QuickLinks
-- Click here to rapidly navigate through this document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
|
|
|
|
|
Filed by the Registrant
ý
|
|
Filed by a Party other than the Registrant
o
|
|
Check the appropriate box:
|
|
o
|
|
Preliminary Proxy Statement
|
|
o
|
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
|
ý
|
|
Definitive Proxy Statement
|
|
o
|
|
Definitive Additional Materials
|
|
o
|
|
Soliciting Material Pursuant to §240.14a-12
|
|
|
|
|
|
BALL CORPORATION
|
(Name of Registrant as Specified In Its Charter)
|
|
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|
|
|
|
|
|
Payment of Filing Fee (Check the appropriate box):
|
ý
|
|
No fee required.
|
o
|
|
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:
|
|
|
(2)
|
|
Aggregate number of securities to which transaction applies:
|
|
|
(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):
|
|
|
(4)
|
|
Proposed maximum aggregate value of transaction:
|
|
|
(5)
|
|
Total fee paid:
|
o
|
|
Fee paid previously with preliminary materials.
|
o
|
|
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:
|
|
|
(2)
|
|
Form, Schedule or Registration Statement No.:
|
|
|
(3)
|
|
Filing Party:
|
|
|
(4)
|
|
Date Filed:
|
BALL CORPORATION
10 Longs Peak Drive, Broomfield, Colorado 80021-2510
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, APRIL 27, 2011
The Annual Meeting of Shareholders of Ball Corporation will be held at the Corporation's offices, 10 Longs Peak Drive, Broomfield, Colorado
80021-2510, on Wednesday, April 27, 2011, at 8:00
A.M.
(MDT) for the following purposes:
-
1.
-
To
elect four directors for three-year terms expiring at the Annual Meeting of Shareholders to be held in 2014;
-
2.
-
To
ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Corporation for 2011;
-
3.
-
To
approve, by non-binding vote, the compensation of the named executive officers as disclosed in the enclosed Proxy Statement;
-
4.
-
To
recommend, by non-binding vote, the frequency of the shareholder vote to approve the compensation of the named executive officers;
-
5.
-
To
consider a shareholder proposal, if properly presented, to have the Board of Directors adopt a rule to redeem any current or future rights plan unless
such plan or amendments to the plan are submitted to a shareholder vote, as a separate ballot item, within 12 months;
-
6.
-
To
consider a shareholder proposal, if properly presented, to have the Board of Directors take the necessary steps, excluding those that may be taken only by
shareholders, to change Ball's jurisdiction of incorporation to Delaware; and
-
7.
-
To
consider any other business as may properly come before the meeting, although it is anticipated that no business will be conducted other than the matters
listed above.
Only
holders of Common Stock of record at the close of business on March 1, 2011, are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.
A
Proxy Statement appears on the following pages. Copies of the Annual Report and Form 10-K for 2010 are being mailed to you with this Notice of Annual Meeting of
Shareholders and Proxy Statement.
|
|
|
|
|
By Order of the Board of Directors
|
|
|
David A. Westerlund
Corporate Secretary
|
March 14,
2011
Broomfield, Colorado
YOUR VOTE IS IMPORTANT
You are urged to complete, sign, date and promptly return your proxy card in the enclosed
postage-paid envelope, or submit your proxy by telephone or via the Internet,
as soon as possible, so that your shares can be voted at the meeting
in accordance with your instructions.
PLEASE
NOTE: The 2011 Annual Meeting of Shareholders will be held to tabulate the votes cast and
to report the results of voting on the items described above. No management presentations
or other business matters are planned for the meeting.
Ball and
are trademarks of Ball Corporation, Reg. U.S. Pat. & Tm. Office
BALL CORPORATION
10 Longs Peak Drive, Broomfield, Colorado 80021-2510
PROXY STATEMENT
March 14, 2011
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, APRIL 27, 2011
Important notice regarding the availability of proxy materials for the Annual
Meeting of Shareholders to be held on Wednesday, April 27, 2011:
The Proxy Statement, 10-K and Annual Report are available at
http://materials.proxyvote.com/058498
To Shareholders of Ball Corporation:
This
Proxy Statement and the accompanying proxy card are furnished to shareholders in connection with the solicitation by the Board of Directors of Ball Corporation ("Corporation" or
"Ball") of proxies to be voted at the Annual Meeting of Shareholders ("Annual Meeting") to be held April 27, 2011, for the purposes stated in the accompanying notice of the meeting.
Please
complete, sign, date and return your proxy card, or submit your proxy by telephone or via the Internet, as soon as possible, so that your shares can be voted at the meeting. Any
Ball Corporation shareholder of record desiring to submit a proxy by telephone or via the Internet will be required to enter the unique voter control number imprinted on the Ball Corporation proxy
card, and therefore should have the card for reference when initiating the process.
-
-
To submit your proxy by telephone, call 1-800-652-8683 on a touch-tone
telephone and follow the simple menu instructions provided. There is no charge for this call.
-
-
To submit your proxy over the Internet, log on to the Web site http://www.investorvote.com and follow the simple
instructions provided.
Similar
instructions are included on the enclosed proxy card.
A
shareholder of the Corporation may revoke a proxy in writing at any time prior to the meeting by sending written notice of revocation to the Corporate Secretary; by voting again by
telephone, via the Internet or in writing; or by voting in person at the meeting.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
At the close of business on March 1, 2011, there were outstanding 169,313,274 shares of Common Stock (together with the
associated preferred stock purchase rights under the Rights Agreement dated as of July 26, 2006, between the Corporation and Computershare Investor Services, LLC, as amended). Other than
944 shares of Common Stock
1
granted
as restricted stock without voting rights, each of the shares of Common Stock is entitled to one vote. Shareholders do not have cumulative voting rights with respect to the election of
directors.
Based
on Schedule 13G filings with the Securities and Exchange Commission ("SEC"), the following table indicates the beneficial owners of more than 5 percent of the
Corporation's outstanding Common Stock as of December 31, 2010:
|
|
|
|
|
|
|
|
Name and Address
of Beneficial Owner
|
|
Shares
Beneficially Owned
(1)
|
|
Percent
of Class
|
|
Lazard Asset Management LLC
30 Rockefeller Plaza
New York, New York 10112
|
|
|
13,318,592
|
(2)
|
|
7.54
|
|
Vanguard Fiduciary Trust Company
500 Admiral Nelson Boulevard
Malvern, Pennsylvania 19355
|
|
|
10,731,696
|
(3)
|
|
6.08
|
|
Iridian Asset Management LLC
David L. Cohen
Harold J. Levy
276 Post Road West
Westport, Connecticut 06880-4704
|
|
|
9,512,458
|
(4)
|
|
5.40
|
|
The Vanguard Group
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
|
|
|
9,353,648
|
(5)
|
|
5.29
|
|
Blackrock Inc.
40 East 52nd Street
New York, New York 10022
|
|
|
9,133,664
|
(6)
|
|
5.17
|
|
-
(1)
-
All
share numbers, including those reflected in the footnotes, have been adjusted to reflect the two-for-one split which was
effective February 15, 2011.
-
(2)
-
5,732,522
shares held with sole voting power and 13,318,592 shares held with sole dispositive power.
-
(3)
-
The
shares are held with shared voting and dispositive power.
-
(4)
-
The
Reporting Persons are lridian Asset Management LLC ("Iridian"), David L. Cohen ("Cohen") and Harold J. Levy ("Levy") (collectively, the
"Reporting Persons").
Iridian
is majority owned by Arovid Associates LLC, a Delaware limited liability company owned and controlled by the following: 12.5 percent by Cohen, 12.5 percent by Levy,
37.5 percent by LLMD LLC, a Delaware limited liability company, and 37.5 percent by ALHERO LLC, a Delaware limited liability company. LLMD LLC is owned
1 percent by Cohen, and 99 percent by a family trust controlled by Cohen. ALHERO LLC is owned 1 percent by Levy and 99 percent by a family trust controlled by Levy.
The
Reporting Persons beneficially owned in the aggregate 9,512,458 shares of Common Stock which equates to approximately 5.4 percent of the outstanding shares (the percentage of shares of
Common Stock owned being based upon 176,641,186 shares of Common Stock outstanding at October 24, 2010, as set forth in the Issuer's Quarterly Report on Form 10-Q for the
quarter ended September 26, 2010). Iridian has direct beneficial ownership of the shares of Common Stock in the accounts for which it serves as the investment adviser under its investment
management agreements. Messrs. Cohen and Levy may be deemed to possess beneficial ownership of the shares of Common Stock beneficially owned by Iridian by virtue of their indirect controlling
ownership of Iridian, and having the power to vote and direct the disposition of shares of Common Stock as joint Chief Investment Officers of Iridian. Messrs. Cohen and Levy disclaim beneficial
ownership of such shares.
Mr. Levy
has direct beneficial ownership of the 40,000 shares of Common Stock owned by him. As used herein, "beneficial ownership" has the meaning set forth in Rule 13d-3
under the Securities Exchange Act of 1934, as amended.
Iridian
has the direct power to vote or direct the vote, and the direct power to dispose or direct the disposition, of 9,512,458 shares of Common Stock. Cohen and Levy may be deemed to share with
Iridian the power to vote or direct the vote and to dispose or direct the disposition of such shares.
Mr. Levy
has the direct power to vote or direct the vote, and the direct power to dispose or direct the disposition, of 40,000 shares of Common Stock.
-
(5)
-
226,504
shares with sole voting and shared dispositive power and 9,127,144 shares held with sole dispositive power.
-
(6)
-
9,133,664
shares are held with sole dispositive power.
2
BENEFICIAL OWNERSHIP
The following table lists the beneficial ownership of Common Stock of the Corporation by director nominees, continuing directors, the
Chief Executive Officer and the four other most highly compensated executive officers and, as a group, of such persons and the other executive officers as of the close of business on March 1,
2011.
|
|
|
|
|
|
|
|
|
|
Title of Class
|
|
Name of
Beneficial Owner
|
|
Shares Beneficially
Owned
(1)
|
|
Percent
of Class
(2)
|
|
Common
|
|
Robert W. Alspaugh
|
|
|
30,765
|
(3)
|
|
*
|
|
Common
|
|
Hanno C. Fiedler
|
|
|
133,754
|
(4)
|
|
*
|
|
Common
|
|
John A. Hayes
|
|
|
827,927
|
(5)
|
|
*
|
|
Common
|
|
R. David Hoover
|
|
|
3,424,745
|
(6)
|
|
2.0
|
|
Common
|
|
John F. Lehman
|
|
|
223,480
|
(7)
|
|
*
|
|
Common
|
|
Scott C. Morrison
|
|
|
347,072
|
(8)
|
|
|
|
Common
|
|
Georgia R. Nelson
|
|
|
41,934
|
(9)
|
|
*
|
|
Common
|
|
Jan Nicholson
|
|
|
338,865
|
(10)
|
|
*
|
|
Common
|
|
Raymond J. Seabrook
|
|
|
992,576
|
(11)
|
|
*
|
|
Common
|
|
George M. Smart
|
|
|
64,020
|
(12)
|
|
*
|
|
Common
|
|
Theodore M. Solso
|
|
|
141,628
|
(13)
|
|
*
|
|
Common
|
|
Stuart A. Taylor II
|
|
|
159,961
|
(14)
|
|
*
|
|
Common
|
|
Erik H. van der Kaay
|
|
|
107,064
|
(15)
|
|
*
|
|
Common
|
|
David A. Westerlund
|
|
|
801,205
|
(16)
|
|
*
|
|
Common
|
|
All of the above and present
executive officers as a group (21)
|
|
|
8,906,436
|
(17)
|
|
5.3
|
|
-
(1)
-
Full
voting and dispositive investment power, unless otherwise noted.
