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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14A-11(c) or Section 240.14a-12
Johnson Controls, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
[JOHNSON CONTROLS LOGO]
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JOHNSON CONTROLS, INC.
5757 N. GREEN BAY AVE.
MILWAUKEE, WISCONSIN 53209
NOTICE OF 2003
ANNUAL MEETING
AND PROXY STATEMENT
Date of Notice December 10, 2002
NOTICE OF THE 2003
ANNUAL MEETING OF THE SHAREHOLDERS
The Annual Meeting of Shareholders of Johnson Controls, Inc. will be held on
Wednesday, January 22, 2003, at 2:00 p.m., E.S.T., at the Grand Hyatt New York,
Park Avenue at Grand Central Station, New York, NY, 10017. The proposals to be
voted on at the Annual Meeting are as follows:
1. The election of four directors:
Dennis W. Archer
John M. Barth
Paul A. Brunner
Southwood J. Morcott
2. The approval of PricewaterhouseCoopers LLP as our independent auditors
for 2003.
3. Consideration of a shareholder proposal that the Company issue a
sustainability report.
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1-2, AND A VOTE AGAINST ITEM
3. THE BOARD OR PROXY HOLDERS WILL USE THEIR DISCRETION ON OTHER MATTERS THAT
MAY ARISE AT THE ANNUAL MEETING.
If you were a shareholder of record at the close of business on November 14,
2002, you are entitled to vote at the Annual Meeting.
If you have any questions about the Annual Meeting, please contact:
Shareholder Services
Johnson Controls, Inc.
5757 N. Green Bay Ave.
Milwaukee, WI 53209
(414) 524-2363
BY ORDER OF THE BOARD OF DIRECTORS
Johnson Controls, Inc.
5757 North Green Bay
Avenue
Post Office Box 591
Milwaukee, WI 53201-0591
[JOHNSON CONTROLS LOGO]
December 10, 2002
Dear Shareholder:
The Johnson Controls Annual Shareholders Meeting will be convened
on Wednesday, January 22, 2003 at 2:00 p.m. E.S.T. The Annual
Meeting will be held at the Grand Hyatt New York, Park Avenue at
Grand Central Station, New York, NY, 10017. The enclosed notice of
meeting and proxy statement details the business to be conducted.
Given the availability, on the Internet, of management
presentations to investors throughout the year, no management
presentation is planned.
We are pleased to once again offer multiple options for voting your
shares. As detailed in the "Questions and Answers" section of this
notice, you can vote your shares via the Internet, by telephone, by
mail or by written ballot at the Annual Meeting. We encourage you
to use the Internet to vote your shares as it is the most
cost-effective method.
Thank you for your support of Johnson Controls.
Sincerely,
JOHNSON CONTROLS, INC.
[/s/ JAMES H. KEYES]
James H. Keyes
Chairman
TABLE OF CONTENTS
QUESTIONS AND ANSWERS....................................... 3
PROPOSALS TO BE VOTED ON:
*ELECTION OF DIRECTORS...................................... 10
*SELECTION OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2003..... 14
*SHAREHOLDER PROPOSAL FOR A SUSTAINABILITY REPORT........... 15
BOARD INFORMATION........................................... 18
BOARD COMPENSATION.......................................... 21
COMPENSATION COMMITTEE REPORT............................... 21
AUDIT COMMITTEE REPORT...................................... 26
PERFORMANCE GRAPH........................................... 27
EXECUTIVE COMPENSATION...................................... 28
EMPLOYMENT AGREEMENTS....................................... 33
JOHNSON CONTROLS SHARE OWNERSHIP............................ 34
VOTING PROCEDURES........................................... 35
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 36
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* Agenda items for the Annual Meeting
2
QUESTIONS AND ANSWERS
Q: WHAT AM I VOTING ON?
A: You are voting on THREE proposals:
1. Election of four directors for a term of 3 years:
Dennis W. Archer
John M. Barth
Paul A. Brunner
Southwood J. Morcott
2. Approval of PricewaterhouseCoopers LLP as our independent auditors for
2003.
3. Consideration of a shareholder proposal that the Company issue a
sustainability report.
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Q: WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD?
A: The Board of Directors is soliciting the proxy and recommends the following
votes:
- FOR each of the directors;
- FOR PricewaterhouseCoopers LLP as our independent auditors for 2003;
- AGAINST the shareholder proposal.
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Q: WILL ANY OTHER MATTERS BE VOTED ON?
A: We are not aware of any other matters that you will be asked to vote on at
the Annual Meeting. If other matters are properly brought before the Annual
Meeting, the Board or proxy holders will use their discretion on these
matters as they may arise. If a nominee cannot or will not serve as
director, then the Board or proxy holders will vote for a person whom they
believe will carry on our present policies.
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Q: HOW DO I VOTE?
A: There are four ways to vote:
- By Internet at HTTP://WWW.EPROXY.COM/JCI/. We encourage you to vote
this way;
- By toll-free telephone at 1-800-240-6326;
- By completing and mailing your proxy card;
- By written ballot at the Annual Meeting.
3
Shares credited to your account in any 401(k) plan or trust will be voted
as directed. If no direction is made, if the card is not signed, or if the
card is not received by January 17, 2003, the shares credited to your
account will be voted in the same proportion as directions received from
other participants.
If you hold the Company's Common Stock, and no voting direction is made,
the shares you hold will be voted FOR all nominees listed in items 1 and 2,
and in the discretion of the proxies, upon such other matters which may
properly come before the meeting or any adjournments thereof. Regarding
item 3, shares you hold are counted toward the quorum requirement but they
do not affect the determination of whether a non-routine matter is approved
or rejected. Broker non-voted shares will not affect the determination of
whether item 3 is approved or rejected.
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Q: WHO CAN VOTE?
A: You can vote at the Annual Meeting if you were a shareholder of record as of
the close of business on November 14, 2002. If you hold the Company's Common
Stock, then you are entitled to one vote per share. If you hold the
Company's Preferred Stock (each share consists of 10,000 units) you are
entitled to two votes per unit. There is no cumulative voting.
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Q: CAN I CHANGE MY VOTE?
A: Yes. You can change your vote or revoke your proxy any time before the
Annual Meeting by:
- entering a new vote by Internet or phone;
- returning a later-dated proxy card;
- notifying John P. Kennedy, Secretary, by written revocation letter at
the Milwaukee address on the front page; or
- completing a written ballot at the Annual Meeting.
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Q: WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
A: The four director nominees receiving the greatest number of votes will be
elected. The approval of PriceWaterhouseCoopers LLP as the independent
auditors for 2003 requires an affirmative majority vote. An affirmative vote
of the majority of votes cast by the shareholders is required to approve the
shareholder proposal.
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Q: WHAT IS THE EFFECT OF NOT VOTING?
A: It will depend on how your share ownership is registered. If you own shares
as a Registered Holder and do not vote, your unvoted shares will not be
represented at the meeting and will not count toward the quorum requirement.
If a quorum is obtained, your unvoted shares will not affect whether a
proposal is approved or rejected.
If you own shares in "street name" through a broker and do not vote, your
broker may represent your shares at the meeting for purposes of obtaining a
quorum. In the absence of your voting instructions, your broker may or may
not vote your shares in its discretion depending on the proposals before the
meeting.
Your broker may vote your shares in its discretion and your shares will
count toward the quorum requirement on "routine matters." Regarding other
proposals, however, your broker may not be able to vote your shares if
qualified as "broker non-vote." Broker non-vote shares are counted toward
the quorum requirement but they do not affect the determination of whether a
non-routine matter is approved or rejected. The Company believes that
proposals 1 and 2 are routine matters on which brokers will be permitted to
vote on behalf of their clients if no voting instructions are furnished. The
Company may also vote, in the discretion of the proxies, upon such other
matters that may properly come before the meeting or any adjournments
thereof. Since the Company believes that proposal 3 is a non-routine matter,
broker non-voted shares will not affect the determination of whether it is
approved or rejected.
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Q: IS MY VOTE CONFIDENTIAL?
A: Yes. Only the election inspectors and certain individuals, independent of
Johnson Controls, Inc., who help with the processing and counting of the
vote have access to your vote. Directors and employees of the Company may
see your vote only if the Company needs to defend itself against a claim or
if there is a proxy solicitation by someone other than the Company.
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Q: WHO WILL COUNT THE VOTE?
