SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Texaco Inc.
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:(1)
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[LOGO]
Texaco Inc.
2000 Westchester Avenue
White Plains, NY 10650
NOTICE OF ANNUAL MEETING
To Stockholders:
The Annual Meeting of the Stockholders of Texaco Inc. will be held at the Hyatt
Regency Tech Center, 7800 East Tufts Avenue, Denver, CO 80237 on Tuesday, May
10, 1994, at 10:00 a.m. for the purpose of transacting such business as may
properly come before the meeting.
The management intends to present for action at this meeting (1) the election of
five directors and (2) the approval of the appointment of auditors for the year
1994. In addition, certain stockholders have notified the company that they
intend to present to the meeting proposals regarding classification of the Board
of Directors, employment opportunity and executive compensation.
The Board of Directors has fixed March 15, 1994, as the record date for
determination of the stockholders entitled to notice of, and to vote at, this
meeting. The list of stockholders entitled to vote will be open to the
examination of any stockholder at the company's office, 4601 DTC Boulevard,
Denver, CO 80237 for ten days prior to May 10, 1994, and will also be available
for inspection at the meeting.
To assure your representation at the meeting, please complete, sign and mail
promptly the enclosed proxy card which is being solicited on behalf of the
management, whether or not you plan to attend the meeting. A return envelope
which requires no postage is enclosed for that purpose. ONLY THOSE STOCKHOLDERS
OR THEIR PROPERLY IDENTIFIED PROXIES WITH VALID ADMISSION CARDS WILL BE ADMITTED
TO THE MEETING. ACCORDINGLY, IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE
BOX PROVIDED ON YOUR PROXY CARD SO THAT WE MAY SEND YOU AN ADMISSION CARD.
Carl B. Davidson
Vice President and Secretary
April 4, 1994
PROXY STATEMENT
This proxy statement and accompanying proxy card are first being mailed to
stockholders on approximately April 4, 1994. The proxies are being solicited by
order of the Board of Directors of Texaco Inc. and all expenses incident thereto
will be borne by the company. Proxies may be solicited by mail, telephone,
telegram, facsimile, or in person. The company will request persons holding
stock in their names for others, or in the names of nominees for others, to
obtain voting instructions from the beneficial owner, and the company will
reimburse such persons for their reasonable out-of-pocket expenses in obtaining
voting instructions. Morrow & Co., Inc. has been retained to assist in
soliciting proxies at a fee not to exceed $25,000, plus reasonable out-of-pocket
expenses. A copy of the Annual Report for 1993, including audited financial
statements, has previously been sent to stockholders. It is not to be regarded
as proxy soliciting material.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the voting power of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter is required for approval of matters presented to the meeting,
except for the election of directors, which requires a plurality of the votes of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Your executed proxy will be voted at the
meeting, unless you revoke it at any time before the vote by filing with the
Secretary of the company an instrument revoking it, duly executing a proxy card
bearing a later date, or appearing at the meeting and voting in person.
Signed, unmarked proxy cards are voted in accordance with managment's
recommendations. The number of shares abstaining on each proposal are counted
and reported as a separate total. Abstentions are included in the tally of
shares represented, but are not included in the determination of the number of
votes cast for or against a particular item. Therefore, abstentions have the
effect of a vote cast against a particular item. Shares not voted simply as a
consequence of brokers voting less than all of their entitlement on
non-discretionary items under the provisions of New York Stock Exchange Rule 452
are not included in the tally of the number of shares cast for, against or
abstained from any proposal, and will, therefore, have no effect on the outcome
of a vote on any item.
It is the policy of the company that all voted proxies and ballots be handled in
a manner that protects employee and individual shareholder voting privacy, and
no such vote shall be disclosed except: as necessary to meet any legal
requirements; in limited circumstances such as a proxy contest in opposition to
the Board of Directors; to permit independent Inspectors of Election to tabulate
and certify the vote; and to respond to shareholders who have written comments
on their proxy cards.
Unless otherwise indicated on any proxy card, the persons named as your proxies
in the proxy card intend to vote the shares it represents FOR all the nominees
for director, FOR Item 2, and AGAINST Items 3, 4 and 5.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND ITS COMMITTEES AND COMPENSATION OF DIRECTORS
The Board of Directors held thirteen meetings in 1993. Each director attended at
least 75% of the aggregate of the total number of meetings of the Board and its
committees on which the director served, except for Mr. Steere who attended 73%.
Employee directors receive no compensation for service on the Board or its
committees. Non-employee directors receive an annual retainer of $30,000, and
$1,250 for each Board and committee meeting attended. The Chairmen of the Audit
Committee and the Compensation Committee receive annual retainers of $7,000. The
Chairmen of the Committee of Non-Management Directors and the Nominating,
Pension and Public Responsibility Committee receive annual
retainers of $5,000. The first $10,000 of the annual retainer and $250 of each
meeting fee is paid in Texaco Common Stock. Directors may elect to receive all
or any part of the remaining retainers and fees in Texaco Common Stock.
Directors may also elect to defer payment of fees, whether in cash, in Common
Stock or in restricted units.
Non-employee directors who have neither received nor are eligible to receive a
benefit from any retirement, pension or other similar plan of the company and
who retire with five or more years of service on the Board are eligible to
receive an annual retirement benefit equal to the annual retainer in effect at
the time of their retirement. This will be paid to the director or the
director's surviving spouse for the number of years which the director served on
the Board.
As part of its overall program to promote charitable giving, the company has
established a directors' planned gift program funded by life insurance policies
on directors. Upon the death of an individual director, the company will donate
the one million dollar proceeds from such life insurance policies to one or more
qualifying charitable organizations recommended by the individual director.
Individual directors derive no financial benefit from this program, since all
charitable deductions accrue solely to the company. During 1993, the company
paid $637,679 in premiums for these policies.
All of the Committees of the Board, except the Finance and Executive Committees,
are composed entirely of non-employee directors.
The Audit Committee was established in 1939. Its members are Mr. Vanderslice
(Chairman), Mr. Murphy, Ms. Smith, Dr. Brademas and Admiral Crowe. Two meetings
were held in 1993. Depending on the nature of the matters under review, the
outside auditors, and such officers and other employees as necessary, attend all
or part of meetings of the committee. The committee reviews and evaluates the
scope of the audit, accounting policies and reporting practices, internal
auditing, internal controls, security procedures and other matters deemed
appropriate. The committee also reviews the performance by Arthur Andersen & Co.
in their audit of the company's financial statements and evaluates their
independence and professional competence.
The Compensation Committee, which met five times in 1993, is composed of Messrs.
Beck (Chairman), Butcher, Carpenter, Price and Vanderslice. This committee has
the responsibility of reviewing the company's compensation structure. To this
end, along with other studies, the committee surveys and reviews compensation
practices in industry to make certain that the company remains competitive and
able to recruit and retain highly qualified personnel and that the company's
compensation structure incorporates programs which reflect the company's
performance and contribute to the achievement of the company's objectives.
The Finance Committee consists of Messrs. DeCrane (Chairman), Beck, Butcher,
Carpenter, Kinnear, Price and Wrigley. The committee met five times in 1993 to
review and to make recommendations to the Board concerning the company's
financial strategies, policies and structure.
The Nominating Committee, consisting of Messrs. Butcher (Chairman), Beck,
Murphy, Vanderslice and Wrigley, met five times in 1993. This committee reviews
the size and composition of the Board of Directors, reviews qualifications of
possible candidates for Board membership and recommends candidates to the Board
as nominees for election as directors. Candidates are selected on the basis of
the contributions such individuals can make in providing advice and guidance to
management. The Board is
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committed to a membership composed of outstanding persons irrespective of gender
or race. The criteria for director candidates, which were developed in
consultation with individual and institutional holders and published by the
company to its stockholders, continue to be the guidelines for the committee.
The Nominating Committee also will consider proposals for nomination from
stockholders of record which are made in writing to the Secretary, are timely,
contain sufficient background information concerning the nominee to enable a
proper judgment to be made as to his or her qualifications and include a written
consent of the proposed nominee to stand for election if nominated and to serve
if elected. The requirements for making nominations are set forth in the
company's by-laws.
The Committee of Non-Management Directors held five meetings in 1993. The
committee, of which Mr. Murphy is Chairman, is composed of all of the
non-employee directors and is responsible for interpreting, administering and
reviewing the Compensation Committee's recommendations for awards made under
company incentive plans, as well as for reviewing the company's organization,
personnel development and key management replacement programs.
