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Whirlpool DEF 14A 2008
2008 Notice and Proxy
Table of Contents

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.     )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨        Preliminary Proxy Statement

¨   CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6 (E) (2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

WHIRLPOOL CORPORATION

(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) :

 

x No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6 (i) (4) and 0-11.

 

  (1)   Title of each class of securities to which transactions applies:

 

  (2)   Aggregate number of securities to which transaction applies:

 

  (3)   Per unit price or other underlying value of transactions 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) :

 

  (4)   Proposed maximum aggregate value of transaction:

 

  (5)   Total fee paid:

 

¨ Fee paid previously with preliminary materials.

 

¨ 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.

 

  (1)   Amount Previously Paid:

 

  (2)   Form, Schedule or Registration Statement No.:

 

  (3)   Filing Party:

 

  (4)   Date Filed:

Notes:

Reg. (S) 240.14a-101

SEC 1913 (3–99)


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LOGO

WHIRLPOOL CORPORATION

Administrative Center            

2000 North M-63                

Benton Harbor, Michigan 49022-2692

To Our Stockholders:

It is my pleasure to invite you to attend the 2008 Whirlpool Corporation annual meeting of stockholders to be held on Tuesday, April 15, 2008 at 8:00 a.m., Chicago time, at 120 East Delaware Place, 8th Floor, Chicago, Illinois.

The formal notice of the meeting follows on the next page. At the meeting, stockholders will vote on the election of four directors and on two stockholder proposals, if they are properly presented at the meeting, and will transact any other business that may properly come before the meeting. In addition, we will discuss Whirlpool’s 2007 performance and the outlook for this year, and answer your questions.

A financial supplement containing important financial information about Whirlpool is contained in Part II of this booklet. We have also mailed with this booklet an annual report that includes summary financial and other important information.

Your vote is important. We urge you to please complete and return the enclosed proxy whether or not you plan to attend the meeting. Promptly returning your proxy will be appreciated, as it will save further mailing expense. You may revoke your proxy at any time prior to the proxy being voted by following the procedures described in Part I of this booklet.

Your vote is important and much appreciated!

LOGO

 

JEFF M. FETTIG

Chairman of the Board

and Chief Executive Officer

 

March 3, 2008


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NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS

The 2008 annual meeting of stockholders of WHIRLPOOL CORPORATION will be held at 120 East Delaware Place, 8th Floor, Chicago, Illinois on Tuesday, April 15, 2008, at 8:00 a.m., Chicago time, for the following purposes:

 

  1. to elect four persons to Whirlpool’s Board of Directors;

 

  2. to vote on a stockholder proposal, if properly presented at the meeting, to elect each director annually;

 

  3. to vote on a stockholder proposal, if properly presented at the meeting, to eliminate supermajority stockholder vote requirements; and

 

  4. to transact such other business as may properly come before the meeting.

A list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose relevant to the meeting during ordinary business hours for at least ten days prior to April 15, 2008 at Whirlpool’s Administrative Center, 2000 North M-63, Benton Harbor, Michigan 49022-2692.

By Order of the Board of Directors

LOGO

 

DANIEL F. HOPP

Senior Vice President, Corporate Affairs,

General Counsel and Corporate Secretary

 

March 3, 2008


Table of Contents
TABLE OF CONTENTS

 

     Page

Part I – Proxy Statement

  

Information about Whirlpool Corporation

   1

Information about the Annual Meeting and Voting

   1

Stockholder Proposals and Director Nominations for 2009 Meeting

   5

Directors and Nominees for Election as Directors

   5

Board of Directors and Corporate Governance

   8

Nonemployee Director Compensation

   15

Security Ownership

   20

Beneficial Ownership

   21

Section 16(a) Beneficial Ownership Reporting Compliance

   22

Compensation Discussion and Analysis

   23

Human Resources Committee Report

   38

Executive Compensation Tables

   39

Summary Compensation Table

   39

Grant of Plan-Based Awards Table

   42

Outstanding Equity Awards at Fiscal Year-End Table

   45

Option Exercises and Stock Vested Table

   49

Pension Benefits Table

   50

Non-Qualified Deferred Compensation Table

   53

Potential Post-Termination Payments Tables

   55

Related Person Transactions

   62

Human Resources Committee Interlocks and Insider Participation

   63

Equity Compensation Plan Information

   64

Matters Relating to Independent Registered Public Accounting Firm

   65

Stockholder Proposals

   68

 

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Part II – Financial Supplement

  

Table of Contents

   F-1

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   F-2

Consolidated Statements of Income

   F-16

Consolidated Balance Sheets

   F-17

Consolidated Statements of Cash Flows

   F-18

Consolidated Statements of Changes in Stockholders’ Equity

   F-19

Notes to the Consolidated Financial Statements

   F-20

Five-Year Selected Financial Data

   F-55

Report by Management on the Consolidated Financial Statements

   F-56

Management’s Report on Internal Control Over Financial Reporting

   F-57

Report of Independent Registered Public Accounting Firm

   F-58

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

  

F-59

Schedule II – Valuation and Qualifying Accounts

   F-60

 

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PROXY STATEMENT

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Stockholders to be Held on April 15, 2008:

This Proxy Statement and the Accompanying Annual Report are Available at

www.whirlpoolcorp.com/investors/annualreportandproxy.

Among other things, this proxy statement contains information regarding: the date, time and location of the meeting, the matters being submitted to the stockholders and how to vote in person. To obtain directions to attend the annual meeting and vote in person, please contact Investor Relations at (269) 923-2641 or via e-mail at investor_relations@whirlpool.com.

 

INFORMATION ABOUT WHIRLPOOL CORPORATION

Whirlpool Corporation is the world’s leading manufacturer and marketer of major home appliances. We manufacture in 12 countries and market products in nearly every country around the world under brand names such as Whirlpool, Maytag, KitchenAid, Jenn-Air, Roper, Estate, Admiral, Amana, Bauknecht, Ignis, Brastemp, Consul, and Acros. We are also a principal supplier to Sears of many major appliances marketed by Sears under the Kenmore brand name. We have approximately 73,000 employees worldwide. Our headquarters are located in Benton Harbor, Michigan, and our address is 2000 North M-63, Benton Harbor, Michigan 49022-2692. Our telephone number is (269) 923-5000.

 

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Our 2008 annual meeting of stockholders will be held on Tuesday, April 15, 2008, at 8:00 a.m., Chicago time, at 120 East Delaware Place, 8th Floor, Chicago, Illinois. All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. If you attend, please note that you may be asked to present valid picture identification. Please also note that if you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of your voting instruction card or brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Cameras, recording devices, cell phones, and other electronic devices will not be permitted at the meeting other than those operated by Whirlpool or its designees.

Information about this proxy statement and who can vote

We are sending the proxy materials because Whirlpool’s Board is seeking your permission (or proxy) to vote your shares at the annual meeting on your behalf. This proxy statement presents information we are required to provide to you under the rules of the Securities and Exchange Commission. It is intended to help you in reaching a decision on voting your shares of stock. Only stockholders of record at the close of business on February 26, 2008, the record date, are entitled to vote at the meeting. As of February 26, 2008, there were 75,618,608 shares of common stock outstanding and entitled to vote, with each share entitled to one vote. We have no other voting securities. This proxy statement and the accompanying proxy form are first being mailed to stockholders on or about March 12, 2008.

 

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Information about voting and revocation of proxies

If your shares of common stock are held in your name, you can vote your shares on matters presented at the annual meeting in one of the following ways.

 

  1. By Written Proxy – All stockholders of record can vote by written proxy card. If you are a street name holder, you will receive a written voting instruction card from your broker or nominee. If you sign and return the accompanying proxy or voting instruction card, your shares will be voted as you direct on the proxy or voting instruction card. If you do not give any direction on the proxy or instruction card, the shares will be voted FOR the nominees named for director and AGAINST the two stockholder proposals (see the section entitled “Stockholder Proposals” later in this proxy statement). Stockholders of record may revoke their proxy at any time before it is exercised (1) by providing a written revocation to Whirlpool’s Corporate Secretary, Daniel F. Hopp, (2) by providing a proxy with a later date, or (3) by voting in person at the meeting. If your shares are held in street name, you must contact your broker or nominee to revoke your proxy.

 

  2. By Telephone or Internet – All stockholders of record also can vote by touchtone telephone from the U.S. and Canada using the toll-free telephone number on the proxy card, or through the Internet, using the procedures and instructions described on the proxy card. Street name holders may vote by telephone or Internet if their broker or nominee makes those methods available, in which case the broker or nominee will enclose the instructions with the proxy materials. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares, and to confirm that their instructions have been properly recorded.

 

  3. In Person – All stockholders of record may vote in person at the meeting. Street name holders may vote in person at the meeting if they have a legal proxy from the record holder to vote at the meeting.

If you participate in the Whirlpool 401(k) Retirement Plan and hold shares of Whirlpool stock in your plan account as of the record date, you will receive a request for voting instructions from the plan trustee (“Vanguard”) with respect to your plan shares. If you hold Whirlpool shares outside of the plan, you will vote those shares separately. You are entitled to direct Vanguard how to vote your plan shares. If you do not provide voting instructions to Vanguard by 11:59 p.m. Eastern time on April 10, 2008, the Whirlpool shares in your plan account will be voted by Vanguard in the same proportion as the shares held by Vanguard for which voting instructions have been received from other participants in the Plan. You may revoke your previously provided voting instructions by filing with Vanguard either a written notice of revocation or a properly executed proxy bearing a later date prior to the deadline for voting plan shares.

 

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Confidentiality of votes

Whirlpool’s Board has adopted a policy requiring all stockholder votes to be kept permanently confidential except (1) when disclosure is required by law, (2) when a stockholder expressly consents to disclosure, or (3) when there is a contested election and the proponent filing the opposition statement does not agree to abide by this policy.

Quorum

Stockholders representing at least 50% of the common stock issued and outstanding as of the record date must be present at the annual meeting, either in person or by proxy, for there to be a quorum at the annual meeting. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner.

Required vote

For more information on director elections, see “Board of Directors and Corporate Governance – Majority Voting for Directors; Director Resignation Policy” later in this proxy statement. For the election of directors (provided the number of nominees does not exceed the number of directors to be elected), each director must receive the majority of the votes cast with respect to that director (number of shares voted “for” a director must exceed the number of votes cast “against” that director). Abstentions and broker non-votes will have no effect on the election of directors. For a stockholder to nominate an individual for director at the 2009 annual meeting, the stockholder must follow the procedures outlined below under the caption “Stockholder Proposals and Director Nominations for 2009 Meeting.” Stockholders may also designate a director nominee to be considered by the Board for recommendation to the stockholders in Whirlpool’s proxy statement for the 2009 annual meeting by following the procedures outlined below under the caption “Director Nominations to be Considered by the Board.”

The affirmative vote of a majority of the outstanding common stock present in person or represented by proxy at the annual meeting and entitled to vote will be required to approve (1) each of the stockholder proposals, if properly presented at the meeting (Items 2 and 3) and (2) any other matter that may properly come before the meeting. Abstentions will be treated as being present and entitled to vote on the matter and, therefore, will have the effect of votes against the proposal. A broker non-vote will be treated as not being entitled to vote on the matter and, therefore, will not be counted for purposes of determining whether the proposal has been approved.

Other business

If any nominee named herein for election as a director is not available to serve, the accompanying proxy will be voted in favor of the remainder of those nominated and may be

 

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voted for a substitute person. Whirlpool expects all nominees to be available and knows of no matter to be brought before the annual meeting other than those covered in this proxy statement. If, however, any other matter properly comes before the annual meeting, we intend that the accompanying proxy will be voted thereon in accordance with the judgment of the persons voting such proxy.

Solicitation costs

Whirlpool will pay the expenses of the solicitation of proxies. We expect to pay fees of approximately $11,500 plus certain expenses for assistance by Georgeson Inc. in the solicitation of proxies. Proxies may be solicited by directors, officers, and Whirlpool employees and by Georgeson Inc. personally and by mail, telegraph, telephone, or other electronic means.

 

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STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

FOR 2009 MEETING

Our annual meeting of stockholders is generally held the third Tuesday in April. Assuming our 2009 annual meeting is held on that date, we must receive notice of your intention to introduce a nomination for director or other item of business at that meeting by January 21, 2009. This notice must be received by the Corporate Secretary of Whirlpool personally or by registered or certified mail and satisfy the procedures set forth in Whirlpool’s by-laws. In addition, any proposal that you intend to have us include in a proxy statement for the annual meeting of stockholders in 2009 must be received by us by November 12, 2008, and must otherwise comply with the Securities and Exchange Commission’s rules, in order to be eligible for inclusion in the proxy statement and proxy form relating to this meeting.

 

DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS

We currently have 12 directors on the Board. The directors are divided into three classes, with each class serving for a three-year period. The stockholders elect approximately one-third of the Board each year. The Board recommends a vote FOR the election of each of the directors nominated below.

 

Nominees for a term to expire in 2011  
HERMAN CAIN, 62, Chief Executive Officer and President of THE New Voice, Inc. (leadership consulting). Whirlpool director since 1992 (except from December 2003 to April 2005 during a bid for political office), and director of AGCO Corporation and Aquila, Inc.   LOGO

 

 
JEFF M. FETTIG, 51, Chairman of the Board and Chief Executive Officer of Whirlpool. Whirlpool director since 1999 and director of The Dow Chemical Company.   LOGO

 

 
MILES L. MARSH, 60, former Chairman of the Board and Chief Executive Officer of Fort James Corporation (paper mills). Whirlpool director since 1990.   LOGO

 

 

 

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PAUL G. STERN, 69, Partner, Arlington Capital Partners, L.L.P. and Thayer Capital Partners, L.L.P. (private investment companies), and Chairman of Claris Capital Partners (private investment banking). Whirlpool director since 1990 and director of The Dow Chemical Company.   LOGO

 

 

 

Directors whose terms expire in 2010  
MICHAEL F. JOHNSTON, 60, Chairman of the Board and Chief Executive Officer of Visteon Corporation (motor vehicle parts and accessories). Whirlpool director since 2003 and director of Flowserve Corporation.   LOGO

 

 
WILLIAM T. KERR, 66, Chairman of the Board of Meredith Corporation (multimedia). Whirlpool director since 2006 after serving eight years on the board of Maytag Corporation. Director of Arbitron, Inc., Interpublic Group of Companies, Inc., and The Principal Financial Group.   LOGO

 

 
JANICE D. STONEY, 67, former Executive Vice President, US WEST Communications Group, Inc. (telephone communications; retired 1992). Whirlpool director since 1987 (except for part of 1994 during a bid for political office) and director of The Williams Companies, Inc.   LOGO

 

 
MICHAEL D. WHITE, 56, Chief Executive Officer of PepsiCo International and Vice Chairman, PepsiCo, Inc. (beverages and snack foods). Whirlpool director since 2004.   LOGO

 

 

 

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Directors Whose Terms Expire in 2009  
GARY T. DICAMILLO, 57, President and Chief Executive Officer of GWP International (professional staffing services). Whirlpool director since 1997 and director of 3Com Corporation and The Sheridan Group, Inc.   LOGO

 

 
KATHLEEN J. HEMPEL, 57, former Vice Chairman and Chief Financial Officer of Fort Howard Corporation (paper mills; retired 1997). Whirlpool director since 1994 and director of Oshkosh Truck Corporation.   LOGO

 

 
ARNOLD G. LANGBO, 70, former Chairman of the Board and Chief Executive Officer of Kellogg Company (grain mill products; retired 2000). Whirlpool director since 1994 and director of The Hershey Company, Johnson & Johnson, and Weyerhaeuser Company.   LOGO

 

 
MICHAEL A. TODMAN, 50, President, Whirlpool North America. Whirlpool director since 2006 and director of Newell Rubbermaid Inc.   LOGO

 

 

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

During 2007, our Board met six times and had four committees. The committees consisted of an Audit Committee, a Human Resources Committee, a Corporate Governance and Nominating Committee, and a Finance Committee. Each director attended at least 75% of the total number of meetings of the Board and the Board committees on which he or she served.

All directors properly nominated for election are expected to attend the annual meeting of stockholders. At the 2007 annual meeting of stockholders, all of our directors nominated for election attended the annual meeting. In addition, all other directors, except for Dr. Stern, attended the 2007 annual meeting of stockholders.

The table below breaks down 2007 committee membership for each committee and each director.

 

Name    Audit   

Human

Resources

  

Corporate

Governance &
Nominating

   Finance

Mr. Cain

      X       X

Mr. DiCamillo

   X          Chair

Mr. Fettig

             

Ms. Hempel

         X    X

Mr. Johnston

      X    Chair     

Mr. Kerr

   X    X        

Mr. Langbo

   X          X

Mr. Marsh

   X    X        

Dr. Stern

      Chair    X     

Ms. Stoney

         X    X

Mr. Todman

             

Mr. White

   Chair    X          

2007 Meetings

   11    3    2    2

Audit Committee

The members of the Audit Committee are Mr. White (Chair), Mr. DiCamillo, Mr. Kerr, Mr. Langbo, and Mr. Marsh. Pursuant to a written charter, the Committee provides independent and objective oversight of our accounting functions and internal controls and monitors the objectivity of our financial statements. The Committee assists Board oversight of:

 

  1. the integrity of our financial statements;

 

  2. our compliance with legal and regulatory requirements;

 

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  3. the independent registered public accounting firm’s qualifications and independence; and

 

  4. the performance of our internal audit function and independent registered public accounting firm.

In performing these functions, the Committee is responsible for the review and discussion of the annual audited financial statements, quarterly financial statements and related reports with management and the independent registered public accounting firm. These related reports include our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Committee also monitors the adequacy of financial disclosure, retains and/or terminates our independent registered public accounting firm and exercises sole authority to review and approve all audit engagement fees and terms. The Committee approves in advance the nature, extent, and cost of all internal control-related and permissible non-audit services provided by the independent registered public accounting firm; and reviews annual reports from the independent registered public accounting firm regarding its internal quality control procedures.

Under its charter, the Committee is comprised solely of three or more independent directors who meet the enhanced independence standards for audit committee members set forth in the New York Stock Exchange (“NYSE”) listing standards (which incorporates the standards set forth in the rules of the Securities and Exchange Commission). The Board has determined that each member of this Committee satisfies the financial literacy qualifications of the NYSE listing standards and that Mr. White satisfies the “audit committee financial expert” criteria established by the Securities and Exchange Commission and has accounting and financial management expertise as required under the NYSE listing rules.

