Phelps Dodge Corp – ‘DEF 14A’ for 5/7/97

As of:  Monday, 3/24/97   ·   For:  5/7/97   ·   Accession #:  950147-97-171   ·   File #:  1-00082

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Definitive Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Solicitation Material                33    137K 

Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [ X ]                                                   
Filed by a Party other than the Registrant [  ]                                 

Check the appropriate box:                                                      

[ ] Preliminary Proxy Statement                                                 
[ ] Confidential,  for  Use  of  the  Commission  Only  (as  permitted  by  Rule
14a-6(e)(2))                                                            
[X] Definitive Proxy Statement                                                  
[ ] Definitive Additional Materials                                             
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12               

PHELPS DODGE CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):                              

[X] No fee required.                                                            
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.    

1) Title of each class of securities to which transaction applies:              

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2) Aggregate number of securities to which transaction applies:                 

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3) Per unit price or other underlying value of transaction  computed pursuant to
   Exchange  Act Rule 0-11  (set  forth the  amount on which the  filing  fee is
calculated and state how it was determined):                              

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4) Proposed maximum aggregate value of transaction:                             

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5) Total fee paid:                                                              

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[ ] Fee paid previously with preliminary materials.                             

[ ] Check box if any part of the fee is offset as provided by Exchange  Act Rule
    0-11(a)(2)  and  identify the filing for which the  offsetting  fee was paid
    previously.  Identify the previous filing by registration  statement number,
or the form or schedule and the date of its filing.                     

1) Amount previously paid:                                              

    ----------------------------------------------------------------------------

2) Form, Schedule or Registration No.                                   

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3) Filing party:                                                        

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4) Date filed:                                                          

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phelps                                                                        
dodge                                                                       
     Corporation          2600 North Central Avenue, Phoenix, Arizona 85004-3014
--------------------------------------------------------------------------------

Douglas C. Yearley                                                              
Chairman of the Board, President                                                
and Chief Executive Officer                                                     
                                                                   April 1, 1997
Dear Shareholder:                                                               

   You are cordially  invited to attend the annual  meeting of  shareholders  of
Phelps Dodge Corporation to be held at 11:30 a.m. on Wednesday,  May 7, 1997, at
the Arizona Biltmore Hotel, 24th Street and Missouri Avenue,  Phoenix,  Arizona.
We hope that you will be able to attend the  meeting,  at which the business and
operations of the Corporation will be reviewed.                                 

   The formal notice of annual meeting and proxy  statement are attached to this
letter.  This  material  contains  information  concerning  the  business  to be
conducted at the meeting and the nominees for election as directors.            

   Even if you are unable to attend the meeting in person,  it is important that
your shares be represented.  Therefore,  please complete,  date, sign and return
the enclosed proxy at your earliest convenience.  At last year's meeting, 83% of
the  outstanding  shares  were  represented  and  we  would  like  even  greater
shareholder participation this year. If you choose to attend the annual meeting,
you may,  of course,  revoke  your proxy and cast your votes  personally  at the
meeting.                                                                        

Sincerely,

     /s/ D C Yearley

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phelps                                                                        
dodge                                                                       
     Corporation          2600 North Central Avenue, Phoenix, Arizona 85004-3014
--------------------------------------------------------------------------------
Notice of Annual Meeting of Shareholders                             May 7, 1997
--------------------------------------------------------------------------------

To the Shareholders of Phelps Dodge Corporation:                                

   The  annual  meeting  of  shareholders  of  Phelps  Dodge   Corporation  (the
"Corporation")  will be held at the  Arizona  Biltmore  Hotel,  24th  Street and
Missouri Avenue, Phoenix, Arizona, on Wednesday, May 7, 1997, at 11:30 a.m., for
the following purposes:                                                         

1. To elect three directors;                                              

   2. To consider  and act upon a proposal to amend the Phelps  Dodge 1993 Stock
Option and Restricted Stock Plan;                                               

   3. To  consider  and act upon a proposal to  authorize  an  amendment  to the
Corporation's  Restated  Certificate of  Incorporation to increase the number of
authorized Common Shares;                                                       

   4. To  consider  and act upon a proposal to  authorize  an  amendment  to the
Corporation's Restated Certificate of Incorporation to reduce the maximum number
of directors;                                                                   

   5. To  consider  and act upon a proposal to ratify the  appointment  of Price
Waterhouse LLP as independent accountants for the Corporation for the year 1997;
and                                                                             

   6. To  transact  such other  business as may  properly be brought  before the
meeting or any adjournments thereof.                                            

   Only  holders of record of the  Corporation's  Common  Shares at the close of
business on March 20, 1997, will be entitled to vote at the meeting.            

   Shareholders  who do not expect to attend the  meeting in person are asked to
date,  sign and complete the enclosed  proxy and return it without  delay in the
enclosed  envelope,  which  requires  no  postage  stamp if mailed in the United
States.                                                                         
                         By order of the Board of Directors,
                      Robert C. Swan
                      Vice President and Secretary

Phoenix, Arizona                                                                
April 1, 1997                                                                   

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PHELPS DODGE CORPORATION  
2600 NORTH CENTRAL AVENUE, PHOENIX, ARIZONA 85004-3014  

PROXY STATEMENT   

   The  accompanying  proxy is  solicited on behalf of the Board of Directors of
Phelps Dodge  Corporation (the  "Corporation")  for use at the annual meeting of
shareholders  to be  held on May 7,  1997,  and any  adjournments  thereof.  The
shareholder giving the proxy may revoke it at any time before it is exercised at
the  meeting  by  delivering  to the  Secretary  of the  Corporation  a  written
instrument of revocation or a duly executed proxy bearing a later date.         

   The only  securities of the  Corporation  entitled to vote at the 1997 annual
meeting are its Common Shares,  of which  64,021,452  shares were outstanding on
March 20, 1997,  each entitled to one vote.  Only  shareholders of record at the
close of  business  on March 20,  1997,  will be  entitled to vote at the annual
meeting.  The proxy of any shareholder  participating in the Automatic  Dividend
Investment  Service for Phelps Dodge Common  Shares,  administered  by The Chase
Manhattan  Bank,  will also serve as  instructions  for the voting of all shares
held for the shareholder's  account under that service. This proxy statement and
the accompanying  form of proxy are being first sent to shareholders on or about
April 1, 1997.                                                                  

1. ELECTION OF DIRECTORS  

   The  Board  of  Directors  of  the  Corporation  currently  consists  of  ten
directors.  The directors are divided into three classes, three in Class I, four
in Class II and three in Class III.  The terms of office of the three  Class III
directors expire at the 1997 annual meeting of shareholders.                    

   The three nominees for election as Class III directors are listed below.  The
nominees  will be elected  to serve for a term of three  years.  The  directors'
terms will  continue  until their  successors  are elected and  qualify.  Unless
otherwise instructed,  the persons named in the accompanying proxy will vote FOR
the  election  of such  nominees.  If for any reason any  nominee  should not be
available for election or able to serve as a director,  the  accompanying  proxy
may be voted for the election of a substitute nominee designated by the Board of
Directors.                                                                      

   A  plurality  of the votes cast at the annual  meeting  is  required  for the
election of directors. Abstentions and broker non-votes therefore have no effect
on the election of directors.                                                   

                  AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NOMINEE                   AND OTHER DIRECTORSHIPS HELD          
------------------- ------------------------------------------------------------
  Robert N. Burt    Mr. Burt,  59,  has been  Chairman  of the  Board  and Chief
   (Class III)        Executive Officer of FMC Corporation, Chicago, Illinois, a
                      producer  of  chemicals   and   machinery   for  industry,
                      agriculture and government,  since 1991. From 1990 to 1993
                      he was President of FMC  Corporation  and  Executive  Vice
                      President  from  1988 to  1990.  From  1989 to 1991 he was
                      Chairman and Chief Executive  Officer of FMC Gold Company.
                      He is a director  of FMC  Corporation  and  Warner-Lambert
                      Company.  Mr. Burt has served as a Phelps  Dodge  director
since 1993.                         
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                  AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
NOMINEE                   AND OTHER DIRECTORSHIPS HELD          
------------------- ------------------------------------------------------------
  Robert D. Krebs   Mr.  Krebs,  54,  has been  President  and  Chief  Executive
   (Class III)        Officer of Burlington Northern Santa Fe Corporation,  Fort
                      Worth, Texas, a holding company engaged in transportation,
                      since 1995.  From 1988 to 1995 he was Chairman,  President
                      and  Chief   Executive   Officer   of  Santa  Fe   Pacific
                      Corporation. He is a director of Burlington Northern Santa
                      Fe Corporation,  Santa Fe Pacific Gold Corporation,  Santa
                      Fe   Pacific   Pipelines,   Inc.,   and   Northern   Trust
                      Corporation.  Mr.  Krebs  has  served  as a  Phelps  Dodge
director since 1987.                

Douglas C. Yearley  Mr.  Yearley,  61, has been  Chairman of the Board and Chief
   (Class III)        Executive  Officer  of  the  Corporation  since  1989  and
                      President of the Corporation  since 1991. He was President
                      of Phelps Dodge Industries, a division of the Corporation,
                      from 1988 until  1990,  Executive  Vice  President  of the
                      Corporation from 1987 until 1989 and Senior Vice President
                      of  the  Corporation  from  1982  through  1986.  He  is a
                      director  of  J.P.  Morgan  & Co.,  Incorporated  and  its
                      principal  banking   subsidiary,   Morgan  Guaranty  Trust
                      Company  of New York,  Lockheed  Martin  Corporation,  USX
                      Corporation  and  Southern  Peru Copper  Corporation.  Mr.
                     Yearley has served as a Phelps Dodge director since 1986.

   The seven  directors  whose terms will continue  after the annual meeting and
will expire at the 1998  annual  meeting of  shareholders  (Class I) or the 1999
annual meeting of shareholders (Class II) are listed below.                     

                  AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
DIRECTOR                     AND OTHER DIRECTORSHIPS HELD             
------------------- ------------------------------------------------------------
   Paul Hazen       Mr. Hazen, 55, has been Chairman and Chief Executive Officer
   (Class I)          of Wells Fargo & Company,  San  Francisco,  California,  a
                      bank  holding  company,  and of Wells Fargo Bank,  N.A., a
                      national  banking  association,  since January 1, 1995. He
                      was  President of Wells Fargo & Company and of Wells Fargo
                      Bank,  N.A.  from 1984 to 1994.  He is a director of Wells
                      Fargo  &  Company,   Wells  Fargo  Bank,  N.A.,   AirTouch
                      Communications,  Inc.  and  Safeway,  Inc.  Mr.  Hazen has
         served as a Phelps Dodge director since 1988.

Marie L. Knowles    Mrs.  Knowles,  50, has been  Executive  Vice  President and
   (Class I)          Chief Financial Officer of Atlantic Richfield Company, Los
                      Angeles,  California,  a diversified energy company, since
                      July  1996.  From  1993  until  1996 she was  Senior  Vice
                      President of Atlantic Richfield Company,  and President of
                      ARCO  Transportation   Company,  a  former  subsidiary  of
                      Atlantic  Richfield  Company,  engaged in the operation of
                      petroleum transportation and storage facilities. From 1990
                      to 1993 she was Vice  President and Controller of Atlantic
                      Richfield Company.  Mrs. Knowles is a director of Atlantic
                      Richfield  Company,   ARCO  Chemical  Company  and  Vastar
                      Resources,  Inc. She has served as a Phelps Dodge director
since 1994.                         

Gordon R. Parker    Mr. Parker,  61, was Chairman of Newmont Mining  Corporation
   (Class I)          and Newmont  Gold  Company,  Denver,  Colorado,  a unified
                      worldwide  gold  mining  company,   from  1986  until  his
                      retirement in 1994. He was Chief Executive Officer of both
                      companies  from 1986 until 1993.  Mr. Parker is a director
                      of Caterpillar,  Inc., Gold Fields of South Africa and The
                      Williams  Companies,  Inc. He has served as a Phelps Dodge
director since 1995.                

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                  AGE, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE
DIRECTOR                     AND OTHER DIRECTORSHIPS HELD             
------------------- ------------------------------------------------------------
  Paul W. Douglas   Mr. Douglas, 70, was Chairman and Chief Executive Officer of
   (Class II)         The   Pittston   Company,   Greenwich,    Connecticut,   a
                      diversified firm engaged in coal mining and transportation
                      services,  from 1984 until his  retirement in 1991. He was
                      President,  Chief  Executive  Officer and  Chairman of the
                      Executive Committee of Freeport-McMoRan Inc., from 1981 to
                      1983 and of Freeport  Minerals  Company from 1975 to 1981.
                      Mr.  Douglas  is a  director  of New York  Life  Insurance
                      Company,  South American Gold and Copper Company  Limited,
                      MacMillan Bloedel Limited and U.S. Trust Corporation and a
                      trustee of U.S.  Trust  Corporation's  subsidiary,  United
                      States  Trust  Company  of New  York.  He has  served as a
Phelps Dodge director since 1983.   

William A. Franke   Mr.  Franke,  60,  has been  Chairman  and  Chief  Executive
   (Class II)         Officer  of  America  West  Holdings   Corporation   since
                      February  1997 and Chairman of the Board of its  principal
                      subsidiary,   America  West  Airlines,  Inc.,  an  airline
                      carrier,   since  1992.  He  was  the  subsidiary's  Chief
                      Executive  Officer from December 1993 until February 1997,
                      and its President  from May 1996 until  February  1997. He
                      has been  President  of Franke & Company,  Inc.,  Phoenix,
                      Arizona,  an investment firm, since 1987. He is a director
                      of  America  West  Holdings   Corporation,   America  West
                      Airlines,  Inc., Central  Newspapers,  Inc., Beringer Wine
                      Estates and Mtel Latin America, Inc. He is also a director
                      and  Chairman  of the Board of  Airplanes  Limited,  and a
                      controlling  trustee and Chairman of Airplanes U.S. Trust,
                      entities involved in aircraft financing and leasing, and a
                      director of the Air Transport  Association of America. Mr.
                    Franke has served as a Phelps Dodge director since 1980.

Southwood J. Morcott Mr. Morcott,  59,  has been  Chairman  of the Board of Dana
   (Class II)         Corporation,  Toledo,  Ohio, a worldwide  manufacturer and
                      distributor  of parts for the  vehicular,  industrial  and
                      mobile off-highway markets, since 1990. From 1987 to 1995,
                      he served as Chairman of Hayes-Dana  Inc. He was appointed
                      Chief  Executive  Officer of Dana  Corporation in 1989 and
                      Chief Operating  Officer in 1986. He was President of Dana
                      Corporation  from 1986 to 1995.  Mr. Morcott is a director
                      of Dana Corporation, CSX Corporation and Johnson Controls,
                     Inc. He has served as a Phelps Dodge director since 1991.

J. Steven Whisler   Mr. Whisler,  42, has been  President of Phelps Dodge Mining
   (Class II)         Company,  a division of the Corporation,  since 1991 and a
                      Senior Vice  President of the  Corporation  since 1988. He
                      was a Vice  President of the  Corporation  from 1987 until
                      1988 and the General Counsel of the Corporation  from 1987
                      until 1991. He is a director of Burlington  Northern Santa
                      Fe  Corporation,  Unocal  Corporation  and  Southern  Peru
                      Copper  Corporation.  Mr.  Whisler  has served as a Phelps
Dodge director since 1995.          

   The Board of Directors met eight times during 1996. Various committees of the
Board also met during the year,  including the Audit  Committee,  four meetings;
the  Compensation  and Management  Development  Committee,  four  meetings;  the
Committee  on  Directors   (nominating   committee),   two  meetings;   and  the
Environmental,  Health and Safety Committee,  three meetings. Average attendance
at all Board and committee meetings was 95%.                                    

   The Audit Committee of the Board of Directors,  comprising  Messrs.  Douglas,
Franke, Hazen (Chairman),  (Mrs.) Knowles and Krebs, among other functions:  (i)
reviews  and  recommends  the  engagement  of  the   Corporation's   independent
accountants,  including  the  approval  of their fee and the scope and timing of
their audit of the Corporation's  financial  statements;  (ii) reviews, with the
Corporation's  Director  of  Corporate  Audit,  the  scope  and  results  of the
Corporation's  internal  audit  activity;  (iii) reviews,  with the  independent
accountants,  the Director of Corporate Audit and the Corporation's  management,
policies and procedures with                                                    
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respect to  internal  auditing  and  financial  and  accounting  controls;  (iv)
reviews,  with the  independent  accountants,  the  accountants'  report  on the
Corporation's  financial  statements,  their  perception  of  the  Corporation's
financial  and  accounting  personnel,  and their  recommendations,  if any, for
improvements in the Corporation's  internal  controls and the  implementation of
such  recommendations;  and (v) reviews the adequacy and  appropriateness of the
Corporation's code of business ethics and policies.                             

   The  Compensation  and  Management  Development  Committee  of the  Board  of
Directors,  comprising  Messrs.  Burt,  Douglas,  Hazen and Morcott  (Chairman),
recommends to the Board the compensation of the  Corporation's  senior officers,
reviews  recommendations  by management as to the compensation of other officers
and key  personnel  and  reviews  management's  program for the  development  of
individuals  to  assume  positions  of  responsibility  in the  Corporation.  In
addition,   the  Committee   reviews  and  recommends  to  the  Board  incentive
compensation  awards  and  grants  options,  which may be in tandem  with  stock
appreciation  rights,  and restricted stock under the  Corporation's  1993 Stock
Option and Restricted Stock Plan (the "1993 Plan").                             

   The  Committee  on Directors of the Board of  Directors,  comprising  Messrs.
Franke, Krebs (Chairman), Morcott and Parker, studies, and makes recommendations
concerning the composition of the Board of Directors and the committees  thereof
and reviews the compensation of Board and committee members.  The Committee also
reviews  the  qualifications  of  potential   candidates  for  director  of  the
Corporation  and  recommends to the Board of Directors  nominees for election as
directors.  The  Committee  will  consider  as  nominees  for  director  persons
recommended  by  shareholders.  Such  recommendations  should  be  sent  to  the
Secretary of the  Corporation and should include the address of the person and a
brief description of his or her qualifications.                                 

   The  Environmental,  Health and Safety  Committee of the Board of  Directors,
comprising  Messrs.  Burt,  (Chairman),  Douglas,  (Mrs.)  Knowles and  Morcott,
reviews,  among  other  things,  the  Corporation's  policies  with  respect  to
environmental,  health and  safety  matters  and the  adequacy  of  management's
programs for  implementing  those policies and reports on such reviews and makes
recommendations with respect to those policies to the Board of Directors.       

   Directors  who are not  employees  of the  Corporation  currently  receive an
annual  retainer  of $25,000  and a fee of $1,000  for each  Board or  committee
meeting  attended or, on a per diem basis,  for rendering other special services
to the Corporation.  Committee Chairmen receive an additional $3,000 for a total
retainer of $28,000. As employee directors,  Messrs.  Yearley and Whisler do not
receive the annual  retainer  or any meeting  fees.  Under an unfunded  plan,  a
director  may elect to defer  receipt of his or her  retainer or meeting fees or
both to future years and to receive interest thereon at prevailing  market rates
or to have such amounts deemed invested in the Corporation's Common Shares.     

   Directors  who have  served  for at least  five  years  and who have not been
employees of the Corporation or any of its  subsidiaries are entitled to receive
an annual  retirement  benefit beginning at age 65 (or at their later retirement
from the Board)  equal to 50% of the annual  retainer  paid from time to time to
active directors and prorated for each year served in excess of five years up to
100% for  retired  directors  who have  served for at least ten years.  The plan
providing  for  these  payments  is  unfunded,  and  payments  under it are made
directly by the Corporation.                                                    

   The  Corporation  provides life  insurance for directors who are not and have
not been employees of the Corporation or any of its subsidiaries. The amounts of
such  insurance  are $50,000 for active  directors and $25,000 for directors who
have  retired in  accordance  with the  Corporation's  Policy on  Retirement  of
Directors.                                                                      

   Directors  who are not,  and have not for one  year  been,  employees  of the
Corporation or its subsidiaries or are not otherwise  eligible to participate in
any  plan of the  Corporation  or its  subsidiaries  entitling  participants  to
acquire  stock,  stock options or stock  appreciation  rights,  are eligible for
option  grants  under the Phelps  Dodge 1989  Directors  Stock  Option Plan (the
"Plan"). The number of such eligible directors currently is eight. Through 1996,
on the first business day following each annual  meeting of  shareholders,  each
eligible  director was granted an option to purchase  1,148 Common  Shares.  The
option price is the fair market value of the Common Shares on the day the option
is  granted  and is payable in cash or in Common  Shares  having a market  value
equal to the option price or in a combination of cash and Common Shares. Options
become                                                                          
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exercisable  in  three  equal  annual   installments   beginning  on  the  first
anniversary of the date of grant. Exercisable options expire no later than three
years  after a director  terminates  his or her  service,  unless  such  service
terminates as a result of removal by the  shareholders  for cause, in which case
the options will be cancelled on the date of  termination.  Options that are not
exercisable  on the  date a  director  terminates  his or her  service  will  be
cancelled  on that  date  unless  such  service  terminates  (i) at or after the
director  reaches age 65, having  served at least ten years,  (ii) on account of
the  director's  death or disability or (iii) in compliance  with any applicable
law or rule of the New  York  Stock  Exchange.  In the  latter  cases,  all of a
director's outstanding options are immediately and fully exercisable at the time
of his  termination  of  service.  Each option  outstanding  at such time as the
Corporation's  shareholders approve a merger or similar transaction in which the
Corporation   will  not  survive  as  a  publicly  held   corporation,   or  the
Corporation's Common Shares are first purchased pursuant to a third party tender
offer,  will be cancelled in exchange for a cash payment  equal to the excess of
the fair market value of the Common Shares on such date over the exercise  price
of such option  multiplied by the number of shares  subject to such option.  The
Plan terminates on the third day following the annual meeting of shareholders to
be  held in the  year  1999.  On  November  6,  1996,  the  Board  of  Directors
indefinitely  suspended  the Plan.  The  suspension  of the Plan will not affect
options outstanding at that time.                                               

   On November 6, 1996, the Board of Directors  adopted the 1997 Directors Stock
Unit  Plan.  The Stock  Unit Plan  awards  an annual  grant to each  nonemployee
director (on January 1) of stock units having a value  equivalent  to 300 of the
Corporation's  Common  Shares  in lieu of the  1,148  stock  options  previously
granted to each director on an annual basis.  Dividend  equivalents are credited
as  additional  stock  units.  Upon  termination  of service as a director,  the
director is entitled  to payment  for his or her  accumulated  stock units in an
equivalent number of the Corporation's  Common Shares.  Upon death of a director
or a change in control of the Corporation, the director is entitled to receive a
cash payment in respect of his or her accumulated  stock units based on the fair
market value of the  Corporation's  Common Shares on the date of death or change
in control.  "Change in  control"  means (i) the  approval by the  Corporation's
shareholders of a merger or similar  transaction in which the  Corporation  will
not survive as a publicly  held  corporation  or (ii) the  Corporation's  Common
Shares are first  purchased  pursuant to a third party tender  offer.  The Stock
Unit Plan terminates on the last day of the year 2006.                          

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION   

   The following directors served on the Compensation and Management Development
Committee of the Board of Directors  during all or part of 1996:  Messrs.  Burt,
Douglas, Hazen and Morcott (Chairman). None of these directors is or has been an
officer or employee of the Corporation or any of its subsidiaries or has had any
other  relationship  with the Corporation or any of its  subsidiaries  requiring
disclosure  herein under the  applicable  rules of the  Securities  and Exchange
Commission.                                                                     
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BENEFICIAL OWNERSHIP OF SECURITIES  

   The following table discloses the number of the  Corporation's  Common Shares
deemed  beneficially  owned as of February 1, 1997,  by each  director  and each
named  executive  officer of the  Corporation  and by all  directors and current
executive officers of the Corporation as a group(a):                            

                            NUMBER OF                                NUMBER OF
                           SHARES                                   SHARES
NAME                          (b)(c)     NAME                          (b)(c)   
----                        -----------  ----                        -----------
Robert N. Burt (d)  ......    3,531      Southwood J. Morcott (d)(f)     7,046  
Paul W. Douglas (d)  .....    9,187      Gordon R. Parker (d) ......     1,682  
William A. Franke (d) ....    9,187      Thomas M. St. Clair .......    85,968  
Paul Hazen (d)(e)  .......   11,666      J. Steven Whisler .........   193,021  
Manuel J. Iraola  ........  100,027      Douglas C. Yearley ........   413,399  
Marie L. Knowles (d) .....    1,682      Directors and current                  
Robert D. Krebs (d)  .....    9,031       executive officers                    
                                        as a group (13)  .........   857,040

--------------                                                                  
(a)  The percentage of Common Shares  beneficially owned by any director and any
     named  executive  officer  was less than one  percent of the Common  Shares
     outstanding   on  February  1,  1997;   the  percentage  of  Common  Shares
     beneficially  owned by all  directors and current  executive  officers as a
   group was 1 percent of the Common Shares outstanding on February 1, 1997.

(b)  Shares shown as beneficially  owned: (i) include restricted shares acquired
     under the 1993 Stock  Option and  Restricted  Stock  Plan as  follows:  Mr.
     Iraola, 30,000 shares; Mr. St. Clair, 0 shares; Mr. Whisler, 25,000 shares;
     and Mr.  Yearley,  0 shares;  all  current  executive  officers as a group,
     55,000 shares; and (ii) include shares which may be acquired within 60 days
     by exercise of stock options as follows:  Mrs. Knowles and Mr. Parker,  382
     shares; Mr. Burt, 1,147 shares; Mr. Krebs, 5,739 shares; Mr. Morcott, 3,443
     shares;  Mr. Iraola,  58,166  shares;  Mr. St. Clair,  65,379  shares;  Mr.
     Whisler,  123,102 shares; and Mr. Yearley, 300,183 shares; each nonemployee
     director (except Mrs. Knowles,  Messrs.  Burt, Krebs,  Morcott and Parker),
     6,887  shares;  all directors  and current  executive  officers as a group,
     587,521  shares.   In  addition  to  the  shares  in  the  table  shown  as
     beneficially  owned,  which include shares which may be acquired  within 60
     days  by  exercise  of  stock  options,  the  individuals  and  group  hold
     additional  stock options as follows:  Mrs.  Knowles and Mr. Parker,  1,914
     shares;  Mr. Iraola,  63,334  shares;  Mr. St. Clair,  62,690  shares;  Mr.
     Whisler,  100,042  shares;  and Mr. Yearley,  220,605 shares;  each outside
     director (except Mrs. Knowles and Mr. Parker),  2,297 shares; all directors
and current executive officers as a group, 481,070 shares.            

(c)  Each director and named  executive  officer has sole voting and  investment
     power  over  the  shares  shown  as  beneficially  owned  except:  (i)  the
     restricted shares acquired under the 1993 Stock Option and Restricted Stock
     Plan as to which each holder has sole voting but no investment  power; (ii)
     shares which may be acquired within 60 days by exercise of stock options as
     to which each  holder has no voting or  investment  power;  and (iii) 2,600
     shares as to which Mr.  Iraola has  shared  voting  and  investment  power;
     44,919  shares as to which Mr.  Whisler  has shared  voting and  investment
     power;  and,  113,216  shares as to which Mr. Yearley has shared voting and
investment power.                                                     

(d)  Includes  300 stock units  awarded  January 1, 1997 under the Phelps  Dodge
Corporation 1997 Directors Stock Unit Plan.                           

(e)  Includes 1,524 stock units acquired in the Phelps Dodge stock account under
     the  Deferred   Compensation   Plan  for  the  Directors  of  Phelps  Dodge
Corporation.                                                          

(f)  Includes 1,550 stock units acquired in the Phelps Dodge stock account under
     the  Deferred   Compensation   Plan  for  the  Directors  of  Phelps  Dodge
Corporation.                                                          

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE   

   Section  16(a)  of  the   Securities   Exchange  Act  of  1934  requires  the
Corporation's  directors and executive  officers,  and persons who own more than
ten percent of a registered class of the Corporation's equity                   
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securities to file reports of ownership of and transactions in the Corporation's
securities with the Securities and Exchange  Commission ("SEC") and the New York
Stock Exchange  ("NYSE").  Such  directors,  executive  officers and ten-percent
stockholders  are also  required  to furnish the  Corporaton  with copies of all
Section 16(a) forms they file.                                                  

   Based  solely on a review of the copies of such forms  received by it, and on
written representations from certain reporting persons, the Corporation believes
that during fiscal 1996 all Section 16(a) filing requirements  applicable to its
directors, officers and ten percent stockholders were satisfied.                

   To the  knowledge of the  Corporation,  the following  entities  beneficially
owned in excess of five percent of the Corportion's Common Shares as of December
31, 1996:                                                                       

                               NUMBER     PERCENT OF
NAME AND ADDRESS                OF SHARES   OUTSTANDING 
----------------                ---------   ----------- 
Wellington Management Company, LLP (a)       4,977,258     7.68%                
75 State Street                                                                 
Boston, MA 02109                                                                

--------------------                                                            
(a)  A report on Schedule 13G dated January 24, 1997,  disclosed that Wellington
     Management  Company,  LLP, as a parent holding  company,  had shared voting
     power over  2,257,318  shares and shared  dispositive  power over 4,977,258
shares.                                                               
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EXECUTIVE COMPENSATION  

   The following table summarizes the  compensation  paid by the Corporation for
1996,  1995 and 1994 to each of the four named  individuals  who were  executive
officers of the Corporation in 1996:                                            

                                                        [Enlarge/Download Table]
                          SUMMARY COMPENSATION TABLE                                                           


                    ANNUAL COMPENSATION(b)                             LONG-TERM COMPENSATION                  
------------------------------------------------------------ ---------------------------------------- ---------
                                                                        AWARDS              PAYOUTS            
                                                             -------------------------- -------------          
                                                                                            LONG               
                                                     OTHER                                  TERM         ALL   
          NAME                                      ANNUAL    RESTRICTED                 PERFORMANCE    OTHER  
           AND                   BASE               COMPEN-     STOCK        OPTIONS        PLAN       COMPEN- 
        PRINCIPAL               SALARY     BONUS   SATION(c)  AWARDS(d)      GRANTED       PAYOUTS    SATION(f)
        POSITION         YEAR     ($)       ($)       ($)        ($)           (#)           ($)         ($)   
----------------------- ------ --------- --------- --------- ------------ ------------- ------------- ---------
                                                                                                               
Douglas C. Yearley       1996   675,000   675,000   56,172          -0-    103,601 (a)       -0-       109,465 
Chairman Of The Board    1995   640,000   642,880   48,639          -0-    163,032 (a)       -0-       101,270 
President, Chief         1994   560,000   560,000   24,580          -0-    190,615 (a)   203,651 (e)    56,000 
Executive                                                                                                      
Officer And Director                                                                                           

J. Steven Whisler        1996   355,000   300,000   14,793          -0-     44,499 (a)       -0-        38,489 
Senior Vice President    1995   340,000   267,200    6,149    1,684,375     63,010 (a)       -0-        36,684 
And Director             1994   300,000   241,100      -0-          -0-     55,594 (a)   109,563 (e)    30,000 

Manuel J. Iraola(g)      1996   320,000   280,000   17,216          -0-     30,000           -0-        36,650 
Senior Vice President    1995   275,000   227,600   17,208    1,684,375     50,000           -0-        31,094 

Thomas M. St. Clair      1996   290,000   188,900   12,589          -0-     53,572 (a)       -0-        50,915 
Senior Vice              1995   280,000   186,200    3,631          -0-     40,630 (a)       -0-        47,901 
President And            1994   270,000   187,200      213          -0-     56,987 (a)    99,040 (e)    27,000 
Chief Financial Officer                                                                                        
<FN>                                                                                                           

(a)  The option  grants  denoted by "(a)"  include  reload  options,  as well as                               
     normal compensatory options.                                                                              

(b)  Amounts  shown  under   "Bonus"  were  paid  under  the  Annual   Incentive                               
     Compensation  Plan.  Amounts shown under "Base Salary" and "Bonus"  include                               
     any  salary or bonus  deferred  by the  executive  under the  Phelps  Dodge                               
     Employee Savings Plan (the "Savings Plan") and the Comprehensive  Executive                               
     Nonqualified  Retirement and Savings Plan of Phelps Dodge  Corporation (the                               
     "Comprehensive Nonqualified Plan").                                                                       

(c)  Tax payment reimbursements.                                                                               

(d)  The 1995 awards  reflect a special  grant of  restricted  shares to each of                               
     Messrs.  Iraola and Whisler.  These grants  require a five year  post-grant                               
     service to vest,  but are  subject  to  earlier  vesting as a result of the                               
     recipient's  death,  disability or retirement or a change in control of the                               
     Corporation.  Dividends  on  restricted  stock are paid to the  holder.                                   

     On December 31, 1996, the named  executives  held the following  numbers of                               
     shares of restricted  stock which had the following  aggregate values as of                               
     such date; Mr.  Whisler,  25,000 shares valued at  $1,698,438;  Mr. Iraola,                               
     30,000 shares valued at  $2,038,125.  The reported  values are based on the                               
     market  value of  unrestricted  shares of the  Corporation's  stock,  as of                               
     December 31, 1996, and as such do not reflect any discount  attributable to                               
     the restrictions on transferability  and risk of forfeiture inherent in the                               
     restricted stock.                                                                                         

(e)  The  1992-1994  Long-Term  Performance  Plan  award  was  paid  100% in the                               
     Corporation's  Common Shares restricted as to transferability  for a period                               
     of two years following the end of the performance review period.                                          

(f)  Amounts  shown  include the  following  contributions  and  accruals by the                               
     Corporation  for  1996 to the  Savings  Plan and 1996  accruals  under  the                               
     savings portion of the Comprehensive  Nonqualified Plan, respectively,  for                               
     the benefit of the named executives:  Mr. Yearley, $15,000 and $52,500; Mr.                               
     Iraola,  $15,000 and $17,000;  Mr.  Whisler,  $15,000 and $20,500;  Mr. St.                               
     Clair,   $15,000  and  $14,000.   Amounts  shown  also  include  a  payment                               
     representing  the  premiums  on whole  life  insurance  policies  effective                               
     December  29, 1996 for the benefit of the named  executives:  Mr.  Yearley,                               
     $41,965; Mr. Iraola, $4,650; Mr. Whisler, $2,989; Mr. St. Clair, $21,915.                                 

(g)  Effective  January 6, 1995,  Mr. Iraola was elected a Senior Vice President                               
     of the Corporation and President of Phelps Dodge Industries,  a division of                               
     the Corporation.                                                                                          
</FN>                                                                                                          

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STOCK OPTIONS   

   Each of the named  executives  was  eligible  to receive  two types of option
grants during 1996:  normal option  grants and reload option  grants.  The first
type of grant is a compensatory  award normally made on an annual basis which is
intended  to reward  each  named  executive  based on the  Corporation's  future
performance.  Normal  option  grants  customarily  include  the right to receive
reload options.                                                                 

   A reload  option is granted  to an  employee  who  exercises  an option  with
already-owned  shares. It replaces the opportunity for future  appreciation that
the employee  would  otherwise  lose by exercising  the original  option,  while
encouraging the employee to increase his share ownership. Reload options provide
only limited  incremental  value to the employee as compared to the options they
replace.   Reload  option  grants  customarily  include  the  right  to  receive
additional reload options.                                                      

   The  following  table  contains   information  with  respect  to  the  normal
compensatory option grants and reload option grants made to each named executive
during 1996 and the hypothetical value at the time of grant based on a variation
of the Black-Scholes model (see footnote (c) on page 10). The Corporation is not
aware of any option  pricing  model which can provide a true  assessment  of the
value of the options.  Over their lives,  the options  could have a greater or a
lesser  value than that shown in the table,  and under some  circumstances  they
could have zero value.                                                          

                                                        [Enlarge/Download Table]


                          OPTION GRANTS IN 1996                                          

                         NORMAL      % OF TOTAL                                          
                       AND RELOAD  OPTIONS GRANTED                           GRANT DATE  
                        OPTIONS     TO EMPLOYEES    EXERCISE   EXPIRATION     PRESENT    
NAME                   GRANTED(a)    IN 1996(b)      PRICE        DATE        VALUE(c)   
--------------------- ------------ --------------- ---------- ------------ --------------
                                                                                         
Douglas C. Yearley  .    70,000         12.9%       $71.6250     12/4/06      $889,000   
                         18,097                      73.2500     12/1/03       135,400   
                         15,504                      73.2500     12/2/02       116,000   
J. Steven Whisler  ..    35,000         5.6%         71.6250     12/4/06       444,500   
                          9,499                      72.2500     12/4/01        70,100   
Manuel J. Iraola  ...    30,000         3.7%         71.6250     12/4/06       381,000   
Thomas M. St. Clair      20,000         6.7%         71.6250     12/4/06       254,000   
                          4,289                      73.2500     12/2/02        32,100   
                            900                      73.2500     12/5/00         6,700   
                          5,026                      73.2500     12/1/03        37,600   
                          6,334                      73.2500     12/5/00        47,400   
                          5,119                      71.9375     12/1/03        37,600   
                          4,664                      71.9375     12/4/01        34,300   
                          7,240                      71.9375     12/7/04        53,200   
<FN>                                                                                     
----------------                                                                         
(a)  During 1996,  normal  options were granted in the following  amounts to the         
     named executive  officers:  Mr. Yearley,  70,000; Mr. Whisler,  35,000; Mr.         
     Iraola,  30,000; and Mr. St. Clair,  20,000. The remaining grants disclosed         
     in the table are reload options.                                                    

     Options  expire no later than the tenth  anniversary  of the date of grant,         
     plus one day.  If an employee  retires on his normal  retirement  date,  or         
     early under any  pension or  retirement  plan  maintained  by Phelps  Dodge         
     Corporation or any subsidiary,  or dies, his exercisable  options terminate         
     no later  than the fifth  anniversary  of his  retirement  or death.  If an         
     optionee's  employment  terminates for any reason other than  retirement or         
     death,  his exercisable  options  terminate no later than 30 days following         
     the termination of his employment.                                                  

     Options generally become  exercisable in three  substantially  equal annual         
     installments  beginning  on the first  anniversary  of the date of grant or         
     earlier  (but not earlier  than six months from the date of grant except in         
     the case of death) on (i) an employee's  normal  retirement  date or death,         
     (ii) the date an employee  ceases to be employed if his  employment  ceases         
     within two years  following  a change of control  of the  Corporation,  and         
     (iii) the date the Corporation's  Common Shares are purchased pursuant to a         
     third party tender offer or the Corporation's shareholders approve a merger         
     or similar transaction which the Corporation will not survive as a publicly         
     held corporation.                                                                   
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     Options  include  limited  rights   exercisable   only  in  the  event  the         
     Corporation's  Common Shares are purchased pursuant to a third party tender         
     offer  or the  Corporation's  shareholders  approve  a  merger  or  similar         
     transaction  which the  Corporation  will not  survive as a  publicly  held         
     corporation.  Under these limited rights, an optionee may elect, in lieu of         
     purchasing  shares,  to relinquish the option with respect to all or any of         
     such  shares  and to  receive a payment  equal to (i) the price  paid for a         
     Common Share in such merger or similar transaction multiplied by the number         
     of Common  Shares the  optionee  could have  purchased  less (ii) the total         
     purchase  price for that  number of  Common  Shares  under the terms of the         
     option.                                                                             

     Options  customarily  include  the right to receive  reload  options in the         
     event the optionee  exercises an option with already-owned  shares.  Reload         
     options  contain the same  expiration  dates and other terms as the options         
     they replace except that they have an exercise price per share equal to the         
     fair  market  value of a Common  Share on the  date the  reload  option  is         
     granted and become  exercisable  in full six months after they are granted.         
     Reload options  customarily  include the right to receive additional reload         
     options.                                                                            

(b)  Illustrates  the total  number of normal  and reload  options  granted as a         
     percent of the aggregate number of 1996 normal options (686,400 shares) and         
     1996 reload options (114,967 shares) granted to all employees.                      

(c)  The  hypothetical  present  value of the  options  at the date of grant was         
     determined using a variation of the Black-Scholes option pricing model. The         
     Black-Scholes model is a complicated  mathematical  formula which is widely         
     used to value options  traded on the stock  exchanges.  However,  executive         
     stock options differ from exchange-traded  options in several key respects.         
     Executive  options are  long-term,  nontransferable  and subject to vesting         
     restrictions,  whereas  exchange-traded  options are  short-term and can be         
     exercised or sold  immediately in a liquid  market.  The model used here is         
     adapted to estimate the present value of an executive  option and considers         
     a  number  of  factors,  including  the  grant  price  of the  option,  the         
     volatility of the Corporation's  Common Shares, the dividend rate, the term         
     of the  option,  the time it is  expected to be  outstanding  and  interest         
     rates.  The  Black-Scholes  values were derived  using as  assumptions  the         
     following  financial factors which existed at essentially the time that the         
     options were granted:  volatility of .2402,  dividend  yield of 3.32%,  and         
     interest rates of 5.70% for normal options and 5.47% for reload options. In         
     view of the  Corporation's  historic  exercise  experience and the inherent         
     motivation  to exercise  options early in their terms because of the reload         
     option  feature,  normal options were assumed to be  outstanding  for three         
     years at time of  exercise  and reload  options  for one year.  No downward         
     adjustments were made to the resulting  grant-date option values to account         
     for potential forfeiture or  nontransferability of the options in question.         
     Because   the  model  is  adapted  to  value   executive   options  and  is         
     assumption-based, it only values the options in theory.                             
</FN>                                                                                    

   Reload  option  grants  are  part of the  Corporation's  overall  program  to
increase the number of Common Shares owned by its  executive  officers and other
key employees.  Traditional option programs generally do not encourage optionees
to  exercise  options  prior  to the end of  their  term or to hold  the  shares
received  upon  such  exercise.  The  Compensation  and  Management  Development
Committee  adopted the reload option  program,  with  shareholder  approval,  to
encourage  option  exercises  and stock  retention by  permitting an optionee to
exercise an option with  already-owned  Common  Shares and to be restored to the
same economic opportunity available immediately prior to such exercise.         

   Under the reload program,  an employee who exercises an option  (the"Original
Option")  with  already-  owned  shares prior to the end of the option term will
receive an additional  option (the "Reload Option")  covering a number of shares
equal to the number used to exercise the Original Option. The Reload Option will
be  exercisable,  beginning  six  months  after  grant  and  continuing  for the
remaining term of the Original Option, at a price equal to the fair market value
of the shares on the date the Original  Option is exercised.  As a result of the
exercise of the Original  Option with  already-owned  shares,  the net number of
Common  Shares held by the employee  will  increase by the number of shares that
has an aggregate  market value equal to the "spread" on the option (the "spread"
equals the  aggregate  market price of the option  shares on the day of exercise
less the aggregate  exercise  price).  Thus, the number of shares covered by the
Reload Option plus the number of additional  shares  received on the exercise of
the  Original  Option  will equal the number of shares  covered by the  Original
Option.  The  program  thereby  serves to  replace  the  opportunity  for future
appreciation that an optionee would otherwise lose by exercising an option using
already-owned  shares.  In  addition,  by inducing  option  exercises  and stock
retention,  the reload  feature  offers  optionees  the  opportunity  to receive
dividends  on a greater  number of shares than would be the case  without such a
feature.                                                                        
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   An  employee  will also  benefit  from the use of the  reload  feature if the
market price of the underlying shares declines between the date he exercises the
Original  Option and the  expiration  date of that  option.  By  encouraging  an
employee to exercise options with shares, the reload feature enables an employee
to protect  against a decline in the market price of the Common  Shares  without
losing the potential benefit of a price increase.                               

   The following table provides information concerning options exercised in 1996
by the named executives and the options held by them at the end of 1996:        

AGGREGATED OPTION EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION VALUES   

                                                                VALUE OF
                                               NUMBER OF       UNEXERCISED
                                               UNEXERCISED      IN-THE-MONEY
                     SHARES                   OPTIONS AT        OPTIONS AT
                   ACQUIRED                   12/31/96          12/31/96
                        ON         VALUE      (EXERCISABLE/    (EXERCISABLE/
         NAME         EXERCISE(a)   REALIZED   UNEXERCISABLE)  UNEXERCISABLE)(b)
-------------------- ----------- ------------ --------------- ------------------
Douglas C. Yearley  .  54,100    $1,501,488   380,571/169,701 $3,125,586/372,924
J. Steven Whisler  ..  20,450       791,159   157,916/ 76,001  2,039,042/159,236
Manuel J. Iraola  ...  17,200       672,788    53,166/ 68,334    773,906/211,562
Thomas M. St. Clair    47,661     1,023,632    65,379/ 62,690    226,478/ 99,937

-------------------                                                             
(a)  All of the named  executives  (except Mr. Iraola) used shares already owned
     by them to pay  the  exercise  price  of  some or all of the  options  they
     exercised in 1996. Mr. Yearley exercised all of the options he exercised in
     1996 in this manner. He acquired 20,499 shares on exercise of these options
     in excess of the shares used to pay the exercise price and received  reload
     options to  purchase  33,601  shares.  Options  for 20,450 and 47,661  were
     exercised by Mr. Whisler and Mr. St. Clair,  respectively,  in this manner.
     The numbers of Common  Shares  acquired  on  exercise  of these  options in
     excess of the shares used to pay the exercise price were 10,951 and 14,089,
respectively.                                                         

(b)  Value is based on the mean of the high and low prices of the Common  Shares
on the Consolidated Trading Tape on December 31, 1996 ($67.9375).     

 PENSION AND OTHER RETIREMENT BENEFITS

   The following  pension table shows the estimated  aggregate  annual  benefits
payable in the form of a straight  life annuity  commencing  at age 65 (i) under
the Phelps Dodge Retirement Plan for Salaried  Employees (the "Retirement Plan")
as supplemented by the supplementary  retirement provisions of the Comprehensive
Nonqualified Plan that make up amounts limited by the Internal Revenue Code (the
"Code")  and  (ii)  under  the  supplementary   retirement   provisions  of  the
Comprehensive Nonqualified Plan based on incentive compensation under the Annual
Incentive Compensation Plan:                                                    
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                                                        [Enlarge/Download Table]
                              PENSION PLAN TABLE                                            


 FINAL AVERAGE                                                                              
   SALARY AND                                                                               
    INCENTIVE                                                                               
  COMPENSATION       ESTIMATED ANNUAL BENEFITS FOR YEARS OF BENEFIT SERVICE INDICATED(c)    
                ----------------------------------------------------------------------------
     (a)(b)          10         15         20         25         30         35         40   
--------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
                                                                                            
$  290,000      $ 44,410   $ 66,620   $ 88,820   $111,030   $133,230   $155,440   $177,640  
$  465,000      $ 72,410   $108,620   $144,820   $181,030   $217,230   $253,440   $289,640  
$  660,000      $103,610   $155,420   $207,220   $259,030   $310,830   $362,640   $414,440  
$  765,000      $120,410   $180,620   $240,820   $301,030   $361,230   $421,440   $481,640  
$  850,000      $134,010   $201,020   $268,020   $335,030   $402,030   $469,040   $536,040  
$  935,000      $147,610   $221,420   $295,220   $369,030   $442,830   $516,640   $590,440  
$1,020,000      $161,210   $241,820   $322,420   $403,030   $483,630   $564,240   $644,840  
$1,105,000      $174,810   $262,220   $349,620   $437,030   $524,430   $611,840   $699,240  
$1,190,000      $188,410   $282,620   $376,820   $471,030   $565,230   $659,440   $753,640  
$1,275,000      $202,010   $303,020   $404,020   $505,030   $606,030   $707,040   $808,040  
$1,360,000      $215,610   $323,420   $431,220   $539,030   $646,830   $754,640   $862,440  
$1,445,000      $229,210   $343,820   $458,420   $573,030   $687,630   $802,240   $916,840  
$1,530,000      $242,810   $364,220   $485,620   $607,030   $728,430   $849,840   $971,240  
<FN>                                                                                        

---------------                                                                             
(a)  The  Retirement  Plan  provides a member upon  retirement  at age 65 with a            
     pension for life in a defined  amount based upon final  average  salary and            
     length of benefit service.  Under the Retirement Plan, final average salary            
     ("Final Average  Salary") is the highest average annual base salary for any            
     consecutive 36-month period plus the average annual incentive  compensation            
     for any  consecutive  60-month  period during a member's last 120 months of            
     employment.  Benefit  service  includes all periods of employment  with the            
     Corporation  or  its   participating   subsidiaries.   Benefits  under  the            
     Retirement Plan are subject to certain  limitations  under the Code, and to            
     the  extent  the result of such  limitations  would be a benefit  less than            
     would  otherwise be paid under such Plan,  the difference is provided under            
     the supplementary  retirement provisions of the Comprehensive  Nonqualified            
     Plan.  The formula for  determining  benefits  payable under the Retirement            
     Plan takes into account  estimated social security  benefits  payable.  The            
     amounts set forth in the table  assume  maximum  social  security  benefits            
     payable in 1996.                                                                       

(b)  Amounts of annual incentive  compensation  have been estimated based on the            
     five-year  average annual incentive  compensation  awarded to participating            
     employees   for  1992  through   1996.   The  actual  amount  of  incentive            
     compensation  for an individual at any level of Final Average  Salary could            
     vary.                                                                                  

(c)  The expected credited years of benefit service at normal retirement for the            
     Corporation's  four current executive officers as of December 31, 1996, are            
     as follows:  Mr. Yearley,  41 years; Mr. Whisler,  43 years; Mr. Iraola, 30            
     years and Mr. St. Clair, 11 years. The years of service are based on normal            
     retirement for all executive  officers  under the  Retirement  Plan and the            
     applicable provisions of the Comprehensive Nonqualified Plan.                          
</FN>                                                                                       

SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS

   The  Corporation  has severance  agreements  with each of its four  executive
officers under which the executive would receive a lump sum payment equal to his
annual base salary in the event the Corporation terminates his employment, other
than for cause or mandatory retirement,  or the executive voluntarily terminates
his  employment  because of material  reductions  in his salary or his position,
duties and  responsibilities.  The terminated  executive  would also receive (i)
outplacement  services  at a cost up to 15% of his base salary and (ii) the cost
of continued coverage for a limited period under the Corporation's group health,
life insurance and disability plans.                                            

   The Corporation  also has agreements  with such  executives  under which each
executive  would  receive,  in  the  event  he  ceases  to be  employed  by  the
Corporation  (for a reason  other than death,  disability,  willful  misconduct,
normal  retirement or under certain  circumstances  a voluntary  termination  of
employment by the executive)  within two years  following a change of control of
the Corporation, a lump sum equal to two times                                  
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(i) the executive's highest base salary during that year and the prior two years
and (ii) the executive's  target bonus under the Annual  Incentive  Compensation
Plan for the year in which the  change of  control  occurs.  The  amount of such
payment is subject to reduction  if the date an executive  ceases to be employed
by the Corporation is within 24 months of his normal  retirement date or if such
amount,  plus any other  payments that are contingent on such change of control,
constitutes  an  "excess  parachute  payment"  as  defined  in the  Code and the
reduction  results in a greater net after-tax  benefit to the executive.  Except
under  certain  circumstances,  these  change of  control  agreements  expire on
November 3, 1997.                                                               

   Although normal  compensatory  options  granted by the Corporation  generally
become exercisable in three substantially equally annual installments  beginning
on the first anniversary of the date of grant,  they also become  exercisable in
certain change of control situations. Specifically, such options are exercisable
(but not  earlier  than six  months  from  the  date of  grant)  on the date the
Corporation's Common Shares are purchased pursuant to a third party tender offer
or the Corporation's  shareholders approve a merger or similar transaction which
the Corporation  will not survive as a publicly held corporation or, in the case
of the  four  executive  officers  and  certain  other  employees,  the date the
employee  ceases to be  employed  if he ceases to be  employed  within two years
following a change of control of the  Corporation.  In  addition,  such  options
include limited rights  exercisable only in the event the  Corporation's  Common
Shares are purchased pursuant to a third party tender offer or the Corporation's
shareholders  approve a merger or similar transaction which the Corporation will
not survive as a publicly  held  corporation.  Under these  limited  rights,  an
optionee may elect, in lieu of purchasing  shares, to relinquish the option with
respect to all or any of such  shares and to receive a payment  equal to (i) the
price paid for a Common Share in such merger or similar  transaction  multiplied
by the number of Common Shares the optionee  could have  purchased less (ii) the
total  purchase  price for that number of Common  Shares  under the terms of the
option.                                                                         

   The Retirement Plan and the  Comprehensive  Nonqualified Plan provide for the
payment of unreduced  benefits to employees who meet  liberalized age and length
of service requirements and whose employment is terminated by the Corporation or
any of its  subsidiaries  within two years  following a change of control of the
Corporation.                                                                    

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE   
REPORT ON EXECUTIVE COMPENSATION  

   The  Corporation's  goal is to be the  leader  in each  of the  domestic  and
international mining and manufacturing  activities in which it competes. It also
seeks  to  achieve  and  sustain   progressive   increases   in  value  for  its
shareholders,   while   balancing   appropriately   the  short-  and   long-term
opportunities for the Corporation.                                              

   To meet these  objectives,  the Corporation  employs high caliber,  dedicated
senior  managers  who are  well  trained  and  results  oriented.  The  Board of
Directors  established the Compensation and Management  Development Committee to
provide oversight of the Corporation's  compensation and management  development
programs and to ensure that these programs maximize the Corporation's ability to
attract, retain and motivate employees to meet these stated objectives.         

   The Committee believes it can motivate senior managers participating in these
programs by:                                                                    

   o  Emphasizing  the  relationship  between pay and  performance  by rewarding
      managers  who bring about solid  achievement  with regard to key  business
      strategies  and specific  operational  objectives  and by  increasing  the
      relative  amount of  compensation  at risk as management  responsibilities
increase.                                                           

   o  Assuring that the elements of variable compensation are linked as directly
      as practicable  to measurable  financial,  operational  and other forms of
performance.                                                        

o  Encouraging stock ownership by executives.                             

   o  Tying pay for  performance as closely as possible to success in maximizing
the value of the Corporation's stock over the long term.            
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   The Committee is composed of directors (currently four) who are not employees
of  the  Corporation.   It  has  periodically   retained  respected  independent
compensation  consultants  to advise and assist it in  connection  with  various
compensation matters.                                                           

EXECUTIVE OFFICER COMPENSATION                                                  

   The executive  officers are compensated by salaries,  annual incentive awards
and long-term incentive  compensation.  Each element focuses on performance in a
different but  complementary  way.  Salaries focus on individual  performance as
well as competence.  Annual incentives  relate to individual,  corporate and, if
appropriate, unit performance. Long-term incentive awards, which are paid in the
form of stock  options,  and, from time to time, in restricted  stock,  create a
long-term  identity of interest with the shareholders based on the Corporation's
performance and related growth of shareholder value.                            

   The Committee believes that the Corporation competes for its executive talent
primarily  with  similarly  sized  industrial  companies  located  in the United
States. Accordingly, where possible, the Committee compares the compensation for
the  top  four  executives,  at  least  annually,  to the  compensation  paid to
executives  holding  similar  positions  at  sixteen  publicly-held   industrial
corporations  of an average  size,  measured  by  revenues  and market  capital,
similar  to  that of the  Corporation  (referred  to  below  as the  "comparison
group").  For other executives,  comparisons to similar positions are based on a
much larger group of companies  of similar size to the  Corporation  measured by
revenues.  The Committee  believes that the  competitive  data used is generally
representative  of the  competitive  level  of  compensation  paid to  executive
officers in companies the size of Phelps  Dodge.  Thus,  the companies  used for
comparison   purposes  in  connection   with  the   compensation   paid  to  the
Corporation's  executive  officers are different from the companies  included in
the Peer  Group  used in the  performance  graphs  on pages 17 and 18 to compare
shareholder returns.                                                            

   Salaries.   Individual   salaries  for   executive   officers  are  generally
established by the Board of Directors,  on the  recommendation of the Committee,
to reflect the officers'  performance  and  competence.  Salary  adjustments are
targeted to move  salaries to median levels over time for sustained and expected
performance  and  competence.  Based on  available  information,  the  Committee
believes  salaries  in 1996 for the  executive  officers  were at the  median or
slightly below for officers  relatively new to their  positions when compared to
employees  holding similar  positions in the comparison group of companies.  The
Committee determined that based on the excellent  performance of the Corporation
and the sustained  performance of the individual executives named in the Summary
Compensation  Table,  salaries for these executives should be adjusted upward in
1997 to at least the  median of the  salaries  of the same  comparison  group of
companies.                                                                      

   Annual  Incentive  Compensation.   The  Annual  Incentive  Compensation  Plan
provides the  executive  officers and certain  other  officers and managers with
compensation  based on success in achieving  annual  individual,  corporate and,
where  appropriate,  unit goals. For each executive  officer,  a target award is
determined approximating the median of the annual incentive compensation paid by
the  comparison  group  to  individuals  holding  comparable  positions.   Lower
threshold awards and higher maximum awards are also established. Corporate goals
are set using  return on equity and net  operating  cash flow return on invested
capital,  both  of  which  are  fundamental   indicators  of  the  Corporation's
performance. The goals are equally weighted and determine 70% of the CEO's total
annual  incentive  compensation,  and  60% and 15% of the  CFO's  and  operation
executives'  awards,  respectively.  In 1996,  the  Company's  performance  with
respect to return on equity was approximately  midway between target and maximum
goals.  The Company's 1996  performance  with respect to net operating cash flow
return on invested capital exceeded the maximum goal. Based on these results and
the Committee's  evaluation of performance to individual and, where appropriate,
unit goals, the Committee recommended,  and the Board approved, Annual Incentive
Compensation  awards  for  1996  above  the  targeted  amounts  for  the  listed
executives.                                                                     

   Stock Options.  The Committee  uses stock options as the principal  method of
providing long-term incentive  compensation  primarily because employees benefit
from  options,  if at all,  only to the extent of  increases in the value of the
Corporation's  Common  Shares.  To further the  identity  of  interest  with the
shareholders, the executive officers are expected to acquire and own significant
numbers of the Corporation's shares.                                            

   The Committee and the Board of Directors  have  determined  that to focus the
executives'  attention  to an  appropriate  extent  on the  long-term  growth of
shareholder value, the targeted compensation levels with                        
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respect to the present value of stock  options  should be  approximately  midway
between the fiftieth and  seventy-fifth  percentiles of the long-term  incentive
awards  made  to  executives  holding  similar  positions  in  companies  in the
comparison  group.   Adjustments  are  made  from  these  levels  based  on  the
performance,  career  potential,  critical skills and prior grant history of the
executive  officer.  Stock options granted to executive officers in 1996 were at
or above the targeted levels. All of the Committee's option grants for 1996 were
approved by the Board.                                                          

   Restricted  Stock.  The Committee  also made grants of restricted  stock to a
limited number of other key employees under the  Corporation's  Stock Option and
Restricted  Stock Plan. The principal  purpose of these grants was to retain the
services  of key  executive  personnel  through  a means  that also  provides  a
meaningful economic incentive to increase the value of the Corporation's  Common
Shares.  The  size  of  each  award  was  determined  based  on the  Committee's
subjective  determination  of  the  recipient's  expected  contribution  to  the
Corporation over the stated vesting period,  the significance of the recipient's
position with the  Corporation  and the importance of maintaining  continuity of
management in the recipient's function.                                         

   Stock  Ownership  Guidelines.   To  underscore  the  connection  between  the
interests of management and  stockholders,  the Corporation,  several years ago,
established informal stock ownership  guidelines for its executive officers.  In
1996, the Corporation  formalized  this program and established  stock ownership
targets for officers of the  Corporation who hold the position of Vice President
and above and certain senior  executives  within the Phelps Dodge Mining Company
and Phelps Dodge Industries divisions. The targets are expressed in terms of the
value of the Corporation's  Common Shares held by the executive as a multiple of
base salary.  The targets  range from one and  one-half  times salary up to five
times salary for the CEO. Many Vice Presidents and other executives already hold
a  substantial  amount of Common  Shares,  but those who do not hold  sufficient
shares have four years to reach their personal ownership targets.               

   IRS Limit on Deductibility  of  Compensation.  Section 162(m) of the Internal
Revenue Code  generally  places a $1 million per person limit on the deduction a
publicly-held  corporation may take for compensation paid to its chief executive
officer and its four other highest compensated  "covered  employees,"  excluding
for  this  purpose   deferred   compensation   and,  in  general,   compensation
constituting  "performance-based"   compensation.  The  Corporation  is  seeking
shareholder  approval of an amendment  to its 1993 Stock  Option and  Restricted
Stock Plan, described on page 19 of this proxy statement, to continue to exclude
the  compensation  from stock options from the $1 million  deductibility  limit.
Other elements of the compensation payable to executive officers, such as salary
and annual  incentive  compensation,  are not  excludable  from such limit.  Mr.
Yearley  deferred  $240,000 of his salary in 1996,  however,  as a result of the
Corporation's  performance  in  1996  and  the  related  above-target  incentive
compensation  award to Mr. Yearley,  his compensation  subject to Section 162(m)
exceeded one million dollars resulting in a loss of income tax deductions having
a value of approximately $150,000.                                              

CEO COMPENSATION                                                                

   Douglas C. Yearley, the Chief Executive Officer of the Corporation,  received
a base salary of $675,000 in 1996, an Annual Incentive  Compensation  Plan award
of $675,000 for 1996  performance  compared to stated  corporate and  individual
performance  goals,  and a compensatory  option grant in 1996 to purchase 70,000
Common Shares.  Mr. Yearley also received in 1996, under a program  available to
all optionees, 33,601 reload options in connection with his use of already-owned
shares to pay the exercise price of other options.  The number of reload options
granted to an employee is  equivalent  to the number of shares that the employee
transfers to the Corporation to exercise outstanding options.                   

   The first 70% of Mr. Yearley's Annual Incentive  Compensation  Plan award was
equally determined on the basis of the Corporation's actual return on equity and
net operating  cash flow return on invested  capital as compared to goals set at
the beginning of the year. The Corporation's  performance was midway between the
target and the maximum  goals for return on equity and above the maximum for net
operating  cash flow  return  on  invested  capital.  The  remaining  30% of Mr.
Yearley's  award  was based on the  Committee's  subjective  judgment  as to his
performance  with regard to individual  goals  pertaining to the  organization's
culture, shareholder value, the growth of Phelps Dodge Mining Company and Phelps
Dodge Industries. Based on its judgment as to Mr. Yearley's performance in these
respects, the Committee made an above-target award to him as to this part of his
incentive compensation. Mr. Yearley's compensatory stock option grant, which was
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at the  targeted  level,  was based on the policy  discussed  above under "Stock
Options,"  including  the  Committee's   evaluation  of  Mr.  Yearley's  overall
performance  during 1996, his potential and critical  skills,  and the number of
stock  options  and the  number  of  shares of  restricted  stock  that had been
previously granted to him.                                                      

   The Committee  believes that Mr.  Yearley's 1996 salary was equal to the 1996
median paid by comparable companies to their CEOs. With the payment at an above-
target annual  incentive award and a stock option grant at the target level, the
total value of the  compensation  package  provided to Mr.  Yearley for 1996 was
above  the  median  level  while  perfomance  was in  the  top  quartile  of the
comparison group of companies.  The Committee  believes that adjustments to base
salaries  in  1997  will  position  Mr.  Yearley's  total  compensation  at  the
appropriate level for his sustained excellent performance in the future.        

CONCLUSION                                                                      

   The  Committee  will  continue to  evaluate  the  Corporation's  compensation
programs to best enable the  Corporation  to employ and motivate  high  caliber,
dedicated people. Such employees,  properly motivated, are believed to be key to
achievement  of the  Corporation's  goal to be the  international  leader in the
mining  and  manufacturing  activities  in which  it  competes  and the  related
enhancement of shareholder value over the long term.                            

                               THE COMPENSATION AND MANAGEMENT
                     DEVELOPMENT COMMITTEE

                              Southwood J. Morcott, Chairman

              Robert N. Burt

               Paul W. Douglas

          Paul Hazen

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5 YEAR PERFORMANCE GRAPH

              1991      1992      1993      1994      1995      1996
              ----      ----      ----      ----      ----      ----

Phelps Dodge        $100      $150      $156      $204      $212      $237      
S&P 500             $100      $107      $118      $120      $165      $203      
S&P Metals Mining   $100      $108      $120      $140      $154      $157      

The chart above reflects $100 invested at 12/31/91 in Phelps Dodge common stock,
the S&P 500, and in a peer group  represented  by the S&P Metals  Mining  index,
comprised  of Phelps  Dodge,  ASARCO  Incorporated,  Cyprus Amax  Minerals  Co.,
Freeport-McMoRan Copper & Gold Inc., and Inco Ltd.                              

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10-YEAR PERFORMANCE GRAPH 

                  1986  1987 1988  1989 1990  1991  1992  1993  1994  1995  1996
                  ----  ---- ----  ---------  ----  ----  ----  ----  ----  ----

Phelps Dodge      $100  $227 $262  $353 $356  $441  $661  $688  $899  $932 $1042
S&P 500           $100  $105 $123  $162 $157  $204  $220  $242  $245  $337  $415
S&P Metals Mining $100  $176 $232  $267 $253  $286  $307  $342  $399  $441  $450

The chart above reflects $100 invested at 12/31/86 in Phelps Dodge common stock,
the S&P 500, and a peer group  represented by the S&P Metals Mining index.  This
published index includes Phelps Dodge, ASARCO Incorporated, Cyprus Amax Minerals
Co.,  Freeport-McMoRan  Copper & Gold Inc.  and Inco  Ltd.  This  10-year  graph
illustrates  the  relative  stock  performances  over a period that more closely
represents the longer business cycle  generally  associated with the industry of
the  Corporation  and is especially  meaningful  because the business  focus and
growth strategies of the Corporation have been and continue to be long term.    

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2. APPROVAL OF AN AMENDMENT TO THE  
1993 STOCK OPTION AND RESTRICTED STOCK PLAN   

   On February 5, 1997, the Board of Directors unanimously approved,  subject to
approval by the  Corporation's  shareholders,  an amendment to the Corporation's
1993 Stock  Option  and  Restricted  Stock  Plan (the "1993  Plan") to limit the
maximum number of the  Corporation's  Common Shares that may be awarded as stock
options to any single  participant  in any twelve month period to 350,000 Common
Shares.  This amendment will assure that any  additional  stock options  granted
will continue to qualify as "other performance-based compensation" under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").           

   Under Section 162(m) of the Code, no deduction is allowed in any taxable year
of the Corporation for  compensation in excess of $1 million paid to each of its
chief executive  officer and its four most highly paid other executive  officers
who are serving in such  capacities  as of the last day of such taxable year. An
exception to this rule applies to certain  performance based  compensation as to
which the  shareholders  have approved the performance  criteria and the maximum
amount payable to any given individual in a specified period.  Stock options are
inherently  performance based, since they provide value to employees only if the
stock price  appreciates.  While Section 162(m)  generally became effective with
respect to  compensation  payable after 1993, a special rule stated that options
granted  under the 1993 Plan prior to the 1997  annual  meeting of  shareholders
would be treated as performance based compensation  without shareholder approval
of the otherwise required per person award limits.                              

   To be approved,  the proposed  amendment requires the affirmative vote of the
holders of a majority of the Common Shares  present in person or  represented by
proxy at the annual  meeting and  entitled  to vote  thereon.  Abstentions  from
voting on this proposal  (including  broker  non-votes)  will have the effect of
votes against this  proposal.  If not  otherwise  specified,  properly  executed
proxies will be voted in favor of the proposal.  If  shareholders do not approve
the  amendment  to  the  1993  Plan,  no  option  grants  will  be  made  to the
Corporation's  executive  officers under the 1993 Plan following the 1997 annual
meeting of shareholders.                                                        

   On March 20, 1997,  the closing price of the  Corporation's  Common Shares on
the New York Stock Exchange was $75.375 per share.                              

   The following is a summary of the material terms of the 1993 Plan, as amended
by the proposed amendment.                                                      

 GENERAL INFORMATION REGARDING THE 1993 PLAN

   The 1993 Plan is administered by the Compensation and Management  Development
Committee, which is authorized to grant stock options, stock appreciation rights
and  restricted  stock grants to officers and other key executive and management
employees of the Corporation and its subsidiaries.  While the number of grantees
will vary from year to year,  in 1996,  160  employees,  including  19 officers,
received awards under the 1993 Plan.                                            

   The  maximum  number of the  Corporation's  Common  Shares that may be issued
under the 1993 Plan is 5,000,000  plus the number of Common  Shares  received by
the  Corporation  after  February 3, 1993 in payment of the exercise price under
any Option,  whether issued under the Plan or the Phelps Dodge  Corporation 1979
Stock  Option  Plan or the  Phelps  Dodge  Corporation  1987  Stock  Option  and
Restricted  Stock  Plan which were  incorporated  into the 1993 Plan.  If Common
Shares under a grant are not issued, those Common Shares will again be available
for inclusion in future  grants.  Additionally,  there is available for issuance
under the 1993 Plan any Common  Shares  subject to options  under  certain prior
plans which are canceled,  terminated or otherwise  settled without the issuance
of the Corporation's  Common Shares or a direct payment in cash. Payment of cash
in lieu of Common  Shares is  considered  an issuance of Common Shares under the
1993 Plan.  Common  Shares  issued  pursuant  to the Plan may either be treasury
shares  or newly  issued  shares.  If there is a stock  split,  stock  dividend,
recapitalization,  or other relevant change affecting the  Corporation's  Common
Shares,  appropriate  adjustments  would be made in the number of Common  Shares
that could be issued in the future and in the number of Common  Shares and price
under all outstanding grants made before the event.                             
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GRANTS UNDER THE 1993 PLAN  

   Stock  Options.  The  Committee  may grant  nonqualified  options and options
qualifying as incentive  stock  options under the Code.  The option price of any
option must be at least equal to the fair market  value of a Common Share on the
date of grant.  The term of each  option is fixed by the  Committee  but may not
exceed ten years from the date of grant.  The Committee  determines  the time or
times at which each option may be exercised.  Options may be made exercisable in
installments,  and the  exercisability  of  options  may be  accelerated  by the
Committee.  Subject to the per person limit described  above,  the Committee has
the  discretion  to determine  the number of Common Shares to be awarded to each
participant.                                                                    

   Stock  Appreciation  Rights.  The  Committee  may grant SARs that entitle the
grantee to receive an amount  equal to the excess of the then fair market  value
of the Common Shares with respect to which the SAR is being  exercised  over the
price fixed by the Committee at the time the SAR was granted. Payment is made in
cash, in Common Shares, or a combination of the two as the Committee determines.
If an SAR is exercised,  the right under any related option would terminate.  If
any related  stock  option is  exercised,  any SAR related to the Common  Shares
purchased  would  terminate.  The Committee  will determine the time or times at
which an SAR may be exercised.                                                  

   Restricted  Stock Grants.  The Committee may also issue Common Shares under a
restricted stock grant, subject to the satisfaction of any applicable conditions
thereon,  such as continued  employment for a specified period or the attainment
of stated performance objectives. The grant would set forth a restriction period
(including a period  related to the attainment of goals) during which the shares
of restricted  stock granted would remain subject to forfeiture.  The grantee of
an award of  restricted  stock  generally may not dispose of the shares prior to
the  expiration  of the  restriction  period.  During this period,  a grantee of
restricted stock would generally have all the rights of a stockholder, including
the right to vote the Common Shares and receive dividends.                      

   Termination  of  Employment.  In the event of  termination  of  employment by
reason of retirement,  long term disability or death, any restrictions on shares
of restricted stock shall lapse. Additionally,  any option or SAR may thereafter
be exercised in full for a period of up to 5 years in the case of retirement and
for a period of up to one year in the case of  disability  or death,  subject in
each case to the  stated  term of the  option.  In the event of  termination  of
employment  for any  reason  other than  retirement,  disability  or death,  any
options  and  SARs  which  are not then  exercisable  will be  canceled  and any
exercisable  options will remain  exercisable  for up to 30 days  following such
termination. In the event of termination of employment for any reason other than
retirement, disability or death, any shares of restricted stock then outstanding
as to which the period of restriction  has not lapsed will be forfeited  (unless
otherwise determined by the Committee).                                         

   Change of Control  Provisions.  The 1993 Plan provides that the Committee may
provide participants with certain additional rights and benefits in the event of
a  "Change  in  Control"  (as  defined  in the 1993  Plan),  including,  without
limitation,  allowing all SARs to become immediately exercisable for a period of
thirty days and waiving the restrictions  limitations  applicable to outstanding
restricted stock awards.                                                        

FEDERAL INCOME TAX CONSEQUENCES   

   Stock Options. The grant of an incentive stock option or a nonqualified stock
option  would not result in income for the  grantee  or in a  deduction  for the
Corporation.                                                                    

   The  exercise  of a  nonqualified  stock  option  generally  would  result in
ordinary income for the grantee and a deduction for the Corporation  measured by
the  difference  between the fair market value of the Common Shares  received at
the time of exercise and the option price.                                      

   The exercise of an incentive stock option would not result in ordinary income
for the grantee if the grantee (i) does not dispose of the Common  Shares within
two years  after  the date of grant or one year  after  the  transfer  of Common
Shares upon exercise and (ii) is an employee of the  Corporation or a subsidiary
of the Corporation from the date of grant until three months before the exercise
date. If these  requirements  are met, the grantee's  basis in the Common Shares
upon later disposition would be the option price. Any gain would be taxed to the
grantee as long term capital gain, and the Corporation  would not be entitled to
a deduction.                                                                    
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The excess of the market  value on the  exercise  date over the option  price is
considered as income for purposes of the alternative minimum tax;  therefore,  a
grantee is  potentially  subject to the  minimum tax on the excess of the market
value of the Common Shares purchased over option price as a result of exercise. 

   If the grantee  disposes of the incentive stock option Common Shares prior to
the expiration of either of the holding  periods  described  above,  the grantee
would recognize  ordinary  income,  and the  Corporation  would be entitled to a
deduction,  equal to the lesser of the fair market value of the Common Shares on
the exercise date minus the option price or the amount  realized on  disposition
minus the option  price.  Any gain in excess of this amount  would be treated as
long term or short term capital gain, depending on whether the Common Shares are
held for the requisite holding period. Under current federal income tax law, net
capital gains (the excess of net long term capital gains over any net short term
capital losses) are taxed at the same rate as ordinary income.                  

   SARs.  The grant of an SAR would not result in income for the grantee or in a
deduction  for the  Corporation.  Upon the exercise of an SAR, the grantee would
recognize  ordinary income and the Corporation  would be entitled to a deduction
measured by the fair market value of the Common Shares plus any cash received.  

   Restricted  Stock  Grant.  The grant of  restricted  stock will not result in
income for the grantee or in a deduction for the  Corporation for federal income
tax purposes,  unless the recipient  timely elects to have income  recognized at
the time of the grant.  Absent  such  election,  dividends  paid while the stock
remains  subject to such  restrictions  would be taxable  to the  recipient  and
deductible by the Corporation as  compensation  for federal income tax purposes.
At the time the restrictions lapse, the grantee would recognize ordinary income,
and the  Corporation  would be  entitled  to a  deduction,  measured by the fair
market value of the Common Shares at the time of lapse.                         

OTHER INFORMATION   

   The  Board  may  terminate  or  suspend  the  1993  Plan at any time but such
termination or suspension shall not affect any stock options, SARs or restricted
stock awards then outstanding  under the 1993 Plan.  Unless terminated by action
of the Board,  the 1993 Plan will continue in effect until February 3, 2003, but
awards  granted prior to such date shall continue in effect until they expire in
accordance with their terms.  The Board may also amend the 1993 Plan as it deems
advisable,  but  subject  to any  shareholder  approval  required  of  any  such
amendment under applicable law. The Committee may amend the term of any award or
option  theretofore  granted,  retroactively  or  prospectively,   but  no  such
amendment shall  adversely  affect any such award or option without the holder's
consent.                                                                        

   The Board of Directors  unanimously  recommends  that  shareholders  vote FOR
approval of the amendment to the 1993 plan.                                     

3. AUTHORIZATION OF INCREASED NUMBER OF COMMON SHARES   

   The Board of Directors has authorized and recommends that  shareholders  also
authorize  an  amendment  to  Article  THIRD  of  the  Restated  Certificate  of
Incorporation to increase to 200 million the authorized number of Common Shares.
The text of the  proposed  amendment  is set forth in  Exhibit  A to this  Proxy
Statement.  Article THIRD of the Restated Certificate of Incorporation currently
authorizes the issuance of 100 million Common Shares, par value $6.25 per share.

   As of March 20,  1997,  64,021,452  million  Common  Shares  were  issued and
outstanding,  and  11,155,945  Common  Shares  were held in the  treasury of the
Corporation.  An additional  5,000,000  Common Shares were reserved for issuance
upon exercise of outstanding employee stock options. A total of 2,034,841 Common
Shares remain available for issuance.                                           

   Because of the limited  number of Common Shares  available for issuance,  the
Board of Directors recommends that the shareholders approve the amendment to the
Restated  Certificate  of  Incorporation  to increase  the number of  authorized
shares of Capital Stock.  Such an increase will enable the  Corporation to enjoy
greater flexibility in raising capital, acquiring assets or companies, effecting
stock  splits  or stock  dividends,  instituting  employee  benefit  plans,  and
pursuing other corporate purposes.                                              
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   In particular,  the Board of Directors has taken into  consideration  that if
the  trading  price of the  Common  Shares  continued  to rise and the  Board of
Directors  determined  that a stock split was advisable,  the Company  currently
does not have sufficient  authorized but unissued shares to effect such a split.
An increase in the amount of authorized Capital Stock would also allow shares to
be issued without the expense and delay of a special shareholders' meeting.     

   The  additional  shares  would be  available  for  issuance  without  further
shareholder action unless required by the Restated Certificate of Incorporation,
applicable law or the rules of any stock  exchange upon which the  Corporation's
securities  may be  listed.  The New York  Stock  Exchange,  on which the Common
Shares are  presently  listed,  currently  requires  shareholder  approval  as a
prerequisite  to  listing  shares  in  several   instances,   including  certain
acquisition transactions.                                                       

   The  availability of the additional  shares could  discourage or frustrate an
attempt to effect a change in control of the Corporation.  The additional shares
could be used to  dilute  the  stock  ownership  of a person  seeking  to obtain
control of the Corporation. At present, the Corporation has no agreements, plans
or  commitments  with respect to the sale or issuance of the  additional  Common
Shares  which  would be  authorized  by the  proposed  amendment.  The  Board of
Directors  is  not  aware  of  any  person  seeking  to  obtain  control  of the
Corporation.                                                                    

   Authorization of the proposed  amendment will require the affirmative vote of
the holders of a majority of the Common  Shares  outstanding  on the record date
for the annual meeting.                                                         

   The Board of Directors recommends a vote FOR authorization of an amendment to
increase the number of authorized common shares.                                

4. AUTHORIZATION TO REDUCE MAXIMUM SIZE OF BOARD  

   The Board of Directors has authorized and recommends that  shareholders  also
authorize  an  amendment  to  Article  SIXTH  of  the  Restated  Certificate  of
Incorporation  to reduce the maximum number of directors from fifteen to twelve.
The text of the  proposed  amendment  is set forth in  Exhibit  B to this  Proxy
Statement.  Article SIXTH presently  provides that the number of directors shall
be not less than nine nor more than fifteen,  excluding any directors who may be
elected by holders of any series of Preferred Stock of the Corporation voting as
a separate class or series. The by-laws of the Corporation  further provide that
the exact  number of  directors  shall be fixed  from time to time by a majority
vote of the entire Board.                                                       

   The proposed  amendment is being submitted to the shareholders in recognition
of the Board of  Directors'  judgment  that a smaller Board can be more decisive
and effective  than a larger Board.  The Board  believes that this is consistent
with the trend in publicly  held  corporations,  which has been toward  somewhat
smaller rather than larger Boards.  As stated in the American Bar  Association's
Corporate Director's  Guidebook,  "This may reflect the emerging consensus that,
except perhaps in the very largest and most complex corporations, smaller boards
(those with  twelve or fewer  members)  function  more  effectively  than larger
boards."                                                                        

   Although the Board  currently has ten members,  the Restated  Certificate  of
Incorporation  presently allows for as many as fifteen.  The Board has concluded
that lowering the maximum number of directors to twelve would allow for a modest
increase in the future,  if desired,  while  keeping the size of the Board small
enough to permit it to best meet its responsibilities.                          

   In  approving  the proposed  amendment,  the Board also  considered  that one
possible  effect of its action would be to limit the number of directors  that a
third party  could elect at a single  annual  meeting.  Under the  Corporation's
by-laws,  the Corporation's Board is classified,  which means that approximately
one-third of the directors are elected at each annual meeting.  In addition,  if
the by-laws were amended to allow the shareholders to fix the size of the Board,
the  shareholders at an annual meeting would be able to increase the size of the
Board and elect additional  directors.  If the proposed  amendment were adopted,
the maximum  size to which the Board may be  increased  would be twelve,  rather
than fifteen.                                                                   

   Authorization of the proposed  amendment will require the affirmative vote of
the holders of a majority of the Common  Shares  outstanding  on the record date
for the annual meeting.                                                         

   The Board of Directors  recommends  a vote FOR  approval of the  amendment to
reduce the maximum number of directors from fifteen to twelve.                  
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5. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS   

   On the  recommendation  of the Audit  Committee,  the Board of Directors  has
appointed  Price  Waterhouse LLP as independent  accountants for the Corporation
for the year 1997,  subject to  ratification  by the  shareholders at the annual
meeting.  Price  Waterhouse LLP or a predecessor  firm has been the  independent
accountants for the Corporation since 1915. A representative of Price Waterhouse
LLP will be present at the annual meeting of  shareholders  with the opportunity
to make a statement if he so desires and to respond to appropriate questions.   

   The Board of Directors  recommends a vote FOR ratification of the appointment
of Price Waterhouse LLP as independent accountants.                             