The Pension Committee met three times in 1993. The members are Messrs. Wrigley
(Chairman), Murphy, Price and Steere. The committee approves investment policy
and guidelines, reviews investment performance, and appoints and retains
trustees, insurance carriers and investment managers for the company's
retirement plans.
The Public Responsibility Committee met three times in 1993. The members are Dr.
Brademas (Chairman), Admiral Crowe, Dr. Jenifer, Mr. Kinnear, Ms. Smith and Mr.
Steere. The committee reviews and makes recommendations regarding the policies
and procedures affecting the company's role as a responsible corporate citizen,
including those related to corporate governance, equal employment opportunity,
health, environmental and safety matters, the company's relationships with its
several constituencies and the company's philanthropic programs.
The Board of Directors also has an Executive Committee, which may exercise all
of the powers of the Board in the management and direction of the business and
affairs of the company, except those which by statute are reserved to the Board
of Directors. This committee, consisting of Messrs. DeCrane (Chairman), Butcher,
Carpenter, Kinnear, Krowe, Murphy and Vanderslice, met once in 1993.
VOTING SECURITIES
Excluding 15,127,539 shares of the company's common stock, par value $6.25 per
share ("Common Stock") held in the company's treasury, there were outstanding,
at March 15, 1994, the following series of voting securities: 259,165,878 shares
of Common Stock, 801,012.65 shares of Series B ESOP Convertible Preferred Stock
("Series B Preferred Stock") and 65,641.81 shares of Series F ESOP Convertible
Preferred Stock ("Series F Preferred Stock"). Each outstanding share of Common
Stock is entitled to one vote, each outstanding share of Series B Preferred
Stock is entitled to 12.9 votes and each outstanding share of Series F Preferred
Stock is entitled to ten votes, on all matters properly brought before the
meeting. All the shares of the Series B and Series F Preferred Stock are voted
by State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02104-1389, the independent trustee of the company's
Employee Stock Ownership Plans. State Street filed a Schedule 13G disclosing
that as of December 31, 1993 it had voting and dispositive power over 15,229,461
shares, or approximately 5.6% of the company's outstanding voting securities, as
trustee of the foregoing plans (as well as various collective investment funds
and personal trust accounts). Under the terms of these plans, State Street is
required to vote shares attributable to any participant in accordance with
confidential instructions received from the participant and to vote all shares
for which it
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shall not have received instructions in the same ratio as the shares with
respect to which instructions were received.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of January 1, 1994, information with respect
to the company's voting securities beneficially owned by directors, executive
officers included in the "Summary Compensation Table" and all directors and
executive officers of the company as a group. The total beneficial ownership of
all directors and executive officers as a group represented less than 1% of each
class of shares outstanding.
NUMBER OF SHARES
----------------------------
SERIES B
NAMES OF BENEFICIAL OWNERS COMMON STOCK PREFERRED
- - ----------------------------------------------- --------------- -----------
Robert A. Beck................................. 1,852 --
Peter I. Bijur................................. 23,079 84
John Brademas.................................. 869 --
Willard C. Butcher............................. 1,415(1) --
Edmund M. Carpenter............................ 753 --
William J. Crowe, Jr........................... 800 --
Alfred C. DeCrane, Jr.......................... 113,307 204
James L. Dunlap................................ 49,778 94
Franklyn G. Jenifer............................ 133 --
James W. Kinnear............................... 74,975 201
Allen J. Krowe................................. 35,950 162
Thomas S. Murphy............................... 15,740 --
Charles H. Price, II........................... 1,266 --
Robin B. Smith................................. 644 --
William C. Steere, Jr.......................... 1,137 --
Thomas A. Vanderslice.......................... 10,681 --
William Wrigley................................ 27,060(2) --
Elton G. Yates................................. 43,566 124
Directors and Executive Officers as a group.... 719,101 2,371
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(1) Does not include 21 shares held by Mr. Butcher's wife as custodian for their
minor son, as to which Mr. Butcher disclaims beneficial interest.
(2) Does not include 124,796 shares owned of record by Wm. Wrigley Jr. Company,
of which Mr. Wrigley is among the officers authorized to vote the shares
owned by that company, or 1,000 shares held in a trust, of which Mr. Wrigley
is the trustee, for the benefit of his son. Mr. Wrigley disclaims any
beneficial interest in such shares.
OTHER RELATIONSHIPS
Tugboat and barge services provided to Texaco in 1993 by Wilmington
Transportation Company totaled $81,504, which is less than 5% of that company's
total revenue. Mr. Wrigley is controlling stockholder, Chairman of the Board and
Chief Executive Officer of Santa Catalina Island Company, of which Wilmington
Transportation Company is a wholly-owned subsidiary. The company paid General
Signal Corporation, of which Mr. Carpenter is Chairman and Chief Executive
Officer, $83,832 for products. Payments of $1,398,222 for advertising were made
to broadcasting entities and publications owned by Capital Cities/ABC, Inc., of
which Mr. Murphy is Chairman and Chief Executive Officer.
4
These transactions were effected in the ordinary course of business on terms at
least as favorable to the company as those obtainable in similar transactions
with unaffiliated parties.
ITEM 1--ELECTION OF DIRECTORS
The Board is divided into three classes of directors. At each annual meeting of
stockholders, members of one of the classes, on a rotating basis, are elected
for a three-year term.
In accordance with the company's Restated Certificate of Incorporation and
by-laws, the Board of Directors by resolution fixed the total number of
directors at 15 until the 1994 Annual Meeting, at which time it shall revert to
14 upon the retirement from the Board of Mr. Kinnear. Admiral Crowe has been
nominated by President Clinton to serve as Ambassador to Great Britain and
Northern Ireland. He has advised the Board of his intention to resign from the
Board, if his nomination is confirmed. The Board has taken action which will
reduce the number of directors by one upon his resignation.
The five persons designated by the Board as nominees for election as directors
at the Annual Meeting for three-year terms expiring in 1997 are Dr. Jenifer and
Messrs. Beck, Butcher, Carpenter, and Vanderslice. All of the nominees are
currently directors and, except for Dr. Jenifer, were previously elected by the
stockholders.
The company has no reason to believe that any of the nominees will be
disqualified or unable or unwilling to serve if elected. However, if any nominee
should become unavailable for any reason, proxies may be voted for another
person nominated by the present Board of Directors to fill the vacancy, or the
size of the Board may be reduced. Following is certain biographical information
concerning the nominees, as well as those directors whose terms of office are
continuing after the meeting.
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NOMINEES FOR THREE-YEAR TERM EXPIRING AT THE 1997 ANNUAL MEETING.
[PHOTO] ROBERT A. BECK, 68, Chairman Emeritus since 1987 and former Chairman of the Board and
Chief Executive Officer of The Prudential Insurance Company of America, has been a
director since 1984. He joined Prudential in 1951, was elected President in 1974, and
Chairman and Chief Executive Officer in 1978. He is a director of The Prudential Insurance
Company of America, Campbell Soup Co., Xerox Corporation and The Boeing Company, and is a
Trustee of Syracuse University.
[PHOTO] WILLARD C. BUTCHER, 67, former Chairman of the Board and Chief Executive Officer of the
Chase Manhattan Bank, N.A., has been a director since 1981. He is a Trustee Emeritus of
the American Enterprise Institute for Public Policy Research, and a Fellow Emeritus of
Brown University, and is a member of The Business Council, a member of the Advisory
Committee of Daimler-Benz of North America, Vice Chairman of the Board of Lincoln Center
for the Performing Arts, Inc. as well as a trustee of the Business Committee for the Arts,
Inc. He is also a director of ASARCO Incorporated, Celgene Corporation, International
Paper Company and Olympia & York Companies (U.S.A.).
[PHOTO] EDMUND M. CARPENTER, 52, Chairman and Chief Executive Officer of General Signal
Corporation since 1988, was elected a director in 1991. Prior to serving with General
Signal, Mr. Carpenter was President, Chief Operating Officer, and a director of ITT
Corporation. He is a director of Campbell Soup Company, Dana Corporation and Electroglas,
Inc.
