Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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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
GENERAL MOTORS CORPORATION
......................................................................
(Name of Registrant as Specified In Its Charter)
......................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
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and 0-11
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applies:
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applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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GM GENERAL MOTORS CORPORATION
NOTICE OF ANNUAL MEETING
April 17, 2003
Dear Stockholder:
You are invited to attend the annual meeting of stockholders of General
Motors Corporation. It will be held at 9 a.m. local time on Tuesday, June 3,
2003, at the Hotel du Pont, 11th & Market Streets, Wilmington, Delaware. At the
meeting, stockholders will vote upon the following matters:
* The election of directors for the next year;
* The ratification of the Board of Directors' proposal for the selection of
independent public accountants for the next year;
* Eight stockholder proposals (if they are properly presented at the
meeting).
If you were a record holder of Common Stock, $1 2/3 par value ("Common
Stock"), or Class H Common Stock, $0.10 par value ("Class H Common Stock"), at
the close of business on April 4, 2003, you will be entitled to vote at the
meeting. For this document, Common Stock and Class H Common Stock together will
be referred to as "GM Stock." A list of stockholders entitled to vote at the
meeting will be available for examination at General Motors Corporation,
Renaissance Center, Detroit, Michigan, for ten days before the meeting between
9 a.m. and 5 p.m., and at the Hotel du Pont during the annual meeting.
The annual meeting will include a report on the state of the business, and
thereafter focus on electing directors, voting on the selection of independent
public accountants and stockholder proposals, and related discussion. After
that, we will provide time for business-related questions and comments. If you
plan to attend the meeting, please see the instructions on page 3.
In addition to the annual meeting, GM holds regional stockholder forums.
These meetings provide a less formal way for you to learn about General Motors
and discuss related issues with senior management. The time and location of
these meetings are announced in Stockholder News as well as on the Internet
under "Calendar for Investors" at http://investor.gm.com.
Please read the attached proxy statement carefully and submit your proxy as
soon as possible. You have your choice of voting your proxy via the Internet, by
telephone, or by completing and returning the enclosed proxy card.
Sincerely,
/s/ Nancy E. Polis /s/ John F. Smith, Jr.
Secretary Chairman
TABLE OF CONTENTS
Page
PROXY STATEMENT........................................................ 1
GENERAL INFORMATION.................................................... 1
Stockholders Entitled to Vote..................................... 1
Voting............................................................ 1
Voting of Stock Plans for Employees............................... 2
Proxy Statement Proposals......................................... 3
Attending the Annual Meeting...................................... 3
Householding of Annual Meeting Materials.......................... 3
Electronic Delivery of Annual Meeting Materials................... 4
Material for Beneficial Owners.................................... 4
Expenses of Solicitation.......................................... 4
BOARD OF DIRECTORS GOVERNANCE.......................................... 4
Selection of Nominees for Directors............................... 4
Directors......................................................... 5
Director Compensation............................................. 5
Committees of the Board of Directors.............................. 6
ITEM NO. 1--Nomination and Election of Directors....................... 7
Information about Nominees for Directors.......................... 7
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE......................... 14
EXECUTIVE COMPENSATION TABLES.......................................... 18
AUDIT COMMITTEE REPORT................................................. 25
FEES PAID TO AUDITOR................................................... 25
ITEM NO. 2--Ratification of the selection of Deloitte & Touche
as independent public accountants for the year
2003...................................................... 27
ITEM NO. 3--Stockholder proposal to retain an auditing
consulting firm that was not part of Deloitte &
Touche.................................................... 27
ITEM NO. 4--Stockholder proposal to report on greenhouse gas
emissions................................................. 28
ITEM NO. 5--Stockholder proposal to require an independent
chairman separate from the chief executive
officer................................................... 30
ITEM NO. 6--Stockholder proposal to require stockholder approval
of a "poison pill"........................................ 31
ITEM NO. 7--Stockholder proposal to adopt cumulative voting........... 33
ITEM NO. 8--Stockholder proposal to appoint independent
directors to key Board committees......................... 35
ITEM NO. 9--Stockholder proposal to award performance-based
stock options to senior executives and directors.......... 36
ITEM NO. 10--Stockholder proposal to appoint an independent
auditor that will not provide GM with non-audit
consulting services....................................... 38
OTHER MATTERS.......................................................... 39
EXHIBIT A--TEXT OF THE AUDIT COMMITTEE CHARTER......................... A-1
GENERAL MOTORS CORPORATION
300 RENAISSANCE CENTER, P.O. BOX 300, DETROIT, MICHIGAN 48265-3000
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 2003
This proxy statement is provided in connection with the solicitation of
proxies, by order of the Board of Directors of General Motors Corporation, to be
used at the annual meeting of stockholders of the Corporation. The enclosed
proxy card represents your holdings of Common Stock and/or Class H Common Stock
in the registered account name shown. We expect that this proxy statement and
the enclosed proxy will be mailed, or will be available through the Internet for
those stockholders receiving their proxy materials electronically, on or after
Thursday, April 17, 2003, to each stockholder entitled to vote.
In addition to this proxy statement and card, the GM 2002 Annual Report is
provided in this package.
GENERAL INFORMATION
STOCKHOLDERS ENTITLED TO VOTE
The Board of Directors designated April 4, 2003, as the record date for
determining stockholders entitled to vote at the annual meeting. On that date,
the Corporation had 560,678,283 shares of Common Stock and 1,107,518,293 shares
of Class H Common Stock outstanding and entitled to vote. Each share of Common
Stock entitles the holder to one vote, and each share of Class H Common Stock
entitles the holder to 0.2 vote.
VOTING
You may give instructions to grant or withhold authority to vote for
election of all the Board of Directors' nominees, or any individual nominee, and
to vote for or against, or abstain from voting upon, each of the nine proposals.
If you are a stockholder of record (you hold shares in your name in an
account with GM's stock transfer agent, EquiServe), you can vote in any one of
the following three ways:
* By Internet: Go to the Web site, www.eproxyvote.com/gm, shown on your
proxy card. You will need to enter your voter control number that appears
on your proxy card.
* By Telephone: Call the toll-free number, 1-877-779-8683, as listed on
your proxy card. If you are outside the continental United States or
Canada, call collect at 1-201-536-8073. You will need to provide your
voter control number that appears on your proxy card. Please follow the
instructions on your proxy card and the voice prompts on the telephone.
* By Mail: Mark, sign your name exactly as it appears on your proxy card,
date your proxy card, and return it in the enclosed envelope. If you
receive more than one proxy card (which means you have shares in more
than one account), you must mark, sign, and date each of them, or
alternatively vote all these shares through the Internet or by telephone.
If you sign and return your proxy card and do not specify a choice, your
shares will be voted as the Board of Directors has recommended, as
indicated in this proxy statement.
If you prefer, you may also vote by ballot at the annual meeting, which
will cancel any proxy you previously gave.
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After you have signed and returned the enclosed proxy card or voted through
the Internet or by telephone, you may revoke your proxy at any time until it is
voted at the annual meeting. You may do this by sending a written notice of
revocation or a subsequent proxy card, by voting subsequently through the
Internet or by telephone, or by voting in person at the annual meeting. The
shares represented by a proxy will be voted unless the proxy card is received
late or in a form that cannot be voted.
By signing and returning the proxy card or by voting through the Internet
or by telephone, you will authorize the Proxy Committee to vote your shares of
Common Stock and/or Class H Common Stock as you direct and on any proposals that
General Motors does not know about now but that may be presented properly at the
meeting. The Proxy Committee comprises three executive officers of the
Corporation: G. Richard Wagoner, Jr., John M. Devine, and Robert A. Lutz, each
of whom is authorized to act on behalf of the Committee.
If your shares are held by a broker, bank, or other record holder, please
refer to the instructions they provide for your shares to be voted.
As a matter of policy, GM believes your vote should be private. Therefore,
we use an independent specialist to receive, inspect, count, and tabulate
proxies. Representatives of the independent specialist also act as judges at the
annual meeting.
Except for Item 1, or as otherwise noted, each proposal in this proxy
statement will be approved if it receives a majority of the votes present,
either in person or by proxy, at the meeting. Item 1, the election of directors,
is somewhat different: the ten candidates who receive the most votes will be
elected to the ten available memberships on the Board. If you submit your proxy
or attend the meeting but choose to abstain from voting on any proposal, you
will be considered present at the meeting and not voting in favor of the
proposal. Since most proposals pass only if they receive favorable votes from a
majority of votes present at the meeting, the fact that you are abstaining and
not voting in favor of a proposal will have the same effect as if you had voted
against the proposal. (In contrast, a "broker non-vote," where a broker
withholds authority to cast a vote as to a certain proposal, is deemed not
present at the meeting with regard to that proposal.)
VOTING OF STOCK PLANS FOR EMPLOYEES
If you participate in the following stock plans for employees, your proxy
card will serve to instruct the Trustees, plan committees, or independent
fiduciaries of those plans how to vote your shares in the plan:
* General Motors Savings-Stock Purchase Program for Salaried Employees in
the United States (the "GM S-SPP")
* General Motors Personal Savings Plan for Hourly-Rate Employees in the
United States (the "GM PSP")
* General Motors Canadian Savings-Stock Program for Salaried Employees
(the "GM Canadian Plan")
* General Motors of Canada Limited Group RRSP and Savings Plan for Hourly
Employees (the "GM RRSP")
* Fidelity Investments Canada Limited Next StepTM -- Personal Retirement
Group (the "FICL-PRG")
* Raytheon Canada Savings and Investment Program (the "Raytheon Canada
SIP")
* Raytheon Savings and Investment Plan (the "Raytheon Plan")
* Delphi Corporation Savings-Stock Purchase Program for Salaried Employees
in the United States (the "Delphi S-SPP")
* Delphi Corporation Personal Savings Plan for Hourly-Rate Employees in the
United States (the "Delphi PSP")
* Hughes Non-Bargaining Employees Thrift and Savings Plan (the "Hughes
Non-Bargaining Plan")
* Hughes Savings Plus Plan (the "Hughes Savings Plan")
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* Saturn Individual Savings Plan for Represented Members (the "Saturn ISP")
* GMAC Mortgage Group Inc. Savings Incentive Plan (the "GMAC Mortgage
Plan")
* GMAC Insurance Personal Lines -- Retirement Plan (the "GMAC Insurance
Plan")
If you do not provide instructions on how to vote your shares held in the
GM S-SPP, the Hughes Non-Bargaining Plan, the Hughes Savings Plan, or the Delphi
S-SPP, those shares may be voted at the discretion of the Trustee, plan
committee, or independent fiduciary. If you do not provide instructions on how
to vote your shares held in the GM PSP, the GM Canadian Plan, the GM RRSP, the
FICL-PRG, the Raytheon Canada SIP, the Raytheon Plan, the Delphi PSP, the Saturn
ISP, the GMAC Mortgage Plan, and the GMAC Insurance Plan, the shares will not be
voted.
PROXY STATEMENT PROPOSALS
At the annual meeting each year, the Board of Directors asks stockholders
to vote on its nominees for election as directors. In addition, GM's By-laws
require that at each annual meeting the stockholders approve the independent
public accountants selected by the Audit Committee and the Board of Directors.
The Board of Directors also may submit other matters for stockholder approval at
the annual meeting.
In addition to these matters presented by the Board of Directors, you may
be asked to vote on one or more stockholder proposals. We have been asked from
time to time why the Board opposes the stockholder proposals included in the
proxy statement.
The Board does not disagree with all stockholder proposals submitted to the
Corporation. When it agrees with a proposal and thinks it is in the best
interests of GM and its stockholders, the proposal usually can be implemented
without a stockholder vote. The stockholder proposals that appear in the proxy
statement are only those with which the Board of Directors disagrees and
believes it must oppose in fulfilling its obligations to represent and safeguard
the best interests of stockholders as a whole.
The deadline for stockholders to submit a proposal to include in the
Corporation's proxy statement for the 2004 annual meeting is December 19, 2003.
Any proposals intended to be presented at the 2004 meeting must be received by
the Corporation on or before that date. Please send proposals to the Secretary,
General Motors Corporation, by mail to MC 482-C38-B71, 300 Renaissance Center,
P.O. Box 300, Detroit, MI 48265-3000, or by fax at 313-667-3166.
ATTENDING THE ANNUAL MEETING
If you plan to attend the meeting, please detach and retain the admission
ticket attached to your proxy card. As capacity is limited, you may bring only
one guest to the meeting. If you hold your stock through a broker, bank, or
other record holder, please bring evidence that you own Common Stock and/or
Class H Common Stock to the meeting and we will provide you with admission
tickets. If you receive your annual meeting materials electronically and wish to
attend the meeting, please follow the instructions provided for attendance. A
form of government-issued photograph identification will be required to enter
the meeting. To permit as many stockholders as possible to participate, only
stockholders or their valid proxy holders may speak at the meeting. A map with
driving directions appears on the back page of this proxy statement.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
The Securities and Exchange Commission permits corporations to send a
single copy of the annual report and proxy statement to any household at which
two or more stockholders reside if it appears they are members of the same
family. Each stockholder will continue to receive a separate proxy card. This
procedure, referred to as householding, is intended to reduce the volume of
duplicate information stockholders receive and also to reduce expenses for
corporations. General Motors has instituted this procedure for all stockholders
of record.
If one set of these documents was sent to your household for the use of all
GM stockholders in your household, and one or more of you would prefer to
receive your own set, please contact our stock transfer
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agent, EquiServe, by telephone at 1-800-331-9922 (if calling from outside the
continental United States or Canada, call collect at 1-781-575-3990) or by
Internet at www.equiserve.com.
If a broker or other record holder holds your GM shares, please contact
your broker or other record holder directly if you have questions, require
additional copies of the proxy statement or annual report, or wish to receive
multiple reports by revoking your consent to householding.
ELECTRONIC DELIVERY OF ANNUAL MEETING MATERIALS
You can save the Corporation postage and printing expenses by consenting to
receive your GM annual report and proxy materials via the Internet. At your
request, you will receive an e-mail notification when these documents are
available electronically through the Internet. Registered stockholders (those
with an account maintained in their name with EquiServe) may sign up for this
service at www.econsent.com/gm. Beneficial stockholders (those holding their
stock through a broker or bank) may sign up at www.icsdelivery.com/gm, if their
broker or bank is among the majority that participate in electronic delivery.
MATERIAL FOR BENEFICIAL OWNERS
Brokers, dealers, banks, voting trustees, and other nominees who want a
supply of the Corporation's proxy soliciting material to send to beneficial
owners should write to:
General Motors Corporation
c/o Morrow & Co., Inc.
445 Park Avenue, 5th Floor
New York, NY 10022-2606
EXPENSES OF SOLICITATION
The Corporation will pay the cost of this solicitation of proxies. General
Motors will solicit proxies by mail and electronic means, and the directors,
officers, and employees of GM may also solicit proxies. These persons will not
receive any additional compensation for such services. In addition, GM has
retained Morrow & Co., Inc., to assist in soliciting proxies for a fee of up to
$50,000, plus reasonable out-of-pocket expenses. The Corporation will reimburse
brokers and other stockholders of record for their expenses in forwarding proxy
material to beneficial owners.
BOARD OF DIRECTORS GOVERNANCE
SELECTION OF NOMINEES FOR DIRECTORS
The Directors and Corporate Governance Committee (the "Committee") is
responsible for recommending candidates for membership on the Board. In
assessing potential new directors, the Committee considers individuals from
various disciplines and diverse backgrounds. The selection of qualified
directors is complex and crucial to GM's long-term success. Board candidates are
considered based upon various criteria, such as their broad-based business
skills and experiences, a global business and social perspective, concern for
the long-term interests of the stockholders, and personal integrity and
judgment. In addition, directors must have time available to devote to Board
activities and to enhance their knowledge of the global automotive industry.
Under the Corporation's By-laws, each year prior to the annual meeting of
stockholders the Committee recommends the Board's nominees to serve as GM
directors for the next year. The Board is soliciting proxies to elect these
individuals. Except for G. Richard Wagoner, Jr., who is an employee of the
Corporation, all candidates nominated by the Board of Directors have been
determined to be independent directors as defined under Section 2.12 of the
Corporation's By-laws. (If you would like a copy of GM's By-laws, please write
to the Secretary, General Motors Corporation, MC 482-C38-B71, 300 Renaissance
Center, P.O. Box 300, Detroit, MI 48265-3000, or go to www.gm.com on the
Internet and click on "Corporate Governance.")
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To recommend an individual for Board membership, write to the Secretary at
the address given above. If you intend to nominate a candidate for director at
the annual meeting, or to introduce any other matter (aside from a stockholder
proposal under Rule 14a-8 of the Securities and Exchange Commission's proxy
rules, which is discussed on page 3), you must give the Corporation written
notice. Such notice must be received by the Secretary of the Corporation not
more than 180 days and not less than 120 days before the date of the annual
meeting. For the 2004 annual meeting, such notice must be received between
December 5, 2003, and February 3, 2004.
DIRECTORS
The Board of Directors held a total of eight meetings in 2002. It is
currently composed of 13 members. John F. Smith, Jr. is not standing for
reelection pursuant to the Director Retirement Policy, and Nobuyuki Idei and
Lloyd D. Ward are not standing for reelection at their request. Upon their
departure from the Board, Mr. Smith will become a special advisor to
Mr. Wagoner, and Mr. Idei will become a founding member of the new
General Motors Asian Advisory Council.
