UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

Ryder System, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ryder System, Inc.

11690 N.W. 105^th Street
Miami, Florida 33178

 

NOTICE OF 2009 ANNUAL MEETING OF SHAREHOLDERS

 

 

By order of the Board of Directors,

 

Robert D. Fatovic

Executive Vice President, Chief Legal Officer and Corporate Secretary

 

Miami, Florida

March 19, 2009

TABLE OF CONTENTS

 

RYDER SYSTEM, INC.

11690 N.W. 105th STREET
MIAMI, FLORIDA 33178

 

 

PROXY STATEMENT

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING TO BE HELD ON MAY 1, 2009.

 

The Company’s Proxy Statement and Annual Report are available online at: http://www.proxyvote.com

 

You are receiving this proxy statement because you own shares of Ryder common stock that entitle you to vote at the 2009 Annual Meeting of Shareholders. Our Board of Directors (Board) is soliciting proxies from shareholders who wish to vote at the meeting. By use of a proxy, you can vote even if you do not attend the meeting. This proxy statement describes the matters on which you are being asked to vote and provides information on those matters so that you can make an informed decision.

 

This year we have elected to take advantage of the Securities and Exchange Commission’s “notice and access” rule that allows us to furnish proxy materials to shareholders online. We believe electronic delivery will expedite the receipt of proxy materials, while significantly lowering costs and reducing the environmental impact of printing and mailing full sets of proxy materials. As a result, on or about March 19, 2009, we mailed to shareholders either (i) a Notice of Internet Availability (Notice) containing instructions on how to access our proxy materials online or (ii) a printed set of proxy materials which includes this proxy statement, our 2008 annual report and a proxy card. If you receive a Notice by mail, you will not receive a printed copy of the materials, unless you specifically request one. Instructions on how to receive a paper copy of the proxy materials are included in the Notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under our By-Laws, directors are elected for three-year terms, typically with one-third of the directors standing for election in any given year. The four directors whose terms expire at the 2009 Annual Meeting of Shareholders are John M. Berra, Luis P. Nieto, Jr., E. Follin Smith and Gregory T. Swienton. Upon the recommendation of the Corporate Governance and Nominating Committee (Governance Committee), our Board of Directors has nominated John M. Berra, Luis P. Nieto, Jr., E. Follin Smith and Gregory T. Swienton for re-election at the 2009 Annual Meeting of Shareholders for a three-year term that expires at the 2012 Annual Meeting of Shareholders, and each have consented to serve if elected.

 

In July 2008, the Board of Directors elected James S. Beard to the Board of Directors. A third-party search firm identified Mr. Beard as a Board candidate, and after an interview process and a recommendation by the Governance Committee, the Board approved his election to the Board. The search firm was paid a fee for their service. In accordance with our By-Laws, Mr. Beard is being nominated for election at the 2009 Annual Meeting of Shareholders. Because our By-Laws require that the number of directors whose terms expire in any given year remains as nearly equal in number as possible, Mr. Beard is being nominated to serve in the class of directors whose terms expire at the 2011 Annual Meeting of Shareholders. Mr. Beard has consented to serve if elected.

 

Our Board of Directors determined that, other than Gregory T. Swienton, each director nominee qualifies as independent under applicable regulations and the categorical director independence standards adopted by our Board of Directors and set forth under “Director Independence” on page 11 of this proxy statement.

 

David I. Fuente, Eugene A. Renna, Abbie J. Smith and Christine A. Varney are currently serving terms that expire at the 2010 Annual Meeting of Shareholders. L. Patrick Hassey, Lynn M. Martin and Hansel E. Tookes, II, are currently serving terms that expire at the 2011 Annual Meeting of Shareholders.

 

The principal occupation and certain other information about each director and director nominee appears on the following pages.

 

The Board of Directors recommends a vote FOR the election of each of the director nominees.

NOMINEE FOR DIRECTOR
FOR A TERM OF OFFICE EXPIRING AT THE 2011 ANNUAL MEETING

 

 

NOMINEE FOR DIRECTOR
FOR A TERM OF OFFICE EXPIRING AT THE 2012 ANNUAL MEETING

 

 

 

DIRECTORS CONTINUING IN OFFICE

 

 

We maintain a Corporate Governance page on our website at www.ryder.com, which includes our Corporate Governance Guidelines, Principles of Business Conduct and Board Committee Charters. The Corporate Governance Guidelines set forth our governance principles relating to, among other things: director independence (including our categorical director independence standards); director qualifications and responsibilities; Board structure; director compensation; management succession; and the periodic performance evaluation of the Board. The Principles of Business Conduct apply to our officers, employees and Board members and cover all areas of professional conduct including conflicts of interest, confidentiality, compliance with law, and mechanisms to report known or suspected wrongdoing. The Principles of Business Conduct include a Finance Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Controller and senior financial management. Any changes to these documents and any waivers granted by the Governance Committee with respect to our Principles of Business Conduct will be posted on our website. Any waivers with respect to our Principles of Business Conduct shall also be disclosed in a public filing made with the SEC.

 

Shareholders may submit requests for free printed copies of our Corporate Governance Guidelines, Principles of Business Conduct (including the Finance Code of Ethics) and Board Committee Charters in writing to: Ryder System, Inc., Attention: Corporate Secretary, 11690 N.W. 105^th Street, Miami, Florida 33178.

 

Director Independence

 

It is our policy that a substantial majority of the members of our Board of Directors and all of the members of our Audit Committee, Compensation Committee, Governance Committee and Finance Committee qualify as independent as required by the NYSE corporate governance listing standards.

 

To assist it in making independence determinations, our Board of Directors has adopted categorical director independence standards, which are part of our Corporate Governance Guidelines. The Board determined that each of the following transactions or relationships will not, by itself, be deemed to create a material relationship for the purpose of determining a director’s independence:

 

 

 

For purposes of these independence standards, an “immediate family member” includes a director’s spouse, parents, children, siblings, mother- and father-in-law, son- and daughter-in-law, brother- and sister-in-law, and anyone (other than domestic employees) who shares such director’s home.

 

Pursuant to our Corporate Governance Guidelines, the Board undertook its annual review of director independence in February 2009, which included a review of each director’s responses to questionnaires asking about any relationships with us. This review is designed to identify and evaluate any transactions or relationships between a director or any member of his or her immediate family and us or members of our senior management.

