SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
________________________
ALEXANDER & BALDWIN, INC.
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(Name of Registrant as Specified in its Charter)
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if other than the Registrant)
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ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
March 6, 2006
To the Shareholders of Alexander & Baldwin, Inc.:
The 2006 Annual Meeting of Shareholders of Alexander & Baldwin, Inc.
will be held in the Bankers Club on the 30th Floor of the First Hawaiian Center,
999 Bishop Street (a map providing directions to the Annual Meeting is located
on the following page), Honolulu, Hawaii, on Thursday, April 27, 2006 at 8:30
a.m. You are invited to attend the meeting, and we hope you will be able to do
so. At the meeting, we will have the opportunity to discuss the Company's
financial performance during 2005, and our future plans and expectations.
Whether or not you now plan to attend the Annual Meeting, we encourage
you to sign, date and mail the enclosed proxy and return it in the enclosed
envelope at your earliest convenience. Alternatively, A&B shareholders of record
can vote their shares over the Internet, or by calling a specially designated
telephone number. These Internet and telephone voting procedures are designed to
authenticate your vote and to confirm that your voting instructions are
followed. Specific instructions for shareholders of record who wish to use
Internet or telephone voting procedures are set forth in the enclosed proxy.
Regardless of the size of your holding, it is important that your
shares be represented. If you attend the Annual Meeting, you may withdraw your
proxy and vote in person.
Sincerely,
/s/ W. Allen Doane
W. ALLEN DOANE
President and Chief Executive Officer
[OBJECT OMITTED]
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of
Alexander & Baldwin, Inc. ("A&B") will be held in the Bankers Club on the 30th
Floor of the First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii, on
Thursday, April 27, 2006, at 8:30 a.m., Honolulu time, for the following
purposes:
1. To elect eight directors to serve until the next Annual
Meeting of Shareholders and until their successors are duly
elected and qualified;
2. To ratify the appointment of auditors for the ensuing year;
and
3. To transact such other business as properly may be brought
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on February 17,
2006 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
PLEASE PROMPTLY SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED, OR VOTE VIA THE INTERNET OR BY TELEPHONE.
By Order of the Board of Directors
/s/ Alyson J. Nakamura
ALYSON J. NAKAMURA
Secretary
March 6, 2006
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Alexander & Baldwin, Inc. ("A&B") for
use at the Annual Meeting of Shareholders to be held on April 27, 2006 and at
any adjournment or postponement thereof (the "Annual Meeting"). Shareholders may
submit their proxies either by signing, dating and returning the enclosed proxy,
or via the Internet or by telephone in accordance with the procedures set forth
in the enclosed proxy. A proxy may be revoked at any time prior to its exercise
by a written revocation bearing a later date than the proxy and filed with the
Secretary of A&B, by submission of a later-dated proxy or subsequent Internet or
telephonic proxy, or by voting in person at the Annual Meeting.
Only shareholders of record at the close of business on February 17,
2006 are entitled to notice of and to vote at the Annual Meeting. On that date,
A&B had outstanding 44,188,971 shares of common stock without par value, each
of which is entitled to one vote. Provided a quorum is present, the affirmative
vote of a majority of the shares of A&B common stock represented at the Annual
Meeting, in person or by proxy, will be necessary for the election of directors
and the ratification of the appointment of auditors. Abstentions and broker
non-votes will be included for purposes of determining a quorum at the Annual
Meeting. Broker non-votes will have the same effect as a vote to withhold
authority in the election of directors, and abstentions and broker non-votes
will have the same effect as a vote against the ratification of auditors.
Following the original mailing of proxy soliciting material, officers,
employees and directors of A&B and its subsidiaries may, without additional
compensation, solicit proxies by appropriate means, including by mail, telephone
or personal interview. Arrangements also will be made with brokerage houses and
other custodians, nominees and fiduciaries that are record holders of A&B's
common stock to forward proxy soliciting material to the beneficial owners of
such stock, and A&B will reimburse such record holders for their reasonable
expenses. A&B has retained the firm of Morrow & Co., Inc. to assist in the
solicitation of proxies, at a cost of $9,500 plus reasonable out-of-pocket
expenses.
This Proxy Statement and the enclosed proxy are being mailed to
shareholders, and are being made available on the Internet at
www.alexanderbaldwin.com, on or about March 6, 2006.
ELECTION OF DIRECTORS
Directors will be elected at the Annual Meeting to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected and
qualified. There is no cumulative voting in the election of directors.
Nominees. The nominees of the Board of Directors are the eight persons
named below, all of whom currently are members of the Board of Directors. The
Board has reviewed each of its current directors and has determined that all
such persons, with the exception of Mr. Doane, who is an executive officer of
A&B, are independent under Nasdaq rules. The Board of Directors has no reason to
believe that any nominee will be unable to serve. However, if any nominee or
nominees should decline or become unable to serve for any reason, shares
represented by the accompanying proxy will be voted for such other person or
persons as the Board of Directors may nominate. Under A&B's retirement policy
for directors, Carson R. McKissick and Charles M. Stockholm, who have served as
directors since 1971 and 1972, respectively, are retiring from the Board at the
Annual Meeting. In addition to their service as directors, Mr. Stockholm has
served as Chairman of the Board since 1999, and Mr. McKissick has served as
Chairman of the Audit Committee since 1989. The Board and management of A&B
thank Messrs. McKissick and Stockholm for their years of service and valued
advice.
The following table sets forth the name, age (as of March 31, 2006) and
principal occupation of each person nominated by the A&B Board, their positions
with A&B and business experience during at least the last five years, and the
year each first was elected or appointed a director.
Principal occupation, information as to
other positions with A&B, and other Director
Name directorships Age since
---- ------------------------------------------ --- --------
Michael J. Chun President and Headmaster, The Kamehameha 62 1990
Schools, Kapalama Campus, Honolulu, Hawaii
(educational institution) since June 1988;
Director of Bank of Hawaii Corporation.
W. Allen Doane President and Chief Executive Officer of 58 1998
A&B since October 1998; Chairman of
the Board of A&B's subsidiary, Matson
Navigation Company, Inc. ("Matson"), from
July 2002 to January 2004; Vice Chairman of
the Board of Matson from January 2004 to
present and from December 1998 to July 2002;
Executive Vice President of A&B from August
1998 to October 1998; Chief Executive
Officer of A&B's subsidiary, A&B-Hawaii,
Inc. ("ABHI"), from January 1997 to December
1999, when ABHI was merged into A&B;
President of ABHI from April 1995 to
December 1999; Director of BancWest
Corporation and its banking subsidiary,
First Hawaiian Bank. Mr. Doane has been
appointed Chairman of the Board of A&B,
effective upon election as a director at
A&B's 2006 Annual Meeting.
Walter A. Dods, Chairman of the Board of BancWest 64 1989
Jr. Corporation and its subsidiary, First
Hawaiian Bank, Honolulu, Hawaii,
(banking) since September 1989; Chief
Executive Officer of BancWest Corporation and
its subsidiary, First Hawaiian Bank, from
September 1989 through December 2004;
Director of BancWest Corporation and its
banking subsidiaries, First Hawaiian Bank
and Bank of the West; Director of Maui
Land & Pineapple Company, Inc. since October
2004. Mr. Dods has been appointed lead
independent director of A&B, effective upon
election as a director at A&B's 2006
Annual Meeting.
Charles G. King President and Dealer Principal, King 60 1989
Auto Center, Lihue, Kauai, Hawaii
(automobile dealership) since October
1995; Dealer Principal, King Windward
Nissan, Kaneohe, Oahu, Hawaii (automobile
dealership) since February 1999; Dealer
Principal, King Infiniti (automobile
dealership) since April 2004.
