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OMB
APPROVAL
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OMB
Number:
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3235-0059
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Expires:
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January 31,
2009
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Estimated
average burden hours per response
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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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Filed by a
Party other than the Registrant
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Check the
appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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X
Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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BORGWARNER
INC.
(Name of Registrant
as Specified In Its Charter)
(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1) Title
of each class of securities to which transaction
applies:
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2) Aggregate
number of securities to which transaction applies:
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3) Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed
maximum aggregate value of transaction:
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5) Total
fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1) Amount
Previously Paid:
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2) Form,
Schedule or Registration Statement No.:
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3) Filing
Party:
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4) Date
Filed:
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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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BORGWARNER
INC.
___________________
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
Auburn Hills,
Michigan
March 17,
2008
Dear
Stockholder:
BorgWarner Inc.
will hold its Annual Meeting of Stockholders at the Company’s headquarters
located at 3850 Hamlin Road, Auburn Hills, Michigan, 48326, on April 30,
2008, at 9:00 a.m., local time, for the following purposes:
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1.
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To elect the
nominees for Class III Directors to serve for the next three
years;
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2.
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To vote
upon a proposal to approve an amendment to the Company’s Restated
Certificate of Incorporation to increase the authorized common stock of
the Company from 150,000,000 shares to 390,000,000
shares;
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3.
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To ratify the
appointment of Deloitte & Touche LLP as the independent registered
public accounting firm for the Company for 2008;
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4.
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To transact
such other business as may properly come before the meeting or any
adjournment or postponement thereof.
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Only stockholders
at the close of business on March 3, 2008 are entitled to vote at the
meeting or any adjournment or postponement thereof.
Your vote is important! Whether or
not you intend to be present at the meeting, and in order to assure that your
shares are represented at the meeting, please mark, sign and date the enclosed
proxy card and return it in the enclosed prepaid envelope. If you
prefer, you can submit your proxy by telephone or the internet. If
you attend the meeting, you may vote in person if you wish to do so, even if you
have previously submitted your proxy.
Please read the
attached proxy statement carefully as it describes in greater detail the matters
to be acted upon and your voting rights with respect to those
matters.
Along with the
attached proxy statement, we are sending you our 2007 summary annual report,
which includes our financial statements. Most of you can elect to
view future proxy statements and annual reports over the internet instead of
receiving paper copies in the mail. Please refer to page 2 of the
proxy statement and your proxy card for further information.
By
Order of the Board of Directors
/s/ John J.
Gasparovic
John J.
Gasparovic
Secretary
YOUR VOTE IS
IMPORTANT!
YOU MAY VOTE
BY:
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Signing and returning the
accompanying proxy card
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OR
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Voting
by telephone or by the Internet (See proxy card for
instructions.);
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OR
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Voting in person at the meeting
(if you are a stockholder of record)
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TABLE
OF CONTENTS
BORGWARNER
INC.
3850 Hamlin
Road
Auburn Hills, Michigan
48326
PROXY
STATEMENT
March 17,
2008
This proxy
statement is furnished in connection with the solicitation of proxies by the
Board of Directors of BorgWarner Inc. (the “Company”) for the Company’s 2008
Annual Meeting of Stockholders to be held at the Company’s headquarters at 3850
Hamlin Road, Auburn Hills, Michigan 48326 on April 30, 2008 at
9:00 a.m., local time, or at any adjournments thereof. This proxy statement
and the accompanying form of proxy and our 2007 summary annual report are being
mailed to stockholders beginning on or about March 20, 2008. The Company’s
Summary Annual Report to Stockholders for the year ended December 31, 2007
is enclosed.
Record Date and Voting at the Annual
Meeting
Only stockholders
of record at the close of business on March 3, 2008 will be entitled to
vote at the meeting. As of such date, there were 117,393,116 issued and
116,412,639 outstanding shares of common stock. Each share of common stock
entitles the holder to one vote.
If
you return your signed proxy card or vote by telephone or by the Internet before
the Annual Meeting, we will vote your shares as you direct. Any proxy returned
without specification as to any matter will be voted as to each proposal in
accordance with the recommendation of the Board of Directors. You may revoke
your proxy at any time before the vote is taken by delivering to the Secretary
of the Company written revocation or a proxy bearing a later date, or by
attending and voting at the Annual Meeting.
The election
inspectors will tabulate the votes cast prior to the meeting and at the meeting
to determine whether a quorum is present. The presence in person or by proxy of
the holders of a majority of common stock will constitute a quorum. A quorum is
necessary to transact business at the Annual Meeting. Shares of common stock
represented by proxies that reflect abstentions or “broker non-votes” (i.e.,
shares held by a broker or nominee which are represented at the Annual Meeting,
but with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as present and entitled to vote for
purposes of determining the presence of a quorum.
With respect to
Proposal 1 and the election of Directors, stockholders may (a) vote in
favor of all nominees, (b) withhold votes as to all nominees, or
(c) withhold votes as to specific nominees. In an uncontested director
election, such as this year’s election, a director nominee may serve on the
board only if the nominee receives the favorable vote of more than 50% of the
shares voted. In a contested election, directors are elected by a
plurality vote. Withheld votes and broker non-votes will not affect the outcome
of the election of directors.
With respect to
Proposal 2 and the proposed amendment to our certificate of incorporation: the
approval and adoption of that amendment requires the affirmative vote of a
majority of the outstanding shares of the Company’s common stock. An
abstention or a broker nonvote is the functional equivalent of a “no” vote on
this proposal.
With respect to
Proposal 3: the affirmative vote of a majority of the votes cast with respect to
a particular proposal is required for approval and adoption of that
proposal. An abstention on this proposal will be the functional
equivalent of a “no” vote on that proposal. However, a broker nonvote
on any one of those proposals will not be counted for purposes of determining
the number of votes cast on that proposal and thus will not affect the outcome
of the vote on that proposal.
Electronic
Delivery of Proxy Statement and Annual Report
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON APRIL 30, 2008. THE PROXY STATEMENT AND ANNUAL REPORT
TO SECURITY HOLDERS ARE AVAILABLE ON THE INTERNET SITE AT
http://ww3.ics.adp.com/streetlink/BWA
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Beneficial
Stockholders
Most stockholders
can elect to view future proxy statements and annual reports over the internet
instead of receiving paper copies in the mail.
You can choose this option and save the Company
the cost of producing and mailing these documents by:
• Following
the instructions provided on your voter instruction form;
• Following
the instructions provided when you vote over the Internet; or
• Going
to
www.proxyvote.com
and following the instructions provided.
If you choose to view future proxy statements
and annual reports over the Internet, you will receive an e-mail message next
year containing the Internet address to access the Company’s proxy statement and
annual report. The e-mail message also will include instructions for
voting over the Internet. You will have the opportunity to opt out at
any time by following the instructions on
www.proxyvote.com
You do not have to re-elect Internet access each year.
Registered
Stockholders
For internet access
to your future proxy materials and more, simply logon to BNY Mellon Shareowner
Services Investor ServiceDirect
®
at
www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you
through enrollment.
Householding
Information
The Company has adopted a procedure called
“householding,” which has been approved by the SEC. Under this
procedure, a single copy of the summary annual report, proxy statement or Notice
of Internet Availability of Proxy materials, as applicable, will be sent to any
household at which two or more stockholders reside, unless one of the
stockholders at that address notifies the Company that they wish to receive
individual copies. This procedure reduces our printing costs and
fees. Stockholders who participate in householding will continue to
receive separate proxy cards.
Householding
will not affect dividend check mailings in any way.
The Company will
deliver promptly upon written or oral request a separate copy of the summary
annual report, the proxy statement or Notice of Internet Availability of Proxy
Materials, as applicable to any stockholder at a shared address to which a
single copy of those documents was delivered. If you share an address
with another stockholder and you wish to receive a separate copy of any of those
documents you may inform the Company of your wish by contacting Mary Brevard,
Vice President, Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan
48326 (tel: 248-754-9200). Similarly, if you share an address with
another stockholder that is receiving multiple copies and wish to request that
the number of copies of those documents being delivered to that address be
reduced to a single copy, you may inform the Company of your wish by contacting
Mary Brevard, Vice President, Investor Relations at the above address and
telephone number.
PROPOSAL 1— ELECTION OF DIRECTORS
The Company’s Board
of Directors currently consists of ten directors and is divided into three
classes. Robin J. Adams and David T. Brown are the nominees for election as
Class III Directors to the Board at this meeting. Mr. Glaske will
retire from the Board of Directors at the 2008 Annual Meeting of Stockholders in
accordance with retirement guidelines adopted by the Board. Following
the election of directors at this Annual Meeting your Board of Directors will
have nine members and one vacancy. If elected, each nominee will
serve for a term of three years or until his successor is elected and qualified.
The Class I Directors have terms expiring at the 2009 Annual Meeting of
Stockholders and the Class II Directors have terms expiring at the 2010
Annual Meeting of Stockholders. Each of the nominees for election as a
Class III Director has agreed to serve if elected. All of the
Class III Directors are presently directors of the Company. In the event
that any nominee should become unavailable for election, the Board of Directors
may designate a substitute nominee, in which event the shares represented by
proxies at the meeting will be voted for such substitute nominee unless an
instruction to the contrary is indicated on the proxy card.
Recommendation
YOUR BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR
CLASS III DIRECTOR —ROBIN J. ADAMS AND DAVID T. BROWN
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Information on Nominees for Directors
and Continuing Directors
The following table
sets forth as of March 3, 2008, with respect to each of the Company’s
current directors continuing to serve, his or her name, age, principal
occupation, the year in which he or she first became a director of the Company
and directorships in other entities:
Class I
Directors
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Age
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Principal Occupation and
Directorships
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Phyllis O.
Bonanno
1999
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64
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Ms. Bonanno
has been President and CEO of International Trade Solutions, Inc., an
international trade consulting firm, since March 2002. She was the
President of TradeBuilders, Inc. from October 2000 until October 2001. She
was President of Columbia College from July 1997 until March 2000. She is
also a director of Adams Express Company, Mohawk Industries, Inc. and
Petroleum & Resources Corporation.
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Alexis P.
Michas
1993
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50
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Mr. Michas
has been the Managing Partner of Stonington Partners, Inc., an
investment management firm since 1996. He is also a director of AirTran
Airways, Inc., PerkinElmer, Inc., Lincoln Educational Services Corporation
and a number of privately-held companies.
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Richard O.
Schaum
2005
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61
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Mr. Schaum served
as the 2007 President of the Society of Automotive Engineers and has
been General Manager, 3rd Horizon Associates LLC, a technology
assessment and development company, since May 2003. He was Vice
President and General Manager of Vehicle Systems for WaveCrest
Laboratories, Inc. from October 2003 until June 2005. He was Executive
Vice President, Product Development for DaimlerChrysler Corporation from
January 2000 until his retirement in March 2003.
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Thomas T.
Stallkamp
2006
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61
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Mr. Stallkamp
has been an Industrial Partner in Ripplewood Holdings LLC, a New York
private equity group, since July 2004. From 2003 to 2004, he served as
Chairman of MSX International, Inc., a global provider of
technology-driven engineering, business and specialized staffing services,
and from 2000 to 2003 he served as its Vice Chairman and Chief Executive
Officer. From 1980 to 1999, Mr. Stallkamp held various positions with
DaimlerChrysler Corporation and its predecessor Chrysler Corporation, the
most recent of which were Vice Chairman and President. Mr. Stallkamp
also serves as a Director of Baxter International,
Inc.
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Class II
Directors
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Age
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Principal Occupation and
Directorships
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Jere A.
Drummond
1996
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68
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Mr. Drummond
retired from the BellSouth Corporation on December 31, 2001. He
served as Vice Chairman of the BellSouth Corporation from January 2000
until his retirement. He was President and Chief Executive Officer
of BellSouth Communications Group, a provider of traditional telephone
operations and products, from January 1998 until December 1999. He
was President and Chief Executive Officer of BellSouth Telecommunications,
Inc. from January 1995 until December 1997 and was elected a director of
BellSouth Telecommunications, Inc. in 1993. He is also a director of
AirTran Holdings, Inc. Centillium Communications, Inc. and SAIC,
Inc.
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Timothy M.
Manganello
2002
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58
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Mr. Manganello
has been Chairman of the Board since June 2003 and Chief Executive Officer
of the Company since February 2003. He was also President and Chief
Operating Officer from February 2002 until February 2003. He was
Executive Vice President from June 2001 until February 2002. He was
Vice President of the Company from February 1999 until June 2001 and
President and General Manager of BorgWarner TorqTransfer Systems Inc.
("TorqTransfer Systems") from February 1999 until February 2002. He
was appointed a director of the Company in 2002. Mr. Manganello is
also a director of Bemis Company, Inc. and he serves as the
Board Chairman of Federal Reserve Bank of Chicago, Detroit
branch.
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Ernest J.
Novak, Jr.
2003
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63
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Mr. Novak
retired as a Managing Partner from Ernst & Young in June 2003.
He was a Managing Partner from 1986 until June 2003. Mr. Novak is
also a director of A. Schulman, Inc. and FirstEnergy
Corp.
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Class III
Directors
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Age
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Principal Occupation and
Directorships
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Robin J.
Adams
2005
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54
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Mr. Adams
has been Executive Vice President, Chief Financial Officer and Chief
Administrative Officer since April 2004. He was Executive Vice
President — Finance and Chief Financial Officer of American
Axle & Manufacturing Holdings Inc. (“American Axle”) from July
1999 until April 2004. Prior to joining American Axle, he was Vice
President and Treasurer and principal financial officer of BorgWarner Inc.
from May 1993 until June 1999. Mr. Adams also is a member of the
Supervisory Board of BERU AG.
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David T.
Brown
2004
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59
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Mr. Brown
retired from Owens Corning on December 31, 2007. He was
President and Chief Executive Officer of Owens Corning from April 2002
until his retirement. He was Executive Vice President and Chief Operating
Officer from January 2001 to March 2002. He was Vice President of Owens
Corning and President, Insulating Systems Business from January 1997 to
December 2000.
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Paul E.
Glaske
1994
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73
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Mr. Glaske
was Chairman, President and Chief Executive Officer from April 1992 until
his retirement in October 1999 of Blue Bird Corporation, a leading
manufacturer of school buses, motor homes and a variety of other vehicles.
Mr. Glaske is also a director of Lincoln Educational Services
Corporation, Energy Transfer Partners, L.P. and Energy Transfer Equity,
L.P.
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No director nominee, director or executive
officer is related to any other director nominee, director or executive officer
(or to any director or executive officer of any of the Company’s subsidiaries)
by blood, marriage or adoption. There are no arrangements or
understandings between any nominee or any of our directors or executive officers
or any other person pursuant to which that nominee or director or executive
officer was nominated or elected as a director of the Company or any of its
subsidiaries. No director or executive officer of the Company is
party to, or has any material interests in, any material legal proceedings that
are adverse to the Company or its subsidiaries.
Board of Directors and Its
Committees
The Board of
Directors held four regular meetings during 2007. All of the directors attended
at least 75% of the meetings of the Board of Directors and each committee on
which they served. The Company’s Corporate Governance Guidelines set forth
the Company’s policy that directors should use their best efforts to attend the
Company’s annual meeting of stockholders. All directors serving at the time of
the 2007 Annual Meeting of Stockholders attended the meeting.