[PHOTO] FRANKLYN G. JENIFER, 54, President of Howard University, became a Director on November 1,
1993. Prior to becoming Howard's 14th president in April 1990, Dr. Jenifer served as
chancellor of the Massachusetts Board of Regents of Higher Education, and from 1979 to
1986, as vice chancellor of the New Jersey Department of Higher Education, following an
academic career as a professor of biology. He is a director of the American Council on
Education; Chesapeake & Potomac Telephone Company; the Council for Aid to Education; the
Corporation of Woods Hole Oceanographic Institution; the Public Broadcasting Service and
the Massachusetts Higher Education Assistance Corporation. He is also chairman of the
American Association for the Advancement of Science's National Council for Science and
Technology Education and a Washington trustee of the Federal City Council.
[PHOTO] THOMAS A. VANDERSLICE, 62, Chairman of the Board and Chairman of the Executive Committee
of M/A-COM, Inc., has been a director since 1980. He was formerly Chairman and Chief
Executive Officer of Apollo Computer, Inc., President and Chief Operating Officer of GTE
Corporation, and an officer of General Electric Company. He is a member of the Board of
Trustees of Boston College, and a trustee of the Committee for Economic Development; a
member of the National Academy of Engineering, the American Chemical Society, and the
American Institute of Physics.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 1995 ANNUAL MEETING.
[PHOTO] JOHN BRADEMAS, 67, President Emeritus of New York University, became a director in 1989.
He served eleven terms in Congress as a Representative from Indiana, the last two as
Majority Whip. He is a graduate of Harvard and Oxford Universities, where he was a Rhodes
Scholar. He is a director of Loews Corporation, Scholastic, Inc., and NYNEX Corporation,
and is active in numerous academic and philanthropic organizations.
[PHOTO] ALFRED C. DECRANE, JR., 62, Chairman of the Board and Chief Executive Officer of Texaco
Inc., has had 35 years of service with the company and has been a director since 1977. Mr.
DeCrane assumed the position of Chief Executive Officer in 1993, and has served as
Chairman of the Board since January 1, 1987. Prior to that he had been President since
March 1, 1983, and before then, an Executive Vice President and Senior Vice President and
General Counsel. He is a trustee of the Committee for Economic Development and The
Conference Board, a director of CIGNA Corporation, Dean Witter, Discover & Co., and the
American Petroleum Institute, and a member of the Board of Trustees of the University of
Notre Dame and of the United Way of Tri-State.
[PHOTO] THOMAS S. MURPHY, 68, is Chairman of the Board and Chief Executive Officer of Capital
Cities/ABC, Inc., which operates the ABC Television Network and eight affiliated
television stations, radio networks and radio stations; provides programming for cable
television; is partnered with international broadcasters in program production and
distribution ventures as well as broadcast and cable television services overseas and
publishes daily and weekly newspapers and trade publications. He has been a director since
1977. He is Chairman of the New York University Medical Center Board, a member of the
Board of Overseers of Harvard College and a director of Johnson & Johnson and IBM
Corporation.
[PHOTO] CHARLES H. PRICE, II, 63, Chairman, Mercantile Bank of Kansas City and former United
States Ambassador to the United Kingdom (1983-1989) and Belgium (1981-1983), became a
director in 1989. He is a director of the Mercantile Bancorporation, Inc., Sprint
Corporation, The New York Times Company, Hanson PLC and British Airways PLC. Prior to
service as a United States Ambassador, he had been Chairman of the Board of the Price
Candy Company, American Bancorporation and American Bank and Trust Company.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 1996 ANNUAL MEETING.
[PHOTO] ADMIRAL WILLIAM J. CROWE, JR., 69, retired Chairman of the Joint Chiefs of Staff, became a
director in 1989, after a distinguished career as a U.S. naval officer. He serves as a
director of Merrill Lynch, & Co., Inc., Pfizer, Inc., Norfolk and Southern Corp. and
General Dynamics Corporation, and is a Professor of Geopolitics at Oklahoma University and
Chairman of the President's Foreign Intelligence Advisory Board.
[PHOTO] ALLEN J. KROWE, 61, Vice Chairman of the Board and Chief Financial Officer of Texaco Inc.,
was elected a director on April 1, 1993. He joined Texaco in 1988 as Senior Vice President
and Chief Financial Officer, after having served as Executive Vice President and a
director of IBM Corporation. Mr. Krowe is a director of PPG Industries, Inc., IBJ Schroder
Bank & Trust Company and the University of Maryland Foundation.
[PHOTO] ROBIN B. SMITH, 54, President of Publishers Clearing House since 1981 and also Chief
Executive Officer since 1988, was elected a director in 1992. Prior to joining Publishers
Clearing House, Ms. Smith served with Doubleday & Co., Inc., as President and General
Manager of its Dell Publishing subsidiary. During her 16-year career with Doubleday, she
served in positions of increasing responsibility, including Director of Marketing for the
Book Clubs Division and Corporate Vice President, President and General Manager of the
Book Clubs Division. She is a director of Springs Industries Inc., Huffy Corporation,
Omnicom Group, Inc., and several Prudential mutual funds, and is a member of the Visiting
Committee of the Harvard Board of Overseers to the Harvard Business School.
[PHOTO] WILLIAM C. STEERE, JR., 57, Chairman and Chief Executive Officer of Pfizer, Inc., was
elected a director in 1992. Mr. Steere began his career with Pfizer, a diversified health
care company with global operations, and assumed positions of increasing responsibility,
including President of Pfizer Pharmaceutical Group and President and Chief Executive
Officer, before elevation to his present position in 1992. He is a director of the Federal
Reserve Bank of New York, the New York Botanical Garden, Minerals Technology, Inc.,
WNET-Thirteen, the Business Council, the Business Roundtable and the New York University
Medical Center. He is also chairman of the Board of Directors of the Pharmaceutical
Manufacturers Association.
[PHOTO] WILLIAM WRIGLEY, 61, President, Chief Executive Officer and a director of Wm. Wrigley Jr.
Company, has been a director since 1974. He is Chairman of the Board and Chief Executive
Officer, a Member of the Executive Committee and director of Santa Catalina Island
Company; a director of American Home Products Corporation, Boulevard Bancorp, Wrigley
Memorial Garden Foundation and Grocery Manufacturers of America, Inc. He also serves as a
Trustee of the University of Southern California and is a Benefactor and Life Member of
the Santa Catalina Island Conservancy.
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ITEM 2--APPROVAL OF AUDITORS
The following resolution concerning the appointment of independent auditors will
be offered at the meeting:
"RESOLVED, that the appointment by the Board of Directors of the company of
Arthur Andersen & Co. to audit the accounts of the company and its
subsidiaries for the fiscal year 1994 is hereby ratified and approved."
Arthur Andersen & Co. have been auditing the accounts of the company and its
subsidiaries for many years. In recommending the approval by the stockholders of
the appointment of that firm, the Board of Directors is acting upon the
recommendation of the Audit Committee, which has satisfied itself as to the
firm's professional competence and standing.
Representatives of Arthur Andersen & Co. will be present at the meeting with the
opportunity to make a statement and to respond to appropriate questions.
ITEM 3--STOCKHOLDER PROPOSAL RELATING TO CLASSIFICATION OF THE BOARD OF
DIRECTORS
This stockholder proposal was submitted by the St. Catharine Literary Society,
St. Catharine, KY 40061, beneficial owners of 4,800 shares, and is quoted
directly from their submission.
RESOLVED: That the stockholders of Texaco request that the Board of Directors
take the steps necessary to declassify the elections of Directors by providing
that at future Board elections new directors be elected annually and not by
classes as is now provided. The declassification shall be phased in in a manner
that does not affect the unexpired terms of Directors previously elected.
Supporting Statement
This resolution requests that the Board end the staggered Board system in place
at Texaco and instead have all our Directors elected annually. Presently Texaco
has 3 classes of Directors and 1/3 of our Board is elected each year and each
Director now serves a 3 year term.
Increasingly, institutional investors are calling for the end of this system of
staggered voting. They believe it makes a Board less accountable to shareholders
when directors do not stand for annual election. Significant institutional
investors such as the Public Employees Retirement System of the State of
California, New York City pension funds, New York State pension funds and many
others have been supporting this position. As a result shareholder resolutions
to end this staggered system of voting have been receiving increasingly large
votes and numerous companies have demonstrated leadership by changing practice.
Among them Westinghouse, Chemical Bank, Commonwealth Edison of Chicago, the
Equitable companies.
We believe this is a practice in which corporations seeking to be accountable to
their investors are putting into place. Studies by the Chief Economist of the
SEC have shown that adoption of a classified Board tends to depress a company's
stock price and may be contrary to shareholder interests.