 

As part of this review, other than the relationship with Mr. Swienton, our CEO, the Governance Committee and the Board identified and considered the following two transactions:

 

In his role as Chairman of Emerson Process Management, John M. Berra also serves as Executive Vice President of Emerson Electric Company. We have an ongoing commercial relationship with Emerson Electric Company relating to Emerson’s lease of vehicles from us. The transaction falls outside of the NYSE’s independence requirements and our categorical director independence standards relating to commercial relationships, and therefore, the Board determined that this relationship did not impair Mr. Berra’s independence.

 

An immediate family member of E. Follin Smith serves as an executive of Dow Jones & Company, Inc. We have an ongoing commercial relationship with Dow Jones pursuant to which Dow Jones leases vehicles from us. The transaction falls outside of the NYSE’s independence requirements and our categorical director independence standards relating to commercial relationships, and therefore, the Board determined that this relationship did not impair Ms. Smith’s independence.

 

Based on its independence review and after considering the transactions described above, the Board determined that each of the following directors (which together constitute all of the members of the Board other than Mr. Swienton) is independent: James S. Beard, John M. Berra, David I. Fuente, L. Patrick Hassey, Lynn M. Martin, Luis P. Nieto, Jr., Eugene A. Renna, Abbie J. Smith, E. Follin Smith, Hansel E. Tookes, II and Christine A. Varney.

 

Communications with the Board

 

Shareholders and other interested parties can communicate with our independent directors as a group through the Corporate Governance page of our website at www.ryder.com, or by mailing their communication to Independent Directors, c/o Corporate Secretary, Ryder System, Inc., 11690 N.W. 105th Street, Miami, Florida 33178. Any communications received from interested parties in the manner described above will be collected and organized by our Corporate Secretary and will be periodically, but in any event prior to each regularly-scheduled Board meeting, reported and/or delivered to our independent directors. The Corporate Secretary will not forward spam, junk mail, mass mailings, service complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate materials to the independent directors. Correspondence relating to certain of these matters such as service issues may be distributed internally for review and possible response. The procedures for communicating with our independent directors as a group are available on the Corporate Governance page of our website at www.ryder.com.

 

Our Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding questionable accounting, internal control, financial improprieties or auditing matters. Any of our employees or members of the general public may confidentially communicate concerns about any of these matters to any supervisor or manager, the Vice President of Internal Audit, the Vice President, Global Compliance and Business Standards/Deputy General Counsel, or on a confidential and/or anonymous basis by way of an external toll-free hotline number, an internal ethics phone line, ethics@ryder.com, or to members of our Audit Committee at audit@ryder.com. All of the reporting mechanisms are publicized on our website at www.ryder.com, in our Principles of Business Conduct, through compliance training and wallet cards, brochures and location posters. Upon receipt of a complaint or concern, a determination will be made whether it pertains to accounting, internal control, financial improprieties or auditing matters and if it does, it will be handled in accordance with the procedures established by the

Audit Committee. A summary of all complaints, of whatever type, received through the reporting mechanisms are reported to the Audit Committee at each regularly-scheduled Audit Committee meeting. Matters requiring immediate attention are promptly forwarded to the Chair of the Audit Committee.

 

Board Meetings

 

The Board of Directors held six regular and two special meetings in 2008. Each of the directors attended 75% or more of the aggregate number of meetings of the Board and Committees on which the director served in 2008. Attendance by all directors at Board and Committee meetings averaged 91% in 2008. Our independent directors meet in executive session without management present as part of each regularly-scheduled Board meeting. The Chair of our Governance Committee presides over these executive Board sessions.

 

We expect each of our directors to attend our Annual Meeting of Shareholders. Because the Board of Directors holds one of its regularly-scheduled meetings in conjunction with our Annual Meeting of Shareholders, unless one or more members of the Board are unable to attend, all of the members of the Board are present for the Annual Meeting. All of our directors, other than Lynn M. Martin, attended the 2008 Annual Meeting of Shareholders.

 

Board Committees

 

The Board has four standing committees — Audit, Compensation, Corporate Governance and Nominating and Finance. All of the Committees are composed entirely of independent directors who meet in executive session without management present as part of each regularly-scheduled Committee meeting. We have adopted written Charters for each of the Committees that comply with the NYSE’s corporate governance listing standards, applicable provisions of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and SEC rules. Each Committee Charter sets forth the respective Committee’s responsibilities, and provides for a periodic review of such Charter and an annual evaluation of the respective Committee’s performance. The Charters grant each Committee the authority to obtain the advice and assistance of, and receive appropriate funding from us for, outside legal, accounting or other advisors as the Committee deems necessary to fulfill its obligations.

 

 

Responsibilities

 

The Audit Committee is responsible for appointing, overseeing and determining the compensation and independence of our independent registered certified public accounting firm. The Audit Committee approves the scope of the annual audit and the related audit fees as well as the scope of internal audit procedures. The Audit Committee reviews audit results, financial disclosure and earnings guidance, and is responsible for overseeing investigations into accounting and financial complaints. The Audit Committee also reviews, discusses and oversees the process by which we assess and manage risk.

 

The Audit Committee meets in executive session, consisting exclusively of independent directors, at the end of every regularly-scheduled Audit Committee meeting (other than telephonic meetings). Our Controller, our Vice President of Internal Audit and representatives of our independent registered certified public accounting firm attend all Audit Committee meetings to assist the Audit Committee in its discussion and analysis of the various agenda items. Members of management are generally excused from the Audit Committee meetings as appropriate. The Audit Committee also meets individually with each of our Vice President of Internal Audit, representatives of our independent registered certified public accounting firm, and our Chief Financial Officer, at the end of every regularly-scheduled Audit Committee meeting (other than telephonic meetings).

 

The specific powers and responsibilities of the Audit Committee are set forth in more detail in the Audit Committee’s Charter, which is available on the Corporate Governance page of our website at www.ryder.com. The Charter is

reviewed annually by the Audit Committee and our Governance Committee. Any changes to the Charter are approved by the full Board.

 

Independence and Financial Expertise

 

In addition to the independence standards applicable to all Board members, rules promulgated by the SEC in response to Sarbanes-Oxley require that all members of our Audit Committee meet additional independence standards. Under NYSE rules, each member of the Audit Committee must be financially literate and at least one member must have accounting or related financial management expertise. The SEC requires that at least one Audit Committee member be an “audit committee financial expert”.

 

The Board reviewed the background, experience and independence of Audit Committee members based in large part on the directors’ responses to questions relating to their relationships, background and experience. Based on this review, the Board determined that each member of the Audit Committee meets the independence requirements of the NYSE’s corporate governance listing standards and our categorical director independence standards; meets the enhanced independence standards for audit committee members required by the SEC; is financially literate, knowledgeable and qualified to review financial statements; and qualifies as an “audit committee financial expert” under SEC rules.

