defr14a
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. )
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Filed by the Registrant þ |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
The Williams Companies,
Inc.
(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):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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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. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
The sole purpose of this revision to the original Definitive Proxy
Statement filed on April 22, 2009, is to correct a typographical
error in the table entitled, Grants of Plan Based Awards in
Fiscal Year 2008, on page 37 of the Definitive Proxy
Statement.
STEVEN J.
MALCOLM
CHAIRMAN OF THE BOARD
To the Stockholders of The Williams Companies, Inc.:
You are cordially invited to attend the 2009 annual meeting of
stockholders of The Williams Companies, Inc. The meeting will be
held on Thursday, May 21, 2009, in the Williams Resource
Center Theater, One Williams Center, Tulsa, Oklahoma, at
11:00 a.m., Central time. We look forward to greeting
personally as many of our stockholders as possible at the annual
meeting.
The notice of the annual meeting and proxy statement
accompanying this letter provide information concerning matters
to be considered and acted upon at the annual meeting. At the
annual meeting we will provide a report on our operations,
followed by a
question-and-answer
and discussion period.
For security reasons, briefcases, backpacks, and other large
bags are not permitted in the theater. All such items can be
checked with security upon arrival at the theater.
We know that most of our stockholders are unable to attend the
annual meeting in person. We solicit proxies so that you have an
opportunity to vote on all matters that are scheduled to come
before the annual meeting. Whether or not you plan to attend,
you can be sure your shares are represented by promptly voting
and submitting your proxy by phone, by Internet, or by
completing, signing, dating, and returning your proxy card in
the enclosed postage-paid envelope. Regardless of the number of
shares you own, your vote is important.
Thank you for your continued interest in our Company.
Very truly yours,
Steven J. Malcolm
Enclosures
April 22, 2009
TABLE OF
CONTENTS
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THE
WILLIAMS COMPANIES, INC.
One Williams Center
Tulsa, Oklahoma 74172
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
May 21, 2009
The annual meeting of stockholders of The Williams Companies,
Inc. will be held at the time and place and for the purposes
indicated below.
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TIME |
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11:00 a.m., Central time, on Thursday, May 21, 2009 |
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PLACE |
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Williams Resource Center Theater, One Williams Center, Tulsa,
Oklahoma |
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ITEMS OF BUSINESS |
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1. To elect four directors; |
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2. To ratify the appointment of Ernst & Young LLP
as our independent auditors for 2009; |
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3. To consider one stockholder proposal, if properly
presented; and |
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4. To transact such other business as may properly come
before the annual meeting or any adjournment of the meeting. |
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RECORD DATE |
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You can vote and attend the annual meeting if you were a
stockholder of record at the close of business on March 30,
2009. |
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ANNUAL REPORT |
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Our 2008 annual report, which includes a copy of our annual
report on
Form 10-K,
accompanies this proxy statement. |
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VOTING |
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EVEN IF YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
PROMPTLY VOTE IN ONE OF THE FOLLOWING WAYS SO THAT YOUR SHARES
OF COMMON STOCK MAY BE REPRESENTED AND VOTED AT THE ANNUAL
MEETING: |
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1. CALL THE TOLL-FREE TELEPHONE NUMBER shown on the proxy
card; |
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2. VOTE VIA THE INTERNET on the website shown on the proxy
card; or |
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3. MARK, SIGN, DATE, AND RETURN the enclosed proxy card in
the postage-paid envelope. |
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Important Notice Regarding the Availability of proxy
materials for the Stockholder Meeting to be held on May 21,
2009. |
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The annual report and proxy statement are available at
http://www.edocumentview.com/wmb. |
By order of the Board of Directors,
La Fleur C. Browne
Corporate Secretary
Tulsa, Oklahoma
April 22, 2009
THE
WILLIAMS COMPANIES, INC.
One Williams Center
Tulsa, Oklahoma 74172
PROXY
STATEMENT
GENERAL
We are providing this proxy statement to you as part of a
solicitation by the Board of Directors (the Board)
of The Williams Companies, Inc. for use at our 2009 Annual
Stockholders Meeting and at any adjournment or
postponement thereof. We will hold the meeting at the Williams
Resource Center Theater, One Williams Center, Tulsa, Oklahoma,
on Thursday, May 21, 2009, at 11:00 a.m., Central time.
Pursuant to new rules promulgated by the Securities and Exchange
Commission (SEC), we have elected to provide access
to our proxy materials both by sending you this full set of
proxy materials, including a proxy card, and by notifying you of
the availability of our proxy materials on the Internet. This
proxy statement and our 2008 Annual Report are available at
http://www.edocumentview.com/wmb,
which does not have cookies that identify visitors
to the site.
We expect to mail this proxy statement and accompanying proxy
card to stockholders beginning on or about April 22, 2009.
Unless the context otherwise requires, all references in this
proxy statement to Williams, the
Company, we, us, and
our refer to The Williams Companies, Inc. and its
consolidated subsidiaries.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
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Q: |
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Why am I receiving these materials? |
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You are receiving these materials because at the close of
business on March 30, 2009 (the Record Date),
you owned shares of our common stock. All stockholders of record
on the Record Date are entitled to attend and vote at the annual
meeting. Each stockholder will have one vote on each matter for
every share of common stock owned on the Record Date. On the
Record Date, we had 580,079,341 shares of common stock
outstanding. The shares held in our treasury are not considered
outstanding and will not be voted or considered present at the
meeting. |
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What information is contained in these materials? |
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This proxy statement includes information about the nominees for
director and other matters to be voted on at the annual meeting.
This proxy statement also includes information about the voting
process and requirements, the compensation of our directors and
the principle executive officer, the principal financial officer
and the three other most highly compensated officers
(collectively referred to as our Named Executive
Officers or NEOs), and certain other
information required under SEC rules. |
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What matters can I vote on? |
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You can vote on the following matters: |
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election of four of our directors;
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ratification of Ernst & Young LLP as our
independent auditors for 2009;
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a stockholder proposal requesting that the Company
eliminate classification of terms of the Board to require all
directors to stand for election annually; and
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any other business properly coming before the annual
meeting.
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In the election of directors, you may vote FOR or
AGAINST each individual nominee or indicate that you wish
to ABSTAIN from voting on that nominee. For the other
matters, you may vote FOR or AGAINST the matter,
or you may indicate that you wish to ABSTAIN from voting
on the matter. |
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We know of no matters to be presented at the annual meeting
other than those included in this notice. By signing the proxy
card you are also giving authority to the persons named on the
proxy card to take action on additional matters that may
properly come before the annual meeting. Should any other matter
requiring a vote of stockholders arise, including a question of
adjourning the annual meeting, the persons named in the
accompanying proxy card will vote according to their best
judgment. |
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All votes are confidential, unless disclosure is legally
necessary. |
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How does the Board recommend that I vote on each of the
matters? |
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The Board recommends that you vote FOR each of the
director nominees and the ratification of the appointment of
Ernst & Young LLP as our independent auditors for 2009
(FOR
ITEMS 1-2)
and AGAINST the other proposal (AGAINST
ITEM 3). |
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How do I vote if I am a beneficial owner? |
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You are a beneficial owner if your shares are held in a stock
brokerage account or by a bank or other nominee (commonly
referred to as being held in street name). Your
broker, bank, or nominee is the stockholder of record and
therefore has forwarded proxy-related materials to you as the
beneficial owner. Most of our stockholders hold their shares
through a stockbroker, bank, or other nominee rather than
directly in their own name. As the beneficial owner, you have
the right to direct your broker, bank, or other nominee how to
vote your shares and are also invited to attend the meeting.
However, since you are not the stockholder of record, you may
not vote your shares in person at the meeting unless you obtain
a signed legal proxy from you broker, bank, or nominee giving
you the right to vote the shares. |
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As a beneficial owner, you may vote your shares in any one of
the following ways: |
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Call the toll-free number shown on the proxy card;
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Vote on the Internet on the website shown on the
proxy card;
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Mark, sign, date, and return the enclosed proxy card
in the postage-paid envelope; or
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Vote in person at the annual meeting only if you
obtain a signed legal proxy from your broker, bank, or nominee
giving you this right.
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Will my shares held in street name be voted if I do not
provide my proxy? |
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If your shares are held in the name of a brokerage firm, your
shares might be voted even if you do not provide the brokerage
firm with voting instructions. Under the current rules of the
New York Stock Exchange (NYSE), on certain
routine matters, brokerage firms have the
discretionary authority to vote shares for which their customers
do not provide voting instructions. The election of directors
and the proposal to ratify the appointment of Ernst &
Young LLP as our independent auditors are considered routine
matters for this purpose, assuming that no contest arises as to
any of these matters. The stockholder proposal is not considered
a routine matter and your bank or broker will not be permitted
to vote your shares unless proper voting instructions are
received from you. |
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How do I vote if I am a stockholder of record? |
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You are a stockholder of record if your shares are registered in
your name with our transfer agent, Computershare Investor
Services, LLC. |
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As a stockholder of record, you may vote your shares in any one
of the following ways: |
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Call the toll-free number shown on the proxy card;
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Vote on the Internet on the website shown on the
proxy card;
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Mark, sign, date, and return the enclosed proxy card
in the postage-paid envelope; or
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Vote in person at the annual meeting.
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What if I return my proxy card or vote by Internet or phone
but do not specify how I want to vote? |
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If you sign and return your proxy card or complete the Internet
or Telephone voting procedures, but do not specify how you want
to vote your shares, we will vote them as follows: |
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FOR the election of each of the director
nominees.
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FOR the approval ratifying the appointment of
Ernst & Young LLP as our independent auditors for the
fiscal year ending December 31, 2009.
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AGAINST the stockholder proposal.
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If you participate in the Williams Investment Plus Plan and do
not submit timely voting instructions, the trustee of the plan
will vote the shares in your plan account in the same proportion
that it votes shares in other plan accounts for which it did
receive timely voting instructions, as explained below under the
question How do I vote if I participate in the Williams
Investment Plus Plan? |
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Can I change my vote or revoke my proxy? |
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Yes. You can change your vote or revoke your proxy at any time
before the final vote at the meeting. You can change your vote
by voting again by telephone or on the Internet, executing and
returning a later dated proxy, or attending the annual meeting
and voting in person. If you are a beneficial owner, you can
revoke your proxy by following the instructions sent to you by
your broker, bank, or other nominee. If you are a stockholder of
record, you can revoke your proxy by delivering a written notice
of your revocation to our corporate secretary at One Williams
Center, MD 47, Tulsa, Oklahoma 74172. |
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What shares are included on my proxy card? |
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Your proxy card includes shares held in your own name and shares
held in any Williams plan. You may vote these shares by
Internet, telephone or mail, all as described on the enclosed
proxy card. |
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How do I vote if I participate in the Williams Investment
Plus Plan? |
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If you hold shares in the Williams Investment Plus Plan, these
shares have been added to your other holdings on your proxy
card. Your completed proxy card serves as voting instructions to
the trustee of the plan. You may direct the trustee how to vote
your plan shares by submitting your proxy vote for those shares,
along with the rest of your shares, by Internet, telephone or
mail, all as described on the enclosed proxy card. If you do not
instruct the trustee how to vote, your plan shares will be voted
by the trustee in the same proportion that it votes shares in
other plan accounts for which it did receive timely voting
instructions. |
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What is the quorum requirement for the meeting? |
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There must be quorum for any action to be taken at the meeting
(other than adjournment or postponement of the meeting). For a
quorum to exist at the meeting, stockholders holding a majority
of the shares entitled to vote at the annual meeting must be
present in person or by proxy. You will be considered part of
the quorum if you return a signed and dated proxy card, if you
vote by telephone or on the Internet, or if you vote in person
at the annual meeting. |
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Abstentions and broker non-votes are counted as present and
entitled to vote for determining a quorum. Broker
non-votes are shares held by brokers or nominees over
which the broker or nominee lacks discretionary power to vote
and for which the broker or nominee has not received specific
voting instructions from the beneficial owner. See Will
my shares held in street name be voted if I do not provide my
proxy? |
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What is the voting requirement to approve each of the
matters? |
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A majority of the votes cast by the stockholders is required to
approve
Items 1-3.
Other matters that may properly come before the annual meeting
may also require more than a majority vote under our by-laws,
the laws of Delaware, our restated certificate of incorporation,
or other applicable laws. |
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How will the votes be counted? |
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Abstentions from voting on the election of a director nominee
will not be considered a vote cast with respect to that
directors election and therefore will not be counted in
determining whether the director received a majority of the
votes cast. Abstentions from voting on any other proposal will
have the same effect as a vote against that proposal. |
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Broker non-votes (described two questions above) will be treated
as not present and not entitled vote. |
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Who will count the votes? |
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Votes for the annual meeting will be counted by a representative
of Computershare Trust Company, who will act as the
inspector of elections at the 2009 annual meeting. |
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Where can I find the voting results of the meeting? |
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We will announce the voting results at the meeting. We will also
disclose the voting results in our Quarterly Report on
Form 10-Q
for the period ended June 30, 2009. |
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May I propose actions for consideration at the 2010 meeting
of stockholders? |
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Yes. For your proposal to be considered for inclusion in our
proxy statement for the 2010 meeting, we must receive your
written proposal no later than December 24, 2009. If we
change the date of the 2010 meeting by more than 30 days
from the anniversary of the date of this years meeting,
then the deadline is a reasonable time before we begin to print
and send our proxy materials. Your proposals must comply with
SEC regulations regarding stockholder proposals. |
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For you to raise a proposal (including a director nomination)
from the floor during our 2010 annual meeting of stockholders,
we must receive a written notice of the proposal no earlier than
January 22, 2010 and no later than February 22, 2010
and it must contain the additional information required by our
by-laws. Proposals should be addressed to our corporate
secretary at One Williams Center, MD 47, Tulsa, Oklahoma 74172. |
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Who is paying for this proxy solicitation? |
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The proxy card accompanying this proxy statement is solicited by
the Board. We expect to solicit proxies in person, by telephone,
or other electronic means. In addition, we have retained
MacKenzie Partners, Inc. to assist in the solicitation of
proxies. We expect to pay MacKenzie Partners, Inc. an estimated
$17,500 in fees, plus expenses and disbursements. |
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We will pay the expenses of this proxy solicitation including
the cost of preparing and mailing the proxy statement and
accompanying proxy card. Such expenses may also include the
charges and expenses of banks, brokerage firms and other
custodians, nominees, or fiduciaries for forwarding proxies and
proxy material to beneficial owners of our common stock. |
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Are you householding for stockholders sharing the
same address? |
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Yes. The SECs rules regarding the delivery to stockholders
of proxy statements and annual reports permit us to deliver a
single copy of these documents to an address shared by two or
more of our stockholders. This method of delivery is referred to
as householding, and can significantly reduce our
printing and mailing costs. It also reduces the volume of mail
you receive. This year, we are delivering only one proxy
statement and 2008 Annual Report to multiple registered
stockholders sharing an address, unless we receive instructions
to the contrary from one or more of the stockholders. We will
still be required, however, to send you and each other
stockholder at your address an individual proxy voting card. If
you nevertheless would like to receive more than one copy of
this proxy statement and our 2008 Annual Report, we will
promptly send you additional copies upon written or oral request
directed to our transfer agent, Computershare Investor Services,
LLC, toll free at
1-
800-884-4225.
The same phone number may be used to notify us that you wish to
receive a separate annual report or proxy statement in the
future, or to request delivery of a single copy of an annual
report or proxy statement if you are receiving multiple copies. |
4
PROPOSAL 1
ELECTION OF DIRECTORS
Our restated certificate of incorporation, as amended, provides
for three classes of directors of as nearly equal size as
possible and further provides that the total number of directors
shall be determined by resolution adopted by the affirmative
vote of a majority of the Board, except that the total number of
directors may not be less than five nor more than 17. The term
of each class of directors is normally three years, and the term
of one class expires each year in rotation.
Each of the 2009 nominees for the office of director, Messrs
Engelhardt, Green, Howell and Lorch were elected by
Williams stockholders on May 18, 2006. The terms of
Messrs Engelhardt, Green, Howell and Lorch expire this year. The
persons named as proxies in the accompanying proxy, who have
been designated by the Board, intend to vote, unless otherwise
instructed in such proxy, for the election of
Messrs. Engelhardt, Green, Howell, and Lorch. Should any
nominee named herein become unable for any reason to stand for
election as a director, the persons named in the proxy will vote
for the election of such other person or persons as the
Nominating and Governance Committee may recommend. The Board may
propose to replace such nominee or, if none, the Nominating and
Governance Committee may recommend that the size of the Board be
reduced.
We have included below certain information about the nominees
for election as directors as well as the directors who will
continue in office after the annual meeting. Dr. Lillis,
one of our directors, resigned from the Board effective
March 18, 2009.
Director
Nominees Whose Terms Expire At The Annual Meeting In
2012
Irl F.
Engelhardt, Age 62, Class II
Director since 2005. Mr. Engelhardt has served as chairman
of Patriot Coal Corporation since November 2007. He was chairman
of Peabody Energy Corporation or its predecessor companies from
1993 to 2007, and chief executive officer from 1990 through
2005. He was also co-CEO of The Energy Group from 1997 to 1998
and chairman of Citizens Power from 1998 to 2000.
Mr. Engelhardt is a director of Patriot Coal and Valero
Energy Corporation and the former chairman of The Federal
Reserve Bank of St. Louis.
William
E. Green, Age 72, Class II
Director since 1998. Mr. Green is the founder of William
Green & Associates, a Palo Alto, California law firm
and has been with the firm since 1974. He is also the vice
president, general counsel and secretary of AIM Broadcasting,
LLC. He is a former trustee of Rochester Savings Bank.
Mr. Green is a director of Philanthropic Ventures, Inc.,
Ramsell Holding Corporation and Flowers Heritage Foundation.
W.R.
Howell, Age 73, Class II
Director since 1997. Mr. Howell is chairman emeritus of
J.C. Penney Company, Inc. He was chairman of the board and chief
executive officer of J.C. Penney from 1983 to 1996. He is a
director of Pfizer, Inc. and Deutsche Bank
Trust Corporation and Deutsche Bank Trust Company
Americas, non-public wholly-owned subsidiaries of Deutsche Bank
AG.
George A.
Lorch, Age 67, Class II
Director since 2001. Mr. Lorch is chairman emeritus of
Armstrong Holdings, Inc. He was the chief executive officer and
president of Armstrong World Industries, Inc from 1993 to 1994
and chairman of the board and chief executive officer from 1994
to 2000. From May 2000 to August 2000 he was chairman of the
board and chief executive officer of Armstrong Holdings, Inc.
Mr. Lorch is a director of Pfizer, Inc., Autoliv, Inc.,
HSBC Finance and HSBC North America Holding Co., non-public,
wholly owned subsidiaries of HSBC LLC.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE ELECTION OF DIRECTORS NAMED IN
PROPOSAL 1.
5
Directors
Continuing in Office
Directors
Whose Terms Expire At The Annual Meeting In 2010
Kathleen
B. Cooper, Age 64, Class III
Director since 2006. Dr. Cooper was appointed senior fellow
of the Tower Center for Political Studies at Southern Methodist
University in August 2007. For two previous academic years she
was the dean of the College of Business Administration at the
University of North Texas. From 2001 to 2005, she was an under
secretary for economic affairs at the U.S. Department of
Commerce. Dr. Cooper is a director of Texas Security Bank.
William
R. Granberry, Age 66, Class III
Director since 2005. Mr. Granberry is a member of Compass
Operating Company, LLC. From 1999 to 2004 he managed investments
and consulted with oil and gas companies. He is a director of
Legacy Reserves GP, LLC and Manor Park, Inc.
William
G. Lowrie, Age 65, Class III
Director since 2003. Mr. Lowrie is a retired deputy chief
executive officer of BP Amoco PLC, where he spent his entire
33-year
career holding various positions of increasing responsibility at
Amoco. Mr. Lowrie is a director of The Ohio State
University Foundation.
Directors
Whose Terms Expire At The Annual Meeting In 2011
Joseph R.
Cleveland, Age 64, Class I
Director since 2008. Mr. Cleveland was the Chief
Information Officer of Lockheed Martin Corporation from 2001 to
2008. He was also President of Lockheed Martin Enterprise
Information Systems from 1995 to 2008.
Juanita
H. Hinshaw, Age 64, Class I
Director since 2004. Ms. Hinshaw was senior vice president
and chief financial officer of Graybar Electric Company from
2000 to 2005. Prior to joining Graybar Electric Company, she was
with Monsanto Company for fifteen years. Ms. Hinshaw is a
director of Insituform Technologies, Inc. and SYNERGETICS USA,
INC.
Frank T.
