Succession Planning and Personnel Development. Under the leadership of the Compensation and Management Development Committee, it is your Board’s practice to annually conduct a formal Succession Planning and Personnel Development session in which evaluations of senior executives are reviewed with respect to their potential for promotion into senior leadership positions, including that of the CEO. In addition, a wide variety of senior executives are purposely exposed to your Board by way of Board and Committee presentations and directors have unrestricted access to management for management assessment and development as well as for information gathering.

CEO Performance Evaluation. Your Board has in place a process whereby the Executive Session Presiding Director conducts a formal performance review at least annually of the Chief Executive Officer taking into account the views of all of the other independent directors. This is in addition to the evaluation inherent in the Compensation and Management Development Committee’s determination of performance-based variable compensation each year.

Strategy Review and Oversight. It is your Board’s practice to conduct a full day session at least annually to review the strategies of the Company overall and of its key business components; and to provide advice and counsel to management regarding the strategic issues facing the Company. Throughout the year, management reports to your Board on the status of significant strategic initiatives and issues.

Board Effectiveness Assessment. As set forth in the Corporate Governance Guidelines, your Board assesses its effectiveness at least annually. Most recently, and extending over several Board and Governance & Nominating Committee meetings beginning in September 2002, your Board undertook a comprehensive review of governance practices and structures and it evaluated measures of its effectiveness including in the areas of Performance of Core Responsibilities, Decision-making Support, and the Quality of Deliberations and Director Performance. In addition, directors have been given measures of individual director effectiveness for purposes of self-assessment, reflection and self-improvement. Several governance improvements have arisen from this review, including development of the Corporate Governance Guidelines set forth at Appendix 2 to this Proxy Statement.

Auditor Independence. Your Board recognizes the importance of insuring the independence of the Company’s outside accountants. See page 24 of this Proxy Statement under the caption “Independent Accountants” for a summary of some of the policies designed to monitor and support such independence.

Director Compensation. No director who is an employee of Praxair is compensated for service as a member of the Board of Directors or any committee of the Board of Directors. As of January 1, 2003, compensation for non-employee directors consists of an annual retainer of $55,000, a $1,500 fee for each Board meeting attended, and a $1,500 fee for each committee meeting attended. A director who is also chairman of a Board of Directors’ committee is paid an additional $10,000 annual retainer. The Executive Session Presiding Director is paid a $5,000 annual retainer in addition to any other fees s/he may be due. Directors are reimbursed for travel expenses incurred on behalf of Praxair and, from time to time, Praxair may sponsor a director’s participation in third party-supplied continuing education related to the director’s Board or Committee service.

Each active non-employee director is also a participant in the 1995 Stock Option Plan for Non-Employee Directors of Praxair, Inc. On or about April 1st of each year, each Stock Option Plan participant is granted options to purchase 2,500 shares of Praxair’s Common Stock. The exercise price of each option is 100% of the closing price of Praxair’s stock as reported by the New York Stock Exchange on the date of grant. Each option granted under the stock option plan becomes exercisable on the second anniversary of its date of grant and expires ten years from the date of grant. The plan contains provisions regarding the exercisability and termination of outstanding options in the event of termination of service, retirement, disability, death and change in control of Praxair.

A Deferred Compensation Plan is also available for non-employee directors. Under this plan, non-employee directors may, prior to the beginning of a calendar year, elect to defer to a later date payment of some or all of the cash fees earned in that year. This deferred payment date is fixed by the director at the time of his or her deferral election. At the time of the deferral election, the director also designates that the deferred fees be credited with earnings based upon a “Cash Account”, which earns interest at the prime rate, a “Stock Unit Account”, the value of which varies with the market price of Praxair’s common stock, or a “Discounted Stock Unit Account”, in which stock units are allocated at a 10% discount to the market price of Praxair’s common stock on the date of deferral and, thereafter, their value varies with the market price of that stock. Stock Unit Accounts and Discounted Stock Unit Accounts are also credited with additional stock units whenever dividends are paid on Praxair’s common stock. Stock units provide directors the economic equivalent of stock ownership except that the units may not be transferred or sold and they do not provide any voting or other shareholder rights. The “Cash Account” is paid to the director in cash on the designated payment date. The “Stock Unit Account” and the “Discounted Stock Unit Account” are both paid in the form of Praxair common stock.

Board Committees. The Board currently has 4 standing Committees as described in the nearby table and each is comprised of only independent directors:

Meetings in 2002: 6

Members:
H. Mitchell Watson, Jr.*
Alejandro Achaval
Ronald L. Kuehn, Jr.
Benjamin F. Payton
Wayne T. Smith

The Board has determined that each of these Committee members is financially literate and that one or more Committee members has accounting or financial management expertise

(1) appoints the independent accountants to audit Praxair’s financial statements, approves the fees and terms of such engagement, approves any non-audit engagements of the independent accountants, and meets regularly with, and receives various reports from, the independent accountants. The independent accountants report directly to the Audit Committee;

(2) reviews Praxair’s principal policies for accounting and financial reporting and its disclosure controls and processes, and reviews with management and the independent accountants Praxair’s annual financial statements prior to their publication;

(3) reviews assessments of Praxair’s internal controls, the performance of the Corporate Audit function, and the guidelines and policies by which Praxair undertakes risk assessment and risk management; and

(4) reviews the effectiveness of Praxair’s compliance with laws, business conduct, integrity and ethics policies and programs.

Meetings in 2002: 5

Members:
Ronald L. Kuehn, Jr.*
Claire W. Gargalli
Raymond W. LeBoeuf
G. Jackson Ratcliffe, Jr.
H. Mitchell Watson, Jr.

(1) determines Praxair’s policies relating to the compensation of the Executive Officers and assesses the competitiveness and appropriateness of their compensation and benefits;

(2) approves corporate goals relevant to the Chief Executive Officer’s (“CEO”) compensation, evaluates the CEO’s performance in light of these goals and sets the CEO’s compensation accordingly;

(3) reviews management’s long-range planning for executive development and succession, and develops a CEO succession plan; and

(4) reviews Praxair’s management incentive compensation and equity compensation plans and oversees their administration.

Meetings in 2002: 4

Members:
G. Jackson Ratcliffe, Jr.*
Dale F. Frey
Benjamin F. Payton
Wayne T. Smith

(1) recommends to the Board nominees for election as directors, and periodically reviews potential candidates, including incumbent directors;

(2) reviews policies with respect to the composition, organization and practices of the Board, and developments in corporate governance matters generally; and

(3) reviews Praxair’s policies and responses to important social, political and public issues, including equal employment opportunity, charitable contributions, legislative issues, and important shareholder issues, including management and shareholder proposals offered for shareholder approval.

Meetings in 2002: 3

Members:
Dale F. Frey*
Alejandro Achaval
Claire W. Gargalli
Raymond W. LeBoeuf

(1) monitors Praxair’s financial condition and its requirements for short and long term financing, and reviews, and recommends to the Board, the amounts, timing, types and terms of public stock issues and public and private debt issues;

(2) reviews Praxair’s foreign exchange and interest rate exposures, the results of its foreign exchange, interest rate and derivatives hedging activities, and Praxair’s practices for managing insurable risks;

(3) reviews Praxair’s policies on dividends and stock repurchases; and

(4) reviews the investment performance, administration and funded status of Praxair’s funded benefit plans and appoints administration and investment committees to act as fiduciaries of such plans.