NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS

 

To our Stockholders:

 

 

Our Annual Meeting will be held at the Rosemont Theatre, 5400 N. River Road, Rosemont, Illinois 60018 on Monday, May 4, 2009 at 5:00 P.M., local time.

 

 

The purpose of the meeting is to:

 

 

 

 

Only Motorola stockholders of record at the close of business on March 9, 2009 (the “record date”) will be entitled to vote at the meeting. Please vote in one of the following ways:

 

 

 

 

 

By order of the Board of Directors,

 

A. Peter Lawson

Secretary

 

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2009

 

 

March 13, 2009

 

 

Dear Fellow Stockholder:

 

You are cordially invited to attend Motorola’s 2009 Annual Stockholders Meeting. The meeting will be held on Monday, May 4, 2009 at 5:00 p.m., local time, at the Rosemont Theatre, 5400 N. River Road, Rosemont, Illinois 60018.

 

We encourage you to vote your shares through one of the three convenient methods described in the enclosed Proxy Statement and, if your schedule permits, to attend the meeting. We would appreciate your support on the following management proposals:

 

 

 

 

 

Your vote is important, so please act at your first opportunity.

 

On behalf of your Board of Directors, thank you for your continued support of Motorola.

 

 

TABLE OF CONTENTS

 

PROXY STATEMENT

 

1

PROXY STATEMENT

 

 

This proxy statement (the “Proxy Statement”) is being furnished to holders of common stock (the “Common Stock”), currently $3 par value per share, of Motorola, Inc. (“Motorola”, or the “Company”). Proxies are being solicited on behalf of the Board of Directors of the Company (the “Board”) to be used at the 2009 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at the Rosemont Theatre, 5400 N. River Road, Rosemont, Illinois 60018 on Monday, May 4, 2009 at 5:00 P.M., local time, for the purposes set forth in the Notice of 2009 Annual Meeting of Stockholders.

 

This Proxy Statement, the form of proxy and the Company’s 2008 Annual Report are being mailed to stockholders who have requested hard copies on or after March 17, 2009.

 

All stockholders may view and print Motorola’s Proxy Statement and the 2008 Annual Report at http://materials.proxyvote.com/620076. The Proxy Statement and the 2008 Annual Report are also available on the Company’s website at www.motorola.com/investor.

 

Who Is Entitled to Vote?

 

Only stockholders of record at the close of business on March 9, 2009 (the “record date”) will be entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof. On the record date, there were issued and outstanding 2,276,939,837 shares of Common Stock entitled to vote at the Annual Meeting. The Common Stock is the only class of voting securities of the Company.

 

A list of stockholders entitled to vote at the meeting will be available for examination at the Motorola Innovation Center, 1295 East Algonquin Road, Door 60, Schaumburg, Illinois 60196 for ten days before the Annual Meeting and at the Annual Meeting.

 

Why Did I Receive a Notice of Internet Availability?

 

The Securities and Exchange Commission adopted rules for the electronic distribution of proxy materials. We have elected to provide access to our proxy materials and 2008 Annual Report on the Internet instead of sending a full set of printed proxy materials as in years past. This enables us to reduce costs, provide ease and flexibility for our stockholders and lessen the environmental impact of our Annual Meeting. On or about March 17, 2009, we intend to mail to most of our U.S. and Canadian stockholders a Motorola Notice of Internet Availability of Proxy Materials (the “Motorola Notice”) containing instructions on how to electronically access our 2009 Proxy Statement and 2008 Annual Report and vote online. If you received a Motorola Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request it. Instead, the Motorola Notice instructs you on how to access and review all of the important information contained in the 2009 Proxy Statement and 2008 Annual Report. The Motorola Notice also instructs you on how you may submit your proxy over the Internet. If you received a Motorola Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Motorola Notice.

 

How Can I Vote Without Attending the Annual Meeting?

 

There are three convenient methods for registered stockholders to direct their vote by proxy without attending the Annual Meeting:

 

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If you are a beneficial owner, or you hold your shares in “street name,” please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote by Internet or telephone.

 

How Can I Change My Vote?

 

Registered stockholders can revoke their proxy at any time before it is voted at the Annual Meeting by either:

 

 

If your shares are held in the name of a bank, broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record (that is, your bank, broker or nominee) to be able to vote at the Annual Meeting.

 

How Many Votes Must be Present to Conduct Business at the Annual Meeting?

 

In order for business to be conducted, a quorum must be represented in person or by proxy at the Annual Meeting. A quorum is a majority of the shares entitled to vote at the Annual Meeting. Shares represented by a proxy marked “abstain” will be considered present at the Annual Meeting for purposes of determining a quorum.

 

How Many Votes Am I Entitled to Cast?

 

You are entitled to cast one vote for each share of Common Stock you own on the record date. Stockholders do not have the right to vote cumulatively in electing directors.

 

How Many Votes Are Required to Elect Directors?

 

In February 2006, Motorola’s Board of Directors amended the Company’s Bylaws and Board Governance Guidelines to adopt a majority vote standard for non-contested director elections. Because the number of nominees properly nominated for the 2009 Annual Meeting is the same as the number of directors to be elected at the 2009 Annual Meeting, the 2009 election of directors is a non-contested election. To be elected in a non-contested election, a director nominee must receive more “For” votes than “Against” votes. Abstentions will have no effect on the director election since only votes “For” and “Against” a nominee will be counted.

 

How Many Votes Are Required to Authorize the Amendment to the Restated Certificate of Incorporation to Change the Par Value of our Common Stock to $0.01?

 

The affirmative vote of the holders of a majority of the outstanding shares entitled to vote at the Annual Meeting will be required to authorize amendments to the Restated Certificate of Incorporation to change the par value of our Common Stock to $0.01 per share. Abstentions and broker non-votes will have the same effect as a vote “Against” the proposal.

 

How Many Votes Are Required to Approve the One-Time Option Exchange?

 

The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to approve the amendment to existing equity plans to permit a one-time stock option exchange program for employees, other than executive officers and directors. Abstentions will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect on this proposal.

 

How Many Votes are Required to Authorize the Amendment to the Motorola Employee Stock Purchase Plan of 1999 (the “MOTshare Plan”)?

 

In order to authorize the amendment to the MOTshare Plan, an affirmative vote of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required. Abstentions will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect on this proposal.

 

How Many Votes Are Required to Approve the Stockholder Advisory Vote on Executive Compensation?

 

The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to approve the Stockholder Advisory Vote on Executive Compensation. Abstentions will have the same effect as a vote “Against” the proposal.

 

How Many Votes Are Required to Ratify the Appointment of KPMG LLP as Motorola’s Independent Registered Public Accounting Firm?

 

The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of KPMG LLP. Abstentions will have the same effect as a vote “Against” the proposal.

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PROXY STATEMENT

 

How Many Votes Are Required to Pass Any Shareholder Resolution?

 

In order to recommend that the Board consider adoption of any shareholder proposal, the affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required. For any shareholder proposal, an abstention will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect on the shareholder proposals.

 

Will My Shares be Voted if I Do Not Provide Instructions to My Broker?

 

If you are the beneficial owner of shares held in “street name” by a broker, the broker, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If you do not give instructions to the broker, the broker will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”). The election of directors will be a “discretionary” item. The ratification of the appointment of KPMG LLP and stockholder advisory vote on compensation are also “discretionary” items. The proposals to amend the Restated Certificate of Incorporation to change the par value of our Common Stock to $0.01, to amend existing equity plans to permit the stock option exchange program and to amend the Motorola Employee Stock Purchase Plan of 1999 are “non-discretionary” items. The three shareholder proposals are also “non-discretionary” items.

 

Who Represents My Proxy at the Annual Meeting?

 

If you do not vote in person at the Annual Meeting, but have voted your shares over the Internet, by telephone or by signing and returning your proxy card, you have authorized certain members of Motorola’s senior management designated by the Board and named in your proxy to represent you and to vote your shares as instructed.

 

What if I Return a Proxy But Do Not Provide Specific Voting Instructions For Some or All of the Items?

 

All shares that have been properly voted—whether by Internet, telephone or mail—and not revoked will be voted at the Annual Meeting in accordance with your instructions. If you sign your proxy but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board of Directors. The Board of Directors recommends a vote: (1) “For” the election of the 13 director nominees named in this Proxy Statement, (2) “For” the amendment to the Restated Certificate of Incorporation to change the par value of our Common Stock to $0.01 per share, (3) “For” the amendment to existing equity plans to permit the one-time stock option exchange, (4) “For” the amendment to the Motorola Employee Stock Purchase Plan of 1999, (5) “For” the stockholder advisory vote on executive compensation, and (6) “For” the ratification of the appointment of KPMG LLP as the Company’s independent public accounting firm for 2009. The Board of Directors recommends a vote “Against” each of the three shareholder proposals

 

What if Other Matters Are Voted on at the Annual Meeting?

 

If any other matters are properly presented at the Annual Meeting for consideration and if you have voted your shares by Internet, telephone or mail, the persons named as proxies in your proxy will have the discretion to vote on those matters for you. At the date we filed this Proxy Statement with the Securities and Exchange Commission, the Board of Directors did not know of any other matter to be raised at the Annual Meeting.

 

How Do I Vote if I Participate in the Company’s 401(k) Plan?

 

If you own shares of Common Stock through the Motorola 401(k) Plan (the “401(k) Plan”), the Motorola Notice or proxy card includes the shares you hold in the 401(k) Plan as well as the shares you hold outside of the 401(k) Plan. Under the 401(k) Plan, participants are “named fiduciaries” to the extent of their authority to direct the voting of shares of Common Stock credited to their 401(k) Plan accounts and their proportionate share of allocated shares for which no direction is received and unallocated shares, if any (together, “Undirected Shares”). The trustee of the 401(k) Plan will vote Undirected Shares in the same proportion as the shares for which directions are received, except as otherwise provided in accordance with ERISA. By submitting voting instructions by Internet, telephone, or if hardcopies are requested, by signing, dating and returning the proxy card, you direct the trustee of the 401(k) Plan to vote these shares, in person or by proxy, as designated therein, at the Annual Meeting.

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ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

 

 

How Many Directors Are Standing For Election and For What Term?

 

The number of directors of the Company to be elected at the 2009 Annual Meeting is 13. The directors elected at the 2009 Annual Meeting will serve until their respective successors are elected and qualified or until their earlier death or resignation.

 

Who Are the Nominees?

 

Each of the nominees named below is currently a director of the Company. Each of the nominees was elected at the Annual Meeting of Stockholders held on May 5, 2008, except for Dr. Jha who is standing for election for the first time. The ages shown are as of January 1, 2009. Messrs. Nicholas Negroponte and Miles White are not standing for re-election.

 

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PROXY STATEMENT

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PROXY STATEMENT

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PROXY STATEMENT

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE THIRTEEN NOMINEES NAMED HEREIN AS DIRECTORS. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE ELECTION OF SUCH THIRTEEN NOMINEES AS DIRECTORS.

 

What if a Nominee is Unable to Serve as Director?

 

If any of the nominees named above is not available to serve as a director at the time of the 2009 Annual Meeting (an event which the Board does not now anticipate), the proxies will be voted for the election as director of such other person or persons as the Board may designate, unless the Board, in its discretion, reduces the number of directors.

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PROXY STATEMENT

 

 

What Are the Board’s Corporate Governance Principles?

 

The Board has long adhered to governance principles designed to assure the continued vitality of the Board and excellence in the execution of its duties. The Board has responsibility for management oversight and providing strategic guidance to the Company. In order to do that effectively, the Board believes it should be comprised of individuals with appropriate skills and experiences to contribute effectively to this dynamic process. The Board is comprised of active and former CEOs and CFOs of major corporations and individuals with experience in high-tech fields, investment banking and academia. The Board believes that it must continue to renew itself to ensure that its members understand the industries and the markets in which the Company operates. The Board also believes that it must remain well-informed about the positive and negative issues, problems and challenges facing Motorola and its industries and markets so that the members can exercise their fiduciary responsibilities to stockholders.

 

Which Directors Are Independent?