MacInnis, Age 62, Class I
Director since 1998. Mr. MacInnis has been chairman of the
board and chief executive officer of EMCOR Group, Inc. since
1994. Mr. MacInnis is also chairman of the board and chief
executive officer of ComNet Communications, Inc. He is a
director of ITT Inc. and the Greater New York Chapter of the
March of Dimes.
Steven J.
Malcolm, Age 60, Class I
Director since 2001. Mr. Malcolm has been chairman of the
board and chief executive officer of Williams since 2002. He was
president and chief operating officer of Williams from September
2001 to 2002 and an executive vice president from May 2001 to
September 2001. Mr. Malcolm was president and chief
executive officer of Williams Energy Services, LLC, a subsidiary
of Williams, from 1998 to 2001 and senior vice president and
general manager of Williams Field Services Company, a subsidiary
of Williams, from 1994 to 1998. Mr. Malcolm is a director
of Williams Partners GP LLC, the general partner of Williams
Partners L.P., Williams Pipeline GP LLC, the general partner of
Williams Pipeline Partners L.P., BOK Financial Corporation and
Bank of Oklahoma N.A.
Janice D.
Stoney, Age 68, Class I
Director since 1999. Ms. Stoney retired as an executive
vice president from U S WEST Communications, Inc. in
1992. Ms. Stoney is a director of Whirlpool Corporation.
6
CORPORATE
GOVERNANCE AND BOARD MATTERS
Corporate
Governance
General
Our Board is committed to sound corporate governance practices.
Our Board believes that strong corporate governance is critical
to achieving our performance goals, and to maintaining the trust
and confidence of investors, employees, suppliers, business
partners, regulatory agencies and other stockholders. Our Board
has established broad corporate policies and has the
responsibility for our overall performance and the operation of
the Company by the Chief Executive Officer (CEO) and
other officers.
Corporate
Governance Guidelines
Our Corporate Governance Guidelines provide a framework for the
governance of Williams and address the operation and structure
of the Board, committees of the Board and other Board practices.
The Corporate Governance Guidelines are reviewed at least
annually by the Nominating and Governance Committee. The
Corporate Governance Guidelines are available on our website at
http://www.williams.com
from the Corporate Responsibility/Corporate
Governance/Guidelines tab.
Meeting
Preparation and Participation
Our Board members actively participate in Board and committee
meetings. Generally, materials are distributed to our Board
members one week in advance of each regular Board meeting. To
facilitate active participation, Board members are expected to
review the materials in advance of the meetings.
Strategic
Planning
During the year, the Board meets with management to discuss and
approve strategic plans, financial goals, capital spending and
other factors critical to successful performance. A mid-year
review of progress on objectives and strategies is also
conducted. During Board meetings, directors review key issues
and financial performance. The Board meets privately with the
CEO six times per year and meets in executive session at each
regular Board meeting and additionally as required. Further, the
CEO communicates regularly with the Board on important business
opportunities and developments. In 2008, the Board also held one
of its regularly scheduled meetings at one of our field
locations to further the directors education about our
operations.
Board/Committee/Director
Evaluations
The Board and each of the Board committees conduct annual
self-assessments. The Nominating and Governance Committee also
conducts individual director evaluations of all directors on an
annual basis.
Chief
Executive Officer Evaluation and Management Succession
The Board annually sets the CEOs performance goals and
objectives and meets in executive session to assess the
CEOs performance. The Board maintains a process for
planning orderly succession for the CEO and other executive
officer positions and oversees executive officer development and
succession.
Lead
Director
Mr. W. R. Howell currently serves as the Lead Director. The
Lead Director presides over executive sessions of the
non-employee directors, consults with our chairman of the Board
and our corporate secretary to establish an agenda for each
Board meeting, oversees the flow of information to the Board and
acts as liaison between the non-employee directors and
management.
7
Executive
Sessions of Non-Employee Directors
Non-employee directors meet without management present at each
regularly scheduled Board meeting. Additional meetings may be
called by the Lead Director in his discretion or at the request
of the Board. The Lead Director presides over meetings of the
non-employee directors.
Committees
of the Board
In accordance with our by-laws, the Board annually elects from
its members, the members and the chairman of each committee. The
Board has adopted charters for each of the standing committees
of the Board. The standing committees report to the full Board
at each regular Board meeting.
Director
Independence
The Board has adopted director independence standards, which are
available as an attachment to our Corporate Governance
Guidelines available on our website at
http://www.williams.com
from the Corporate Responsibility/Corporate
Governance/Guidelines tab.
The Board has affirmatively determined that each of
Mr. Cleveland, Dr. Cooper, Mr. Engelhardt,
Mr. Granberry, Mr. Green, Ms. Hinshaw,
Mr. Howell, Dr. Lillis, Mr. Lorch,
Mr. Lowrie, Mr. MacInnis and Ms. Stoney is an
independent director under the current Listing
Standards of the NYSE and our director independence standards.
In so doing, the Board determined that each of these individuals
met the bright line independence standards of the
NYSE and our director independence standards. In addition, the
Board considered transactions and relationships between each
director and any member of his or her immediate family and the
Company and its affiliates and subsidiaries.
With respect to Mr. Howell, the Board considered the fact
that Mr. Howell is a director of Deutsche Bank
Trust Corporation and Deutsche Bank Trust Company
Americas, which provide services to us. In determining that the
relationship was not material, the Board considered the fact
that the relationship arises only from his position as a
director, that he has no material interest in any of the
transactions, that he had no role in any such transactions, and
that such relationship would not bar independence under the NYSE
Listing Standards or our director independence standards.
With respect to Mr. Lorch, the Board considered the fact
that Mr. Lorch is a director of HSBC Finance Corporation
and HSCB North America Holding Co., which provide services to
us. In determining that the relationship was not material, the
Board considered the fact that the relationship arises only from
his position as a director, that he has no material interest in
any of the transactions, that he had no role in any such
transactions, and that such relationship would not bar
independence under the NYSE Listing Standards or our director
independence standards.
With respect to Dr. Lillis, the Board considered the fact
that Dr. Lillis is a director of Medco Health Solutions,
Inc., a company that provides services to us. In determining
that this relationship was not material, the Board considered
the fact that the relationship arises only from his position as
a director, that he has no material interest in any of the
transactions, that he had no role in any such transactions, and
that such a relationship would not bar independence under the
NYSE Listing Standards or our director independence standards.
With respect to Ms. Hinshaw, the Board considered the fact
that Ms. Hinshaw is a director of Insituform Technologies,
Inc. a company whose subsidiaries, Bayou Coating LLC and Bayou
Companies LLC, provide services to us. In determining that the
relationship was not material, the Board considered the fact
that the relationship arises only from her position as a
director, that she has no material interest in any of the
transactions, that she had no role in any such transactions, and
that the relationship would not bar independence under the NYSE
Listing Standards or our director independence standards.
No member of our Board serves as an executive officer of any
non-profit organization to which we made contributions within
any single fiscal year of the preceding three years that
exceeded the greater of $1 million or 2% of such
organizations consolidated gross revenues. Further, in
accordance with our director independence
8
standards, the Board determined that there were no discretionary
contributions to a non-profit organization with which a
director, or a directors spouse, has a relationship that
impacts the directors independence.
The Board determined that Mr. Malcolm is not independent
because he is an executive officer of the Company.
Transactions
with Related Persons
The Board has adopted written policies and procedures with
respect to related person transactions. The policies and
procedures are part of the Audit Committee charter. The Audit
Committee is responsible for reviewing each transaction with
related persons, promoters and certain control persons that are
required to be disclosed in our filings with the SEC. The chair
of the Audit Committee is responsible for reviewing related
person transactions in the event it is impractical to convene an
Audit Committee meeting prior to entering into a related person
transaction. The Audit Committee or the chair, in good faith,
shall approve only those related person transactions that are
in, or not inconsistent with, our best interests and the best
interests of our stockholders. Any proposed related person
transaction involving a member of the Board shall be reviewed
and approved by the full Board. During 2008, there were no
transactions that required review or approval by the Audit
Committee or the full Board in accordance with the policy.
Majority
Vote Standard
Our Board has adopted a majority vote standard for the election
of directors in uncontested elections. The Board also provides
for director resignations in the event a director fails to
receive a majority of the votes cast in an uncontested election.
We hold an irrevocable resignation for each director. If a
director fails to receive the required votes for election, the
Nominating and Governance Committee will act on an expedited
basis to determine whether to accept the resignation. The
Nominating and Governance Committee will then submit its
recommendation for consideration by the Board. The Board will
act on the recommendation and publicly disclose its decision
within 90 days from the date of the certification of the
election results. The Board expects the director whose tendered
resignation is under consideration to abstain from participating
in any decision regarding that tendered resignation. The
Nominating and Governance Committee and the Board may consider
any factors they deem relevant in deciding whether to accept a
directors tendered resignation. If the Board accepts a
directors tendered resignation, the Nominating and
Governance Committee shall recommend to the Board whether to
fill such vacancy or reduce the size of the Board.
Director
Attendance at Annual Meeting of Stockholders
We have a policy regarding Board member attendance at our annual
meeting of stockholders. All Board members are expected to
attend our annual meeting of stockholders. Twelve of the 13 of
the then-current Board members attended the 2008 annual meeting
of stockholders.
Communications
with Directors
Any stockholder or other interested party may communicate with
our directors, individually or as a group, by contacting our
corporate secretary or the Lead Director. The contact
information is maintained on the Investor page of our website at
http://www.williams.com.
The current contact information is as follows:
The Williams Companies, Inc.
One Williams Center, MD 47
Tulsa, Oklahoma 74172
Attn: Lead Director
The Williams Companies, Inc.
One Williams Center, MD 47
Tulsa, Oklahoma 74172
Attn: Corporate Secretary
Email: lafleur.browne@williams.com
9
All such communications will be forwarded to the relevant
director(s) except for solicitations or other matters not
related to our Company.
Code of
Ethics
We have adopted a code of ethics specific to the NEOs. The Code
of Ethics for Senior Officers was filed with the SEC as
Exhibit 14 to our annual report on
Form 10-K
for the year ended December 31, 2003. In addition, we have
adopted a code of business conduct that is applicable to all
employees and directors. The Code of Ethics for Senior Offices
and the Williams Code of Business Conduct are available on the
Companys website at
http://www.williams.com
on the Corporate Responsibility/Corporate
Governance/Ethics & Compliance Program tab.
How to
Obtain Copies of our Governance-Related Materials
Copies of our Corporate Governance Guidelines, Code of Ethics
for Senior Officers, the Williams Code of Business Conduct and
the charters for the Audit Committee, the Compensation Committee
and the Nominating and Governance Committee are available on our
website at
http://www.williams.com
on the Corporate Responsibility/Corporate Governance tab. Copies
of these documents are also available in print to any
stockholder who requests them by sending a written request to
our corporate secretary at The Williams Companies, Inc., One
Williams Center, MD 47, Tulsa, Oklahoma 74172.
Board and
Committee Structure and Meetings
Board
Meetings
The full Board met 14 times in 2008. Further, the non-employee
directors met six times without the chairman of the Board and
CEO present. No director attended fewer than 75% of the
aggregate of the Board and applicable committee meetings held in
2008.
Board
Committees
The Board has four standing committees: Audit, Compensation,
Finance and Nominating and Governance. The Board has also
established an ad hoc Litigation committee. Each standing
committees written charter, as adopted by the Board, is
available on the Companys website at
http://www.williams.com.
10
Board
Committee Membership and Number of Meetings in 2008
The following is a description of each of the committees,
committee membership and number of committee meetings in 2008.
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Nominating
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and
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Audit
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Compensation
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Finance
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Governance
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Committee
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Committee
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Committee
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Committee
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Joseph R. Cleveland
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Kathleen B. Cooper
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Irl F. Engelhardt
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William R. Granberry
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William E. Green
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Juanita H. Hinshaw
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W. R. Howell
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George A. Lorch
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William G. Lowrie
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Frank T. MacInnis
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Steven J. Malcolm
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Janice D. Stoney
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Number of Meetings in 2008
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11
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7
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7
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Audit
Committee
Williams has a separately designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (Exchange
Act). The Audit Committee:
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appoints, evaluates and determines the compensation of
Ernst & Young LLP, our independent auditors;
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assists the Board in fulfilling its responsibilities for
generally overseeing the Companys financial reporting
processes and the audit of the Companys financial
statements, including the integrity of the Companys
financial statements, the Companys compliance with legal
and regulatory requirements, and risk assessment and risk
management;
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reviews the qualifications and independence of the independent
registered public accounting firm;
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reviews the performance of the Companys internal audit
function and the independent registered public accounting firm;
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reviews the Companys earnings releases;
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reviews transactions between the Company and related persons
that are required to be disclosed in our filings with the SEC;
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oversees investigations into complaints concerning financial
matters;
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annually reviews its charter and performance; and
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prepares the Audit Committee report for inclusion in the annual
proxy statement.
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Our Board has determined that all members of the Audit Committee
are financially literate as defined by the rules of
the NYSE and that Ms. Juanita H. Hinshaw and Mr. Irl
F. Engelhardt qualify as audit committee financial
experts as defined by the rules of the SEC. No Audit
Committee member serves on more than three public
11
company audit committees. Each member of the Audit Committee is
independent within the meaning of the NYSE Listing Standards,
Rule 10A-3
of the Exchange Act and the Companys director independence
standards.
Compensation
Committee
The Compensation Committee oversees and directs the design and
implementation of strategic compensation programs for our NEOs
that align the interests of our NEOs with those of our
stockholders. The Compensation Committees key
responsibilities include:
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approving executive compensation philosophy, policies and
programs;
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recommending to the Board incentive and equity-based
compensation plans;
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setting corporate goals and objectives for compensation;
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evaluating the CEO and other NEOs performance in light of
those goals and objectives;
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approving the CEO and other NEOs compensation including salary,
incentive compensation, equity-based compensation and any other
remuneration;
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maintaining certain settlor responsibilities for general
employee benefits matters as detailed under the Companys
ERISA plans;
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reviewing and approving the Compensation Discussion and Analysis
required by the SEC for inclusion in the annual proxy
statement; and
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reviewing and approving severance, change in control agreements
and other arrangements for NEOs.
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Compensation decisions for executives, which include NEOs, are
reviewed and approved by the Compensation Committee. The
Compensation Committee has strategic and administrative
responsibility to compensate NEOs effectively and in a manner
consistent with our compensation strategy.
The Compensation Committee has retained the services of Frederic
W. Cook & Co., an independent executive compensation
consulting firm. The independent compensation consultant:
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provides competitive market data and advice related to the
CEOs compensation level and incentive design;
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reviews and evaluates management-developed market data and
recommendations on compensation levels, incentive mix and
incentive design;
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develops the criteria used to identify comparator companies for
executive compensation and performance comparisons; and
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provides to the Compensation Committee information on executive
compensation trends and implications to the Company.
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The independent compensation consultant was selected by the
Compensation Committee and reports to the chairman of that
Committee. The agenda for meetings of the Compensation Committee
is determined by its Chairman with the Senior Vice President,
Strategic Services and Administration and Chief Administrative
Officer (CAO). The CEO and the CAO are invited to
attend the Compensation Committee meetings, though they leave
the room during discussions and deliberations of individual
compensation actions affecting them personally. The
Companys Compensation and Benefits department supports the
Compensation Committee in its duties and, along with the CEO,
may be delegated authority to fulfill certain administrative
duties regarding the compensation programs. The Compensation
Committee has authority under its charter to retain, approve
fees for and terminate advisors, consultants and agents as it
deems necessary to assist in the fulfillment of its
responsibilities. The Compensation Committee reviews the total
fees paid to outside consultants by the Company to ensure that
the consultant maintains its objectivity and independence when
rendering advice to the Committee. For more information on the
Compensation Committee, please see the Compensation Discussion
and Analysis in this proxy statement.
12
Frederic W. Cook & Co., the same independent
compensation consultant that provides services to the
Compensation Committee, also provides competitive market data
and advice to the Nominating and Governance Committee on
non-employee director compensation.
Each member of the Compensation Committee is independent within
the meaning of the NYSE Listing Standards and the Companys
director independence standards.
Finance
Committee
The Finance Committee provides oversight to the finance and
investments functions of the Company. The Finance Committee:
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oversees the appropriate alignment between our financing
strategies and our business units operating plans and
acquisitions or other investment opportunities;
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oversees the Companys capital structure, derivative
policy, liquidity, borrowings, commodity exposure and share
issuances and repurchases;
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reviews the Companys capital spending; and
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reviews the Companys investments and return on investment
capital.
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Nominating
and Governance Committee
The Nominating and Governance Committee:
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identifies and recommends candidates to the Board consistent
with the criteria approved by the Board;
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reviews candidates recommended by stockholders;
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recommends to the Board the individual to be the chairman of the
Board and CEO;
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reviews and monitors significant developments in the regulation
and practice of corporate governance;
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reviews and recommends to the Board compensation of non-employee
directors;
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conducts a preliminary review of director independence and the
financial literacy and expertise of the Audit Committee members;
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recommends assignments to the committees of the Board to ensure
that membership complies with applicable laws and listing
standards;
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oversees and assists the Board in the review of the Boards
performance;
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annually reviews each committee charter, the corporate
governance guidelines and the Code of Ethics for Senior Officers
and the Williams Code of Business Conduct;
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oversees the Companys compliance programs;
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reviews stockholder proposals and recommends responses to the
Board;
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develops and monitors stock ownership guidelines for
directors; and
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assesses the size and composition of the Board and develops and
reviews director qualifications for approval by the Board.
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Each member of the Nominating and Governance Committee is
independent within the meaning of the NYSE Listing Standards and
the Companys director independence standards.
Consideration of nominees. For Board
membership, the Nominating and Governance Committee considers
the appropriate balance of experience, skills and
characteristics that best suits our needs and the needs of our
stockholders. The Nominating and Governance Committee develops
long-term Board succession plans to ensure that the appropriate
balance is maintained. The process for electing director
nominees entails making a preliminary assessment of each
candidate based upon
his/her
resume and other biographical information,
his/her
willingness to
13
serve and other background information. This information is then
evaluated against the criteria set forth below, as well as the
specific needs of the Company at that time. Qualified candidates
are interviewed by the chairman of the Board and at least one
member of the Nominating and Governance Committee. Candidates
may then meet with other members of the Board and senior
management. At the conclusion of this process, if it is
determined that the candidate will be a good fit, the Nominating
and Governance Committee will recommend the candidate to the
Board for election at the next annual meeting. If the director
nominee is a current Board member, the Nominating and Governance
Committee also considers prior Williams Board performance and
contributions. The Nominating and Governance Committee uses the
same process for evaluating all candidates regardless of the
source of the nomination.
Qualifications of nominees. The minimum
qualifications and attributes that the Nominating and Governance
Committee believes must be possessed by a director nominee
include:
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an understanding of business and financial affairs and the
complexities of a business organization;
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genuine interest in the Company and in representing all of its
stockholders;
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a willingness and ability to spend the time required to function
effectively as a director;
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an open-minded approach to matters and the resolve to make up
his or her own mind on matters presented for
consideration; and
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a reputation for honesty and integrity beyond question.
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All of the director nominees are current elected members of the
Board. The Nominating and Governance Committee has in the past
and may in the future engage the assistance of third parties to
identify and evaluate potential director nominees, as it deems
appropriate.
Stockholder nominations. The Nominating and
Governance Committee will consider written recommendations from
stockholders for director nominations. If you wish to nominate a
candidate, please forward the candidates name and a
detailed description of the candidates qualification, a
document indicating the candidates willingness to serve
and evidence of the nominating stockholders ownership of
the Companys shares to: Corporate Secretary, One Williams
Center, MD 47, Tulsa, Oklahoma 74172. A stockholder wishing to
nominate a candidate must also comply with the notice and other
requirements described above under the question May I
propose actions for consideration at next years meeting of
stockholders?
14
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of
December 31, 2008, concerning beneficial ownership by
holders of five percent or more of our common stock. Unless
otherwise indicated, the persons named have sole voting and
investment power with respect to the shares listed.
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Number of Share of
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Percent
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Name and Address
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Common Stock
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of Class
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FMR LLC1
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37,277,869
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6.442
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%
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82 Devonshire Street
Boston, Massachusetts 02109
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Barclays Global Investors, NA, and
Affiliates2
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39,232,187
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6.780
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%
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45 Fremont
San Francisco, California 94105
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1 |
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A filing with the SEC on February 17, 2009, indicates that
FMR LLC is a Parent Holding Company in accordance with
Section 240.13d-1(b)(ii)(G).