 

 

Responsibilities

 

The Compensation Committee of our Board of Directors oversees, reviews and approves our executive and director compensation policies and programs and regularly reports to the Board of Directors on these matters. The Compensation Committee is also responsible for approving compensation actions for direct reports to the CEO, and recommending compensation actions for the CEO for consideration by the independent directors. The Compensation Committee approves and recommends the appointment of new officers, and reviews and discusses the Compensation Discussion and Analysis included in this proxy statement to determine whether to recommend it for inclusion in our proxy statement.

 

The specific powers and responsibilities of the Compensation Committee are set forth in more detail in the Compensation Committee’s Charter, which is available on the Corporate Governance page of our website at www.ryder.com. The Charter is reviewed annually by the Compensation Committee and our Governance Committee. Any changes to the Charter are approved by the full Board.

 

Compensation Committee Processes and Procedures

 

Meetings.  The Compensation Committee meets at least five times each year in February, May, July, October and December. Each year in December, the Compensation Committee reviews and approves an agenda schedule for the following year. The agenda schedule outlines the various topics the Compensation Committee will consider during the year to ensure that the Compensation Committee adequately fulfills its responsibilities under its Committee Charter. The Compensation Committee considers other topics during the year as needed to fulfill its responsibilities.

 

Our Chief Human Resources Officer (CHRO) works closely with the Chair of the Compensation Committee prior to each Committee meeting to ensure that the information presented to the Committee in connection with the items to be

discussed and/or approved is clear and comprehensive. The information is then provided to the Compensation Committee for its review and consideration typically one week prior to the meeting.

 

The CHRO, CEO, Vice President of Compensation and Benefits and a representative from our legal department attend all regularly-scheduled Compensation Committee meetings to assist the Committee in its discussion and analysis of the various agenda items. These individuals are generally excused from the meetings as appropriate, including for discussions regarding their own compensation. The Compensation Committee meets in executive session, consisting exclusively of independent directors, at the end of every regularly-scheduled meeting.

 

Authority, Role of Management and Delegation.  The Compensation Committee is responsible for reviewing and approving all of the components of our executive compensation program as well as the compensation program for our Board of Directors. New executive compensation plans and programs must be approved by the full Board based on recommendations made by the Compensation Committee. The Compensation Committee, with input from the CEO, is responsible for setting the compensation of all of our other named executive officers. Our independent directors, acting as a group, are responsible for setting CEO compensation based on recommendations from the Compensation Committee. The Compensation Committee has not delegated any of its responsibilities to management.

 

At the Board’s annual succession planning meeting in October of each year, each named executive officer’s performance and succession opportunities are evaluated by the full Board. In February of each year and at other times during the year as needed, our CEO gives the Compensation Committee a performance assessment and compensation recommendation for each named executive officer. Our CEO also reviews each executive’s three-year compensation history, and current compensation data provided by our compensation group and outside consultants.

 

Beginning at the end of each fiscal year, the Compensation Committee and the independent directors conduct a performance review of the CEO. The evaluation questionnaire is prepared by the Governance Committee, which is responsible for determining the process by which the CEO will be evaluated. In February, the Compensation Committee discusses the CEO’s performance review in executive session and formulates its recommendation. At the February Board meeting, in executive session without the CEO present, the independent directors finalize the CEO’s performance evaluation and determine the CEO’s compensation based on the recommendation of the Compensation Committee.

 

Use of Compensation Consultants.  The Compensation Committee has authority to retain compensation consultants, outside legal counsel and other advisors to assist it in fulfilling its responsibilities. Although we do not have a written policy regarding which members of management may engage compensation consultants to assist in the evaluation of executive compensation, historically, in addition to the Compensation Committee, only our CHRO and Vice President of Compensation and Benefits have engaged compensation consultants to assist in the evaluation of executive compensation.

 

In January 2008, the Compensation Committee engaged Cook to assist in an independent review and competitive analysis of Mr. Swienton’s compensation package. Cook was engaged to review competitive market data, and to work directly with the Chair of the Compensation Committee to prepare a proposal for 2008 CEO compensation to be considered by the Compensation Committee and the independent directors. Based upon Cook’s review of relevant compensation data, and their own internal analysis, Cook provided recommendations to the Compensation Committee for a competitive total compensation package for Mr. Swienton. The Compensation Committee considered Cook’s recommendation as one factor in approving Mr. Swienton’s 2008 compensation. Management did not engage Cook or any other compensation consultant during 2008 for any matter related to executive compensation.

 

Compensation Committee Interlocks and Insider Participation.  In 2008, none of our executive officers or directors was a member of the board of directors of any other company where the relationship would be considered a committee interlock under SEC rules.

 

 

 

Responsibilities

 

The Governance Committee is responsible for recommending criteria for Board membership, identifying qualified individuals to serve as directors, reviewing the qualifications of director candidates, including those recommended by our shareholders pursuant to our By-Laws, and recommending to the Board the nominees to be proposed by the Board for election as directors at our Annual Meeting of Shareholders. The Governance Committee recommends the size, structure, composition and functions of Board Committees and reviews and recommends changes to the Charters of each Committee of the Board of Directors. The Governance Committee oversees the Board evaluation process as well as the annual CEO evaluation process. The Governance Committee reviews and recommends changes to our Corporate Governance Guidelines and Principles of Business Conduct. The Governance Committee is also responsible for identifying and analyzing trends in public policy, public affairs and corporate responsibility.

 

Our Chief Legal Officer attends all regularly-scheduled Governance Committee meetings to assist the Governance Committee in its discussion and analysis of the various agenda items. Members of management are generally excused from the Governance Committee meetings as appropriate.

 

The specific powers and responsibilities of the Governance Committee are set forth in more detail in the Governance Committee’s Charter, which is available on the Corporate Governance page of our website at www.ryder.com. The Charter is reviewed annually by the Governance Committee. Any changes to the Charter are approved by the full Board.

 

Process for Nominating Directors

 

In identifying individuals to nominate for election to our Board, the Governance Committee seeks candidates that:

 

 

The Governance Committee will seek to identify individuals who would qualify as independent under applicable NYSE listing standards and our categorical director independence standards, and who are independent of any particular constituency. The Governance Committee may, based on the composition of the Board, seek individuals that have specialized skills or expertise, experience as a leader of another public company or major complex organization, or relevant industry experience. In addition, the Governance Committee will attempt to select candidates who will assist in making the Board a diverse body in terms of age, gender, ethnic background and professional experience.

 

Generally, the Governance Committee identifies individuals for service on our Board through the Committee’s retention of experienced director search firms that are paid to use their extensive resources and networks to find qualified individuals who meet the qualifications established by the Board. These search firms create a comprehensive record of a candidate’s background, business and professional experience and other information that would be relevant to the Governance Committee in determining a candidate’s capabilities and suitability. The Governance Committee will also consider qualified candidates who are proposed by other members of the Board, our senior management and, to the extent submitted in accordance with the procedures described below, our shareholders. The Governance Committee will not consider a director candidate unless the candidate has expressed his or her

willingness to serve on the Board if elected and the Governance Committee has received sufficient information relating to the candidate to determine whether he or she meets the qualifications established by the Board.

 

If a shareholder would like to recommend a director candidate to the Governance Committee, he or she must deliver to the Governance Committee the same information and statement of willingness to serve described above. In addition, the recommending shareholder must deliver to the Governance Committee a representation that the shareholder owns shares of our common stock and intends to continue holding those shares until the relevant Annual Meeting of Shareholders as well as a representation regarding the shareholder’s direct and indirect relationship to the suggested candidate. This information should be delivered to us at 11690 N.W. 105^th Street, Miami, Florida 33178, Attention: Corporate Secretary, for delivery to the Governance Committee no earlier than 120 and no later than 90 days prior to the one-year anniversary of the date of the prior year’s annual meeting of shareholders. Any candidates properly recommended by a shareholder will be considered and evaluated in the same way as any other candidate submitted to the Governance Committee.

 

Upon receipt of this information, the Governance Committee will evaluate and discuss the candidate’s qualifications, skills and characteristics in light of the current composition of the Board. The Governance Committee may request additional information from the recommending party or the candidate in order to complete its initial evaluation. If the Governance Committee determines that the individual would be a suitable candidate to serve as one of our directors, the candidate will be asked to meet with members of the Governance Committee, members of the Board and/or members of senior management, including in each case, our CEO, to discuss the candidate’s qualifications and ability to serve on the Board. Based on the Governance Committee’s discussions and the results of these meetings, the Governance Committee will recommend a nominee or nominees for election to the Board either by our shareholders at our Annual Meeting of Shareholders or by the Board to fill vacancies on the Board between Annual Meetings. The Board will, after consideration of the Governance Committee’s recommendations, nominate a slate of directors for election by our shareholders, or with regards to filling vacancies, elect a nominee to the Board.

 

If a shareholder would like to nominate one or more directors for election at the annual meeting of shareholders without involving the Governance Committee, it must comply with all of the requirements set forth in our By-laws.

 

 

Responsibilities

 

The Finance Committee is responsible for reviewing our overall financial goals, liquidity position, arrangements and requirements. The Committee reviews, approves and recommends certain capital expenditures, issuances of debt and equity securities, dividend policy and pension contributions. The Committee is also responsible for reviewing our relationships with rating agencies, banks and analysts, and reviewing and managing our economic and insurance risk program and tax planning strategies.

 

Our Chief Financial Officer and Treasurer attend all regularly-scheduled Finance Committee meetings to assist the Finance Committee in its discussion and analysis of the various agenda items. Members of management are generally excused from the Finance Committee meetings as appropriate.

 

The specific powers and responsibilities of the Finance Committee are set forth in more detail in the Finance Committee’s Charter which is available on the Corporate Governance page of our website at www.ryder.com. The Charter is reviewed annually by the Finance Committee and our Governance Committee. Any changes to the Charter are approved by the full Board.

 

We recognize that related person transactions can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than in our best interests and that of our shareholders. Accordingly, as a general matter, it is our preference to avoid related person transactions. Nevertheless, we recognize that there are situations where related person transactions may be in, or may not be inconsistent with, our and our shareholders best interests. For example, there may be times where we can obtain products or services from related persons that are of a nature, quantity or quality, or on terms, that are not readily available from alternative sources.

 

In accordance with our written Policies and Procedures Relating to Related Person Transactions, all “related person transactions” are subject to review, approval or ratification by the Governance Committee. For purposes of the Policy, and consistent with Item 404 of Regulation S-K, a “related person transaction” is (i) any transaction in which we or a subsidiary of ours is a participant, the amount involved exceeds $120,000 and a “related person” has a direct or indirect material interest, or (ii) any material amendment to an existing related person transaction. “Related persons” are our executive officers, directors, nominees for director, any person who is known to be the beneficial owner of more than 5% of any class of our voting securities, and any immediate family member of any of the foregoing persons.

 

Our legal department is primarily responsible for the development and implementation of procedures and controls to obtain information from our directors and executive officers relating to related person transactions and then determining, based on the facts and circumstances, and in consultation with management and outside counsel, whether the related person has a direct or indirect material interest in the transaction. The Governance Committee is responsible for reviewing and determining whether to approve related person transactions.

 

In considering whether to approve a related person transaction, the Governance Committee considers the following factors, to the extent relevant: (i) whether the terms of the related person transaction are fair to us and on the same basis as would apply if the transaction did not involve a related person; (ii) whether there are business reasons for us to enter into the related person transaction; (iii) whether the related person transaction would impair the independence of an outside director; and (iv) whether the related person transaction would present an improper conflict of interest for any of our directors or executive officers, taking into account the size of the transaction, the overall financial position of the director, executive officer or related person, the direct or indirect nature of the director’s, executive officer’s or related person’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Governance Committee deems relevant. Any member of the Governance Committee who has an interest in the transaction under discussion will abstain from voting on the approval of the related person transaction. There were no related person transactions during 2008.

 

Our Audit Committee appointed PricewaterhouseCoopers LLP as our independent registered certified public accounting firm for the 2009 fiscal year. Although shareholder ratification of the appointment of PricewaterhouseCoopers LLP is not required, the Board of Directors believes that submitting the appointment to the shareholders for ratification is a matter of good corporate governance. The Audit Committee will consider the outcome of this vote in future deliberations regarding the appointment of our independent registered certified public accounting firm. Representatives of PricewaterhouseCoopers LLP will be present at the 2009 Annual Meeting of Shareholders to respond to questions and to make a statement if they desire to do so.

 

Fees and Services of Independent Registered Certified Public Accounting Firm

 

Fees billed for services by PricewaterhouseCoopers LLP for the 2008 and 2007 fiscal years were as follows ($ in millions):

 

 

 

 

Audit Fees primarily represent amounts for services related to the audit of our consolidated financial statements and internal control over financial reporting, a review of financial statements included in our Forms 10-Q (or other periodic reports or documents filed with the SEC), statutory or financial audits for our subsidiaries or affiliates, and consultations relating to financial accounting or reporting standards.