 

On February 24, 2009, the Board made the determination, based on the recommendation of the Governance and Nominating Committee and in accordance with the Motorola, Inc. Director Independence Guidelines, that Mr. Dorman, Mr. Hambrecht, Ms. Lewent, Mr. Meister, Mr. Negroponte, Mr. Scott, Dr. Sommer, Mr. Stengel, Mr. Vinciquerra, Mr. Warner, Dr. J. White and Mr. M. White were independent during the periods in 2008 and 2009 that they were members of the Board. Mr. Brown, Dr. Jha and Mr. Zander do not qualify as independent directors since they are, or have been, employees of the Company. The Board determined on February 21, 2008 that following the completion of Mr. Meredith’s interim employment from April 1, 2007 to March 31, 2008 he would again be considered independent. See “What is Motorola’s Relationship with Entities Associated with Independent Directors?” for further details.

 

How Was Independence Determined?

 

The Motorola, Inc. Director Independence Guidelines include both the NYSE independence standards and categorical standards the Board has adopted to determine if a relationship that a Board member has with the Company is material. The categorical standards adopted by the Board are as follows:

 

• Contributions or payments (including the provision of goods or services) from Motorola to a charitable organization (including a foundation), a university, or other not-for-profit organization, of which a director or an immediate family member of a director (defined to include a director’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares the director’s home) is an officer, director, trustee or employee, will not impair independence unless the contribution or payment (excluding Motorola matches of charitable contributions made by employees or directors under Motorola’s or the Motorola Foundation’s matching gift programs):

(i) is to an entity of which the director or the director’s spouse currently is an officer, director or trustee, and such person held such position at the time of the contribution,

(ii) was made within the previous three years, and

(iii) was in an amount which, in the entity’s last fiscal year prior to the year of the contribution or payment, exceeded the greater of $300,000 or 5% of such entity’s consolidated gross revenues (or equivalent measure).

 

• Indebtedness of Motorola to a bank or similar entity of which a director or a director’s immediate family member is a director, officer, employee or 10% Owner (as defined below) will not impair independence unless the following are applicable:

(i) the director or the director’s spouse is an executive officer of such entity or an owner who directly or indirectly has a 10% or greater equity or voting interest in such entity (a “10% Owner”) and he or she held that position at any time during the previous twelve months, and

(ii) the total amount of Motorola’s indebtedness during the previous twelve months is more than 5% of the total consolidated assets of such entity in its last fiscal year.

 

• Other business relationships between a director or a director’s immediate family member, such as consulting, legal or financial advisory services provided to Motorola, will not impair independence unless the following are applicable:

(i) the director or the director’s spouse is a partner, officer or 10% Owner of the

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PROXY STATEMENT

company or firm providing such services, and he or she held such position at any time during the previous twelve months, and

(ii) the services that were provided during the previous twelve months were in an amount which, in the company’s or firm’s last fiscal year, exceeded the greater of $1 million or 2% of such company’s or firm’s consolidated gross revenues.

 

This categorical standard does not include business relationships with Motorola’s independent registered public accounting firm because those relationships are covered by the NYSE independence standards.

 

• Motorola’s ownership of voting stock of a company of which the director or the director’s immediate family member is a director, officer, employee or 10% Owner will not impair independence unless the following are applicable:

(i) the director or the director’s spouse is an executive officer of that company, and

(ii) Motorola is currently a 10% Owner of that company.

 

The ownership of Motorola Common Stock by a director or a director’s immediate family member will not be considered to be a material relationship that would impair a director’s independence.

 

When applying the NYSE independence standards and the categorical standards set forth above, “Motorola” includes Motorola, Inc. and any of its subsidiaries, and the Motorola Foundation. A complete copy of the Motorola, Inc. Director Independence Guidelines is available on the Company’s website at www.motorola.com/investor.

 

What is Motorola’s Relationship with Entities Associated with Independent Directors?

 

As previously disclosed, Thomas Meredith’s term as Acting Chief Financial Officer and Executive Vice President of Motorola ended on March 1, 2008 and, under the terms of his agreement, his employment ended on March 31, 2008. In February 2008, the Board determined that after the end of his employment Mr. Meredith’s independence under the Motorola, Inc. Independence Guidelines and the NYSE independence requirements was not impaired by his status as an employee of the Company from April 1, 2007 through March 31, 2008, because he was serving as an interim employee of the Company at the request of the Board while the Company conducted a search for a permanent chief financial officer.

 

As previously disclosed, Motorola and the Motorola Foundation have had various commercial and charitable relationships with the Massachusetts Institute of Technology (“MIT”) and the MIT Media Laboratory. Nicholas Negroponte is a tenured professor of MIT on leave, and formerly the Chairman of the MIT Media Laboratory, an academic and research laboratory at MIT. Judy Lewent is a life member of the MIT Corporation. Motorola and the Motorola Foundation made payments to MIT in each of the last three years significantly below the threshold described in the guidelines. Neither Mr. Negroponte nor Ms. Lewent direct the relationship nor do they vote as a member of the Motorola Board of Directors to approve MIT relationships.

 

All independent directors, other than William Hambrecht, Keith Meister and Ron Sommer, had relationships with entities that were reviewed by the Board under the NYSE’s independence standards and/or the Board’s categorical standards described above covering contributions or payments to charitable or similar not-for-profit organizations. In each case, the payments or contributions were significantly less than the NYSE independence standards or the categorical standards and were determined by the Board to be immaterial.

 

Are the Members of the Audit and Legal, Compensation and Leadership and Governance and Nominating Committees Independent?

 

Yes. The Board has determined that all of the members of the Audit and Legal Committee, the Compensation and Leadership Committee and the Governance and Nominating Committee are independent within the meaning of the Motorola, Inc. Director Independence Guidelines and the NYSE listing standards for independence.

 

Where Can I Receive More Information About Motorola’s Corporate Governance Practices?

 

Motorola maintains a corporate governance page on its website at www.motorola.com/investor that includes information about its corporate governance practices. The following documents are currently included on the website:

 

 

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The Company intends to disclose amendments to the above documents or waivers applicable to its directors, chief executive officers, chief financial officer or corporate controller from certain provisions of its ethical policies and standards for directors and its employees, on the Motorola website. The Company will also provide you a printed copy of these documents if you contact Investor Relations, in writing at Motorola, Inc., 1303 E. Algonquin Road, Schaumburg, IL 60196 or by email at investors@motorola.com.

 

How Often Did the Board Meet in 2008?

 

The Board of Directors held 15 meetings during 2008. Overall attendance at Board and committee meetings was 94%. Each incumbent director attended 81% or more of the combined total meetings of the Board and the committees on which he or she served during 2008.

 

How Many Directors will Comprise the Board?

 

The Board of Directors currently is comprised of 15 directors. Immediately following the Annual Meeting, the Board will consist of 13 directors. In the interim between Annual Meetings, the Board has the authority under the Company’s Bylaws to increase or decrease the size of the Board and to fill vacancies.

 

How Many Executive Sessions of the Board Were Held in 2008?

 

Independent directors of the Company meet regularly in executive session without management as required by the Motorola, Inc. Board Governance Guidelines. Generally, executive sessions are held in conjunction with regularly-scheduled meetings of the Board of Directors. In 2008, the non-employee members of the Board met in executive session 10 times.

 

Who Serves as Chairman of the Board and Presiding Director?

 

On March 31, 2008, the Board of Directors elected Mr. Dorman to serve as the non-executive Chairman of the Board. Mr. Dorman acts as the presiding director at meetings of the independent directors.

 

Will the Directors Attend the Annual Meeting?

 

Board members are expected to attend the Annual Meeting as provided in the Motorola, Inc. Board Governance Guidelines. With the exception of Mr. Hambrecht, all of our directors who stood for election at the 2008 Annual Meeting attended that meeting.

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PROXY STATEMENT

 

To assist it in carrying out its duties, the Board has delegated certain authority to several committees. The Board currently has the following committees: (1) Audit and Legal, (2) Compensation and Leadership, (3) Governance and Nominating, (4) Executive, and (5) Finance. Mr. Zander did not serve on any Board committee in 2008. Committee membership as of December 31, 2008 and the number of meetings of each committee during 2008 are described below:

 

 

Where Can I Locate the Current Committee Charters?

 

Current versions of the Audit and Legal Committee charter, Compensation and Leadership Committee charter and Governance and Nominating Committee charter are available on our website at www.motorola.com/investor.

 

What Are the Functions of the Audit and Legal Committee?

 

 

What Are the Functions of the Compensation and Leadership Committee?

 

 

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What Are the Functions of the Governance and Nominating Committee?

 

 

What Are the Functions of the Executive Committee?

 

 

What Are the Functions of the Finance Committee?

 

 

What is the Decision-Making Process to Determine Executive Compensation?

 

The Board has delegated to the Compensation and Leadership Committee the responsibility to oversee the programs under which compensation is paid or awarded to Motorola’s executives and to evaluate the performance of Motorola’s senior management. The specific functions of the Compensation and Leadership Committee are described in this Proxy Statement under “What Are the Functions of the Compensation and Leadership Committee?” and in the Compensation and Leadership Committee’s charter, which the Compensation and Leadership Committee and the Board periodically review and revise as necessary.

 

The Global Rewards department in Motorola’s Human Resources organization supports the Compensation and Leadership Committee in its work and, in some cases, acts pursuant to delegated authority from the Compensation and Leadership Committee to fulfill various functions in administering Motorola’s compensation programs.

 

In carrying out its duties, the Compensation and Leadership Committee has direct access to outside advisors, independent compensation consultants and others to assist them. During 2008 and 2009, the Compensation and Leadership Committee directly engaged an outside compensation consulting firm to assist them in their review of the compensation for Motorola’s executive officers.

 

For more information on the decisions made by the Compensation and Leadership Committee, see the “Compensation Discussion and Analysis”.

 

What is the Decision-Making Process to Determine Director Compensation?

 

The Governance and Nominating Committee recommends to the Board the compensation for non-employee directors, which is to be consistent with market practices of other similarly situated companies and is to take into consideration the impact on non-employee directors’ independence and objectivity. The Board has asked the Compensation and Leadership Committee to assist the Governance and Nominating Committee in making such recommendations. Although the charter of the Governance and Nominating Committee authorizes the Committee to delegate director compensation matters to management based on its reasonable judgment, the Committee has chosen not to delegate matters related to director compensation. Management has no role in recommending the amount or form of director compensation.

 

What is the Role of Independent Compensation Consultants in Executive and Director Compensation Determinations?

 

In accordance with the Compensation and Leadership Committee’s charter, the Committee has the sole authority, to the extent deemed necessary

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and appropriate, to retain and terminate any compensation consultants, outside counsel or other advisors, including the sole authority to approve the firm’s or advisor’s fees and other retention terms.

 

In accordance with this authority, in 2007, 2008 and 2009, the Compensation and Leadership Committee retained Mercer (“Mercer”) as an external independent consultant to provide insight and advice on matters regarding trends in executive compensation, relative executive pay and benefits practices, relative assessment of pay of Motorola executives to performance, and other topics as the Compensation and Leadership Committee deemed appropriate. See “Independent Consultant Review of Executive Compensation” in “Compensation Discussion and Analysis” for further details on the compensation-related elements the Compensation and Leadership Committee requested be reviewed.

 

In its 2007, 2008 and 2009 independent reviews of Motorola’s senior leadership team’s compensation, Mercer found that Motorola’s current executive compensation programs are fundamentally competitive and sound. The Compensation and Leadership Committee intends to engage an external independent consultant to complete an exhaustive evaluation of the Company’s executive rewards program on a periodic basis, generally every one or two years. The Compensation and Leadership Committee intends to engage an external independent consultant to review the specific compensation of the Co-CEOs and all members of the senior leadership team annually. The Compensation and Leadership Committee agreed with the Mercer studies’ conclusions that no substantive revisions to the compensation programs are required.

 

In 2007, the Compensation and Leadership Committee engaged Mercer to assist the Committee in its review of the compensation for Motorola’s non-employee directors. In view of the market trends outlined by Mercer, the Compensation and Leadership Committee recommended the Governance and Nominating Committee consider: (1) increasing the Audit and Legal Committee Chair annual retainer, (2) introducing stock ownership guidelines equal to four times the annual director retainer fee, and (3) making pro-rata equity grants effective upon the election of a new director to the Board if the election occurs at a time other than at the annual grant to directors.

 

The Governance and Nominating Committee, after reviewing and discussing these recommendations, submitted its recommendations to the Board, which adopted the compensation program currently in place for non-employee directors as described under “How Are the Directors Compensated?”

 

In January 2009, the Committee engaged Mercer as it has in the past to independently review our executive rewards program and the compensation of our senior leadership team, including the Named Executive Officers. Mercer’s 2009 executive compensation review studied: (1) the relationship between our actual 2007 senior executive compensation levels and the Company’s performance using available proxy data at that time, (2) the competitiveness of our target executive pay program in light of our executive compensation strategy, and (3) the competitiveness of our “pay mix”, long-term incentive compensation (“LTI”) mix, equity grants and LTI performance metrics compared to the market.

 

Mercer reviewed the following compensation components in its competitive assessment:

 

 

Mercer relied on both published survey sources and peer company proxy data, including data from our comparator group, to determine our competitive positioning relative to the market.

 

Each position reviewed was matched to the market based on position, responsibility and the scope of the business for which the position was responsible.

 

Pay and Performance Relationship

 

Mercer’s study found that our compensation structure is highly leveraged so that strong Company performance leads to above-market pay and weak Company performance results in below-market pay. Mercer found that, overall, Motorola’s business-based performance on select metrics was below the 25^th percentile of our peers for 2007 and approximately at the 25^th percentile for the three-year period from 2005 to 2007. The metrics were:

 

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Mercer also found that 2007 base salaries and MIP awards for our named executive officers in the 2008 Proxy Statement were at the 25^th percentile of the competitive market. Our total compensation on a present value basis (2007 base salary plus 2007 actual bonus and 2008 LTI value), was above the 25^th percentile of the peer group.

 

2008 Target Pay Levels Relative to Market and Compensation Strategy

 

Mercer’s study found that:

 

 

 

2008 Pay Mix and Program Provisions Compared to the Market

 

Mercer’s study found that:

 

 

The Committee agreed with the Mercer study’s conclusions and, as discussed below, relied on the study’s findings in setting the 2009 compensation levels for our senior leadership team.

 

What Role, if any, do Executive Officers Play in Determining or Recommending Executive and Director Compensation?

 

Motorola’s senior leadership team, comprised of the Co-CEOs and certain executives designated by the Co-CEOs, provides recommendations regarding the design of the Company’s compensation program to the Compensation and Leadership Committee. Upon Compensation and Leadership Committee approval, the senior leadership team is responsible for executing the objectives of the approved compensation program.

 

Each member of Motorola’s senior leadership team is ultimately responsible for approving all compensation actions for their respective organizations. When these compensation actions involve other Motorola executives, the involved senior leadership team member is accountable for ensuring adherence to all established governance procedures.

 

The Co-CEOs are responsible for recommending all compensation actions involving any member of the senior leadership team or officer subject to Section 16 of the Securities Exchange Act of 1934, as amended (“Section 16 Officer”), to the Compensation and Leadership Committee for its approval. The Co-CEOs take an active role in Compensation and Leadership Committee meetings at which compensation actions involving the above officers are discussed.

 

The Compensation and Leadership Committee directly engages an outside consulting firm, Mercer, to assist it in its review of the compensation for Motorola’s senior leadership team. Mercer also participates in certain Committee meetings.

 

The Global Rewards department in Motorola’s Human Resources organization, together with the Senior Vice President, Human Resources, prepares recommendations regarding each Co-CEO’s compensation and brings those recommendations to the Compensation and Leadership Committee. The Co-CEOs do not participate in the discussions regarding their compensation at Committee meetings. Mercer is also available at such meetings.

 

The Compensation and Leadership Committee is responsible for bringing recommended compensation actions involving each Co-CEO to the Board for its concurrence. The Compensation and Leadership Committee cannot unilaterally approve compensation changes for the Co-CEOs.

 

As stated above, management does not recommend or determine director compensation.

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PROXY STATEMENT

 

What Are the Director Stock Ownership Guidelines?

 

Our Board Governance Guidelines provide that, within five years of joining the Board, directors are expected to own Motorola Common Stock with a value equivalent to at least four times the annual retainer fee for directors. For the purposes of these guidelines, Motorola Common Stock includes stock units.

 

During 2008, the annual retainer fee paid to each non-employee director was $100,000. In addition: (1) the chair of the Audit and Legal Committee received an additional annual fee of $20,000; (2) the chair of the Compensation and Leadership Committee received an additional annual fee of $15,000; (3) the non-employee chairs of the other committees each received an additional annual fee of $10,000; and (4) the members of the Audit and Legal Committee, other than the chair, each received an additional annual fee of $5,000. Effective May 5, 2008, the non-employee Chairman of the Board received an additional annual fee of $280,000. The Company also reimburses its directors and, in certain circumstances, spouses who accompany directors, for travel, lodging and related expenses they incur in attending Board and committee meetings or other meetings as requested by Motorola.

 

A director may elect to receive a portion of his or her retainer and other fees in the form of deferred stock units up to the level of deferred stock units permitted in the Motorola Omnibus Incentive Plan of 2006.

 

Non-employee directors receive an annual grant of deferred stock units in the second quarter of the fiscal year. On May 6, 2008, each non-employee director received a deferred stock unit award of 11,696 shares of Common Stock. The number of deferred stock units awarded was determined by dividing $120,000 by the fair market value of a share of Common Stock on the date of grant (rounded up to the next whole number) based on the closing price on the date of grant. The deferred stock units are paid to the director in shares of Common Stock upon termination of service from the Motorola Board of Directors. Dividend equivalents are reinvested in additional deferred stock units subject to the same terms.

 

For a non-employee director who becomes a member of the Board of Directors after the annual grant of deferred stock units, the award will be pro-rated based on the number of months served ($10,000 per month) divided by the closing price of Motorola stock on the day of election to the Board.

 

As of January 1, 2006, non-employee directors are no longer eligible to participate in the Motorola Management Deferred Compensation Plan. Motorola does not currently have a non-equity incentive plan or pension plan for non-employee directors.

 

Non-employee directors do not receive any additional fees for attendance at meetings of the Board or its committees or for additional work done on behalf of the Board or a committee. Mr. Brown, Dr. Jha and Mr. Zander who are, or have been, employees of Motorola, receive no additional compensation for serving on the Board or its committees. Further, Mr. Meredith did not receive any additional compensation for Board service while he was Acting Chief Financial Officer.

 

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The following table further summarizes compensation paid to the non-employee directors during 2008 and to Mr. Zander, our former Chief Executive Officer, who served as Chairman of the Board until May 5, 2008.

 

 

 

 

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PROXY STATEMENT

 

 

 

 

 

 

 

 

 

In 1996, the Board terminated its retirement plan. In 1998, Ms. Lewent, Mr. Negroponte, Mr. Scott and Dr. J. White, the only current directors with interests in the plan at the time of termination, converted their accrued benefits in the retirement plan into shares of restricted Common Stock. They may not sell or transfer these shares and these shares are subject to repurchase by Motorola until such directors are no longer members of the Board because either: (1) they do not stand for re-election or are not re-elected, or (2) their disability or death. Accordingly, there are no current non-employee directors entitled to receive payment of retirement benefits.

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Non-employee directors are covered by insurance that provides accidental death and dismemberment coverage of $500,000 per person. The spouse of each such director is also covered by such insurance when traveling with the director on business trips for the Company. The Company pays the premiums for such insurance. The total premiums for coverage of all such non-employee directors and their spouses during the year ended December 31, 2008 was $2,660.

 

The Company has established written policies and procedures (the “Related Person Transaction Policy” or the “Policy”) to assist it in reviewing transactions in excess of $120,000 (“Transactions”) involving Motorola and its subsidiaries (collectively, the “Company”) and Related Persons (as defined below). This Policy supplements the Company’s other conflict of interest policies set forth in the Principles of Conduct for Members of the Motorola, Inc. Board of Directors and the Motorola Code of Business Conduct for employees and its other internal procedures. A summary description of the Related Person Transaction Policy is set forth below.

 

For purposes of the Related Person Transaction Policy, a Related Person includes the Company’s directors, director nominees and executive officers since the beginning of the Company’s last fiscal year, beneficial owners of 5% or more of any class of the Company’s voting securities (“5% Holder”) and members of their respective Immediate Family (as defined in the Policy).

 

The Policy provides that any Transaction since the beginning of the last fiscal year is to be promptly reported to the Company’s General Counsel. The General Counsel will assist with gathering important information about the Transaction and present the information to the applicable Board committee responsible for reviewing the Transaction. The appropriate Board committee will determine if the Transaction is a Related Person Transaction and approve, ratify or reject the Related Person Transaction. In approving, ratifying or rejecting a Related Person Transaction, the applicable committee will consider such information as it deems important to conclude if the transaction is fair to the Company. The Governance and Nominating Committee will make all determinations regarding transactions involving a director or director nominee. The Audit and Legal Committee will make all determinations involving an executive officer or 5% Holder.

 

The Company had no Related Person Transactions in 2008.

 

What is the Process for Identifying and Evaluating Director Candidates?

 

As stated in the Motorola, Inc. Board Governance Guidelines, when selecting directors, the Board and the Governance and Nominating Committee review and consider many factors, including: experience in the context of the Board’s needs; leadership qualities; diversity; ability to exercise sound judgment; existing time commitments; years to retirement age; and independence. It also considers ethical standards and integrity.

 

The Governance and Nominating Committee will consider nominees recommended by Motorola stockholders provided that the recommendation contains sufficient information for the Governance and Nominating Committee to assess the suitability of the candidate, including the candidate’s qualifications. Candidates recommended by stockholders that comply with these procedures will receive the same consideration that candidates recommended by the Committee and management receive.

 

The Governance and Nominating Committee considers recommendations from many sources, including members of the Board, management and search firms. From time-to-time, Motorola hires global search firms to help identify and facilitate the screening and interview process of director candidates. The search firm screens candidates based on the Board’s criteria, performs reference checks, prepares a biography for each candidate for the Committee’s review and helps set up interviews. The Committee and the Chairman of the Board conduct interviews with candidates who meet the Board’s criteria. The Committee has full discretion in considering its nominations to the Board.

 

 

 

TO APPROVE AN AMENDMENT TO THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF THE COMPANY’S COMMON STOCK FROM $3.00 PER SHARE TO $0.01 PER SHARE

 

The Board of Directors has approved, and recommends that the stockholders approve, an amendment to Article 4 of the Company’s Restated Certificate of Incorporation to change the par value of the Company’s Common Stock from $3.00 per share to $0.01 per share.

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The change to “$0.01 par value” Common Stock will have no impact on the value of the Company’s stock or the rights of its stockholders. It will, however, provide the Company with additional flexibility in utilizing its shares of Common Stock for various corporate purposes.

 

Par value is used to designate the lowest value for which a company can sell its shares and to value the shares on a company’s balance sheet. Historically, the concept of par value was to protect creditors and senior security holders by ensuring that when issuing its own shares a company received at least par value as consideration for the shares. As markets have become more liquid, with stock prices responding more rapidly to market developments, par value has become a generally outdated concept. Instead, for public companies like Motorola, the market sets the price at which stock may be issued or otherwise sold. For these reasons, the vast majority of companies today set their par value at $0.01 per share or even less.

 

Because of the Company’s current $3.00 par value and, in particular, the proximity of this par value to recent market trading prices for the Company’s Common Stock, the Company’s ability to issue stock, declare cash or stock dividends, or repurchase stock, could be hampered. The change in par value to $0.01 per share will give the Company greater flexibility for structuring future transactions and making future financial decisions.

 

The change in the par value of the Company’s stock from $3.00 per share to $0.01 per share will have no effect on the dollar amount of the Company’s total shareholders’ equity. If the change is approved, the Common Stock account on the Company’s balance sheet at $3 per share will be reduced to reflect the product of the number of shares outstanding and the new par value of $0.01 per share. The difference will be transferred to the capital surplus account.

 

The change in par value also will not change the number of authorized common shares. There will remain 4.2 billion authorized common shares, of which approximately 2,276,939,837 were outstanding on March 9, 2009. The change in par value will also have no impact on outstanding Company-issued stock options or restricted stock units.

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF THE COMPANY’S COMMON STOCK FROM $3 PER SHARE TO $0.01 PER SHARE. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE PAR VALUE OF THE COMPANY’S COMMON STOCK FROM $3 PER SHARE TO $0.01 PER SHARE.

 

 

AMENDMENT TO EXISTING EQUITY PLANS TO PERMIT A ONE-TIME STOCK OPTION EXCHANGE PROGRAM FOR EMPLOYEES (EXCLUDING EXECUTIVE OFFICERS AND DIRECTORS)

 

We are seeking stockholder approval of amendments to our existing equity plans (as described below) to allow for a one-time Stock Option Exchange Program (the “Program”). Under the Program, eligible employees would be permitted to exchange outstanding stock options granted prior to June 1, 2007, expiring after December 31, 2009 and with exercise prices equal to or greater than $12.00 per share (the “Eligible Options”), or higher, if the 52-week stock price high exceeds $12.00 at the start date of the Program, for a lesser number of stock options (the “Replacement Options”) or restricted stock units (the “Replacement RSUs” and collectively, “Replacement Awards”) to be granted following the expiration of a tender offer to be made to eligible employees. In no event will we include outstanding options with exercise prices that are below the 52-week stock price high. Our directors and executive officers (as defined under Rule 3b-7 of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) and members of the Motorola senior leadership team are not eligible to participate in the Program.

 

As a result of the financial performance of our Mobile Devices business, Motorola has had substantial operating losses over the last two years, contributing to a decline in our stock price. Factors contributing to the Mobile Devices’ financial results include limited product offerings in certain market segments, particularly 3G devices, including smartphones, as well as very low-tier products. More recently, there has been additional pressure on the share price due in part to several factors beyond the control of our employees and our current senior leadership team. Our Mobile Devices business has been adversely impacted by slowing consumer demand, lengthening replacement cycles, and reduced purchasing power in certain foreign countries associated with the ongoing global economic

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recession. Our Broadband Mobility Solutions business has performed well in recent years, but is now under increasing pressure as the recession impacts enterprise and government spending globally.

 

Our Co-CEOs, both of whom assumed their current roles in 2008, have taken several actions to address the unprecedented economic environment, as well as the challenges facing our Mobile Devices business. Specifically, in late 2008 and early 2009 we announced significant actions to accelerate the consolidation of our product platforms in our Mobile Devices business, and have refocused our investment and market priorities. These efforts will result in a leaner organization with a more competitive and cost-effective product portfolio. Additionally, we are making good progress in developing important new smartphones for 2009 and are pleased with the positive response from our customers to these new devices. Finally, we announced significant cost-reduction actions in late 2008 and in early 2009 across all of our businesses.

 

To date, we believe all of these actions, especially those related to Mobile Devices, have been positively received by the investment community as the right actions to take. We also believe that investors see our Broadband Mobility businesses as healthy, viable, and well-managed businesses with good long-term prospects. Despite these perspectives, and with the continuing challenges in the economic environment, an anticipated rebound has not occurred. As a result, the majority of the stock options currently held by our employees have exercise prices significantly above our current stock price.

 

The Program is structured as a value-for-value exchange. The Replacement Awards would be targeted at providing value that is, in the aggregate, not greater than the fair value of the exchanged options. This means that the employees who participate in the Program are expected to receive a number of Replacement Awards with an aggregate value that does not exceed the aggregate value of the options surrendered in the exchange. The Program is intended to encourage retention and build engagement among Motorola employees, in a manner that is substantially cost neutral and simple to communicate and implement.

 

Background

 

Our equity compensation programs are designed to attract, retain, and motivate the right people, in the right places, at the right time. Approximately 30,000 Motorola employees worldwide—about half of our workforce—participate in our equity grants, which are typically made in May of each year. Prior to 2008, stock options were the primary form of equity compensation granted to employees. As a result, as of February 27, 2009, approximately 226,293,294 options are outstanding to approximately 31,000 optionees. These options were granted under the Motorola Omnibus Incentive Plan of 2006 (the “2006 Plan”) and under the following prior plans which were merged into the 2006 Plan: the Motorola Omnibus Incentive Plan of 2003 (the “2003 Plan”), the Motorola Omnibus Incentive Plan of 2002 (the “2002 Plan”), the Motorola Omnibus Incentive Plan of 2000 (the “2000 Plan”), the Motorola Amended and Restated Incentive Plan of 1998 (the “1998 Plan”) (collectively, the “Prior Plans”) and the Motorola Compensation/Acquisition Plan of 2000 (the “C/A Plan” and, collectively, with the 2006 Plan and the Prior Plans, the “Equity Plans”).

 

Over the past three years, Motorola’s stock price has declined significantly, which has had a negative impact on our ability to retain and motivate employees through the use of stock options. As of February 27, 2009, the closing price of our common stock on the New York Stock Exchange was $3.52 and nearly 100% of our outstanding options were underwater. Approximately 53.1% of the stock options held by employees as of that date had exercise prices equal to or greater than $12.00 per share, were granted prior to June 1, 2007, and will expire after December 31, 2009.

 

The sustained decline in the price of Motorola stock has significantly weakened the retention value of a major component of employee compensation. Because such a large number of our outstanding options have exercise prices well above the current stock price, many employees believe their options are of little or no value. These options are no longer an effective means of retaining our key talent, but we will continue to recognize the compensation expense of these options as they are likely to remain unexercised until they expire. In addition, in our current economic climate, using cash compensation to improve the retention impact of our compensation programs is not desirable.

 

Benefits to Stockholders

 

We believe that our stockholders will benefit from the Program, as it will drive improved retention and engagement among a significant portion of our workforce, at substantially no change in cost. In an economic climate where we have recently made difficult decisions to suspend merit increases in many countries, freeze the U.S. defined benefit pension plan, and suspend the Company match in the U.S. 401(k), we feel the Program would improve retention and engagement through a

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PROXY STATEMENT

balanced approach that meets both employee and stockholder interests.

 

By structuring the Program as a value-for-value exchange, Motorola would restore economic value to the options held by employees, while not creating material additional compensation expense to Motorola. In addition, the Program will reduce outstanding stock option overhang and avoid the potential dilutive effects that would be associated with granting new options to supplement, rather than replace, outstanding options. Finally, Motorola is aware that stockholders generally do not believe that senior executives and directors should benefit from an option exchange program. Accordingly, directors, executive officers and members of the Motorola senior leadership team will not be eligible to participate in the Program.

 

We believe the Program would be beneficial to stockholders by cancelling a large number of outstanding options and issuing new options in their place. This allows Motorola to avoid potential additional dilution to our stockholders’ interests, while also allowing Motorola to recapture the value of compensation costs already being incurred for underwater options. Prior to January 1, 2006, the Company applied the intrinsic value method to all share-based compensation. On January 1, 2006, the Company began using FAS 123R for share-based compensation. Using these methods, we are required to recognize $910 million (net of forfeitures) in compensation expense relating to the Eligible Options, of which $769 million has already been recognized. The remaining $141 million would have to be recognized even if those outstanding awards are never exercised because they are underwater.

 

Benefits to Employees

 

The Program would benefit our employees by providing a renewed stake in the future success of Motorola. The Replacement Options would have a new exercise price that reflects Motorola’s stock price at the time the Program is completed. However, because the Program is structured as a value-for-value exchange, eligible employees who participate in the Program would receive a smaller number of Replacement Awards than those that are surrendered. The Replacement Awards also would carry a new vesting schedule, which will foster retention by requiring employees to continue employment in order to realize the value of the new awards.

 

If our stockholders do not approve the amendments to the Equity Plans authorizing the Program, Eligible Options will remain outstanding and in effect in accordance with their existing terms. We will continue to recognize compensation expense for these Eligible Options, even though the Eligible Options may have little or no retention or incentive value.

 

Overview of the Option Exchange Program

 

If stockholders approve the requisite amendments to our Equity Plans, the Compensation and Leadership Committee (the “Compensation Committee”) of the Company’s Board of Directors will determine the date upon which the Program will begin. At that time, Motorola will file written materials relating to the Program with the United States Securities and Exchange Commission (the “SEC”) as part of a tender offer statement on Schedule TO. Should Motorola’s stock price increase significantly, the Company will reassess the advisability of implementing the Program. After we file materials with the SEC, we will send to eligible employees written materials explaining the precise terms and timing of the Program. Documents filed relating to the Program will be available to the public, including eligible employees, at www.sec.gov.

 

Under the terms of the Program, eligible employees who elect to participate would surrender Eligible Options they currently hold, and in return would receive new Replacement Awards under the 2006 Plan. Motorola is not taking advantage of very recent declines in stock price. Therefore, Motorola is not including any recent stock option grants in its option exchange program. Specifically, Motorola will not include any stock option grants made on or after June 1, 2007. In some non-U.S. jurisdictions, Eligible Options may be exchanged for a lesser number of Replacement RSUs granted under the 2006 Plan, based on local regulatory, tax, accounting or administrative considerations. The number of Replacement Awards that would be received will be determined by an exchange ratio approved by the Compensation Committee after stockholder approval of the Program, based on the price of Motorola stock at the time the Program is initiated, and the exercise price and remaining term of the Eligible Options. Avoiding significant incremental expense will be a significant factor in determining the exchange ratio. In all cases, the number of Replacement Awards received will be fewer than the number of Eligible Options surrendered.

 

Based on a $3.678 stock price at the time of the exchange (using the 10-day average stock price close as of February 27, 2009), the exchange ratio for the Replacement Options would vary from 2-to-1 to 77-to-1 and the exchange ratio for the Replacement RSUs would vary from 4.5-to-1 to 165.5-to-1, depending on the exercise price and remaining term

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of the eligible options. The actual exchange ratios will be established at the time the Program is initiated and will not include outstanding options that have an exercise price below the 52-week stock price high.

 

As of December 31, 2008, there were approximately 228,145,000 options and 32,230,000 shares underlying other types of stock awards outstanding under the Equity Plans. Dividend equivalents are not permitted on stock options or SARs. Of the outstanding options, up to 120,193,022 (or 52.7%) would be eligible for exchange under the proposed Program. If all of the Eligible Options were exchanged for Replacement Options at the estimated exchange ratios described below, the number of Replacement Options granted would be 34,131,051. If all of the Eligible Options that have currently been deemed eligible for Replacement RSUs were exchanged at the estimated exchange ratios described below, the number of Replacement RSUs granted would be 28,779.

 

Up to 52 million of the shares underlying Eligible Options that are surrendered under the Program would be returned to the 2006 Plan and would be eligible for future awards under the 2006 Plan.

 

The actual number of Eligible Options will depend on the number of countries where we determine it to be practical and desirable to offer the Program.

 

For example purposes, after the exchange (assuming all Eligible Options are tendered and without including any grants after December 31, 2008), there will be 124,200,000 shares available for grant (72,200,000 shares available for grant as of December 31, 2008 plus 52,000,000 shares returned to the plan), 142,083,029 options and SARs outstanding (228,145,000 as of December 31, 2008 less 120,193,022 tendered options plus 34,131,051 options granted as part of the exchange) and 32,258,779 full value awards outstanding (32,230,000 as of December 31, 2008 plus 28,779 granted as part of the exchange). These outstanding options and SARs would have a weighted average exercise price of $12.53 and a weighted average remaining term of 6 years. Please see the table below for a side-by-side comparison of before and after the exchange:

 

 

Detailed Description of the Option Exchange Program

 

Timing

 

If the proposed amendments to the Equity Plans are approved by the stockholders, upon approval of the specific terms of the Program by the Compensation Committee, we will file an Offer of Exchange with the SEC. We will then distribute the Offer of Exchange to eligible employees and initiate the exchange period. Eligible employees will be given at least 20 business days from the date the Program is initiated to elect to exchange any or all of their Eligible Options for Replacement Awards. We expect to implement the Option Exchange Program as soon as administratively possible after stockholder approval on May 4, 2009, but in any event it will be implemented no later than 12 months following the date stockholders approve the proposed amendments to the Equity Plans.

 

Eligible Employees

 

The Program would be open to all of our employees worldwide who are employed at the beginning and the end of the exchange period and on the new option grant date, and who hold Eligible Options, except for the following:

 

 

 

 

We intend to make the Program available to our employees who are located outside of the United States, where permitted by local law and where we determine it would be practicable to do so. It is possible that we would need to make modifications to the terms of the Program offered to employees in countries outside the United States either to comply with local requirements, or for tax or accounting reasons. In addition, we may exclude employees in certain non-U.S. jurisdictions from the Program if local law, expense, complexity, administrative burden or similar considerations would make their participation illegal, infeasible or impractical. The tax consequences for participating non-U.S. employees may differ from the U.S. federal income tax consequences.