FMR LLC reports that it has sole power to vote or direct the
vote of 1,373,269 shares and sole power to dispose or
direct the disposition of 37,277,869 shares. |
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2 |
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Reflects shares beneficially owned by Barclays Global Investors,
NA according to a Schedule 13G filed by Barclays Global
Investors, NA with the SEC on February 5, 2009. The
Schedule indicates that Barclays Global Investors, NA, a bank in
accordance with Section 3(a)(6) of the Exchange Act, owns
26,274,487 shares of our common stock. Barclays Global
Investors, NA reports that it has sole power to vote or direct
the vote of 21,433,296 shares and sole power to dispose or
direct the disposition of 26,274,487 shares. Barclays
Global Fund Advisors, a bank in accordance with
Section 3(a)(6) of the Exchange Act, owns
6,043,413 shares of our common stock. Barclays Global
Fund Advisors reports that it has sole power to vote or
direct the vote of 6,007,244 shares and sole power to
dispose or direct the disposition of 6,043,413 shares.
Barclays Global Investors Ltd, an investment advisor in
accordance with Section 240.13d(b)(1)(ii)(E), owns
3,733,279 shares of our common stock. Barclays Global
Investors Ltd reports that it has sole power to vote or direct
the vote of 3,177,140 shares and sole power to dispose or
direct the disposition of 3,733,279 shares. Barclays Global
Investors Japan Limited, an investment advisor in accordance
with Section 240.13d(b)(1)(ii)(E), owns
2,323,263 shares of our common stock. Barclays Global
Investors Japan Limited reports that it has sole power to vote
or direct the vote of 2,323,263 shares and sole power to
dispose or direct the disposition of 2,323,263 shares.
Barclays Global Investors Canada Limited, an investment advisor
in accordance with Section 240.13d(b)(1)(ii)(E), owns
798,819 shares of our common stock. Barclays Global
Investors Canada Limited reports that it has sole power to vote
or direct the vote of 798,819 shares and sole power to
dispose or direct the disposition of 798,819 shares.
Barclays Global Investors Australia Limited, an investment
advisor in accordance with Section 240.13d(b)(1)(ii)(E),
owns 58,926 shares of our common stock. Barclays Global
Investors Australia Limited reports that it has sole power to
vote or direct the vote of 58,925 (sic) shares and sole power to
dispose or direct the disposition of 58,926 shares. |
15
The following table sets forth, as of February 27, 2009,
the number of shares of our common stock beneficially owned by
each of our directors and nominees for directors, by the NEOs
and by all directors and executive officers as a group.
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|
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Shares of
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|
|
|
|
|
|
|
|
Common Stock
|
|
Shares Underlying
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|
|
|
|
|
|
Owned Directly or
|
|
Options Exercisable
|
|
|
|
Percent
|
Name of Individual or Group
|
|
Indirectly1
2
|
|
Within 60
Days3
|
|
Total
|
|
of
Class4
|
|
Alan Armstrong
|
|
|
278,408
|
|
|
|
219,489
|
|
|
|
497,897
|
|
|
|
|
*
|
Donald R. Chappel
|
|
|
455,021
|
|
|
|
396,145
|
|
|
|
851,166
|
|
|
|
|
*
|
Joseph R. Cleveland
|
|
|
3,931
|
|
|
|
0
|
|
|
|
3,931
|
|
|
|
|
*
|
Kathleen B. Cooper
|
|
|
9,689
|
|
|
|
4,500
|
|
|
|
14,189
|
|
|
|
|
*
|
Irl F. Engelhardt
|
|
|
39,680
|
|
|
|
12,000
|
|
|
|
51,680
|
|
|
|
|
*
|
William R. Granberry
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|
11,949
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|
|
|
9,000
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|
|
|
20,949
|
|
|
|
|
*
|
William E. Green
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|
44,543
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|
|
|
35,072
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|
|
|
79,615
|
|
|
|
|
*
|
Ralph A. Hill
|
|
|
329,148
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|
|
|
174,508
|
|
|
|
503,656
|
|
|
|
|
*
|
Juanita H. Hinshaw
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|
|
15,640
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|
|
|
15,000
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|
|
|
30,640
|
|
|
|
|
*
|
W. R. Howell
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|
|
64,835
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|
|
|
53,072
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|
|
|
117,907
|
|
|
|
|
*
|
Charles M. Lillis(5)
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|
55,125
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|
|
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28,536
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|
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|
83,661
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|
|
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*
|
George A. Lorch
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54,759
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|
|
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43,631
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|
|
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98,390
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|
|
|
|
*
|
William G. Lowrie
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|
60,356
|
|
|
|
0
|
|
|
|
60,356
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|
|
|
|
*
|
Frank T. MacInnis
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|
|
58,761
|
|
|
|
53,072
|
|
|
|
111,883
|
|
|
|
|
*
|
Steven J. Malcolm
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|
|
1,247,925
|
|
|
|
1,917,876
|
|
|
|
3,165,801
|
|
|
|
|
*
|
Janice D. Stoney
|
|
|
45,540
|
|
|
|
50,893
|
|
|
|
96,433
|
|
|
|
|
*
|
Phillip D. Wright
|
|
|
401,245
|
|
|
|
360,965
|
|
|
|
762,210
|
|
|
|
|
*
|
All directors and executive officers as a group (20 persons)
|
|
|
3,613,441
|
|
|
|
3,580,114
|
|
|
|
7,193,555
|
|
|
|
1.24
|
%
|
|
|
|
* |
|
Less than 1%. |
|
1 |
|
Includes shares held under the terms of incentive and investment
plans as follows: Mr. Armstrong, 234,749 restricted stock
units and 15 shares in the Companys investment plus
plan; Mr. Chappel, 335,887 restricted stock units;
Mr. Hill, 274,069 restricted stock units and
27,187 shares in the Companys investment plus plan;
Mr. Malcolm, 635,593 restricted stock units and
46,680 shares in the Companys investment plus plan;
and Mr. Wright, 234,749 restricted stock units and
15,421 shares in the companys investment plus plan.
Restricted stock units includes both time-based and
performance-based units and do not have voting or investment
power. Shares held in the Companys investment plus plan
have voting and investment power. |
|
2 |
|
Includes restricted stock units held under the terms of
compensation plans over which directors have no voting or
investment power as follows: Mr. Cleveland, 3,000;
Dr. Cooper, 6,000; Mr. Engelhardt, 6,000;
Mr. Granberry, 6,000; Mr. Green, 6,000;
Ms. Hinshaw, 6,000; Mr. Howell, 14,315;
Dr. Lillis, 7,412; Mr. Lorch, 45,296; Mr. Lowrie,
29,539; Mr. MacInnis, 6,000 and Ms. Stoney, 28,282. |
|
3 |
|
The SEC deems a person to have beneficial ownership of all
shares that that person has the right to acquire within
60 days. The shares indicated represent stock options
granted under our current or previous stock option plans, which
are currently exercisable or which will become exercisable
within 60 days of February 27, 2009. Shares subject to
options cannot be voted. |
|
4 |
|
Ownership percentage is reported based on
579,213,408 shares of common stock outstanding on
February 27, 2009, plus, as to the holder thereof only and
no other person, the number of shares (if any) that the person
has the right to acquire as of February 27, 2009 or within
60 days from that date through the exercise of all options
and other rights. |
|
5 |
|
Includes 500 shares held in the Lillis Family GST Trust. |
16
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys directors and certain of its officers to file
reports of their ownership of the Companys Common Stock
and of changes in such ownership with the SEC and the NYSE.
Regulations also require the Company to identify in this proxy
statement any person subject to this requirement who failed to
file any such report on a timely basis.
To the Companys knowledge, based solely on its review of
the copies of such reports furnished to the Company and written
representations from certain reporting persons, we believe that
all of our officers, directors and greater than 10% stockholders
complied with all Section 16(a) filing requirements
applicable to them during the fiscal year ended
December 31, 2008.
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Summary
This Compensation Discussion and Analysis seeks to explain our
executive pay program to our stockholders. We continuously work
to ensure that the features of our pay program are fulfilling
the objectives we established when designing them. The main
objective of our executive pay program is to reward executives
for creating value for stockholders, consistent with the Company
strategy and the following pay principles:
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|
Our pay program should encourage executives to achieve business
objectives and act in ways that are consistent with our values.
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|
A large portion of the pay earned by executives should be
contingent on performance.
|
|
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|
Our incentive programs should encourage executives to consider
the impact of decisions on stockholders in the short term,
intermediate term, and long term.
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|
The interests of executives should be aligned with the interests
of stockholders.
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|
Our pay program should be competitive and we should consider
what executives holding similar jobs at other companies are paid
to ensure competitiveness.
|
|
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|
A portion of pay should be provided to compensate for the core
activities required for performing in the role.
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|
Our pay program should foster a culture of collaboration with
shared focus and commitment to our Company.
|
We use different forms of pay to achieve our objectives. These
forms of pay include base pay, annual cash incentives, long-term
incentives in the form of equity, and benefits. Each form of pay
accomplishes different objectives. Dividing the total pay
awarded to NEOs among these various forms helps us to achieve a
balance to better accomplish our goals and avoids placing too
much value in any one element.
We follow a consistent process in determining the amounts of
each form of pay for our NEOs. Our Compensation Committee plays
a key role in this process by providing oversight and making
decisions about executive pay. For NEOs other than the CEO,
management and the CEO make recommendations to the Compensation
Committee. NEOs other than the CEO have no role in setting pay
for NEOs. The Compensation Committee has engaged an independent
compensation consultant to advise it in making executive pay
decisions for the CEO and the other NEOs.
When considering how much to pay and what form of pay should be
used, our Compensation Committee considers internal equity and
pay information from a group of comparator companies. To
supplement that information, market data from executive
compensation surveys is used to validate the reasonableness of
the information gathered from the comparator group.
After the pay information has been reviewed and discussed, a
range for base pay for each position is set. The actual base pay
for each NEO can be set above or below the median for this range
due to the experience, skills, and sustained performance of the
individual NEO.
17
The target opportunity to earn annual cash incentives is also
set after considering market data and internal equity. The
actual cash incentive paid to NEOs varies based upon achievement
of business goals and individual performance. We use Economic
Value
Added®
(EVA®)
as the measure of attainment of business goals.
We also grant long-term incentives to NEOs in the form of
equity, including stock options, time-based restricted stock
units and performance-based restricted stock units. Like the
other forms of pay, a variety of factors, including the
competitive market, the NEOs impact on our Company, and
the NEOs performance, are used in determining the value of
long-term incentives. Granting different forms of equity is
intended to achieve different purposes, including aligning the
interests of NEOs with the long-term interests of stockholders,
facilitating executive ownership of Company stock, driving
performance, and providing a retention element to our pay
program.
We have adopted policies that further the goals of our executive
pay program and also mitigate excessive risk taking by our NEOs,
including a recoupment policy, stock ownership guidelines, and
we discourage derivative transactions linked to our
Companys common stock. We do not enter into employment
agreements with our NEOs, but we do provide a change in control
program.
Objective
of Our Pay Programs
During 2008, we continued to focus on growing our business and
creating stockholder value through our Game Plan for Growth
strategy. Our pay program objective is to reward our NEOs and
employees for successfully implementing our strategy. We use
EVA®
as the tool to measure our success. We believe that
EVA®
aligns NEOs and employees interests with
stockholders interests. Improving
EVA®
means creating sustainable value for our stockholders. Our NEOs
and employees are rewarded for improving
EVA®.
What is
EVA®?
EVA®
measures the value created by a company. Simply stated, it is
the financial return in a given period less the capital charge
for that period. The calculation we use is as follows:
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EVA®
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=
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|
net operating profits after taxes
(NOPAT)
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|
Less
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|
Capital Charge (the amount of capital
invested in Williams multiplied by the cost
of capital)
|
|
Generating profits in excess of both operating and capital costs
(debt and equity) creates positive
EVA®.
If
EVA®
is positive, value has been created. The objectives of our
EVA®-based
incentive programs are to provide:
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|
|
Alignment, by providing management an incentive to choose
strategies and investments that maximize long-term stockholder
value;
|
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|
Leverage, by providing management sufficient incentive
compensation to motivate them to put forth extra effort, take
prudent risks and make tough decisions to maximize stockholder
value;
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|
Retention, by providing management sufficient total compensation
to retain them; and
|
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|
Cost control, by limiting the cost of compensation to levels
that will maximize the wealth of current stockholders within the
context of the other objectives.
|
Using
EVA®
creates a mind-set in our organization that all activities and
incentives should focus on creating economic value for
stockholders.
Game Plan
for Growth
Our goal is to create sustainable growth and stockholder value
by creating positive
EVA®.
In order to accomplish this, in early 2006 we set ambitious
three-year goals that we refer to as the Game Plan for Growth.
The performance of our NEOs and other employees is measured by
progress made towards these goals. Individual
18
adjustments within our annual cash incentive plan are based on
each NEOs contributions to the Game Plan for Growth. The
goals to be achieved by 2009 were as follows:
|
|
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|
|
Be one of the top-performing investments in the energy sector by
delivering total return to stockholders in the top
25 percent of comparable companies for at least two out of
the three years.
|
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|
Significantly improve
EVA®
while increasing the aggregate segment profit of
$1.5 billion by 50 percent.
|
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|
|
Invest approximately $5 billion in our natural-gas-based
businesses in ways that create more
EVA®,
meet customers needs and enhance our competitive position.
|
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|
Increase production to more than one billion cubic feet of gas
daily.
|
|
|
|
Put new rates into effect so that our Transco and Northwest
Pipeline systems remain competitive and value-creating; manage
our costs to maximize our return; and capture the highest
percentage of demand growth of any pipeline.
|
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|
Earn a reputation among top producers as the most reliable
provider of gathering and processing services so that we
increase the scale of our business including via
Williams Partners, L.P. in key growth basins.
|
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|
Execute power contracts that offset at least 50 percent of
the financial obligations associated with our tolling agreements
between 2010 and 2015.
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|
Improve our safety culture as measured by key indicators in our
Core Values & Beliefs survey and achieve our goals for
the Environmental, Health and Safety Management System Framework.
|
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|
|
Build a compliance track record that continuously improves our
reputation among key regulators and governance bodies.
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|
|
|
Exceed the norm for both the energy industry and high-performing
companies in the employee engagement and diversity areas of our
Core Values & Beliefs survey.
|
Over the past three years, we have achieved or exceeded each of
these goals except falling short of being included in the top
25 percent of comparable companies in total return to
stockholders two out of three years. Our success in executing
the Game Plan for Growth led to the creation of significant
positive
EVA®
and contributed to the following accomplishments in 2008:
|
|
|
|
|
Our exploration and production business achieved robust
production total growth of 19 percent and domestic growth
of 20 percent.
|
|
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|
In addition to the organic growth, we also made two significant
acquisitions in the Piceance Basin and Barnett Shale that added
significant natural gas reserves to the exploration and
production business.
|
|
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|
The Company continued to expand our midstream business through
two significant expansions, construction of the Willow Creek
natural gas processing plant and increasing the processing and
natural gas liquid (NGL) production capacities at the Echo
Springs natural gas processing plant.
|
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|
We made progress on several notable expansions in our gas
pipeline business.
|
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|
The initial public offering of a gas pipeline-focused master
limited partnership, Williams Pipeline Partners L.P., was
completed amidst very difficult market conditions.
|
|
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|
Building on our legacy of being a responsible corporate citizen,
we published our first Corporate Responsibility report. The
report covers our activities during 2007, including the results
of our initial greenhouse gas inventory, an overview of how we
account for corporate responsibility processes and how we
demonstrate our corporate citizenship through actions.
|
|
|
|
The results of the 2008 Core Values and Beliefs survey in the
areas of both employee engagement and diversity were
statistically significantly higher than those from our last
survey which was completed in 2005.
|
19
|
|
|
|
|
We improved our safety culture as measured by key indicators in
our Core Values & Beliefs survey. A statistically
significant increase was realized compared to 2005 results and
when compared to the norms for the energy industry and
high-performing companies.
|
Our Pay
Philosophy
Our Pay Philosophy throughout the entire organization is to be
competitive in the marketplace while also considering the value
a job provides to the Company. In doing so, we seek to motivate
high performance that produces returns for stockholders that are
higher than they would earn by investing in other companies. We
believe linking
EVA®
to what we pay NEOs helps ensure that the decisions we make are
aligned with what is best for stockholders. Our pay programs
also reward NEOs for the way they accomplish our goals to better
ensure we reward the right behavior and the right results in the
context of business and enterprise strategies while fostering a
culture of collaboration and teamwork. This forms the basis of
our pay-for-performance philosophy.
The principles of our pay philosophy influence the design and
administration of our pay programs. Decisions about how we pay
NEOs are based on these principles. The Compensation Committee
uses several different types of pay that are linked to both our
short-term and long-term performance in the executive pay
program. Included are base pay, annual cash incentives,
long-term incentives and benefits. The role of pay is to attract
and retain the talent needed to drive stockholder value and help
each of our businesses meet or exceed financial and operational
performance targets. The chart below illustrates the linkage
between the types of pay we use and our pay principles. Further,
it creates an understanding of the amounts reported in the 2008
Summary Compensation Table in this Compensation Discussion and
Analysis.
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Annual Cash
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Long-term
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|
Pay Principles
|
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Base Pay
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|
Incentives
|
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|
Incentives
|
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Benefits
|
|
Pay should reinforce business objectives and values
|
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ü
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ü
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ü
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|
A significant portion of an NEOs total pay should be
variable based on performance
|
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ü
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ü
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Incentive pay should balance short-term, intermediate, and
long-term performance
|
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ü
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ü
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Incentives should align interest of NEOs with stockholders
|
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ü
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ü
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Pay opportunity should be competitive
|
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ü
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ü
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ü
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ü
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A portion of pay should be provided to compensate for the core
activities required for performing in the role
|
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ü
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ü
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|
Pay should foster a culture of collaboration with shared focus
and commitment to our Company
|
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ü
|
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ü
|
|
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|
Mitigating
Risk
Many elements of our executive compensation program serve to
mitigate excessive risk taking. Several of the key factors
include:
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|
|
Mix of Pay: The mix of pay weighted to base salary, annual cash
incentives and long-term incentives is consistent with
comparator company practices and avoids placing too much value
on any one element of compensation, particularly the annual cash
incentive. The mix of our compensation program is intended to
motivate NEOs to consider the impact of decisions on
stockholders in the short, intermediate, and long terms.
|
20
|
|
|
|
|
Annual Cash Incentive: Our annual cash incentive plan also
limits annual cash incentive payments to 200% of target levels.
Any incentive earned beyond this amount, up to a maximum of
400%, is placed in reserve and is at risk for future performance.
|
|
|
|
Performance-based Awards:
|
|
|
|
|
|
To strengthen the relationship between pay and performance, our
annual cash incentive and long-term incentive plans include
performance-based awards. The entire annual cash incentive award
is measured against EVA performance while a significant portion
of the long-term equity awards provided to NEOs is in the form
of performance-based restricted stock units and stock options.
In order to earn the performance-based restricted stock unit
award, the Company must achieve pre-determined three-year
performance goals.
|
|
|
|
To drive a long-term perspective, all restricted stock unit
awards have a three-year cliff vesting period as opposed to
vesting annually.
|
|
|
|
Additionally, our NEOs incentive compensation performance
is measured at the enterprise level. This further mitigates risk
by ensuring their interest is aligned with the overall success
of Williams.
|
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|
|
Stock Ownership Guidelines As discussed later in
this Compensation Discussion and Analysis, all NEOs, consistent
with their responsibilities to the stockholders as a whole, must
hold an equity interest in the Company equal to a stated
percentage of their base pay.
|
|
|
|
Recoupment Policy In the event we are required to
restate our financial statements due to fraud or misconduct we
have a recoupment policy in place to recover incentive-based
compensation from NEOs.
|
|
|
|
Derivative Transactions Our insider trading policy
discourages NEOs from entering into derivative transactions such
as short sales where the value is based on the price of our
common stock.
|
Our pay program is intended to motivate NEOs to achieve business
objectives that generate stockholder returns while acting in
ways that are consistent with our values.
The Pay
Setting Process
Setting pay is an annual process that occurs during the first
quarter of the year. A review is done to ensure that we are
(1) paying competitively (2) paying equitably and
(3) paying in a way that encourages and rewards for
performance that exceeded expectations. We follow the underlying
principles of our pay philosophy as shown in the chart below.
The size of the circles in the chart denotes the degree to which
the underlying factors of our pay principles impact the pay
awarded to the NEOs.
21
When setting pay we determine a target pay mix (distribution of
pay among different forms of pay) for the NEOs. The average
target pay mix for all NEOs is illustrated below. Consistent
with our pay-for-performance philosophy, the actual amounts
paid, excluding benefits, are determined based on individual and
Company performance. Because performance is a factor, the target
and actual pay mix will vary specifically as it relates to the
annual cash incentives.
Compensation
Recommendations and Decisions
Role of
Management
In order to make pay recommendations, management provides the
CEO with data from the annual proxy statements of companies in
our comparator group along with pay information compiled from
executive and industry related salary surveys that are
nationally recognized. The survey data is used as a supplemental
data point as well as a reference for validating the
reasonableness of the information gathered from the comparator
group.