Constance H. Lau President, Chief Executive Officer and 54 2004
Director of American Savings Bank,
F.S.B. ("ASB"), Honolulu, Hawaii
(banking), a subsidiary of Hawaiian
Electric Industries, Inc. ("HEI"), since
June 2001; Chief Operating Officer and
Senior Executive Vice President of ASB from
December 1999 to June 2001. Effective
May 2, 2006, Ms. Lau has been appointed
President and Chief Executive Officer of
HEI and Chairman of ASB and Hawaiian
Electric Company, Inc., HEI's electric
utility subsidiary, and has been nominated
to serve as a Director of HEI, with a
term commencing in May 2006.
Douglas M. President and Chief Executive Officer of 51 2005
Pasquale Nationwide Health Properties, Inc. ("NHP")
(healthcare real estate investment trust)
since April 2004; Director of NHP since
November 2003; Executive Vice President
and Chief Operating Officer of NHP from
November 2003 to April 2004; Chairman
of the Board and Chief Executive Officer
of ARV Assisted Living, Inc. from
December 1999 to September 2003; President
and Chief Executive Officer of Atria
Senior Living Group from April 2003 to
September 2003.
Maryanna G. Shaw Private investor. 67 1980
Jeffrey N. Senior Partner, Watanabe Ing Kawashima & 63 2003
Watanabe Komeiji LLP, Honolulu, Hawaii
(attorneys at law) since 1990; Director
of HEI; Non-Executive Chairman of the
Board of HEI, effective May 2, 2006.
The Bylaws of A&B provide that no person (other than a person nominated
by or on behalf of the Board) will be eligible to be elected a director at an
annual meeting of shareholders unless a written shareholder's notice that the
person's name be placed in nomination is received by the Chairman of the Board,
the President, or the Secretary of A&B not less than 60 days nor more than 90
days prior to the anniversary date of the immediately preceding annual meeting.
If the annual meeting is not called for a date which is within 30 days of the
anniversary date of the preceding annual meeting, a shareholder's notice must be
given not later than 10 days after the date on which notice of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever occurs first. To be in proper written form, a shareholder's
notice must set forth specified information about each nominee and the
shareholder making the nomination. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
Shareholders should note that separate procedures have been established
for shareholders to submit director candidates for consideration by the
Nominating and Corporate Governance Committee. These procedures are described
below under the subsection "Nominating Committee Processes."
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Board of Directors and Committees of the Board. The Board of Directors
held nine meetings during 2005. In conjunction with several of these meetings,
the independent directors of A&B met in formally-scheduled executive sessions,
led by the Chairman of the Board. All directors were present for 75 percent or
more of the total number of meetings of the Board of Directors and Committees of
the Board on which they serve. The Board of Directors has an Audit Committee, a
Compensation Committee, and a Nominating and Corporate Governance Committee.
The current members of the Audit Committee, which held seven meetings
during 2005, are Mr. McKissick, Chairman, Mr. Dods, Ms. Lau, Mr. Pasquale and
Ms. Shaw, each of whom is an independent director under the applicable Nasdaq
listing standards. The duties and responsibilities of the Audit Committee are
set forth in a written charter adopted by the Board of Directors, and are
summarized in the Audit Committee Report which appears in this Proxy Statement.
A current copy of the charter of the Audit Committee is available on the
corporate governance page of A&B's corporate website at
www.alexanderbaldwin.com.
The current members of the Compensation Committee, which held six
meetings during 2005, are Mr. King, Chairman, Dr. Chun, Mr. Stockholm and Mr.
Watanabe, each of whom is an independent director under the applicable Nasdaq
listing standards. The Compensation Committee has general responsibility for
management and other salaried employee compensation and benefits, including
incentive compensation and stock incentive plans. The Compensation Committee
also determines the compensation for A&B's Chief Executive Officer. The
Compensation Committee is governed by a charter, a current copy of which is
available on the corporate governance page of A&B's corporate website at
www.alexanderbaldwin.com.
The current members of the Nominating and Corporate Governance
Committee (the "Nominating Committee"), which held four meetings in 2005, are
Mr. Stockholm, Chairman, and Messrs. Dods and McKissick, each of whom is an
independent director under the applicable Nasdaq listing standards. The
functions of the Nominating Committee include identifying and recommending to
the Board individuals qualified to serve as directors of A&B; recommending to
the Board the size of committees of the Board and monitoring the functioning of
the committees; advising on Board composition and procedures; reviewing
corporate governance principles and other corporate governance issues; and
overseeing the annual evaluation of the Board and evaluating the Nominating
Committee's performance. The Nominating Committee is governed by a charter, a
current copy of which is available on the corporate governance page of A&B's
corporate website at www.alexanderbaldwin.com.
Nominating Committee Processes. The Nominating Committee identifies
potential nominees by asking current directors and executive officers to notify
the Committee if they become aware of qualified persons who might be available
to serve on the Board. The Committee also, from time to time, engages firms that
specialize in identifying director candidates.
The Nominating Committee also will consider director candidates
recommended by shareholders. In considering such candidates, the Nominating
Committee will take into consideration the needs of the Board and the
qualifications of the candidate. The Nominating Committee may also take into
consideration the number of shares held by the recommending shareholder and the
length of time that such shares have been held. To have a candidate considered
by the Nominating Committee, a shareholder must submit a written recommendation
that includes the name of the shareholder, evidence of the shareholder's
ownership of A&B stock (including the number of shares owned and the length of
time of ownership), the name of the candidate, the candidate's resume or a
listing of his or her qualifications to be a director of A&B and the candidate's
consent to be named as a director if approved by the Nominating Committee and
nominated by the Board.
The shareholder recommendation and information described above must be
sent to the Corporate Secretary at 822 Bishop Street, Honolulu, Hawaii 96813 and
must be received not less than 120 days before the anniversary of the date on
which A&B's Proxy Statement was released to shareholders in connection with the
previous year's annual meeting.
The Nominating Committee believes that the minimum qualifications for
serving as a director of A&B are that a nominee demonstrate high ethical
standards, a commitment to shareholders, a genuine interest in A&B and a
willingness and ability to devote adequate time to a director's duties. The
Committee also is authorized to consider such other factors that it deems to be
in the best interests of A&B and its shareholders.
Once a potential candidate has been identified by the Nominating
Committee, the Committee collects and reviews information regarding the person
to determine whether the person should be considered further. If appropriate,
the Committee may request information from the candidate, review the person's
accomplishments and qualifications, and conduct interviews with the candidate.
The Committee's evaluation process does not vary based on whether or not a
candidate is recommended by a shareholder.
A&B paid a fee to a third-party search firm to assist in identifying
and evaluating candidates for nomination as directors. The search firm provided
information on potential candidates, assisted in background reviews and
performed other functions in connection with assisting the Nominating Committee
in identifying and evaluating potential director candidates.
Compensation of Directors. Outside directors received an annual cash
retainer of $27,000 and an additional $7,500 if also serving as Chairperson of
the Compensation Committee or the Nominating Committee, and an additional
$10,000 if serving as Chairperson of the Audit Committee. Annual compensation
for the lead independent director will be $20,000 effective April 27, 2006.
Outside directors received an attendance fee of $1,200 per Board meeting and,
in addition, attendance fees of $1,200 and $1,000 per committee meeting if also
serving as chairpersons and members, respectively, of Board committees. Pursuant
to an agreement with A&B, Mr. Stockholm, A&B's non-executive Chairman of the
Board, has received an additional annual retainer of $150,000 since 1999. In
2006, Mr. Stockholm also received a discretionary cash bonus in the amount of
$125,000 for services rendered in 2005. All directors of A&B served as directors
of A&B's Matson subsidiary and, in such capacities, outside directors received
attendance fees of $1,000 per Matson Board meeting. Outside directors may defer
up to 100 percent of their annual cash retainer and meeting fees until
retirement or until such earlier date as they may select. No directors have
deferred such fees. In addition to the annual cash retainer and meeting fees,
each individual who served as an outside director during 2005 received an annual
stock retainer of 300 shares of A&B common stock (or a proportionate amount if
the director served for less than a full year), which had a fair market value
of $13,095 on the date of the award. Directors who are employees of A&B or its
subsidiaries do not receive compensation for serving as directors.