 

Up to 30,000 employees would be eligible for the Program. The Program will not be made available to former employees or retirees.

 

Replacement Awards

 

Replacement Options would be used for eligible employees located in the United States and are

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PROXY STATEMENT

anticipated to be used in most of the countries with eligible employees covered by the Program. It is possible that certain terms of the Program may need to be modified in countries outside the United States in order to comply with local requirements, or for tax, accounting or administrative reasons. This could include, in some countries, the offering of Replacement RSUs (instead of Replacement Options) in exchange for Eligible Options.

 

Exchange Ratios

 

The number of Eligible Options that an eligible employee must surrender to obtain Replacement Awards is called the Exchange Ratio. The Exchange Ratio will, in all cases, require an employee to exchange a larger number of Eligible Options for a smaller number of Replacement Awards. The Exchange Ratio will be determined by the Compensation Committee prior to the commencement of the Program, and will be based on the exercise price and the remaining term of the Eligible Option. The options subject to the Program will be valued using the Black-Scholes option pricing model. The model uses the following variables: stock price volatility, risk free interest rates, option term, option exercise price, dividend yield and stock price on the date of grant.

 

Based on a $3.678 stock price at the time of the exchange (using the 10-day average stock price close as of February 27, 2009), the exchange ratios of surrendered Eligible Options to new Replacement Options would vary from 2-to-1 to 77-to-1 and the exchange ratio for the Replacement RSUs would vary from 4.5-to-1 to 165.5-to-1.

 

STOCK OPTION EXCHANGE RATIOS

 

The table below displays the Replacement Option exchange ratios for our estimated number of outstanding eligible options. The actual number of Eligible Options may vary based on the determination of eligibility for employees who are located outside of the United States.

 

The Program is structured as a value-for-value exchange. The Replacement Options would be targeted at providing value that is, in the aggregate, not greater than the fair value of the exchanged options. The majority of the Eligible Options have a remaining term that is greater than the 5-year term of the Replacement Options and have a weighted average remaining term of approximately 5.72 years.

 

 

For purposes of example only, if a participant exchanged two grants of Eligible Options, one grant of 500 options falling in the Tier 1 category and one grant of 500 options falling in the Tier 3 category, the Replacement Option grant would be a total of 305 new stock options. The new options would have an exercise price equal to the closing price of Motorola Common Stock on the grant date, vest 50% per year at the first and second anniversary of the grant, and would have a term of 5 years. Below is an example of the calculation:

 

 

The same methodology used to determine the exchange ratios in the above example will be used to determine the actual exchange ratios under the Program.

 

RESTRICTED STOCK UNIT EXCHANGE RATIOS

 

The table below displays the Replacement RSU exchange ratios for our estimated number of outstanding eligible options that have been deemed eligible for Replacement RSUs. The actual number of Eligible Options eligible for Replacement RSUs may vary based on the determination of eligibility for employees who are located outside of the United States.

 

The Program is structured as a value-for-value exchange. The Replacement RSUs would be targeted at providing value that is, in the aggregate, not greater than the fair value of the exchanged options.

 

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PROXY STATEMENT

 

For purposes of example only, if a participant exchanged two grants of Eligible Options, one grant of 500 options falling in the Tier 1 category and one grant of 500 options falling in the Tier 3 category, the Replacement RSU grant would be a total of 136 new RSUs that vest 50% per year at the first and second anniversary of the grant. Below is an example of the calculation:

 

 

The same methodology used to determine the exchange ratios in the above example will be used to determine the actual exchange ratios under the Program.

 

Participation

 

Participation in the Program is voluntary. Under the Program, eligible employees will have the choice, on a grant by grant basis, to exchange any or all of their Eligible Options. However, eligible employees would not be permitted to exchange a portion of a single option grant for Replacement Awards; but rather would be required to exchange all or none of the Eligible Options within a single grant.

 

Vesting, Term and Other Provisions of Replacement Awards

 

The Replacement Awards would be subject to a new vesting schedule and would be unvested at the time of grant, regardless of whether the Eligible Options exchanged were partly or wholly vested. The Replacement Awards would vest 50% per year on the first and second anniversary of the grant, and Replacement Options would have a term of 5 years. At the time the Program is initiated, the Eligible Options that are expected to be eligible for Replacement Awards will have a weighted average remaining vesting period of approximately 6.81 months and a weighted average remaining term of approximately 5.72 years.

 

The 5-year term of the Replacement Options is shorter than the weighted average remaining term of the Eligible Options that are expected to be eligible for Replacement Awards. Additionally, the vesting period of the Replacement Awards is longer than the weighted average remaining vesting period of the Eligible Options that are expected to be eligible for Replacement Awards.

 

The other terms and conditions of the Replacement Awards would be governed by the 2006 Plan and would be outlined in an award agreement to be entered into as of the grant date.

 

Cancellation of Surrendered Eligible Options

 

All surrendered options would be cancelled at the time of the proposed exchange. Up to 52 million of the shares underlying Eligible Options that are surrendered under the Program would be returned to the 2006 Plan and would be eligible for future awards under the 2006 Plan. Eligible Options that are not surrendered will not be affected and will remain exercisable according to their original terms.

 

Accounting Treatment

 

The Program will be accounted for under Statement of Financial Accounting Standards No. 123 (revised), Share-Based Payment (FAS 123R). Under these rules, the exchange of options will be characterized as a modification of the exchanged options. Any difference between the fair value of the new Replacement Awards over the fair value of the exchanged options at the time of the exchange will result in a modest additional compensation expense. The actual amount of the compensation expense will depend on participation levels and on the exchange ratios, Black-Scholes values, and vesting schedules established at the time of the exchange. We do not expect the additional compensation expense, if any, to be material to Motorola.

 

U.S. Federal Income Tax Consequences

 

The exchange of Eligible Options should be treated as a non-taxable exchange and neither Motorola nor our employees should recognize any income for U.S. federal income tax purposes upon the grant of the Replacement Options. However, the tax consequences for participating non-U.S. employees may differ from U.S. federal income tax consequences.

 

Potential Modification to Terms to Comply with Governmental Requirements

 

If the Company commences the Program, the terms of the Program will be described in a

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PROXY STATEMENT

Schedule TO that will be filed with the SEC before or concurrent with the initiation of the exchange period. Although we do not expect the SEC to require any modifications, it is possible that we would need to alter the terms of the Program to comply with comments from the SEC. In addition, we intend to make the Program available to certain employees located outside the United States, where permitted by local law and where we determine it would be practical and desirable to do so. It is possible that we would need to make modifications to the terms offered to employees in countries outside the United States either to comply with local requirements, or for tax or accounting reasons. Motorola also reserves the right to not implement the Program in any country where it would be impractical or inadvisable to do so.

 

Effect on Stockholders

 

Although we are unable to predict the precise impact of the Program on our stockholders because we are unable to predict how many or which employees will exchange their eligible awards, we have designed the Program in a manner intended to ensure that the value of the equity granted in the Program is no greater than the value of the eligible awards surrendered. The Program is intended to restore competitive and appropriate equity incentives for our employees, reduce our existing overhang and recapture value for compensation expense already being incurred.

 

Text of Amendment of Existing Plans

 

In order to permit the Company to implement the Program in compliance with its Equity Plans and applicable New York Stock Exchange listing rules, the Compensation Committee recommended and the Board approved amendments to the Company’s Equity Plans, subject to approval of the amendments by the Company’s stockholders. The Company is seeking stockholder approval to amend each of the Company’s Equity Plans to allow for the Program. The amendments permitting the exchange of Stock Options (as defined below) would replace the last sentence of Section 6 of the 2006 Plan, the 2003 Plan, the 2002 Plan, the 2000 Plan and the C/A Plan and Section 5 of the Restated 1998 Plan, respectively. By amending the Restated 1998 Plan, the amendment will be inserted as a new sentence in place of the last clause of Section 13.3 of the Company’s 1998 Incentive Plan (the Restated 1998 Plan prior to its amendment and restatement) (“1998 Plan”), and will become a term of the stock options which remain outstanding under the 1998 Plan. The amendment will read as follows:

 

Notwithstanding any other provision of the Plan to the contrary, upon approval of the Company’s stockholders, the Committee may provide for, and the Company may implement, a one time only option exchange offer, pursuant to which certain outstanding Stock Options could, at the election of the person holding such Stock Option, be tendered to the Company for cancellation in exchange for the issuance of a lesser amount of Stock Options with a lower exercise price, or other equity benefit as approved by the Committee, provided that such one time only option exchange offer is implemented within twelve months of the date of such stockholder approval.

 

Summary of the 2006 Plan

 

The following is a summary of the material terms of the 2006 Plan as proposed to be amended and is qualified in its entirety by reference to the 2006 Plan that was filed electronically with this Proxy Statement with the Securities and Exchange Commission. Such text is not included in the printed version of this proxy statement. A copy of the 2006 Plan is available from the Company’s Secretary at the address on the cover of this document.

 

The 2006 Plan permits awards of Stock Options, Stock Appreciation Rights (“SARs”), Restricted Stock and Restricted Stock Units, Deferred Stock Units, Performance Shares, Performance Cash Awards, Annual Management Incentive Awards, and other Stock Awards and Cash Awards as defined and described below.

 

Awards and grants under the 2006 Plan are referred to as “Benefits.” Those eligible for Benefits under the 2006 Plan are referred to as “Participants.” Participants include all employees and non-employee directors of the Company and employees of any subsidiary in which the Company owns a 50% or greater interest which the Company consolidates for financial reporting purposes.

 

Shares Available for Issuance

 

The total number of shares reserved for issuance under the 2006 Plan after the merger of the Prior Plans was approximately 140.5 million shares (based upon 80 million shares reserved for issuance under the 2006 Plan and approximately 60.5 million shares available under the Prior Plans as of April 30, 2006), plus any shares that became available for issuance pursuant to the reusage provisions discussed below.

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PROXY STATEMENT

 

Administration and Eligibility

 

The 2006 Plan is administered by the Compensation Committee. The Compensation Committee approves the aggregate Benefits and the individual Benefits for most senior elected officers and non-employee directors. The Compensation Committee delegates some of its authority under the 2006 Plan in accordance with the terms of the 2006 Plan.

 

No Participant may receive in any calendar year: (i) Stock Options relating to more than 3 million shares, (ii) Restricted Stock or Restricted Stock Units relating to more than 1.5 million shares, (iii) SARs relating to more than 3 million shares, (iv) Performance Shares relating to more than 1.5 million shares, or (v) Deferred Stock Units relating to more than 50,000 shares. No non-employee director may receive in any calendar year: (i) Stock Options relating to more than 50,000 shares, or (ii) Deferred Stock Units relating to more than 50,000 shares. (Each of the above limits is subject to the adjustment provisions discussed below).

 

Benefits

 

Stock Options

 

Grants of Options

 

The Compensation Committee is authorized to grant Stock Options to Participants (“Optionees”), which may be either Incentive Stock Options (“ISOs”) or Nonqualified Stock Options (“NSOs”). NSOs and ISOs are collectively referred to as “Stock Options”. The exercise price of any Stock Option must be at least equal to the fair market value of the shares on the date of the grant. At the time of grant, the Compensation Committee in its sole discretion will determine when Options are exercisable and when they expire, provided the term cannot exceed 10 years.

 

For purposes of the 2006 Plan, fair market value shall be determined in such manner as the Compensation Committee may deem equitable, or as required by applicable law or regulation.

 

Payment of Option Price

 

Payment for shares purchased upon exercise of a Stock Option must be made in full at the time of purchase. Payment may be made: (a) in cash, (b) by the transfer to the Company of shares owned by the Participant having a fair market value on the date of exercise equal to the option exercise price (or certification of ownership of such shares), (c) to the extent permitted by applicable law, by delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to the Company, or (d) in such other manner as may be authorized by the Compensation Committee.

 

SARs

 

The Compensation Committee has the authority to grant SARs to Participants and to determine the number of shares subject to each SAR, the term of the SAR, the time or times at which the SAR may be exercised, and all other terms and conditions of the SAR. A SAR is a right, denominated in shares, to receive, upon exercise of the right, in whole or in part, without payment to the Company, an amount, payable in shares, in cash or a combination thereof, that is equal to: (i) the fair market value of Common Stock on the date of exercise of the right, minus (ii) the fair market value of Common Stock on the date of grant of the right, multiplied by the number of shares for which the right is exercised. Except with respect to SARs issued in substitution for Stock Options (see the following paragraph), the exercise price of any SAR must be at least equal to the fair market value of the shares on the date of the grant.

