SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Kimberly-Clark Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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March 11, 2003
(KIMBERLY-CLARK LOGO)
THOMAS J. FALK
Chairman of the Board and
Chief Executive Officer
TO OUR STOCKHOLDERS:
On behalf of the Board of Directors and management of Kimberly-Clark
Corporation, I cordially invite you to the Annual Meeting of Stockholders to be
held on Thursday, April 24, 2003, at 11:00 a.m. at our World Headquarters which
is located at 351 Phelps Drive, Irving, Texas.
At the Annual Meeting, stockholders will be asked to elect four directors
for a three-year term, approve the selection of the Corporation's independent
auditors and vote on four stockholder proposals. These matters are fully
described in the accompanying Notice of Annual Meeting and proxy statement.
It is important that your stock be represented at the meeting regardless
of the number of shares you hold. You are encouraged to specify your voting
preferences by marking and dating the enclosed proxy card, voting electronically
using the Internet or using the telephone voting procedures.
If you plan to attend the meeting, please check the card in the space
provided or so indicate electronically or by telephone. This will assist us with
meeting preparations, and will enable us to expedite your admittance. If your
shares are not registered in your own name and you would like to attend the
meeting, please ask the broker, trust, bank or other nominee that holds your
shares to provide you with evidence of your share ownership, which will enable
you to gain admission to the meeting.
Sincerely,
/s/ THOMAS J. FALK
Thomas J. Falk
KIMBERLY-CLARK CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 2003
The Annual Meeting of Stockholders of KIMBERLY-CLARK CORPORATION will be
held at the Corporation's World Headquarters, 351 Phelps Drive, Irving, Texas,
on Thursday, April 24, 2003, at 11:00 a.m. for the following purposes:
1. To elect four directors for a three-year term to expire at the 2006
Annual Meeting of Stockholders;
2. To approve the selection of Deloitte & Touche LLP as independent
auditors;
3. To act upon four stockholder proposals which may be presented at the
meeting; and
4. To take action upon any other business which properly may come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on February 24, 2003 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
It is important that your shares be represented at the meeting. I urge you
to sign, date and promptly return the enclosed proxy card in the enclosed
business reply envelope, or vote using the Internet or telephone.
The accompanying proxy statement also is being used to solicit voting
instructions for the shares of the Corporation's common stock which are held by
the trustees of the Corporation's employee benefit and stock purchase plans for
the benefit of the participants in the plans. It is important that each
participant in the plans signs, dates and returns the voting instruction card
which is enclosed with the proxy statement in the business reply envelope
provided or indicate his or her preference using the Internet or telephone.
By order of the Board of Directors.
/s/ RONALD D. MC CRAY
Ronald D. Mc Cray
Vice President, Associate General
Counsel and Secretary
P. O. Box 619100
Dallas, Texas 75261-9100
March 11, 2003
TABLE OF CONTENTS
Introduction.......................................................... 1
Electronic Delivery of Proxy Materials and Annual Report............ 1
Who May Vote........................................................ 1
How You May Vote.................................................... 1
How You May Revoke or Change Your Vote.............................. 2
Confidential Voting................................................. 2
Costs of Solicitation............................................... 2
Votes Required/Voting Procedures.................................... 2
Dividend Reinvestment and Stock Purchase Plan....................... 2
Employee Benefit Plans.............................................. 2
Delivery of One Proxy Statement and Annual Report to a Single
Household to Reduce Duplicate Mailings........................... 3
Proposal 1. Election of Directors..................................... 3
General Information................................................. 3
Certain Information Regarding Directors and Nominees................ 4
Security Ownership of Management.................................... 8
Certain Transactions and Business Relationships..................... 9
Board of Directors and Committees................................... 9
Stockholder Nominations for Directors............................... 10
Compensation of Directors........................................... 11
Proposal 2. Approval of Auditors...................................... 12
Principal Accounting Firm Fees...................................... 12
Proposal 3. Stockholder Proposal Regarding the Corporation's Amended
and Restated Rights Agreement....................................... 13
Stockholder Proposal................................................ 13
Response of the Corporation to Stockholder Proposal................. 14
Proposal 4. Stockholder Proposal Regarding Expensing Stock Options.... 16
Stockholder Proposal................................................ 16
Response of the Corporation to Stockholder Proposal................. 17
Proposal 5. Stockholder Proposal Regarding Indexing Stock Options for
Executives.......................................................... 18
Stockholder Proposal................................................ 18
Response of the Corporation to Stockholder Proposal................. 19
Proposal 6. Stockholder Proposal Regarding An Independent Chairman of
the Board........................................................... 20
Stockholder Proposal................................................ 20
Response of the Corporation to Stockholder Proposal................. 21
i
Executive Compensation................................................ 22
Summary Compensation Table.......................................... 22
Option Grants in 2002............................................... 23
Aggregated Option Exercises in 2002 and Option Values as of December
31, 2002......................................................... 24
Compensation Committee Report on Executive Compensation............. 24
Salaries for 2002................................................ 25
Cash Bonus Awards for 2002....................................... 25
Equity Plans..................................................... 25
2002 Compensation of the Chief Executive Officer................. 26
Alignment of Executive Compensation with Corporate Performance... 27
Tax Deduction for Executive Compensation......................... 27
Performance Graph................................................... 28
Compensation Committee Interlocks and Insider Participation......... 28
Defined Benefit Retirement Plan..................................... 28
Executive Severance Plan............................................ 30
Corporation's Severance Pay Plan.................................... 30
Section 16(a) Beneficial Ownership Reporting Compliance............... 30
2004 Stockholder Proposals............................................ 31
Annual Meeting Advance Notice Requirements............................ 31
Audit Committee Report................................................ 31
Other Matters......................................................... 32
Appendix A -- Audit Committee Charter................................. A-1
ii
March 11, 2003
(KIMBERLY-CLARK LOGO)
PROXY STATEMENT
INTRODUCTION
The accompanying proxy is solicited on behalf of the Board of Directors of
Kimberly-Clark Corporation for use at the Annual Meeting of Stockholders to be
held on April 24, 2003 and at any adjournment thereof. We are first mailing this
proxy statement and the accompanying proxy to holders of the Corporation's
common stock on March 11, 2003.
ELECTRONIC DELIVERY OF PROXY MATERIALS AND ANNUAL REPORT
The Notice of Annual Meeting and proxy statement and the Corporation's 2002
Annual Report are available on our Internet site at www.kimberly-clark.com. In
the future, instead of receiving copies of the proxy statement and annual report
in the mail, stockholders may elect to receive an e-mail with a link to these
documents on the Internet. Receiving your proxy materials online saves the
Corporation the cost of producing and mailing documents to your home or
business, and gives you an automatic link to the proxy voting site.
Stockholders of Record: If your shares are registered in your own name, to
enroll in the electronic delivery service go directly to our transfer agent's
website at http://www.econsent.com/kmb anytime and follow the instructions.
Beneficial Stockholders: If your shares are not registered in your name,
to enroll in the electronic delivery service check the information provided to
you by your bank or broker or contact your bank or broker for information on
electronic delivery service.
Plan Participants: If you are a participant in one or more of the
Corporation's employee benefit or stock purchase plans, to enroll in the
electronic delivery service go directly to our transfer agent's website at
http://www.econsent.com/kmb anytime and follow the instructions.
WHO MAY VOTE
Each stockholder of record at the close of business on February 24, 2003
will be entitled to one vote for each share registered in the stockholder's
name. As of that date, there were outstanding 510,722,187 shares of common stock
of the Corporation.
HOW YOU MAY VOTE
You may vote in person by attending the meeting or by completing and
returning a proxy by mail, or vote using the Internet or the telephone. To vote
your proxy by mail, mark your vote on the enclosed proxy card, then follow the
instructions on the card. To vote your proxy using the Internet or by telephone,
see the instructions on the proxy form and have the proxy form available when
you access the Internet website or place your telephone call.
The named proxies will vote your shares according to your directions. If
you sign and return your proxy but do not make any of the selections, the named
proxies will vote your shares for the election of directors, for the approval of
the selection of the Corporation's independent auditors and against approval of
each of the stockholder proposals.
HOW YOU MAY REVOKE OR CHANGE YOUR VOTE
You may revoke your proxy before the time of voting at the meeting in any
of the following ways:
- by mailing a revised proxy to the Secretary of the Corporation
- by changing your vote on the Internet website
- by using the telephone voting procedures
- by voting in person at the meeting
CONFIDENTIAL VOTING
Stockholders' proxies and plan participants' voting instruction cards are
received by the Corporation's independent proxy processing agent, and the vote
is certified by independent Inspectors of Election. Proxies, ballots and voting
instruction cards that identify the vote of stockholders and participants will
be kept confidential, except as necessary to meet legal requirements, in cases
where stockholders and participants request disclosure or write comments on
their cards, or in a contested matter involving an opposing proxy solicitation.
During the proxy solicitation period, the Corporation will receive daily
tabulation reports from the independent proxy processing agent, but these
reports provide only aggregate data. In addition, the agent will identify
stockholders who fail to vote so that the Corporation may contact them and
request they do so.
COSTS OF SOLICITATION
The Corporation will bear the cost of preparing, printing and delivering
materials in connection with this solicitation of proxies including the cost of
the proxy solicitation, and the expenses of brokers, fiduciaries and other
nominees in forwarding proxy material to beneficial owners. In addition to the
use of the mail and electronic delivery, solicitation may be made by telephone
or otherwise by regular employees of the Corporation. The Corporation has
retained W.F. Doring & Co., Inc. to aid in the solicitation at a cost of
approximately $11,000, plus reimbursement of out-of-pocket expenses.
VOTES REQUIRED/VOTING PROCEDURES
A majority of the shares of the Corporation's common stock, present in
person or represented by proxy, shall constitute a quorum for purposes of the
Annual Meeting. Directors shall be elected by a plurality of the votes present
in person or represented by proxy at the Annual Meeting and entitled to vote on
the election of directors. In all matters other than the election of directors,
the affirmative vote of a majority of shares present in person or represented by
proxy at the Annual Meeting and entitled to vote on the subject matter shall be
the act of the stockholders. Abstentions are treated as votes against a proposal
and broker non-votes will not be considered present and entitled to vote.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
If a stockholder is a participant in the Corporation's Automatic Dividend
Reinvestment and Stock Purchase Plan, the proxy card represents the number of
full shares in the stockholder's account in the plan, as well as shares
registered in the stockholder's name.
EMPLOYEE BENEFIT PLANS
The Corporation also is sending this proxy statement and voting materials
to participants in various employee benefit and stock purchase plans of the
Corporation. The trustee of each plan, as the stockholder of record of shares of
the common stock of the Corporation held in the plans, will vote whole shares of
stock attributable to each participant's interest in the plans in accordance
with
2
the directions the participant gives or, if no directions are given by the
participant, in accordance with the directions of the respective plan committee.
DELIVERY OF ONE PROXY STATEMENT AND ANNUAL REPORT TO A SINGLE HOUSEHOLD TO
REDUCE DUPLICATE MAILINGS
Each year in connection with the Corporation's Annual Meeting of
Stockholders, the Corporation is required to send to each stockholder of record
a proxy statement and annual report, and to arrange for a proxy statement and
annual report to be sent to each beneficial stockholder whose shares are held by
or in the name of a broker, bank, trust or other nominee. Because many
stockholders hold shares of the Corporation's common stock in multiple accounts,
this process results in duplicate mailings of proxy statements and annual
reports to stockholders who share the same address. Stockholders may avoid
receiving duplicate mailings and save the Corporation the cost of producing and
mailing duplicate documents as follows:
Stockholders of Record: If your shares are registered in your own name and
you are interested in consenting to the delivery of a single proxy statement or
annual report, you may contact Stockholder Services, P.O. Box 612606, Dallas,
Texas 75261-2606 or call 972-281-1521.
Beneficial Stockholders: If your shares are not registered in your own
name, your broker, bank, trust or other nominee that holds your shares may have
asked you to consent to the delivery of a single proxy statement or annual
report if there are other Kimberly-Clark stockholders who share an address with
you. If you currently receive more than one proxy statement or annual report at
your household, and would like to receive only one copy of each in the future,
you should contact your nominee.
Right to Request Separate Copies: If you consent to the delivery of a
single proxy statement and annual report but later decide that you would prefer
to receive a separate copy of the proxy statement or annual report, as
applicable, for each stockholder sharing your address, then please notify us or
your nominee, as applicable, and we or they will promptly deliver such
additional proxy statements or annual reports. You may also contact us at the
address and phone number listed on page 32 if you wish to receive a separate
copy of the proxy statement or annual report for each stockholder sharing your
address in the future.
PROPOSAL 1. ELECTION OF DIRECTORS
GENERAL INFORMATION
The Board of Directors is divided into three classes, as required by the
Corporation's Restated Certificate of Incorporation. Directors of one class are
elected each year for a term of three years. As of the date of this proxy
statement, the Board of Directors consists of 13 members, including Mae C.
Jemison, M.D. and Dennis R. Beresford who were elected to the Board by the Board
of Directors effective as of September 1, 2002 and November 12, 2002,
respectively. Six of the directors have terms which expire at this year's Annual
Meeting (Class of 2003), four have terms which expire at the 2004 Annual Meeting
(Class of 2004), and three have terms which expire at the 2005 Annual Meeting
(Class of 2005). William O. Fifield and Wolfgang R. Schmitt, members of the
Class of 2003, have advised the Board that they intend to retire from the Board
effective at this year's Annual Meeting. Wayne R. Sanders, formerly a member of
the Class of 2003, retired on February 28, 2003.