Under A&B's 1998 Non-Employee Director Stock Option Plan (the
"Non-Employee Director Plan"), a non-qualified stock option to purchase 8,000
shares of A&B common stock automatically is granted at each Annual Meeting of
Shareholders to each individual who is, at the meeting, elected or reelected as
an outside director of A&B. The option price per share is the mean between the
highest and lowest selling prices per share of A&B common stock on the grant
date, and the option expires 10 years from the date of grant, or earlier if the
optionee ceases to be a director. Options become exercisable in three equal
annual installments, beginning one year after the grant date. At the 2005 Annual
Meeting, held on April 28, 2005, options to purchase 8,000 shares of A&B common
stock, at an exercise price of $40.38 per share, were granted to each of the
outside directors under the Non-Employee Director Plan.
In the past, A&B has maintained life insurance, personal excess
liability insurance and a retirement plan, and provided medical and dental
benefits for its outside directors. These benefits ceased as of December 31,
2004 (with the exception of medical and dental benefits, which ceased as of June
30, 2005). In 2005, outside directors were reimbursed for their estimated income
tax liability by reason of A&B's payments through June 30, 2005 for medical and
dental benefits, as applicable. Under the retirement plan, a director with five
or more years of service will receive a lump-sum payment upon retirement or
attainment of age 65, whichever is later (but in no event later than the date of
the first annual meeting of shareholders after the director attains age 72),
that is actuarially equivalent to a payment stream for the life of the director
consisting of 50 percent of the amount of the annual retainer fee in effect at
the time of his or her retirement or other termination, plus 10 percent of that
amount, up to an additional 50 percent, for each year of service as a director
over five years. Effective December 31, 2004, these retirement benefits were
frozen based on a director's service and retainer on that date and no further
benefits accrue for subsequent periods. Directors retained business travel
accident coverage of $200,000 for themselves and $50,000 for their spouses while
accompanying directors on A&B business. They also may participate in the
Company's matching gifts program, in which the Company matches contributions to
qualified cultural and educational organizations up to a maximum of $3,000 for
each director, and in the Company's deferred compensation program. In February
2005, the Board adopted a "Share Ownership Guideline Policy" for itself,
encouraging each non-employee director by April 1, 2010 to own A&B common stock
with either a value of five times the amount of the 2005 cash retainer of
$27,000 or three thousand (3,000) shares.
Shareholder Communications with Directors. The Board has a process to
receive communications from shareholders. Shareholders may contact any member
(or all members) of the Board by mail. To communicate with the Board of
Directors, correspondence should be addressed to the Board of Directors or any
one or more individual directors or group or committee of directors by either
name or title. All such correspondence should be sent "c/o A&B Law Department"
at A&B's headquarters at 822 Bishop Street, Honolulu, Hawaii 96813.
All communications received as set forth in the preceding paragraph
will be opened by the A&B Law Department for the sole purpose of determining
whether the contents constitute a communication to A&B's directors. Any contents
that are not in the nature of advertising, promotions of a product or service,
or patently offensive material will be forwarded promptly to the director or
directors to whom it is addressed. In the case of communications to the Board or
to any group of directors, the A&B Law Department will make sufficient copies of
the contents to send to each addressee.
In addition, it is A&B policy that directors are invited and strongly
encouraged to attend the Annual Meeting of Shareholders. All ten members of the
Board of Directors were in attendance at the 2005 Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
The following table lists the names and addresses of the only
shareholders known by A&B to have owned beneficially more than five percent of
A&B's common stock outstanding on February 17, 2006, the number of shares they
beneficially own, and the percentage of outstanding shares such ownership
represents. Except as indicated in the footnotes, such shareholders have sole
voting and dispositive power over shares they beneficially own.
Name and Address Amount of Percent of
of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- ----------
FMR Corp. 6,583,395 (a) 14.9
82 Devonshire
Boston, MA 02109
--------------------
(a) As reported in Amendment No. 4 to Schedule 13G dated February 14, 2006
(the "FMR 13G") filed with the SEC. According to the FMR 13G, FMR
Corp., through its subsidiaries, Fidelity Management & Research
Company, Fidelity Management Trust Company and Strategic Advisers,
Inc., and an affiliate of FMR Corp., Fidelity International Limited,
has, in the aggregate, sole voting power over 2,778,808 shares, sole
dispositive power over all 6,583,395 shares, and does not have shared
voting or dispositive power over any shares.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Security Ownership of Directors and Executive Officers. The following
table shows the number of shares of A&B common stock beneficially owned as of
February 17, 2006 by each director and nominee, by each executive officer named
in the "Summary Compensation Table" below, and by directors, nominees and
executive officers as a group and, if at least one-tenth of one percent, the
percentage of outstanding shares such ownership represents. Except as indicated
in the footnotes, directors, nominees and executive officers have sole voting
and dispositive power over shares they beneficially own.
Number of
Name or Number Shares Stock Percent
in Group Owned (a)(b) Options (c) Total of Class
-------------- ------------ ----------- ----- --------
Michael J. Chun 4,453 26,514 30,967 --
W. Allen Doane 192,562 333,499 526,061 1.2
Walter A. Dods, Jr. 13,238 31,999 45,237 0.1
Charles G. King 10,485 31,999 42,484 --
Constance H. Lau 700 7,999 8,699 --
Carson R. McKissick 7,600 31,999 39,599 --
Douglas M. Pasquale 550 2,666 3,216 --
Maryanna G. Shaw 279,485 31,999 311,484 0.7
Charles M. Stockholm 17,046 6,333 23,379 --
Jeffrey N. Watanabe 821 10,999 11,820 --
James S. Andrasick 85,042 34,166 119,208 0.3
Stanley M. Kuriyama 79,737 108,966 188,703 0.4
Matthew J. Cox 15,898 14,034 29,932 --
Christopher J. Benjamin 22,574 19,432 42,006 --
21 Directors, Nominees
and Executive Officers
as a Group 851,758 764,471 1,616,229 3.6
--------------------
(a) Amounts do not include shares owned by spouses of those directors and
executive officers who disclaim beneficial ownership thereof, as
follows: Mr. McKissick - 600 shares; in addition, Mr. Stockholm and
Ms. Shaw, who are husband and wife, each disclaim beneficial ownership
of all shares beneficially owned by the other. Amounts do not include
shares beneficially owned in a fiduciary capacity by trust companies
or the trust departments of banks of which A&B directors are directors
or officers, or both, and shares held by foundations or trusts of
which A&B directors are trustees or directors, including as follows:
BancWest Corporation - 880,360 shares, Bank of Hawaii - 524,838
shares, The Wallace Alexander Gerbode Foundation, of which Ms. Shaw
and Mr. Stockholm are trustees - 40,000 shares, and the William
Garfield King Educational Trust, of which Mr. King is a trustee -
400 shares.
(b) Amounts include shares as to which directors, nominees and executive
officers have (i) shared voting and dispositive power, as follows: Dr.
Michael J. Chun - 3,526 shares, Mr. King - 685 shares, Ms. Lau - 200
shares, Mr. Pasquale - 550 shares, Ms. Shaw - 18,248 shares, and
directors, nominees and executive officers as a group - 27,038 shares,
and (ii) sole voting power only: directors, nominees and executive
officers as a group - 742 shares.
