TEXACO 1997
Item 6-Stockholder Proposal Relating to Classification of the
Board of Directors
This stockholder proposal was submitted by the International
Brotherhood of Teamsters, 25 Louisiana Avenue, N.W., Washington,
DC 20001, beneficial owners of 3,600 shares, and is quoted
directly from their submission.
RESOLVED: That the stockholders of Texaco request that
the Board of Directors take the steps necessary to declassify
the elections of Directors by providing that at future Board
elections new directors be elected annually and not by classes as
is now provided. The declassification shall be phased in a manner
that does not affect the unexpired terms of Directors previously
elected.
Supporting Statement
This resolution requests that the Board end the staggered
board system in place at Texaco and instead have all our Directors
elected annually. Presently Texaco has 3 classes of Directors
and 1/3 of our Board is elected each year and each Director now
serves a 3 year term.
Increasingly, institutional investors are calling for the
end of this system of staggered voting. They believe it makes a
Board less accountable to shareholders when directors do not stand
for annual election. Significant institutional investors such as
the Public Employees Retirement System of the State of California,
New York City pension funds, New York State pension funds and many
others have been supporting this position. As a result shareholder
resolutions to end this staggered system of voting have
been receiving increasingly large votes. In fact this resolution
received a massive vote at Texaco's 1995 stockholder meeting of
44% indicating that many Texaco shareholders feel the time has come
for this reform. Numerous companies have demonstrated leadership
by changing this practice. Included among them are Westinghouse,
Chemical Bank, Commonwealth Edison of Chicago, the Equitable
companies.
We believe this is a practice in which corporations seeking
to be accountable to their investors are increasingly putting into
place. Studies by the Chief Economist of the SEC have shown that
adoption of a classified Board tends to depress a company's stock
price and may be contrary to shareholder interests.
The election of corporate directors is a primary avenue for
shareholders to influence corporate affairs and exert accountability
on management. We strongly believe that our company's financial
performance is linked to its corporate governance policies and
procedures and the level of management accountability they impose.
Therefore, as shareholders concerned about the value of our
investment, we're concerned by our company's current system
of electing only one-third of the Board of Directors each year.
On other governance issues Texaco is often considered a leader.
We believe this staggering of director terms prevents shareholders
from annually registering their views on the performance
of the board collectively and each director individually.
Most alarming is that the staggered board can help insulate
directors and senior executives from the consequences of poor
financial or social performance by denying shareholders the
opportunity to replace an entire Board which is pursuing failed
policies.
In addition socially concerned investors also support this
reform since the recent scandal regarding racial discrimination
and legal settlement of $170 million demonstrates the need for
annual board accountability.
To hold the Board more fully accountable on financial and
social performance we believe the staggered board system should
be ended at Texaco."
The Board of Directors recommends a vote AGAINST this
proposal for the following reasons:
The company's practice of having a classified Board was
approved overwhelmingly by stockholders by a vote of 86.4% and
instituted in 1984, as part of a corporate governance system that
would help Texaco carry out its long-term business strategy and
also assist in protecting the interests of stockholders against
raids on their stock value by possible hostile approaches.
A classified Board offers a number of advantages to a
corporation, especially one like Texaco, that must plan
effectively over the long term. The company's Board structure
helps assure stability, since a majority of the directors
at any one time will have prior experience as directors of the
company, and helps the company to attract and retain highly
qualified individuals willing to commit the time and dedication
necessary to understand the company, its operations and its
competitive environment.
Directors on the company's classified Board can best
properly represent the interests of all stockholders. For example,
this structure can give the Board needed time to evaluate any
proposal to acquire the company, study alternative proposals,
and help ensure that the best price will be obtained in any
transaction involving the company. A classified Board also
encourages persons seeking to acquire control of the company to
initiate such an acquisition through arm's-length negotiations
with the Board, which would then be in a position to negotiate a
transaction that is fair to all stockholders.
A number of leading institutional investors and commentators
have recognized the benefits inherent in a classified Board.
For example, the Teachers Insurance and Annuity Association -
College Retirement Equities Fund, has concluded that a classified
Board is in full accordance with the principles of good corporate
governance, and has recognized and supported the right of a Board
to organize its functions and its business in the manner it
deems most efficient.
As detailed in the Section providing information concerning
the Board of Directors beginning on page 3, Texaco has
been a consistent leader in implementing corporate governance
policies that ensure responsiveness and accountability to
stockholders. In recognition of this leadership role, in both
1994 and 1995 Chief Executive magazine named Texaco's Board of
Directors as one of the five best boards of the 200 companies
examined.
The Board continues to believe that a classified Board is
appropriate and prudent in protecting the interests of all of
Texaco's stockholders, and that the continuity and quality of
leadership that results from a classified Board provides the
proper environment in which to foster the creation of long-term
value for stockholders.
A similar proposal was put before stockholders two years
ago and received less than a majority of the votes cast,
confirming the board's view that a classified board structure
was a significant stockholder rights protection that should be
retained.
Therefore, the Board of Directors recommends a vote AGAINST
this proposal.
Corporate Accountability
| SHAREHOLDER RESOLUTIONS | SEC Regs |
Washington Corporations | Mutual Funds | Related Websites
WISE USE MOVEMENT,
David E. Ortman,
P.O. Box 17804
Seattle, WA 98107
deom@JPS.NET
1997 Wise
Use Movement.
Northwest Corporate
Accountability -TABLE OF CONTENTS-