The four nominees for director set forth on the following pages are
proposed to be elected at this year's Annual Meeting to serve for a term to
expire at the 2006 Annual Meeting of Stockholders (Class of 2006) and until
their successors are elected and have qualified. Should any nominee become
unable to serve, proxies may be voted for another person designated by
management. All nominees have advised the Corporation that they will serve if
elected. The remaining seven directors will continue to serve as directors for
the terms set forth on the following pages.
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The nominees for director are such that immediately after the election of
the nominees to the Board of Directors, a majority of all directors holding
office will be "Independent Directors" under the terms of the Corporation's
By-Laws. The Board has determined that all directors and nominees are
Independent Directors, except for Thomas J. Falk and Claudio X. Gonzalez.
CERTAIN INFORMATION REGARDING DIRECTORS AND NOMINEES
The names of the nominees for the Class of 2006 and of the other directors
continuing in office, their ages as of the date of the Annual Meeting, the year
each first became a director, their principal occupations during at least the
past five years, other directorships held by each as of the date hereof and
certain other biographical information are set forth on the following pages by
Class, in the order of the next Class to stand for election.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING AT THE
2006 ANNUAL MEETING OF STOCKHOLDERS
(CLASS OF 2006)
DENNIS R. BERESFORD
Ernst & Young Executive Professor of Accounting, University of Georgia
Mr. Beresford, age 64, has served as Ernst & Young Executive Professor of
Accounting at the J.M. Tull School of Accounting, Terry College of Business,
University of Georgia since 1997. From 1987 to 1997, he served as the Chairman
of the Financial Accounting Standards Board. Prior to that, Mr. Beresford held
various positions at the accounting firm of Ernst & Young. He serves on the
board of directors and audit committees of WorldCom, Inc., Legg Mason, Inc. and
National Service Industries, Inc. He has been a director of the Corporation
since November 12, 2002.
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THOMAS J. FALK
Chairman of the Board and Chief Executive Officer
Mr. Falk, age 44, was elected Chairman of the Board and Chief Executive Officer,
effective February 18, 2003, and President and Chief Executive Officer of the
Corporation effective September 12, 2002. Prior to that, he served as President
and Chief Operating Officer of the Corporation since his election in 1999. Mr.
Falk previously had been elected Group President-Global Tissue, Pulp and Paper
in 1998, where he was responsible for the Corporation's global tissue
businesses. He also was responsible for the Wet Wipes and Neenah Paper sectors,
Pulp Operations and Consumer Business Services, Environment and Energy and Human
Resources organizations. Mr. Falk joined the Corporation in 1983 and has held
other senior management positions in the Corporation. He has been a director of
the Corporation since 1999.
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MAE C. JEMISON, M.D.
President, The Jemison Group, Inc.
Dr. Jemison, age 46, is founder and President of The Jemison Group, Inc. and
BioSentient Corporation. She is the A.D. White Professor at Large at Cornell
University and serves as Bayer Corporation's national science advocate. Dr.
Jemison served as a professor of Environmental Studies at Dartmouth College from
1995 to 2002. From 1987 to 1993, she served as a National Aeronautics and Space
Administration (NASA) astronaut. Dr. Jemison serves on the board of directors of
Scholastic, Inc., Valspar Corporation, The Dorothy Jemison Foundation for
Excellence and the Texas Governor's Council for Science and BioTechnology
Development. She has been a director of the Corporation since September 1, 2002.
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RANDALL L. TOBIAS
Chairman Emeritus, Eli Lilly and Company
Mr. Tobias, age 61, served as Chairman of the Board and Chief Executive Officer
of Eli Lilly and Company from 1993 until he retired in 1998. He previously had
been Vice Chairman of the Board of AT&T since 1986, and had been employed by
AT&T since 1964. Mr. Tobias is a director of ConocoPhillips, Knight-Ridder,
Inc., Interactive Intelligence, Inc. and Windrose Medical Properties Trust. He
is also a trustee of the Colonial Williamsburg Foundation. He has been a
director of the Corporation since 1994.
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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE
2004 ANNUAL MEETING OF STOCKHOLDERS
(CLASS OF 2004)
PASTORA SAN JUAN CAFFERTY
Professor, University of Chicago
Mrs. Cafferty, age 62, has been a Professor since 1985 at the University of
Chicago's School of Social Service Administration where she has been a member of
the faculty since 1971. Mrs. Cafferty is a director of Harris Trust and Savings
Bank, Harris Bankcorp, Inc., Harris Bankmont, Inc., Waste Management, Inc. and
the Peoples Energy Corporation and its subsidiaries, and a Trustee of the Lyric
Opera Association and Rush-Presbyterian-St. Luke's Medical Center in Chicago.
She has been a director of the Corporation since 1976.
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CLAUDIO X. GONZALEZ
Chairman of the Board and Managing Director, Kimberly-Clark de Mexico, S.A. de
C.V.
Mr. Gonzalez, age 68, has served as Chairman of the Board and Managing Director
of Kimberly-Clark de Mexico, S.A. de C.V., an equity company of the Corporation,
since 1973. He was employed by the Corporation in 1956 and by Kimberly-Clark de
Mexico, S.A., the predecessor of Kimberly-Clark de Mexico, S.A. de C.V., in
1957. He is a director of Kellogg Company, General Electric Company, The
Investment Company of America, Home Depot Inc., The Mexico Fund, Grupo ALFA,
Grupo Carso and America Movil, and is a member of the Advisory Board of Unilever
N.V. and Unilever PLC, and the International Advisory Council of J.P. Morgan
Chase & Co. He has been a director of the Corporation since 1976.
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LINDA JOHNSON RICE
President and Chief Executive Officer, Johnson Publishing Company, Inc.
Mrs. Johnson Rice, age 45, has been President and Chief Executive Officer of
Johnson Publishing Company, Inc., a multi-media company, since 2002. She joined
that company in 1980, became Vice President in 1985 and was elected President
and Chief Operating Officer in 1987. Mrs. Johnson Rice is a director of Bausch &
Lomb Incorporated, Viad Corp and Omnicom Group, Inc. She has been a director of
the Corporation since 1995.
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MARC J. SHAPIRO
Vice Chairman, J.P. Morgan Chase & Co.
Mr. Shapiro, age 55, has been Vice Chairman of J.P. Morgan Chase & Co. since
1997. Before assuming his current position, Mr. Shapiro was Chairman, President
and Chief Executive Officer of Chase Bank of Texas, a wholly owned subsidiary of
J.P. Morgan Chase & Co., from 1989 until 1997. Mr. Shapiro is a member of the
board of directors of Burlington Northern Sante Fe Corporation and a trustee of
Weingarten Realty Investors. He also serves on the boards of M.D. Anderson
Cancer Center, Weill Medical College of Cornell University, United Way of New
York City, Local Initiatives Support Corporation and Rice University. He has
been a director of the Corporation since 2001.
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TERM EXPIRING AT THE
2005 ANNUAL MEETING OF STOCKHOLDERS
(CLASS OF 2005)
JOHN F. BERGSTROM
Chairman and Chief Executive Officer, Bergstrom Corporation
Mr. Bergstrom, age 56, has served as Chairman and Chief Executive Officer of
Bergstrom Corporation, Neenah, Wisconsin, for more than the past five years.
Bergstrom Corporation owns and operates automobile sales and leasing businesses
and a credit life insurance company in Wisconsin. Mr. Bergstrom is a director of
the Wisconsin Energy Corporation, Wisconsin Gas, Wisconsin Electric Power
Company, Sensient Technologies Corp., Banta Corporation, The Catholic Diocese of
Green Bay, Midwest Express Holdings, Inc. and the Green Bay Packers, Inc. He
also is a member of the board of trustees of Marquette University and the
Medical College of Wisconsin. He has been a director of the Corporation since
1987.
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PAUL J. COLLINS
Retired Vice Chairman, Citigroup Inc.
Mr. Collins, age 66, retired in 2000 as Vice Chairman of Citigroup Inc. He had
been Vice Chairman of Citigroup Inc. since its inception in 1998 as a result of
the merger of Citicorp and Travelers Group Inc. Prior to the merger, Mr. Collins
was a Vice Chairman of Citicorp and its principal subsidiary, Citibank N.A.,
since 1988. He was a director of Citicorp, Inc. and Citibank, N.A., from 1985 to
2000, and is currently a director of BG Group plc, Genuity Inc. and Nokia
Corporation. Mr. Collins is a trustee of the University of Wisconsin Foundation
and the Glyndebourne Arts Trust. He has been a director of the Corporation since
1983.
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ROBERT W. DECHERD
Chairman of the Board, President and Chief Executive Officer, Belo Corp.
Mr. Decherd, age 52, has served as Chairman of the Board and Chief Executive
Officer of Belo Corp., a broadcasting and publishing company, since 1987. Mr.
Decherd became President of that company in 1994, and previously served as
President from 1985 through 1986. He has been a director of Belo Corp. since
1976. Mr. Decherd also is a member of the Advisory Council for the Harvard
University Center for Ethics and the Professions, and serves on the Media
Security and Reliability Council as part of President Bush's Homeland Security
initiative. He has been a director of the Corporation since 1996.
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7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of December 31, 2002, unless
otherwise indicated, regarding the number of shares of the common stock of the
Corporation beneficially owned by all directors and nominees, by each of the
executive officers named in "Executive Compensation" below (collectively, the
"Named Executive Officers"), and by all directors, nominees and executive
officers as a group.
NAME OF INDIVIDUAL OR AMOUNT AND NATURE OF
IDENTITY OF GROUP BENEFICIAL OWNERSHIP(1)(2)(3)
--------------------- -----------------------------
Dennis R. Beresford......................................... 1,500
John F. Bergstrom........................................... 23,000(4)(6)
Pastora San Juan Cafferty................................... 11,220(5)(6)
Paul J. Collins............................................. 16,600(5)(6)
Robert W. Decherd........................................... 20,000(6)
O. George Everbach.......................................... 530,743(6)
Thomas J. Falk.............................................. 919,809(6)
William O. Fifield.......................................... 12,000(5)(6)
Claudio X. Gonzalez......................................... 171,656
Mae C. Jemison, M.D. ....................................... 130(7)
Steven R. Kalmanson......................................... 396,794(6)
Linda Johnson Rice.......................................... 10,300(6)(8)
Wayne R. Sanders............................................ 2,151,212(6)
Wolfgang R. Schmitt......................................... 10,417(5)(6)
Kathi P. Seifert............................................ 560,232(6)(9)
Marc J. Shapiro............................................. 11,076(6)
Randall L. Tobias........................................... 15,600(5)(6)
All directors, nominees and executive officers as a group... 5,681,073(6)(10)
---------------
(1) Except as otherwise noted, the directors, nominees and Named Executive
Officers, and the directors, nominees and executive officers as a group,
have sole voting and investment power with respect to the shares listed.
(2) Each director, nominee and Named Executive Officer owns less than one
percent of the outstanding shares of the Corporation's common stock. All
directors, nominees and executive officers as a group own 1.1 percent of
the outstanding shares of the Corporation's common stock.
(3) For each director who is not an officer or employee of the Corporation or
any of its subsidiaries or equity companies, share amounts include shares
issued pursuant to the Outside Directors' Compensation Plan, which is
described below under the heading "Compensation of Directors."
(4) Includes 1,600 shares held by trusts for the benefit of Mr. Bergstrom's son
and daughter and for which Mr. Bergstrom serves as trustee. Also includes
5,000 shares held by Bergstrom Investments L.P., a partnership of which Mr.
Bergstrom and his brother are general partners and their respective
children are limited partners, and of which Mr. Bergstrom shares voting
control.
(5) In addition to the shares listed in the table which are beneficially owned,
the following directors have stock credits allocated to their deferred
compensation accounts as of December 31, 2002 under the Corporation's
deferred compensation plan for directors: Mrs. Cafferty, 23,178.79 credits;
Mr. Collins, 51,903.08 credits; Mr. Fifield, 5,913.15 credits; Mr. Schmitt,
8,407.06 credits; and Mr. Tobias, 10,796.50 credits. The accounts reflect
the election of the directors to defer into stock credits compensation
previously earned by them as directors of the Corporation. Although these
directors are fully at risk as to the price of the Corporation's common
stock represented by stock credits, the stock credits are not shares of
stock and the directors do not have any rights as holders of common stock
with respect to the stock credits. See "Executive
Compensation -- Compensation of Directors" for additional information
concerning the deferred stock accounts.
(6) Includes the following shares which could be acquired within 60 days of
December 31, 2002 by: Mr. Bergstrom, 5,400 shares; Mrs. Cafferty, 5,400
shares; Mr. Collins, 5,600 shares; Mr. Decherd, 5,000 shares; Mr. Everbach,
442,586 shares; Mr. Falk, 725,000 shares; Mr. Fifield, 5,000 shares; Mr.
Kalmanson, 340,079 shares; Mrs. Johnson Rice, 5,000 shares; Mr. Sanders,
1,820,000 shares; Mr. Schmitt, 6,417 shares; Ms. Seifert, 506,624 shares;
Mr. Shapiro, 10,076 shares; Mr. Tobias, 5,600 shares; and all directors,
nominees and executive officers as a group, 4,583,364 shares. Also, shares
of common stock held by the trustee of the Corporation's Incentive
Investment Plan for the benefit of, and which are attributable to the
accounts in the plan of, the Named Executive Officers above are included in
this table.
(7) Includes 130 shares owned beneficially by Dr. Jemison as of January 30,
2003.
8
(8) Includes 300 shares held by a trust for the benefit of Mrs. Johnson Rice's
daughter and for which Mrs. Johnson Rice serves as a co-trustee and shares
voting and investment power.
(9) Includes 170 shares held by Ms. Seifert's spouse in custody for their son.
(10) Voting and investment power with respect to 56,439 of the shares is shared.