(c) Amounts reflect shares deemed to be owned beneficially by directors,
nominees and executive officers because they may be acquired prior to
May 5, 2006 through the exercise of stock options.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 (the "Exchange Act") requires A&B's
directors and executive officers, and persons who own more than 10 percent of
its common stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the SEC. A&B believes that during fiscal 2005, its directors and
executive officers filed all reports required to be filed under Section 16(a) on
a timely basis, except that, due to an administrative oversight, Matthew J. Cox,
Executive Vice President and Chief Operating Officer of Matson, was required to
file a Form 4 on or before May 3, 2005, with respect to the acquisition of 141
common stock-equivalent units, but such Form 4 was filed on January 27, 2006.
Certain Relationships and Transactions. Walter A. Dods, Jr., a director
of A&B, purchased two residential units on January 11, 2006, at market prices in
a project being developed by a limited liability company in which a subsidiary
of A&B is a member, for an aggregate purchase price of $1,950,000. Both G.
Stephen Holaday, General Manager, Hawaiian Commercial & Sugar Company, and the
adult son of Carson R. McKissick, a director of A&B who is not standing for
reelection due to retirement, have entered into agreements to purchase
condominium units in a project being developed by a limited liability company in
which a subsidiary of A&B is a member, for a purchase price of $1,817,500 and
$1,070,000, respectively. Charles G. King, a director of A&B, owns a 6.1 percent
interest, and Mr. King's brother owns a 65 percent interest, in a corporation
that has entered into a five-year commercial lease (with one five-year renewal
option) at market rates with a subsidiary of A&B. The amount of rent paid in
2005 was $124,875, and the remaining aggregate rental obligation under the
five-year lease term is $779,850.
Constance H. Lau, a director of A&B, has been appointed President and
Chief Executive Officer of Hawaiian Electric Industries, Inc. ("HEI"), effective
May 2, 2006. She also is President, Chief Executive Officer and a director of
American Savings Bank, F.S.B., a subsidiary of HEI. A&B and its subsidiaries
have a number of relationships with American Savings Bank, including:
American Savings Bank (i) has a 9 percent participation in A&B's
$200,000,000 revolving credit and term loan agreement under which no amount was
outstanding at February 15, 2006, (ii) had a 13.08 percent participation in a
$130,000,000 construction loan made to a limited liability company in which a
subsidiary of A&B is a member, that was paid in full on January 11, 2006, and
for which a limited guarantee equal to the lesser of $15,000,000 or 15.5 percent
of the outstanding loan balance was executed by an A&B subsidiary, (iii) has a
$40,000,000 construction loan made to a limited liability company in which a
subsidiary of A&B is a member, that had a total outstanding balance of
$16,184,714 at February 15, 2006, (iv) intends to enter into a $40,000,000
construction loan with a limited liability company in which a subsidiary of A&B
is a member during the first quarter of 2006, (v) is a commercial tenant in
certain properties owned by A&B or its subsidiaries, under leases with terms
expiring from May 2006 to December 2017, with aggregate net rents in 2005 of
$455,612, and from and after January 1, 2006 of $4,090,952, and (vi) is a
holdover licensee in A&B's Maui Mall Shopping Center, with a month-to-month
license for a monthly rent of $1,282 per month. A&B also has two certificates of
deposit with American Savings Bank that total $44,663 and which have maturities
of less than six months.
In 2005, an A&B division sold electricity that it had produced to Maui
Electric Company, Inc., an HEI subsidiary, in the amount of approximately
$16,022,000.
Ms. Lau's spouse is the Vice Chairman, Chief Executive Officer and
Director of Finance Factors, Ltd., a Hawaii-based financial institution. Finance
Factors had a 2.31 percent participation in a $130,000,000 construction loan
made to a limited liability company in which a subsidiary of A&B is a member,
that was paid in full on January 11, 2006, and for which a limited guarantee
equal to the lesser of $15,000,000 or 15.5 percent of the outstanding loan
balance was executed by an A&B subsidiary. Finance Factors has two commercial
leases with A&B, with terms expiring in November 2007 and November 2012, with
aggregate net rents in 2005 of approximately $59,095, and from and after January
1, 2006 of approximately $450,820. In addition, Ms. Lau's brother-in-law is a
partner in a law firm that was a commercial tenant in an office building owned
by a subsidiary of A&B until October 2005. As part of a normal, arms-length
lease renegotiation process, lease rent in 2005 was abated in return for a
release of claims relating to water intrusion and for a new ten-year lease term.
The brother of Matthew J. Cox, Executive Vice President and Chief
Operating Officer of Matson, is an officer in a company from which Matson leased
transportation equipment in 2005 in the amount of $1,188,765.
Jeffrey N. Watanabe, a director of A&B, is a partner in a law firm that
performed legal services for a limited liability company in which a subsidiary
of A&B is a member.
Code of Ethics. A&B has adopted a Code of Ethics that applies to the
Chief Executive Officer, Chief Financial Officer and Controller (the "Code"). A
copy of the Code, along with copies of Codes of Conduct applicable to all
directors, officers and employees of A&B, is posted on the corporate governance
page of A&B's website, www.alexanderbaldwin.com. A&B intends to satisfy any
disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to,
or a waiver from, a provision of the Code by posting such information on its
website.
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation. The following table summarizes
the cash and noncash compensation paid by A&B for services rendered, during each
of the last three completed fiscal years, by A&B's Chief Executive Officer and
the four other most highly compensated executive officers. As used in this Proxy
Statement, "named executive officers" means all persons identified in the
Summary Compensation Table.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------- -------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All
Compen- Stock Underlying LTIP Other
Name and sation Awards Options/SARs Payouts Compen-
Principal Position Year Salary($) Bonus($)(5) ($)(8) ($)(9) (#) ($)(10) sation($)(12)
------------------ ---- --------- ----------- ------ ------ ------------ ------- -------------
W. Allen Doane 2005 755,000 450,054(6) 2,533 2,808,306 70,000 850,000 28,950
President and Chief 2004 716,250 425,025(6) 2,424 1,173,555 85,000 850,000 27,638
Executive Officer of A&B 2003 690,000 400,039(6) 2,135 599,961 85,000 250,000 34,500
James S. Andrasick (1) 2005 477,076 223,006(6) 1,563 965,546 21,200 396,000 18,512
President and Chief Executive 2004 476,400 205,390(6) 61,819 879,221 41,300 200,085(11) 20,442
Officer of Matson 2003 380,167 312,012(6) 315,983 546,283 40,000 52,323(11) 19,008
Stanley M. Kuriyama (2) 2005 333,750 144,499(6) 1,013 636,671 14,100 180,676 16,313
President and Chief Executive 2004 259,725 143,087(6) 506 316,543 30,400 250,000 13,942
Officer, A&B Land Group 2003 248,100 150,002(6) 466 303,400 25,000 52,276(11) 12,405
Matthew J. Cox (3) 2005 289,456 169,383(6) 521 307,242 5,700 62,400(11) 14,984
Exec. Vice President and 2004 281,024 184,665(7) 521 123,188 10,200 87,572(11) 14,581
Chief Operating Officer of 2003 264,216 177,120 480 0 16,000 6,150 13,211
Matson
Christopher J. Benjamin (4) 2005 251,250 190,522(6) 1,013 327,232 9,900 0 13,838
Senior Vice President and 2004 203,594 120,953(6) 506 169,282 20,900 0 12,216
Chief Financial Officer 2003 150,167 42,207(6) 321 11,146 5,000 0 7,508
(1) Mr. Andrasick became an executive officer of A&B effective June 2000, as
Senior Vice President, Chief Financial Officer and Treasurer. He was
appointed Executive Vice President of A&B, effective April 25, 2002, and
was appointed President and Chief Executive Officer of Matson, effective
July 1, 2002. He ceased to serve as Chief Financial Officer and
Treasurer, effective February 9, 2004.
(2) Mr. Kuriyama was appointed President and Chief Executive Officer of A&B's
Land Group, effective July 1, 2005. He also serves as Vice Chairman and
Chief Executive Officer of A&B Properties, Inc., a position he has held
since December 1999.