If you elect all ten nominees at the 2003 annual meeting, the Board will be
composed of nine directors who are independent and not employed by General
Motors and one who is currently an officer of the Corporation.
In addition to being members of the Board, most directors serve on one or
more of its six standing Committees. (Please refer to "Committees of the Board
of Directors" commencing on page 6 for information concerning Committees'
responsibilities and current membership.) Directors spend a considerable amount
of time preparing for Board and Committee meetings and, from time to time, are
called upon for their counsel between meetings. The Board as well as each
Committee can retain the services of an outside advisor at their request. In
2002, average attendance at Board and Committee meetings was 93%.
The non-employee directors of the Board will meet in executive sessions at
least two times each year without management present. The Chair of the Directors
and Corporate Governance Committee will act as presiding director at the
executive sessions. At these sessions, at a minimum, the non-employee directors
review CEO succession, performance and compensation; strategic issues for Board
consideration; future Board agendas and the flow of information to directors;
management progression and succession; and the Board's corporate governance
guidelines. The presiding director is responsible for advising the Chief
Executive Officer of decisions reached, and suggestions made, at these sessions.
(The guidelines are available from the Secretary upon written request, or on
GM's Web site at www.gm.com.)
DIRECTOR COMPENSATION
Only non-employee directors receive payment for serving on the Board. Since
Mr. Wagoner is an employee of the Corporation, he is not compensated as a
director. Non-employee directors are not eligible to participate in the
executive incentive program, Savings-Stock Purchase Program, or any of the
retirement programs for General Motors employees. Other than as described in
this section, there are no separate benefit plans for directors. Compensation
paid to non-employee directors is as follows:
* Annual retainer -- $200,000(a)
* Retainer for Committee Chair -- $ 5,000
* Audit Committee Chair -- $ 30,000
* Audit Committee Member -- $ 20,000
(a) Under the General Motors Compensation Plan for Non-Employee Directors (the
"Plan"), non-employee directors are required to defer $140,000 of the above
annual retainer in restricted units of Common Stock. In addition, under the
Plan directors may also elect to defer all or a portion of the remaining
compensation in cash or units of Common Stock.
The annual stock option grant of 3,000 shares was eliminated, and the
approximate value was combined into the annual retainer. In addition, the
$1,500 per diem rate was also eliminated.
5
Restricted stock units under the Plan are credited with dividend
equivalents in the form of additional stock units. Amounts deferred under the
Plan are generally not available until after the director retires from the Board
at age 70. After the director leaves the Board, payment under the Plan is made
in cash based on the number of stock units valued at the average quarterly mean
market price prior to payment.
The Board has established a stock ownership guideline for non-employee
directors to further the link between director and stockholder interests. Each
non-employee director will be required to own stock and/or deferred restricted
stock units equal in value to three times the annual retainer within five years
of joining the Board or the adoption of this guideline. Non-employee directors
are also prohibited during their term of service from selling any shares of GM
Stock, except for the exercise of stock options granted prior to 2003.
The Corporation also provides the use of company vehicles, certain personal
liability insurances, and other benefits on an annual basis at an estimated
aggregate value of $17,000 per director. Directors, like salaried employees, are
eligible to participate in a matching contributions program to accredited
four-year colleges, universities, and community colleges, and all eligible
contributions will be matched on a dollar-for-dollar basis up to $5,000
annually. Directors are also reimbursed for travel expenses incurred in
connection with their duties as directors.
Non-employee members of the General Motors Board of Directors who serve as
directors of Hughes Electronics Corporation receive an annual retainer of
$140,000 under the Hughes Electronics Corporation Compensation Plan for
Non-Employee Directors. In 2002, Eckhard Pfeiffer was a member of the Hughes
Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE met seven times in 2002. The primary function of the
Committee is to assist the Board of Directors in fulfilling its oversight
responsibilities with respect to the financial reports and other financial
information provided by the Corporation to the stockholders and others, the
Corporation's system of internal controls, the Corporation's compliance
procedures for the employee code of ethics and standards of business conduct,
and the Corporation's audit, accounting, and financial reporting processes
generally. All members of the Audit Committee are independent directors as
defined by the Corporation's By-laws and the New York Stock Exchange (the
"NYSE"). Philip A. Laskawy serves as the Committee's financial expert as
required by the NYSE and satisfies the standard for "audit committee financial
expert" recently announced by the Securities and Exchange Commission under the
Sarbanes-Oxley Act of 2002.
Membership: Philip A. Laskawy (Chair) Alan G. Lafley
Nobuyuki Idei Eckhard Pfeiffer
CAPITAL STOCK COMMITTEE oversees the relationship between General Motors
and its wholly owned subsidiary, Hughes Electronics Corporation, to ensure that
transactions between the two companies are in the best interests of each
corporation and are fair to the holders of both classes of GM common stock.
Membership: Eckhard Pfeiffer (Chair) John H. Bryan
Percy N. Barnevik
DIRECTORS AND CORPORATE GOVERNANCE COMMITTEE met seven times in 2002 and is
comprised entirely of independent directors. The Committee researches and
recommends candidates for membership on the Board and conducts continuing
studies of the size, composition, and compensation of the Board. The Committee
is also responsible for implementing, periodically reviewing, and proposing
revisions to the Board's corporate governance guidelines, recommending Committee
memberships, rotation, and chairs, and setting the agendas for the executive
sessions of the Board of Directors.
Membership: George M. C. Fisher (Chair) Karen Katen
Percy N. Barnevik Alan G. Lafley
John H. Bryan
6
EXECUTIVE COMPENSATION COMMITTEE met six times in 2002. The Committee is
composed entirely of independent directors and ensures that the Corporation's
compensation policies and practices support the successful recruitment,
development, and retention of executive talent. It determines the compensation
of senior executives, including the senior leadership group of the Corporation,
and approves benefit and incentive compensation plans of the Corporation or its
major subsidiaries, which affect employees subject to its review. The members of
the Committee are not eligible to participate in any of the compensation plans
or programs it administers.
Membership: John H. Bryan (Chair) Karen Katen
George M. C. Fisher
INVESTMENT FUNDS COMMITTEE serves as the named fiduciary of GM's and a
number of its subsidiaries' benefit plans governed by the Employee Retirement
Income Security Act (ERISA).
Membership: E. Stanley O'Neal (Chair) Philip A. Laskawy
Armando Codina Eckhard Pfeiffer
Nobuyuki Idei John F. Smith, Jr.
PUBLIC POLICY COMMITTEE fosters GM's commitment to operate its business
worldwide in a manner consistent with the rapidly changing demands of society.
Topics reviewed by this Committee include research and development, automotive
safety, environmental and energy matters, diversity, health care, education,
communications, employee health and safety, trade, and philanthropic activities.
The Committee provides public policy guidance to management to support GM's
progress in growing the business globally within the framework of GM's core
values.
Membership: Percy N. Barnevik (Chair) E. Stanley O'Neal
Armando Codina Lloyd D. Ward
ITEM NO. 1
NOMINATION AND ELECTION OF DIRECTORS
The Proxy Committee will vote your shares for the ten nominees described in
the following section unless you withhold such authority. Each director will
serve until the next annual election of directors and until a successor is
elected and qualified, or until the director's earlier resignation or removal.
If any nominees for director become unavailable before the annual meeting, which
we do not anticipate, the Board of Directors may decrease the number of
directors to be elected or designate substitute nominees, who would receive the
votes of the Proxy Committee.
Pursuant to the Director Retirement Policy of the Board of Directors,
John F. Smith, Jr. is not standing for reelection. Mr. Smith joined General
Motors Corporation in 1961 and the General Motors Board of Directors in 1990.
He is currently a member of the Investment Funds Committee. Additionally,
Nobuyuki Idei and Lloyd D. Ward have requested that they not be included
among the nominees for reelection. Mr. Idei joined the General Motors Board
of Directors in 1999 and is currently a member of the Audit and Investment
Funds Committees. Mr. Ward joined the General Motors Board of Directors in
2000 and is currently a member of the Public Policy Committee.
Of the nominees in the following section, Philip A. Laskawy was elected a
director of General Motors Corporation since the last annual meeting of
stockholders.
INFORMATION ABOUT NOMINEES FOR DIRECTORS
The following information about each nominee's principal occupation or
employment and other affiliations and about the GM Stock beneficially owned as
of February 28, 2003, has been furnished to the Corporation by the nominees for
directors. In addition to the affiliations mentioned on the following pages, the
nominees are active in many local and national cultural, charitable,
professional, and trade organizations.
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--------------------------------------------------------------------------------
PERCY N. BARNEVIK AGE 62 JOINED GM BOARD 1996
Chairman of AstraZeneca PLC, United Kingdom, since 1999; Honorary Chairman of
Sandvik AB, Sweden, since 2002; Chairman of Sandvik AB, Sweden
(1983-May 7, 2002); Chairman, Investor AB, Sweden (1997-2002);
Chairman, ABB Ltd., Switzerland (1997-2001)
COMMITTEES -- Public Policy (Chair), Capital Stock, Directors and Corporate
Governance
DIRECTORSHIPS -- AstraZeneca PLC
AFFILIATIONS -- Representative of the European Commission to the ASEM
(Asia-Europe) Vision Group; Member of the Advisory Board of the Council on
Foreign Relations, The Business Council, the International Investment Council
advising the South African Government, the International Advisory Council of the
Federation of Korean Industries, the India Advisory Council of the World
Economic Forum - Confederation of Indian Industries, the Advisory Council of
Centre for European Reform - UK, Advisory Councils at the Wharton School of
Business Administration and at Humboldt University (Berlin), the Academies of
Engineering Sciences in Sweden and Finland; Honorary member of the American
Academy of Arts and Sciences
--------------------------------------------------------------------------------
JOHN H. BRYAN AGE 66 JOINED GM BOARD 1993
Retired Chairman and Chief Executive Officer, Sara Lee Corporation, Chicago,
Illinois, since October 5, 2001; held offices of Chairman (1976-2001) and
Chairman and Chief Executive Officer (1976-2000)
COMMITTEES -- Executive Compensation (Chair), Capital Stock, Directors and
Corporate Governance
DIRECTORSHIPS -- BP p.l.c., Bank One Corporation, Goldman Sachs Group Inc.
AFFILIATIONS -- Member of The Business Council, the National Trust Council of
the National Trust for Historic Preservation, and the Board of Directors of
Catalyst; Trustee of the University of Chicago and life Trustee of
Rush-Presbyterian-St. Luke's Medical Center; Chairman of the Board of Trustees
of The Art Institute of Chicago
--------------------------------------------------------------------------------
ARMANDO M. CODINA AGE 56 JOINED GM BOARD 2002
Chairman and Chief Executive Officer, Codina Group, Inc., a full-service
commercial real estate firm based in Coral Gables, Florida, since 1979
COMMITTEES -- Investment Funds, Public Policy
DIRECTORSHIPS -- AMR Corporation, BellSouth Corporation, FPL Group, Inc.
AFFILIATIONS -- Chairman Emeritus of the Board of Trustees of Florida
International University; Member of the Florida Council of 100, and the
Community Partnership for the Homeless, Inc.
--------------------------------------------------------------------------------
GEORGE M. C. FISHER AGE 62 JOINED GM BOARD 1996
Retired Chairman and Chief Executive Officer, Eastman Kodak Company, Rochester,
New York, since January 1, 2001; held offices of Chairman (January-December
2000) and Chairman and Chief Executive Officer (January 1997-January 2000)
COMMITTEES -- Directors and Corporate Governance (Chair), Executive Compensation
DIRECTORSHIPS -- Delta Air Lines, Inc., Eli Lilly & Company
AFFILIATIONS -- Chairman of the National Academy of Engineering; Member of The
Business Council and the International Academy of Astronautics; Fellow of the
American Academy of Arts and Sciences
--------------------------------------------------------------------------------
8
--------------------------------------------------------------------------------
KAREN KATEN AGE 53 JOINED GM BOARD 1997
Executive Vice President, Pfizer Inc, New York, New York, and President, Pfizer
Global Pharmaceuticals since April 1, 2001; held offices of Corporate Senior
Vice President (1999-April 2001), Executive Vice President, Pfizer
Pharmaceuticals Group (1997-2001), and President, Pfizer U.S. Pharmaceuticals
Group (1995-2002)
COMMITTEES -- Directors and Corporate Governance, Executive Compensation
DIRECTORSHIPS -- Harris Corporation
AFFILIATIONS -- Member of the International Council of J.P. Morgan Chase & Co.,
the Pharmaceutical Research and Manufacturers Association of America, the
European Federation of Pharmaceutical Industry Associations, the American
Diabetes Association Board of Corporate Advisors, the National Alliance for
Hispanic Health, the American Bureau for Medical Advancement in China, Catalyst,
the National Board of Trustees for the American Cancer Society Research
Foundation, RAND, and the Council for the United States and Italy; Trustee of
the University of Chicago and council member of the Graduate School of Business
--------------------------------------------------------------------------------
ALAN G. LAFLEY AGE 55 JOINED GM BOARD 2002
Chairman, The Procter & Gamble Company, Cincinnati, Ohio, since 2002 and
President and Chief Executive since 2000; held offices of President -- Global
Beauty Care and North America (1999-2000), Executive Vice President and
President -- North America, Procter & Gamble North America (1998-99), Executive
Vice President and President -- Asia, Procter & Gamble Asia (1995-98)
COMMITTEES -- Audit, Directors and Corporate Governance
DIRECTORSHIPS -- The Procter & Gamble Company, General Electric Company
AFFILIATIONS -- Member of The Business Roundtable, The Business Council, G100,
the Boards of Trustees of Hamilton College and Xavier University, and the Lauder
Institute Board of Governors (Wharton School of Arts & Sciences)
--------------------------------------------------------------------------------
PHILIP A. LASKAWY AGE 62 JOINED GM BOARD 2003
Retired Chairman and Chief Executive Officer, Ernst & Young, New York, New York,
since June 2001; held offices of Chairman and Chief Executive Officer (1994-June
2001)
COMMITTEES -- Audit (Chair), Investment Funds
DIRECTORSHIPS -- Cap Gemini Ernst & Young, Henry Schein, Inc., Loews
Corporation, and The Progressive Corporation
AFFILIATIONS -- Member of the Board of Trustees of the International Accounting
Standards Committee
--------------------------------------------------------------------------------
E. STANLEY O'NEAL AGE 51 JOINED GM BOARD 2001
Chief Executive Officer, Merrill Lynch & Co., Inc., New York, New York, since
December 2002, and Chairman-Elect since July 2002; held offices of President and
Chief Operating Officer (2001-02), President, U.S. Private Client Group
(2000-01), Executive Vice President and Chief Financial Officer (1998-2000),
Executive Vice President and Co-Head, Global Markets and Investment Banking
Group (1997-98)
COMMITTEES -- Investment Funds (Chair), Public Policy
DIRECTORSHIPS -- Merrill Lynch & Co., Inc., New York Stock Exchange Director
Nominee, June 2003
AFFILIATIONS -- Trustee of the Center for Strategic and International Studies,
The National Urban League, Ronald McDonald House of New York, Catalyst, and the
Buckley School
--------------------------------------------------------------------------------
9
--------------------------------------------------------------------------------
ECKHARD PFEIFFER AGE 61 JOINED GM BOARD 1996
Retired President and Chief Executive Officer, Compaq Computer Corporation,
Houston, Texas, since 1999; held offices of President and Chief Executive
Officer (1991-99)
COMMITTEES -- Capital Stock (Chair), Audit, Investment Funds
DIRECTORSHIPS -- Biogen, Inc., IFCO Systems, N.V., Intershop Communications AG,
Syntek Capital AG, Telefonaktiebolaget LM Ericsson, Hughes Electronics
Corporation (a subsidiary of GM)
AFFILIATIONS -- Member of the Advisory Board of Deutsche Bank
--------------------------------------------------------------------------------
G. RICHARD WAGONER, JR. AGE 50 JOINED GM BOARD 1998
Chairman and Chief Executive Officer effective May 1, 2003; President and Chief
Executive Officer since June 1, 2000; held offices of President and Chief
Operating Officer (1998-2000), and Executive Vice President and President GM's
North American Operations (1994-98); joined General Motors Corporation in 1977
DIRECTORSHIPS -- General Motors Acceptance Corporation and Hughes Electronics
Corporation (both subsidiaries of GM)
AFFILIATIONS -- Member of the Boards of Trustees of Duke University and Detroit
Country Day School and the Board of Dean's Advisors of the Harvard Business
School; Member of The Business Council and The Business Roundtable
--------------------------------------------------------------------------------
10
SECURITY OWNERSHIP OF DIRECTORS, NAMED EXECUTIVE OFFICERS,
AND CERTAIN OTHERS
The beneficial ownership as of February 28, 2003, of GM Stock for each
director, each Named Executive Officer, and all current directors and officers
as a group is shown in the following tables. The shares listed below do not
include GM Stock held by the pension or profit sharing plans of any other
corporation or other entity, or of any endowment funds of an educational or
charitable institution of which a director or executive may serve as director or
trustee. Each of the individuals listed below, as well as all the current
directors and officers as a group, owns less than one percent of the outstanding
shares and voting power of GM Stock.
