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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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Halliburton Company
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
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CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(HALLIBURTON LOGO)
March 23, 2004
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Halliburton Company. The meeting will be held on Wednesday, May 19, 2004, at
9:00 a.m., local time, in Ballroom B of the Four Seasons Hotel, 1300 Lamar
Street, Houston, Texas 77010. The Notice of Annual Meeting, proxy statement and
proxy card from the Board of Directors are enclosed. The materials provide
further information concerning the Annual Meeting.
At the meeting, stockholders are being asked to:
-- elect a Board of Directors of eleven Directors to serve for the coming
year;
-- consider and act upon a proposal to amend the Certificate of
Incorporation of Halliburton to increase the authorized common stock
of Halliburton; and
-- consider three stockholder proposals.
Please refer to the proxy statement for detailed information on each of these
proposals.
It is very important that your shares are represented and voted at the
meeting. Your shares may be voted electronically on the Internet, by telephone
or by returning the enclosed proxy card. If you attend the meeting, you may vote
in person even if you have previously voted. We would appreciate you informing
us on the proxy card if you expect to attend the meeting so that we can provide
adequate seating.
The continuing interest of our stockholders in the business of Halliburton
is appreciated and we hope you will be able to attend the Annual Meeting.
Sincerely,
-s- DAVID J. LESAR
DAVID J. LESAR
Chairman of the Board, President
and Chief Executive Officer
(HALLIBURTON LOGO)
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 2004
The Annual Meeting of Stockholders of Halliburton Company, a Delaware
corporation, will be held on Wednesday, May 19, 2004, at 9:00 a.m., local time,
in Ballroom B of the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas
77010. At the meeting, the stockholders will be asked to consider and act upon
the matters discussed in the attached proxy statement as follows:
1. To elect eleven Directors to serve for the ensuing year and until their
successors shall be elected and shall qualify.
2. To consider and act upon a proposal to amend Article FOURTH of
Halliburton's Certificate of Incorporation, as amended, to increase the
authorized common stock of Halliburton, par value $2.50 per share, from
600,000,000 shares to 1,000,000,000 shares.
3. To consider and act upon three stockholder proposals, if properly
presented at the meeting.
4. To transact any other business that properly comes before the meeting or
any adjournment or adjournments of the meeting.
These items are fully described in the following pages, which are made a
part of this Notice. The Board of Directors has set Monday, March 22, 2004, at
the close of business, as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting and at any adjournment of the
meeting.
We request that you vote your shares as promptly as possible. You may vote
your shares in a number of ways if you have shares registered in your own name:
-- electronically via the Internet at http://www.eproxy.com/hal,
-- by telephone if you are in the U.S. and Canada, by calling
1-800-435-6710 (toll-free), or
-- by marking your votes, dating, signing the proxy card or voting
instruction form enclosed and returning it in the postage-paid
envelope provided.
If you hold Halliburton shares with a broker or bank, you may also be
eligible to vote via the Internet or by telephone if your broker or bank
participates in the proxy voting program provided by ADP Investor Communication
Services.
IF YOU PLAN TO ATTEND:
ATTENDANCE AT THE MEETING IS LIMITED TO STOCKHOLDERS AND ONE GUEST EACH.
ADMISSION WILL BE ON A FIRST-COME, FIRST-SERVED BASIS. REGISTRATION WILL BEGIN
AT 8:00 A.M., AND THE MEETING WILL BEGIN AT 9:00 A.M. EACH STOCKHOLDER HOLDING
STOCK IN BROKERAGE ACCOUNTS WILL NEED TO BRING A COPY OF A BROKERAGE STATEMENT
REFLECTING STOCK OWNERSHIP AS OF THE RECORD DATE. PLEASE NOTE THAT YOU MAY BE
ASKED TO PRESENT VALID PICTURE IDENTIFICATION, SUCH AS A DRIVER'S LICENSE OR
PASSPORT.
By order of the Board of Directors,
-s- MARGARET E. CARRIERE
MARGARET E. CARRIERE
Vice President and
Secretary
March 23, 2004
---------------------
YOU ARE URGED TO VOTE YOUR SHARES AS PROMPTLY AS POSSIBLE BY (1) FOLLOWING
THE ENCLOSED VOTING INSTRUCTIONS TO VOTE VIA THE INTERNET OR BY TELEPHONE, OR
(2) MARKING YOUR VOTES, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
TABLE OF CONTENTS
PAGE
----
General Information................................................... 1
Item 1 - Election of Directors....................................... 2
Information about Nominees for Director..................... 2
Stock Ownership of Certain Beneficial Owners and Management........... 5
Corporate Governance.................................................. 7
The Board of Directors and Standing Committees of Directors........... 7
Executive Compensation
Compensation Committee Report on Executive Compensation..... 12
Comparison of Cumulative Total Return....................... 17
Summary Compensation Table.................................. 18
Option Grants for Fiscal 2003............................... 19
Option Exercises and Values for Fiscal 2003................. 19
Long-Term Incentive Plans - Awards in Fiscal 2003........... 20
Equity Compensation Plan Information........................ 20
Employment Contracts and Change-In-Control Arrangements..... 20
Directors' Compensation............................................... 22
Audit Committee Report................................................ 25
Fees Paid to KPMG LLP................................................. 26
The Selection of Auditors............................................. 27
Proposal to Amend the Certificate of Incorporation to
Item 2 - Increase Authorized Common Stock............................ 28
Item 3 - Stockholder Proposal on Operations in Iran.................. 29
Item 4 - Stockholder Proposal on Director Election Vote Threshold.... 31
Item 5 - Stockholder Proposal to Separate Chairman/CEO............... 33
Additional Information................................................ 36
Other Matters......................................................... 36
Appendix A - Corporate Governance Guidelines.......................... A-1
Appendix B - Audit Committee Charter.................................. B-1
Appendix C - Compensation Committee Charter........................... C-1
Appendix D - Management Oversight Committee Charter................... D-1
Appendix E - Nominating and Corporate Governance Committee Charter.... E-1
Appendix F - Corporate Policy, Services of Independent Accountants.... F-1
Appendix G - Amendment to Certificate of Incorporation................ G-1
i
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Halliburton
Company ("Halliburton", the "Company", "we" or "us"). By executing and returning
the enclosed proxy or by following the enclosed voting instructions, you
authorize the persons named in the proxy to represent you and vote your shares
on the matters described in the Notice of Annual Meeting.
Subject to space availability, all stockholders as of the record date, or
their duly appointed proxies, may attend the Meeting and each may be accompanied
by one guest. Admission to the Meeting will be on a first-come, first-served
basis. Registration will begin at 8:00 a.m., and the Meeting will begin at 9:00
a.m. Please note that you may be asked to present valid picture identification,
such as a driver's license or passport when you check in at the registration
desk.
If you hold your shares in "street name" (that is, through a broker or other
nominee), you will need to bring a copy of a brokerage statement reflecting your
stock ownership as of the record date.
NO CAMERAS, RECORDING EQUIPMENT, ELECTRONIC DEVICES, LARGE BAGS, BRIEFCASES
OR PACKAGES WILL BE PERMITTED IN THE MEETING.
If you attend the Meeting, you may vote in person. If you are not present,
your shares can be voted only if you have followed the instructions for voting
via the Internet or by telephone or returned a properly executed proxy; and in
these cases, your shares will be voted as you specify. If no specification is
made, the shares will be voted in accordance with the recommendations of the
Board of Directors. You may revoke the authorization given in your proxy at any
time before the shares are voted at the Meeting.
The record date for determination of the stockholders entitled to vote at
the Annual Meeting is the close of business on March 22, 2004. Halliburton's
common stock, par value $2.50, is the only class of capital stock that is
outstanding. As of March 22, 2004, there were 439,822,919 shares of common stock
outstanding. Each of the outstanding shares of common stock is entitled to one
vote on each matter submitted to the stockholders for a vote at the Meeting. A
complete list of stockholders entitled to vote will be kept at our offices at
the address specified below for ten days prior to, and will be available at, the
Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by us to act as election inspectors for the Meeting.
Except as set forth below, the affirmative vote of the majority of shares
present in person or represented by proxy at the Meeting and entitled to vote on
the subject matter will be the act of the stockholders. Shares for which a
holder has elected to abstain on a matter will count for purposes of determining
the presence of a quorum and will have the effect of a vote against the matter.
In the election of Directors, the candidates for election receiving the
highest number of affirmative votes of the shares entitled to be voted, whether
or not a majority of the shares present, up to the number of Directors to be
elected by those shares, will be elected. Shares present but not voting on the
election of Directors will be disregarded, except for quorum purposes, and will
have no legal effect. With respect to the proposal to amend the Certificate of
Incorporation to increase the number of authorized shares, the affirmative vote
of the holders of a majority of the outstanding shares of common stock is
required to approve the amendment.
The election inspectors will treat shares held in street name which cannot
be voted by a broker on specific matters in the absence of instructions from the
beneficial owner of the shares, known as broker non-vote shares, as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. In determining the outcome of any matter for which the broker does not
have discretionary authority to vote, however, those shares will not have any
effect on that matter. Those shares may be entitled to vote on other matters.
1
In accordance with our confidential voting policy, no vote of any
stockholder will be disclosed to Halliburton's officers, Directors or employees,
except:
-- as necessary to meet legal requirements and to assert claims for and
defend claims against Halliburton;
-- when disclosure is voluntarily made or requested by the stockholder;
-- when the stockholder writes comments on the proxy card; or
-- in the event of a proxy solicitation not approved and recommended by
the Board of Directors.
The proxy solicitor, the election inspectors and the tabulators of all
proxies, ballots and voting tabulations that identify stockholders are
independent and are not employees of Halliburton.
This proxy statement, the form of proxy and voting instructions are being
sent to stockholders on or about April 2, 2004. Our Annual Report to
Stockholders, including financial statements, for the fiscal year ended December
31, 2003 accompanies this proxy statement. The Annual Report is not to be
considered as a part of the proxy solicitation material or as having been
incorporated by reference.
Our principal executive office is located at 5 Houston Center, 1401
McKinney, Suite 2400, Houston, Texas 77010.
ELECTION OF DIRECTORS
(ITEM 1)
Eleven Directors are to be elected to serve for the ensuing year and until
their successors are elected and qualify. The common stock represented by the
proxies will be voted for the election as Directors of the eleven nominees
unless we receive contrary instructions. If any of the nominees are unwilling or
unable to serve, favorable and uninstructed proxies will be voted for a
substitute nominee designated by the Board of Directors. If a suitable
substitute is not available, the Board of Directors will reduce the number of
Directors to be elected. Each nominee has indicated approval of his or her
nomination and his or her willingness to serve if elected.
Our corporate governance guidelines require a Director to retire immediately
prior to the Annual Meeting following his or her seventy-second birthday.
Halliburton's Board made a determination at its March 3, 2004 meeting to waive
mandatory retirement for one year from May 19, 2004 until May 18, 2005, for two
Directors, Charles J. DiBona and C.J. Silas, who would otherwise retire on May
19, 2004. This determination was deemed by the Directors to be in the best
interests of the stockholders.
INFORMATION ABOUT NOMINEES FOR DIRECTOR
ROBERT L. CRANDALL, 68, Chairman Emeritus, AMR
Corporation/American Airlines, Inc. (engaged primarily in
the air transportation business); President, American
Airlines, Inc. 1980-1995; Chairman, President and Chief
Executive Officer, AMR Corporation/American Airlines
1985-1995; and Chairman and Chief Executive Officer, AMR
Corporation/American Airlines 1985-1998; joined Halliburton
(PHOTO) Company Board in 1986; Chairman of the Compensation
Committee and member of the Audit and the Management
Oversight Committees; Director of Air Cell, Inc., Anixter
International, Celestica Inc., i2 Technologies, Inc., and
serves on the Advisory Board of American International
Group, Inc. and on the Federal Aviation Administration
Management Advisory Committee.
2
KENNETH T. DERR, 67, Retired Chairman of the Board,
Chevron Corporation (an international oil company); Chairman
and Chief Executive Officer, Chevron Corporation, 1989-1999;
(PHOTO) joined Halliburton Company Board in 2001; member of the
Audit, the Nominating and Corporate Governance and the
Management Oversight Committees; Director of AT&T Corp.,
Citigroup Inc. and Calpine Corporation.
CHARLES J. DIBONA, 72, Retired President and Chief
Executive Officer, American Petroleum Institute (a major
petroleum industry trade association), 1979-1997; joined
Halliburton Company Board in 1997; Chairman of the Health,
(PHOTO) Safety and Environment Committee, member of the Nominating
and Corporate Governance and the Management Oversight
Committees; Chairman of the Board of Trustees, Logistics
Management Institute.
W. R. HOWELL, 68, Chairman Emeritus, J.C. Penney
Company, Inc. (a major retailer); Chairman of the Board,
J.C. Penney Company, Inc., 1983-1996; Chief Executive
Officer, J.C. Penney Company, Inc., 1983-1995; joined
Halliburton Company Board in 1991; Chairman of the
Management Oversight Committee and member of the Audit and
the Compensation Committees; Director of American Electric
(PHOTO) Power Company, Exxon-Mobil Corporation, Pfizer Inc. and the
Williams Company. He is also a Director of Deutsche Bank
Trust Corporation and Deutsche Bank Trust Company Americas,
non-public wholly owned subsidiaries of Deutsche Bank AG,
and Viseon, Inc. Mr. Howell has informed us that he does not
intend to stand for reelection to the Board of Viseon, Inc.
in 2004.
RAY L. HUNT, 60, Chairman of the Board and Chief
Executive Officer, Hunt Oil Company (oil and gas exploration
and development) and Chairman of the Board, Chief Executive
Officer and President, Hunt Consolidated, Inc. for more than
five years; joined Halliburton Company Board in 1998;
Chairman of the Nominating and Corporate Governance
(PHOTO) Committee and member of the Audit and the Management
Oversight Committees; Director of Electronic Data Systems
Corporation, PepsiCo, Inc., King Ranch Company, and Chairman
of the Board of Directors of the Federal Reserve Bank of
Dallas and member of the Board of Managers of Verde Group,
LLC.
DAVID J. LESAR, 50, Chairman of the Board,
President and Chief Executive Officer of the Company, since
2000; President of the Company, 1997-2000; Executive Vice
(PHOTO) President and Chief Financial Officer, 1995-1997; joined
Halliburton Company Board in 2000; Director of Lyondell
Chemical Company and Mirant Corporation.
AYLWIN B. LEWIS, 49, President, Chief Multibranding
& Operating Officer, YUM! Brands, Inc. (a quick service
restaurant company), since 2003; Chief Operating Officer,
YUM! Brands, Inc., 2000-2003; Executive Vice President,
Operations and New Business Development, YUM! Brands, Inc.,
January-July 2000; Chief Operating Officer, Pizza Hut, Inc.,
(PHOTO) 1997-1999; Senior Vice President, Operations, Pizza Hut,
Inc., 1996-1997; Senior Vice President, Marketing and
Operations Development, KFC - Pepsico, Inc., 1995-1996;
joined Halliburton Company Board in 2001; member of the
Compensation, the Health, Safety and Environment and the
Management Oversight Committees; Director of The Walt Disney
Company.
3
J. LANDIS MARTIN, 58, Chairman and Chief Executive
Officer, Titanium Metals Corporation (an integrated producer
of titanium metals), since 1995; President, Titanium Metals
Corporation, since 2000; President and Chief Executive
Officer, NL Industries, Inc. (a manufacturer and marketer of
titanium dioxide pigments), 1987-2003; Chairman of the Board
and Chief Executive Officer, Baroid Corporation (and its
(PHOTO) predecessor), acquired by Dresser Industries, Inc. in 1994,
1990-1994; joined Halliburton Company Board in 1998; member
of the Health, Safety and Environment and the Management
Oversight Committees; Director of Titanium Metals
Corporation, Apartment Investment and Management
Corporation, Crown Castle International Corporation and
Trico Marine Services, Inc.
JAY A. PRECOURT, 66, Chairman of the Board and
Chief Executive Officer, Scissor Tail Energy, LLC (a
gatherer, transporter and processor of natural gas and
natural gas liquids), since 2000; Chairman of the Board,
Hermes Consolidated, Inc. (a gatherer, transporter and
refiner of crude oil and refined products), since 1999; Vice
(PHOTO) Chairman and Chief Executive Officer, Tejas Gas Corporation,
1986-1999; President, Tejas Gas Corporation, 1996-1998;
joined Halliburton Company Board in 1998; member of the
Compensation, the Health, Safety and Environment and the
Management Oversight Committees; Director of Founders Funds,
Inc., The Timken Company and Apache Corp.
DEBRA L. REED, 47, President and Chief Financial
Officer, Southern California Gas Company and San Diego Gas &
Electric Company (regulated utility companies), since 2002;
President of San Diego Gas & Electric Company, 2000-2001;
President, Energy Distribution Services, Southern California
(PHOTO) Gas Company, 1998-2001; Senior Vice President, Southern
California Gas Company, 1995-1998; joined Halliburton
Company Board in 2001; member of the Health, Safety and
Environment, the Nominating and Corporate Governance and the
Management Oversight Committees.
C. J. SILAS, 71, Retired Chairman of the Board and
Chief Executive Officer, Phillips Petroleum Company (engaged
in exploration and production of crude oil, natural gas and
natural gas liquids on a worldwide basis, the manufacture of
(PHOTO) plastics and petrochemicals and other activities); Chairman
of the Board and Chief Executive Officer, Phillips Petroleum
Company, 1985-1994; joined Halliburton Company Board in
1993; Chairman of the Audit Committee and member of the
Compensation and the Management Oversight Committees.
4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about persons or groups, based on
information contained in Schedules 13G filed with the Securities and Exchange
Commission reflecting beneficial ownership at December 31, 2003, who own or have
the right to acquire more than five percent of our common stock.
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- -------
Capital Research and Management Company..................... 28,170,000(1) 6.43%
333 South Hope Street, Los Angeles, CA 90071
Morgan Stanley.............................................. 24,787,508(2) 5.66%
1585 Broadway, New York, NY 10036
----------------
(1) Capital Research and Management Company (CRM) is an investment adviser and
is deemed to be the beneficial owner of 28,170,000 shares. CRM has sole
dispositive power over 28,170,000 shares.
(2) Morgan Stanley is the indirect beneficial owner of 24,787,508 shares held by
its business units. Morgan Stanley has shared voting power and shared
dispositive power over 24,352,075 shares.
The following table sets forth, as of March 2, 2004, the amount of our
common stock owned beneficially by each Director, each of the executive officers
named in the Summary Compensation Table on page 18 and all Directors and
executive officers as a group.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
--------------------
SOLE SHARED
VOTING AND VOTING OR
NAME OF BENEFICIAL OWNER OR INVESTMENT INVESTMENT PERCENT
NUMBER OF PERSONS IN GROUP POWER(1) POWER(2) OF CLASS
--------------------------- ---------- ---------- --------
Albert O. Cornelison, Jr. .................................. 95,671 *
Robert L. Crandall.......................................... 9,400 *
Kenneth T. Derr............................................. 12,600 *
Charles J. DiBona........................................... 6,400 *
C. Christopher Gaut......................................... 94,944 *
John W. Gibson, Jr.......................................... 318,430 *
Robert R. Harl.............................................. 316,995 *
W. R. Howell................................................ 8,300 *
Ray L. Hunt................................................. 84,847 69,712(3) *
David J. Lesar.............................................. 1,631,342 20,000(3) *
Aylwin B. Lewis............................................. 9,600 *
J. Landis Martin............................................ 34,201 *
Jay A. Precourt............................................. 25,840 *
Debra L. Reed............................................... 9,600 250(3) *
C. J. Silas................................................. 8,400 *
Shares owned by all current Directors and executive officers
as a group (19 persons)................................... 3,217,786 *
----------------
* Less than 1% of shares outstanding.