(3) Mr. Cox was appointed Executive Vice President and Chief Operating
Officer of Matson, effective July 1, 2005. He had been Senior Vice
President and Chief Financial Officer of Matson from June 2001 to July
2005.
(4) Mr. Benjamin was appointed Senior Vice President of A&B, effective July
1, 2005. He had been Vice President of A&B from April 2003 to July 2005.
He was appointed Chief Financial Officer of A&B, effective February 9,
2004.
(5) "Bonus" consists of cash amounts earned for the fiscal year identified in
column (b) under A&B's One-Year Performance Improvement Incentive Plan
("One-Year Plan"), except as set forth in note (6).
(6) Represents the portion of the named executive officer's award under the
One-Year Plan payable in cash. The named executive officer elected to
receive the balance of the One-Year Plan award in restricted stock, the
value of which is included in column (f). In the case of Mr. Andrasick in
2003, the amount also includes a bonus of $130,000 in recognition of his
dual responsibilities during that year as President and Chief Executive
Officer of Matson and Chief Financial Officer and Treasurer of A&B.
(7) Includes (i) the portion of the named executive officer's award under the
One-Year Plan which such officer elected to defer under the A&B Deferred
Compensation Plan and to convert into common stock-equivalent units, and
(ii) additional common stock-equivalent units awarded, in the discretion
of the Compensation Committee, in an amount equal to 50 percent of the
common stock-equivalent units into which the deferred One-Year Plan award
was converted.
(8) "Other Annual Compensation" consists of amounts reimbursed to the named
executive officers for their estimated income tax liability by reason of
A&B's payments for the cost of personal excess liability insurance.
Personal excess liability insurance for executives was cancelled
effective December 31, 2005. In the case of Mr. Andrasick, in 2003 such
amount also includes payments of (i) $100,000 in consideration of his
relocation from Honolulu, Hawaii to San Francisco, California to serve as
President and Chief Executive Officer of Matson, (ii) $123,373 in
reimbursement for temporary living and other costs incurred in connection
with his relocation and (iii) $91,170 in reimbursement for taxes
associated with the payments made in (ii), and in 2004, such amount also
included $34,800 in reimbursement for additional costs associated with
his relocation.
(9) Represents (i) the dollar amount of One-Year Plan awards, for the fiscal
year identified in column (b), elected to be received in restricted
stock, (ii) the dollar amount of A&B's Three-Year Performance Improvement
Incentive Plan ("Three-Year Plan") awards, for the three-year plan cycle
ending with and including the fiscal year identified in column (b),
elected to be received in restricted stock, (iii) additional restricted
stock awarded, in the discretion of the Compensation Committee, in an
amount equal to 50% of the dollar amount of the One-Year Plan and/or the
Three-Year Plan award that the named executive officer has elected to
take in stock, and (iv) the dollar amount of restricted stock granted
under the A&B 1998 Stock Option/Stock Incentive Plan for the fiscal year
identified in column (b). As of December 31, 2005, the number and value
(based upon a $54.24 per share closing price of A&B's common stock on
December 30, 2005) of shares of restricted stock held by the named
executive officers are as follows: Mr. Doane - 100,612 shares
($5,457,195); Mr. Andrasick - 59,830 shares ($3,245,179); Mr. Kuriyama -
32,749 shares ($1,776,306); Mr. Cox - 6,664 shares ($361,455); and Mr.
Benjamin - 11,650 shares ($631,896). Dividends are payable on the
restricted shares to the extent payable on A&B's common stock generally.
(10) "LTIP Payouts" consist of cash amounts earned under the Three-Year Plan
for the three-year plan cycle ending with and including the fiscal year
identified in column (b).
(11) Represents the portion of the named executive officer's award under the
Three-Year Plan payable in cash. The named executive officer elected to
receive the balance of the Three-Year Plan award in restricted stock, the
value of which is included in column (f).
(12) "All Other Compensation" for 2005 includes: (i) amounts contributed by
A&B to the A&B Profit Sharing Retirement Plan and A&B Individual Deferred
Compensation Plan ($12,600 each for Messrs. Doane, Kuriyama, Cox and
Benjamin and $10,500 for Mr. Andrasick); and (ii) amounts accrued for
profit sharing under the A&B Excess Benefits Plan, pursuant to which
executives chosen by the Compensation Committee receive additional
credits and payments equal to the difference between the maximum benefit
permitted under federal tax laws and the benefit the executives otherwise
would receive under A&B's qualified plans (Mr. Doane - $16,350, Mr.
Andrasick - $8,012, Mr. Kuriyama - $3,713, Mr. Cox - $2,384, and Mr.
Benjamin - $1,238).
Option Grants. The following table contains information concerning the
grant of stock options under A&B's 1998 Stock Option/Stock Incentive Plan ("1998
Plan") during 2005 to the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Number of Percent of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees Price Present Value
Name Granted (#) in Fiscal Year ($/share) Expiration Date ($)(2)
---- ------------ ---------------- --------- --------------- -------------
W. Allen Doane 70,000(1) 26.1% 44.445 January 25, 2015 725,032
James S. Andrasick 21,200(1) 7.9% 44.445 January 25, 2015 219,581
Stanley M. Kuriyama 14,100(1) 5.3% 44.445 January 25, 2015 146,042
Matthew J. Cox 5,700(1) 2.1% 44.445 January 25, 2015 59,038
Christopher J. Benjamin 9,900(1) 3.7% 44.445 January 25, 2015 102,540
(1) Options granted on January 26, 2005 under the 1998 Plan with an exercise
price per share equal to the fair market value of the underlying shares of
A&B common stock on the grant date. These options become exercisable in
three annual installments beginning one year after the date of grant. No
stock appreciation rights were granted with these options.
(2) Based on the Black-Scholes option pricing model, the assumptions used
included: (i) stock volatility of 22.21%, (ii) the expected exercise of
options in 6.4 years, (iii) a risk-free rate of return of 4.0%, (iv) a
discount of 6.15% for the forfeiture resulting from an executive officer's
termination of employment prior to exercise, and (v) a long-term dividend
yield of 2.19%. There is no assurance the value realized by an executive
officer will be at or near the value estimated by this option pricing
model. The actual value, if any, an executive officer may realize will
depend upon how much the stock price has increased over the exercise price
on the date the option is exercised.
Option Exercises and Fiscal Year-End Holdings. The following table
provides information, with respect to the named executive officers, concerning
(i) the exercise of stock options and stock appreciation rights during the 2005
fiscal year and the value realized in connection with such exercise, and (ii)
the number and value of unexercised options held as of December 31, 2005.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs At Options/SARs
Shares FY-End (#) At FY-End ($)(3)
Acquired Value ---------------------- --------------------
Name on Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- ------------ ----------- ------------- ----------- -------------
W. Allen Doane 76,200 2,345,272 (1) 253,499 155,001 6,727,428 2,683,126
James S. Andrasick 37,767 873,332 (2) 0 62,068 0 1,164,057
Stanley M. Kuriyama 0 0 85,799 42,701 2,329,208 799,848
Matthew J. Cox 10,666 163,965 (2) 3,400 17,834 70,992 350,021
Christopher J. Benjamin 3,000 83,923 (2) 7,498 25,706 160,548 440,032
(1) Based on either (i) the mean of the highest and lowest sales price of A&B
common stock on the date of exercise or (ii) the highest sales price of
A&B common stock on date of exercise, in each case minus the exercise
price.
(2) Based on the mean of the highest and lowest sales price of A&B common
stock on the date of exercise, minus the exercise price.
(3) Based on the mean of the highest and lowest sales price of A&B common
stock on December 30, 2005 ($54.385 per share), minus the exercise price.