DIRECTORS
SHARES BENEFICIALLY
OWNED DEFERRED STOCK UNITS (A) STOCK OPTIONS (B)
------------------- ------------------------- -------------------
COMMON CLASS H COMMON CLASS H COMMON CLASS H
------ ------- ------ ------- ------ -------
P. N. Barnevik.............. 9,628 1,188 6,307 2,525 1,000 0
J. H. Bryan................. 6,603 1,266 12,701 3,733 9,738 1,797
A. M. Codina................ 2,000 0 2,207 0 1,000 0
G. M. C. Fisher............. 4,752 792 4,711 13,227(c) 6,908 1,236
N. Idei..................... 4,250 2,250 6,329 1,562 1,000 0
K. Katen.................... 4,000 3,000 7,056 2,542 6,141 1,377
A. G. Lafley................ 1,000 0 2,567 0 1,000 0
P. A. Laskawy............... 2,000 0 0 0 0 0
E. S. O'Neal................ 1,000 1,400(d) 1,557 834 1,000 0
E. Pfeiffer................. 4,512 4,752 9,430 23,962(c) 8,436 14,572(c)
L. D. Ward.................. 1,000 0 5,640 1,320 1,000 0
---------------
(a) Deferred Stock Units -- These amounts have been deferred under the General
Motors Corporation Compensation Plan for Non-Employee Directors, as well as
amounts deferred under the Hughes Electronics Corporation Compensation Plan
for Non-Employee Directors. The only material difference between the Hughes
Plan and the General Motors Corporation Compensation Plan for Non-Employee
Directors is that all stock amounts refer exclusively to Class H Common
Stock. For more information about this plan, please refer to the section on
Director Compensation on page 5.
(b) Number of shares that may be acquired through the exercise of stock options
within 60 days of February 28, 2003.
(c) Also includes 450 deferred stock units (G. M. C. Fisher), and 20,959
deferred stock units and 12,775 options (E. Pfeiffer) granted under the
Hughes Deferred Compensation Plan.
(d) E. S. O'Neal disclaims any beneficial ownership of any GM Stock owned by
Merrill Lynch & Co., Inc. or its affiliates, for the benefit of others or
itself.
11
NAMED EXECUTIVE OFFICERS AND
ALL DIRECTORS AND EXECUTIVE OFFICERS
SHARES BENEFICIALLY DEFERRED STOCK
OWNED (A) UNITS (B) STOCK OPTIONS (C)
------------------- ------------------- ---------------------
COMMON CLASS H COMMON CLASS H COMMON CLASS H
------- ------- ------- ------- --------- -------
J. M. Devine....... 14,720 3,503 277,694 0 433,336 0
T. A. Gottschalk... 52,150 19,828 44,013 0 400,793 0
R. A. Lutz......... 8,420 0 177,272 0 133,336 0
J. F. Smith, Jr.... 268,324 162,811 104,691 83,313 2,253,151 0
G. R. Wagoner, Jr.. 105,992 64,139 148,931 16,755 1,288,882 0
All Directors and
Officers of the
Corporation as
a group............ 677,137 327,985 885,951 149,773 6,011,849 18,982
---------------
(a) Shares Beneficially Owned include shares credited under the General Motors
Savings-Stock Purchase Program for Salaried Employees (the "GM S-SPP") and
the General Motors Canadian Savings-Stock Program for Salaried Employees
(the "GM Canadian Plan"). The GM S-SPP is generally available to all
salaried employees in the U.S. and provides that participants may contribute
up to 40% of eligible salary, subject to maximum limits established by the
Internal Revenue Code (the "IRC"). The GM Canadian Plan is available to all
salaried employees in Canada, and there is no maximum contribution limit.
(b) Deferred Stock Units include shares under the General Motors Benefit
Equalization Plan-Savings (the "BEP-S"). The BEP-S is a non-qualified
"excess benefits" plan that is exempt from the Employee Retirement Income
Security Act ("ERISA") and the IRC limitations and provides executives with
the full GM matching contribution without regard to the IRC limitations.
Amounts credited under the Plan are maintained in share units of Common
Stock. Following termination of employment, an employee may elect to receive
a complete distribution of amounts in the BEP-S account, which will be paid
in cash. Deferred units also include undelivered incentive awards that will
vest upon the occurrence of certain events and that are subject to
forfeiture under certain circumstances.
(c) Number of shares that may be acquired through the exercise of stock options
within 60 days from February 28, 2003. The shares reported in this column
reflect adjustments to the original option grants resulting from a 3-for-1
Class H Common Stock split in the form of a 200% stock dividend in 2000.
Additional information regarding stock options is provided on pages 19
and 20.
12
CERTAIN BENEFICIAL OWNERS
The following table gives information about each entity known to GM to be
the beneficial owner of more than five percent of GM Stock as of February 28,
2003.
NUMBER OF PERCENT OF
NAME AND ADDRESS TITLE OF STOCK SHARES CLASS
---------------------------------------- -------------------- ----------- ----------
State Street Bank and Trust Company(a) Common 97,829,725 17.5%
225 Franklin Street Class H 51,480,457 5.9%
Boston, MA 02110 % of Total Vote(b) 14.3%
Southeastern Asset Management, Inc. Class H 67,899,904 7.1%
6410 Poplar Ave., Suite 900 % of Total Vote(b) 1.4%
Memphis, TN 38119
Oppenheimer Capital LLC Class H 48,403,772 5.1%
1345 Avenue of the Americas, % of Total Vote(b) *
49th floor
New York, NY 10105
Capital Research and Management Company Class H 48,681,460 5.2%
333 South Hope Street % of Total Vote(b) *
Los Angeles, CA 90071
Sole dispositive power as investment
advisor
U.S. Trust Corporation(c) Class H 181,500,000 18.9%
447 West 47th Street % of Total Vote(b) 4.8%
New York, NY 10036
---------------
* Less than one percent.
(a) Acting in various fiduciary capacities for various employee benefit plans.
(b) Combined voting power of Common Stock and Class H Common Stock. Each share
of Common Stock is equivalent to one vote, and each share of Class H Common
Stock is equivalent to 0.2 vote.
(c) Includes shares beneficially owned by U.S. Trust Corporation acting as the
independent trustee for the Corporation's employee pension plan and
Voluntary Employees' Beneficiary Association ("VEBA") plan trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lloyd D. Ward, a member of GM's Board, served as Chief Executive Officer of
the U.S. Olympic Committee (the "USOC"). General Motors has been a Corporate
Sponsor of the USOC and its affiliates for several years and has made the U.S.
Olympic marketing rights that GM receives as a Corporate Sponsor an important
element in its marketing and advertising strategies. In 2002, GM as a Corporate
Sponsor provided $3.75 million in cash contributions and value comparable to
$19.5 million in use of vehicles to the USOC and the Salt Lake City Olympic
Games.
E. Stanley O'Neal, a member of GM's Board, is the Chief Executive Officer
and Chairman-Elect of Merrill Lynch & Co., Inc., which provided services
including underwriting and investment banking services to GM in 2002.
In 2001 and 2002, General Motors invested a total of $2 million in
Cunningham Motor Company ("CMC"). Robert A. Lutz, an executive officer of the
Corporation, was the principal owner and vice chairman of the board of CMC. In
consideration for this investment, GM received an equity interest in CMC of
22.9%, with minimal voting rights. In November 2002 CMC gave notice that it had
ceased business operations, and it is not anticipated that operations will be
resumed.
13
Executive officers of General Motors have from time to time received
mortgage loans from GMAC or its subsidiaries, or acted as co-signers for loans
made to family members. These loans were made in the ordinary course of business
and on the same terms and conditions, including interest rates and collateral,
as those prevailing at the same time for comparable transactions with other
employees, retirees, and dealers of General Motors, which are substantially the
same as those offered to unrelated customers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities law requires that directors and certain officers of the
Corporation must report to the Securities and Exchange Commission and the
Corporation, within certain periods, how many shares of the Corporation's equity
securities they own and if they conducted any transactions in that stock. Based
upon information furnished by these stockholders, the Corporation believes that
all required filings for 2002 and prior years have been made in a timely manner,
except that in 2002, J. W. Marriott, Jr. and E. A. Feldstein inadvertently filed
their Statement of Beneficial Ownership (Form 4) after the due date, and
H. J. Pearce inadvertently disclosed an inaccurate number of shares sold. All
transactions have now been accurately reported.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
During the third quarter of 2002, the Executive Compensation Committee (the
"Committee") evaluated its compensation governance practices in light of the
environment of public focus on compensation and enhanced regulation. Following
this review, the Committee was satisfied that the current practices demonstrate
sound governance. The Committee is responsible for overseeing the development
and administration of the compensation and benefit programs for the
Corporation's executives, including Named Executive Officers whose compensation
is reported in this proxy statement. To assist in this process, the Committee
engages an independent executive compensation consulting firm, which is directly
accountable to the Committee. Since 1989, the Committee has been composed
entirely of independent directors. In 2002 and until April 1, 2003, the
membership of the Committee was composed of John H. Bryan, Chair,
George M. C. Fisher, and Eckhard Pfeiffer.
As in prior years, during 2002, the Board of Directors met in executive
session to review the Corporation's performance and the performance of the CEO
and other senior leaders, including the Named Executive Officers. The Committee
advised the Board with respect to all compensation determinations for these
executives. Further, the Committee regularly updates the Board on key
compensation matters.
The Committee also confirmed that the Corporation's policy on loans to
directors and executive officers of the Corporation complies with the
Sarbanes-Oxley Act of 2002, which generally prohibits public companies from
making personal loans to their executive officers and directors. The Corporation
prohibits loans to its directors and executive officers, other than GMAC
mortgage and auto loans which are made on terms that are acceptable under the
Sarbanes-Oxley Act of 2002.
COMPENSATION PHILOSOPHY -- Executive compensation programs for General
Motors and its major subsidiaries are based on the belief that the interests of
employees should be closely aligned with those of GM's stockholders. Under this
philosophy:
* A significant portion of each executive's total compensation is linked to
accomplishing specific, measurable results intended to create value for
stockholders in both the short- and long-term.
* Compensation plans are developed to motivate executives to improve the
overall performance and profitability of the Corporation, and the
specific region/unit to which they are assigned. Executives will be
rewarded only when and if the business goals previously established by
management and the Committee have been achieved.
* Each executive's individual performance and contribution will be
reflected through differentiated salary adjustments and the amount of
incentive awards paid, if any.
* Long-term incentive awards are paid in GM Stock to further reinforce the
link between executives' and stockholders' interests.
14
* In years of strong performance, executives can earn highly competitive
levels of compensation as compared to executives in positions of similar
complexity and scope of responsibility at comparator companies. The
Corporation will thus be able to attract, retain, and motivate the
leadership talent it needs to maintain and grow its businesses
successfully. Conversely, in years of below average performance,
executives will receive compensation that is less than competitive
benchmarks.
STOCK OWNERSHIP GUIDELINES -- The Corporation feels strongly that the best
way to reinforce the link between the executives' and stockholders' interests is
to require that executives own a significant amount of GM Stock. As a result,
the Committee has established formal stock ownership guidelines for all
corporate officers, including the Named Executive Officers, and other select
senior executives. The guidelines are as follows:
MINIMUM AGGREGATE
POSITION VALUE EQUIVALENT
------------------------------------------------------- ---------------------
Chairman, President & CEO, and Vice Chairmen........... 5 times base salary
Executive Vice Presidents.............................. 4 times base salary
Group Vice Presidents.................................. 3 times base salary
Vice Presidents........................................ 2 times base salary
COMPENSATION DEDUCTIBILITY POLICY -- In 2002, GM stockholders approved an
incentive compensation program effective until 2007, which includes provisions
allowing the Corporation to comply with regulations under Section 162(m) of the
Internal Revenue Code. As a result, the Corporation is able to take a tax
deduction for performance-based compensation in excess of $1 million per taxable
year paid to each of the Named Executive Officers. The Code does not permit
companies to take a tax deduction for salary paid in excess of $1 million. While
the Corporation makes every effort to ensure that it will be able to deduct the
compensation it pays, if compliance with Section 162(m) conflicts with the
Corporation's compensation philosophy, or what is believed to be in the best
interests of the Corporation and its stockholders, we may conclude that paying
non-deductible compensation is more consistent with that philosophy and in the
Corporation's and stockholders' best interests.
TYPES OF COMPENSATION -- In addition to benefits, which are reviewed in the
tables following this report, there are three major components of an executive's
total compensation package:
* Base Salary
* Annual Incentives
* Long-Term Incentives
In determining the proper amount for each compensation component, we review
the compensation paid for similar positions at other large corporations with
which GM competes for executive talent. Because the job market for these
executives is not limited to the auto industry alone, a group consisting of
significant, global industrial/service corporations has been identified as our
"comparator group." Each year we review the compensation paid at these
companies, as well as their corporate performance, and other factors in
determining the appropriate performance measures and compensation levels for our
executives. We also rely on information and advice provided by our outside
consultant.
Base Salary -- Base salaries for GM executives are targeted at the upper
end of the third quartile of salaries paid for similar positions at our
comparator group of companies. The base salaries of individual executives can
and do vary from this salary benchmark based on such factors as individual
performance, potential for future advancement, specific job responsibilities,
and length of time in their current position.
Annual Incentives -- For the 2002 performance year, annual incentives for
all executive officers were earned under the General Motors 1997 Annual
Incentive Plan that was approved by the stockholders at the 1997 annual meeting.
All executives are eligible to be considered for annual incentive awards.
When we establish performance targets, we also set a minimum performance
level that must be achieved before any awards can be paid. If this minimum level
of performance is not met, there will be no annual incentive payout.
Stockholders approved a maximum award payable to any one individual as part of
the 1997 Annual Incentive Plan. When we establish the payout range, we assess
the degree of performance necessary to achieve the objective by reviewing both
past and projected performance levels, as well as
15
external marketplace conditions such as the economic outlook, competitive
performance levels, projected automotive industry volumes, projected market
share, and quality improvements. The size of final awards depends on the actual
level of performance achieved in comparison with the pre-established corporate
and regional unit objectives, as well as individual performance. Performance
data may be adjusted to reflect the impact of unplanned or extraordinary events.
Finally, a peer review is conducted to assess the business performance relative
to that of key competitors.
As in previous years, management recommended that the Committee establish
very aggressive performance targets for 2002. We tied the payment of annual
incentive awards to meeting specific levels of net income, Return On Net Assets
("RONA"), market share, and quality that were based upon the Corporation's
business plans. At the end of 2002, we reviewed the Corporation's overall
operating performance and determined that financial results for net income and
RONA were well above target performance requirements. In addition, for
geographic regions/operating units, we reviewed performance against
pre-established targets for quality and market share within those regions/units,
and several regions met or exceeded regional target expectations. As a result,
the corporate final incentive award payouts exceeded the target level, although
they were below the maximum.
Stock Options -- Stock options were also granted under the provisions of
the 1997 Stock Incentive Plan. All executives are eligible to be considered for
stock option grants. Options are granted to emphasize the importance of
improving stock price performance and increasing stockholder value over the
long-term and to encourage executives to own GM Stock. These options are granted
at 100% of the average price of the stock on the date of grant. In this way
executives can be rewarded only if the stock price increases, which will benefit
both stockholders and executives. Our Plan does not allow the re-pricing of
options without stockholder approval.
Options are granted based on competitive long-term incentive compensation
practices. The size of these grants and other long-term awards is intended to
place executives in the third quartile of long-term incentives granted at
comparator companies. In determining the size of new grants to each Named
Executive Officer, we consider the number of option shares each executive has
previously been granted. Options are denominated in Common Stock. An additional
option grant was made in February 2002 to executives in recognition of
performance during 2001 in the areas of market share, quality, manufacturing
productivity, and new products, and to motivate the leadership team to maintain
the positive momentum going forward. Beginning in 2003, all General Motors new
stock option grants will be expensed as a compensation cost over the vesting
period.
Other Long-Term Incentives -- Stock Performance Program awards under the GM
Performance Achievement Plan are normally granted only to the Corporation's
senior executives. Like annual incentive awards, these grants are made annually;
however, any payout is determined based on the Total Shareholder Return ("TSR")
performance ranking of Common Stock compared to that of other stocks in the S&P
500 Composite Stock Price Index (the "S&P 500 Index") over a three-year period.
Executives were granted target awards denominated in shares of the Corporation's
Common Stock for the 2002-2004 performance period. The final number of shares to
be delivered at the end of the three-year performance period, if any, will
depend on GM's TSR ranking (based on market price appreciation plus the
compounding effect of reinvested dividends) relative to other companies in the
S&P 500 Index. If the Corporation's ranking in the S&P 500 Index, over the
three-year period falls below the 25th percentile, no payout will be made. If
the Corporation ranks within the top 10% of the companies in the S&P 500 Index,
the maximum payout level would be achieved. Between threshold and maximum,
payout percentages will be related to the ranking position. By establishing
awards in this fashion, executives will be highly motivated to improve stock
price performance, which would be to their benefit as well as that of the
Corporation's stockholders.
For the 2000-2002 period, GM's TSR results were below the threshold level
established for payout of the long-term incentive plan, and therefore, no awards
were paid.