A: Wells Fargo Bank Minnesota, N.A. will count the vote. Its representatives
will be the inspectors of the election.
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5
Q: WHAT SHARES ARE COVERED BY MY PROXY CARD?
A: The shares covered by your proxy card represent the shares of Johnson
Controls stock you own that are registered with the Company and its transfer
agent, Wells Fargo Bank Minnesota, N.A. Additionally, employees of the
Company who have shares credited to Johnson Controls' employee savings and
investment plans [401(k) Plan] are also covered by your proxy card. The
trustees of these plans will vote these shares as directed.
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Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: It means your shares are in more than one account. You should vote the
shares on all your proxy cards. To provide better shareholder services, we
encourage you to have all your non-broker account shares registered in the
same name and address. You may do this by contacting our transfer agent,
Wells Fargo Bank Minnesota, N.A., toll-free at 1-877-602-7397.
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Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: All shareholders of record as of the close of business on November 14, 2002
can attend. Seating, however, is limited. Attendance at the Annual Meeting
will be on first arrival basis at the Meeting.
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Q: WHAT DO I NEED TO ATTEND THE ANNUAL MEETING?
A: To attend the Annual Meeting, please follow these instructions:
- To enter the Annual Meeting, bring your proof of ownership and
identification.
- If a broker or other nominee holds your shares, bring proof of your
ownership with you to the Annual Meeting.
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Q: WILL THERE BE A MANAGEMENT PRESENTATION AT THE ANNUAL MEETING?
A: Given the availability, on the Internet, of management presentations to
investors throughout the year, no management presentation is planned.
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Q: CAN I BRING A GUEST?
A: Seating availability at the Annual Meeting is limited.
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Q: WHAT IS THE QUORUM REQUIREMENT OF THE ANNUAL MEETING?
A: A majority of the outstanding shares on November 14, 2002, constitutes a
quorum for voting at the Annual Meeting. If you vote, your shares will be
part of the quorum. Abstentions and broker non-votes will be counted in
determining the quorum, but neither will be counted as votes cast. On the
record date, 88,907,827 shares of our Common Stock were outstanding and
201.3464 shares of our Preferred Stock were outstanding.
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Q: HOW MUCH DID THIS PROXY SOLICITATION COST?
A: The Company will primarily solicit proxies by mail and will cover the
expense of such solicitation. Georgeson Shareholder Communications Inc. will
help us solicit proxies for all brokers and nominees at a cost of $10,000
plus expenses. Our officers and employees may also solicit proxies for no
additional compensation. We may reimburse brokers or other nominees for
reasonable expenses they incur in sending these proxy materials to you if
you are a beneficial holder of our shares.
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Q: HOW DO I RECOMMEND SOMEONE TO BE A DIRECTOR FOR THE 2004 ANNUAL MEETING?
A: You may recommend any person to be a director by writing to the Secretary of
the Company. Your letter must include your intention to nominate someone for
director along with the candidate's name, biographical data, and
qualifications. The Company's By-Laws require that shareholders send written
notice no sooner than September 26, 2003, and no later than October 26,
2003, in order to recommend a director for the 2004 Annual Meeting.
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Q: WHEN ARE SHAREHOLDER PROPOSALS DUE FOR THE 2004 ANNUAL MEETING?
A: Shareholder proposals must be presented pursuant to Securities and Exchange
Commission Rule 14a-8, by August 12, 2003, to be included in the Company's
proxy materials for the 2004 Annual Meeting.
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7
Q: WHAT ARE THE REQUIREMENTS FOR PRESENTING INFORMATION OTHER THAN A
SHAREHOLDER'S PROPOSAL AT THE 2004 ANNUAL MEETING?
A: A shareholder that intends to present business at the 2004 Annual Meeting
other than pursuant to Rule 14a-8 must comply with the requirements set
forth in the Company's By-Laws. Among other things, a shareholder must give
written notice of the intent to bring business before the Annual Meeting to
the Company, pursuant to the By-Laws, not less than 45 days and not more
than 75 days prior to the month and day in the current year corresponding to
the date on which the Company first mailed its proxy materials for the prior
year's annual meeting of shareholders. Therefore, since the Company
anticipates mailing its proxy statement on December 10, 2002, the Company
must receive notice of a shareholder proposal submitted other than pursuant
to Rule 14a-8 no sooner than September 26, 2003, and no later than October
26, 2003.
If the notice is received after October 26, 2003, then the notice will be
considered untimely and the Company is not required to present such
proposal at the 2004 Annual Meeting. If the Board of Directors chooses to
present a proposal submitted after October 26, 2003, at the 2004 Annual
Meeting, then the persons named in proxies solicited by the Board of
Directors for the 2004 Annual Meeting may exercise discretionary voting
power with respect to such proposal.
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Q: WHERE CAN I FIND CORPORATE GOVERNANCE MATERIALS FOR JOHNSON CONTROLS?
A: The Ethics Policy, Corporate Governance Guidelines, Section 16 insider
trading transactions and the Charters for the Audit, Compensation and
Corporate Governance Committees of the Company's Board of Directors are
provided at the Company web site at www.johnsoncontrols.com/governance.htm
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Q: WHAT IS THE PROCESS FOR REPORTING POSSIBLE VIOLATIONS OF JOHNSON CONTROLS
POLICIES?
A: Reports of possible violations of the Ethics Policy or of financial or
accounting policies may be made to the Audit Committee of the Board.
Employees may also anonymously report a violation by calling 1-866-444-1313
in the U.S. and Canada, or 1-678-366-6294 if located elsewhere. The
employee's report will be provided to the director appointed to lead the
Board in executive session, which will initiate an investigation.
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8
Q: HOW DO I OBTAIN MORE INFORMATION ABOUT JOHNSON CONTROLS, INC.?
A: To obtain additional information about Johnson Controls, Inc. you may:
- contact the Manager of Shareholder Services, at 1-800-524-6220;
- go to the web site at www.johnsoncontrols.com; or
- write to:
Johnson Controls, Inc.
Attn: Shareholder Services X-32
5757 N. Green Bay Ave.
P.O. Box 591
Milwaukee, WI 53201-0591
PLEASE VOTE. YOUR VOTE IS VERY IMPORTANT.
PROMPTLY RETURNING YOUR PROXY WILL HELP TO REDUCE THE COST OF THIS SOLICITATION.
9
ELECTION OF DIRECTORS
BOARD STRUCTURE: The Board of Directors consists of 12 members. The
directors are divided into three classes. At each Annual
Meeting, the term of one class expires. Directors in
each class serve for three-year terms, or until the
director's earlier retirement pursuant to the Board of
Directors Retirement Policy.
BOARD NOMINEES
NOMINEES FOR TERMS TO EXPIRE AT THE 2003 ANNUAL MEETING:
[ARCHER PHOTO] DENNIS W. ARCHER Director since 2002
Age 60
Chairman, Dickinson Wright PLLC (law firm) since 2002. Mr.
Archer is currently president-elect of the American Bar
Association and will become president in August 2003. Mr.
Archer served as Mayor of Detroit from 1994 to 2001. He was
an Associate Justice of the Michigan Supreme Court from 1986
to 1994. Mr. Archer is also a Director of Compuware
Corporation and Covisint.
[BARTH PHOTO] JOHN M. BARTH Director since 1997
Age 56
President, Chief Operating Officer and member of the Board
of Directors, Johnson Controls, Inc., since September 1998
and Executive Vice President since 1991. As of October 1,
2002, Mr. Barth became Chief Executive Officer of Johnson
Controls, Inc. In 1987, Mr. Barth was named Vice President
and General Manager of the Plastics Technology Group. In
1990, he became Vice President and General Manager of the
Plastics Technology Group and the Automotive Systems Group.
Mr. Barth is a director of Handleman Company and Covisint.
Mr. Barth serves as a member of the Executive Committee.
[BRUNNER PHOTO] PAUL A. BRUNNER Director since 1983
Age 67
President and Chief Executive Officer, Spring Capital Inc.,
Stamford, Connecticut (international investment management),
since 1985. President and Chief Executive Officer, ASEA,
Inc., 1982 to 1984. President and Chief Executive Officer,
Crouse Hinds Co., 1967 to 1982. Mr. Brunner is the Chairman
of the Audit Committee and a member of the Compensation
Committee.