 

Audit-Related Fees represent amounts for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. These services include audits of employee benefit plans, consultations concerning matters relating to Section 404 of Sarbanes-Oxley and due diligence.

 

Tax Fees represent amounts for U.S. and international tax compliance services (including review of our federal, state, local and international tax returns), tax advice and tax planning, in accordance with our approval policies described below.

 

Approval Policy

 

All services rendered by our independent registered certified public accounting firm are either specifically approved (including the annual financial statement audit) or are pre-approved by the Audit Committee in each instance in accordance with our Approval Policy for Independent Auditor Services (Approval Policy), and are monitored both as to spending level and work content by the Audit Committee to maintain the appropriate objectivity and independence of the independent registered certified public accounting firm’s core service, which is the audit of our consolidated financial statements and internal control over financial reporting. Under the Approval Policy, the terms and fees of annual audit services, and any changes thereto, must be approved by the Audit Committee. The Approval Policy also sets forth detailed pre-approved categories of other audit, audit-related, tax and other non-audit services that may be performed by our independent registered certified public accounting firm during the fiscal year, subject to the dollar limitations set by the Audit Committee. The Audit Committee may, in accordance with the Approval Policy, delegate to any member of the Audit Committee the authority to approve audit and non-audit services to be performed by the independent registered certified public accounting firm. The Audit Committee has delegated to the Chair of the Audit Committee the authority to approve audit and non-audit services if it is not practical to bring the matter before the full Audit Committee and the estimated fee does not exceed $100,000. Any Audit Committee member who exercises his or her delegated authority, including the Chair, must report any approval decisions to the Audit Committee at its next scheduled meeting. All of the services provided in 2008 were approved by the Audit Committee in accordance with the Approval Policy.

 

The Board of Directors recommends a vote FOR ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered certified public accounting firm for the 2009 fiscal year.

 

The following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into a filing.

 

The Audit Committee of the Board of Directors of the Company is comprised of five outside directors, all of whom are independent under the rules of the NYSE, our categorical director independence standards and applicable rules of the SEC. The Committee operates under a written Charter that specifies the Committee’s responsibilities. The full text of the Committee’s Charter is available on the Corporate Governance page of the Company’s website (www.ryder.com). The Audit Committee members are not auditors and their functions are not intended to duplicate or to certify the activities of management and the independent registered certified public accounting firm.

 

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Company’s management has the responsibility for preparing the consolidated financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. The Company’s independent registered certified public accounting firm is responsible for performing an integrated audit of the Company’s year-end consolidated financial statements and internal control over financial reporting as of the end of the year in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), and expressing opinions on (i) whether the financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States, and (ii) whether the Company maintained effective internal control over financial reporting based on criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and management’s assessment of the effectiveness of internal control over financial reporting with Company management, including a discussion of the quality of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

 

The Committee reviewed with the independent registered certified public accounting firm its judgments as to the quality of the Company’s accounting principles and such other matters as are required to be discussed with the Committee by Statement on Auditing Standards No. 61, “Communications with Audit Committees,” adopted by the PCAOB, as amended, and the rules of the SEC. In addition, the Committee has discussed with the independent registered certified public accounting firm the firm’s independence from Company management and the Company, reviewed the written disclosures and letter from the independent registered certified public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered certified public accounting firm’s communications with the audit committee concerning independence and considered the compatibility of non-audit services with the independent registered certified public accounting firm’s independence.

 

The Committee discussed with the Company’s internal auditor and representatives of the independent registered certified public accounting firm the overall scope and plans for their respective audits. The Committee met with the internal auditor and representatives of the independent registered certified public accounting firm, with and without management present, to discuss the results of their audits; their evaluations of the Company’s internal control, including internal control over financial reporting; and the overall quality of the Company’s financial reporting.

 

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in the Annual Report on Form 10-K for the year ended December 31, 2008 filed by the Company with the SEC. The Committee has also approved, subject to shareholder ratification, the selection of PricewaterhouseCoopers LLP as the Company’s independent registered certified public accounting firm for the 2009 fiscal year.

 

Submitted by the Audit Committee of the Board of Directors.

 

Abbie J. Smith (Chair)
Luis P. Nieto, Jr.
Eugene A. Renna
E. Follin Smith
Hansel E. Tookes, II

 

The following table shows the number of shares of common stock beneficially owned as of January 14, 2009, by each director and each executive officer named in the Summary Compensation Table herein, individually, and all directors and executive officers as a group. No family relationships exist among our directors and executive officers.

 

 

 

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports with the SEC relating to their common stock ownership and changes in such ownership. To our knowledge, based solely on our records and certain written representations received from our executive officers and directors, during the year ended December 31, 2008, all Section 16(a) filing requirements applicable to directors, executive officers and greater than 10% shareholders were complied with on a timely basis.

 

The following table shows the number of shares of common stock held by all persons who are known by us to beneficially own or exercise voting or dispositive control over more than five percent of our outstanding common stock.

 

 

 

 

This Compensation Discussion and Analysis is designed to provide our shareholders with a clear understanding of our compensation philosophy and objectives, compensation-setting process, and 2008 compensation programs and actions for our named executive officers. Our named executive officers are those executive officers listed below whose compensation is disclosed in the Summary Compensation Table on page 39 of this proxy statement (named executive officers or NEOs):

 

 

Mr. John H. Williford, President — Global Supply Chain Solutions was hired in June 2008. Based on Mr. Williford’s compensation for the second half of 2008, he is not considered a named executive officer for 2008.

 

Executive Summary

 

The following provides a brief overview of the more detailed disclosure set forth in this Compensation Discussion and Analysis.

 

 

 

Oversight and Authority over Executive Officer Compensation

 

Compensation Setting Process

 

The Compensation Committee is responsible for determining the compensation philosophy and objectives for our named executive officers, and for reviewing, approving and, in some cases, recommending to the Board of Directors the approval of, all components of our executive compensation program. Our independent directors, acting as a group, are responsible for setting CEO compensation based on recommendations from the Compensation Committee. The Compensation Committee, with input from the CEO, is responsible for setting the compensation of all of our other named executive officers.

With respect to compensation decisions for named executive officers (other than our CEO), in February of each year and at other times during the year as needed, our CEO gives the Compensation Committee a performance assessment and compensation recommendation for each named executive officer. The performance assessment includes strengths, weaknesses and succession potential and is based on individual performance evaluations conducted by the CEO and the executive officer’s direct supervisor (if different from the CEO). Our CEO also reviews each executive’s three-year compensation history, and current compensation data provided by our compensation group and outside consultants. At the Board’s annual succession planning meeting in October, each NEO is also evaluated by the full Board as part of Ryder’s succession planning process.