(1) Included in the table are shares of common stock that may be purchased
pursuant to outstanding stock options within 60 days of March 2, 2004 for
the following: Mr. Cornelison - 29,038; Mr. Crandall - 3,000; Mr. Derr
- 7,000; Mr. DiBona - 3,000; Mr. Gaut - 33,334; Mr. Gibson - 159,500; Mr.
Harl - 159,631; Mr. Howell - 3,000; Mr. Hunt - 11,500; Mr. Lesar - 857,102;
Mr. Lewis - 7,000; Mr. Martin - 11,500; Mr. Precourt - 11,500; Ms.
Reed - 7,000; Mr. Silas - 3,000 and four unnamed executive
officers - 256,181. Until the options are exercised, these individuals will
neither have voting nor investment power over the underlying shares of
common stock but only have the right to acquire beneficial ownership of the
shares through exercise of their respective options.
5
(2) The Halliburton Stock Fund is an investment fund established under the
Halliburton Company Employee Benefit Master Trust to hold Halliburton
common stock for some of Halliburton's profit sharing, retirement and
savings plans. The Fund held 7,362,256 shares of common stock at March 2,
2004. Two executive officers not named in the above table have beneficial
interests in the Fund. Shares held in the Fund are not allocated to any
individual's account. The shares of common stock which might be deemed to
be beneficially owned as of March 2, 2004 by the unnamed executive officers
total 1,284. The Trustee, State Street Bank and Trust Company, votes shares
held in the Halliburton Stock Fund in accordance with voting instructions
from the participants. Under the terms of the plans, a participant has the
right to determine whether up to 15% of his account balance in a plan is
invested in the Halliburton Stock Fund. The Trustee, however, determines
when sales or purchases are to be made.
(3) Mr. Hunt holds 69,712 shares as the trustee of trusts established for the
benefit of his children. Mr. Lesar holds 20,000 shares in a family
partnership. Ms. Reed has shared voting and investment power over 250
shares held in her husband's Individual Retirement Account.
6
CORPORATE GOVERNANCE
In 1997, our Board of Directors adopted a formal statement of its
responsibilities and corporate governance guidelines to ensure effective
governance in all areas of its responsibilities. Since 1997, our corporate
governance guidelines have been reviewed periodically and revised as appropriate
to reflect the dynamic and evolving processes relating to corporate governance,
including the operation of the Board. Our Board's corporate governance
guidelines, as revised in March 2004, can be found on the Corporate Governance
page of our website www.halliburton.com and in Appendix A hereto.
Our Board also wants our stockholders to understand how the Board conducts
its affairs in all areas of its responsibility. For that reason, we have made
the full text of our Audit; Compensation; Management Oversight; and Nominating
and Corporate Governance Committees's charters available on our website and
attached these charters as Appendices B, C, D, and E. The charter of the Health,
Safety and Environment Committee is under review and will be made available on
our website later this year.
We have posted on our website our Code of Business Conduct, which applies to
all of our employees and Directors and serves as a code of ethics for our
principal executive officer, principal financial officer, principal accounting
officer or controller, and other persons performing similar functions. If you do
not have access to our website you can request a hard copy of the Code of
Business Conduct by contacting the Vice President and Secretary at the address
set forth on page 2 of this proxy statement. Any waivers to our code of ethics
with respect to our executive officers can only be made by our Audit Committee.
THE BOARD'S ROLE IN STRATEGIC PLANNING
Our Board believes that its primary responsibility is to oversee
Halliburton's affairs for the benefit of our stockholders. Our corporate
governance guidelines specify several core areas that are included within this
responsibility. One of them, strategic planning, is discussed in more detail
below.
Our Board has the responsibility for reviewing and approving Halliburton's
strategic and business plans and for monitoring Halliburton's performance
against those plans. There are several provisions of the corporate governance
guidelines that directly address our Board's role in carrying out its duties
concerning Halliburton's long-range strategic plans.
-- The Chief Executive Officer's performance is evaluated by the Board using
specific criteria that include:
-- performance of the business, including achievement of financial
objectives and goals;
-- development and implementation of initiatives to provide long-term
economic benefit to Halliburton; and
-- accomplishment of strategic objectives.
-- Each year at one of its regular meetings, our Board reviews and approves
Halliburton's long-term strategic and business plans.
-- At subsequent Board meetings throughout the year, our Directors monitor
Halliburton's performance against those strategic and business plans.
-- To keep our Directors informed about Halliburton's business and
performance between meetings, we routinely provide Board members with
monthly financial statements, earnings reports, press releases and other
pertinent information about the Company.
THE BOARD OF DIRECTORS
AND
STANDING COMMITTEES OF DIRECTORS
The Board of Directors has standing Audit; Compensation; Nominating and
Corporate Governance; Health, Safety and Environment; and Management Oversight
Committees. Each of the standing committees is comprised in the business
judgment of the Board entirely of non-employee Directors, and members of the
Audit; Compensation; and Nominating and Corporate Governance Committees are
comprised entirely of independent Directors. During the last fiscal year, the
Board of Directors met on 7 occasions, the Audit Committee met on
7
8 occasions, the Compensation Committee met on 5 occasions, the Nominating and
Corporate Governance Committee met on 2 occasions, the Health, Safety and
Environment Committee met on 2 occasions, and the Management Oversight Committee
met on 5 occasions. The non-employee Directors of the Board and the Management
Oversight Committee each met in executive session, with no Company personnel
present, on 5 occasions. The Chairman of the Management Oversight Committee
functions as the Lead Director of the executive sessions. All members of the
Board attended at least 75 percent of the total number of meetings of the Board
and the committees on which he or she served during the last fiscal year. Our
corporate governance guidelines provide that all Directors should attend our
Annual Meeting, and all of our Directors attended the 2003 Meeting.
To foster better communication with our stockholders, a process exists for
stockholders to communicate with the Audit Committee and the Board of Directors.
The process has been approved by both the Audit Committee and the Board, and
meets the requirements of the New York Stock Exchange, or NYSE, and the
Securities and Exchange Commission, or SEC. The methods of communication with
the Board include mail, a dedicated telephone number and an e-mail address.
Information regarding these methods of communication is on our website,
www.halliburton.com, under "Corporate Governance".
Halliburton's Director of Business Conduct, a Company employee, will review
all stockholder communications received in accordance with the existing process.
The Chairman of the Audit Committee will be promptly notified of any significant
communication involving accounting, internal accounting controls, or auditing
matters. The Chairman of the Management Oversight Committee will be promptly
notified of any other significant stockholder communications and communications
addressed to a named Director will be promptly sent to such Director. A report
summarizing all communications will be sent to each Director quarterly and
copies of communications will be available for review by any Director.
MEMBERS OF THE COMMITTEES OF THE BOARD OF DIRECTORS
----------------------------------------------------------------------
NOMINATING
AND
HEALTH, MANAGEMENT CORPORATE
AUDIT COMPENSATION SAFETY AND OVERSIGHT GOVERNANCE
COMMITTEE COMMITTEE ENVIRONMENT COMMITTEE COMMITTEE
----------------------------------------------------------------------
Robert L. Crandall.............. X X* X
----------------------------------------------------------------------
Kenneth T. Derr................. X X X
----------------------------------------------------------------------
Charles J. DiBona............... X* X X
----------------------------------------------------------------------
W. R. Howell.................... X X X*
----------------------------------------------------------------------
Ray L. Hunt..................... X X X*
----------------------------------------------------------------------
Aylwin B. Lewis................. X X X
----------------------------------------------------------------------
J. Landis Martin................ X X
----------------------------------------------------------------------
Jay A. Precourt................. X X X
----------------------------------------------------------------------
Debra L. Reed................... X X X
----------------------------------------------------------------------
C. J. Silas..................... X* X X
----------------------------------------------------------------------
----------------
* Chairman
8
AUDIT COMMITTEE
The Audit Committee's role is one of oversight, while Halliburton's
management is responsible for preparing financial statements. The independent
accounting firm appointed to audit our financial statements (the "principal
independent accountants") is responsible for auditing those financial
statements. The Audit Committee is not providing any expert or special assurance
as to Halliburton's financial statements or any professional certification as to
the principal independent accountants' work. The following functions are the key
responsibilities of the Audit Committee in carrying out its oversight:
-- recommending the appointment of the principal independent accountants
to the Board of Directors, and together with the Board of Directors
being responsible for the appointment, compensation, retention and
oversight of the work of the principal independent accountants;
-- reviewing the scope of the principal independent accountants'
examination and the scope of activities of the internal audit
department;
-- reviewing Halliburton's financial policies and accounting systems and
controls;
-- reviewing audited financial statements and interim financial
statements;
-- preparing a report for inclusion in Halliburton's proxy statement
regarding the Audit Committee's review of audited financial statements
for the last fiscal year which includes a statement on whether it
recommends that the Board include those financial statements in the
Annual Report on Form 10-K;
-- approving the services to be performed by the principal independent
accountants; and
-- reviewing and assessing the adequacy of the Audit Committee's Charter
annually and recommending revisions to the Board.
The Audit Committee also reviews Halliburton's compliance with its Code of
Business Conduct which was formally adopted by the Board in 1992. The Audit
Committee meets separately with the principal independent accountants, internal
auditors and management to discuss matters of concern, and to receive
recommendations or suggestions for change and to exchange relevant views and
information.
COMPENSATION COMMITTEE
The primary function of the Compensation Committee is to ensure that the
Company's compensation program is effective in attracting, retaining and
motivating key employees, that it reinforces business strategies and objectives
for enhanced stockholder value and that the program is administered in a fair
and equitable manner consistent with established policies and guidelines.
The Compensation Committee's responsibilities include, but are not limited
to:
-- determining and approving the Chief Executive Officer's (CEO)
compensation level based on the evaluation of the CEO's performance by
the Management Oversight Committee in light of the goals and
objectives set by these Committees;
-- producing a compensation committee report on executive compensation as
required by the SEC, to be included in Halliburton's annual proxy
statement;
-- taking part in an annual performance evaluation of the Compensation
Committee;
-- developing and approving an overall executive compensation philosophy,
strategy and framework consistent with corporate objectives and
stockholder interests;
-- reviewing and approving all actions relating to compensation,
promotion and employment-related arrangements for specified officers
of Halliburton, its subsidiaries and affiliates;
-- establishing performance criteria and reward schedules under
Halliburton's annual incentive pay plans and Performance Unit Program
and certifying the performance level achieved and reward payments at
the end of each plan year or three-year cycle;
-- approving any other incentive or bonus plans applicable to specified
officers of Halliburton, its subsidiaries and affiliates;
-- administering awards under Halliburton's 1993 Stock and Incentive Plan
and its Supplemental Executive Retirement Plan;
9
-- selecting an appropriate comparator group against which Halliburton's
total executive compensation program is measured;
-- reviewing and approving or recommending to the Board, as appropriate,
major changes to, and taking administrative actions associated with,
any other forms of non-salary compensation under its purview;
-- reviewing and approving the stock allocation budget among all employee
groups within Halliburton;
-- monitoring and reviewing periodically overall compensation program
design and practice to ensure continued competitiveness,
appropriateness and alignment with established philosophies,
strategies and guidelines;
-- reviewing and approving appointments to the Administrative Committee
which oversees the day-to-day administration of certain non-qualified
executive compensation plans;
-- retaining persons having special competence (including consultants and
other third-party service providers) as necessary to assist the
Committee in fulfilling its responsibilities and maintaining the sole
authority to retain and terminate these persons, including the
authority to approve fees and other retention terms; and
-- performing such other duties and functions as the Board of Directors
may from time to time delegate.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee's responsibilities
include, but are not limited to:
-- reviewing periodically the corporate governance guidelines adopted by
the Board of Directors and recommending revisions to the guidelines as
appropriate;
-- developing and recommending to the Board for its approval an annual
self-evaluation process of the Board and its committees. The Committee
shall oversee the annual self-evaluations;
-- reviewing and periodically updating the criteria for Board membership
and evaluating the qualifications of each Director candidate against
the criteria;
-- assessing the appropriate mix of skills and characteristics required
of Board members;
-- identifying and screening candidates for Board membership;
-- establishing procedures for stockholders to recommend individuals for
consideration by the Committee as possible candidates for election to
the Board;
-- reviewing annually each Director's continuation on the Board and
recommending to the Board a slate of Director nominees for election at
the Annual Meeting of Stockholders;
-- recommending candidates to fill vacancies on the Board;
-- reviewing periodically the status of each Director to assure
compliance with the Board's policy that at least two-thirds of
Directors meet the definition of independent Director;
-- reviewing the Board's committee structure, and recommending to the
Board for its approval Directors to serve as members and as Chairs of
each committee;
-- reviewing annually any stockholder proposals submitted for inclusion
in Halliburton's proxy statement and recommending to the Board any
Halliburton statements in response;
-- reviewing periodically Halliburton's Director compensation practices,
conducting studies and recommending changes, if any, to the Board; and
-- reporting regularly on Committee activities and findings to the Board.
10
Stockholder Nominations of Directors. Nominations by stockholders may be
made at an Annual Meeting of Stockholders in the manner provided in our By-laws.
The By-laws provide that a stockholder entitled to vote for the election of
Directors may make nominations of persons for election to the Board at a meeting
of stockholders by complying with required notice procedures. Nominations shall
be made pursuant to written notice to the Vice President and Secretary at the
address set forth on page 2 of this proxy statement, and must be received at our
principal executive offices not less than ninety (90) days prior to the
anniversary date of the immediately preceding Annual Meeting of Stockholders.
The notice shall set forth:
-- as to each person the stockholder proposes to nominate for election or
reelection as a Director:
-- the name, age, business address and residence address of the
person;
-- the principal occupation or employment of the person;
-- the class and number of shares of Halliburton common stock that
are beneficially owned by the person; and
-- all other information relating to the person that is required to
be disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended; and
-- as to the stockholder giving the notice:
-- the name and record address of the stockholder; and
-- the class and number of shares of Halliburton common stock that
are beneficially owned by the stockholder.
The proposed nominee may be required to furnish other information as
Halliburton may reasonably require to determine the eligibility of the proposed
nominee to serve as a Director. At any meeting of stockholders, the presiding
officer may disregard the purported nomination of any person not made in
compliance with these procedures.
Qualifications of Directors. Candidates nominated for election or
reelection to the Board of Directors should possess the following
qualifications:
-- personal characteristics:
-- highest personal and professional ethics, integrity and values;
-- an inquiring and independent mind; and
-- practical wisdom and mature judgment;
-- broad training and experience at the policy-making level in business,
government, education or technology;
-- expertise that is useful to Halliburton and complementary to the
background and experience of other Board members, so that an optimum
balance of members on the Board can be achieved and maintained;
-- willingness to devote the required amount of time to carrying out the
duties and responsibilities of Board membership;
-- commitment to serve on the Board over a period of several years to
develop knowledge about Halliburton's principal operations;
-- willingness to represent the best interests of all stockholders and
objectively appraise management performance; and
-- involvement only in activities or interests that do not create a
conflict with the Director's responsibilities to Halliburton and its
stockholders.
The Nominating and Corporate Governance Committee is responsible for
assessing the appropriate mix of skills and characteristics required of Board
members in the context of the perceived needs of the Board at a given point in
time and shall periodically review and update the criteria as deemed necessary.
Diversity in personal background, race, gender, age and nationality for the
Board as a whole may be taken into account in considering individual candidates.
Process for the Selection of New Directors. The Board is responsible for
filling vacancies on the Board. The Board has delegated to the Nominating and
Corporate Governance Committee the duty of selecting and recommending
prospective nominees to the Board for approval. The Nominating and Corporate
Governance Committee considers suggestions of candidates for Board membership
made by current Committee and Board
11
members, Halliburton management, and stockholders. On occasion, the Committee
may retain an independent executive search firm to identify candidates for
consideration. A stockholder who wishes to recommend a prospective candidate
should notify Halliburton's Vice President and Secretary, as described in this
proxy statement. The Nominating and Corporate Governance Committee also
considers whether to nominate persons put forward by stockholders pursuant to
Halliburton's By-laws relating to stockholder nominations.
When the Nominating and Corporate Governance Committee identifies a
prospective candidate, the Committee determines whether it will carry out a full
evaluation of the candidate. This determination is based on the information
provided to the Committee by the person recommending the prospective candidate,
and the Committee's knowledge of the candidate. This information may be
supplemented by inquiries to the person who made the recommendation or to
others. The preliminary determination is based on the need for additional Board
members to fill vacancies or to expand the size of the Board, and the likelihood
that the candidate will meet the Board membership criteria listed above. The
Committee will determine, after discussion with the Chairman of the Board and
other Board members, whether a candidate should continue to be considered as a
potential nominee. If a candidate warrants additional consideration, the
Committee may request an independent executive search firm to gather additional
information about the candidate's background, experience and reputation, and to
report its findings to the Committee. The Committee then evaluates the candidate
and determines whether to interview the candidate. Such an interview would be
carried out, in person or via telephone conference, by one or more members of
the Committee and others as appropriate. Once the evaluation and interview are
completed, the Committee recommends to the Board which candidates should be
nominated. The Board makes a determination of nominees after review of the
recommendation and the Committee's report.
HEALTH, SAFETY AND ENVIRONMENT COMMITTEE
The Health, Safety and Environment Committee's responsibilities include, but
are not limited to:
-- reviewing and assessing Halliburton's health, safety and environmental
policies and practices and proposing modifications or additions as
needed;
-- overseeing the communication and implementation of these policies
throughout Halliburton;
-- reviewing annually the health, safety and environmental performance of
Halliburton's operating units and their compliance with applicable
policies and legal requirements; and
-- identifying, analyzing and advising the Board on health, safety and
environmental trends and related emerging issues.
MANAGEMENT OVERSIGHT COMMITTEE
The Management Oversight Committee's responsibilities include, but are not
limited to:
-- evaluating the performance of the Chief Executive Officer;
-- reviewing succession plans for senior management of Halliburton and
its major operating units;
-- evaluating management development programs and activities; and
-- reviewing other internal matters of broad corporate significance.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Halliburton seeks to enhance the Company's value by providing a broad
spectrum of high quality services and related products within the energy
services and engineering and construction business segments in which Halliburton
operates. We believe that Halliburton's total compensation package for
executives should emphasize compensation plans that are linked to measures of
both absolute and relative performance.
Our charter makes us responsible for overseeing Halliburton's overall
compensation philosophy and objectives and gives us specific responsibility for
reviewing, approving and monitoring the compensation program for senior
executives of Halliburton and its business units. Our principal function is to
ensure that Halliburton's compensation program is effective in attracting,
retaining and motivating key employees, that it reinforces business strategies
and
12
objectives consistent with the Company's goals and that it is administered in a
fair and equitable manner consistent with established policies and guidelines.