10
[MORCOTT PHOTO] SOUTHWOOD J. MORCOTT Director since 1993
Age 64
Retired Chairman, President, and Chief Executive Officer of
Dana Corporation, Toledo, Ohio (vehicular and industrial
systems manufacturer). Mr. Morcott is a director of CSX
Corporation, Navistar International Corporation and
Phelps-Dodge Corporation. Mr. Morcott is Chairman of the
Compensation Committee and a member of the Corporate
Governance Committee.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ITS NOMINEES
CONTINUING DIRECTORS
TERMS EXPIRE AT THE 2004 ANNUAL MEETING:
[BARNETT PHOTO] ROBERT L. BARNETT Director since 1986
Age 62
Executive Vice President, President and Chief Executive
Officer, Commercial, Government and Industrial Solutions
Sector, Motorola, Inc. (manufacturer of electronics
products), Schaumburg, Illinois, June 1998 to present.
Executive Vice President and President, Motorola Inc., Land
Mobile Products Sector, Motorola Inc., 1997 to 1998.
Corporate Vice President, iDen Group, Motorola Inc., 1995 to
1997. Mr. Barnett is a director of USG Corp. and Central
Vermont Public Service. Mr. Barnett serves on the audit
committee of Central Vermont Public Service and USG Corp.
Mr. Barnett is a member of the Executive and Pension and
Benefits Committees and the Chairman of the Corporate
Governance Committee.
[DAVIS PHOTO] WILLIE D. DAVIS Director since 1991
Age 68
President, All Pro Broadcasting Incorporated, Los Angeles,
California (radio broadcasting), since 1977. Mr. Davis is a
director of Alliance Bank Co., Checker's Drive-In
Restaurant, Inc., Dow Chemical Company, Kmart Corporation,
MGM Grand Inc., Sara Lee Corporation, Strong Capital
Management, MGM Inc., Wisconsin Energy Corporation, and
Manpower, Inc. Mr. Davis is a member of the Audit and
Corporate Governance Committees.
11
[JOERRES PHOTO] JEFFREY A. JOERRES Director since 2001
Age 43
Chief Executive Officer, President and Director since 1999,
and Chairman since 2001, Manpower, Inc. Mr. Joerres served
as Senior Vice President of European Operations from 1998 to
1999, Senior Vice President of Major Account Development
from 1995 to 1998, and Vice President of Marketing and Major
Account Development from 1993 to 1995 at Manpower, Inc. Mr.
Joerres is a director of Artisan Funds, National Association
of Manufacturers and serves on the board of trustees for the
Committee for Economic Development. Mr. Joerres serves on
the audit committee for Artisan Funds. He is a member of the
Compensation and Pension and Benefits Committees.
[TEERLINK PHOTO] RICHARD F. TEERLINK Director since 1994
Age 66
Retired Chairman of the Board and President and Chief
Executive Officer, Harley-Davidson, Inc., Milwaukee,
Wisconsin, 1998 and 1997, respectively. Mr. Teerlink served
as President and Chief Operating Officer of Harley-Davidson,
Inc. since 1988. Mr. Teerlink was a member of the board of
directors of Harley-Davidson, Inc. from 1987 to 2002. Mr.
Teerlink is a director of Snap-on, Inc. He is a member of
the Audit and Executive Committees.
TERMS EXPIRE AT THE 2005 ANNUAL MEETING:
[BLACK PHOTO] NATALIE A. BLACK Director since 1998
Age 52
Senior Vice President, General Counsel and Corporate
Secretary, Kohler Co., Kohler, Wisconsin (manufacturer and
marketer of plumbing products, power systems and furniture)
since 2001. Ms. Black has also served as General Counsel
since 1991, Group President from 1998 to 2001, Group Vice
President -- Interiors from 1986 through 1998 and Vice
President from 1983 through 1986 for Kohler Co. Ms. Black is
a member of the Corporate Governance and Pension and
Benefits Committees.
[CORNOG PHOTO] ROBERT A. CORNOG Director since 1992
Age 62
Retired Chairman of the Board of Directors of Snap-on,
Incorporated, Kenosha, Wisconsin (tool manufacturer). He
served as its Chief Executive Officer and President from
1991 to 2001 and its Chairman from 1991 to 2002. Mr. Cornog
is a director of Wisconsin Energy Corporation. Mr. Cornog
serves on the audit committee for We Energies. Mr. Cornog is
a member of the Audit and Executive Committees.
12
[KEYES PHOTO] JAMES H. KEYES Director since 1985
Age 62
Chairman and Chief Executive Officer, Johnson Controls,
Inc., Milwaukee, Wisconsin. As of October 1, 2002 Mr. Keyes
retired as Chief Executive Officer of Johnson Controls,
Inc., but remains Chairman of the Board of Directors. In
1985 Mr. Keyes was named Executive Vice President and
subsequently became Chief Operating Officer and a member of
the Board of Directors. He became President of Johnson
Controls, Inc., in 1986, its Chief Executive Officer in
1988, and Chairman in 1993. Mr. Keyes is a director of the
Federal Reserve Bank of Chicago, LSI Logic Corporation and
Pitney Bowes, Inc. He also serves on the audit committee for
LSI Logic Corporation and Pitney Bowes, Inc. Mr. Keyes is
Chairman of the Executive Committee.
[LACY PHOTO] WILLIAM H. LACY Director since 1997
Age 57
Former Chairman and Chief Executive Officer, MGIC Investment
Corporation (NYSE:MTG). Mr. Lacy retired at the end of 1999
after a 28-year career at MGIC Investment and its principal
subsidiary, Mortgage Guaranty Insurance Corporation (MGIC),
the nation's leading private mortgage insurer. Mr. Lacy is
also a Director of Ocwen Financial Corp. and C-2, Inc. He
serves on the audit committee of both Ocwen Financial Corp.
and C-2, Inc. Mr. Lacy is the Chairman of the Pension and
Benefits Committee and a member of the Compensation
Committee.
13
SELECTION OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2003
We ask that you approve the appointment of
PricewaterhouseCoopers LLP as our independent auditors.
PricewaterhouseCoopers LLP has audited our accounts for
many years. The Board appointed them as independent
auditors for 2003 upon recommendation of the Audit
Committee.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS JOHNSON CONTROLS'
INDEPENDENT AUDITORS FOR 2003.
14
SHAREHOLDER PROPOSAL FOR A SUSTAINABILITY REPORT
Two shareholders, the General Board of Pension and Health Benefits of the
United Methodist Church, 1201 Davis Street, Evanston, Illinois, 60201, and the
Benedictine Sisters Charitable Trust, 530 Bandera Road, San Antonio, Texas,
78228, have informed the Company that they intend to present jointly the
proposal set forth below at the meeting. The General Board of Pension and Health
Benefits of the United Methodist Church states that it is the beneficial owner
of 17,200 shares of our Common Stock. The Benedictine Sisters Charitable Trust
states that it is the beneficial owner of 200 shares of our Common Stock.
PROPOSAL
Whereas, the global economy presents corporations with the challenge of creating
sustainable business relationships by participating in the sustainable
development of communities in which they operate. The World Commission on
Environment and Development defined sustainable development as "development
which meets the needs of the present without compromising the ability of future
generations to meet their own needs." (Our Common Future, 1987).
We believe the ability of corporations to continue to provide goods/services in
our interdependent world depends on their acceptability to the societies where
they do business. Good corporate citizenship goes beyond the traditional
functions of creating jobs and paying taxes, to include corporate practices
designed to protect human rights, worker rights, land and the environment.
According to the Dow Jones Sustainability Group, sustainability includes:
"Encouraging long lasting social well being in communities where they operate,
interacting with different stakeholders (e.g., clients, suppliers, employees,
government, local communities and non-governmental organizations) and responding
to their specific and evolving needs thereby securing a long term 'license to
operate,' superior customer and employee loyalty and ultimately superior
financial returns." (www.sustainability-index.com; March 2000).
In our opinion, concerned investors evaluate companies on their financial,
environmental and social performance -- the triple bottom line. Some companies
have published sustainability reports and are taking a long-term approach to
creating shareholder value through embracing opportunities and managing risks
derived from economic, environmental and social developments. We believe
sustainability reporting should be included in our company's annual report.
