Caterpillar Board to Review ‘Poison Pill’

Caterpillar Board to Review ‘Poison Pill’ CHICAGO (Reuters) – Heavy equipment maker Caterpillar Inc. CAT.N said on Friday that its “poison pill” takeover defense, a hot topic at its past three annual meetings, will be reviewed by a committee of independent directors. Caterpillar also posted information about its corporate governance practices on the company’s Web site, saying it wants to help restore confidence in corporate America. “With the scandals we’ve all read about in the papers, it’s important that you trust that we make these business decisions with the best interests of investors in mind,” Doug Oberhelman, group president, told analysts on a conference call. Caterpillar’s Web posting follows similar action on Thursday by General Electric Co. GE.N and puts it in compliance with proposed rules for all companies listed on the New York Stock Exchange. The decision by Peoria, Illinois-based Caterpillar to review its “poison pill” is part of a growing trend. “Poison pills,” or shareholder rights programs, became popular in the 1980s as a way to protect shareholders by making a hostile takeover prohibitively expensive. They have come under fire in recent years, though, for allegedly entrenching management and reducing accountability. Shareholder resolutions asking Caterpillar’s board to put the “poison pill” to a shareholder vote have been on the annual meeting ballot for three years. All have been narrowly rejected, although the proposal did receive a majority of the yes-no votes in 2000. Under the three-year independent director evaluation, or TIDE, provision adopted Oct. 9, independent directors will review the pill at least every three years to determine if it is still is in the best interests of the company and its shareholders. “It’s somewhat of a compromise,” said John Laide, vice president of TrueCourse Inc., a New York-based firm that tracks takeover defenses. He said 16 companies, including Caterpillar, have adopted TIDE provisions so far this year, up from 10 last year and seven in 2000. Among the larger companies that have such provisions are drug maker Pfizer Inc., insurer Aetna Inc., paper producer Georgia-Pacific Corp. and Morgan Stanley, according to the Investor Responsibility Research Center. Many companies also are posting more corporate governance information on their Web sites. Caterpillar’s site includes a code of worldwide business conduct, a list of board members and current charters for each of Caterpillar’s board committees. The company generally wins high marks on corporate governance issues. Institutional Shareholder Services, an independent firm that tracks such practices, said it ranks Caterpillar in the top 11 percent of firms in the Standard & Poor’s 500. Compared to other capital goods companies, Caterpillar ranks in the top 7 percent, ISS said. Caterpillar shares rose 62 cents to close at $43.16

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