 

The Compensation Committee also may, in its discretion, substitute SARs which can be settled only in Common Stock for outstanding Stock Options. The grant price of the substituted SAR shall be equal to the exercise price of the related Stock Option. Additionally, the other terms and conditions of any substitute SAR shall be substantially the same as those applicable to the Stock Option that it replaces and the term of the substitute SAR shall not exceed the term of the Stock Option that it replaces.

 

Prohibition on Repricing of Stock Options and SARs

 

The Compensation Committee is prohibited from cancelling any outstanding Stock Option or SAR for the purpose of reissuing the option or SAR to the participant at a lower option exercise price or SAR grant price or reducing the exercise price of an outstanding option or grant price of an outstanding SAR. However, upon approval of the Company’s stockholders of this proposal to amend the Equity Plans, the Compensation Committee may provide for, and the Company may implement, a one time only exchange offer, pursuant to which certain outstanding options could, at the election of the person holding such option, be tendered to the Company for cancellation in exchange for the issuance of a lesser amount of options with a lower exercise price, provided that such one time only exchange offer is implemented within twelve months of the date of such stockholder approval.

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PROXY STATEMENT

 

Restricted Stock and Restricted Stock Units

 

Restricted Stock consists of shares which are transferred or sold by the Company to a Participant, but are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the Participant. Restricted Stock Units are the right to receive shares at a future date after vesting upon the attainment of certain conditions and satisfaction of certain restrictions. The Compensation Committee determines the eligible Participants to whom, and the time or times at which, grants of Restricted Stock or Restricted Stock Units will be made, the number of shares or units to be granted, the price to be paid, if any, the time or times within which the shares covered by such grants will be subject to forfeiture, the time or times at which the restrictions will terminate, and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with the Company, the passage of time or other restrictions or conditions. Awards of Restricted Stock and Restricted Stock Units may include the right to be credited with dividends or dividend equivalents.

 

Deferred Stock Units

 

Deferred Stock Units provide a Participant a vested right to receive shares in lieu of other compensation at termination of employment or service or at a specific future designated date. Deferred Stock Units may include the right to be credited with dividend equivalents in accordance with the terms and conditions of the units.

 

Performance Shares

 

A Participant who is granted Performance Shares has the right to receive shares or cash or a combination of shares and cash equal to the fair market value of such shares at a future date in accordance with the terms of such grant and upon the attainment of performance goals specified by the Compensation Committee for a performance period of at least 12 months. The Compensation Committee may, in its discretion, make a cash payment equal to the fair market value of shares of Common Stock otherwise required to be issued to a Participant pursuant to a Performance Share award.

 

Performance Cash Awards

 

A Participant who is granted a Performance Cash Award has the right to receive a payment in cash upon the attainment of performance goals specified by the Compensation Committee for a performance period of at least 12 months. The Compensation Committee may substitute actual shares of Common Stock for the cash payment otherwise required to be made pursuant to a Performance Cash Award.

 

Performance Goals

 

Awards of Restricted Stock, Restricted Stock Units, Performance Shares, Performance Cash Awards and other incentives under the 2006 Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code, including, but not limited to: cash flow; cost; ratio of debt to debt plus equity; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; sales growth; price of the Common Stock; return on net assets, equity or stockholders’ equity; market share; or total return to stockholders (“Performance Criteria”).

 

Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Performance Criteria shall be calculated in accordance with (a) the Company’s financial statements (including without limitation the Company’s “consolidated earnings before income taxes” as defined in the following section), (b) Generally Accepted Accounting Principles, or (c) under an objective methodology established by the Compensation Committee prior to the issuance of an award which is consistently applied.

 

Annual Management Incentive Awards

 

The Compensation Committee has the authority to grant Management Incentive Awards to designated executive officers of the Company or any subsidiary.

 

Management Incentive Awards will be paid out of an incentive pool equal to five percent of the Company’s “consolidated earnings before income taxes” for each calendar year.

 

The Compensation Committee will allocate an incentive pool percentage to each designated executive officer for each calendar year. In no event, may the incentive pool percentage for any one executive officer exceed 30% of the total pool. For purposes of the 2006 Plan, “consolidated earnings before income taxes” will mean the consolidated earnings before income taxes of the Company, computed in accordance with Generally Accepted Accounting Principles, but shall exclude the effects of the following items, if and only if, such items are separately identified in the Company’s quarterly

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PROXY STATEMENT

earnings releases: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss, (ii) gains or losses on the disposition of a business or investment, (iii) changes in tax or accounting regulations or laws, or (iv) the effect of a merger or acquisition. The executive officer’s incentive award then will be determined by the Compensation Committee based on the executive officer’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Compensation Committee. In no event may the portion of the incentive pool allocated to an executive officer who is subject to Section 162(m) of the Code be increased in any way, including as a result of the reduction of any other executive officer’s allocated portion.

 

Stock Awards

 

The Compensation Committee may award shares of Common Stock to Participants without payment therefore as additional compensation for service to the Company or a subsidiary. Stock Awards may be subject to other terms and conditions, which may vary from time to time and among employees, as the Compensation Committee determines to be appropriate.

 

Cash Awards

 

A Cash Award consists of a monetary payment made by the Company to an employee as additional compensation for his or her services to the Company or a subsidiary. Cash Awards may be subject to other terms and conditions, which may vary from time to time and among employees, as the Compensation Committee determines to be appropriate.

 

Amendment of the 2006 Plan

 

The Board or the Compensation Committee has the right and power to amend the 2006 Plan, provided, however, that neither the Board nor the Compensation Committee may amend the 2006 Plan in a manner which would impair or adversely affect the rights of the holder of a Benefit without the holder’s consent, except that the Compensation Committee may, in its discretion, substitute SARs which can be settled only in stock for outstanding Stock Options without a Participant’s consent, as described above. The Company shall obtain stockholder approval of any amendment of the 2006 Plan to the extent necessary to comply with applicable laws, regulations or stock exchange rules.

 

Termination of the 2006 Plan

 

The Board may terminate the 2006 Plan at any time. The Plan is scheduled to terminate on February 23, 2016, the tenth anniversary of its adoption by the Board. Termination will not in any manner impair or adversely affect any Benefit outstanding at the time of termination.

 

Change in Control

 

Upon the occurrence of a Change in Control (as defined in the 2006 Plan), all outstanding Stock Options and SARs shall become vested and exercisable, all restrictions on Restricted Stock and Restricted Stock Units shall lapse, all performance goals shall be deemed achieved at target levels and all other terms and conditions met, all Performance Shares shall be delivered, all Performance Cash Awards, Deferred Stock Units and Restricted Stock Units shall be paid out as promptly as practicable, all Annual Management Incentive Awards shall be paid out at target levels (or earned levels, if greater) and all other terms and conditions deemed met, and all Other Stock or Cash Awards shall be delivered or paid. The treatment of outstanding Benefits set forth above is referred to herein as “Accelerated Treatment”. Accelerated Treatment shall not apply if and to the extent that such Benefits are assumed by the successor corporation (or parent thereof) or are replaced with an award that preserves the value of the award existing at the time of the Change in Control and provides for subsequent payout in accordance with the same vesting schedule applicable to the original Benefit; provided, however, that with respect to any awards that are assumed or replaced, such assumed or replaced awards must provide for the Accelerated Treatment with respect to any Participant that is involuntarily terminated (for a reason other than Cause (as defined in the 2006 Plan)) or quits for Good Reason (as defined in the 2006 Plan) within 24 months of the Change in Control. The Change in Control provision under the 2006 Plan is commonly known as a “double trigger change in control provision”.

 

Adjustments

 

If there is any change in the number, class, market price or terms of the Common Stock by reason of any stock dividend, stock split, recapitalization, reorganization, merger, consolidation, spin-off, disaffiliation of a subsidiary, combination of shares, exchange of shares, stock rights offering or other similar event or any distribution to the holders of shares of Common Stock other than a regular cash dividend, the Compensation Committee shall make such substitution or adjustment in the number of or class of shares which may be issued under the 2006 Plan in the aggregate or to any one Participant in any calendar year and in the number, class, price or terms of shares subject to outstanding awards granted under the 2006 Plan as it deems appropriate.

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PROXY STATEMENT

 

In direct connection with the sale, lease, distribution to stockholders, outsourcing arrangement or any other type of asset transfer or transfer of any portion of a facility or any portion of a discrete organizational unit of the Company or a subsidiary, the Compensation Committee may authorize the assumption or replacement of affected Participants’ awards by the spun-off facility or organization or by the entity that controls the spun-off facility or organizational unit following disaffiliation.

 

In the event of any merger, consolidation, or reorganization of the Company with or into another corporation which results in the Company’s outstanding Common Stock being converted into or exchanged for different securities, cash, or other property, there shall be substituted on an equitable basis as determined by the Compensation Committee, for each share of Common Stock subject to a Benefit, the number and kind of shares of stock, other securities, cash, or other property to which holders of Common Stock of the Company are entitled pursuant to the transaction.

 

Substitution and Assumption of Benefits

 

Either the Board or the Compensation Committee may authorize the issuance of Benefits in connection with the assumption of, or substitution for, outstanding benefits previously granted to individuals who become employees of the Company or any subsidiary as the result of any merger, consolidation, acquisition of property or stock, or reorganization other than a Change in Control, upon such terms and conditions as it deems appropriate. To the extent permitted by Section 303A.08 of the Corporate Governance Standards of the New York Stock Exchange, any substitute awards granted under the 2006 Plan shall not count against the share limitations set forth herein.

 

Reusage

 

If a Stock Option granted under the 2006 Plan or the Prior Plans expires or is terminated, surrendered or canceled without having been fully exercised or if Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance Shares or SARs granted under the 2006 Plan or the Prior Plans are forfeited or terminated without the issuance of all of the shares subject thereto, the shares covered by such Benefits will again be available for use under the 2006 Plan (to the extent permitted under the terms of the Prior Plans if the original award occurred under such a Plan). Shares covered by a Benefit granted under the 2006 Plan or the Prior Plans will not be counted as used unless and until they are actually issued and delivered to a Participant. Any shares of Common Stock covered by a SAR shall be counted as used only to the extent shares are actually issued to the Participant upon exercise of the SAR. Shares exchanged by an optionee as full or partial payment of the exercise price under any Stock Option exercised under the 2006 Plan, shares withheld to pay withholding taxes in connection with the exercise or payment of a Benefit will not be counted as used. Shares covered by a Benefit that is settled in cash will not be counted as used.

 

U.S. Federal Income Tax Consequences

 

The Company has been advised by counsel that the federal income tax consequences as they relate to Benefits are as follows:

 

ISOs

 

An Optionee does not generally recognize taxable income upon the grant or upon the exercise of an ISO. Upon the sale of ISO shares, the Optionee recognizes income in an amount equal to the difference, if any, between the exercise price of the ISO shares and the fair market value of those shares on the date of sale. The income is taxed at long-term capital gains rates if the Optionee has not disposed of the stock within two years after the date of the grant of the ISO and has held the shares for at least one year after the date of exercise and the Company is not entitled to a federal income tax deduction. The holding period requirements are waived when an Optionee dies.

 

The exercise of an ISO may in some cases trigger liability for the alternative minimum tax.

 

If an Optionee sells ISO shares before having held them for at least one year after the date of exercise and two years after the date of grant (a “disqualifying disposition”), the Optionee recognizes ordinary income to the extent of the lesser of: (i) the gain realized upon the sale; or (ii) the difference between the exercise price and the fair market value of the shares on the date of exercise. Any additional gain is treated as long-term or short-term capital gain depending upon how long the Optionee has held the ISO shares prior to disposition. In the year of a disqualifying disposition, the Company receives a federal income tax deduction in an amount equal to the ordinary income that the Optionee recognizes as a result of the disposition.

 

NSOs

 

An Optionee does not recognize taxable income upon the grant of an NSO. Upon the exercise of such a Stock Option, the Optionee recognizes ordinary income to the extent the fair market value of the shares received upon exercise of the NSO on the date of exercise exceeds the exercise price. The Company receives an income tax deduction in an amount equal to the ordinary

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PROXY STATEMENT

income that the Optionee recognizes upon the exercise of the Stock Option.

