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| 1. |
Composition
The committee is comprised of four independent directors: Roger B. Porter, David B. Price, Jr., Paul T. Stecko and Jane L. Warner. All members meet the independence standards for compensation and nominating committee membership under the NYSE listing standards. Mr. Price serves as Chairman.
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| 2. |
Compensation Responsibilities
The committee has the responsibility, among other things, to: (1) establish the salary rate of officers and employees of the Company and its subsidiaries; (2) examine periodically the compensation structure of the Company; (3) supervise the welfare and pension plans and compensation plans of the Company; and (4) produce an annual report on executive compensation for inclusion in the Company's proxy statement in accordance with applicable rules and regulations of the Securities and Exchange Commission.
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| 3. |
Compensation Philosophy
The basic philosophy underlying the Company's executive compensation policies, plans and programs is that executive and stockholder financial interests should be aligned as closely as possible, and the compensation package should be based on delivering pay in line with performance.
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| 4. |
Board Compensation
The committee determines the compensation and benefits for non-employee, or outside, directors. In 2006, each outside director was paid an annual retainer fee of $50,000 for service on the Board of Directors. In general, 100% of the retainer fee is to be paid in the form of common stock equivalents. A director may elect, however, to have up to 40%, or $20,000, of the fee paid in cash. The outside directors also receive attendance fees, committee chair and membership fees, and reimbursement of their expenses for attending meetings of the Board of Directors and its committees. The fees are generally paid in cash, but at the option of the director may be paid in the form of common stock equivalents. Outside directors receive $1,000 for each meeting of the Board of Directors attended. Outside directors who are members of the Audit Committee and Compensation/Nominating/Governance Committee receive $1,000 for each in-person meeting, and $500 for each telephonic meeting, of the respective
committee attended. In 2005, each outside director who served as a Chairman of the Audit Committee or the Compensation/Nominating/Governance Committee was paid a fee of $8,000 per chairmanship. Also, the lead independent director was paid a $6,000 retainer fee for serving as the chairman and primary spokesman when the Board of Directors meets in executive session. Outside directors who serve as members of the Audit Committee or Compensation/Nomination/Governance Committee are paid $4,000 per committee membership. Members of the Three-year Independent Director Evaluation Committee receive $1,000 plus expenses for each meeting of that committee attended.
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| 5. |
Executive Salary and Bonus Compensation
The committee is responsible for determining an executive's annual cash compensation, which consists primarily of a base salary plus amounts paid in lieu of Company matching contributions to the Company's 401(k) plans (when Internal Revenue Service maximums are reached) and bonuses under the Company's executive incentive compensation plan, the Tenneco Value Added Incentive Compensation Plan.
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| 6. |
Executive Long-Term and Stock-Based Incentives
The Company's long-term and stock-based incentive plans have been designed to align a significant portion of executive compensation with stockholder interests. The current plan - the 2006 Long-Term Incentive Plan - permits the granting of a variety of awards including stock options, restricted stock, stock equivalent units and performance units. The Company's former plans were structured similarly. |
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| 7. |
Executive Compensation Subcommittee
The committee has formed a subcommittee called the Executive Compensation Subcommittee. The subcommittee is comprised entirely of outside directors for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)"). As more fully described in the Charter of the Executive Compensation Subcommittee, the purpose of the subcommittee is to establish, administer and approve all compensation for the Company's executive officers that is intended to qualify as "performance-based compensation" for purposes of Section 162(m).
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| 8. |
Nominating/Governance Responsibilities
The committee has significant corporate governance responsibilities including, among other things, to: (a) review and determine the desirable balance of experience, qualifications and expertise among members of the Board; (b) review possible candidates for membership on the Board and recommend a slate of nominees for election as directors at each annual meeting of stockholders; (c) review the function and composition of the other committees of the Board and recommend membership on these committees; (d) review the qualifications of and recommend candidates for election as officers of the Company; and (e) develop, recommend to the Board of Directors for approval and, as appropriate, recommend to the Board of Directors revisions to Corporate Governance Principles applicable to the Company.
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| 9. |
Consideration of Director Nominees
The committee regularly assesses the size of the Board of Directors, the need for expertise on the Board of Directors and whether any vacancies are expected on the Board of Directors due to retirement or otherwise. The committee's process for identifying and evaluating nominees is as follows: In the case of incumbent directors whose terms of office are set to expire, the Committee reviews such directors' overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance and any transactions of such directors with the Company during their term. In the event that vacancies are anticipated, or otherwise arise, the committee considers various potential candidates for director which may come to its attention through a variety of sources, including current Board members, stockholders or other persons. In addition, from time to time the committee will retain a professional search firm to assist it in identifying director
candidates, for which the firm generally receives a fee. All candidates for director are evaluated at regular or special meetings of the committee. In evaluating and determining whether to recommend a person as a candidate for election as a director, the committee considers the qualification standards set forth in the Company's Corporate Governance Principles, including: (i) personal and professional ethics, integrity and values; (ii) an ability and willingness to undertake the requisite time commitment to Board functions; (iii) independence pursuant to the guidelines set forth in the Corporate Governance Principles and applicable rules and regulations; (iv) age, which must be less than 72; (v) the potential impact of service on the board of directors of other public companies, including competitors of the Company; and (vi) an absence of employment at a competitor of the Company.
The committee will consider director candidates recommended by stockholders provided the procedures set forth below are followed by stockholders in submitting recommendations. The committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether the candidate was recommended by a stockholder. A stockholder of the Company may nominate persons for election to the Board of Directors at an annual meeting if the stockholder submits such nomination, together with certain related information required by the Company's By-laws, in writing to the Secretary of the Company at the principal executive offices of the Company not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting. In the event, however, that the date of the annual meeting is more than thirty days before or more than
seventy days after that anniversary date, the notice must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of the meeting is first made. Following verification of the stockholder's status, the committee will perform an initial analysis of the qualifications of the nominee pursuant to the criteria listed above to determine whether the nominee is qualified for service on the Company's Board of Directors before deciding to undertake a complete evaluation of the nominee. Other than the verification of compliance with the procedures set forth in the Company's by-laws and stockholder status, and the initial analysis performed by the committee, a person nominated by a stockholder for election to the Board of Directors is treated like any other potential
candidate during the review process by the committee.
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