To further align management's financial interests with those of the
stockholders, the Corporation maintains stock ownership guidelines for
approximately 400 key managers, including the Named Executive Officers. All
executive officers are expected to own the Corporation's stock in an amount
equivalent to three times their annual salary. The Chief Executive Officer is
expected to own an amount of the Corporation's stock which is six times his
annual salary. These guidelines have been met or exceeded by each of the Named
Executive Officers.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
The Corporation leases office space in Neenah, Wisconsin from Neenah
Downtown Redevelopment Associates Limited Partnership, a partnership engaged in
the redevelopment of downtown real estate. John F. Bergstrom previously owned a
14 percent limited partner interest in the partnership, which he divested in
December 2002. During 2002, rental payments made by the Corporation to the
partnership were $1,072,948. The Board has determined that the Corporation's
transactions with the partnership do not impair Mr. Bergstrom's independence as
a director.
In 2002, the Corporation paid $320,011 to Maxair, Inc. for jet fuel
purchases and rental payments due under a lease for aircraft hangar and related
office space in Appleton, Wisconsin. Steven R. Kalmanson, a Named Executive
Officer, and his family own Maxair, Inc. The Corporation expects to engage in
similar transactions with Maxair, Inc. in 2003.
Management believes that the amounts charged and paid in connection with
the foregoing arrangements were reasonable compared with the amounts which would
be charged and paid for similar services or products from other third parties.
BOARD OF DIRECTORS AND COMMITTEES
Mr. Falk was appointed as Chairman of the Board on February 18, 2003,
succeeding Mr. Sanders who had been Chairman since 1992. Mr. Sanders announced
in September 2002 his decision to retire from the Corporation effective February
28, 2003. Mr. Collins was appointed Lead Director on November 12, 2002, and as
Chairman of the Executive Committee of the Board on February 18, 2003. As Lead
Director, Mr. Collins will continue to chair executive session meetings of
non-management directors, among other responsibilities. The non-management
directors are scheduled to meet in executive session without the presence of
management approximately five times per year.
The Board of Directors met six times in 2002. All of the incumbent
directors attended in excess of 75 percent of the total number of meetings of
the Board and committees of the Board on which they served.
The standing committees of the Board include the Audit Committee,
Compensation Committee, Executive Committee, and Nominating and Corporate
Governance Committee.
The Audit Committee, currently composed of Mr. Decherd, Chairman, Mr.
Beresford, Dr. Jemison, Mr. Schmitt and Mr. Tobias, met six times during 2002.
The Audit Committee assists the Board in fulfilling its oversight
responsibilities to stockholders, the investment community and others for
monitoring (1) the quality and integrity of the financial statements of the
Corporation; (2) the Corporation's compliance with ethical policies contained in
the Corporation's Code of Conduct, and legal and regulatory requirements; (3)
the independence, qualification and performance of the Corporation's independent
auditors; and (4) the performance of the Corporation's internal auditors. The
Committee also selects, subject to stockholder approval, and engages the
independent auditors to audit the books, records and accounts of the
Corporation, reviews the
9
scope of the audits, and establishes policy in connection with internal audit
programs of the Corporation. See "Audit Committee Report" below for further
information. The Audit Committee members satisfy the independence, financial
literacy and expertise requirements of the New York Stock Exchange. The Board
has determined that Mr. Beresford satisfies the requirements for an "audit
committee financial expert" under the rules and regulations of the Securities
and Exchange Commission and that he can effectively serve on the Audit Committee
notwithstanding his commitments to three other audit committees on which he
serves. The Board of Directors adopted a revised Audit Committee Charter on
November 12, 2002. A copy of the revised Audit Committee Charter is included as
Appendix A to this proxy statement.
The Compensation Committee, currently composed of Mr. Collins, Chairman,
Mrs. Cafferty, Mrs. Johnson Rice and Mr. Shapiro, met three times during 2002.
Each member of the Compensation Committee is an Independent Director. The nature
and scope of the Committee's responsibilities are set forth below under
"Executive Compensation -- Compensation Committee Report on Executive
Compensation."
The Executive Committee is currently composed of Mr. Collins, Chairman, Mr.
Bergstrom, Mr. Falk, Mr. Fifield and Mr. Gonzalez. The Committee, when the Board
of Directors is not in session, has and may exercise all the powers of the Board
to direct the business and affairs of the Corporation, except powers assigned in
the Corporation's By-Laws to another standing Committee of the Board and except
to the extent limited in any respect by law or the Certificate of Incorporation
or By-Laws of the Corporation. The policy of the Board of Directors is that only
administrative matters, or urgent matters that arise between regular meetings of
the Board, are acted upon by the Executive Committee. During 2002, the Committee
acted once by unanimous written consent.
The Nominating and Corporate Governance Committee is currently composed of
Mrs. Cafferty, Chairman, Mr. Beresford, Mr. Bergstrom, Mrs. Johnson Rice and Mr.
Tobias. The Committee (1) oversees the process by which individuals are
nominated to become board members, and (2) oversees matters of corporate
governance, including advising the Board on (A) board organization, membership,
function, performance and compensation, (B) committee structure and membership,
and (C) policies and positions regarding significant stockholder relations
issues. The Committee monitors and recommends improvements to the practices and
procedures of the Board, reviews stockholder proposals and other proxy materials
relating to corporate governance and considers responses or actions with respect
to such proposals. Each member of the Nominating and Corporate Governance
Committee is an Independent Director. The Nominating Committee and Corporate
Governance Committee were combined in November 2002. The Nominating Committee
met three times during 2002 and the Corporate Governance Committee met once in
2002.
STOCKHOLDER NOMINATIONS FOR DIRECTORS
The Nominating and Corporate Governance Committee of the Board of Directors
considers nominees recommended by stockholders as candidates for election to the
Board of Directors at the Annual Meeting of Stockholders. A stockholder wishing
to nominate a candidate for election to the Board at the Annual Meeting is
required to give written notice to the Secretary of the Corporation of his or
her intention to make a nomination. The notice of nomination must be received by
the Corporation not less than 50 days nor more than 75 days prior to the
stockholders' meeting, or if the Corporation gives less than 60 days notice of
the meeting date, the notice of nomination must be received within 10 days after
the meeting date is announced. The notice of nomination is required to contain
certain information about both the nominee and the stockholder making the
nomination. The Corporation may require that the proposed nominee furnish other
information to determine that person's eligibility to serve as a director. A
nomination which does not comply with the above procedure will be disregarded.
10
COMPENSATION OF DIRECTORS
Directors who were not officers or employees of the Corporation or any of
its subsidiaries, affiliates or equity companies receive an annual retainer of
(1) options to acquire 2,500 shares of common stock of the Corporation and (2) a
cash payment of $50,000 payable pro rata quarterly in advance. These directors
can elect to receive the cash portion of the retainer in the form of additional
stock options. Directors who are also the chairmen of the Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee and the
Lead Director each receive an annual retainer of options to acquire 300 shares
of the common stock of the Corporation. The option price per share for all
options granted to outside directors will be no less than 100 percent of the
market value per share of the Corporation's common stock on the date of grant.
These directors also receive a daily attendance fee of $1,200 per meeting for
each day or fraction thereof spent in attendance at a meeting of the Board or
any committee, subject to a maximum of $3,600 for any day on which more than one
meeting is held. In addition, the Corporation reimburses these directors for
expenses incurred as a result of attending Board or committee meetings.
A director who is an officer or an employee of the Corporation or any of
its subsidiaries, affiliates or equity companies does not receive any
compensation for services as a member of the Board or any committee, but is
reimbursed for expenses incurred as a result of the service.
Under the deferred compensation plan for directors of the Corporation,
directors who are not officers or employees of the Corporation or any of its
subsidiaries, affiliates or equity companies may make an irrevocable election to
defer receipt of all or a portion of their annual cash retainer and meeting fees
for any year. Compensation of a director that is deferred under the plan is
credited either to a cash account or a stock account, as provided in the
election. Amounts allocated to a cash account are converted into cash credits
and will earn additional cash credits quarterly at a rate of one-fourth of the
per annum rate of either six percent or the rate paid from time to time on
six-month U.S. Treasury Bills, whichever is higher. Amounts allocated to a stock
account are converted into stock credits equal to the number of shares of common
stock of the Corporation which could have been purchased with the amounts. A
participant's stock account also is credited with additional stock credits based
on the amount of any dividends paid on the Corporation's common stock. Cash
credits and stock credits are converted to and paid in cash at the time of
distribution on the date elected by a participant, and with respect to stock
credits, based on the price of a share of common stock of the Corporation. Stock
credits are not shares of stock; no shares of the Corporation's common stock are
ever distributed to a participant under the plan; and no participant acquires
any rights as a holder of common stock under the plan. Upon retirement as a
director, all accounts are distributed in one to 20 annual installments, as
elected by the participant, or upon death.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE FOUR NOMINEES FOR DIRECTOR.
11
PROPOSAL 2. APPROVAL OF AUDITORS
The Audit Committee of the Board of Directors has selected Deloitte &
Touche LLP as the principal independent auditors to audit the financial
statements of the Corporation for 2003, subject to ratification by the
stockholders. If the stockholders do not approve the selection of Deloitte &
Touche LLP, the selection of other independent auditors will be considered by
the Audit Committee. Deloitte & Touche LLP have been the independent auditors
for the Corporation since 1928.
PRINCIPAL ACCOUNTING FIRM FEES
The aggregate fees billed to the Corporation and its subsidiaries for the
fiscal year ended December 31, 2002 by the Corporation's principal accounting
firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and
their respective affiliates (collectively, "Deloitte"), were:
Audit Fees......................................... $3,645,000
Financial Information
Systems Design and Implementation Fees........... $ 0
All Other Fees(a)(b)............................... $4,451,000
---------------
(a) The Audit Committee has determined that provision of these services by
Deloitte does not impair Deloitte's independence.
(b) All Other Fees include expatriate tax planning services ($1,508,000), other
tax advisory services ($1,476,000), statutory audits ($1,101,000), audits
of employee benefit plans ($225,000) and other services unrelated to the
audit ($141,000).
Beginning with next year's proxy statement, the Corporation will provide
information regarding fees billed to the Corporation and its subsidiaries by the
principal independent auditors using different categories in accordance with new
Securities and Exchange Commission rules effective as of the end of 2003. If the
new Securities and Exchange Commission rules had been effective at the time this
proxy statement was mailed to stockholders, the following information would have
been provided:
2002 2001
---------- ----------
Audit Fees(a)......................... $4,840,000 $3,176,000
Audit Related Fees(b)................. $ 272,000 $ 336,000
Tax Fees(c)........................... $2,984,000 $1,768,000
All Other Fees........................ $ 0 $ 33,000
---------------
(a) Includes fees for statutory audits, comfort letters, attest services,
consents, assistance with and review of Securities and Exchange Commission
filings and other related matters.
(b) Includes fees for employee benefit plans, due diligence assistance and
other matters.
(c) Includes fees for expatriate tax planning and other tax advisory services.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so,
and will be available to respond to questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS
SELECTION.
12
PROPOSAL 3. STOCKHOLDER PROPOSAL REGARDING THE CORPORATION'S AMENDED AND
RESTATED RIGHTS AGREEMENT
Nick Rossi has sent a letter to the Corporation's Chairman requesting that
the proposal set forth below be submitted to our stockholders for consideration
at the Annual Meeting. Mr. Rossi has stated that he or someone acting on his
behalf intends to introduce the following proposal at the Annual Meeting. As of
October 21, 2002, Mr. Rossi beneficially owned 3,120 shares of the Corporation's
common stock. Mr. Rossi's address is P.O. Box 249, Boonville, CA 95415. Mr.
Rossi's proposal uses the term "poison pill" to refer to the Corporation's
stockholder rights plan (the "rights plan"). The Board of Directors opposes such
stockholder proposal for the reasons set forth below the proposal.
Proxies solicited by management will be voted against the stockholder
proposal below unless stockholders specify a contrary choice in their proxies.
STOCKHOLDER PROPOSAL
In accordance with applicable rules of the Securities and Exchange
Commission, we have set forth Mr. Rossi's proposal below:
"3-SHAREHOLDER VOTE ON POISON PILLS
THIS TOPIC WON AN AVERAGE 60%-YES VOTE AT 50 COMPANIES IN 2002
This is to recommend that our Board of Directors redeem any
poison pill previously issued (if applicable) and not adopt or
extend any poison pill unless such adoption or extension has
been submitted to a shareholder vote.
This topic won an average 60%-yes vote at 50 companies in 2002,
according to the Investor Responsibility Research Center
tabulation on Average Voting Results, December 2002.
HARVARD REPORT
A 2001 report by Harvard and Wharton authors found that good
corporate governance (which took into account whether a company
had a poison pill) was positively and significantly related to
company value. The report is titled, "Corporate Governance and
Equity Prices," July 2001, by Paul A. Gompers, Harvard
University, Joy L. Ishii, Harvard University and Andrew Metrick,
The Wharton School, University of Pennsylvania. This report
reviewed the relationship between the corporate governance index
for 1,500 companies and company performance from 1990 to 1999.
Some believe that a company with good governance will perform
better over time, leading to a higher stock price. Others see
good governance as a means of reducing risk, as they believe it
decreases the likelihood of bad things happening to a company.
Source: "Putting a Value on Governance," Directors & Boards,
Spring 1997.
Since the 1980s Fidelity, a mutual fund giant with $800 billion
invested, has withheld votes for directors at companies that
have approved poison pills, Wall Street Journal, June 12, 2002.
COUNCIL OF INSTITUTIONAL INVESTORS RECOMMENDATION
The Council of Institutional Investors www.cii.org, an
organization of 120 pension funds which invests $1.5 trillion,
called for shareholder approval of poison pills. The Council of
Institutional Investors' recommendation is documented in Council
Policies, Corporate Governance Policies, Core Policies,
Shareholder Voting Rights, Item 5.b., approved March 25, 2002.