In order to continue to motivate the executive workforce to maintain its
focus on aggressive cost reduction and cash generation, the 2000 special Net
Margin grant was cancelled and replaced by the Leadership Challenge grant, which
aligns performance measures to more clearly address today's highly competitive
and volatile business environment. The 2002 grant was made to the entire
executive team
16
worldwide, and payment of this grant is contingent upon attainment of specific
structural cost improvement and cash flow targets well above projected business
plan levels over the two-year period, 2002-2003. Individual target awards are
the same as for the Net Margin grant and are denominated in shares of Common
Stock. Payout opportunities range from 0%-100% in 25% increments based on the
performance attained during the two-year measurement period.
AWARDS TO CHIEF EXECUTIVE OFFICER
In determining Mr. Wagoner's compensation for 2002, the Committee
considered a number of important factors, particularly his highly effective
leadership in GM's strong performance in an unusually challenging global
economic and industry environment. Impressive results were achieved in a number
of key areas through an intense focus on well-executed launches of winning cars
and trucks, aggressive marketing, improved quality and productivity, and a
continued focus on cost reduction. GM continued to show significant quality and
customer satisfaction improvements by internal and external measures in all four
automotive regions, as well as GMAC. In 2002 GM gained market share in three out
of four regions around the world in very challenging market conditions, saw
continued market share growth in the U.S. and Canada, and established solid
inroads in key growth markets such as China and Korea. Mr. Wagoner's role in
leading the Corporation to improved operational effectiveness was further
reflected in GM's strong financial performance during the year, and the
Committee therefore, determined Mr. Wagoner's compensation as follows:
Base Salary -- Mr. Wagoner's salary remained unchanged during 2002.
Annual Incentives -- Although results in relation to the established
corporate and regional performance measures for net income, RONA, market share,
and quality for the year were well above target levels, senior management
suggested to the Committee that, in the current economic environment, a cash
bonus should not be paid to the Named Executive Officers. After considering this
advice, the Committee determined that no cash bonuses would be paid to executive
officers, and restricted stock units, to be delivered at retirement or mutual
separation, would be granted in lieu of earned bonuses. The Committee believes
that this will serve to recognize the company's significant achievements in
2002, while at the same time further aligning Mr. Wagoner's and senior
management's interests with those of the stockholders on a long-term basis, and
increasing their equity ownership in the Corporation. This significant action by
both the executives and the Committee exhibits their strong belief in the future
of the Corporation.
Stock Options -- As part of the Corporation's continuing compensation
review process, the Committee reviewed the size and expected value of the
options granted to Mr. Wagoner in comparison with option grants to CEOs of our
comparator group of companies. After considering the number of options
previously granted to him, the Committee increased his 2002 stock option grant
to 500,000 shares of Common Stock. Mr. Wagoner received an additional option
grant for 100,000 shares in February 2002.
Other Long-Term Incentives -- The Performance Achievement Plan target
grants are disclosed starting on page 20. The grants cover the three-year period
2002-2004. Because the cumulative TSR for the 2000-2002 performance period was
below threshold as described above, no payout was made.
During 2002, the Committee met with the Board of Directors in executive
session to review the Corporation's performance and the performance of
Mr. Wagoner and other members of senior management. The Board concurred with our
decisions.
EXECUTIVE COMPENSATION COMMITTEE
John H. Bryan, Chair
George M. C. Fisher Karen Katen
17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below shows the pre-tax compensation paid during the last three
fiscal years to Chairman J. F. Smith, Jr., President and Chief Executive Officer
G. R. Wagoner, Jr., and each of the three other most highly compensated
executive officers during 2002.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ---------------------------------------
AWARDS PAYOUTS
OTHER ---------------------------------------
ANNUAL RESTRICTED STOCK LONG-TERM ALL OTHER
NAME AND COMPEN- STOCK UNITS OPTIONS INCENTIVES COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) (2) (3) (4) SATION(5)
------------------------- ------ ----------- --------- --------- ----------- ----------- ----------- -----------
$ $ $ $ # Shares $ $
J. F. Smith, Jr. 2002 1,025,000 0 105,499 2,202,750 300,000 0 82,274
Chairman of the Board 2001 1,452,000 0 120,613 400,000 835,000 118,567
2000 2,050,000 1,169,000 74,797 400,000 3,120,000 128,557
34,382
G. R. Wagoner, Jr. 2002 2,000,000 0 5,006,250 600,000 0 84,160
President and Chief 2001 2,000,000 0 400,000 480,000 80,675
Executive Officer 2000 1,554,000 784,000 250,000 1,616,000
428,953
J. M. Devine* 2002 1,450,000 0 3,003,750 300,000 703,000 418,168
Vice Chairman and Chief 2001 1,450,000 1,500,000 69,721 200,000 1,380,000
Financial Officer
R. A. Lutz* 2002 1,450,000 0 94,153 3,003,750 200,000 1,388,000 26,581
Vice Chairman --
Product 2001 483,333 500,000 200,000 0 0
Development and
Chairman, GM North
America
T. A. Gottschalk* --
Executive 2002 900,000 0 1,602,000 140,000 0 19,800
Vice President, Law & 2001 858,000 0 70,000 230,000 32,617
Public Policy and
General Counsel
---------------
* Messrs. Devine, Lutz, and Gottschalk became executive officers in 2001.
(1) Amounts include $60,166 (2002), $53,767 (2001), and $21,626 (2000) for
J. F. Smith, Jr., $26,599 (2001) for J. M. Devine, and $64,536 (2002) for
R. A. Lutz related to required personal use of company aircraft.
(2) Fair market value of restricted stock units ("RSUs"); Common Stock awarded
in lieu of cash bonus. Amounts shown in table above reflect the following
share amounts: J. F. Smith, Jr., 55,000 units; G. R. Wagoner, Jr., 125,000
units; J. M. Devine, 75,000 units; R. A. Lutz, 75,000 units; and
T. A. Gottschalk, 40,000 units. RSUs will be delivered at retirement or
mutual separation and are valued at $40.05, which was the average of the
high and low value of Common Stock on the date of the grant. The number and
value of aggregate unvested and unpaid restricted stock or Performance
Achievement Plan holdings (excluding those listed above) of each of the
Named Executive Officers to be earned over their careers as of December 31,
2002, were: J. F. Smith, Jr., 33,786 units Common Stock ($1,245,352), 34,386
units Class H Common Stock ($367,930); G. R. Wagoner, Jr., 16,454 units
Common Stock ($606,494), 16,755 units Class H Common Stock ($179,279);
J. M. Devine, 152,320 units Common Stock ($5,614,515); and R. A. Lutz,
60,706 units Common Stock ($2,237,623). The value of these restricted stock
and Performance Achievement Plan units is based on December 31, 2002,
closing stock prices of $36.86 for Common Stock and $10.70 for Class H
Common Stock. Dividend equivalents are paid at the same rate as paid on
Common Stock.
(3) All options are for Common Stock.
(4) Amounts reflect long-term incentive payouts under the General Motors 1997
Performance Achievement Plan. The awards cover three-year performance
periods (2000-2002, 1999-2001, and 1998-2000) and are paid in the form of
shares of Common Stock. No awards were paid for the 2000-2002 performance
period, except vested RSUs for J. M. Devine valued at $703,000, and vested
RSUs for R. A. Lutz valued at $1,388,000. The 1999-2001 awards vested and
were paid in one installment, and were fully reported in 2001. The 1998-2000
awards vested and were paid in two installments and were fully reported in
2000.
18
(5) These amounts include contributions by the Corporation under the various
savings plans and imputed income for endorsement split dollar life
insurance. In the event of the executive's death, the Corporation would be
reimbursed for its premiums for the life insurance policy. Additional
information regarding the savings plans will be found in footnote (a) on
page 12. For 2002, the respective amounts are as follows:
J. F. Smith, Jr., $12,298 savings plans, $69,976 life and accident
insurance; G. R. Wagoner, Jr., $23,998 savings plans, $10,384 life and
accident insurance; J. M. Devine, $28,998 savings plans, $14,935 life
insurance, and periodic pension replacement payments totalling $385,020, as
compensation for foregone non-qualified pension benefits from a previous
employer; R. A. Lutz, $26,581 savings plans; and T. A. Gottschalk, $19,800
savings plans.
OPTION/SAR GRANTS IN 2002
The following table shows the stock options granted to the Named Executive
Officers in 2002. They were granted in a combination of non-qualified and
Incentive Stock Options ("ISOs") on January 7, 2002, and February 4, 2002. All
options become exercisable in three equal annual installments commencing on the
first anniversary of the date of grant. The ISOs expire ten years from the date
of grant, and the non-qualified options expire two days later.
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED(1) IN 2002 PRICE DATE VALUE(2)
------------------------------ --------- ------------- ----------- ------------ -------------
# Shares % $/Share $ $
J. F. Smith, Jr............... 200,000 0.90 50.46 1/8/12 2,560,000
100,000 0.45 50.82 2/5/12 1,279,000
G. R. Wagoner, Jr............. 500,000 2.24 50.46 1/8/12 6,400,000
100,000 0.45 50.82 2/5/12 1,279,000
J. M. Devine.................. 200,000 0.90 50.46 1/8/12 2,560,000
100,000 0.45 50.82 2/5/12 1,279,000
R. A. Lutz.................... 100,000 0.45 50.46 1/8/12 1,280,000
100,000 0.45 50.82 2/5/12 1,279,000
T. A. Gottschalk.............. 90,000 0.40 50.46 1/8/12 1,152,000
50,000 0.22 50.82 2/5/12 639,500
---------------
(1) All grants are exercisable only for Common Stock.
(2) These values were determined based on the Black-Scholes option-pricing model
at the time of grant. The following assumptions were used in the
calculation:
* Expected price volatility -- 34.6% for the January 7 grant and 34.5% for
the February 4 grant;
* Options will be exercised in the fifth year;
* An interest rate based upon the corresponding yield of a government
bond maturing five years from the date of grant (4.336% and 4.214%,
respectively);
* Dividends at the rate in effect on the date of grant (3.96% and
3.94%, respectively);
* No adjustment has been made for non-transferability.
The fact that we use the Black-Scholes model does not necessarily mean we
believe or acknowledge that it can accurately determine the value of options.
The ultimate benefit realized by the recipient of the option, if any, will
depend on the future market price of Common Stock and the optionee's individual
investment decisions, neither of which can be predicted with any degree of
certainty.
19
AGGREGATED OPTION/SAR EXERCISES IN 2002 AND
OPTION/SAR VALUES AT DECEMBER 31, 2002
The following table provides information concerning the options held by
each of the Named Executive Officers at the end of 2002. The year-end value is
based on the closing price of Common Stock on December 31, 2002 ($36.86).
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 2002 DECEMBER 31, 2002
SHARES
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
------------------------ ----------- --------- ------------------------- ------------------------
# Shares $ # Shares $
J. F. Smith, Jr......... 106,870 2,770,054 1,886,484 / 699,997 341,698 / 0
G. R. Wagoner, Jr....... 178,254 5,079,422 888,882 / 949,996 0 / 0
J. M. Devine............ 0 0 266,668 / 733,332 0 / 0
R. A. Lutz.............. 0 0 66,668 / 333,332 0 / 0
T. A. Gottschalk........ 62,708 1,528,527 309,125 / 208,330 0 / 0
LONG-TERM INCENTIVE AWARDS
The following table shows target long-term incentive award opportunities
granted to Named Executive Officers in 2002. The award opportunities cover the
2002-2004 performance period and were granted under the General Motors 1997
Performance Achievement Plan, except as noted below. If the minimum or threshold
performance level is met or exceeded, the percentage of the target award that
will eventually be paid to participants will depend on the Corporation's Total
Shareholder Return ("TSR") ranking relative to other companies in the S&P 500
Composite Stock Price Index (the "S&P 500 Index") over the three-year period. If
the minimum performance level is not met, no awards will be paid.
In 2002, in addition to the regular long-term incentive awards, the 2000
Net Margin grant was cancelled and replaced with the Leadership Challenge grant
under the 1997 Performance Achievement Plan to better align performance measures
with today's business environment and improve financial results. Payment of the
award is contingent upon improving the Corporation's cash generation from
operations in 2002 and 2003, and reducing structural costs beyond committed
levels in 2002 and 2003. Payout opportunities range from 0%-100% in 25%
increments and will be paid in Common Stock if targets are met by
December 31, 2003. If targets are not met, the special award will expire on
December 31, 2003, and no payment will be made. There are no minimums or
maximums for this award. All shares are for Common Stock.
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS LEADERSHIP
# SHARES, --------------------------------------------------- CHALLENGE
UNITS, OR PERFORMANCE GRANT
NAME OTHER RIGHTS PERIOD THRESHOLD TARGET MAXIMUM # SHARES
------------------------- ------------- ----------- --------- --------- --------- -----------
J. F. Smith, Jr.......... 21,557 2002-2004 10,779 21,557 43,114 23,234
G. R. Wagoner, Jr........ 51,325 2002-2004 25,663 51,325 102,650 27,240
J. M. Devine............. 20,530 2002-2004 10,265 20,530 41,060 19,228
R. A. Lutz............... 20,530 2002-2004 10,265 20,530 41,060 19,228
T. A. Gottschalk......... 15,398 2002-2004 7,699 15,398 30,796 8,012
RETIREMENT PROGRAM
General Motors executives in the United States may receive benefits in
retirement from both a tax-qualified plan that is subject to the requirements of
the Employee Retirement Income Security Act ("ERISA") and from non-qualified
plans. Together, these plans are referred to here as the "GM Salaried Program."
Retired executives' tax-qualified benefits are pre-funded and are paid out of
the assets of the General Motors Retirement Plan for Salaried Employees;
however, non-qualified benefits are not pre-funded and are paid out of the
Corporation's general assets.
20
Two formulas are used to calculate the total of both the tax-qualified and
non-qualified retirement benefits available to eligible U.S. executives. One
formula, the regular Supplemental Executive Retirement Plan ("SERP") Formula,
offers benefits that are calculated based upon an average of the highest five
years of salary during the last ten years of the executive's career, and also
takes into account both the executive's contributory and non-contributory
service to GM. These benefits are subject to an offset of a portion of the
maximum Social Security Benefit available to an individual at age 65, regardless
of actual receipt. The Board of Directors has delegated to the Committee
discretionary authority to grant additional eligible years of credited service
to selected key executives under such terms and conditions as the Committee
shall determine for purposes of computing the regular and alternative forms of
SERP for such executives. Both the regular and alternative forms of the SERP
benefit are provided under a program that is non-qualified for tax purposes and
not pre-funded. Non-qualified benefits under either the regular or alternative
formulas can be reduced or eliminated for both retirees and active employees by
the Committee and/or the Board of Directors.
The alternative SERP Formula determines benefits based upon average annual
total direct compensation, calculated as the sum of [a] the average of the
highest five years of salary in the ten years before retirement plus [b] the
average of the highest five years of bonus received in the ten years preceding
retirement -- each average calculated independently. The alternative SERP
Formula also takes into account the executive's contributory (or
non-contributory) service subject to a maximum of 35 years and provides for an
offset of 100% of the maximum Social Security Benefit available to an individual
at age 65. Only executives who satisfy certain criteria, including not working
for any competitor or otherwise acting in any manner that is not in the best
interests of the Corporation, are eligible to receive benefits calculated under
the alternative SERP Formula in lieu of benefits calculated under the regular
SERP Formula. The total of the tax-qualified and non-qualified retirement
benefits made available under either the regular or the alternative SERP
Formulas are compared, and eligible executives receive retirement benefits under
whichever formula provides the greater benefit.
Table I shows the estimated total of both the tax-qualified and
non-qualified retirement benefits, as calculated under the regular SERP Formula
(based upon an Average Annual Base Salary as of December 31, 2002), that would
be paid in monthly installments as a single life annuity to GM executives
retiring as early as age 62 in 2003.
Table II shows the estimated total of both the tax-qualified and
non-qualified retirement benefits as calculated under the alternative SERP
Formula (based upon Average Annual Total Direct Compensation as of December 31,
2002) that would be paid in monthly installments as a single life annuity to GM
executives retiring as early as age 62 in 2003.
If an eligible executive elects to receive the retirement benefits shown in
Tables I or II in the form of a 65% joint and survivor annuity, the single life
annuity amounts shown in each of the tables would generally be reduced by 5% to
12%, depending upon the age differential between spouses. In addition,
executives may elect to receive a portion of the non-qualified SERP benefit paid
in a lump sum, calculated using mortality tables and a seven percent discount
rate.
21
TABLE I
PROJECTED TOTAL ANNUAL RETIREMENT BENEFITS FROM ALL COMPONENTS OF THE GM
SALARIED PROGRAM
ASSUMING EXECUTIVE'S BENEFITS ARE CALCULATED UNDER THE REGULAR SERP FORMULA (a)
YEARS OF CREDITED SERVICE
AVERAGE ANNUAL ---------------------------------------------------------------------------
BASE SALARY 7 14 21 28 35 42
--------------- ------- ------- --------- --------- --------- ---------
$ $ $ $ $ $ $
500,000 67,075 134,150 201,225 268,300 335,376 402,451
1,000,000 137,075 274,150 411,225 548,300 685,376 822,451
1,500,000 207,075 414,150 621,225 828,300 1,035,376 1,242,451
2,000,000 277,075 554,150 831,225 1,108,300 1,385,376 1,662,451
2,500,000 347,075 694,150 1,041,225 1,388,300 1,735,376 2,082,451
---------------
(a) The Average Annual Base Salary and the Years of Credited Service as of
December 31, 2002, for each of the Named Executive Officers were as follows:
J. F. Smith, Jr., $1,915,000 (42 years); G. R. Wagoner, Jr., $1,598,333 (25
years); and T. A. Gottschalk, $782,917 (16 years). J. M. Devine completed 24
months of service with the Corporation as of December 31, 2002, and his
Average Annual Base Salary for such 24-month period was $1,450,000 per
annum. R. A. Lutz completed 16 months of service with the Corporation as of
December 31, 2002, and his Average Annual Base Salary for such 16-month
period was $1,450,000 per annum. The Annual Base Salaries for the most
recent year(s) considered in the calculations reported here will be found in
the Summary Compensation Table on page 18 in the column labeled "Salary."