OVERALL EXECUTIVE COMPENSATION PHILOSOPHY AND STRATEGY
The primary objectives of Halliburton's total compensation package for
senior executives are to:
-- emphasize operating performance drivers; and
-- establish and maintain competitive executive compensation programs
that enable Halliburton to attract, retain and motivate high caliber
executives who will assure the long-term success of the business.
Halliburton's compensation program is designed and regularly reviewed to
ensure that the program's components support Halliburton's strategies and
motivate employees to achieve business success. In determining what we deem to
be appropriate types and amounts of compensation for executive officers, we
consult with outside compensation consultants and review compensation data
obtained from independent sources.
In the design and administration of executive compensation programs, we
generally target current market levels of compensation at the 50th percentile
for good performance and between the 50th and 75th percentile competitive level
for outstanding performance. In doing so, we consider the market data for a
comparator group which reflects the markets in which Halliburton competes for
business and people. The comparator group is composed of:
-- specific peer companies within the energy services and engineering and
construction industries; and
-- selected companies from general industry having similar revenue size,
number of employees and market capitalization and which, in our
opinion, provide comparable references.
Regression analysis is used in assessing all market compensation data to
provide appropriate comparisons based on company size, complexity and
performance, and individual role and job content. A consistent present value
methodology is used in assessing stock-based and other long-term incentive
awards.
The focus and mix of executive compensation elements and opportunities are
tailored by individual position to reflect an appropriate balance among fixed
and variable pay, short and long-term focus, and business/organization unit or
corporate accountability.
Our executive compensation program consists of:
-- a cash base salary;
-- an annual incentive program;
-- long-term incentive awards; and
-- supplemental retirement and other executive benefits.
2003 SPECIAL COMPENSATION-RELATED CONSIDERATIONS
Although steady progress was made during 2003 with respect to the resolution
of our asbestos liability, investor concerns continued throughout the year and
our stock price remained depressed relative to our competitors. As a result,
achieving comparable levels of compensation, particularly long-term
compensation, for our executives relative to our comparator group remained a
challenge. As a consequence we chose to continue dividend equivalent payments on
outstanding stock options for all actively employed option holders throughout
2003.
Payment of 2002 Retention Awards. As reported in our Report on Executive
Compensation in the 2003 proxy statement, Halliburton established retention
arrangements in early 2002 for a select group of high performing senior and key
executives deemed critical to the continuing operations of the Company. The
retention period lasted from February 1, 2002 until January 1, 2003 and payments
were made in January 2003. Accordingly, these payments are included in the
Summary Compensation Table on page 18 with respect to the participating named
executive officers.
13
BASE SALARY
Executive salaries are referenced to market data for comparable positions
within the comparator group. In addition to considering market comparisons in
making salary decisions, we exercise discretion and judgment based on the
following factors:
-- level of responsibility;
-- experience in current role and equitable compensation relationships
among all Halliburton executives;
-- performance; and
-- external factors involving competitive positioning and general
economic conditions.
No specific formula is applied to determine the weight of each factor.
In light of Mr. Lesar's excellent performance and leadership in dealing with
the asbestos situation and other serious issues facing the Company in 2003, the
Committee raised his annual base salary by 9.1% to $1,200,000. In recognition of
promotions, Messrs. Cornelison and Gibson also received base salary increases in
2003. Overall, adjustments to executive salaries made in 2003 were minimal
except those recognizing promotions or significant changes in job
responsibilities.
SHORT TERM INCENTIVE PLANS
In 1995, we established the Annual Performance Pay Plan to provide a means
to link total compensation to Halliburton's performance, as measured by cash
value added, or CVA. CVA measures the difference between after tax cash income
and a capital charge, based upon Halliburton's weighted average cost of capital,
to determine the amount of value, in terms of cash flow, added to Halliburton's
business. Since the inception of the Plan, CVA has provided a close correlation
to total stockholder return, notwithstanding the reduced stock price resulting
from Halliburton's asbestos-related issues in recent years. We believe the
long-term viability of CVA will continue to be an astute proxy for total
stockholder return.
At the beginning of each plan year, we establish a reward schedule that
aligns given levels of CVA performance beyond a threshold level with reward
opportunities. The level of achievement of annual CVA performance determines the
dollar amount of incentive compensation payable to participants.
Officers of Halliburton and its business units and specific senior managers
were eligible to participate in the Annual Performance Pay Plan during 2003. In
2003, consolidated CVA performance did not meet the required threshold level.
Accordingly, Mr. Lesar and the other executives named in the Summary
Compensation Table earned no annual incentive compensation for the year.
The Company continues to make substantial progress in a number of critical
areas. In an effort to recognize the ongoing efforts and future contributions
made by selected named executive officers and key managers towards this
progress, discretionary cash payments were made in early 2004. Accordingly, such
payments will be included in the 2005 proxy statement Summary Compensation
Table.
LONG-TERM INCENTIVE PLANS
Halliburton uses long-term incentives to achieve the following objectives:
-- reward consistent achievement of value creation and operating
performance goals;
-- align management with stockholder interests; and
-- encourage long-term perspectives and commitment.
Our 1993 Stock and Incentive Plan (the "1993 Plan") provides for a variety
of cash and stock-based awards, including stock options, restricted stock, and
performance shares, among others. Under the 1993 Plan, we may, in our
discretion, select from among these types of awards to establish individual
long-term incentive awards.
In 2003 we continued to reduce our emphasis on stock options as the primary
form of long-term compensation by using a combination of vehicles to meet our
long-term incentive objectives. These included restricted stock and performance
units as well as stock options. The appropriate mix was determined based on
level within the organization. At the executive level, we placed particular
emphasis on operations-based incentives, such as performance units, in addition
to stock options and restricted stock.
14
By granting a mix of long-term incentives, the Company expects to
effectively address volatility in our industry and in the stock
market -- thereby sustaining more value and preserving an incentive for
management to meet performance goals. In addition to assuring judicious use of
Company shares, we believe that this strategy will also achieve enhanced
stockholder value through performance goals that use operating performance as
the primary measure of success.
Our determination of the size of equity-based grants to executive officers
are based on market references to long-term incentive compensation for
comparable positions within the comparator group and on our subjective
assessment of organizational roles and internal job relationships. As a result
of the long-term incentive awards that were made in 2001 and 2002, which were
intended to provide three years worth of long-term incentive value, Messrs.
Lesar, Cornelison, Gibson and Harl did not receive any option grants or
restricted stock awards in 2003. Mr. Gaut received awards as listed in the
Summary Compensation Table pursuant to his employment agreement with the
Company.
In 2003, we expanded participation in the Performance Unit Program to a
broader group of key executives. The Performance Unit Program is a long-term
program designed to provide key executives with specified incentive
opportunities contingent on the level of achievement of pre-established
corporate performance objectives and continued employment. The 2003 cycle began
on January 1, 2003 and will end on December 31, 2005 (the "2003 Cycle").
Performance is measured based on Company consolidated Return on Capital Employed
("ROCE") compared to both absolute goals and results achieved by comparator
companies. Individual incentive opportunities are established based on market
references. The Program allows for rewards to be paid in cash, stock or a
combination thereof.
The 2001 cycle ended on December 31, 2003. Results for this first cycle of
the Program included the achievement of Target levels of performance on both
absolute and relative measures. Reward amounts earned by applicable named
executive officers are listed in the Summary Compensation Table. Rewards for the
2001 cycle were paid in the form of one-half stock and one-half cash.
As noted under 2003 Special Compensation-Related Considerations, we chose to
continue to pay dividend equivalents on outstanding stock options to
actively-employed option holders throughout 2003. This temporary program,
established in 2002, serves to enhance the Company's ability to retain and
motivate key employees by offsetting lost equity compensation associated with
the decline in share price. The program was very well received by option holders
and has been approved to continue, at a minimum, through the first two quarters
of 2004.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Supplemental Executive Retirement Plan (formerly the Senior Executives'
Deferred Compensation Plan) was established to provide retirement benefits to
key executives. Determinations as to who will receive an allocation for a
particular plan year and the amount of the allocation are made in our sole
discretion. However, in making our determinations, we consider guidelines that
include references to:
-- retirement benefits provided from other company programs;
-- compensation;
-- length of service;
-- years of service to normal retirement,
and allocating contributions with a goal of achieving a 75% base pay replacement
assuming retirement at age 65 with 25 or more years of service.
We authorized a 2003 supplemental retirement benefit addition for Mr. Lesar
of $267,000.
POLICY REGARDING SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation paid to the chief executive
officer or any of the four other most highly compensated officers to the extent
the compensation exceeds $1 million in any year. Qualifying performance-based
compensation is not subject to this sanction if certain requirements are met.
15
Our policy is to utilize available tax deductions whenever appropriate and
consistent with our compensation philosophy. When designing and implementing
executive compensation programs, we consider all relevant factors, including the
availability of tax deductions with respect to compensation. Accordingly, we
have attempted to preserve the federal tax deductibility of compensation in
excess of $1 million a year to the extent doing so is consistent with the
intended objectives of our executive compensation philosophy but we may from
time to time pay compensation to our executive officers that may not be fully
deductible. Because of the elective deferral by some executive officers of
portions of their salary and incentive compensation, the loss of deductibility
for 2003 earned compensation will not be significant.
The 1993 Stock and Incentive Plan, as amended and restated effective May 20,
2003, enables qualification of stock options, stock appreciation rights and
performance share awards as well as short-term and long-term cash performance
plans under Section 162(m).
We believe that the interests of Halliburton and its stockholders are well
served by the executive compensation programs currently in place. These programs
encourage and promote Halliburton's compensation objectives and permit the
exercise of our discretion in the design and implementation of compensation
packages. We will continue to review our executive compensation plans
periodically to determine what changes, if any, should be made.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF
DIRECTORS
Robert L. Crandall, Chairman
Charles J. DiBona
W. R. Howell
Aylwin B. Lewis
Jay A. Precourt
C. J. Silas
16
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total stockholder return on our
common stock for the five-year period ended December 31, 2003, with the Standard
& Poor's 500 Stock Index and the Standard & Poor's Energy Composite Index over
the same period. This comparison assumes the investment of $100 on December 31,
1998 and the reinvestment of all dividends. The stockholder return set forth on
the chart below is not necessarily indicative of future performance.
TOTAL STOCKHOLDERS' RETURN - FIVE YEARS
ASSUMES INVESTMENT OF $100 ON DECEMBER 31, 1998 AND REINVESTMENT OF DIVIDENDS
(PERFORMANCE GRAPH)
------------------------------------------------------------------------------------------------
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
-------- -------- -------- -------- -------- --------
Halliburton....... 100 137.69 125.46 46.05 67.80 96.32
S&P 500........... 100 121.04 110.01 96.94 75.51 97.17
S&P Energy........ 100 100.65 100.91 104.55 106.79 115.30
17
The following four tables set forth information regarding the Chief
Executive Officer and the next four most highly compensated executive officers
of Halliburton (collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
------------------------
AWARDS
ANNUAL COMPENSATION ------------------------- PAYOUTS
------------------------------------ RESTRICTED SECURITIES ------------------------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#) ($)(4) ($)(5)
------------------ ---- --------- --------- ------------ ---------- ------------ --------- ------------
David J. Lesar............... 2003 1,200,000 1,008,333 -- 0 0 1,956,563 426,528
Chairman of the Board,
President 2002 1,100,000 1,719,972 -- 4,482,368 0 N/A 448,678
and Chief Executive Officer 2001 1,100,000 2,200,000 -- 3,381,513 154,408 N/A 538,795
of the Company
Albert O. Cornelison, Jr..... 2003 432,000 212,667 -- 0 0 N/A 200,141
Executive Vice President and 2002 N/A N/A -- N/A -- N/A N/A
General Counsel of the 2001 N/A N/A -- N/A -- N/A N/A
Company(6)
C. Christopher Gaut.......... 2003 416,667 100,000 -- 615,000 100,000 N/A 136,667
Executive Vice President and 2002 N/A N/A -- N/A N/A N/A N/A
Chief Financial Officer of
the 2001 N/A N/A -- N/A N/A N/A N/A
Company(6)
John W. Gibson, Jr........... 2003 600,000 352,917 -- 0 0 303,801 241,556
President and Chief
Executive 2002 N/A N/A -- N/A N/A N/A N/A
Officer of Halliburton
Energy 2001 N/A N/A -- N/A N/A N/A N/A
Services, Inc. (6)
Robert R. Harl............... 2003 425,000 212,500 -- 0 0 303,801 32,794
President and Chief
Executive 2002 425,000 166,134 -- 1,004,247 0 N/A 126,604
Officer of Kellogg 2001 425,000 212,500 -- 757,609 34,594 N/A 153,804
Brown & Root
---------------
(1) The amounts disclosed include cash retention bonus payments made in 2003 for
the 2002 Retention Awards for Messrs. Lesar, Cornelison, Gibson, and Harl,
and a signing bonus for Mr. Gaut.
(2) The dollar value of perquisites and other personal benefits for each of the
named executive officers was less than established reporting thresholds.
(3) In 2001, Mr. Lesar was granted 154,407 shares with restrictions lapsing over
10 years and Mr. Harl was granted 34,594 shares with restrictions lapsing
over 10 years. In 2002, Mr. Lesar was granted 308,810 shares with
restrictions lapsing over 10 years and Mr. Harl was granted 69,187 shares
with restrictions lapsing over 10 years. In 2003, Mr. Gaut was granted
30,000 shares with restrictions lapsing over 10 years. Dividends are paid on
the restricted shares. The total number and value of restricted shares held
by each of the above individuals as of December 31, 2003 were as follows:
TOTAL AGGREGATE
RESTRICTED MARKET
NAME SHARES VALUE
---- ---------- -----------
Mr. Lesar................................................... 783,740 $20,377,240
Mr. Cornelison.............................................. 45,143 1,173,718
Mr. Gaut.................................................... 30,000 780,000
Mr. Gibson.................................................. 130,584 3,395,184
Mr. Harl.................................................... 171,587 4,461,266
(4) Payouts from the Performance Unit Program for the 2001 cycle that began on
January 1, 2001 and ended on December 31, 2003.
(5) "All Other Compensation" includes the following accruals for or
contributions to various plans for the fiscal year ending December 31, 2003:
(i) 401(k) plan matching contributions for Mr. Lesar -- $8,000, Mr.
Cornelison -- $8,000, Mr. Gaut -- $8,000, Mr. Gibson -- $8,000, and Mr.
Harl -- $8,000; (ii) benefit restoration accruals for Mr. Lesar
-- $108,799, Mr. Cornelison -- $36,377, Mr. Gaut -- $8,667, Mr. Gibson
-- $31,777, and Mr. Harl -- $16,103; (iii) supplemental executive
retirement plan contributions for Mr. Lesar -- $267,000, Mr.
Cornelison -- $150,000, Mr. Gaut -- $120,000, Mr. Gibson -- $177,000, and
Mr. Harl -- $0; (iv) above-market earnings on benefit restoration account
for Mr. Lesar -- $19,923, Mr. Cornelison -- $5,764, Mr. Gaut -- $0, Mr.
Gibson -- $544, and Mr. Harl -- $8,691; and (v) above-market earnings on
amounts deferred under elective deferral plans for Mr. Lesar -- $22,806, Mr.
Cornelison -- $0, Mr. Gaut -- $0, Mr. Gibson -- $24,235, and Mr. Harl -- $0.
(6) Mr. Cornelison became an executive officer on May 15, 2002; Mr. Gaut became
an executive officer on March 3, 2003; and Mr. Gibson became an executive
officer on January 13, 2003.
18
OPTION GRANTS FOR FISCAL 2003
INDIVIDUAL GRANTS(1)
-------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ----------- ------------ --------- ---------- -- ---
David J. Lesar.................... 0 0 -- -- $ 0 $ 0
Albert O. Cornelison, Jr.......... 0 0 -- -- 0 0
C. Christopher Gaut............... 100,000 4.09 20.50 3/3/2013 1,289,233 3,267,172
John W. Gibson, Jr................ 0 0 -- -- 0 0
Robert R. Harl.................... 0 0 -- -- 0 0
All Optionees..................... 2,443,139 100.00 23.447(3) (3) 36,025,740 91,296,300
All Stockholders.................. N/A N/A N/A N/A $6,463,353,295 $16,379,406,251(4)
----------------
(1) All options granted under the 1993 Plan are granted at the fair market
value of the common stock on the grant date and generally expire ten years
from the grant date. During employment, options vest over a three year
period, with one-third of the shares becoming exercisable on each of the
first, second and third anniversaries of the grant date. The options
granted to designated executives are transferable by gift to individuals
and entities related to the optionee, subject to compliance with guidelines
adopted by the Compensation Committee.
(2) The assumed values result from the indicated rates of stock price
appreciation. Values were calculated based on a 10-year exercise period for
all grants. The actual value of the option grants is dependent on future
performance of the common stock. There is no assurance that the values
reflected in this table will be achieved. Halliburton did not use an
alternative formula for a grant date valuation, as it is not aware of any
formula that will determine with reasonable accuracy a present value based
on future unknown or volatile factors.
(3) The exercise price shown is an average of the price of all options granted
in 2003. Options expire on one or more of the following dates: January 6,
2013, January 29, 2013, February 14, 2013, March 3, 2013, May 22, 2013,
June 9, 2013, July 17, 2013, July 30, 2013, August 15, 2013, September 4,
2013, October 9, 2013, October 24, 2013, November 10, 2013, November 12,
2013, November 13, 2013, and November 21, 2013.
(4) "All Stockholders" values are calculated using the average exercise price
for all options awarded in 2003, $23.447, based on the outstanding shares
of common stock on December 31, 2003.
AGGREGATED OPTION EXERCISES IN FISCAL 2003
AND DECEMBER 31, 2003 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE (SHARES) FISCAL YEAR-END($)
ON EXERCISE REALIZED -------------------------- -----------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
David J. Lesar.......................... 0 0 895,704 115,806 275,768 0
Albert O. Cornelison, Jr................ 0 0 27,069 5,906 0 0
C. Christopher Gaut..................... 0 0 0 100,000 0 550,000
John W. Gibson, Jr...................... 0 0 164,985 16,453 0 0
Robert R. Harl.......................... 0 0 150,982 25,945 0 0
LONG-TERM INCENTIVE COMPETITION
The Performance Unit Program was established in 2001 to provide selected key
executives with incentive opportunities based on the level of achievement of
pre-established corporate performance objectives over three-year performance
cycles. The purpose of the program is to reinforce Halliburton's objectives for
sustained long-term performance and value creation as well as reinforce
strategic planning processes and balance short and long-term decision making.
Performance measures for the three-year cycle that began January 1, 2003,
combine relative and absolute components tied to Halliburton's consolidated
weighted average return on capital employed (ROCE). A
19
performance matrix combining both the actual achievement of pre-established ROCE
level (Absolute Goal) and Halliburton's ROCE achievement level as compared to
the comparator group (Relative Goal) is used to determine the percent of
incentive opportunity achieved. The award is then calculated by multiplying the
percent of incentive opportunity achieved by the target award. Payment may be
made in cash, stock or a combination of cash and stock at the discretion of the
Compensation Committee. No incentive will be earned or payment made under the
Performance Unit Program for performance below the threshold level.