13
In recent years, various companies have been willing to redeem
existing poison pills or seek shareholder approval for their
poison pill. This includes Columbia/HCA and McDermott
International. I believe that our company should follow suit and
allow shareholder input.
ALLOW SHAREHOLDER VOTE REGARDING POISON PILLS
YES ON 3"
RESPONSE OF THE CORPORATION TO STOCKHOLDER PROPOSAL
The Board of Directors unanimously recommends a vote against this proposal.
The Board does not believe that adopting this proposal would be in the best
interests of the Corporation or its stockholders for the reasons set forth
below.
The Corporation received a proposal regarding its rights plan last year.
Although more than 50 percent of those stockholders who voted cast a vote in
favor of the proposal, less than 50 percent of the outstanding shares were voted
in favor of the proposal. The results of the vote did not obligate the Board to
take action with respect to the rights plan; however, following the Annual
Meeting, the Board again carefully evaluated the issue consistent with its
fiduciary duties and concluded that, in its judgment, maintaining the rights
plan is in the best interests of the Corporation and its stockholders.
The study cited in this year's proposal does not change the Board's view.
The 2001 study Corporate Governance and Equity Prices by Paul Gompers, Joy Ishii
and Andrew Metrick relied on by the proponent does not contradict the
conclusions in the studies reviewed by the Board and noted below. The study does
not state, as Mr. Rossi suggests, that the existence of a rights plan has a
negative effect on stock price. In fact, it noted that a rights plan can
increase stockholder value when it is used for the benefit of stockholders to
achieve higher takeover premiums.
As the last two years have shown, the Corporation periodically receives
proposals from stockholders who request that the Corporation repeal its rights
plan. These proponents claim that this takeover defense negatively impacts
stockholder value. The Board of Directors does not agree with this view and
believes that the rights plan has a positive effect on stockholder value.
The Board's belief is supported by numerous studies and reports including
the following:
- the 1994 study by University of Rochester economists Robert Comment and
G. William Schwert who concluded that the adoption of rights plans has no
meaningful effect on stock price. Significantly, they concluded that
rights plans "are reliably associated with higher premiums for selling
shareholders." This study was published in the Journal of Financial
Economics, volume 39, pages 3-43 (1995).
- the 1997 study by Georgeson & Company, a nationally recognized proxy
solicitation and investor relations firm, which studied 319 merger and
acquisition transactions completed between 1992 and 1996, found that
companies with rights plans receive higher takeover premiums in both
hostile and friendly transactions. This study also concluded that rights
plans do not diminish stockholder value by preventing takeovers, but were
actually associated with higher overall stockholder value. This study is
currently available on Georgeson's website
(www.georgeson.com/pdf/M&Apoisonpill.pdf).
The Board of Directors believes that Kimberly-Clark's takeover defenses are
in the best short-term and long-term interests of the Corporation and its
stockholders. In 1988, after carefully considering its fiduciary duties to
stockholders and after receiving reports from its outside corporate law firm and
a prominent Wall Street investment banking firm, the Board of Directors adopted
the Corporation's rights plan. In 1995, again after carefully considering its
fiduciary duties to stockholders and after receiving reports from its legal and
financial advisors, the Board of Directors adopted the Corporation's amended and
restated rights plan. Following last year's stockholder proposal requesting the
repeal of the rights plan, the Board again carefully reviewed its fiduciary
duties to
14
stockholders and determined that maintaining the plan was in the best interests
of the Corporation and its stockholders.
The Board maintains the rights plan because it believes that a rights plan
(1) helps to maximize stockholder value by protecting stockholders against
unfair or coercive takeover tactics that do not provide fair value to all
stockholders, (2) provides the Board with an important corporate governance tool
that allows the Board more time to evaluate an acquisition offer and to bargain
with a potential bidder on behalf of stockholders and (3) is in the best
interests of the Corporation's stockholders. In reaching these conclusions, the
Board reviewed (a) the arguments for and against rights plans, (b) the available
studies and literature on the effect that rights plans have on stock prices and
hostile takeover attempts and (c) relevant court decisions regarding rights
plans and the rights of directors to implement and maintain rights plans. It is
estimated that 60 percent of Fortune 500 companies maintain a rights plan,
presumably for similar reasons.
It is important to note that even a narrow short-term, "get-the-best-price
and cash-out" view of this subject supports the maintenance of adequate takeover
defenses. Recent history is filled with companies whose management and
stockholders reaped short-term stock gains followed by disastrous consequences
for remaining stockholders, employees, retirees and communities after a change
of control. Stockholder proponents argue that dismantling takeover defenses
would benefit the stockholders, at least in the short-term, by providing a
larger one time gain in a change of control. As a 131 year-old company, the
Board believes this is not only a narrow view of takeover defenses, but is also
wrong. Good corporate governance requires that the Board balance the short- and
long-term interests of the Corporation and its stockholders.
Moreover, takeover defenses should be viewed in terms of the Corporation's
obligations to all constituencies including remaining stockholders, employees,
retirees, customers, suppliers and the communities depending on the
approximately 64,000 jobs and financial support that Kimberly-Clark provides.
The Board has moral and ethical obligations to all its constituents and
stakeholders, and not only to the group of stockholders who favor this proposal.
It would be irresponsible to ignore any of the individuals whose investments are
an important part of the Corporation's success. Each constituent's stake is
unique, but inextricably linked with that of the others. Together they help to
support the Corporation's business. The well being of these individuals is a
vital part of the Corporation's overall health.
There are numerous recent examples of companies changing ownership and
crumbling under their new capital structures. Employees, retirees, customers,
suppliers and communities, as well as stockholders who continue to hold stock
get left "holding the bag" when over-leveraged "new owners" do not make the
grade. In the Board's opinion, it has an obligation to weigh the "best price" in
terms of issues such as employment, security of pension and health care plans,
and viability of the new owners' capital structure. The Board wants the
Corporation to be financially strong so that: its stockholders can foresee a
safe and profitable future; its employees can expect continued work; its
customers can expect quality products; and its communities can anticipate the
benefits of continued operations. The rights plan allows time for this analysis,
and provides the Board with an opportunity to negotiate the best terms of a
transaction, including best price.
The Board of Directors believes that the Corporation's rights plan will
encourage bidders to negotiate with the Board to develop an offer that the Board
believes is in the best interests of the Corporation, its stockholders and other
constituents. The Board has a legal obligation to redeem the rights issued under
the rights plan in the event of a takeover proposal that is in best interests of
the Corporation.
For the above reasons, the Board unanimously believes that the
Corporation's rights plan is in the best short- and long-term interests of its
stockholders, as well as our employees, retirees, customers, suppliers and the
communities where the Corporation operates.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL.
15
PROPOSAL 4. STOCKHOLDER PROPOSAL REGARDING EXPENSING STOCK OPTIONS
The Massachusetts Carpenters Pension & Annuity Funds (the "Carpenters
Funds") have sent a letter to the Corporation's Secretary requesting that the
proposal set forth below be submitted to our stockholders for consideration at
the Annual Meeting. The Carpenters Funds have stated that the Carpenters Funds
Chairman or a designated representative intends to introduce the following
proposal at the Annual Meeting. As of November 13, 2002, the Carpenters Funds
beneficially owned 9,140 shares of the Corporation's common stock. The
Carpenters Funds address is 350 Fordham Road, Wilmington, MA 01887. The Board of
Directors opposes such stockholder proposal for the reasons set forth below the
proposal.
Proxies solicited by management will be voted against the stockholder
proposal below unless stockholders specify a contrary choice in their proxies.
STOCKHOLDER PROPOSAL
In accordance with applicable rules of the Securities and Exchange
Commission, we have set forth the Carpenter Funds proposal below:
"OPTION EXPENSING PROPOSAL
Resolved, that the shareholders of Kimberly-Clark Corporation
("Company") hereby request that the Company's Board of Directors
establish a policy of expensing in the Company's annual income
statement the costs of all future stock options issued by the
Company.
STATEMENT OF SUPPORT: Current accounting rules give companies
the choice of reporting stock option expenses annually in the
company income statement or as a footnote in the annual report
(See: Financial Accounting Standards Board Statement 123). Most
companies, including ours, report the cost of stock options as a
footnote in the annual report, rather than include the option
costs in determining operating income. We believe that expensing
stock options would more accurately reflect a company's
operational earnings.
Stock options are an important component of our Company's
executive compensation program. Options have replaced salary and
bonuses as the most significant element of executive pay
packages at numerous companies. The lack of option expensing can
promote excessive use of options in a company's compensation
plans, obscure and understate the cost of executive compensation
and promote the pursuit of corporate strategies designed to
promote short-term stock price rather than long-term corporate
value.
A recent report issued by Standard & Poor's indicated that the
expensing of stock option grant costs would have lowered
operational earnings at companies by as much as 10%. "The
failure to expense stock option grants has introduced a
significant distortion in reported earnings," stated Federal
Reserve Board Chairman Alan Greenspan. "Reporting stock options
as expenses is a sensible and positive step toward a clearer and
more precise accounting of a company's worth." Globe and Mail,
"Expensing Options Is a Bandwagon Worth Joining," Aug. 16, 2002.
Warren Buffett wrote in a New York Times Op-Ed piece on July 24,
2002:
There is a crisis of confidence today about corporate
earnings reports and the credibility of chief executives. And
it's justified.
For many years I've had little confidence in the earnings
numbers reported by most corporations. I'm not talking about
Enron and WorldCom -- examples of outright crookedness.
Rather, I am referring to the legal, but improper, accounting
methods used by chief executives to inflate reported
earnings . . .
16
Options are a huge cost for many corporations and a huge
benefit to executives. No wonder, then, that they have fought
ferociously to avoid making a charge against their earnings.
Without blushing, almost all C.E.O.'s have told their
shareholders that options are cost-free . . .
When a company gives something of value to its employees in
return for their services, it is clearly a compensation
expense. And if expenses don't belong in the earnings
statement, where in the world do they belong?
Many companies have responded to investors' concerns about their
failure to expense stock options. In recent months, more than
100 companies, including such prominent ones as Coca Cola,
Washington Post, and General Electric, have decided to expense
stock options in order to provide their shareholders more
accurate financial statements. Our Company has yet to act. We
urge your support."
RESPONSE OF THE CORPORATION TO STOCKHOLDER PROPOSAL
The Board of Directors unanimously recommends a vote against this proposal.
The Board does not believe that expensing options in the Corporation's
annual income statement would, at this time, be in the best interests of the
Corporation or its stockholders. Rather, the Board and the Audit Committee,
which is composed of only independent directors, believe that the stockholders
would benefit from greater clarity and comparability in the Corporation's
financial statements if the Corporation continues its practice of disclosing the
value of stock options in the footnotes to the financial statements, which is
consistent with generally accepted accounting principles.
The accounting treatment for stock options is under consideration by a wide
array of regulatory bodies, including the United States Congress, the Securities
and Exchange Commission, the Financial Accounting Standards Board and the
International Accounting Standards Board. It is not clear how this issue will be
resolved. Given this uncertainty, the Board believes that the best approach is
to wait for appropriate regulators to provide final direction on this issue. It
would not serve the best interests of the Corporation or its stockholders to
change the Corporation's accounting practices now and then possibly have to
change again when any new requirements become effective. In the meantime, the
Corporation will continue to comply with all applicable accounting regulations.
In addition, adoption of the proposal would make it more difficult for the
Corporation's stockholders and potential stockholders to compare the
Corporation's operating results to those of other companies. The Corporation
currently follows the accounting policy that is followed by the vast majority of
U.S. companies. None of the Corporation's peer group currently expense stock
options, and those companies that do expense stock options do not do so using a
consistent valuation methodology. As a result, the values attributed to stock
option grants may not be directly comparable.
Finally, adopting the proposal would not provide investors with any
additional information. The Corporation already discloses in the footnotes to
its annual financial statements the "fair value" of options in more detail than
this proposal would require to be included in the income statement itself. Since
1972, the Corporation has accounted for stock options using Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Pursuant to Statement of Financial Accounting Standard No. 123, Accounting for
Stock Based Compensation, the Corporation has consistently made the required
footnote disclosure. Moreover, a recent study by the management consulting firm
Towers Perrin suggests that the effect of stock options is already reflected in
a company's stock price. A press release regarding this study is available on
the Towers Perrin website
(www.towers.com/towers_news/news/PressRelease_2002/pr112102.htm).
At this time, the Board believes that the Corporation is taking the most
appropriate action by following the current accounting rules regarding stock
option disclosure in the footnotes to its
17
financial statements. The Board will continue to monitor developments relating
to the expensing of options, including regulatory changes and trends in
voluntary adoption of option expensing policies. If in the future the Board
believes expensing options would be in the best interests of the Corporation and
its stockholders, it will adopt such a policy.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL.
PROPOSAL 5. STOCKHOLDER PROPOSAL REGARDING INDEXING STOCK OPTIONS FOR EXECUTIVES
The Sheet Metal Workers' National Pension Fund (the "SMW Fund") has sent a
letter to the Corporation's Secretary requesting that the proposal set forth
below be submitted to our stockholders for consideration at the Annual Meeting.
The SMW Fund has stated that its Corporate Governance Representative or another
designated representative intends to introduce the following proposal at the
Annual Meeting. As of November 6, 2002, the SMW Fund beneficially owned 17,400
shares of the Corporation's common stock. The address of the SMW Fund is Edward
F. Carlough Plaza, 601 North Fairfax Street, Suite 500, Alexandria, VA
22314-2075. The Board of Directors opposes such stockholder proposal for the
reasons set forth below the proposal.