TABLE II
PROJECTED TOTAL ANNUAL RETIREMENT BENEFITS FROM ALL COMPONENTS OF THE GM
SALARIED PROGRAM ASSUMING EXECUTIVE'S BENEFITS ARE CALCULATED UNDER THE
ALTERNATIVE SERP FORMULA (a)
AVERAGE ANNUAL ELIGIBLE YEARS OF CREDITED SERVICE
TOTAL DIRECT ---------------------------------------------------------------
COMPENSATION 7 14 21 28 35
--------------- ------- --------- --------- --------- ---------
$ $ $ $ $ $
1,075,000 91,983 204,858 317,733 430,608 543,483
2,275,000 217,983 456,858 695,733 934,608 1,173,483
3,475,000 343,983 708,858 1,073,733 1,438,608 1,803,483
4,675,000 469,983 960,858 1,451,733 1,942,608 2,433,483
5,875,000 595,983 1,212,858 1,829,733 2,446,608 3,063,483
7,075,000 721,983 1,464,858 2,207,733 2,950,608 3,693,483
8,275,000 847,983 1,716,858 2,585,733 3,454,608 4,323,483
---------------
(a) The Average Annual Total Direct Compensation and the Eligible Years of
Credited Service (shown in parentheses and capped at 35 years), which may be
considered in the alternative SERP calculation as of December 31, 2002, for
each of the Named Executive Officers were as follows: J. F. Smith, Jr.,
$4,460,600 (35 years); G. R. Wagoner, Jr., $3,554,333 (25 years); and
T. A. Gottschalk, $1,541,917 (16 years). J. M. Devine completed 24 months of
service with the Corporation as of December 31, 2002, and his Average Annual
Total Direct Compensation for such 24-month period was $3,447,000 per annum.
R. A. Lutz completed 16 months of service with the Corporation as of
December 31, 2002, and his Average Annual Total Direct Compensation for such
16-month period was $3,695,500 per annum. The Annual Total Direct
Compensation for the most recent year(s) considered in the calculations
reported here will be found in the Summary Compensation Table on page 18 in
the columns labeled "Salary" and "Bonus." For 2002, an amount equal to the
hypothetical cash value of a payout under the Annual Incentive Plan was used
to calculate the Alternative Formula SERP.
22
EMPLOYMENT AGREEMENTS
General Motors believes that continuity in the Corporation's senior
leadership group serves the Corporation best. In this regard, each Named
Executive Officer has agreed that if he leaves the Corporation he will not work
for a competitor for up to two years. In addition, like other senior executives
of the Corporation, the Named Executive Officers would be eligible to
participate in certain incentive plans that provide for vesting upon certain
change in control events.
In December 2000, the Corporation entered into an employment agreement with
John M. Devine. Under this agreement, Mr. Devine was guaranteed a bonus of not
less than $1,000,000 for 2002, which he waived in lieu of restricted stock units
as described on page 17. If the Corporation terminates Mr. Devine's employment
without cause, the Corporation will pay him up to two years base salary and
target bonus. The Corporation also agreed to replace certain supplemental
pension obligations to compensate Mr. Devine for benefits from a previous
employer, which were forfeited when his employment with General Motors
commenced.
In August 2001, the Corporation entered into an employment agreement with
Robert A. Lutz for a term of three years. Under this agreement, Mr. Lutz was
guaranteed a bonus of no less than $1,000,000 for the second twelve months of
employment, which he waived in lieu of receipt of restricted stock units as
described on page 17. At the time of hire, Mr. Lutz was granted restricted stock
units, which will vest in equal installments during the term of the original
employment agreement. In December 2002, Mr. Lutz and the Corporation extended
his employment agreement through December 2005. Under this agreement, Mr. Lutz
was guaranteed a bonus of no less than $500,000 for 2004.
PERFORMANCE PRESENTATION
The following graphs compare five-year cumulative return to stockholders
for each of the two classes of General Motors common stocks against the S&P 500
Composite Stock Price Index (the "S&P 500 Index") and comparator data. Each line
represents an assumed initial investment of $100 on December 31, 1997, and
reinvestment of dividends over the period.
For Common Stock, a comparison is made with Ford Motor Company and
DaimlerChrysler Corporation. The data for DaimlerChrysler assumes an initial
investment in Chrysler Corporation and conversion of Chrysler stock to
DaimlerChrysler as a result of its merger with Daimler.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
GENERAL MOTORS COMMON STOCK, S&P 500 INDEX, FORD, AND DAIMLERCHRYSLER
DATE GM COMMON STOCK S&P 500 INDEX FORD DAIMLERCHRYSLER
1997 100 100 100 100
1998 121 129 185 149
1999 153 156 173 124
2000 110 141 144 68
2001 109 125 101 72
2002 86 97 62 54
23
Class H Common Stock was registered under Section 12 of the Exchange Act in
late December 1997, and for purposes of this chart it is assumed that an initial
$100 investment was made on December 31, 1997. A comparison based on industry
peer companies (the "Industry Peer Group-Old"), which includes AOL Time Warner,
AT&T, Comcast Corporation, Cox Communications, EchoStar Communications
Corporation, Gilat Satellite Networks, Ltd., Pegasus Communications, and SES
Global-FDR, was developed to complete the analysis. However, in November 2002,
AT&T sold its broadband unit to Comcast Corporation. Since it is now primarily a
communications services company, AT&T has been dropped from the peer index, and
Charter Communications Corporation has been added in its place for the 2002
analysis (the "Industry Peer Group-New"). The comparison assumes $100 invested
in Class H Common Stock, the S&P 500 Index, the Industry Peer Group-Old, and the
Industry Peer Group-New, on December 31, 1997, and reflects dividend
reinvestment and annual weighting of the industry peer indices by individual
company market capitalization. Although the companies in the industry peer
indices were selected because of similar industry characteristics, they are not
entirely representative of the Corporation's business.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
GENERAL MOTORS CLASS H COMMON STOCK, S&P 500 INDEX,
INDUSTRY PEER GROUP-OLD, AND INDUSTRY PEER GROUP-NEW
INDUSTRY PEER INDUSTRY PEER
DATE GM CLASS H STOCK S&P 500 GROUP OLD GROUP NEW
1997 100 100 100 100
1998 107 129 176 327
1999 260 156 248 602
2000 187 141 121 352
2001 125 125 125 316
2002 87 97 69 153
24
AUDIT COMMITTEE REPORT
The Audit Committee of the General Motors Board of Directors (the
"Committee") is a standing committee comprised of four independent directors. It
operates under a written charter adopted by the Board of Directors. The
Committee's charter, included in this proxy statement as Exhibit A, was revised
in 2003 in response to new requirements regarding independent accountants,
corporate governance, and disclosure that resulted from the Sarbanes-Oxley Act
of 2002 and other proposed regulations. The members of the Committee are Philip
A. Laskawy (Chair), Nobuyuki Idei, Alan G. Lafley, and Eckhard Pfeiffer. The
Committee annually recommends to the Board of Directors the selection of the
Corporation's independent accountants. That recommendation is subject to
ratification by the Corporation's stockholders.
Management is responsible for the Corporation's internal control and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and issuing a report thereon. As provided in its
Charter, the Committee's responsibilities include the monitoring and oversight
of these processes.
Consistent with its Charter responsibilities, the Committee has met and
held discussions with management and the independent accountants. In this
context, management represented to the Committee that the Corporation's
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America. The Committee has
reviewed and discussed the consolidated financial statements with management and
the independent accountants, and discussed with the independent accountants
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Corporation's independent accountants have also provided to the
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with the independent accountants that firm's independence.
The Audit Committee has also considered whether the provision of non-audit
services is compatible with maintaining the independent accountants'
independence.
Based upon the Committee's discussions with management and the independent
accountants as described in this report, and the Committee's review of the
representation of management and the report of the independent accountants to
the Committee, the Committee recommended that the Board of Directors include the
audited consolidated financial statements in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2002, filed with the Securities and
Exchange Commission.
Philip A. Laskawy (Chair)
Nobuyuki Idei
Alan G. Lafley
Eckhard Pfeiffer
FEES PAID TO AUDITOR
The Corporation retained Deloitte & Touche to audit its consolidated
financial statements for the year ended December 31, 2002. The Corporation and
its subsidiaries also retained Deloitte & Touche, as well as other accounting
and consulting firms, to provide various other services in 2002. Historically,
the Audit Committee annually approved each year's engagement for audit services
in advance. The Committee established complementary procedures in August 2002 to
expressly pre-approve non-audit services provided by the Corporation's
independent accountants.
Deloitte & Touche includes the member firms of Deloitte Touche Tohmatsu and
their respective affiliates, including Deloitte Consulting. Commencing on March
5, 2003, GM management adopted a policy not to award any new General Motors
business to Deloitte Consulting in light of the delay in carrying out the
previously announced plans for the separation of Deloitte Consulting from
Deloitte & Touche. Deloitte & Touche announced on March 28, 2003, that it would
not carry out those plans to separate Deloitte Consulting. The Corporation plans
to terminate existing engagements with Deloitte Consulting as soon as
25
practicable, and anticipates that substantially all engagements will be
terminated before the end of the second quarter 2003.
The aggregate fees billed to the Corporation in 2002 for professional
services performed by Deloitte & Touche, including Deloitte Consulting, were:
$ MILLIONS
-------------------------------------------------------------------
2002 2001
---------------------------- ----------------------------
GM HUGHES TOTAL GM HUGHES TOTAL
--- ---- ----- --- ---- -----
Audit Fees............. $22 $ 3 $ 25 $21 $ 3 $ 24
Audit-Related Fees..... 21 1 22 16 2 18
--- ---- ----- --- ---- -----
Subtotal............. $43 $ 4 $ 47 $37 $ 5 $ 42
--- ---- ----- --- ---- -----
Tax Fees............... 7 2 9 7 2 9
All Other Fees......... 33 67 100 29 22 51
--- ---- ----- --- ---- -----
Total................ $83 $ 73 $ 156 $73 $ 29 $ 102
--- ---- ----- --- ---- -----
--- ---- ----- --- ---- -----
AUDIT FEES: $25 million, $22 million-GM and $3 million-Hughes, ($24 million,
$21 million-GM and $3 million-Hughes, in 2001) for the audit of the
Corporation's annual consolidated financial statements, including reviews of the
interim financial statements contained in the Corporation's Quarterly Reports on
Form 10-Q and preparation of statutory reports. In addition, included in this
category are fees for services that generally only Deloitte & Touche reasonably
can provide, e.g., comfort letters, statutory audits, attest services, consents,
and assistance with and review of documents filed with the Securities and
Exchange Commission. None of these fees were billed by Deloitte Consulting.
AUDIT-RELATED FEES: $22 million, $21 million-GM and $1 million-Hughes,
($18 million, $16 million-GM and $2 million-Hughes, in 2001) for assurance and
related services that are traditionally performed by the independent accountant.
More specifically, these services include employee benefit plan audits, due
diligence related to mergers and acquisitions, accounting consultations and
audits in connection with proposed or consummated acquisitions, internal control
reviews, attest services that are not required by statute or regulation, and
consultation concerning financial accounting and reporting standards. None of
these fees were billed by Deloitte Consulting.
TAX FEES: $9 million, $7 million-GM and $2 million-Hughes, ($9 million,
$7 million-GM and $2 million-Hughes, in 2001) for services performed by the
professional staff in Deloitte & Touche's tax practice. This includes fees for
tax compliance, tax planning, and tax advice. Tax compliance involves
preparation of original and amended tax returns and claims for refund and tax
payment-planning services. Tax planning and tax advice encompass a diverse range
of services, including assistance with tax audits and appeals, tax advice
related to mergers and acquisitions and employee benefit plans, and requests for
rulings or technical advice from taxing authorities. None of these fees were
billed by Deloitte Consulting.
ALL OTHER FEES: $100 million, $33 million-GM and $67 million-Hughes,
($51 million, $29 million-GM and $22 million-Hughes, in 2001) for project
management, process improvements, and assistance for systems not associated with
the financial statements. A significant portion ($67 million in 2002, $20
million in 2001) is for services provided by Deloitte Consulting for a customer
satisfaction process reengineering project at Hughes Electronics Corporation,
which is now substantially complete. Included in these fees for GM for 2002 is
$30 million ($23 million-Deloitte Consulting, $7 million-Deloitte & Touche) for
various other projects, process improvements, and assistance with non-financial
information systems and $3 million for assistance with financial information
systems implementation and design by Deloitte Consulting ($6 million in 2001).
GM contracted for these financial information systems services before the
Sarbanes-Oxley Act was adopted in the summer of 2002, which now prohibits an
accounting firm from providing such services to its audit clients. Of the total
$156 million paid to Deloitte & Touche (including Deloitte Consulting) in 2002,
$93 million, $26 million-GM and $67 million-Hughes, (in "All Other Fees"), or
60%, was paid to Deloitte Consulting.
26
ITEM NO. 2
The Sarbanes-Oxley Act provides that each corporation's audit committee is
directly responsible for appointing the independent public accountants. The
General Motors By-laws provide in addition that the selection of the independent
public accountants shall be submitted to the stockholders at the annual meeting
for their ratification. The Audit Committee (the "Committee") has selected
Deloitte & Touche as GM's independent accountants for 2003, and the Board of
Directors has approved that selection. If the stockholders do not ratify the
Committee's selection of Deloitte & Touche, the Committee will endeavor to
appoint other accountants. Because of the difficulty and expense of making any
change in public accountants beginning mid-year, however, it is likely that the
Committee would not select new public accountants immediately.
Deloitte & Touche is considered well qualified, and has offices or
affiliates in or near most locations in the U.S. and other countries where
General Motors operates. Deloitte & Touche rotates its audit partners assigned
to audit General Motors at least once every five years. The Committee reviews
and approves in advance any instance where the supervising partner responsible
for the General Motors audit is assigned for more than three years.
Representatives of Deloitte & Touche will attend the annual meeting and
will have the opportunity to make any statement they wish. They will also be
available to answer questions that you may have.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF DELOITTE & TOUCHE AS INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE
BOOKS, RECORDS, AND ACCOUNTS OF THE CORPORATION AND ITS SUBSIDIARIES FOR THE
YEAR 2003. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS
PROPOSAL UNLESS YOU SPECIFY A DIFFERENT CHOICE.
ITEM NO. 3
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave. N.W.,
Suite 215, Washington, DC 20037, owner of approximately 104 shares of Common
Stock, has given notice that she intends to present for action at the annual
meeting the following resolution:
"RESOLVED: "That the shareholders recommend that the Board of
Directors take the necessary steps to have the accounting
consulting firm be NOT a spin-off from the same accounting firm,
but to be the spin-off from an entirely different firm."
REASONS: Recent accounting scandals have put emphasis on the
INDEPENDENCE of accountants."
Therefore, in our opinion the Corporation and its shareholders
would be best served by HYBRID ACCOUNTANTS. While we do agree in
the separation of accounting and consulting services, in order
to achieve the INDEPENDENCE desired by all, it would be best to
have consulting services performed by a firm other than the
spin-off from the regular accountant. Many employees from the
spin-off used to work for the original accounting firm. Only a
HYBRID would result in more INDEPENDENCE. Washington Gas Light
Company, for instance, has Deloitte & Touche as auditors and
PricewaterhouseCoopers, a separate firm, as their consultant."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors and management of General Motors are committed to
the independence of its public accountants. This independence strengthens
financial reporting integrity and quality. These beliefs are incorporated in the
charter for the Audit Committee (the "Committee") of the Board of Directors. The
Committee, comprised of independent directors, is responsible for the selection,
evaluation, compensation and, where appropriate, replacement of the independent
accountants. Selection of the independent accountants is submitted to the Board
of Directors for approval and to the stockholders for ratification. Consistent
with these Committee responsibilities, it is recognized that the independent
accountants are
27
ultimately accountable to the Committee and the Board of Directors. In
discharging these responsibilities, the Committee approves all independent audit
engagement fees and terms; reviews and pre-approves any non-audit services to be
provided by the independent accountants to ensure they do not compromise the
independent accountants' independence; ensures that the lead audit partners
assigned by the Corporation's independent accountant to the Corporation, as well
as the audit partner responsible for reviewing the Corporation's audit, are
changed at least every five years; and reviews the Corporation's policies
regarding the hiring of employees or former employees of the Corporation's
independent accountant.
On an annual basis, the Committee reviews with the independent accountants
a written statement required by the Independence Standards Board and discusses
with the public accountants their independence. Should these discussions
disclose any relationships that may reasonably be thought to bear on the
independence of the accountants, the Committee will recommend that the Board of
Directors take appropriate action to ensure the independence of the independent
accountants.
