Waste Management 2011 Annual Report Download - page 70

stockholders. The Company’s Stock Ownership Guidelines were implemented by the wholly-independent
MD&C Committee in 2002. These guidelines are reviewed at least annually and are revised as appropriate. As
stated in our Compensation Discussion and Analysis under “Other Compensation Policies and Practices,” we
instituted stock ownership guidelines because ownership of Company stock demonstrates a commitment to, and
confidence in, the Company’s long-term prospects. We believe that the requirement that these individuals
maintain a portion of their individual wealth in the form of Company stock deters actions that would not benefit
stockholders generally. Accordingly, the Board believes the existing Stock Ownership Guidelines, together with
the fact that a substantial portion of executive compensation is linked to Company performance through annual
cash bonus performance criteria and long-term incentive programs, already successfully align the interests of
senior executives with those of stockholders and focuses executives appropriately on long-term performance.
As described earlier in this Proxy Statement, the Company’s current Stock Ownership Guidelines vary
depending on the individual executive’s title and are expressed as a fixed number of shares. The Stock
Ownership Guidelines apply to all senior executive management and selected Vice Presidents. Examples of
ownership requirements are 165,000 shares for our Chief Executive Officer; 48,000 shares for our Executive
Vice Presidents and Senior Group Vice Presidents; and 25,575 shares for Senior Corporate Vice Presidents.
Shares owned outright, deferred stock units, and phantom stock held in the 401(k) plan and in the Deferral Plan
count toward meeting the targeted ownership requirements. Restricted stock shares, restricted stock units and
performance share units, if any, do not count toward meeting the requirement until they are vested or earned.
The existing Stock Ownership Guidelines also contain a holding requirement. Until the individual’s
ownership requirement is achieved, Senior Vice Presidents and above are required to retain 100% of all net
shares acquired through the Company’s long-term incentive plans and Vice Presidents are required to retain at
least 50% of such net shares. The requisite stock ownership level must thereafter be retained throughout the
officer’s employment with the Company. Additionally, the Stock Ownership Guidelines generally require Senior
Vice Presidents and above to hold all of their net shares and Vice Presidents to hold 50% of their net shares for at
least one year after such shares are acquired, even if required ownership levels have already been achieved. The
Board believes these holding periods discourage these individuals from taking actions in an effort to gain from
short-term or otherwise fleeting increases in the market value of our stock.
In the case of each of our senior executive officers, the amount of stock he is required to hold under our
existing Stock Ownership Guidelines is greater than 25% of the total number of shares that he owns. Therefore,
even if the proponent’s proposed 25% ownership requirement applied to all shares owned (as opposed to only
shares acquired through equity pay programs), and even if the proposed 25% ownership requirement applied to
shares acquired in the past (as opposed to only future grants and awards), the existing Stock Ownership
Guidelines already impose a higher ownership requirement than the proponent proposes. As a result, not only is
the proposed 25% threshold currently moot, but it would require far more onerous and complex means to monitor
compliance than the current guidelines that state a flat number of shares that must be owned, regardless of how
acquired. We also note that the proponent’s proposal makes reference to the number of options issued to our
Chief Executive Officer last year; however, such options vest over time and then must later be exercised;
accordingly, our Chief Executive Officer does not yet have ownership of any shares of Common Stock associated
with those options, making the unvested options irrelevant for purposes of stock ownership requirements.
The proponent does not offer any explanation as to why stock retention after termination of an executive’s
employment contributes to the long-term value of the Company. This proposed requirement would be an
administrative burden to the Company and could, in fact, result in an executive’s ultimate equity award being
dramatically affected by matters completely unrelated to the Company’s performance or the executive’s actions
during the period of the executive’s employment with the Company. This unfair and arbitrary result would likely
hinder the ability of the Company to attract and retain executive talent.
The MD&C Committee’s annual review of the Stock Ownership Guidelines allows for prudent and
reasoned adjustment of the ownership guidelines on a regular basis in light of all facts and circumstances. It is in
the best interests of the Company and the stockholders to allow the MD&C Committee the flexibility to employ
its expertise to fulfill this function, as opposed to relying on a rigid policy. For these and the other reasons
discussed above, the Board believes that this proposal is not in the best interests of the Company or its
stockholders.
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