Proxies solicited by management will be voted against the stockholder
proposal below unless stockholders specify a contrary choice in their proxies.
STOCKHOLDER PROPOSAL
In accordance with applicable rules of the Securities and Exchange
Commission, we have set forth the SMW Fund proposal below:
"INDEXED OPTIONS PROPOSAL
Resolved, that the shareholders of Kimberly-Clark (the
"Company") request that the Board of Directors adopt an
executive compensation policy that all future stock option
grants to senior executives shall be performance-based. For the
purposes of this resolution, a stock option is performance-based
if the option exercise price is indexed or linked to an industry
peer group stock performance index so that the options have
value only to the extent that the Company's stock price
performance exceeds the peer group performance level.
STATEMENT OF SUPPORT: As long-term shareholders of the Company,
we support executive compensation policies and practices that
provide challenging performance objectives and serve to motivate
executives to achieve long-term corporate value maximization
goals. While salaries and bonuses compensate management for
short-term results, the grant of stock and stock options has
become the primary vehicle for focusing management on achieving
long-term results. Unfortunately, stock option grants can and do
often provide levels of compensation well beyond those merited.
It has become abundantly clear that stock option grants without
specific performance-based targets often reward executives for
stock price increases due solely to a general stock market rise,
rather than to extraordinary company performance.
Indexed stock options are options whose exercise price moves
with an appropriate peer group index composed of a company's
primary competitors. The resolution requests that the Company's
Board ensure that future senior executive stock option plans
link with the options exercise price to an industry performance
index associated with a peer group of companies selected by the
Board, such as those companies used in the Company's proxy
statement to compare 5 year stock price performance.
18
Implementing an indexed stock option plan would mean that our
Company's participating executives would receive payouts only if
the Company's stock price performance was better then that of
the peer group average. By tying the exercise price to a market
index, indexed options reward participating executives for
outperforming the competition. Indexed options would have value
when our Company's stock price rises in excess of its peer group
average or declines less than its peer group average stock price
decline. By downwardly adjusting the exercise price of the
option during a downturn in the industry, indexed options remove
pressure to reprice stock options. In short, superior
performance would be rewarded.
At present, stock options granted by the Company are not indexed
to peer group performance standards. As long-term owners, we
feel strongly that our Company would benefit from the
implementation of a stock option program that rewarded superior
long-term corporate performance. In response to strong negative
public and shareholder reactions to the excessive financial
rewards provided executives by non-performance based option
plans, a growing number of shareholder organizations, executive
compensation experts, and companies are supporting the
implementation of performance-based stock option plans such as
that advocated in this resolution. We urge your support for this
important governance reform."
RESPONSE OF THE CORPORATION TO STOCKHOLDER PROPOSAL
The Board of Directors unanimously recommends a vote against this proposal
for the reasons set forth below.
The Board believes that adoption of this proposal would place unnecessary
constraints on the Compensation Committee that are not in the best interests of
the Corporation or its stockholders. The Corporation's stockholders have had and
will continue to have an opportunity to express their opinion on executive
option plans because all current executive option plans have been and all such
future plans will be subject to a stockholder vote. The Corporation's
stockholders approved the current executive stock option plan in 2001.
The Compensation Committee, which is composed of only independent
directors, and the Board believe that the Corporation's current compensation
programs, including the current option plans, give the Corporation the
flexibility that it needs to attract and retain senior executives whose
abilities are essential to the Corporation's long-term success. The Compensation
Committee and the Board also believe that the Corporation should retain this
critical flexibility to (1) structure compensation programs, including the
mechanisms for any performance-based stock options, to achieve these important
objectives and (2) make decisions based on a review of all relevant information,
including specific financial and non-financial performance results, without
imposing rigid, pre-set constraints.
As described in its Report on Executive Compensation, beginning on page 24,
the Compensation Committee periodically evaluates the Corporation's compensation
programs, and compares them with those of other companies, including the
Corporation's peer group and other large industrial companies. In determining
the compensation to be paid to executive officers, the Compensation Committee
employs compensation policies designed to align compensation with the
Corporation's overall business strategy, values and management initiatives.
Based on available information from 2001, none of the companies in the
Consumer Company Group used by the Compensation Committee for comparison
purposes (which group of companies the Corporation most directly competes with
for management talent) and none of the companies in the Fortune 500 used indexed
options. Requiring the Corporation to grant options with conditions or other
terms that are inconsistent with compensation practices followed by the
Corporation's competitors could place it at a disadvantage in recruiting and
retaining senior executives. In addition, indexed options may have a dilutive
effect on stockholders because a greater number of
19
options may need to be granted to senior executives for the Corporation's
compensation to remain competitive.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL.
PROPOSAL 6. STOCKHOLDER PROPOSAL REGARDING AN INDEPENDENT CHAIRMAN OF THE BOARD
The National Automatic Sprinkler Industry Pension Plan (the "NAS Plan") has
sent a letter to the Corporation's Secretary requesting that the proposal set
forth below be submitted to our stockholders for consideration at the Annual
Meeting. The NAS Plan has stated that a designated representative intends to
introduce the following proposal at the Annual Meeting. As of November 6, 2002,
the NAS Plan beneficially owned 44,236 shares of the Corporation's common stock.
The NAS Plan address is 8000 Corporate Drive, Landover, MD 20785. The Board of
Directors opposes such stockholder proposal for the reasons set forth below the
proposal.
Proxies solicited by management will be voted against the stockholder
proposal below unless stockholders specify a contrary choice in their proxies.
STOCKHOLDER PROPOSAL
In accordance with applicable rules of the Securities and Exchange
Commission, we have set forth the NAS Plan proposal below:
"RESOLVED: The shareholders of Kimberly-Clark ("Company") urge
the Board of Directors to amend the Company's by laws to require
that an independent director -- as defined by the rules of the
New York Stock Exchange ("NYSE") -- who has not served as an
officer of the Company be its Chairman of the Board of
Directors.
SUPPORTING STATEMENT
The recent wave of corporate scandals at such companies as
Enron, WorldCom and Tyco has resulted in renewed emphasis on the
importance of independent directors. For example, both the NYSE
and the NASDAQ have proposed new rules that would require
corporations that wish to be traded on them to have a majority
of independent directors.
Unfortunately, having a majority of independent directors alone
is clearly not enough to prevent the type of scandals that have
afflicted Enron, WorldCom and Tyco. All of these corporations
had a majority of independent directors on their boards when the
scandals occurred.
All of these corporations also had a Chairman of the Board who
was also an insider, usually the Chief Executive Officer
("CEO"), or a former CEO, or some other officer. Obviously, no
matter how many independent directors there are on a board, that
board is less likely to protect shareholder interests by
providing independent oversight of the officers if the Chairman
of that board is also the CEO or some other officer of the
company.
We respectfully urge the board of our Company to drastically
change its corporate governance structure and the public's
perception of it by having an independent director serve as its
Chairman.
Although this change would be dramatic, it would hardly be
radical. In the United Kingdom it is common to separate the
offices of Chairman and CEO. In 1996, a blue ribbon commission
on Director Professionalism of the National Association of
Corporate Directors recommended that an independent director
should be charged with 'organizing the board's evaluation of the
CEO and providing continu-
20
ous ongoing feedback; chairing executive sessions of the board;
setting the agenda with the CEO, and leading the board in
anticipating and responding to crises.' "
RESPONSE OF THE CORPORATION TO STOCKHOLDER PROPOSAL
The Board of Directors unanimously recommends a vote against this proposal
for the reasons set forth below.
The Board does not believe that this proposal is in the best interests of
the Corporation or its stockholders because it would reduce the Board's
flexibility to decide who should be Chairman of the Board. The Board believes
that it is in the best position to determine who should serve as Chairman in
light of the Corporation's circumstances at any given time and to organize its
functions and conduct its business in the manner it deems most efficient.
The Corporation's current practice for selection of a Chairman of the Board
is an integral part of the Board's governance structure and is consistent with
its obligation to oversee the Corporation in the best interests of its
stockholders. Board independence and oversight are best maintained through
effective corporate governance practices. At its November 2002 meeting, the
Board designated a Lead Director, Mr. Collins. The Lead Director plays an
important role in our corporate governance structure, including chairing the
executive sessions (which do not include management) of the independent
directors and serving as an ex-officio member of all standing Board committees
with the right to participate in those committee proceedings. The lead director
structure is a recognized alternative to having an independent director serve as
chairman of the board. The January 2003 report by the Conference Board
Commission on Public Trust and Private Enterprise recognizes the lead director
as a valid alternative and the March 2000 TIAA-CREF Policy Statement on
Corporate Governance recognizes the need for a board to have flexibility in
organizing its functions.
The Board's Audit, Compensation, and Nominating and Corporate Governance
Committees are each composed solely of independent directors. The independent
insight, advice, and counsel that each outside, independent director contributes
to the Corporation would not be enhanced by requiring that the Chairman of the
Board be an independent director. Contrary to the implications of the proposal,
the Corporation's By-Laws neither provide the Chairman with special management
oversight responsibilities or special authority nor insulate an executive
Chairman from Board oversight. The By-Laws simply provide that the Chairman
presides at meetings of the Board. Moreover, directors of the Corporation,
including the Chairman of the Board, are bound by fiduciary obligations imposed
by state law to serve the best interests of the Corporation's stockholders.
Requiring that the Chairman be an independent director would not serve to
enhance or diminish the fiduciary duties of any director or officer of the
Corporation.
Currently there is nothing in the Corporation's By-Laws that would preclude
the Board of Directors from selecting a Chairman who is an outside, independent
director, rather than someone who serves or has served as an officer of the
Corporation, if the Board believes that such action is in the best interests of
the Corporation's stockholders. In contrast, the proposed amendment to the
Corporation's By-Laws limits the flexibility of the Board to act in the manner
that it determines would best serve stockholders' interests and to organize its
functions and conduct its business in the manner it deems most efficient.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL.
21
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for each
of 2000, 2001 and 2002 awarded to, earned by, or paid to the Chief Executive
Officer and the four most highly compensated executive officers of the
Corporation (the Named Executive Officers), other than the Chief Executive
Officer, whose total annual salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ----------------------- ---------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(3) ($)(4) (#) ($)(5) ($)(6)
--------------------------- ---- --------- --------- ------------ ---------- ---------- --------- ------------
Thomas J. Falk(1) 2002 793,750 347,778 10,648 4,466,250 300,000 953,614 6,000
Chairman of the Board 2001 675,000 0 3,213 0 225,000 2,885,112 3,376
and Chief Executive Officer 2000 600,000 599,584(2) 3,607 407,750 200,000 0 5,100
Wayne R. Sanders(1)(7) 2002 950,000 530,112 10,986 0 400,000 1,668,826 6,000
Retired Chief Executive 2001 950,000 0 10,963 0 500,000 8,517,441 5,100
Officer 2000 950,000 1,110,304(2) 14,477 0 400,000 0 5,100
O. George Everbach 2002 470,000 143,500 0 0 60,000 953,614 6,000
Senior Vice President -- 2001 455,000 0 705 0 60,000 1,682,541 5,100
Law and Government Affairs 2000 440,000 299,792 785 0 70,000 0 5,100
Steven R. Kalmanson(8) 2002 425,000 442,800(2) 0 0 100,000 429,127 6,000
Group President --
Family Care
Kathi P. Seifert 2002 500,000 141,450 0 0 100,000 715,212 6,000
Executive Vice President 2001 480,000 0 0 0 80,000 1,711,178 5,100
2000 450,000 394,012(2) 139 349,500 90,000 0 5,100
---------------
(1) Mr. Falk was elected President and Chief Executive Officer on September 12,
2002, and Chairman of the Board and Chief Executive Officer on February 18,
2003. Mr. Sanders served as Chairman of the Board and Chief Executive
Officer from January 1 to September 12, 2002, and as Chairman of the Board
until February 18, 2003. Mr. Falk's salary was increased to an annual level
of $925,000 effective October 1, 2002 and to $1,000,000 effective March 1,
2003 to reflect the increase in his responsibilities.
(2) Includes amounts voluntarily deferred by the Named Executive Officer under
the Corporation's Deferred Compensation Plan. The Deferred Compensation Plan
allows executive officers to defer portions of current base salary and bonus
compensation otherwise payable during the year. See "Compensation Committee
Report on Executive Compensation-Tax Deduction for Executive Compensation"
below for a more complete description of the plan.
(3) Amounts shown consist of amounts reimbursed for federal and state income
taxes on certain personal and spousal travel required for company purposes.
Amounts shown do not include perquisites provided by the Corporation, such
as payments made to or on behalf of the Named Executive Officers pursuant to
the Corporation's Executive Financial Counseling Program and the incremental
costs to the Corporation for personal and spousal travel required for
company purposes on aircraft owned by the Corporation. The aggregate amount
of perquisites provided to each Named Executive Officer did not exceed the
lesser of $50,000 or 10 percent of such officer's combined salary and bonus
for any year.
(4) Restricted stock awards in 2000 were granted pursuant to the Corporation's
1999 Restricted Stock Plan. Restricted stock awards in 2002 were granted
pursuant to the Corporation's 2001 Equity Participation Plan. Upon the
adoption of the 2001 Equity Participation Plan, no further awards can be
made under the 1999 Restricted Stock Plan. All restricted stock awards were
valued at the closing price of the Corporation's stock on the date of grant.