Human Resources Committee

The members of the Human Resources Committee are Dr. Stern (Chair), Mr. Cain, Mr. Johnston, Mr. Kerr, Mr. Marsh, and Mr. White. Pursuant to a written charter, the Committee assures the adequacy of the compensation and benefits of Whirlpool’s officers and top management and compliance with any executive compensation disclosure requirements. In performing these functions, the Committee has sole authority and responsibility to retain and terminate any consulting firm assisting in the evaluation of CEO or senior executive compensation. The Committee has the following duties and responsibilities, among others:

 

  1. reviews and approves corporate goals and objectives relevant to CEO compensation, evaluates the CEO’s performance in light of these goals and objectives, and sets the CEO’s compensation level based on this evaluation and other relevant business information;

 

  2. determines and approves the compensation and other employment arrangements for Whirlpool’s elected officers;

 

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  3. makes recommendations to the Board with respect to incentive-compensation and equity-based plans; and

 

  4. determines and approves grants for each individual participant under the stock option plans and administers the stock option plans.

The Committee has the authority to form subcommittees and delegate to those subcommittees certain actions. Under its charter, the Committee is comprised solely of three or more independent directors who meet the independence standards under the NYSE listing standards. For information about the Committee’s processes for establishing and overseeing executive compensation refer to “Compensation Discussion and Analysis – Role of the Human Resources Committee.”

Corporate Governance and Nominating Committee

The members of the Corporate Governance and Nominating Committee are Mr. Johnston (Chair), Ms. Hempel, Dr. Stern, and Ms. Stoney. Pursuant to a written charter, the Committee provides oversight on the broad range of issues surrounding the composition and operation of the Board, including:

 

  1. identifying individuals qualified to become Board members;

 

  2. recommending to the Board director nominees for the next annual meeting of stockholders;

 

  3. recommending to the Board a set of corporate governance principles applicable to Whirlpool; and

 

  4. recommending to the Board changes relating to director compensation.

The Committee also provides recommendations to the Board in the areas of Committee selection and rotation practices, evaluation of the overall effectiveness of the Board and management, and review and consideration of developments in corporate governance practices. The Committee retains the sole authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm’s fees and other retention terms. To assist the Committee in identifying potential director nominees who meet the criteria and priorities established from time to time and facilitate the screening and nomination process for such nominees, the Committee has retained a third party search firm. During 2007, we engaged Heidrick & Struggles to assist the Committee in identifying and soliciting potential candidates to join our Board. On an annual basis, the Committee solicits input from the full Board and conducts a review of the effectiveness of the operation of the Board and Board Committees, including reviewing governance and operating practices and the Corporate Governance Guidelines for Operation of the Board of Directors. Under its charter, the Committee is comprised solely of three or more independent directors who meet the independence standards under the NYSE listing standards.

 

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Finance Committee

The members of the Finance Committee are Mr. DiCamillo (Chair), Mr. Cain, Ms. Hempel, Mr. Langbo, and Ms. Stoney. Pursuant to a written charter, the Committee considers issues impacting our financial structure and makes recommendations to the Board. The Committee develops capital policies and strategies to set an acceptable capital structure, regularly reviews dividend action, risk policy and liquidity management, adequacy of insurance coverage, the annual business plan as it relates to funds flow, capital expenditure and financing requirements, capital investment projects, major financial transactions, and tax and planning strategy and initiatives. The Committee also provides oversight of the Pension Fund Committee with respect to pension plan investment policies and plan funding requirements.

Director Independence

The Corporate Governance and Nominating Committee conducts an annual review of the independence of the members of the Board and its committees and reports its findings to the full Board. Ten of our 12 directors are nonemployee directors (all except Messrs. Fettig and Todman). Although the Board has not adopted categorical standards of materiality for independence purposes (other than those set forth in the NYSE listing standards), information provided by the directors and Whirlpool did not indicate any relationships (e.g., commercial, industrial, banking, consulting, legal, accounting, charitable, or familial), which would impair the independence of any of the nonemployee directors. Based on the report and recommendation of the Corporate Governance and Nominating Committee, the Board has determined that each of its nonemployee directors satisfies the independence standards set forth in the listing standards of the NYSE. Other than the transactions, relationships, and arrangements described in the section entitled “Related Person Transactions,” there was one other matter considered by the Board in determining that Whirlpool’s nonemployee directors are independent.

The Committee’s independence determinations included the review of transactions which commenced in 2004 between Whirlpool and a temporary staffing agency. The agency was selected as a supplier to Whirlpool through a competitive bid process. In 2007, the agency was acquired by a corporation which employs Mr. DiCamillo. The amount involved in transactions between Whirlpool and the agency was below the objective test of independence established under NYSE standards. In addition, Mr. DiCamillo confirmed that he did not participate in transactions between Whirlpool and the agency or receive compensation based on those transactions.

Executive Sessions of Nonemployee Directors and

Communications Between Stockholders and the Board

The Board holds executive sessions of its nonemployee directors generally at each regularly scheduled meeting. The Presiding Director serves as the chairperson for these executive sessions.

 

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The Presiding Director is an independent director elected by the independent directors on the Board. In addition to presiding at executive sessions of nonemployee directors, the Presiding Director has the responsibility to: (1) coordinate with the Chairman and CEO in establishing the annual agenda and topic items for Board meetings; (2) retain independent advisors on behalf of the Board as the Board may determine is necessary or appropriate; (3) assist the Human Resources Committee with the annual evaluation of the Chairman and CEO’s performance, and in conjunction with the Chair of the Human Resources Committee, meet with the Chairman and CEO to discuss the results of such evaluation; and (4) perform such other functions as the independent directors may designate from time to time. Mr. Marsh currently is serving as the Presiding Director.

Interested parties, including stockholders, may communicate directly with the Chairman of the Audit Committee or the nonemployee directors as a group by writing to those individuals or the group at the following address: Whirlpool Corporation, 27 North Wacker Drive, Suite 615, Chicago, Illinois 60606-2800. This address is administered by an independent maildrop business. If correspondence is received by the Corporate Secretary, it will be forwarded to the appropriate person or persons in accordance with the procedures adopted by a majority of the independent directors of the Board with a copy to the Presiding Director. When reporting a concern, please supply sufficient information so that the matter may be addressed properly. Although you are encouraged to identify yourself to assist Whirlpool in effectively addressing your concern, you may choose to remain anonymous, and Whirlpool will use its reasonable efforts to protect your identity to the extent appropriate or permitted by law.

Corporate Governance Guidelines for Operation of the Board of Directors

Whirlpool is committed to the highest standards of corporate governance. On the recommendation of the Corporate Governance and Nominating Committee, the Board adopted a set of Corporate Governance Guidelines for Operation of the Board of Directors, which, among other things, sets forth the qualifications and other criteria for director nominees. The desired personal and experience qualifications for director nominees are described in more detail below under the caption “Director Nominations to be Considered by the Board.”

Majority Voting for Directors; Director Resignation Policy

In December 2006, the Board approved an amendment to Whirlpool’s by-laws to require directors to be elected by the majority of the votes cast with respect to such director in uncontested elections (number of shares voted “for” a director must exceed the number of votes cast “against” that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), directors will be elected by a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our Board’s policy, any director who fails to be elected must offer to tender his or her resignation to the Board. The Board shall nominate for election or re-election as director only candidates who agree to tender, promptly following the annual

 

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meeting at which they are elected or re-elected as director, irrevocable resignations that will be effective upon (1) the failure to receive the required vote at the next annual meeting at which they face re-election and (2) Board acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with this Board policy.

If an incumbent director fails to receive the required vote for re-election, the Corporate Governance and Nominating Committee will act on an expedited basis to determine whether to accept the director’s resignation and will submit such recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. The Corporate Governance and Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation.

Code of Ethics

All of Whirlpool’s directors and employees, including its Chief Executive Officer, Chief Financial Officer, and other senior financial officers, are required to abide by our long-standing Code of Ethics, augmented to comply with the requirements of the NYSE and Securities and Exchange Commission, to ensure that Whirlpool’s business is conducted in a consistently legal and ethical manner. The Code of Ethics covers all areas of professional conduct, including employment policies, conflicts of interest, fair dealing, and the protection of confidential information, as well as strict adherence to all laws and regulations applicable to the conduct of our business. We intend to disclose future amendments to, or waivers from, certain provisions of the Code of Ethics for executive officers and directors on the Whirlpool website within four business days following the date of any such amendment or waiver.

Director Nominations to be Considered by the Board

Stockholders entitled to vote in the election of directors of the Board may nominate director candidates at times other than at the annual meeting. For a nomination to be properly made by any stockholder and be considered for recommendation by the Board to the stockholders and included in our proxy statement for the 2009 annual meeting, written notice of such stockholder’s nomination must be given, either by personal delivery or by registered or certified United States mail, postage prepaid, to the Corporate Secretary of Whirlpool (and must be received by the Corporate Secretary) by November 12, 2008. Such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of Whirlpool entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a statement whether such person, if elected, intends to tender, promptly following such person’s election or re-election, an irrevocable resignation effective upon such person’s 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 in accordance with the relevant Board policy; (d) such other information regarding each nominee proposed by such

 

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stockholder as would be required to be included in a proxy statement filed pursuant to the then current proxy rules of the Securities and Exchange Commission, if the nominee were to be nominated by the Board; and (e) the consent of each nominee to serve as a director of Whirlpool if so elected. In order for a stockholder nomination to be included in the proxy statement, the nominee must meet the selection criteria as determined by the Corporate Governance and Nominating Committee.

The Board evaluates director nominees recommended by stockholders in the same manner in which it evaluates other director nominees. Whirlpool has established through its Corporate Governance and Nominating Committee selection criteria that identify desirable skills and experience for prospective Board members, including those properly nominated by stockholders, and address the issues of diversity and background. The Board, with the assistance of the Corporate Governance and Nominating Committee, selects potential new Board members using criteria and priorities established from time to time. Desired personal qualifications for director nominees include: intelligence, integrity, strength of character, and commitment. Nominees should also have the sense of timing required to assess and challenge the way things are done and recommend alternative solutions to problems; the independence necessary to make an unbiased evaluation of management performance and effectively carry out responsibilities of oversight; an awareness of both the business and social environment in which today’s corporation operates; and a sense of urgency and spirit of cooperation that will enable them to interface with other Board members in directing the future, profitable growth of Whirlpool. Desired experience for director nominees include: at least ten years of experience in a senior executive role with a major business organization, preferably, as either Chief Executive Officer or Chairman (equivalent relevant experience from other backgrounds such as academics or government may also be considered); a proven record of accomplishment and line operating (or equivalent) experience; first-hand experience with international operations; a working knowledge of corporate governance issues and the changing role of the Board; exposure to corporate programs designed to create shareholder value, while balancing the needs of all stakeholders. Director nominees should not be employed by or affiliated with any organization that has competitive lines of business or that may otherwise present a conflict of interest. The composition, skills, and needs of the Board change over time and will be considered in establishing the profile of desirable candidates for any specific opening on the Board.

Available Information

Whirlpool’s current Corporate Governance Guidelines, Code of Ethics, and written charters for its Audit, Finance, Human Resources, and Corporate Governance and Nominating Committees are posted on the Whirlpool website: www.whirlpoolcorp.com – click on the “Governance” tab. Stockholders may also request a free copy of these documents from: Greg Fritz, Director, Investor Relations, Whirlpool Corporation, 2000 North M-63, Mail Drop 2800, Benton Harbor, Michigan 49022-2692; (269) 923-2641.

 

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NONEMPLOYEE DIRECTOR COMPENSATION

Our 2007 director compensation is reflected in the table below. We believe that it is important to attract and retain outstanding nonemployee directors. One way that we achieve this goal is through a competitive compensation program. To that end, in 2007, our Corporate Governance and Nominating Committee, which is responsible for making director compensation recommendations to the Board, worked with Hewitt Associates to evaluate the competitiveness of our compensation program for our directors who are not employees of Whirlpool. After evaluating competitive market data on nonemployee director compensation, Hewitt recommended an increase in the annual cash retainer, and certain other changes in our director compensation program, so that we can remain competitive with other large publicly held companies. After evaluating Hewitt’s report, in February 2008 the Committee recommended and the Board approved, effective for 2008, (1) an increase in the annual retainer from $75,000 to $90,000, (2) a change in the term of director stock options (as described below under the heading “Nonemployee Director Equity Plan”), and (3) termination of the option to relinquish all or part of the annual cash retainer under the Charitable Award Contribution and Additional Life Insurance Plan for Directors (the “Charitable Program” described below). In addition, the Board has adopted an equity ownership guideline for nonemployee directors under which these directors are encouraged to own Whirlpool stock equal in value to four times the basic annual cash retainer, with a five-year timetable to obtain this objective. Only nonemployee directors receive compensation for their services as a director.

The 2007 nonemployee director compensation, by element, was as follows:

 

Type of Compensation    Amount

Annual Cash Retainer

   $75,000

Annual Stock Options Retainer*

   1,157 options

Annual Stock Awards Retainer*

   610 shares

Annual Retainer for Committee Chair (in addition to other retainers):

    

Audit Committee

   $20,000

All Other Committees

   $10,000

Annual Retainer for Presiding Director (in addition to other retainers)

   $20,000

 

* See “Nonemployee Director Equity Plan” below for explanation of how the number of options and shares were calculated for 2007.

Nonemployee Director Equity Plan

Our Nonemployee Director Equity Plan provides for (1) a one time grant of 1,000 shares of common stock made at the time a director first joins the Board; (2) an annual grant of stock options with the number of options to be based on dividing $36,000 by the product of the fair market value of a single share of our common stock on the final trading day before the annual meeting of stockholders ($88.83 for the April 17, 2007 grant) multiplied by 0.35; and

 

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(3) an annual grant of stock worth $54,000 with the number of shares to be issued to the director determined by dividing $54,000 by the average fair market value of a single share of our common stock for the final three trading days before the grant ($88.42 for the April 17, 2007 grant). The exercise price under each option granted is the fair market value of the common stock on the last trading day before the annual meeting of stockholders ($88.83 on April 16, 2007).

Options granted in 2007 are exercisable for the earlier of 20 years after grant or two years after a nonemployee director ceases to serve on our Board, or one year in the case of the nonemployee director’s death. Options granted in and after 2008 are exercisable for the earlier of ten years after grant or five years after a nonemployee director ceases to serve on our Board, or one year in the case of the nonemployee director’s death. However, no option is exercisable within the first six months of its term, unless death or disability of the director occurs. In the event that the death or disability of the director does occur and an option is exercised in the first six months of its term, any shares of common stock issued on such exercise may not be sold until the six-month anniversary of the grant date. Payment of the exercise price may be made in cash or, if permitted by law, Whirlpool common stock, valued at its market price at the time of exercise. All annual grants are made to directors on the date of our annual meeting of stockholders.

Deferral of Annual Retainer and Stock Grants

A nonemployee director may elect to defer any portion of the annual cash retainer and annual stock awards retainer until he or she ceases to be a director. Under this policy, when the director’s term ends, any deferred annual retainer will be made in a lump sum or in monthly or quarterly installments. In addition, payment of any deferred annual stock grant will be made as soon as is administratively feasible. Amounts deferred on or before December 31, 2004 accrue interest quarterly at a rate equal to the prime rate in effect from time to time. Amounts deferred after December 31, 2004 may be allocated to notional investments that mirror those available to participants in our U.S. 401(k) plan, with the exception of the Whirlpool stock fund.

Charitable Program

Through 2007, each nonemployee director, upon election or re-election to the Board, could choose to relinquish all or a portion of the annual cash retainer, in which case Whirlpool may, at its sole discretion, then make an award of up to $1 million to a charitable organization upon the director’s death. Under the program, the election to relinquish compensation is irreversible, Whirlpool may decide to purchase insurance or self-fund any charitable contributions made under the program, and Whirlpool may choose to make contributions in the director’s name to as many as three charities. As discussed below in the “Nonemployee Director Compensation Table,” Whirlpool purchases insurance to partially fund this program, and pays the premiums on behalf of the directors. Each director could also elect to relinquish a portion of the annual cash retainer and have such amount used to purchase term life insurance in excess of that described in the next paragraph. The Board of Directors acted to eliminate these two options, prospectively, as of January 1, 2008.

 

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Term Life Insurance

Whirlpool pays the premiums to provide each nonemployee director who elects to participate, with term life insurance while serving as a director, and also makes a related income tax reimbursement payment. The coverage amount is equal to one-tenth of the director’s basic annual cash retainer times the director’s months of service (not to exceed 120). In addition, Whirlpool provides each nonemployee director with travel accident insurance of $1 million.

Whirlpool Appliances

For evaluative purposes, Whirlpool permits nonemployee directors to test Whirlpool products for home use, and reimburses the directors for any income taxes they incur as a result of this policy. The cost to Whirlpool of this arrangement in 2007 (based on distributor price of products and delivery, installation, and service charges) did not exceed $10,500 for any one nonemployee director or $29,000 for all nonemployee directors as a group.

Business Expenses

Whirlpool reimburses nonemployee directors for business expenses related to their attendance at Whirlpool meetings, including room, meals and transportation to and from Board and committee meetings (e.g., commercial flights, trains, cars and parking). On rare occasions, a director’s spouse may accompany a director when traveling on Whirlpool business. Normally a director will travel to and from Whirlpool Board meetings on Whirlpool corporate or other private aircraft. Directors are also reimbursed for attendance at qualified third-party director education programs.

Nonemployee Director Compensation Table

 

Name  

Fees Earned or
Paid in Cash(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(6)

($)

   

Total

($)

Herman Cain

  75,000   53,814   46,292       5,436     180,542

Gary T. DiCamillo

  85,000   53,814   46,292       5,455     190,561

Allan D. Gilmour*

  27,926           66,235     94,161

Kathleen J. Hempel

  75,000   53,814   46,292       3,152     178,258

Michael F. Johnston

  85,000   53,814   46,292       18,774     203,880

William T. Kerr

  75,000   53,814   46,292       1,430     176,536

Arnold G. Langbo

  75,000   53,814   46,292       16,187     191,293

Miles L. Marsh

  90,000   53,814   46,292       4,694     194,800

Paul G. Stern

  85,000   53,814   46,292       3,474     188,580

Janice D. Stoney

  75,000   53,814   46,292       11,640     186,746

Michael D. White

  95,000**   53,814   46,292       80,523     275,629

 

* Mr. Gilmour retired from the Whirlpool Board in April 2007.

 

** Of this amount, Mr. White relinquished $11,207 under the Charitable Program.

 

(1) The aggregate dollar amount of all fees earned or paid in cash for services as a director, including all annual retainer fees, before deferrals and relinquishments.