The Board of
Directors has a standing Compensation Committee, Audit Committee, Corporate
Governance Committee and Executive Committee. The Charters for each of our Board
committees can be accessed on the Company’s website at
www.borgwarner.com
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The Board has
determined that all Board members meet the independence requirements of the New
York Stock Exchange (“NYSE”), with the exception of Mr. Manganello, our
Chairman and Chief Executive Officer, and Mr. Adams, our
Executive Vice President, Chief Financial Officer and Chief Administrative
Officer. Under the Company’s Corporate Governance Guidelines, a director will
not be considered independent unless the Board determines that such director has
no direct or indirect material relationship with the Company. In addition, the
Company’s Corporate Governance Guidelines provide, among other things,
that:
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a director
who is an employee, or whose immediate family member is an executive
officer, of the Company is not “independent” until three years after the
end of such employment relationship.
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a director
who receives, or whose immediate family member receives, more than
$100,000 per year in direct compensation from the Company, other than
director and committee fees or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service), is not “independent” until three years after he or she
ceases to receive more than $100,000 per year in such
compensation.
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a director
who is affiliated with or employed by, or whose immediate family member is
affiliated with or employed in a professional capacity by, a present or
former internal or external auditor of the Company, is not “independent”
until three years after the end of the affiliation or the employment or
auditing relationship.
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a director
who is employed, or whose immediate family member is employed, as an
executive officer of another company where any of the Company’s present
executives serve on that company’s compensation committee, is not
“independent” until three years after the end of such service or the
employment relationship.
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a director
who is an executive officer or an employee, or whose immediate family
member is an executive officer, of a company that makes payments to, or
receives payments from, the listed company for property or services in an
amount which, in any single fiscal year, exceeds the greater of
$1 million, or 2% of such other company’s consolidated gross
revenues, is not “independent” until three years after falling below such
threshold.
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a director
who is not considered independent by relevant statute or regulation is not
“independent.”
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Compensation
Committee.
The current members of the Compensation Committee
are Directors Drummond (Chairman), Bonanno, and Brown. The principal functions
of the Compensation Committee include reviewing and approving executive
appointments, remuneration, and compensation plans and supervising the
administration of these plans. The Compensation Committee met six times during
2007.
Audit
Committee.
The current members of the Audit Committee are
Directors Novak (Chairman), Schaum and Stallkamp. The Audit Committee of
the Board of Directors of BorgWarner Inc. is charged with assisting the full
Board in fulfilling the Board’s oversight responsibility with respect to the
quality and integrity of the accounting, auditing and financial reporting
practices of the Company. The Committee also has the responsibility for, among
other things, selection and compensation of the independent registered public
accounting firm, monitoring the independent registered public accounting firm’s
qualifications, independence and work (including resolving any disagreements
between the Company’s management and the independent registered public
accounting firm regarding financial reporting), pre-approving all audit services
to be performed by the independent registered public accounting firm, monitoring
the performance of the Company’s internal audit function and reviewing on behalf
of the Board the Company’s pension plans and risk management programs. The
responsibilities of the Committee are set forth in its charter, which is
reviewed at least annually.
Each member of the
Committee meets the independence requirements set by the New York Stock
Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange
Commission. The Board of Directors has determined that Mr. Novak is
a financial expert as defined by the rules and regulations of the
Securities and Exchange Commission. None of the members of the Committee
simultaneously serve on the audit committees of more than two other public
companies.
The Audit
Committee met seven times during 2007. The Audit Committee’s charter, which was
amended in November 2007, is attached as Annex A.
Corporate Governance
Committee.
The present members of the Corporate Governance
Committee are Directors Glaske (Chairman), Drummond and Michas. The principal
functions of the Corporate Governance Committee include making recommendations
to the Board of Directors regarding: (i) Board composition and structure,
(ii) corporate governance principles, including the nature, duties and
powers of Board committees, (iii) term of office for members,
(iv) qualified persons to be nominated for election or re-election as
directors, (v) stockholders’ suggestions for board nominations,
(vi) the emergency successor to the Chief Executive Officer, and (vii) any
requests for waivers of application of the Company’s Code of Ethical Conduct and
any related person transactions. The Corporate Governance Committee also
establishes criteria for Board and committee membership, evaluates Company
policies relating to the recruitment of directors and oversees the evaluation of
the Board, its committees and management. The Corporate Governance Committee met
four times during 2007.
The Corporate
Governance Committee will consider nominees for the Board of Directors from a
variety of sources, including current directors, management, retained
third-party search firms, and stockholders.
Stockholders of
record of the Company may recommend director candidates for inclusion by the
Board in the slate of nominees which the Board recommends to stockholders for
election. Appropriate biographical information and background material must be
submitted to the “BorgWarner Inc. Corporate Governance Committee”
c/o BorgWarner Inc. General Counsel, 3850 Hamlin Road, Auburn Hills,
Michigan 48326 in a timely manner. Assuming that appropriate biographical and
background material is provided for candidates recommended by stockholders, the
Corporate Governance Committee will evaluate those candidates by following
substantially the same process, and applying substantially the same criteria, as
for candidates submitted by Board members. The General Counsel will review the
information and provide to the Chairman of the Corporate Governance Committee an
assessment of the candidate’s independence, freedom from conflicts of interest
and general suitability. If the Chairman of the Committee decides to submit the
candidate to the entire Committee, each member will receive the candidate’s
background information and will be afforded an opportunity to interview the
candidate.
In
considering whether to recommend to the full Board any candidate for inclusion
in the Board’s slate of recommended director nominees, the Corporate Governance
Committee will consider, among other things, the following factors:
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personal and
professional ethics, integrity and values;
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the education
and breadth of experience necessary to understand business problems and
evaluate and postulate solutions;
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interest and
availability of time to be involved with the Company and its employees
over a sustained period;
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stature to
represent the Company before the public, stockholders and various others
who affect the Company;
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willingness
to objectively appraise management performance in the interest of the
stockholders;
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open
mindedness on policy issues and areas of activity affecting overall
interests of the Company and its stockholders;
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involvement
only in activities and interests that do not create a conflict with the
director’s responsibilities to the Company and its
stockholders;
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ability to
evaluate strategic options and risks;
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contribution
to the Board’s desired diversity and
balance;
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willingness
to limit public company board service to four or fewer boards of public
companies, unless the Corporate Governance Committee approves otherwise;
and
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agreement
to tender promptly following their election an irrevocable resignation
effective upon failure to receive the required vote for re-election at the
next meeting at which such person would face re-election and upon
acceptance of such resignation by the Board of
Directors.
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The Company
believes that the backgrounds and qualifications of the directors, considered as
a group, should provide a significant composite mix of experience, knowledge and
abilities that will allow the Board to fulfill its responsibilities. If the
Corporate Governance Committee determines that a stockholder-nominated candidate
is suitable and that the candidate should be recommended to the full Board, a
quorum of the full Board must discuss whether to include the candidate in the
slate of nominees which the Board recommends to stockholders for election and,
if appropriate, adopt a resolution authorizing the inclusion.
There have been no
material changes to the procedures by which security holders may recommend
nominees since last year’s annual meeting.
You may send
communications to your Board of Directors and to individual directors.
Such communications should be submitted in writing addressed to your Board of
Directors or to one or more named individual directors in care of BorgWarner
Inc., General Counsel, 3850 Hamlin Road, Auburn Hills, Michigan 48326. All
such communications will be forwarded promptly to your Board of Directors or
such named individual director.
Executive
Committee.
The present members of the Executive Committee are
Directors Drummond, Manganello and Michas. The Executive Committee is empowered
to act for the full Board during intervals between Board meetings when
telephonic meetings cannot reasonably be arranged, with the exception of certain
matters that by law may not be delegated. The Executive Committee met once
during 2007.
Executive
Sessions.
The non-employee directors meet in executive
sessions without the presence of any corporate officer or member of management
in conjunction with regular meetings of the Board. Director Glaske is the
current presiding director. It is expected that Director Michas will
become presiding director upon Mr. Glaske’s retirement. Interested
parties can make concerns known directly to the non-management directors on-line
at
www.mysafeworkplace.com
or by toll-free call to 1-800-461-9330.
REPORT OF THE BORGWARNER INC. AUDIT COMMITTEE
Management of your Company is responsible for
the preparation, presentation and integrity of your Company's financial
statements and for the effectiveness of internal control over reporting.
Management and the Company's internal auditing department are responsible for
maintaining its accounting and financial reporting principles and internal
controls and procedures designed to maintain compliance with accounting
standards and applicable laws and regulations. Deloitte & Touche LLP,
the independent registered public accounting firm for the Company is
responsible for auditing your Company's financial statements and internal
controls over financial reporting, and expressing opinions on (1) the conformity
of the financial statements with accounting principles, generally accepted in
the United States of America and (2) the effectiveness of internal control over
financial reporting. The Audit Committee is responsible for the
appointment, oversight, compensation and retention of the independent registered
public accounting firm.
In the performance of its oversight function, the Audit Committee has reviewed
and discussed with management and Deloitte & Touche LLP, the audited
financial statements for the year ended December 31, 2007. The Audit
Committee also has discussed with Deloitte & Touche LLP, the matters
required to be discussed by the Public Company Accounting Oversight Board
(“PCAOB”) Interim Auditing Standard AU Section 380, "Communication with Audit
Committees." We have received from Deloitte & Touche LLP the
written disclosures and the letter required by Independence Standards Board
Standard No. 1. ("Independence Discussions with Audit Committees"), and have
discussed with Deloitte & Touche LLP their independence. The Audit
Committee has concluded that Deloitte & Touche LLP's provision of audit and
non-audit services to the Company is compatible with their
independence.
The Audit Committee discussed with Deloitte & Touche LLP the overall
scope and plans for their audit. The Audit Committee meets with Deloitte
& Touche LLP, with and without management present to discuss the results of
their audits, the evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. In addition, the
Audit Committee provided guidance and oversight to the internal audit function,
including the audit plan, and results of internal audit activity. The
Director of Internal Audit has direct access to the Committee to discuss any
matters desired, and the Director of Internal Audit presented an update of
internal audit activity at each Committee meeting.
The members of the Audit Committee are not
full-time employees of your Company and are not performing the functions of
auditors or accountants. As such, it is not the duty or responsibility of
the Audit Committee or its members to conduct "field work" or other types of
auditing or accounting reviews or procedures or to set auditor independence
standards. Members of the Audit Committee necessarily rely on the
information provided to them by management and the independent auditors.
Accordingly, the Audit Committee's considerations and discussions referred to
above do not assure that the audit of the Company's financial statements has
been carried out in accordance with generally accepted auditing standards, that
the financial statements are presented in accordance with generally accepted
accounting principles, or that the Company's auditors are
"independent."
Based upon the reports and discussions
described in this report, and subject to the limitations on the role and
responsibilities of the Audit Committee that are described above and in the
Audit Committee's charter, the Audit Committee recommended to the Board of
Directors that the audited financial statements of the Company be included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2007. It also recommended to the Board that, subject to stockholder
ratification, Deloitte & Touche LLP be appointed as the independent
registered public accounting firm for the Company.
BORGWARNER
INC. AUDIT COMMITTEE
Ernest J. Novak,
Chairman
Thomas T.
Stallkamp Richard O. Schaum
The
Audit Committee Report does not constitute soliciting material. It is not
considered filed by us and shall not be incorporated by reference into any of
our other filings under the Securities Act or the Exchange Act unless we state
otherwise.
Security
Ownership of Certain Beneficial Owners and Management
The following table
sets forth, as of February 29, 2008, certain information regarding
beneficial ownership of common stock by those persons and entities that are
known to the Company as beneficially owning more than five percent of the
Company’s common stock.
|
|
Number
of
|
|
|
Percent
of
|
|
Name and Address of Beneficial
Owner
|
|
Shares
|
|
|
Class
|
|
|
|
|
|
|
|
|
|
|
UBS
AG
|
|
|
16,354,032
|
(a)
|
|
|
14.1
|
%
|
Bahnhofstrasse
45,
PO Box CH-8021
Zurich,
Switzerland
|
|
|
|
|
|
|
|
|
AXA Financial, Inc.
|
|
|
6,014,168
|
(b)
|
|
|
5.2
|
%
|
1290 Avenue of the Americas
New York, New York 10104
|
|
|
|
|
|
|
|
|
(a)
|
|
Pursuant to a
Schedule 13G/A dated February 14, 2008 on behalf of UBS AG
indicating that it had sole voting power for 15,036,076 and shared
dispositive power for 16,354,032.
|
(b)
|
|
Pursuant to a
Schedule 13G/A dated February 29, 2008 on behalf of AXA
Financial, Inc., AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, AXA Courtage Assurance Mutuelle and AXA indicating that it had
sole voting power for 3,989,220 shares, shared voting power for 167,866
shares, and sole dispositive power for 6,014,168
shares.
|
The following table
sets forth, as of March 3, 2008, certain information regarding the beneficial
ownership of common stock. Each person who was a director of the
Company at December 31, 2007, each nominee for election as a director, each
executive officer named in the Summary Compensation Table, and such directors
and executive officers as a group.
|
|
Amount
and Nature
of Stock Ownership(
b
)(
c
)
|
|
|
|
|
Name of Beneficial
Owner
(a)
|
|
|
|
Percent of
Class
|
|
|
|
|
|
|
|
|
|
|
Timothy M.
Manganello
|
|
|
350,598.93
|
|
|
|
*
|
|
Robin J.
Adams
|
|
|
182,184.36
|
|
|
|
*
|
|
Bernd
Matthes
|
|
|
43,556.00
|
|
|
|
*
|
|
Cynthia
Niekamp
|
|
|
73,246.71
|
|
|
|
*
|
|
Roger J.
Wood
|
|
|
120,955.38
|
|
|
|
*
|
|
Phyllis O.
Bonanno
|
|
|
33,428.00
|
|
|
|
*
|
|
David T.
Brown
|
|
|
5,682.00
|
|
|
|
*
|
|
Jere A.
Drummond
|
|
|
37,704.00
|
|
|
|
*
|
|
Paul E.
Glaske (d)
|
|
|
71,322.00
|
|
|
|
*
|
|
Alexis P.
Michas
|
|
|
183,014.00
|
|
|
|
*
|
|
Ernest J.
Novak, Jr.
|
|
|
20,104.00
|
|
|
|
*
|
|
Richard O.
Schaum
|
|
|
7,568.00
|
|
|
|
*
|
|
Thomas T.
Stallkamp
|
|
|
6,674.00
|
|
|
|
*
|
|
All directors
and executive officers of the Company (18 persons)
|
|
|
1,737,264.16
|
|
|
|
1.48%
|
|
*
|
Represents
less than one percent.
|
(a)
|
For purposes
of the above table, the address for each named person is 3850 Hamlin Road,
Auburn Hills, Michigan 48326.
|
(b)
|
Includes
the following number of shares issuable upon the exercise of options
within the next 60 days: 80,926 for Mr. Adams; 24,000 for
Ms. Bonanno; 28,000 for Mr. Drummond; 28,000 for
Mr. Glaske; 112,440 for Mr. Manganello; 14,840 for Mr. Matthes;
24,000 for Mr. Michas; 28,000 for Ms. Niekamp; 8,000 for
Mr. Novak; 39,418 for Mr. Wood; and 675,186 for all directors
and executive officers of the Company.
|
(C)
|
Includes
all shares with respect to which each officer or director directly, or
indirectly, through any contract, arrangement, understanding, relationship
or otherwise, has or shares the power to vote or to direct voting of such
shares or to dispose or to direct the disposition of such
shares.
|
(d)
|
Retiring at
April 30, 2008 Annual Meeting of
Stockholders
|
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934 requires the Company’s executive officers,
directors and persons who beneficially own more than 10 percent of a registered
class of the Company’s equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of the Company’s common
stock. Such officers, directors and persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
they file with the SEC.
