What was the shareholder derivative lawsuit about?

The lawsuit alleged that 3M's 2007 Proxy Statement contained misleading information regarding the tax deductibility of compensation and the criteria used to determine payouts under the company's Executive Annual Incentive Plan.

What are the key terms of the settlement?

3M agreed to a formal resolution clarifying its interpretation of "Special Items" for compensation calculations, will pay the plaintiff's legal fees and expenses, and confirmed its intent to preserve flexibility in executive compensation. The lawsuit was dismissed.

What does 3M mean by "Special Items" in the context of the settlement?

"Special Items" are defined in the settlement to include amounts related to unusual or infrequent events, restructurings, asset write-downs, divestitures, litigation, changes in tax laws or accounting principles, and unusual tax transactions, consistent with accounting standards and SEC reporting requirements.

Did 3M admit to any wrongdoing?

No, 3M and the named officers and directors maintained that the suit was improper and denied any violation of law or breach of fiduciary duty. The settlement was entered into to avoid the costs and distractions of litigation.

MMM 8-K SEC Disclosure

Summary

3M Company (MMM) announced on July 7, 2009, the settlement of a shareholder derivative lawsuit. The lawsuit, filed against the company and its directors and officers, alleged that the 2007 Proxy Statement contained false and misleading information regarding the tax deductibility and standards for executive compensation under the 3M Executive Annual Incentive Plan. The settlement, approved by the court, involved 3M disclosing specific information about the plan's operation and confirming the Compensation Committee's interpretation of "Special Items." While 3M and its executives maintained the suit was improper and denied any wrongdoing, the settlement was reached to avoid the costs, distractions, and uncertainties of further litigation. As part of the settlement, 3M will pay the plaintiff's attorneys' fees and expenses. This filing provides clarity on how "Special Items" are defined and treated in calculating adjusted net income for compensation purposes and reaffirms the company's intent to maintain flexibility in executive compensation.

Key Highlights

13M has settled a shareholder derivative lawsuit concerning its 2007 Proxy Statement and executive compensation.
2The lawsuit alleged false and misleading statements regarding the tax deductibility and calculation standards of the Executive Annual Incentive Plan.
3The settlement requires 3M to formally disclose its interpretation of "Special Items" used in compensation calculations.
4"Special Items" are defined to include a range of unusual, infrequent, or restructuring-related financial events, consistent with SEC reporting and accounting principles.
53M will pay the plaintiff's attorneys' fees and expenses as part of the settlement.
6The company and its officers/directors deny any wrongdoing but settled to avoid litigation costs and distractions.
7The settlement confirms the Compensation Committee's authority to determine executive compensation in the company's best interest, regardless of tax deductibility under Section 162(m) of the IRC.

3M CO 8-K Report, Corporate Update (Jul 7, 2009)

Summary

Key Highlights

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