 

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(2) Value of the annual grant of shares of common stock (610 in 2007); the amount is less than $54,000 due to rounding. The value reflects the 2007 compensation cost recognized under Financial Accounting Standards Board’s Statement No. 123(R) (revised 2004), “Share-Based Payment” (“FAS 123R”), and is equal to the grant date fair value of the stock awards. See Note 11 to the Consolidated Financial Statements contained in the Financial Supplement to this proxy statement for a discussion of the relevant assumptions used in calculating the compensation cost and grant date fair value under FAS 123R. The compensation cost and the grant date fair value of the stock awards for financial reporting purposes likely vary from the actual amount the director receives based on a number of factors, including stock price fluctuations, timing of sale and differences from valuation assumptions. As of December 31, 2007, none of our nonemployee directors was deemed to have outstanding restricted stock awards because all stock awards vest immediately.

 

(3) Value of the annual grant of stock options (1,157 in 2007) which generally become exercisable six months after grant and expire either 20 years from the award date or the second anniversary of the date that the director ceases to be a director. The value reflects the 2007 compensation cost recognized under FAS 123R, and is therefore different than the amount used to calculate the number of options granted to each director under the Nonemployee Director Equity Plan. The 2007 compensation cost disclosed in this column is equal to the grant date fair value of the option awards calculated in accordance with FAS 123R because all of the stock options vested during 2007. See Note 11 to the Consolidated Financial Statements contained in the Financial Supplement to this proxy statement for a discussion of the relevant assumptions used in calculating the compensation cost and grant date fair value under FAS 123R. The compensation cost and the grant date fair value of the stock option awards for financial reporting purposes likely vary from the actual amount the director receives based on a number of factors, including stock price fluctuations, timing of exercise, and differences from valuation assumptions. As of December 31, 2007, the number of stock options held by each nonemployee director (all of which have fully vested) were:

 

Herman Cain

   2,288

Gary T. DiCamillo

   6,877

Allan D. Gilmour

   8,120

Kathleen J. Hempel

   7,477

Michael F. Johnston

   4,477

William T. Kerr

   4,025

Arnold G. Langbo

   7,477

Miles L. Marsh

   8,677

Paul G. Stern

   8,677

Janice D. Stoney

   9,877

Michael D. White

   3,877

 

(4) Whirlpool does not have a non-equity incentive plan for nonemployee directors.

 

(5) Whirlpool does not have a pension plan for nonemployee directors and does not pay above-market or preferential rates on non-qualified deferred compensation for nonemployee directors.

 

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(6) The table below presents an itemized account of “All Other Compensation” provided in 2007 to the nonemployee directors.

 

Director   

Tax

Reimbursements(a)

($)

    

Life Insurance

Premiums

($)

    

Charitable

Program(b)

($)

  

Whirlpool

Appliances and
Other Benefits

($)

    

Total

($)

Herman Cain

   3,080      704         1,652      5,436

Gary T. DiCamillo

   2,772      865         1,818      5,455

Allan D. Gilmour

   5,992      359      55,498    4,386      66,235

Kathleen J. Hempel

   1,951      941         260      3,152

Michael F. Johnston

   7,807      441         10,526      18,774

William T. Kerr

   1,018      152         260      1,430

Arnold G. Langbo

   11,338      981         3,868      16,187

Miles L. Marsh

   3,344      1,090         260      4,694

Paul G. Stern

   1,329              2,145      3,474

Janice D. Stoney

   7,786      1,080         2,774      11,640

Michael D. White

   5,640      391      66,588    7,904      80,523

 

  (a) Tax reimbursements on income imputed to the director for Whirlpool appliances and other benefits received, and life insurance premiums paid on behalf of the director by Whirlpool.

 

  (b) Includes 2007 interest cost, service cost, and life insurance premiums paid in connection with the Charitable Program, less 2007 relinquishments. The maximum amount payable upon death under the Charitable Program is $1 million on behalf of Mr. Gilmour, and $1.5 million on behalf of Mr. White.

 

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SECURITY OWNERSHIP

The following table presents the ownership on December 31, 2007 of the only persons known by us as of February 15, 2008 to beneficially own more than 5% of our common stock based upon statements on Schedule 13G filed by such persons with the SEC.

 

Schedule 13G
Filed On
   Name and Address of Beneficial Owner    Shares
Beneficially
Owned
   Percent of
Class
 

2/14/2008

  

FMR LLC(1)

82 Devonshire Street

Boston, MA 02109

   9,532,290    12.57 %

2/14/2008

  

PRIMECAP Management Company(2)

225 South Lake Avenue, #400

Pasadena, CA 91101

   8,606,155    11.35 %

2/8/2008

  

Pzena Investment Management, LLC(3)

120 West 45th Street, 20th Floor

New York, NY 10036

   8,150,633    10.75 %

2/12/2008

  

The Vanguard Group Inc.(4)

100 Vanguard Blvd.

Malvern, PA 19355

   4,205,558    5.55 %

2/14/2008

  

Vanguard Chester Funds – Vanguard Primecap Fund(5)

100 Vanguard Blvd.

Malvern, PA 19355

   4,000,000    5.27 %

 

(1) Based solely on a Schedule 13G/A filed with the SEC by FMR LLC, (“FMR”) and Edward C. Johnson, all such shares are beneficially owned by three entities: (a) Fidelity Management & Research Company, a registered investment advisor to various investment companies (“Fidelity Funds”) and a wholly-owned subsidiary of FMR (“FM&RC”), (b) Strategic Advisers, Inc. (“SA”), a wholly-owned subsidiary of FMR and a registered investment advisor, and (c) Pyramis Global Advisors Trust Company (“PGATC”), an indirect wholly-owned subsidiary of FMR and a bank. FM&RC is the beneficial owner of 9,470,495 shares. Mr. Johnson (Chairman of FMR), FMR (through its control of FM&RC) and Fidelity Funds each has sole dispositive power with respect to 9,470,495 shares. Neither Mr. Johnson nor FMR has the sole power to vote or direct the voting of the shares owned directly by Fidelity Funds. The sole voting power of all shares directly owned by Fidelity Funds resides with the Board of Trustees of such funds. SA is the beneficial owner of 1,685 shares. PGATC is the beneficial owner of 60,110 shares. Mr. Johnson and FMR (through its control of PGATC) each has sole dispositive and voting power with respect to 60,110 shares.

 

(2) Based solely on a Schedule 13G/A filed with the SEC by PRIMECAP Management Company, a registered investment advisor. PRIMECAP has sole voting power with respect to 1,861,355 shares and sole dispositive power with respect to 8,606,155 shares.

 

(3) Based solely on a Schedule 13G/A filed with the SEC by Pzena Investment Management, LLC, a registered investment advisor. Pzena has sole voting power with respect to 4,176,737 shares and sole dispositive power with respect to 8,150,633 shares.

 

(4) Based solely on a Schedule 13G filed with the SEC by The Vanguard Group Inc., (“Vanguard”) a registered investment advisor. Vanguard has sole voting power with respect to 79,694 shares and sole dispositive power with respect to 4,205,558 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of Vanguard, is the beneficial owner with sole voting power of 36,660 shares as a result of its serving as investment manager of collective trust accounts.

 

(5) Based solely on a Schedule 13G/A filed with the SEC by Vanguard Chester Funds – Vanguard Primecap Fund (“Vanguard”), a registered investment advisor. Vanguard has sole voting power with respect to all shares.

 

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BENEFICIAL OWNERSHIP

The following table reports beneficial ownership of common stock by each director, nominee for director, the Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers, and all directors and executive officers of Whirlpool as a group, as of February 19, 2008. Beneficial ownership includes, unless otherwise indicated, all shares with respect to which each director or executive officer, directly or indirectly, has or shares the power to vote or to direct the voting of such shares or to dispose or direct the disposition of such shares. The address of all directors and executive officers named below is c/o Whirlpool Corporation, 2000 North M-63, Benton Harbor, Michigan 49022-2692.

 

     Shares
Beneficially
Owned(1)
  Deferred
Stock
Units(2)
  Shares
Under
Exercisable
Options(3)
  Total(4)   Percentage  

Marc R. Bitzer

  36,871   9,501   11,233   57,605   *  

Herman Cain

  9,228   0   2,288   11,516   *  

Gary T. DiCamillo

  5,439   5,210   6,877   17,526   *  

Jeff M. Fettig

  137,773   92,908   467,801   698,482   *  

Kathleen J. Hempel

  7,828   4,058   7,477   19,363   *  

Michael F. Johnston

  3,000   2,538   4,477   10,015   *  

William T. Kerr

  2,621   0   4,025   6,646   *  

Arnold G. Langbo

  8,135   4,969   7,477   20,581   *  

Miles L. Marsh

  10,722   5,501   8,677   24,900   *  

Paulo F. M. Periquito

  163,034   50,138   154,481   367,653   *  

Paul G. Stern

  9,428   6,621   8,677   24,726   *  

Janice D. Stoney

  7,301   7,990   9,877   25,168   *  

Roy W. Templin

  17,032   303   22,398   39,733   *  

Michael A. Todman

  30,648   29,368   56,449   116,465   *  

Michael D. White

  2,700   2,104   3,877   8,681   *  

All directors and executive officers as a group (16 persons)

  466,772   249,556   791,915   1,508,243   1.96 %

 

* Less than 1%.

 

(1) Does not include 1,483,031 shares held by the Whirlpool 401(k) Trust (but does include 3,955 shares held for the accounts of executive officers); Executive Vice President and Chief Financial Officer Roy W. Templin serves as one of four individual trustees with shared voting and investment powers.

 

(2) Represents the number of shares of common stock, based on deferrals made into the Deferred Compensation Plan II for Nonemployee Directors, one of the executive deferred savings plans, or the terms of deferred stock awards, that we are required to pay to a nonemployee director when the director leaves the Board or to an executive officer when the executive officer is no longer an employee. None of these deferred stock units have voting rights.

 

(3) Includes shares subject to options that will become exercisable within 60 days of February 19, 2008.

 

(4) No shares of Whirlpool stock have been pledged as security by any of these individuals.

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires Whirlpool’s directors and executive officers and persons who own more than 10% of Whirlpool’s common stock (each a reporting person) to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Whirlpool’s common stock. Based solely on its review of the copies of such reports furnished to or prepared by Whirlpool and written representations that no other reports were required, Whirlpool believes that all Section 16(a) filing requirements applicable to reporting persons were complied with during the fiscal year ended December 31, 2007, except as follows. A third-party benefit plan administrator allocated $4,466 to a phantom stock fund under a deferred compensation plan account for W. Timothy Yaggi. The administrator did not timely report the allocation to Whirlpool, resulting in a late Form 4 filing. In addition, 54.1 shares were allocated to Mr. Templin’s brokerage account as a result of a dividend reinvestment program maintained by a brokerage firm. The acquisitions were not timely reported to Whirlpool, resulting in late Form 5 filings.

 

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COMPENSATION DISCUSSION AND ANALYSIS

In this proxy statement, we refer to our Chief Executive Officer, Chief Financial Officer and our other three most highly-compensated executive officers as our “named executive officers” or “NEOs.” This section includes information regarding, among other things, the overall objectives and philosophy of our compensation program and each element of compensation we provide to our NEOs. This section should be read in conjunction with the detailed tables under “Executive Compensation Tables” later in this proxy statement.

Compensation Overview

The Human Resources Committee of the Board of Directors sets compensation for each executive officer using a market-based approach, with differentiation based on individual and company performance. The elements of our compensation program reflect our “pay for performance” philosophy. The Committee creates a compensation package for each NEO that contains a mix of compensation elements that it believes best addresses the NEO’s responsibilities and that will best achieve our overall compensation objectives. In establishing target compensation, the Committee considers factors discussed below such as market value and job responsibility. The Committee does not use a specific formula for allocating between fixed and variable components of pay or between long-term incentive vehicles. Generally, the proportion of equity compensation rises with increasing job responsibility. Taken as a whole, our compensation program is designed so that the individual’s target compensation level rises as job responsibility increases, with the portion of performance-based, or “at risk” compensation rising as a percentage of total target compensation. As a result, actual total compensation of an executive as a multiple of the total compensation of his or her subordinates is designed to increase in periods of above-target performance and decrease in times of below target performance. In addition, the Committee makes distinctions in the mix of cash and equity components based on job responsibility in shaping each NEO’s compensation package.

Compensation Elements

 

Element    Characteristics
   

Base Salary

  

•    Fixed component based on responsibility, experience and performance

   
    

•    Target is the median level for similar positions in the comparator group

   

Short-term Incentives

  

•    Variable cash incentives based on annual performance under the Performance Excellence Plan

   
    

•    Target is the difference between the median level of total cash compensation for similar positions in the comparator group and the median base salary

 

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Element    Characteristics
   

Long-term Incentives

  

•    Performance-based variable equity and cash incentives under the Strategic Excellence Program

   
    

•    Target is the difference between the median level of total pay for similar positions in the comparator group and the sum of the individual’s target base salary plus target short-term incentive

Special Incentives

  

•    Discretionary cash incentives to recognize extraordinary performance of short-term goals under the Executive Officer Bonus Plan

   
    

•    Discretionary equity incentives to motivate and retain key leadership talent under the Special Retention Program or the Career Stock Program

   
    

•    Special incentives are not awarded based on the results of competitive benchmarking

   

Other Benefits

  

•    Health and welfare benefits available to substantially all salaried employees

   
    

•    Limited perquisites designed to support a market-competitive compensation package

   

Retirement Benefits

  

•    U.S. based NEOs participate in qualified and non-qualified defined benefit and defined contribution plans

   
    

•    Target is the median income replacement ratio for a broad-based group of companies

   
    

•    NEOs outside the U.S. participate in retirement plans designed to be competitive within their regions

The Objectives of Whirlpool’s Compensation Program

We are dedicated to global leadership and to delivering superior stockholder value. Our executive compensation philosophy supports these objectives by attracting and retaining the best management talent and by motivating these employees to achieve business and

 

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financial goals that create value for stockholders in a manner consistent with Whirlpool’s focus on five enduring values: respect, integrity, diversity and inclusion, teamwork, and the spirit of winning.

To achieve our objectives, we implement a “pay for performance” philosophy using the following guiding principles:

 

   

compensation should be incentive-driven with both a short- and long-term focus;

 

   

a significant portion of pay should be variable, or “at risk”;

 

   

components of compensation should be tied to increasing stockholder value; and

 

   

compensation should be tied to a balanced evaluation of business and individual performance measured against financial, customer, and employee related objectives – a “balanced scorecard” approach.

Compensation Process and Methodology

Role of the Human Resources Committee

Our Human Resources Committee has overall responsibility for Whirlpool’s executive compensation programs. Typically, the Committee adopts the compensation goals and objectives for awards under our short-term and long-term incentive plans at its meeting in February of each year. The Committee also generally considers and makes decisions about the principle elements of each executive officer’s compensation package at its February meeting. The Committee also performs its evaluation of CEO performance and establishes CEO compensation at this meeting. Throughout the year, the Committee evaluates the overall effectiveness of our compensation philosophy and programs. In addition, the Committee reviews management’s recommendations regarding hiring, promotion, retention, severance and individual executive compensation packages related to those events. The Committee may also consider management recommendations to improve compensation programs.

In making its determinations, the Committee reviews and considers various factors and affords different weight to these factors depending on the type of determination and the circumstances under which it arises. For example, in determining base salary, the Committee may rely more heavily on market data and the recommendation of its independent compensation advisor. In determining the payout of incentive awards, the Committee’s consideration of company performance and management’s assessment of individual performance may predominate. In setting long-term compensation, the Committee may give more weight to the complexity of the individual’s position and impact on overall company results. While the Committee may solicit and review recommendations from its independent compensation advisor, and in some circumstances, management, the Committee makes decisions regarding these matters in the exercise of its sole discretion.

Benchmarking and the Role of Consultants

Our Human Resources Committee establishes target compensation levels using a market-based approach. Each year, the Committee engages an independent compensation

 

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advisor to advise the Committee on Whirlpool’s executive compensation program. At the beginning of 2007, the Committee retained Hewitt Associates, an outside human resources consulting firm, as its independent executive compensation advisor to provide data and analysis regarding pay levels for our NEOs and other senior executives. Specifically, the Committee requested that Hewitt Associates assist the Committee in (1) reviewing the group of companies against whom Whirlpool’s senior executive pay levels are compared (our “comparator group”); (2) reviewing executive compensation market practices and trends in general; (3) designing and recommending the compensation packages provided to the named executive officers (“NEOs”) and other senior executives; and (4) providing a marketplace assessment of the compensation for the NEOs and other senior executives in comparison to the compensation for comparable positions within the comparator group. With respect to the CEO, Hewitt Associates provided a recommendation, without the CEO’s input, to the Committee regarding the CEO’s compensation package (target and mix of pay components). The Committee used Hewitt’s recommendation as the primary basis for the Committee’s final decision on the CEO’s compensation package. After taking into account input from the CEO, Hewitt Associates also provided a recommendation to the Committee for the other NEOs and senior executives. Other than the work it performs for the Committee, Hewitt Associates provides minimal compensation consulting services to Whirlpool and its executive officers, such as reviewing our nonemployee director compensation, providing market data for non-senior management compensation, and assisting with compensation disclosure. In addition, Hewitt provides actuarial services to Whirlpool’s European region.

For 2007, Hewitt Associates recommended that the Committee retain the comparator group listed below which we have used to benchmark executive compensation in prior years. We selected these companies because they have national and international business operations and are similar to Whirlpool in sales volumes, market capitalizations, employment levels, lines of business, and organizational structure. Companies in the comparator group are recognized for their excellence in the areas of consumer focus and trade partner relations, and for possessing highly complex global supply chains and manufacturing footprints.

 

3M

   Honeywell International Inc.

The Black & Decker Corporation

   Illinois Tool Works, Inc.

Caterpillar Inc.

   Ingersoll-Rand Company

Cummins Inc.

   Kellogg Company

Colgate-Palmolive Company

   Motorola, Inc.

Deere & Company

   PPG Industries, Inc.

Eastman Kodak Company

   Raytheon Company

Eaton Corporation

   Sara Lee Corporation

Emerson Electric Co.

   Textron, Inc.

The Goodyear Tire & Rubber Company

   United Technologies Corp.

H. J. Heinz Company

   Xerox Corporation

 

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We use publicly disclosed compensation data contained in proxy statements, as well as proprietary surveys purchased from third-party consulting firms to acquire market compensation data for companies in the comparator group. In 2007, Hewitt Associates reviewed the market data and recommended appropriate comparisons within the market data for Whirlpool’s senior executives, including our NEOs, based on the content, scope, and complexity of each position. To ensure a balanced and accurate review of the market value for each position, the Committee reviewed the statistical median market values for each position in addition to size-adjusted median market values based upon the revenue accountability for each position.