Based solely on a
review of the copies of such forms that were received by the Company, or written
representations from certain reporting persons that no Form 5s were required for
those persons, the Company believes that all filing requirements applicable to
its directors, executive officers and greater than 10 percent stockholders were
complied with during 2007.
Code of
Ethics
The Company has
long maintained a Code of Ethical Conduct which is applicable to all directors,
officers and employees of the Company. In addition, the Company has adopted a
Code of Ethics for CEO and Senior Financial Officers which applies to the
Company’s Chief Executive Officer, Chief Financial Officer, Treasurer and
Controller. Each of these codes is posted on the Company’s website at
www.borgwarner.com.
COMPENSATION
DISCUSSION AND ANALYSIS
General
The primary
executive compensation objectives of the Compensation Committee of our Board of
Directors are to:
·
|
attract and
retain the best possible executive
talent,
|
·
|
motivate
these executives to achieve goals that support the Company’s business
strategy (including growth and the creation of long term
value),
|
·
|
link
executives’ and stockholders’ interests through equity-based plans,
and
|
·
|
provide a
compensation package that is based on individual performance as well as
overall business results.
|
To achieve these
objectives, our Compensation Committee has implemented and maintains
compensation plans and programs that tie a substantial portion of our
executives’ overall compensation to our financial performance, our common stock
price, and the achievement of total shareholder return as compared to our
industry. Overall, the intention is to set compensation targets slightly above
the median competitive levels of comparable companies in the automotive,
transportation and general industry sectors (as described further in the
Compensation Benchmarking section) and reward for above median
performance. Targets are set above the median to motivate exceptional
performance.
The primary
components of our 2007 compensation program are base salary, an annual bonus
plan, performance shares and stock options. Generally, we set base compensation
at the market median, which we believe enables us to hire and retain individuals
in a competitive environment and to reward satisfactory individual performance
and a satisfactory level of contribution to our overall business goals. We use
annual cash incentives in order to reward our executives for meeting annual
objectives of our long-range plan. We use long term equity incentives
to reward long-term performance (over a time horizon of three or more years)
thus linking our executives’ interests with that of stockholders by maximizing
long-term stockholder value. We determine the appropriate level for
each compensation component for each executive based in part, but not
exclusively, on competitive benchmarking. Other factors that affect
these decisions include our recruiting and retention goals, our view of internal
equity and consistency (e.g., size and complexity of business managed, scope and
influence of role), and other considerations we deem relevant, such as rewarding
superior performance.
Our Compensation
Committee performs a strategic review of our executive officers’ compensation at
least annually. During this review, our Compensation Committee evaluates our
compensation philosophy and objectives to ensure that they continue to reflect
our business objectives, competitive realities and our Board’s determination of
the best interests of stockholders. Our Compensation Committee then determines
whether our compensation programs are meeting these objectives, providing
adequate incentives and motivation to our executive officers and adequately
compensating our executive officers relative to comparable officers in other
companies with which we compete for executives. Also as part of this strategic
review in 2007, our Compensation Committee determined the compensation of our 17
corporate officers including our Chief Executive Officer, our Chief Financial
Officer and the three other officers whose compensation is detailed in the
Summary Compensation Table on page 20 (the “Named Executive Officers”). For
compensation decisions, including decisions regarding the grant of equity
compensation, relating to executive officers other than our Chief Executive
Officer, our Compensation Committee considers recommendations from our Chief
Executive Officer. At the request of the Compensation Committee, materials for
Committee meetings are prepared by our Vice President, Human Resources with
assistance from the compensation consultant engaged by the Committee, Hewitt
Associates, LLC (the “Compensation Consultant”) in 2007. Our Compensation
Committee’s strategic review for the 2007 plan year occurred in October 2006 and
its strategic review for the 2008 plan year occurred in October 2007 (in each
instance in an extended session). The Committee consulted with our Chief
Executive Officer during this session regarding the compensation of our 16 other
corporate officers.
Compensation
Benchmarking
Our Compensation
Committee believes that benchmarking is a useful tool because it is a reflection
of the market in which we compete for talent and provides credibility for our
compensation programs with both our employees and our stockholders. However,
benchmarking is not the only criterion used in compensation
decisions. Other factors such as internal equity, individual and
business performance, and the degree of alignment between job duties of the
incumbent with the benchmark job description are also considered. For
example, in instances where an executive officer is uniquely key to our success,
our Compensation Committee may provide compensation in excess of these
benchmarks.
As part of our
compensation benchmarking, each year our Compensation Committee engages an
outside consultant, Hewitt Associates, LLC in 2007, to compare the total
compensation levels (including base salary, annual bonus, and long-term
incentives) for our executive officers to the compensation practices of a
comparator group with whom we compete for talent. Our Compensation Committee has
established that the comparator group (“Comparator Group”) used for benchmarking
executive officer compensation should include companies with revenues between
$1.5 billion and $15 billion in the automotive, transportation and general
industrial sectors, with general industrial companies comprising no more than
25% of the total group. The group used for establishing 2007 compensation levels
consisted of the following thirty-one companies:
AMSTED
Industries, Inc.
|
Fleetwood
Enterprises, Inc.
|
Praxair
Inc.
|
BAE Systems,
Inc.
|
Freightliner
LLC
|
Robert Bosch
Corporation
|
Ball
Corporation
|
Harley-Davidson
Motor Co.
|
The
Sherwin-Williams Co.
|
Brunswick
Corporation
|
Illinois Tool
Works Inc.
|
SPS
Technologies Inc.
|
Cummins
Inc.
|
Intl Truck
and Engine Corp.
|
Thyssen Krupp
Budd Co.
|
Dana
Corporation
|
ITT
Industries, Inc.
|
The Timken
Company
|
Denso Intl
America, Inc.
|
Kennametal
Inc.
|
TRW
Automotive Inc.
|
Donaldson
Company Inc.
|
Metaldyne
Corporation
|
Valmont
Industries Inc.
|
Dover
Corporation
|
PACCAR
Inc.
|
Worthington
Industries Inc.
|
Eastman
Chemical Co.
|
Parker
Hannifin Corporation
|
|
Eaton
Corporation
|
Polaris
Industries Inc.
|
|
Due to the
differences in size among the comparator companies, a form of analysis known as
regression was used in order to normalize the survey results for the size of our
Company.
Generally, our
executive compensation program comprises base salary at the 50th percentile of
the Comparator Group, annual target bonus at the 65th percentile of the
Comparator Group, and long-term target incentives at the 65th percentile of the
Comparator Group. We believe that these percentiles reflect consideration of our
stockholders’ interests in paying what is necessary, but not significantly more
than necessary, to achieve our corporate goals. We also believe that these
percentiles provide for a competitive level of base compensation at the midpoint
of the market and place a higher level of compensation potential (65th
percentile) on direct performance-based components (bonus and long-term
incentives). Further, the achievement of a target level long-term incentive
payout under the performance share grants is predicated on our total shareholder
return over a three year period being at the 65th percentile of our
peers.
Components
of Compensation
The key elements of
our executive compensation program are base salary, short-term (annual)
incentives and long-term incentives. In 2007 the long-term incentive vehicles
used were performance shares, stock options and stock
units. Additionally, a limited number of executive benefits and
perquisites are used based on competitive practices and to provide a connection
to our industry, such as the provision of leased vehicles with BorgWarner
component content to our executives.
Base Salary
Base salaries for
our executives are established based on the scope of the executive’s
responsibilities, taking into account competitive market compensation paid by
other companies for similar positions and internal equity. Base salaries
are reviewed annually, and adjusted from time to time to realign salaries with
market levels after taking into account individual responsibilities, individual
and business unit performance, and experience.
Based on its review
of the compensation data described above in October 2006 for the 2007 plan year,
our Compensation Committee determined that, relative to the Comparator Group,
the majority of the Named Executive Officers had base salaries below the targets
set forth in our executive compensation program. Even so, due to the
competitive pressures in the North American automotive industry, a
recommendation was made by our Chief Executive Officer and accepted by our
Compensation Committee to freeze the base salary for our Chief Executive Officer
and all but one of the Named Executive Officers in 2007. Dr. Matthes
received a base salary increase for internal equity purposes resulting from the
growth of the business unit he manages.
Our Compensation
Committee’s review of the 2008 base salaries for our Named Executive Officers
occurred in October 2007. The freezing of base salaries in 2007 as
noted above resulted in salaries significantly below the median of the
Comparator Group for all but one of our Named Executive
Officers. Base salary increases ranging from 0 – 22% were therefore
granted for 2008 in accordance with our stated philosophy to target the median
of the competitive market, to reward strong 2007 performance, and to motivate
continued strong performance.
Short-Term
Incentives
The Management
Incentive Plan (“MIP”) is our cash-based, annual incentive plan for
executives. The primary purposes of the MIP are: (i) to focus key managers
on creating economic value ("EV") for the Company; (ii) to reinforce
teamwork and collaboration among key managers of the Company by measuring the
management team at each business unit by the business results they achieve
together; (iii) to deliver competitive awards for key managers when economic
value objectives are achieved or surpassed; and (iv) to attract and retain key
managers by enabling participants in the MIP to share in the success of the
Company. As a result, we have chosen to use EV as our performance measure
because we consider EV to be the foundation on which we operate and a very
dynamic measure of how well we turn investment into profit. It is based on the
concept that a business can be financially strong in the long run only if it
consistently earns enough to cover its operating cost and, at the same time,
produces enough additional earnings to cover its cost of capital or pay interest
on debt and provide the required return to its stockholders. We consider any
amount that exceeds these requirements to truly be additional economic
value.
The formula used in
the MIP is as follows: EV = After-Tax Operating Income minus (Average Operating
Investment x Cost of Capital). We define “After-Tax Operating Income” as income
prior to interest and finance charges net of income taxes calculated at a fixed
composite statutory rate. We define “Average Operating Investment” for each
business unit as the sum of the assets employed in the business less operating
liabilities such as accounts payable, accruals, and long-term liabilities other
than debt. We define “Average Operating Investment” for the Company to be the
sum of debt, minority interest, and stockholders equity less cash and cash
equivalents and 1987 leveraged buy-out (“LBO”) related goodwill. We define “Cost
of Capital” as the rate of return on capital invested required to compensate
debt and equity investors.
Actual performance
under our MIP is measured annually from January 1 to December 31. Our
Compensation Committee determines any earned MIP bonuses for any given fiscal
year after review of the actual performance in relation to pre-established
targets for that fiscal year. Ordinarily, bonuses are paid in a
single installment in the first quarter following the completion of a given
fiscal year. The MIP is designed so that bonus compensation determined
thereunder is considered qualified performance-based compensation within the
meaning of Internal Revenue Code Section 162(m). Although annual
bonuses currently depend primarily on the achievement of EV objectives, our
Compensation Committee may adjust bonus measures and awards based on other
financial or non-financial measures that it believes will benefit long-term
stockholder value. While EV was the sole measure used for the payment of
executive bonuses for the 2007 plan payment made in the first quarter of 2008,
an adjustment was made to the EV performance improvement goals. See
page 14 for an explanation of this adjustment.
We
expect each of our business units to increase its economic value each year in
order to receive above threshold levels of payout. Accordingly, a range of
performance expectations (Threshold, Target and Maximum) is set by management
and approved by our Compensation Committee, three years at a time, for our
Company and each of our business units. At the time the performance expectations
are set, there is substantial uncertainty as to whether they will be
met. Generally, the Threshold for each of the three years is set at a
level that is greater than or equal to the EV achieved in the last year of the
preceding three year period. In each of the second and third years of
the three-year cycle, the Threshold value remains constant and the Target and
Maximum values are adjusted upward each year. For the 2005 – 2007
performance cycle, the Target and Maximum values were set at an improvement of
1% and 2%, respectively, of the operating investment (“OI”) at the beginning of
the three-year cycle.
Establishment
of 2005 - 2007 Cycle EV Levels
|
Year 1:
2005
|
Year 2:
2006
|
Year 3:
2007
|
Threshold
|
Base
EV
|
Base
EV
|
Base
EV
|
Target
|
Base + 1% of OI
|
Base + 2% of OI
|
Base + 3% of OI
|
Maximum
|
Base + 2% of OI
|
Base + 4% of OI
|
Base + 6% of OI
|
Because the
performance objectives under our MIP are determined three years at a time rather
than annually, our MIP is a very challenging plan for our executives and forces
our key managers to find ways to generate and sustain economic growth over an
extended period. Over the last nine years, results at or above target
have been achieved just over half of the time.
In
order to encourage a longer-term perspective in decision-making while continuing
to reward participants for the achievement of annual goals, our MIP includes a
“Carryover Bonus” feature that allows participants to earn, over the following
two-year period, any MIP bonus opportunity (up to specified maximum limits) that
was not attained during the current plan year. Thus, if the Maximum bonus
opportunity is not earned in a given year, then the amount of the shortfall can
be earned over the next two years (50% each year) by achieving results each year
which are higher than the prior year. However, no Carryover Bonus
from a prior year is earned if the Threshold level of performance for the
current year is not achieved. For example, if an individual was part of a unit
which achieved results at Threshold in year one, that individual would carryover
the lost dollar opportunity between Threshold and Maximum into years two and
three. If in year two that individual’s unit achieved Maximum
results, he would be paid 50% of that lost opportunity from year
one. If in the subsequent year three, his unit’s performance was
below Threshold, he would lose the other 50% of the original carryover from year
one. Because the carryover opportunity is available in addition to
the basic bonus opportunity for the next two years, in a given year, the
Carryover Bonus from prior years may increase the annual bonus opportunity of
the executive officers above the regular target levels.
Because 2007 was
the last year of a 3-year cycle of MIP, our Compensation Committee and
management undertook a study in mid-2007 with the assistance of the Compensation
Consultant to reassess the MIP design with regard to its relevance to current
market practice and projections of the business environment for the 2008 – 2010
cycle. Subsequently, based on typical plan design features as compared with
other companies, as well as dramatic shifts in the shrinking North American auto
industry, our Compensation Committee determined that for the 2008-2010 cycle the
following EV-based performance objectives represent realistic stretch goals that
are calibrated to motivate continued excellent performance and delivery of
shareholder value. This plan also addresses overall competitiveness
critical to attraction and retention of talent.
Establishment
of 2008 – 2010 Cycle EV Levels
|
2008
|
2009
|
2010
|
Threshold
|
Base
EV
|
Base
EV
|
Base
EV
|
Target
|
Base + 0.5% of OI
|
Base + 1% of OI
|
Base + 1.5% of OI
|
Maximum
|
Base + 1% of OI
|
Base + 2% of OI
|
Base + 3% of OI
|
The results of this
study completed in mid-2007 caused our Compensation Committee to also reassess
the applicability of the 2007 MIP performance improvement factors established 3
years earlier. Our Compensation Committee therefore determined in
November 2007 that the new EV performance improvement formula outlined above for
the third year of the cycle should also be applied to the 2007 results
(including the carryover calculation) to better reflect competitive market
practices and to be more realistic in view of shifts in the automotive industry
that have already occurred. This action supports a critical goal of
the program to motivate employees to desired performance in a year where the
Company’s stock price and total shareholder return increased
significantly.