The Social Investment Forum, the national trade association for the socially
responsible investing (SRI) industry wrote in a letter to the New York Stock
Exchange, "Investors in the U.S. currently face a significant disadvantage by
their companies not adequately disclosing material social and environmental
risks. We support principles that would encourage companies to better disclose,
in an aggregate manner, material risks, liabilities, and impairments." (8/6/02)
We believe corporate sustainability includes a commitment to pay a sustainable
living wage to employees. Workers need to have the purchasing power to meet
15
their basic needs. A purchasing power study conducted in 15 cities in Mexico
found that it takes four to five Mexican minimum wages to support a family of
four (Making the Invisible Visible, Center for Reflection Education and Action,
June 2001). We believe paying sustainable wages contributes to community
development and employee loyalty to the company.
The sustainability of corporations, we believe, is connected to the economic
sustainability of their workers and the communities where corporations operate
and sell products. Effective corporate policies can benefit both communities and
corporations.
RESOLVED: shareholders request the Board of Directors to prepare at reasonable
expense a report dealing with the social and environmental issues related to
sustainability. A summary of the report should be provided to shareholders by
October 2003.
SUPPORTING STATEMENT
We believe the report should include:
1. The company's operating definition of sustainability.
2. A review of current company policies and practices related to social,
environmental and economic sustainability.
3. A summary of long-term plans to integrate sustainability objectives
throughout company operations.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "AGAINST" THE PROPOSAL
We believe our current policies and practices concerning social, environmental
and economic issues already address more than adequately the concerns behind the
shareholder proposal. Our Corporate Vision Statement, which appears on our web
site at www.johnsoncontrols.com/vision/asp, guides our activities around the
world. It commits us to consistently treat our customers, employees,
shareholders, suppliers and the communities in which we operate with honesty,
dignity, fairness and respect. It outlines our pledge to conduct business with
the highest ethical standards.
We are committed to enhancing the quality of life in the communities in which we
operate by providing financial support to local non-profit organizations,
fostering our employees' volunteer efforts and operating safe and
environmentally responsible facilities. There are no geographic limitations.
We have extensive policies and an active program to ensure that we conduct our
operations in a manner that provides a safe and healthy workplace and safeguards
the environment. Our compensation policy and practices are to pay wages and
benefits that are competitive in the respective communities in which we operate
to
16
attract and retain quality employees. In Mexico and various other countries in
which we operate, the wages we pay to our employees are well above the minimum
wage standards. Further, we conduct extensive certification and training
throughout the world to assure compliance with our Ethics Policy.
Johnson Controls has also voluntarily published reports that address key issues
such as ethics, the environment and employee safety and health. For example, we
mailed our Ethics Policy to our shareholders in 2000 and published an
environmental, safety and health report on our web site in 2002. This
information can be found at www.johnsoncontrols.com/corpvalues/.
Our track record demonstrates that, wherever we operate, we work hard to be a
good corporate citizen, including promoting social, environmental and economic
issues. Therefore, the Board of Directors believes that conducting a special
review of social, environmental and economic issues and preparing an additional
report to shareholders on the subject as the proposal seemingly requests are
unnecessary and would not be effective uses of corporate resources. We have
been, and will remain, committed to treating all employees with dignity,
fairness and respect, protecting the health and safety of our employees,
protecting the environment, and enhancing the quality of life in the communities
in which we operate.
FOR THESE REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE
PROPOSAL
17
BOARD INFORMATION
BOARD MEETINGS: In 2002, the Board held a total of six regular
meetings. Each director of the Company attended in
excess of 93% of the aggregate number of meetings of
the Board and the total number of meetings of all
committees of the Board on which such director served
during the time each such Director was a member of the
Board.
BOARD COMMITTEES: EXECUTIVE COMMITTEE: The primary functions of the
committee are to exercise all the powers of the Board
when the Board is not in session, as permitted by law.
The Executive Committee held no meetings last year.
Members: Mr. Keyes, Chairman, and Messrs. Barnett,
Barth, Cornog and Teerlink.
AUDIT COMMITTEE: The primary functions of the committee
are to:
- Review annually the internal audit and other controls
established by management;
- Evaluate and report on the independence of
independent accountants;
- Assess the financial reporting process and selection
of accounting policies;
- Review management's evaluation and proposed selection
of independent accountants;
- Review the audit plans prepared by internal audit and
independent accountants;
- Review management's proposed procedures for
confidential reporting of concerns regarding internal
accounting controls, accounting and auditing matters;
- Review information required to be disclosed by
management under Section 302 of the Sarbanes-Oxley
Act of 2002;
- Preapprove all auditing services and permitted
non-audit services to be performed by the Company's
independent accountants;
- Review significant issues concerning litigation,
contingent liabilities, tax and insurance as
reflected in periodic reports to the SEC;
- Review management information systems;
- Review and monitor compliance procedures;
18
- Report the results or findings of all activities to
the Board on a periodic basis; and
- Review annually the committee's performance and
report findings and recommendations to the Board.
The Audit Committee held four regular and four review
meetings last year. All members are non-employee
directors. Members: Mr. Brunner, Chairman, and Messrs.
Cornog, Davis and Teerlink.
COMPENSATION COMMITTEE: The primary functions of the
committee are to:
- Recommend to the Board the selection and retention of
officers and key employees;
- Recommend salary structures, officer gradings, and
salaries for elected officers;
- Administer and recommend amendments to the executive
compensation plans;
- Review and recommend salary adjustments of the Chief
Executive Officer;
- Recommend to the Board bonus awards, income and other
compensation for executive officers;
- Recommend officer compensation packages and the
approval of disclosure statements;
- Review the Company's executive compensation programs
with outside consultants;
- Review annually the committee's performance and
report findings and recommendations to the Board;
- Recommend management succession; and
- Report the results or findings of these activities to
the Board on a periodic basis.
The Compensation Committee held four meetings last
year. Members: Mr. Morcott, Chairman, and Messrs.
Brunner, Joerres and Lacy.
CORPORATE GOVERNANCE COMMITTEE (FORMERLY DIRECTORS
COMMITTEE): The primary functions of the committee are
to:
- Recommend to the Board nominees for directors;
- Consider shareholder nominated candidates for
election as directors;
19
- Recommend the size and composition of the Board;
- Develop guidelines and criteria for the
qualifications of directors;
- Recommend director compensation programs;
- Recommend committees and committee structure for the
Board;
- Recommend performance criteria for the Board and to
review its performance;
- Review annually the Committee's performance and
report findings and recommendations to the Board;
- Review and recommend corporate governance practices
and policies of the Company;
- Review conflicts of interest that may affect
directors; and
- Report the results or findings of these activities to
the Board on a periodic basis.
The Corporate Governance Committee held five meetings
last year. Members: Mr. Barnett, Chairman, and Ms.
Black and Messrs. Davis and Morcott.
PENSION AND BENEFITS COMMITTEE: The primary functions
of the committee are to:
- Review actuarial assumptions and actuarial valuation
of the pension plans on an annual basis;
- Review investment policies of the funds of employee
benefit plans;
- Select and terminate investment managers as
appropriate;
- Review with investment advisors past performance and
current investment strategy;
- Review and approve the adoption of any new trust
agreements or master trusts implementing the plans;
- Monitor Company policies affecting employee benefit
plans; and
- Review plan provisions annually, and propose
amendments when necessary.
20
The Pension and Benefits Committee held five meetings
last year. Members: Mr. Lacy, Chairman, and Ms. Black
and Messrs. Barnett and Joerres.
BOARD COMPENSATION
RETAINER AND FEES: Non-employee directors receive a $50,000 annual
retainer. To encourage such directors to own our
shares, they receive 50% of their retainer in our
Common Stock each year. The stock is priced as of the
date of the Annual Meeting. New directors also receive
a grant of 400 shares of Common Stock upon election or
appointment and a pro rata share of the annual retainer
for the remainder of that year. This stock is priced as
of the date of the first meeting of the Board at which
the new director participates. Directors also receive
$1,500 for each Board or committee meeting they attend,
or $2,000 for each meeting they attend of which they
are the Chairperson. Participating members of the Audit
Committee also receive a meeting fee for each quarterly
financial review. We also reimburse directors for any
related expenses.
Non-employee directors are permitted to defer all or
any part of their retainer and fees under the Deferred
Compensation Plan for Certain Directors. The amount
deferred is deemed invested in an interest-bearing fund
(which is credited with interest annually) or stock
units (which is credited with dividends), as the
director elects. The deferred amount plus earnings, or
gain and dividends, as applicable, are paid to the
board member after the director retires or otherwise
ceases service on the board.