Role of Management

Each year, our management, led by the CEO and Chief Human Resources Officer, makes recommendations to the Committee regarding the compensation and benefit programs for individuals in Career Bands 0 and 1 consisting of 11 employees which includes all executive officers. In addition, the CEO makes recommendations to the independent compensation advisor regarding individual compensation packages of the executive officers. Management recommends the performance metrics to be used in the Performance Excellence Plan and the Strategic Excellence Program for adoption by the Committee. The Committee has authority to adopt or modify these metrics in its sole discretion. In addition, management may assess individual performance to assist the Committee in making determinations regarding awards to be paid out under incentive programs.

The Chief Human Resources Officer attends all Committee meetings, other than portions of those meetings held in executive session. Materials for Committee meetings are drafted by Whirlpool’s human resources department and the Committee’s independent compensation advisor.

Base Salary

In February 2007, the Human Resources Committee reviewed salary increase guidelines for each NEO. In the case of NEOs other than the CEO, the guidelines are established based on the CEO’s assessment of individual performance, as well as competitive market reviews provided by Hewitt Associates. In the case of the CEO, the salary increase guidelines were based on Hewitt Associates data only.

Based on this review, the Committee made annual salary increases effective March 1, 2007 as follows: Mr. Fettig’s salary was increased from $1,100,000 to $1,200,000; Mr. Templin’s salary was increased from $550,000 to $600,000; Mr. Todman’s salary was increased from $650,000 to $720,000; Mr. Bitzer’s salary was increased from €435,000 to €460,000 (approximately U.S. $596,340 to $630,612). Mr. Periquito’s salary was not increased in March 2007, because the Committee determined that his salary at that time was fully competitive with the market. Mr. Periquito’s salary was increased from $645,000 to $700,000 in connection with his promotion to President of Whirlpool International in June 2007.

 

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Short-Term Incentives

Consistent with Whirlpool’s “pay for performance” philosophy, all salaried employees are eligible to participate in an annual cash incentive opportunity, the Performance Excellence Plan (“PEP”). PEP provides an annual incentive designed to focus attention on stockholder value creation, drive performance in support of this goal and other business goals, and reflect individual performance as measured against financial, customer, and employee-related objectives. The Committee establishes target incentive levels for NEOs as a percentage of their base salary earnings during the performance period. PEP ensures that a significant proportion of pay for our NEOs is at risk and variable. For 2007, PEP targets for NEOs were as follows: Mr. Fettig’s target was 140% of his base salary earnings; Mr. Templin’s target was 85% of his base salary earnings; Mr. Todman’s target was 100% of his base salary earnings; Mr. Bitzer’s target was 80% of his base salary earnings; Mr. Periquito’s target was 80% of his base salary earnings from January through June and was increased to 100% of his base salary earnings through the remainder of the year in connection with his promotion.

As discussed below under the caption “Deductibility of Compensation and Related Issues,” the Human Resources Committee strives to preserve the tax deductibility of executive compensation to the extent practicable. PEP awards granted to the NEOs qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, and are, therefore, not included in the $1 million cap on deductible compensation, provided that certain requirements are met. Section 162(m) requires that the Committee establish a target within the first 90 days of the fiscal year which cannot be adjusted due to unusual and uncontrollable events or conditions that might affect Whirlpool’s financial performance. In addition, to qualify under Section 162(m), PEP payouts to NEOs cannot be adjusted upward to take into account the effects of such events or conditions. To preserve maximum tax deductibility and allow the Committee the latitude to address unforeseeable and uncontrollable events and conditions, and to facilitate the Committee’s ability to assess and reward individual performance under the Whirlpool performance assessment system, the Committee set a return on equity (“ROE”) target for executive officers at a level that would allow the Committee to take into consideration the impact of such events or conditions in adjusting payouts downward. The Committee set maximum possible payouts with respect to the ROE targets under PEP at $3 million for the CEO and at four times an established percentage of base salary, but not more than 330% of base salary for each other NEO for Section 162(m) purposes (which was an amount less than $3 million). The ROE targets are tied to our projected operating plan and, therefore, their achievement is substantially uncertain at the time they are set.

While the ROE targets were used for purposes of Section 162(m), the PEP for 2007 was designed so that ROE results only determined the maximum possible payouts under PEP. The Committee also established targeted incentive levels and equally weighted company and individual performance factors for each executive officer. In defining PEP performance factors for 2007, the Committee determined that company performance in-line with expected performance would result in a payout equal to 100% of the targeted incentive level. Company performance substantially above expected performance could result in a payout equal to 200%

 

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of the targeted incentive level and performance below expected performance could result in no amount being paid out under PEP. The company performance measures adopted by the Committee for purposes of determining awards under PEP for 2007 are contained in the following “balanced scorecard”:

 

   

financial measures – revenue growth, earnings, earnings per share, free cash flow, and economic value added;

 

   

customer measures – market share, quality, and brand equity progress; and

 

   

employee measures – the strengthening of our talent pipeline, diversity, engagement of our employees, and the effective management of the Whirlpool performance management system.

The Committee established each executive officer’s rating under Whirlpool’s Extraordinary Performance and Results (“EP&R”) performance management system as the individual performance measure. EP&R is based on a rigorous review of individual achievements during the performance period relative to goals established by each employee’s direct supervisor. Under the EP&R assessment of individual performance, each employee, including each NEO, is assigned one of the following performance ratings annually: 1-Extraordinary Results; 2-Very Strong Results; 3-Strong Results; 4-Results Need to Be Improved; and 5-Unacceptable Results. For NEOs, individual performance ratings correlate to the following performance factors:

1-Extraordinary Results: 200%

2-Very Strong Results: 150%

3-Strong Results: 100%

4-Results Need to Be Improved: 50% or 75%

5-Unacceptable Results: 0%, no award given

Under the 2007 PEP, the “balanced scorecard” and performance factors determined through use of the EP&R framework resulted in a combined performance factor that was multiplied by the targeted incentive levels to attain a suggested final payout value under PEP (ranging from 0%-400% of the targeted incentive level).

In reviewing performance under PEP for 2007, at its February 2008 meeting, the Committee determined that the ROE target established for 2007 was met. The Committee then used a judgment-based approach to exercise negative discretion to determine the actual payout to each NEO. For each NEO, the Committee adjusted payouts in a non-formulaic way from a targeted incentive level based on the “balanced scorecard” and EP&R outcomes.

In exercising its judgment to determine final payouts to the NEOs under PEP in 2007, the Committee considered that our earnings from continuing operations of $8.10 per share versus the previous year’s record of $6.35 per share reflected achievement of a stretch goal

 

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and good year-over-year performance in a challenging environment. The Committee further considered that overall customer measures were met or exceeded and that each employee measure was met or exceeded. Using these factors, the Committee determined that based on the “balanced scorecard” results the company performance factor was 100%.

In determining the individual performance factor under EP&R, the Committee considers each NEO’s absolute performance, performance relative to internal peers, any unforeseen factors that influenced the results of each NEO, and the extent to which the leadership of each NEO has contributed to Whirlpool’s success during the performance period based on qualitative measures. With respect to NEOs other than the CEO, the Committee may rely on the assessment of individual performance provided by the CEO. For 2007, each NEO received a performance rating of Level 2 or higher.

Long-Term Incentives

Strategic Excellence Program

The Strategic Excellence Program (“SEP”) is our primary long-term incentive program for executives. The compensation opportunities under SEP are tied directly to Whirlpool’s financial and strategic performance over a preset period beginning each January 1 and continuing for one year or longer. Each set of performance measures is unique and designed to incentivize the achievement of specific long-term strategic goals. The length of the performance period varies from year to year depending on the performance measures established by the Committee.

SEP is designed to deliver long-term shareholder value by providing performance-based long-term incentives to participants based upon the achievement of strategic objectives. SEP awards consist of either stock options and restricted stock units or stock options, restricted stock units and performance units payable in cash, depending on the NEO’s job responsibilities. The Committee typically makes SEP awards to executive officers annually and establishes performance measures at its February meeting. As discussed above with respect to PEP, the Committee establishes an ROE target for purposes of ensuring that SEP awards qualify as performance-based compensation under Section 162(m). For 2007, the Committee established a transformational objective of expanding external operating profit through the full deployment and delivery of operational capability, as the performance measure to determine suggested SEP payouts. The Committee provided for the performance of the transformational objective to be measured on results under a “transformational scorecard” consisting of innovation, total cost productivity, price margin realization, total cost of quality and the ratio of operating profit to earnings from continuing operations. The Committee designated a performance period of one year.

As discussed above under PEP, the Committee establishes market-based target incentive levels for each executive officer on the basis of a percentage of base salary. The Committee determined the following SEP targets for NEOs for 2007: for Mr. Fettig – 500%; for Mr. Templin – 175%; for Mr. Todman – 175%; for Mr. Bitzer – 150%; for Mr. Periquito – 175%. For 2007, the Committee determined that performance in-line with expectations would

 

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result in a payout equal to 100% of the targeted incentive level for performance and/or restricted stock units, while performance substantially above expected performance could result in a payout equal to 200% of the targeted incentive level for performance and/or restricted stock units. Performance below expected performance could result in fewer or no performance and/or restricted stock units being paid out. In assessing performance under SEP for 2007, the Committee determined that the ROE target was met and reviewed the “transformational scorecard” results for 2007. Based on this assessment, the Committee concluded that the objective of expanding external operating profit during 2007 was achieved at the 100% level.

Stock options awarded as part of SEP are not subject to modification based on achievement of performance objectives. Because stock options only provide value in the event that Whirlpool’s stock price increases beyond the fair market value of Whirlpool stock on the date of grant, it is our belief that compensation awarded through stock options is inherently performance-based. As a result, stock option grants are not based on “transformational scorecard” performance. Stock option grants are issued with an exercise price equal to the fair market value of the stock at the time of grant. The option term is ten years and options vest in three equal annual installments. Stock options granted to our NEOs in 2007 are reflected in the Summary Compensation Table and the Grant of Plan-Based Awards Table.

Enhanced SEP

In 2005, the Human Resources Committee established an Enhanced Strategic Excellence Program for a limited group of employees in our top two organizational levels, including each NEO. Consistent with the SEP emphasis on long-term strategic value creation, the program was designed to drive shareholder value creation and focus on managing through a long-term economic cycle. The Committee established performance objectives based on earnings per share for 2007 and cumulative free cash flow for 2005 through 2007. The Committee provided for the value of awards under Enhanced SEP to be paid out 50% in stock and 50% in cash. In its February 2008 meeting, the Committee reviewed Whirlpool’s performance and determined that the 2007 earnings per share measure exceeded expectations and the 2005 through 2007 cumulative free cash flow measure exceeded expectations. As a result of this analysis, the Committee determined that participants in Enhanced SEP, including the NEOs, would receive payouts equal to 255% of the targeted awards. Enhanced SEP awards are reflected in the Summary Compensation Table.

Special Incentives

We maintain certain incentive programs to be used by the Committee on an as-needed basis to respond to special circumstances, for example, to recognize individual achievement or to respond to industry and labor market conditions. We do not use a formula or set guidelines to determine when to grant incentives under these programs, however, the Committee is disciplined in its approach to setting compensation. Examples of circumstances that may cause the Committee to believe that additional grants under these programs are required to meet competitive industry and labor market conditions include, but are not limited to, increased responsibility due to strategic transactions or corporate re-alignment or increased recruitment

 

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opportunities due to industry fragmentation or consolidation. In addition, awards granted under these programs can be used to provide an additional incentive to a key employee in order to maximize long-term retention when such employee’s outstanding incentives fully vest and/or become payable in the near term.

Executive Officer Bonus Program

The Committee does not generally award bonuses on a discretionary basis. The Executive Officer Bonus Plan, however, gives the Committee the discretion to grant bonus payouts to designated executive officers in recognition of individual performance that demonstrates exceptional excellence in the execution and achievement of short-term goals without sacrificing focus on and commitment to Whirlpool’s long-term success and sustainable performance. These discretionary awards are directly tied to our “pay for performance” philosophy by providing the Committee with the flexibility to reward strong individual performance outside an individual’s structured compensation program. The Committee has not granted awards under this plan during any of the last five fiscal years.

Special Retention Program

The Special Retention Program was established to provide grants of phantom restricted stock to selected officers as a means of motivating and retaining key leadership talent. Mr. Templin received a grant of 15,000 restricted stock units under this program during 2007. The purpose of this grant is to provide additional retention incentive to Mr. Templin and further align his interests with those of stockholders. Half of this grant will vest on the third anniversary of the date of grant, while the other half of the grant will vest on the seventh anniversary of the date of grant. Payment will be made in the form of Whirlpool stock upon vesting.

Career Stock Program

The Career Stock Program was established to provide one-time grants of phantom restricted stock to select key executives as a means of retaining those executives and encouraging long-term employment. Recipients and award sizes are based on determinations relating to a broad range of factors. Mr. Todman and Mr. Bitzer both received grants of 30,000 restricted stock units under this program during 2007. These grants are intended to encourage long-term employment and further align their interests with those of stockholders. Vesting in this program occurs over an extended period of time, with the final tranche becoming vested upon retirement after reaching age 60. Tranches of this grant that vest while employed with the company are automatically deferred and are not paid out. Final payment of this grant is made upon termination of employment in the form of Whirlpool shares.

Timing of Equity Awards

We have generally followed a practice of making all equity-based grants to employees, including NEOs, on a single date every year. The Committee grants these equity-based awards at its regularly-scheduled meeting in mid-February. This meeting usually occurs about two

 

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weeks after we release our final earnings for the prior fiscal year, which permits material information regarding our performance for the prior fiscal year to be disclosed to the public before equity-based grants are made to employees. While most of our equity-based awards have historically been made pursuant to our annual grant program, the Committee retains the discretion to make additional “off-cycle” awards in connection with promotions, recruitment efforts, or significant accomplishments. Stock option exercise prices are set equal to the fair market value of Whirlpool stock on the date of grant. Under the 2007 Omnibus Stock and Incentive Plan, fair market value is equal to the officially quoted closing price of our common stock on the date of grant.

Perquisites

We provide a very limited number of perquisites to executives, including financial services, limited use of Whirlpool owned and leased property, product discounts, home security, and executive physicals. Mr. Fettig and Mr. Todman may use company aircraft for personal use to ensure their personal security. Personal use of company aircraft is considered taxable income to these executives using the Standard Industry Fare Level method. Mr. Bitzer and Mr. Periquito are eligible to receive the use of a company car as part of a competitive total compensation package. In connection with his promotion to President of Whirlpool International, Mr. Periquito received an increase in his allowance for increased living costs outside the United States from $75,000 to $100,000. As an expatriate in Italy, Mr. Bitzer is eligible for payments to defray the cost of his children’s education. These perquisites are designed to support a market competitive total compensation package and ensure that Whirlpool derives the most value from our overall compensation expenditure.

Post-Termination Payments

Our U.S.-based NEOs are eligible to receive benefits under a severance policy generally available to U.S. salaried employees. Under Italian law, Mr. Bitzer is entitled to a lump sum severance benefit equal to one year of salary, plus the average of his last three awards received through participation in PEP, plus an accrued lump sum statutory severance indemnity payment (TFR) equal to €67,687 (approximately U.S. $92,792). Under the terms of his employment agreement, Mr. Periquito is entitled to an amount equal to 13.82 months of base salary. In addition, the Human Resources Committee may agree to provide additional severance benefits upon the termination of an NEO.

We have entered into Compensation Benefits and Assurance agreements with each executive officer, including each NEO, under our change in control severance program. We maintain this program to ensure that our NEOs are not deterred from exploring opportunities that will result in maximum value for stockholders, including actions that may result in a change in their position or standing within Whirlpool. The value of the severance benefits associated with a change in control of Whirlpool is based on a thorough review of competitive market practice. We believe that these benefits are of reasonable value and ultimately benefit stockholders. See the “Potential Post-Termination Payments Tables” section later in this proxy statement.

 

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Deductibility of Compensation and Related Issues

Section 162(m) of the Internal Revenue Code imposes a $1 million deduction limit on compensation paid to executives named in the compensation section of the proxy statements of public companies, subject to certain rules and exceptions for non-discretionary performance based plans approved by stockholders.

The Committee intends to preserve the tax deductibility of executive compensation to the extent practicable while focusing on consistency with its compensation policies, the needs of Whirlpool, and stockholder interests. Whirlpool’s stockholders have approved PEP and our omnibus stock and incentive plans that award our long-term incentives to executives. Many of the types of awards authorized in these and other stockholder-approved plans would be considered qualifying “performance-based” compensation for purposes of Section 162(m). As a result, such awards would not count toward the $1 million deduction limit. However, the Committee retains the ability to make payments in one or more of the programs described in this report that may not qualify for tax deductibility under Section 162(m).

Retirement Benefits

NEOs are eligible for retirement benefits designed to provide, in total, a market-competitive level of income replacement upon achieving retirement eligibility by using a combination of qualified and non-qualified plans. We assess retirement benefits for named executive officers against data provided to the Towers Perrin Employee Benefits Information Center by other U.S. companies that provide survey data on executive benefits. The Towers Perrin Employee Benefits Information Center database contains information on over 700 companies of varying size, competing in a variety of industries.

Accordingly, this survey tool includes data on a much broader base of companies than those included in the executive compensation comparator group. This assessment is an important factor used by the Committee in determining the median retirement income replacement ratio among similarly situated executives at such companies as the targeted amount of total retirement benefits for our NEOs. Total retirement benefits are provided through a combination of qualified and non-qualified defined contribution plans and qualified and non-qualified defined benefit plans. As a result of the current mix of our retirement plans, we believe that total retirement benefits for the NEOs are slightly below the median level when compared to the other companies in the survey. Whirlpool continues to strive to provide retirement benefits at the median level.

Our NEOs in the United States participate in one qualified defined contribution plan, the Whirlpool 401(k) Retirement Plan, and the following non-qualified defined contribution plans: the Executive Deferred Savings Plan II (which includes the Whirlpool Executive Restoration Plan, also known as the DC Restoration Plan) and its predecessor, the Executive Deferred Savings Plan. These plans are defined contribution plans that for 2007 only provide a benefit in the event that eligible employees, including the NEOs, elect to participate in the plans by deferring portions of their base salary, PEP incentive payment, and SEP incentive payment into the plans.

 

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Our NEOs in the United States participate in three defined benefit pension plans: the Whirlpool Employees Pension Plan (“WEPP”) and the associated Whirlpool Retirement Restoration Plan (the “DB Restoration Plan”), and the Supplemental Executive Retirement Plan (“SERP”). These plans provide a defined benefit upon retirement relative to base salary and PEP incentive earned during the employment period. The formulas for these programs are designed to provide a benefit at the median of the competitive market and support Whirlpool’s overall retirement benefit goal of providing a median level of replacement income upon retirement.