Based on our
compensation philosophy, in November 2006, for the 2007 plan year, our
Compensation Committee approved target bonus opportunities ranging from 85% to
125% of base salary for our Named Executive Officers. (See Grants of
Plan-Based Awards table on page 22). Our Named Executive Officers receive
50% of the Target opportunity for achieving Threshold performance and 200% of
the Target opportunity for achieving Maximum performance or above. Results
in between these levels are interpolated. In November 2007, our
Compensation Committee approved the target bonus opportunities for our executive
officers for 2008. These target bonus opportunities range from 85% to
130% of base salary for our Named Executive Officers. The target bonus
opportunities reflect the approximated 65th percentile of annual bonus levels
for similar positions in the Comparator Group. The final bonus amounts
paid, if any, are determined by our Compensation Committee based on achievement
of the performance measures.
The bonus
opportunity for each officer is further defined by unit, group and corporate
results as applicable. The Compensation Committee’s objective for the
Presidents is to assign the largest percentage of the bonus opportunity to the
individual business unit for which the executive has responsibility, while also
promoting collaboration within and between business groups.
For our Named
Executive Officers, the 2007 bonus opportunities were allocated as
follows:
|
BorgWarner
Inc.
|
BERU*
|
Business
Group
|
Business
Unit
|
T.
Manganello, CEO
|
90%
|
10%
|
|
|
R. Adams,
CFO
|
90%
|
10%
|
|
|
R. Wood,
President, Turbo/Emissions
|
20%
|
10%
|
15%
|
55%
|
C. Niekamp,
President, TorqTransfer Systems
|
30%
|
|
15%
|
55%
|
B. Matthes,
President, Transmission Systems
|
30%
|
|
15%
|
55%
|
* In
January 2005, BorgWarner acquired a majority stake in BERU, a leading global
supplier of diesel cold starting technology, gasoline ignition technology, and
electronic control units and sensor technology. For 2007, BERU was
not included in “BorgWarner Inc.” for purposes of calculating incentive
compensation, consistent with the MIP’s treatment for
acquisitions. Beginning in 2008 BERU will be included in
"BorgWarner Inc." for incentive compensation purposes.
In
November 2007, our Compensation Committee revised these percentages for the
three Presidents mentioned in the table above to reflect a split of 60% based on
business unit, 15% based on business group and 25% based on BorgWarner Inc.
corporate results for 2008 to further align their bonus opportunity to the
results of their individual units, consistent with market
practices.
In
February 2008, our Compensation Committee determined that, for purposes of our
MIP, during the 2007 plan year, the Company created economic value of $49.3
million, which resulted in a payout under the new performance improvement
formula indicated above between the Target and Maximum levels for the BorgWarner
Inc. component. A portion of the bonus payments for Mr. Manganello,
Mr. Adams, Mr. Wood, Ms. Niekamp and Dr. Matthes included carryover from the
previous year. For details of these amounts, as well as further
information regarding the 2007 MIP bonuses paid to our Named Executive Officers,
see the Summary Compensation Table on page 20.
Long-Term
Incentives
We
believe that long-term performance is achieved through an ownership culture that
rewards our executives for the maximization of long-term stockholder value. Our
long-term incentive plans have been established and operated to provide certain
of our employees, including our executive officers, with appropriate incentives
to help align their interests with the interests of our stockholders.
Furthermore, our stock compensation plans have provided a method for our
executive officers to acquire equity interests in our Company and comply with
our stock ownership guidelines.
ESPP.
The Executive Stock
Performance Plan (“ESPP”) was approved by our stockholders and became effective
on April 18, 1995. Under the terms of the ESPP, the final award of units was
made in February 2004 for the three-year performance period beginning January 1,
2004 and ending on December 31, 2006. Therefore the final payment under the ESPP
was made in February 2007 for the 2004 to 2006 performance
period.
SIP.
All long-term incentive
grants awarded in 2007 (performance shares, stock options and stock units) were
awarded under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan
(the “SIP”). Although the SIP provides for the use of a variety of
equity-related vehicles, our Compensation Committee determined in 2007 to rely
primarily on grants of stock options and performance shares in order to motivate
and reward executives for growth in total shareholder return as compared to our
industry (in the case of performance shares) and growth in the Company’s stock
price (in the case of stock options and performance shares).
As
discussed above, the target awards (in dollars) for our executives are based on
the 65th percentile market value that reflects the responsibility of each Named
Executive Officer, with grant sizes (in shares) based on a valuation
methodology calculated by the Compensation Consultant. This
methodology is the same one used by the Compensation Consultant in its market
study to value equity compensation consistently between companies. Based on its
review of the market data described above, our Compensation Committee approved
grants in 2007 that were substantially at this target market value for our Named
Executive Officers.
In 2007, two-thirds
of total value of the target long-term incentive opportunity was delivered
through performance shares and one-third of total value was delivered through
stock options. Due to the significant challenges in the automotive industry, our
Compensation Committee determined to place the greater emphasis on performance
shares because of its belief that this long-term incentive vehicle provides a
more direct comparison of our performance to the performance of our peers within
our industry while firmly aligning our executives’ interests with the interests
of our stockholders. See further discussion of the performance shares
below.
In February 2007,
performance shares were granted to our Named Executive Officers to coincide with
the beginning of the three-year performance period. Stock options
were also granted at that time. In accordance with the SIP, the
exercise price for the stock options was set at the average of the high and low
price of our common stock on the date of grant.
At
its November 2007 meeting, our Compensation Committee decided that restricted
stock would be used for a portion of the 2008 long-term incentive award grants
(replacing one-third of the value that would otherwise have been granted in
stock options). This change, which will also be made for
non-officer participants, is viewed as a more effective retention tool and
reflects the increasing use of restricted stock in the competitive
market. It also better aligns the officers’ equity compensation with
that of the members of the Board of Directors, who receive their equity
compensation through restricted stock.
Performance
Shares
. Annual grants of performance shares are designed to
provide competitive payouts at the end of a three-year period relative to how
well we perform against a peer group of companies (the “Peer Group Companies”)
in terms of Total Shareholder Return (“TSR”). A listing of the Peer Group
Companies (for the 2006 and 2007 grants) can be found on page 22 and the
Former Peer Group Companies (for the 2005 grant) can be found on page
25. Our Board of Directors reserves the right to modify the list at
any time in order to ensure that the peer group remains relevant as a measure
for TSR performance. When granted, each performance share represents one share
of common stock. In order for participants to earn a target award,
the performance of our common stock must be at the 65th percentile of the TSR
performance over a three-year period when compared to the Peer Group Companies.
The value of the payout at the end of the three-year performance period is based
on both the TSR performance and the stock price at the end of the period.
This provides an additional link to stockholder value.
A new performance
period begins each January 1 and ends three years later on December 31. As a
result, up to three performance periods may overlap in a given
year.
The target award is
determined at the beginning of the performance period. The award is expressed in
terms of performance shares. Our Compensation Committee established a
convention in February 2007 for determining the stock price to be used for
converting the target dollar amount to a specific number of
shares. This was established in order to provide consistency in the
method of determining the stock price to be used from year to
year. The convention uses the average closing price of the Company’s
common stock for the last five (5) trading days of the year preceding the date
of grant, which coincides with the end of the prior performance period. The
actual shares awarded for 2007 are detailed on page 22 in the Grants of
Plan-Based Awards table. The final value of each performance share will be
determined only after the close of the performance period. There is no annual
vesting of the target awards under this plan.
The actual number
of performance shares earned at the time of payout will range from 0% to a
maximum of 175% of target, depending on our TSR performance at the end of the
three-year period relative to the percentile distribution of TSR performance for
the other companies in the peer group.
Performance
Share TSR Performance/Payout Table
BorgWarner
TSR Percentile to Peer Group
|
Percent of
Target Number of Performance Shares Earned
|
Below 25
th
percentile
|
0.000%
|
25
th
percentile
|
25.000%
|
35
th
percentile
|
43.750%
|
50
th
percentile
|
71.875%
|
65
th
percentile
|
100.000%
|
75
th
percentile
|
130.000%
|
90
th
percentile
|
175.000%
|
Interpolation is
used to determine the percent of performance shares when our percentile rank
does not fall directly on one of the ranks listed in the above.
Payment of earned
performance shares is made in a combination of stock and cash in order to
facilitate ownership of our common stock by our executives. Under current
practice, sixty percent of the earned performance shares are converted to our
common stock. The shares of stock are typically delivered shortly after our
Compensation Committee certifies the results, which occurs during the first
quarter after the three-year cycle has ended. Also under current practice, forty
percent of the award is paid in cash since the full amount of the award is
subject to income tax in the year in which it is received. The cash
portion is based on the fair market value (average of the high and low sales
price) of our stock on the date of delivery.
Stock Options
. The role
of stock options in the overall executive compensation package has been as a
retention tool and as an incentive to and reward for improving the long term
stock value to stockholders. In 2007, the stock options were granted
in February at the same time as the performance shares. The exercise
price is the average of the highest and lowest reported sales price of our
common stock on the New York Stock Exchange on the day of the award. This method
is used to mitigate any major fluctuations in the stock price that could occur
during a typical day of trading in the stock market.
The option term is
ten years from the date of grant and each stock option grant is subject to a
two-step vesting period. One-half of the stock option grant will become
available for exercise on the second anniversary of the grant and the remainder
of the grant will become available for exercise on the third anniversary of the
grant if the option-holder is still employed by the Company.
Executive
Benefits and Perquisites
General.
Our Named Executive
Officers are eligible to participate in all of our employee benefit plans (such
as medical, dental and vision care plans; flexible spending accounts for
healthcare; life, accidental death and dismemberment and disability insurance;
employee assistance programs (confidential counseling); a defined contribution
retirement plan including a 401(k) feature; and paid time off), in each case on
the same basis as our other employees. The retirement plans described below are
provided to executives in order to permit them to accumulate funds for
retirement and to provide a competitive retirement package as compared to other
companies. Additionally, as described below, a limited number of executive
perquisites are used, also based on competitive practices. Our Compensation
Committee in its discretion may revise, amend or add to an officer’s executive
benefits and perquisites if it deems it advisable. We believe that the benefits
and perquisites we provide our executives are currently at or below median
competitive levels for comparable companies.
The additional
executive perquisites available to our Named Executive Officers include a
company-leased vehicle, financial counseling, and limited personal use of
corporate aircraft (we do not encourage personal use but recognize that at times
it is appropriate). Each of our Named Executive Officers is eligible
for a new vehicle at the earlier of 60,000 miles or three years. In addition to
the cost of the lease, we pay for the cost of insurance, vehicle license, taxes,
and maintenance. Financial counseling and annual income tax preparation services
are provided to our Named Executive Officers through a third-party service to
allow Named Executive Officers to better focus on meeting the considerable
demands of their positions.
Other executive
benefits available to our Named Executive Officers include the BorgWarner Inc.
Retirement Savings Excess Benefit Plan (“Excess Plan”) and the BorgWarner Inc.
2004 Deferred Compensation Plan (“Deferred Compensation Plan”). All
of our Named Executive Officers received Company contributions under the Excess
Plan in 2007.
None of our Named
Executive Officers made deferrals into the Deferred Compensation Plan in
2007. Mr. Wood has an account balance in the Deferred Compensation
Plan from deferrals made prior to his appointment as an officer of the
Company. See further descriptions of these plans on pages
27 - 28 under the Non-Qualified Deferred Compensation section.
Pension Benefits
.
Except as described below on page 26, none of our Named Executive
Officers participate in or have account balances in any of the qualified or
non-qualified defined benefit pension plans sponsored by us.
Potential
Payments Upon Termination or Change of Control
Change of Control
Employment Agreements.
We have entered into Change of Control
Employment Agreements (the “Change of Control Agreements”) with each of our
Named Executive Officers. In establishing the Change of Control Agreements, our
Board of Directors determined that it is in the best interests of the Company
and its stockholders (i) to assure that we will have the continued
dedication of our Named Executive Officers in the event of the threat or
occurrence of a Change of Control, and (ii) to diminish the inevitable
distraction of our Named Executive Officers by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control by
agreeing to provide two to three years of compensation (depending on position)
if the executive’s employment is terminated as a result of a Change of Control.
See pages 29 - 30 for further details of the Change of Control Agreements for
our Named Executive Officers.
Severance Benefits.
Each of our Named Executive Officers is eligible for severance benefits
under the BorgWarner Inc. Transitional Income Plan (“TIP”). The TIP was
established to provide some financial protection to all U.S. salaried employees
in the event that their employment is terminated for reasons beyond their
control. The TIP benefit includes a lump sum payment that is based on salary
level and length of service with us (with a maximum benefit of twenty-six weeks
of base salary, adjusted for unemployment benefits) and medical
coverage.
Stock
Ownership Guidelines
In
order to promote equity ownership and further align the interests of our
management and our stockholders, we have established stock ownership guidelines
that request our executives to hold a significant and sustained long-term
personal financial interest in the Company. Our stock ownership guidelines,
which apply to all of our officers including our Named Executive Officers,
request that our officers own and continuously hold a minimum level of stock as
long as we employ them. The levels of requested stock ownership for our Named
Executive Officers are as follows:
Position
|
Stock Ownership
Guideline
|
CEO
|
Three times
average salary plus bonus for prior three years
|
CFO and
Presidents
|
Two times
average salary plus bonus for prior three
years
|
Each of our Named
Executive Officers is expected to fulfill this goal within five years of his or
her appointment as an officer. Moreover, enough stock must be secured during
each of the first five years to demonstrate progress toward fulfilling the goal
by year five. Our Compensation Committee reviews the ownership level for our
Chief Executive Officer and all other persons covered under this guideline each
year. Our Board of Directors reserves the right to determine what action will be
taken if a covered individual does not meet the requested ownership guidelines.
All of our Named Executive Officers met the requested stock ownership guidelines
in 2007.
Our Insider Trading
and Confidentiality Policy prohibits our directors and employees from engaging
in any transaction involving a put, call or other option on BorgWarner
Securities or from selling any BorgWarner Securities he or she does not own;
i.e., “selling short.”
Deductibility
of Compensation
Section 162(m) of
the U.S. Internal Revenue Code places a limit on the deduction as a business
expense of compensation in excess of $1 million paid to certain “covered
employees” of a publicly held corporation (generally, our Chief Executive
Officer, Chief Financial Officer and our next three most highly compensated
executive officers in the year that the compensation is paid). Compensation that
is “performance-based compensation” generally does not count toward Section
162(m)’s $1 million limit.
Our compensation
plans are designed so that bonus compensation determined thereunder qualifies as
performance-based compensation within the meaning of Section 162(m). Our
Compensation Committee is comprised solely of “outside directors” for purposes
of Section 162(m) of the Internal Revenue Code. It is believed that
all compensation earned by the named executive officers in 2007 was fully
deductible for Federal income tax puroses.
COMPENSATION COMMITTEE REPORT
The Compensation
Committee of the Company has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended to
the Board that the Compensation Discussion and Analysis be included in this
Proxy Statement.
THE COMPENSATION
COMMITTEE
Jere A. Drummond,
Chairman
Phyllis O.
Bonanno
David T.
Brown
The Compensation
Committee Report does not constitute soliciting material. It is not
considered filed by us and shall not be incorporated by reference into any of
our other filings under the Securities Act or the Exchange Act unless we state
otherwise.
Compensation
Committee Interlocks and Insider Participation
During our last
completed fiscal year, the voting members of our Compensation Committee were
Jere A. Drummond, Chairman, Phyllis O. Bonanno and David T. Brown. None of these
persons was an officer or employee of the Company or any of its subsidiaries, or
was formerly an officer of the Company or of any of its subsidiaries during such
fiscal year. None of these persons has any relationship requiring disclosure by
the Company under Item 404 of Regulation S-K.
No
executive officer of the Company served as a member of the compensation
committee (or other board committee performing equivalent functions or, in the
absence of any such committee, the entire board of directors) of another entity,
one of whose executive officers served on the Company’s Compensation Committee
or the Company’s Board of Directors. No executive officer of the Company served
as a director of another entity, or as a member of the compensation committee
(or other board committee performing equivalent functions or, in the absence of
any such committee, the entire board of directors) of such other entity, one of
whose executive officers served on the Compensation Committee or the Board of
Directors of the Company.
EXECUTIVE COMPENSATION
Summary
Compensation Table
The following table
sets forth information regarding compensation earned by our Named Executive
Officers during 2007:
Name and
Principle Position
|
Year
|
|
Salary
|
|
|
Bonus
(1)
|
|
|
Stock Awards
(2)
|
|
|
Option Awards
(3)
|
|
|
Non-Equity
Incentive Plan Compensation (4)
|
|
|
Change in
Pension Value and Non-Qualified Deferred Compensation Earnings
(5)
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
Timothy M.
Manganello
|
2007
|
|
|
900,000
|
|
|
|
-
|
|
|
|
6,296,024
|
|
|
|
1,030,051
|
|
|
|
2,666,782
|
|
|
|
-
|
|
|
|
237,695
|
|
|
|
11,130,552
|
|
Chairman and
CEO
|
2006
|
|
|
900,000
|
|
|
|
-
|
|
|
|
315,529
|
|
|
|
494,516
|
|
|
|
624,118
|
|
|
|
-
|
|
|
|
293,431
|
|
|
|
2,627,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin J.
Adams
|
2007
|
|
|
466,000
|
|
|
|
-
|
|
|
|
1,644,501
|
|
|
|
445,985
|
|
|
|
1,061,342
|
|
|
|
-
|
|
|
|
111,776
|
|
|
|
3,729,604
|
|
EVP, CFO and
CAO
|
2006
|
|
|
466,000
|
|
|
|
-
|
|
|
|
167,811
|
|
|
|
295,042
|
|
|
|
215,686
|
|
|
|
-
|
|
|
|
150,336
|
|
|
|
1,294,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger J.
Wood
|
2007
|
|
|
395,000
|
|
|
|
-
|
|
|
|
1,271,210
|
|
|
|
254,809
|
|
|
|
709,924
|
|
|
|
-
|
|
|
|
158,982
|
|
|
|
2,789,925
|
|
President and
GM, Turbo / Emission Systems
|
2006
|
|
|
395,000
|
|
|
|
-
|
|
|
|
117,169
|
|
|
|
123,333
|
|
|
|
329,835
|
|
|
|
-
|
|
|
|
249,738
|
|
|
|
1,215,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia A.
Niekamp
|
2007
|
|
|
365,000
|
|
|
|
-
|
|
|
|
1,032,589
|
|
|
|
213,575
|
|
|
|
875,385
|
|
|
|
-
|
|
|
|
58,724
|
|
|
|
2,545,274
|
|
President and
GM, TorqTransfer Systems
|
2006
|
|
|
365,000
|
|
|
|
85,000
|
|
|
|
117,169
|
|
|
|
119,341
|
|
|
|
43,448
|
|
|
|
-
|
|
|
|
90,256
|
|
|
|
820,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernd W.
Matthes(6)
|
2007
|
|
|
365,000
|
|
|
|
-
|
|
|
|
1,032,589
|
|
|
|
198,144
|
|
|
|
326,478
|
|
|
|
-
|
|
|
|
321,672
|
|
|
|
2,243,883
|
|
President and
GM, Transmission Systems
|
2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
1) $85,000 sign-on bonus paid
in 2006 per 2004 employment offer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) 2007
compensation expense of the 2005, 2006, and 2007 performance share awards.
Assumptions used in the
|
|
calculations
of these amounts are included in the Company’s audited financial
statements for the fiscal year ended December 31, 2007,
|
|
|
|
|
|
|
|
|
|
included in
the Company’s Summary Annual Report for 2008 filed with the Securities and
Exchange Commission (See Note 12 on pages 49-52).
|
|
|
|
|
|
|
|
|
This also
includes the 2007 compensation expense of the August 3, 2007 Recognition
and Retention Grant to Mr. Manganello.
|
|
|
|
|
|
|
|
|
Details of
this grant were disclosed in an 8-K filing on August 7, 2007. The
compensation expense reported for 2006 included the
|
|
|
|
|
|
|
|
|
2004 ESPP
award and the 2005 and 2006 performance share awards. Assumptions used in
the 2006 calculations were included in
|
|
|
|
|
|
|
|
the Company’s
2006 Annual Report filed with the Securities and Exchange Commission (See
Note 13 on pages 55-58).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) 2007
compensation expense of aggregate grant date fair value of the 2004, 2005,
2006, 2007 Stock Option awards, excluding forfeitures.
|
|
|
|
|
|
|
|
|
|
Assumptions
used in the calculations of these amounts are included in the Company’s
audited financial statements for the fiscal year ended
|
|
|
|
|
|
|
|
|
|
December 31, 2007, included in
the Company’s Summary Annual Report for 2008 filed with the Securities and
Exchange Commission (See Note 12 on pages 49-52).
|
|
|
|
|
|
|
|
|
|
The
compensation expense reported for 2006 included the aggregate grant date
fair values of the 2004, 2005, 2006 Stock Option awards,
excluding
|
|
|
|
|
|
forfeitures.
Assumptions used in the 2006 calculations were included in the Company’s
2006 Annual Report filed with the Securities and Exchange
|
|
|
|
|
|
Commission
(See Note 13 on pages 55-58).
|
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(4) Reflects
the 2007 plan year payout, paid in February 2008, under the Management
Incentive Plan (MIP), including Carryover Bonus payments
of
|
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|
|
|
|
$691,606 for
Mr. Manganello, $243,180 for Mr. Adams, $95,801 for Mr. Wood, $80,424 for
Dr. Matthes, and $288,055 for Ms. Niekamp.
|
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The 2006 plan
year payout under the MIP included Carryover Bonus payments of $2,582 for
Mr. Manganello, $1,141 for
|
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|
Mr. Adams,
$713 for Mr. Wood. No Carryover Bonus was paid to Ms. Niekamp for the 2006
plan year.
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(5) The
actual change in the present value of the accumulated pension value
decreased for Dr. Matthes by $98,908 in 2007 due to an increase in
the
|
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|
|
|
discount rate
used in 2007 compared to the rate used in 2006. Change in Pension Value
for 2007 was converted from Euro to US Dollar using
|
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|
|
an exchange
rate of 1 Euro = 1.4598 US Dollar.
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(6)
Compensation is not reported for Dr. Matthes for 2006 as he was not a
Named Executive Officer.
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All
Other Compensation Table
The following table
details, by category, the amounts reported above in the “All Other Compensation”
column of the Summary Compensation Table for each of our Named Executive
Officers. All of our Named Executive Officers exceeded the aggregate threshold
of $10,000 for perquisites and personal benefits. The chart below indicates the
amount in each category for each of our Named Executive Officers:
Name
|
|
Personal Use
of Leased Vehicle
|
|
|
Financial
Counseling
|
|
|
Personal Use
of Company Aircraft
|
|
|
Relocation
Costs (1)
|
|
|
Life
Insurance Premiums Paid by Company
|
|
|
Tax
Reimbursement
|
|
|
Registrant
Contributions to Defined Contribution Plans (2)
|
|
|
TOTAL of "All
Other Compensation"
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
Timothy M.
Manganello
|
|
|
17,071
|
|
|
|
10,000
|
|
|
|
6,363
|
|
|
|
-
|
|
|
|
900
|
|
|
|
10,101
|
|
|
|
193,260
|
|
|
|
237,695
|
|
CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin J.
Adams
|
|
|
9,943
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
839
|
|
|
|
7,250
|
|
|
|
83,744
|
|
|
|
111,776
|
|
CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger J.
Wood
|
|
|
9,674
|
|
|
|
10,000
|
|
|
|
997
|
|
|
|
28,917
|
|
|
|
711
|
|
|
|
8,944
|
|
|
|
99,739
|
|
|
|
158,982
|
|
President,
TBS/E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia A.
Niekamp
|
|
|
-
|
|
|
|
10,000
|
|
|
|
1,477
|
|
|
|
-
|
|
|
|
657
|
|
|
|
5,061
|
|
|
|
41,529
|
|
|
|
58,724
|
|
President,
TTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernd W.
Matthes
|
|
|
9,084
|
|
|
|
10,000
|
|
|
|
606
|
|
|
|
173,905
|
|
|
|
657
|
|
|
|
85,791
|
|
|
|
41,629
|
|
|
|
321,672
|
|
President,
TS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
1) Amounts relating to
relocation from New York to North Carolina and North Carolina to Michigan
for Mr. Wood, and from Germany to Michigan for Dr.
Matthes.
|
|
(2) Amounts
contributed by the Company on behalf of its Named Executive officers
during 2007 pursuant to the provisions of the RSP and the Excess
Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
details the tax reimbursement amounts listed in Column (g) of the above
table:
Name
|
|
Tax
Reimbursement for Personal Use of Leased Vehicle
|
|
|
Tax
Reimbursement for Financial Counseling Services
|
|
|
Tax
Reimbursement for Personal Use of Company Aircraft
|
|
|
Tax
Reimbursement for Relocation Costs
|
|
|
Total Tax
Reimbursement
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
Timothy M.
Manganello
|
|
|
2,846
|
|
|
|
6,828
|
|
|
|
427
|
|
|
|
-
|
|
|
|
10,101
|
|
CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin J.
Adams
|
|
|
2,846
|
|
|
|
4,404
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,250
|
|
CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger J.
Wood
|
|
|
2,846
|
|
|
|
4,404
|
|
|
|
444
|
|
|
|
1,250
|
|
|
|
8,944
|
|
President,
TBS/E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia A.
Niekamp
|
|
|
-
|
|
|
|
4,404
|
|
|
|
657
|
|
|
|
-
|
|
|
|
5,061
|
|
President,
TTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernd W.
Matthes
|
|
|
2,798
|
|
|
|
4,404
|
|
|
|
270
|
|
|
|
78,319
|
|
|
|
85,791
|
|
President,
TS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants
of Plan Based Awards
The following table
summarizes the grants of equity and non-equity plan awards to our Named
Executive Officers in 2007:
Name
|
Grant
Date
|
Estimated
Possible Payout Under
|
Estimated
Future Payout Under
|
All Other
Stock Awards: Number of Shares or Stock Units
|
All Other
Option Awards: Number of Securities Underlying Option
|
Exercise or
Base Price of Option Awards (4)
|
Closing
Market Price on Date of Option Grant
|
Grant Date
Fair Value of Stock and Option Awards
|
|
|
Non-Equity
Incentive Plan Awards (1)
|
Equity
Incentive Plan Awards
|
|
|
|
|
|
|
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
|
|
|
|
|
|
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
(#)
|
(#)
|
(#)
|
($/Share)
|
($/Share)
|
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
(m)
|
Timothy M.
Manganello
|
|
562,500
|
1,125,000
|
2,250,000
|
|
|
|
|
|
|
|
|
CEO
|
2/6/2007
(2)
|
|
|
|
22,000
|
88,000
|
154,000
|
|
|
|
|
3,080,000
|
|
2/6/2007
(3)
|
|
|
|
|
|
|
|
114,840
|
34.95
|
35.00
|
1,208,117
|
|
8/3/2007
(5)
|
|
|
|
|
|
|
253,274
|
|
|
|
11,166,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin J.
Adams
|
|
233,000
|
466,000
|
932,000
|
|
|
|
-
|
|
|
|
|
CFO
|
2/6/2007
(2)
|
|
|
|
8,350
|
33,400
|
58,450
|
|
|
|
|
1,169,000
|
|
2/6/2007
(3)
|
|
|
|
|
|
|
|
43,460
|
34.95
|
35.00
|
457,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger J.
Wood
|
|
167,900
|
335,800
|
671,500
|
|
|
|
-
|
|
|
|
|
President,
TBS/E
|
2/6/2007
(2)
|
|
|
|
5,200
|
20,800
|
36,400
|
|
|
|
|
728,000
|
|
2/6/2007
(3)
|
|
|
|
|
|
|
|
27,060
|
34.95
|
35.00
|
284,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia A.
Niekamp
|
|
155,150
|
310,300
|
620,500
|
|
|
|
-
|
|
|
|
|
President,
TTS
|
2/6/2007
(2)
|
|
|
|
3,800
|
15,200
|
26,600
|
|
|
|
|
532,000
|
|
2/6/2007
(3)
|
|
|
|
|
|
|
|
19,700
|
34.95
|
35.00
|
207,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernd W.
Matthes
|
|
155,100
|
310,300
|
620,500
|
|
|
|
-
|
|
|
|
|
President,
TS
|
2/6/2007
(2)
|
|
|
|
3,800
|
15,200
|
26,600
|
|
|
|
|
532,000
|
|
2/6/2007
(3)
|
|
|
|
|
|
|
|
19,700
|
34.95
|
35.00
|
207,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
1) 2007 bonus opportunity
under the MIP. Estimated possible payout levels do not reflect carryover
opportunities for the prior years.
|
|
|
|
|
(2) 2007
Performance Share Grant: Value of grant = number of target shares times
the closing stock price on grant date of $35.00.
|
|
|
|
|
All amounts
reflect values after December 17, 2007 stock split.
|
|
|
|
|
|
|
|
|
|
(3) 2007
Stock Option Grant: Stock options granted same day as approved by
Compensation Committee of the Board of Directors.
|
|
|
|
|
FMV at grant
date = number of shares times $10.52, excluding forfeitures in accordance
with FAS123R. All amounts reflect
|
|
|
values after
December 17, 2007 stock split.
|
|
|
|
|
|
|
|
|
(4) Exercise
Price is the average of the high and the low stock price on day of
grant. Value is adjusted to reflect December 17, 2007 stock
split.
|
|
|
|
(5) 2007
Recognition and Retention Grant: Value of Grant = number of stock units
times the average of the high and low stock price on
|
|
|
|
|
August 3,
2007 of $44.09. Values are adjusted to reflect December 17, 2007 stock
split. Details of this grant were disclosed in an 8-K filing on
August 7, 2007.
|
|
|
The equity awards
reflected in the Grants of Plan-Based Awards table are granted under the SIP.
Further details regarding BorgWarner’s incentive plans can be found in our
Compensation Discussion and Analysis on pages 12-17.
The peer group for
the performance share grants includes publicly traded companies in the
automotive supplier industry with at least $1 billion in sales that compete for
stockholder investment dollars. For the performance period from January 1, 2007
to December 31, 2009, the peer group includes the following companies (the “Peer
Group Companies”):
American
Axle & Manufacturing
|
Johnson
Controls Inc.
|
Tenneco
Automotive Inc.
|
ArvinMeritor
Inc.
|
Lear
Corporation
|
TRW
Automotive Inc.
|
Autoliv
Inc.
|
Magna
International Inc.
|
Visteon
Corporation
|
Gentex
Corporation
|
Modine
Manufacturing Co.
|
|
Our Board of
Directors reserves the right to modify the list at any time in order to ensure
that the peer group remains relevant as a measure for TSR performance in the
automotive supply industry.