Retirement Plans. The A&B Retirement Plan for Salaried Employees
("Retirement Plan"), a non-contributory defined benefit pension plan, provides
retirement benefits to A&B's salaried employees who are not subject to
collective bargaining agreements. The table below shows estimated annual
retirement benefits to covered participants at normal retirement age (age 65)
under this plan, including amounts payable under A&B's Excess Benefits Plan,
pursuant to which executives chosen by the Compensation Committee will receive
additional credits and payments equal to the difference between the maximum
benefit permitted under federal tax laws and the benefit the executives
otherwise would receive under A&B plans.
PENSION PLAN TABLE
Years of Service
----------------
Remuneration 15 20 25 30 35 40
------------ -- -- -- -- -- --
$ 125,000 $31,612 $42,150 $52,687 $57,956 $63,225 $68,493
150,000 38,550 51,400 64,250 70,675 77,100 83,525
175,000 45,487 60,650 75,812 83,394 90,975 98,556
200,000 52,425 69,900 87,375 96,112 104,850 113,587
250,000 66,300 88,400 110,500 121,550 132,600 143,650
300,000 80,175 106,900 133,625 146,987 160,350 173,712
400,000 107,925 143,900 179,875 197,862 215,850 233,837
500,000 135,675 180,900 226,125 248,737 271,350 293,962
600,000 163,425 217,900 272,375 299,612 326,850 354,087
700,000 191,175 254,900 318,625 350,487 382,350 414,212
800,000 218,925 291,900 364,875 401,362 437,850 474,337
900,000 246,675 328,900 411,125 452,237 493,350 534,462
1,000,000 274,425 365,900 457,375 503,112 548,850 594,587
1,100,000 302,175 402,900 503,625 553,987 604,350 654,712
1,200,000 329,925 439,900 549,875 604,862 659,850 714,837
1,300,000 357,675 476,900 596,125 655,737 715,350 774,962
1,400,000 385,425 513,900 642,375 706,612 770,850 835,087
1,500,000 413,175 550,900 688,625 757,487 826,350 895,212
1,600,000 440,925 587,900 734,875 808,362 881,850 955,337
1,700,000 468,675 624,900 781,125 859,237 937,350 1,015,462
1,800,000 496,425 661,900 827,375 910,112 992,850 1,075,587
1,900,000 524,175 698,900 873,625 960,987 1,048,350 1,135,712
Retirement benefits are based on participants' average monthly
compensation in the five highest consecutive years of their final 10 years of
service. Compensation includes base salary, overtime pay, certain commissions
and fees, shift differentials and one-year bonuses. The amounts are based on an
ordinary straight life annuity payable at normal retirement age, and do not give
effect to social security offsets. Credited years of service as of March 1, 2006
for the named executive officers are: Mr. Doane - 14.9, Mr. Andrasick - 5.8, Mr.
Kuriyama - 14.1, Mr. Cox - 4.8 and Mr. Benjamin - 4.5.
In addition, Mr. Doane participates in the A&B Executive
Survivor/Retirement Benefit Plan ("Executive Survivor Plan"). The Executive
Survivor Plan provides for a pre-retirement death benefit equal to 50 percent of
final base compensation for 10 years and, at such person's election upon
retirement, either (i) a continuation of such death benefit or (ii) an
additional retirement income benefit equal to 26 percent of final base
compensation for 10 years.
Change in Control Agreements. A&B currently has change in control
agreements (the "Agreements") with Messrs. Doane, Andrasick, Kuriyama, Cox and
Benjamin in order to encourage their continued employment with A&B by providing
them with greater security in the event of termination of their employment
following a change in control of A&B. Each Agreement has an initial one-year
term and is automatically extended at the end of each term for a successive
one-year period, unless terminated by A&B. The Agreements provide for certain
severance benefits if the executive's employment is terminated by A&B without
"cause" or by the executive for "good reason" following a "change in control" of
A&B (as those terms are defined in the Agreements). Upon such termination of
employment, the executive will be entitled to receive a lump-sum severance
payment equal to two times the sum of the executive's base salary plus certain
awards and amounts under various A&B incentive and deferred compensation plans,
and an amount equal to the spread between the exercise price of outstanding
options held by the executive and the higher of the then-current market price of
A&B common stock or the highest price paid in connection with a change in
control of A&B. In addition, A&B will maintain all (or provide similar) employee
benefit plans for the executive's continued benefit for a period of two years
after termination. Each Agreement provides for a tax gross-up payment to offset
any excise taxes that may become payable by an executive by reason of Sections
280G and 4999 of the Internal Revenue Code of 1986, as amended, if the
executive's employment is terminated without cause or for good reason following
a change in control of A&B. A&B will also reimburse executives for individual
outplacement counseling services.
Executive Severance Plan. In 2005, A&B adopted an Executive Severance
Plan ("Severance Plan") for certain designated executives, including Messrs.
Doane, Andrasick, Kuriyama, Cox and Benjamin. The purpose of the Severance Plan
is to retain key employees and to encourage such employees to use their best
business judgment in managing the Company's affairs. The Severance Plan provides
certain severance benefits if a designated executive is involuntarily terminated
without cause or laid off from employment as part of a job
elimination/restructuring or reduction in force. Upon such termination of
employment, the executive will be entitled to receive an amount equal to six
months' base salary, payable in equal installments over a period of one year,
and designated benefits. If the executive executes an acceptable release
agreement, the executive shall receive additional benefits, including an
additional six months of base salary and designated benefits, reimbursement for
outplacement counseling services and a prorated share of incentive plan awards
that would have been payable to the executive had he or she remained employed
until the end of the applicable performance period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee directs the management of A&B's executive
compensation program. The Compensation Committee is composed entirely of
independent Board members, and is assisted by an international management
consulting firm that advises the Compensation Committee on compensation matters.
The charter of the Compensation Committee is available on the corporate
governance page of A&B's corporate website at www.alexanderbaldwin.com.
Compensation Philosophy
The Compensation Committee has implemented an executive compensation
philosophy, approved by the Board, that seeks to relate executive compensation
to corporate performance, individual performance and creation of shareholder
value. This philosophy is achieved through a performance-based compensation
system, pursuant to which a substantial portion of executive officers'
compensation is based on the short-term and long-term results achieved for A&B
and A&B shareholders and on the executive officers' individual performances. For
2005, approximately 76 percent of the compensation of named executive officers
in the above Summary Compensation Table was in the form of performance-based
compensation that was not guaranteed.
An objective of the executive compensation philosophy is to enable
executive officers to receive above-average compensation, when warranted by
corporate, business unit and individual performance, compared with compensation
of executive officers with comparable job responsibilities at other companies,
in order that A&B will be able to attract, retain and motivate executive
officers. In light of the fact that achievement of above-average compensation is
tied to corporate, business unit and individual performance, there is no
assurance that this level of compensation will be achieved.
Comparative data is provided by the Compensation Committee's
independent compensation consultant and is based on national compensation survey
data. The Compensation Committee periodically reviews executive compensation
levels and plans. In general, A&B compensation levels are at market, benefits
are competitive, perquisites are limited and severance/change in control amounts
are appropriate. A&B competes for executive talent across a broad group of
industries, so survey data based on a broad group of industrial companies is
more appropriate than survey data based on just the companies in the Dow Jones
US Industrial Transportation Index.
For 2005, based on the Company's performance, overall compensation for
the named executive officers ranged from below median to above median; none of
the named executive officers were at or above the 75th percentile.
Consistent with the foregoing compensation objectives, the Compensation
Committee will not necessarily limit executive compensation to that amount
deductible by A&B under Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Compensation Committee nevertheless will consider the deductibility
of executive compensation as one factor in its consideration of compensation
matters, and will consider reasonable steps and alternatives to preserve the
deductibility of compensation payments.