OTHER COMPENSATION: Non-employee directors are eligible to participate in a
Director Share Unit Plan. The Company credits $25,000
worth of stock units annually into each non-employee
director's account at the then current market price.
Such units are accumulated and credited with dividends
until retirement at which time the units will be paid
out based upon the market price of the Common Stock at
that time.
MEDICAL PLAN: Current directors who are not covered by other
insurance and who are under 70 years of age may
purchase medical coverage on the same basis as Company
employees.
COMPENSATION COMMITTEE REPORT
THE COMMITTEE: The Compensation Committee is composed only of
independent directors as defined by the requirements of
the New York Stock Exchange and the Company's Corporate
21
Governance Guidelines. The committee exercises the
Board's powers in compensating the Company's executives
and the executive officers of our Company and its
subsidiaries. We make every effort to see that our
compensation program is consistent with the values of
our Company and furthers its business strategy.
OVERALL OBJECTIVES: The Company aligns compensation with its values and
business objectives. The objectives target customer
satisfaction, technology, growth, market leadership and
shareholder value. The Compensation Committee has
established a program to:
- Attract and retain key executives critical to the
long-term success of the Company;
- Reward executives for long-term strategic management
and the enhancement of shareholder value;
- Integrate compensation programs, which can focus on
after-tax return on shareholders equity, return on
investment and growth;
- Support a performance-oriented environment that
rewards performance not only with respect to Company
goals but also Company performance as compared to
that of industry performance levels; and
- Preserve the federal income tax deductibility of
compensation paid. Accordingly, the Company has taken
appropriate actions to preserve the deductibility of
annual incentives, long-term performance plan
payments, and stock option awards. However, the
Committee may authorize payments that may not be
deductible if it believes that this is in the best
interests of the Company and its shareholders.
EXECUTIVE
COMPENSATION
GENERALLY: The Compensation Committee reviews executive pay each
year. Compensation depends on many factors, including
individual performance and responsibilities, future
challenges and objectives, and how he or she might
contribute to our future success. We also look at the
Company's financial performance and the compensation
levels at comparable companies.
To meet the objectives, we studied competitive
compensation data based on surveys provided to the
Committee by an independent compensation consultant.
The survey for officers and senior managers involved 22
companies. We made adjustments to account for
differences in annual sales of our Company and those
companies in the survey.
22
TOTAL COMPENSATION: Annual executive compensation consists of a base salary
and incentive compensation.
Approximately 82% of the total compensation paid to the
executive officer group is tied to company performance.
This is comparable to the average of the companies in
the executive compensation survey. Doing so helps
encourage performance that increases the value of your
shares.
The Committee sets target minimum and maximum
performance levels for our annual and long-term
incentive plans substantially above the prior year's
target goals, and prior year's actual performance.
Doing so motivates the officers to encourage future
growth and keeps the goals challenging.
BASE SALARY: The Committee determines the levels of salary for key
executive officers and a salary range for other
executives. Factors considered are:
- Salary survey comparison results;
- Prior year salary;
- Changes in individual job responsibilities;
- Past performance of individuals; and most
importantly,
- Achievement or trends toward achievement of specified
Company goals.
ANNUAL INCENTIVES: The Committee sets an annual incentive award formula
under the Executive Incentive Compensation Plan (EICP).
The award is based on specific benchmarks that are
consistent with our annual and long-term strategic
planning objectives. These benchmarks are also based on
achievement of business plans that the Board has
approved that include goals of improved performance
over the previous year and take into account industry
growth and cycles.
At the end of the fiscal year, the Committee applies
the formula to objective performance results to
determine each executive's award for the year.
LONG-TERM
INCENTIVES: All executive officers participate in the Long Term
Performance Plan (LTPP), which serves to motivate executives to achieve
longer-term objectives by providing incentive
compensation based on our performance over a three-
year period. Under the LTPP, the Committee assigns an
executive a contingent performance award. The executive
may earn this award based upon the Company's return on
shareholder equity during the specified three-year
period
23
relative to the Standard & Poor's 500 Index (less
transportation, financials and utilities sectors)
median return on shareholders' equity over the same
period. At the end of the period, the Committee
determines the Company's relative performance results
to determine the actual LTPP award amount.
RESTRICTED STOCK
PLAN: The Committee grants restricted stock under the 2001
Restricted Stock Plan. The Committee determines the
participants, the size of the award and its terms and
conditions. 250,000 shares of treasury stock have been
authorized for use in this Plan.
STOCK OPTION
PROGRAM: The Committee grants stock options under the 2000 Stock
Option Plan. The Committee determines which individuals
are awarded stock options, the terms at which option
grants shall be made, the terms of the options, and the
number of shares subject to each option.
SAVINGS AND
INVESTMENT PLAN
401(K): Executive officers may participate in the Company's
Savings and Investment Plan, which includes Company
contributions to the plan, and an Equalization Benefit
Plan under which certain executives are entitled to
additional benefits that cannot be paid under qualified
plans due to Internal Revenue Code limitations.
Employee and Company contributions in excess of
qualified plan limits are accounted for as if invested
in various accounts.
STOCK OWNERSHIP
GUIDELINES: The Executive Stock Ownership Policy requires all
officers and senior managers in each business group,
within five years of becoming subject to the Policy, to
hold our Common Stock in an amount of one to three
times their annual salary.
The 1995 Common Stock Purchase Plan for Executives
(CSPPE) facilitates the acquisition of common stock by
executives subject to the Executive Stock Ownership
Policy. Participants in the CSPPE may deduct from their
pay up to $2,500 per month to purchase shares of Common
Stock. The price of each share is 100% of the average
price of shares purchased by Wells Fargo Bank
Minnesota, N.A as agent for the participants. No
brokerage fees or commissions are charged and the
Company bears the expense of administering the CSPPE.
CEO COMPENSATION: Mr. Keyes' total compensation is based on our Company's
outstanding performance, his individual performance,
executive compensation levels at other companies, the
desire to retain his services and terms of his
employment
24
agreement. His salary and incentives reflect the
leadership, vision and focus he has provided to our
Company.
Mr. Keyes' base salary increased to $1,250,000 in 2002
from $1,200,000 in 2001. This salary approximated the
average base salary for other chief executive officers
for the 22 companies reviewed.
Approximately 86% of Mr. Keyes' compensation was tied
to company performance. Mr. Keyes' fiscal 2002 EICP
award of $2,411,000 was based upon the return on
shareholder's equity and operating income growth for
the Company for fiscal 2002 and represented 96% of the
maximum amount available under the criteria set forth
by the Committee. In fiscal 2002, Mr. Keyes received
payment under the LTPP of $1,950,000, which is based
upon the Company's return on shareholder equity over
the past three fiscal years and represents 100% of the
maximum amount available under the criteria established
by the Committee. Mr. Keyes received an option award of
200,000 shares on November 14, 2001 and a restricted
stock award of 40,000 shares on January 1, 2002.
Southwood J. Morcott, Chairman
Paul A. Brunner
Jeffrey A. Joerres
William H. Lacy
Members, Compensation Committee
25
AUDIT COMMITTEE REPORT
The Board of Directors appoints an audit committee each year to review the
Company's financial matters. In 2002, the Board adopted amendments to the
written charter governing the audit committee. Each member of the Company's
audit committee meets the independence requirements set by the New York Stock
Exchange as detailed in the Corporate Governance Guidelines. The Board of
Directors has determined that Mr. Brunner and Mr. Teerlink are financial experts
as defined by the Securities and Exchange Commission. The audit committee
members reviewed and discussed the audited financial statements for the fiscal
year ending September 30, 2002, with management. The committee also discussed
all the matters required to be discussed by Statement of Auditing Standard No.
61 with the Company's independent auditors, PricewaterhouseCoopers LLP. The
audit committee received a written disclosure and letter from
PricewaterhouseCoopers LLP as required by Independence Standards Board Standard
No. 1. Based on their review and discussions, the audit committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report to Shareholders and Form 10-K to be filed with the
Securities and Exchange Commission. Fees paid by the Company to
PricewaterhouseCoopers LLP for the year ended September 30, 2002, include:
$5,139,200(1) in audit fees; $600,800 in financial information systems design
and implementation fees; and $5,575,900(2) in all other fees. The audit
committee has reviewed these fees and found that the performance of non-audit
services did not impair the independence of PricewaterhouseCoopers LLP. This
finding was presented to the Board of Directors on November 20, 2002.