Role of
the CEO
Before making base pay and long-term incentive decisions, our
CEO reviews the competitive market information for the other
NEOs. After considering the market data, the CEO takes into
account internal equity and individual performance and
recommends base pay and long-term incentive awards to the
Compensation Committee.
For our annual cash incentive plan, the CEOs
recommendation is based on
EVA®
attainment with an adjustment for individual performance.
Individual performance includes business unit
EVA®
results for the business unit leaders, achievement of goals
including those in the Game Plan for Growth, and demonstration
of key leadership competencies (see leadership competencies in
the section entitled Base Pay in this Compensation
Discussion and Analysis). The modifications made are fairly
modest. For 2008 the adjustments made to the NEOs annual cash
incentive awards were on average less than 4%.
Role of
the Other NEOs
Our other NEOs have no role in setting compensation for any of
the NEOs.
Role of
the Compensation Committee
For all NEOs, except the CEO, the Compensation Committee reviews
the CEOs recommendations, supporting market data, and
individual performance assessments. Before the Compensation
Committee determines the pay, their independent compensation
consultant, Frederic W. Cook & Co., Inc., reviews all
of the data and advises on the reasonableness of the pay
recommendations.
22
For the CEO, the Board meets in executive session without
management present to review the CEOs performance. In this
session, the Board reviews:
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Evaluations of the CEO completed by each board member other than
the CEO;
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The CEOs written assessment of his own performance
compared with the stated goals and objectives found in the
Game Plan for Growth section;
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Evaluations of the CEO completed by each of the other
NEOs; and
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EVA®
performance of the Company relative to the goals established.
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The Compensation Committee uses these evaluations and
competitive market information provided by its independent
compensation consultant to determine the CEOs base pay,
annual cash incentive target, long-term incentive amounts and
performance adjustments to be made to his annual cash incentive
payment.
Role of
the Independent Compensation Consultant
In 2007, the Compensation Committee engaged Frederic W.
Cook & Co., Inc. to assist it in determining or
approving the compensation for our NEOs. Frederic W.
Cook & Co., Inc. also assists the Nominating and
Governance Committee with regard to determining nonemployee
director compensation but otherwise does no other work for the
Company. Please refer to the section Corporate Governance
and Board Matters Board and Committee Structure and
Meetings Compensation Committee of this proxy
statement for a discussion of the independent compensation
consultant.
To assist the Compensation Committee in discussions and
decisions about compensation for our CEO, the Committees
independent compensation consultant presents competitive market
data that includes proxy data from the approved comparator group
and published compensation data, using the same surveys and
methodology used for our other NEOs (described in the Role
of Management section in this Compensation Discussion and
Analysis). Our comparator group is developed by the
Committees independent compensation consultant, with input
from management, and is approved by the Compensation Committee.
2008
Comparator Group
This years comparator group includes 18 companies
(see below), consisting of a mix of both direct competitors and
similar-sized companies within the broader energy industry.
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The AES Corp.
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Hess Corp.
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Anadarko Petroleum Corp.
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Murphy Oil Corp.
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Apache Corp.
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NiSource Inc.
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Constellation Energy Grp. Inc.
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ONEOK Inc.
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Devon Energy Corp.
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PG&E Corp.
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Dominion Resources Inc.
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Plains All American Pipeline LP
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Duke Energy Corp.
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Schlumberger Ltd.
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El Paso Corp.
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Sempra Energy
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Halliburton Co.
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Sunoco Inc.
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Each year the Compensation Committee reviews the comparator
group to validate the list of comparator companies and make any
changes if appropriate. The 2007 comparator group continued to
be appropriate in terms of size and business for Williams
executive officer pay comparisons in 2008. However, KeySpan was
acquired by National Grid in 2007 and, as a result, was no
longer available for comparison going forward.
For 2009, the Compensation Committee approved a revised
comparator group. The 2008 group consists of companies in the
broader energy industry. The group used for 2009 pay decisions
puts more focus on companies that work in the same industry
segment and reflect where we compete for business and talent.
Objectives
of our Comparator Group
To determine competitive total pay levels, we use our comparator
group when we consider the amount and form of pay used by
competitors as well as how competitors divide pay among the
various forms. Through the use of
23
publicly available financial measures, we review our comparator
group to validate the design of our incentive plans and test the
pay and performance relationship of our NEOs.
Size
Reflects Companys Business and Complexity
We consider a range of revenues, assets, and market
capitalization when selecting companies for our comparator
group. This results in compensation that is appropriately scaled
and reflects comparable complexities in business operations.
Industry
and Business Operations Similarities
In order to provide reasonable performance comparisons, our
comparator group companies operate within the same industry
and/or face
similar business challenges and opportunities. Business
consolidation and unique operating models today create some
challenges in identifying comparator companies. As a result, we
take a broader view of comparability to include organizations
that are similar in some, but not all, respects.
Sufficient
Number of Companies
Our comparator group contains a sufficient number of companies
to facilitate valid comparisons. We target 15 to
25 companies as the number of companies to use in order to
have a valid comparator group.
How We
Determine the Amount for Each Type of Pay
The compensation data of our comparator group is the primary
market data we use when benchmarking the competitive pay of our
NEOs. Aggregate market data obtained from recognized third party
executive compensation survey companies (e.g. Towers Perrin,
Mercer, Hewitt) is used to supplement and validate comparator
group market data. We typically obtain a range of annual
revenues of the companies whose data is included in the
aggregate analysis provided by the third party survey, but the
identities of the specific companies included in the survey are
not disclosed.
Because setting pay is not an exact science, the Compensation
Committee uses comparator group data and compensation surveys as
reference points in considering total pay packages for NEOs.
Since this market data alone does not reflect the strategic
competitive value of our roles within the Company, internal pay
equity is also considered when making pay decisions. Because we
take on an enterprise-wide perspective to promote collaboration
and ensure our overall success, paying the NEOs equitably is
important. Other considerations used when making pay decisions
for the NEOs includes reviewing historical pay and tally sheets
that include annual pay and benefit amounts. The Compensation
Committee also reviews wealth accumulated over the past five
years and the total aggregate value of all equity awards and
holdings of the NEOs.
Base
Pay
Base pay serves as the foundation of our pay program. We use
base pay to compensate our NEOs for carrying out duties of their
jobs. Most other major components of pay are determined based on
a relationship to base pay, including annual and long-term
incentives, termination payments, and retirement benefits.
Base pay for the NEOs, including the CEO, is set considering the
market median, with potential individual variation from the
median due to experience, skills, and sustained performance of
the individual as part of our pay-for-performance philosophy.
Performance is measured in two ways; through the Right
Results obtained in the Right Way. Right
Results is an assessment of the NEOs success in attaining
their annual goals as they relate to the Game Plan for Growth,
business unit strategies, and personal development plans. Right
Way reflects the NEOs behavior as exhibited through our
leadership competencies. The following table contains our twenty
leadership competencies grouped within five key areas.
24
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INSPIRE A
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OPTIMIZE
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MODEL THE
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SHARED
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CHAMPION
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LEVERAGE
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BUSINESS
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WAY
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VISION
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INNOVATION
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TALENT
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PERFORMANCE
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Caring About People
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Enterprise Perspective
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Change Leadership
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Building Effective Teams
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Business Acumen
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Integrity
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Vision and Strategic Perspective
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Entrepreneurial Spirit
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Communication
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Customer and Market Focus
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Loyalty and Commitment
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Promoting Diversity and Creativity
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Developing People Resources
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Decision Making
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Willingness to Take Risks
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Empowering Others
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Drive for Results
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Managerial Courage
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Functional/Technical Skills
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Motivating and Inspiring Others
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The base pay increases made in early 2008 as well as the
percentage of the market median is shown below. We believe that
both the ratio of base pay of our NEOs to the market median and
the percent increase given are appropriate when we consider
experience, skills, sustained performance and the amount of pay
to be at risk.
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2008 Base Pay
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as a % of
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% Increase
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Market
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Executive Officer
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Position
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from 2007
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Median
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Steven J. Malcolm
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CEO
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4.8%
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110%
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Donald R. Chappel
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CFO
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4.3%
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108%
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Alan S. Armstrong
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Senior Vice President, Midstream
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7.8%
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104%
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Ralph A. Hill
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Senior Vice President, Exploration & Production
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7.8%
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104%
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Phillip D. Wright
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Senior Vice President, Gas Pipelines
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4.2%
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108%
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Annual
Cash Incentives Target
We pay annual cash incentives to encourage and reward our NEOs
for making decisions that improve our performance as measured by
EVA®.
Similar to base pay, the starting point to determine annual cash
incentive targets (expressed as a percent of base pay) is
competitive market information. The market information gives us
an idea of what other companies target to pay in annual cash
incentives for similar jobs. The internal value of the job is
then considered before the target is set for the year. We define
the internal value of a job to be how important the job is to
executing our strategy compared to the importance of other jobs
in the Company. The annual cash incentive targets as a
percentage of base pay for the NEOs in 2008 are as follows:
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CEO
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100
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CFO
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75
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Other NEOs
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65
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Annual
Cash Incentives Actual
Since we implemented
EVA®
in 2004, the annual cash incentive plan has been funded upon
attainment of an established
EVA®
target. Applying
EVA®
measurement to this annual cash incentive process encourages
management to make business decisions that help drive long-term
stockholder value. To determine the funding of the annual cash
incentive, we use the following calculation for each NEO:
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Base pay received in 2008
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×
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Incentive Target %
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×
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EVA Goal Attainment %
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Actual payments may be adjusted upwards to recognize individual
performance that exceeded expectations, which include success
toward our Game Plan for Growth and individual goals and
successful demonstration of the leadership competencies
discussed above. Payments may also be adjusted downwards if
performance so warrants.
How We
Set the
EVA®
Goals
Setting the
EVA®
goals for the annual cash incentive plan begins with an internal
budgeting and planning process. The rigorous process includes an
evaluation of the challenges and opportunities for the Company
as well as each of our business units. The key steps in the
process are as follows:
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Business and financial plans are submitted by the business units
and reviewed by the corporate planning department.
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The business and financial plans are reviewed and analyzed by
the CEO, CFO and other NEOs.
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Management establishes the
EVA®
goal and presents it to the Compensation Committee.
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The Compensation Committee reviews, discusses and makes
adjustments as necessary to managements recommendations
and sets the goal at the beginning of each fiscal year.
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Once the goal is approved by the Compensation Committee, the
progress relative to the goal is regularly monitored and
reported to the Compensation Committee throughout the year.
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2008
EVA®
Goal for the Annual Cash Incentive Plan
The attainment percentage of
EVA®
goals results in payment of annual cash incentives along a
continuum between threshold and stretch levels, which
corresponds to 0% through 200% of the NEOs annual cash
incentive target. As approved by the Compensation Committee, for
every $108 million change in
EVA®
the payout level increases/decreases by 100% up to a maximum of
400%. If EVA improvement exceeds 200%, any payout is placed in a
reserve. Reserve payments are made annually if future
performance thresholds are met, but in no event will the payout
level exceed the capped level of 400%. Shown in the chart below
are the
EVA®
improvement goals for the 2008 annual cash incentive and the
resulting payout level:
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EVA®
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Payout Level as a % of Target
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Improvement
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(Attainment %)
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(In millions)
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$39
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Threshold
(where incentives start to be earned)
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$147
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100%
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$255
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200%
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Based on
EVA®
performance relative to the established goals, the Compensation
Committee certified performance results of $212 million in
EVA®
improvement and approved payment of the annual cash incentive
plan at 160% of target. While our stock price declined late in
the year primarily due to poor stock market performance and
declining commodity prices,
EVA®
results reflect our strong full year 2008 performance results.
How the
Annual Cash Incentive Plan Works
If
EVA®
exceeds our stretch goal of 200%, the annual cash incentive pool
will fund up to a maximum of 400% of target for NEOs. Any award
earned above 200% of target is not paid out in cash but instead
is placed in a reserve, which is at risk for future performance.
This means the reserve amounts will be paid only if future
EVA®
threshold
26
levels are met. If threshold performance is not met, a portion
of the reserve balance is subject to forfeiture. In years where
threshold
EVA®
performance is met, one-third of the reserve balance is paid in
cash. If the NEO leaves due to retirement, death or long-term
disability, reserve payments may be made to him at the same time
payments are made to other NEOs. If the NEO leaves for any other
reason, the reserve balance is forfeited at that point. No
interest is applied to the reserve balance, and NEOs have no
vested right to the balance.
The
EVA®
Calculation
EVA®
is first calculated as previously discussed, NOPAT less Capital
Charge. Our incentive program allows for adjustments to be made
to
EVA®
calculations to reflect extraordinary items. After an analysis
of companies that utilize
EVA®
as an incentive measure, we determined that it is standard
practice to make adjustments to
EVA®
calculations to create better alignment with stockholders.
When determining which adjustments are appropriate, we are
guided by the principle of ensuring that incentive payments do
not result in unearned windfalls or undue penalties to NEOs. In
other words, we make adjustments to ensure NEOs are not rewarded
for positive results they did not take action to create nor are
they penalized for certain unusual circumstances outside their
control. We believe the adjustments improve the alignment of
incentives with stockholder value creation and ensure
EVA®
is an incentive measure that effectively encourages NEOs to take
actions to create value for stockholders. The categories of
adjustments to our
EVA®
calculation are:
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Gains, losses and impairments;
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Mark-to-market, commodity price collar, and construction
work-in-progress; and
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Other unusual items that could result in unearned windfalls or
undue penalties to NEOs such as certain litigation matters and
natural disasters.
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Management as well as the Compensation Committees outside
independent compensation consultant test our relative
performance on various measures, including total stockholder
return, earnings per share and cash flow, to the industry
comparator group to ensure our
EVA®
performance is consistently delivering stockholder value. The
Compensation Committee uses this analysis to validate our
EVA®
results.
The annual cash incentive plan satisfies the requirements for
performance-based compensation as defined in Section 162(m)
of the Internal Revenue Code of 1986, as amended (the
Code) and is therefore a tax deductible expense. For
payments under our annual cash incentive plan to be considered
performance-based compensation under Section 162(m), the
Compensation Committee can only exercise negative discretion
relative to actual performance when determining the amount to be
paid. In order to ensure compliance with Section 162(m),
the Compensation Committee has established a target in excess of
the maximum individual payout allowed to NEOs under our annual
cash incentive plan. Reductions are made each year and are not a
reflection of the performance of the NEOs but rather ensure
flexibility with respect to paying based upon performance.
Long-Term
Incentives
Long-term incentives are provided in the form of equity and
include stock options, time-based restricted stock units and
performance based restricted stock units. We provide long-term
incentives to reward performance and align NEOs with long-term
stockholder interests by giving NEOs an ownership stake in the
Company, encouraging sustained long-term performance, and
providing a retention element.
To determine the value for long-term incentives granted to NEOs
each year we consider the following factors:
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the proportion of long-term incentives relative to base pay;
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the NEOs impact on Company performance and ability to
create value;
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long-term business objectives;
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awards made to executives in similar positions within our
comparator group of companies;
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27
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the market competitiveness of the role the NEO is in (in other
words, is there a risk the NEO might leave to work for
another company because there is a high demand for the talent
that NEO possesses?);
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the NEOs demonstrated performance over the past few
years; and
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the NEOs leadership performance.
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The allocation of our long-term incentive program for 2008 is
shown in the chart below. The long-term incentive mix for the
CEO differs from the other NEOs due to the desire to have 100%
of his long-term incentives be performance-based. Because the
CEO has a greater ability to influence financial results, the
Compensation Committee considers it appropriate that 100% of his
long-term incentives are directly tied to performance based upon
our pay or-performance philosophy.
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CEO
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Other NEOs
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Stock Options
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50%
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25%
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Time-Based Restricted Stock Units
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0%
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25%
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Performance-Based Restricted Stock Units
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50%
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50%
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The primary objectives for each type of equity awarded are shown
below. The size of the circles in the chart denotes the degree
to which the equity type aligns with our objectives.
As shown above, performance-based awards and stock options have
the strongest stockholder alignment. Because of this, we believe
that it is necessary the NEOs have a greater portion of their
long-term incentive mix tied to these equity vehicles.
Stock
Option Awards
For participants, stock options have value only to the extent
the price of our common stock on the date of exercise exceeds
the price at the time the options were granted (in other words,
the stock price must increase for stock options to have value).
Time-Based
Restricted Stock Units
Time-Based Restricted Stock Unit grants were introduced in 2002,
primarily as a retention device during a period of uncertainty
and instability in our executive population. We continue to use
this type of equity for retention purposes due to continued
volatility in the industry and executive movement. In addition
to retention, time-based restricted stock units facilitate stock
ownership.
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Performance-Based
Restricted Stock Units
To further strengthen the relationship between pay and
performance, the performance-based restricted stock units are
earned only upon our attaining specific
EVA®
goals and the NEOs continued employment. Shown in the
chart below are the
EVA®
improvement goals for the performance-based restricted stock
units for the 2006 to 2008 performance period and the resulting
payout level:
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EVA®
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Payout Level as a % of Target
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Improvement
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(Attainment %)
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(In millions)
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$278
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Threshold
(where incentives start to be earned)
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$386
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100%
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$494
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200%
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Based on
EVA®
performance relative to the established goals, the Compensation
Committee certified performance results of $440 million in
EVA®
improvement for the 2006 to 2008 performance period and approved
payment of the performance-based restricted stock units at 150%
of target.
EVA®
created over a three-year period is used as a long-term
performance measure to further drive and reinforce actions
leading to desired
EVA®
results and to extend this focus over multiple years. This
longer-term
EVA®
focus is intended to help achieve sustained financial
improvement and align with longer-term stockholder interest.
In developing three-year performance goals the Compensation
Committee considers circumstances facing the Company and each
business unit, as well as challenges facing the industry.
Achieving
EVA®
goals at a minimum or the threshold level is required for these
awards to begin to be earned. Our intent is to establish
three-year
EVA®
goals where each year the probability or level of difficulty to
achieve target is consistent. In setting these goals, we expect
that the performance will be at or below the threshold level (to
achieve no payout) about
10-20% of
the time, that the performance will be at or above the stretch
level (to achieve a maximum or 200% payout) about
10-20% of
the time, and that performance will range between the threshold
level to stretch level (to achieve a 0% to 200% payout) about
70-80% of
the time.
For awards granted in 2008, the three-year performance measure
is the cumulative
EVA®
goals for 2008 through 2010. The cumulative
EVA®
goals were set during 2008 and will be certified at the end of
the period when the Compensation Committee reviews progress
toward
EVA®
goals over the three-year period. When calculating
EVA®
performance over the three-year period, the Compensation
Committee will consider adjustments using a process and criteria
similar to that described under Annual Cash
Incentives The
EVA®
Calculation in this Compensation Discussion and Analysis.
However, individual performance is not considered in determining
the actual number of shares earned.
Grant
Practices
We typically make our annual equity grant in February or early
March of each year. The Compensation Committee meets at least
two days after the annual earnings release to approve the
grants. The Compensation Committee approves all equity grants to
NEOs and the grant date for such awards is on or after the date
of such approval in order to ensure the market has time to
absorb material information disclosed at the time of the
earnings release and reflect that information in the stock price.
The grant date for off-cycle grants for individuals that are not
NEOs, for reasons such as retention or new hires, is the first
business day of the month following the approval of the grant.
The purpose of this approach is to remove option grant timing
from the influence of the release of material information.
Accounting
and Tax Treatment
We consider the impact of accounting and tax treatment when
designing all aspects of pay, but the primary driver of program
design is the support of business objectives. Stock options and
performance-based restricted stock units are intended to satisfy
the requirements for performance-based compensation as defined
in Section 162(m) of
29
the Code and are therefore considered a tax deductible expense.
Time-based restricted stock units do not qualify as
performance-based and may not be fully deductible.
Benefits
Consistent with the Compensation Committees philosophy to
maximize pay at risk, our NEOs receive very few perquisites
(perks) or supplemental benefits. The perks they receive are as
follows:
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|
|
|
|
Retirement Restoration Benefits: NEOs participate in our
qualified retirement program on the same terms as our other
employees. We offer a retirement restoration plan to our NEOs to
maintain a proportional level of pension benefits to our NEOs as
provided to other employees. The Code limits pension benefits
based on an annual compensation limit. For 2008, the limit was
$230,000. Any reduction in an NEOs pension benefit in the
tax-qualified pension plan due to this limit is made up for
(subject to a cap) in the unfunded restoration retirement plan.
Benefits for NEOs are calculated using the same benefit formula
as that used to calculate benefits for all employees in the
qualified pension plan. The value of pay in the form of stock
option or other equity is not used in the formula to calculate
benefits under the pension plan or restoration plan for NEOs,
which is consistent with the treatment for all employees.