The election of corporate directors is the primary avenue for shareholders to
influence corporate affairs and exert accountability on management. We strongly
believe that our Company's financial performance is closely linked to its
corporate governance policies and procedures and the level of management
9
accountability they impose. Therefore, as shareholders concerned about the value
of our investment, we are disturbed by our Company's current system of electing
only one-third of the board of directors each year. We believe this staggering
of director terms prevents shareholders from annually registering their views on
the performance of the board collectively and each director individually.
Most alarming is that the staggered Board can help insulate directors and senior
executives from the consequences of poor performance by denying shareholders the
opportunity to replace an entire Board which is pursuing failed policies.
In addition socially concerned investors also have reason to support this
reform.
For example Church investors have expressed concerns about Texaco's
environmental accountability. In addition we are deeply disturbed by reports of
discrimination against individual female and minority employees and a number of
court suits charging discrimination.
An internal survey by Texaco discovered that 1/3 of employees and were fearful
of publicly sharing opinions within the company.
These types of issues cry out for Board attention. To hold the Board accountable
on financial and/or social performance we believe the staggered Board system
should be ended at Texaco.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The company's practice of having a classified Board was approved overwhelmingly
by stockholders by a vote of 86.4% and instituted in 1984, as part of a
carefully crafted structure designed to help Texaco carry out its long term
business strategy successfully.
A classified Board offers a number of advantages to a corporation, especially
one like Texaco that must plan effectively over the long term. The company's
Board structure helps assure stability, since a majority of the directors at any
one time will have prior experience as directors of the company, and helps the
company to attract and retain highly qualified individuals willing to commit the
time and dedication necessary to understand the company, its operations and its
competitive environment.
The classified Board also provides an effective balance between desirable
continuity and the need for accountability. Directors on the company's
classified Board can best properly represent the interests of all stockholders.
For example, this structure can give the Board needed time to evaluate any
proposal to acquire the company, study alternative proposals, and help ensure
that the best price will be obtained in any transaction involving the company. A
classified Board also encourages persons seeking to acquire control of the
company to initiate such an acquisition through arm's length negotiations with
the Board, which would then be in a position to negotiate a transaction that is
fair to all stockholders.
Leading institutional investors, including the Teachers Insurance and Annuity
Association-College Retirement Equities Fund, have concluded that a classified
Board is in full accordance with the principles of good corporate governance,
and have recognized and supported the right of a Board to organize its functions
and its business in the manner it deems most efficient.
There is no evidence to support the implication by the proponents of this
proposal that directors elected for a three-year term are less accountable to
shareholders; accountability being a function of selection of responsible,
experienced and respected individuals and not whether they serve one or three
year
10
terms. Nor is there evidence that the company's classified Board has depressed
the company's stock price. Quite to the contrary, Texaco and its stock price
have performed solidly and competitively since adoption of the classified Board.
Texaco has been a consistent leader in the field of corporate governance. The
company has taken many early initiatives in this area, including the following:
(i) maintaining a majority of non-management directors (now 13 out of 15), (ii)
maintaining audit, nominating and compensation committees composed solely of
non-management directors, and (iii) adopting by-laws that provide for
shareholder nomination of candidates for director. In recognition of this
leadership role, the California Public Employees Retirement System honored
Texaco's Chief Executive Officer in 1992 with its Excellence in Corporate
Governance Award.
The Board continues to believe that a classified Board is appropriate and
prudent in protecting the interests of all of Texaco's stockholders. As
demonstrated by Texaco's strong performance record, the continuity and quality
of leadership that results from a classified Board provides the proper
environment in which to foster the creation of long-term value for stockholders.
The stockholders strongly agreed with this position when originally asked to
vote on the issue in 1984, and nothing has led the Board to conclude that the
reasons advanced to support that approach then do not continue to be valid.
THE BOARD OF DIRECTORS, FOR THESE REASONS, RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
ITEM 4--STOCKHOLDER PROPOSAL RELATING TO EMPLOYMENT OPPORTUNITY
This stockholder proposal was submitted by the Sisters of Charity of St. Vincent
de Paul of New York, Mount St. Vincent-on-Hudson, 6301 Riverdale Ave., Bronx,
N.Y. 10471, beneficial owners of 4,600 shares, and is quoted directly from their
submission.
We believe there is a strong need for corporate commitment to equal employment
opportunity. We also believe a clear policy opposing all forms of discrimination
is a sign of a socially responsible corporation. Since a substandard Equal
Employment Opportunity record leaves a company open to expensive legal action,
poor employee morale and even the loss of certain business, it is in the
company's and shareholder's interests to have a strong record and adequate
information available on our equal employment record.
We share the concerns of the 1991 United States Congressional Civil Rights and
Glass Ceiling Acts that "...additional remedies under Federal law are needed to
deter harassment and intentional discrimination in the workplace...women and
minorities remain underrepresented in management and decision making positions
in business." We support the statement, "We continue to find that if the CEO is
committed to ensuring diversity, it can happen." as published in the U.S. Labor
Department's report "Pipelines of Progress."
We believe issues related to Equal Employment Opportunity and Affirmative Action
are important to shareholder value. Our goal is to encourage our Board of
Directors and Chief Executive Officer to improve our corporation's Equal
Employment record and that of their industry.
As a major employer we are in a position to take the lead in ensuring that women
and minority employees receive fair employment opportunities and promotions we
believe the review required in this resolution keeps the issue high on
management's agenda and reaffirms our public commitment to Equal Employment
Opportunity and programs responsive to the concerns of women and minorities.
11
We believe Texaco's must improve its record with regard to discrimination
lawsuits. The U.S. Department of Labor lists five cases.
In a Texaco employee survey in 1992 suprisingly 1/3 of employees said "...they
are not comfortable with expressing their opinions" and 40% said workers are not
recognized for their efforts. Texaco must also improve its equal employment
opportunities for higher level employees. According to Texaco's 1992 statistics
80% of the highest paid positions were white males employees.
RESOLVED: The shareholders request the Board to initiate a review of Texaco's
policies and practices related to equal employment opportunity and affirmative
action and recommend constructive changes. The Public Responsibility Committee
shall oversee this review and make a summary report available to shareholders by
September, 1994. This report shall be prepared at reasonable cost and may
exclude confidential information. This review shall focus on the following
areas,
1. Affirmative action/equal employment and implementation plans.
2. If our company's hiring and performance evaluation/grading processes ensure
non-discriminatory, comparable rewards for all employees and how they can be
improved.
3. Analysis of efforts to attain realistic minority representation at the
middle, upper middle and executive levels of managerial employees and plans
for improvement.
4. Analysis of the number of companies and lawsuits brought by minority and
female employees, the company's potential financial liability, and whether
Texaco needs to take steps to deal with these issues more creatively before
they become matters for legal action.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
Texaco is in full agreement that a strong commitment to equal employment
opportunity is the responsibility of any company. It is Texaco's firm corporate
policy to treat every employee with respect and dignity, and to provide each
employee with the opportunity to develop and advance to the utmost of his or her
abilities. Company policy also stresses the importance of open and honest
communication among all employees. Texaco is proud of the progress it has made
in recent years in building a valued, diverse workforce with richly varied
backgrounds, and is fully committed to continuing to improve.
Proponents of this resolution are asking for a review of the company's equal
opportunity plans, implementation and performance. The Board agrees that close
monitoring and evaluation of our performance is an important element in ensuring
that advancement continues in this area. However, Texaco already conducts
numerous reviews, analyses and employee surveys, including a recently completed
diversity assessment survey. These are all designed to help the company better
understand its work environment, and further a culture that promotes an
all-inclusive workforce and creative energy from all its employees.
Texaco also ensures that the company's commitment to equal opportunity is
communicated clearly to employees. That is accomplished through such means as
the statement of policy issued by the Chief Executive Officer, the company's
Human Resources Guidelines, the Equal Opportunity brochure and the statement of
Texaco's Vision and Values which has been distributed to all employees and is
the basic statement of the company's regard for each individual.
12
Implementation of the company's policy goes well beyond communications. It
includes:
. Human Resources Committees that monitor closely the development within the
company of minorities and women;
. Forty different Affirmative Action plans;
. Increased emphasis on equal employment/affirmative action training for
managers and supervisors;
. A Job Posting Program, which provides interested employees with the
information they need in order to take advantage of opportunities within the
company;
. Establishment of relationships with a variety of organizations representing
minority groups, in order to help the company continuously improve its equal
employment efforts;
. Establishment of an Employee Problem Resolution Procedure, designed to provide
employees with the opportunity to raise and fairly resolve workplace disputes
without litigation (which Procedure already addresses the Proponent's request
for steps to deal creatively with internal problems without litigation); and
. The Texaco Foundation, which has reached out through its contributions program
to assist programs and efforts that help the career development of women and
minorities.
