of this proxy statement.

 

Perquisites. We provide named executive officers with other benefits that we believe are competitive and consistent with the Company’s overall executive compensation program. These benefits are reflected in the All Other Compensation column in the Summary Compensation Table. These benefits allow our named executive officers to work more efficiently and, in the case of the financial counseling program, help them optimize the value received from our compensation and benefit programs. These perquisites include a company automobile or car allowance, paid parking at the Company’s headquarters, an annual executive physical, reimbursement for health club membership and financial planning. In connection with the negotiation of an employment contract with the Company’s new CEO, the Company also agreed to provide the CEO with certain relocation and related benefits, which are discussed below. The value of perquisites to our named executive officers is set forth in a separate table in a footnote to the All Other Compensation column of the Summary Compensation Table.

Executive Compensation Policies

 

Stock Award Granting Practices. The Company makes its annual long-term stock-based incentive grants each September at a regularly scheduled meeting of the Committee, which typically occurs during the third week of the month, or about six weeks after the Company has publicly released a report of our annual earnings. The meeting date is the effective grant date for the awards, and the exercise/grant price is equal to the closing price of the Company’s stock on that date.

 

The Committee may also make occasional grants of stock options and other equity-based awards at other times to recognize, retain or recruit a named executive officer. These grants are approved by the Committee on or before the grant date, which is determined based on the timing of the triggering event. The exercise/grant price is the closing price of the Company’s stock on the effective date of the grant. The Committee must approve all equity grants to executive officers of the Company, including named executive officers.

 

All long-term stock-based incentive grants are made pursuant to the terms set forth in The Clorox Company 2005 Stock Incentive Plan.

 

Executive Stock Ownership Guidelines. To preserve the linkage between the interests of executive officers of the Company and stockholders, all executive officers, including the named executive officers, are expected to establish and maintain a significant level of direct stock ownership. This can be achieved in a variety of ways, such as by retaining stock received upon the exercise of options or the vesting of stock awards or purchasing stock in the open market. The current stock ownership guidelines are as follows:

 

Ownership levels – The minimum required ownership levels are stock having a value equal to four times base annual salary for the CEO and three times base annual salary for the other named executive officers.

 

Retention ratios – Executive officers, including named executive officers, are required to retain a certain percentage of shares obtained upon the exercise of options or the release of restrictions on full-value equity-based awards, after satisfying any applicable tax withholding requirement. The CEO is expected to retain 75% of shares acquired until the minimum ownership level is met. After attaining the expected ownership level, the CEO must retain 50% of any further shares acquired until retirement or termination. Other named executive officers must retain 75% of shares acquired until the minimum required ownership levels are met and thereafter must retain 25% of shares acquired for one year after receipt.

 

Ownership levels are based on shares of Common Stock owned by the named executive officer or held pursuant to Company plans. No stock options are counted in determining ownership levels, and shares that have not vested due to time or performance restrictions are also excluded from the ownership guidelines. Named executive officers are required to achieve ownership levels over time through the ongoing retention ratios associated with the exercise of stock options and vesting of full-value shares.

 

Securities Trading Policy. Named executive officers and directors may not purchase or sell options to sell or buy the Company’s stock (“puts” and “calls”) or engage in short sales with respect to the Company’s stock.

 

Tax Deductibility Limits on Executive Compensation. Section 162(m) of the IRC limits the tax deductibility of certain compensation paid to executive officers that exceeds $1 million per year unless such amounts are determined to be performance-based compensation. Our policy with respect to Section 162(m) seeks to balance the interests of the Company in maintaining flexible incentive plans under which the Company benefits from the ability to deduct the compensation paid to any executive officer against the possible loss of a tax deduction when taxable compensation for any of the five highest paid executive officers exceeds $1 million per year. The Company’s EIC Plan and stock-based incentive plan are designed to meet the requirements of Section 162(m) for performance-based compensation.

Compensation for Mr. Knauss – Chairman and CEO

 

On August 25, 2006, the board of directors hired Mr. Knauss as chairman and chief executive officer, a position Mr. Knauss assumed on October 2, 2006. In connection with his hiring, the Company entered into an employment agreement with Mr. Knauss that includes the following compensation package:

 

 

Both the stock options and restricted stock units vest over a four-year period beginning one year from the grant date. If Mr. Knauss terminates employment with the Company prior to completing three years of continuous service under certain specified circumstances, a portion of these awards will automatically vest. Information about these grants is set forth in the Grants of Plan-Based Awards Table and in Potential Payments Upon Termination or Change in Control.

 

Pursuant to his employment agreement, Mr. Knauss participates in a replacement SERP that provides cash retirement benefits that are equal to the greater of the amount calculated under the Clorox Company SERP or the benefits to which he would have been entitled if he had stayed at his previous employer. In the event that Mr. Knauss’ employment with the Company terminates prior to the completion of three years of service under certain specified circumstances, he will be credited with a minimum of three years of benefit accruals under the replacement SERP. Information about this replacement SERP is set forth in the narrative to the Pension Benefits Table.

 

Information about Mr. Knauss’ base salary, sign-on bonus and the special guaranteed short-term cash incentive award is set forth in the footnotes to the Summary Compensation Table.

 

Compensation for Mr. Matschullat – Interim Chairman and Interim CEO

 

Mr. Matschullat served as interim chairman and interim CEO from March 7, 2006 through October 2, 2006 and, thereafter, he resumed his role as an independent director of the Company. Mr. Matschullat received $266,875 in base salary in fiscal year 2007 and, in September 2006, he received a discretionary cash bonus amount of $1,000,000, of which $400,000 was attributable to his service to the Company during fiscal year 2007 and $600,000 was attributable to his service to the Company during fiscal year 2006. The bonus amount was in recognition of Mr. Matschullat’s service as interim CEO, given the length and magnitude of the assignment, as well as his leadership on the Search Committee for the new CEO. This bonus was not paid pursuant to the Company’s EIC Plan. Mr. Matschullat elected to defer 100% of his salary and cash bonus, which will be payable in the Company’s stock at the time of his termination of service as a director of the Company, as set forth in the Nonqualified Deferred Compensation Table. Information regarding Mr. Matschullat’s salary and discretionary cash bonus is set forth in the Summary Compensation Table. Mr. Matschullat’s compensation as an independent director paid after October 2, 2006 is reported in the Director Compensation Table.

 

COMPENSATION COMMITTEE REPORT

 

As detailed in its charter, the Management Development and Compensation Committee of the Board oversees the Company’s executive compensation policies and programs. As part of this function, the Committee discussed and reviewed with management the Compensation Discussion and Analysis. Based on this review, we have recommended to the board of directors that the Compensation Discussion and Analysis be included in the Proxy Statement.

 

THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

 

Michael E. Shannon, Chair

Tully M. Friedman

George J. Harad

Carolyn M. Ticknor

2007 Summary Compensation Table

 

The following table sets forth the compensation earned, paid or awarded to our named executive officers for the fiscal year ended June 30, 2007.

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants of Plan-Based Awards

 

This table shows grants of plan-based awards to the named executive officers during 2007.

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following equity awards granted to our named executive officers were outstanding as of the end of fiscal year 2007: