Caterpillar Faces Call to Shake Up Audit Panel -- WSJ

By Andrew Tangel Features Dow Jones Newswires

An investment group wants to shake up Caterpillar Inc.'s audit committee, amid mounting scrutiny of the machinery giant's offshore tax strategy.

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CtW Investment Group, an arm of union coalition Change to Win, issued a public letter Wednesday asking shareholders to vote against three Caterpillar board members that the group says kept an inadequate watch over Caterpillar's tax strategy and outside auditor PricewaterhouseCoopers LLP.

Caterpillar has faced years of scrutiny over a strategy that shifted much of the profit from its lucrative replacement-parts business to a Swiss subsidiary. The strategy, which dates back to the late 1990s, has lowered the company's U.S. tax bill. It has also drawn scrutiny, including an employee lawsuit, a U.S. Senate investigation and a federal criminal investigation that led to March 2 raids on Caterpillar's headquarters and two nearby facilities in Illinois.

Protest votes against directors without a competing slate of nominees don't often succeed. But they can lead to pressure for change if they garner significant support or embarrass directors. CtW said the unions it represents collectively own 1.8 million shares, or 0.3% of Caterpillar stock. Shareholders are scheduled to meet June 14.

"Given their long tenure and the audit committee's lack of response, we question these directors' ability to provide adequate oversight of the continuing federal investigation of the offshore tax structure and outside auditors," Dieter Waizenegger, CtW's executive director, wrote in the letter.

"I'm astonished at how many alarm bells went off and then were turned off," Mr. Waizenegger said in an interview.

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The investment group is targeting board members Daniel Dickinson, a private-equity executive; Dennis Muilenburg, chairman and chief executive of Boeing Co.; and William Osborn, former chairman and chief executive of Northern Trust Corp.

A Caterpillar spokeswoman declined to comment Wednesday. The company has previously said it was paying the taxes it owed and was cooperating with federal authorities.

PwC and a Boeing spokesman declined to comment.

CtW's letter says the audit committee has failed to address PwC's conflict of interest in the Swiss tax strategy. The accounting firm developed the tax plan and audits Caterpillar's books.

The letter also calls on shareholders to support its proposed changes to the company's "clawback policy" for recouping executive pay in the event of incidents that may damage Caterpillar's reputation. The company opposes that proposal, and says its existing clawback policy is robust.

Write to Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

May 18, 2017 02:47 ET (06:47 GMT)