Additionally, we do not provide a nonqualified benefit related
to our qualified 401(k) defined contribution retirement plan.
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|
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Financial Planning Allowance: We offer financial planning to
provide expertise on current tax laws to assist NEOs with
personal financial planning and prepare for contingencies such
as death and disability. In addition, by working with a
financial planner, NEOs gain a better understanding of and
appreciation for the programs the Company provides, which helps
to maximize the retention and engagement aspects of the dollars
the Company spends on these programs.
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Home security: We pay home security for our CEO to ensure
personal safety.
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Personal Use of Company Aircraft: We provide limited personal
use of the Company aircraft at the CEOs discretion. As
shown in the footnotes to the 2008 Summary Compensation Table,
the incremental cost associated with aircraft usage for personal
reasons in 2008 was limited to the CEO. The incremental cost to
the Company of all trips was approximately $31,387. Our policy
is to discourage personal use of the aircraft, but the CEO
retains discretion to permit its use when he deems appropriate,
such as when the destination is not well served by commercial
airlines, personal emergencies, and the aircraft is not being
used for business purposes.
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Event Center: We have a suite and club seats at an event center
that were purchased for business purposes. If it is not being
used for business purposes, we make the suite and club seats
available to our employees, including our NEOs, as a form of
reward and recognition.
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Executive Physicals: The Compensation Committee approved
mandated physicals for the NEOs that began in 2009. NEO
physicals will align with our wellness initiative as well as
assist in mitigating risk. Mandated NEO physicals lessen vacancy
succession risk because it helps to identify and prevent issues
that would leave a NEO role vacated unexpectedly.
|
Additional
Executive Compensation Policies
In addition to establishing the pay elements described above, we
have adopted a number of policies to further the goals of the
executive compensation program, particularly with respect to
strengthening the alignment of our NEOs interests with
stockholder long-term interests.
Recoupment
Policy
In 2008, the Compensation Committee approved a recoupment policy
to allow the Company to recover incentive-based compensation
from NEOs in the event we are required to restate our financial
statements due to fraud or intentional misconduct. The policy
provides the Board discretion to determine situations where
recovery of incentive pay is appropriate.
30
Stock
Ownership Guidelines
In 2005, the Board adopted stock ownership guidelines for all
NEOs. All NEOs, consistent with their responsibilities to the
stockholders as a whole, must hold an equity interest in the
Company. Specifically, the CEO must own an amount of stock equal
to at least five years base pay. Other NEOs must own stock
equal to at least three years base pay. New NEOs are
allowed five years from the date of election, promotion to NEO,
or commencement of employment as an NEO to accumulate the
required shares. Once the requirement is met, the individual is
considered to be in compliance if the NEO continues to hold the
number of shares to maintain the value necessary to fulfill the
requirement.
Annually the Compensation Committee reviews the guidelines for
competitiveness and alignment with best practice and monitors
the NEOs progress toward meeting the guidelines. The
Compensation Committee maintains discretion to modify the
guidelines in special circumstances of financial hardship such
as illness of the NEO or a family member. All NEOs complied with
the guidelines upon their adoption in 2005 and continue to own
at least what is required under the guidelines.
Derivative
Transactions
Our insider trading policy applies to transactions in positions
or interests whose value is based on the performance or price of
our common stock. Because of the inherent potential for abuse,
Williams discourages employees and directors from entering into
short sales or use of equivalent derivative securities. In
addition, our insider trading policy requires that officers,
directors, and certain key employees seeking to enter into such
a transaction obtain pre-clearance.
Employment
Agreements
We do not enter into employment agreements with our NEOs. We can
remove a NEO prior to retirement when it is in the best
interests of the Company.
Termination
and Severance Arrangements
The NEOs are not covered under a severance plan; however the
Compensation Committee exercises judgment and considers the
circumstances surrounding the departure when deciding if a
severance package is appropriate. If it is determined that a
severance package is appropriate, the Compensation Committee
takes into consideration the NEOs term of employment, past
accomplishments, reasons for separation from the Company, and
competitive market practice. The only pay or benefits an
employee has a right to receive upon termination of employment
are those that have already vested or which vest under the terms
in place when equity was granted. Please refer to the
Change in Control Agreements section in this proxy
statement for further discussion of termination provisions.
Change in
Control Agreements
Our change in control program provides severance benefits for
our NEOs. Our program includes a double trigger (requires both a
change in control and termination of NEOs employment) for
benefits and equity vesting. While a double trigger for equity
is not the competitive norm of our comparator group, this
practice creates security for the NEOs but does not provide an
incentive for the NEO to leave the Company. Our program is
designed to encourage the NEOs to focus on the best interest of
stockholders by alleviating their concerns about a possible
detrimental impact to their compensation and benefits under a
potential change in control, not to provide compensation
advantages to NEOs for executing a transaction.
Our Compensation Committee reviews our change in control
benefits annually to ensure they are consistent with competitive
practice and aligned with our compensation philosophy. As part
of the review, calculations are performed to determine the
overall program costs to the Company if a change in control
event were to occur and all covered NEOs were terminated as a
result. An assessment of competitive norms including the
reasonableness of the elements of compensation received is used
to validate benefit levels for a change in control. In reviews
of the change in control program to date, our Compensation
Committee has concluded that the current benefits provided are
appropriate and critical to attracting and retaining executive
talent.
31
The following chart details the benefits received if an NEO were
to be terminated following a change in control as well as an
analysis of those benefits as it relates to the Company,
stockholders, and the NEO. Please also see the Change in
Control Agreements section in this proxy statement for
further discussion of our change in control program.
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What does the
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|
benefit provide to
|
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|
What does the
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|
|
Current
|
Change in Control
|
|
|
the Company and
|
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|
benefit provide to
|
|
|
Competitive
|
Benefit
|
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|
stockholders?
|
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|
the NEO?
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|
Practice*
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|
Multiple of 3x Base Pay plus annual cash incentive at target
|
|
|
Continuation of employment of those who will influence the
successful closing of the deal. Encourages NEOs to remain
engaged and stay focused.
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|
Financial security for the NEO equivalent to three years of
continued employment.
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|
ü
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|
Accelerated vesting of stock awards
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|
An incentive to stay during and after a change in control. If
there is risk of forfeiture, a disincentive to stay or to
support the transaction may be created.
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|
The NEOs are kept whole, if they have a separation from service
following a change in control.
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ü
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|
18 months of medical or health coverage through COBRA
|
|
|
This is a minimal cost to the Company that creates a competitive
benefit.
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Guaranteed health coverage paid by the Company.
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ü
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3x the previous years Retirement Restoration allocation
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|
This is a minimal cost to the Company that creates a competitive
benefit.
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|
May allow those NEOs who are nearing retirement the ability to
receive a cash payment to make up for lost allocations due to a
change in control.
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ü
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|
Reimbursement of Legal Fees to enforce benefit
|
|
|
Keeps the NEO focused on the Company and not concerned about
their personal situation and whether acquiring company will
honor commitments after a change in control.
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Security during a non-stable period of time.
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Outplacement assistance
|
|
|
Helps to keep NEO focused on supporting the transaction and less
concerned about trying to secure another position.
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|
Because executive jobs are harder to secure, this benefit
assists the NEO in finding a comparable job.
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Gross up on excise and income tax
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Ensures that the change in control benefits discussed above are
delivered.
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|
Safety from paying the excise tax on a payment that the NEO
cannot control. The gross up helps to ensure the full benefit
intended to be delivered to the NEO is delivered.
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ü
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* |
|
Competitiveness was determined through a review of our
comparator companies change in control benefits. |
32
2009 Pay
Program Design Changes
Certain changes to our executive pay program have been made for
2009. Specifically, there have been changes made to our
comparator group, maximum funding for our annual cash incentive
plan, long-term incentive mix, and the metric used for the
three-year performance-based restricted stock unit award.
2009
Comparator Group
As discussed earlier, each year the Compensation Committee
reviews the comparator group to validate the list of comparator
companies and make any changes if appropriate. For 2009, in
addition to the comparator company criteria discussed earlier,
companies were chosen if their primary business was similar to
at least one of our business segments and the size of the
company was similar to ours. We also made adjustments for
companies that had been acquired in 2008. The comparator group
for 2009 consists of the following:
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Anadarko Petroleum Corp.
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|
Murphy Oil Corp.
|
Apache Corp.
|
|
NiSource Inc.
|
Centerpoint Energy
|
|
Noble Energy
|
Chesapeake Energy Corp.
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ONEOK Inc.
|
Devon Energy Corp.
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|
Plains All American Pipeline LP
|
Dominion Resources Inc.
|
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Questar Corp.
|
El Paso Corp.
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|
Sempra Energy
|
EOG Resources
|
|
Souther Union Co.
|
Equitable Resources
|
|
Spectra Energy Corp.
|
Hess Corp.
|
|
XTO Energy Inc.
|
2009
Annual Cash Incentive Plan
After review of the annual cash incentive plan, the Compensation
Committee approved a change to reduce the maximum annual cash
incentive pool funding from 400% to 250% and eliminated the
incentive reserve for the plan beginning in 2009.
2009
Long-term Incentive Mix
In order to motivate and incent NEOs to increase stockholder
value and restore some retention that has been lost due to the
current economic conditions, we changed the allocation of stock
awards in our long-term incentive plan for our NEOs, excluding
the CEO, in 2009. We continue to deliver a larger portion of
equity in performance-based awards and stock options because
they have the strongest stockholder alignment. Shown below is
the long-term incentive mix for 2009.
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NEOs
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(excluding CEO)
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Stock Options
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30%
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Time-Based Restricted Stock Units
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35%
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Performance-Based Restricted Stock Units
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35%
|
|
2009
Performance-based Restricted Stock Unit Metric
Setting a three-year
EVA®
performance goal for our performance-based restricted stock
units would be difficult in 2009 considering significant
uncertainty surrounding the current economic environment. While
we will maintain our focus on creating stockholder value through
EVA®
in our annual cash incentive plan, we will use three-year
relative and absolute Total Shareholder Return (TSR) metrics for
our performance-based restricted stock unit awards. This design
change has allowed us to remain committed to ensuring a
long-term performance focus as part of our equity program.
33
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
We have reviewed and discussed the foregoing Compensation
Discussion and Analysis with management. Based on our review and
discussions with management, we recommend to the Board of
Directors that the Compensation Discussion and Analysis be
included in this proxy statement and in our Annual Report on
Form 10-K
for the year ended December 31, 2008.
By the members of the Compensation Committee of the Board of
Directors:
W. R. Howell, Chairman
Kathleen B. Cooper
William R. Granberry
George A. Lorch
Frank T. MacInnis
Janice D. Stoney
34
EXECUTIVE
COMPENSATION AND OTHER INFORMATION
2008
Summary Compensation Table
The following table sets forth certain information with respect
to the compensation of the NEOs, based on total compensation
excluding change in pension value and nonqualified deferred
compensation earned during fiscal year 2008.
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Name and Principal
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Stock
|
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Option
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Incentive Plan
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Compensation
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All Other
|
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Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Awards1
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Awards2
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|
Compensation3
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|
Earnings4
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|
Compensation5
|
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Total
|
|
Steven J. Malcolm
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2008
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$
|
1,094,231
|
|
|
$
|
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|
$
|
(1,924,386
|
)
|
|
$
|
2,866,225
|
|
|
$
|
2,000,000
|
|
|
$
|
1,201,514
|
|
|
$
|
56,215
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|
|
$
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5,293,799
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|
Chairman, President &
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2007
|
|
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|
1,050,000
|
|
|
|
|
|
|
|
7,735,288
|
|
|
|
2,365,144
|
|
|
|
2,373,086
|
|
|
|
369,208
|
|
|
|
46,484
|
|
|
|
13,939,211
|
|
Chief Executive Officer
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|
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2006
|
|
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|
1,040,385
|
|
|
|
|
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3,390,725
|
|
|
|
3,047,585
|
|
|
|
2,309,630
|
|
|
|
540,860
|
|
|
|
14,712
|
|
|
|
10,343,896
|
|
Donald R. Chappel
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2008
|
|
|
|
597,115
|
|
|
|
|
|
|
|
(112,686
|
)
|
|
|
724,061
|
|
|
|
780,008
|
|
|
|
330,531
|
|
|
|
14,772
|
|
|
|
2,333,801
|
|
Senior Vice President,
|
|
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2007
|
|
|
|
572,115
|
|
|
|
|
|
|
|
2,300,815
|
|
|
|
736,725
|
|
|
|
925,752
|
|
|
|
126,797
|
|
|
|
14,459
|
|
|
|
4,676,664
|
|
Chief Financial Officer
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|
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2006
|
|
|
|
545,192
|
|
|
|
|
|
|
|
1,174,711
|
|
|
|
407,276
|
|
|
|
892,956
|
|
|
|
169,615
|
|
|
|
14,032
|
|
|
|
3,203,782
|
|
Ralph A. Hill
|
|
|
2008
|
|
|
|
480,962
|
|
|
|
|
|
|
|
(105,497
|
)
|
|
|
370,818
|
|
|
|
579,633
|
|
|
|
363,151
|
|
|
|
29,586
|
|
|
|
1,718,653
|
|
Senior Vice President,
|
|
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2007
|
|
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|
446,538
|
|
|
|
|
|
|
|
1,980,314
|
|
|
|
293,974
|
|
|
|
662,532
|
|
|
|
26,578
|
|
|
|
58,284
|
|
|
|
3,468,221
|
|
Exploration & Production
|
|
|
2006
|
|
|
|
416,154
|
|
|
|
|
|
|
|
852,201
|
|
|
|
242,915
|
|
|
|
621,798
|
|
|
|
115,723
|
|
|
|
39,862
|
|
|
|
2,288,653
|
|
Phillip D. Wright
|
|
|
2008
|
|
|
|
497,692
|
|
|
|
|
|
|
|
(79,091
|
)
|
|
|
315,913
|
|
|
|
557,418
|
|
|
|
381,705
|
|
|
|
10,010
|
|
|
|
1,683,647
|
|
Senior Vice President,
|
|
|
2007
|
|
|
|
477,692
|
|
|
|
|
|
|
|
1,534,603
|
|
|
|
251,496
|
|
|
|
669,676
|
|
|
|
68,048
|
|
|
|
9,801
|
|
|
|
3,011,317
|
|
Gas Pipelines
|
|
|
2006
|
|
|
|
456,154
|
|
|
|
|
|
|
|
785,796
|
|
|
|
228,206
|
|
|
|
644,014
|
|
|
|
146,148
|
|
|
|
9,496
|
|
|
|
2,269,813
|
|
Alan S. Armstrong
|
|
|
2008
|
|
|
|
480,962
|
|
|
|
|
|
|
|
(79,091
|
)
|
|
|
294,273
|
|
|
|
580,884
|
|
|
|
273,091
|
|
|
|
14,586
|
|
|
|
1,564,705
|
|
Senior Vice President,
|
|
|
2007
|
|
|
|
446,538
|
|
|
|
|
|
|
|
1,523,004
|
|
|
|
251,496
|
|
|
|
664,410
|
|
|
|
32,110
|
|
|
|
16,615
|
|
|
|
2,934,173
|
|
Midstream
|
|
|
2006
|
|
|
|
416,154
|
|
|
|
|
|
|
|
785,796
|
|
|
|
228,206
|
|
|
|
624,615
|
|
|
|
97,077
|
|
|
|
16,199
|
|
|
|
2,168,047
|
|
|
|
1 |
Stock Awards. Awards were granted under the
terms of the 2002 Incentive Plan and 2007 Incentive Plan.
Amounts shown are awards that were outstanding and expensed in
2008. Due to the discretion retained by the Compensation
Committee when determining the extent to which identified
long-term incentive performance measures have been attained and
the requirements of FAS 123(R) relating to establishment of
an accounting grant date, Williams applies variable accounting
for our performance-based restricted stock units until actual
performance is certified by the Compensation Committee. The
negative figures are related to the expense recognition of 2006
and 2007 performance-based restricted stock unit awards and are
based upon the closing stock price on December 31, 2008.
|
The grant date fair value of awards granted in 2008 can be found
in the Grants of Plan Based Awards in 2008 table.
Beginning with equity grants made in 2007, the restricted stock
units do not include the right to payment of dividends.
The assumptions used to value the stock awards can be found in
our Annual Report on
Form 10-K
for the year-ended December 31, 2008.
|
|
2 |
Option Awards. Awards are granted under the
terms of the 2002 Incentive Plan and 2007 Incentive Plan.
Amounts shown are awards that were outstanding and expensed in
2008. The grant date fair value of awards granted in 2008 can be
found in the Grants of Plan Based Awards in 2008
table.
|
The assumptions used to value the option awards can be found in
our Annual Report on
Form 10-K
for the year-ended December 31, 2008.
|
|
3 |
Non-Equity Incentive Plan. As stated in the
Compensation Discussion and Analysis in this proxy statement,
the annual cash incentive pool funds up to a maximum of
400 percent of target. Any award earned above
200 percent of target is placed in a reserve. However, the
2008 annual cash incentive plan did not pay out in excess of
200% so no additional amount was placed in the reserve for the
2008 performance period. The Compensation Committee and the CEO
reviewed each NEOs performance and contributions for the
year and adjusted the amount of each NEOs Company-funded
award based on individual performance and business unit
performance, where applicable. The total amount of the award is
shown for each NEO.
|
35
The annual cash incentive and reserve amounts paid in 2009 as it
relates to 2008 performance are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Amount of
|
|
|
|
Reserve
|
|
|
Total Bonus
|
|
|
Placed in
|
|
|
Reserve
|
|
|
|
Balance
|
|
|
for 2008
|
|
|
Reserve
|
|
|
Paid in 2009
|
|
|
Steven J. Malcolm
|
|
$
|
546,173
|
|
|
$
|
1,817,942
|
|
|
|
|
|
|
$
|
182,058
|
|
Donald R. Chappel
|
|
|
135,159
|
|
|
|
735,000
|
|
|
|
|
|
|
|
45,008
|
|
Ralph A. Hill
|
|
|
164,064
|
|
|
|
525,000
|
|
|
|
|
|
|
|
54,633
|
|
Phillip D. Wright
|
|
|
97,352
|
|
|
|
525,000
|
|
|
|
|
|
|
|
32,418
|
|
Alan S. Armstrong
|
|
|
167,819
|
|
|
|
525,000
|
|
|
|
|
|
|
|
55,884
|
|
|
|
4
|
Change in Pension Value and Nonqualified Deferred
Compensation Earnings. The amount shown is an
aggregate change from December 31, 2007 to
December 31, 2008 in the actuarial present value of the
accrued benefit under the qualified pension and supplemental
plan. Please refer to the Pension Benefits for 2008
table for further details of the present value of the accrued
benefit. The primary reason for the increase in present value in
2008 is due to the use of a reduced discount rate. The lower
discount rate results in a larger present value amount.
Likewise, the amounts shown for 2007, the change reflects the
use of an increased discount rate which decreases the present
value at the end of that year.
|
|
5
|
All Other Compensation. Amounts shown
represent payments made on behalf of the NEOs and includes life
insurance premium, a 401(k) matching contribution, and
perquisites (if applicable). Perquisites include financial
planning services, home security for the CEO and personal use of
the Company aircraft. The incremental cost method was used to
calculate the personal use of the Company aircraft. The
incremental cost calculation includes such items as fuel,
maintenance, weather and airport services, pilot meals, pilot
overnight expenses, aircraft telephone and catering. The amount
of perquisites for Mr. Hill and Mr. Malcolm is
included because the aggregate amount exceeds $10,000.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Company Aircraft
|
|
|
|
|
Financial Planning
|
|
|
Home Security
|
|
|
Personal Usage
|
|
Steven J. Malcolm
|
|
|
$
|
8,750
|
|
|
$
|
577
|
|
|
$
|
31,387
|
|
Ralph A. Hill
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
Notable
Items
The Compensation Committee considers the compensation of CEOs
from similarly-sized comparator companies when setting
Mr. Malcolms pay. It is the competitive norm for CEOs
to be paid more than other NEOs. In addition, the Compensation
Committee believes the difference in pay between the CEO and
other NEOs is consistent with our compensation philosophy
(summarized in the Compensation Discussion and Analysis), which
considers the external (market) and internal value of each job
to the Company along with the incumbents experience and
performance of the job in setting pay. The CEOs job is
different from the other NEOs because the CEO has ultimate
responsibility for performance results and is accountable to the
Board and stockholders. Consequently, the Compensation Committee
believes it is appropriate for the CEOs pay to be higher.
Mr. Chappels base pay, annual cash incentive target
and long-term incentive amounts for 2008 are higher than other
NEOs (other than the CEO) because of the impact of his role and
market data. Because Mr. Chappel directly interfaces with
stockholders and has greater accountability to stockholders his
pay is greater than that of the other NEOs, excluding the CEO.