In accordance with the Compensation Committee's executive compensation
philosophy, the major components of compensation under A&B's executive
compensation program consist of: (i) base salary, (ii) annual incentive
compensation pursuant to the One-Year Performance Improvement Incentive Plan
("One-Year Plan"), (iii) annual incentive compensation pursuant to the Annual
Incentive Plan ("Annual Incentive Plan"), and (iv) long-term incentive
compensation pursuant to the 1998 Plan, which includes executive officers and
other senior managers. Another component of long-term incentive compensation has
been the Three-Year Performance Improvement Incentive Plan (the "Three-Year
Plan"); however, as discussed below, there will be no awards granted under the
Three-Year Plan for the 2005-2007 plan cycle.
Base Salary
Adjustments to base salary, if any, are considered annually by the
Compensation Committee. The Compensation Committee reviews the salary
adjustments for the executive officers (other than the Chief Executive Officer)
with the Chief Executive Officer and the senior human resources executive. In
making a salary adjustment, the Compensation Committee considers the executive
officer's performance in the past year, the previously-described survey data
pertaining to the salary level necessary for A&B to pay competitively, and
projected salary increases in the coming year for executive officers in the
selected diversified group of companies, but does not consider any specific
corporate performance factor. For 2005, the base salaries of the Chief Executive
Officer and executive officers as a group were set to achieve the 50th
percentile overall. No executive was paid above the 75th percentile.
Annual Incentives
The One-Year Plan provides performance-based incentives to eligible
executive officers and other key employees who contribute materially to the
financial success of A&B. In determining the size of an incentive award to an
executive officer or other key employee, the Compensation Committee considers
corporate performance, individual performance and business unit performance (if
applicable). Corporate performance counts toward 20 percent-60 percent of the
incentive awards, depending upon the executive officer's responsibilities. For
incentive awards granted for the 2005 plan cycle, the corporate performance
factors, and their relative weights, were as follows: corporate profit before
income tax (65 percent) and return on invested capital (35 percent). Business
unit performance was measured by business unit pre-tax profit (100 percent). The
relevant corporate performance factors and their relative weights are determined
annually by the Compensation Committee, and therefore are subject to change for
future plan cycles.
The Annual Incentive Plan provides performance-based incentives to four
groups of key employees, including executives, at the A&B corporate level or one
of three strategic business units. Those individuals who are eligible under the
One-Year Plan will not be eligible to participate in the Annual Incentive Plan.
In determining the size of an incentive award, the Compensation Committee will
consider, as applicable, corporate performance, individual performance or
business unit performance. Corporate performance will be measured, in the case
of an executive at the A&B corporate level, by the performance of A&B as a
whole, and, in the case of an executive located at one of the strategic business
units, by the performance of the applicable operating unit.
Under either incentive plan, at the beginning of each one-year plan
cycle, the goals for corporate performance factors, as well as the goals for the
specific business units to which the executives are assigned and the goals for
the individuals themselves, are identified, and threshold, target and
extraordinary award levels are assigned. At the end of each plan cycle, the
amounts of the incentive awards, if any, are determined by comparing results
with the performance goals under the applicable plan. Aggregate awards are
limited by whether A&B or the business unit meets certain levels of performance
set by the Compensation Committee at the beginning of each plan cycle. The
Compensation Committee, however, retains the discretion to adjust awards if, in
its judgment, the awards do not accurately reflect the performance of A&B, the
unit or the individual.
Long-Term Incentives
The Three-Year Plan is structured like the One-Year Plan, but provides
performance-based incentives to eligible executive officers and a limited number
of other key employees who contribute materially to the financial success of A&B
on the basis of individual performance, corporate performance and business unit
performance (if applicable) over a three-year performance cycle. Corporate
performance counts toward 20 percent-100 percent of the incentive awards,
depending upon the executive officer's responsibilities. For incentive awards
granted for the 2003-2005 plan cycle, the specific corporate performance
factors, and their relative weights, were as follows: corporate profit before
income tax (65 percent) and return on adjusted net assets (35 percent). As with
the One-Year Plan, the relevant corporate performance factors and their relative
weights are determined at the beginning of each plan cycle by the Compensation
Committee, and therefore are subject to change for future plan cycles. In
addition, as with the One-Year Plan, the specific business unit performance
factors used in assessing individual performance, and their relative weights,
vary by business unit and job position.
There will be no awards granted under the Three-Year Plan for the
2005-2007 plan cycle, as the Company is relying more heavily on the use of stock
options and restricted stock for compensation for that period.
Stock option and/or restricted stock grants under the 1998 Plan are
considered annually by the Compensation Committee. Such grants are viewed as a
desirable long-term compensation method because they link directly the financial
interests of executive officers with those of shareholders. Specific terms of
options granted in 2005 are described under the subsection of this Proxy
Statement captioned "Option Grants." Restricted stock granted in 2005 will vest
in three equal annual installments. If an employee retires, dies or becomes
disabled prior to the end of the applicable period, all unvested shares
automatically vest. Grantees receive dividends on the full amount of restricted
stock granted, regardless of vesting, at the same rate as is payable on A&B's
common stock generally.
Stock options and/or restricted stock are granted at the discretion of
the Compensation Committee. In determining the size of an award to an executive
officer, the Compensation Committee considers, among other things, general
industry survey data, general industry practice, and the shares covered by the
award as a reflection of the executive officer's current and expected future
contributions to A&B. The Compensation Committee also reviews previously-granted
awards and amounts of awards outstanding.
The Company has guidelines to encourage stock ownership by A&B
executives. The expectation is that these guidelines will be achieved over a
five-year period.
Position Salary Multiple
-------- ---------------
Chief Executive Officer 5x
Named Executive Officers 3.5x
Other Designated Executives 1x to 3.5x
Achievement of the guidelines may be met in either of two ways: 1) value of
--------
stock: owning shares of A&B common stock with a value of 1 time to 5 times (as
-----
set forth above) the amount of the covered executive's salary as of the date
the executive became covered by the guidelines; or 2) number of shares:
----------------
owning a number of shares of A&B common stock which, at the time the executive
became covered by the guidelines, would have had a then current value equal to
1 time to 5 times (as set forth above) the amount of the executive's salary at
that time.
Chief Executive Officer Compensation
For 2005, the Compensation Committee approved a base salary increase
for the Chief Executive Officer, based on his performance in the previous year
and the salaries of other executive officers with comparable job
responsibilities in the surveys used by the independent consultant. In this
regard, the Compensation Committee's objective was to maintain a competitive
base salary, which was accomplished based on the surveys used by the independent
consultant. Mr. Doane received an award under the Three-Year Plan for the
2003-2005 performance cycle that was slightly above the exceptional level. Mr.
Doane's award under the One-Year Plan for 2005 was slightly above the
extraordinary level under the Plan, and the amount of the award was determined
on the basis of the performance of A&B and Mr. Doane for the Plan year. Mr.
Doane also received a stock option grant totaling 70,000 shares and a restricted
stock grant of 48,000 shares in 2005. That grant was based on an overall review
of corporate performance in 2004, without focus on any specific corporate
performance measure, and an assessment of Mr. Doane's current and expected
contributions to A&B. The full Board of Directors reviews the Chief Executive
Officer's performance at least annually, using both financial and non-financial
goals.
The foregoing report is submitted by Mr. King (Chairman), Dr. Chun, and
Messrs. Stockholm and Watanabe.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2005, the members of the Compensation Committee were Mr. King,
Chairman, Dr. Chun, and Messrs. Stockholm and Watanabe. As set forth above under
the subsection "Certain Relationships and Transactions," Mr. King owns a 6.1
percent interest, and his brother owns a 65 percent interest, in a corporation
which has entered into a commercial lease with a subsidiary of A&B, and Mr.