The restricted stock awards in 2000 and 2002 were granted on June 8, 2000
and September 12, 2002, respectively, and the closing prices of the
Corporation's stock on these dates were $58.25 and $59.55 per share,
respectively. The shares granted in 2000 to Mr. Falk and Ms. Seifert vest on
June 8, 2005 and June 8, 2004, respectively. The shares granted in 2002 to
Mr. Falk vest on September 12, 2007. As of December 31, 2002, the number and
value (based on the December 31, 2002 stock price of $47.47 per share) of
total shares of restricted stock held by the Named Executive Officers are:
Mr. Falk (89,000 shares; $4,224,830), Mr. Kalmanson (16,000 shares;
$759,520) and Ms. Seifert (12,000 shares; $569,640). Dividends are paid on
restricted stock at the same rate paid to all stockholders of the
Corporation. See "Compensation Committee Report on Executive
Compensation-Equity Plans" below for a more complete description of the
plan.
(5) Amounts shown consist of participation share payments made pursuant to the
1992 Equity Participation Plan for awards that were granted to Named
Executive Officers of the Corporation on February 11, 1993, February 16,
1995 and February 13, 1996. The awards granted in 1993 and 1995 matured on
December 31, 2000 and were paid according to their terms in the first
quarter of 2001. The awards granted in 1996 matured on December 31, 2001 and
were paid according to their terms during the first quarter of 2002. No
awards of participation shares have been granted to Named Executive Officers
since 1998. Each participation share is assigned a base value equal to the
book value of one share of the Corporation's common stock as of the close of
the fiscal year immediately prior to the award. The value is adjusted each
quarter based on multiplying dividends declared per share of the
Corporation's common stock during the quarter by the total number of
participation shares and dividend shares in the participant's account. The
normal maturity date of a participation share award is the close of the
fiscal year in which the fifth or seventh anniversary of the date of the
award occurs. The participant is entitled to receive a cash payment equal to
the sum of (i) the increase (if any) in book value of the participation
shares on the maturity date of the award over the base value of the shares,
and (ii) the book value of the dividend shares on the maturity date (equal
to the book value of an equivalent number of shares of the Corporation's
common stock).
22
(6) Amounts shown consist solely of the Corporation's matching contributions
under the Corporation's Incentive Investment Plan.
(7) Mr. Sanders retired from the Corporation on February 28, 2003 following 28
years of service, including 11 years as Chairman of the Board and Chief
Executive Officer. In connection with his retirement, the Corporation has
agreed to provide him with an office and administrative assistance for a
period of five years at an annual cost of approximately $200,000.
(8) Mr. Kalmanson became an executive officer of the Corporation on January 1,
2002.
The policies and practices of the Corporation pursuant to which the
compensation set forth in the Summary Compensation Table was paid or awarded are
described under "Compensation Committee Report on Executive Compensation" below.
The following table sets forth information concerning grants of stock
options during 2002 to each of the Named Executive Officers and the potential
realizable value of the options at assumed annual rates of stock price
appreciation for the option term.
OPTION GRANTS IN 2002(1)
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZABLE VALUE AT
UNDERLYING OPTIONS ASSUMED ANNUAL RATES OF STOCK
OPTIONS GRANTED TO EXERCISE OR PRICE APPRECIATION FOR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -------------------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
---- ---------- ------------ ----------- ---------- ------- ------------ ------------
Thomas J. Falk................ 300,000 5.3 60.99 2/17/12 0 11,506,885 29,160,706
Wayne R. Sanders.............. 400,000 7.0 60.99 2/17/12 0 15,342,513 38,880,941
O. George Everbach............ 60,000 1.1 60.99 2/17/12 0 2,301,377 5,832,141
Steven R. Kalmanson........... 100,000 1.8 60.99 2/17/12 0 3,835,628 9,720,235
Kathi P. Seifert.............. 100,000 1.8 60.99 2/17/12 0 3,835,628 9,720,235
---------------
(1) The plan governing stock option grants provides that the option price per
share shall be no less than 100 percent of the market value per share of the
Corporation's common stock at the date of grant. The term of any option is
no more than 10 years from the date of grant. Options granted in 2002 become
exercisable 30 percent after the first year following the grant thereof, an
additional 30 percent after the second year and the remaining 40 percent
after the third year; provided however, that all of the options become
exercisable for three years upon death or total or permanent disability, and
for five years upon the retirement of the officer. In addition, options
generally become exercisable upon a termination of employment following a
change in control and options granted to the officers named in this table
are subject to the Corporation's Executive Severance Plan described later in
this proxy statement (see "Executive Compensation -- Executive Severance
Plan"). The options may be transferred by the officers to family members or
certain entities in which family members have interests.
(2) The dollar amounts under these columns are the result of calculations
assuming annual rates of stock price appreciation over the option term at
the 5 percent and 10 percent rates set by, and the 0 percent rate permitted
by, Securities and Exchange Commission rules and are not intended to
forecast possible future appreciation, if any, in the Corporation's common
stock price.
23
The following table sets forth information concerning exercises of stock
options during 2002 by each of the Named Executive Officers and the value of
each officer's unexercised options as of December 31, 2002 based on a closing
stock price of $47.47 per share of the Corporation's common stock on that date:
AGGREGATED OPTION EXERCISES IN 2002
AND OPTION VALUES AS OF DECEMBER 31, 2002
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, DECEMBER 31,
ACQUIRED VALUE 2002(#) 2002($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------
Thomas J. Falk.................................. 0 0 487,500 602,600
537,500 0
Wayne R. Sanders................................ 0 0 1,390,000 1,581,825
910,000 0
O. George Everbach.............................. 0 0 378,586 2,106,238
130,000 0
Steven R. Kalmanson............................. 12,586 279,095 264,079 1,640,070
170,000 0
Kathi P. Seifert................................ 0 0 416,624 2,930,020
192,000 0
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Corporation is
composed entirely of Independent Directors. See "Proposal 1. Election of
Directors -- General Information." The Board designates the members and the
Chairman of the Committee. The Compensation Committee also constitutes the stock
option committee for the stock option plans of the Corporation disclosed in this
proxy statement. In addition, the Compensation Committee is responsible for
establishing and administering the policies governing annual compensation,
restricted stock awards and long-term incentive awards. The Compensation
Committee periodically evaluates the Corporation's compensation programs, and
compares them with those of other companies, both within the Corporation's peer
industry group and other large industrial companies. The Compensation Committee
also oversees the development processes for senior management and future senior
management candidates.
The companies the Compensation Committee uses for making base salary
comparisons include some, but not all, of the companies appearing in the indexes
of the performance graph below. The first group used for comparison is composed
of 22 companies which have significant consumer businesses (the "Consumer
Company Group"), of which the Corporation is about median in terms of annual
sales and with which the Corporation competes in its businesses and/or for
executive talent. The second group used for comparison is composed of 97
industrial companies with annual sales exceeding $5 billion (the "Industrial
Company Group"). Written salary information concerning the compensation
practices of these two groups of companies was provided to the Compensation
Committee by two independent consultants.
In determining the compensation to be paid to executive officers in 2002,
the Compensation Committee employed compensation policies designed to align
compensation with the Corporation's overall business strategy, values and
management initiatives. These policies are intended to (1) reward executives for
long-term strategic management and the enhancement of stockholder value through
stock option, restricted stock and long-term incentive awards, (2) support a
performance-oriented environment that rewards achievement of internal company
goals and recog-
24
nizes company performance compared to the performance of similarly situated
companies and of other large industrial companies through the annual payment of
cash bonuses, and (3) attract and retain executives whose abilities are
considered essential to the long-term success and competitiveness of the
Corporation through the Corporation's salary administration program.
Salaries for 2002
In determining base salaries of executive officers, the Compensation
Committee compares the executive officers' salaries to those for similar
positions in the two groups of companies referred to above, with primary
emphasis placed upon the Consumer Company Group so that the Committee may
compare data on specific salary levels for comparable positions. The
Compensation Committee's policy is to set executive officers' salaries at or
near the median salary level of these companies, with the salary of the Chief
Executive Officer set at or near the median salary level for chief executive
officers of the Consumer Company Group (see "2002 Compensation of the Chief
Executive Officer" below). In implementing the policy, the Compensation
Committee also considers the individual performance of the officer, the
performance of the unit over which the officer has responsibility (primarily
based upon growth in the operating profit of the unit), the performance of the
Corporation (primarily based upon growth in earnings per share and shareholder
return), and the officer's tenure. No specific weight is assigned to any
individual factor. Salary actions taken by the Compensation Committee with
respect to the executive officers in 2002 were consistent with the policies and
practices described above.
Cash Bonus Awards for 2002
The cash bonus awards for 2002 set forth in the Summary Compensation Table
were based on the Corporation's Executive Officer Achievement Award Program. The
Compensation Committee's policy is to provide opportunities to an executive
officer for cash bonuses under the program which, together with his or her base
salary, are within the third quartile (that quartile between the 50th and 75th
percentiles) of compensation for the Industrial Company Group if the officer's
goals have been fully met during the year. In determining the target cash bonus
awards, the Compensation Committee considers data for the Industrial Company
Group and periodically reviews data for the Consumer Company Group.
Actual annual cash bonus awards are determined by measuring performance
against specific goals established at the beginning of each year. The goals for
2002 took into account, depending on the responsibility of the individual, the
performance of the group or unit with which the individual is associated
(primarily based upon growth in the operating profit of the unit). Such goals
also took into account the overall performance of the Corporation (based upon
the Corporation's long-term goal of maintaining growth in earnings per share
from operations (the "EPS Goal") and its long-term goal of exceeding the S&P 500
index for total shareholder return (the "Shareholder Return Goal")). The cash
bonus awards paid for 2002 with respect to these Goals were determined by the
Compensation Committee taking into consideration the competitive performance of
the Corporation. An executive officer's goals are designed to reflect the
relationship of his or her responsibilities to the Corporation's EPS Goal and
Shareholder Return Goal. The goals described above may or may not be equally
weighted and will vary from one executive officer to another. The opportunities
for cash bonus awards for the executive officers in 2002 were consistent with
the policies and practices described above.
Equity Plans
The Corporation maintains the 2001 Equity Participation Plan (the "2001
Plan") pursuant to which stock option grants can be made to executive officers.
The stockholders of the Corporation approved the 2001 Plan at the 2001 Annual
Meeting. Prior to the adoption of the 2001 Plan, the Corporation also maintained
the 1992 Equity Participation Plan (the "1992 Plan"). The 2001 Plan and the 1992
Plan are collectively referred to as the "Equity Plans." The Equity Plans are
intended to
25
provide a means of encouraging the acquisition of an ownership interest in the
Corporation by employees, including executive officers, who contribute
materially by managerial, scientific or other innovative means to the success of
the Corporation, thereby increasing their motivation for and interest in the
Corporation's long-term success.
The 1992 Plan permitted grants of long-term incentive awards in the form of
participation shares in addition to stock options. No grants of participation
shares have been made since 1998 and the 1992 Plan is no longer in effect for
future grants of participation shares or stock options. The 1992 Plan employed
book value through the use of participation shares and dividend shares, each of
which, when awarded, was credited to a participant's memorandum account. For a
description of the material terms of participation share awards pursuant to the
1992 Plan, see note 5 to the table above entitled "Summary Compensation Table."
Each Named Executive Officer received a payment in 2001 for participation shares
awards that were granted by the Corporation on February 11, 1993 and February
16, 1995 and in 2002 for participation share awards that were granted by the
Corporation on February 13, 1996.
The number of stock option awards granted to an executive officer is based
principally on the officer's position and the compensation practices of the
Consumer Company Group. The Compensation Committee's policy is for the value of
the awards, on an annualized basis, to be within the third quartile with respect
to similar awards made by the companies comprising the group. In implementing
the policy, the Compensation Committee also considers the individual performance
of the officer. The Committee does not determine the size of the grants by
reference to the amount and value of awards currently held by an executive
officer. However, the Compensation Committee takes into account the timing and
nature of prior grants to an executive officer. The payout resulting from any
stock option award is based on growth in the market value of the Corporation's
common stock subsequent to the grant of the awards.
The Equity Plans also employ market value as a basis for rewarding past
performance and as a motivation for future performance through the use of
tax-qualified and nonqualified stock options. For a description of the material
terms of stock option grants pursuant to the Equity Plans, see note 1 to the
table above entitled "Option Grants in 2002."
Under the 2001 Plan, selected key employees, including executive officers,
may be granted awards of restricted stock and restricted stock units.
Participants have the right to vote with respect to the restricted shares and
receive dividends. The restricted stock awards under the plan vest three to ten
years from the date of grant at the discretion of the Compensation Committee.
The plan provides that restricted stock units may be paid in cash or shares of
the Corporation's stock, or a combination of both, at the maturity of the award.
It is the policy of the Compensation Committee that restricted stock awards are
to be granted less frequently than stock option awards.
2002 Compensation of the Chief Executive Officer
The Committee last increased the salary of Mr. Sanders in 1997 based on the
policies and practices described above. The Compensation Committee granted
additional stock options to Mr. Sanders in lieu of an increase in his salary in
2002. Based upon comparison of the data provided by the independent consultants
described above, Mr. Sanders' salary in 2002 was in the bottom quartile of
salary levels of the chief executive officers of the Consumer Company Group. Mr.
Sanders' salary is below the target level because of the Compensation
Committee's decision to award additional stock options instead of increasing Mr.
Sanders' salary.
The Committee, after consultation with an independent compensation
consultant, increased the salary of Mr. Falk to $925,000, effective October 1,
2002, and to $1,000,000, effective March 1, 2003, to recognize the increase in
his responsibilities upon his elections as Chief Executive Officer and Chairman
of the Board of Directors of the Corporation. Based upon comparison of data
provided by the independent consultant, Mr. Falk's salary in 2002 was below the
median salary level of chief
26
executive officers in the comparison group, but is expected to be at or near the
median level in 2003 following the adjustments in his salary described above.