GM has historically used a significant number of consultants to help on a
wide range of matters, where their services can advance the Corporation's goals
at a reasonable price. GM regularly seeks competing bids from multiple leading
consulting firms with the appropriate resources and skills for defined projects.
Any artificial restriction on the consulting firms GM can consider could
adversely affect the quality and costs of services.
Commencing on March 5, 2003, GM management adopted a policy not to award
any new General Motors business to Deloitte Consulting in light of the delay in
carrying out the previously announced plans for the separation of Deloitte
Consulting from Deloitte & Touche. Deloitte & Touche announced on
March 28, 2003, that it would not carry out those plans to separate Deloitte
Consulting. The Corporation plans to terminate existing engagements with
Deloitte Consulting as soon as practicable, and anticipates that substantially
all engagements will be terminated before the end of the second quarter 2003.
General Motors, however, believes that it would be prudent to have the
flexibility to retain Deloitte Consulting in the future if such an engagement
were in the Corporation's interest -- for example, if GM needed unique services
offered only by Deloitte Consulting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 3. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
ITEM NO. 4
The Community of the Sisters of St. Dominic of Caldwell, NJ, 52 Old
Swartswood Station Road, Newton, NJ 07860, owners of approximately 75 shares of
Common Stock, and other filers have given notice that they intend to present for
action at the annual meeting the following resolution:
"Whereas:
Passenger vehicles account for one-fifth of all annual U.S.
greenhouse gas emissions linked to global climate change that
are released in the U.S. each year. The production,
transportation and use of gasoline for cars and light trucks
(SUVs, minivans, pick-ups) resulted in the emission of 302
million metric tons (MMT) of greenhouse gases by the U.S. in
2000.
American's heavy reliance on petroleum products to power
vehicles also affects national security, as today more than half
of the oil consumer in the U.S. is imported. U.S. cars and
trucks consume 11% of the world's total oil production, and
account for 40% of U.S. oil consumption.
Cars and trucks are the largest single source of air pollution
in most urban areas. Nearly 100 million Americans live in
EPA-designated "air quality nonattainment areas" that expose
them to unhealthy levels of ground-level ozone, particulate
matter, sulfur dioxide and other pollutants.
28
We feel that using available and emerging improvements to
conventional technologies -- addressing aerodynamic design,
vehicle load reduction, improved engine efficiency, transmission
innovations, and integrated starter-generators -- automakers can
build a fleet of vehicles that average 40 miles per gallon (mpg)
by 2012. Hybrid gasoline-electric vehicles could boost that
average to at least 55 miles per gallon by 2020. These fuel
economy gains can be achieved without sacrificing safety,
comfort or utility for consumers.
We believe that high greenhouse gas intensity of U.S. vehicle
manufacturers undermines competitive positioning of U.S. exports
to climate-conscious economies. Companies may face unexpected
costs associated with the imposition of greenhouse gas emission
regulations. Substantial new opportunities may open up for
proactive firms capable of meeting demand for cleaner, more
efficient technologies in the global marketplace.
GM, Ford and DaimlerChrysler are all investing in advanced
technologies such as hybrids and hydrogen fuel cells that could
significantly address all three major problems of global climate
change, urban air pollution and energy security. However, these
companies have vigorously opposed recent efforts by the U.S.
Congress and States to require increased fuel economy and
reduced tailpipe emissions, while failing to propose alternative
plans to achieve comparable environmental results. We believe
that this places the financial future of these companies -- and
thus shareholder value -- at grave risk.
This risk is underscored by research that shows that companies
with top-rated environmental records in their industry are
faring significantly better financially than those with worse
records. From 1997-2000, these top-rated companies had 3.53%
higher annual returns on investment than a broader universe of
companies, and 7.8% higher annual returns than companies with
low-rated environmental records.
Resolved: that the Company report to shareholders (at reasonable
cost and omitting proprietary information) by August 2003 on (a)
estimated total annual greenhouse gas emissions (i) from our
company's own operations and (ii) from its products; (b) how the
company can significantly reduce greenhouse gas emissions from
its fleet of vehicle product (using a 2002 baseline) by 2012 and
2020; and (c) an evaluation of what new public policies would
enable and assist the company in achieving these emission
reductions."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
Essentially all the information requested by this resolution is publicly
available, and the major emissions statistics and corporate policies are
summarized in the GM Corporate Responsibility and Sustainability Report, which
can be found on the Internet at www.gmresponsibility.com. This report contains
comprehensive environmental performance data, including GM's greenhouse gas
emissions from our 147 facilities worldwide and from our products sold in North
America and Europe. Among the highlights of the 2002 report are a reduction in
CO2 emissions per kilometer of 58% for U.S. cars and 44% for U.S. trucks since
the mid-1970s, a reduction in CO2 emissions per kilometer from our European
vehicles of 10% since 1995, a 90% reduction since 1990 in the global warming
potential of refrigerants placed in new U.S. vehicle air conditioners, a 9.6%
reduction in global GM facility CO2 emissions since 2000, a 16.5% reduction in
CO2 emissions from U.S. facilities since 1990, and a 47% reduction in CO2
emissions from Canadian facilities since 1990.
The GM Corporate Responsibility and Sustainability Report also describes
many of GM's plans for the future. For example, through participation in the
U.S. Environmental Protection Agency's Climate Leaders program, GM has pledged
to reduce its North American facility CO2 emissions by 10% from 2000 to 2005.
The report further states that the development of new cost-effective energy
technologies, such as renewable hydrogen, is the most effective way to improve
energy efficiency and reduce greenhouse gas emissions. In addition, the report
describes many of the development programs and specific technologies that GM is
pursuing to achieve that goal, discusses the status of legislative and
regulatory activities in key markets, and provides fuel economy comparisons of
GM products to those of our key competitors.
29
GM is pursuing an aggressive plan to develop and bring to market new
technologies as part of the solution to local and global environmental
challenges. New technologies such as continuously variable transmissions and
displacement on demand engines are being applied to a large portion of our
vehicle fleet over the next several years to enhance the fuel efficiency of
gasoline-powered vehicles. In addition, GM will make available three different
hybrid powertrains across a range of the popular vehicles that customers want to
drive, including trucks, sport utility vehicles, and mid-size cars. As with all
fuel efficiency technologies, the impact of these hybrid vehicles on average
fleet fuel economy will depend on customer response.
Longer term, hydrogen fuel cells offer the promise of significantly reduced
emissions. During the past year, GM has focused on the storage, cost, and
fueling infrastructure necessary to support hydrogen-powered vehicles. GM has
also joined the FreedomCAR partnership with the U.S. Department of Energy,
automotive suppliers, energy companies, and other automakers. This partnership
will focus on the research needed to develop the necessary technologies such as
fuel cells and hydrogen from domestic renewable sources.
In recent years in North America, consumer demand for enhanced vehicle
size, performance, and features has tended to offset GM's ongoing implementation
of energy efficiency technologies. Even with aggressive implementation of these
technologies, achievement of fleet average fuel economy of 40 mpg by 2012 would
not be feasible and could have an adverse effect on consumer choice, safety,
comfort, and utility. Going forward, the challenge will be to combine corporate
and government initiatives in ways that satisfy consumers, meet environmental
objectives, and maintain healthy economic conditions.
General Motors supports market-oriented public policies to foster the
development and introduction of advanced technology vehicles, such as hybrid and
fuel cell-powered vehicles. Consumer tax credits, if properly structured, can be
an effective way to promote initial acceptance of these new technologies. In
contrast, regulatory policies that simply mandate the production of these
vehicles do not create the market demand required to gain consumer acceptance.
Given U.S. fuel prices, which remain quite low by global standards, and the high
initial costs of these technologies, consumer tax incentives could promote
market acceptance to help build volumes and ultimately reduce costs. In
addition, governments can act as a catalyst for the early introduction of new
vehicle technologies through their own government fleets. Similar policies for
alternative fuel vehicles that can contribute toward reducing emissions would
also be beneficial.
It is important to recognize that society needs to take a total systems
approach to environmental issues, including encouraging the private sector to
innovate and deploy new technologies; adopting strategies to address the marine,
rail, and air components of the transportation sector; as well as addressing
greenhouse gas emissions from all other sources globally. Scientific research
needs to continue to better understand the nature, extent, causes, and most
effective strategies to address environmental issues.
In summary, in view of the extensive public reporting already performed by
General Motors in this area, the Board of Directors believes that the
preparation of additional reports would not be a good use of corporate
resources.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 4. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
ITEM NO. 5
Nick Rossi, P.O. Box 249, Boonville, CA 95415, owner of approximately 525
shares of Common Stock and approximately 237 shares of Class H Common Stock, has
given notice that he intends to present for action at the annual meeting
the following resolution:
"Shareholders recommend that our Board of Directors amend the
bylaws to require a strictly independent director, who is not
the current or earlier CEO of our company, to serve as Chairman
of our Board of Directors at all times and as soon as possible.
The primary purpose of the Board of Directors is to protect
shareholders' interests by providing independent oversight of
management, including the CEO. Shareholders believe
30
that a separation of the roles of Chairman and CEO will promote
greater management accountability to shareholders at our
company.
Corporate governance experts have questioned how one person,
serving as both Chairman and CEO, can effectively monitor and
evaluate his or her own performance. Shareholders believe the
current combination of chairman and CEO roles is a conflict of
interest because one of the chairman's main functions is to
monitor the CEO.
Peter Crist, Vice Chairman of Korn/Ferry International said
separating the role of CEO and Chairman is healthy and a growing
trend. Consolidating the two roles under one person sometimes
leads to the "imperial CEO," Crist said. "When you aggregate all
the power in one person, that's very difficult to check," he
said.
Two-thirds of directors favor splitting the roles of chairman
and CEO. This is a way to reform corporate operations and
prevent business collapses like Enron. Source: McKinsey & Co.
corporate governance survey.
Shareholders believe that an independent Chairman will
strengthen the Board's integrity and improve its oversight of
management.
To ensure a check and balance oversight of our investment vote
for an:
Independent Board Chairman
Yes on 5"
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board believes that it would not be in the best interests of the
Corporation and its stockholders to adopt a By-law requiring that an independent
director serve as Chairman of the Board. The Board of Directors, a majority of
whom are independent, has been, and continues to be, a strong proponent of
independent leadership at the Board level. The Board fully recognizes that
independence from management is a prerequisite to fulfilling its duty, as set
forth in its Corporate Governance Guidelines, "to regularly monitor the
effectiveness of management policies and decisions including the execution of
its strategies." Further, the independent directors meet without management in
executive session at least twice a year and comprise all six standing committees
of the Board (effective May 2003). With regard to the question whether the
Chairman and CEO roles should be separated, the Board's Corporate Governance
Guideline 4 states:
The Board should be free to make this choice any way that seems best for
the Company at a given point in time. Therefore, the Board does not have
a policy, one way or the other, on whether or not the role of the
Chairman and Chief Executive should be separate or combined and, if it
is to be separate, whether the Chairman should be selected from the
non-employee directors or be an employee.
The Board values its flexibility to select, on a case-by-case basis, the
style of leadership best able to meet the Corporation's needs based on
individuals available and circumstances at the time. Amending the By-laws as
proposed would deprive the Board of the flexibility to select a Chairman who at
the time of the decision is the most qualified individual to lead the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 5. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
ITEM NO. 6
John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278, owner
of approximately 50 shares of Common Stock and approximately 270 shares of Class
H Common Stock, has given notice that he intends to present for action at the
annual meeting the following resolution:
"This topic won an overall 60%-yes vote at 50 companies in 2002
Shareholders recommend that our company not adopt, maintain or
extend any poison pill unless such adoption, maintenance or
extension is submitted to a shareholder vote.
31
Harvard Report
A 2001 Harvard Business School study found that good corporate
governance (which took into account whether a company had a
poison pill) was positively related to company value. This study
conducted by Paul A. Gompers, Harvard Business School reviewed
the relationship between the corporate governance index for
1,500 companies and company performance from 1990 to 1999.
The report states that an investment strategy that bought stocks
with the strongest shareholder rights and sold stocks with the
weakest shareholder rights would have earned abnormal [positive]
returns of 8.5% per year.
Certain governance experts believe that a company with good
governance will perform better over time, leading to a higher
stock price. Others see good governance as a means of reducing
risk, decreasing the likelihood of bad things happening to a
company. Since the 1980s Fidelity, an $800 billion mutual fund
withheld votes for directors at companies that approved poison
pills, Wall Street Journal, June 12, 2002.
This topic won more than 41% of the yes-no votes cast at both
the 2001 and 2002 GM annual meetings. This result was achieved
in spite of our management's vote-no solicitations in 2001 and
2002. Our management directed both negative solicitations to
some of our largest shareholders. There was no vote-yes
solicitation to respond to. Thus shareholders could question
whether our management is interested in a level playing field.
Challenges Faced by our Company
I believe the challenges facing our company today are so great
that we must vote for the best corporate governance principles
to meet these challenges.
Challenges facing General Motors include:
1) GM stock hit a 10-year low since the 2002 annual
meeting.
2) Hughes Electronics (GMH) stock fell 83% -- from $47 in
March 2000 to $8 in October 2002.
3) While Asian manufacturers like Honda and Nissan now hold
just 24% of the light-truck and SUV market, it's
doubtful they will be content to leave it at that.
4) GM loses money on every 0% car loan it offers.
5) Used car prices are tanking.
6) Foreign-owned vehicle capacity in the U.S. is expect to
reach 5.4 million in 2008 -- up from 1.9 million in
1990. Much of the new capacity is aimed at the one
market segment where the big three made serious money in
the 1990s -- trucks.
Council of Institutional Investors Recommendation
The Council of Institutional Investors www.cii.org, an
organization of 120 pension funds investing $2 trillion, called
for shareholder approval of poison pills. I believe our company
should follow this recommendation.
Allow Shareholder Vote on any Poison Pill
This topic won an overall 60%-yes vote at 50 companies in 2002
Yes on 6"
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors believes that the action requested in this proposal
is unnecessary and ill-advised. The Board of Directors has not adopted a
shareholder rights plan (sometimes called a "poison pill") and has no present
intention to adopt one. Circumstances could arise in the future, however, which
would make such a plan an important tool for protecting the interests of the
Corporation's stockholders in compliance with the fiduciary duties of the Board
of Directors. Under those circumstances, requiring stockholder approval before a
rights plan could be adopted would interfere with the ability of the Board of
Directors to act in the stockholders' best interests.
Rights plans are designed to strengthen the directors' ability, in
compliance with their fiduciary duties, to protect stockholders from unfair and
abusive takeover tactics and to maximize stockholder value. That is why
32
more than 2,000 companies, including more than half of the companies in the S&P
500 Composite Stock Price Index, have adopted some type of rights plans.
Contrary to the proponent's suggestion, the ability to adopt a shareholder
rights plan would not give the Board of Directors absolute veto power over any
business combination. Rather, the Delaware Supreme Court, which has upheld the
legal validity of shareholders rights plans, has made it clear that a board must
act in accordance with its fiduciary duties if it adopts or maintains a rights
plan. An appropriate rights plan would neither prevent unsolicited proposals
from being made nor prevent a company from being acquired at a price that is
fair and adequate. In fact, in a study of takeover data from 1992 through 1996,
Georgeson & Company, a nationally recognized proxy solicitation and investor
relations firm, found that the presence of a rights plan neither increased the
likelihood of defeat of an unsolicited takeover proposal nor reduced the
likelihood of a company becoming a takeover target. The same Georgeson & Company
study found that the premiums paid to acquire companies with rights plans
averaged eight percentage points higher than premiums for companies without such
plans.
In recommending a vote against the proposal, the Board of Directors has not
determined that a rights plan should or should not be adopted by the
Corporation. If and when the Board considers adopting a rights plan, the
determination would be made only after careful deliberation, in light of all
circumstances then prevailing and in the exercise of the Board's fiduciary
duties. In this regard, it should be noted that the Board of Directors is
annually elected in its entirety and is composed of a large majority of
independent directors.
In addition, if circumstances make a rights plan an appropriate tool for
protecting stockholders' interests, the management of General Motors has
committed to safeguard those interests by including a "TIDE" provision in any
rights plan it might recommend to the Board. (TIDE stands for Three-Year
Independent Director Evaluation.) The "TIDE" provision would establish a Board
committee of independent directors who would review the rights plan every three
years and would recommend that the full Board modify or terminate the plan,
whenever a majority of the review committee deemed it appropriate. To support
its deliberations, that committee would request a report and recommendations
from its own investment bankers and lawyers based on an evaluation of company
performance, markets, and developments in relevant corporate law. A majority of
the full Board could then take action to modify or terminate the rights plan
according to its terms.
The Board believes that future circumstances could warrant the adoption of
a rights plan quickly, without time to seek stockholder approval. Since the
Board of Directors may need such flexibility so that they can act in the best
interests of GM stockholders, the Board recommends a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 6. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
ITEM NO. 7
Louis Lauve, 3900 Watson Place, N.W. 2G-B, Washington, DC 20016, owner of
approximately 44 shares of Common Stock, has given notice that he intends to
present for action at the annual meeting the following resolution:
"Shareholders recommend that our Board of Directors adopt a
cumulative voting bylaw. Cumulative voting means that each
shareholder may cast as many votes as equal the number of shares
held, multiplied by the number of directors to be elected. Each
shareholder may cast all such cumulated votes for a single
candidate or split votes between multiple candidates, as each
shareholder sees fit.