-
(2)
-
*
Indicates less than 1 percent ownership.
-
(3)
-
Includes
12,429 stock units equivalent to 12,429 shares with no voting rights or dispositive investment power that have been deferred by Mr. Alspaugh
pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 18,336 restricted stock units with no voting rights or dispositive investment power.
-
(4)
-
Includes
20,000 shares that Mr. Fiedler may acquire during the next 60 days upon exercise of stock options. Also includes 16,336 shares of
restricted stock or restricted stock units without voting rights. Voting rights attach to the shares as the restrictions lapse.
-
(5)
-
Includes
351,186 shares that Mr. Hayes may acquire during the next 60 days upon the exercise of stock options. Also includes 192,208 stock
units equivalent to 192,208 shares with no voting rights or dispositive investment power that have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 154,430
restricted stock units with no voting rights or dispositive investment power.
-
(6)
-
Includes
336,948 shares held in trust for Mr. Hoover's spouse, as to which he disclaims beneficial ownership, and 2,034,088 shares that he may
acquire during the next 60 days upon the exercise of stock options. Also includes 827,633 stock units equivalent to 827,633 shares with no voting rights or dispositive investment power that
have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 205,000 restricted stock units with no voting rights or dispositive investment power.
-
(7)
-
Includes
16,000 shares that Mr. Lehman may acquire during the next 60 days upon the exercise of stock options. Also includes 48,114 stock
units equivalent to 48,114 shares with no voting rights or dispositive investment power that have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 16,336
restricted stock units with no voting rights or dispositive investment power.
-
(8)
-
Includes
105,098 shares that Mr. Morrison may acquire during the next 60 days upon the exercise of stock options. Also includes 94,598 stock
units equivalent to 94,598 shares with no voting rights or dispositive investment power that have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 39,600
restricted stock units with no voting rights or dispositive investment power.
-
(9)
-
Includes
19,598 stock units equivalent to 19,598 shares with no voting rights or dispositive investment power that have been deferred by Ms. Nelson
pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 16,336 restricted stock units with no voting rights or dispositive investment power.
-
(10)
-
Includes
16,000 shares that Ms. Nicholson may acquire during the next 60 days upon the exercise of stock options. Also includes 23,235 stock
units equivalent to 23,235 shares with no voting rights or dispositive investment power that have been deferred pursuant
3
to
the Ball Corporation Deferred Compensation Company Stock Plans, and 16,336 restricted stock units with no voting rights or dispositive investment power.
-
(11)
-
Includes
9,750 shares owned by Mr. Seabrook's child, as to which he disclaims beneficial ownership, and 383,088 shares that he may acquire during
the next 60 days upon the exercise of stock options. Also includes 288,459 stock units equivalent to 288,459 shares with no voting rights or dispositive investment power that have been deferred
pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 81,250 restricted stock units with no voting rights or dispositive investment power.
-
(12)
-
Includes
12,634 stock units equivalent to 12,634 shares with no voting rights or dispositive investment power that have been deferred by Mr. Smart
pursuant to the Ball Corporation Deferred Compensation Company Stock Plans and 16,336 restricted stock units with no voting rights or dispositive investment power.
-
(13)
-
Includes
16,000 shares that Mr. Solso may acquire during the next 60 days upon the exercise of stock options. Also includes 44,446 stock
units equivalent to 44,446 shares with no voting rights or dispositive investment power that have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 16,336
restricted stock units with no voting rights or dispositive investment power.
-
(14)
-
Includes
16,000 shares that Mr. Taylor may acquire during the next 60 days upon the exercise of stock options. Also includes 46,947 stock
units equivalent to 46,947 shares with no voting rights or dispositive investment power that have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 16,336
restricted stock units with no voting rights or dispositive investment power.
-
(15)
-
Includes
39,462 stock units equivalent to 39,462 shares with no voting rights or dispositive investment power that have been deferred by Mr. van der
Kaay pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 16,336 restricted stock units with no voting rights or dispositive investment power.
-
(16)
-
Includes
6,156 shares owned by Mr. Westerlund's spouse, as to which he disclaims beneficial ownership, and 385,338 shares that he may acquire during
the next 60 days upon the exercise of stock options. Also includes 243,743 stock units equivalent to 243,743 shares with no voting rights or dispositive investment power that have been deferred
pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and 70,000 restricted stock units with no voting rights or dispositive investment power.
-
(17)
-
Includes
353,894 shares to which beneficial ownership is disclaimed, and 3,947,186 shares that may be acquired during the next 60 days upon the
exercise of stock options, and includes 199,000 shares to which beneficial ownership is disclaimed. Also includes 2,173,139 stock units equivalent to 2,173,139 shares with no voting rights or
dispositive investment power that have been deferred pursuant to the Ball Corporation Deferred Compensation Company Stock Plans, and includes 125,103 units to which beneficial ownership is disclaimed;
and 852,256 restricted stock units with no voting rights or dispositive investment power, and includes 27,200 restricted stock units to which beneficial ownership is disclaimed. In addition, 67,426
shares have been pledged.
VOTING ITEM IELECTION OF DIRECTORS
Pursuant to our Amended Articles of Incorporation and the Indiana Business Corporation Law, our Board of Directors ("Board") is divided
into three classes, as nearly equal in number as possible, with directors serving staggered three-year terms. Amendments to the Indiana Business Corporation Law in 2009 made this
classified Board structure statutorily required for Ball Corporation, effective from and after July 31, 2009. On April 27, 2011, four persons are to be elected to serve as directors
until the 2014 Annual Meeting of Shareholders. Unless otherwise instructed on the proxy card, the persons named in the accompanying proxy intend to vote for nominees John A. Hayes,
George M. Smart, Theodore M. Solso, and Stuart A. Taylor II to hold office as directors of the Corporation until the 2014 Annual Meeting of Shareholders (Class II),
or, in each case, until his respective successor is elected and qualified. All nominees have consented to be named as candidates in the Proxy Statement and have agreed to serve if elected. If, for any
reason, any of the nominees becomes unavailable for election, the shares represented by proxies will be voted for any substitute nominee or nominees designated by the Board. The Board has no reason to
believe that any of the nominees will be unable to serve.
In
accordance with the Indiana Business Corporation Law, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. Abstentions and broker nonvotes are considered neither votes "for" nor "against." Proxies may not be voted for a greater number of persons than the four named nominees.
Set
forth for each director nominee in Class II and for each continuing director in Classes I and III is the director's principal occupation and employment during
the past five years or, if longer, the period during which the director has served as a director, and certain other information, including his or her public company directorships during the past five
years.
4
DIRECTOR NOMINEES AND CONTINUING DIRECTORS
|
|
|
|
|
To Be Elected for a Term of Three Years Until the 2014 Annual Meeting (Class II)
|
John A. Hayes
|
|
President and Chief Executive Officer, Ball Corpor-
ation, since January 2011; President and Chief Operating Officer, January 2010 to January 2011; Executive Vice President and Chief Operating Officer 2008-2010; President, Ball Packaging Europe and Senior Vice President, Ball Corporation 2007-2008;
Executive Vice President, Ball Packaging Europe and Vice President, Ball Corporation 2005-2006; Vice President, Corporate Strategy, Marketing and Development 2003-2005; Vice President, Corporate Planning and Development 2000-2003; Senior Director,
Corporate Planning and Development 1999. Age 45.
|
|
Director since 2010.
|
George M. Smart
|
|
President, Sonoco-Phoenix, Inc., North Canton, Ohio, a subsidiary of Sonoco Products Company, 2001 to 2004. Age 65.
|
|
Director since 2005. Member, Audit and Human Resources Committees.
Mr. Smart is a director of FirstEnergy Corp., Akron, Ohio.
|
Theodore M. Solso
|
|
Chairman and Chief Executive Officer, Cummins Inc., Columbus, Indiana, since January 2000. Age 64.
|
|
Director since 2003. Member, Audit and Human Resources Committees.
Mr. Solso is a director of Ashland Inc., Covington, Kentucky. In the past five years, Mr. Solso has served on the board of Irwin Financial Corporation, Columbus, Indiana.
|
Stuart A. Taylor II
|
|
Chief Executive Officer, The Taylor Group L.L.C., Chicago, Illinois, since June 2001; Senior Managing Director, Bear, Stearns & Co. Inc., Chicago, Illinois, 1999 to 2001. Age 50.
|
|
Director since 1999. Member, Human Resources and Nominating/Corporate Governance Committees.
Mr. Taylor is a director of Hillenbrand, Inc., Batesville, Indiana.
|
The Board of Directors recommends that shareholders vote "FOR" the election of each nominee for Director named above.
|
5
|
|
|
|
|
To Continue in Office Until the 2012 Annual Meeting (Class III)
|
Robert W. Alspaugh
|
|
Chief Executive Officer, KPMG International, 2002 to 2005. Age 64.
|
|
Director since 2008. Member, Audit and Nominating/Corporate Governance Committees.
Mr. Alspaugh is a director of Autoliv, Inc., Stockholm, Sweden, and VeriFone Holdings, Inc., San Jose, California.
|
R. David Hoover
|
|
Chairman, Ball Corporation since January 2011. Chairman and Chief Executive Officer January 2010 to January 2011; Chairman, President and Chief Executive Officer, April 2002 to January 2010; President and Chief
Executive Officer, January 2001 to April 2002; Vice Chairman, President and Chief Operating Officer, April 2000 to January 2001; Vice Chairman, President and Chief Financial Officer, January 2000 to April 2000; Vice Chairman and Chief Financial
Officer, 1998 to 2000; Executive Vice President and Chief Financial Officer, 1997 to 1998; Executive Vice President, Chief Financial Officer and Treasurer, 1996 to 1997. Age 65.
|
|
Director since 1996.
Mr. Hoover is a director of Eli Lilly and Company, Indianapolis, Indiana; Energizer Holdings, Inc., St. Louis, Missouri, and Qwest Communications International, Inc., Denver, Colorado. In the past five years, Mr. Hoover
served on the board of Irwin Financial Corporation, Columbus, Indiana.
|
Jan Nicholson
|
|
President, The Grable Foundation, Pittsburgh, Pennsylvania, since 1990; Managing Director, Strategic Risk Assessment, MBIA Insurance Corporation, Armonk, New York, 1998 to 2000; Managing Director, Research and
Development, Capital Markets Assurance Corporation (CapMAC), New York, New York, 1994 to 1998. Age 65.
|
|
Director since 1994. Member, Audit and Finance Committees.
Ms. Nicholson is a director of Radian Group Inc., Philadelphia, Pennsylvania.
|
6
|
|
|
|
|
To Continue in Office Until the 2013 Annual Meeting (Class I)
|
Hanno C. Fiedler
|
|
Executive Vice President, Ball Corporation, and Chairman and Chief Executive Officer, Ball Packaging Europe, December 2002 to December 2005; Chairman and Chief Executive Officer, Schmalbach-Lubeca AG, 1996 to 2002.