To
the extent a stock option is exercisable in the event of death of the option
holder, the option may be exercised for a period of one year from the date of
such death or until the expiration of the stock option, whichever period is
shorter. To the extent a stock option is exercisable in the event of disability
or retirement, the option may be exercised for a period of three years from the
date of such disability or retirement or until the expiration of the stock
option, whichever period is shorter. Our Compensation Committee may elect to
accelerate the exercise date of a stock option in the event of employment
termination, such as due to death, disability, or retirement. Stock options
granted in 2005, 2006, and 2007 provided for immediate vesting in the event of
retirement as defined under the Plan. Stock options granted in 2007 provided for
immediate vesting in the event of death or disability. Our Compensation
Committee decided to incorporate these provisions into these award agreements in
order to provide for consistency in the acceleration of options in the event of
retirement, death or disability. Our Compensation Committee took competitive
practice into consideration.
If
an option-holder incurs a termination of employment due to cause, any stock
options held by the option-holder will terminate. If termination of employment
is voluntary and without cause, any vested and unexercised stock options may be
exercised for a period of five business days from the date of termination or
until expiration of the stock option, whichever period is shorter. If
termination of employment is involuntary and without cause, any vested and
unexercised stock options may be exercised for one year or until the
expiration of the stock option, whichever period is shorter.
In
the event of a Change of Control, during the sixty day period from and after a
Change of Control, our Compensation Committee may allow the option-holder to
surrender all or part of his or her options to the Company and receive a cash
payment equal to the difference between the Change of Control price and the
exercise price of the option, less appropriate tax withholdings. However, if the
Change of Control is within six months of the date of grant to an officer or
director subject to Section 16(b) of the Exchange Act, then the option holder is
unable to elect to receive a cash payment until after six months from the date
of grant.
Regarding adjustments
to shares, in the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the stock or other change in corporate structure affecting the stock,
our Compensation Committee or our Board of Directors may make such substitution
or adjustments in the aggregate number, kind and option price of shares or
adjustments in the consideration receivable upon exercise as it may determine to
be appropriate in its sole discretion.
Outstanding
Equity Awards at Fiscal Year End
The following table
summarizes all equity awards to our Named Executive Officers that remain either
unexercised and/or unvested as of December 31, 2007:
|
Option
Awards
|
Stock
Awards
|
Name
|
Number of
Securities Underlying Unexercised Options Exercisable (1)
|
Number of
Securities Underlying Unexercised Options Unexercisable
(1)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
|
Option
Exercise Price (1)
|
Option
Expiration Date (2)
|
Number of
Shares or Units of Stock That Have Not Vested (1)(3)
|
Market Value
of Shares or Units of Stock That Have Not Vested (1)(3)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested
(1)(4)
|
Equity
Incentive Plan Awards: Market or Payout of Unearned Shares, Units or Other
Rights That Have Not Vested (1)(4)
|
|
(#)
|
(#)
|
(#)
|
(#)
|
|
(#)
|
($)
|
(#)
|
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Timothy M.
Manganello
|
|
114,840
|
|
34.95
|
02/06/2017
|
|
|
|
|
CEO
|
|
100,000
|
|
29.09
|
07/26/2016
|
|
|
|
|
|
62,000
|
62,000
|
|
29.04
|
07/27/2015
|
|
|
|
|
|
25,072
|
|
|
22.28
|
07/28/2014
|
|
|
|
|
|
23,064
|
|
|
12.66
|
07/24/2012
|
|
|
|
|
|
2,304
|
|
|
12.07
|
07/25/2011
|
|
|
|
|
|
|
|
|
|
|
253,698
|
12,281,514
|
|
|
|
|
|
|
|
|
|
|
311,500
|
15,079,715
|
|
|
|
|
|
|
|
|
|
|
Robin J.
Adams
|
|
43,460
|
|
34.95
|
02/06/2017
|
|
|
|
|
CFO
|
|
40,000
|
|
29.09
|
07/26/2016
|
|
|
|
|
|
15,000
|
15,000
|
|
29.04
|
07/27/2015
|
|
|
|
|
|
25,926
|
|
|
22.28
|
07/28/2014
|
|
|
|
|
|
40,000
|
|
|
22.15
|
04/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
100,450
|
4,862,785
|
|
|
|
|
|
|
|
|
|
|
Roger J.
Wood
|
|
27,060
|
|
34.95
|
02/06/2017
|
|
|
|
|
President,
TBS/E
|
|
28,000
|
|
29.09
|
07/26/2016
|
|
|
|
|
|
10,000
|
10,000
|
|
29.04
|
07/27/2015
|
|
|
|
|
|
14,686
|
|
|
22.28
|
07/28/2014
|
|
|
|
|
|
14,732
|
|
|
16.52
|
07/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
74,900
|
3,625,909
|
|
|
|
|
|
|
|
|
|
|
Cynthia A.
Niekamp
|
|
19,700
|
|
34.95
|
02/06/2017
|
|
|
|
|
President,
TTS
|
|
21,000
|
|
29.09
|
07/26/2016
|
|
|
|
|
|
8,000
|
8,000
|
|
29.04
|
07/27/2015
|
|
|
|
|
|
20,000
|
|
|
22.28
|
07/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
54,950
|
2,660,130
|
|
|
|
|
|
|
|
|
|
|
Bernd W.
Matthes
|
|
19,700
|
|
34.95
|
02/06/2017
|
|
|
|
|
President,
TS
|
|
21,000
|
|
29.09
|
07/26/2016
|
|
|
|
|
|
8,000
|
8,000
|
|
29.04
|
07/27/2015
|
|
|
|
|
|
6,840
|
|
|
22.28
|
07/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
54,950
|
2,660,130
|
|
|
|
|
|
|
|
|
|
|
(
1) All amounts reflect values
after December 17, 2007 stock split.
|
|
|
|
|
|
|
(2) The stock
options noted with expiration dates of 2011, 2012, 2013, and 2014 are
fully vested. Stock options with an expiration date of
|
|
|
2015 are 50%
vested, with the other 50% vesting on July 27, 2008. Stock options with an
expiration date of 2016 will vest 50% on July 26, 2008
|
|
|
and 50% on
July 26, 2009. Stock options with an expiration date of 2017 will vest 50%
on February 6, 2009 and 50% on February 6, 2010.
|
|
|
(3) The
values in columns (g) and (h) represent the number of shares granted and
the year-end value of the August 3, 2007 Recognition and
|
|
|
Retention
stock grant to Mr. Manganello, valued at $48.41 per share, which is the
closing stock price on December 31, 2007.
|
|
|
|
Dividend
equivalents earned on Novemeber 15, 2007 are included. Details
of this grant were disclosed in an 8-K filing on August 7,
2007.
|
|
|
|
(4) The
values of columns (i) and (j) are comprised of performance share grants
made under the SIP, issued for the performance periods of
|
|
|
2006-2008 and
2007-2009. Column (i) represents the number of all outstanding unearned
performance shares that would be paid out at the
|
|
|
end of each
performance period if maximum TSR performance is achieved. The maximum
value was assumed based on actual performance
|
|
|
over the most
recent period at maximum levels. Column (j) represents the number of
performance shares in column (i) times the closing
|
|
|
stock price
of $48.41 on December 31, 2007. Actual future payouts will depend on
several factors, including (i) the number of performance
|
|
|
shares that
are earned, as determined after the end of the performance period based on
the level at which the applicable performance goals
|
|
|
have been
achieved, as described on page 16; and (ii) the fair market value of
stock, as defined in the Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Exercises and Stock Vested
The following table
summarizes all option exercises and stock vestings by our Named Executive
Officers during 2007:
|
Option
Awards
|
Stock
Awards
|
|
Number of
Shares Acquired on Exercise (1)
|
Value
Realized On Exercise
|
Number of
Shares Acquired on Vesting (2)
|
Value
Realized On Vesting (3)
|
Name
|
(#)
|
($)
|
(#)
|
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Timothy M.
Manganello
|
-
|
-
|
64,575
|
3,126,076
|
CEO
|
|
|
|
|
Robin J.
Adams
|
-
|
-
|
32,288
|
1,563,062
|
CFO
|
|
|
|
|
Roger J.
Wood
|
-
|
-
|
23,975
|
1,160,630
|
President,
TBS/E
|
|
|
|
|
Cynthia A.
Niekamp
|
-
|
-
|
23,975
|
1,160,630
|
President,
TTS
|
|
|
|
|
Bernd W.
Matthes
|
7,740
|
355,586
|
23,975
|
1,160,630
|
President,
TS
|
|
|
|
|
|
|
|
|
|
(
1) Stock option exercises on
June 19, 2007 were comprised of two exercises, 4,320
shares
|
that were
granted on July 23, 2003 and 3,420 shares granted on July 24,
2004.
|
|
(2) Number of
“shares” disclosed in column (d) represents the total number of
performance
|
shares earned
for the 2005-2007 performance period and paid in 2008. The
performance
|
shares are
actually paid 60% in stock and 40% in cash.
|
|
|
(3) Amount in
column (e) is equal to the number of units vested multiplied by $48.41,
which
|
is the
closing stock price at the end of the performance period on December 31,
2007.
|
As previously stated
in the Compensation Discussion and Analysis, the granting of performance shares
is designed to provide competitive payouts at the end of a three-year period
relative to how well the Company performs against its Peer Group Companies in
TSR.
At the end of the
2005 to 2007 performance period, the Company’s TSR was above the 90th
percentile relative to the peer group companies’ in effect at the time of the
grant ("Former Peer Group Companies"). These companies were Arvin
Meritor, Autoliv, Cummins Engine, Dana, Delphi, Dura, Eaton, Johnson Controls,
Lear, Magna, Modine, Tenneco and Visteon. Tower Automotive was also
originally in this peer group, but ceased trading on July 31,
2007. The gross value of the payouts, before taxes, is reflected
above in column (e) of the table.
Pension
Benefits
Name
|
Plan
Name
|
|
Number of
Years Credited Service
|
|
|
Present Value
of Accumulated Benefit (1)
|
|
|
Payment
During Last Fiscal Year
|
|
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
Timothy
M. Manganello
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
C CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin J. Adams
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger J. Wood
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
President,
TBS/E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia A. Niekamp
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
President, TTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernd W. Matthes
|
BorgWarner
Transmission Systems GmbH Pension Plan
|
|
|
11.8
|
|
|
|
593,026
|
|
|
|
-
|
|
President, TS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Converted from Euro to US
Dollar using an exchange rate of 1 Euro = 1.4598 US Dollar for SFAS 87/158
disclosure purposes.
|
|
Dr. Matthes, formerly
an employee of BorgWarner Transmission Systems GmbH in Germany and now a
U.S.-based employee, was vested in a defined benefit pension plan while an
employee in Germany and is therefore entitled to receive an annual retirement
benefit from the Transmission Systems GmbH pension plan based on 11.8
years of credited service for the time he was employed in Germany.
The Present Value
of the Accumulated Pension Benefits as of December 31, 2007 for Dr. Matthes is
calculated using the following assumptions:
. Mortality
Tables: Heubeck 2005G
|
.
Discount Rate: 5.75%
|
.
Retirement Age: 65
|
. Annual
Pension Increase: 1.75%
|
The discount rate
of 5.75% is based on yields of bonds in the iBoxx EUR AA 10+ index as of
December 31, 2007 and takes into account the duration of plan liabilities. A
"pension increase" assumption of 1.75% is applied annually, beginning at
retirement age. The Heubeck 2005G tables are generational mortality tables
introduced in 2005 and allow for improved longevity. Use of these tables was
phased in over three years, with 100% of the new tables being used to value plan
liabilities at year-end 2007.
Non-Qualified
Deferred Compensation
The following table
shows the non-qualified deferred compensation activity for our Named Executive
Officers during 2007:
Name
|
|
|
Executive
Contributions in Last FY
|
|
|
Registrant
Contributions in Last FY
|
|
|
Aggregate
Earnings in Last FY
|
|
|
Aggregate
Withdrawals/ Distributions
|
|
|
Aggregate
Balance at Last FYE
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
Timothy M.
Manganello,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
169,385
|
|
|
|
292,008
|
|
|
|
-
|
|
|
|
1,795,324
|
|
Robin J.
Adams,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFO
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
59,369
|
|
|
|
74,161
|
|
|
|
-
|
|
|
|
347,086
|
|
Roger J.
Wood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
TBS/E (1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
21,313
|
|
|
|
-
|
|
|
|
273,551
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
72,476
|
|
|
|
60,144
|
|
|
|
-
|
|
|
|
486,045
|
|
Cynthia A.
Niekamp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
TTS
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
21,206
|
|
|
|
12,309
|
|
|
|
-
|
|
|
|
120,009
|
|
Bernd W.
Matthes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
TS
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
20,279
|
|
|
|
2,879
|
|
|
|
-
|
|
|
|
62,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
1) Deferred Compensation
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Excess
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No Deferred
Compensation elections were made by Named Executive Officers for fiscal
year 2007.
|
|
|
|
|
|
Our Named Executive
Officers are eligible to participate in the BorgWarner Inc. Retirement Savings
Plan (“RSP”). This plan, which is available to all U.S. salaried and
certain hourly employees, allows our Named Executive Officers to take advantage
of current tax-advantaged opportunities for accumulating future retirement
income. The RSP is comprised of two components: a Company Retirement Account and
a Savings Account with a match feature. In the Company Retirement Account, the
Company makes a contribution to the employee’s account each pay period based on
years of service and eligible pay ranging from 4% to 6% of compensation up to
the Social Security wage base and from 8% to 11.5% of compensation above the
Social Security wage base. In the Savings Account, participants may make
contributions to the plan of 1% to 28% of their eligible earnings on a
before-tax and/or after-tax basis (up to the statutorily prescribed annual limit
on pre-tax contributions under the Internal Revenue Code). The Company will
match 100% of the first 3% of the employee’s pre-tax contributions. Participant
contributions are held in trust as required by law. All employee contributions
are 100% vested when contributed, and any employer contributions vest 100% after
three years of service.
The Excess Plan is
an unfunded, non-qualified retirement plan, which keeps certain highly
compensated employees whole with regard to Company contributions that are
otherwise limited under the RSP by Internal Revenue Code provisions.
Participation is automatic once these limits are reached in a plan year. The
contributions vest in the same manner as under the RSP. Distributions are
made only when, and if, the participant is entitled to benefits under the
RSP. No in-service withdrawals or loans are available.
The Deferred
Compensation Plan is a non-qualified plan that allows executives to defer
from 1% to 20% of their base salary and up to 100% of their bonus (if any bonus
is paid) in 1% increments. Participants in this plan receive market
earnings. When making a deferral election, a participant may elect to have his
or her account paid out at retirement, disability, or death in either a single
lump sum or quarterly payments over a term of 5, 10, or 15 years. If the
participant’s employment is terminated prior to retirement, disability, or
death, the account will be paid out in a single lump sum. The Plan also
provides for distributions for hardship upon approval of our Compensation
Committee and lump sum payments upon the occurrence of a Change of
Control.
Participants in the
Excess Plan may elect to invest their deferrals in the same investment choices
that are offered in the RSP. Participants in the Deferred Compensation
Plan may elect to invest their deferrals in the same investment choices that are
offered in the RSP, except for the BorgWarner Stock Fund. As the Excess Plan and
the Deferred Compensation Plan are unfunded, no money is actually invested.