LONG-TERM INCENTIVE PLANS - AWARDS IN FISCAL 2003
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
-------------------------------------------------
PERFORMANCE PERFORMANCE
CATEGORY OR OTHER
JANUARY 1, 2003 PERIOD UNTIL
SALARY MATURATION OR THRESHOLD TARGET MAXIMUM
NAME ($) PAYOUT ($) ($) ($)
---- --------------- ------------- --------- --------- ---------
David J. Lesar...................................... 1,200,000 2003-2005 900,000 1,800,000 3,600,000
Albert O. Cornelison, Jr. .......................... 432,000 Fiscal Years 129,600 259,200 518,400
C. Christopher Gaut(1).............................. 500,000 187,500 375,000 750,000
John W. Gibson, Jr. ................................ 600,000 225,000 450,000 900,000
Robert R. Harl...................................... 425,000 127,500 255,000 510,000
---------------
(1) Annual salary as of commencement of employment on March 3, 2003.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN(A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------------- -------------------- ----------------------------
Equity compensation plans approved by
security holders........................ 18,280,780 $31.05 30,280,898
Equity compensation plans not approved by
security holders........................ -- -- --
---------- ------ ----------
Total..................................... 18,280,780 $31.05 30,280,898
----------------
Note: There are 1,257,147 million shares with a weighted average exercise price
of $35.76 to be issued upon exercise of outstanding options that were
assumed in the 1998 Dresser merger, the 1996 Landmark acquisition and
other business combinations. No further grants can be issued under these
assumed plans.
EMPLOYMENT CONTRACTS AND
CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT CONTRACTS
Mr. Lesar. Mr. Lesar entered into an employment agreement with Halliburton
as of August 1, 1995 which provided for his employment as Executive Vice
President and Chief Financial Officer of Halliburton. The agreement also
provides that, while Mr. Lesar is employed by Halliburton, management will
recommend to the Compensation Committee:
-- annual supplemental retirement benefit allocations under the
Supplemental Executive Retirement Plan (formerly part of the Senior
Executives' Deferred Compensation Plan); and
-- annual grants of stock options under Halliburton's 1993 Stock and
Incentive Plan, or 1993 Plan.
20
These recommendations are to be consistent with the criteria utilized by the
Compensation Committee for similarly situated executives.
Under the terms of his employment agreement, in the event Mr. Lesar is
involuntarily terminated by Halliburton for any reason other than termination
for cause (as defined in the agreement), Halliburton is obligated to pay Mr.
Lesar a severance payment equal to:
-- the value of any restricted shares that are forfeited because of
termination; and
-- five times his annual base salary.
Mr. Cornelison. Mr. Cornelison entered into an employment agreement with
Halliburton on May 15, 2002, which provided for his employment as Vice President
and General Counsel. Mr. Cornelison's employment agreement also provides for an
annual salary of not less than $332,000 and participation in Halliburton's
Annual Performance Pay Plan.
Mr. Gaut. Mr. Gaut entered into an employment agreement with Halliburton on
March 3, 2003, which provided for his employment as Executive Vice President.
Mr. Gaut's employment agreement also provided for his subsequent appointment as
Chief Financial Officer, an annual salary of not less than $500,000 and
participation in Halliburton's Annual Performance Pay Plan. In addition, Mr.
Gaut was granted 30,000 restricted shares and 100,000 stock options under the
1993 Plan.
Mr. Gibson. Mr. Gibson entered into an employment agreement with Halliburton
and Halliburton's subsidiary Landmark Graphics Corporation on January 1, 2000,
which provided for his employment as Chief Operating Officer of Landmark. Mr.
Gibson's employment agreement also provides for an annual salary of not less
than $360,000 and participation in Halliburton's Annual Performance Pay Plan.
Mr. Harl. Mr. Harl entered into an employment agreement with Halliburton and
Halliburton's subsidiary, Brown & Root Services Corporation (which was merged
into Kellogg Brown & Root, Inc. or KBR), on September 29, 1998, which provided
for his employment as President of KBR. Mr. Harl's employment agreement also
provides for an annual salary of not less than $325,000 and participation in
Halliburton's Annual Performance Pay Plan. In addition, Mr. Harl was granted
15,000 restricted shares under the 1993 Plan.
Under the terms of the employment agreements with Messrs. Cornelison, Gaut,
Gibson and Harl, if any of these executives are terminated for any reason other
than voluntary termination (as defined in the agreements), death, retirement
(either at age 65 or voluntarily prior to age 65), permanent disability, or
termination by Halliburton for cause (as defined in the agreements), the
executive is entitled to severance payments equal to:
-- the value of any restricted shares that are forfeited because of
termination;
-- two years' base salary;
-- any unpaid bonus earned in prior years; and
-- any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
CHANGE-IN-CONTROL ARRANGEMENTS
Under the 1993 Plan, in the event of a Corporate Change, unless an Award
Document otherwise provides, as of the Corporate Change Effective Date, the
following will occur automatically:
-- any outstanding Options and Stock Appreciation Rights shall become
immediately vested and fully exercisable;
-- any restrictions on Restricted Stock Awards shall immediately lapse;
-- all performance measures upon which an outstanding Performance Award
is contingent shall be deemed achieved and the Holder shall receive a
payment equal to the maximum amount of the Award he or she would have
been entitled to receive, prorated to the Corporate Change Effective
Date; and
-- any outstanding cash Awards including, but not limited to, Stock Value
Equivalent Awards, shall immediately vest and be paid based on the
vested value of the award.
21
Under the Annual Performance Pay Plan:
-- in the event of a change-in-control during a plan year, a participant
will be entitled to an immediate cash payment equal to the maximum
dollar amount he or she would have been entitled to for the year,
prorated through the date of the change-in-control; and
-- in the event of a change-in-control after the end of a plan year but
before the payment date, a participant will be entitled to an
immediate cash payment equal to the incentive earned for the plan
year.
Under the Performance Unit Program:
-- in the event of a change-in-control during a performance cycle, a
participant will be entitled to an immediate cash payment equal to the
maximum amount he or she would have been entitled to receive for the
performance cycle, prorated to the date of the change-in-control; and
-- in the event of a change-in-control after the end of a performance
cycle but before the payment date, a participant will be entitled to
an immediate cash payment equal to the incentive earned for that
performance cycle.
Under the Employee Stock Purchase Plan, in the event of a change-in-control,
unless the successor corporation assumes or substitutes new stock purchase
rights:
-- the purchase date for the outstanding stock purchase rights will be
accelerated to a date fixed by the Compensation Committee prior to the
effective date of the change-in-control; and
-- on the effective date, any unexercised stock purchase rights will
expire and Halliburton will promptly refund the unused amount of each
participant's payroll deductions.
DIRECTORS' COMPENSATION
Directors' Fees and Deferred Compensation Plan
All non-employee Directors receive an annual fee of $40,000 and an
attendance fee of $2,000 for each meeting of the Board of Directors. The
Directors' also receive an attendance fee of $2,000 per meeting for committee
service. The annual fee was increased from $30,000 to $40,000 at the May 21,
2003 meeting. The increase became effective in June 2003. The Chairmen of the
Audit; Compensation; Nominating and Corporate Governance; Health, Safety and
Environment; and Management Oversight Committees each receive an additional
$10,000 retainer annually.
Under the Directors' Deferred Compensation Plan, Directors are permitted to
defer their fees, or a portion of their fees, until after they cease to be a
Director. A participant may elect, on a prospective basis, to have his or her
deferred compensation account either credited quarterly with interest at the
prime rate of Citibank, N.A. or translated on a quarterly basis into common
stock equivalents. Distribution will be made either in a lump sum or in annual
installments over a 5- or 10-year period, as determined in the discretion of the
committee appointed to administer the plan. Distributions of common stock
equivalents are made in shares of common stock, while distributions of deferred
compensation credited with interest are made in cash. Messrs. Crandall, Derr,
DiBona, Hunt, Lewis and Precourt and Ms. Reed have elected to participate in the
plan.
Directors' Restricted Stock Awards
Pursuant to the terms of the Restricted Stock Plan for Non-Employee
Directors, which was approved by the stockholders at the 1993 Annual Meeting,
each non-employee Director receives an annual award of 400 restricted shares of
common stock as a part of his or her compensation. The awards are in addition to
the Directors' annual retainer and attendance fees. Shares awarded under the
Directors' Restricted Stock Plan may not be sold, assigned, pledged or otherwise
transferred or encumbered until the restrictions are removed. Restrictions will
be removed following termination of Board service under specified circumstances,
which include, among others, death or disability, retirement under the Director
mandatory retirement policy, or early retirement after at least four years of
service. During the restriction period, Directors have the right to vote, and to
receive dividends on, the restricted
22
shares. Any shares that under the plan's provisions remain restricted following
termination of service will be forfeited.
At the July 17, 2003 meeting of Directors, the Directors approved annual
awards of 600 restricted shares of common stock under the 1993 Plan for
non-employee Directors as compensation in addition to the 400 restricted shares
awarded under the Restricted Stock Plan for Non-Employee Directors. The terms of
the awards are the same as the annual awards under the Restricted Stock Plan for
Non-Employee Directors. Directors not participating in the Directors' Retirement
Plan will also receive an annual award of 800 restricted shares of common stock
that have been converted from stock option awards as described below for a total
annual award of 1,800 restricted shares of common stock under both the
Restricted Stock Plan for Non-Employee Directors and the 1993 Plan. Directors
participating in the Directors' Retirement Plan will also receive an annual
award of 400 restricted shares of common stock that have been converted from
stock option awards for a total annual award of 1,400 restricted shares of
common stock.
Directors' Stock Options
Subsequent to the 2000 Annual Meeting and until the July 17, 2003 meeting of
Directors, the non-employee Directors were granted awards under the 1993 Plan as
follows:
-- Each Director elected after the 2000 Annual Meeting received an option
for 5,000 shares of Halliburton common stock at the time of initial
election to the Board and an option for 2,000 shares each year
thereafter at the time of the Director's reelection. The option grants
were in lieu of benefits under the Directors' Retirement Plan
(discussed below) which is closed to Directors first elected after the
2000 Annual Meeting.
-- Each Director who continued to participate in the Directors'
Retirement Plan received an annual option for 1,000 shares at the time
of reelection to the Board.
-- Each "grandfathered" Director who opted out of the Directors'
Retirement Plan (Messrs. Hunt, Martin and Precourt) received a
one-time option grant for 5,000 shares and an annual option for 2,000
shares at the time of reelection.
Options granted under the stock option program:
-- have an exercise price equal to the closing price of Halliburton's
common stock on the grant date;
-- become exercisable six months after the grant date; and
-- are exercisable for 10 years from the date of grant or three years
after termination of service, whichever is the shorter period.
At the July 17, 2003 meeting of Directors, the Directors determined that, in
lieu of future stock option awards, restricted stock would be awarded under the
1993 Plan. Using a 2.5 conversion rate effective August 1, 2003, awards which
would have been of 5,000, 2,000 and 1,000 stock options will now be awards of
2,000, 800 and 400 shares of restricted stock, respectively. This Director
action prospectively terminates the awards of stock options to non-employee
Directors, but it does not impact stock options previously awarded to such
Directors.
Directors' Retirement Plan
As noted above, the Directors' Retirement Plan is closed to new Directors
elected after May 16, 2000. Each individual who was serving as a non-employee
Director on May 16, 2000 continued to be eligible to participate in the plan but
had a one-time right to opt out of the plan and receive the same level of option
grants as a new Director. Messrs. Hunt, Martin and Precourt elected to cease
participation in the plan in exchange for the right to receive additional grants
of options.
Under the Directors' Retirement Plan, each non-employee Director who
continues as a participant will receive an annual benefit upon the benefit
commencement date. The benefit commencement date is the later of a participant's
termination date or attainment of age 65. The benefit will be equal to the last
annual retainer for the participant for a period of years equal to the
participant's years of service on his or her termination date. The
23
minimum benefit payment period for each participant is 5 years. Upon the death
of a participant, benefit payments will be made to the surviving spouse, if any,
over the remainder of the retirement benefit payment period. Years of service
for each Director participant under the plan are: Mr. Crandall - 19, Mr.
DiBona - 7, Mr. Howell - 13, and Mr. Silas - 11. Assets are transferred to State
Street Bank and Trust Company, as Trustee, to be held under an irrevocable
grantor trust to aid Halliburton in meeting its obligations under the Directors'
Retirement Plan. The principal and income of the trust are treated as assets and
income of Halliburton for federal income tax purposes and are subject to the
claims of general creditors of Halliburton to the extent provided in the plan.
Charitable Contributions
Matching Gifts. To further Halliburton's support for charities, non-employee
Directors are able to participate in Halliburton's educational and
not-for-profit hospital and medical foundation programs on the same terms as
Halliburton's employees. Under those programs, Halliburton may make a
contribution in the amount double the amount contributed by the Director to an
educational institution, not-for-profit hospital or medical foundation approved
by the Halliburton Foundation. The maximum aggregate match is $40,000 per year.
Halliburton has not made a charitable contribution to any charitable
organization in which any Director serves as an executive officer, within the
preceding three years, that exceeds in any single fiscal year the greater of $1
million or 2% of such charitable organizations consolidated gross revenues.
24
AUDIT COMMITTEE REPORT
Halliburton's Audit Committee consists of Directors who, in the business
judgment of the Board of Directors, are independent under Securities and
Exchange Commission regulations and the New York Stock Exchange listing
standards. In addition, in the business judgment of the Board of Directors, all
five members of the Audit Committee, Robert L. Crandall, Kenneth T. Derr, W. R.
Howell, Ray L. Hunt and C. J. Silas, have accounting or related financial
management experience required under the listing standards and have been
designated by the Board of Directors as "audit committee financial experts". We
operate under a written charter, a copy of which is included as Appendix B to
this proxy statement. As required by the charter, we review and reassess the
charter annually and recommend any changes to the Board of Directors for
approval.
Under the charter, Halliburton's management is responsible for preparing
Halliburton's financial statements and the principal independent accountants are
responsible for auditing those financial statements. The Audit Committee's role
under the charter is to provide oversight of management in carrying out
management's responsibility and to appoint, compensate, retain and oversee the
work of the principal independent accountants. The Audit Committee is not
providing any expert or special assurance as to Halliburton's financial
statements or any professional certification as to the principal independent
accountants' work.
In fulfilling our oversight role for the year ended December 31, 2003, we:
-- reviewed and discussed Halliburton's audited financial statements with
management;
-- discussed with KPMG LLP, Halliburton's principal independent
accountants, the matters required by Statement on Auditing Standards
No. 61 relating to the conduct of the audit;
-- received from KPMG LLP the written disclosures and letter required by
Independence Standards Board Standard No. 1; and
-- discussed with KPMG LLP its independence.
Based on our:
-- review of the audited financial statements,
-- discussions with management,
-- discussions with KPMG LLP, and
-- review of KPMG LLP's written disclosures and letter,
we recommended to the Board of Directors that the audited financial statements
be included in Halliburton's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 for filing with the Securities and Exchange Commission.
Our recommendation considers our review of that firm's qualifications as
independent accountants for the Company. Our review also included matters
required to be considered under Securities and Exchange Commission rules on
auditor independence, including the nature and extent of non-audit services. In
our business judgment the nature and extent of non-audit services performed by
KPMG LLP during the year did not impair the firm's independence.
Respectfully submitted,
THE AUDIT COMMITTEE OF DIRECTORS
Robert L. Crandall
Kenneth T. Derr
W. R. Howell
Ray L. Hunt
C. J. Silas, Chairman
25
FEES PAID TO KPMG LLP
During 2002 and 2003, Halliburton incurred the following fees for services
performed by KPMG LLP:
2003 2002
---- ----
(IN MILLIONS) (IN MILLIONS)
Audit Fees.................................................. $13.4 $10.2
Audit-related fees.......................................... 1.2 0.5
Tax fees.................................................... 3.2 1.2
Other fees.................................................. 6.6 4.3
----- -----
Total..................................................... $24.4 $16.2
===== =====
AUDIT FEES
Audit fees represent the aggregate fees for professional services rendered
by KPMG LLP for the audit of our annual financial statements for the fiscal year
ended December 31, 2003 and December 31, 2002, including audits of many of our
subsidiaries in regards to compliance with statutory requirements in foreign
countries, and the reviews of our financial statements included in the Forms
10-Q we filed for fiscal year 2003 and 2002.
AUDIT-RELATED FEES
Audit-related fees primarily include professional services rendered by KPMG
LLP for audits of our employee benefit plans and advice and consultation related
to our implementation of the provisions of Section 404 of the Sarbanes-Oxley
Act.
TAX FEES
The aggregate fees for tax services primarily consisted of international tax
compliance, and services related to our expatriate employees including tax and
immigration related services.
ALL OTHER FEES
All other fees comprise professional services rendered by KPMG LLP primarily
related to the SEC investigation and work associated with the bankruptcy
proceedings of our subsidiaries DII Industries, LLC, Kellogg Brown & Root, Inc.
and other affected subsidiaries.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established written pre-approval policies that
require the approval by the Audit Committee of all services provided by KPMG LLP
as the principal independent accountants that examine the financial statements
and the books and records of Halliburton and all audit services provided by
other independent accountants. The current version of the policy is attached to
this proxy statement as Appendix F. All of the fees described above provided by
KPMG LLP to Halliburton were approved in accordance with the policy. Our Audit
Committee considered whether KPMG LLP's provisions of tax services and All Other
Fees as reported above is compatible with maintaining KPMG LLP's independence as
our principal independent accounting firm.
WORK PERFORMED BY PRINCIPAL ACCOUNTANT'S FULL TIME, PERMANENT EMPLOYEES
KPMG LLP's work on Halliburton's audit was performed by KPMG LLP partners
and employees.
26
THE SELECTION OF AUDITORS
KPMG LLP has examined Halliburton's financial statements beginning with the
fiscal year ending December 31, 2002. The Board of Directors has appointed KPMG
LLP as principal independent accountants to examine the financial statements and
the books and records of Halliburton for the year ending December 31, 2004. The
appointment was made upon the recommendation of the Audit Committee. KPMG LLP
has advised that neither the firm nor any member of the firm has any direct
financial interest or any material indirect interest in Halliburton. Also,
during at least the past three years, neither the firm nor any member of the
firm has had any connection with Halliburton in the capacity of promoter,
underwriter, voting trustee, Director, officer or employee.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
stockholders.
The Board of Directors has decided to change its practice of presenting a
resolution at the Annual Meeting for the stockholders to ratify the appointment
of the principal independent accountants. The Board of Directors believes
procedures that the Board and the Audit Committee have put in place with respect
to the principal independent accountants makes such practice unnecessary.
- - - - - - - - - -
27
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
(ITEM 2)
The Board of Directors has unanimously approved, declared advisable and
recommends that the stockholders consider and approve an amendment (the
"Amendment") to ARTICLE FOURTH of Halliburton's Certificate of Incorporation, as
amended (the "Certificate"), pursuant to which the authorized amount of shares
of common stock would be increased from 600 million shares to 1 billion shares.