Age 65.
|
|
Director since 2002. Member, Finance Committee.
Mr. Fiedler serves on the Supervisory Boards of LIC Langmatz GmbH, Garmisch- Partenkirchen, Germany; Pfleiderer AG, Neumarkt, Germany; and MAN-Roland Druckmaschinen AG, Offenbach, Germany. In the past five years, Mr. Fiedler
has served on the Supervisory Boards of Thyssen Krupp Steel AG, Duisburg, Germany; Howaldtswerke-Deutsche Werft AG, Kiel, Germany; and Unterehmensverwaltung GmbH & Co. KG, Neumarkt, Germany.
|
John F. Lehman
|
|
Chairman, J.F. Lehman & Company, New York, New York, since 1990; Chairman of the Board, OAO Technology Solutions, Inc., Greenbelt, Maryland, since 2001; Chairman of the Board, Sperry Marine Inc.,
Charlottesville, Virginia, 1993 to 1996; Managing Director, Investment Banking Division, PaineWebber Inc., New York, New York, 1988 to 1990; Secretary of the Navy, Washington, D.C., 1981 to 1987. Age 68.
|
|
Director since 1987. Member, Finance and Nominating/Corporate Governance Committees.
Mr. Lehman is a director of EnerSys, Reading, Pennsylvania, and Verisk, Inc., Jersey City, New Jersey.
|
Georgia R. Nelson
|
|
President and Chief Executive Officer, PTI Resources, LLC, Chicago, Illinois, since June 2005; President, Midwest Generation EME LLC, Chicago, Illinois, April 1999 to June 2005; General Manager, Edison
Mission Energy Americas, Irvine, California, January 2002 to June 2005. Age 61.
|
|
Director since 2006. Member, Human Resources and Nominating/Corporate Governance Committees.
Ms. Nelson is a director of Cummins Inc., Columbus, Indiana, and Nicor Inc., Naperville, Illinois. In the past five years, Ms. Nelson has served on the board of Tower Automotive, Inc., Novi, Michigan.
|
Erik H. van der Kaay
|
|
Chairman of the Board, Symmetricom, Inc., October 2002 to October 2003; President, Chief Executive Officer, and Chairman of the Board, Datum, Inc., Irvine, California, April 1998 to October 2002 upon
Symmetricom's acquisition of Datum. Age 70.
|
|
Director since 2004. Member, Audit and Finance Committees.
Mr. van der Kaay is a director of RF Micro Devices, Greensboro, North Carolina, and Orolia, S.A., Sophia Antipolis, France. In the past five years, Mr. van der Kaay has served on the boards of Comarco, Inc., Irvine, California,
and TransSwitch Corporation, Shelton, Connecticut.
|
7
DIRECTOR AND NOMINEE EXPERIENCE AND QUALIFICATIONS
Set out below are the specific experience, qualifications, attributes and skills of each of the Corporation's directors and director
nominees which led the Board to conclude that each person should serve as a director of the Corporation.
Robert W. Alspaugh
Mr. Alspaugh enjoyed a distinguished 35-year career with KPMG, with increasing responsibility, which culminated
in his acting as Deputy Chairman and Chief Operating Officer of KPMG-U.S. from 1998 to 2002 and Chief Executive Officer of KPMG International from 2002 to October 2005.
Mr. Alspaugh's extensive experience, qualifications and skills as a leader of one of the "big four" global accounting firms enhance his service on the Corporation's Audit Committee and he has
provided valuable input as a result. He also sits on two other public company boards, one in the U.S. and the other in Europe (where he chairs the audit committee), thus providing good
cross-functional background and experience, with an international component. Mr. Alspaugh's extensive professional experience as a leader of a major global accounting firm, advising and
supporting large international corporations, make him well qualified to serve as a director.
Hanno C. Fiedler
After a successful career with TRW, Inc., in 1996 Mr. Fiedler became Chairman and Chief Executive Officer of
Schmalbach-Lubeca AG, one of the largest and most successful rigid packaging companies based in Europe. When Ball acquired the beverage can business of Schmalbach-Lubeca in December 2002,
Mr. Fiedler became Chairman and Chief Executive Officer of Ball Packaging Europe GmbH and also joined the Board of Ball Corporation. In that capacity, Mr. Fiedler provided
excellent leadership to our newly-acquired European business which generated strong earnings performance during his tenure, despite the adverse effects of the German mandatory deposit system for rigid
packaging which was initiated in 2003. Mr. Fiedler retired from active management of Ball Packaging Europe at the end of 2005, but has continued as the Chairman of its Supervisory Board to the
present. He also serves on the Supervisory Boards of three major German companies. His leadership experience within the rigid container industry worldwide, with specific emphasis on Europe, makes him
well qualified to serve as a director.
John A. Hayes
Prior to joining Ball Corporation in 1999, Mr. Hayes was a Vice President of Lehman Brothers Inc. and part of an
investment banking team which focused on merger and acquisition and financing advice to several major companies, including the Corporation. At Ball, Mr. Hayes initially headed our corporate
development and planning activities as Senior Director and then Vice President, Corporate Planning and Development, taking on the added responsibilities of marketing and new product development from
2003 to mid-2005. He then served as President of Ball Packaging Europe, which produced excellent financial results and strong revenue growth under his leadership. During 2008 and 2009,
Mr. Hayes served as Ball's Executive Vice President and Chief Operating Officer, successfully leading our key operating divisions through the current economic and financial crisis. In January
2010 he was named our President and Chief Operating Officer and joined the Ball Corporation Board. In January 2011, he became our President and Chief Executive Officer. Mr. Hayes' extensive
investment banking and leadership experience within Ball make him well qualified to serve as a director.
R. David Hoover
Mr. Hoover has enjoyed a varied and successful 41-year career with Ball, serving in multiple corporate and
divisional roles, including as Vice President and Treasurer from 1987 through 1992, Chief Financial Officer from 1993 to April 2000, and Chief Operating Officer for the balance of 2000. He was our
Chief Executive Officer from January 2001 to January 2011, and led the Corporation through an unprecedented period of growth in revenues, earnings per share and free cash flow. Mr. Hoover's
considerable working knowledge and leadership experience with respect to our Corporation make him uniquely qualified to serve as a director. He has been a Ball Board member for 15 years,
serving as Chairman since 2002, and serves as a director of three other major U.S.-based public companies. Mr. Hoover has also served on the Board of Trustees of DePauw University since 2002
and on the Board of Boulder Community Hospital since 2006.
John F. Lehman
Mr. Lehman served as Secretary of the Navy in the Reagan Administration from 1981 to 1987, after which he was Managing Director
of Paine Webber Inc.'s Investment Banking Division from 1988 to 1990 where he led the firm's aerospace and defense advisory practice. He then established J.F. Lehman & Company, a New
York-based investment company, and has served as its chairman since 1990. Mr. Lehman is also Chairman of the Princess Grace Foundation and an Overseer of the School of Engineering
at the University of Pennsylvania. He has a rare combination of extensive business experience, public service, political acumen and global perspective. Mr. Lehman served as a member of the
National Commission on Terrorist Attacks Upon the United States, also known as the 9/11 Commission, from 2002 to 2004. He has been an astute and valuable member of Ball's Board for 24 years and
has chaired its Finance Committee for many years. Mr. Lehman's public service, financial industry experience and Ball Board experience make him well qualified to serve as a director.
8
Georgia R. Nelson
Ms. Nelson has enjoyed a successful 40-year career in the energy industry, serving as a senior executive for
several U.S. and international energy companies, including as President of Midwest Generation EME, LLC from April 1999 to June 2005 and General Manager of Edison Mission Energy Americas from
January 2002 to June 2005. She is a member of the Executive Committee of the National Coal Council since 2000 and served as its Chairman from 2006 to 2008. She has had extensive international
operations, construction, environmental and policy experience on four continents. Ms. Nelson regularly lectures on business and corporate governance matters, including at Northwestern
University's Kellogg Graduate School of Management, and serves on the advisory committee of the Center for Executive Women at Northwestern. Ms. Nelson also serves as a director of two other
public companies. Ms. Nelson's leadership roles in the power generation and distribution industries, as well as her service on other company boards, clearly qualify her to serve as a director
of our Corporation.
Jan Nicholson
Ms. Nicholson enjoyed a long and successful career in the financial services industry in New York, which, after an
18-year tenure at Citicorp, included positions as Managing Director, Research and Development for CapMAC from 1994 to 1998 and Managing Director, Strategic Risk Assessment for MBIA
Insurance Corporation from 1998 to 2000. She also served as a director of Rubbermaid, Inc. from 1992 until 1999, and chaired its Audit Committee from 1994 through 1998. In addition,
Ms. Nicholson is a director of Radian Group Inc. and has been President of The Grable Foundation since 1990. She has been a member of Ball's Board for 17 years and has chaired our
Audit Committee since 2004. Ms. Nicholson's career in the financial services industry and her service on the Rubbermaid Audit Committee and board, as well as her long service in those
capacities with Ball, make her well qualified to serve as a director.
George M. Smart
Mr. Smart's long career and success in the U.S. can manufacturing industry make him well qualified to serve as a director. He
steadily assumed increasing responsibility at Central States Can Co., a division of Van Dorn Company, culminating in his acting as its President and Chief Executive Officer from 1978 to 1993.
When Central States was acquired in 1993, Mr. Smart and his management team established a start-up company, Phoenix Packaging Corporation, to manufacture and sell
full-panel easy-open ends for food containers, including to Ball's food can division. Serving as Chairman and Chief Executive Officer for Phoenix, Mr. Smart led its
growth to a profitable company with revenues in excess of $80 million, when it was sold to Sonoco Products Company and became Sonoco-Phoenix, Inc. in 2001. Mr. Smart served as
President of Sonoco-Phoenix until 2004 and has been Chairman of the Board of FirstEnergy Corp. since 2004. He previously served on the boards of Belden & Blake Corporation, Commercial Intertech
Corporation, Unizan Financial, Van Dorn Company, and as Chairman of the Can Manufacturers Institute.
Theodore M. Solso
Mr. Solso has had a successful 40-year career at Cummins Inc., a Fortune 500 manufacturing company with
operations around the world. This culminated with Mr. Solso becoming Chairman and Chief Executive Officer of Cummins in January 2000, a position in which he serves today. Under his leadership,
Cummins has increased revenues from $6.6 billion in 2000 to $10.8 billion in 2009. During the same period, its earnings per share and operating cash flow have increased from $0.35 and
$550 million, to $2.49
and $1.1 billion, respectively. Mr. Solso has been on our Board since 2003 and serves as a director of Ashland Inc. He is also a member of The Indiana Academy and a member of the
Business Roundtable. Mr. Solso also co-chairs the U.S.-Brazil CEO Forum and is a trustee of Earth University in Costa Rica. Mr. Solso's long experience in leadership
positions with a major global manufacturing company make him well qualified to serve as a director.