U.S.-based NEO Defined Contribution Plans

The Whirlpool 401(k) Retirement Plan provides a defined contribution retirement benefit qualified under section 401(k) of the Internal Revenue Code. This plan offers participants a pre-tax retirement savings vehicle plus employer contributions that encourage participant retirement savings and provide additional assets for employees’ retirement. Most employees of Whirlpool are eligible to participate in this plan, although different levels of employer contributions apply to different groups. This plan provides an automatic employer contribution of 3% of pay and a match of up to 4% of pay, provided that participants contribute at least 5% of pay on a pre-tax basis to the plan and subject to contribution and benefit limitations under the Internal Revenue Code.

The Whirlpool Corporation Executive Deferred Savings Plan (“EDSP I”) is a non-qualified plan designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan. Participants may no longer make deferrals to EDSP I. The Whirlpool Corporation Executive Deferred Savings Plan II (“EDSP II”) became effective January 1, 2005 to comply with the requirements of Section 409A of the Internal Revenue Code. EDSP II includes two components: the traditional component is known as EDSP II and the new component, which became effective January 1, 2007, is known as the Whirlpool Executive Restoration Plan (the “DC Restoration Plan”). The traditional component allows eligible executives to contribute up to 75% of their short-term incentives and long-term incentives. The DC Restoration Plan works with the Whirlpool 401(k) Retirement Plan to enable executives to defer funds and receive Whirlpool matching contributions and non-elective contributions using the same formula as the Whirlpool 401(k) Retirement Plan, but without regard to limitations imposed by the Internal Revenue Code. Amounts deferred into this plan have already been earned by the executives and have been deferred through a voluntary enrollment process. These values are unfunded and are paid from Whirlpool’s general assets.

U.S.-based NEO Defined Benefit Plans

WEPP is a qualified plan that provides all eligible employees, which includes most Whirlpool salaried employees in the United States, with a defined pension benefit upon reaching retirement eligibility as described under the caption “Pension Benefits Table” later in this proxy statement. Benefits in this plan have been frozen for most participants effective December 31, 2006 based on their service and pay as of December 31, 2006. The benefits of

 

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participants eligible to retire on or before December 31, 2009 will be frozen effective December 31, 2009. None of our NEOs are eligible for the delayed freeze date and none of our NEOs are currently eligible for early retirement.

The DB Restoration Plan is a non-qualified plan that works with WEPP to provide Whirlpool executives that portion of their retirement benefit which would have been paid under WEPP if Internal Revenue Code maximum annual benefits and compensation limitations did not apply. Benefits under this plan are frozen as of the same dates as benefits under WEPP as described above. Years of service are calculated under this plan using the same method employed under WEPP. The plan does not grant additional years of service credits to our NEOs.

SERP is a non-qualified plan that supplements Whirlpool’s broad-based retirement plan and provides benefits in excess of Internal Revenue Code limitations under WEPP. SERP generally provides retirement income based on the average of the highest five payouts received under PEP during the last ten years of employment multiplied by years of service. Years of service are calculated under this plan using the same method employed under WEPP. SERP does not grant additional years of service credits to our NEOs. Other companies may reflect the value of incentive compensation, like PEP, in their qualified plan benefit formulas. In contrast, WEPP calculates benefits based solely on salary. Therefore, SERP is designed to further our goal of providing Whirlpool executives with a level of income replacement compensation at retirement that approximates the median when compared to the other companies in the Towers Perrin survey discussed above.

NEOs based outside the U.S.

Our NEOs in locations outside the United States receive retirement benefits designed to be competitive with benefits provided to executives in comparable positions within their regions. As an executive in Italy, Mr. Bitzer is subject to the National Collective Agreement for Industrial Dirigenti, which stipulates certain compensatory arrangements and benefits for industrial executives in Italy. One of the benefits mandated by the agreement is a voluntary defined contribution plan, Previndai, to which both Mr. Bitzer and Whirlpool contribute.

Pursuant to the terms of his employment contract, Mr. Periquito participates in the Founder Pension Plan, a non-U.S. retirement plan, to which both Mr. Periquito and Whirlpool contributed. In 2006, the pension asset and obligation attributable to Mr. Periquito were transferred to a private pension fund with Bradesco Bank pursuant to the terms of the Founder Pension Plan. The benefit under this plan is fully accrued and funded. No further contributions are expected to be made to this private pension fund. Mr. Periquito is able to draw from the reserve prior to and during retirement.

 

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Stock Ownership Guidelines

In 1995, management adopted, with the Committee’s approval, stock ownership guidelines to support the objective of increasing the amount of stock owned by the most senior group of executives. The guidelines for stock ownership are based on an individual’s level in the organization and range from seven times base salary for the Chief Executive Officer to one-half times base salary for lower level executives, including those who are not NEOs. Ownership guidelines as a multiple of base salary are listed below:

 

CEO:    7 times base salary
President:    5 times base salary
Executive Vice Presidents:    4 times base salary

These ownership guidelines are approved by the Committee and are based on a review of competitive market practice as conducted by the independent executive compensation advisor to the Committee, as well as to ensure that our NEOs and other senior Whirlpool leaders have a significant stake in Whirlpool’s long-term success. The guidelines state that each executive should achieve the required level of stock ownership within five years.

The Committee, as well as Whirlpool’s senior leadership, annually reviews progress for each executive on achieving their required level of ownership. During the Committee’s most recent review of ownership levels, it was determined that all NEOs had either met their guideline or were on track to meet their guideline during the required timeframe.

 

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HUMAN RESOURCES COMMITTEE REPORT

As detailed in its charter, the Human Resources Committee of Whirlpool’s Board oversees our compensation program on behalf of the full Board. In the performance of its oversight function, the Human Resources Committee, among other things, reviewed and discussed with management the Compensation Discussion and Analysis set forth in this proxy statement.

Based upon the review and discussions referred to above, the Human Resources Committee recommended to the Board that the Compensation Discussion and Analysis be included in Whirlpool’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and Whirlpool’s Proxy Statement to be filed in connection with our 2008 Annual Meeting of Stockholders, each of which will be filed with the Securities and Exchange Commission.

HUMAN RESOURCES COMMITTEE

Dr. Paul G. Stern, Chair

Mr. Herman Cain

Mr. Michael F. Johnston

Mr. William T. Kerr

Mr. Miles L. Marsh

Mr. Michael D. White

 

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EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table includes information regarding “total compensation,” as defined by the proxy disclosure rules applicable to executive compensation, earned by our NEOs during the 2007 and 2006 fiscal years; however, 2006 information is not provided for Mr. Bitzer because he was not a NEO during fiscal year 2006. It does not reflect the actual compensation received by our NEOs or the target compensation established for our NEOs by the Human Resources Committee for those periods.

The components of total compensation set forth in the Summary Compensation Table are described below:

Salary.  This column reflects salary amounts earned during each fiscal year.

Bonus.  The NEOs, with the exception of Mr. Periquito, do not typically receive discretionary cash bonuses. Mr. Periquito receives a cash payment as compensation for increased living costs outside of the United States.

Stock Awards.  Stock awards consist of restricted stock units awarded under the Strategic Excellence Program (“SEP”), Career Stock Program (“CSP”) and/or Special Retention Program (“SRP”) in 2007 and 2006, and other restricted stock units which were awarded, but not vested by January 1, 2006. A restricted stock unit is the right to receive a share of Whirlpool common stock or the equivalent on a pre-defined date. Amounts recorded in this column reflect the FAS 123(R) compensation expense recognized for these awards in our financial statements for the 2007 fiscal year. The recognized compensation expense will likely vary from the actual value realized by the NEO due to stock price fluctuations, forfeitures and differences between valuation assumptions and actual experience.

Option Awards.  Option awards consist of non-qualified stock options awarded under the Strategic Excellence Program in 2007 and 2006, and other options which were awarded but not vested by January 1, 2006. Amounts recorded in this column reflect the FAS 123(R) compensation expense recognized for these awards in our financial statements for the 2007 fiscal year. The recognized compensation expense will likely vary from the actual value realized by the NEO due to stock price fluctuations, timing of exercises, forfeitures and differences between valuation assumptions and actual experience.

Non-equity Incentive Compensation Expense.  Non-equity compensation expense consists of annual cash bonuses earned on the basis of achievement of company and individual performance objectives under the Performance Excellence Plan (“PEP”) and performance units earned on the basis of achievement of long-term objectives under the SEP. A performance unit is the right to receive a specific cash payment on a pre-defined date. Once earned, performance units may be subject to additional vesting requirements under the terms of the award. Amounts recorded in this column include performance units earned both under the 2007 Strategic Excellence Program and the 2005 Enhanced Strategic Excellence Program.

 

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Please refer to the sections under the captions “Compensation Discussion and Analysis – Long-Term Incentives – Strategic Excellence Program” and – “Enhanced SEP” for more information on these awards.

Change in Pension Value and Non-qualified Deferred Compensation Earnings.  For U.S.-based NEOs, change in pension value reflects the difference between the actuarial present value of each NEO’s accumulated benefit under the Whirlpool Employees Pension Plan (“WEPP”), Supplemental Executive Retirement Plan (“SERP”), and Defined Benefit Restoration Plan (“DB Restoration Plan”) as set forth in the Pension Benefits Table for 2006 and for 2007. No increase in actuarial present value was recorded for Mr. Periquito’s accumulated benefit under the Founder’s Pension Plan because the pension has been fully funded and does not accumulate additional value. As a non U.S.-based employee, Mr. Bitzer does not participate in a defined benefit or actuarial plan. None of the NEOs receive above-market or preferential earnings on their non-qualified deferred compensation.

All Other Compensation.  All other compensation includes perquisites and insurance premiums. NEOs may receive different perquisites and different levels of personal benefits depending on what is usual and customary for comparable positions in their geographic markets.

 

Name and

Principal Position

  Year     Salary ($)     Bonus ($)    

Stock

Awards (1)
($)

    Option
Awards (1)
($)
    Non-Equity
Incentive Plan
Compensation (2)
($)
    Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings (3)
($)
    All Other
Compensation (4)
($)
    Total ($)  

Jeff M. Fettig

Chairman of the

Board and Chief

Executive Officer

  2007     1,183,333         5,094,224     1,180,245     6,962,500     930,008     138,226     15,488,536  
    2006     1,083,333         4,775,626     737,102     2,300,000     1,290,083     125,156     10,311,300  

Roy W. Templin

Executive Vice

President and Chief Financial Officer

  2007     591,667         1,369,963     134,603     1,922,813     67,407     39,841     4,126,294  
    2006     541,667         1,028,882     72,104     1,131,250     91,714     3,087     2,868,704  

Michael A. Todman President,

Whirlpool

North America

  2007     708,333         1,803,096     260,484     2,142,313     202,240     166,031     5,282,497  
    2006     650,000         1,590,591     176,086     825,000     288,651     129,077     3,659,405  

Paulo F. M. Periquito President,

Whirlpool

International

  2007     671,643     87,504 (6)   1,387,997     136,917     3,402,155     (7)   166,470     5,852,686  
    2006     645,000     75,000 (6)   1,341,200     368,283     2,112,375     2,508,000     164,448     7,214,306  

Marc R. Bitzer (5) Executive Vice

President and President, Whirlpool Europe

  2007     625,340         896,856     108,109     1,519,759         82,173     3,232,237  

 

(1) See Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the 2007 fiscal year for a discussion of the relevant assumptions used in calculating the compensation cost.

 

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(2) Represents the sum of cash awards earned in 2007 under PEP and the cash awards under the 2005 Enhanced SEP for all NEOs. For Messrs. Templin, Periquito, and Bitzer, this amount also includes awards earned under 2007 SEP. 2007 SEP awards are subject to time-based vesting and will not be paid out until February 2010. The individual PEP, Enhanced SEP, and SEP awards that comprise the total value in the “Non-Equity Incentive Plan Compensation” column above for our NEOs were:

 

Name    2007 PEP Award ($)    2007 SEP Cash Award
(earned, but unvested) ($)
   2005 Enhanced
SEP Cash Award

Jeff M. Fettig

   2,500,000       4,462,500

Roy W. Templin

   760,000    350,000    812,813

Michael A. Todman

   1,100,000       1,042,313

Paulo F. M. Periquito

   1,846,092    322,500    1,233,563

Marc R. Bitzer

   794,571    315,306    409,882

 

(3) See the Pension Benefits Table for the actuarial present value of these benefits. None of our NEOs received above-market earnings on their non-qualified deferred compensation accounts.

 

(4) The following table presents an itemized account of the “All Other Compensation” column provided in 2007 to our NEOs:

 

Name  

Personal Use of
Whirlpool
Aircraft(a)

($)

    Car &
Driver(b)
($)
    Other
Perquisites(c)
($)
    Insurance
Premiums
($)
   

Defined Contribution
Plan Contributions(d)

($)

    Total
($)
 

Jeff M. Fettig

  95,429         24,786     1,846     16,165     138,226  

Roy W. Templin

  19,335         5,839     923     13,744     39,841  

Michael A. Todman

  125,065         24,359     1,105     15,502     166,031  

Paulo F. M. Periquito

      96,948     6,505     63,017         166,470  

Marc R. Bitzer

      31,634     21,827     23,686     5,026     82,173  

 

  (a) Our incremental cost for personal use of Whirlpool aircraft is calculated by multiplying the aircraft’s hourly variable operating cost by a trip’s flight time, which includes any flight time of an empty return flight. Variable operating costs are based on industry standard rates of our variable operating costs, including fuel costs, trip-related maintenance, landing/ramp fees and other miscellaneous variable costs. On certain occasions, a spouse or other family member may accompany one of our NEOs on a flight. No additional operating cost is incurred in such situations under the foregoing methodology. We do not pay our NEOs any amounts in connection with taxes on income imputed to them for personal use of our aircraft.

 

  (b) For Mr. Periquito, this amount includes $25,272 for the incremental cost to Whirlpool of providing a car and $71,676 for the incremental cost to Whirlpool of providing a driver. We calculated the incremental cost of the driver by using the actual employment cost to Whirlpool during 2007 and of the car by using the value of (1) the purchase price divided by four (for the expected usage of the car in years) and (2) the annual cost of insurance, maintenance, and registration. For Mr. Bitzer, this value represents $31,634 for the incremental cost to Whirlpool of providing a car.

 

  (c) Represents the incremental cost to Whirlpool of: Whirlpool products offered at discounted prices; financial planning services; physical examinations at the NEO’s choice of several medical facilities; personal use of property that we lease primarily for business purposes; reimbursement of children’s educational costs related to expatriate status; and home security. Individually, none of these categories of perquisites or personal benefits exceeded $25,000 for any single NEO.

 

  (d) Represents Whirlpool’s contributions to the 401(k) Retirement Plan for Messrs. Fettig, Templin, and Todman. Represents Whirlpool’s contributions to Previndai, a voluntary savings plan for executives (dirigenti) in Italy, for Mr. Bitzer.

 

(5) Compensation values shown for Mr. Bitzer have been converted from Euros to US Dollars using the daily average currency conversion rate during 2007 of 1 U.S. Dollar = .72945 Euros

 

(6) Represents additional compensation for increased living costs outside the United States.

 

(7) No change in actuarial value is reflected due to transfer of the asset and the obligation to a private pension account in 2006.

 

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Grant of Plan-Based Awards Table

During the 2007 fiscal year, we granted short- and long-term cash incentives, restricted stock units, and stock options. The table below describes the awards that we granted to our NEOs for the 2007 fiscal year on an award-by-award basis.

PEP awards are granted under the stockholder approved Performance Excellence Plan. SEP awards, including stock options, restricted stock units (“RSUs”) and performance units (“Long-term Cash”) were granted under the 2002 Omnibus Stock and Incentive Plan. Career Stock Program (“CSP”) awards and Special Retention Program (“SRP”) awards were granted under the 2007 Omnibus Stock and Incentive Plan.

Under our 2007 Omnibus Stock and Incentive Plan, fair market value is defined as the officially quoted closing price of our common stock on the grant date. Previously, our omnibus stock and incentive plans, including the 2002 Omnibus Stock and Incentive Plan, defined fair market value as the average of the highest and lowest trading price per share of common stock on the grant date. In the following table, we have provided an extra column to show the closing price on the grant date (see “Closing Price” column).

For more information about these programs, see “Compensation Discussion and Analysis – Short-Term Incentives” and “Compensation Discussion and Analysis – Long-Term Incentives.”

 

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Table of Contents

Name

 

Grant
Date

   

Estimated Possible

Payouts Under Non-Equity

Incentive Plan Awards ($)

   

Estimated Future

Payouts Under Equity

Incentive Plan Awards (#)

    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
    Exercise
or Base
Price of
Option
Awards
($/Share)
    Closing
Price
($/Share)
    Grant
Date Fair
Value of
Stock and
Option
Awards ($) (7)
 
    Threshold     Target     Maximum     Threshold     Target     Maximum            
Jeff M. Fettig                          
PEP – Cash(1)     0     1,657,000     3,000,000                    
SEP – RSUs(2)   2/19/2007           0     32,000     64,000             2,612,160  
SEP – Stock Options(3)   2/19/2007                                               91,000     94.47     96.20     2,048,410  
Roy W. Templin                          
PEP – Cash(1)     0     502,917     1,760,000                    
SEP – Long-term Cash(6)   2/19/2007     0     350,000     700,000                    
SEP – RSUs(2)   2/19/2007           0     3,750     7,500             306,113  
SEP – Stock Options(3)   2/19/2007                   10,600     94.47     96.20     238,606  
SRP – RSUs(4)   6/18/2007                                         15,000                       1,749,900  
Michael A. Todman                          
PEP – Cash(1)     0     708,333     2,380,000                    
SEP – RSUs(2)   2/19/2007           0     6,700     13,400             546,921  
SEP – Stock Options(3)   2/19/2007                   19,100     94.47     96.20     429,941  
CSP – RSUs(5)   6/18/2007                                         30,000                       3,499,800  
Paulo F. M. Periquito                          
PEP – Cash(1)     0     615,310     2,461,240                    
SEP – Long-term Cash(6)   2/19/2007     0     322,500     645,000                    
SEP – RSUs(2)   2/19/2007           0     4,436     8,872             362,111  
SEP – Stock Options(3)   2/19/2007                                               9,754     94.47     96.20     219,563  
Marc R. Bitzer                          
PEP – Cash(1)     0     504,490     2,017,959                    
SEP – Long-term Cash(6)   2/19/2007     0     315,306     630,612                    
SEP – RSUs(2)   2/19/2007           0     3,201     6,402             261,298  
SEP – Stock Options(3)   2/19/2007                   9,145     94.47     96.20     205,854  
CSP – RSUs(5)   6/18/2007                                         30,000                       3,499,800  

 

(1) Represents estimated possible payouts on the grant date for short-term cash awards granted in 2007 under PEP for each of our NEOs. See the column captioned “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for the actual payout amounts for 2007.