Paul A. Brunner, Chairman
Robert A. Cornog
Willie D. Davis
Richard F. Teerlink
Members, Audit Committee
(1) Includes domestic and foreign statutory audit fees in support of the
consolidated audit opinion of $1,896,500, additional foreign statutory
audits of $2,463,600, employee benefit plan audit fees of $145,700 and audit
fees for partially-owned affiliates of $633,400.
(2) A component of these fees includes tax compliance fees of $1,026,600 and tax
consulting fees of $909,800.
26
PERFORMANCE GRAPH
EXPLANATION OF THE GRAPH: The line graph below compares the cumulative
total shareholder return on our Common Stock
with the cumulative total return of companies on
the Standard & Poor's 500 Stock Index and
companies formerly on the S&P's Manufacturers
(Diversified Industrials) Index.* This graph
assumes the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG S&P 500 INDEX,
S&P MANUFACTURERS (DIVERSIFIED INDUSTRIALS)
INDEX* AND JOHNSON CONTROLS, INC.
----------------------------------------------------------------------------------------------
COMPANY/INDEX 9/97 9/98 9/99 9/00 9/01 9/02
----------------------------------------------------------------------------------------------
Johnson Controls, Inc. 100 95.48 138.30 113.26 141.72 169.58
----------------------------------------------------------------------------------------------
S&P Manufacturers (Diversified
Industrials)* 100 90.16 141.32 139.70 125.46 95.53
----------------------------------------------------------------------------------------------
S&P 500 Comp-Ltd. 100 109.06 139.37 157.87 115.86 92.14
----------------------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
* The Manufacturers (Diversified Industrials) index was discontinued as a formal
index of Standard & Poor's effective December 31, 2001. The company has
replicated the index using return data for the fourteen companies that
comprised the Manufacturers (Diversified Industrials) as of that date.
27
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid for the past three
fiscal years to each of the five most highly compensated executive officers,
including the Chief Executive Officer.
SUMMARY OF COMPENSATION TABLE
LONG-TERM
OTHER ANNUAL OPTIONS/ INCENTIVE ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2) ($)(3)
------------------ ------ ------ ----- ------------ -------- --------- ------------
John M. Barth........... 2002 820,000 1,296,000 -- 100,000 907,000 67,879
President and Chief 2001 775,005 579,000 -- 150,000 720,000 113,940
Executive Officer 2000 681,258 1,199,000 -- 75,000 420,000 85,837
James H. Keyes.......... 2002 1,225,500 2,411,000 95,123 200,000 1,950,000 107,210
Chairman 2001 1,175,001 978,000 143,455 250,000 1,440,000 201,600
2000 1,082,505 2,260,000 -- 150,000 972,000 160,714
Stephen A. Roell........ 2002 510,000 753,000 -- 40,000 530,000 41,348
Senior Vice President 2001 490,005 340,000 -- 50,000 420,000 68,580
and Chief Financial 2000 452,508 683,000 -- 44,000 256,000 55,025
Officer
Giovanni Fiori.......... 2002 480,000 671,000 -- 35,000 500,000 --
Executive Vice 2001 462,504 246,000 -- 50,000 367,000 --
President and 2000 432,504 586,000 -- 44,000 144,000 --
President,
International
Rande S. Somma.......... 2002 462,500 709,000 -- 35,000 371,000 27,935
Vice President 2001 437,500 235,000 -- 50,000 244,000 54,980
and President, 2000 364,585 533,000 -- 40,000 70,000 34,559
Automotive Systems
Group
-------------------------
(1) The aggregate amount of "Other Annual Compensation" which includes
perquisites and personal benefits was less than the required reporting
threshold (the lesser of $50,000 or 10% of the officer's annual salary and
bonus for the year), with the exception of Mr. Keyes.
(2) In fiscal 2002, based upon the data available at this time, LTPP
participants were granted 100% of the target available under the criteria
established by the Compensation Committee.
(3) "All Other Compensation" consists of contributions by the Company on behalf
of the named individuals to the Company's Savings and Investment plan.
28
STOCK OPTIONS AND
STOCK APPRECIATION
RIGHTS (SARS)
GRANTS: The Company has an employee Stock Option Plan under
which options to purchase Common Stock and SARs are
granted to officers and other key employees of the
Company and its subsidiaries. The per share option/SAR
prices are the fair market value of the Company's
Common Stock on the date of the grant and the term of
the option is 10 years. Fifty percent of each award is
exercisable two years after the grant date and the
remainder is exercisable three years after the grant
date.
OPTION GRANTS IN FISCAL YEAR 2002
The following table lists our grants during 2002 of stock options to the
executive officers named in the Summary of Compensation Table.
% OF
TOTAL OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL 2002 ($/SHARE) DATE 5%($) 10%($)
--------------------- ------- ------------- ----------- ---------- ----------- -----------
John M. Barth........ 100,000 6.57% $80.2300 11/14/11 $ 5,045,622 $12,786,596
James H. Keyes....... 200,000 13.14% $80.2300 11/14/11 $10,091,243 $25,573,192
Stephen A. Roell..... 40,000 2.63% $80.2300 11/14/11 $ 2,018,249 $ 5,114,638
Giovanni Fiori....... 35,000 2.30% $80.2300 11/14/11 $ 1,765,968 $ 4,475,309
Rande S. Somma....... 35,000 2.30% $80.2300 11/14/11 $ 1,765,968 $ 4,475,309
The amounts shown above as potential realizable values
rely on arbitrarily assumed rates of share price
appreciation prescribed by the Securities and Exchange
Commission. In assessing those values, please note that
the ultimate value of the options, as well as your
shares, depends on actual future share values. Market
conditions and the efforts of the directors, the
officers and others to foster the future success of our
Company can influence those future share values.
2002 OPTIONS,
SAR HOLDINGS AND
EXERCISES: The following table lists the number of shares acquired
and the value realized as a result of option exercises
during fiscal 2002 for the listed officers. It also
includes the number and value of their exercisable and
non-exercisable options and SARs as of September 30,
2002.
29
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS/SAR VALUES
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AS OF IN-THE-MONEY
SHARES 9/30/02 OPTIONS
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
-------------------------- ----------- ------------- --------------- ----------------------
John M. Barth............. 0 $ 0 127,500/287,500 $2,361,922/$3,625,069
James H. Keyes............ 102,000 $6,208,097.40 630,000/525,000 $19,825,862/$6,267,827
Stephen A. Roell.......... 45,000 $1,523,866.50 22,000/112,000 $397,841/$1,380,151
Giovanni Fiori............ 55,000 $2,491,472.20 67,000/107,000 $1,239,733/$1,380,151
Rande S. Somma............ 15,000 $ 624,303.00 26,000/105,000 $473,926/$1,343,984
LONG-TERM INCENTIVE
COMPENSATION: As noted above in the Compensation Committee's report,
the Long-Term Performance Plan (LTPP) rewards
executives for helping us achieve sustained performance
goals and encourages their continued efforts on our
behalf. Payouts of awards granted for fiscal 2002 are
tied to our Company's weighted average return on
shareholders' equity for fiscal years 2002, 2003, 2004
compared with the median return on shareholders' equity
of the Standard & Poor's 500 Index (less
transportation, financials and utilities sectors) (The
Index) during the same three-year period. To establish
a weighted average, performance in the third year of
the award is multiplied by 3/6, performance in the
second year is multiplied by 2/6, and performance in
the first year is multiplied by 1/6. If the Company's
average level of return is:
- Less than the 45th percentile of the return for
companies in the Index, no award is earned;
- Equal or greater than the 45th percentile, the
threshold amount is earned;
- Equal to or greater than the 50th percentile, the
target amount is earned;
- Equal to or greater than the 55th percentile, 110% of
the target amount is earned;
- Equal to or greater than the 60th percentile, 120% of
the target amount is earned;
- Equal to or greater than the 65th percentile, 150% of
the target amount is earned; and
- At or above the 75th percentile, the maximum amount,
180% of the target amount, is earned.