Stuart A. Taylor II
Mr. Taylor spent the first 15 years of his working career at Bear Stearns & Co. Inc.,
culminating with the position of Senior Managing Director in Chicago. While at Bear Stearns, Mr. Taylor acted for many companies on merger and acquisition and financing transactions, including
for Ball on its 1993 acquisition of Heekin Can Company. In 2001, Mr. Taylor established The Taylor Group L.L.C., of which he is Chief Executive Officer, a successful investment company that
primarily invests in minority-owned businesses. Mr. Taylor has been a director of Ball since 1999, acted as our Presiding Director from 2004 to 2008 and chairs our Human Resources Committee. He
is also a director of Hillenbrand, Inc., an Indiana based public company. Mr. Taylor's extensive experience as an investment banker, entrepreneurial investor and Ball Board member make
him well qualified to serve as a director.
Erik H. van der Kaay
Mr. van der Kaay, a native of the Netherlands, had a long and successful career in the U.S. telecom industry, including
service as a senior executive with Allen Telecom throughout the 1990s, culminating as Executive Vice President, and as Chairman, President and Chief Executive Officer of Datum, Inc. from 1998
to 2002 and as Chairman of Symmetricom, Inc. from 2002 to 2003. He has also served as the managing director of a Brazilian telecom company, as well as on the board of directors of several
public companies and is currently a board member of RF Micro Devices in the U.S. and Orolia, S.A. in Europe, providing good cross-functional background and experience, with an international
component. In addition, he has served since 2007 as a member of the South East Audit Committee
9
Leadership
Network convened by Ernst & Young and comprised of audit committee members of leading public companies. Mr. van der Kaay's experience as a leader and as a director of several
other companies as well as his business and financial acumen, and his international perspective, make him well qualified to serve as a director.
BOARD LEADERSHIP STRUCTURE AND RISK OVERSIGHT
On January 26, 2011, John A. Hayes became our President and Chief Executive Officer ("CEO") and R. David Hoover, our predecessor
CEO, continues to serve as Chairman of the Board. The decision to split the position of Chairman and CEO is part of an orderly succession plan by which Mr. Hayes has transitioned into his
current role. Mr. Hayes has risen to the position of CEO after more than 11 years with Ball, most recently serving as President and Chief Operating Officer and a member of the Board.
Mr. Hayes has also previously served as President of Ball Packaging Europe from 2006 to early 2008, and then as Executive Vice President and Chief Operating Officer of the Corporation.
Splitting the role of Chairman and CEO at this time will allow Mr. Hayes the opportunity to focus on his new executive responsibilities in managing the Corporation; while having
Mr. Hoover as Chairman will provide continuity. Mr. Hayes and Mr. Hoover have worked closely together for more than 11 years, and the Board believes that their continued
collaboration in their new respective roles will result in a smooth change in senior management that will be beneficial to shareholders.
Our
Board of Directors is composed of Mr. Hoover, Mr. Hayes and nine other directors, eight of whom are independent directors. The Board has four standing
committeesAudit, Nominating/Corporate Governance, Human Resources and Finance. Each of the committees, except for Finance, is composed solely of independent directors (the Finance
Committee is primarily composed of independent directors), with each of the four committees having an independent director serving as chairman.
Pursuant
to SEC and NYSE rules, regularly scheduled executive sessions of nonmanagement directors are held. Executive sessions of independent directors are also held at least annually.
Such meetings promote open discussion by nonmanagement and independent directors, enabling them to serve as a check on management, if necessary. The meetings of the nonmanagement and independent
directors are chaired by the Presiding Director, who is an independent director appointed by the Board.
In
accordance with NYSE requirements, our Audit Committee is responsible for overseeing the risk management function of the Corporation. While the Audit Committee has primary
responsibility for overseeing risk management, the entire Board is involved in overseeing risk management for the Corporation. Additionally, each Board committee considers the specific risks within
its area of responsibility. Our Internal Audit Department has, for many years, analyzed various areas of risk to the Corporation and has provided risk assessment and analysis to our Audit Committee.
In 2007, the Corporation established a comprehensive Enterprise Risk Management process which is now supervised by our Senior Vice President and Chief Financial Officer, whereby key corporate and
divisional risks are systematically identified and assessed on a quarterly basis. The results of this ongoing risk assessment are reported to our Audit Committee and to our Board at least annually.
One
of the responsibilities of our Board of Directors is to evaluate the effectiveness of the Board and make recommendations involving its organization and operation. We recognize that
different board leadership structures may be appropriate for different companies. We believe our current leadership structure, with Mr. Hayes serving as Chief Executive Officer,
Mr. Hoover as Chairman of the Board, a Board with a majority of independent directors, an independent chairman for each of our standing Board committees and separate meetings of nonmanagement
and independent directors, provides the most effective form of leadership for our Corporation at this time. We believe that our directors provide effective oversight of risk management through the
Board's regular dialogue with Ball management, the Enterprise Risk Management process, and assessment of specific risks within each Board committee's areas of responsibility.
BOARD DIVERSITY
Ball's Nominating/Corporate Governance Committee consistently applies the principles of diversity in its consideration of candidates
for Board positions. In addition to considering characteristics such as race, gender and national origin, the Committee considers a variety of other characteristics, such as business and professional
experience, education and skill, all leading to differences of viewpoint and other individual qualities that contribute to Board
10
heterogeneity.
This has resulted in a diverse group of talented and capable Board members, as described in more detail under "Director and Nominee Experience and Qualifications" on pages 8
and 9.
GOVERNANCE OF THE CORPORATION
Corporate Governance Guidelines
The Board has established Corporate Governance Guidelines to comply with the relevant provisions of Section 303A of the New York
Stock Exchange ("NYSE") Listed Company Manual ("NYSE Listing Standards"). The Corporate Governance Guidelines are set forth on the Corporation's Web site at www.ball.com under the "Corporate" page,
section "Investors," under the subsection "Financial Information," and under the link, "Corporate Governance." A copy may also be obtained upon request from the Corporation's Corporate Secretary.
Policies on Business Ethics and Conduct
Ball established a Corporate Compliance Committee in 1993 chaired by a designated Compliance Officer. The Committee publishes a code of
business ethics, which is in the form of the Business Ethics booklet. The Board has adopted a separate additional business ethics statement referred to as the Ball Corporation Executive Officers and
Directors Business Ethics Statement ("Executive Officers and Directors Ethics Statement") designed to establish principles requiring the highest level of ethical behavior toward achieving business
success within the requirements of the law and the Corporation's policies and ethical standards. The Business Ethics booklet and the Executive Officers and Directors Ethics Statement are set forth on
the Corporation's Web site at www.ball.com under the "Corporate" page, section "Investors," under the subsection "Financial Information," and under the link, "Corporate Governance." Copies may also be
obtained upon request from the Corporation's Corporate Secretary.
Director Training
All new directors receive orientation training soon after being elected to the Board. Continuing education programs are made available
to directors including internal presentations, third-party presentations and externally offered programs. Three directors attended externally offered director training programs in 2010.
Communications With Directors
The Corporation has established means for shareholders or others to send communications to the Board. Persons interested in
communicating with the Board, its individual directors or its Committees may send communications in writing to the Corporate Secretary or the Chairman of the Board. The communication should be sent in
care of the Corporate Secretary, Ball Corporation, by mail to P.O. Box 5000; Broomfield, Colorado 80038-5000 or facsimile transmission
to 303-460-2127.
In
accordance with the NYSE and SEC requirements, the Corporation has established additional means for interested parties to send communications to the Board and selected Committees,
which are described on the Corporation's Web site at www.ball.com under the "Corporate" page, section "Investors," under the subsection "Financial Information," and under the link, "Corporate
Governance."
Shareholder
proposals for inclusion in the Corporation's proxy materials will continue to be handled and must be communicated as disclosed in this Proxy Statement on page 55.
Meetings of Nonmanagement and Independent Directors
The Board meets regularly and not less than four times per year. Nonmanagement directors meet regularly, usually in conjunction with a
regular Board meeting. Independent directors meet at least annually. Georgia R. Nelson served as Presiding Director for meetings of nonmanagement and independent directors held in 2010.
Director Independence Standards
Pursuant to the NYSE Listing Standards, the Board has adopted a policy adhering to the director independence requirements of the NYSE
in determining the independence of directors. These standards are described on the
11
Corporation's
Web site at www.ball.com under the "Corporate" page, section "Investors," under the subsection "Financial Information," and under the link, "Corporate Governance."
The
Board has determined that a majority of the Board is independent, and the Board has determined that based upon the NYSE independence standards, during 2010 each of the members of the
Board was and currently is independent with the exception of Messrs. Fiedler, Hayes and Hoover.
CERTAIN COMMITTEES OF THE BOARD
The standing committees of the Board are the Audit, Nominating/Corporate Governance, Human Resources and Finance Committees.
Audit Committee:
The primary purpose of the Audit Committee is to assist the Board in fulfilling its responsibilities to oversee management's conduct
and the integrity of the Corporation's public financial reporting process including the overview of (1) accounting policies, (2) the system of internal accounting controls over financial
reporting, (3) disclosure controls and procedures, (4) the performance of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Corporation
("independent auditor"), (5) the Internal Audit Department, and (6) oversight of our risk management. The Audit Committee is responsible for engaging and evaluating the Corporation's
independent auditor, including the independent auditor's qualifications and independence; resolving any differences between management and the independent auditor regarding financial reporting;
preapproving all audit and non-audit services provided by the independent auditor; and establishing procedures for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters.
Members
of the Audit Committee are Ms. Nicholson and Messrs. Alspaugh, Smart, Solso and van der Kaay. The Board has determined that each member of the Audit Committee is
independent and financially literate, has accounting or financial management expertise and is an Audit Committee financial expert under the NYSE Listing Standards and the SEC regulations. The Audit
Committee met five times during 2010.
The
Report of the Audit Committee is set forth on page 48. The Committee has considered the non-audit services provided during 2010 and 2009 by the independent auditor
as disclosed below and determined the services were compatible with maintaining the auditor's independence. The Committee believes the fees paid to the independent auditor in respect of the services
were appropriate, necessary and cost efficient in the management of the business of the Corporation and are compatible with maintaining the auditor's independence.
Audit Fees and Services
The following table represents fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of the
Corporation's annual consolidated financial statements and quarterly reports and the auditor's report under the Sarbanes-Oxley Act of 2002 for fiscal 2010 and fiscal 2009, together with fees for
audit-related services and tax services rendered by PricewaterhouseCoopers LLP during fiscal 2010 and fiscal 2009. Audit-related services for 2010 consisted of consultations related to a
comfort letter for the Corporation's 2010 bond offering, advice related to the sale of a business segment and discontinued operations presentation, derivative transactions, various local and special
audits, joint venture consultations, including consolidation, audit of specific accounting matters, and various consents related to SEC filings. Tax fees consisted principally of tax compliance,
including tax compliance matters related to tax audits and return preparation fees and fees for tax consultations. Other fees primarily included fees related to due
12
diligence
assistance on various acquisitions and advisory services related to consolidation and reporting process improvement initiatives.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Audit Fees
|
|
|
|
|
|
|
|
|
Attestation Report and Accounting Consultations
|
|
$
|
5,481,000
|
|
$
|
4,835,000
|
|
|
Foreign Statutory Audits
|
|
|
1,209,000
|
|
|
1,382,000
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Benefit Plans
|
|
$
|
29,000
|
|
$
|
27,000
|
|
|
Consultations
|
|
|
395,000
|
|
|
331,000
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
Tax Compliance Matters
|
|
$
|
428,000
|
|
$
|
544,000
|
|
|
Tax Consultations
|
|
|
1,413,000
|
|
|
1,061,000
|
|
All Other Fees
|
|
$
|
1,330,000
|
|
$
|
8,000
|
|
The Audit Committee's Charter requires management to submit for preapproval all audit, audit-related and non-audit-related services to
be performed by the independent auditor. Management and the independent auditor submit a report of fees for review and preapproval by the Committee on a quarterly basis. The Audit Committee requires
management and the independent auditor to submit a report at least annually regarding audit, audit-related, tax and all other fees paid by the Corporation to the independent auditor for services
rendered in the immediately preceding two fiscal years. The Committee considers whether the fees for non-audit and audit-related services are compatible with maintaining the auditor's
independence and requires management and the independent auditor to confirm this as well. The Audit Committee preapproved 100 percent of all of the above-referenced fees paid in 2010 and 2009
for services that were provided by PricewaterhouseCoopers LLP.
There
were no hours expended by persons other than the independent auditor's full-time, regular employees on the independent auditor's engagement to audit the Corporation's
financial statements.
A
copy of the Audit Committee Charter is attached as Annex I to this Proxy Statement and is set forth on the Corporation's Web site at www.ball.com under the "Corporate" page,
section "Investors," under the subsection "Financial Information," and under the link, "Corporate Governance."
Nominating/Corporate Governance Committee:
The Nominating/Corporate Governance Committee is responsible for assisting the Board in fulfilling its responsibility to identify
qualified individuals to become Board members; recommending to the Board the selection of Board nominees for the next Annual Meeting of Shareholders; addressing the independence and effectiveness of
the Board by advising and making recommendations on matters involving the organization and operation of the Board, Corporate Governance Guidelines and directorship practices; overseeing the evaluation
of the Board and its Committees; and reviewing and assessing the Corporation's Sustainability activities and performance. The Nominating/Corporate Governance Committee utilizes the standards set forth
below for considering director nominees.
Members
of the Nominating/Corporate Governance Committee are Messrs. Alspaugh, Lehman and Taylor and Ms. Nelson. The Board has determined that the members of the Committee
are independent under the NYSE Listing Standards. The Nominating/Corporate Governance Committee met four times during 2010.
The
Board has established a process whereby nominees for the Board may be submitted by members of the Board, the Chief Executive Officer, shareholders and any other persons. The
Committee considers these recommended candidates in light of criteria set forth below.
The
Committee will seek candidates who meet at a minimum the following criteria: (1) candidates who have sufficient time to attend or otherwise be present at Board, relevant Board
Committee and Shareholders' meetings; (2) candidates who will subscribe to Ball Corporation's Corporate Governance Guidelines and the Executive Officers and Directors Ethics Statement;
(3) candidates who demonstrate credentials and experience in a broad range of corporate matters; (4) candidates who have experience, qualifications, attributes and skills that would
qualify them to
13
serve
as a director; (5) candidates who will subscribe to the finalized strategic and operating plans of the Corporation as approved by the Board from time to time; (6) candidates who
are not affiliated with special interest groups that represent major causes or constituents; and (7) candidates who meet the criteria, if any, for being a director of the Corporation as set
forth in the Indiana Business Corporation Law, the Articles of Incorporation and Bylaws of the Corporation.
The
Committee will apply the principles of diversity in consideration of candidates. The Committee may utilize and pay third-party consultants to identify and screen candidates on a
confidential basis for service on the Board. The Committee will also determine candidates' qualifications in light of the standards set by the Committee and by evaluating the qualifications of all
candidates in an attempt to select the most qualified nominees suited to serve as a director while attempting to ensure that a majority of the Board is independent and, where needed, to
meet the NYSE and SEC requirements for financial literacy, accounting or financial management expertise or audit committee financial expert status.
The
Nominating/Corporate Governance Committee will consider candidates recommended by shareholders. Any such recommendation should be in writing and addressed to the Chair,
Nominating/Corporate Governance Committee, in care of the Corporate Secretary, Ball Corporation, by mail to P.O. Box 5000, Broomfield, Colorado 80038-5000.
The
Committee received no recommendations for candidates as nominees for the Board from a security holder or group of security holders that beneficially owned more than 5 percent
of the Corporation's voting Common Stock for at least one year as of the date of the recommendation.
A
copy of the Nominating/Corporate Governance Committee Charter is attached as Annex II to this Proxy Statement and is set forth on the Corporation's Web site at www.ball.com
under the "Corporate" page, section "Investors," under the subsection "Financial Information," and under the link, "Corporate Governance."
Human Resources Committee:
The primary purpose of the Human Resources Committee is to assist the Board in fulfilling its responsibilities related to the
evaluation and compensation of the Chief Executive Officer and overseeing the compensation of the other executive officers of the Corporation; reviewing and approving the schedule of salary ranges and
grades for the salaried employees of the Corporation; approving the Corporation's stock and cash incentive compensation programs including awards to executive officers and the number of shares to be
optioned and/or granted from time to time to employees of the Corporation; approving and receiving reports on major benefit plans, plan changes and determinations and discontinuations of benefit
plans; discussing the performance evaluation system and succession planning system of the Corporation, including discussions with the Chairman of the Board and Chief Executive Officer about the
succession plan for the Chairman of the Board and Chief Executive Officer; hiring experts, including executive compensation consultants, as deemed appropriate to advise the Committee; assessment of
compensation-related risks; and authorizing the filing of required reports with federal, state and local governmental agencies.
Members
of the Human Resources Committee are Messrs. Smart, Solso and Taylor and Ms. Nelson. The Board has determined that the members of the Committee are independent
under the NYSE Listing Standards. The Human Resources Committee met four times during 2010. A copy of the Human Resources Committee Charter is attached as Annex III to this Proxy Statement and
is set forth on the Corporation's Web site at www.ball.com under the "Corporate" page, section "Investors," under the subsection "Financial Information," and under the link, "Corporate Governance."
Finance Committee:
The Finance Committee assists the Board in fulfilling its responsibility to oversee management in the financing and related risk
management of the Corporation, the status of the Corporation's retirement plans and insurance policies and the Corporation's policies relating to interest rates, commodity hedging and currency
hedging. The Committee may hire experts as deemed appropriate to advise the Committee in the performance of its duties. The Committee reports to the Board concerning the financing of the Corporation
and the performance of the Committee.
The
members of the Finance Committee are Messrs. Fiedler, Lehman and van der Kaay and Ms. Nicholson. The Committee met four times during 2010. A copy of the Finance
Committee Charter is attached as Annex IV to this Proxy Statement and is set forth on the Corporation's Web site at www.ball.com under the "Corporate" page, section "Investors," under the
subsection "Financial Information," and under the link, "Corporate Governance."
14
BOARD MEETINGS AND ANNUAL MEETING
The members of the Board are expected to attend all meetings of the Board, relevant Committee meetings and the Annual Meeting of
Shareholders. The Board held seven meetings during 2010. Every director attended 75 percent or more of the aggregate of the total number of meetings of the Board and the total number of
meetings held by all committees of the Board on which the director served. All directors attended the 2010 Annual Meeting.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Ball Corporation has adopted a policy with respect to transactions with related persons requiring its executive officers and directors
to comply with all SEC and NYSE requirements concerning transactions between the Corporation and "related persons," as defined in the applicable SEC and NYSE rules. With respect to related persons,
David L. Taylor currently serves as President and Chief Executive Officer of a wholly owned subsidiary of Ball Corporation, and is the spouse of Lisa A. Pauley, an executive officer of the
Corporation. For 2010, Mr. Taylor's base salary was approximately $392,000. To facilitate compliance with such policy, the Board adopted procedures for the review, approval or ratification of
any transaction required to be reported under the applicable rules. The policy provides that each executive officer and director will promptly report to the Chairman of the Board any transaction with
the Corporation undertaken or contemplated by such
officer or director, by any beneficial owner of 5 percent or more of the Corporation's voting securities or by any immediate family member. The Chairman of the Board will refer the transaction
to the General Counsel for review and recommendations. Upon receipt of such review and recommendations, the matter will be brought before the Nominating/Corporate Governance Committee to consider
whether the transaction in question should be approved, ratified, suspended, revoked or terminated. This policy for transactions with related persons is in writing and is part of the Ball Corporation
Executive Officers and Directors Ethics Statement. The written form of the policy can be found on the Corporation's Web site as indicated in the section "Policies on Business Ethics and Conduct" on
page 11.
EXECUTIVE COMPENSATION
REPORT OF THE HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS
The Human Resources Committee of the Board of Directors ("Committee") has reviewed the following Compensation Discussion and Analysis
and discussed its contents with members of the Corporation's management. Based on this review and discussion, the Committee has recommended that the Compensation Discussion and Analysis ("CD&A") be
incorporated by reference in the Corporation's Annual Report on Form 10-K and as set out in this Proxy Statement.
15
EXECUTIVE COMPENSATION
EXECUTIVE SUMMARY
Ball Corporation experienced another good year in 2010, both financially and operationally, as we reported strong performance in sales,
earnings and earnings per share. Our financial performance provided a total return to shareholders of 32.6 percent, based on stock price appreciation plus reinvested dividends. This compares to
a 12.8 percent return of the S&P 500 and the 11.0 percent return of the Dow Jones Industrial Average. The company also generated significant free cash flow of $506 million.
Free cash flow is a key component of our business strategy as it is used to invest in our businesses, make acquisitions, return value to our shareholders through stock repurchases and dividends and
reduce debt. We also achieved economic value added profitability greater than 2009 levels and an after-tax return on invested capital of 11 percent.
The
year was also marked by a number of strategic business actions that position the company for continued success, including acquisitions in aluminum extruded container markets,
expansion of our metal beverage packaging business in developing growth markets, divestiture of our plastic packaging business, the integration of four metal beverage packaging plants acquired in
October 2009, significant program wins in our aerospace business, execution of our stock repurchase plan, successful debt refinancing and prudent balance sheet management. These results are due in
large part to our focus on disciplined growth, operational excellence and talent management.
The
strong business performance in 2010 is a continuation of the performance trend we have delivered over the past 10 years. The graph below compares the Corporation's cumulative
10-year total shareholder return on common stock with the cumulative total returns of the Dow Jones US Containers & Packaging Index and the S&P 500 Index. The graph tracks
the performance of a $100 investment in our common stock and in each of the indexes (assuming the reinvestment of all dividends) from December 31, 2000, to December 31, 2010.
Copyright© 2011 Standard & Poor's, a division of The McGraw-Hill Companies Inc. All rights
reserved. (www.researchdatagroup.com/S&P.htm)
Copyright© 2011 Dow Jones & Company. All rights reserved.
Pay for Performance Serves as the Foundation of our Executive Compensation Program
The objective of our executive compensation program is to align the
compensation of management with economic value creation for our shareholders. The Corporation has established and managed a performance-based executive compensation program that pays its executives as
owners of the business and ensures that pay realized by executives is closely linked to the value realized by shareholders.
The
key components of our executive compensation program have remained substantially the same for several years. The Human Resources Committee ("Committee") is confident that our
compensation programs and our "executives-as-owners" pay for performance approach to compensation has directly contributed to the successful performance of the business and has
resulted in an executive team closely aligned with shareholders, including executive stock ownership levels well above the market standards based on customary stock ownership guidelines.
16
The
major components of our executives-as-owners pay for performance approach are:
Short-term incentive plan
that pays for the degree of achievement of annual goals for economic value added at the corporate
and business unit level. Economic value added measures the value created by the company in excess of its cost of capital. We believe that maximizing the after-tax return on invested
capital while simultaneously minimizing the after-tax cost of capital in all our businesses is key to driving shareholder value. Our analysis indicates and we strongly believe that
economic value added performance is highly correlated to stock price and shareholder returns.
Long-term incentive structure
that has performance-based pay tied to sustained capital efficiency and shareholder returns. The
program has four ongoing components:
-
-
Long-term cash plan that rewards achievement relative to targeted three-year average ROAIC and
Ball's relative shareholder returns over a three-year period.
-
-
Performance contingent restricted stock unit plan that builds executive ownership contingent on Ball achieving returns at
or above its cost of capital over a three-year period.
-
-
Stock option plan that promotes share ownership directly in-line with gains to investors.
-
-
Deposit Share Program, used on a selective basis, that promotes share ownership by making awards of restricted stock units
to executives contingent on an equivalent investment in Ball stock by that executive and the retention of those shares acquired by the executive for up to four years.
Our Heavy Weighting of Compensation Mix to Performance Creates Pay for Performance Linkage
The charts below represent the mix of target total
compensation awarded to the Corporation's CEO and other NEOs in 2010. Consistent with our executives-as-owners pay for performance philosophy, a large proportion of the target
total compensation is variable based on performance, which constitutes pay at risk. The CEO is eligible to participate in the same executive programs as the CFO and the other NEOs; however, a larger
proportion of his target total compensation is at risk. As shown below, 86 percent of the target total compensation awarded to the CEO and 82 percent awarded to the other NEOs in 2010
was based on elements that may vary from year to year depending on business performance. Additionally, 70 percent of the CEO's and 69 percent of the other NEOs' target total compensation
was based on long-term performance of three years or more. This emphasis on longer term compensation, through performance-based long-term cash and equity awards, ensures a
strong continued alignment between Ball's executive ownership and shareholder value creation objectives.
We Are Committed to Prudent Corporate Governance
Another critical aspect of our compensation program is our adherence to a prudent corporate
governance model and the continuous improvement of compensation practices. Notable elements are:
-
-
Our executive compensation consultant is engaged by and reports directly to the Committee.
-
-
Our Committee is composed entirely of independent directors who meet the NYSE standards.
17
-
-
A formal risk assessment review of our compensation programs conducted by the Committee's executive compensation
consultant concluded that our compensation practices, policies and program do not create risks that are reasonably likely to have a material adverse effect on the Company.
-
-
Stock ownership guidelines are established for executives and directors and have been attained by all.
-
-
External marketplace (general industry and peer group) benchmarking, internal pay comparisons among executives (internal
equity) and executive tally sheets are instrumental in compensation decisions.
-
-
Any perquisites provided to executives are of nominal value (executive physicals, financial planning) and we do not
provide gross-up payments on such perquisites.
-
-
Our change in control agreements do not exceed two times pay and require a termination of employment following a change in
control ("double trigger") before severance benefits are triggered. Excise tax gross-ups have been eliminated for any new change in control agreements entered into after January 1,
2010.
-
-
We included a recoupment or "clawback" provision to our Stock and Cash Incentive Plan that was approved by shareholders at
the 2010 Annual Meeting of Shareholders. This provision provides that in the case of fraud or intentional misconduct by any executive at a level of vice president or above, full reimbursement of any
incentive compensation or cancellation of any outstanding awards may result.
-
-
Dividend equivalents related to performance contingent restricted stock units granted pursuant to the 2010 Stock and Cash
Incentive Plan will be accrued and paid only when and if the performance condition is achieved and the restrictions on the units lapse.
Composition of our NEOs
Our NEOs for 2010 were: R. David Hoover, Chairman and CEO; John Hayes, President and COO; Scott Morrison, Senior Vice
President and CFO; Raymond Seabrook, EVP and COO, Global Packaging; and David Westerlund, EVP, Administration and Corporate Secretary.
Effective
January 1, 2010, the following promotions occurred: John Hayes to President and COO; Scott Morrison to Senior Vice President and CFO; Raymond Seabrook, our previous EVP
and CFO, to EVP and COO, Global Packaging. In addition, R. David Hoover, Chairman and CEO, retired as CEO on January 26, 2011. He continues as nonexecutive Chairman. John Hayes assumed the
position of President and CEO at that time. These thoughtfully planned and well-executed actions demonstrate successful focus on executive succession planning, talent management and
transition execution.
NEO Compensation Actions in 2010
In January 2010, after review of competitive market data based on both general industry and peer group, the company's
financial and operational performance, executive compensation consultant and CEO recommendations, tally sheet analysis, promotion actions leading to greater responsibility as defined above, executive
individual performance and internal pay comparisons, the Committee
authorized the following target total compensation elements for the CEO and other NEOs:
-
-
Base pay increases, which incorporated promotional increases for Messrs. Hayes, Morrison and Seabrook.
-
-
Continued utilization of the short-term incentive economic value added plan. Target incentive opportunity
percentages remained the same for all NEOs except Messrs. Hayes, Morrison and Seabrook, which increased as a result of their promotions.
-
-
Continued utilization of the long-term cash plan for all NEOs. Target incentive opportunity percentages
remained the same for all NEOs except Messrs. Hayes and Morrison, which increased as a result of their promotions.
-
-
The award of performance contingent restricted stock units, stock appreciation rights and stock options.
Ball's
target total compensation for the CEO and the other NEOs approximated, on average, the competitive market median and was appropriate for the Corporation considering general
industry and Peer Group data, company performance, executive-specific factors such as individual performance and executive responsibility as well as internal equity.
In
April 2010, the Committee approved the use of the Deposit Share Plan for certain employees, which included Scott Morrison.
18
COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and analysis ("CD&A") is intended to provide an overview of the decisions used to determine the executive
compensation tables included in this Proxy Statement.
Compensation Objectives and Philosophy
The primary objective of Ball's executive compensation program is to attract and retain exceptional leaders and enable them to behave
like an ownerone of our Five Keys to Success. When setting executive compensation, Ball applies a consistent approach for all executive officers and intends that the combination of
compensation elements closely aligns the executives' financial interest with those of the shareholders. The program is mainly designed to:
-
-
Attract, motivate and retain a highly capable and performance-focused executive team;
-
-
Promote a culture of employee owners whose financial interests are aligned with those of the Corporation's shareholders;
-
-
Pay for performance such that total compensation reflects the individual performance of executives and the absolute and
relative performance of Ball; and
-
-
Efficiently manage the potential stock dilution, cash flow, tax and reported earnings implications of executive
compensation, consistent with the other objectives of the program.
Target
total compensation is comprised of base salary, annual economic value added incentive compensation and long-term incentive compensation in the form of both cash and
equity. In support of Ball's emphasis on significant ownership by key executives, Ball delivers long-term incentive opportunities that encourage ownership. Generally, the amount of
compensation realized or potentially realizable does not directly impact the level at which future pay opportunities are set. However, when granting equity awards, the Committee reviews and considers
both individual performance and the number of outstanding and previously granted equity awards.
In
addition to promoting share ownership, the Corporation's executive compensation objectives and philosophy focus on rewarding performance. This means that shareholder returns along
with corporate, operating unit and individual performance, both short-term and long-term, determine the largest portion of executive pay.
Role of the Human Resources Committee and Executive Compensation Consultant
The Human Resources Committee ("Committee") oversees the administration of the executive compensation program and determines the
compensation of the executive officers of the Corporation. The Committee is solely composed of nonmanagement directors, all of whom meet the independence requirements of the NYSE. To assist the
Committee in discharging its responsibilities, the Committee has retained an independent consultant ("Consultant"). This Consultant is employed by Pay Governance, LLC. The Consultant is engaged
by and reports directly to the Committee. Specifically, the Consultant's role is to develop recommendations for the Committee related to all aspects of executive compensation programs and the
Consultant works with management to obtain information necessary to develop the recommendations.
During
the first half of 2010, the Consultant was employed by Towers Watson. Since the majority of such consulting occurs in the last two quarters of the year, minimal executive
compensation services were provided by Towers Watson in 2010. Effective July 1, 2010, the Consultant became an employee of Pay Governance, LLC, an independent company that is not
affiliated with Towers Watson. The total fees paid for executive compensation services to Towers Watson for the period of January 1, 2010, thru June 30, 2010, were $56,716. The total
fees for
executive compensation services provided to the Committee by Pay Governance from July 1, 2010, to December 31, 2010, were $183,394. Pay Governance, LLC provides no other services
to the Corporation.
The
total fees for other services provided to the Corporation by Towers Watson during 2010 were $5,312,177. Towers Watson provides health and welfare and retirement plan strategy, design
and actuarial services to the Corporation. The decision to engage Towers Watson for such services was determined by the executive overseeing the benefits organization and approved by the Executive
Vice President, Administration. The Consultant had no role in the delivery of the health and welfare and retirement services described above. The Committee is assured that the services provided
19
by
the Consultant were objective and not influenced by the other services provided to the Corporation by Towers Watson because of the following: (1) the contractual arrangement for executive
compensation services provided to the Committee was completely separate from the arrangement of other services provided to the Corporation; (2) the Consultant received no compensation based on
the fees charged to the Corporation for other services; and (3) the Consultant did not participate in Towers Watson sales meetings regarding opportunities at the Corporation. Additionally, the
individual executive compensation consultant's qualifications, expertise and protocols ensure that the services provided to the Committee are both objective and of high quality.
Process for Determining Executive Compensation
Typically, the Committee reviews and adjusts executive total compensation levels, including equity grants annually in January of each
year. This practice was utilized when reviewing and adjusting 2010 executive total compensation.
The
CEO's target total compensation package is set by the Committee during an executive session based on the Committee's review of the competitive information prepared by the Consultant,
assessment of the CEO's individual performance in conjunction with the financial and operating performance of the Corporation, and appropriate business judgment.
A
recommendation for the target total compensation of the Corporation's other executive officers, including the CFO and other NEOs, is made by the CEO after reviewing the executive's and
the Corporation's performance in conjunction with the executive's responsibility and experience when compared to the competitive information prepared by the Consultant. The compensation package for
the other executive officers, including the CFO and the other NEOs, is established by the Committee taking into consideration the recommendation of the CEO and the executive officer's individual job
responsibilities, experience and overall performance.
To
facilitate this process, the Consultant creates tally sheets for each executive, which are used by the Committee when setting target total compensation for the CEO and other executive
officers. Tally sheets outline each executive's annual target and actual pay as well as total accumulated pay under various performance and employment scenarios and corporate performance, both recent
and projected. The Consultant also prepares for the Committee an independent review and recommendation of the CEO's compensation. In its deliberations, the Committee meets with the CEO and other
members of senior management, as appropriate, to discuss the
application of the competitive benchmarking (pay and performance) relative to the unique structure and needs of the Corporation.
Market Benchmarking
The Corporation begins the annual process by reviewing each executive officer's target total compensation in relation to the
50th percentile of comparably sized companies based on general industry data. The Corporation also takes into account, as an additional reference point, competitive compensation data from a
selected group of peer companies consisting of leading container and packaging, distiller and brewer, food, household durable and nondurable goods companies ("Peer Group"). This general industry and
Peer Group data is gathered by the Consultant and presented to the Corporation and the Committee in reports that provide a comparative analysis of our executive officer compensation to this
competitive market compensation. The Consultant works in collaboration with the Corporation's Compensation Department when preparing such reports.
For
2010 executive compensation planning, the companies comprising Ball's Peer Group included the following:
|
|
|
|
|
Anheuser-Busch InBev
|
|
H.J. Heinz Company
|
|
Owens-Illinois, Inc.
|
Campbell Soup Company
|
|
The Hershey Company
|
|
Smurfit-Stone Container Company
|
The Clorox Company
|
|
Jarden Corporation
|
|
Sonoco Products Company
|
Colgate-Palmolive Company
|
|
Kellogg Company
|
|
Temple-Inland, Inc.
|
Fortune Brands, Inc.
|
|
Molson Coors Brewing Company
|
|
Wm. Wrigley Jr. Company
|
|
|
|
|
|
During the third quarter of 2010, the Committee engaged the Consultant to assess whether the Peer Group required changes to ensure it is
reflective of Ball's business type and competitive market for talent. In determining
20
potential
changes to comparator companies, the Consultant used both qualitative criteria and objective quantitative criteria, including:
-
-
Qualitative elements
-
-
Reflect the labor market for the Company's executive talent, in terms of both industry and organizational complexity
-
-
Focus on direct peers from Ball's primary industry (containers and packaging)
-
-
Supplemented with two additional groups of related companies sufficient to create a stable peer group that can be used
over time:
-
-
Nondurable consumer product companieseither where containers and packaging are a critical element of final
product or with a higher focus on meeting annual performance expectations, individual consumer as ultimate purchaser of product, and
-
-
Broader manufacturing companiesspecifically within the aerospace, office services and supplies capital goods,
chemical, paper product and steel industries.
-
-
Quantitative elements
-
-
Organizational scope:
-
-
Primary measure: Revenue of ~$3 billion to $15 billion
-
-
Secondary measure: Market capitalization of ~$3 billion to $15 billion.
-
-
Financial metrics:
-
-
Market capitalization/revenue ratio: Multiples of ~ 0.5 to 2.0
-
-
Operating profit margin: Positive operating margin ranging from 5 to 20 percent
-
-
Three-year total shareholder return: No outlying large declines (given economic downturn), ideally
outperforming the S&P 500
As
a result of this assessment, the composition of the Peer Group was modified to include the following companies, which will be utilized for 2011 executive compensation planning:
|
|
|
|
|
Avery Dennison Corporation
|
|
Greif, Inc.
|
|
Pactiv Corp.
|
Bemis Company, Inc.
|
|
H.J. Heinz Company
|
|
PPG Industries, Inc.
|
Campbell Soup Company
|
|
ITT Corporation
|
|
Sara Lee Corp.
|
ConAgra Foods, Inc.
|
|
MeadWestvaco Corporation
|
|
Sealed Air Corporation
|
Crown Holdings Inc.
|
|
Molson Coors Brewing Company
|
|
Silgan Holdings, Inc.
|
Eastman Chemical Company
|
|
Owens-Illinois, Inc.
|
|
Sonoco Products Company
|
Goodrich Corp.
|
|
|
|
United States Steel Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companies in the New Ball Peer Group
Market Capitalization, Enterprise Value, Revenue and Net Income
|
|
In millions
|
|
Market Capitalization*
|
|
Enterprise Value*
|
|
Revenue**
|
|
Net Income**
|
|
25th Percentile
|
|
$
|
3,700
|
|
$
|
5,100
|
|
$
|
3,600
|
|
$
|
150
|
|
50th Percentile
|
|
$
|
4,800
|
|
$
|
7,700
|
|
$
|
6,400
|
|
$
|
285
|
|
75th Percentile
|
|
$
|
8,900
|
|
$
|
10,300
|
|
$
|
10,200
|
|
$
|
600
|
|
Ball Corporation
|
|
$
|
5,469
|
|
$
|
8,105
|
|
$
|
7,345
|
|
$
|
388
|
|
-
*
-
As
of September 15, 2010
-
**
-
FY
2009
21
Risk Assessment
The Committee has reviewed the concept of risk as it relates to our compensation programs and does not believe our compensation
programs encourage excessive or inappropriate risk. Overall, our internal risk assessment confirms that our compensation arrangements are low in risk and do not foster undue risk taking, because they
are performance driven and have strong governance and control mechanisms. The Committee's executive compensation Consultant conducted a thorough risk assessment of our executive compensation programs
and assessed numerous criteria with particular attention to whether those programs implicate financial risks, operational risks or reputational risks. The Consultant reported to the Committee that
Ball's executive compensation programs are low in risk. In reaching that conclusion, the Consultant noted that there is strong Human Resource Committee involvement, long-term incentives
are predominantly risk-based equity and thus tied to shareholder returns, market comparisons are utilized, ownership requirements are applied and Ball has embraced "economic value added"
principles in its compensation for many years.
Stock Ownership Guidelines
Consistent with its ownership philosophy, Ball has established guidelines that all executive officers retain minimum ownership levels
of the Ball Corporation Common Stock. As of December 31, 2010, all executive officers including the CEO and the other NEOs have met their ownership guidelines. The 2010 stock ownership
guidelines (minimum requirements) were as follows:
|
|
|
|
|
Executive
|
|
Ownership Multiple
(of Base Salary)
|
|
CEO
|
|
|
5 times
|
|
CFO, EVPs and SVPs
|
|
|
3 times
|
|
Other Executives
|
|
|
1 to 2 times
|
|
Additionally, the Corporation has established a 10,000 share stock ownership guideline for each nonmanagement director.
When
the Corporation's share price appreciates, some executives and/or directors may desire to lock in a portion of that appreciation, thereby managing a portion of the economic risk
associated with concentrated holdings of Ball Common Stock. The Corporation has evaluated the potential approaches that executives and directors can use. As a result of this review, executives are
permitted to use prepaid variable forward contracts or contracts to purchase or sell Ball Corporation Common Stock pursuant to SEC Rule 10b5-1. Put and call options and other
hedging transactions involving Corporation stock (including selling the stock "short") are not permitted.
22
Elements of Ball's Executive Compensation Program and 2010 Performance
The primary elements of Ball's executive compensation program are designed to be consistent with the compensation objectives described
above. The elements are outlined in the following table. The purpose of each element is also provided to demonstrate how each fits with the overall compensation objectives, specifically, stock
ownership and pay for performance.
|
|
|
|
|
|
|
|
|
Component
|
|
Element
|
|
Purpose
|
|
Performance Measures
|
|
2010 Performance
|
|
Base CompensationCurrent Year
|
|
Annual Base Salary
|
|
Fixed element of pay based on an individual's primary duties and responsibilities.
|
|
Individual performance and contribution based on primary duties and responsibilities.
|
|
All NEOs received base pay increases. Non-promotion related increases were less than 3 percent.
|
Annual Incentive Performance Based Cash
|
|
Annual Economic Value Added Incentive Compensation Plan
|
|
Designed to reward achievement of specified annual corporate and/or operating unit financial goals pursuant to economic value added principles.
|
|
Actual 2010 economic value added based on the amount of corporate net operating profit after-tax, less a charge for capital employed in the business, as compared to the 2010 economic value added target.
|
|
Resulted in an award of 202 percent of target for all NEOs. Amounts in excess of 200 percent were banked and remain at risk.
|
Long-Term Incentive Performance Based Cash
|
|
Acquisition-Related Special Incentive Plan
|
|
Designed to promote the successful integration of newly acquired businesses thereby enhancing financial returns and cash flow.
|
|
Cumulative earnings before interest and taxes and cumulative cash flow of the Metal Beverage Packaging Division, Americas.
|
|
The first 15-month cycle ended December 31, 2010, resulted in an interim award payment of 23 percent of the total target award.
|
|
|
Long-Term Cash Incentive Plan
|
|
Designed to promote long-term creation of shareholder value in absolute terms (ROAIC) and relative terms (performance versus a group of companies in the S&P 500) and provide an executive retention
incentive.
|
|
50 percent based on total shareholder return over three years relative to a group of S&P 500 companies and 50 percent based on ROAIC over three years, as compared to targets.
|
|
The 2008-2010 cycle resulted in an award payment of 200 percent of target for all NEOs based on performance above target for three years relative total shareholder return (84th percentile) and ROAIC
(11.1 percent).
|
Long-Term Incentive Performance Based Equity
|
|
Stock Options and Stock-Settled Stock Appreciation Rights
|
|
Designed to promote share ownership and long-term performance resulting in the creation of shareholder value.
|
|
Stock price performance relative to the grant date stock price (exercise price) of the stock options/SAR grants.
|
|
Stock price performance ending December 31, 2010, excluding dividends:
|
|
|
Restricted Stock/ Restricted Stock Units
|
|
Designed to promote share ownership, provide a retention incentive, and provide long-term incentive for the creation of shareholder value.
|
|
Attainment of required holding period and stock price performance.
|
|
Ball vs. S&P 500 one-year:
31.6 percent vs.
12.8 percent.
Ball vs. S&P 500 three-year:
53.89 percent vs.
negative 14.35 percent.
|
|
|
Deposit Shares
|
|
Designed to promote executive financial investment in the Corporation, promote share ownership and provide long-term incentive for performance resulting in the creation of shareholder value.
|
|
Attainment of required holding period and stock price performance.
|
|
|
|
|
Performance Contingent Restricted Stock Units
|
|
Designed to promote share ownership through the achievement of financial returns in excess of the Corporation's estimated weighted average cost of capital.
|
|
Actual ROAIC over three years, equal to or exceeds the Corporation's estimated weighted average cost of capital established at the beginning of the performance period.
|
|
For all NEOs, resulted in 100 percent vesting on January 31, 2011, of the 2008-2010 performance-contingent restricted stock unit award, based on actual ROAIC over the three-year period exceeding the weighted
average cost of capital target.
|
23
|
|
|
|
|
|
|
|
|
Component
|
|
Element
|
|
Purpose
|
|
Performance Measures
|
|
2010 Performance
|
|
Benefits
|
|
Life and Pension Benefits
|
|
Support basic life and retirement income security needs.
|
|
N/A
|
|
N/A
|
|
|
Supplemental Executive Retirement Plan
|
|
Replicates benefits provided under the qualified pension plan, not otherwise payable due to IRS qualified plan limits.
|
|
|
|
|
|
|
Non-Qualified Deferred Compensation
|
|
Provides eligible participants the ability to defer certain pretax compensation into a savings plan to support retirement income or other needs.
|
|
|
|
|
|
|
Perquisites and Other Personal Benefits
|
|
Noncash compensation generally nominal in value ranging from 2 to 3 percent of total compensation, which may consist of components such as financial planning, company contributions, aircraft usage and insurance
premiums. The percent of total compensation may exceed the nominal range for an executive on foreign assignment.
|
|
|
|
|
Specifics Related to the 2010 Executive Compensation Elements
Base Salary
The level of base salary takes into account job responsibilities, experience level and market competitiveness. Base salaries are
generally reviewed annually in late January, with any changes becoming effective retroactively on January 1 of that year. Annual adjustments are based on individual performance, performance of
the area of responsibility, the Corporation's performance, competitiveness versus the external market and internal merit increase budgets.
Annual Incentive
This short-term pay for performance incentive is used to encourage and reward the CEO and other NEOs for making decisions
that improve performance as measured by economic value added. It is designed to produce sustained shareholder value by establishing a direct link between economic value added and incentive
compensation. This annual incentive to the CEO and other NEOs is paid
consistent with the terms of the Ball Corporation Stock and Cash Incentive Plan and the Ball Corporation Annual Incentive Compensation Plan, which are administered by the Committee. Economic value
added was selected as the measure for Ball's Annual Incentive Compensation Plan because it has been demonstrated to correlate management's incentive with total shareholder return. Economic value added
is computed by subtracting a charge for the use of invested capital from net operating profit after-tax as illustrated below.
|
|
|
|
|
|
|
|
|
EVA
|
|
=
|
|
Net Operating Profits After Taxes
(NOPAT)
|
|
Minus
|
|
Capital Charge (the amount of
capital invested by Ball multiplied
by the after-tax cost of capital)
|
Generating
profits in excess of both operating and capital costs (debt and equity) creates economic value added. If economic value added improves, value has been created.
Performance Measures
Targets are established annually for each operating unit and for the Corporation as a whole based on prior performance. The
Plan
design motivates continuous improvement in order to achieve payouts at or above target over time.
24
The
Corporation's and/or operating unit's economic value added financial performance determines the amount, if any, of awards earned under the Annual Incentive Compensation Plan. Such
awards are based on actual economic value added performance relative to the established economic value added target. For any one year, the economic value added target is equal to the sum of the prior
year's target economic value added and one-half the amount of the prior year's economic value added gain or shortfall relative to the prior year's economic value added target and may be
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year's
economic value
added target
|
|
=
|
|
Prior year's
economic value
added target
|
|
+
|
|
1/2
|
|
|
|
Prior year's
actual economic
value added
|
|
-
|
|
Prior year's
economic value
added target
|
|
|
Improvement
in economic value added occurs when the amount of net operating profit after-tax less a charge for capital employed in the business increases over time. It
establishes a direct link between annual incentive compensation and continuous improvement of return on invested capital relative to a 9 percent "hurdle rate." The Corporation has established
9 percent as the "hurdle rate" when evaluating capital expenditures and strategic initiatives in most regions in which we do business. This "hurdle rate" is above the Corporation's true cost of
capital.
For
a given year, a payout at 100 percent of target annual incentive compensation is achieved when actual economic value added is equal to the target economic value added target.
Actual annual incentive payments each year can range from 0 to 200 percent of the targeted incentive opportunity based on corporate performance and/or
the performance of the operating unit over which the executive has responsibility. For the Corporation's consolidated plan, a payout of 0 percent is realized when actual economic value added is
$98 million less than targeted economic value added. A payout of 200 percent is achieved when actual economic value is $49 million in excess of target economic value added. A
payout greater than 200 percent may be achieved if actual economic value added is more than $49 million higher than target economic value added; however any amounts over
200 percent of target are banked and remain at risk until paid. The cumulative bank balance is paid over time in one-third increments based on corporate and/or operating unit
performance.
Target Incentive Percentages
This short-term performance-based incentive opportunity is established each year as a percentage of an
executive's annual base salary and is targeted at approximately the 50th percentile of the competitive market with the opportunity to earn more for above-target performance or less for
below-target performance. For 2010, the target incentive opportunities and the actual award earned for the CEO and other NEOs are as follows:
|
|
|
|
|
|
|
|
Name
|
|
Target Annual
Incentive Percent
|
|
Actual Annual Incentive
Based on Performance
|
|
|
|
R. David Hoover
|
|
|
110 percent
|
|
|
222 percent
|
|
Scott C. Morrison
|
|
|
60 percent
|
|
|
121 percent
|
|
John A. Hayes
|
|
|
85 percent
|
|
|
172 percent
|
|
Raymond J. Seabrook
|
|
|
75 percent
|
|
|
152 percent
|
|
David A. Westerlund
|
|
|
70 percent
|
|
|
141 percent
|
|
Certain executives including the CEO and the other NEOs may elect to defer the payment of all or a portion of their annual incentive compensation
into the 2005 Deferred Compensation Plan and/or the 2005 Deferred Compensation Company Stock Plan. The executive becomes a general unsecured creditor of the Corporation with respect to amounts
deferred. Amounts deferred to the 2005 Deferred Compensation Plan, or its successor, are notionally "invested" among various investment funds available under the applicable Plan. A participant's
amounts are not actually invested in the investment funds for their account, but the return on the participant's account is determined as if the amounts were invested in those funds. Amounts deferred
into the 2005 Deferred Compensation Company Stock Plan receive a 20 percent Corporation match with a maximum match of $20,000 per year. Amounts deferred into this Plan will be represented in
the participant's account as stock units, with each unit having a value equivalent to one share of Ball Corporation Common Stock. Participants may later reallocate a prescribed number of units to
other notional investment funds, comparable to those described above, subject to specified time constraints. One-half of the amount deferred into the 2005 Deferred Compensation Company
Stock Plan must remain deferred until retirement or other termination of employment.
25
Long-Term Incentives
This element of compensation is designed to provide ownership and cash opportunities to promote the achievement of longer term
financial performance goals and enhanced total shareholder returns. The Corporation's long-term incentive opportunity is generally provided through a combination of equity and cash awards,
which the Committee believes best matches the compensation principles for the program. In 2010, long-term incentives awarded prior to shareholder approval of the 2010 Stock and Cash
Incentive Plan in April were provided pursuant to the existing 2005 Stock and Cash Incentive Plan; and awards following that approval were pursuant to the newly approved 2010 Plan. This Plan permits
grants of cash awards, stock options, stock appreciation rights or stock awards (e.g., shares, restricted stock and restricted stock units).
In
2010, Ball delivered approximately 25 percent of the target long-term incentive through performance-based cash awards and approximately 75 percent through
performance-based equity awards. This award mix was set to achieve the objectives described above, while viewed in light of market practices and cost implications. The total amount of
long-term incentives, based on the grant date expected value, was established in relation to the 50th percentile of the competitive market as well as individual performance and the
Corporation's financial and operating performance. This emphasis on long-term compensation, through performance-based long-term cash and equity awards, ensures a strong
continued alignment with Ball's executive ownership and shareholder value creation objectives.
Performance-Based Cash Awards
Ball's performance-based long-term cash incentive award is intended to focus executives on the achievement
of multiyear performance goals that will enhance shareholder value. The Corporation's total shareholder return and return on average invested capital ("ROAIC") are considered in determining the
amount, if any, of awards earned under the Corporation's Long-Term Cash Incentive Plan ("LTCIP"). Performance is generally measured on a cumulative basis over a three-year
performance period. Awards pursuant to the LTCIP are generally made on an annual basis such that three performance periods overlap. Any actual award earned is paid at the end of the
three-year performance period.
The
2008 through 2010, 2009 through 2011, and 2010 through 2012 performance periods provide executives the opportunity to earn awards based on a combination of two performance measures.
One-half of the award is based on the Corporation's three-year total shareholder return as measured against the total shareholder returns of a group of companies in the
S&P 500 not including companies in the S&P 500 Index that are classified as being part of the Financial or Utilities industry sectors or the Transportation industry group. Companies
added to the S&P 500 during the performance period are also excluded. Total shareholder return is measured by comparing the average daily closing price and dividends of the Corporation in the
third year of the performance cycle with the average daily closing price and dividends prior to the start of the performance cycle relative to the distribution of the equivalent total shareholder
returns during the performance cycle of the group of companies as described above. The target performance requirement for the total shareholder returns measure is the 50th percentile of the S&P
group described above. The other one-half of the award is based on ROAIC performance over the three-year period. ROAIC is calculated by dividing the average of the
Corporation's net operating profit after-tax over the relevant performance period by its average invested capital over such period. The target performance requirement for the ROAIC measure
is 9 percent, which is above the Corporation's estimated weighted average cost of capital. The target, minimum and maximum performance requirements are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
|
|
Total Shareholder Return
|
|
|
37.5th percentile
|
|
|
50th percentile
|
|
|
75th percentile
|
|
|
|
ROAIC
|
|
|
7 percent
|
|
|
9 percent
|
|
|
11 percent
|
|
|
|
For each measure, minimum performance results in a zero payout factor, target performance results in a 100 percent payout factor and
maximum performance results in a 200 percent payout factor for the respective one-half of the award. Performance between minimum, target and maximum is extrapolated to determine the
payout factor.
26
The
incentive opportunity is established as a percentage of the executive's average base salary plus target annual incentive over the three-year performance period. For the
2010 through 2012 performance period, the incentive opportunities for the CEO and other NEOs are as follows:
|
|
|
|
|
|
|
Name
|
|
Target Incentive Percentage
|
|
|
|
R. David Hoover
|
|
|
40 percent
|
|
|
|
Scott C. Morrison
|
|
|
25 percent
|
|
|
|
John A. Hayes
|
|
|
30 percent
|
|
|
|
Raymond J. Seabrook
|
|
|
25 percent
|
|
|
|
David A. Westerlund
|
|
|
25 percent
|
|
|
|
The executive's award for any given performance cycle is calculated as follows:
Actual
payments at the end of the performance period for each factor (total shareholder return ("TSR") and ROAIC) can range from 0 to 100 percent of the target opportunity based
on actual performance relative to the established performance measures described above.
As
a result of the Corporation's actual performance for the 2008 through 2010 performance period, cash payouts (made in early 2011) for the CEO and other NEOs in the plan are
200 percent of the target opportunities and are reported in the Summary Compensation Table. The potential award value of the 2010 through 2012 performance period, which was awarded to the NEOs
in 2010, is reported in the Grants of Plan-Based Awards Table.
Special Acquisition Incentive Plan
In conjunction with the 2009 acquisition of certain beverage can manufacturing operations, the Corporation
implemented an Acquisition-Related Special Incentive Plan designed
to motivate participating employees to successfully integrate the acquisition into the Corporation. Payouts under this Plan are based on cumulative earnings before interest and taxes and cumulative
cash flow over a 39-month period, with awards, if any, made at 15 months, 27 months and 39 months. Minimum, target and maximum values have been established for each
performance measure; however, due to the competitive sensitive nature of such financial metrics, these values have been excluded. A payout at or near target is the most likely outcome. This incentive
opportunity is established as a percentage of an executive's average base salary over the 39-month performance period and is provided below for each NEO.
|
|
|
|
|
|
|
Name
|
|
Target Incentive Percentage
|
|
|
|
R. David Hoover
|
|
|
40 percent
|
|
|
|
Scott C. Morrison
|
|
|
40 percent
|
|
|
|
John A. Hayes
|
|
|
40 percent
|
|
|
|
Raymond J. Seabrook
|
|
|
40 percent
|
|
|
|
David A. Westerlund
|
|
|
40 percent
|
|
|
|
The executive's actual award will be calculated as follows:
27