 

(2) Represents estimated possible payouts of common stock underlying restricted stock units awarded in 2007 under SEP as of the first day of the performance period. See the column captioned “Stock Awards – Number of Shares or Units of Stock That Have Not Vested” in the Outstanding Equity Awards at Fiscal Year-End Table for actual payouts. These awards are subject to time-based vesting and will not be paid out until February 2010.

 

(3) Represents stock options issued to each of our NEOs in 2007 under SEP. These options vest and become exercisable in equal installments on the first, second, and third anniversary of the grant date.

 

(4) Represents restricted stock units issued to Mr. Templin under SRP. These awards, which are payable in Whirlpool stock, vest ratably with 50% of the award becoming vested on the third anniversary of the grant date and the remaining 50% of the award becoming vested on the seventh anniversary of the grant date.

 

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(5) Represents restricted stock units issued to Messrs. Todman and Bitzer under CSP. These awards, which are payable in Whirlpool stock, vest ratably. The awards issued to Mr. Todman will vest 50% on the fifth anniversary of the grant date and 50% upon retirement after age 60. The awards issued to Mr. Bitzer will vest one-third on the fifth anniversary of the grant date, one-third on the tenth anniversary of the grant date, and one-third upon retirement after age 60.

 

(6) Represents estimated possible payouts on the grant date for Long-term Cash awards granted in 2007 under SEP for Messrs. Templin, Periquito, and Bitzer. See the column captioned “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for the actual payout amount for 2007. Although earned in 2007, the 2007 SEP awards are subject to time-based vesting and will not be paid out until February 2010. In 2007, Messrs. Fettig and Todman did not receive long-term cash awards as part of their participation in SEP.

 

(7) Represents the grant-date fair value calculated under FAS 123(R), as presented in our financial statements, for the 2007 fiscal year.

 

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Outstanding Equity Awards at Fiscal Year-End Table

Our NEOs had the following types of equity awards outstanding at the end of the 2007 fiscal year: stock option awards granted under SEP or our predecessor program and restricted stock awards granted under SEP, SRP, or CSP. The predecessor program to the SEP had substantially the same terms and guidelines as the SEP. For more information about these programs, see “Compensation Discussion and Analysis – Long-Term Incentives.” In addition, in 2006, certain executives received restricted stock units to recognize their contributions to the acquisition and integration of Maytag (“Special Recognition RSUs”).

 

     Option Awards     Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
(#)
    Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
(2)
   

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

    Option
Exercise
Price
($)
    Option
Expiration
Date
   

Number

of

Shares

or Units

of Stock

That

Have

Not

Vested
(#)

    Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested
($)
 

Jeff M. Fettig

Stock Options (1)

                   
    18,000           63.13     6/15/2008            
    50,000           52.28     4/05/2009            
    64,000           52.19     2/14/2010            
    70,000           54.07     2/19/2011            
    70,000           67.29     2/18/2012            
    70,000           49.60     2/17/2013            
    40,000           72.94     2/16/2014            
    27,734     55,466       89.16     2/20/2016            
    0     91,000       94.47     2/19/2017            

SEP – RSUs

                   
              70,564 (3)    5,760,139 (4)       
              48,580 (5)   3,965,585 (6)      
              32,000 (7)   2,612,160 (8)      
SRP – RSUs             45,625 (9)   3,724,369 (10)      

CSP – RSUs

            10,000 (17)   816,300 (18)      

Special

Recognition – RSUs

                                25,000 (11)    2,040,750 (12)            

Roy W. Templin

Stock Options (1)

                   
    10,000           62.98     7/01/2013            
    2,664           72.94     2/16/2014            
    3,100     6,200       89.16     2/20/2016            
        10,600       94.47     2/19/2017            

SEP – RSUs

                   
              12,855 (3)   1,049,353 (4)      
              5,397 (5)   440,557 (6)      
              3,750 (7)   306,113 (8)      

SRP – RSUs

            25,000 (13)   2,040,750 (10)       

Special

Recognition – RSUs

                                15,000 (11)   1,224,450 (12)            

 

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     Option Awards     Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
(#)
    Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
(2)
   

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

    Option
Exercise
Price
($)
    Option
Expiration
Date
   

Number

of

Shares

or Units

of Stock

That

Have

Not

Vested
(#)

    Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested
($)
 

Michael A. Todman

Stock Options (1)

                         
    27,000           67.29     2/18/2012              
    10,282           72.94     2/16/2014              
    6,400     12,800       89.16     2/20/2016              
        19,100       94.47     2/19/2017              

SEP – RSUs

                         
                  16,483 (3)    1,345,507 (4)       
                  11,163 (5)   911,236 (6)      
                  6,700 (7)   546,921 (8)      

SRP – RSUs

                28,875 (15)   2,357,066 (10)      

CSP – RSUs

                42,000 (17)   3,428,460 (18)       

Special

Recognition – RSUs

                                7,500 (11)   612,225 (12)            

Paulo F. M. Periquito

Stock Options (1)

                   
    33,000           52.19     2/14/2010            
    33,000           54.07     2/19/2011            
    33,000           67.29     2/18/2012            
    33,000           49.60     2/17/2013            
    12,339           72.94     2/16/2014            
    3,445     6,890       89.16     2/20/2016            
        9,754       94.47     2/19/2017            

SEP – RSUs

                   
              19,508 (3)   1,592,438 (4)      
              6,330 (5)   516,718 (6)      
              4,436 (7)   362,111 (8)      

SRP – RSUs

            18,500 (14)    1,510,155 (10)      

CSP – RSUs

                                10,000 (19)   816,300 (18)            

Marc R. Bitzer

Stock Options (1)

                         
    3,563           75.32     2/16/2014              
    2,311     4,621       89.16     2/20/2016              
        9,145       94.47     2/19/2017              

SEP – RSUs

                         
                  5,852 (3)   477,699 (4)      
                  4,246 (5)   346,601 (6)      
                  3,201 (7)   261,298 (8)      

SRP – RSUs

                19,250 (16)   1,571,378 (10)      

CSP – RSUs

                                42,000 (17)   3,428,460 (18)            

 

(1) These stock option grants were made under SEP or under our predecessor program. The last two listed stock option entries represent grants from the 2006 SEP and 2007 SEP, respectively.

 

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(2) As shown in the table above, each NEO has two awards with remaining unvested stock options listed in this column. These awards represent grants from the 2006 SEP and 2007 SEP. SEP stock options generally vest and become exercisable in equal installments on the first, second, and third anniversary of the grant date. As of the last day of our 2007 fiscal year, the awards under the 2006 SEP had two remaining vesting dates, February 20, 2008 and February 20, 2009, while the awards under the 2007 SEP had all three vesting dates remaining, February 19, 2008, February 19, 2009, February 19, 2010.

 

(3) Represents the “actual” number of shares of restricted stock earned under our 2005 Enhanced SEP and awarded on February 18, 2008.

 

(4) Represents the “actual” number of shares earned under 2005 Enhanced SEP multiplied by the closing price of our common stock on December 31, 2007 (the last trading day of our 2007 fiscal year). The value of the 2005 Enhanced SEP awards on February 18, 2008, the payment date, was as follows: Mr. Fettig – $6,244,208; Mr. Templin – $1,137,539; Mr. Todman – $1,458,581; Mr. Periquito – $1,726,263; Mr. Bitzer – $517,843.

 

(5) Represents earned, but unvested restricted stock units under 2006 SEP. The grants from 2006 SEP had a one-year performance period during the 2006 fiscal year. Although earned in 2006, these restricted stock units are subject to time-based vesting and will not be paid out until February 20, 2009.

 

(6) Represents earned, but unvested restricted stock units under 2006 SEP multiplied by the closing price of our common stock on December 31, 2007 (the last trading day of the 2007 fiscal year). The ultimate value of the 2006 SEP awards will depend on the value of our common stock on the actual vesting date.

 

(7) Represents earned, but unvested restricted stock units under 2007 SEP. The grants from 2007 SEP had a one-year performance period during the 2007 fiscal year. Although earned in 2007, these restricted stock units are subject to time-based vesting and will not be paid out until February 19, 2010.

 

(8) Represents earned, but unvested restricted stock units under 2007 SEP multiplied by the closing price of our common stock on December 31, 2007 (the last trading day of the 2007 fiscal year). The ultimate value of the 2007 SEP awards will depend on the value of our common stock on the actual vesting date.

 

(9) Represents earned, but unvested restricted stock units under the Special Retention Program (“Special Retention RSUs”). Although earned, these restricted stock units are subject to time-based vesting. 23,125 units were paid out on February 19, 2008 and 22,500 units will be paid on July 1, 2011.

 

(10) Represents earned, but unvested Special Retention RSUs multiplied by the closing price of our common stock on December 31, 2007 (the last trading day of the 2007 fiscal year). The ultimate value of these Special Retention RSUs will depend on the value of our common stock on the actual vesting date.

 

(11) Represents earned, but unvested Special Recognition RSUs granted to Messrs. Fettig, Templin, and Todman. Although earned, these Special Recognition RSUs are subject to time-based vesting and will not be paid out until August 12, 2009.

 

(12) Represents earned, but unvested Special Recognition RSUs granted to Messrs. Fettig, Templin, and Todman multiplied by the closing price of our common stock on December 31, 2007 (the last trading day of the 2007 fiscal year). The ultimate value of these Special Recognition RSUs will depend on the value of our common stock on the actual vesting date.

 

(13) Represents earned, but unvested Special Retention RSUs. Although earned, these restricted stock units are subject to time-based vesting and will not be paid out until June 18, 2010 (7,500), September 1, 2011 (10,000), and June 18, 2014 (7,500).

 

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(14) Represents earned, but unvested Special Retention RSUs as of December 31, 2007. Although earned, these restricted stock units were subject to time-based vesting and were paid out on February 19, 2008.

 

(15) Represents earned, but unvested Special Retention RSUs. Although earned, these restricted stock units are subject to time-based vesting. 13,875 units were paid out on February 19, 2008, and 15,000 will be paid out on July 1, 2011.

 

(16) Represents earned, but unvested Special Retention RSUs as of December 31, 2007. Although earned, these restricted stock units were subject to time-based vesting and 9,250 units were paid out on February 19, 2008, and 10,000 units will be paid out on July 1, 2011.

 

(17) Represents earned, but unvested restricted stock units under the Career Stock Program (“Career Stock RSUs”). Although earned, these Career Stock RSUs are subject to time-based vesting and are not fully paid out until the NEOs retire.

 

(18) Represents earned, but unvested Career Stock RSUs multiplied by the closing price of our common stock on December 31, 2007. The ultimate value of these Career Stock RSUs will depend on the value of our common stock on the NEO’s retirement date.

 

(19) Mr. Periquito achieved retirement age as defined under CSP during the most recent fiscal year. Mr. Periquito became eligible to receive the final unvested tranche of his CSP award containing 10,000 shares of Whirlpool stock plus accrued dividends upon his retirement from Whirlpool.

 

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Option Exercises and Stock Vested Table

The table below describes the option awards exercised by our NEOs listed in the table and their stock awards that vested during 2007. The option awards exercised consist of awards granted under SEP (or the predecessor plan to SEP, which had substantially the same terms and guidelines as SEP). The stock awards that vested consist of awards granted under the:

 

   

2004 Strategic Excellence Program in the case of Messrs. Fettig, Templin, Todman, Periquito, and Bitzer;

 

   

Career Stock Program, in the case of Mr. Periquito; and

 

   

Special Retention Program, in the case of Messrs Fettig, Templin, Todman, and Bitzer.

For more information about these programs, see “Compensation Discussion and Analysis – Long-Term Incentives.”

 

     Option Awards     Stock Awards  
Name   Number of Shares
Acquired on Exercise (1)
    Value Realized On
Exercise (2) ($)
    Number of Shares
Acquired on Vesting (3)
    Value Realized on
Vesting (4) ($)
 

Jeff M. Fettig

  20,500     953,968     29,000     3,128,960  

Roy W. Templin

  0     0     10,420     998,925  

Michael A. Todman

  54,500     2,309,458     16,620     1,829,658  

Paulo F. M. Periquito

  53,000     2,829,563     1,944     183,640  

Marc R. Bitzer

  12,000     468,390     10,562     1,170,839  

 

(1) Option awards exercised by Mr. Fettig were granted on April 15, 1997. Option awards exercised by Mr. Todman were granted on June 15, 1998 (5,500), February 19, 2001 (22,000), and February 17, 2003 (27,000). Option awards exercised by Mr. Periquito were granted on July 10, 1997 (5,000), June 15, 1998 (15,000), and April 5, 1999 (33,000). Option awards exercised by Mr. Bitzer were granted on February 18, 2002 (12,000).

 

(2) The dollar value realized reflects the total pre-tax value realized by our NEOs (fair market value of Whirlpool common stock on exercise date minus the exercise price of the option).

 

(3) Stock awards listed for Mr. Fettig represent the vesting of 6,500 shares granted under 2004 SEP, of which 4,875 shares were voluntarily deferred into the Whirlpool Corporation Executive Deferred Savings Plan II, and the vesting of 22,500 shares granted as part of SRP in July 2004. Stock awards listed for Mr. Templin represent the vesting of 420 shares granted under 2004 SEP and the vesting of 10,000 shares granted as part of SRP in September 2004. Stock awards listed for Mr. Periquito represent the vesting of 1,944 shares granted under 2004 SEP. Stock awards listed for Mr. Todman represent the vesting of 1,620 shares granted under 2004 SEP and the vesting of 15,000 shares granted as part of SRP in July 2004. Stock awards listed for Mr. Bitzer represent the vesting of 562 shares granted under 2004 SEP and 10,000 shares granted as part of the SRP in July 2004.

 

(4) The dollar value realized reflects the final pre-tax value received by our NEOs upon the vesting of the stock awards. The value of Whirlpool common stock on the vesting date is based on the average of Whirlpool’s high and low stock price on that date, pursuant to the terms of the plan under which the award was granted.

 

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Pension Benefits Table

The following table describes the estimated actuarial present value of accrued pension benefits through the end of our 2007 fiscal year for each of our NEOs listed in the table. Our U.S.-based NEOs are entitled to benefits under the Whirlpool Employees Pension Plan (“WEPP”), the Whirlpool Retirement Benefit Restoration Plan (“DB Restoration Plan”), and the Whirlpool Supplemental Executive Retirement Plan (“SERP”). None of our U.S.-based NEOs is retirement-eligible as of the last day of our 2007 fiscal year. The number of years of service credited to each NEO equals the NEO’s length of eligible service with Whirlpool. Whirlpool currently has a policy against crediting additional years of service under the following pension plans.

For benefits under WEPP, the formula is:

 

2% x years of service x average base salary

In this formula:

 

   

“years of service” for salaried employees is generally based on hours worked as a salaried employee and also includes hours paid but not worked (such as vacations and holidays), hours of military service required to be recognized under federal law, and hours for up to 24 months of long-term disability;

 

   

“average base salary” generally means the average of base salary in effect during the 60 sequential (but not necessarily consecutive) full calendar months of a participant’s last 120 or fewer consecutive full calendar months of service before retirement or other termination of service that will produce the largest average monthly amount; and

 

   

the maximum number of years of service credited under the plan is 30 years.

Retirement benefits under this formula are limited by the Internal Revenue Code. Benefits can be paid to plan participants in a variety of annuity forms or as a lump sum amount. The benefits payable to our NEOs from this plan were frozen as of December 31, 2006.

After reaching age 55 and completing five years of service with Whirlpool, salaried participants in this plan are eligible for early retirement benefits under the plan. Benefits paid prior to age 65 are reduced. The factors used to determine this reduction vary with the participant’s age. For example, for salaried participants whose benefits have vested and who retire from active service at age 55, their retirement benefits are reduced to 55% of the full retirement benefit payable at age 65. None of our NEOs who participate in this plan are eligible for early retirement as of the last day of our 2006 fiscal year.

Under the DB Restoration Plan, the retirement eligibility and benefit formula are the same as under WEPP, except that in this plan statutory benefit limitations are not applied in

 

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calculating benefits under the formula. With respect to our NEOs who participate in this plan, payments under this plan are generally made in a lump sum after the later of: (1) six months following termination of employment or (2) the participant’s reaching age 55. Participants may not make withdrawals during their employment. The benefits payable to our NEOs from this plan were frozen as of December 31, 2006.

With respect to benefits under SERP, the formula is:

 

2% x years of service x average of the highest 5 PEP awards received over the last 10 years

In this formula:

 

   

“years of service” has the same meaning as it does under WEPP described above; and

 

   

the maximum number of years of service credited under the plan is 30 years.

Our NEOs are eligible for benefits under SERP if they terminate employment for any reason except a termination for “Cause” after early retirement age or normal retirement age, or after completing five years of service, provided they have received one or more PEP awards within the last ten calendar years preceding their termination of employment. Executives may also be eligible for SERP benefits if they terminate employment prior to early retirement age or before completing five years of service due to the existence of a long-term disability.

Normal retirement means retiring on or after the normal retirement age, which is generally the later of the executive’s 65th birthday or completion of five years of continuous service. With respect to our NEOs who participate in this plan, payments under this plan are generally made in a lump sum after the later of: (1) six months following termination of employment or (2) the participant’s reaching age 55. Participants may not make withdrawals during their employment.

The actuarial present values of benefits under these plans are calculated in accordance with the following assumptions: (1) discount rate: 2007 – 6.2%, 2006 – 5.90%, 2005 – 5.65%; (2) assumed retirement age: 65; (3) no pre-retirement decrements; (4) assumed form of payment: lump sum, determined as equal to the present value of the life annuity provided by the plans’ formulas and calculated based on the plans’ provisions, including an interest rate based on high-quality corporate bond yields (assumed to be 6.2%) and mortality assumption that is based on the RP-2000 Table. The actuarial increase during our 2007 fiscal year of the projected retirement benefits can be found in the Summary Compensation Table in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column (all amounts reported under that heading represent actuarial increases in our plans).

Mr. Periquito is retirement eligible as of the last day of our 2007 fiscal year. Both Mr. Periquito and Whirlpool contributed to his benefit under the Founder Pension Plan, a non-U.S. pension plan, prior to its transfer to a private pension fund. No further contributions

 

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to the fund are expected to be made by Whirlpool. Mr. Periquito may draw from the fund prior to and during retirement. Mr. Bitzer does not participate in any defined benefit pension plans.

