Summary
Freeport-McMoRan Copper & Gold Inc. (FCX) filed an 8-K on May 6, 2005, announcing the approval of its 2005 Annual Incentive Plan (AIP) by its stockholders. This new plan is set to replace the existing annual incentive plan for awards beginning with the fiscal year 2006. The AIP is designed to provide cash incentive bonuses to senior executives, with key differences including a more restricted participation scope, limited to officers, and the introduction of a safety performance factor that can adjust the overall award pool. The AIP's performance criteria are tied to a minimum average "return on investment" (ROI) of 6% over a five-year period, calculated using net income, stockholders' equity, and long-term debt. The funding for these awards is initially set at 2.5% of the "net cash provided by operating activities," with potential adjustments up to 2.75% or reductions based on safety performance. A significant portion of the funding pool (20%) is allocated for safety incentives, with the Corporate Personnel Committee setting specific safety performance measures annually.
Key Highlights
- 1Stockholders approved the 2005 Annual Incentive Plan (AIP) effective for fiscal year 2006 and beyond.
- 2The AIP is designed to provide annual cash incentive bonuses to senior executives.
- 3Participation in the AIP is limited to officers of the Company or its subsidiaries.
- 4A new safety performance factor has been incorporated, which can adjust the funding pool for awards.
- 5Awards are contingent on an average 'return on investment' of at least 6% over a five-year rolling period.
- 6The initial plan funding amount is 2.5% of 'net cash provided by operating activities', with a cap of 2.75%.
- 720% of the plan funding is designated as a safety incentive pool, subject to objective performance measures.