Rather, a notional account is maintained which mirrors the returns of these
mutual funds. The funds available and their annual rate of return for the
calendar year ended December 31, 2007 as reported by the plan administrator are
as follows:
Barclays
Equity Index:
|
5.38%
|
Barclays Life
Path 2010:
|
5.08%
|
Barclays Life
Path 2015:
|
4.73%
|
Barclays Life
Path 2020:
|
4.42%
|
Barclays Life
Path 2025:
|
4.01%
|
Barclays Life
Path 2030:
|
3.82%
|
Barclays Life
Path 2035:
|
3.52%
|
Barclays Life
Path 2040:
|
3.34%
|
Barclays Life
Path 2045:
|
3.06%
|
Barclays Life
Path RET:
|
5.24%
|
BGI US Debt
Index:
|
6.95%
|
BorgWarner
Company Stock:
|
65.41%
|
Buffalo Small
Cap:
|
(.33%)
|
Harbor
International Fund:
|
21.82%
|
TRP Stable
Value Fund, Sched N
1
:
|
4.73%
|
Vanguard Mid
Cap Index:
|
6.22%
|
1
Formerly known as the
Investment Contracts Fund
Potential
Payments Upon Termination or Change of Control
The following table
shows the post-employment payments that would be paid to each of our Named
Executive Officers under the various employment-related scenarios. The
calculations assume each Named Executive Officer’s employment is terminated on
December 31, 2007. For purposes of the calculations, the closing stock price on
the last business day of 2007 ($48.41) was used to determine the market
value of stock options and stock units.
Name
|
Payment
Triggering Events Not In Connection with a Change of Control
("CoC")
|
|
|
|
Payment
Triggering Events In Connection with a CoC
|
|
|
Involuntary
Termination
|
Voluntary
Termination
|
|
|
|
|
|
Involuntary
Termination
|
Voluntary
Termination
|
|
with Cause
(1)
|
without Cause
(2)
|
with Good
Reason (3)
|
without Good
Reason (3)
|
Retirement
(2)
|
Death
(4)
|
Disability
(2)
|
|
CoC
only
|
with Cause
(6)
|
without Cause
(5)
|
for Good
Reason (5)
|
without Good
Reason (7)
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
Timothy M.
Manganello
|
1,795,324
|
10,259,153
|
4,559,606
|
4,559,606
|
14,938,414
|
12,305,474
|
11,805,474
|
|
-
|
-
|
34,949,750
|
34,949,750
|
-
|
CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin J.
Adams
|
347,086
|
4,943,330
|
2,365,582
|
2,365,582
|
6,591,869
|
5,994,519
|
5,528,519
|
|
-
|
-
|
8,232,553
|
8,232,553
|
-
|
CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger J.
Wood
|
759,596
|
3,642,755
|
1,806,845
|
1,806,845
|
4,741,778
|
4,402,118
|
4,007,118
|
|
-
|
-
|
6,612,416
|
6,612,416
|
-
|
President,
TBS/E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia A.
Niekamp
|
120,009
|
2,798,941
|
797,569
|
797,569
|
3,624,882
|
3,429,202
|
3,064,202
|
|
-
|
-
|
4,486,334
|
4,486,334
|
-
|
President,
TTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernd W.
Matthes
|
62,004
|
2,026,886
|
574,422
|
574,422
|
2,852,827
|
2,622,147
|
2,292,147
|
|
-
|
-
|
4,492,694
|
4,492,694
|
-
|
President,
TS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes
vested balance of the Excess Plan and vested balance of the Deferred
Compensation Plan (Mr. Wood only).
|
|
|
|
|
|
|
(2) Includes
2007 MIP payment, value of vested stock options, 2005-2007 PSP payment,
vested balance of the
|
|
|
|
|
|
Excess Plan,
and vested balance of the Deferred Compensation Plan (Mr. Wood
only).
|
|
|
|
|
|
|
|
|
(3) Includes
value of vested stock options, vested balance of the Excess Plan, and
vested balance of the Deferred
|
|
|
|
|
|
|
Compensation
Plan (Mr. Wood only).
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) Includes
2007 MIP payment, value of vested stock options, 2005-2007 PSP payment,
vested balance of the
|
|
|
|
|
|
Excess Plan,
vested balance of the Deferred Compensation Plan (Mr. Wood only), and life
insurance.
|
|
|
|
|
|
|
(5) Includes
cash severance payment based on three times the average of base plus
bonus, 2007 MIP payment,
|
|
|
|
|
|
|
|
stock option
payment, 2007 stock unit payment, 2006-2008 and 2007-2009 performance
share payment, retirement benefit based on
|
|
|
|
|
|
|
three times
the 2007 Company contributions to the RSP, value of welfare benefits (i.e.
health care, life
|
|
|
|
|
|
|
|
insurance,
and disability insurance coverage for 3 years), outplacement services, and
excise tax and tax
|
|
|
|
|
|
gross-up
payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) While
there are no additional payments associated with Involuntary Termination
for Cause associated with a
|
|
|
|
|
|
|
|
Change of
Control, each Named Executive Officer would be eligible for the same
payments listed under footnote (1) above.
|
|
|
|
|
|
(7) While
there are no additional payments associated with Voluntary Termination
without Good Reason associated
|
|
|
|
|
|
|
with a Change
of Control, each Named Executive Officer would be eligible for the same
payments listed
under
footnote (3) above.
|
|
The stated amounts
do not include vested benefits under the qualified RSP or under the TIP, as
these benefit plans are available to all salaried employees. The provisions of
each plan would determine the timing and method of payments made under the above
scenarios.
Change
of Control Employment Agreements
Below is a general
description of certain terms and conditions of our existing Change of Control
Agreements.
In
the event a Change of Control of the Company is followed within three years by
(1) the termination of a Named Executive Officer’s employment for any
reason other than death, disability, or Cause or (2) such Named Executive
Officer terminates his or her employment for Good Reason, then under the Change
of Control Agreements, the Named Executive Officer shall be paid a lump sum cash
amount equal to three times his or her annual base salary and average annual
bonus for the most recent three years, and a lump sum cash amount equal to three
times the Company’s retirement contributions which would have been made on his
or her behalf in the first year after termination of employment. If an excise
tax is imposed under Section 4999 of the Internal Revenue Code on payments
received by the Named Executive Officer due to a Change of Control of the
Company or any interest or penalty is incurred by the Named Executive Officer
with respect to such excise tax, the Company will pay the Named Executive
Officer an amount that will net the Named Executive Officer the amount the Named
Executive Officer would have received if the excise or penalty had not been
imposed. In addition, the Named Executive Officer is entitled to continued
employee welfare benefits for three years after termination of
employment.
“Change of Control”
means (a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) of beneficial ownership of 20% or more of either (i) the then
outstanding shares of our common stock or (ii) the combined voting power of
our then outstanding voting securities entitled to vote generally in the
election of our directors, (b) a change in the majority of our Board of
Directors, (c) a major corporate transaction, such as a merger or sale of
substantially all of our assets, which results in a change in the majority of
our Board of Directors or a majority of stockholders or (d) a complete
liquidation or dissolution of the Company.
“Cause” means the
willful and continued failure of the executive to perform substantially the
executive’s duties or the willful engaging by the executive in illegal conduct
or gross misconduct materially injurious to us.
“Good Reason” means
the diminution of responsibilities, assignment to inappropriate duties, our
failure to comply with compensation or benefit provisions, transfer to a new
work location more than 35 miles from the executive’s previous work
location, a purported termination of the Change of Control Employment Agreement
by us other than in accordance with the Change of Control Employment Agreement,
or our failure to require any successor to us to comply with the Change of
Control Employment Agreement.
Director
Compensation
The following table
details the compensation earned by each non-employee director who served on the
Board of Directors in 2007. Directors who are employees of BorgWarner are not
compensated for their service on the Board:
Name
|
|
Fees Earned
or Paid in Cash
|
|
|
Stock Awards
(1)
|
|
|
Option
Awards
|
|
|
Aggregate Number of Outstanding
Stock and Option Awards
(2)
|
|
|
Non-Equity
Incentive Plan Compensation
|
|
|
Changes in
Pension Value and Nonqualified Deferred Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
(#
|
)
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
Phyllis O.
Bonanno
|
|
|
55,000
|
|
|
|
80,284
|
|
|
|
-
|
|
|
|
27,782
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David T.
Brown
|
|
|
55,000
|
|
|
|
55,002
|
|
|
|
-
|
|
|
|
1,894
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
110,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jere A.
Drummond
|
|
|
73,000
|
|
|
|
80,276
|
|
|
|
-
|
|
|
|
32,316
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
153,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul E.
Glaske
|
|
|
58,000
|
|
|
|
61,933
|
|
|
|
-
|
|
|
|
29,894
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
119,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexis P.
Michas
|
|
|
53,500
|
|
|
|
80,284
|
|
|
|
-
|
|
|
|
27,782
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
133,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ernest J.
Novak, Jr.
|
|
|
85,000
|
|
|
|
80,276
|
|
|
|
-
|
|
|
|
12,316
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
165,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard O.
Schaum
|
|
|
57,000
|
|
|
|
73,353
|
|
|
|
-
|
|
|
|
3,782
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas T.
Stallkamp
|
|
|
56,500
|
|
|
|
55,019
|
|
|
|
-
|
|
|
|
3,782
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
111,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
1) 2007 compensation expense
of aggregate grant date fair value of the 2005, 2006, 2007 Restricted
Stock Awards, excluding forfeitures, in accordance with FAS
123R.
|
|
(2) Aggregate
number of outstanding shares of restricted stock and outstanding vested
and unvested stock options at fiscal year-end. Values reflect
12/17/2007 stock split.
|
|
Annual compensation
for our non-employee directors for 2007 was comprised of the following
components: annual retainer, Board meeting fees, Committee meeting fees, and
equity compensation, consisting of restricted stock. Our non-employee directors
were not granted any Stock Option Awards and did not receive any Non-Equity
Incentive Plan Compensation for 2007. After review of non-employee director
compensation paid by peer and other corporations, the Board approved an increase
in non-employee director compensation to be effective January 1, 2008, the first
increase since 2005.
As
allowed under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive
Plan, each non-employee director received $165,000 worth of restricted stock in
the initial year of each three-year term. In April 2007, two non-employee
directors (Drummond and Novak) were elected for a three-year term. These two
directors were each awarded 2,158 shares of restricted common stock, determined
by dividing the total value of $165,000 by the average of the high and low of
the Company’s stock price at the time of the grant. The restrictions on the
shares of stock will expire over the three-year term, one third in each year and
the Compensation Committee has the authority to accelerate vesting in the event
of retirement. During the period that the restrictions are in place, directors
have all of the rights of a stockholder of the Company holding the same class or
series of stock as the restricted stock, including the right to vote the shares
and the right to receive any cash dividends. Non-employee directors elected to
new terms in 2008 will receive $258,000 worth of restricted stock in the initial
year of each three-year term. Non-employee directors continuing to serve without
re-election will receive pro-rated increases in equity compensation to equalize
the equity compensation increase.
The annual retainer
for non-employee directors in 2007 was $40,000 for service on the Board of
Directors. Beginning January 1, 2008 the annual retainer for non-employee
directors was increased to $55,000. The annual retainer is prorated when a new
member joins or a current member leaves our Board. Mr. Glaske will
retire from the Board at the 2008 Annual Meeting in accordance with retirement
guidelines adopted by the Board. When a qualified candidate is
identified, a new director will be appointed to Class III by the Board of
Directors.
Each
non-employee director received $1,500 for each Board meeting attended. Each
Committee member also received $1,500 ($3,000 if he or she was the Chairman of
the committee) for each committee meeting attended. In recognition of increased
time commitments, the Chairman of the Audit Committee received $5,000 for each
committee meeting attended since January 1, 2005. Meeting and
attendance fees were not changed for 2008. The Company pays for the expenses
associated with attendance at Board and Committee meetings and other functions
attended at the request of the Company. The Company maintains a
directors’ deferred compensation plan under which directors may defer receipt of
retainer fees only. Four directors deferred fees under the plan in
2007.
PROPOSAL 2
– TO VOTE TO APPROVE AN
AMENDMENT
TO THE COMPANY’S RESTATED CERTIFICATE OF
INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY
FROM
150,000,000 SHARES TO 390,000,000 SHARES
On February 7, 2008, your Board of Directors
unanimously approved a proposal to increase the authorized capital stock of the
Company. If approved by our stockholders, the proposed increase in
our authorized capital stock will be accomplished through an amendment to the
Company’s restated certificate of incorporation that will increase the total
authorized common stock of the Company from 150,000,000 shares to 390,000,000
shares. A copy of the proposed amendment is attached to this proxy
statement as Annex B. On March 3, 2008 there were 117,393,116 issued
and 116,412,639 outstanding shares of common stock. As of December 31,
2007, 9
,158,500
shares were reserved for business purposes, including for equity
compensation awards in accordance with shareholder approved equity plans.
Your Board of
Directors approved the proposed increase in authorized common stock because it
believes that the continued availability of shares of common stock is advisable
to provide the Company with the flexibility to take advantage of opportunities
to issue such stock to obtain capital, or as consideration for possible
acquisitions or for other purposes (including, without limitation, the issuance
of additional shares of common stock through stock splits and stock dividends in
appropriate circumstances).
Other than as permitted under our
employee benefit plans and under outstanding options, warrants and other
securities convertible into common stock, t
here are, at present, no
plans, understandings, agreements or arrangements concerning the issuance of
additional shares of common stock or preferred stock.
However, if the proposed increase
in authorized shares is approved by our stockholders, then shares of common
stock could be issued from time to time by action of our board of directors on
such terms and conditions as our board may consider appropriate. No additional
action or authorization by our stockholders would be necessary prior to any such
issuance unless required by applicable law or the rules of the New York Stock
Exchange (or any other stock exchange or national securities association trading
system on which our common stock is then listed or quoted). Depending upon the
circumstances, the issuance of such additional shares could have a dilutive
effect or an anti-takeover effect (although that is not the intent of this
proposal).
Recommendation
For
the foregoing reasons, your Board of Directors believes that this proposal is in
the best interests of BorgWarner and its stockholders and unanimously recommends
that you vote FOR this proposal.
If a majority of our
outstanding shares of common stock are voted FOR the amendment, then the
amendment will be approved.
If your shares are
held by your broker as your nominee (that is, in “street name”), and you do
not timely tell your nominee how to vote your shares, then your nominee may not
be permitted to vote your shares on this proposal (a so-called "broker
nonvote"). For purposes of this proposal, a broker nonvote and an abstention are
the functional equivalents of a "no" vote.
Accordingly, if your
shares are held in street name, then you will need to obtain a proxy form from
the institution that holds your shares and follow the instructions included on
that form regarding how to instruct your broker to vote your shares. If your
shares are held in street name, your proxy card may contain instructions from
your broker that allow you to vote your shares using the Internet or telephone.
Please consult with your broker if you have any questions regarding the
electronic voting of shares held in street name.
PROPOSAL 3
— RATIFICATION OF SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of
Directors proposes that the stockholders approve the selection by the Audit
Committee of Deloitte & Touche LLP, the member firms of Deloitte Touche
Tohmatsu, and their respective affiliates (collectively, “Deloitte”) to serve as
the Company’s independent registered public accounting firm for the 2008 fiscal
year.
The Board of
Directors anticipates that representatives of Deloitte will be present at the
meeting to respond to appropriate questions, and will have an opportunity, if
they desire, to make a statement.
Recommendation
Y
our
Board of Directors believes that this proposal is in the best interests of
BorgWarner and its stockholders and unanimously recommends that you vote FOR
this proposal.