The Certificate also currently authorizes the issuance of up to 5 million shares
of preferred stock (the "Preferred Stock"), of which no shares are issued and
outstanding. The Amendment would not alter the authorized amount of Preferred
Stock.
The resolution to be voted upon to effect the Amendment is set forth in
Appendix G to this proxy statement.
PURPOSE AND EFFECTS OF THE AMENDMENT
As of March 22, 2004 there were approximately 439.8 million shares of common
stock issued and outstanding and approximately 140.4 million shares reserved. Of
the shares reserved, approximately 49.0 million shares were reserved for
employee benefit plans and director compensation plans, approximately 31.9
million shares were reserved for issuance upon conversion of our 3 1/8%
convertible senior notes due 2023 and 59.5 million shares were reserved for
issuance to one or more trusts for the benefit of asbestos and silica personal
injury claimants in connection with the plan of reorganization proposed in the
Chapter 11 bankruptcy proceedings of our subsidiaries DII Industries, LLC,
Kellogg Brown & Root, Inc. and other affected subsidiaries.
The Board of Directors believes that the flexibility provided by the
Amendment to permit Halliburton to issue or reserve additional common stock, in
the discretion of the Board of Directors, without the delay or expense of a
special meeting of stockholders, is in the best interests of Halliburton and its
stockholders. Shares of common stock may be used for general purposes, including
stock splits and stock dividends, acquisitions, possible financing activities
and other employee, executive and director benefit plans. Possible financing
activities might include raising additional capital funds through offerings of
shares of our common stock or of equity or debt securities convertible into or
exchangeable for shares of our common stock. We have no present plans,
arrangements, commitments or understanding with respect to the issuance of any
of the additional shares of common stock that would be authorized by adoption of
the Amendment.
Pursuant to the Certificate, our stockholders have no preemptive rights with
respect to the additional shares of common stock being authorized. The
Certificate does not require further approval of stockholders prior to the
issuance of any additional shares of common stock. In some circumstances
(generally relating to the number of shares to be issued, the manner of offering
and the identity of the recipients), the rules of the New York Stock Exchange,
or NYSE, may require specific authorization in connection with the issuance of
additional shares. We do not anticipate that we will seek authorization from
stockholders for issuance of additional shares of common stock unless required
by applicable laws or the NYSE.
The issuance of any additional shares of common stock may have the effect of
diluting the percentage of stock ownership, book value and voting rights of the
present holders of the common stock. The Amendment also may have the effect of
discouraging attempts to take over control of Halliburton, as additional shares
of common stock could be issued to dilute the stock ownership and voting power
of, or increase the cost to, a party seeking to obtain control of us. The
Amendment is not being proposed in response to any known effort or threat to
acquire control of Halliburton and is not part of a plan by management to adopt
a series of amendments to the Certificate and By-laws having an anti-takeover
effect.
In accordance with Delaware law, the affirmative vote of the holders of a
majority of the outstanding shares of common stock is required to approve the
Amendment. Accordingly, abstentions and broker non-votes applicable to shares
present at the Meeting will have the same effect as votes cast against approval
of the Amendment. If the Amendment is approved, we intend to file the Amendment
with the Secretary of State of Delaware soon after the approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSED AMENDMENT TO OUR CERTIFICATE OF INCORPORATION.
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28
STOCKHOLDER PROPOSAL ON OPERATIONS IN IRAN
(ITEM 3)
The New York City Police Pension Fund and the New York City Fire Department
Pension Fund ("NYC Funds"), located at 1 Centre Street, New York, New York
10007-2341, has notified Halliburton that it intends to present the resolution
set forth below to the Annual Meeting for action by the stockholders. NYC Funds'
supporting statement for the resolution, along with the Board of Directors'
statement in opposition is set forth below. As of December 2, 2003, the New York
City Police Pension Fund beneficially owned 284,984 shares of Halliburton's
common stock and the New York City Fire Department Pension Fund beneficially
owned 128,606 shares of Halliburton's common stock. Proxies solicited on behalf
of the Board of Directors will be voted AGAINST this proposal unless
stockholders specify a contrary choice in their proxies.
PROPOSAL
Halliburton Company
Review and Report on Operations in Iran
WHEREAS, since the 2001 terrorist attacks against the United States, there has
been increased interest among investors and the general public concerning
corporate ties to states that reportedly sponsor terrorist activity, and
WHEREAS, U.S. law currently restricts trade by American companies with states
designated as "sponsors of terrorism" by the U.S. State Department, and
WHEREAS, in February 2000 Halliburton opened an office in Iran under the name of
Halliburton Products and Services, Ltd., its Cayman Islands subsidiary,
THEREFORE, be it resolved that shareholders request that the Board of Directors
establish a committee of the Board to review Halliburton's operations in Iran
with a particular reference to potential financial and reputational risks
incurred by the company by such operations, and
Be it further resolved that shareholders request that this review committee
report to shareholders on its findings no later than September 2004. This report
should be produced at reasonable cost and contain no proprietary information.
SUPPORTING STATEMENT
According to the U.S. State Department, the Iranian government has actively
supported and funded terrorist operations against innocent civilians outside its
own borders. These activities led to the imposition of government sanctions that
provide that virtually all trade and investment activity with Iran by U.S.
corporations, is prohibited. We believe that Halliburton's use of its Cayman
Island subsidiary to establish operations in Tehran violates the spirit, if not
the letter of the law. It also exposes the company to the prospect of negative
publicity, public protests, and a loss of consumer confidence, all of which can
have a negative impact on shareholder value.
In 2001, the Securities and Exchange Commission stated that a company's
involvement with states that sponsor terrorism is a legitimate shareholder
concern "substantially likely to be significant to a reasonable investors
decision about whether to invest in that company". The New York City Police and
Fire Department Pension Funds urge you to vote FOR this resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. HALLIBURTON'S
STATEMENT IN OPPOSITION IS AS FOLLOWS:
The New York City Police Pension Fund and the New York City Fire Department
Pension Fund (the Funds) have submitted an identical proposal to the one the
Funds submitted for last year's proxy statement. Last year, the parties agreed
that Halliburton would prepare a report for its Board of Directors, and would
publish the report in
29
its 2003 Annual Report, in return for the New York City Comptroller, on behalf
of the Funds, withdrawing the proposal. Halliburton believes it complied with
that agreement, prepared the Iran report which stated the nature and amount of
Halliburton subsidiaries' business in Iran, and sent it to the New York City
Comptroller's office on October 23, 2003. A copy of Halliburton's Iran report is
available on Halliburton's website at www.halliburton.com, and is included in
our 2003 Annual Report.
We do not believe that our reputation is adversely affected by doing
legitimate business. Further, the amount of Iran work is not significant to our
total operations. Our foreign subsidiaries' operations in Iran represented less
than one percent of both gross sales and net earnings from continuing operations
of Halliburton in 2003. Inasmuch as Halliburton subsidiaries have conducted
these operations in Iran openly for some fifty years, we perceive no significant
risk to the company in continuing.
Regarding allegations of terrorist activity sponsored by the government of
Iran, we believe that decisions as to the nature of such governments and their
actions are better made by governmental authorities and international entities
such as the United Nations as opposed to individual persons or companies. Where
the United States government has mandated that United States companies refrain
from commerce, we comply, often to the advantage of our international
competitors. In the case of doing business in Iran, Halliburton's limited
operations are staffed and managed by non-U.S. personnel in compliance with
applicable law. While the Board shares the Funds' concern about terrorist
activities, history has shown that single country, let alone corporate, boycotts
and sanctions, are ineffective, often injuring the economic interests of the
boycotting entity.
Halliburton does not always agree with the policies or actions of
governments in every place that we or our affiliates do business. Due to the
long-term nature of our business and the inevitability of political and social
change, however, it is neither prudent nor appropriate for Halliburton to
establish its own country-by-country foreign policy.
Because of the long-term view we need to take and the requirements of our
customers, the Board believes that the reporting requested by the proposal will
not create value to the stockholders. Halliburton fully complied with the New
York Comptroller's request last year and produced a thorough report.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED AGAINST THE PROPOSAL UNLESS INSTRUCTED
OTHERWISE.
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30
STOCKHOLDER PROPOSAL ON DIRECTOR ELECTION VOTE THRESHOLD
(ITEM 4)
The United Brotherhood of Carpenters Pension Fund ("UBC Funds"), located at
101 Constitution Avenue, N.W., Washington, D.C. 20001, has notified Halliburton
that it intends to present the resolution set forth below to the Annual Meeting
for action by the stockholders. UBC Funds' supporting statement for the
resolution, along with the Board of Directors' statement in opposition is set
forth below. As of December 19, 2003, the UBC Funds beneficially owned 7,400
shares of Halliburton's common stock. Proxies solicited on behalf of the Board
of Directors will be voted AGAINST this proposal unless stockholders specify a
contrary choice in their proxies.
PROPOSAL
RESOLVED: That the shareholders of Halliburton Company ("Company") hereby
request that the board of directors initiate the appropriate process to amend
the Company's governance documents (certificate of incorporation or bylaws) to
provide that nominees standing for election to the board of directors must
receive the vote of a majority of the shares entitled to vote at an annual
meeting of shareholders in order to be elected or re-elected to the board of
directors.
SUPPORTING STATEMENT
Our Company is incorporated in the state of Delaware. Delaware corporate law
provides that a company's certificate of incorporation or bylaws may specify the
number of votes that shall be necessary for the transaction of any business. (8
Del. C. 1953, Section 216 -- Quorum and required vote for stock corporations).
Further, the law provides that in the absence of any such specification in the
certificate of incorporation or bylaws of the corporation, directors "shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors." Our Company presently does not specify a vote requirement other than
a plurality for the election of directors, so Company directors are elected by a
plurality of the vote.
We feel that it is appropriate and timely for the board to initiate a change
in the threshold vote required for a nominee to be elected to the board of
directors. While the governance change proposed would entail a vote of the
shareholders, the board of directors is positioned to initiate the amendment
process. We believe that in order to make corporate director elections more
meaningful at our Company, directors should have to receive the vote of a
majority of the shares entitled to be voted in a director election. Under the
present system, a director can be re-elected even if a substantial majority of
the votes cast is withheld from that director. For example, if there are 100
million votes represented at a meeting and eligible to be cast and 90 million of
these votes are withheld from a given candidate, he or she would still be
elected with a plurality of the vote despite the fact that 90% of the votes cast
withheld support for that nominee's election to the board. We believe that a
director candidate that does not receive a majority of the vote cast should not
be seated as a director.
It is our contention that the proposed majority vote standard for corporate
board elections is a fair and reasonable standard and adoption of such a
standard will strengthen the corporate governance processes at our Company. We
urge your support of this important governance reform.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. HALLIBURTON'S
STATEMENT IN OPPOSITION IS AS FOLLOWS:
The Proposal indicates that Directors of Halliburton are elected by a
plurality because Halliburton has not specified a voting requirement for
directors other than plurality voting. That is untrue. Paragraph 4 of
Halliburton's By-laws provides that Directors shall be elected by a plurality
vote.
The number of director positions to fill each year is determined by the
Board of Directors and is based upon the Nominating and Corporate Governance
Committee's and the Board's determinations as to the number of Directors
necessary to staff the Board's committees and to address the Board's workload.
The requirement of a
31
majority vote for election of a director could put the Board in the position of
having an insufficient number of members to carry out the Board's work.
The penultimate sentence of the second paragraph of the Supporting Statement
provides an illustration that a board nominee could be elected by a plurality of
the vote despite the fact that 90% of the votes cast withheld support for that
nominee's election to the board. This illustration is not necessarily true and
is misleading. It assumes, but does not state, that the number of nominees is
equal to the number of directors to be elected. Of course, the nominee in the
illustration would not be elected if there are more nominees than positions to
be filled and the nominee receiving 10 million votes did not receive a plurality
vote.
The references in the Supporting Statement to "strengthen the corporate
governance processes" and "governance reform" are misleading, especially when
combined with the 90% withhold vote illustration. For the past three years, the
largest withhold vote received by any Halliburton Board-nominated Director was
16%. At last year's annual meeting, which involved each of the incumbent
Directors, the largest withhold vote received was approximately 3%. The Proposal
suggests that Directors for Halliburton's Board are being elected by minimal
affirmative votes and that change is in order. That clearly is not the case for
Halliburton.
While conceptually the requirement of a majority vote is simple, it does
raise issues. The Securities and Exchange Commission issued proposed rules on
stockholder access to the proxy (Security Holder Director Nominations, Release
No. 34-48626), and one of the questions raised by the SEC in the proposed rule,
after stating that most companies use plurality voting in the election of
directors, is what specific issues arise where other than plurality voting is
used.
The Board of Directors is of the view that election of Directors of
Halliburton by plurality voting, which is the norm in the United States, is
appropriate and that no change to the Halliburton By-law provision providing for
election of Directors by a plurality vote is necessary.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED AGAINST THE PROPOSAL UNLESS INSTRUCTED
OTHERWISE.
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32
STOCKHOLDER PROPOSAL TO SEPARATE CHAIRMAN/CEO
(ITEM 5)
The United Association S&P 500 Index Fund ("UA Funds"), located at 1 Freedom
Valley Drive, Oaks, Pennsylvania 19456, has notified Halliburton that it intends
to present the resolution set forth below to the Annual Meeting for action by
the stockholders. UA Funds' supporting statement for the resolution, along with
the Board of Directors' statement in opposition is set forth below. As of
December 18, 2003, the United Association S&P 500 Fund is a beneficial owner of
26,942 shares of Halliburton's common stock. Proxies solicited on behalf of the
Board of Directors will be voted AGAINST this proposal unless stockholders
specify a contrary choice in their proxies.
PROPOSAL
Separate Chairman/CEO
RESOLVED, that the shareholders of Halliburton Company ("Company") urge the
Board of Directors to take the necessary steps to amend the by-laws to require
that, subject to any presently existing contractual obligations of the Company,
the Chairman of the Board of Directors shall not concurrently serve as the Chief
Executive Officer.
SUPPORTING STATEMENT
The Board of Directors is elected by shareholders to oversee management and
its Chairman provides leadership for the Board. The Business Roundtable has
noted that "the paramount duty of the board of directors is to select a Chief
Executive Officer and to oversee the CEO and other senior management. . . ." The
Business Roundtable, Principles of Corporate Governance, May 2002.
We believe that to be effective a board of directors must be led by a
Chairman who is independent of management, for, in our opinion, having the same
individual serve as both Chairman and CEO necessarily impairs the Chairman's
ability to hold the CEO accountable.
The Conference Board recently issued a report on corporate governance. The
Commission's members included John Snow, U.S. Treasury Secretary and Former
Chairman of CSX Corporation; John Bogle, the Founder and former Chairman of
Vanguard Group; Arthur Levitt Jr., former SEC Chairman; and former Federal
Reserve System Chairman Paul Volcker. Its report stated:
The Commission is profoundly troubled by the corporate scandals of the
recent past. The primary concern in many of these situations is that
strong CEOs appear to have exerted a dominant influence over their
boards, often stifling the efforts of directors to play the central
oversight role needed to ensure a healthy system of corporate
governance. . . .
The ultimate responsibility for good corporate governance rests with the
board of directors. Only a strong, diligent and independent board of
directors that understands the key issues, provides wise counsel and asks
management the tough questions is capable of ensuring that the interests
of shareowners as well as other constituencies are being properly served.
The Conference Board Commission on Public Trust and Private Enterprise,
Findings and Recommendations, Jan. 9, 2003.
The Report discussed three principal approaches to provide the appropriate
balance between board and CEO functions, including:
The roles of Chairman and CEO would be performed by two separate
individuals, and the Chairman would be one of the independent directors.
The Commission recommends that each corporation give careful
consideration, based on its particular circumstances, to separating the
offices of Chairman and Chief Executive Officer. The Commission believes
that separating the positions of Chairman and CEO is fully consistent
with the objectives of the [Sarbanes-Oxley] Act, the proposed New York
Stock Exchange
33
listing requirements, and the proposed NASDAQ requirements, and that
separating the roles of Chairman and CEO enhances implementation of the
Act and stock exchange reforms.
Our Company's Chairman is also its CEO. We urge your support for this
proposal to require that the Chairman of the Board of Directors not also serve
as the Chief Executive Officer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. HALLIBURTON'S
STATEMENT IN OPPOSITION IS AS FOLLOWS:
The Board believes it is in the best interests of stockholders to permit our
CEO to also serve as Chairman of the Board. The existing By-laws give the Board
the flexibility to determine whether the roles of Chairman and CEO should be
combined or separate. The Board believes that stockholders are best served if
the Board remains free to decide what leadership structure works best for
Halliburton based upon the then current facts and circumstances. Currently, Mr.
Lesar fills the roles of both Chairman and CEO. The Board believes that this
remains the best leadership structure for Halliburton at this time.
We disagree with the proponent's premise that the Board will be dominated by
the CEO, ineffective and unable to hold the CEO accountable if the Chairman is
not an independent Board member. Halliburton has been a leader in maintaining a
strong and independent Board and follows sound corporate governance practices,
as described in detail starting on page 7 of this proxy statement. Except for
Mr. Lesar, the Board is currently composed entirely of independent Directors.
Halliburton has established corporate governance guidelines that provide as
follows:
-- two-thirds of the members of the Board must be independent;
-- independence standards that meet or exceed the Corporate Governance
Rules of the New York Stock Exchange;
-- only outside Directors serve on Board committees;
-- five standing committees of the Board:
-- Management Oversight;
-- Audit;
-- Compensation;
-- Nominating and Corporate Governance; and
-- Health, Safety and Environment;
-- Board approval of the members and Chairman of the committees of the
Board;
-- at the discretion of the committee Chairman, advance review and
approval of the agendas of committee meetings;
-- executive sessions of the outside Directors at each regularly
scheduled Board meeting and Management Oversight Committee meeting;
-- designation of the Chairman of Management Oversight Committee as the
Lead Director with the ability to:
-- preside over the executive sessions of outside Directors;
-- liaise with CEO in connection with executive sessions;
-- propose items for inclusion on the agenda for a Board meeting;
-- propose or raise at any Board meeting subjects that are not on
the agenda; and
-- participate in the establishment of the schedule of the regularly
scheduled Board meetings; and
-- annual evaluation of the performance of the CEO by the Management
Oversight Committee.
In addition to the corporate governance guidelines and the charters of the
committees, the Board has demonstrated that it is independent and effective. The
non-employee members of the Board held executive sessions without Mr. Lesar
during five regularly scheduled Board meetings and five Management Oversight
Committee meetings in 2003 and will meet in executive sessions at future
regularly scheduled Board and Management Oversight Committee meetings and
certain special meetings. In addition to the executive sessions, there were
twenty-two meetings in 2003 of the committees of the Board. In 2004 and in
future years, it is anticipated that there will be similar numbers of executive
sessions and committee meetings, if not more. A further demonstration of the
independence of the Board and its committees is the fact that the key committees
of the Board were
34
established and independent before mandated by the enactment of the
Sarbanes-Oxley Act of 2002 and the recent issuance of the Corporate Governance
Rules of the New York Stock Exchange. As a result, there are established,
existing and independent processes for the effective oversight of critical
issues entrusted to independent Directors, such as the integrity of
Halliburton's financial statements, CEO and senior management compensation,
Board evaluation and selection of Directors. Except for the Health, Safety and
Environment Committee charter which is under review and will be made available
on our website later this year, the charters for the committees are set forth in
Appendices B, C, D and E of this proxy statement. These charters contain a full
description of the roles of these independent committees.