All of these and other equal employment opportunity programs and practices, and
their implementation, are regularly reviewed by the Public Responsibility
Committee of the Board.
The company's commitment to equal opportunity, and programs implementing that
commitment, have borne positive results. A comparison of the consolidated data
filed annually with the Equal Employment Opportunity Commission (EEOC) for the
period ending September 30, 1993 with the data from 1988 shows:
. A 15% increase in the percentage of minorities in the full-time U.S.
workforce;
. A 26% increase in the percentage of women in the full-time U.S. workforce; and
. A 60% increase in the percentage of women and a 34% increase in the percentage
of minorities in the top EEOC job category, Officials and Managers.
An extensive article in the March 29, 1994 edition of The Wall Street Journal
dealing with Women in Management lists the number and percentage of women
managers at the 200 largest companies in 1992. Among the 12 oil and gas
companies listed, Texaco ranked third in the number of women as a percentage of
all managers, having achieved a 300% increase in the ten-year period since 1982.
Additional progress has been made since then.
It is noteworthy that this progress has occurred amidst a major downsizing of
the company's 24,000 employee U.S. workforce. With a large workforce, in a
difficult period, Texaco actually received very few complaints or lawsuits
related to claims of discrimination or unfair treatment--contrary to the
proponents' implication that five lawsuits is an extreme number. Litigation can,
it should be pointed out, be a necessary defense of shareholder value if the
company believes strongly that a claim is unjust. The results of the few
instances where litigation was deemed appropriate support this.
13
Finally, the additional report requested by the proponents would be duplicative
of a report already published by Texaco that was responsive to a similar
resolution by proponents last year. This report, Texaco: Equal
Opportunity--Taking Affirmative Action at Work and in the Community, which the
company intends to update periodically, is available upon request as stated in
the company's Annual Report to Stockholders.
Because of Texaco's existing equal opportunity policies and programs, its
efforts to continuously improve those programs, its Texaco: Equal Opportunity
report and other publications, the fact that the company already files detailed
reports with the appropriate government agencies and that it closely monitors
its efforts internally, the Board believes that additional reports would be
duplicative and not serve a useful purpose.
THE BOARD OF DIRECTORS, FOR THESE REASONS, RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
ITEM 5 - STOCKHOLDER PROPOSAL RELATING TO EXECUTIVE COMPENSATION
This stockholder proposal was submitted by the Province of the Most Holy Name of
Jesus of the Order of Friars Minor in the USA (the Franciscans), 100 Arch
Street, P.O. Box 227 Boston, MA 02107-2278, beneficial owners of 9,500 shares,
and is quoted directly from their submission.
WHEREAS: We believe financial, social and environmental criteria should all be
taken into account in fixing compensation packages for corporate officers.
Public scrutiny on compensation is reaching a new intensity--not just for the
Chief Executive Officer, but for all executives. Concerns expressed include the
following:
Too often top executives receive considerable increases in compensation
packages, even when corporate financial performance is poor and
stockholders watch dividends slip and stock prices drop.
Executive compensation, even when it decreases in a bad year, is usually
not proportional to a year's poor financial returns and the financial
burden borne by stockholders. Professor Graef Crystal, a national authority
on executive compensation, argues that CEOs, get paid "hugely in good
years," and "if not hugely, then merely wonderfully in bad years."
When top officers' compensation packages are compared to those of the
lowest paid employees, Professor Crystal notes many U.S. CEOs make 160
times more than the average employee. In other countries the difference can
be as low as one tenth that amount. Other executive pay differentials need
similar scrutiny.
The relationship between compensation and the social and environmental
impact of a company's decisions is an important question. For instance,
should top officers' pay for a given year be reduced if the company is
found guilty of systemic sexual harassment or race discrimination or poor
environmental performance, especially if it results in costly fines or
expensive protracted litigation? Should responsible officers pay be on a
business-as-usual scale in the year of a major environmental accident?
Should compensation for Texaco's CEO reflect the company's record of oil
spills and illegal discharges that incur large fines or pollute groundwater
or seepage that threatens drinking water supplies?
14
We believe that these questions deserve the careful scrutiny of our Board and
its Compensation Committee.
RESOLVED: Shareholders request that the Board institute an Executive
Compensation Review, and prepare a report available to shareholders by October
1994 with the results of the Review and recommended changes in practice. The
review shall cover pay, benefits, perks, stock options and special arrangements
in the compensation packages for all the company's top officers.
Supporting Statement
We recommend that the Board study and report on the following in its review:
1. Ways to link executive compensation more closely to financial performance
with proposed criteria and formulae.
2. Ways to link compensation to environmental and social corporate performance
(e.g. lower base pay with incentives given for meeting or surpassing certain
environmental and social standards).
3. Ways to link financial viability of the company to long-term environmental
and social sustainability (e.g. linkages that avoid short-range thinking, and
instead encourage long-range planning).
4. A description of social and environmental criteria to take into account (e.g.
environmental law suits, settlements, penalties, violations, results of
internal or independent environment audits).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
This identical proposal was considered at last year's Annual Meeting and was
rejected by more than 91% of the stockholders voting on it. Since that time, the
Securities and Exchange Commission, and the U.S. Congress in the Omnibus Budget
Reconciliation Act of 1993, have both provided guidance as to the type and
extent of executive compensation information for companies as is reflected in
this Proxy Statement.
The company's performance-related compensation program, a leader in its
industry, was crafted by the Compensation Committee in 1988 with the help of a
nationally-known and experienced compensation consulting firm. The program is
described in the Compensation Committee Report beginning on the following page.
At the request of the Committee, the program was reviewed in depth in 1992 by
another independent expert and found to be effective in reflecting performance
and shareholder value. This, too, is described in the Compensation Committee
Report.
The compensation program consists of base compensation, variable elements which
are tied to short-term performance, and separate elements which relate to
long-term performance with specific focus on the building of shareholder value.
Precise criteria to measure elements of operating and financial performance
against the company's plans, as well as against competition, are built into the
program.
In light of the information which is already being provided and the reviews and
analyses which have been made, this proposal asks the Board to do what is
already being done:
15
. Executive compensation is in fact linked very closely to financial performance
based on criteria and formulae selected by the Board of Directors to motivate
performance which it believes will best serve the stockholders' interest.
. Compensation is linked to environmental and social corporate performance in
several ways. Most importantly, the company's strong commitment to the
environment, health and safety is a core value of the company--beyond being
good policy and good business. To help meet this commitment, Texaco spent some
$775 million in 1993 alone on environmental programs.
. Upholding the company's responsibility to the environment and to the
communities in which it works is as central to its operations, and rated as
highly as other facets of its business. Because it is so integral, a positive
environmental record is important to the company's overall performance and
financial results--and thus directly impacts the levels of the bonus pool and
individual bonus awards.
. The integrated impact of environmental performance on compensation affects
long-term compensation elements as well. Long-term compensation is based on
share value and dividends, which can be affected positively or negatively by
the company's environmental preformance.
. Company performance in all areas of operation is of significant interest to
the Board of Directors. In this regard, the Board has established a Public
Responsibility Committee whose charter includes the monitoring of policies,
procedures and performance in areas like equal opportunity, health,
environment and safety. The Committee receives reports on performance in these
areas and provides the Board and Management with its assessments and
expectations. The Committee, and the Board, are committed to full dialogue
with regard to the company's performance in these and other areas. Open
communication regarding the company's performance, the Committee believes, can
only help Texaco's results and enhance shareholder value.
. Texaco is an Equal Opportunity Employer and its units have 40 separate
Affirmative Action plans in effect throughout the United States. Performance
is reported periodically to appropriate government agencies as required by
law.
We believe the company's commitment to a performance-based compensation system,
as well as the incorporation of adherence to its Corporate Conduct Guidelines
and its Visions and Values statement in the evaluation process for individual
annual performance ratings, meet the concerns raised in support of this
proposal. Accordingly, the cost and effort of yet another report on these
matters, which would overlap the current widely circulated Environment, Health
and Safety Review and the Compensation Committee Report, do not appear to us to
be warranted.