 

Beginning at the end of each fiscal year, the Compensation Committee and the independent directors conduct a performance review of the CEO. For the review, the CEO and each independent director completes a comprehensive CEO evaluation questionnaire relating to the CEO’s performance. This questionnaire is prepared by the Governance Committee, which is responsible for determining the process by which the CEO will be evaluated. At the Compensation Committee’s February meeting, the CEO presents his personal performance results for the prior fiscal year and responds to any questions that the Compensation Committee may have. The Compensation Committee also reviews the CEO’s three-year compensation history, and current compensation data provided by our compensation group and outside consultants. At the completion of this review, the Compensation Committee discusses the CEO’s performance review in executive session and formulates its recommendation. At the February Board meeting, in executive session without the CEO present, the independent directors finalize the CEO’s performance evaluation and determine the CEO’s compensation based on the recommendations of the Compensation Committee.

 

In February of each year (in connection with the NEO’s performance evaluation and the conclusion of our business planning process), the Compensation Committee conducts its annual review of the executive compensation packages. Based on this review, the Compensation Committee approves (a) base salary changes, (b) any amounts earned under the previous year’s annual bonus and LTI programs, (c) performance targets and target payout opportunity under the annual bonus program for the current year and (d) LTI awards for the next three-year cycle. The Compensation Committee may approve other individual compensation actions during the year as needed. While the Compensation Committee considers competitive market compensation data, it does not attempt to maintain a certain target percentile within a comparative group. Rather, the Compensation Committee’s objective is to target executive pay at levels that are market competitive based on Company and individual performance. Specifically, the Compensation Committee’s goal is to design a compensation program and set compensation levels to provide median levels of compensation for achieving target financial results, and below-market compensation when Company and/or individual performance fail to meet expectations. While compensation levels may differ among NEOs based on competitive factors and the role, responsibilities and performance of each specific NEO, there are no material differences in the compensation philosophies, objectives or policies for our NEOs. The Compensation Committee considers all executives’ relative pay when making decisions regarding hiring, promoting and retaining our executives but does not have a formal policy regarding internal pay equity.

 

Use of Compensation Consultants

 

The Compensation Committee has authority to retain compensation consultants, outside legal counsel and other advisors to assist in fulfilling its responsibilities. Historically, in addition to the Compensation Committee, our Chief Human Resources Officer (CHRO) and Vice President of Compensation and Benefits have from time-to-time engaged compensation consultants to assist in the evaluation of executive compensation.

 

In January 2008, the Compensation Committee engaged Cook, to assist in an independent review and competitive analysis of Mr. Swienton’s compensation package. Cook was engaged to review competitive market data, and to work directly with the Chair of the Compensation Committee to prepare a proposal for 2008 CEO compensation to be considered by the Compensation Committee and the independent directors. Based upon Cook’s review of relevant compensation data, and their own internal analysis, Cook provided recommendations to the Compensation Committee for a competitive total compensation package for Mr. Swienton. The Compensation Committee considered Cook’s recommendation as one factor in approving Mr. Swienton’s 2008 compensation. Management did not engage Cook or any other compensation consultant during 2008 for any matter related to executive compensation.

Compensation Philosophy and Objectives

 

The most important objective of our executive compensation program is to recruit, retain and motivate high-quality executives who possess diverse skills and talents that can help us achieve our short-term goals and long-term strategies. In addition, we strive to design, implement and maintain an executive compensation program that accomplishes the following four key goals:

 

 

The Compensation Committee regularly evaluates the effectiveness of our executive compensation programs, considering the cost to us and the value to the executive of each element of compensation, in light of the above stated compensation objectives.

 

Company and Individual Performance in 2008 and 2007

 

Company Performance

 

In 2008, we faced significant economic challenges in the latter part of the year. As a result, Company performance was below planned levels. Despite these difficult conditions, we had full-year earnings growth of 7%, on a comparable basis (as described in our Annual Report on Form 10-K for the year ended December 31, 2008), and FMS contractual revenue growth of 5% excluding foreign exchange impact. Our access to capital was stable throughout 2008 and we continued to maintain positive operating cash flow and free cash flow during a period of significant credit market instability. We completed four acquisitions in 2008 including one strategic acquisition in our Supply Chain Solutions business segment.

 

In 2007, we realized record earnings for the fourth consecutive year despite weakening economic conditions in the U.S. Operating revenue grew 4% and comparable net earnings per share (as described in our Annual Report on Form 10-K for the year ended December 31, 2007) grew 6% from 2006 levels, although performance was below our planned targets. We grew our contractual revenue base in 2007 which is a critical component of our long-term strategy. In addition, both operating cash flow and free cash flow grew in 2007 reflecting our financial discipline and focus on maintaining a strong balance sheet. We completed one acquisition in our FMS business segment in 2007 and planned to continue our focus on completing additional accretive acquisitions in 2008.

 

Executive Performance

 

In determining the compensation package for our NEOs, including Mr. Swienton, the Compensation Committee and the independent directors consider the results of the NEO’s annual performance evaluation, comparative compensation data and information on our competitive position and operating/financial performance.

 

For each of his direct reports, Mr. Swienton provided input to the Compensation Committee as to the executive’s performance and made a recommendation to the Compensation Committee as to the executive’s compensation. In setting compensation for these executives, the Compensation Committee also took into account the executive’s responsibilities and tenure as well as their challenges and initiatives for 2008. In determining the compensation for Mr. Sanchez who was appointed as our Chief Financial Officer in October 2007, the Compensation Committee considered Mr. Sanchez’s significant responsibilities including for the Company’s information technology, corporate development and strategy, and risk management functions. The Compensation Committee also considered Mr. Sanchez’s successful transition into the CFO role and his strong leadership in dealing with regulatory and operating issues in Brazil and difficult credit market conditions. With respect to determining Mr. Tegnelia’s 2008

compensation, the Compensation Committee considered Mr. Tegnelia’s success in restructuring the FMS sales organization and implementing positive business process changes, as well as the positive impact of FMS acquisitions that had been and were expected to be completed in 2007 and 2008. In addition, during 2008, Mr. Tegnelia took responsibility for our FMS operations in Canada and Europe. In reviewing the compensation of Mr. Fatovic, the Compensation Committee took into account Mr. Fatovic’s additional responsibilities to oversee Ryder’s environmental, safety, corporate compliance and governmental affairs functions. Under Mr. Fatovic, we showed strong environmental leadership, significantly improved safety performance and a strong commitment to corporate compliance. Mr. Renehan oversees the sales and marketing function for our FMS business segment and reports directly to Mr. Tegnelia. Both Mr. Tegnelia and Mr. Swienton provided input to the Compensation Committee as to Mr. Renehan’s performance and compensation. In setting Mr. Renehan’s compensation, the Compensation Committee considered his responsibility as the head of sales for our largest business segment, our FMS lease and rental sales performance, as well as individual performance relative to targeted initiatives.