36
Grants of
Plan Based Awards in Fiscal Year 2008
The following table sets forth certain information with respect
to the grant of stock options, restricted stock units and awards
payable under the Companys annual cash incentive plan
during the last fiscal year to the NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
|
Estimated Future Payouts Under
|
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
of Stock
|
|
|
|
Grant
|
|
|
|
Non-Equity Incentive Plan
Awards1
|
|
|
|
Equity Incentive Plan Awards
|
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
and Option
|
|
Name
|
|
Date
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
Threshold
|
|
|
Target2
|
|
|
Maximum
|
|
|
|
or
Units3
|
|
|
Options4
|
|
|
Awards
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Malcolm
|
|
|
2/25/2008
|
|
|
|
$
|
182,058
|
|
|
$
|
1,276,288
|
|
|
$
|
3,100,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,391
|
|
|
$
|
36.50
|
|
|
$
|
2,789,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,192
|
|
|
|
164,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald R. Chappel
|
|
|
2/25/2008
|
|
|
|
|
45,053
|
|
|
|
492,889
|
|
|
|
1,239,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,772
|
|
|
|
36.50
|
|
|
|
651,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,822
|
|
|
|
79,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,453,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,911
|
|
|
|
|
|
|
|
|
|
|
|
726,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph A. Hill
|
|
|
2/25/2008
|
|
|
|
|
54,688
|
|
|
|
367,313
|
|
|
|
888,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,587
|
|
|
|
36.50
|
|
|
|
495,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,264
|
|
|
|
60,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,104,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,132
|
|
|
|
|
|
|
|
|
|
|
|
552,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip D. Wright
|
|
|
2/25/2008
|
|
|
|
|
32,451
|
|
|
|
355,951
|
|
|
|
895,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,463
|
|
|
|
36.50
|
|
|
|
390,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,893
|
|
|
|
47,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
872,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,946
|
|
|
|
|
|
|
|
|
|
|
|
436,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan S. Armstrong
|
|
|
2/25/2008
|
|
|
|
|
55,940
|
|
|
|
372,202
|
|
|
|
899,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,463
|
|
|
|
36.50
|
|
|
|
390,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,893
|
|
|
|
47,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
872,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,946
|
|
|
|
|
|
|
|
|
|
|
|
436,029
|
|
|
|
1 |
Non-Equity Incentive Awards. Awards from the 2008
annual cash incentive plan (AIP) are shown.
|
|
|
|
|
|
Threshold: Because one-third of the AIP reserve
balance is payable upon meeting threshold performance, one-third
of the NEOs reserve balance is shown.
|
|
|
|
Target: The amount shown is based upon an
EVA®
attainment of 100% plus one-third of the AIP reserve.
|
|
|
|
Maximum: The maximum amount the NEOs can receive is
400% of their AIP target. However, any amount earned above 200%
of target is placed into the AIP reserve. After adding the
excess amount to the reserve, one-third of the new balance is
paid to the NEO. The calculation is as follows:
|
|
|
|
|
|
Maximum amount that can be earned in a year
|
|
=
|
|
Base Pay * AIP Target% * 400%
EVA®
Attainment
|
|
|
|
|
|
Maximum amount that can be paid in a year
|
|
=
|
|
(Base Pay * AIP Target% * 200%
EVA®
Attainment)
Plus
(Greater Than 200%
EVA®
Attainment + AIP Reserve)
¸
3
|
|
|
2
|
Represents performance-based restricted stock units granted
under the 2007 Incentive Plan. Performance-based restricted
stock units can be earned over a three-year period only if the
established
EVA®
performance target is met and the NEO is employed on the
certification date, subject to certain exceptions such as the
executives death or disability. These shares will be
distributed no earlier than the third anniversary of the grant.
If performance plan goals are exceeded, the NEO can receive up
to 200% of target. If plan goals are not met, the NEO can
receive as little as 0% of target.
|
|
3
|
Equity Incentive Awards. Time-based restricted stock
units granted under the 2007 Incentive Plan. Time-based shares
vest three years from the grant date of February 25, 2008
on February 25, 2011.
|
|
4
|
Stock Options were granted under the 2007 Incentive Plan. Stock
options granted in 2008 become exercisable in three equal annual
installments beginning one year after the grant date. One-third
of the options vested on February 25, 2009. Another
one-third will vest on February 25, 2010, with the final
one-third vesting on February 25, 2011. Once vested, stock
options are exercisable for a period of 10 years from the
grant date.
|
37
Outstanding
Equity Awards at 2008 Fiscal Year-End
The following table sets forth certain information with respect
to the outstanding equity awards held by the NEOs at the end of
2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Unearned
|
|
|
Payout Value
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Shares,
|
|
|
of Unearned
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Units of
|
|
|
shares, Units
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Stock or
|
|
|
or Other
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Other Rights
|
|
|
Rights That
|
|
|
|
|
Grant
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Expiration
|
|
|
|
Grant
|
|
|
Have Not
|
|
|
Have Not
|
|
|
That Have
|
|
|
Have Not
|
|
Name
|
|
|
Date1
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Date
|
|
|
|
Date
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Vested4
|
|
Steven J. Malcolm
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
217,391
|
|
|
|
|
|
|
$
|
36.50
|
|
|
|
2/25/2018
|
|
|
|
|
2/25/20083
|
|
|
|
|
|
|
|
|
|
|
|
82,192
|
|
|
$
|
1,190,140
|
|
|
|
|
|
2/26/2007
|
|
|
|
66,666
|
|
|
|
133,334
|
|
|
|
|
|
|
|
28.30
|
|
|
|
2/26/2017
|
|
|
|
|
2/26/20073
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
1,448,000
|
|
|
|
|
|
3/3/2006
|
|
|
|
166,666
|
|
|
|
83,334
|
|
|
|
|
|
|
|
21.67
|
|
|
|
3/3/2016
|
|
|
|
|
3/3/20063
|
|
|
|
|
|
|
|
|
|
|
|
110,000
|
|
|
|
1,592,800
|
|
|
|
|
|
2/25/2005
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
19.29
|
|
|
|
2/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/5/2004
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
9.93
|
|
|
|
2/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/27/2002
|
|
|
|
475,000
|
|
|
|
|
|
|
|
|
|
|
|
2.58
|
|
|
|
11/27/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2002
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
15.86
|
|
|
|
2/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2001
|
|
|
|
33,333
|
|
|
|
|
|
|
|
|
|
|
|
26.79
|
|
|
|
9/19/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/2/2001
|
|
|
|
27,232
|
|
|
|
|
|
|
|
|
|
|
|
39.98
|
|
|
|
4/2/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/18/2001
|
|
|
|
114,373
|
|
|
|
|
|
|
|
|
|
|
|
34.77
|
|
|
|
1/18/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/16/2000
|
|
|
|
65,356
|
|
|
|
|
|
|
|
|
|
|
|
42.29
|
|
|
|
3/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/16/1999
|
|
|
|
10,893
|
|
|
|
|
|
|
|
|
|
|
|
37.18
|
|
|
|
9/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/18/1999
|
|
|
|
10,893
|
|
|
|
|
|
|
|
|
|
|
|
36.66
|
|
|
|
3/18/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald R. Chappel
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
50,772
|
|
|
|
|
|
|
|
36.50
|
|
|
|
2/25/2018
|
|
|
|
|
2/25/20082
|
|
|
|
|
|
|
|
|
|
|
|
19,911
|
|
|
|
288,311
|
|
|
|
|
|
2/26/2007
|
|
|
|
16,150
|
|
|
|
32,300
|
|
|
|
|
|
|
|
28.30
|
|
|
|
2/26/2017
|
|
|
|
|
2/25/20083
|
|
|
|
|
|
|
|
|
|
|
|
39,822
|
|
|
|
576,623
|
|
|
|
|
|
3/3/2006
|
|
|
|
27,947
|
|
|
|
13,974
|
|
|
|
|
|
|
|
21.67
|
|
|
|
3/3/2016
|
|
|
|
|
2/26/20072
|
|
|
|
|
|
|
|
|
|
|
|
19,069
|
|
|
|
276,119
|
|
|
|
|
|
2/25/2005
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
19.29
|
|
|
|
2/25/2015
|
|
|
|
|
2/26/20073
|
|
|
|
|
|
|
|
|
|
|
|
38,139
|
|
|
|
552,253
|
|
|
|
|
|
2/5/2004
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
9.93
|
|
|
|
2/5/2014
|
|
|
|
|
3/3/20062
|
|
|
|
|
|
|
|
|
|
|
|
18,164
|
|
|
|
263,015
|
|
|
|
|
|
4/16/2003
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
5.10
|
|
|
|
4/16/2013
|
|
|
|
|
3/3/20063
|
|
|
|
|
|
|
|
|
|
|
|
36,328
|
|
|
|
526,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph A. Hill
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
38,587
|
|
|
|
|
|
|
|
36.50
|
|
|
|
2/25/2018
|
|
|
|
|
2/25/20082
|
|
|
|
|
|
|
|
|
|
|
|
15,132
|
|
|
|
219,111
|
|
|
|
|
|
2/26/2007
|
|
|
|
14,535
|
|
|
|
29,070
|
|
|
|
|
|
|
|
28.30
|
|
|
|
2/26/2017
|
|
|
|
|
2/25/20083
|
|
|
|
|
|
|
|
|
|
|
|
30,264
|
|
|
|
438,223
|
|
|
|
|
|
3/3/2006
|
|
|
|
20,325
|
|
|
|
10,163
|
|
|
|
|
|
|
|
21.67
|
|
|
|
3/3/2016
|
|
|
|
|
2/26/20072
|
|
|
|
|
|
|
|
|
|
|
|
17,162
|
|
|
|
248,506
|
|
|
|
|
|
2/25/2005
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
19.29
|
|
|
|
2/25/2015
|
|
|
|
|
2/26/20073
|
|
|
|
|
|
|
|
|
|
|
|
34,325
|
|
|
|
497,026
|
|
|
|
|
|
1/18/2001
|
|
|
|
22,875
|
|
|
|
|
|
|
|
|
|
|
|
34.77
|
|
|
|
1/18/2011
|
|
|
|
|
3/3/20062
|
|
|
|
|
|
|
|
|
|
|
|
13,210
|
|
|
|
191,281
|
|
|
|
|
|
3/16/2000
|
|
|
|
22,875
|
|
|
|
|
|
|
|
|
|
|
|
42.29
|
|
|
|
3/16/2010
|
|
|
|
|
3/3/20063
|
|
|
|
|
|
|
|
|
|
|
|
26,420
|
|
|
|
382,562
|
|
|
|
|
|
9/16/1999
|
|
|
|
8,169
|
|
|
|
|
|
|
|
|
|
|
|
37.18
|
|
|
|
9/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/18/1999
|
|
|
|
8,169
|
|
|
|
|
|
|
|
|
|
|
|
36.66
|
|
|
|
3/18/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip D. Wright
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
30,463
|
|
|
|
|
|
|
|
36.50
|
|
|
|
2/25/2018
|
|
|
|
|
2/25/20082
|
|
|
|
|
|
|
|
|
|
|
|
11,946
|
|
|
|
172,978
|
|
|
|
|
|
2/26/2007
|
|
|
|
11,305
|
|
|
|
22,610
|
|
|
|
|
|
|
|
28.30
|
|
|
|
2/26/2017
|
|
|
|
|
2/25/20083
|
|
|
|
|
|
|
|
|
|
|
|
23,893
|
|
|
|
345,971
|
|
|
|
|
|
3/3/2006
|
|
|
|
16,090
|
|
|
|
8,046
|
|
|
|
|
|
|
|
21.67
|
|
|
|
3/3/2016
|
|
|
|
|
2/26/20072
|
|
|
|
|
|
|
|
|
|
|
|
13,349
|
|
|
|
193,294
|
|
|
|
|
|
2/25/2005
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
19.29
|
|
|
|
2/25/2015
|
|
|
|
|
2/26/20073
|
|
|
|
|
|
|
|
|
|
|
|
26,697
|
|
|
|
386,573
|
|
|
|
|
|
2/5/2004
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
9.93
|
|
|
|
2/5/2014
|
|
|
|
|
3/3/20062
|
|
|
|
|
|
|
|
|
|
|
|
10,458
|
|
|
|
151,432
|
|
|
|
|
|
11/27/2002
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
2.58
|
|
|
|
11/27/2012
|
|
|
|
|
3/3/20063
|
|
|
|
|
|
|
|
|
|
|
|
20,916
|
|
|
|
302,864
|
|
|
|
|
|
2/11/2002
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
15.86
|
|
|
|
2/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2001
|
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
|
|
26.79
|
|
|
|
9/19/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/18/2001
|
|
|
|
9,803
|
|
|
|
|
|
|
|
|
|
|
|
34.77
|
|
|
|
1/18/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/16/2000
|
|
|
|
20,424
|
|
|
|
|
|
|
|
|
|
|
|
42.29
|
|
|
|
3/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/16/1999
|
|
|
|
8,169
|
|
|
|
|
|
|
|
|
|
|
|
37.18
|
|
|
|
9/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/18/1999
|
|
|
|
8,169
|
|
|
|
|
|
|
|
|
|
|
|
36.66
|
|
|
|
3/18/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan S. Armstrong
|
|
|
|
2/25/2008
|
|
|
|
|
|
|
|
30,463
|
|
|
|
|
|
|
|
36.50
|
|
|
|
2/25/2018
|
|
|
|
|
2/25/20082
|
|
|
|
|
|
|
|
|
|
|
|
11,946
|
|
|
|
172,978
|
|
|
|
|
|
2/26/2007
|
|
|
|
11,305
|
|
|
|
22,610
|
|
|
|
|
|
|
|
28.30
|
|
|
|
2/26/2017
|
|
|
|
|
2/25/20083
|
|
|
|
|
|
|
|
|
|
|
|
23,893
|
|
|
|
345,971
|
|
|
|
|
|
3/3/2006
|
|
|
|
16,090
|
|
|
|
8,046
|
|
|
|
|
|
|
|
21.67
|
|
|
|
3/3/2016
|
|
|
|
|
2/26/20072
|
|
|
|
|
|
|
|
|
|
|
|
13,349
|
|
|
|
193,294
|
|
|
|
|
|
2/25/2005
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
19.29
|
|
|
|
2/25/2015
|
|
|
|
|
2/26/20073
|
|
|
|
|
|
|
|
|
|
|
|
26,697
|
|
|
|
386,573
|
|
|
|
|
|
2/5/2004
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
9.93
|
|
|
|
2/5/2014
|
|
|
|
|
3/3/20062
|
|
|
|
|
|
|
|
|
|
|
|
10,458
|
|
|
|
151,432
|
|
|
|
|
|
11/27/2002
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
2.58
|
|
|
|
11/27/2012
|
|
|
|
|
3/3/20063
|
|
|
|
|
|
|
|
|
|
|
|
20,916
|
|
|
|
302,864
|
|
|
|
|
|
5/16/2002
|
|
|
|
7,917
|
|
|
|
|
|
|
|
|
|
|
|
15.71
|
|
|
|
5/16/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/2002
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
15.86
|
|
|
|
2/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/18/2001
|
|
|
|
14,297
|
|
|
|
|
|
|
|
|
|
|
|
34.77
|
|
|
|
1/18/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/16/2000
|
|
|
|
11,437
|
|
|
|
|
|
|
|
|
|
|
|
42.29
|
|
|
|
3/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/16/1999
|
|
|
|
5,719
|
|
|
|
|
|
|
|
|
|
|
|
37.18
|
|
|
|
9/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/18/1999
|
|
|
|
5,719
|
|
|
|
|
|
|
|
|
|
|
|
36.66
|
|
|
|
3/18/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
Stock
Options
|
|
1 |
The following table reflects the vesting schedules for
associated stock option grant dates for awards that had not been
100% vested as of December 31, 2008:
|
|
|
|
|
|
Grant Date
|
|
Vesting Schedule
|
|
Vesting Dates
|
|
2/25/2008
|
|
One-third vests each year for three years
|
|
2/25/2009, 2/25/2010, 2/25/2011
|
2/26/2007
|
|
One-third vests each year for three years
|
|
2/26/2008, 2/26/2009, 2/26/2010
|
3/03/2006
|
|
One-third vests each year for three years
|
|
3/03/2007, 3/03/2008, 3/03/2009
|
Stock
Awards
|
|
2 |
The following table reflects the vesting dates for associated
time-based restricted stock unit award grant dates:
|
|
|
|
|
|
Grant Date
|
|
Vesting Schedule
|
|
Vesting Dates
|
|
2/25/2008
|
|
100% vests in three years
|
|
2/25/2011
|
2/26/2007
|
|
100% vests in three years
|
|
2/26/2010
|
3/03/2006
|
|
100% vests in three years
|
|
3/03/2009
|
|
|
3
|
All performance-based restricted stock units are subject to
attainment of performance targets established by the
Compensation Committee. These awards will vest no earlier than
the end of the performance period and therefore do not have a
specific vesting date. The awards included on the table are
outstanding as of December 31, 2008.
|
|
4
|
Values are based on a closing stock price of $14.48 on
December 31, 2008.
|
Option
Exercises and Stock Vested in Fiscal Year 2008
The following table sets forth certain information with respect
to options exercised by the NEO and stock that vested during
fiscal year 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
Name
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
|
Steven J. Malcolm
|
|
|
5,446
|
|
|
|
$20,771
|
|
|
|
233,092
|
|
|
$
|
7,511,879
|
|
Donald R. Chappel
|
|
|
25,000
|
|
|
|
795,593
|
|
|
|
49,942
|
|
|
|
1,682,045
|
|
Ralph A. Hill
|
|
|
38,780
|
|
|
|
959,379
|
|
|
|
36,994
|
|
|
|
1,244,654
|
|
Phillip D. Wright
|
|
|
91,338
|
|
|
|
2,901,095
|
|
|
|
36,994
|
|
|
|
1,244,654
|
|
Alan S. Armstrong
|
|
|
7,624
|
|
|
|
29,795
|
|
|
|
36,994
|
|
|
|
1,244,654
|
|
The amounts realizable from prior compensation thus far have not
been a material factor when the Compensation Committee
determines pay. The Compensation Committee sets pay based on a
target total compensation amount. How much compensation the NEOs
receive depends on stock market performance of the
Companys shares.
Retirement
Plan
The retirement plan for the Companys NEOs consists of two
programs: the pension plan and the retirement restoration plan
as described below. Together these plans provide the same
benefits to our NEOs as the pension plan provides to all other
employees of the Company. The retirement restoration plan was
implemented to address the Codes annual compensation limit.
39
Pension
Plan
Our NEOs who have completed one year of service participate in
our pension plan on the same terms as our other employees. Our
pension plan is a noncontributory, tax qualified defined benefit
plan (with a cash balance design) subject to the Employee
Retirement Income Security Act of 1974, as amended.
Each year, participants earn compensation credits that are
posted to their cash balance account. The annual compensation
credits are equal to the sum of a percentage of eligible pay
(base pay and certain bonuses) and a percentage of eligible pay
greater than the social security wage base. The percentage
credited is based upon the participants age as shown in
the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percent of Eligible Pay Greater
|
|
Age
|
|
Eligible Pay
|
|
|
|
|
|
than the Social Security Wage Base
|
|
|
Less than 30
|
|
|
4.5%
|
|
|
|
+
|
|
|
|
1%
|
|
30-39
|
|
|
6%
|
|
|
|
+
|
|
|
|
2%
|
|
40-49
|
|
|
8%
|
|
|
|
+
|
|
|
|
3%
|
|
50 or over
|
|
|
10%
|
|
|
|
+
|
|
|
|
5%
|
|
For participants who were active employees and participants
under the plan on March 31, 1998, and April 1, 1998,
the percentage of eligible pay is increased by 0.3% multiplied
by the participants total years of benefit service earned
as of March 31, 1998.
In addition, interest is credited to account balances quarterly
at a rate determined annually in accordance with the terms of
the plan.
The monthly annuity available to those who take normal
retirement is based on the participants account balance as
of the date of retirement. Normal retirement age is 65. Early
retirement eligibility begins at 55. At retirement, participants
may choose to receive a single-life annuity or they may choose
one of several other forms of payment having an actuarial value
equal to that of the single-life annuity.
Retirement
Restoration Plan
The Code limits the pension benefits based on the annual
compensation limit that can be accrued in tax-qualified defined
benefit plans, such as our pension plan. Any reduction in an
NEOs pension benefit accrual due to these limits will be
compensated, subject to a cap, under an unfunded top hat plan,
our retirement restoration plan.
