Baker Hughes 2004 Annual Report Download - page 41

STOCKHOLDER฀PROPOSAL฀NO.฀1฀
REGARDING฀MAJORITY฀VOTES฀PROTOCOL
The฀following฀proposal฀was฀submitted฀to฀Baker฀Hughes฀by฀
William฀C.฀Thompson,฀Jr.,฀Comptroller,฀City฀of฀New฀York฀(with฀
an฀address฀of฀1฀Centre฀Street,฀New฀York,฀New฀York฀10007-
2341฀and฀an฀email฀address฀of฀[e-mail].
gov),฀on฀behalf฀of฀the฀Boards฀of฀Trustees฀of฀the฀New฀York฀City฀
Pension฀Funds฀which฀hold฀beneficially฀2,514,284฀shares฀of฀the฀
Company’s฀Common฀Stock,฀and฀is฀included฀in฀this฀Proxy฀State-
ment฀in฀compliance฀with฀SEC฀rules฀and฀regulations.
Proponent’s฀Statement฀in฀Support฀of฀Proposal:
WHEREAS,฀in฀2002,฀United฀States฀Congress,฀the฀Securities฀
and฀Exchange฀Commission,฀and฀the฀stock฀exchanges,฀recog-
nizing฀the฀urgent฀need฀to฀restore฀public฀trust฀and฀confidence฀
in฀the฀capital฀markets,฀acted฀to฀strengthen฀accounting฀regula-
tions,฀to฀improve฀corporate฀financial฀disclosure,฀independent฀
oversight฀of฀auditors,฀and฀the฀independence฀and฀effectiveness฀
of฀corporate฀boards;฀and฀
WHEREAS,฀we฀believe฀these฀reforms,฀albeit฀significant฀
steps฀in฀the฀right฀direction,฀have฀not฀adequately฀addressed฀
shareholder฀rights฀and฀the฀accountability฀of฀directors฀of฀corpo-
rate฀boards฀to฀the฀shareholders฀who฀elect฀them;฀and฀
WHEREAS,฀we฀believe฀the฀reforms฀have฀not฀addressed฀a฀
major฀concern฀of฀institutional฀investors฀–฀the฀continuing฀failure฀
of฀numerous฀boards฀of฀directors฀to฀adopt฀shareholder฀proposals฀
on฀important฀corporate฀governance฀reforms฀despite฀the฀propos-
als฀being฀supported฀by฀increasingly฀large฀majorities฀of฀the฀totals฀
of฀shareholder฀votes฀cast฀for฀and฀against฀the฀proposals;฀
WHEREAS,฀the฀Board฀of฀Directors฀of฀our฀company฀has฀not฀
adopted฀shareholder฀proposals฀that฀were฀supported฀by฀major-
ity฀votes฀in฀the฀past฀five฀years;฀
NOW,฀THEREFORE,฀BE฀IT฀RESOLVED:฀That฀the฀shareholders฀
request฀the฀Board฀of฀Directors฀to฀adopt฀a฀policy฀establishing฀an฀
engagement฀process฀with฀the฀proponents฀of฀shareholder฀pro-
posals฀that฀are฀supported฀by฀a฀majority฀of฀the฀votes฀cast,฀exclud-
ing฀abstentions฀and฀broker฀non-votes,฀at฀any฀annual฀meeting.
In฀adopting฀such฀a฀policy,฀the฀Board฀of฀Directors฀should฀
consider฀including฀the฀following฀steps:
•฀ Within฀four฀months฀after฀the฀annual฀meeting,฀an฀indepen-
dent฀board฀committee฀should฀schedule฀a฀meeting฀(which฀
may฀be฀held฀telephonically)฀with฀the฀proponent฀of฀the฀pro-
posal,฀to฀obtain฀any฀additional฀information฀to฀provide฀to฀the฀
Board฀of฀Directors฀for฀its฀reconsideration฀of฀the฀proposal.฀
The฀meeting฀with฀the฀proponent฀should฀be฀coordinated฀with฀
the฀timing฀of฀a฀regularly฀scheduled฀board฀meeting.
•฀ Following฀the฀meeting฀with฀the฀proponent,฀the฀indepen-
dent฀board฀committee฀should฀present฀the฀proposal฀with฀
the฀committee’s฀recommendation,฀and฀information฀relevant฀
to฀the฀proposal,฀to฀the฀full฀Board฀of฀Directors,฀for฀action฀
consistent฀with฀the฀company’s฀charter฀and฀by-laws,฀which฀
should฀necessarily฀include฀a฀consideration฀of฀the฀interest฀
of฀the฀shareholders.฀
Statement฀of฀the฀Board฀of฀Directors฀and฀Management฀in฀
Opposition฀to฀Stockholder฀Proposal฀No.฀1
Your฀Board฀of฀Directors฀believes฀it฀has฀already฀adequately฀
addressed฀and฀implemented฀the฀purpose฀of฀this฀proposal฀–฀to฀
adopt฀a฀policy฀opening฀the฀lines฀of฀communication฀in฀an฀effort฀
to฀assure฀thoughtful฀consideration฀by฀the฀Board฀of฀Directors฀of฀
stockholder฀proposals.฀In฀particular,฀your฀Board฀of฀Directors฀
believes฀this฀proposal฀is฀unnecessary฀for฀the฀following฀reasons:
1.฀ The฀Company’s฀currently฀existing฀policy฀has฀an฀established฀
process฀for฀the฀evaluation฀of฀ALL฀stockholder฀proposals.
2.฀ The฀Company’s฀Annual฀Meeting฀provides฀ample฀opportunity฀
each฀year฀for฀stockholders฀to฀ask฀questions฀of฀or฀otherwise฀
communicate฀directly฀with฀members฀of฀the฀Company’s฀Board฀
of฀Directors฀on฀matters฀relevant฀to฀the฀Company.฀Further-
more,฀a฀process฀has฀already฀been฀established฀to฀provide฀the฀
Company’s฀stockholders฀and฀other฀interested฀parties฀with฀an฀
open฀line฀of฀communication฀to฀any฀member฀of฀the฀Compa-
ny’s฀Board฀of฀Directors฀by฀sending฀a฀written฀communication฀
to฀the฀Company’s฀Corporate฀Secretary฀who฀will฀then฀forward฀
the฀communication฀to฀the฀appropriate฀director(s).฀
3.฀ The฀Board฀of฀Directors฀has฀introduced฀and฀supported฀a฀bind-
ing฀proposal฀for฀the฀2005฀Annual฀Meeting฀of฀Stockholders฀
to฀amend฀the฀Company’s฀Restated฀Certificate฀of฀Incorpora-
tion฀eliminating฀the฀classification฀of฀the฀Board.฀
The฀Governance฀Committee,฀whose฀Governance฀Guide-
lines฀are฀posted฀under฀the฀“About฀Baker฀Hughes”฀section฀of฀
the฀Company’s฀website฀at฀www.bakerhughes.com,฀is฀charged฀
with฀the฀responsibility฀for฀the฀initial฀evaluation฀of฀stockholder฀
proposals฀to฀ensure฀that฀the฀process฀would฀be฀conducted฀
under฀the฀purview฀of฀independent฀directors.฀Upon฀submission฀
of฀a฀stockholder฀proposal฀to฀the฀Committee,฀the฀Committee฀
will฀evaluate฀and฀make฀recommendations,฀as฀appropriate,฀to฀
the฀Board฀of฀Directors,฀with฀respect฀to฀such฀proposals.฀This฀
evaluation฀by฀the฀Committee฀may฀include,฀without฀limitation,฀
consideration฀of:฀
•฀ the฀appropriateness฀of฀the฀proposal,฀
•฀ the฀best฀interest฀of฀all฀stockholders฀of฀the฀Company,฀
•฀ whether฀the฀proposal฀would฀result฀in฀appropriately฀฀
accomplishing฀the฀goals฀and฀objectives฀described฀in฀
such฀proposal,฀and
•฀ any฀other฀considerations฀that฀the฀Committee฀may฀฀
deem฀appropriate.฀
The฀process฀of฀evaluation฀may฀include฀communication฀
directly฀with฀the฀stockholder฀proponent฀by฀the฀Committee฀
or฀its฀management฀designees,฀as฀the฀Committee฀may฀deem฀
appropriate.฀The฀Board’s฀existing฀policy฀is฀broader฀than฀
requested฀by฀the฀stockholder฀proponent฀because฀the฀Board฀
believes฀all฀properly฀submitted฀stockholder฀proposals฀should฀฀
be฀thoughtfully฀considered.
Although฀the฀current฀process฀does฀not฀mandate฀direct฀
contact฀between฀the฀Board฀and฀the฀proponent฀of฀a฀stock-
holder฀proposal,฀the฀Board฀of฀Directors฀has฀in฀the฀past,฀when฀
it฀has฀deemed฀appropriate,฀on฀its฀own฀initiative฀met฀with฀pro-
ponents฀to฀discuss฀stockholder฀proposals฀and฀believes฀the฀
existing฀approach฀of฀evaluating฀stockholder฀proposals฀better฀
serves฀the฀interests฀of฀the฀Company฀and฀its฀stockholders.฀
Proxy฀Statement฀฀฀฀฀25