Cumulative voting increases the possibility of electing at least
one director with an independent or focused viewpoint.
Cumulative voting is more likely to broaden the perspective of
the Board, particularly in encouraging directors independent of
management. This will help achieve the objective of the Board
representing all shareholders.
Cumulative voting provides a voice for minority holdings, while
not interfering with the voting majority of the Board. Only
cumulative voting gives proportionate weight to votes by
stockholders whose holdings are sufficiently large to elect at
least one but not all the directors.
33
With cumulative voting I believe a significant minority of
shareholders could elect one director who gives greater priority
to certain issues such as corporate governance. For instance I
believe our company could benefit if one director gave greater
focus on strengthening the governance practices of our board.
These are examples of practices, taken from our company 2002
proxy, which some shareholders believe should be permanently
improved:
1) 42% of our directors are allowed to have other affiliations
with the company.
2) Directors are allowed to own only 1000 shares.
3) Directors with a business transaction with our company are
allowed to sit on the key Audit Committee.
4) A Chairman of our Board is allowed to have an interlock with
another director.
5) Fully-employed directors are allowed to serve on 4 other
boards.
Cumulative voting allows a significant group of shareholders to
elect a director of its choice -- bringing an independent and
focused perspective to board decisions.
For an independent perspective:
Cumulative Voting
Yes on 7"
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors opposes this proposal because it does not believe
cumulative voting is in the best interests of GM and its stockholders. It is the
belief of the Board that cumulative voting could impair the effective
functioning of the Board. Cumulative voting could result in the election of a
Board member who represents the special interest of a small group of
stockholders rather than all of GM's stockholders. Cumulative voting also
introduces the possibility of partisanship among Board members that could weaken
their ability to work together, a requirement essential to the effective
functioning of any board of directors. The Board is required to fairly represent
all stockholders. To do so, each director must feel a responsibility toward all
the stockholders, without special loyalty to any one group. Under non-cumulative
voting, each director is elected by stockholders representing a plurality of all
shares voted. In contrast, cumulative voting can have undesirable effects since
directors so elected might be principally concerned about representing and
acting in the interest of special groups of stockholders rather than in the
interests of all stockholders. At General Motors, all of our stockholders are
minority owners, although some stockholders have more extensive holdings than
others. The Board does not believe that some minority of stockholders should be
advantaged or disadvantaged compared with all other stockholders.
General Motors' stockholders, at the 2000 meeting and on sixteen previous
occasions, rejected a proposal for cumulative voting and should continue to do
so. At GM, cumulative voting is not necessary to provide management
accountability. The Board is committed to continuing its good corporate
governance practices, which include such safeguards as an annually elected
Board, a majority of independent directors, exclusively independent membership
of key Board committees, confidential voting, absence of "dead hand poison
pill," and published Board governance guidelines.
This proposal would alter the current process in such a way that could
permit stockholders representing less than a majority of all shares to elect a
director. Since each director oversees the management of the Corporation for the
benefit of all stockholders, the Board believes that changing the current voting
procedure would not be in the best interests of all stockholders and therefore
recommends a vote against this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 7. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
34
ITEM NO. 8
Ray T. Chevedden, 5965 S. Citrus Ave., Los Angeles, CA 90043, owner of
approximately 2,000 shares of Common Stock, has given notice that he intends to
present for action at the annual meeting the following resolution:
"Shareholders recommend that strictly independent directors be
nominated by our board for key board committees to the fullest
extent possible. This includes the nomination of an appropriate
number of strictly independent directors to the full board in
order that independent director candidates will be available for
nomination to our key board committees.
The standard of independence is the standard of the Council of
Institutional Investors www.cii.org, "A director is deemed
independent if his or her only non-trivial professional,
familial or financial connection to the corporation or its CEO
is his or her directorship." This proposal calls for our
company's governing documents to be amended accordingly,
including the bylaws -- adopting this principle at all times
even if regulations allow the company to meet a lessor standard
at any particular time.
A reason to Improve
These are examples of practices, taken from our company 2002
proxy, which highlight the need for more independent directors.
1) 42% of our directors are allowed to have other affiliations
with our company.
2) Directors with a business transaction with our company are
allowed to sit on the key Audit Committee.
3) A Chairman of our Board is allowed to have an interlock with
another director.
Serious about good governance
Enron and the corporate disasters that followed forced many
companies to get serious about good governance which includes
independent directors. When the buoyant stock market burst,
suddenly the importance of governance was clear. In a time of
crises, a vigorous board that has done its job can help
companies minimize the damage.
A look back at Business Week's inaugural ranking of the best and
worst boards in 1996 tells the story. For the 3 years after the
list appeared, the stocks of companies with the best boards
outperformed those with the worse boards by 2 to 1.
Increasingly, institutional investors are flocking to stocks of
companies perceived as being well governed and punishing stocks
of companies seen as having lax oversight, "The Best & Worst
Boards," Business Week, October 7, 2002.
To protect our investment money at risk:
Independent Directors for Key Board Committees
Yes on 8"
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors has been, and continues to be, a strong proponent of
board independence, and has already taken effective measures to ensure that all
of its Committees are composed exclusively of independent directors. General
Motors' widely acclaimed Guidelines on Significant Corporate Governance Issues
were adopted by the Board in January 1994, and will be revised in May 2003, to
state in Item 22: All committee memberships will consist exclusively of
independent Directors as defined in By-law 2.12 (emphasis added). The only
difference between the Corporation's current policy and the proposal would be in
how "independent" is defined. Section 2.12 of the GM By-laws gives this
definition of independent:
[A] director who: (i) is not and has not been employed by the corporation
or its subsidiaries in an executive capacity within the five years
immediately prior to the annual meeting at which the nominees of the board
of directors will be voted upon; (ii) is not (and is not affiliated with a
company or firm that is) a significant advisor or consultant to the
corporation or its subsidiaries; (iii) is not affiliated with a
35
significant customer or supplier of the corporation or its subsidiaries;
(iv) does not have significant personal services contract(s) with the
corporation or its subsidiaries; (v) is not affiliated with a tax-exempt
entity that receives significant contributions from the corporation or its
subsidiaries; and (vi) is not a spouse, parent, sibling or child of any
person described by (i) through (v).
The proposal would consider a director independent if the director's "only
non-trivial professional, familial, or financial connection to the corporation
or its CEO is his or her directorship" (emphasis added). Since the proposal does
not define "non-trivial," for a company like GM that maintains scores of
business relationships attempting to comply with such an indefinite requirement
would be unduly burdensome and could impair the Corporation's ability to attract
the best possible directors to its Board. The more concrete, certain definition
of "independent" now set forth in GM's By-laws is consistent with definitions
used by major institutional investors, stockholder advisors, and the New York
Stock Exchange, and would be amended to satisfy any changes in the requirements
of the applicable laws or stock exchange rules.
As of May 2003, the Board's six standing committees are composed solely of
independent directors as defined by Section 2.12 of the GM By-laws. Thus, the
Board of Directors believes that the goal of this proposal has already been
achieved and that the proposal is therefore unnecessary and not in the best
interests of the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 8. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
ITEM NO. 9
John Lauve, 200 N. Saginaw, Holly, MI 48442, owner of approximately 412
shares of Common Stock, has given notice that he intends to present for action
at the annual meeting the following resolution:
"Shareholders request that our Board of Directors adopt an
executive compensation policy that all future stock options to
senior executives and directors shall be performance-based. A
stock option is performance-based if the option exercise price
is indexed or linked to an industry peer group stock performance
index so that the options have value only when our company's
stock price performance exceeds the peer group performance
level.
Support challenging performance objectives for our executives
As shareholders, we support compensation policies for senior
executives that provide challenging performance objectives and
motivate executives to achieve long-term shareholder value. We
believe that our company's current policies can be improved for
the benefit of all shareholders.
"Future stock options" include agreements renewing, modifying or
extending existing stock option grants or employment agreements
that contain stock option grants. This is not intended to
interfere with existing agreements. However it does recommend
the greatest flexibility to adopt the spirit and the letter of
this proposal to the fullest extent possible.
Indexed stock options are options whose exercise price moves
with an appropriate peer group index composed of a company's
primary competitors. This proposal requests that future senior
executive and director stock option plans link the options'
exercise price to a peer industry group performance index which
would preferably be selected by the strictly independent
directors on our Board's Compensation Committee. For example the
peer companies used in our company's proxy statement which
compares the 5-year stock price performance of our stock.
Outperform the Market
According to Level 3, a company which adopted this proposal
topic, the Level 3 "outperform stock option" program "aligns
directly management's and stockholders' interests by basing
stock option value on Level 3's ability to outperform the
market."
36
Implementing an indexed stock option plan means that our
Company's participating executives would receive payouts only if
the Company's stock price performance exceeded that of the peer
group average. By tying the exercise price to a market index,
indexed-options reward executives and directors for
outperforming the competition. Indexed-options would have value
when our Company's stock price exceeds or declines less than its
peer group average stock price. By downwardly adjusting the
exercise price of the option during a downturn in the industry,
indexed-options remove pressure to reprice stock options. In
short, superior performance would be rewarded:
Yes for Performance-Based Stock Options"
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
This proposal urges the Board to adopt a policy that some portion of future
stock option grants to senior executives and directors shall be
"performance-based," which it defines as indexed options where the exercise
price is linked to an industry index composed of a company's primary
competitors. To date, very few major companies have used "performance-based"
options, although most companies do utilize stock options as a competitive pay
component. Stock options form one of the long-term pay components of GM's total
compensation program and are an important retention tool. Requiring the
Corporation to grant options with conditions or other terms that are
inconsistent with compensation practices followed by the Corporation's
competitors could place it at a substantial disadvantage in recruiting and
retaining senior executives. The Board, however, continues to monitor the
development of market practices with regard to incentive compensation, and
equity compensation in particular, and intends to adapt its incentive designs to
remain competitive in the market for executive talent.
All executives and most of GM's salaried employees (approximately 50,000)
are eligible to participate in the company's stock option programs. The
Executive Compensation Committee of GM's Board, which consists entirely of
independent directors, has granted stock options to provide an incentive for
superior performance leading to long-term increased stockholder value. Each
option permits the employee, generally for a period of ten years, to buy a share
of Common Stock from the Corporation at the price of Common Stock on the day the
option is granted. These stock options, which generally vest in equal increments
two and three years after grant, are inherently performance-based, because their
value is directly linked to the price of Common Stock over time and thus
reflects the fundamental performance of the Corporation. Because the value of GM
stock options is already directly linked to the price of Common Stock, and
therefore to stockholder value, the Board of Directors believes the proposal is
unnecessary, and recommends a vote against it.
In addition, although our stock option programs are not indexed option
programs, GM's Long-Term Incentive Plan, under which approximately 400 members
of senior leadership are awarded grants, is based on relative Total Shareholder
Return ("TSR") and stock performance. The plan covering three fiscal years
provides stock-based awards at pre-determined levels based upon the ranking of
Common Stock TSR compared to companies in the S&P 500 Composite Stock Price
Index. This program is designed to ensure that executives are not rewarded for
stock price increases due solely to a general rise in the stock market. For the
performance period 2000-2002, no payouts were made under this plan because GM's
TSR relative to the peer group did not meet the minimum payout level. We believe
the combination of the relative TSR plan for senior leadership and the stock
option plan as approved for a broader group of executives and salaried employees
provides a well-balanced long-term focus, which is in the best interests of both
the Corporation and the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 9. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
37
ITEM NO. 10
Amalgamated Bank LongView Collective Investment Fund, 11-15 Union Square,
New York, NY 10003, owner of approximately 194,056 shares of Common Stock, has
given notice that it intends to present for action at the annual meeting the
following resolution:
"RESOLVED: The shareholders request that the Board of
Directors of General Motors Corp. ("GM" or the "Company")
appoint as independent auditors only those firms and their
affiliates that agree not to provide GM with non-audit
consulting services for the term of any appointment.
SUPPORTING STATEMENT
Independent auditors play a key role in promoting
confidence in the integrity of financial reporting and U.S.
capital markets. The Securities and Exchange Commission requires
independent auditors to certify or audit the financial
information that companies file with the SEC. As a result, the
work that auditors perform is important not only to companies,
but also to investors.
The collapses of Enron and WorldCom, together with the
recent increase in the number of accounting restatements at
other companies, have shone a spotlight on the role of
independent auditors. The Sarbanes-Oxley law, enacted in 2002,
prohibits audit firms from providing some, but not all, types of
non-audit services to audit clients.
In our view, it is important to eliminate incentives that
can undermine an auditor's objectivity and tough-mindedness. An
auditor's independence can be compromised in various ways. The
provision of certain kinds of non-audit consulting services to
audit clients may create economic incentives that can lead a
firm to devalue the audit services and focus on retaining the
client, even at the cost of making inappropriate audit
judgments.
There have been reports in the media about individual
auditors being pressured to "cross-sell" their employer's
non-audit services to audit clients. There have also been
reports about auditors submitting "loss leader" bids to provide
audit services as a way to establish a relationship with a
company and then try to sell more lucrative non-audit services.
In recent decades, the proportion of revenues derived from
non-audit services, such as internal audit, information
technology, financial advisory and appraisal and valuation
services, has grown steadily. At the five largest public
accounting firms, revenues derived from non-audit services grew
from 13% of total revenues in 1981 to half of total revenues in
2000.
The phenomenon is apparent at GM, which reported that in
2001 the Company paid Deloitte & Touche, LLP $21 million for
audit fees, $21 million for audit-related services, $9 million
for tax services and $2 million for other non-audit services.
Deloitte Consulting was paid $6 million for financial
information systems design and implementation, $20 million for
customer satisfaction process re-engineering consulting, and $23
million for all other non-audit services.
We believe that firms retained by GM to provide audit
services should perform only audit services.
We urge you to vote FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Directors, with the assistance of its professional advisors,
has given this proposal careful, thorough consideration. While both the Audit
Committee (the "Committee") and the full Board of Directors agree with the
proponent that the independent accounting firm engaged by the Corporation to
perform
38
audit services should not also undertake certain types of consulting services
for the Corporation, the Board believes that the necessary restrictions are
already in place.
Within the last year, Congress has passed legislation and the Securities
and Exchange Commission (the "SEC") has established rules placing restrictions
on what services an independent accounting firm can perform without impairing
its independence. General Motors' management and the Committee actively monitor
the compliance of our independent accountants, Deloitte & Touche, with the legal
and regulatory requirements. In fact, the Committee specifically reviews and
approves all services -- both audit and non-audit -- provided by Deloitte &
Touche before those services are rendered.
In addition to these monitoring and pre-approval procedures, the Board of
Directors annually seeks stockholder ratification of its selection of
independent accountants. General Motors also provides to its stockholders
information relating to fees paid to Deloitte & Touche and discloses the
Committee's considerations regarding whether the provision of non-audit services
is compatible with maintaining their independence, all as required by the rules
of the SEC.
The Board of Directors believes that in the current environment there is a
general perception that it is desirable to substantially reduce the amount of
certain consulting services that are provided by Deloitte & Touche. Commencing
on March 5, 2003, GM management adopted a policy not to award any new General
Motors business to Deloitte Consulting in light of the delay in carrying out the
previously announced plans for the separation of Deloitte Consulting from
Deloitte & Touche. Deloitte & Touche announced on March 28, 2003, that it would
not carry out those plans to separate Deloitte Consulting. The Corporation plans
to terminate existing engagements with Deloitte Consulting as soon as
practicable, and anticipates that substantially all engagements will be
terminated before the end of the second quarter 2003. General Motors, however,
believes that it would be prudent to have the flexibility to retain Deloitte
Consulting in the future if such an engagement were in the Corporation's
interest -- for example, if GM needed unique services offered only by Deloitte
Consulting.
The Board of Directors also believes that the stockholder proposal is so
broadly drawn that it would restrict the independent accountants to performing
only audit services. There are several services that, while technically not
included under the definition of audit services, the Board believes only make
sense for the independent accountants to provide to the Corporation. These
services include performing audits of employee benefit plans, providing
assistance in conducting due diligence in connection with acquisitions, advising
on accounting standards and their application to transactions being considered
by the Corporation, and providing services relating to tax compliance and
planning.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
ITEM NO. 10. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
OTHER MATTERS
The enclosed proxy gives the Proxy Committee discretionary authority to
vote your shares in accordance with its best judgment with respect to all
additional matters that might come before the annual meeting.
IF YOU VOTE BY MAIL, WE ENCOURAGE YOU TO SPECIFY YOUR CHOICES BY MARKING
THE APPROPRIATE BOXES ON THE ENCLOSED PROXY CARD. YOU DO NOT NEED TO MARK ANY
BOXES IF YOU WISH TO VOTE ACCORDING TO THE BOARD OF DIRECTORS' RECOMMENDATIONS;
JUST SIGN, DATE, AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE. IF YOU VOTE
THROUGH THE INTERNET OR BY TELEPHONE, SIMPLY FOLLOW THE INSTRUCTIONS ON THE
PROXY CARD. THANK YOU FOR YOUR COOPERATION AND YOUR PROMPT RESPONSE.
