3M 2009 Annual Report Download - page 107

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deductibility of compensation payable under the Executive Annual Incentive Plan (“Plan”) and the standards for
determining the amounts payable under the Plan. The lawsuit sought a declaration voiding shareholder approval of
the Plan, termination of the Plan, voiding the elections of directors, equitable accounting, and awarding costs,
including attorneys’ fees.
In May 2008, the Company and the individual defendants agreed to settle the litigation without admitting any liability
or wrongdoing of any kind. The settlement agreement, which was subject to court approval, called for the
Compensation Committee of the Company’s Board of Directors to adopt a resolution formally stating its interpretation
of certain aspects of the Plan, and the Company to file a Current Report on Form 8-K to the same effect, and to pay
up to $600,000 in attorney’s fees to the plaintiff’s counsel. On December 30, 2008, the Court issued an order
preliminarily approving the settlement agreement. As a result, the Company notified all stockholders of the proposed
settlement and its terms and their right to object to the terms of the settlement. On June 5, 2009, the Court issued an
order approving the settlement.
French Competition Council Investigation
On December 4, 2008, the Company’s subsidiary in France received a Statement of Objections from the French
Competition Council alleging an abuse of a dominant position regarding the supply of retro-reflective films for vertical
signing applications in France and of participation in a concerted practice with the major French manufacturers of
vertical signs. The Statement of Objections is an intermediate stage in the proceedings and no final determination
regarding an infringement of French competition rules has been made. 3M has filed its response denying that the
Statement of Objections states a valid claim against 3M. It is difficult to predict the final outcome of the investigation
at this time.
Compliance Matters
On November 12, 2009, the Company contacted the Department of Justice (DOJ) and Securities and Exchange
Commission (SEC) to voluntarily disclose that the Company was conducting an internal investigation as a result of
reports it received about its subsidiary in Turkey, alleging bid rigging and bribery and other inappropriate conduct in
connection with the supply of certain reflective and other materials and related services to Turkish government
entities. The Company also contacted certain affected government agencies in Turkey. The Company continues to
cooperate with the DOJ and SEC in the Company’s ongoing investigation of this matter. The Company retained
outside counsel to conduct an assessment of its policies, practices, and controls and to evaluate its overall
compliance with the Foreign Corrupt Practices Act. The Company cannot predict at this time the outcome of its
investigation or what regulatory actions may be taken or what other consequences may result.
Respirator Mask/Asbestos Litigation
As of December 31, 2009, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in
various courts that purport to represent approximately 2,510 individual claimants, down from the approximately 2,700
individual claimants with actions pending at December 31, 2008.
The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of
some of the Company’s mask and respirator products and seek damages from the Company and other defendants
for alleged personal injury from workplace exposures to asbestos, silica, coal mine dust or other occupational dusts
found in products manufactured by other defendants or generally in the workplace. A minority of claimants generally
allege personal injury from occupational exposure to asbestos from products previously manufactured by the
Company, which are often unspecified, as well as products manufactured by other defendants, or occasionally at
Company premises.
Since approximately 2006, the Company has experienced a significant decline in the number of new claims filed
annually by apparently unimpaired claimants. The Company attributes this decline to several factors, including
certain changes enacted in several states in recent years of the law governing asbestos-related claims, and the
highly-publicized decision in mid-2005 of the United States District Court for the Southern District of Texas that
identified and criticized abuses by certain attorneys, doctors and x-ray screening companies on behalf of primarily
unimpaired claimants, many of whom were recruited by plaintiffs’ lawyers through mass chest x-ray screenings. The
Company expects the filing of claims by unimpaired claimants in the future to continue at much lower levels than in
the past. The Company believes that due to this change in the type and volume of incoming claims, it is likely that the
number of claims alleging more serious injuries, including mesothelioma and other malignancies, while remaining
relatively constant, will represent a greater percentage of total claims than in the past. The Company has
demonstrated in past trial proceedings that its respiratory protection products are effective as claimed when used in