The elements of compensation that are included in applying the
payment and benefit formula for the retirement restoration plan
are the same elements that are used, except for application of a
cap, in the base pension plan for all employees. The elements of
pay included in that definition are total base pay, including
any overtime, base pay-reduction amounts, and cash bonus awards,
if paid (unless specifically excluded under a written bonus or
incentive-pay arrangement). Specifically excluded from the
definition are severance pay, cost-of-living pay, housing pay,
relocation pay (including mortgage interest differential),
taxable and non-taxable fringe benefits and all other
extraordinary pay, including any amounts received from equity
compensation awards.
With respect to bonuses, annual cash incentives are considered
in determining eligible pay under the pension plan. Long-term
equity compensation incentives are not considered.
40
Pension
Benefits for 2008
The following table sets forth certain information with respect
to the actuarial present value of the accrued benefit under the
qualified pension and retirement restoration plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Payments
|
|
|
|
|
|
Years Credited
|
|
|
Present Value of
|
|
|
During Last
|
|
Name
|
|
Plan Name
|
|
Services
|
|
|
Accrued
Benefit1
|
|
|
Fiscal Year
|
|
|
Steven J.
Malcolm2 3
|
|
Pension Plan
|
|
|
25
|
|
|
$
|
634,650
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
25
|
|
|
|
3,548,292
|
|
|
|
|
|
Donald R.
Chappel3
|
|
Pension Plan
|
|
|
6
|
|
|
|
154,945
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
6
|
|
|
|
801,236
|
|
|
|
|
|
Ralph A. Hill
|
|
Pension Plan
|
|
|
25
|
|
|
|
400,217
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
25
|
|
|
|
764,172
|
|
|
|
|
|
Phillip D. Wright
|
|
Pension Plan
|
|
|
20
|
|
|
|
366,719
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
20
|
|
|
|
874,152
|
|
|
|
|
|
Alan S. Armstrong
|
|
Pension Plan
|
|
|
23
|
|
|
|
271,701
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
23
|
|
|
|
507,283
|
|
|
|
|
|
|
|
1
|
The primary actuarial assumptions used to determine the present
values include an annual interest credit to normal retirement
age equal to 5%, a discount rate equal to 6.0%.
|
|
2
|
If Mr. Malcolm were to retire from active service prior to
age 65, he would be eligible to receive an enhanced
retirement based on his Rule of 55 eligibility. The Rule of 55
is a transition benefit that was provided to all employees
meeting the eligibility criteria at the time the Companys
pension plan was converted from a final average pay formula to a
cash balance formula. To be eligible for the Rule of 55
enhancement an employees age and years of service at the
time of the cash balance conversion in 1998 must have totaled 55.
|
|
3
|
Mr. Malcolm and Mr. Chappel are the only NEOs eligible
to retire as of 12/31/2008.
|
Nonqualified
Deferred Compensation
A nonqualified deferred compensation table has not been
disclosed because we do not provide this type of program for any
of our NEOs or other employees.
Change In
Control Agreements
We have entered into change in control agreements with each of
the NEOs. These agreements are intended to provide for
continuity of management if there is a change in control of the
Company.
The agreements define a change in control as any of
the following:
|
|
|
|
|
Any person or group (other than an Affiliate of Williams or an
employee benefit plan of Williams or an Affiliate of Williams)
becomes a Beneficial Owner, as such term is defined under the
Exchange Act, of 20% or more of the Companys common stock
or 20% or more of the combined voting power of all securities
entitled to vote generally in the election of directors
(Voting Securities), unless such person owned both
more than 75% of common stock and Voting Securities, directly or
indirectly, immediately before such acquisition in substantially
the same proportion as their ownership immediately before such
acquisition;
|
|
|
|
The Williams directors as of a date certain (Existing
Directors) and directors approved after that date by at
least two-thirds of the Existing Directors cease to constitute a
majority of the directors of Williams;
|
|
|
|
Consummation of any merger, consolidation, recapitalization or
reorganization or similar transaction (Reorganization
Transaction), other than a Reorganization Transaction that
results in the person who was the direct or indirect owner of
the outstanding common stock and Voting Securities of the
Company prior to the transaction becoming, immediately, after
the transaction the owner of at least 65% of the common stock
then outstanding and Voting Securities representing 65% of the
combined voting power of the
|
41
|
|
|
|
|
then outstanding Voting Securities of the surviving corporation
in substantially the same respective proportion as that
persons ownership immediately before such Reorganization
Transaction;
|
|
|
|
|
|
approval by the stockholders of Williams of the complete
liquidation of Williams or the sale or other disposition of all
or substantially all of the consolidated assets of Williams
other than a transaction that would result in (i) a related
party owning more than 50% of the assets of Williams immediately
prior to the transaction; or (ii) the persons who were the
direct or indirect owners of Williams outstanding common stock
and Voting Securities prior to the transaction continues to own,
directly or indirectly, 50% or more of the assets owned by
Williams immediately prior to the transaction.
|
A change in control shall not occur if:
|
|
|
|
|
the NEO agrees in writing prior to an event that such an event
is not a change in control; or
|
|
|
|
the Board determines that a liquidation, sale or other
disposition, described in the fourth bullet above, that was
approved by the stockholders shall not occur, except to the
extent termination occurred prior to such determination.
|
If during the term of the agreement, a change in control occurs,
each NEO is entitled to the following:
If the employment of any NEO is terminated (i) other than
for cause (as defined below), disability (a physical
or mental infirmity which impairs the NEOs ability to
substantially perform his duties for twelve months or more),
death or a disqualification disaggregation (as
defined below) or (ii) he resigns for good
reason (generally, a material adverse change in the
NEOs title, position or responsibilities, a reduction in
the NEOs base salary, a reduction in the NEOs annual
bonus, relocation, a material reduction in the level of employee
benefits, a material breach by the Company of its obligations
under the change in control agreement, a successor
companys failure to honor the agreement, or the failure of
the Board to provide written notice of the act or omission
constituting cause) each is entitled to the
following:
|
|
|
|
|
Within 10 days after the termination date:
|
|
|
|
|
|
Accrued but unpaid base salary, accrued earned but unpaid cash
incentive, and accrued but unpaid paid time off (lump sum
payment);
|
|
|
|
|
|
On the first business day following six months after the
termination date:
|
|
|
|
|
|
Prorated annual bonus for the year of separation through the
termination date (lump sum payment);
|
|
|
|
A severance amount equal to three times his then base salary
plus an annual bonus amount (such bonus amount being his target
percentage times his base salary in effect at the termination
date as if performance goals were achieved at 100%) (lump sum
payment);
|
|
|
|
Receipt of an amount equal to three times the total allocations
made by Williams for the NEO in the preceding calendar year
under our retirement restoration plan (lump sum payment);
|
|
|
|
Receipt of an amount equal to the sum of the value of the
unvested portion of the NEOs accounts or accrued benefits
under the Companys 401K plan (lump sum payment);
|
|
|
|
|
|
Continued participation in the Companys medical benefit
plans for the lesser of a post-termination coverage period that
has been elected by the NEO or 18 months, in the same
manner and at the same cost of similar situated employees;
|
|
|
|
All restrictions on stock options held by the NEO shall lapse,
and the options shall vest and become immediately exercisable;
|
|
|
|
All restricted stock shall vest and shall be paid out only in
accordance with the terms of the respective award agreements;
|
|
|
|
Continued participation in the Companys Directors and
Officers Liability Insurance for six years;
|
|
|
|
Indemnification as set forth under the Companys
bylaws; and
|
42
|
|
|
|
|
Outplacement benefits for six months at a cost not exceeding
$25,000.
|
In addition, each NEOs is generally entitled to receive a
gross-up
payment in an amount sufficient to make him whole for any
federal excise tax on excess parachute payments imposed under
Section 280G and 4999 of the Code.
If, an NEOs employment is terminated for cause, other than good
reason or death or disability the NEO is entitled to:
|
|
|
|
|
Accrued but unpaid base salary, accrued earned but unpaid cash
incentive, and accrued but unpaid paid time off (lump sum
payment);
|
Cause means an NEOs
|
|
|
|
|
conviction of or a plea of nolo contendere to a felony or a
crime involving fraud, dishonesty or moral turpitude;
|
|
|
|
willful or reckless material misconduct in the performance of
his duties which has an adverse effect on Williams or any of its
subsidiaries or affiliates;
|
|
|
|
willful or reckless violation or disregard of the code of
business conduct of Williams or the policies of its subsidiaries;
|
|
|
|
habitual or gross neglect of his duties.
|
Cause generally does not include bad judgment or negligence,
acts or omissions made in good faith after reasonable
investigation by the NEO or acts or omissions with respect to
which the Board determines that the NEO had satisfied the
standards of conduct for indemnification or reimbursement under
the Companys bylaws or indemnification agreement, or
failure to meet performance goals, objectives or measures if
efforts to do so were made in good faith within a defined period.
A disqualification disaggregation means:
|
|
|
|
|
the termination of an NEO from Williams or an Affiliates
employ prior to the date of a change in control for any reason
including, terminations effected by a spin off, sale or other
disaggregation by Williams or such Affiliate of a business unit;
|
|
|
|
the termination of an NEOs employment by a successor after
the date of the change in control and ending on the second
anniversary of the change in control due to a disaggregation if
the NEO is employed in substantially the same position and the
Williams change in control agreement is assumed by the successor.
|
Termination
Scenarios
The following table sets forth circumstances that provide for
payments to the NEOs following or in connection with a change in
control of the Company, or an NEOs termination of
employment, including resignation, severance, retirement, death
and disability. NEOs are generally eligible to retire at the
earlier of age 55 and completion of 3 years of service
or age 65.
All values are based on a termination date of December 31,
2008, as well as a closing stock price of $14.48 on such date,
the last business day of the year. The values shown are intended
to provide reasonable estimates of the potential benefits the
NEOs would receive upon termination. Because the values are
based on various assumptions they may not represent the actual
amount received. In addition to the amounts disclosed in the
following table, the NEOs would retain the amounts that have
been earned over the course of their employment prior to the
termination event, such as the NEOs accrued retirement benefits
and previously vested stock options and restricted stock units.
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
|
|
|
|
Death &
|
|
|
Not for
|
|
|
|
|
Name
|
|
Payment
|
|
Cause1
|
|
|
Retirement2
|
|
|
Disability3
|
|
|
Cause4
|
|
|
CIC5
|
|
|
|
Malcolm, Steven J
|
|
AIP Reserve
|
|
|
|
|
|
$
|
546,173
|
|
|
$
|
546,173
|
|
|
$
|
546,173
|
|
|
$
|
546,173
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
|
|
|
|
2,675,550
|
|
|
|
2,675,550
|
|
|
|
2,675,550
|
|
|
|
4,230,940
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,600,000
|
|
|
|
Outplacement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
Health & Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,957
|
|
|
|
RRP Enhancement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,692,013
|
|
|
|
Tax Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,112,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
3,221,723
|
|
|
$
|
3,221,723
|
|
|
$
|
3,221,723
|
|
|
$
|
18,222,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chappel, Donald R
|
|
AIP Reserve
|
|
|
|
|
|
|
135,159
|
|
|
|
135,159
|
|
|
|
135,159
|
|
|
|
135,159
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
|
|
|
|
1,469,777
|
|
|
|
1,807,299
|
|
|
|
1,807,299
|
|
|
|
2,482,350
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,150,000
|
|
|
|
Outplacement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
Health & Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,514
|
|
|
|
RRP Enhancement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558,032
|
|
|
|
Tax Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,170,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
1,604,936
|
|
|
$
|
1,942,458
|
|
|
$
|
1,942,458
|
|
|
$
|
8,544,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hill, Ralph A
|
|
AIP Reserve
|
|
|
|
|
|
|
164,064
|
|
|
|
164,064
|
|
|
|
164,064
|
|
|
|
164,064
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
|
|
|
|
1,164,218
|
|
|
|
1,435,046
|
|
|
|
1,435,046
|
|
|
|
1,976,708
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400,750
|
|
|
|
Outplacement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
Health & Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,165
|
|
|
|
RRP Enhancement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406,671
|
|
|
|
Tax Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
1,328,282
|
|
|
$
|
1,599,110
|
|
|
$
|
1,599,110
|
|
|
$
|
4,996,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wright, Phillip D
|
|
AIP Reserve
|
|
|
|
|
|
|
97,352
|
|
|
|
97,352
|
|
|
|
97,352
|
|
|
|
97,352
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
|
|
|
|
914,953
|
|
|
|
1,127,670
|
|
|
|
1,127,670
|
|
|
|
1,553,110
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,475,000
|
|
|
|
Outplacement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
Health & Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,172
|
|
|
|
RRP Enhancement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
476,926
|
|
|
|
Tax Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
1,012,305
|
|
|
$
|
1,225,023
|
|
|
$
|
1,225,023
|
|
|
$
|
4,643,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armstrong, Alan S
|
|
AIP Reserve
|
|
|
|
|
|
|
167,819
|
|
|
|
167,819
|
|
|
|
167,819
|
|
|
|
167,819
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
|
|
|
|
914,953
|
|
|
|
1,127,670
|
|
|
|
1,127,670
|
|
|
|
1,553,110
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400,750
|
|
|
|
Outplacement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
Health & Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,514
|
|
|
|
RRP Enhancement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
360,989
|
|
|
|
Tax Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
1,082,772
|
|
|
$
|
1,295,490
|
|
|
$
|
1,295,490
|
|
|
$
|
4,531,183
|
|
|
|
|
|
|
1 |
|
If an NEO is terminated for cause or leaves the Company
voluntarily, no additional benefits will be received. |
|
2 |
|
If an NEO retires then all unvested stock options will fully
accelerate. A pro-rated portion of the unvested time based
restricted stock units will accelerate and a pro-rated portion
of any performance based restricted stock units will vest
pending certification by the Compensation Committee that the
performance measures were met. |
|
3 |
|
If an NEO dies or becomes disabled then all unvested stock
options will fully accelerate. All unvested time based
restricted stock units will fully accelerate and a pro-rated
portion of any performance based restricted |
44
|
|
|
|
|
stock units will vest pending certification by the Compensation
Committee that the performance measures were met. |
|
4 |
|
If an NEO is terminated without cause then all unvested stock
options cancel. All unvested time based restricted stock units
will fully accelerate and a pro-rated portion of any performance
based restricted stock units will vest pending certification by
the Compensation Committee that the performance measures were
met. |
|
5 |
|
Upon a change in control, all unvested stock options accelerate.
All unvested time based restricted stock units fully accelerate
and performance based restricted stock units will accelerate at
target. |
Please note that we make no assumptions as to the achievement of
performance goals as it relates to the performance based
restricted stock units. If the award is covered by
Section 409A of the Code, lump sum payments and
distributions occurring from these events will occur six months
after the triggering event.
Only non-employee directors receive director fees. In 2008, the
Company paid non-employee directors:
|
|
|
|
|
$110,000 annual retainer ($75,000 paid in cash and $35,000 paid
in stock); and
|
|
|
|
3,000 restricted stock units.
|
Chairpersons of each of the Compensation, Finance, Litigation,
and Nominating and Governance Committees received an additional
annual retainer of $10,000 while the chairperson of the Audit
Committee received an additional annual retainer of $15,000.
Mr. Howell received additional compensation of $20,000 for
his services as Lead Director in 2008.
Through The Williams Companies Inc. 2007 Incentive Plan, each
non-employee director annually receives a form of long-term
equity compensation approved by the Nominating and Governance
Committee. Non-employee directors generally receive their awards
on the date of the annual stockholders meeting. An individual
who becomes a non-employee director after the annual meeting but
prior to August 1 will be granted the full compensation paid as
of December 15. An individual who becomes a non-employee
director on or after August 1 and on or before December 15 will
be granted pro-rated compensation paid as of December 15.
An individual who becomes a non-employee director on or after
December 16 and prior to the next annual meeting of stockholders
will be granted pro-rated compensation as of date of the annual
meeting.
Non-employee directors are reimbursed for expenses (including
costs of travel, food and lodging) incurred in attending Board,
committee and stockholder meetings, which generally include the
use of Company aircraft. Directors are also reimbursed for
reasonable expenses associated with other business activities,
including participation in Director education programs. In
addition, the Company pays premiums on directors and
officers liability insurance policies covering directors.
Directors are also eligible to participate in the:
|
|
|
|
|
Williams Matching Grant Program for eligible charitable
organizations; and
|
|
|
|
The United Way Program.
|
The Williams Matching Grant Program and the United Way Program
are available to all Williams employees. The maximum gift
total for a participant in the Matching Grant Program is $10,000
in any calendar year. No match is made to the United Way under
the Matching Grant Program unless the giving relates to a
natural disaster or is applied to the funding of a capital
campaign at a United Way funded agency. Under the United Way
Program there are no limits to the match if given through the
annual Williams United Way campaign.
45
Director
Compensation for Fiscal Year 2008
The compensation received by each director in 2008 is outlined
in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
Fees
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
Earned
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
or Paid
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Name
|
|
in
Cash1
|
|
|
in
Stock2
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation3
|
|
|
Total
|
|
|
Joseph R. Cleveland
|
|
$
|
75,000
|
|
|
$
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
222,770
|
|
Kathleen B. Cooper
|
|
|
75,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,861
|
|
|
|
228,631
|
|
Irl F. Engelhardt
|
|
|
75,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
232,770
|
|
William R. Granberry
|
|
|
75,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,030
|
|
|
|
225,800
|
|
William E. Green
|
|
|
85,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,010
|
|
|
|
233,780
|
|
Juanita H. Hinshaw
|
|
|
95,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
242,770
|
|
William R. Howell
|
|
|
105,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,050
|
|
|
|
257,820
|
|
Charles M. Lillis
|
|
|
85,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
242,770
|
|
George A. Lorch
|
|
|
95,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,250
|
|
|
|
251,020
|
|
William G. Lowrie
|
|
|
90,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,421
|
|
|
|
280,191
|
|
Frank T. MacInnis
|
|
|
85,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,050
|
|
|
|
237,820
|
|
Janice D. Stoney
|
|
|
75,000
|
|
|
|
147,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
232,770
|
|
|
|
|
1 |
|
The fees paid in cash are itemized in the chart below. |
Committee
and Lead Director Cash Retainers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash
|
|
|
|
|
|
|
|
|
Nominating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retainer
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including
|
|
|
Audit
|
|
|
Compensation
|
|
|
Governance
|
|
|
Finance
|
|
|
Special
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
Service on
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Litigation
|
|
|
Lead
|
|
|
Litigation
|
|
|
|
|
|
|
Two
|
|
|
Chair
|
|
|
Chair
|
|
|
Chair
|
|
|
Chair
|
|
|
Chair
|
|
|
Director
|
|
|
Committee
|
|
|
|
|
|
|
Committees
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Total
|
|
|
Cleveland
|
|
$
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75,000
|
|
Cooper
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
Engelhardt
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
Granberry
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
Green
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,000
|
|
|
|
85,000
|
|
Hinshaw
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
95,000
|
|
Howell
|
|
|
75,000
|
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
105,000
|
|
Lillis
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
85,000
|
|
Lorch
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
10,000
|
|
|
|
95,000
|
|
Lowrie
|
|
|
75,000
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
MacInnis
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,000
|
|
Stoney
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
2 |
|
Represents the grant date fair value of the fees earned in both
common stock and restricted stock units for the Board. The value
shown in the fees earned or paid in stock column is
both the grant date fair value and the disclosable amount
based on the amount of the financial accounting charge to
earnings for 2008. Because the stock is not at risk of
forfeiture at the time of grant the full amount of the
accounting charge associated with the grants was taken in 2008. |
|
3 |
|
All other compensation includes matching contributions made on
behalf of the Board to charitable organizations through the
Matching Grants Program or the United Way Program. |
46
Outstanding
Awards as of Fiscal Year End 2008
|
|
|
|
|
The aggregate number of stock options outstanding at fiscal year
end is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
Securities
|
|
|
|
Shares or Units
|
|
|
Underlying
|
|
|
|
of Stock
|
|
|
Unexercised Options
|
|
Name
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Joseph R. Cleveland
|
|
|
3,000
|
|
|
|
|
|
Kathleen B. Cooper
|
|
|
6,000
|
|
|
|
4,500
|
|
Irl F. Engelhardt
|
|
|
6,000
|
|
|
|
12,000
|
|
William R. Granberry
|
|
|
6,000
|
|
|
|
9,000
|
|
William E. Green
|
|
|
6,000
|
|
|
|
35,072
|
|
Juanita H. Hinshaw
|
|
|
6,000
|
|
|
|
15,000
|
|
William R. Howell
|
|
|
14,282
|
|
|
|
53,072
|
|
Charles M. Lillis
|
|
|
7,406
|
|
|
|
28,536
|
|
George A. Lorch
|
|
|
45,296
|
|
|
|
43,631
|
|
William G. Lowrie
|
|
|
29,446
|
|
|
|
|
|
Frank T. MacInnis
|
|
|
6,000
|
|
|
|
53,072
|
|
Janice D. Stoney
|
|
|
28,194
|
|
|
|
50,893
|
|
2009
Compensation
Consistent with best practices, in an effort to provide a more
targeted level of annual compensation to our non-employee
directors, the Nominating and Governance Committee approved a
change to the 2009 compensation program. For their service
non-employee directors will continue to receive $110,000 as an
annual retainer. The entire amount will be paid in cash.