THE BOARD OF DIRECTORS, FOR THESE REASONS, RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent outside directors. The Committee is responsible
for establishing and administering the compensation policies applicable to the
company's officers and senior personnel.
16
In 1988 the Committee commissioned an independent outside consulting firm to
undertake a comprehensive review of Texaco's total executive compensation
program. At that time, the company was engaged in a major program of asset and
operational restructuring in order to repay debt, improve productivity and
increase stockholder value, all with the objective of regaining its position as
a fully competitive challenger in the international petroleum industry.
Management had advised the Committee of its desire to have the compensation
package more directly tied to corporate performance, including earnings, return
on shareholders' equity, return on capital employed and total shareholder
return. This compensation review, and the compensation program which resulted
from it, were designed to produce a performance-oriented result and have, in
fact, done so each year since then.
As part of the compensation program, each year the company and the Committee
test Texaco's performance since its restructuring (one of the earliest in
industry) against the results of its competitors. That comparison is reflected
in the graphs on page 23.
The company's management pay structure and award opportunities are targeted to
be competitive in the mid-range with a mixed group of twenty oil and non-oil
companies. The comparable companies were selected based on size, complexity and
operational challenge in relation to Texaco. All of the comparable companies,
except for the U.S. subsidiary of one foreign based oil company, are included in
the S&P 500 Index and four of these companies are also included in the S&P 500
Integrated International Oil Index, both of which are used in the comparison
graphs on page 23.
The compensation program is composed of three elements: salary at a competitive
level to attract and retain the highest caliber of employees; performance bonus;
and long-term stock-based incentives. The bonus is performance-based, and the
long-term awards are tied to stock price performance and total shareholder
return. This mix of compensation elements places more of total compensation at
risk and emphasizes performance. Both the bonus and stock elements of the plan
were presented to and approved by stockholder vote in 1989, and the stock-based
incentives were approved by the stockholders again in 1993.
As a person's level of responsibility in the company increases, a greater
portion of potential total compensation opportunity is shifted from salary to
performance incentives and to greater reliance on the value of the company's
Common Stock, through stock-based awards. This increasingly aligns the long-term
interests of these managers with the interests of stockholders. The total of
salary and bonus is intended to provide cash compensation which is to be
competitive in a mid-range when performance meets goals.
The overall salary range structure including midpoints and progression between
grade levels is maintained at a mid-range competitive level to attract and
retain the highest caliber of employees. Individual salary rates are based on
the salary range for the position as well as the length of service in grade and
the quality of performance in that position.
The performance-based bonus program is funded only if earnings generate
sufficient funds to establish an Incentive Bonus Reserve. This reserve is an
amount equal to not more than 1% of the consolidated net income of the company
up to 6% of the company's return on equity, plus 3% of the consolidated net
income of the company in excess of 6% of the company's return on equity.
Competitive target bonus opportunities are established for each position grade
level. The level of each plan participant's bonus is based on achievement for
that year of corporate and/or divisional objectives established each year by the
Committee which the Committee believes underpin stockholder value and which
support the strategic goals of the company. These corporate and divisional
objectives include: performance versus
17
nine companies in the integrated oil industry which are also included in the
twenty company peer group; performance versus the annual plan of operating and
financial objectives approved each year by the Board of Directors; and
performance versus the prior year's results. For those below the more senior
levels there is also a subjective element in the bonus formula under which
participants are rated with respect to initiative, managerial ability, overall
contribution to corporate and/or unit performance, fostering the company's
Vision and Values and compliance with the Corporate Conduct Guidelines.
The long-term incentive program consists of stock options and performance
restricted shares (which do not vest unless goals targeted to the performance of
the company's competitors are met), emphasizes total return to stockholders,
motivates stock ownership by the management by requiring that vested benefits be
received in stock and not cash, and encourages retention and continuity of
management. The company has no obligatory levels for equity holdings by
management personnel, but, long-term incentive awards are designed and
administered to encourage share ownership and have done so. The values of the
packages of long-term incentive awards comprised of performance shares and
options at each grade level are established by the Committee and are intended to
be fully competitive with the programs offered by the twenty companies in the
comparable group.
The compensation of the Chief Executive Officer and any other officer/director
is established by the Committee, and reviewed with and approved by the Committee
of Non-Management Directors--which consists of all the outside directors and is
chaired by one of them. The compensation for Mr. DeCrane for 1993 was determined
by the Compensation Committee in the same general manner as for other members of
the management team. Upon assuming the responsibilities of Chairman and Chief
Executive Officer on April 1, 1993, his annual salary was increased by an amount
within the established guidelines for combined merit/promotion compensation
actions at all salary levels of the company. Reference was also made to the
salary rate of Chief Executive Officers of the twenty comparable companies and
his salary was at the mid-range of that group. Mr. DeCrane's bonus for 1993 was
determined solely by the performance of the company with respect to the
established Incentive Bonus Plan objectives as applied to the target level for
his position grade. His bonus and those for the other named executives were
between 50% and 64% of the maximum possible had all corporate objectives been
exceeded. Long-term awards granted in 1993 were based on the targets set under
the same guidelines established by the Compensation Committee for all members of
the management team. In establishing the overall compensation for Mr. DeCrane
the Committee compared Texaco's performance with the twenty comparable companies
operating in the same business environment, considering a range of performance
factors including normalized earnings, return on capital employed, return on
average stockholder's equity, total return to shareholders, net income per
share, and worldwide reserve replacement. His total compensation was at the
mid-range of compensation paid by these companies and reflected his success in
meeting objectives and setting strategies for the longer range.
Mr. Kinnear continues as a director until his term ends with the holding of the
1994 Annual Meeting. He had previously agreed to serve as President and Chief
Executive Officer until April 1, 1993, when he took normal retirement under the
company's Group Retirement Plan, and thereafter not to compete with the company
anywhere in the world, and also to make himself available to consult with the
company when and if requested. In connection with the foregoing, the company
awarded Mr. Kinnear a cash bonus for 1993 equal to one-half of what he would
have otherwise been awarded had he occupied the position of President and CEO
for the entire year. In addition, Mr. Kinnear was granted long-term awards as
indicated in the compensation table for making himself available to the company,
which has used his services in a number of instances since his retirement, and
to recognize his long and dedicated service to the company.
18
In 1992, the Committee commissioned a second independent study of the company's
executive compensation programs by a nationally-known compensation consulting
firm different from the one which helped design the program in 1988. In
connection with this further review the consultant was asked to answer four
specific questions:
1. Is the overall reward program reasonable and are the individual pay elements
that make up the total program also reasonable?
2. Are the risk/reward relationships in all of the variable pay elements
appropriate and fair?
3. Are variable pay elements sufficiently responsive to changes in performance,
both on the upside and downside?
4. Is the pay package sufficiently sensitive to shareholder interests and
supportive of Texaco's strategic plan?
The Consultant answered: "Our examination of all the executive pay data covering
several years for Texaco and its group of peer companies leads us to conclude
that with respect to each of the specific questions posed by the Committee,
Texaco's overall compensation program is designed and administered to achieve
its objectives."
On December 20, 1993, the Internal Revenue Service issued proposed regulations
pursuant to Internal Revenue Code section 162(m), which was added to the Code by
the Omnibus Budget Reconciliation Act of 1993. Section 162(m) limits the amount
of compensation a corporation may deduct as a business expense. That limit,
which applies to up to five executives individually, is $1 million per
individual, per year, subject to certain specified exceptions. One of these
exceptions is compensation which is "performance based." Because Texaco's
incentive bonus and stock incentive plans are deemed to be performance-based
under transitional rules contained in the proposed IRS regulations, all
compensation payments in 1994 should be fully deductible. The company will
review the final regulations and determine what, if any, action is appropriate
in regard to deductibility of compensation payments in later years.
CONCLUSION
The Committee believes that the quality and motivation of all of Texaco's
employees, including its managers, make a significant difference in the
long-term performance of the company. The Committee also believes that
compensation programs which reward performance that meets or exceeds high
standards also benefit the stockholders, so long as there is an appropriate
downside risk element to compensation when performance falls short of such
standards and that the Committee has appropriate flexibility in administering
the program to achieve the objectives of the program. The Committee is of the
opinion that Texaco's management compensation programs meet these requirements,
have contributed to the company's success, and are deserving of stockholder
support.