The cash bonuses paid to Mr. Sanders and Mr. Falk for 2002 were in
recognition of progress made by the Corporation during 2002 in attaining the
2002 EPS Goal and the competitive performance of the Corporation. Because target
levels with respect to this goal were not fully achieved during 2002, the bonus
awards paid to Mr. Sanders and Mr. Falk were 50 percent of their target bonus
levels. The Compensation Committee believes that, based upon comparison of the
most recent data, Mr. Sanders' and Mr. Falk's compensation in 2002 met the
Compensation Committee's policies regarding compensating the Corporation's Chief
Executive Officer.
The Committee awarded to Mr. Falk a special grant of 75,000 shares of
restricted stock upon his election as Chief Executive Officer of the Corporation
to strengthen the retention element of his overall compensation package. These
shares of restricted stock were granted with a five-year vesting period.
Alignment of Executive Compensation with Corporate Performance
The Compensation Committee believes that executive compensation for 2002
adequately reflects its policy to align the compensation with overall business
strategy, values and management initiatives, and to ensure that the
Corporation's goals and performance are consistent with the interests of its
stockholders.
Tax Deduction for Executive Compensation
In order to ensure that future annual bonus payments to executive officers
are deductible by the Corporation, the Corporation adopted the Executive Officer
Achievement Award Program in 2002, which was approved by the Corporation's
stockholders.
The Corporation also has adopted a deferred compensation plan in response
to limitations on executive compensation deductibility which allows each
executive officer to defer all salary in excess of $1,000,000 for any fiscal
year. In addition, the deferred compensation plan allows each executive officer
to defer all or a portion of his or her bonus for any fiscal year. While the
deferred compensation plan remains unfunded, in 1994 the Board of Directors
approved the establishment of a trust and authorized the Corporation to make
contributions to the trust to provide a source of funds to assist the
Corporation in meeting its liabilities under the deferred compensation plan. The
plan permits the officers to limit their annual cash compensation to the
$1,000,000 limitation which may be deducted by the Corporation for federal
income tax purposes. A deferral will result in the possible deduction by the
Corporation of compensation when paid; however, there is no obligation on any
executive officer to defer any amounts during any fiscal year.
Furthermore, to maximize the deductibility of the compensation paid to the
Corporation's executive officers, the 1992 Plan, as amended, and the 2001 Plan
ensure that compensation resulting from the exercise of stock options and
payments made in connection with participation share awards will be fully
deductible.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Paul J. Collins, Chairman
Pastora San Juan Cafferty
Linda Johnson Rice
Marc J. Shapiro
27
PERFORMANCE GRAPH
Comparison of
Five Year Cumulative Total Return Among
Kimberly-Clark, S&P 500, & Peer Group(1)
The stock price performance shown on the graph below may not be indicative
of future price performance.
TOTAL SHAREHOLDER RETURN
(PERFORMANCE GRAPH)
BASE
PERIOD
COMPANY NAME/INDEX DEC97 DEC98 DEC99 DEC00 DEC01 DEC02
------------------ ------ ------ ------ ------ ------ ------
KIMBERLY-CLARK CORP.................... 100 112.88 138.11 151.93 130.90 106.12
S&P 500 INDEX.......................... 100 128.58 155.63 141.46 124.65 97.10
PEER GROUP............................. 100 119.93 129.13 120.92 126.15 124.12
(1) The companies included in the Peer Group are The Clorox Co.,
Colgate-Palmolive Company, Johnson & Johnson, The Procter & Gamble Company,
Unilever Group, Georgia-Pacific Corp. and The Gillette Company. The Peer
Group used in this proxy statement includes the same companies as those
included in the Peer Group used in the proxy statement for the Corporation's
prior fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, the following directors served as members of the Compensation
Committee of the Board of Directors of the Corporation: Paul J. Collins, Pastora
San Juan Cafferty, Linda Johnson Rice, Marc J. Shapiro and Randall L. Tobias.
Wayne R. Sanders, Chairman of the Board and Chief Executive Officer of the
Corporation during part of 2002, served as a member of the compensation
committee of the board of directors of Kimberly-Clark de Mexico, S.A. de C.V. In
January 2003, Thomas J. Falk, the current Chairman of the Board and Chief
Executive Officer of the Corporation replaced Mr. Sanders as a member of the
compensation committee of the board of directors of Kimberly-Clark de Mexico,
S.A. de C.V. Claudio X. Gonzalez, Chairman of the Board and Managing Director of
Kimberly-Clark de Mexico, S.A. de C.V., serves as a member of the Board of
Directors of the Corporation.
DEFINED BENEFIT RETIREMENT PLAN
The table below illustrates the estimated annual standard pension benefit
payable upon retirement in 2002 at specified compensation levels and years of
service classifications.
28
PENSION PLAN TABLE
YEARS OF BENEFIT SERVICE
------------------------------------------------------------------------------------
15 20 25 30 35 40 45
REMUNERATION YEARS YEARS YEARS YEARS YEARS YEARS YEARS
------------ -------- -------- ---------- ---------- ---------- ---------- ----------
$ 200,000.............................. $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 105,000 $ 120,000 $ 135,000
400,000.............................. 90,000 120,000 150,000 180,000 210,000 240,000 270,000
600,000.............................. 135,000 180,000 225,000 270,000 315,000 360,000 405,000
800,000.............................. 180,000 240,000 300,000 360,000 420,000 480,000 540,000
1,000,000.............................. 225,000 300,000 375,000 450,000 525,000 600,000 675,000
1,200,000.............................. 270,000 360,000 450,000 540,000 630,000 720,000 810,000
1,400,000.............................. 315,000 420,000 525,000 630,000 735,000 840,000 945,000
1,600,000.............................. 360,000 480,000 600,000 720,000 840,000 960,000 1,080,000
1,800,000.............................. 405,000 540,000 675,000 810,000 945,000 1,080,000 1,215,000
2,000,000.............................. 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,350,000
2,200,000.............................. 495,000 660,000 825,000 990,000 1,155,000 1,320,000 1,485,000
2,400,000.............................. 540,000 720,000 900,000 1,080,000 1,260,000 1,440,000 1,620,000
2,600,000.............................. 585,000 780,000 975,000 1,170,000 1,365,000 1,560,000 1,755,000
2,800,000.............................. 630,000 840,000 1,050,000 1,260,000 1,470,000 1,680,000 1,890,000
3,000,000.............................. 675,000 900,000 1,125,000 1,350,000 1,575,000 1,800,000 2,025,000
The compensation covered by the Corporation's defined benefit plan for
which the above table is provided includes the salary and bonus information set
forth in the Summary Compensation Table. The estimated years of benefit service,
as of normal retirement at age 65, for the Named Executive Officers other than
Wayne R. Sanders are: O. George Everbach, 19.7 years; Thomas J. Falk, 40.0
years; Steven R. Kalmanson, 40.3 years; and Kathi P. Seifert, 36.2 years. Mr.
Sanders retired from the Corporation on February 28, 2003 with 27.7 years of
benefit service. Under the plan, an employee is entitled to receive an annual
standard benefit based on years of benefit service and integrated with social
security benefits. Benefits under the plan will be limited to the extent
required by the Internal Revenue Code of 1986, as amended, with excess benefits
over this limitation being paid pursuant to supplemental plans. While these
supplemental plans remain unfunded, in 1994 the Board of Directors approved the
establishment of a trust and authorized the Corporation to make contributions to
this trust in order to provide a source of funds to assist the Corporation in
meeting its liabilities under the plans. Each of the Named Executive Officers is
a participant in these supplemental plans.
Retirement benefits for participants who have at least five years of
vesting service may begin on a reduced basis at age 55, or on an unreduced basis
at normal retirement age. Unreduced benefits also are available for participants
with 10 years of vesting service at age 62 or as early as age 60 with 30 years
of vesting service. The normal form of benefit is a single-life annuity payable
monthly.
Benefits will be actuarially adjusted if the employee receives one of the
available forms of joint and survivor or other optional forms of benefit. In
addition, each participant in the supplemental plans has the option of receiving
an actuarially determined lump sum payment upon retirement after age 55 in lieu
of the monthly payments which otherwise would be payable to the participant
under the plans. Further, in the event of a change of control of the Corporation
or a reduction in the Corporation's long-term credit rating below investment
grade, each participant would have the option of receiving the present value of
his or her accrued benefits in the supplemental plans at that time in a lump
sum, reduced by 10 percent and 5 percent for active and former employees,
respectively.
29
EXECUTIVE SEVERANCE PLAN
The Corporation has agreements under the Corporation's Executive Severance
Plan (the "Executive Severance Plan") with each Named Executive Officer, except
for Mr. Sanders whose agreement expired when he retired on February 28, 2003.
The agreements provide that in the event of a "Qualified Termination of
Employment" (as described below), the participant will receive a cash payment in
an amount equal to the sum of (1) three times annual base salary and the target
bonus award which would be payable as if the performance goals established at
the beginning of each year were met under the Executive Officer Achievement
Award Program, (2) the value, at the end of the calendar quarter preceding
termination, of forfeited participation shares under the Corporation's Equity
Plans, (3) the value, based on the Corporation's stock price at the date of the
participant's termination, of forfeited restricted stock and certain unvested
incentive stock options, (4) the value of three additional years of service and
compensation under the Corporation's pension plan and its related supplemental
plans and (5) three years of COBRA premiums for medical and dental coverage. In
addition, nonqualified stock options, and certain incentive stock options, will
vest and be exercisable within the earlier of five years from the participant's
termination or the remaining term of the option. The Plan also provides that in
certain circumstances if the participant incurs excise tax due to the
application of Section 280G of the Internal Revenue Code of 1986, the
participant is entitled to an additional cash payment so that the participant
will be in the same position as if the excise tax were not applicable. Qualified
Termination of Employment is defined in the Plan to mean termination of
employment within two years following a change of control of the Corporation (as
defined in the Plan) either involuntarily without cause, by the participant with
good reason or voluntarily by the participant for any reason during the 30 day
period beginning on the first anniversary of the change of control. In addition,
any involuntary termination without cause within one year before a change of
control will also be determined to be a Qualified Termination of Employment if
it is in connection with, or in anticipation of, a change of control. The Board
has determined the eligibility criteria for participation in the Plan. Each
agreement expires three years from its date of execution, unless extended by the
Board of Directors.
CORPORATION'S SEVERANCE PAY PLAN
The Corporation's Severance Pay Plan generally provides eligible employees
(including the Named Executive Officers) a lump sum severance payment of one
week's pay for each year of employment in the event of involuntary termination
without cause. The minimum severance payment is six weeks pay and the maximum is
26 weeks pay. Benefits under this plan will not be paid to a Named Executive
Officer in the event benefits are payable under the Executive Severance Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and any persons owning more than 10
percent of a class of the Corporation's stock to file reports with the
Securities and Exchange Commission and the New York Stock Exchange regarding
their ownership of the Corporation's stock and any changes in ownership. The
Corporation maintains a compliance program to assist the Corporation's directors
and executive officers in making these filings.
On August 29, 2002, the Securities and Exchange Commission adopted rules
that now require certain of these reports be filed on an accelerated basis. The
new rules also require that many transactions, including an increase in phantom
stock units resulting from participation in the Corporation's Outside Directors
Deferred Compensation Plan, that had been reportable on an annual basis in
February, now be reported within two business days. The Outside Directors
Deferred Compensation Plan, which permits directors to receive phantom stock
units in lieu of cash fees, is described above under "Proposal 1. Election of
Directors -- Compensation of Directors."
30
Additional phantom stock units were paid to Mr. Collins and Mr. Tobias in lieu
of cash fees in connection with meetings of the Board of Directors and its
committees on September 11-12, 2002. The reports reflecting increases in these
phantom stock units were filed with the Securities and Exchange Commission and
the New York Stock Exchange on September 19, 2002.
2004 STOCKHOLDER PROPOSALS
Proposals by stockholders for inclusion in the Corporation's 2004 proxy
statement and form of proxy for the Annual Meeting of Stockholders to be held in
2004 should be addressed to the Secretary, Kimberly-Clark Corporation, P.O. Box
619100, Dallas, Texas 75261-9100, and must be received at this address no later
than November 11, 2003. Upon receipt of a proposal, the Corporation will
determine whether or not to include the proposal in the proxy statement and
proxy in accordance with applicable law. It is suggested that proposals be
forwarded by certified mail -- return receipt requested.
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
The Corporation's By-Laws require advance notice for any business to be
brought before a meeting of stockholders. In general, for business to properly
be brought before an Annual Meeting by a stockholder (other than in connection
with the election of directors; see "Proposal 1. Election of
Directors -- Stockholder Nominations for Directors"), written notice of the
stockholder proposal must be received by the Secretary of the Corporation not
less than 75 days nor more than 100 days prior to the first anniversary of the
preceding year's Annual Meeting. Certain other notice periods are provided if
the date of the Annual Meeting is advanced by more than 30 days or delayed by
more than 60 days from the anniversary date. The stockholder's notice to the
Secretary must contain a brief description of the business to be brought before
the meeting and the reasons for conducting such business at the meeting, as well
as certain other information. Additional information concerning the advance
notice requirement and a copy of the Corporation's By-Laws may be obtained from
the Secretary of the Corporation at the address provided below.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee of the Board assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Corporation.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Corporation
that might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," discussed with the auditors any relationships that may impact their
objectivity and independence and satisfied itself as to the auditors'
independence. The Audit Committee also discussed with management, the internal
auditors and the independent auditors the quality and adequacy of the
Corporation's internal controls and the internal audit function's organization,
responsibilities and budget and staffing. The Audit Committee reviewed with both
the independent and the internal auditors their audit plans, audit scope and
identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Audit Committee reviewed the audited financial statements of the
Corporation as of and for the fiscal year ended December 31, 2002, with
management and the independent auditors.