For the above reasons, the Board believes it would be unwise to impose an
absolute rule prohibiting the CEO from also serving as Chairman of the Board.
The Board does not believe that a separation of these two positions will provide
any meaningful additional oversight and the Board should have the flexibility to
determine the best leadership structure for Halliburton to achieve the optimal
result for stockholders. At the present time, the Board firmly believes that
combining the offices contributes to a more efficient and effective Board. Since
the CEO bears primary responsibility for managing the day-to-day business of
Halliburton, he is the person who is best suited to chair Board meetings and
ensure that key business issues and stockholders' interests are brought to the
attention of the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED AGAINST THE PROPOSAL UNLESS INSTRUCTED
OTHERWISE.
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35
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES
Under our By-laws, no business may be brought before an Annual Meeting
unless it is specified in the notice of the Meeting or is otherwise brought
before the Meeting by or at the direction of the Board or by a stockholder
entitled to vote who has delivered notice to Halliburton (containing the
information specified in the By-laws) not less than ninety (90) days prior to
the first anniversary of the preceding year's Annual Meeting. These requirements
are separate from and in addition to the SEC's requirements that a stockholder
must meet in order to have a stockholder proposal included in Halliburton's
proxy statement. This advance notice requirement does not preclude discussion by
any stockholder of any business properly brought before the Annual Meeting in
accordance with these procedures.
PROXY SOLICITATION COSTS
The proxies accompanying this proxy statement are being solicited by
Halliburton. The cost of soliciting proxies will be borne by Halliburton. We
have retained Georgeson Shareholder Communications Inc. to aid in the
solicitation of proxies. For these services, we will pay Georgeson a fee of
$12,500 and reimburse it for out-of-pocket disbursements and expenses. Officers
and regular employees of Halliburton may solicit proxies personally, by
telephone or other telecommunications from some stockholders if proxies are not
received promptly. We will, upon request, reimburse banks, brokers and others
for their reasonable expenses in forwarding proxies and proxy material to
beneficial owners of Halliburton's stock.
STOCKHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING
Stockholders interested in submitting a proposal for inclusion in the proxy
materials for the Annual Meeting of Stockholders in 2005 may do so by following
the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion,
stockholder proposals must be received by Halliburton's Vice President and
Secretary at 5 Houston Center, 1401 McKinney, Suite 2400, Houston, Texas 77010,
no later than December 3, 2004. The 2005 Annual Meeting will be held on May 18,
2005.
OTHER MATTERS
As of the date of this proxy statement, we know of no business that will be
presented for consideration at the Annual Meeting other than the matters
described in this proxy statement. If any other matters should properly come
before the Meeting for action by stockholders, it is intended that proxies in
the accompanying form will be voted on those matters in accordance with the
judgment of the person or persons voting the proxies.
By Authority of the Board of Directors,
-s- MARGARET E. CARRIERE
MARGARET E. CARRIERE
Vice President and
Secretary
March 23, 2004
36
APPENDIX A
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors believes that the primary responsibility of the Directors
is to provide effective governance over Halliburton's affairs for the benefit of
its stockholders. That responsibility includes:
-- Evaluating the performance of the Chief Executive Officer and taking
appropriate action, including removal, when warranted;
-- Selecting, evaluating and fixing the compensation of executive
management of Halliburton and establishing policies regarding the
compensation of other members of management;
-- Reviewing succession plans and management development programs for
members of executive management;
-- Reviewing and approving periodically long-term strategic and business
plans and monitoring corporate performance against such plans;
-- Adopting policies of corporate conduct, including compliance with
applicable laws and regulations and maintenance of accounting,
financial, disclosure and other controls, and reviewing the adequacy
of compliance systems and controls;
-- Evaluating annually the overall effectiveness of the Board; and
-- Reviewing matters of corporate governance.
The Board has adopted the following Guidelines to assist it in the exercise of
its responsibilities. These Guidelines are reviewed periodically and revised as
appropriate to reflect the dynamic and evolving processes relating to the
operation of the Board.
GUIDELINES ON GOVERNANCE
Revised as of March 3, 2004
OPERATION OF THE BOARD - MEETINGS
1. Chairman of the Board and Chief Executive Officer. The Board believes that,
under normal circumstances, the Chief Executive Officer of Halliburton
should also serve as the Chairman of the Board. The Chairman of the Board
and Chief Executive Officer is responsible to the Board for the overall
management and functioning of Halliburton.
2. Lead Director. The Chairman of the Management Oversight Committee, which is
composed of all of the outside Directors, will function as the lead director
when the Committee meets in executive session outside the presence of the
Chief Executive Officer and other Company personnel and will serve as the
interface between that Committee and the Chief Executive Officer in
communicating the matters discussed during the executive sessions.
3. Executive Sessions of Outside Directors. During each regular Board meeting,
the outside Directors meet in scheduled executive sessions. Further, the
Management Oversight Committee is composed of all of the outside Directors
and meets in executive session during a portion of each of its five regular
meetings per year. In addition, any member of the Management Oversight
Committee may request the Committee Chairman to call an executive session of
the Committee at any time.
Each December, the Management Oversight Committee meets in executive session
to evaluate the performance of the Chief Executive Officer. In evaluating
the Chief Executive Officer, the Committee takes into consideration the
executive's performance in both qualitative and quantitative areas,
including:
-- leadership and vision;
-- integrity;
-- keeping the Board informed on matters affecting Halliburton and its
operating units;
A-1
-- performance of the business (including such measurements as total
shareholder return and achievement of financial objectives and goals);
-- development and implementation of initiatives to provide long-term
economic benefit to Halliburton;
-- accomplishment of strategic objectives; and
-- development of management.
The evaluation will be communicated to the Chief Executive Officer by the
Chairman of the Management Oversight Committee and will be used by the
Compensation Committee in the course of its deliberations when considering
the Chief Executive Officer's compensation for the ensuing year.
4. Regular Attendance of Non-Directors at Board Meetings. The Chief Financial
Officer and the General Counsel will be present during Board meetings,
except where there is a specific reason for one or both of them to be
excluded. In addition, the Chairman of the Board may invite one or more
members of management to be in regular attendance at Board meetings and may
include other officers and employees from time to time as appropriate to the
circumstances.
5. Frequency of Board Meetings. The Board has five regularly scheduled meetings
per year. Special meetings are called as necessary. It is the responsibility
of the Directors to attend the meetings.
6. Board Access to Executive Management. Directors have open access to
Halliburton's management, subject to reasonable time constraints. In
addition, members of Halliburton's executive management routinely attend
Board and Committee meetings and they and other managers frequently brief
the Board and the Committees on particular topics. The Board encourages
executive management to bring managers into Board or Committee meetings and
other scheduled events who (a) can provide additional insight into matters
being considered or (b) represent managers with future potential whom
executive management believe should be given exposure to the members of the
Board.
7. Board Access to Independent Advisors. As necessary and appropriate, the
Board has the authority to retain, set terms of engagement and dismiss such
independent advisors, including legal counsel or other experts, as it deems
appropriate, and to approve the fees and expenses of such advisors.
8. Long-term Plans. Long-term strategic and business plans will be reviewed
annually at one of the Board's regularly scheduled meetings.
9. Selection of Agenda Items for Board Meetings. The Chairman of the Board and
Chief Executive Officer establishes the agenda for each Board meeting,
although other Board members are free to suggest items for inclusion on the
agenda. Each Director is free to raise at any Board meeting subjects that
are not on the agenda for that meeting.
10. Board/Committee Forward Agenda. A forward agenda of matters requiring
recurring and focused attention by the Board and each Committee will be
prepared and distributed prior to the beginning of each calendar year in
order to ensure that all required actions are taken in a timely manner and
are given adequate consideration.
11. Information Flow; Advance Review of Meeting Materials. In advance of each
Board or Committee meeting, a proposed agenda will be distributed to each
member. In addition, to the extent feasible or appropriate, information and
data important to the members' understanding of the matters to be
considered, including background summaries of presentations to be made at
the meeting, will be distributed in advance of the meeting. Directors also
routinely receive monthly financial statements, earnings reports, press
releases, analyst reports and other information designed to keep them
informed of the material aspects of Halliburton's business, performance and
prospects. It is each Director's responsibility to review the meeting
materials and other information provided by Halliburton.
A-2
BOARD STRUCTURE
1. Two-thirds of the Members of the Board Must Be Independent Directors. The
Board believes that as a matter of policy two-thirds of the members of the
Board should be independent Directors. A Director will be considered
independent if he or she:
-- does not have a material relationship with Halliburton or its
affiliates;
-- has not been employed by Halliburton or an affiliate within the
preceding five years;
-- has not received and does not have an immediate family member that has
received more than $100,000 in direct compensation from Halliburton,
other than directors fees, committee fees or pension or deferred
compensation for prior service, within the preceding five years;
-- has not been employed and does not have an immediate family member
that has been employed by Halliburton's independent auditor or its
principal outside law firm within the preceding five years;
-- is not an employee of a company or firm that is a significant* advisor
or consultant to Halliburton or its affiliates;
-- has not been a beneficial owner of more than 10% of a significant*
customer or supplier or an employee or executive officer of a customer
or supplier and does not have an immediate family member that is an
executive officer of such customer or supplier of Halliburton or its
affiliates that makes payments to, or receives payments from,
Halliburton or its affiliates in the amount which exceeds the greater
of $1 million or 2% of such customer's or supplier's consolidated
gross revenues within the preceding three years;
-- does not have a significant* personal or professional services
contract(s) with Halliburton or its affiliates;
-- is not affiliated as an employee with a tax-exempt entity that
receives contributions from Halliburton or its affiliates that are
more than one percent or $50,000, whichever is greater, of the
operating budget of such tax-exempt entity;
-- is not a spouse, parent, sibling, child or immediate family member of
a person that has been an officer or former officer of Halliburton or
one of its affiliates within the preceding five years; and
-- has not been within the preceding five years part of an interlocking
directorate in which the Chief Executive Officer or another executive
officer of Halliburton serves on the board or compensation committee
of another corporation that employs the Director.
(* "SIGNIFICANT" MEANS A BUSINESS RELATIONSHIP THAT WOULD REQUIRE DISCLOSURE
UNDER SEC RULES.)
The definition of independence and compliance with this policy will be
reviewed periodically by the Nominating and Corporate Governance Committee.
All Directors complete independence questionnaires annually and the Board
makes an annual determination of the independence of its members.
The Board believes that employee Directors should number not more than two.
While this number is not an absolute limitation, other than the Chief
Executive Officer, who should at all times be a member of the Board,
employee Directors should be limited only to those officers whose positions
or potential make it appropriate for them to sit on the Board.
2. Size of the Board. The Board believes that, optimally, the Board should
number between ten and fourteen members. The By-laws prescribe that the
number of Directors will not be less than eight nor more than twenty.
3. Service of Former Chief Executive Officers and Other Former Employees on the
Board. Employee Directors shall retire from the Board at the time of their
retirement as an employee unless continued service as a Director is
requested and approved by the Board.
4. Annual Election of All Directors. As provided in Halliburton's By-laws, all
Directors are elected annually. Should a Director's principal title change
during the year, he or she must submit a letter of Board resignation to the
Chairman of the Nominating and Corporate Governance Committee who, with the
full Committee, shall have the discretion to accept or reject the letter.
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5. Board Membership Criteria. Candidates nominated for election or reelection
to the Board of Directors should possess the following qualifications:
-- Personal characteristics;
-- highest personal and professional ethics, integrity and values;
-- an inquiring and independent mind;
-- practical wisdom and mature judgment.
-- Broad training and experience at the policy-making level in business,
government, education or technology;
-- Expertise that is useful to Halliburton and complementary to the
background and experience of other Board members, so that an optimum
balance of members on the Board can be achieved and maintained;
-- Willingness to devote the required amount of time to carrying out the
duties and responsibilities of Board membership;
-- Commitment to serve on the Board over a period of several years to
develop knowledge about Halliburton's principal operations;
-- Willingness to represent the best interests of all stockholders and
objectively appraise management performance; and
-- Involvement only in activities or interests that do not create a
conflict with the Director's responsibilities to Halliburton and its
stockholders.
The Nominating and Corporate Governance Committee is responsible for
assessing the appropriate mix of skills and characteristics required of
Board members in the context of the perceived needs of the Board at a given
point in time and shall periodically review and update the criteria as
deemed necessary. Diversity in personal background, race, gender, age and
nationality for the Board as a whole may be taken into account in
considering individual candidates.
The Nominating and Corporate Governance Committee will evaluate the
qualifications of each Director candidate against these criteria in making
its recommendation to the Board concerning his or her nomination for
election or reelection as a Director.
6. Process for the Selection of New Directors. The Board is responsible for
filling vacancies on the Board. The Board has delegated to the Nominating
and Corporate Governance Committee the duty of selecting and recommending
prospective nominees to the Board for approval. The Nominating and Corporate
Governance Committee considers suggestions of candidates for Board
membership made by current Committee and Board members, Halliburton
management, and stockholders. On occasion, the Committee may retain an
independent executive search firm to identify candidates for consideration.
A stockholder who wishes to recommend a prospective candidate should notify
Halliburton's Vice President and Secretary, as described in our proxy
statement. The Nominating and Corporate Governance Committee also considers
whether to nominate persons put forward by stockholders pursuant to
Halliburton's By-laws relating to stockholder nominations.
When the Nominating and Corporate Governance Committee identifies a
prospective candidate, the Committee determines whether it will carry out a
full evaluation of the candidate. This determination is based on the
information provided to the Committee by the person recommending the
prospective candidate, and the Committee's knowledge of the candidate. This
information may be supplemented by inquiries to the person who made the
recommendation or to others. The preliminary determination is based on the
need for additional Board members to fill vacancies or to expand the size of
the Board, and the likelihood that the candidate will meet the Board
membership criteria listed in item 5 above. The Committee will determine,
after discussion with the Chairman of the Board and other Board members,
whether a candidate should continue to be considered as a potential nominee.
If a candidate warrants additional consideration, the Committee may request
an independent executive search firm to gather additional information about
the candidate's background, experience and reputation, and to report its
findings to the Committee. The Committee then evaluates the candidate and
determines whether to interview the candidate. Such an interview would be
carried out, in person or via telephone conference, by one or more members
of the Committee and others as appropriate. Once the evaluation and
interview are completed, the Committee recommends to the Board which
candidates should be nominated. The Board makes a determination of nominees
after review of the recommendation and the Committee's report.
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7. Director Tenure. The Nominating and Corporate Governance Committee, in
consultation with the Chief Executive Officer, will review each Director's
continuation on the Board annually in making its recommendation to the Board
concerning his or her nomination for election or reelection as a Director.
There are no term limits on Directors' service, other than mandatory
retirement.
8. Director Retirement. It is the policy of the Board that each outside
Director shall retire from the Board immediately prior to the annual meeting
of stockholders following his or her seventy-second birthday. Employee
Directors shall retire at the time of their retirement from employment with
Halliburton unless continued service as a Director is approved by the Board.
9. Director Compensation Review. It is appropriate for executive management of
Halliburton to report periodically to the Nominating and Corporate
Governance Committee on the status of Halliburton's Director compensation
practices in relation to other companies of comparable size and
Halliburton's competitors.
10. Changes. Changes in Director compensation, if any, should come upon the
recommendation of the Nominating and Corporate Governance Committee, but
with full discussion and concurrence by the Board.
11. General Principles for Determining Form and Amount of Director
Compensation. The Nominating and Corporate Governance Committee annually
reviews the competitiveness of Halliburton's Director compensation
practices. In doing so, the Committee compares Halliburton's practices with
those of its comparator group, which includes both peer and general industry
companies. Specific components reviewed include: cash compensation, equity
compensation, benefits and perquisites. Information is gathered directly
from published proxy statements of comparator group companies. Additionally,
the Committee utilizes external market data gathered from a variety of
survey sources to serve as a reference point against a broader group of
companies. Determinations as to the form and amount of Director compensation
are based on Halliburton's competitive position resulting from this review.
12. Conflicts of Interest. If an actual or potential conflict of interest
develops because of significant dealings or competition between Halliburton
and a business with which the Director is affiliated, the Director should
report the matter immediately to the Chairman of the Board for evaluation by
the Board. A significant conflict must be resolved or the Director should
resign.
If a Director has a personal interest in a matter before the Board, the
Director shall disclose the interest to the full Board and excuse himself or
herself from participation in the discussion and shall not vote on the
matter.
13. Board Attendance at Annual Meeting. It is the policy of the Board that all
Directors attend the Annual Meeting of Stockholders and Halliburton's annual
proxy statement shall state the number of Directors who attended the prior
year's Annual Meeting.
COMMITTEES OF THE BOARD
1. Number and Types of Committees. A substantial portion of the analysis and
work of the Board is done by standing Board Committees. A Director is
expected to participate actively in the meetings of each Committee to which
he or she is appointed.
The Board has established the following standing Committees: Management
Oversight; Audit; Compensation; Nominating and Corporate Governance; and
Health, Safety and Environment. Each Committee's charter is to be reviewed
periodically by the Committee and the Board.
2. Composition of Committees. It is the policy of the Board that only outside
Directors serve on Board Committees. Further, only independent Directors
serve on the Audit; Compensation; and the Nominating and Corporate
Governance Committees.
A Director who is part of an interlocking directorate (i.e., one in which
the Chief Executive Officer or another Halliburton executive officer serves
on the board of another corporation that employs the Director) may not
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serve on the Compensation Committee. The composition of the Compensation
Committee will be reviewed annually to ensure that each of its members meet
the criteria set forth in applicable SEC, NYSE and IRS rules and
regulations.
In addition, the composition of the Audit Committee will be reviewed
annually to ensure that each of its members meets the criteria set forth in
applicable NYSE and SEC rules and regulations.
3. Assignment and Rotation of Committee Members. The Nominating and Corporate
Governance Committee, with direct input from the Chief Executive Officer,
recommends annually to the Board the membership of the various Committees
and their Chairmen and the Board approves the Committee assignments. In
making its recommendations to the Board, the Committee takes into
consideration the need for continuity; subject matter expertise; applicable
SEC, IRS or NYSE requirements; tenure; and the desires of individual Board
members.
4. Frequency and Length of Committee Meetings. Each Committee shall meet as
frequently and for such length of time as may be required to carry out its
assigned duties and responsibilities. The schedule for regular meetings of
the Board and Committees for each year is submitted and approved by the
Board in advance. In addition, the Chairman of a Committee may call a
special meeting at any time if deemed advisable.
5. Committee Agendas; Reports to the Board. Appropriate members of management
and staff will prepare draft agenda and related background information for
each Committee meeting which, to the extent desired by the relevant
Committee Chairman, will be reviewed and approved by the Committee Chairman
in advance of distribution to the other members of the Committee. A forward
agenda of recurring topics to be discussed during the year will be prepared
for each Committee and furnished to all Directors. Each Committee member is
free to suggest items for inclusion on the agenda and to raise at any
Committee meeting subjects that are not on the agenda for that meeting.