By order of the Board of Directors,
Nancy E. Polis, Secretary
April 17, 2003
39
EXHIBIT A
GENERAL MOTORS CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS CHARTER
PURPOSE
The Audit Committee's primary function is assisting the GM Board with its
responsibility for overseeing the integrity of GM's financial statements, the
qualifications and independence of the independent accountants, and the
performance of GM's internal audit staff and independent accountants.
In carrying out this function, the Committee shall independently and
objectively monitor the performance of GM's financial reporting process and
systems of disclosure controls and internal controls; review and appraise the
audit efforts of GM's independent accountants and internal audit group; provide
for open, ongoing communications concerning GM's financial position and affairs
between the Board and the independent accountants, GM's financial and senior
management, and GM's internal audit department; review GM's policies and
compliance procedures regarding ethics; prepare the Audit Committee Report for
the annual proxy statement; and report regularly to the Board regarding the
execution of its duties.
MEMBERSHIP
The Committee shall be comprised of three or more directors as determined
by the Board. The duties and responsibilities of a Committee member are in
addition to those required of a director. Each Committee member shall be an
independent director as determined in accordance with the Corporation's by-laws
and as defined by all applicable laws and regulations. All members of the
Committee shall be "financially literate" and the Committee will have at least
one member qualified as an "audit committee financial expert" as defined by
applicable regulations.
MEETINGS
The Committee shall meet approximately six times annually. Periodically,
it shall meet in executive sessions with management, the General Auditor, the
independent accountants, or other GM officers. Annually, it shall meet with
representatives of GM's major subsidiaries regarding their systems of internal
control, results of audits, and integrity of financial reporting. The Committee
shall periodically meet in executive session absent GM management.
The Committee shall maintain independence both in establishing its agenda
and directly accessing management of GM and its subsidiaries. Annually, the
Committee will reassess the adequacy of this charter, evaluate its performance,
and report these and other actions to the Board of Directors with any
recommendations.
RESPONSIBILITIES AND DUTIES
GM management is responsible for preparing financial statements; the
Committee's primary responsibility is oversight. To carry out this
responsibility, the Committee shall undertake the following common recurring
activities:
Financial Statements
* Discuss with management and the independent accountants the annual
audited financial statements and quarterly financial statements prior to
filing including Management's Discussion and Analysis of Financial
Condition and Results of Operations, GM's earnings announcements prior to
release, and the results of the independent accountants' reviews. The
Committee may be represented by the Chair or a subcommittee to review
earnings announcements.
* Review critical accounting policies, financial reporting and accounting
standards and principles (including significant changes to those
principles or their application), and key accounting decisions affecting
the Corporation's financial statements. The review shall include the
rationale for such choices and possible alternatives.
A-1
* Review with the independent accountants any audit problems or
difficulties with management's response.
* Review GM's financial reporting process, including disclosure controls
and procedures, the systems of internal control, and the independent
accountants' attestation of management's internal control report.
* Review any disclosure of significant deficiencies in the design or
operation of internal controls.
Independent Accountants
* Select, evaluate, and, if appropriate, terminate or replace the
independent accountants. (The Committee's selection shall be annually
submitted to the Board for approval and to the stockholders for
ratification.) The independent accountants are accountable to the
Committee and the Board of Directors. The Committee shall approve the
audit engagement fees and pre-approve any non-audit services to be
provided by the independent accountants.
* Review reports by the independent accountants describing: their internal
quality control procedures; any material issues raised by the most recent
internal quality control review, peer review, or regulatory inquiry
within the preceding five years; and all relationships between the
independent accountants and GM.
* Ensure that rotation of the independent accountants' audit partners
satisfies regulatory requirements, and set policies about hiring current
or former employees of the independent accountants.
* Review and discuss with the independent accountants the annual statement
required by Independence Standards Board (ISB) Standard No. 1.
Internal Audit
* Review the performance of the internal audit department including the
objectivity and authority of its reporting obligations, the proposed
audit plans for the coming year, and the results of internal audits.
Review and concur in the appointment of the General Auditor.
Legal and Compliance
* Establish procedures for reviewing and handling complaints or concerns
received by GM regarding accounting, internal accounting controls, or
auditing matters, including enabling employees to submit concerns
confidentially and anonymously, and review management's disclosure of any
frauds that involve management or other employees who have a significant
role in internal control.
* Review procedures and compliance processes pertaining to corporate ethics
and standards of business conduct as embodied in GM's policy, Winning
With Integrity: Our Values and Guidelines for Employee Conduct.
The Committee may diverge from this list as appropriate if circumstances
or regulatory requirements change. In addition to these activities, the
Committee will perform such other functions as necessary or appropriate under
law, stock exchange rules, GM's charter and by-laws, and the resolutions and
other directives of the Board. The Committee may obtain advice, assistance, and
investigative support from outside legal, accounting, or other advisors as it
deems appropriate to perform its duties, and GM shall provide appropriate
funding, as determined by the Committee, for any such advisers.
A-2
[GM Logo]
2003 ANNUAL MEETING
Hotel du Pont
11th & Market Streets
Wilmington, Delaware
[MAP]
Complimentary self-parking is available at Hotel du Pont Car Park located on
Orange Street at the corner of 12th Street (parking vouchers will be provided to
stockholders at the meeting). The hotel's valet parking service is available for
a non-reimbursable charge.
GENERAL DIRECTIONS
FROM PHILADELPHIA ON I-95 SOUTH
1. Take I-95 South to Exit 7A marked "52 South, Delaware Avenue."
2. Follow 11th Street in the middle lane through six traffic lights. Hotel du
Pont is on the right. For complimentary self-parking, turn left on Orange
Street, Car Park is on the left.
FROM BALTIMORE ON I-95 NORTH
1. Follow I-95 North to Wilmington, take Exit 7 marked "Route 52, Delaware
Avenue."
2. From right lane, take Exit 7 onto Adams Street.
3. At the third traffic light, turn right onto 11th Street.
4. Follow 11th Street in the middle lane through six traffic lights. Hotel du
Pont is on the right. For complimentary self-parking, turn left on Orange
Street, Car Park is on the left.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RESULTS OF THE ANNUAL MEETING
Final certified results of voting at the annual meeting will be available on
GM's Web site, WWW.GM.COM. To obtain a transcript of the meeting, stockholders
should write to GM Fulfillment Center, MC 480-000-FC1, 30200 Stephenson Hwy.,
Madison Heights, MI 48071-1621.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
VISIT GM ON THE INTERNET
Explore the world of General Motors products and services on our Web site,
WWW.GM.COM. Surf our home page to learn about "The Company," our "Automotive"
brands, and products and services that go "Beyond Automotive." From the home
page, you can access our many brand Web sites -- from Buick to Vauxhall and from
ACDelco to XM Radio -- to discover the GM product or service that's just right
for you.
[Recycle Logo] Printed on recycled paper 4000-PS-03
2003 ANNUAL MEETING OF STOCKHOLDERS ADMISSION TICKET
Tuesday, June 3, 2003, 9 a.m. local time
Hotel du Pont, 11th & Market Streets, Wilmington, Delaware
[Map]
PLEASE BRING GOVERNMENT-ISSUED PHOTOGRAPH IDENTIFICATION
TO PRESENT FOR ADMITTANCE TO THE MEETING.
Complimentary self-parking is available at Hotel du Pont Car Park located on
Orange Street at the corner of 12th Street (parking vouchers will be provided to
stockholders at the meeting). The hotel's valet parking service is available for
a non-reimbursable charge.
GENERAL DIRECTIONS
From Philadelphia on I-95 South
1. Take I-95 South to Exit 7A marked "52 South, Delaware Avenue."
2. Follow 11th Street in the middle lane through six traffic lights. Hotel du
Pont is on the right. For complimentary self-parking, turn left on Orange
Street, Car Park is on the left.
From Baltimore on I-95 North
1. Follow I-95 North to Wilmington, take Exit 7 marked "Route 52, Delaware
Avenue."
2. From right lane, take Exit 7 onto Adams Street.
3. At third traffic light, turn right onto 11th Street.
4. Follow 11th Street in the middle lane through six traffic lights. Hotel du
Pont is on the right. For complimentary self-parking, turn left on Orange
Street, Car Park is on the left.
PLEASE RETAIN AND PRESENT THIS TICKET FOR ADMISSION TO THE MEETING.
--------------------------------------------------------------------------------
GENERAL MOTORS CORPORATION
PROXY/VOTING INSTRUCTION CARD
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS
HOTEL DU PONT, 11TH & MARKET STREETS, WILMINGTON, DELAWARE
TUESDAY, JUNE 3, 2003, 9 A.M. LOCAL TIME
The undersigned authorizes G. Richard Wagoner, Jr., John M. Devine, and
Robert A. Lutz, and each of them as the Proxy Committee, to vote the COMMON
STOCK AND/OR CLASS H COMMON STOCK of the undersigned upon the nominees for
Directors: (01) P. N. Barnevik, (02) J. H. Bryan, (03) A. M. Codina,
(04) G. M. C. Fisher, (05) K. Katen, (06) A. G. Lafley, (07) P. A. Laskawy,
(08) E. S. O'Neal, (09) E. Pfeiffer, and (10) G. R. Wagoner, Jr.*; upon the
other Items shown on the reverse side, which are described on the pages
identified in the Table of Contents to the Proxy Statement; and upon all other
matters which may come before the 2003 Annual Meeting of Stockholders of General
Motors Corporation, or any adjournment thereof.
This card also provides voting instructions for the shares held in various
employee savings plans as described in the Proxy Statement. IF YOUR
REGISTRATIONS ARE NOT IDENTICAL, YOU MAY RECEIVE MORE THAN ONE SET OF PROXY
MATERIALS. PLEASE SIGN AND RETURN ALL CARDS YOU RECEIVE.
TO VOTE BY INTERNET OR TELEPHONE -- SEE REVERSE SIDE.
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.
*Numbers refer to Director nominee telephone voting codes.
2003 ANNUAL MEETING
ADMISSION TICKET
GENERAL MOTORS CORPORATION This ticket will admit
c/o EquiServe Trust Company, N.A. stockholder and one guest.
P.O. Box 8694 (See reverse side.)
Edison, NJ 08818-8694
VOTE BY INTERNET, TELEPHONE OR MAIL.
IF YOU VOTE BY INTERNET OR TELEPHONE, DO NOT MAIL THE PROXY CARD.
VOTER CONTROL NUMBER
--------------------------------
--------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
VOTE-BY-INTERNET
1. Log on to the Internet and go to www.eproxyvote.com/gm.
2. Enter your Voter Control Number listed above and follow the steps outlined
on the secured Web site.
OR
VOTE-BY-TELEPHONE
1. Call toll-free 1-877-779-8683. Outside continental United States or Canada,
call collect at 1-201-536-8073.
2. Enter your Voter Control Number listed above and follow the recorded
instructions.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
--------------------------------------------------------------------------------
PLEASE MARK /X/
VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-2
AND "AGAINST" ITEMS 3-10.
This proxy/voting instruction card will be voted
"FOR" Items 1-2 if no choice is specified.
GM Proposals FOR WITHHELD
1. Election of Directors / / / /
------------------------------------------------
For, EXCEPT vote withheld from above nominee(s)
FOR AGAINST ABSTAIN
2. Ratify selection of independent
accountants / / / / / /
This proxy/voting instruction card will be voted
"AGAINST" Items 3-10 if no choice is specified.
STOCKHOLDER PROPOSALS FOR AGAINST ABSTAIN
3. Retain auditing consulting firm that was
not part of Deloitte & Touche / / / / / /
4. Report on greenhouse gas emissions / / / / / /
5. Require an independent chairman separate
from chief executive officer / / / / / /
6. Require stockholder approval of a
"poison pill" / / / / / /
7. Adopt cumulative voting / / / / / /
8. Appoint independent directors to key
Board committees / / / / / /
9. Award performance-based stock options
to senior executives and directors / / / / / /
10. Appoint independent auditor that will
not provide GM with non-audit
consulting services / / / / / /
THIS PROXY/VOTING INSTRUCTION CARD REPRESENTS YOUR HOLDINGS OF COMMON STOCK
AND/OR CLASS H COMMON STOCK.
Signature(s): ___________________________________ Date _________________ 2003
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY/VOTING INSTRUCTION CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
NOTE: Please add your title if you are signing as attorney, administrator,
executor, guardian, trustee, or in any other representative capacity.
SEE REVERSE SIDE
GM GENERAL MOTORS CORPORATION COMMON
PROXY CARD
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS
HOTEL DU PONT, 11TH & MARKET STREETS, WILMINGTON, DELAWARE
TUESDAY, JUNE 3, 2003, 9 A.M. LOCAL TIME
The undersigned authorizes G. Richard Wagoner, Jr., John M. Devine, and
Robert A. Lutz, and each of them as the Proxy Committee, to vote the COMMON
STOCK of the undersigned upon the nominees for Directors: P. N. Barnevik,
J. H. Bryan, A. M. Codina, G. M. C. Fisher, K. Katen, A. G. Lafley,
P. A. Laskawy, E. S. O'Neal, E. Pfeiffer, and G. R. Wagoner, Jr.; upon the other
Items shown on the reverse side, which are described on the pages identified in
the Table of Contents to the Proxy Statement; and upon all other matters which
may come before the 2003 Annual Meeting of Stockholders of General Motors
Corporation, or any adjournment thereof.
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.
----------------
SEE REVERSE SIDE
----------------
GM-503 Rev 4/03
PLEASE MARK /X/ COMMON
VOTES AS IN
THIS EXAMPLE:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-2
AND "AGAINST" ITEMS 3-10.
This proxy card will be voted
"FOR" Items 1-2 if no choice is specified.
GM PROPOSALS FOR WITHHELD
1. Election of Directors / / / /
------------------------------------------------
For, EXCEPT vote withheld from above nominee(s)
FOR AGAINST ABSTAIN
2. Ratify selection of independent
accountants / / / / / /
This proxy card will be voted
"AGAINST" Items 3-10 if no choice is specified.
STOCKHOLDER PROPOSALS FOR AGAINST ABSTAIN
3. Retain auditing consulting firm that was
not part of Deloitte & Touche / / / / / /
4. Report on greenhouse gas emissions / / / / / /
5. Require an independent chairman separate
from chief executive officer / / / / / /
6. Require stockholder approval of a
"poison pill" / / / / / /
7. Adopt cumulative voting / / / / / /
8. Appoint independent directors to key
Board committees / / / / / /
9. Award performance-based stock options
to senior executives and directors / / / / / /
10. Appoint independent auditor that will
not provide GM with non-audit
consulting services / / / / / /
THIS PROXY CARD REPRESENTS YOUR HOLDINGS OF COMMON STOCK.
Signature(s): ___________________________________ Date _________________ 2003
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
NOTE: Please add your title if you are signing as attorney, administrator,
executor, guardian, trustee, or in any other representative capacity.
SEE REVERSE SIDE
GM GENERAL MOTORS CORPORATION CLASS H
PROXY CARD
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS
HOTEL DU PONT, 11TH & MARKET STREETS, WILMINGTON, DELAWARE
TUESDAY, JUNE 3, 2003, 9 A.M. LOCAL TIME
The undersigned authorizes G. Richard Wagoner, Jr., John M. Devine, and
Robert A. Lutz, and each of them as the Proxy Committee, to vote the CLASS H
COMMON STOCK of the undersigned upon the nominees for Directors: P. N. Barnevik,
J. H. Bryan, A. M. Codina, G. M. C. Fisher, K. Katen, A. G. Lafley,
P. A. Laskawy, E. S. O'Neal, E. Pfeiffer, and G. R. Wagoner, Jr.; upon the other
Items shown on the reverse side, which are described on the pages identified in
the Table of Contents to the Proxy Statement; and upon all other matters which
may come before the 2003 Annual Meeting of Stockholders of General Motors
Corporation, or any adjournment thereof.
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.
----------------
SEE REVERSE SIDE
----------------
GM-504 Rev 4/03
PLEASE MARK /X/ CLASS H
VOTES AS IN
THIS EXAMPLE:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1-2
AND "AGAINST" ITEMS 3-10.
This proxy card will be voted
"FOR" Items 1-2 if no choice is specified.
GM PROPOSALS FOR WITHHELD
1. Election of Directors / / / /
------------------------------------------------
For, EXCEPT vote withheld from above nominee(s)
FOR AGAINST ABSTAIN
2. Ratify selection of independent
accountants / / / / / /
This proxy card will be voted
"AGAINST" Items 3-10 if no choice is specified.
STOCKHOLDER PROPOSALS FOR AGAINST ABSTAIN
3. Retain auditing consulting firm that was
not part of Deloitte & Touche / / / / / /
4. Report on greenhouse gas emissions / / / / / /
5. Require an independent chairman separate
from chief executive officer / / / / / /
6. Require stockholder approval of a
"poison pill" / / / / / /
7. Adopt cumulative voting / / / / / /
8. Appoint independent directors to key
Board committees / / / / / /
9. Award performance-based stock options
to senior executives and directors / / / / / /
10. Appoint independent auditor that will
not provide GM with non-audit
consulting services / / / / / /
THIS PROXY CARD REPRESENTS YOUR HOLDINGS OF CLASS H COMMON STOCK.
Signature(s): ___________________________________ Date _________________ 2003
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
NOTE: Please add your title if you are signing as attorney, administrator,
executor, guardian, trustee, or in any other representative capacity.
SEE REVERSE SIDE