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OMB
APPROVAL
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OMB Number:
3235-0059
Expires:
January 31, 2008
Estimated
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per response 14
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange Act
of 1934 (Amendment No. )
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Filed by the
Registrant:
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X
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Preliminary
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for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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X
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Caterpillar
Inc.
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(Name of
Registrant as Specified In Its Charter)
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(Name of
Person(s) Filing Proxy Statement, if other than the
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SEC 1913
(04-05)
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Persons
who are to respond to the collection of information contained in this form
are not required to respond unless the form displays a currently valid OMB
control number.
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Chairman and Chief
Executive Officer
Caterpillar
Inc.
Peoria, Illinois
61629
May 10,
2010
Dear Sir or
Madam:
“What a difference
a year can make!” That is what I stated last year and it is just as
true this year. Last year, we successfully made the tough decisions
to control costs, reduce inventory and strengthen Caterpillar’s liquidity
position. Those efforts allowed us to maintain our dividend –
rewarding long-term shareholders, like you, for believing in
Caterpillar. Now, capital markets are improving, demand for our
products is rising, and when we announced our first-quarter results, we also
raised our outlook for 2010. We are encouraged by positive economic
changes throughout the world and are poised to strengthen our global leadership
position.
As you know, six
months ago we announced that Doug Oberhelman would succeed me as CEO on July 1,
2010. Doug has developed and refined the next phase of our Vision
2020 strategy, including our streamlined corporate structure designed to create
a leaner, more agile, customer-focused company. During this time of
transition and strategy implementation, Doug and the entire leadership team will
focus on elevating Caterpillar to the next level, and we need to give them the
necessary tools to get the job done.
You are a valued
investor in Caterpillar stock, and I want to personally request your support
FOR
Company Proposal 3 – Amend 2006 Long-Term Incentive Plan (Incentive
Plan). The Incentive Plan is an important tool for Caterpillar to
attract and retain those key employees who contribute to our
success. In contrast, I ask that you vote AGAINST
Shareholder Proposal 8 – Special Stockholder Meetings. This
stockholder proposal would allow a small minority of stockholders to divert
focus away from Doug’s efforts to implement our strategy. For the
reasons provided below, we strongly encourage you to give individual
consideration to Caterpillar.
Vote FOR our Long-Term
Incentive Plan – Company Proposal 3
I am asking that
you vote FOR
Company Proposal 3 – Amend 2006 Long-Term Incentive Plan. Our
Incentive Plan is an important tool for us to attract, retain and motivate our
employees. I have always said that people make the difference, and we
need to retain and reward those key employees who led us through the recession
and attract new talent to lead us into the future.
By amending the
Incentive Plan, we expect to have enough shares to issue equity incentive awards
for an additional 3-4 years. In addition, we are modifying the terms
of the Incentive Plan to clarify our conservative compensation practices as
follows:
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We expressly
prohibit the exchange of underwater options or stock appreciation rights
for cash;
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We cap the
award of full value shares at 35% of the total
shares;
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·
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We are
further restricting the change in control definition, narrowing
circumstances where awards could vest early;
and
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·
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We are
clarifying that shares withheld for payment of taxes will not be available
for additional grants.
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We understand that
many institutions look to RiskMetrics as they decide how to vote for equity
compensation plans. RiskMetrics uses several tests to evaluate such
proposals, and I ask you to consider the following, based on the RiskMetrics
model:
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·
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Caterpillar
passes the Total Shareholder Return (TSR) review because our 1-year and
3-year TSR performance through December 31, 2009 was above our 4-digit
GICS industry group median. Thus, the Pay for Performance
Policy does not apply.
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·
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Caterpillar
passes the Burn Rate Policy. Our projected 3-year average burn
rate of 1.39% is less than (1) RiskMetrics’ allowable cap of 1.95% or (2)
2% of the weighted average common shares outstanding.
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·
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Caterpillar’s
Shareholder Value Transfer (SVT) cost is approximately 5.53%, which is
slightly higher than RiskMetrics’ recommended cost cap of
5%. However, our SVT percentage is slightly higher because (1)
we believe that employees should own a required amount of shares to be
eligible for equity awards and (2) we place a 3-year vesting term on
almost all of our awards. We believe these policies tie today’s
decisions to our long-term growth and stockholder value, even though it
means our SVT percentage is slightly
higher.
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Voting FOR
Company Proposal 3 will allow us to attract new talent, retain existing leaders
and tie the decisions made today to the interests of our
stockholders.
Vote AGAINST Special
Stockholder Meetings – Shareholder Proposal 8
I am asking that
you vote AGAINST
Shareholder Proposal 8 – Special Stockholder Meetings. This proposal
would allow a small minority of stockholders (those who cumulatively hold 10% of
our shares) to call a special meeting of ALL of our
stockholders. It is important to understand that these proposals have been
driven by stockholders of companies where executive compensation is excessive,
corporate governance is significantly lacking or director independence is at
question. Consider Caterpillar’s actions in these areas:
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Last year we
announced a 50% reduction in executive compensation; we kept our
promise.
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Stockholders
asked for a declassified Board; we are submitting it to you for a
vote.
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·
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Stockholders
asked us to eliminate supermajority voting provisions; we are submitting
it to you for a vote.
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Caterpillar
previously eliminated its “poison pill”
defense.
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We have a
clawback policy for officer equity incentive
compensation.
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All of the
directors, except myself, are independent under NYSE
standards.
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We have an
independent Presiding Director.
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All of the
Board committees are chaired by, and comprised of, independent
directors.
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We have a
conservative compensation philosophy; we believe in strong corporate governance;
and we elect independent directors. As demonstrated above, we listen
to our stockholders and take action.
Please consider
that our charter and bylaws already provide for the calling of special
meetings. The Chairman or a majority of the Board may at any time
call a special meeting of stockholders. You may ask why these
individuals should be the only ones that are entitled to call a special
meeting. First and foremost, you have repeatedly elected these
directors and trusted them to make decisions that are in the best interests of
the Company. Minority stockholders have not been elected and have no
duty to other stockholders – they act in their own self-interest. At
Caterpillar, our independent directors:
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Have the
power and the duty to call a
special meeting of stockholders if the circumstances
require;
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Owe a duty to
all of
our stockholders; minority stockholders do not;
and
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Are in the
best position to weigh the costs and disruption of calling a special
meeting against the potential benefits to the Company and its
stockholders.
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Stockholder meetings are expensive and time-consuming.
For example, last year, our costs for printed materials, distribution and
solicitation alone were over $1 million. Additionally, there is the considerable
cost of time spent by the directors, officers and the many employees who review
and prepare the materials and plan these meetings. This expense and
effort for our Annual Meeting is important to ensure that all of our
stockholders have a voice, but we do not believe that a small minority should be
able to divert the Company’s resources and attention from its long-term
strategic plans by calling a special meeting for
issues that may only impact a minority of stockholders with a limited
agenda.
Again, I urge you
to give these proposals particular attention and consider supporting Caterpillar
- a company with a long history of ethical behavior, outstanding product
performance and strong corporate governance. Please vote FOR our
Long-Term Incentive Plan – Company Proposal 3 and vote AGAINST
Special Stockholder Meetings – Shareholder Proposal 8. I also
ask that you vote AGAINST the other two stockholder proposals for the reasons
outlined in our 2010 Proxy Statement.
Thank you again for
your consideration.
Sincerely,
/s/ James W.
Owens
James W.
Owens
Chairman &
CEO