Reports on each Committee meeting (other than Management Oversight Committee
meetings) are made to the full Board. All Directors are furnished copies of
each Committee's minutes.
OTHER BOARD PRACTICES
1. Director Orientation and Continuing Education. An orientation program has
been developed for new Directors which includes comprehensive information
about Halliburton's business and operations; general information about the
Board and its Committees, including a summary of Director compensation and
benefits; and a review of Director duties and responsibilities. Halliburton
provides continuing education courses several times per year on business
unit product and service line operations.
2. Board Interaction with Institutional Investors and Other Stakeholders. The
Board believes that it is executive management's responsibility to speak for
Halliburton. Individual Board members may, from time to time, meet or
otherwise communicate with outside constituencies that are involved with
Halliburton. In those instances, however, it is expected that Directors will
do so only with the knowledge of executive management and, absent unusual
circumstances, only at the request of executive management.
3. Shareholder Communications with Directors. To foster better communication
with our stockholders, a process exists for stockholders to communicate with
the Audit Committee and the Board of Directors. The process has been
approved by the Audit Committee, and meets the requirements of the New York
Stock Exchange, or NYSE and the Securities and Exchange Commission, or SEC.
The methods of communication with the Board include mail, a dedicated
telephone number and an e-mail address. Information regarding these methods
of communication is on our website, www.halliburton.com, under "Corporate
Governance".
Halliburton's Director of Business Conduct, a company employee, will review
all stockholder communications received in accordance with the existing
process. The Chairman of the Audit Committee will be promptly notified of
any significant communication involving accounting, internal accounting
controls, or auditing matters. The Chairman of the Management Oversight
Committee will be promptly notified of any other significant stockholder
communications and communications addressed to a named Director will be
promptly
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sent to such Director. A report summarizing all communications will be sent
to each Director quarterly and copies of communications will be available
for review by any Director.
4. Periodic Review of These Guidelines. The operation of the Board of Directors
is a dynamic and evolving process. Accordingly, these Guidelines will be
reviewed periodically by the Nominating and Corporate Governance Committee
and any recommended revisions will be submitted to the full Board for
consideration.
Approved as revised: Board of Directors of
Halliburton Company
March 3, 2004
Supersedes previous version dated:
July 19, 2001
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APPENDIX B
AUDIT COMMITTEE CHARTER
GENERAL
The Audit Committee of the Board of Directors of Halliburton Company shall
consist of at least three directors, all of whom shall be independent. Members
of the Committee shall be considered independent if they (i) satisfy the
independence requirements of the New York Stock Exchange, (ii) do not, other
than in the capacity as a member of the Board of Directors or as a member of a
committee of the Board, accept any consulting, advisory or other compensatory
fee from the Company and (iii) are not an affiliated person of the Company other
than as a result of being a member of the Board of Directors. As determined by
the Board of Directors, the Members of the Committee will be financially
literate with at least one having accounting or related financial management
expertise and being an "audit committee financial expert" as defined by the
Securities and Exchange Commission. Company management, internal auditors, the
independent accounting firm appointed to audit the financial statements of the
Company (the "Principal Independent Accountants") and the Company's General
Counsel may attend each meeting or portions thereof as required by the
Committee. The Committee will have seven regularly scheduled meetings each year
and will meet at such other times as it deems necessary to fulfill its
responsibilities.
ROLE
The Audit Committee's role is to:
1. assist the Board's oversight of:
-- the integrity of the Company's financial statements;
-- the Company's compliance with legal and regulatory requirements;
-- the Principal Independent Accountants' qualifications and
independence;
-- the performance of the Company's internal audit function and the
Principal Independent Accountants; and
-- the adequacy of the Company's financial disclosure and internal
controls;
2. appoint, compensate, retain and oversee the work of the Principal
Independent Accountants and appoint, compensate, retain and oversee the
audit services work of other independent accountants, and to resolve any
disagreements between management and the Principal Independent Accountants
regarding financial reporting; and
3. prepare the report that the SEC rules require be included in the Company's
annual proxy statement.
RESPONSIBILITIES
The Audit Committee's role is one of oversight whereas the Company's management
is responsible for preparing the Company's financial statements and the
Principal Independent Accountants are responsible for auditing those financial
statements. The Audit Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the Principal Independent Accountants' work. The following functions shall be
the key responsibilities of the Audit Committee in carrying out its oversight
function.
1. Provide an open avenue of communications between the internal auditors, the
Principal Independent Accountants, management and the Board of Directors,
including periodic private sessions with the internal auditors, the
Principal Independent Accountants and management. The private sessions with
the Principal Independent Accountants shall address, among other things, any
audit problems or difficulties encountered in the course of the audit and
Company management's response, any restrictions on the scope of the
Principal Independent Accountants' activities or on access to requested
information, and any significant disagreements with management.
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2. Receive and review reports from Company management and the General Counsel
relating to legal and regulatory matters that may have a material impact on
the Company's financial statements and Company compliance policies.
3. Receive and review reports from internal auditors relating to major findings
and recommendations from internal audits conducted Company-wide. Consult
with and review reports from internal auditors relating to on-going
monitoring programs including the Company's Code of Business Conduct and
compliance with policies of the Company.
4. Review and discuss the Company's annual audited financial statements,
quarterly financial statements and the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" with Company management and the Principal Independent
Accountants, reviewing, among other things:
-- major issues regarding accounting principles followed by the Company
and financial statement presentations, including any significant
changes in the Company's selection or application of accounting
principles, and major issues as to the adequacy of the Company's
internal controls and any audit steps adopted in light of material
control deficiencies;
-- analyses prepared by management and/or the Principal Independent
Accountants setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements, including analyses of the effects of alternative GAAP
methods on the financial statements; and
-- the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements.
5. Review with Company management, the internal auditors and the Principal
Independent Accountants, the Company's annual assessment of the
effectiveness of its internal controls and the Principal Independent
Accountants' attestation and report about the Company's assessment.
6. Discuss with Company management the types of information to be disclosed and
presentations made in the Company's earnings press releases, as well as
financial information and earnings guidance provided to analysts and ratings
agencies.
7. Discuss with Company management the Company's policies with respect to risk
assessment and risk management.
8. Review the internal audit program in terms of scope of audits conducted or
scheduled to be conducted and review with the internal auditors and the
Principal Independent Accountants the coordination of their respective audit
activities.
9. The Committee and the Board shall be ultimately responsible for the
appointment, compensation, retention and oversight of the work of the
Principal Independent Accountants, which will report directly to the
Committee and the Committee will resolve any disagreements between
management and the Principal Independent Accountants regarding financial
reporting. The Committee's responsibility includes the responsibility to
approve in advance, except as otherwise permitted by applicable law, all
services performed by the Principal Independent Accountants for the Company.
The Committee will also appoint, compensate, retain and oversee the audit
services work of other independent accountants.
The Principal Independent Accountants are ultimately accountable to the
Board and the Committee on all matters pertaining to the services provided
by the Principal Independent Accountants to the Company.
10. The Committee will recommend annually the appointment of the Principal
Independent Accountants to the Board for its approval, based upon an annual
performance evaluation of the Principal Independent Accountants.
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This evaluation will include obtaining and reviewing a written report by the
Principal Independent Accountants that addresses:
-- the Principal Independent Accountants' quality-control procedures;
-- any material issues raised by the most recent internal quality-control
review, or peer review, of the Principal Independent Accountants, or
by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or more
independent audits carried out by the Principal Independent
Accountants, and any steps taken to deal with any such issues; and
-- the Principal Independent Accountants' independence with respect to
the Company, which will delineate all relationships between the
Principal Independent Accountants and the Company.
In evaluating the report, the Committee will discuss with the Principal
Independent Accountants whether any disclosed relationship or service could
impact the Principal Independent Accountants' objectivity and independence.
The Committee will recommend to the Board that the Board take appropriate
action in response to the Principal Independent Accountants' report to
ensure the independence of the Principal Independent Accountants.
11. Receive a report from the Principal Independent Accountants prior to the
filing of the annual audited financial statements of:
-- all critical accounting policies and practices to be used;
-- all alternative treatments within generally acceptable accounting
principles for policies and practices related to material items that
have been discussed with Company management, including ramifications
of the use of such alternative disclosures and treatments and the
treatment preferred by the Principal Independent Accountant; and
-- other material written communications between the Principal
Independent Accountants and Company management, such as any management
letter or schedule of unadjusted differences.
12. Prepare a Report, for inclusion in the Company's proxy statement, disclosing
that the Committee reviewed and discussed the audited financial statements
with management and discussed certain other matters with the Principal
Independent Accountants. Based upon these discussions, state in the Report
whether the Committee recommended to the Board that the audited financial
statements be included in the Annual Report.
13. As appropriate, retain and obtain the advice and assistance of outside
legal, accounting and other advisors, in addition to obtaining advice from
the Company's internal counsel or regular outside counsel. The Company will
provide funding as determined by the Committee to compensate legal,
accounting and other advisors retained by the Committee.
14. Establish such procedures as necessary to timely implement the provisions of
the Sarbanes-Oxley Act of 2002 applicable to audit committees, including,
but not limited to, procedures for:
-- the receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing
matters; and
-- the confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
15. Set hiring policies for employees or former employees of the Principal
Independent Accountants.
16. Conduct an annual performance evaluation of the Committee and discuss those
results with the Board of Directors.
17. Review and reassess the adequacy of the Audit Committee's charter annually.
If any revisions therein are deemed necessary or appropriate, submit the
same to the Board for its consideration and approval.
18. Report regularly to the Board of Directors on the Committee's proceedings.
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QUORUM
For the transaction of business at any meeting of the Audit Committee, a
majority of the members shall constitute a quorum.
Approved as revised: Board of Directors of
Halliburton Company
March 15, 2004
Supersedes previous version dated:
February 12, 2003
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APPENDIX C
COMPENSATION COMMITTEE CHARTER
The role of the Compensation Committee is to establish and oversee the
compensation policies and practices of Halliburton Company on behalf of its
Board of Directors. It is the Committee's responsibility to review, monitor,
approve and recommend, as applicable, compensation policies, plans and actions,
and make appropriate reports to the Board of Directors. The primary function of
the Committee is to ensure that the Company's compensation program is effective
in attracting, retaining and motivating key employees, that it reinforces
business strategies and objectives for enhanced shareholder value and that it is
administered in a fair and equitable manner consistent with established policies
and guidelines.
ORGANIZATION
The Compensation Committee shall consist entirely of at least three independent,
non-employee directors. Committee members shall be appointed by the full Board
of Directors for a one-year term beginning immediately following the Annual
Meeting of Stockholders each year. A Chairperson shall be designated by the
Board from among the members appointed. Committee members shall be chosen based
on their competence and ability to add substance to the deliberations of the
Committee. Members of the Committee shall have no relationship to the Company
that could interfere with the exercise of their independence from management and
the Company. The composition of the Committee shall be reviewed annually to
ensure that each of its members meet the criteria set forth in applicable SEC
and IRS rules and regulations.
Compensation Committee members shall devote sufficient attention to their duties
to enable them to fully understand the environment in which the Company's
compensation program operates as well as to understand and apply principles of
competitive compensation practice. The Chairperson shall be responsible for
making regular reports to the Board of Directors. The Committee shall meet a
minimum of four times per year.
RESPONSIBILITY
The Compensation Committee shall be generally responsible for the Company's
overall compensation philosophy and objectives, and specifically responsible for
reviewing, approving and monitoring compensation strategies, plan design,
guidelines and practices as they relate to senior management. The Compensation
Committee shall be responsible for 1) specifically reviewing and approving
compensation for specified officers as provided in Halliburton Company Policy
3-9002 (or any successor policy) and 2) generally reviewing and monitoring
compensation for other employees, both as agreed by the Compensation Committee
at the start of each year. The scope of the Committee's authority includes,
among other things, the following responsibilities:
1. Developing and approving an overall executive compensation philosophy,
strategy and framework consistent with corporate objectives and
stockholder interests.
2. Issuing an annual report on executive compensation for inclusion in the
Company's proxy statement, in accordance with applicable rules and
regulations.
3. Reviewing and approving annually the corporate objectives applicable to
the Company's Chief Executive Officer's compensation, evaluating the
Chief Executive Officer's performance relative to the achievement of
those objectives, and determining his or her compensation based on this
evaluation.
4. Specifically reviewing and approving all actions relating to
compensation, promotion and employment-related arrangements (including
severance arrangements) for specified officers of the Company, its
subsidiaries and affiliates.
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5. Establishing annual performance criteria and reward schedules under the
Company's Annual Performance Pay Plan (or any other similar or
successor plans) and certifying the performance level achieved and
reward payments at the end of each plan year.
6. Establishing performance criteria and award schedules under the
Company's Performance Unit Program (or any other similar or successor
plans) and certifying the performance level achieved and award payments
at the end of each performance cycle.
7. Approving any other incentive or bonus plans applicable to specified
officers of the Company, its subsidiaries and affiliates.
8. Administering awards under the Company's 1993 Stock and Incentive Plan
and Supplemental Executive Discretionary Retirement Plan (or any other
similar or successor plans).
9. Selecting an appropriate peer group or peer groups against which the
Company's total executive compensation program is measured.
10. Reviewing and approving or recommending to the Board of Directors, as
appropriate, major changes to, and taking administrative actions
associated with, any other forms of non-salary compensation under its
purview.
11. Reviewing and approving the stock allocation budget among all employee
groups of the Company, its subsidiaries and affiliates.
12. Monitoring and reviewing periodically overall compensation program
design and practice to ensure continued competitiveness,
appropriateness and alignment with established philosophies, strategies
and guidelines.
13. Reviewing and approving appointments to the Administrative Committee
which oversees the day-to-day administration of certain non-qualified
executive compensation plans.
14. Retaining persons having special competence (including consultants and
other third-party service providers) as necessary to assist the
Committee in fulfilling its responsibilities and maintaining the sole
authority to retain and terminate these persons, including the
authority to approve fees and other retention terms.
15. Performing an annual performance evaluation of the Committee.
16. Performing such other duties and functions as the Board of Directors
may from time to time delegate.
Approved as revised: Board of Directors of
Halliburton Company
July 17, 2003
Supersedes previous version dated:
September 11, 2002
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APPENDIX D
MANAGEMENT OVERSIGHT COMMITTEE CHARTER
I. PURPOSE OF THE COMMITTEE
The Management Oversight Committee (the "Committee") is a Board Committee,
composed of all of the non-employee Directors, which meets in executive session
during a portion of each of its five regular meetings per year. Its purpose is
to provide a regularly scheduled opportunity for all non-employee Directors to
meet, apart from Company management, in executive session to address
responsibilities which the Board has assigned to the Committee and to discuss
matters the Committee deems important.
II. COMMITTEE MEMBERSHIP
The Committee members shall consist of all of the non-employee Directors of the
Board. A majority of the members of the Committee shall constitute a quorum
thereof.
III. COMMITTEE STRUCTURE AND OPERATIONS
The Chair of the Management Oversight Committee shall also be deemed the Lead
Director. The Committee shall fix its own rules of procedure and shall meet
where and as provided by such rules or by resolution of the Committee. In
addition to the regular meeting schedule established by the Committee, the Chair
of the Committee may call a special committee meeting at any time.
The Vice President and Secretary of the Company shall be the Secretary of the
Management Oversight Committee unless the Committee designates otherwise.
In the absence of the Chair during any Committee meeting, the Committee may
designate a Chair pro tempore.
The Committee shall act only on the affirmative vote of a majority of the
members at a meeting or by unanimous written consent.
Whenever, at any meeting of the Management Oversight Committee, any member of
the Committee expresses the judgment that any matter under consideration should
be referred to the Board for consideration, it shall be so referred.
IV. COMMITTEE RESPONSIBILITIES AND ACTIVITIES
The following shall be the responsibilities and common recurring activities of
the Committee in carrying out its purpose. These activities are set forth as a
guide with the understanding that the Committee may diverge from this guide as
appropriate given the circumstances:
(1) evaluate the performance of the Chief Executive Officer;
(2) review succession plans for senior management of Halliburton and
its major operating units;
(3) evaluate management development programs and activities;
(4) review other internal matters of broad corporate significance; and
D-1
(5) take such other action and do such other things as may be referred
to it from time to time by the Board.
V. COMMITTEE EVALUATION
The Committee members will annually complete a self-evaluation of the
Committee's effectiveness and provide a report of that assessment to the Board.
VI. COMMITTEE CHARTER
The Committee Charter shall be reviewed at least annually and revised as
appropriate.
VII. RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee has the authority to retain, set terms of engagement and dismiss
such outside advisors, including legal counsel or other experts, as it deems
appropriate, and to approve the fees and expenses of such advisors.
Approved: Board of Directors of Halliburton
Company
February 18, 2004
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APPENDIX E
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
I. STATUS
The Nominating and Corporate Governance Committee is a committee of the Board of
Directors. The Committee shall be responsible for matters related to service on
the Board of Directors and associated issues of corporate governance.
II. MEMBERSHIP
The Nominating and Corporate Governance Committee shall consist of a minimum of
three Directors. All members of the Committee shall be independent Directors,
and shall satisfy the New York Stock Exchange standard for independence. Members
of the Committee shall be appointed, and may be removed, by the Board of
Directors.
III. PURPOSE
The purpose of the Committee shall be:
-- to develop, implement and periodically review the Company's corporate
governance guidelines;
-- to develop and implement a process to assess Board and committee
effectiveness;
-- to identify individuals qualified to become Board members, consistent
with Board-approved criteria;
-- to determine the composition of the Board of Directors and its
committees; including selection of the Director nominees for the next
annual meeting of shareholders; and
-- to make recommendations in Board compensation.
IV. MEETINGS
The Committee shall formally meet as often as may be deemed necessary or
appropriate, but no fewer than two times annually. The Committee may ask members
of management or others to attend meetings or to provide relevant information.
The Committee shall periodically meet in executive session. The Vice President
and Secretary of the Company shall be the Secretary of the Nominating and
Corporate Governance Committee unless the Committee designates otherwise.
V. RESPONSIBILITIES AND DUTIES
In furtherance of its purpose and goal, the Committee shall have the following
authority and responsibilities:
-- reviewing periodically the corporate governance guidelines adopted by
the Board of Directors and recommending revisions to the guidelines as
appropriate;
-- developing and recommending to the Board for its approval an annual
self-evaluation process of the Board and its committees. The Committee
shall oversee the annual self-evaluations;
-- reviewing and periodically updating the criteria for Board membership
and evaluating the qualifications of each Director candidate against
the criteria;
-- assessing the appropriate mix of skills and characteristics required
of Board members;
-- identifying and screening candidates for Board membership;
-- establishing procedures for stockholders to recommend individuals for
consideration by the Committee as possible candidates for election to
the Board;
-- reviewing annually each Director's continuation on the Board and
recommending to the Board a slate of Director nominees for election at
the Annual Meeting of Stockholders;
-- recommending candidates to fill vacancies on the Board;
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-- reviewing periodically the status of each Director to assure
compliance with the Board's policy that at least two-thirds of
Directors meet the definition of independent Director;
-- reviewing the Board's committee structure, and recommending to the
Board for its approval Directors to serve as members and as Chairs of
each committee;
-- reviewing annually any stockholder proposals submitted for inclusion
in Halliburton's proxy statement and recommending to the Board any
Halliburton statements in response;
-- reviewing periodically Halliburton's Director compensation practices,
conducting studies and recommending changes, if any, to the Board; and
-- reporting regularly on Committee activities and findings to the Board.