Non-employee directors will also receive an annual restricted
stock award valued at $115,000 on the date of grant.
Fees for the Lead Director and committee chairpersons will
continue to be paid in cash. The Lead Director fee and the Audit
Committee chair fee have been increased to $25,000 and $20,000
respectively. The chairpersons of the Compensation, Finance,
Nominating and Governance and Litigation Committees will
continue to receive an annual retainer of $10,000.
The changes described above are based on the Nominating and
Governance Committees independent compensation
consultants review of compensation of the non-employee
directors utilizing the same 18 comparator companies used for
the Companys 2008 executive compensation comparisons. For
additional perspective, comparator group data was supplemented
by information from the Frederic W. Cook 2007 Director
Compensation Survey.
47
EQUITY
COMPENSATION STOCK PLANS
Securities
authorized for issuance under equity compensation
plans
The following table provides information concerning our common
stock that may be issued upon the exercise of options, warrants
and rights under all of our existing equity compensation plans
as of December 31, 2008, including The Williams Companies,
Inc. 2007 Incentive Plan, The Williams Companies, Inc. 2002
Incentive Plan, The Williams Companies, Inc. Stock Plan for
Non-Officer Employees, The Williams Companies, Inc. 1996 Stock
Plan, The Williams Companies, Inc. 1996 Stock Plan for
Non-Employee Directors and The Williams Companies, Inc. 1998
Stock Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of Securities
|
|
|
|
|
|
for Future Issuance
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Under Equity Compensation
|
|
|
|
upon Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding Securities
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Reflected in the
|
|
Plan Category
|
|
Warrants and
Rights1
|
|
|
Warrants and
Rights2
|
|
|
1st Column of This Table)
|
|
|
Equity Compensation plans approved by security holders
|
|
|
15,896,358
|
|
|
$
|
17.66
|
|
|
|
16,378,490
|
|
Equity Compensation plans not approved by security
holders3
|
|
|
297,744
|
|
|
$
|
34.55
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
16,194,102
|
|
|
$
|
18.10
|
|
|
|
16,378,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Includes 4,682,840 shares of restricted stock units, all of
which were approved by security holders. |
|
2 |
|
Excludes the shares issuable upon the vesting of restricted
stock units included in the first column of this table for which
there is no weighted-average price. |
|
3 |
|
These plans were terminated upon stockholder approval of the
2007 Incentive Plan. Options outstanding in these plans remain
in the plans subject to their terms. Those options generally
expire 10 years after the grant date. |
48
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee oversees the financial reporting process of
Williams on behalf of the Board. Management has the primary
responsibility for the financial statements and the reporting
process including the systems of internal controls. The Audit
Committee meets separately with management, the internal
auditors, independent auditors and the general counsel. The
Audit Committee operates under a written charter approved by the
Board, a copy of which is available on our website at
http://www.williams.com.
The charter, among other things, provides that the Audit
Committee has full authority to appoint, oversee, evaluate and
terminate when appropriate, the independent auditor. In this
context, the Audit Committee:
|
|
|
|
|
reviewed and discussed the audited financial statements in
Williams annual report on
Form 10-K
with management, including a discussion of the quality, not just
the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of
disclosures in the financial statements;
|
|
|
|
reviewed with Ernst & Young LLP, Williams
independent auditors, who are responsible for expressing an
opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments
as to the quality and acceptability of Williams accounting
principles and such other matters as are required to be
discussed with the Audit Committee under generally accepted
auditing standards;
|
|
|
|
received the written disclosures and the letter from
Ernst & Young LLP required by applicable requirements
of the Public Company Accounting Oversight Board regarding
Ernst & Young LLPs communications with the Audit
Committee concerning independence;
|
|
|
|
discussed with Ernst & Young LLP its independence from
management and Williams and considered the compatibility of the
provision of non-audit services by the independent auditors with
the auditors independence;
|
|
|
|
discussed with Ernst & Young LLP the matters required
to be discussed by statement on Auditing Standards No. 61,
as amended, as adopted by the Public Company Accounting
Oversight Board in Rule 3200T;
|
|
|
|
discussed with Williams internal auditors and
Ernst & Young LLP the overall scope and plans for
their respective audits. The Audit Committee meets with the
internal auditors and Ernst & Young LLP, with and
without management present, to discuss the results of their
examinations, their evaluations of Williams internal
controls and the overall quality of Williams financial
reporting;
|
|
|
|
based on the foregoing reviews and discussions, recommended to
the Board of Directors (and the Board has approved) that the
audited financial statements be included in the annual report on
Form 10-K
for the year ended December 31, 2008, for filing with the
SEC; and
|
|
|
|
recommended, together with the Board, subject to stockholder
approval, the selection of Ernst & Young LLP to serve
as Williams independent auditors.
|
This report has been furnished by the members of the Audit
Committee of the Board of Directors:
William G. Lowrie, chairman
Joseph R. Cleveland
Irl F. Engelhardt
William E. Green
Juanita H. Hinshaw
49
PROPOSAL 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board has
appointed, subject to stockholder approval, the firm of
Ernst & Young LLP as the independent auditors to audit
our financial statements for calendar year 2009. The firm of
Ernst & Young LLP has served us in this capacity for
many years. A representative of Ernst & Young LLP will
be present at the annual meeting and will be available to
respond to appropriate questions. Although the audit firm has
indicated that no statement will be made, an opportunity for a
statement will be provided. In the event a majority of the
stockholders do not ratify the appointment of Ernst &
Young LLP as the independent auditors to audit our financial
statements for calendar year 2009, the Audit Committee and the
Board will consider the voting results and evaluate whether to
select a different independent auditor.
As required by our Audit Committee charter, we are asking our
stockholders to ratify the selection of Ernst & Young
LLP as our independent auditor. Although ratification is not
required by Delaware law, our articles or our by-laws, our Board
is submitting the selection of Ernst & Young LLP to
our stockholders for ratification as a matter of good corporate
governance. Even if the selection of Ernst & Young LLP
is ratified, our Audit Committee may select a different
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of the Company and our stockholders.
THE BOARD OF DIRECTORS OF WILLIAMS RECOMMENDS A VOTE
FOR THE RATIFICATION OF ERNST & YOUNG LLP
AS OUR INDEPENDENT AUDITORS FOR 2009.
Principal
Accountant Fees and Services
Fees for professional services provided by our independent
auditors for each of the last two fiscal years in each of the
following categories are:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Millions)
|
|
|
Audit Fees
|
|
$
|
14.4
|
|
|
$
|
15.4
|
|
Audit-Related Fees
|
|
|
0.7
|
|
|
|
1.3
|
|
Tax Fees
|
|
|
0.3
|
|
|
|
0.3
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15.4
|
|
|
$
|
17.0
|
|
|
|
|
|
|
|
|
|
|
Fees for audit services in 2008 and 2007 include fees associated
with the annual audit, the reviews of our quarterly reports on
Form 10-Q,
the audit of our assessment of internal controls as required by
Section 404 of the Sarbanes-Oxley Act of 2002, and services
performed in connection with other filings with the SEC.
Audit-related fees in 2008 and 2007 primarily include audits of
investments and joint ventures, and audits of employee benefit
plans. Tax fees in 2008 and 2007 include tax planning, tax
advice and tax compliance.
Tax Services. Ernst & Young LLP does
not provide tax services to our NEOs.
Policy on
Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditors
The Audit Committee is responsible for appointing, setting
compensation and overseeing the work of Ernst & Young
LLP, our independent auditors. The Audit Committee has
established a policy regarding pre-approval of all audit and
non-audit services provided by Ernst & Young LLP.
On an ongoing basis, our management presents specific projects
and categories of service to the Audit Committee for which
advance approval is requested. The Audit Committee reviews those
requests and advises management if the Audit Committee approves
the engagement of Ernst & Young LLP. On a periodic
basis, our management reports to the Audit Committee regarding
the actual spending for such projects and services compared to
the approved amounts. The Audit Committee may also delegate the
ability to pre-approve audit and permitted non-audit services,
excluding services related to the Companys internal
control over financial reporting, to a subcommittee of one or
more committee members, provided that any such pre-approvals are
reported on at a
50
subsequent Audit Committee meeting. In 2008, 100% of
Ernst & Young LLPs fees were pre-approved by the
Audit Committee.
Our Audit Committees pre-approval policy with respect to
audit and non-audit services is an attachment to our Audit
Committee Charter available on our website at
http://www.williams.com
at the Corporate Responsibility/Corporate Governance/Board
Committees/Audit Committee Charter tab.
51
PROPOSAL 3
STOCKHOLDER PROPOSAL
A stockholder proposes to present the following resolution for
adoption at the annual meeting of stockholders. The Company will
promptly provide the name, address and stock holding of the
stockholder upon oral or written request directed to our
corporate secretary. In accordance with applicable proxy
regulations, the proposal and supporting statements, for which
the Company accepts no responsibility, are set forth below.
RESOLUTION
That the shareholders of THE WILLIAMS COMPANIES, INC. request
its Board of Directors to take the steps necessary to eliminate
classification of terms of the Board of Directors to require
that all Directors stand for election annually. The Board
declassification shall be completed in a manner that does not
affect the unexpired terms of the previously-elected Directors.
STATEMENT
Greater accountability and independence of directors is the
objective of this proposal. One Director of Williams, Charles
Lillis, obviously did not show independence in his service as a
director of Washington Mutual where investors had to demand
enactment of objectives of a shareholder proposal which was
approved by shareholders but disregarded by directors.
The proponent believes the election of directors is the
strongest way that shareholders influence the directors of any
corporation. Currently, our board of directors is divided into
three classes with each class serving three-year terms. Because
of this structure, shareholders may only vote for one-third of
the directors each year. This is not in the best interest of
shareholders because it reduces accountability.
Xcel Energy Inc., Devon Energy Corporation, ConocoPhillips,
ONEOK, Inc. CenterPoint Energy, Inc., Hess Corporation have
adopted this practice and it has been approved by shareholders
at CH Energy Group, Inc., Central Vermont Public Service
Corporation, Black Hill Corporation, Spectra Energy Corp., and
several others, upon presentation of a similar resolution by the
proponent during 2008. The proponent is a professional investor
who has studied this issue carefully.
The performance of our management and our Board of Directors is
now being more strongly tested due to economic conditions and
the accountability for performance must be given to the
shareholders whose capital has been entrusted in the form of
share investments.
A study by researchers at Harvard Business School and the
University of Pennsylvanias Wharton School titled
Corporate Governance and Equity Prices (Quarterly
Journal of Economics, February, 2003), looked at the
relationship between corporate governance practices (including
classified boards) and firm performance. The study found a
significant positive link between governance practices favoring
shareholders (such as annual directors election) and firm value.
While management may argue that directors need and deserve
continuity, management should become aware that continuity and
tenure may be best assured when their performance as directors
is exemplary and is deemed beneficial to the best interests of
the corporation and its shareholders.
The proponent regards as unfounded the concern expressed by some
that annual election of all directors could leave companies
without experienced directors in the event that all incumbents
are voted out by shareholders. In the unlikely event that
shareholders do vote to replace all directors, such a decision
would express dissatisfaction with the incumbent directors and
reflect the need for change.
If you agree that shareholders may benefit from greater
accountability afforded by annual election of all directors,
please vote FOR this proposal.
52
COMPANY
RESPONSE TO PROPOSAL 3
THE BOARD
OF DIRECTORS OF WILLIAMS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST THIS PROPOSAL 3.
The Board has carefully considered this stockholder proposal and
believes that the proposal, which seeks to declassify the Board
and to have annual elections of all directors, is not in the
best interests of our stockholders and the Company. Under the
Companys Certificate of Incorporation, the Board is
divided into three classes of directors with staggered
three-year terms. Accordingly, stockholders elect approximately
one-third of the directors each year, and the entire Board can
be replaced in the course of three annual meetings. The Board
believes that a classified Board is more advantageous to and
better serves the long-term interests of the Company and its
stockholders for the reasons discussed below. The Board believes
that each of the benefits of a classified Board that are
discussed below are particularly important now in light of
depressed stock prices that currently prevail in the marketplace.
Stability and Continuity
Three-year staggered terms are designed to provide stability and
to provide a framework in which, at any given time, a majority
of directors will have had prior experience as directors of the
Company and a more thorough knowledge of the Companys
operations and strategy. Directors who have experience with the
Company and knowledge about its business are a valuable resource
and are better positioned to make the fundamental decisions that
are best for the Company and its stockholders. In addition,
because a classified Board produces more orderly change in the
composition of the Board and in the policies and strategies of
the Company, a classified Board may strengthen the
Companys ability to recruit and retain prominent and
highly-qualified directors who are willing and able to commit
the time and resources required to understand fully the Company
and its operations. The Board believes that its classified
structure has helped to attract well-qualified directors who are
willing to make a significant commitment to the Company and its
stockholders for the long term. In addition, in light of the
current corporate governance climate, in which many qualified
individuals are increasingly reluctant to serve on public
company boards, the Company could also be placed at a
competitive disadvantage in recruiting qualified director
candidates if their Board service could potentially be limited
to a one-year term.
Accountability to Stockholders
The Board believes that the benefits of our classified Board
structure do not come at the cost of directors
accountability to stockholders. Directors elected to three-year
terms are not any less accountable or responsive to stockholders
than directors elected annually, since all directors are
required to act in the best interests of our stockholders and
the Company, in accordance with their fiduciary duties under
Delaware law, regardless of the length of their terms. Moreover,
the Board has implemented a number of measures to further
promote Board accountability and good corporate governance. For
example, the Board has adopted a majority vote standard for the
election of directors in uncontested elections and has adopted a
policy whereby incumbent directors who do not receive a majority
of the votes cast must tender their resignation. We believe that
overall accountability of the Board is achieved through our
stockholders selection of responsible, experienced and
respected individuals as directors and is not compromised by the
length of any directors term.
Protection Against Unfair Takeover Attempts
The Board believes that a classified Board plays an important
role in protecting against an unsolicited takeover proposal at a
price that is not in the long-term best interests of the Company
and its stockholders. A mere attempt to obtain control, even if
unsuccessful, can seriously disrupt the conduct of a
companys business and cause it to incur substantial
expense. Classified board structures have been shown to be an
effective means of protecting long-term stockholder interests
against these types of abusive tactics. While a classified Board
does not prevent or preclude unsolicited takeover attempts, it
encourages potential acquirers to negotiate with the Board and
to offer a full and fair price in order to provide maximum value
to our stockholders. Because only one-third of the
Companys directors are elected at any annual meeting of
stockholders, at least two annual meetings would be required to
replace a majority of the Board and to dismantle other
stockholder protection measures. This gives the directors
additional time and leverage to evaluate the adequacy and
fairness of any takeover proposal, weigh alternative proposals
and ultimately negotiate the best result for all stockholders.
53
The Board has carefully considered this proposal and the
arguments for and against a classified board structure. For the
reasons discussed above, the Board has concluded that the
Companys classified board structure continues to promote
the best interests of our stockholders and the Company.
FOR THESE REASONS, WE RECOMMEND A VOTE AGAINST
THIS STOCKHOLDER PROPOSAL.
54
INCORPORATION
BY REFERENCE
The Compensation Committee Report on Executive Compensation and
the Report of the Audit Committee, are not deemed filed with the
SEC and shall not be deemed incorporated by reference into any
prior or future filings made by Williams under the Securities
Act or the Exchange Act, except to the extent that Williams
specifically incorporates such information by reference. In
addition, this proxy statement includes several website
addresses. These website addresses are intended to provide
inactive, textual references only. The information on these
websites is not part of this proxy statement.
WEBSITE
ACCESS TO REPORTS AND OTHER INFORMATION
We file our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
proxy statements and other documents electronically with the SEC
under the Exchange Act. You may read and copy any materials that
we file with the SEC at the SECs Public Reference Room at
100 F Street, N.E., Washington, DC 20549. You may
obtain information on the operation of the Public Reference Room
by calling the SEC at
1-800-SEC-0330.
You may also obtain such reports from the SECs Internet
website at
http://www.sec.gov.
Our Internet website is
http://www.williams.com.
We make available free of charge through the Investors tab of
our Internet website our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Our corporate
governance guidelines, director independence standards, Code of
Ethics for Senior Officers, Board committee charters and the
Williams Code of Business Conduct are also available on our
Internet website. We will also provide, free of charge, a
copy of any of our corporate documents listed above upon written
request to our corporate secretary at Williams, One Williams
Center, MD 47, Tulsa, Oklahoma 74172.
By order of the Board of Directors,
La Fleur Browne
Corporate Secretary
Tulsa, Oklahoma
April 22, 2009
55
Annual
Meeting Proxy
Card
Election
of Directors
PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET
VOTING INSTRUCTIONS.
A. Proposals
The Board of Directors recommends a vote FOR the
election of each of the nominees listed below.
1. Election of Directors.
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For
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Against
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Abstain
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For
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Against
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Abstain
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01 Irl F. Engelhardt
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04 George A. Lorch
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02 William E. Green
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03 W. R. Howell
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The Board of Directors recommends a vote FOR
proposal 2.
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2. |
Ratification of Auditors
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Abstain
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Ratification of Ernst & Young LLP as auditors for 2009
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The Board of Directors recommends a vote AGAINST
proposal 3.
3. Stockholder proposal relating to the election of
directors annually.
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For
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Against
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Abstain
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Stockholder proposal relating to the election of directors
annually
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4. To transact such other business as may properly come
before the annual meeting or any adjournment of the meeting.
Mark this box with an X if you have made comments
below. o
B. Non-Voting Items
C. Authorized Signatures Sign
Here This section must be completed for your
instructions to be executed.
The signer hereby revokes all proxies previously given by the
signer to vote at said Annual Meeting or any adjournments
thereof.
Note: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as
such.
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Signature 1 Please keep signature within the box
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Signature 2 Please keep signature within the box
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Date (mm/dd/yyyy)
/ /
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1
Proxy
The Williams Companies, Inc.
Proxy Solicited on Behalf of the Board of Directors of
Williams for the Annual Meeting of Stockholders on May 21,
2009.
The undersigned stockholder of The Williams Companies, Inc.
(Williams) hereby appoints STEVEN J. MALCOLM, DONALD
R. CHAPPEL and JAMES J. BENDER, jointly and severally with full
power of substitution, as proxies to represent and to vote all
of the shares of Williams Common Stock the undersigned is
entitled to vote at the Annual Meeting of Stockholders of
Williams to be held on the 21st day of May, 2009, and at
any and all adjournments thereof on all matters coming before
said meeting.
Election of Directors, Nominees:
(01) Irl F. Engelhardt, (02) William E. Green,
(03) W. R. Howell, (04) George A. Lorch
To participants in The Williams Investment Plus Plan: This
proxy/voting instruction card constitutes your voting
instructions to the Trustee(s) of the Plan listed above.
Non-voted shares will be voted in the same proportion on each
issue as the Trustees votes those shares for which it receives
voting instructions from Participants.
THIS PROXY, WHEN PROPERLY EXECUTED AND TIMELY RETURNED, WILL
BE VOTED AS INDICATED. IF NO VOTING DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED FOR ALL LISTED NOMINEES AND IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS ON THE OTHER
MATTERS REFERENCED ON THE REVERSE SIDE HEREOF.
You are encouraged to specify your choices by marking the
appropriate boxes, SEE REVERSE SIDE. But you need not mark any
boxes if you wish to vote in accordance with the Board of
Directors recommendations. This proxy, when properly
executed, will be voted in the manner directed herein.
Telephone
and Internet Voting Instructions
You can vote by telephone or Internet. Available
24 hours a day 7 days a week.
Instead of mailing your proxy, you may choose one of the two
voting methods outlined below to vote your proxy.
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Call toll free
1-800-652-VOTE
(8683) in the United States or Canada any time on a touch
tone telephone. There is NO CHARGE to you for the call.
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Follow the simple instructions provided by the recorded message.
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Go to the following web site: www.edocumentview.com/wmb
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Enter the information requested on your computer screen and
follow the simple instructions.
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Mark, sign and date the proxy card.
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Return the proxy card in the postage-paid envelope provided.
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VALIDATION DETAILS ARE LOCATED ON THE FRONT OF THIS
FORM IN THE COLORED BAR. If you vote by telephone or the
Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be
received by 1:00 a.m., Central Time, on May 21,
2009.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE STOCKHOLDER MEETING MAY 21, 2009. The
proxy statement and annual report are available at
[http://www.proxydocs.com/wmb].
THANK YOU
FOR VOTING
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