 

In setting Mr. Swienton’s compensation for 2008, the Compensation Committee considered our financial results for 2007 outlined above. The Compensation Committee also considered (a) Mr. Swienton’s strong leadership and focus during increasingly difficult economic conditions, (b) his ability to hire strong industry leaders and retain long-tenured, well-rounded executives to fill key positions in the Company, (c) his commitment to return value to the shareholders through measured increases in the dividend and stock repurchase programs, (d) his continued emphasis on growth through accretive acquisitions and (e) his continued ability to maintain financial discipline and deliver cost savings.

 

Benchmarking

 

In evaluating each element of our executive compensation program, the Compensation Committee considers the executive compensation program and practices, as well as the financial performance, of comparative groups of companies. Management and the Compensation Committee view this data as one factor in making compensation decisions, but do not rely solely on this information.

 

In 2008, our compensation group and the Compensation Committee utilized broad-based published surveys, specifically the Mercer Benchmark Database — Executive, which is comprised of 2,579 U.S.-based companies across all industries to provide relevant comparative compensation data. This Database does not provide company specific data. The Mercer Benchmark Database is a position-specific database which is searchable based on a variety of factors. For any specific position, narrowed by revenue and scope, the Database provides detailed aggregate compensation data with respect to base salary, short-term incentives and LTIs. The Compensation Committee uses the data from these published market surveys and databases to ensure that it is acting responsibly and to establish points of reference to determine whether and to what extent it is establishing competitive levels of compensation for our executives. The Compensation Committee does not target a specific percentile of any survey or peer group. Rather, the Compensation Committee compares numerous elements of executive compensation, including base salaries, annual incentive compensation, long-term cash and equity-based incentives and retirement benefits, to assist in determining whether proposed compensation programs are competitive and then uses its experience and judgment to make final compensation decisions.

 

As discussed above, Cook was retained by the Compensation Committee to compare Mr. Swienton’s compensation to external market data to determine whether his compensation package was at competitive levels, and to recommend any changes based on their competitive assessment. Cook utilized two peer groups against which they analyzed Mr. Swienton’s compensation. The first group (Peer Group) was comprised of 18 companies that are in a

related industry and are of comparable size based on revenue and market capitalization. This was the same Peer Group that was used in evaluating Mr. Swienton’s compensation in 2007. The Peer Group is comprised of:

 

 

Our business is comprised of three distinct, complex business segments: Fleet Management Solutions (FMS), Supply Chain Solutions and Dedicated Contract Carriage. Although there are other public companies that operate in one or more of our business segments, we do not believe there are any public companies that provide similar fleet management services (which represents nearly 65% of our consolidated revenues) or that provide the same mix of services, and that publicly disclose financial performance and compensation data relating to that business. As a result, we do not have access to relevant compensation data for our direct competitors. However, management and the Compensation Committee believe the Peer Group provides a useful basis of comparison for our CEO compensation because, similar to Ryder, many of these companies are asset-based providers of transportation or transportation-related services or otherwise provide leasing or rental services. Furthermore, many are impacted by similar economic factors affecting our Company including freight demand and fuel prices.

 

Cook also compiled a second comparator group (Market Group) of 13 service-based companies with market capitalizations ranging from $1 to $7 billion. This group was used to provide more general industry data outside of transportation/logistics. The Market Group was comprised of:

 

 

The Compensation Committee uses benchmark comparisons to peer groups or published surveys, as applicable, to ensure that it is acting responsibly and to establish points of reference to determine whether and to what extent it is establishing competitive levels of compensation for our executives. The Compensation Committee compares numerous elements of executive compensation, including base salaries, annual incentive compensation, long-term cash and equity-based incentives and retirement benefits, to assist in determining whether proposed compensation programs are competitive. The Compensation Committee then uses its experience and judgment to make final compensation decisions.

 

Elements of our 2008 Executive Compensation Program

 

Our executive officers do not have employment agreements. This gives the Compensation Committee flexibility to change the executive compensation program with respect to components, pay mix and amounts. Our NEOs do, however, have individual severance agreements which are described in more detail under the heading “Severance and Change of Control Benefits”.

 

In 2008, our executive compensation program consisted of base salary, annual bonus, LTIs, and benefits and perquisites. We do not have a formal policy relating to the allocation of total compensation among the various components. However, both management and the Compensation Committee believe that the more senior the position an executive holds, the more influence they have over our financial performance. As such, a greater amount of NEO

compensation should be at-risk based on Company performance. The compensation mix for our CEO for 2008 was targeted as set forth in the following chart.

 

 

Pay Mix for Chief Executive Officer (at target)

 

 

 

 

The chart below is representative of the overall target pay mix for our other named executive officers.

 

Pay Mix for Other Named Executive Officers (at target)

 

 

 

The actual compensation mix for each named executive officer may vary based on job responsibilities, Company performance, individual performance, isolated compensation actions and contributions to the organization.

Following is a description of each component of executive compensation for 2008:

 

 

 

Other Compensation

 

Time-Based Restricted Stock Rights

 

In the past, we made annual grants of time-based restricted stock rights to our named executive officers. Generally, the restricted stock rights vested in three equal annual installments regardless of Company performance. Beginning in 2006, the Compensation Committee granted PBRSRs and cash awards in lieu of the time-based restricted stock rights as the Compensation Committee believes that PBRSRs are more consistent with its compensation objectives. Time-based restricted stock rights continue to be used for retention purposes and to encourage potential new hires to leave their current employment. The time-based restricted stock rights include a right to receive dividend equivalents during the vesting period.

 

In February 2008, the Compensation Committee granted time-based restricted stock rights to certain Company officers. Mr. Tegnelia received 12,000 time-based restricted stock rights and Mr. Fatovic received 10,000 time-based restricted stock rights. These grants cliff vest on the third anniversary of the grant date. These grants were made to reward Messrs. Tegnelia and Fatovic for their continued leadership and to assure continued retention of these long-tenured employees during challenging economic conditions.

 

Clawback Policy

 

If an executive is terminated for Cause (as defined in the severance agreements described on page 46 under “NEO Severance Agreements”) or if he violates certain noncompete and nonsolicitation provisions of his severance agreement, our annual bonus program and LTI awards include clawback provisions that allow us to (i) cancel vested and unvested stock options and unvested restricted stock awards, (ii) recoup cash paid to the executive under the annual bonus program within one year prior to the termination, and (iii) recoup proceeds received by the executive within one year prior to the termination upon the exercise of stock options or the sale of stock underlying vested restricted stock rights.