30
LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL 2002(1)
AMOUNT OF PERFORMANCE
CONTINGENT PERIOD UNTIL
PERFORMANCE MATURATION THRESHOLD TARGET MAXIMUM
NAME AWARD($) OR PAYOUT ($) ($) ($)
---- ----------- ------------ --------- ------ -------
John M. Barth............... 1,495,000 Fiscal Years 1,196,000 1,495,000 2,691,000
James H. Keyes.............. 1,625,000 2002-2004 1,300,000 1,625,000 2,925,000
Stephen A. Roell............ 463,000 370,000 463,000 833,000
Giovanni Fiori.............. 510,000 408,000 510,000 918,000
Rande S. Somma.............. 489,000 391,000 489,000 880,000
-------------------------
(1) The values in this table were calculated based on each executive's salary
that will be effective January 1, 2003. Actual values at the time of payout
will be calculated using each executive's base salary on the last day of the
performance period, and therefore, the values in the table could increase or
decrease. The maximum values in the table may not be increased higher than
the maximum of $3 million under the LTPP.
RETIREMENT PLANS: The following table shows the maximum annual retirement
benefits payable under the Company's plans, including
amounts attributable to the Company's Equalization
Benefit Plan. Under the Johnson Controls Pension Plan
(the Plan), participants become entitled to benefits
after five years of service with the Company or any of
its subsidiaries, and the normal retirement date is a
participant's 65th birthday.
The Internal Revenue Code places maximum limitations on
the amount of benefits that may be paid under the Plan.
The Company has adopted an Equalization Benefit Plan
under which certain executives are entitled to pension
benefits that cannot be paid under the qualified Plan
due to these limitations.
31
PENSION PLAN TABLE*
AVERAGE ANNUAL
COMPENSATION IN
HIGHEST 5
CONSECUTIVE YEARS
OF LAST 10 YEARS
BEFORE RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
--------------------- -------- --------- --------- --------- --------- ---------
300,000 76,500 102,000 127,500 153,000 170,250 187,500
600,000 153,000 204,000 255,000 306,000 340,500 375,000
900,000 229,500 306,000 382,500 459,000 510,750 562,500
1,200,000 306,000 408,000 510,000 612,000 681,000 750,000
1,500,000 382,500 510,000 637,500 765,000 851,250 937,500
1,800,000 459,000 612,000 765,000 918,000 1,021,500 1,125,000
2,100,000 535,500 714,000 892,500 1,071,000 1,191,750 1,312,500
2,400,000 612,000 816,000 1,020,000 1,224,000 1,362,000 1,500,000
2,700,000 688,500 918,000 1,147,500 1,377,000 1,532,250 1,687,500
3,000,000 765,000 1,020,000 1,275,000 1,530,000 1,702,500 1,875,000
3,300,000 841,500 1,122,000 1,402,500 1,683,000 1,872,750 2,062,500
3,600,000 918,000 1,224,000 1,530,000 1,836,000 2,043,000 2,250,000
-------------------------
* Assuming normal retirement age and years of service under provisions in effect
on September 30, 2002 and assuming retirement on that date.
YEARS OF SERVICE: As of September 30, 2002, the executive officers named
in the Summary of Compensation Table were credited with
the following years of service under the Plan: Mr.
Keyes, 33 years, Mr. Barth, 32 years, Mr. Roell, 19
years and Mr. Somma, 14 years. Mr. Fiori is not a
participant in the Plan.
BENEFITS ACCRUAL: Pension plans of the Company apply to certain salaried
and non-union hourly employees of the Company,
including officers of the Company. Under the Plan,
benefits are accrued according to the following
formula: 1.15% of Participant's Average Monthly
Compensation multiplied by the Participant's years of
Benefit Service plus 0.55% of Average Monthly
Compensation in excess of the Participant's Covered
Compensation multiplied by the Participant's years of
Benefit Service. The amounts payable may be adjusted to
reflect the Participant's decision on survivor
benefits, early retirement or termination, and in some
instances age.
DEFINITIONS: "Average Monthly Compensation" is defined as the
average monthly compensation, including salary and
bonus, for the highest five consecutive years in the
last 10 years.
"Covered Compensation" means the average of
compensation subject to Social Security taxes
(including salary and bonus) for the 35-year period
ending in the year the Participant attains Social
Security Retirement Age; i.e., the age at which the
Participant will be entitled to full Social Security
payments.
32
EMPLOYMENT AGREEMENTS
EMPLOYMENT
AGREEMENTS
GENERALLY: We have employment agreements with each of the named
executive officers of the Company. These agreements
provide that employment shall continue unless
terminated by either the Company or the employee.
TERMINATION: The agreements provide for termination by the Company
for cause, for death or disability and under certain
circumstances without cause. If terminated without
cause, the employee is entitled to receive pay in an
amount equal to or greater than two times the Company's
termination allowance policy or an amount equal to 52
weeks' earnings of the employee. If terminated for
cause, the employee's compensation is terminated
immediately.
CHANGE OF CONTROL: We also have change of control agreements with each of
these officers. In the event of a change of control,
the agreements provide for a severance payment equal to
three times the executive's annual compensation plus a
lump sum payment equal to lost benefits under the
retirement plan if the executive is terminated other
than for cause or with good reason to terminate
employment. If the amount paid upon termination exceeds
amounts established under the Internal Revenue Code,
which results in payment of additional federal taxes,
the executive will receive an additional payment so
that the executive will retain the full amount to which
he is entitled under the agreement. The executive also
has 30 days at the end of the first year after a change
of control to terminate his employment for any reason
and still receive this benefit.
The EICP, LTPP, 2000 Stock Option Plan, 2001 Restricted
Stock Option Plan and Deferred Compensation Plan for
Certain Directors provide that, in the event of a
change of control of our Company, participants,
including the named executives, shall be entitled to
receive early payment of deferred amounts and immediate
payout of current amounts attributable to participants.
EXECUTIVE SURVIVOR
BENEFITS PROGRAM: The Company has in effect an Executive Survivor
Benefits Plan for certain executives. Coverage under
this plan is in lieu of the Company's regular group
life insurance coverage. If a participating executive
dies while he is employed by the Company, his
beneficiary is entitled to payments of between 90% and
100% (depending on the executive's age) of the
executive's final base annual salary for a period of 10
years.
33
JOHNSON CONTROLS SHARE OWNERSHIP
DIRECTORS AND
OFFICERS: The following table lists our Common Stock ownership as
of November 14, 2002, for the persons or groups
specified. Ownership includes direct and indirect
(beneficial) ownership as defined by the Securities and
Exchange Commission rules. To our knowledge, each
person, along with his or her spouse, has sole voting
and investment power over the shares unless otherwise
noted. None of these persons beneficially owns more
than 1% of the outstanding Common Stock.
AMOUNT AND UNITS REPRESENTING
NATURE(1) OF DEFERRED
NAME OF BENEFICIAL OWNER STOCK OWNERSHIP COMPENSATION(3)
------------------------ --------------- ------------------
John M. Barth................................. 316,323(2) 49,762 Units
James H. Keyes................................ 1,036,959(2) 120,509 Units
Stephen A. Roell.............................. 137,758(2) 21,095 Units
Giovanni Fiori................................ 148,050(2) 16,427 Units
Rande S. Somma................................ 103,423(2) 5,372 Units
William F. Andrews (Retired November, 2001)... 7,295 6,554 Units
Dennis W. Archer (Elected March, 2002)........ 400 567 Units
Robert L. Barnett............................. 1,490 28,269 Units
Natalie A. Black.............................. 882 3,225 Units
Paul A. Brunner............................... 14,330 7,072 Units
Robert A. Cornog.............................. 6,516 10,891 Units
Willie D. Davis............................... 4,730 6,965 Units
Jeffrey A. Joerres (Elected November, 2001)... 777 1,139 Units
William H. Lacy............................... 6,500 7,570 Units
Southwood J. Morcott.......................... 2,883 10,823 Units
Richard F. Teerlink........................... 4,786 4,600 Units
Gilbert R. Whitaker, Jr (Retired November,
2001)....................................... 6,203 13,229 Units
All Directors and Executive Officers as a
group (not including deferred shares
referred to in footnote (3))................ 2,495,570
TOTAL PERCENT OF CLASS OF COMMON STOCK
EQUIVALENTS................................. 2.68%
-------------------------
(1) Includes all shares for each officer or director that directly has or shares
the power to vote or direct the vote of such shares, or to dispose of or
direct disposition of such shares.
(2) Includes shares of Common Stock which, as of November 14, 2002, were subject
to outstanding stock options exercisable within 60 days as follows: Mr.
Barth, 240,000, Mr. Keyes, 830,000, Mr. Roell, 69,000, Mr. Fiori, 114,000,
and Mr. Somma, 71,000. This also reflects common stock equivalents of
Deferred Stock Option and Preferred Units that are owned by these officers.
