Baker Hughes 2007 Annual Report Download - page 57

2007 Proxy Statement 39
The Baker Hughes Incorporated Director Compensation
Deferral Plan, as amended and restated effective July 24, 2002
(the “Deferral Plan”), is intended to provide a means for mem-
bers of our Board of Directors to defer compensation otherwise
payable and provide flexibility with respect to our compensa-
tion policies. Under the provisions of the Deferral Plan, directors
may elect to defer income with respect to each calendar year.
The compensation deferrals may be stock option-related defer-
rals or cash-based deferrals.
Effective February 24, 2006, the Company’s Board of Direc-
tors approved the vesting of restricted stock awarded to inde-
pendent non-management directors as an annual non-retainer
equity award for the years 2002 through 2005 under the Baker
Hughes Incorporated 2002 D&O Plan that previously vested
upon retirement from the Company’s Board of Directors. As a
result, 4,417 shares of restricted stock issued to each of nine
directors and 1,826 shares of restricted stock issued to one
director became fully vested; however, the Company did not
recognize an expense for SFAS 123(R) purposes in 2006 as the
expense had been incurred in prior periods.
COMPENSATION COMMITTEE REPORT
The Compensation Committee held four meetings during
fiscal year 2007. The Compensation Committee has reviewed
and discussed the Compensation Discussion and Analysis with
management. Based upon such review, the related discussions
and such other matters deemed relevant and appropriate by
the Compensation Committee, the Compensation Committee
has recommended to the Board of Directors that the Compen-
sation Discussion and Analysis be included in this Proxy State-
ment to be delivered to stockholders.
H. John Riley, Jr. (Chairman)
Edward P. Djerejian
Claire W. Gargalli
Pierre H. Jungels
J. Larry Nichols
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Riley
(Chairman), Djerejian, Jungles, Nichols and Ms. Gargalli, all of
whom are independent non-management directors. None of
the Compensation Committee members has served as an offi-
cer or employee of the Company, and none of the Company’s
executive officers has served as a member of a compensation
committee or board of directors of any other entity, which has
an executive officer serving as a member of the Company’s
Board of Directors.
AUDIT/ETHICS COMMITTEE REPORT
The Audit/Ethics Committee is comprised of six members,
each of whom is independent, as defined by the standards of
the NYSE, the rules of the SEC, and under the Company’s policy
for director independence (“Policy for Director Independence,
Audit/Ethics Committee Members and Audit Committee Finan-
cial Expert”, attached as Annex A to this Proxy Statement).
Under the Charter of the Audit/Ethics Committee (attached as
Annex B to this Proxy Statement), the Audit/Ethics Committee
assists the Board of Directors in overseeing matters relating to
the accounting and reporting practices of the Company, the
adequacy of the Company’s disclosure controls and internal
controls, the quality and integrity of the quarterly and annual
financial statements of the Company, the performance of
the Company’s internal audit function and the review and pre-
approval of the current year audit and non-audit fees with the
Company’s Independent Registered Public Accounting Firm. The
Audit/Ethics Committee also oversees the Company’s policies
with respect to risk assessment and risk management and com-
pliance programs relating to legal and regulatory requirements.
During the year ended December 31, 2007, the Audit/Ethics
Committee held nine meetings and otherwise met and commu-
nicated with management and with Deloitte & Touche LLP, the
Company’s Independent Registered Public Accounting Firm for
2007. Deloitte & Touche discussed with the Audit/Ethics Com-
mittee various matters under applicable auditing standards,
including information regarding the scope and results of the
audit and other matters required to be discussed by the State-
ment on Auditing Standards No. 61, as amended, “Communi-
cation with Audit Committees.” The Audit/Ethics Committee
also discussed with Deloitte & Touche its independence from
the Company and received the written disclosures and the
letter from Deloitte & Touche concerning independence as
required by the Independence Standards Board Standard
No. 1, “Independence Discussions with Audit Committees.”
The Audit/Ethics Committee also reviewed the provision of
services by Deloitte & Touche not related to the audit of the
Company’s financial statements and not related to the review
of the Company’s interim financial statements as it pertains to
the independence of Deloitte & Touche. Deloitte & Touche also
periodically reported the progress of its audit of the effective-
ness of the Company’s internal control over financial reporting.
The Audit/Ethics Committee reviewed and discussed with
management the Company’s financial results prior to the
release of earnings. In addition, the Audit/Ethics Committee
reviewed and discussed with management, the Company’s
internal auditors and Deloitte & Touche the interim financial
information included in the March 31, 2007, June 30, 2007
and September 30, 2007 Form 10-Qs prior to their being
filed with the SEC. The Audit/Ethics Committee also reviewed
and discussed the Company’s audited financial statements for
the year ended December 31, 2007 with management, the
Company’s internal auditors and Deloitte & Touche. Deloitte &
Touche informed the Audit/Ethics Committee that the Compa-
ny’s audited financial statements are presented fairly in confor-
mity with accounting principles generally accepted in the
United States of America. The Audit/Ethics Committee also
monitored and reviewed the Company’s procedures and
policies relating to the requirements of Section 404 of the
Sarbanes-Oxley Act and related regulations.
Based on the review and discussions referred to above,
and such other matters deemed relevant and appropriate
by the Audit/Ethics Committee, the Audit/Ethics Committee