 

Restricted Stock

 

A Participant who receives an award of Restricted Stock does not generally recognize taxable income at the time of the award. Instead, the Participant recognizes ordinary income in the first taxable year in which his or her interest in the shares becomes either: (i) freely transferable; or (ii) no longer subject to substantial risk of forfeiture. The amount of taxable income is equal to the fair market value of the shares less the cash, if any, paid for the shares.

 

A Participant may elect to recognize income at the time he or she receives Restricted Stock in an amount equal to the fair market value of the Restricted Stock (less any cash paid for the shares) on the date of the award.

 

The Company receives a compensation expense deduction in an amount equal to the ordinary income recognized by the Participant in the taxable year in which restrictions lapse (or in the taxable year of the award if, at that time, the Participant had filed a timely election to accelerate recognition of income).

 

Other Benefits

 

In the case of an exercise of a SAR or an award of Restricted Stock Units or Deferred Stock Units, Performance Shares, Common Stock or a Cash Award, the Participant will generally recognize ordinary income in an amount equal to any cash received and the fair market value of any shares received on the date of payment or delivery. In that taxable year, the Company will receive a federal income tax deduction in an amount equal to the ordinary income which the Participant has recognized.

 

Summary of the Prior Plans

 

The material terms of the 2003 Plan, the 2002 Plan, the 2000 Plan, the C/A Plan and the Restated 1998 Plan are substantially similar to the material terms of the 2006 Plan described above, except with respect to available shares under the plans, numerical limitations on individual awards, Change in Control, Eligibility and Benefits that may be granted under the Plan. With respect to the C/A Plan, Motorola directors and officers are not eligible to participate. In addition, the only benefits that may be granted under the Restated 1998 Plan are Stock Options and SARs. As noted above, the Replacement Awards under the Program would be granted under the 2006 Plan and not under any of the Prior Plans or the C/A Plan.

 

In the event of a Change in Control (as defined under the 2003 Plan, the 2002 Plan, the 2000 Plan, the C/A Plan and the Restated 1998 Plan which is substantially the same as defined under the 2006 Plan), all outstanding Benefits will receive Accelerated Treatment as described above under the description of Change in Control under the 2006 Plan. Such Accelerated Treatment is not subject to forfeiture. This Change in Control provision is commonly known as a “single trigger change in control provision.”

 

In the event of Change in Control as defined under the 1998 Plan, each Stock Option outstanding on the date on which the Change in Control occurs will immediately become exercisable in full for the remainder of its term and each participant holding such Stock Options will have the right, upon his or her election made during a period of 60 days following the date on which the Change in Control occurs, to have the Company purchase any or all such Stock Options for an immediate lump-sum cash payment equal to the product of the (1) the excess, if any, of the higher of (i) the fair market value on the date immediately prior to the date of payment, or if the shares of the Company’s Common Stock did not trade on such date, on the last previous day on which the shares of the Company’s Common Stock traded prior to such date, or (ii) the highest per share price for the Company’s Common Stock actually paid in connection with the Change in Control, over the per share exercise price of each such Stock Option held, and (2) the number of shares covered by each such stock option. For purposes of the 1998 Plan, a Change of Control is defined as (i) any change in the person or group that possesses, directly or indirectly, the power to direct or cause the direction of the management and the policies of the Company, whether through the ownership of voting securities, by contract or otherwise; (ii) the acquisition, directly or indirectly, of securities of the Company representing at least 20 percent of the combined voting power of the outstanding securities of the Company (other than by the Company, or any employee benefit plan of the Company); (iii) certain mergers and consolidations involving the Company; (iv) the sale or other disposition of all or substantially all of the Company’s assets; (v) a liquidation or dissolution of the Company approved by its stockholders; and (vi) a change in the majority of the board in existence prior to the first public announcement relating to any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board of the Company), contested election or substantial stock accumulation. Fair Market Value for purposes of the 1998 Plan is defined as the

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PROXY STATEMENT

average of the high and low sale prices of shares of the Company’s common stock as reported for the New York Stock Exchange—Composite Transactions on a given date or in the absence of sales on a given date, the average of the high and low sale prices (as so reported) for the New York Stock Exchange—Composite Transactions on the previous day on which a sale occurred prior to such date.

 

New Plan Benefits

 

All Benefits made under the 2006 Plan are made at the discretion of the Compensation Committee. Awards made under the 2006 Plan in connection with the Program will be determined by the extent to which eligible employees participate in the Program. Therefore, the benefits and amounts that will be received or allocated under the 2006 Plan in connection with the Program are not determinable at this time. In addition, directors, executive officers and members of the Motorola senior leadership team are not eligible to participate in the Program.

 

Approval by Stockholders

 

This proposal to amend the Equity Plans must be approved by the affirmative vote of a majority of the outstanding shares represented at the meeting and entitled to vote. If stockholders approve this proposal, the Board and the Compensation Committee intend to commence the Program as soon as practicable after the Annual Meeting. If stockholders do not approve this proposal, the Program will not take place.

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO EXISTING EQUITY PLANS TO PERMIT A ONE-TIME STOCK OPTION EXCHANGE PROGRAM. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE AMENDMENT TO EXISTING EQUITY PLANS TO PERMIT A ONE-TIME STOCK OPTION EXCHANGE PROGRAM.

 

 

AMENDMENT TO THE MOTOROLA EMPLOYEE STOCK PURCHASE PLAN OF 1999

 

The Board of Directors believes it is in the best interests of the Company to encourage stock ownership by employees of the Company. The Board of Directors has approved, subject to stockholder approval, amending the Motorola Employee Stock Purchase Plan of 1999 (the “MOTshare Plan” or the “Plan”) to increase the aggregate number of shares of Common Stock available for sale to employees by an additional 75 million shares. The Plan was initially adopted in 1999 and authorized the sale to employees of up to an aggregate of 54.3 million shares of Common Stock issued under the Plan. Both the Board of Directors and the stockholders in 2002 and 2007 approved amending the Plan to increase the aggregate number of shares of Common Stock available for sale to employees by 50 million shares each time.

 

As of March 1, 2009, the Company had issued and employees had purchased approximately 123.7 million shares of the 154.3 million total shares authorized to date under the Plan. The Company estimates that an additional 28.4 million shares will be issued and purchased for the six-month purchase period ending March 31, 2009. Accordingly, there is the possibility that, without this amendment, there would be insufficient authorized shares for all issuances before the 2010 Annual Meeting. The Company believes that with the approval of the additional authorized shares, there will be sufficient shares for purchases under the Plan until 2010, or beyond, depending on the participation rates and the price of our Common Stock.

 

If the Plan is approved by stockholders, this approval will satisfy the stockholder approval requirements of Section 423 of the Internal Revenue Code, as amended (“Section 423”), and so permit certain participants to receive special tax treatment under Section 423 with respect to the purchase and sale of the shares purchased under the Plan as described below.

 

A summary of the principal features of the Plan as administered in the U.S. is provided below, but is qualified in its entirety by reference to the full text of the Plan that was filed electronically with this Proxy Statement with the Securities and Exchange Commission. Such text is not included in the printed version of this proxy statement. A copy of the Plan is available from the Company’s Secretary at the address on the cover of this document.

 

Administration and Eligibility

 

The Plan is administered by the Compensation and Leadership Committee of the Board of Directors (the “Committee”). The Committee has the authority to make rules and regulations governing the administration of the Plan. The Committee may delegate the administration of the Plan in accordance with the terms of the Plan.

 

The Committee may, in its discretion: (i) deviate from the provisions of the Plan in administering the Plan in jurisdictions other than the United States, or (ii) adopt sub-plans of the Plan applicable to particular countries or qualifying subsidiaries outside of the United States, that are not intended to comply with the requirements of Section 423 (“non-Section

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PROXY STATEMENT

423 subplan”); provided however, that the aggregate number of shares of Common Stock subject to the Plan does not exceed the aggregate number of shares of Common Stock available for sale under the Plan. The specific terms of any non-Section 423 subplan such as eligibility requirements or method of contribution are not known at this time and may vary from the terms of the Plan described below.

 

Substantially all regular employees of the Company and designated subsidiaries are eligible to participate in the MOTshare Plan, except that the following may be excluded at the discretion of the Committee: (i) employees whose customary employment is 20 hours or less per week; and (ii) employees whose customary employment is for not more than 5 months per year.

 

As of December 31, 2008, approximately 50,000 employees were eligible to participate in the Plan and approximately 17,300 employees actually participated in the MOTshare Plan.

 

Participation and Terms

 

An eligible employee may elect to participate in the Plan as of any Enrollment Date. “Enrollment Dates” occur on the first day of the offering period which is currently set at six-month intervals beginning on approximately April 1 and October 1. To participate in the Plan, an employee must complete an enrollment and payroll deduction authorization form which indicates the amounts to be deducted from his or her salary and applied to the purchase of the shares on the Share Purchase Date (as hereinafter defined). The payroll deduction must be within limits set by the Committee.

 

A payroll deduction account is established for each participating employee by the Company and all payroll deductions made on behalf of each employee (on an after-tax basis) are credited to each such employee’s respective payroll deduction account. On the last trading day of each offering period (the “Share Purchase Date”), the amount credited to each participating employee’s payroll deduction account is applied to purchase as many shares as may be purchased with such amount at the applicable purchase price.

 

The purchase price for the Shares will not be less than the lesser of 85% of the closing price of shares of Common Stock as reported on the New York Stock Exchange on: (i) the first trading day of the applicable offering period, or (ii) the Share Purchase Date. Employees may purchase shares through the MOTshare Plan only by payroll deductions.

 

Amendment and Termination

 

The Board of Directors of the Company may amend the Plan at any time, provided that if stockholder approval is required for the Plan to continue to comply with the requirements of Securities and Exchange Commission Regulation Section 240.16b-3 or Section 423 of the Internal Revenue Code (the “Code”), such amendment shall not be effective unless approved by the Company’s stockholders within twelve months after the date of the adoption by the Board of Directors.

 

The MOTshare Plan may be terminated by the Board of Directors at any time.

 

U.S. Federal Income Tax Consequences

 

The MOTshare Plan is intended to be an “employee stock purchase plan” as defined in Section 423, as from time to time amended, with the exception of non-Section 423 subplans. As a result, an employee participant will pay no federal income tax upon enrolling in the Plan or upon purchase of the shares. A participant may recognize gain or loss upon the sale or other disposition of shares purchased under the Plan, the amount and character of which will depend on whether the shares are held for two years from the first day of the offering period.

 

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PROXY STATEMENT

 

Other Information

 

On March 9, 2009, the closing price of the Common Stock was $3.12.

 

The design of the MOTshare Plan does result in a financial statement expense under applicable accounting guidance (FAS 123R). However, the MOTshare Plan allows the Company to provide an efficient and cost-effective vehicle for all eligible employees to acquire Motorola shares on a regular basis.

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDING THE MOTOROLA EMPLOYEE STOCK PURCHASE PLAN OF 1999 (THE “MOTSHARE PLAN”). UNLESS OTHERWISE INDICATED ON YOUR PROXY, THE SHARES WILL BE VOTED FOR AMENDING THE MOTSHARE PLAN.

 

 

STOCKHOLDER ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

The Board of Directors has adopted a Corporate Governance Guideline, commonly known as a “Say-on-Pay” proposal, to annually provide stockholders with the opportunity to endorse or not endorse the Company’s executive compensation policies and procedures through consideration of the following non-binding advisory resolution:

 

“Resolved, that the stockholders approve the overall executive compensation policies and procedures employed by the Company, as described in the Compensation Discussion and Analysis regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.”

 

Motorola’s executive compensation policies and procedures are designed to attract, retain and motivate key individuals with competitive compensation differentiated for superior performers to correlate with such individuals’ contributions to Company success. Motorola uses meaningful equity awards to provide compensation that is dependent on the Company’s performance (or “at-risk”) to align the interests of our executives and stockholders.

 

Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE EXECUTIVE COMPENSATION POLICIES AND PROCEDURES. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE APPROVAL OF THE EXECUTIVE COMPENSATION POLICIES AND PROCEDURES.

 

 

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit and Legal Committee of the Board has appointed KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009. Services provided to the Company and its subsidiaries by KPMG LLP in fiscal year 2008 are described under “Audit and Legal Committee Matters—Independent Registered Public Accounting Firm Fees”.