 

Name   Plan Name   Number of Years
Credited Service
  Present Value of
Accumulated
Benefit ($)
    Payments During
Last Fiscal Year
($)

Jeff M. Fettig

  WEPP   26     497,037    
         
   

DB Restoration

  26     1,559,141    
         
   

SERP

  27    

Total

4,014,435

 

6,070,613

 

 

 

Roy W. Templin

  WEPP   4     54,535    
         
    DB Restoration   4     49,254    
         
    SERP   5    

Total

155,404

 

259,193

 

 

 

Michael A. Todman

  WEPP   14     255,219    
         
   

DB Restoration

  14     406,461    
         
   

SERP

  15    

Total

845,709

 

        1,507,389

 

 

 
         

Paulo F.M. Periquito

  Private Pension Fund       11,043,607 (1)  

 

(1) Benefit was frozen in 2006. Change in pension value from the prior year is due solely to the change in the conversion rate from the Brazilian Real to the U.S. Dollar.

 

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Non-Qualified Deferred Compensation Table

The table below provides information about the non-qualified defined contribution deferred compensation plans in which our NEOs participate. Our U.S.-based NEOs participate in the Whirlpool Corporation Executive Deferred Savings Plan (“EDSP I”) and the Whirlpool Corporation Executive Deferred Savings Plan II (“EDSP II”). EDSP I was designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan. Participants may no longer make deferrals to EDSP I. EDSP II became effective January 1, 2005 to comply with the requirements of new Code Section 409A.

EDSP II includes two components: the traditional component is known as EDSP II and the new component, which became effective January 1, 2007, is known as the Whirlpool Executive Restoration Plan (the “DC Restoration Plan”). The traditional EDSP II is designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan and the DC Restoration Plan. This component allows eligible executives to contribute up to 75% of their base salary, short-term incentives and long-term incentives.

For our NEOs, the DC Restoration Plan treats base salary as the only form of compensation eligible for deferral under the plan. With respect to our NEOs who participate in this plan, distributions under the plan are generally made in a lump sum after a six month waiting period following termination of employment. EDSP I and EDSP II (including both the traditional component and the DC Restoration Plan component) are unfunded non-qualified plans that are secured by our general assets. Amounts deferred are credited to recordkeeping accounts for participants, and the recordkeeping balances are credited with earnings and losses measured by investments generally similar to those selected by executives and available in the Whirlpool 401(k) Retirement Plan (other than the Whirlpool stock fund). Participants may not make withdrawals during their employment, except in the event of hardship, as approved by the Human Resources Committee.

As an executive in Italy, Mr. Bitzer participates in Previndai, a voluntary defined contribution plan mandated by the National Collective Agreement for Industrial Dirigenti. Both Mr. Bitzer and Whirlpool make contributions to his Previndai account, as reflected in the Summary Compensation Table. Mr. Periquito does not participate in any non-qualified defined contribution or other non-qualified deferred compensation plans.

 

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Name    Executive
Contributions
in Last FY (1) ($)
   Registrant
Contributions
in Last FY ($)
   Aggregate
Earnings
in Last FY ($)
    Aggregate
Withdrawals/
Distributions ($)
 

Aggregate

Balance
at Last FYE (2) ($)

Jeff M. Fettig

                  

EDSP I

         70,029       1,802,139

EDSP II

   454,880       (48,570 )     819,159

DC Restoration

   42,464    128,032    (3,624 )     166,872

Total

   497,344    128,032    17,835       2,788,170

Roy W. Templin

                  

EDSP I

              

EDSP II

   65,000       17,875       209,962

DC Restoration

   38,212    43,355    2,288       83,855

Total

   103,212    43,355    20,163       293,817

Michael A. Todman

                  

EDSP I

         33,461       655,411

EDSP II

         9,936       166,973

DC Restoration

      37,450    607       38,057

Total

      37,450    44,004       860,441

 

(1) Executive contributions during the last fiscal year include base salary deferrals into the DC Restoration Plan and performance-based incentive compensation into EDSP II.

 

(2) The following amounts are also being reported as compensation in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” and “Stock Awards” columns: Mr. Fettig – $308,295 for 2006, $8,564 for 2007; Mr. Templin – $55,100 for 2006, $65,000 for 2007; and Mr. Todman – $0 for 2006, $0 for 2007. This column reflects non-preferential earnings on the accumulated balance during 2007 and previous fiscal years.

 

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Potential Post-Termination Payments Tables

The tables below describe the compensation and benefits payable to each of our NEOs in the following circumstances: involuntary termination by Whirlpool for cause, involuntary termination by Whirlpool without cause, resignation, retirement, death, disability, and change in control (with and without a qualifying termination). The amounts shown assume that termination of employment or a change in control occurred as of December 31, 2007, and estimate certain amounts which would be paid to our NEOs upon the specified event. Due to the number of factors that affect the nature and amounts of compensation and benefits provided upon the events discussed below, the actual amounts paid or distributed may be different. Factors that could greatly affect these amounts include the timing during the year of any such event, Whirlpool’s stock price, and the NEO’s age.

The tables quantify and the accompanying narrative disclosure describes the compensation and benefits that are paid in addition to compensation and benefits generally available to salaried employees. Examples of compensation and benefits generally available to salaried employees, and thus not included below, are distributions under the Whirlpool 401(k) Retirement Plan, accrued vacation pay, and, in certain circumstances, vested equity.

Involuntary Terminations and Resignation

We provide no additional benefits to any of our NEOs in the event that the NEO resigns from Whirlpool. Also, we do not have employment agreements with any of our NEOs that would provide benefits in the event that we terminate the NEO’s employment involuntarily for cause. Upon resignation and involuntary termination for cause, and in accordance with the terms of the long-term incentive awards granted under our incentive programs, our NEOs forfeit all unvested awards, as well as all vested, or partially vested, but unexercised awards. Generally, in the event we terminate the employment of an NEO involuntarily without cause, the payment of the value of the unvested portion of restricted stock units granted under the Career Stock Program is the only benefit to which the NEO is entitled. Under Italian law, in the event of termination without cause, Mr. Bitzer is also entitled to a lump sum severance benefit equal to one year of salary, plus the average of his last three awards received through participation in PEP, plus an accrued lump sum statutory severance indemnity payment (TFR) equal to €67,687 (approximately U.S. $92,792). The severance benefit provided to Mr. Bitzer in the event of involuntary termination without cause is generally available to all employees in his classification and is, therefore, not reflected below. Under the terms of his employment agreement, Mr. Periquito is entitled to an amount equal to 13.82 months of base salary, in the event of termination without cause. The Human Resources Committee may, in its discretion, approve additional severance benefits designed to mitigate economic injury to the NEO as a direct result of the termination.

Retirement

Among our NEOs, only Mr. Periquito is retirement-eligible as of the last day of our 2007 fiscal year, and, thus, he may take a full distribution of his pension plan benefit at any time, including prior to retirement. Since the other NEOs are not retirement-eligible, if these

 

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NEOs chose to “retire” as of the last day of our 2007 fiscal year, the effect of that “retirement” would be the same as if the NEO had resigned, as described immediately above. Since none of our NEOs (other than Mr. Periquito) is retirement-eligible, the following quantification of estimated compensation and benefits payable at retirement, as well as the accompanying narrative disclosure, assume that each of our NEOs was retirement-eligible as of the end of our 2007 fiscal year.

In the event of retirement, our NEOs would be entitled to a mix of short- and long-term incentives. The possible short-term incentive payout would consist of a prorated cash payout at target under PEP for the fiscal year in which the NEO retires. Proration is based on the ratio of the number of days worked during the performance period to the total number of days in the performance period.

The possible long-term incentive payouts consist of accelerated vesting of unvested, or partially unvested, restricted stock awards, performance units, and stock options under SEP and restricted stock units under the CSP. Performance units are payable in cash. The presently unvested, or partially unvested, SEP awards that remain outstanding are from fiscal years 2005, 2006, and 2007. At the first regularly-scheduled Human Resources Committee meeting following the completion of the applicable performance period, the Committee reviews certain performance measures and determines whether the NEO has earned the award. The Committee met on February 18, 2008 and determined that our NEOs earned their 2005 Enhanced SEP awards. The Enhanced SEP cash and restricted stock awards were granted for a three-year performance period (2005-2007) and no determination was made as to whether our NEOs had earned the Enhanced SEP grant as of December 31, 2007. As a result, a retirement-eligible NEO would become eligible to receive a prorated benefit, in cash and restricted stock, if the NEO was at least 18 months into the performance period prior to retirement. In the case of the Enhanced SEP awards, as of the last day of our 2007 fiscal year, each NEO had completed the entire performance period. Therefore, a retirement-eligible NEO would receive a full target award in cash and restricted stock, upon retirement.

The 2006 SEP award was granted for a one-year performance period. The Human Resources Committee met on February 19, 2007 and determined that our NEOs earned their 2006 SEP awards. As a result, a retirement-eligible NEO would be eligible to receive a full award, in cash and restricted stock, upon retirement.

The 2007 SEP award was granted for a one-year performance period. The Human Resources Committee met on February 18, 2008 and determined that our NEOs earned their 2007 SEP awards. However, as of the last day of our 2007 fiscal year, no determination had been made as to whether our NEOs had earned this SEP grant. As a result, a retirement-eligible NEO would become eligible to receive a prorated benefit, in cash and restricted stock, if the NEO was at least six months into the performance period prior to retirement. In the case of the 2007 SEP awards, as of the last day of our 2007 fiscal year, each NEO would have completed the full 12 months of the performance period. However, since the Committee would not yet have met to determine whether our NEOs earned their 2007 SEP awards and the actual amount of these awards would not be known, a retirement-eligible NEO would receive

 

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a payout at target, in cash and restricted stock, upon retirement. If the NEO is terminated at any time prior to the end of the fiscal year, the NEO would receive a prorated payout, in cash and restricted stock, upon retirement. Proration is based on the ratio of the number of days worked during the performance period to the total number of days in the performance period.

In addition, upon the retirement of a retirement-eligible NEO, the NEO would receive accelerated vesting of all applicable unvested stock option awards granted under SEP. Unvested stock options under SEP that are accelerated upon the retirement of a retirement-eligible NEO must be exercised within five years or the unexercised stock options will be cancelled.

With respect to unvested restricted stock awards granted under the CSP, the benefit a retirement-eligible NEO would receive upon retirement would depend on the NEO’s place in the vesting timeline of the award. For the purposes of the table below and consistent with our assumption that each of our NEOs is retirement-eligible, we include a value showing the full vesting of unvested awards under the CSP. In reality, even a retirement-eligible NEO might not receive this full vesting treatment. This determination would likely vary depending on the NEO’s age, tenure with Whirlpool, the number of years since the grant date, and the vesting schedule described in the individual award agreement.

Upon retirement, our NEOs would forfeit any applicable unvested Special Recognition RSUs, unvested restricted stock units under SRP and restricted stock units granted under the CSP for which time-based vesting requirements were not met.

Death and Disability

Upon the death or disability of one of our NEOs, with respect to the accelerated vesting of unvested, or partially unvested, SEP cash awards, restricted stock awards, and stock options, the same analysis applies under these two scenarios as would apply in the case of the retirement of a retirement-eligible NEO, as described immediately above.

Unlike the treatment in the case of retirement, the benefit upon death or disability consists of the accelerated vesting of all unvested restricted stock awards under the CSP without regard to the time elapsed under the vesting schedule.

Just as in the event of a retirement-eligible NEO’s retirement, in the case of disability or death, the NEO forfeits any applicable unvested Special Recognition RSUs and unvested restricted stock awards granted under SRP.

 

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The following table shows the possible payouts to each of our NEOs for the specified type of employment termination. As detailed above, the values for the retirement portion of the table assume that our NEOs were retirement-eligible as of the last day of the 2007 fiscal year and also assume that our NEOs were eligible for the full vesting of any unvested restricted stock awards under the CSP. As a result of these assumptions, the benefit conferred to our NEOs upon retirement is identical to the benefit conferred in the event of a disability. In addition, the amounts under “Retirement and Disability – Total” in the table below are identical to the amounts under “Death – Total” in the table below for each of the NEOs other than Mr. Periquito. In the event that Mr. Periquito dies, his designated beneficiaries would receive a life insurance benefit equal to 36 times his monthly base salary. This benefit is unique to Mr. Periquito and, thus, the incremental benefit paid out in the event of his death varies by the amount of this benefit from the payout in the event of his retirement or disability. The designated beneficiaries of our other NEOs would receive the same life insurance benefits generally available to all salaried employees and, thus, there is no additional incremental benefit paid out in the event that they die.

 

     RESIGNATION   INVOLUNTARY
TERMINATION
  RETIREMENT AND DISABILITY   DEATH
                    Short-
Term
Incentives
  Long-Term Incentives         
Name  

Resignation

($)

  With
Cause
($)
 

Without
Cause (1)

($)

 

2007

PEP

($)

 

2005
SEP
RSUs

($)

  2006
SEP
RSUs
($)
  2007
SEP
RSUs
($)
 

2005

SEP
Cash ($)

  2006
SEP
Cash
($)
  2007
SEP
Cash
($)
  SEP
Stock
Options
($)
  Career
Stock
Program
($)
 

TOTAL

($)

  TOTAL (2)
($)
Jeff M. Fettig       816,300   1,680,000   2,258,865   3,965,585   2,612,160   1,750,000         816,300   13,082,910   13,082,910
Roy W. Templin         510,000   411,497   440,557   306,113   318,750   481,250   350,000       2,818,167   2,818,167
Michael A. Todman       3,428,460   720,000   527,656   911,256   546,921   408,750         3,428,460   6,543,043   6,543,043
Paulo F. M. Periquito       806,167   700,000   624,470   516,697   362,111   483,750   564,375   322,500       3,573,903   5,673,903
Marc R. Bitzer       3,428,460   504,490   187,341   346,560   261,298   160,738   434,831   315,306     3,428,460   5,639,024   5,639,024

 

(1) Represents the benefit of accelerated vesting of unvested restricted stock units under the Career Stock Program for Messrs. Fettig, Todman, and Bitzer, and contractual severance payments for Mr. Periquito.

 

(2) For Mr. Periquito, represents the total benefit in the “Retirement and Disability” portion of the table and the added special life insurance benefit described above. All other NEOs receive the same life insurance benefits generally available to all salaried employees and, thus, no additional amounts are reflected in the table above.

Change in Control

We have agreements with Messrs. Fettig, Templin, Todman, Periquito, and Bitzer that take effect only in the event of a “change in control.” A “change in control” in accordance with these agreements is generally defined to include the acquisition by any person or group of 25% or more of Whirlpool’s voting securities, a change in the composition of the Board such that the existing Board or persons who were approved by a majority of directors or their successors on the existing Board no longer constitute a majority, and approval by the stockholders of an acquisition or liquidation of Whirlpool.

 

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Upon the occurrence of a change in control, our NEOs receive full accelerated vesting of previously unvested, or partially unvested, long-term incentives. These long-term incentives include:

 

   

cash, restricted stock, and stock options under SEP from fiscal years 2005, 2006, and 2007;

 

   

restricted stock awards under the CSP;

 

   

restricted stock awards under the SRP; and

 

   

Special Recognition RSUs.

In addition to the accelerated vesting of these awards, our NEOs may be entitled to receive an additional lump-sum payment in an amount sufficient to cover the full cost of any excise tax and the NEO’s city, state, and federal income, employment, and excise taxes on this additional payment and on such iterative payments such that the NEO is made entirely whole for the impact of the excise tax. The excise tax gross-up represents a benefit actually paid out by Whirlpool in connection with the occurrence of a change in control, whereas the accelerated vesting of long-term incentives provides a benefit to our NEOs, but does not represent amounts that we pay out solely in the event of a change in control. The following table shows the possible payouts to our NEOs triggered solely upon the occurrence of a change in control as of December 31, 2007.

 

     CHANGE IN CONTROL
ONLY
     Long-Term Incentives   Excise
Tax
Gross-Up
  TOTAL
Name   SEP
Stock
Options
($)
 

2005
SEP
RSUs

($)

 

2006
SEP
RSUs

($)

 

2007
SEP
RSUs

($)

 

2005
SEP
Cash

($)

  2006
SEP
Cash
($)
  2007
SEP
Cash
($)
 

CSP
RSUs

($)

 

Special
Recognition
RSUs

($)

 

SRP
RSUs

($)

  ($)   ($)
Jeff M. Fettig     2,258,865   3,965,585   2,612,160   1,750,000       816,300   2,040,750   3,724,369   3,512,904   20,680,933
Roy W. Templin     411,497   440,557   306,113   318,750   481,250   350,000     1,224,450   2,040,750   1,290,574   6,863,941
Michael A. Todman     527,656   911,256   546,921   408,750       3,428,460   612,225   2,357,066     8,792,334
Paulo F. M. Periquito     624,470   516,697   362,111   483,750   564,375   322,500       1,510,155     4,384,058
Marc R. Bitzer     187,341   346,560   261,298   160,738   434,831   315,306   3,428,460     1,571,378     6,705,912

Additional benefits are payable to our NEOs after a change in control, but only after a qualifying termination occurs. Qualifying terminations include: involuntary termination of the NEO by Whirlpool; voluntary termination by the NEO for good reason, as defined in the agreement; voluntary termination by the NEO during, and only during, the 13th month after the change in control; or a material breach of the change in control agreement by Whirlpool.

Cash severance arising from these change in control agreements is paid out in a lump sum payment equal to:

 

   

the NEO’s unpaid base salary;

 

   

vacation pay equal to twice the annual accrual rate appropriate for the NEO, based on the NEO’s length of service with Whirlpool;

 

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unreimbursed business expenses;

 

   

all other items earned by and owed to the NEO through and including the date of the termination;

 

   

the higher of 3 times the NEO’s base salary on the date of the termination or the NEO’s base salary at any time during the 12 months prior to the change in control;

 

   

the higher of 3 times current target bonus opportunity (in terms of a percentage of base salary) under PEP or the NEO’s highest target bonus opportunity at any time during the 12 months prior to the change in control; and

 

   

the higher of the NEO’s pro rata target bonus opportunity (in terms of a percentage of Base Salary) under PEP or the highest target bonus opportunity at any time during the 12 months prior to the change in control, or the actual bonus earned through the date of the termination under PEP based on the NEO’s current level of goal achievement.

The amount of cash severance will be offset by any other severance-type payments the NEO may be eligible or entitled to receive from any other sources.

Our NEOs are also entitled to receive continued benefits for 36 months in connection with a termination after a change in control. These benefits include certain health, life, and short- and long-term disability insurance benefits. The severance benefits provided to the NEOs in the event of a change in control include an amount, payable at the same time and in the same form as if paid from the non-qualified defined benefit pension plans, equal to the additional benefits to which the NEO would be entitled under our non-qualified defined benefit pension plans if:

 

   

the NEO’s benefits had fully vested;

 

   

the number of years of credited service was increased by 3 years; and

 

   

the NEO’s age was equal to the NEO’s actual age plus 3 years for purposes of determining retirement eligibility and early retirement reduction factors.

The continuation of the NEO’s benefits will be calculated at the same cost and at the same level of coverage as in effect on the date of termination.

Mr. Periquito’s change in control agreement differs slightly due to certain cost of living adjustments that are factored into his cash severance. In addition, Mr. Periquito’s continued benefits differ from those benefits for other NEOs as described above and include: a designated automobile, special life insurance, and hospital, medical, dental, and pharmaceutical assistance.

 

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The following table shows possible payouts to our NEOs as of December 31, 2007, triggered upon the occurrence of a change in control and a subsequent qualifying termination.

 

     CHANGE
IN
CONTROL
ONLY
  QUALIFYING TERMINATION AFTER CHANGE IN CONTROL
         Cash Compensation   Health,
Welfare and
Other
Benefits ($)
  Enhanced
Pension
Benefits
($)
  Incremental
Excise Tax
Gross-Up
($)
  TOTAL
($)
Name   TOTAL ($)   Severance
Payments ($)
  Annual
Incentives ($)
       
Jeff M. Fettig   20,680,933   8,640,000   1,680,000   45,573   451,568   5,468,924   36,966,998
Roy W. Templin   6,863,941   3,330,000   510,000   42,804   101,792   2,022,494   12,871,031
Michael A. Todman   8,792,334   4,320,000   720,000   43,350   169,141   4,194,542   18,239,367
Paulo F. M. Periquito   4,384,058   4,500,000   700,000   189,052       9,773,110
Marc R. Bitzer   6,705,912   3,405,305   504,490   71,059       10,686,766

 

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RELATED PERSON TRANSACTIONS

Policy for Evaluating Related Person Transactions

The Board has adopted a written policy relating to the Corporate Governance and Nominating Committee’s review and approval of transactions with related persons that are required to be disclosed in proxy statements by SEC regulations (“related person transactions”). A “related person” is defined under the applicable SEC regulation and includes our directors, executive officers, and owners of 5% or more of our common stock. The Corporate Secretary administers procedures adopted by the Board with respect to related person transactions and the Committee reviews and approves all such transactions. At times, it may be advisable to initiate a transaction before the Committee has evaluated it, or a transaction may begin before discovery of a related person’s participation. In such instances, management consults with the Chairman of the Committee to determine the appropriate course of action. Approval of a related person transaction requires the affirmative vote of the majority of disinterested directors on the Committee. In approving any related person transaction, the Committee must determine that the transaction is fair and reasonable to Whirlpool. The Committee periodically reports on its activities to the Board. The written policy relating to the Committee’s review and approval of related person transactions is available on our website: www.whirlpoolcorp.com – click on the “Governance” tab, then click on “Board of Directors.” All of the related person transactions described under the heading “Related Person Transactions” below have been approved by the Corporate Governance and Nominating Committee pursuant to this policy.

Related Person Transactions

Harbor Shores Community Redevelopment Inc. (“Harbor Shores”) is a not-for-profit entity partially owned by three U.S. not-for-profit entities, including the Whirlpool Foundation. The purpose of the Harbor Shores project is to transform approximately 530 acres in Benton Harbor and St. Joseph, Michigan into a residential, recreational and commercial community with a goal of enhancing the economic base in southwest Michigan. The project, which is expected to be completed in 2013, places a special emphasis on providing literacy and job training combined with employment options for low and moderate income residents. Since September 2005, Whirlpool Corporation has loaned $12 million to Harbor Shores, secured by a mortgage on real estate owned by Harbor Shores, and guaranteed up to an additional $10 million borrowed by Harbor Shores from a third-party bank. The guarantee was made in the ordinary course, on substantially the same terms as those prevailing at the time for comparable guarantees with persons not related to the lender, and did not involve other unfavorable features. Certain current and former members of Whirlpool Corporation management serve as volunteer officers and trustees of Harbor Shores, including Whirlpool’s current CFO. None of these individuals has a personal financial interest in or otherwise receives compensation or benefits from Harbor Shores, Whirlpool Corporation, or the Whirlpool Foundation for their services to the Harbor Shores project.

 

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Whirlpool employs a son of Arnold Langbo, one of the directors of Whirlpool. Mr. Gary Langbo holds a management position in Whirlpool’s Marketing Department and received base salary and bonus compensation of $251,303 in 2007, along with other employment benefits that are standard for Whirlpool employees at that management level. Mr. Arnold Langbo was not involved in the recruiting or hiring of his son, nor in any decision affecting his son’s compensation. His son’s compensation was established by Whirlpool in accordance with our compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions.

 

HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Human Resources Committee was at any time during 2007 an officer or employee of Whirlpool and no member of the Committee has formerly been an officer of Whirlpool. In addition, no “compensation committee interlocks” existed during fiscal year 2007.

 

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EQUITY COMPENSATION PLAN INFORMATION

The following table presents information relating to securities authorized under equity compensation plans as of December 31, 2007. The only plan reflected below that was not approved by our security holders is the Key Employee Treasury Stock Ownership Plan. This plan, the terms of which are substantially similar to our omnibus stock and incentive plans, was established to support the hiring and retention initiatives at key leadership positions by providing key leaders with the opportunity to receive Whirlpool common stock and stock options, restricted stock, and phantom stock awards to be paid from our treasury stock. In 2007, no awards were made under this plan.

 

Plan category  

Number of securities to
be issued upon exercise
of outstanding options,
warrants

and rights(1)

   

Weighted-average
exercise price of
outstanding options,
warrants

and rights(1) ($)

    Number of securities
remaining available for
future issuance under
equity compensation
plans(2)

Equity compensation plans approved by security holders

  4,434,443 (3)   $ 69.31 (4)   3,206,684

Equity compensation plans not approved by security holders

  0       0     171,500

Total

  4,434,443     $ 69.31     3,378,184

 

(1) In addition to the shares shown in the table, certain stock options granted by Maytag were converted into options to acquire our stock in connection with the Maytag acquisition in March 2006. As of December 31, 2007, there were 1,440,489 shares of Whirlpool common stock subject to the converted options, having a weighted-average exercise price of $133.10. No further grants may be made under the equity-based plans assumed by Whirlpool in connection with the acquisition.

 

(2) Excluding securities in the “Number of securities to be issued upon exercise of outstanding options, warrants and rights” column.

 

(3) This amount includes 2,934,480 shares subject to outstanding stock options and 1,499,963 shares subject to outstanding restricted stock units.

 

(4) The weighted-average exercise price information does not include any outstanding restricted stock units.

 

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MATTERS RELATING TO

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP has been appointed by the Audit Committee to be our independent registered public accounting firm for fiscal year 2008. Representatives of Ernst & Young are expected to be present at the annual meeting to respond to appropriate questions and may make a statement if they so desire.

Fees

In the years indicated, Ernst & Young billed Whirlpool the following fees (in millions):

 

       Year ended December 31
      2006    2007

Audit Fees

   $ 10.5    $ 10.7

Audit Related Fees

     0.5      0.5

Tax Fees

     4.6      4.4

All Other Fees

     0.1      0.1

Total

   $ 15.7    $ 15.7

Audit-related fees are principally comprised of fees for services provided in connection with employee benefit plan audits and consultation with management as to the accounting or disclosure treatment of various transactions or events. Tax fees are principally comprised of fees for services provided in connection with worldwide tax planning and compliance services, expatriate tax services, and assistance with tax audits and appeals.

Advance Approval Policy for Independent Registered Public Accounting Firm Services

Pursuant to its written charter, the Audit Committee, or a subcommittee thereof comprised of one or more independent directors, is responsible for approving in advance all audit, internal control-related, and permitted non-audit services the independent registered public accounting firm performs for us. In recognition of this responsibility, the Audit Committee has established a policy to approve in advance all audit, internal control-related, and permissible non-audit services the independent registered public accounting firm provides. Prior to engagement of the independent registered public accounting firm for the next year’s audit, management or the independent registered public accounting firm submits to the Audit Committee a request for approval of services expected to be rendered during that year. This request outlines each of the four categories listed above and the Audit Committee approves these services by category. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original advance

 

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approval. In those instances, the Audit Committee requires specific approval in advance before engaging the independent registered public accounting firm. The Audit Committee may delegate authority to make advance approval to one or more of its members. The member or members to whom such authority is delegated must report, for information purposes only, any such approval decisions to the Audit Committee at its next scheduled meeting. A copy of the Audit Committee Pre-Approval Policy for Independent Registered Public Accounting Firm Services appears on Whirlpool’s website: www.whirlpoolcorp.com – click on the “Governance” tab, and then “Board of Directors.”

Audit Committee Report

The Audit Committee provides independent oversight of Whirlpool’s accounting functions and monitors the objectivity of the financial statements prepared under the direction of Whirlpool’s management. In addition, the Committee retains our independent registered public accounting firm; reviews major accounting policy changes by Whirlpool; reviews and approves the scope of the annual internal and independent audit processes; reviews and monitors our assessment of internal controls; approves in advance audit, permitted non-audit, and internal control-related services provided by the independent registered public accounting firm; approves all fees paid to the independent registered public accounting firm; and monitors our activities designed to assure compliance with Whirlpool’s ethical standards. The Committee is composed of five directors who have been determined by the Board to be “independent” and “financially literate” pursuant to the NYSE listing requirements. The Committee operates under a written charter adopted by our Board.

The Committee has reviewed our audited consolidated financial statements for 2007 with management, and management has represented to the Committee that these financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Committee discussed with management the quality and the acceptability of the accounting principles employed, including all critical accounting policies used in the preparation of the financial statements and related notes, the reasonableness of judgments made, and the clarity of the disclosures included in the statements.

The Committee also reviewed our consolidated financial statements for 2007 with Ernst & Young LLP, our independent registered public accounting firm for 2007 (“Ernst & Young”), which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States. Further, the Committee reviewed with Ernst & Young its judgment as to the quality, not just the acceptability, of Whirlpool’s accounting principles. In addition, the Committee met with Ernst & Young, with and without management present, to discuss the results of its examinations, its evaluations of our internal controls, and the overall quality of our financial reporting. The Audit Committee met eleven times during the fiscal year ended December 31, 2007.

The Committee has received the written disclosures and the letter from Ernst & Young required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as modified or supplemented, and has discussed with Ernst & Young its

 

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independence. The Committee considered the compatibility of non-audit services Ernst & Young provided to us with Ernst & Young’s independence. Finally, the Committee discussed with Ernst & Young the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board, and the Board has approved, the inclusion of the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2007 for filing with the Securities and Exchange Commission. The Committee has selected Ernst & Young as our independent registered public accounting firm for 2008.

AUDIT COMMITTEE

Mr. Michael D. White, Chair

Mr. Gary T. DiCamillo

Mr. William T. Kerr

Mr. Arnold G. Langbo

Mr. Miles L. Marsh

 

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STOCKHOLDER PROPOSALS

Item 2 – Stockholder Proposal Relating to Annual Election of Directors

We have been advised that the following non-binding stockholder proposal will be presented at the annual meeting. The proposal will be voted on at the annual meeting if the proponent (who owns 95 shares of our common stock, as of November 2007), or a qualified representative, is present at the meeting and submits the proposal for a vote. Following the stockholder proposal is our statement in opposition. We will provide to stockholders the name and address of the proponent upon receiving an oral or written request.

For the reasons set forth below in our Board’s statement in opposition to the stockholder proposal, our Board of Directors recommends a vote against Item 2.

The text of the shareholder proposal and supporting statement appear below as received by us and Whirlpool assumes no responsibility for its content or accuracy.

 

 

Resolution Proposed by Stockholder

RESOLVED: Shareholders request that our Directors take the steps necessary to adopt annual election of each director in the most expeditious manner possible, in compliance with applicable law and in a manner so that each director shall have a term of equal length from the date of first implementation to the greatest extent possible.

This includes using all means in our Board’s power such as corresponding special company solicitations and one-on-one management contacts with major shareholders to obtain the vote required for formal adoption of this proposal topic. Also for such transition solely through direct action of our board if such transition is in compliance with applicable law.

Stockholder’s Supporting Statement

This topic won a 69% yes-vote average at 44 major companies in 2007. The Council of Institutional Investors www.cii.org recommends adoption of annual election of each director.

Arthur Levitt, Chairman of the Securities and Exchange Commission, 1993-2001 said: In my view it’s best for the investor if the entire board is elected once a year. Without annual election of each director shareholders have far less control over who represents them. Source: “Take on the Street” by Arthur Levitt.

Nick Rossi, Boonville, Calif., who submitted a number of proposals on this topic, said the merits our current practice, in which only a few directors stand for elected annually, is not in the best interest of our Company and its stockholders. Eliminating this staggered system would require each director to stand for election annually and would give stockholders an opportunity to register their view on the performance of each director annually. Electing directors in this manner is one of the best methods available to stockholders to ensure that the Company will be managed in a manner that is in the best interest of stockholders.

 

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Some companies express the unfounded concern that the annual election of each director could leave a company without experienced directors in the event that all incumbents are voted out by stockholders. In the unlikely event that stockholders would vote to replace all directors, such a decision would express an overwhelming dissatisfaction with the incumbent directors and would reflect the need for change.

In recent years, a number of companies have completely transitioned to annual election of each director in one year in response to the strong shareholder support like the 69% yes-vote average at 44 major companies in 2007.

Elect Each Director Annually – Yes on 2

 

 

Whirlpool’s Board of Directors Statement OPPOSING This Proposal

The Corporate Governance and Nominating Committee of Whirlpool’s Board of Directors, which is composed entirely of independent directors, regularly considers and evaluates a broad range of corporate governance issues. For the reasons set forth below, and based on the recommendation of the Corporate Governance and Nominating Committee, Whirlpool’s Board has determined that it is in the best interests of Whirlpool and its stockholders to maintain the current classified Board structure which has been in place for over 20 years.

Accountability to Stockholders and Strong Corporate Governance.  Whirlpool’s stockholders already have a meaningful opportunity at each annual meeting of stockholders to communicate their views on our oversight of Whirlpool’s management through the director election process. In December 2006, the Board approved an amendment to Whirlpool’s by-laws to require each director to be elected by the majority of votes cast with respect to that director in an uncontested election. Under our policy, any director who fails to be elected must tender his or her resignation. The Board will then make a final determination, taking into account all the relevant facts and circumstances, of whether to accept that resignation. Prior to this amendment, a director could have been elected even if he or she did not receive the affirmative vote of the majority of shares voted at the annual meeting.

With this majority voting standard now in place, Whirlpool’s stockholders can effectively register their views on the performance of directors by withholding their votes from any nominee for any reason. In addition, each director is required to uphold his or her fiduciary duties to Whirlpool’s stockholders and Whirlpool, regardless of whether he or she is subject to election in a particular year.

Enhances the Independence of the Board.  We believe that electing directors to three-year terms, rather than one-year terms, enhances the independence of nonemployee directors by providing them with a longer assured term of office, thereby insulating them against pressures from special interest groups who might have an agenda contrary to the interests of all stockholders. Our current classified Board structure permits directors to focus on Whirlpool’s long-term interests instead of on the re-nomination process, leading to greater independence and better governance.

 

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Stability and Continuity.  We believe that in light of the adoption of the majority vote provision described above, staggered board elections are necessary to ensure that the majority of directors have prior experience and familiarity with Whirlpool’s businesses, products, markets, opportunities and challenges. At a company with both a majority vote provision and a non-classified board, it is possible that a majority, or even all, of the directors could fail to be elected in a single year, jeopardizing the company’s long-term strategies and growth plans.

A classified Board also assists Whirlpool in attracting and retaining highly qualified directors who are willing to commit the time and resources necessary to understand Whirlpool, its operations and its competitive environment. We believe that agreeing to serve a three-year term demonstrates a nominee’s commitment to Whirlpool and its stockholders over the long-term. Given the current corporate governance climate, in which many qualified individuals are increasingly reluctant to serve on public boards, Whirlpool could be at a competitive disadvantage in recruiting qualified director candidates if their Board service might be limited to a one-year period.

Protection against Certain Takeovers.  We believe that a classified board plays an important role in ensuring that the interests of all stockholders are protected and maximized in connection with an unsolicited takeover proposal. A classified board structure prevents the strategy of a potential acquirer replacing a majority of the Board with its own nominees at a single meeting and thereby gaining control of Whirlpool without paying a fair value to Whirlpool’s stockholders. A classified board structure does not preclude a takeover, but rather provides the Board the additional time and leverage necessary to evaluate the adequacy and fairness of a takeover proposal, and to negotiate the best deal possible for the benefit of all stockholders, without the threat of imminent removal of a majority of Board members.

Recommendation Only.  Whirlpool’s stockholders should be aware that this stockholder proposal is simply a request that the Board take the actions stated in the proposal. Declassification of the Board requires an amendment to Whirlpool’s Certificate of Incorporation which must first be approved by the Board and then submitted to a vote of the stockholders at a subsequent meeting. A vote in favor of the proposal, therefore, would constitute a recommendation that the Board initiate this amendment. The Board does not believe, however, that such an amendment is in the best interests of Whirlpool or its stockholders.

 

The Board of Directors recommends a vote AGAINST the stockholder proposal advocating the election of all Whirlpool directors annually appearing at Item 2 on the accompanying proxy or voting instruction card.

 

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Item 3 – Stockholder Proposal Relating to the Adoption of Simple Majority Vote

We have been advised that the following non-binding stockholder proposal will be presented at the annual meeting. The proposal will be voted on at the annual meeting if the proponent (who owns 24 shares of our common stock, as of November 2007), or a qualified representative, is present at the meeting and submits the proposal for a vote. Following the stockholder proposal is our statement in opposition. We will provide to stockholders the name and address of the proponent upon receiving an oral or written request.

For the reasons set forth below in our Board’s statement in opposition to the stockholder proposal, our Board of Directors recommends a vote against Item 3.

The text of the shareholder proposal and supporting statement appear below as received by us and Whirlpool assumes no responsibility for its content or accuracy.

 

 

Resolution Proposed by Stockholder.

RESOLVED: Shareowners urge our company to take all steps necessary, in compliance with applicable law, to fully adopt simple majority vote requirements in our Charter and By