____________________________________________________________
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
Aggregate fees
including expenses billed to us for the years ended December 31, 2007
and 2006, for professional services performed by Deloitte & Touche,
were as follows:
|
|
2007
|
|
|
2006
|
|
Audit
Fees and Expenses
|
|
$
|
4,268,900
|
|
|
$
|
4,236,600
|
|
Audit-Related
Fees
|
|
$
|
253,700
|
|
|
$
|
348,900
|
|
Tax Fees
|
|
$
|
362,000
|
|
|
$
|
346,700
|
|
All
Other Fees
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
4,884,600
|
|
|
$
|
4,932,200
|
|
|
Your Audit Committee
has adopted procedures for pre-approving all audit and non-audit services
provided by the independent registered public accounting firm, including the
fees and terms of such services. These procedures include reviewing detailed
back-up documentation for audit and permitted non-audit services. The
documentation includes a description of, and a budgeted amount for, particular
categories of non-audit services that are recurring in nature and therefore
anticipated at the time that the budget is submitted. Audit Committee approval
is required to exceed the pre-approved amount for a particular category of
non-audit services and to engage the independent registered public accounting
firm for any non-audit services not included in those pre-approved amounts. For
both types of pre-approval, the Audit Committee considers whether such services
are consistent with the rules on auditor independence promulgated by the SEC and
the PCAOB. The Audit Committee also considers whether the independent registered
public accounting firm is best positioned to provide the most effective and
efficient service, based on such reasons as the auditor’s familiarity with the
Company’s business, people, culture, accounting systems, risk profile, and
whether the services enhance the Company’s ability to manage or control risks
and improve audit quality. The Audit Committee may form and delegate
pre-approval authority to subcommittees consisting of one or more members of the
Audit Committee, and such subcommittees must report any pre-approval decisions
to the Audit Committee at its next scheduled meeting. All of the services
provided by the independent registered public accounting firm were pre-approved
by your Audit Committee.
OTHER
INFORMATION
The Company is not
aware of any business to come before this annual meeting other than the matters
described in this proxy statement. However, if any other matters
should properly come before this meeting, votes pursuant to the proxy will be
cast thereon in accordance with the discretion of the persons named in the
accompanying proxy.
Expenses of
Solicitation
The cost of
solicitation of proxies will be borne by the Company. In addition to
solicitation of proxies by use of the mail, proxies may be solicited by
directors, officers and regularly engaged employees of the Company. None of
these directors, officers or employees will receive any extra compensation for
doing this. We have also retained Georgeson to assist us in
soliciting proxies for a fee of $8500 plus reasonable out-of-pocket
expenses. Brokers, nominees and other similar record holders will be
requested to forward solicitation material and will be reimbursed by the Company
upon request for their reasonable out-of-pocket expenses.
Stockholder
Proposals
Stockholder
proposals which are intended to be presented at the 2009 Annual Meeting of
Stockholders pursuant to SEC Rule 14a-8 must be received by the Company on
or before November 22, 2008, for inclusion in the proxy statement relating
to that meeting.
A
stockholder who intends to present business, including the election of a
director, at the 2009 Annual Meeting of Stockholders other than pursuant to
Rule 14a-8, must comply with the requirements set forth in the Company’s
Amended and Restated By-Laws. Among other things, under the Company’s Bylaws to
bring business before an annual meeting a stockholder must give written notice
to the Secretary of the Company not less than 90 days and not more than
120 days prior to the first anniversary of the preceding year’s annual
meeting. Therefore, for stockholder proposals to be presented other than
pursuant to Rule 14a-8, the Company must receive notice no sooner than
December 27, 2008, and no later than January 28, 2009. The notice
should contain (a) as to each person whom the stockholder proposes to
nominate for election as director, all information that is required to be
disclosed in solicitations of proxies for election of directors under the
securities laws, including the person’s written consent to serve as a director
if elected, and (b) as to any other business: the reason for conducting
such business; any material interest in such business the stockholder has; the
name and address of the stockholder proposing such business as it appears in the
Company’s books; and the number of shares of the Company that are beneficially
owned by the stockholder. Stockholders should consult the Company’s Amended and
Restated By-Laws to ensure that all of the specific requirements of such notice
are met.
Available Information on Corporate
Governance and SEC Filings
Through its website
(
www.borgwarner.com
),
the Company makes available, free of charge, the Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, all amendments to those reports, and other filings with the
Securities and Exchange Commission, as soon as reasonably practicable after they
are electronically filed with, or furnished to, the SEC. The Company also
makes the following documents available on its website: the Audit Committee
Charter; the Compensation Committee Charter; the Corporate Governance Committee
Charter; the Company’s Corporate Governance Guidelines; the Company’s Code of
Ethical Conduct; and the Company’s Code of Ethics for CEO and Senior Financial
Officers. You may also obtain a copy of any of the foregoing documents, free of
charge, if you submit a written request to Mary Brevard, Vice President,
Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326.
No person is authorized to give any information
or make any representation other than that contained in this proxy statement,
and if given or made, such information may not be relied upon as having been
authorized.
ANNEX A
CHARTER
BORGWARNER
INC.
AUDIT
COMMITTEE
The BorgWarner Inc.
Audit Committee (the "Committee") is responsible for providing assistance to the
Board of Directors in monitoring (i) the integrity of the financial statements
of the Corporation, (ii) the independent auditor’s qualifications and
independence (iii) the performance of the Corporation’s internal audit function
and independent auditors, and (iv) the compliance by the Corporation with legal
and regulatory requirements.
The Committee shall
be composed of three or more directors who are free of any relationship that, in
the opinion of the Board of Directors, would interfere with their individual
exercise of independent judgment as a Committee member and who meet the
independence and experience requirements of the New York Stock Exchange and
applicable regulations of the Securities and Exchange Commission (the
“Commission”). All members of the Committee shall be generally
knowledgeable in financial and auditing matters and at least one member of the
Committee shall be “an audit committee financial expert” as defined by the
Commission. Committee members shall not simultaneously serve on the
audit committees of more than two other public corporations.
In its audit
capacity, the Committee shall provide assistance to the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Corporation. The
Committee shall report regularly to the Board and establish and maintain free
and open communication between the directors, the independent accountants, the
internal auditors and the financial management of the
Corporation. The Committee will:
1.
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Be directly
responsible for the selection of, and compensation and oversight of the
work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
related work. The independent auditor shall report directly to
the Committee.
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2.
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Pre-approve
all auditing services and permitted non-audit services (including the fees
and terms thereof) to be performed for the Corporation by its independent
auditor, subject to the de minimus exceptions for non-audit services
described in Section 10A(i)(1)(B) of the Exchange Act that are approved by
the Committee prior to the completion of the audit. Discuss and consider
the independence of the independent auditors, including the auditors'
written affirmation of
independence.
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3.
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Discuss and
review with the independent auditors and financial management of the
Corporation the proposed scope of the audit for the current year and the
nature and thoroughness of the audit process; and at the conclusion
thereof, receive and review audit reports including any comments or
recommendations of the independent
auditors.
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4.
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Review with
the independent auditor any audit problems or difficulties and
management’s response.
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5.
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Adopt hiring
policies for employees or former employees of the independent auditor who
participated in any capacity in the audit of the
Corporation.
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6.
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Review with
the independent auditors, the Corporation's Director of Internal Audit and
with the Corporation's financial and accounting managers, the adequacy and
effectiveness of the Corporation's internal auditing, accounting and
financial policies, procedures and controls; and elicit any
recommendations for the improvement of existing internal control
procedures or the establishment of controls or
procedures. Particular emphasis should be given to the adequacy
of the internal controls to expose payments, transactions or procedures
which might be deemed illegal or otherwise
improper.
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7.
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Review the
internal audit function of the Corporation including proposed audit plans
for the coming year, the coordination of its programs with the independent
auditors and the results of the internal
programs.
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8.
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Review and
discuss recurring financial statements (including quarterly reports and
disclosures made in management’s discussion and analysis) to be issued to
the stockholders or the public with management and the independent auditor
and recommend to the Board the inclusion of the Corporation's audited
financial statements in the Corporation's Annual Report on Form
10-K.
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(a)
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All critical
accounting policies and practices to be
used.
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(b)
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All
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent
auditor.
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(c)
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Other
material written communication between the independent auditor and
management, such as any management letter or schedule of unadjusted
differences.
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10.
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Discuss with
management the Corporation’s earnings press releases, including the use of
“proforma” or “adjusted” non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types of
presentations to be made.)
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11.
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Investigate
any matter brought to its attention within the scope of its duties and
retain outside counsel or other experts for this or any other purpose, if,
in its judgment, such retention is appropriate. The Corporation
shall provide appropriate funding, as determined by the Committee, for
payment of compensation to the independent auditor for the purpose of
rendering or issuing an audit report and to any advisors employed by the
Committee and for other expenses necessary or appropriate in carrying out
its duties.
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12.
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Report
Committee activities to the full Board and annually issue a summary report
(including appropriate oversight conclusions) suitable for submission to
stockholders.
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13.
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Review
disclosures made to the Committee by the Corporation’s CEO and CFO during
their certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal controls
or material weaknesses therein and any fraud involving management or other
employees who have a role in the Company’s internal
controls.
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14.
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Ensure the
rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by
law.
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15.
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Obtain and
review a report from the independent auditor at least annually regarding
(a) the independent auditor’s internal quality-control procedures, (b) any
material issues raised by the most recent internal quality-control review,
or peer review, of the firm, or any inquiry or investigation by
governmental or professional authorities within the preceding five years
respecting one or more independent audits carried out by the firm, (c) any
steps taken to deal with any such issues, and (d) all relationships
between the independent auditor and the Corporation. Evaluate the
qualifications, performance and independence of the independent auditor,
including considering whether the auditor’s quality controls are adequate
and the provision of permitted non-audit services is compatible with
maintaining the auditor’s independence, taking into account the opinions
of management and internal auditors. The Committee shall present its
conclusions with respect to the independent auditor to the
Board.
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16.
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Establish
procedures for the receipt, retention and treatment of complaints received
by the Corporation regarding accounting, internal accounting controls or
auditing matters, and the confidential, anonymous submission by employees
of concerns regarding questionable accounting or auditing
matters.
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17.
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Discuss with
the Corporation’s General Counsel legal matters that may have a material
impact on the financial statements or the Corporation’s compliance
policies.
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18.
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Discuss with
management the Corporation’s risk assessment and risk management
policies.
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The Committee's
charter, policies and procedures will be reassessed at least annually to allow
reaction to changing conditions and environment and to assure that the
Corporation's accounting and reporting practices are in accordance with all
requirements and are of the highest quality. The Committee may amend
or repeal its charter, policies and procedures, as the Committee deems
appropriate. The Committee shall annually review the Committee’s own
performance.
The Committee shall
meet as often as it determines necessary, but not less frequently than
quarterly. The Committee shall meet periodically with management, the internal
auditors and the independent auditor in separate executive
sessions. These meetings shall include the independent auditors'
evaluation of the Corporation's financial, accounting and auditing personnel and
an assessment of the cooperation the independent auditors received during the
review. The Committee may request any officer or employee of the
Corporation or the Corporation’s outside counsel or independent auditor to
attend a meeting of the Committee or to meet with any members of, or consultants
to, the Committee.
The Committee may
form and delegate authority to subcommittees consisting of one or more members
when appropriate, including the authority to grant pre-approvals of audit and
permitted non-audit services, provided that decisions of such subcommittee shall
be presented to the full Committee at its next scheduled meeting.
The Chair of the
Committee shall establish such rules for the Committee and its members as may
from time to time be necessary and proper for the conduct of the Committee’s
business, in conformity with applicable laws, rules and
regulations.
PROPOSED
AMENDMENT TO THE RESTATED
CERTIFICATE
OF INCORPORATION OF BORGWARNER INC.
The proposed amendment to the Company’s
restated certificate of incorporation would amend and restate the first sentence
of Article IV in its entirety to read as follows:
The total number of shares of all classes of
stock which the Corporation shall have the authority to issue is 420,000,000
shares, consisting of 390,000,000 shares of Common Stock, par value $0.01 per
share (“Common Stock”), 25,000,000 shares of Non-Voting Common Stock, par value
$0.01 per share (“Non-Voting Common Stock” and, together with the Common Stock,
the “Junior Stock”), and 5,000,000 shares of Preferred Stock, par value $0.01
per share (“Preferred Stock”).
This
Proxy is Solicited by the Board of Directors in Connection
With
the Annual Meeting of Stockholders
9:00 A.M. (local
time)
April 30,
2008
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PLACE:
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BorgWarner
Inc.
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3850
Hamlin Road
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Auburn
Hills, Michigan 48326
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PROXY:
JOHN J.
GASPAROVIC and LAURENE H. HORISZNY and each of them, are hereby appointed by the
undersigned as attorneys and proxies with full power of substitution, to vote
all the shares of Common Stock held of record by the undersigned on
March 3, 2008 at the Annual Meeting of Stockholders of BorgWarner Inc. or
at any adjournment(s) or postponement(s) of the meeting.
WITH RESPECT TO ANY MATTER THAT SHOULD PROPERLY
COME BEFORE THE ANNUAL MEETING THAT IS NOT SPECIFIED HEREIN, THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE PROXY HOLDER.
THIS
PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY
Address Change/Comments
(Mark
the corresponding box on the reverse side)
/
FOLD AND DETACH HERE /
You can now
access your BorgWarner account online.
Access your
BorgWarner stockholder account online via Investor ServiceDirect®
(ISD).
The transfer agent
for BorgWarner now makes it easy and convenient to get current information on
your stockholder account.
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• View
account status
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• View
payment history for dividends
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• View
certificate history
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• Make
address changes
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• View
book-entry information
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• Obtain a
duplicate 1099 tax form
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•
Establish/change your PIN
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Visit us on the
web at http://www.bnymellon.com/shareowner
For
Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday
Eastern Time
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TOLL FREE NUMBER: 1-800-370-1163
IF NO CHOICE
IS SPECIFIED, this Proxy will be voted “FOR” the election of all listed
nominees, “FOR” proposals 2 and 3, all in accordance with the
recommendations of the Board of Directors.
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Please
Mark
Here
for Address
Change or
Comments
SEE
REVERSE SIDE
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1.
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Election of
two Class III Directors:
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for
all
nominees
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withhold
authority
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listed
(except as indicated)
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to vote for
all nominees listed
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01 Robin J.
Adams
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02 David T.
Brown
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(INSTRUCTION: To
withhold authority to vote for any individual nominee, write that nominee’s name
on the space provided below.)
________________________________
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FOR
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AGAINST
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ABSTAIN
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2.
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To approve
the Amendment to the Company’s Restated Certificate of Incorporation to
increase the authorized common stock of the Company from 150,000,000
shares to 390,000,000 shares.
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FOR
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AGAINST
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ABSTAIN
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3.
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To
ratify the
appointment of Deloitte & Touche LLP as Independent Registered Public
Accounting Firm for the Company for 2008.
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4.
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To transact such other
business as may properly come before the meeting or any adjourment or
postponement thereof.
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Dated:
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__________________________________________2008
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__________________________________________
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Signatur
e
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______________________________________
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Signature if held jointly
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Please sign exactly
as your name appears hereon. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
/
FOLD AND DETACH HERE /
WE
ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH
ARE AVAILABLE 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/bwa
Use the
internet to vote your proxy.
Have your
proxy card in hand when
you access
the web site.
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OR
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Telephone
1-866-540-5760
Use any
touch-tone telephone to
vote your
proxy. Have your proxy
card in hand
when you call.
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If you vote your
proxy by Internet or by telephone, you do NOT need to mail back your proxy
card.
To vote by mail,
mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
Choose
MLink
SM
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You can view the
A
nnual Report and Proxy Statement on
the internet at ww3.ics.adp.com/streetlink/BWA