 

We are asking our stockholders to ratify the selection of KPMG LLP as our independent registered public accounting firm. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of KPMG LLP to our stockholders for ratification as a matter of good corporate practice.

 

Representatives of KPMG LLP will be present at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.

 

The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of KPMG LLP. Abstentions will have the same effect as a vote “Against” the proposal.

 

In the event stockholders do not ratify the appointment, the appointment will be reconsidered by the Audit and Legal Committee and the Board. Even if the selection is ratified, the Audit and Legal Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

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PROXY STATEMENT

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT PUBLIC ACCOUNTING FIRM FOR 2009. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE RATIFICATION OF KPMG LLP.

 

 

 

SHAREHOLDER PROPOSAL RE: CUMULATIVE VOTING

 

The Company has been advised that Kenneth Steiner, the beneficial owner of 5,000 shares, intends to submit the following proposal for consideration at the 2009 Annual Meeting.

 

7—Cumulative Voting

 

RESOLVED:  Cumulative Voting. Shareholders recommend that our Board take the steps necessary to adopt cumulative voting. Cumulative voting means that each shareholder may cast as many votes as equal to the number of shares held, multiplied by the number of directors to be elected. A shareholder may cast all such cumulated votes for a single candidate or split votes between multiple candidates. Under cumulative voting shareholders can withhold votes from certain poor-performing nominees in order to cast multiple votes for others.

 

Statement of Kenneth Steiner

Cumulative voting won 54%-support of Aetna and greater than 51%-support at Alaska Air in 2005 and in 2008. It also received greater than 53%-support at General Motors (GM) in 2006 and in 2008. The Council of Institutional Investors www.cii.org recommended adoption of this proposal topic. CalPERS also recommend a yes-vote for proposals on this topic.

 

Cumulative voting allows a significant group of shareholders to elect a director of its choice—safeguarding minority shareholder interests and bringing independent perspectives to Board decisions.

 

The merits of this Cumulative Voting proposal should also be considered in the context of the need for improvements in our company’s corporate governance and in individual director performance. For instance in 2008 the following governance and performance issues were identified:

David Dorman		Yum! Brands (YUM)
David Dorman		CVS Caremark (CVS)
Samuel Scott		Bank of New York Mellon (BK)
Samuel Scott		Abbott Laboratories (ABT)
Miles White		Abbott Laboratories (ABT)
Keith A. Meiste		Federal-Mogul (FDML)
Thomas Meredith		Motive (MOTV.PK)
Douglas Warner		Anheuser-Busch (BUD)

Judy Lament

Miles White (also on our nomination committee)

Call a special shareholder meeting.

Act by written consent.

Cumulative voting.

Vote on executive pay.

 

The above concerns shows there is need for improvement. Please encourage our board to respond positively to this proposal:

 

Cumulative Voting
Yes on 7

 

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PROXY STATEMENT

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ADOPTION OF THIS SHAREHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED AGAINST THE ADOPTION OF THIS PROPOSAL.

 

Cumulative voting would serve to disproportionately empower special interests. It allows a minority to usurp the will of the majority. Cumulative voting could enable individual shareholders or groups of shareholders with far less than a majority of the shares to pool their votes and elect directors concerned only with advancing the interests of the group responsible for their election, rather than the best interests of Motorola and of all of our shareholders.

 

The Board believes our current majority voting standard is the most fair with one vote per share per nominee and most likely to annually produce an effective board of directors that will represent the interests of all the stockholders. This is why the vast majority of S&P 500 companies do not have cumulative voting.

 

Importantly, the Board also believes that cumulative voting is inconsistent with our shareholder-approved majority voting standard adopted in early 2006 for the election of directors. In the case of an uncontested election, both Motorola’s Bylaws and Board Governance Guidelines provide that in order to be elected, directors must receive a majority of the votes cast. Whereas majority voting is a democratic approach to determinations; cumulative voting could allow a minority group of stockholders to block the will of the majority and frustrate the very purposes of majority voting. In adopting majority voting, at least one other company has simultaneously eliminated cumulative voting to avoid the incompatibility.

 

Further, when cumulative voting is combined with a majority voting standard, difficult technical and legal issues can arise. It is unclear if and how the proposal is intended to apply to both contested and uncontested elections. Further, it is unclear whether the corporation laws of Delaware, the state of Motorola’s incorporation, allow for cumulating “against” votes. As a result, groups such as the American Bar Association Committee on Corporate Laws, the Council of Institutional Investors and other commentators have recognized the incompatibility of cumulative and majority voting. For these reasons and the others stated above, the Board of Directors recommends that you vote AGAINST the adoption of this shareholder-submitted proposal.

 

 

SHAREHOLDER PROPOSAL RE: SPECIAL SHAREOWNER MEETINGS

 

The Company has been advised that William Steiner, the beneficial owner of 3,000 shares, intends to submit the following proposal for consideration at the 2009 Annual Meeting.

 

8—Special Shareowner Meetings

 

RESOLVED, Shareowners ask our board to take the steps necessary to amend our bylaws and each appropriate governing document to give holders of 10% of our outstanding common stock (or the lowest percentage allowed by law above 10%) the power to call special shareowner meetings. This includes that such bylaw and/or charter text will not have any exception or exclusion conditions (to the fullest extent permitted by state law) that apply only to shareowners but not to management and/or the board.

 

Statement of William Steiner

Special meetings allow shareowners to vote on important matters, such as electing new directors, that can arise between annual meetings. If shareowners cannot call special meetings investor returns may suffer. Shareowners should have the ability to call a special meeting when a matter merits prompt consideration.

 

This proposal topic won impressive support at the following companies (based on 2008 yes and no votes):

 

Occidental Petroleum (OXY)			66	%		Emil Rossi (Sponsor)
FirstEnergy Corp. (FE)			67	%		Chris Rossi
Marathon Oil (MRO)			69	%		Nick Rossi

 

Shareowners should have the ability to call a special meeting when a matter is sufficiently important to merit prompt consideration. Fidelity and Vanguard have supported a shareholder right to call a special meeting.

 

The proxy voting guidelines of many public employee pension funds also favor this right. Governance ratings services, such as The Corporate Library and Governance Metrics International, have taken special meeting rights into consideration when assigning company ratings.

 

Please encourage our board to respond positively to this proposal:

 

Special Shareowner Meetings -
Yes on 8

 

 

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PROXY STATEMENT

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ADOPTION OF THIS SHAREHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED AGAINST THE ADOPTION OF THIS PROPOSAL.

 

Motorola’s stockholders already have the power to act by written consent at any time under Delaware law. The written consent may be on any issue that would be presented at a stockholder meeting. There is no minimum ownership threshold required for any stockholder or group of stockholders to commence a written consent solicitation. Furthermore, the written consent method does not require prior notice or a vote to commence.

 

At the same time, the burden on the Company for holding additional stockholder meetings would be significant in financial expense, time and management resources. For a company of Motorola’s size, special meetings require extensive planning, logistics, communications, staff support and security measures. We also respect our stockholders’ limited time with a thoughtfully designed process that does not subject them to special interests or agendas.

 

Permitting holders of 10% to call a special meeting that may serve their narrow purpose rather than those of our Company and the majority of our stockholders is neither good corporate governance, nor in the best interests of our Company and stockholders. Unlike a stockholder with a potential agenda or special interest, the Chairman of the Board and the Board of Directors have a legal fiduciary duty to represent the best interests of all shareholders. The Board believes the decision to call a special meeting should remain in the hands of our Chairman of the Board and Board of Directors in order to make sure all stockholders’ interests are taken into consideration and to enable our Company’s business to be conducted in an orderly fashion.

 

The annual stockholders meeting, annual director elections, shareholder proposal process, written communication methods with the Board, investor relations contacts and stockholder written consent process described above all provide mechanisms for dialogue between the Company and stockholders.

 

Therefore, the requested amendment does not provide much value because the right for any stockholder to commence a written consent already exists along with various other communication methods. However, it subjects both the Company and therefore its stockholders to potential unlimited costs for what may serve special interests or agendas and disserve the stockholders as a whole. For these reasons and the others stated above, the Board of Directors recommends that you vote AGAINST the adoption of this shareholder-submitted proposal.

 

 

 

SHAREHOLDER PROPOSAL RE: “A GLOBAL SET OF CORPORATE STANDARDS” FOR HUMAN RIGHTS

 

The Company has been advised that the Presbyterian Church (U.S.A.), the beneficial owner of 750 shares intends to submit the following proposal for consideration at the 2009 Annual Meeting. The following proposal has also been co-filed by the General Board of Pension and Health Benefits of The United Methodist Church, the Domestic and Foreign Missionary Society of the Episcopal Church, and the Mercy Investment Program.

 

2009 Motorola Shareholder Resolution on Human Rights Policy

 

Whereas, Motorola, as a global corporation, faces increasingly complex problems as the international social, and cultural context within which Motorola operates changes.

 

Companies are faced with ethical and legal challenges arising from diverse cultures and political and economic contexts. Today, management must address issues that include human rights, workers’ right to organize and bargain collectively, non-discrimination in the workplace, protection of the environment and sustainable community development. Motorola itself does business in countries with human rights challenges including China, Malaysia, Russia, and Israel and the occupied Palestinian territories, for example.

 

Several international conventions, declarations and treaties set forth internationally recognized standards designed to protect human rights—civil, political, social environmental, cultural and economic—that should be reflected in Motorola’s policies. These include the Universal Declaration of Human Rights, the Fourth Geneva Convention, the Hague Conventions, International Covenant on Civil and Political Rights, the core labor standards of the International Labor Organization, and the International Covenant on Economic, Cultural and Social Rights. We believe that these documents will help inform Motorola’s revision of its human rights policy. In addition, United Nations resolutions and reports of special rapporteurs on countries where Motorola does business, and “Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights,” adopted by the United Nations Sub-Commission on the Promotion and Protection of Human

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PROXY STATEMENT

Rights in August 2003 are helpful, as are the comprehensive human rights policies developed for global companies found in “Principles for Global Corporate Responsibility: Bench Marks for Measuring Business Performance,” developed by an international group of religious investors.

 

As companies formulate comprehensive policies, we believe significant commercial advantages may accrue through enhanced corporate reputation, improved employee recruitment and retention, improved community and stakeholder relations and reduced risk of adverse publicity, consumer boycotts, divestment campaigns and lawsuits.

 

RESOLVED, shareholders request the Board to amend by October 2009 Motorola’s policies related to human rights that guide its international and U.S. operations to conform more fully with international human rights and humanitarian standards as reflected in the above-named documents.

 

Supporting Statement

 

We believe Motorola’s current human rights policies are limited in scope, and provide little or no guidance for determining business relationships where our products or services could entangle the company in human rights violations. We believe that our company’s policies should reflect a more comprehensive understanding of human rights.

 

Motorola should be able to assure shareholders that employees are treated fairly and with dignity wherever they work in the global economy. Going beyond internal practices, however, the company should be able to provide similar assurance that its products and services are not used in human rights violations. One element of ensuring compliance is utilization of independent monitors made up of respected local human rights, religious and non-governmental organizations that know local culture and conditions. We believe the adoption of a more comprehensive human rights policy, coupled with implementation, enforcement and independent monitoring, make assure shareholders of Motorola’s global leadership.

 

Please support this resolution.

 

 

RECOMMENDATION OF THE BOARD

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ADOPTION OF THIS SHAREHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED AGAINST THE ADOPTION OF THIS PROPOSAL.

 

The Company agrees with the principles on which this proposal is based and already addresses the concerns it raises, making this proposal unnecessary. In fact, the Company already has in place a comprehensive set of policies and procedures that address human rights, which are designed to ensure that its operations worldwide are conducted using the highest standards of integrity and ethical business conduct applied uniformly and consistently.

 

The Company’s policies include: the Motorola Code of Business Conduct, the Motorola Human Rights Policy, the Motorola Supplier Code of Conduct, and the Motorola Environment, Health & Safety Policy. These specific policies are based upon internationally recognized human rights standards, such as the Universal Declaration of Human Rights, the core labor standards of the International Labour Organization, the United Nation’s Global Compact, Social Accountability 8000 (SA 8000) standard, and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, to name a few.

 

The Company’s policies reflect a comprehensive understanding of human rights and support the following important areas: