Baker Hughes 2010 Annual Report Download - page 49

2 0 11 P r o x y S t a t e m e n t 37
Recommendation of the Board of Directors
Your Board of Directors recommends a vote FOR
ratification of the selection of Deloitte & Touche LLP
as the Company’s Independent Registered Public
Accounting Firm for 2011.
FEES PAID TO DELOITTE & TOUCHE LLP
Deloitte & Touche LLP, the member firms of Deloitte Touche
Tohmatsu and their respective affiliates (collectively, “Deloitte
Entities”) billed or will bill the Company or its subsidiaries for
the aggregate fees set forth in the table below for services
provided during 2010 and 2009. These amounts include fees
paid or to be paid by the Company for (i) professional services
rendered for the audit of the Company’s annual financial
statements, review of quarterly financial statements and audit
services related to the effectiveness of the Company’s internal
control over financial reporting, (ii) assurance and related
services that are reasonably related to the performance of
the audit or review of the Company’s financial statements
and (iii) professional services rendered for tax compliance,
tax advice, and tax planning.
2010 2009
(In millions) $ $
Audit fees 15.8 12.4
Audit-related fees 0.6 0.3
Tax fees 1.5 1.3
Total 17.9 14.0
Audit fees include fees related to the audit of the Com-
pany’s annual financial statements, review of quarterly finan-
cial statements and audit services related to the effectiveness
of the Company’s internal control over financial reporting.
Audit-related fees are primarily for assistance in connection
with various registration statements, proxy statements and
related matters involving our merger with BJ Services, debt
offerings and business restructurings.
Tax fees are primarily for the preparation of income,
payroll, value added and various other miscellaneous tax
returns in 22 of the more than 90 countries where the Com-
pany operates. The Company also incurs local country tax
advisory services in these countries. Examples of these kinds
of services are assistance with audits by the local country tax
authorities, acquisition and disposition advice, consultation
regarding changes in legislation or rulings and advice on the
tax effect of other structuring and operational matters.
All other fees include fees for audit and other services
to various Company sponsored employee benefit plans which
fees are incurred by and paid by the respective plans.
In addition to the above services and fees, Deloitte Entities
provide audit and other services to various Company sponsored
benefit plans which fees are incurred by and paid by the respec-
tive plans. Fees paid to Deloitte Entities for these services totaled
approximately $0.2 million in 2010 and $0.3 million in 2009.
Pre-Approval Policies and Procedures
The Audit/Ethics Committee has adopted guidelines for
the pre-approval of audit and permitted non-audit services
by the Company’s Independent Registered Public Accounting
Firm. The Audit/Ethics Committee will consider annually and,
if appropriate, approve the provision of audit services by its
Independent Registered Public Accounting Firm and consider
and, if appropriate, pre-approve the provision of certain defined
audit and non-audit services. The Audit/Ethics Committee will
also consider on a case-by-case basis and, if appropriate, approve
specific engagements that are not otherwise pre-approved.
Any proposed engagement with estimated non-audit fees of
$15,000 or more that does not fit within the definition of a
pre-approved service are presented to the Chairman of the
Audit/Ethics Committee for pre-approval. The Chairman of the
Audit/Ethics Committee will report any specific approval of ser-
vices at its next regular meeting. The Audit/Ethics Committee
will review a summary report detailing all services being pro-
vided to the Company by its Independent Registered Public
Accounting Firm. All of the fees and services described above
under “audit fees,” “audit-related fees” and “tax fees” were
approved under the Guidelines for Pre-Approval of Audit and
Non-Audit Fees of the Independent Registered Public Account-
ing Firm and pursuant to Section 202 of SOX.
PROPOSAL NO. 3
THE REAPPROVAL OF THE PERFORMANCE CRITERIA
FOR AWARDS UNDER THE ANNUAL INCENTIVE
COMPENSATION PLAN, AS REQUIRED BY SECTION 162(M)
OF THE INTERNAL REVENUE CODE
Background
The Company’s stockholders are being asked to reapprove
the performance criteria that may apply to annual performance
bonuses granted under the Annual Incentive Compensation
Plan. Stockholder approval of the performance-based compen-
sation measures under the Annual Incentive Compensation
Plan is required every five years in order to qualify compensa-
tion under the Annual Incentive Compensation Plan as exempt
from Section 162(m) of the Internal Revenue Code of 1986
as amended (the “Code”), thereby allowing the Company to
deduct for federal income tax purposes compensation paid
under the Annual Incentive Compensation Plan. If stockholders
do not reapprove the performance criteria, the Company will
not be able to grant awards under the Annual Incentive Com-
pensation Plan that are intended to be performance-based com-
pensation under Section 162(m) of the Code. If that happens,
we may not be entitled to a tax deduction for some or all of
the short-term incentives provided to our chief executive offi-
cer and our other most highly compensated executive officers.
In 1995 the Board of Directors adopted, and the stock-
holders approved, the Annual Incentive Compensation Plan,
which provides for cash bonuses for officers and key employees
of the Company and its affiliates based upon the achievement
of performance goals for the year. The performance criteria for
bonuses under the Annual Incentive Compensation Plan were