Watanabe is a partner in a law firm that performed legal services in 2005 for a
limited liability company in which a subsidiary of A&B is a member.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of five
directors, all of whom have been determined to be independent pursuant to the
requirements of Nasdaq. Ms. Lau and Messrs. Dods, McKissick and Pasquale have
been determined by the Board of Directors to be audit committee financial
experts under the rules of the SEC. The Board of Directors has adopted a written
charter for the Audit Committee.
The Audit Committee provides assistance to the Board of Directors in
fulfilling its obligations with respect to matters involving the accounting,
auditing, financial reporting, internal control and legal compliance functions
of A&B. Among other things, the Audit Committee reviews and discusses with
management and Deloitte & Touche LLP, A&B's independent auditors, the results of
the year-end audit of A&B, including the auditors' report and audited financial
statements. In this context, the Audit Committee has reviewed and discussed
A&B's audited financial statements with management, has discussed with Deloitte
& Touche LLP the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended, and, with and without management present, has
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee has received the written disclosures and the letter
from Deloitte & Touche LLP required by Independence Standards Board Standard No.
1, and has discussed with Deloitte & Touche LLP its independence from A&B. The
Audit Committee has determined that the provision of non-audit services rendered
by Deloitte & Touche LLP to A&B is compatible with maintaining the independence
of Deloitte & Touche LLP from A&B in the conduct of its auditing function.
In compliance with applicable SEC rules, the Audit Committee has
adopted policies and procedures for Audit Committee approval of audit and
non-audit services. Under such policies and procedures, the Audit Committee
pre-approves or has delegated to the Chairman of the Audit Committee authority
to pre-approve all audit and non-prohibited, non-audit services performed by the
independent auditor in order to assure that such services do not impair the
auditor's independence. Any additional proposed services or costs exceeding
pre-approved cost levels require additional pre-approval as described above. The
Audit Committee may delegate pre-approval authority to one or more of its
members for services not to exceed a specific dollar amount per engagement.
Requests for pre-approval include a description of the services to be performed,
the fees to be charged and the expected dates that the services will be
performed.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that A&B's audited consolidated
financial statements be included in A&B's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 for filing with the SEC. The Audit Committee
also has appointed, subject to shareholder ratification, Deloitte & Touche LLP
as independent auditors.
The foregoing report is submitted by Mr. McKissick (Chairman), Mr.
Dods, Ms. Lau, Mr. Pasquale and Ms. Shaw.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on A&B's common stock against the
cumulative total return of the S&P Composite - 500 Stock Index and the Dow Jones
US Industrial Transportation Index. The Dow Jones US Industrial Transportation
Index is a published index, which includes A&B. For illustrative purposes, A&B
again has chosen to display the Dow Jones US Real Estate Investment Index in the
comparison.
[GRAPHIC OMITTED]
* $100 INVESTED ON DECEMBER 31, 2000 IN ALEXANDER & BALDWIN, INC. COMMON STOCK,
THE S&P 500 STOCK INDEX, THE DJ US INDUSTRIAL TRANSPORTATION INDEX, AND THE
DJ US REAL ESTATE INVESTMENT INDEX. TOTAL RETURN ASSUMES REINVESTMENT OF
DIVIDENDS. FISCAL YEARS ENDING DECEMBER 31.
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
Alexander & Baldwin, Inc. 100 106 106 143 184 240
S&P Composite - 500 100 88 69 88 98 103
DJ US Industrial Transportation 100 113 116 149 192 214
DJ US Real Estate 100 112 116 159 208 228
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP as independent auditors of A&B for the ensuing year, and the Audit
Committee recommends that shareholders vote in favor of ratifying such
appointment. Deloitte & Touche LLP and its predecessors have served A&B as such
since 1957. Representatives of Deloitte & Touche LLP are expected to be present
at the Annual Meeting, where they will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions from shareholders.
For the years ended December 31, 2005 and 2004, professional services
were performed by Deloitte & Touche LLP (including consolidated affiliates) as
follows:
Audit Fees. The aggregate fees billed for the audit of the Company's
annual financial statements for the fiscal years ended December 31,
2005 and 2004 and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q were $1,557,150 and
$1,582,062, respectively. $875,000 of the 2005 fees and $875,000 of the
2004 fees represented Sarbanes-Oxley Section 404 attestation-related
work.
Audit-Related Fees. The aggregate fees billed for Audit-Related
services for the fiscal years ended December 31, 2005 and 2004 were
$94,250, and $226,652, respectively. The fees related to audits of
employee benefit plans and research and consultation on vessel delivery
for the fiscal year ended December 31, 2005, and to audits of employee
benefit plans, research and consultation on joint ventures and vessel
delivery, and consultation for Sarbanes-Oxley readiness (excluding
Section 404 attestation work) for the fiscal year ended December 31,
2004.
Tax Fees. There were no aggregate fees billed for tax services for the
fiscal years ended December 31, 2005 and 2004.
All Other Fees. There were no aggregate fees for services not included
above for the fiscal years ended December 31, 2005 and 2004.
OTHER BUSINESS
The Board of Directors of A&B knows of no other business to be
presented for shareholder action at the Annual Meeting. However, should matters
other than those set forth in this Proxy Statement properly come before the
Annual Meeting, the proxyholders named in the accompanying proxy will vote upon
them in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 2007
Proposals of shareholders intended to be presented pursuant to Rule
14a-8 under the Exchange Act at the Annual Meeting of A&B in the year 2007 must
be received at the headquarters of A&B on or before November 6, 2006 in order to
be considered for inclusion in the year 2007 Proxy Statement and proxy. In order
for proposals of shareholders made outside of Rule 14a-8 under the Exchange Act
to be considered "timely" within the meaning of Rule 14a-4(c) under the Exchange
Act, such proposals must be received at the headquarters of A&B not later than
January 27, 2007. A&B's Bylaws require that proposals of shareholders made
outside of Rule 14a-8 under the Exchange Act must be submitted, in accordance
with the requirements of the Bylaws, not later than January 27, 2007 and not
earlier than December 28, 2006.
By Order of the Board of Directors
/s/ Alyson J. Nakamura
ALYSON J. NAKAMURA
Secretary
March 6, 2006
PROXY CARD
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 27, 2006
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS1
The undersigned hereby appoints W. A. Doane,
W. A. Dods, Jr., and M. G. Shaw, and each of them,
proxies with full power of substitution, to vote
the shares of stock of Alexander & Baldwin, Inc.,
which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Corporation
to be held on Thursday, April 27, 2006, and at any
adjournments or postponements thereof, on the
matters set forth in the Notice of Meeting and
Proxy Statement, as follows:
(continued and to be signed on reverse side)
______________________________________________________________________________
FOLD AND DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2 BELOW.
---
Please mark your X
votes as indicated
in this example
1. ELECTION OF DIRECTORS (Check one box only): 01 M. J. Chun, 02 W. A. Doane, 03
W. A. Dods, Jr., 04 C. G. King,
05 C. H. Lau, 06 D. M. Pasquale,
07 M. G. Shaw, 08 J. N. Watanabe.
FOR all nominees __ (To withhold authority to vote
listed to the right: |__| for any individual nominee,
check the "FOR all nominees"
WITHOUT AUTHORITY box to the left and write the
to vote for all nominees listed to name of the nominee for whom
the right: __ you wish to withhold authority
|__| in the space provided below.)
____________________________________________________________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP
as the auditors of the Corporation:
FOR AGAINST ABSTAIN
__ __ __
|__| |__| |__|
3. In their discretion on such other matters as properly
may come before the meeting or any adjournments or
postponements thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS
AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS NAME(S) APPEARS ABOVE
Signature____________________ Signature__________________ Date_________________
IMPORTANT: WHEN STOCK IS IN TWO OR MORE NAMES, ALL SHOULD SIGN. WHEN SIGNING
AS EXECUTOR, TRUSTEE, GUARDIAN OR OFFICER OF A CORPORATION, GIVE 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
http://www.proxyvoting.com/alex
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site.
OR
Telephone
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.