 

Severance and Change of Control Benefits

 

All officers (including all executive officers) are currently eligible for certain severance benefits under either individual severance agreements (in the case of our NEOs) or the terms of our executive severance plan, as discussed below. These benefits are described in more detail under the heading “Potential Payments Upon Termination or Change of Control” on page 45. Severance benefits are intended to ease the consequences of an unexpected

termination of employment. These benefits are also designed to prevent our senior executives from seeking employment with our competitors after termination or soliciting our employees or customers during the restricted period. The change of control benefits are designed to preserve productivity, avoid disruption and prevent attrition during a period when we are, or are rumored to be, involved in a change of control transaction. The change of control severance program also motivates executives to pursue transactions that are in our shareholders’ best interests notwithstanding the potential negative impact of the transaction on their future employment. While cognizant of their terms, the Compensation Committee does not view the change of control and severance arrangements as an element of current compensation, and such arrangements do not necessarily affect the Compensation Committee’s annual compensation decisions.

 

During 2006, the Compensation Committee conducted a comprehensive review and evaluation of our severance and change of control severance benefits and approved changes to the benefits effective January 1, 2007. These changes were described in detail in our 2008 proxy statement.

 

Through January 30, 2008, all officers (including all executive officers) who were parties to individual severance and change of control agreements prior to adoption of the new executive severance plan were eligible for certain severance benefits under the terms of our severance agreement and change of control benefits under the terms of our change of control severance agreement, forms of which are on file with the SEC.

 

The new severance and change of control severance benefits for the named executive officers, including Mr. Swienton, are provided under new individual severance agreements. A description of the current severance and change of control severance benefits as well as a summary of potential payments relating to these and other termination events, can be found under the heading “Potential Payments Upon Termination or Change of Control” on page 45.

 

Equity Granting Practices

 

The Compensation Committee has a written Policy on Equity Granting Practices, which provides that all grants of equity awards must be approved by the Compensation Committee (or in the case of the CEO, the independent directors acting as a group) at a Board or Compensation Committee meeting and not by written consent. In the case of new hires (other than executive officers and other direct reports to our CEO), equity grants may be approved by the Chair of the Compensation Committee. The grant date of any equity award shall be the date of the Board or Compensation Committee meeting at which the award was approved, provided that the grant date for a new hire will be the later of (i) the date of the Board or Compensation Committee meeting at which the award was approved or (ii) the date on which the new hire commences employment. The exercise price of any stock option issued by us will be the average of the high and low sales price on the grant date (as required by our current equity compensation plans).

 

We do not time our equity award grants relative to the release of material non-public information. In 2008, the Compensation Committee amended the Policy to provide that the Compensation Committee could designate a grant date for time-based restricted stock rights that is later, but not before, the Compensation Committee approval date in order to prevent the rights from vesting at a time when the executive is prevented from trading stock as a result of the Company’s insider trading policy, thereby avoiding potential negative tax implications to the executive.

 

Stock Ownership Requirements

 

To demonstrate the importance of linking executive management and shareholder interests, we established formal stock ownership requirements for all of our officers. The CEO must own Company stock or stock equivalents (including any unvested restricted stock rights) having a value equal to at least two times his annual base salary, and all other officers must own Company stock or stock equivalents having a value equal to at least one times their base salary. The ownership requirements must be proportionately satisfied within five years of being appointed an officer. As of December 31, 2008, all named executive officers were in compliance with their stock ownership requirements.

Tax Implications

 

Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, precludes public companies from taking a federal income tax deduction for compensation in excess of $1 million paid to individual named executive officers unless certain specific and detailed criteria are met, including the requirement that compensation be “performance-based” and under a plan approved by our shareholders.

 

We review all components of our executive compensation program based upon the requirements of Section 162(m) of the Internal Revenue Code. Stock-based awards under our current equity compensation plan are designed to meet the requirements of Section 162(m), and accordingly, stock options and other stock-based awards granted to the named executive officers under this plan are eligible for the “performance-based” exception to Section 162(m). Our 2008 annual bonus awards were granted under the Ryder System, Inc. 2005 Equity Compensation Plan, which was approved by our shareholders in May 2005. We expect these awards to meet the requirements of Section 162(m).

 

The Compensation Committee believes that preserving its flexibility in awarding compensation is in our best interest and that of our shareholders and may determine, in light of all applicable circumstances, to award compensation in a manner that will not preserve the deductibility of such compensation under Section 162(m).

 

Nonqualified Deferred Compensation

 

Under Section 409A of the Internal Revenue Code, amounts deferred by a NEO under a nonqualified deferred compensation plan (including certain severance plans) may be included in gross income when earned and subject to a 20% additional federal tax, unless the plan complies with certain requirements related to the timing of deferral election and distribution decisions. We administer our plans consistent with Section 409A requirements and have amended plan documents effective December 31, 2008 to reflect Section 409A requirements.

 

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into a filing.

 

Our Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Submitted by the Compensation Committee of the Board of Directors.

 

John M. Berra (Chair)

James S. Beard

David I. Fuente

L. Patrick Hassey

Lynn M. Martin

Christine A. Varney

 

The following table sets forth the 2008, 2007 and 2006 compensation for:

 

 

We refer to the executive officers included in the Summary Compensation Table as our named executive officers. A detailed description of the plans and programs under which our named executive officers received the following compensation can be found in the Compensation Discussion and Analysis beginning on page 23.

 

Summary Compensation Table

 

 

 

 

 

 

 

 

 

2008 Grants of Plan-Based Awards

 

The following table reflects the five types of plan-based awards granted to our named executive officers in 2008. The first row represents the range of payouts under the 2008 annual cash incentive (bonus) awards granted under the Ryder System, Inc. 2005 Equity Compensation Plan. The second row represents the number of shares of common stock to be issued upon vesting of the PBRSRs granted in 2008 under the Ryder System, Inc. 2005 Equity Compensation Plan as part of our LTI program. The third row represents the target payout under the performance-based cash awards granted in 2008 under the Ryder System, Inc. 2005 Equity Compensation Plan as part of our LTI program. The fourth row represents stock options granted during 2008 under the Ryder System, Inc. 2005 Equity Compensation Plan as part of our LTI program. The fifth row, as applicable, represents time-based restricted stock rights granted to certain of our named executive officers in 2008 under the Ryder System, Inc. 2005 Equity Compensation Plan.