Robert A. Beck Willard C. Butcher
Chairman
Edmund M. Carpenter Charles H. Price, II
Thomas S. Vanderslice
19
The following compensation information is furnished for service performed
by the company's Chief Executive Officer, its former Chief Executive Officer and
its four other most highly compensated executive officers for the three years
indicated.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ---------------------------------------
AWARDS
--------------------------
SECURITIES PAYOUTS
OTHER RESTRICTED UNDERLYING ----------- ALL
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($)(2)(3) SARS(#)(3) PAYOUTS($)(4) COMPENSATION($)(5)
- - ------------------- --------- --------- --------- ----------------- ------------- ----------- ------------ -----------------
A.C. DeCrane, Jr. 1993 875,000 807,008 12,127 762,976 75,099 -0- 55,317
Chairman of 1992 783,333 509,876 98,132 515,768 74,676 1,810,577 48,874
the Board/CEO 1991 745,000 521,068 171,211 412,633 81,181 -0- 46,516
A.J. Krowe 1993 588,750 528,815 4,031 534,657 86,609 -0- 166,096
Vice Chairman 1992 525,500 408,726 5,060 321,625 46,196 -0- 162,221
and CFO 1991 506,250 439,304 7,640 257,283 31,500 -0- 30,375
E.G. Yates 1993 490,570 397,478 4,628 333,404 67,012 -0- 32,296
Senior Vice 1992 462,304 203,000 36,931 321,625 52,953 603,596 29,776
President 1991 447,000 405,394 56,383 257,283 42,291 -0- 28,527
J.L. Dunlap 1993 383,333 216,966 2,055 206,029 36,038 -0- 25,817
Senior Vice 1992 347,500 266,091 21,025 198,750 28,693 239,249 22,360
President 1991 323,750 234,425 30,804 158,935 29,055 99,908 21,066
P.I. Bijur 1993 355,000 201,984 4,010 159,219 41,353 -0- 25,888
Senior Vice 1992 326,667 189,005 24,356 153,594 24,786 327,615 21,444
President 1991 308,083 183,035 41,323 102,471 8,575 -0- 20,292
J.W. Kinnear 1993 256,250 430,374 27,806 1,041,137 140,910 173,369 430,628
President/CEO 1992 1,000,000 679,459 231,331 736,021 106,569 2,879,932 61,874
Until April 1, 1991 942,500 694,096 345,581 588,896 115,679 -0- 58,437
1993
- - ---------------
(1) Includes dividend equivalents on units awarded and reported in past years
under long-term incentive plans which were discontinued in 1989 and under
which final payments were made in 1993.
(2) Messrs. DeCrane, Krowe, Yates, Dunlap, Bijur and Kinnear have restricted
shareholdings of 48,767; 29,290; 23,159; 15,290; 11,233 and 70,595 shares,
respectively, as of December 31, 1993. The shares had a market value of
$3,157,663; $1,896,528; $1,499,545; $990,028; $727,337 and $4,571,026,
respectively, at December 31, 1993, based on a value of $64.75 per share.
These share numbers and values include the 1993 award reported in the
"Restricted Stock" column above. Dividends are paid on the restricted stock
at the same time and rate as dividends paid to holders of unrestricted
stock.
(3) In order to provide assurances to certain current and retired employees that
they will be provided with the benefits to which they are entitled under the
company's incentive plans, the company has obtained insurance on portions of
the amounts against its failure to provide these benefits.
(4) Vesting of units awarded and reported in past years under long-term
incentive plans which were discontinued in 1989 and under which final
payments were made in 1993.
(5) Matching contributions to the Employees Thrift Plan as provided on the same
basis for all employees. Mr. Krowe is entitled to Texaco retirement benefits
commencing in July 1992, the month after he attained age 60, for the period
October 1988 through June 1992, which are no less than he would have been
entitled to under his previous employer's retirement plan, reduced by the
amount actually received from that previous employer's plan. Included in the
amounts shown for Mr. Krowe is $130,771 received pursuant to that
arrangement in 1993. Mr. Kinnear's amount includes accrued vacation pay and
payments made for service as a consultant.
20
OPTION GRANTS IN 1993
INDIVIDUAL GRANTS
- - ---------------------------------------------------------------------------------------------------- GRANT DATE
NUMBER OF VALUE
SECURITIES -----------
UNDERLYING % OF TOTAL EXERCISE OR GRANT DATE
OPTIONS OPTIONS BASE EXPIRATION PRESENT
NAME DATE GRANTED(#) GRANTED PRICE($/SH.) DATE VALUE $ **
- - ------------------------------------- --------- ----------- ------------- ----------- --------- -----------
A.C. DeCrane, Jr. 06/25/93 59,900 3.87% 63.6875 06/25/03 $ 428,884
10/01/93 15,199* 0.98% 67.8750 06/28/01 113,081
A.J. Krowe 06/25/93 41,975 2.71% 63.6875 06/25/03 300,541
04/07/93 10,225* 0.66% 64.9375 06/28/01 74,234
04/07/93 8,065* 0.52% 64.9375 06/22/00 58,552
04/07/93 3,500* 0.23% 64.9375 05/09/99 25,410
10/01/93 1,715* 0.11% 67.8750 06/22/00 12,760
10/07/93 11,739* 0.76% 68.5000 06/26/02 87,925
10/07/93 9,390* 0.61% 68.5000 06/28/01 70,331
E.G. Yates 06/25/93 26,175 1.69% 63.6875 06/25/03 187,413
04/01/93 10,319* 0.67% 64.0000 06/28/01 74,090
06/29/93 10,259* 0.66% 64.0625 06/28/01 73,352
06/29/93 9,928* 0.64% 64.0625 06/26/02 70,985
10/11/93 7,668* 0.50% 68.5625 06/22/00 57,203
10/11/93 2,663* 0.17% 68.5625 06/26/02 19,866
J.L. Dunlap 06/25/93 16,175 1.04% 63.6875 06/25/03 115,813
06/28/93 6,363* 0.41% 63.6875 06/28/01 45,432
10/04/93 7,576* 0.49% 68.5625 06/26/02 56,896
10/04/93 5,924* 0.38% 68.5625 06/22/00 44,489
P.I. Bijur 06/25/93 12,500 0.81% 63.6875 06/25/03 89,500
04/07/93 7,515* 0.49% 64.9375 05/09/99 54,559
04/07/93 7,456* 0.48% 64.9375 06/22/00 54,131
04/07/93 828* 0.05% 64.9375 06/28/01 6,011
10/11/93 7,154* 0.46% 68.5625 06/28/01 53,369
10/11/93 5,900* 0.38% 68.5625 06/26/02 44,014
J.W. Kinnear 01/22/93 89,850 5.80% 57.9375 01/22/03 586,721
10/01/93 28,218* 1.82% 67.8750 06/26/02 209,942
10/01/93 22,842* 1.47% 67.8750 06/28/01 169,944
- - ---------------
* Restoration of options originally granted and reported in 1989, 1990, 1991
and 1992. All options include a restoration feature, by which options are
granted to replace shares that are exchanged by participants as full or
partial payment to the company of the purchase price of shares being
acquired through the exercise of a stock option or withheld by the company
in satisfaction of their tax withholding obligations. Additionally, all
options, including restored options, are granted at an exercise price which
is equal to the market price of the company's Common Stock on the day of
grant. Therefore, restored options are issued at an exercise price which is
at a higher price than the exercise price of the original grant. Options
vest 50% after one year and are fully exercisable after two years. Restored
options are fully exercisable after six months.
** In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. The company's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option valuation models, including the Black-
Scholes model, require a prediction about the future movement of the stock
price. The following assumptions were made for purposes of calculating the
Grant Date Present Value: for all grants the option term is assumed to be
three years, volatility at .2000, dividend yield of 5% and interest rates of
4.05 to 4.42%. The real value of the options in this table depends upon the
actual performance of the company's stock during the applicable period.
21
AGGREGATED OPTION EXERCISES IN 1993 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END(#)* AT YEAR-END($) **
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------------ ------------- ------------ ----------- -------------- ----------- --------------
A.C. DeCrane, Jr. 2,066 $ 140,230 100,340 133,086 $ 95,964 $ 359,788
A.J. Krowe 4,227 $ 284,921 38,005 93,906 $ 7,320 $ 185,949
E.G. Yates 2,496 $ 164,063 52,416 65,593 $ 23,639 $ 169,162
J.L. Dunlap 1,720 $ 115,924 28,426 51,762 $ 8,338 $ 129,724
P.I. Bijur 2,216 $ 149,281 16,264 41,304 $ 639 $ 92,172
J.W. Kinnear 5,789 $ 392,928 113,068 223,860 $ 37,735 $ 1,035,938
- - ---------------
* Includes options reported in the chart entitled "Option Grants in 1993".
** Based on year-end price of $64.75.
PERFORMANCE GRAPHS
The two graphs on the following page compare the cumulative total
shareholder return on Texaco's common stock with the cumulative total return of
the Standard & Poor's 500 Stock Index and the Standard & Poor's Integrated
International Oil Index during five-year and six-year periods. The measurement
period in the first graph begins on December 31, 1988, and the second graph
begins one year earlier on December 31, 1987. The second graph fully reflects
the results of the extensive restructuring undertaken by the company in 1988.
22
FIVE-YEAR COMPARISON
CUMULATIVE RETURN TO SHAREHOLDERS
(PRICE APPRECIATION AND THE REINVESTMENT OF DIVIDENDS)
TEXACO VS. S&P INDICIES
[PERFORMANCE GRAPH]
TOTAL
RETURN
ANNUAL
GROWTH
1988 1989 1990 1991 1992 1993 RATE
------- ------ ------ ------ ------ ------ ------
TEXACO $100.00 141.86 153.43 163.50 168.08 191.31 13.9%
S&P 500 $100.00 131.59 127.49 166.17 178.81 196.75 14.5%
S&P 500 OILS $100.00 134.82 144.19 166.21 170.39 204.34 15.4%
SIX-YEAR COMPARISON
CUMULATIVE RETURN TO SHAREHOLDERS
(PRICE APPRECIATION AND THE REINVESTMENT OF DIVIDENDS)
TEXACO VS. S&P INDICIES
[PERFORMANCE GRAPH]
TOTAL
RETURN
ANNUAL
GROWTH
1987 1988 1989 1990 1991 1992 1993 RATE
------- ------ ------ ------ ------ ------ ------ ------
TEXACO $100.00 143.84 204.05 220.68 235.17 241.75 275.18 18.4%
S&P 500 $100.00 116.50 153.30 148.52 193.58 208.31 229.20 14.8%
S&P 500 OILS $100.00 119.41 160.99 172.18 198.47 203.47 244.01 16.0%
23
RETIREMENT PLAN
Over 18,200 employees of the company and its subsidiaries, including the 24
elected officers, are eligible to participate in the Retirement Plan. The plan
is a qualified plan under the Internal Revenue Code, and provides benefits
funded by company contributions. In addition, participants have the option of
making contributions to the plan and receiving greater pension benefits.
Contributions are paid to a Master Trustee and to insurance companies for
investment.
For purposes of calculating pension benefits for the named executive officers,
the plans recognize salary and bonus only and do not take into account other
forms of compensation. For the named executive officers, salary and bonus for
the last three years are shown in the salary and bonus columns of the Summary
Compensation Table. Effective January 1, 1994, IRS regulations provide that
covered remuneration cannot exceed $150,000 per year (as indexed for inflation)
for purposes of this plan. The amount of an employee's pension is the greater of
a benefit based upon a final pay formula (applicable in most cases), a career
average formula, or a minimum retirement benefit.
PENSION PLAN TABLE
YEARS OF BENEFIT SERVICE
COVERED REMUNERATION* 15 20 25 30 35 40 45
- - ----------------------- ---------------------------------------------------------------------------------
$ 100,000 $ 22,500 $ 30,000 $ 37,050 $ 44,050 $ 51,050 $ 58,050 $ 65,050
200,000 45,000 60,000 74,100 88,100 102,100 116,100 130,100
400,000 90,000 120,000 148,200 176,200 204,200 232,200 260,200
600,000 135,000 180,000 222,300 264,300 306,300 348,300 390,300
800,000 180,000 240,000 296,400 352,400 408,400 464,400 520,400
1,000,000 225,000 300,000 370,500 440,500 510,500 580,500 650,500
1,200,000 270,000 360,000 444,600 528,600 612,600 696,600 780,600
1,400,000 315,000 420,000 518,700 616,700 714,700 812,700 910,700
1,600,000 360,000 480,000 592,800 704,800 816,800 928,800 1,040,800
1,800,000 405,000 540,000 666,900 792,900 918,900 1,044,900 1,170,900
2,000,000 450,000 600,000 741,000 881,000 1,021,000 1,161,000 1,301,000
- - ---------------
* 'Covered Remuneration' means the highest three-year average salary and bonus,
if any, during the last ten years of employment. The years of benefit service
for the following individuals are: Mr. DeCrane, 35; Mr. Dunlap, 31; Mr. Bijur,
27; Mr. Krowe, 5; and Mr. Yates, 38. With respect to the plan, annual pension
benefits are based on the non-contributory final pay formula (up to 1.5% of
final average pay times benefit service) and assume the participant retires at
age 65 and has been a non-contributory member of the plan throughout the
period of service. These amounts, however, do not reflect a reduction for
Social Security benefits pursuant to the provisions of the plan. They do
include those additional sums, if any, payable under a Supplemental Pension
Plan to compensate those employees who have earned annual pension benefits
payable under the plan but which are limited by Section 415 of the Internal
Revenue Code.
STOCKHOLDER PROPOSALS
Stockholders may present proposals to be considered for inclusion in the 1995
Proxy Statement, provided they are received at the company's principal executive
office no later than December 5, 1994, and are in compliance with applicable
laws and Securities and Exchange Commission regulations.
24
OTHER BUSINESS
The management is not aware of any matters, other than those indicated above,
that will be presented for action at the meeting. If other proper matters are
introduced, the persons named in the accompanying proxy will vote the shares
they represent in accordance with their judgment.
By order of the Board of Directors.
CARL B. DAVIDSON
Vice President and Secretary.
April 4, 1994
25
[LOGO]
TEXACO INC.
2000 Westchester Avenue
White Plains, NY 10650
THIS PROXY IS SOLICITED ON BEHALF FOR THE BOARD OF DIRECTORS
J. Brademas, A.C. DeCrane, Jr., T.S. Murphy, C.H. Price, II, and each of them,
as proxies, with full power of substitution, are hereby authorized to represent
and to vote, as designated on the reverse side, all Common Stock of Texaco Inc.
held of record by the undersigned on March 15, 1994, at the Annual Meeting of
Stockholders to be held at 10:00 A.M., on May 10, 1994, at the Hyatt Regency
Tech Center, 7800 East Tufts Avenue, Denver, Colorado 80237.
ACCOUNT NO. PROXY NO.
----------- ---------
CUSIP 881694 10 3
SEE REVERSE SIDE
PLEASE SIGN, DATE
AND RETURN _________________________________________ Date _______,1994
(Sign exactly as name appears, indicating
position or representative capacity, where
applicable)
Please specify your choices by clearly marking the appropriate boxes. Unless
specified, this proxy will be voted FOR Items 1 and 2, AGAINST Items 3, 4 and
5, and will be voted in the discretion of the proxies on such other matters as
may properly come before the meeting or any adjournment thereof.
DIRECTORS RECOMMEND A VOTE FOR ITEMS 1 AND 2
1. ELECTION OF DIRECTORS FOR A THREE YEAR TERM: / / FOR all listed nominees
Nominees are: R.A. Beck, W.C. Butcher, E.M. Carpenter, / / WITHHOLD vote for all listed nominees
F.G. Jenifer, T.A. Vanderslice / / WITHHOLD vote only from ______________
__________________________________________
FOR AGAINST ABSTAIN
2. APPROVAL OF ARTHUR ANDERSEN & CO. AS AUDITORS FOR THE YEAR 1994 / / / / / /
DIRECTORS RECOMMEND A VOTE AGAINST ITEMS 3, 4 AND 5
FOR AGAINST ABSTAIN
3. STOCKHOLDER PROPOSAL RELATING TO CLASSIFICATION OF DIRECTORS / / / / / /
4. STOCKHOLDER PROPOSAL RELATING TO EMPLOYMENT OPPORTUNITY / / / / / /
5. STOCKHOLDER PROPOSAL RELATING TO EXECUTIVE COMPENSATION / / / / / /
PLEASE REQUEST TICKETS IF YOU PLAN TO ATTEND THE MEETING.
Because of limited seating, it may be necessary to limit SEND TICKETS FOR
admission to only those stockholders and family members stockholder / /
who have requested and received advance admission tickets. stockholder &
If you plan to attend, check one of the boxes at right family member / /
and promptly return this card. Tickets will be mailed to you.