(3) Includes deferred shares under the Deferred Compensation Plan and the
Deferred Compensation Plan For Certain Directors. Units will not be
distributed in the form of Common Stock.
34
SCHEDULE 13G FILINGS: The Company believes that the following table is an
accurate representation of beneficial owners of more
than 5% of any class of the Company's securities. The
table is based upon reports on Schedules 13G filed with
the Securities and Exchange Commission or other
information believed to be reliable.
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- --------------------------- ---------- ----------
Series D Convertible Fidelity Management 201.9548(1) 100%
Preferred Stock Trust Company
$1.00 Par Value 82 Devonshire Street
Boston, MA 02109
-------------------------
(1) Fidelity Management Trust Company reported as of October 31, 2002 that it
held shared voting power and sole dispositive power with respect to the
shares indicated above in its capacity as trustee of the Johnson Controls,
Inc. Employee Stock Ownership Trust
VOTING PROCEDURES
ELECTION OF DIRECTORS: To be elected, directors must receive a plurality of
the shares present and voting in person or by proxy,
provided a quorum exists. A quorum is present if at
least a majority of the outstanding shares on the
record date are present in person or by proxy.
Plurality means that the number of directors who
receive the largest number of votes cast are elected as
directors, up to the maximum number of directors to be
chosen at the meeting. Consequently, any shares not
voted (whether by abstention, broker non-vote or
otherwise) have no impact in the election of directors
except to the extent the failure to vote for an
individual results in another individual receiving a
larger number of votes.
OTHER PROPOSALS: To be approved, each of the proposals: (a) to ratify
the election of PricewaterhouseCoopers LLP as our
independent auditors for 2003, and (b) to consider the
shareholder proposal to issue a sustainability report,
must receive more votes "FOR" the proposal than
"AGAINST." For purposes of determining the vote with
respect to these proposals, any shares not voted
(whether by abstention, broker non-vote or otherwise)
will have no impact.
The enclosed proxies will be voted in accordance with
the instructions you place on the proxy card. Unless
otherwise stated, all shares represented by your
returned, signed proxy will be voted as the Board
recommends for each proposal as noted in the Notice of
this proxy statement. Proxies may be revoked as
indicated in the corresponding "Questions and Answers"
section.
35
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(A) Based on a review of reports filed by our directors,
executive officers and of beneficial holders of 5% or
more of our shares, and upon representations from those
persons, all reports required to be filed during 2002
with the Securities and Exchange Commission under
Section 16(a) of the Securities Exchange Act of 1934
were timely made, except for one; an indirect holding
omitted from the initial Form 3 filing by Jeffrey A.
Joerres. This omission was promptly corrected upon
discovery and Mr. Joerres reported the holding in an
amended Form 3.
By order of the Board of Directors.
/s/ JOHN P. KENNEDY
John P. Kennedy, Secretary
December 10, 2002
36
[JOHNSON CONTROLS LOGO] PROXY COMPANY #
CONTROL #
VOTE BY TELEPHONE, INTERNET OR MAIL,
24 HOURS A DAY, 7 DAYS A WEEK
[TELEPHONE PICTURE] [COMPUTER PICTURE] [ENVELOPE PICTURE]
toll-free in U.S. and Canada: OR HTTP://WWW.EPROXY.COM/JCI/ OR
800-240-6326
Use any touch-tone telephone Use the Internet to vote your proxy. Mark, sign and date your Proxy Form and
to vote your proxy. Have your Have your Proxy Form in hand when return it in the postage-paid envelope
Proxy Form in hand when you call. you access the website. You will be we have provided.
You will be prompted to enter your prompted to enter your company and control
company and control numbers, located numbers, located in the box above, to
in the box above, and then follow create an electronic ballot.
the simple directions.
------------------------------------------------------------------------------------------------------------------------------------
The undersigned, having received the Notice of Meeting and Proxy This proxy when properly executed will be voted in
Statement dated December 10, 2002, and Annual Report for 2002, the manner directed therein by the undersigned.
hereby appoints J.P. Kennedy and J.H. Keyes, and each of them, Your telephone or Internet vote authorizes the
proxies with power of substitution to vote for the undersigned at named proxies to vote your shares in the same
the annual shareholders' meeting of Johnson Controls, Inc., on January manner as if you marked, signed and mailed your
22, 2003, and at any adjournments thereof, hereby revoking any proxy Proxy Form. This proxy allows you to vote all
heretofore given by the undersigned for such meeting. non-broker account shares of Johnson Controls you
hold as of November 14, 2002. IF YOU SUBMIT YOUR
PROXY BY TELEPHONE OR INTERNET, THERE IS NO NEED
FOR YOU TO MAIL BACK YOUR PROXY FORM.
\/ Please Detach Here \/
2003 ANNUAL MEETING - JANUARY 22, 2003 [JOHNSON CONTROLS LOGO]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
FOR AGAINST ABSTAIN
FOR ALL WITHHOLD FROM ALL 2. Approval of PriceWaterhouseCoopers [ ] [ ] [ ]
[ ] [ ] as independent auditors for 2003.
1.Election of Directors
01 Dennis W. Archer As the Company already publishes reports
02 John M. Barth that address these concerns, your Board
03 Paul A. Brunner of Directors recommends a vote AGAINST item 3.
04 Southwood J. Morcott
FOR AGAINST ABSTAIN
EXCEPTIONS 3. Proposal to issue a sustainability report. [ ] [ ] [ ]
--------------------------------------------------
If no direction is made, this proxy will be voted
-------------------------------------------------- FOR all nominees listed in items 1 and 2, and
AGAINST item 3, and in the discretion of the
To withhold authority to vote for any individual proxies, upon other such matters which may properly
nominee(s), write the number code(s) of the nominee(s) come before the meeting or any adjournments thereof.
in the exceptions box.
[IMPORTANT INFORMATION CONTAINED ON REVERSE SIDE; PLEASE READ.]
[ ] Check this box if address change, and indicate -------------------------------------------------------
correction below:
-------------------------------------------------------
PLEASE SIGN IN BOX ABOVE.
Please sign name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee, or guardian, give full
title. For joint accounts, each owner must sign.
Dated:
-----------------------------------------------------------
JOHNSON CONTROLS, INC.
PROXY
2003 Annual Meeting - January 22, 2003
If you are a participant in the Bridgewater LLC Profit Sharing Plan, the Johnson
Controls World Services Retirement Savings Plan, the Johnson Controls Northern
New Mexico Retirement Savings Plan, the Johnson Controls, Inc. Savings and
Investment Plan, the Technotrim Savings and Investment Plan, the Trimmasters
Savings and Investment Plan, the Johnson Controls, Inc. ASG Production
Employees' Savings and Investment Plan, or the Johnson Controls IFM Retirement
Savings Plan, this proxy card also entitles you to direct Fidelity Management
Trust Company how to vote Johnson Controls shares credited to your account.
If you are a participant in the Johnson Controls Interiors PERT Plan, this proxy
card also entitles you to direct Putnam Fiduciary Trust Company how to vote
Johnson Controls shares credited to your account.
The shares credited to your account in any above-referenced plan will be voted
as directed. If no direction is made, if the card is not signed, or if the card
is not received by January 17, 2003, the plan shares credited to your account
will be voted in the same proportion as directions received from participants.
If you hold the Company's Common Stock, and no voting direction is made, the
shares you hold will be voted FOR all nominees listed in items 1 and 2, and in
the discretion of the proxies, upon such other matters which may properly come
before the meeting or any adjournments thereof. Regarding item 3, shares you
hold are counted toward the quorum requirement but they do not affect the
determination of whether a non-routine matter is approved or rejected. Broker
non-voted shares will not affect the determination of whether it is approved or
rejected.
If you own shares by other means than those stated above, you will receive
separate proxy materials which you should complete and return as indicated in
those materials. To understand the effect of not voting your shares, please
refer to the Questions and Answers section of the Proxy Statement.
Dear Shareholder,
Earlier this year, you opted to receive your Johnson Controls Annual Report and
Proxy electronically instead of in hard copy form.
Prior to voting your shares, please view these documents on-line at
WWW.JOHNSONCONTROLS.COM/PROXY.HTM.
To vote your shares, follow the instructions on the enclosed proxy card.
Your vote is important. Please vote your shares as soon as possible.