OTHER MATTERS   

   The Board of Directors  is not aware of any other  matters to be presented at
the annual meeting.  If any other matter proper for action at the meeting should
be  presented,  the  holders  of the  accompanying  proxy  will vote the  shares
represented by the proxy on such matter in accordance  with their best judgment.
If any matter not proper for  action at the  meeting  should be  presented,  the
holders of the proxy will vote against consideration thereof or action thereon. 

   All  shares  represented  by the  accompanying  proxy,  if the  proxy is duly
executed and  received by the  Corporation  at or prior to the meeting,  will be
voted at the meeting in accordance with any instructions specified on such proxy
and, where no instruction is specified, as indicated on such proxy.             

   It is the policy of the Corporation that, except under limited circumstances,
each shareholder  proxy card,  ballot and voting  tabulation that identifies any
shareholder  will be kept  confidential  and that the receipt and  tabulation of
such votes  will be  conducted  by  independent  third  parties,  including  the
Corporation's  transfer  agent  and  its  proxy  solicitation  firm,  and not by
employees of the Corporation.                                                   

   The  cost  of  soliciting  proxies  for the  meeting  will  be  borne  by the
Corporation.  The Corporation has retained Morrow & Co., Inc., 909 Third Avenue,
New York, N.Y. 10022-4799 to assist in soliciting proxies for a fee estimated at
$12,500 plus reasonable expenses. Morrow & Co., Inc. and some officers and other
employees of the  Corporation  may solicit proxies in person and by telephone or
otherwise.  The Corporation may also reimburse brokers and others who are record
holders of the  Corporation's  shares for their reasonable  expenses incurred in
obtaining voting instructions from beneficial owners of such shares.            

   On June 1, 1996, the Corporation purchased directors' and officers' liability
insurance  policies from National  Union Fire  Insurance  Company of Pittsburgh,
Pa., Aetna Casualty and Surety Company,  Continental  Casualty Company,  Federal
Insurance  Company and XL Insurance  Company,  each for a three-year term ending
June 1, 1999,  at premiums  of  $1,230,636,  $400,000,  $347,500,  $150,000  and
$200,000,  respectively.  The policies insure (i) directors,  officers, division
presidents and vice  presidents of the  Corporation  and its  subsidiaries,  and
employees who are  fiduciaries of employee  benefit plans of the Corporation and
its subsidiaries,  against certain liabilities they may incur in the performance
of their duties and (ii) the  Corporation  against any  obligation  to indemnify
such persons against such liabilities, and (iii) the Corporation for allegations
related to securities claims.                                                   

PROPOSALS FOR 1997  

   The  Corporation  will review for  inclusion in next year's  proxy  statement
shareholder  proposals received by December 2, 1997. Proposals should be sent to
the Secretary of the Corporation,  2600 North Central Avenue,  Phoenix,  Arizona
85004-3014.                                                                     
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ANNUAL REPORT FOR 1996  

   The annual report of the Corporation for the year 1996,  including  financial
statements, is being furnished concurrently with this proxy statement to persons
who were  shareholders  of record as of March 20, 1997,  the record date for the
annual  meeting.  The annual  report does not form part of the  material for the
solicitation of proxies.                                                        

                 By order of the Board of Directors,
                  Robert C. Swan
                Vice President and Secretary

Phoenix, Arizona                                                                
April 1, 1997                                                                   

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                                                                       EXHIBIT A
ARTICLE THIRD   

   Assuming Proposal 3. is adopted, Article THIRD of the Restated Certificate of
Incorporation  of Phelps Dodge  Corporation,  as in force and effect on the date
hereof, will be amended in its entirety as follows:                             

   "THIRD: The total number of shares which the Corporation shall have authority
to issue  shall be two  hundred six  million  (206,000,000),  consisting  of six
million  (6,000,000)  Preferred  Shares having a par value of one dollar ($1.00)
per share and two hundred million (200,000,000) Common Shares having a par value
of six dollars and twenty-five cents ($6.25) per share."                        

A-1 

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                                                                       EXHIBIT B
ARTICLE SIXTH   

   Assuming Proposal 4. is adopted, Article SIXTH of the Restated Certificate of
Incorporation  of Phelps Dodge  Corporation,  as in force and effect on the date
hereof, will be amended in its entirety as follows:                             

   "SIXTH: The number of the Corporation's Directors shall not be less than nine
nor more than  twelve,  provided  that  whenever  the holders of any one or more
series of Preferred  Shares of the  Corporation  become entitled to elect one or
more  Directors  to the Board of  Directors in  accordance  with any  applicable
provisions  of  this  Certificate  of  Incorporation,  such  maximum  number  of
Directors  shall be  increased  automatically  by the number of  Directors  such
holders are so entitled to elect. Such increase shall remain in effect until the
right of such holders to elect such Director or Directors  shall cease and until
the Director or Directors  elected by such holders shall no longer hold office."

B-1 

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Notice of                                                                       

Annual Meeting                                                                  

of Shareholders                                                                 

and Proxy                                                                       

Statement                                                                       

May 7, 1997                                                                     

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PROXY CARD SIDE 1                                                               
PROXY 

  PHELPS DODGE CORPORATION

 SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION

     The  undersigned  shareholder of Phelps Dodge  Corporation  hereby appoints
Paul W. Douglas,  William A. Franke, Paul Hazen and J. Steven Whisler, or any of
them, proxies of the undersigned, each with power of substitution, at the annual
meeting of shareholders  of the  Corporation to be held at the Arizona  Biltmore
Hotel,  24th street and Missouri Avenue,  Phoenix,  Arizona,  on May 7, 1997, at
11:30 a.m., and at any  adjournments  thereof,  to vote all Common Shares of the
Corporation  held or owned by the  undersigned,  including any which may be held
for the undersigned's  account under the Automatic  Dividend  Investment Service
for Phelps Dodge Common Shares administered by The Chase Manhatten Bank.        

The proxies are instructed to vote as directed below, and in their discretion on
all other matters. Where no direction is specified, this proxy will be voted FOR
Management Proposals 1, 2, 3, 4 and 5 as recommended by the Board of Directors. 

Management Proposals:                                                           

The Board of Directors  recommends you vote FOR Management  Proposals 1, 2, 3, 4
and 5                                                                           

Proposal 1:  Election of Directors  for the  respective  terms  specified in the
Proxy Statement: Messrs. Burt, Krebs and Yearley.     

FOR all            WITHHELD           WITHHELD for the following only 
  nominees      for all nominees       (write name(s) of nominee(s) below)

   [      ]           [       ]         ------------------------------------

PLEASE SIGN ON REVERSE SIDE 
AND RETURN PROMPTLY 

--------------------------------------------------------------------------------
PROXY CARD SIDE 2                                                               
--------------------------------------------------------------------------------

PROXY 

Proposal 2:  Approval of an Amendment  to the 1993 Stock  Option and  Restricted
Stock Plan                                            

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 3:  Authorization to increase the number of common shares.             

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 4:  Authorization to reduce maximum size of Board of Directors.        

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 5:  Ratification of Independent Public Accountants.                    

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Dated:
                                          ------------------------------------

    Signature:
                                              --------------------------------

    Signature:
                                              --------------------------------

Please sign exactly as name appears above.  Joint owners should each sign.  When
signing as attorney, executor,  administrator,  trustee or guardian, please give
full title as such.                                                             

--------------------------------------------------------------------------------

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PROXY CARD SIDE 1                                                               
CONFIDENTIAL PROXY

PHELPS DODGE EMPLOYEE SAVINGS PLAN

 SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION

To M & I Marshall & Ilsley Trust Company of Arizona, Trustee:                   

         I hereby  acknowledge  receipt  of the  Notice  of  Annual  Meeting  of
Shareholders of Phelps Dodge  Corporation to be held on Wednesday,  May 7, 1997,
and accompanying Proxy Statement.  I hereby instruct you to vote in person or by
proxy,  at such  meeting and at any  adjournments  thereof all the Phelps  Dodge
Corporation Common Shares credited to my account under the Phelps Dodge Employee
Savings Plan ("SP") as indicated below,  and in your or your proxies' discretion
on all other matters.                                                           
         You are  instructed  to vote  the  shares  credited  to my  account  as
directed on the reverse side.                                                   

         UNLESS WE RECEIVE  INSTRUCTIONS  FROM YOU THE NUMBER OF SHARES CREDITED
TO YOUR ACCOUNT AS OF THE RECORD DATE,  MARCH 20, 1997, WILL NOT BE VOTED AT THE
MEETING.                                                                        
   THIS PROXY IS CONTINUED ON THE REVERSE SIDE

 PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY

--------------------------------------------------------------------------------
PROXY CARD SIDE 2                                                               

The Board of Directors  recommends you vote FOR Management Proposals 1, 2, 3, 4,
and 5.                                                                          

Proposal 1:  Election of Directors  for the  respective  terms  specified in the
Proxy Statement: Messrs. Burt, Krebs and Yearley.     

[  ]  FOR all nominees                      [  ]  WITHHELD for all nominees     

                                       WITHHELD for the following only
                                            (write name(s) of nominees(s) below)

                                            ------------------------------------

Proposal 2:  Approval of an Amendment  to the 1993 Stock  Option and  Restricted
Stock Plan                                            

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 3:  Authorization to increase the number of common shares.             

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 4:  Authorization to reduce maximum size of Board of Directors.        

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 5:  Ratification of Independent Public Accountants.                    

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Dated:
                                          ------------------------------------

    Signature:
                                              --------------------------------

    Signature:
                                              --------------------------------

NOTE:  Please sign as name appears  hereon.  Joint owners should each sign. When
signing as attorney, executor,  administrator,  trustee or guardian, please give
full title as such.                                                             

--------------------------------------------------------------------------------

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PROXY CARD SIDE 1                                                               
 PROXY

PHELPS DODGE CORPORATION

 Solicited on Behalf of the Board of Directors of Phelps Dodge Corporation

         The undersigned shareholder of PHELPS DODGE CORPORATION hereby appoints
PAUL W. DOUGLAS,  WILLIAM A. FRANKE, PAUL HAZEN and J. STEVEN WHISLER, or any of
them,  proxies  of the  undersigned,  each with  power of  substitution,  at the
meeting of shareholders  of the  Corporation to be held at the Arizona  Biltmore
Hotel, 24th Street and Missouri Avenue, Phoenix,  Arizona, on Wednesday,  May 7,
1997 at 11:30 a.m., and at any adjournments  thereof,  to vote all Common Shares
of the Corporation held or owned by the undersigned,  including any which may be
held for the  undersigned's  account  under the  Automatic  Dividend  Investment
Service for Phelps Dodge Common Shares administered by The Chase Manhattan Bank.

 THIS PROXY IS CONTINUED ON THE REVERSE SIDE
 PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY

--------------------------------------------------------------------------------
PROXY CARD SIDE 2                                                               

The Board of Directors  recommends you vote FOR Management  Proposals 1, 2, 3, 4
and 5.                                                                          

Proposal 1:  Election of Directors  for the  respective  terms  specified in the
Proxy Statement: Messrs. Burt, Krebs and Yearley.     

[  ]  FOR all nominees                      [  ]  WITHHELD for all nominees     

                                       WITHHELD for the following only
                                            (write name(s) of nominees(s) below)

                                            ------------------------------------

Proposal 2:  Approval of an Amendment  to the 1993 Stock  Option and  Restricted
Stock Plan                                            

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 3:  Authorization to increase the number of common shares.             

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 4:  Authorization to reduce maximum size of Board of Directors.        

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Proposal 5:  Ratification of Independent Public Accountants.                    

                                   FOR  [  ]    AGAINST  [  ]  ABSTAIN  [  ]

Dated:
                                          ------------------------------------

    Signature:
                                              --------------------------------

    Signature:
                                              --------------------------------

NOTE:  Please sign as name appears  hereon.  Joint owners should each sign. When
signing as attorney, executor,  administrator,  trustee or guardian, please give
full title as such.                                                             

--------------------------------------------------------------------------------

Dates Referenced Herein   and   Documents Incorporated by Reference

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