VI. SUBCOMMITTEES
The Committee has the authority to form, and to delegate authority to,
subcommittees, to the extent it deems appropriate, provided that such
subcommittees are composed entirely of independent Directors.
VII. COMMITTEE EVALUATION
The Committee members will annually complete a self-evaluation of the
Committee's effectiveness and provide a report of that assessment to the Board.
VIII. COMMITTEE CHARTER
The Committee Charter shall be reviewed at least annually and revised as
appropriate.
IX. RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee has the authority to retain, set the terms of engagement, and
terminate outside counsel and any other advisors, as it deems appropriate,
including any independent search firms to assist in identifying Director
candidates, and the Committee has the sole authority to approve related fees and
retention terms.
Approved: Board of Directors of Halliburton
Company
February 18, 2004
E-2
APPENDIX F
CORPORATE POLICY
SERVICES OF INDEPENDENT ACCOUNTANTS
PURPOSE
To establish the policy of Halliburton Company, its subsidiaries and affiliates
(the "Company") with respect to (1) the types of services that may be provided
by the independent accounting firm appointed to audit the financial statements
of Halliburton Company (the "Principal Independent Accountants") and (2) the
approval of all services provided by the Principal Independent Accountants and
all audit services provided by other independent accountants.
GENERAL
This Policy is intended to assist management, the Audit Committee and the Board
of Directors in carrying out their respective responsibilities to ensure that
(1) the independence of the Principal Independent Accountants is not impaired,
(2) no prohibited services are provided by the Principal Independent Accountants
and (3) that all services provided by the Principal Independent Accountants and
all audit services provided by independent accountants other than the Principal
Independent Accountants are pre-approved by the Audit Committee. Nothing herein
shall be deemed to amend or restrict the Audit Committee Charter, to restrict
the authority of the Audit Committee to appoint, compensate, retain and oversee
the work of the Principal Independent Accountants and audit services work of
other independent accountants or to alter in any way the responsibilities of the
Audit Committee, the Principal Independent Accountants, other independent
accountants and management as set forth in the Audit Committee Charter or as
required under applicable laws, rules or regulations as they relate to the
matters covered herein.
POLICY
1. The services ("Permitted Services") which can be performed for the Company
by the Principal Independent Accountants will be categorized as follows
consistent with rules of the Securities and Exchange Commission (the "SEC")
pertaining to fee disclosure:
-- Audit;
-- Audit-Related;
-- Tax; and
-- All Other.
2. Audit services include:
-- audit of financial statements that are filed with the SEC;
-- quarterly reviews;
-- statutory audits;
-- comfort letters;
-- consents;
-- review of registration statements;
-- Sarbanes-Oxley Section 404 attestations;
-- accounting research for completed transactions;
-- tax or information technology control assistance for Audit services;
and
-- such other services as the SEC may, from time to time, deem to
constitute Audit services.
F-1
3. Audit-Related services include:
-- employee benefit plan audits;
-- due diligence assistance;
-- accounting research on proposed transactions;
-- assistance with regulatory matters involving the SEC and Public
Company Accounting Oversight Board ("PCAOB"), environmental
compliance, and project bidding or execution; and
-- other audit or attest services required by regulatory authorities.
4. Tax services include:
-- preparation of original and amended tax returns, claims for refund and
tax payment-planning services;
-- tax planning and tax advice, which includes assistance with tax audits
and appeals, tax advice relating to proposed transactions, employee
benefit plans and requests for rulings or technical advice from taxing
authorities; and
-- global tax compliance and advisory services for expatriate employees.
Notwithstanding the above, Tax services will not include representation
before a tax court, district court or U.S. federal court of claims.
5. Other services include:
-- special investigations to assist the Audit Committee or its counsel;
-- corporate secretarial services in foreign jurisdictions; and
-- other services that can be performed for the Company by the Principal
Independent Accountants which are allowed by the rules of the SEC and
PCAOB and are specifically approved by the Audit Committee or the
Committee Designee (as defined below).
6. The Audit Committee has determined that the Principal Independent
Accountants providing Audit-Related services, Tax services and Other
services is consistent with the maintenance of auditor independence.
Accordingly, the Audit Committee is pre-approving as set forth in this
Paragraph 6 the performance by the Principal Independent Accountants of the
enumerated Permitted Services:
a. Audit, Audit-Related and Tax services will be described in a plan
submitted by the Principal Independent Accountants to, and approved in
advance on, an annual basis by the Audit Committee. The approved plan,
together with any approved modifications or supplements to the plan, is
referred to in this policy as the "Principal Independent Accountants
Auditor Services Plan";
b. For Audit, Audit-Related and Tax services that are not included in the
Principal Independent Accountants Auditor Services Plan, (1) any service
the fees for which will be $150,000 or less are approved, and (2) any
service the fees for which will be greater than $150,000 will require
the specific approval of (a) the Audit Committee, or (b) the Chairman of
the Audit Committee or another member of the Audit Committee designated
by the Audit Committee or the Chairman of the Audit Committee (the
"Committee Designee"); and
c. Other services (1) the fees for which will be $50,000 or less are
approved, and (2) the fees for which will be greater than $50,000 will
require the specific approval of (a) the Audit Committee, or (b) the
Committee Designee.
Any services of the Principal Independent Accountants (i) approved by the
Committee Designee or (ii) pre-approved by the Audit Committee by virtue of
this paragraph 6 but not included in the Principal Independent Accountants
Auditor Services Plan will be reported to the full Audit Committee at its
next regularly scheduled meeting.
F-2
7. Any other Permitted Services to be provided by the Principal Independent
Accountants not specifically listed under paragraphs 2 through 5 will
require specific approval by the (a) Audit Committee or (b) Committee
Designee.
8. On a quarterly basis, the Principal Independent Accountants will furnish to
the Audit Committee a report reflecting the Permitted Services approved
year-to-date categorized as follows:
-- Audit fees;
-- Audit-Related fees;
-- Tax fees; and
-- All Other fees.
9. For any Audit services to be provided by independent accountants other than
the Principal Independent Accountants, the Audit Committee is pre-approving
as set forth in this Paragraph 9 the performance of Audit services by such
independent accountants as follows:
a. Audit services will be described in a plan submitted by the Chief
Accounting Officer to, and approved in advance on, an annual basis by
the Audit Committee. The approved plan, together with any approved
modifications or supplements to the plan, is referred to in this policy
as the "Other Auditor Services Plan"; and
b. For Audit services that are not included in the Other Auditor Services
Plan, (1) any service the fees for which will be $150,000 or less are
approved, and (2) any service the fees for which will be greater than
$150,000 will require the specific approval of (a) the Audit Committee,
or (b) the Committee Designee.
Any Audit services to be provided by independent accountants other than the
Principal Independent Accountants which have been (i) approved by the
Committee Designee or (ii) pre-approved by the Audit Committee by virtue of
this paragraph 9 but not included in the Other Auditor Services Plan will be
reported to the full Audit Committee at its next regularly scheduled
meeting.
10. The Principal Independent Accountants shall not be engaged to provide any
service that would result in the Principal Independent Accountants:
-- functioning in the role of management;
-- auditing its own work; or
-- serving in an advocacy role.
Without limiting the generality of the previous sentence, the following
"Prohibited Non-Audit Services" shall not be performed for the Company by
the Principal Independent Accountants:
-- bookkeeping or other services related to the accounting records or
financial statements of the Company;
-- financial information systems design and implementation;
-- appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;
-- actuarial services;
-- internal audit outsourcing services;
-- management functions or human resources;
-- broker-dealer, investment adviser, or investment banking services;
-- legal services;
-- expert services unrelated to the audit; and
-- any other service that the PCAOB or SEC determines, by regulation, is
impermissible.
11. The Company shall not hire any of the following individuals to fill a
"financial reporting oversight role" (being a position where that person can
influence the contents of Halliburton Company's financial statements or
anyone who prepares them, such as when the person is a member of the Board
of Directors, or the chief executive officer, president, chief financial
officer, chief operating officer, general counsel, chief accounting
F-3
officer, corporate controller, director of internal audit, director of
financial reporting, corporate treasurer, or any equivalent position for
Halliburton Company) for a one year period following the completion of the
annual audit for the Company:
-- lead partner for the audit;
-- concurring partner for the audit; or
-- any other member of the audit engagement team who provides more than
ten hours of audit, review or attest services for the Company.
The Principal Independent Accountants will maintain a list of all members of
the audit engagement team who fall into the categories described above and
present such list to the Chief Accounting Officer on an annual basis.
The approval of the Chief Financial Officer is required before the Company
extends an offer for a position to any personnel of the Principal
Independent Accountants, including any individuals that were formerly
personnel of the Principal Independent Accountants, who participated in the
Company's audit engagement team within the previous two years. The Chief
Financial Officer will report to the Audit Committee as to any personnel or
former personnel of the Principal Independent Accountants who are hired by
the Company during the previous quarter. Additionally, approval of the Audit
Committee Chairman is required before the Company may hire any partner or
former partner of the Principal Independent Accountants.
12. Both the lead and concurring partners of the Principal Independent
Accountants shall be rotated after five years of service and, upon rotation,
are subject to a five year "time out" period. Other audit partners of the
Principal Independent Accountants shall be rotated after seven years of
service and, upon rotation, are subject to a two-year "time out" period.
Audit partners shall mean partners on the audit engagement team who have
responsibility for decision-making on significant auditing, accounting and
reporting matters that affect the financial statements or who maintain
regular contact with management and the Audit Committee. On an annual basis,
the Principal Independent Accountants will report to the Audit Committee the
names and status of rotation of all audit partners subject to rotation.
Approved as revised: Audit Committee of
Halliburton Company
March 15, 2004
Supersedes previous version dated:
May 7, 2003
OTHER REFERENCES
1. Halliburton Company Audit Committee Charter.
F-4
APPENDIX G
AMENDMENT TO CERTIFICATE OF INCORPORATION
RESOLVED, that the first sentence of ARTICLE FOURTH of the Restated Certificate
of Incorporation of Halliburton be amended to increase the number of authorized
shares of Common Stock, par value $2.50 per share, of Halliburton from
600,000,000 to 1,000,000,000 in order to provide a sufficient number of shares
of Halliburton Common Stock to enable Halliburton to perform its obligations in
the normal course of business, such first sentence of Article Fourth of the
Restated Certificate of Incorporation, when so amended, to be and read in its
entirety as follows:
The aggregate number of shares which the Corporation shall have authority to
issue shall be one billion five million (1,005,000,000), consisting of one
billion (1,000,000,000) shares of Common Stock of the par value of Two and
50/100 Dollars ($2.50) per share and five million (5,000,000) shares of
Preferred Stock without par value.
G-1
DIRECTIONS TO THE FOUR SEASONS HOTEL, HOUSTON, TEXAS
(MAP)
HEADING NORTH ON I-45, FROM HOBBY AIRPORT (HOU)/GALVESTON AREA
Take I-45 North. The right lanes will lead to the Scott Street/Downtown
Destinations split. From there, take the Pease Street exit. Follow Pease about
10 blocks to Austin and turn right. Follow Austin 6 blocks to
Lamar and turn left. Hotel will be immediately on the left.
HEADING SOUTH ON I-45, FROM BUSH INTERCONTINENTAL AIRPORT (IAH)/NORTH TEXAS AREA
Take I-45 South to the Dallas/Pierce exit, stay left and exit Jefferson, go
about 8 blocks and turn left on Austin, follow Austin to Lamar and turn left.
The hotel will be immediately on the left.
HEADING SOUTH ON HWY 59, FROM BUSH INTERCONTINENTAL AIRPORT (IAH)
Take Highway 59 Southbound to the McGowan/Tuam exit, turn right on McGowan,
right at Austin and left on Lamar. The hotel will be immediately on the left.
HEADING EAST ON HWY 290, FROM AUSTIN
Take Hwy 290 South to 610 South. Follow 610 almost 2 miles to I-10 East to
Downtown.
Follow the directions below.
HEADING EAST ON I-10, FROM KATY/SAN ANTONIO AREAS
Take I-10 East I-45 South. Follow I-45 a short distance and take the
Dallas/Pierce exit. Stay left and exit Jefferson, go about 8 blocks and turn
left on Austin, follow Austin to Lamar and turn left.
The hotel will be immediately on the left.
HEADING WEST ON I-10, FROM BEAUMONT/LOUISIANA AREAS
Take I-10 West to Hwy 59 South (left exit). Take Highway 59 Southbound to the
McGowan/Tuam exit, turn right on McGowan, right at Austin and left on Lamar. The
hotel will be immediately on the left.
HEADING NORTH ON 288, FROM THE RELIANT PARK AREA
Take Highway 288 to 59 north/Cleveland. Exit at Downtown Destinations/Polk
Street exit. Turn left at the first light onto Polk. Follow Polk about 5 blocks
to Austin and turn right. Go 2 blocks to Lamar and turn left.
Hotel will be immediately on the left.
FORM # HO3746
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' PLEASE
RECOMMENDATIONS JUST SIGN BELOW; NO BOXES NEED TO MARK HERE
BE CHECKED. IF NO DIRECTION IS MADE, THIS PROXY FOR ADDRESS [ ]
WILL BE VOTED FOR ITEMS 1 AND 2 AND VOTED AGAINST CHANGE OR
ITEMS 3, 4 AND 5. COMMENTS
SEE REVERSE SIDE
--------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ITEM 1.
ITEM 1 - ELECTION OF DIRECTORS. NOMINEES:
01 R.L. CRANDALL 02 K.T. DERR
03 C.J. DIBONA 04 W.R. HOWELL
05 R.L. HUNT 06 D.J. LESAR
07 A.B. LEWIS 08 J.L. MARTIN
09 J.A. PRECOURT 10 D.L. REED
11 C.J. SILAS
WITHHOLD
FOR ALL NOMINEES AUTHORITY
LISTED (EXCEPT AS [ ] TO VOTE FOR ALL [ ]
MARKED TO THE CONTRARY) NOMINEES LISTED
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
________________________________________________________________________________
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ITEM 2.
ITEM 2 - PROPOSAL TO AMEND HALLIBURTON'S CERTIFICATE OF INCORPORATION.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DIRECTORS RECOMMEND A VOTE AGAINST ITEMS 3, 4 AND 5.
ITEM 3 - STOCKHOLDER PROPOSAL ON OPERATIONS IN IRAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 4 - STOCKHOLDER PROPOSAL ON DIRECTOR ELECTION VOTE THRESHOLD.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 5 - STOCKHOLDER PROPOSAL TO SEPARATE CHAIRMAN/CEO.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 6 - IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
CONSENTING TO RECEIVE ALL FUTURE ANNUAL MEETING MATERIALS AND SHAREHOLDER
COMMUNICATIONS ELECTRONICALLY IS SIMPLE AND FAST! ENROLL TODAY AT
WWW.MELLONINVESTOR.COM/ISD FOR SECURE ONLINE ACCESS TO YOUR PROXY MATERIALS,
STATEMENTS, TAX DOCUMENTS AND OTHER IMPORTANT SHAREHOLDER CORRESPONDENCE.
YES
I PLAN TO ATTEND
THE MEETING [ ]
SIGNATURE ___________________ SIGNATURE ____________________ DATE _____________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME THE DAY
PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
----------------------------------- ---------------------------------------- ---------------------
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/HAL 1-800-435-6710 MARK, SIGN AND DATE
USE THE INTERNET TO VOTE YOUR PROXY. USE ANY TOUCH-TONE TELEPHONE TO VOTE YOUR PROXY CARD
HAVE YOUR PROXY CARD IN HAND WHEN OR YOUR PROXY. HAVE YOUR PROXY CARD IN OR AND
YOU ACCESS THE WEB SITE. HAND WHEN YOU CALL. TELEPHONE VOTING RETURN IT IN THE
IS NOT AVAILABLE TO STOCKHOLDERS OUTSIDE ENCLOSED POSTAGE-PAID
THE UNITED STATES AND CANADA. ENVELOPE.
----------------------------------- ---------------------------------------- ---------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE, YOU DO NOT NEED TO MAIL BACK
YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT ON THE
INTERNET AT: HTTP://WWW.HALLIBURTON.COM/ANNUALMEETING.JSP
PROXY
HALLIBURTON COMPANY
PROXY FOR 2004 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS D.J. LESAR, A.O. CORNELISON, JR. AND
M.E. CARRIERE, AND ANY OF THEM, PROXIES OR PROXY WITH FULL POWER OF SUBSTITUTION
AND REVOCATION AS TO EACH OF THEM, TO REPRESENT THE UNDERSIGNED AND TO ACT AND
VOTE, WITH ALL POWERS WHICH THE UNDERSIGNED WOULD POSSESS IF PERSONALLY PRESENT,
AT THE ANNUAL MEETING OF STOCKHOLDERS OF HALLIBURTON COMPANY TO BE HELD IN
BALLROOM B AT THE FOUR SEASONS HOTEL, 1300 LAMAR STREET, HOUSTON, TEXAS, ON
WEDNESDAY, MAY 19, 2004, ON THE FOLLOWING MATTERS AND IN THEIR DISCRETION ON ANY
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
RECEIPT OF NOTICE-PROXY STATEMENT DATED MARCH 23, 2004, IS ACKNOWLEDGED.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED.
IN THE ABSENCE OF SUCH DIRECTION THE PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN ITEM 1, FOR THE PROPOSAL SET FORTH IN ITEM 2 AND AGAINST THE
PROPOSALS SET FORTH IN ITEMS 3, 4 AND 5.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
________________________________________________________________________________
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
________________________________________________________________________________
________________________________________________________________________________
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
PARTICIPANTS IN ONE OR MORE OF THE HALLIBURTON COMPANY EMPLOYEE PLANS SHOULD
CONTACT THEIR PLAN ADMINISTRATOR FOR INFORMATION ON THEIR ACCOUNT.
REGISTERED STOCKHOLDERS CAN NOW ACCESS THEIR HALLIBURTON COMPANY ACCOUNT ONLINE.
ACCESS YOUR HALLIBURTON COMPANY STOCKHOLDER ACCOUNT ONLINE VIA INVESTOR
SERVICEDIRECT(R) (ISD).
MELLON INVESTOR SERVICES LLC, TRANSFER AGENT FOR HALLIBURTON COMPANY, NOW MAKES
IT EASY AND CONVENIENT TO GET CURRENT INFORMATION ON YOUR STOCKHOLDER ACCOUNT.
o VIEW ACCOUNT STATUS o VIEW PAYMENT HISTORY FOR DIVIDENDS
o VIEW CERTIFICATE HISTORY o MAKE ADDRESS CHANGES
o VIEW BOOK-ENTRY INFORMATION o OBTAIN A DUPLICATE 1099 TAX FORM
o ESTABLISH/CHANGE YOUR PIN
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