31
Management has the responsibility for the preparation of the Corporation's
financial statements and the independent auditors have the responsibility for
the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
Corporation's audited financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, for filing with the
Securities and Exchange Commission. The Audit Committee also has selected and
recommended to stockholders for approval the reappointment of Deloitte & Touche
LLP as the independent auditors to audit the consolidated financial statements
of the Corporation for 2003.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Robert W. Decherd, Chairman
Dennis R. Beresford
Mae C. Jemison, M.D.
Wolfgang R. Schmitt
Randall L. Tobias
OTHER MATTERS
The management of the Corporation knows of no other matters to be presented
at the meeting. Should any other matter requiring a vote of the stockholders
arise at the meeting, the persons named in the proxy will vote the proxies in
accordance with their best judgment.
By order of the Board of Directors.
/s/ RONALD D. MC CRAY
Ronald D. Mc Cray
Vice President, Associate General
Counsel and Secretary
KIMBERLY-CLARK CORPORATION
P. O. Box 619100
Dallas, Texas 75261-9100
Telephone (972) 281-1200
March 11, 2003
32
APPENDIX A
KIMBERLY-CLARK CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the Audit Committee. The Audit
Committee shall review and reassess the adequacy of this charter annually and
recommend any proposed changes of the charter to the Board for approval. The
Corporation's Nominating and Corporate Governance Committee, in consultation
with the Chairman of the Board, shall recommend members for appointment to, and
the Chairman of, the Audit Committee to the Board for its approval. The Audit
Committee shall be comprised of at least three directors, each of whom is
independent of management and the Corporation. The members of the Audit
Committee shall meet the independence and experience requirements of the New
York Stock Exchange ("NYSE"), the Securities Exchange Act of 1934, and the rules
and regulations of the Securities and Exchange Commission ("SEC"). All Audit
Committee members shall be financially literate, and at least one member shall
be an "audit committee financial expert," as defined by rules and regulations of
the SEC and the NYSE. The Audit Committee shall maintain minutes of its meetings
and report to the Board.
POLICY
The Audit Committee shall assist the Board in fulfilling its oversight
responsibilities to stockholders, the investment community and others for
monitoring (1) the quality and integrity of the financial statements of the
Corporation; (2) the Corporation's compliance with ethical policies contained in
the Corporation's Code of Conduct and legal and regulatory requirements; (3) the
independence, qualification and performance of the Corporation's independent
auditors; and (4) the performance of the Corporation's internal auditors. The
Audit Committee shall have the authority to retain special legal, accounting or
other consultants to advise the Audit Committee. The Audit Committee may request
any officer or employee of the Corporation or the Corporation's outside counsel
or independent auditors to attend a meeting of the Audit Committee or to meet
with any members of, or consultants to, the Audit Committee.
RESPONSIBILITIES AND PROCESSES
The Audit Committee, in carrying out its responsibilities, believes its
policies and procedures should be reviewed periodically, in order to best react
to changing conditions and circumstances. The Audit Committee should take
appropriate actions to ensure a management environment for quality financial
reporting, sound business risk practices, and ethical behavior. The following
shall be the principal duties and responsibilities of the Audit Committee. These
are set forth as a guide with the understanding that the Audit Committee may
supplement them as appropriate.
In carrying out its responsibilities, the Audit Committee shall:
1. Engage, subject to stockholder approval, the independent auditors of
the Corporation to conduct the examination of the books and records
of the Corporation and its affiliates, and to terminate any such
engagement if circumstances warrant. The independent auditors are
ultimately accountable to, and shall report directly to, the Audit
Committee. The Audit Committee shall have the sole authority to
approve all audit and non-audit engagement fees and terms. The Audit
Committee shall provide oversight of the work of the independent
auditors, including resolution of disagreements between management
and the independent auditors regarding financial reporting.
2. Pre-approve all audit services and, to the extent permitted by law,
all non-audit services provided by the independent auditors. The
Audit Committee may delegate pre-approval authority to a member of
the Audit Committee. The decisions of any Audit Committee
A-1
member to whom pre-approval authority is delegated must be presented
to the full Audit Committee at its next scheduled meeting.
3. Meet with the Corporation's independent auditors and management to
review the scope of the proposed annual audit (and related quarterly
reviews), the audit procedures to be followed and, at the conclusion
of the audit, review the principal audit findings including any
comments or recommendations of the Corporation's independent
auditors.
4. Discuss with the Corporation's independent auditors and management
information relating to the auditors' judgments about the quality,
not just the acceptability, of the Corporation's accounting
principles and matters identified by the auditors during its interim
reviews. Also, the Committee shall discuss the results of the annual
audit and any other matters that may be required to be communicated
to the Audit Committee by the Corporation's independent auditors
under generally accepted auditing standards.
5. At least annually, receive from and discuss with the independent
auditors and management, separately or together as determined by the
Committee, a report on (1) all critical accounting policies and
practices to be used; (2) all alternative treatments of financial
information within generally accepted accounting principles that have
been discussed with management of the Corporation, the ramifications
of the use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditors; and (3) other
material written communications between the independent auditors and
management of the Corporation, such as any management letter or
schedule of unadjusted audit differences.
6. Obtain assurance from the Corporation's independent auditors that
they have complied with their obligation to identify and report fraud
in connection with their audit of the financial statements of the
Corporation.
7. Discuss the Corporation's annual audited financial statements and
unaudited quarterly financial statements with management and the
independent auditors, including management's discussion and analysis
of financial condition and results of operations. Discuss other
matters with the Corporation's independent auditors as required by
the Securities and Exchange Commission and, if appropriate, recommend
that the audited financial statements be included in the
Corporation's Form 10-K.
8. Approve the content of the report of the Audit Committee required by
the Securities and Exchange Commission to be included in the
Corporation's annual proxy statement.
9. Provide sufficient opportunity at its meetings to meet separately in
executive session with the Corporation's independent auditors,
members of management and representatives of internal audit. Among
the items to be discussed with the Corporation's independent auditors
are (1) the independent auditors' evaluation of the Corporation's
financial and accounting personnel, (2) the cooperation that the
independent auditors received during the course of its audit, (3) any
management letter provided by the independent auditors and
management's response, and (4) any other matters the Audit Committee
may determine from time to time.
10. At least annually, obtain and review a report by the independent
auditors describing: (1) the firm's internal quality-control
procedures; and (2) any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or by
any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting any
independent audits carried out by the firm and any steps taken to
deal with any such items.
A-2
11. At least annually, receive reports from the Corporation's
independent auditors regarding the auditors' independence from
management and the Corporation (including the identification of all
relationships between the independent auditors and the Corporation),
discuss such reports with the independent auditors, consider whether
the provision of non-audit services by the independent auditors is
compatible with the auditors' independence, and, if determined by
the Audit Committee, recommend that the Board take action to satisfy
itself of the independence of the auditors.
12. Evaluate the performance of the Corporation's independent auditors
and lead audit partner, and report its conclusions to the full
Board.
13. Set hiring policies that conform to applicable Securities and
Exchange Commission or other external guidelines for employment by
the Corporation of employees and former employees of the independent
auditors.
14. Review major changes to the Corporation's auditing and accounting
principles and practices as suggested by the independent auditors,
internal auditors or management.
15. Discuss with the Corporation's independent auditors, the internal
audit executive and management the adequacy and effectiveness of the
Corporation's internal auditing, accounting and financial controls,
and elicit any recommendations for improvement.
16. Review the internal audit function, budgeting and staffing,
including appointment or replacement of the senior internal auditing
executive and the proposed audit scope for the year. The senior
internal auditing executive is accountable to, and shall report
directly to, the Audit Committee.
17. Receive from the internal audit executive a summary of findings from
completed audits (and management's response) and a progress report
on the proposed internal audit plan with explanations for any
deviations from the original plan.
18. Review periodic reports from the internal audit executive with
respect to, and advise the Board regarding compliance with, the
Corporation's Code of Conduct.
19. Discuss with management an outline of press releases regarding
results of operations, as well as general policies on earnings
guidance to be provided to analysts, rating agencies, and the
general public. Review any relevant items with management and the
Corporation's independent auditors prior to release of any such
press releases or earnings guidance. The review shall be with the
Chairman of the Audit Committee or the full Audit Committee, as may
be appropriate.
20. Meet, at least annually, with management to discuss, as appropriate,
significant accounting accruals, estimates and reserves; litigation
matters; management's representations to the independent auditors;
new or proposed regulatory accounting and reporting rules; any
significant off-balance sheet transactions and special purpose
entities; and any significant financial reporting issues or
judgments disputed with the Corporation's independent auditors.
21. Discuss with management policies with respect to risk assessment and
risk management.
22. Review with the Corporation's general counsel legal matters that may
have a material impact on the financial statements.
23. Establish procedures for (1) the receipt, retention, and treatment
of complaints received by the Corporation regarding accounting,
internal accounting controls, or auditing matters, and (2) the
confidential, anonymous submission by employees of the Corporation
of concerns regarding questionable accounting or auditing matters.
A-3
24. Report regularly to the Board any issues that arise with respect to
the quality or integrity of the Corporation's financial statements.
25. In consultation with the Nominating and Corporate Governance
Committee, conduct an annual evaluation of the performance and
effectiveness of the Audit Committee and report the results of that
evaluation to the Board.
While the Audit Committee has the responsibilities and powers set forth in
this charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. Management is responsible for preparing the Corporation's financial
statements and the Corporation's independent auditors are responsible for
auditing the annual financial statements and for reviewing the unaudited interim
financial statements. Nor is it the duty of the Audit Committee to conduct
investigations to assure compliance with laws and regulations and the
Corporation's Code of Conduct.
A-4
(KIMBERLY-CLARK LOGO)
Invitation to Stockholders
Notice of 2003 Annual Meeting
Proxy Statement
(GRAPHIC)
(KIMBERLY-CLARK CORPORATION LOGO)
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL ZKCC52
(KIMBERLY-CLARK CORPORATION LOGO)
PROXY/VOTING INSTRUCTIONS FOR THE ANNUAL MEETING OF STOCKHOLDERS -
APRIL 24, 2003
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Thomas J. Falk, O. George Everbach and Ronald D. Mc Cray, or any of them,
with full power of substitution to each, hereby are appointed proxies and are
authorized to vote, as specified on the reverse side of this card, all shares of
common stock that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Kimberly-Clark Corporation, to be held at the Corporation's
World Headquarters, 351 Phelps Drive, Irving, Texas on April 24, 2003 at 11:00
a.m. and at any adjournment thereof. In their discretion, the proxies are
authorized to vote on such other business as may properly come before the
meeting.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2
AND AGAINST PROPOSALS 3, 4, 5 AND 6. IF YOU PREFER TO VOTE SEPARATELY ON
INDIVIDUAL ISSUES YOU MAY DO SO BY MARKING THE APPROPRIATE BOXES ON THE REVERSE
SIDE.
This card also constitutes voting instructions to the trustees of the
Corporation's employee benefits and stock purchase plans to vote whole shares
attributable to accounts the undersigned may hold under such plans. If no voting
instructions are provided, the respective plan committees, which are composed of
management personnel, will direct the trustees to vote the shares.
Please date, sign and return this proxy/voting instruction card promptly.
If you own shares directly and plan to attend the meeting, please so indicate in
the space provided on the reverse side.
IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE
PLEASE RETURN THIS CARD IN THE SELF-ADDRESSED ENVELOPE PROVIDED.
KIMBERLY-CLARK CORPORATION
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to do so, you conserve natural resources and save your company money! To
sign up for electronic delivery service, go to our transfer agent's
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electronic delivery service at the same time. ACT NOW!
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VOTER CONTROL NUMBER
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-------------------------------------------------- ------------------------------------------------------
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1. LOG ON TO THE INTERNET AND GO TO 1. CALL TOLL-FREE
HTTP://WWW.EPROXYVOTE.COM/KMB. OR 1-877-PRX-VOTE (1-877-779-8683)
2. ENTER YOUR VOTER CONTROL NUMBER LISTED ABOVE 2. ENTER YOUR VOTER CONTROL NUMBER LISTED ABOVE AND
AND FOLLOW THE EASY STEPS OUTLINED ON THE SECURED FOLLOW THE EASY RECORDED INSTRUCTIONS.
WEBSITE.
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IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL ZKCC51
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
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1. Election of Directors
NOMINEES: (01) Dennis R. Beresford, (02) Thomas J. Falk, 2. Selection of Auditors
(03) Mae C. Jemison and (04) Randall L. Tobias
(terms to expire at 2006 Annual Meeting of Stockholders)
WITHHOLD FOR AGAINST ABSTAIN
FOR AUTHORITY [ ] [ ] [ ]
ALL [ ] FROM ALL [ ]
NOMINEES NOMINEES
[ ]
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For all nominees, except vote withheld as noted above.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSALS 3, 4, 5 AND 6.
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FOR AGAINST ABSTAIN
3. Stockholder Proposal Regarding the [ ] [ ] [ ]
Corporation's Amended and Restated
Rights Agreement
4. Stockholder Proposal Regarding [ ] [ ] [ ]
Expensing Stock Options
5. Stockholder Proposal Regarding [ ] [ ] [ ]
Indexing Stock Options for Executives
6. Stockholder Proposal Regarding An [ ] [ ] [ ]
Independent Chairman of the Board
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MARK HERE FOR MARK HERE
ADDRESS CHANGE IF YOU PLAN
AND NOTE [ ] TO ATTEND [ ]
AT LOWER LEFT THE MEETING
PLEASE SIGN BELOW EXACTLY AS NAME APPEARS HEREON.
JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF SIGNING
IN THE NAME OF A CORPORATION OR PARTNERSHIP, PLEASE
SIGN FULL CORPORATE OR PARTNERSHIP NAME AND INDICATE
TITLE OF AUTHORIZED SIGNATORY.
Signature: Date: Signature: Date:
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