ESTEE LAUDER COMPANIES INC, DEF 14A, 1997-09-26

ESTEE LAUDER COMPANIES INC
DEF 14A, 1997-09-26
PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS

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<PAGE>
SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

Filed by the Registrant /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

THE ESTEE LAUDER COMPANIES INC.
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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:

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(2) Form, Schedule or Registration Statement no.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

The Estee Lauder Companies Inc.
767 Fifth Avenue
New York, NY 10153

[LOGO]

Leonard A. Lauder
Chairman and
Chief Executive Officer

September 30, 1997

Dear Fellow Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on Wednesday, November 12, 1997, at 10:00 a.m., local time,
in New York.

The enclosed notice and proxy statement contain details concerning the
business to come before the meeting. You will note that the Board of Directors
of the Company recommends a vote 'FOR' the election of two Directors to serve
until the 2000 Annual Meeting of Stockholders and 'FOR' the ratification of
Arthur Andersen LLP as independent auditors of the Company for the 1998 fiscal
year. Please sign and return your proxy card in the enclosed envelope at your
earliest convenience to assure that your shares will be represented and voted at
the meeting even if you cannot attend.

I look forward to seeing you at the Annual Meeting.

/s/ Leonard A. Lauder

<PAGE>

THE ESTEE LAUDER COMPANIES INC.
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO THE OWNERS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK OF THE ESTEE
LAUDER COMPANIES INC.:

The Annual Meeting of Stockholders of The Estee Lauder Companies Inc., a
Delaware corporation (the 'Company'), will be held at The Essex House, Grand
Salon, 160 Central Park South, New York, New York, on Wednesday, November 12,
1997, at 10:00 a.m., local time, for the following purposes:

1. To elect two Directors to serve until the 2000 Annual Meeting of
Stockholders;

2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company to serve for the 1998 fiscal year; and

3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.

Stockholders of record at the close of business on September 19, 1997, are
entitled to notice of and to vote at the meeting and any adjournments or
postponements thereof. A list of stockholders of the Company as of the close of
business on September 19, 1997, will be available for inspection during normal
business hours from October 29, 1997 through November 11, 1997, at the office of
Jeffrey J. Weinberg, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New
York.

Admission to the meeting will be by ticket only. If you are a stockholder
of record and plan to attend, please check the appropriate box on the proxy card
and an admission ticket will be mailed to you. If you are a stockholder whose
shares are held through an intermediary such as a bank or broker and you plan to
attend, please request a ticket by writing to the Investor Relations Department
at The Estee Lauder Companies Inc., 767 Fifth Avenue, New York, New York 10153.
Evidence of your ownership, which you can obtain from your bank, broker, etc.,
must accompany your letter.

By Order of the Board of Directors

SAUL H. MAGRAM
Secretary

New York, New York
September 30, 1997

EACH STOCKHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY. IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE

MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.

<PAGE>

THE ESTEE LAUDER COMPANIES INC.
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153

September 30, 1997

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 12, 1997

This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The Estee Lauder Companies Inc.
(the 'Company') to be voted at the Annual Meeting of Stockholders of the Company
to be in the Grand Salon at The Essex House, 160 Central Park South, New York,
New York, on November 12, 1997, at 10:00 a.m., local time, and at any
adjournments or postponements thereof.

All proxies delivered pursuant to this solicitation are revocable at any
time before they are exercised at the option of the persons executing them by
giving written notice to the Secretary of the Company, by delivering a later
dated proxy or by voting in person at the Annual Meeting.

The mailing address of the principal executive offices of the Company is
767 Fifth Avenue, New York, New York 10153. The approximate date on which this
Proxy Statement and form of proxy are first being sent or given to stockholders
is September 30, 1997.

All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. Regarding the election of Directors to serve until the Annual
Meeting of Stockholders in 2000, stockholders may vote in favor of all nominees
or withhold their votes as to specific nominees. With respect to other proposals
to be voted upon, stockholders may vote in favor of a proposal, against a
proposal or may abstain from voting. Stockholders should specify their choices
on the enclosed form of proxy. If no specific instructions are given with
respect to the matters to be acted upon, the shares represented by a signed
proxy will be voted FOR the election of all nominees and FOR the proposal to
ratify the appointment of Arthur Andersen LLP as independent auditors. Directors
will be elected by a plurality of the votes cast by the holders of the shares of
Class A Common Stock and Class B Common Stock voting in person or by proxy at
the Annual Meeting. In accordance with the Company's Amended and Restated
Bylaws, the appointment of Arthur Andersen LLP as independent auditors will be
ratified by a majority of the votes cast 'For' or 'Against' the proposal by
holders of Class A Common Stock and Class B Common Stock of the Company voting
on the proposal in person or by proxy at the Annual Meeting. Accordingly,
abstentions and broker non-votes, while not included in calculating vote totals,
will have the practical effect of reducing the number of votes 'For' needed to
approve the proposal.

Only owners of record of shares of Class A Common Stock and Class B Common
Stock of the Company at the close of business on September 19, 1997, are
entitled to vote at the meeting or adjournments or postponements thereof. Each
owner of record of Class A Common Stock on the record date is entitled to one
vote for each share of Class A Common Stock of the Company so held. Each owner
of record of Class B Common Stock is entitled to ten votes for each share of
Class B Common Stock of the Company so held. On September 19, 1997, there were
61,436,663 shares of Class A Common Stock and 56,839,667 shares of Class B
Common Stock of the Company issued and outstanding.

<PAGE>

ELECTION OF DIRECTORS

(ITEM 1)

BOARD OF DIRECTORS

The Board of Directors of the Company, in accordance with the Bylaws, has
fixed the number of Directors of the Company at seven. The Directors are divided
into three classes, each serving for a period of three years.

Approximately one-third of the members of the Board of Directors are
elected by the stockholders annually. The Directors whose terms will expire at
the 1997 Annual Meeting of Stockholders are Fred H. Langhammer and Faye
Wattleton, each of whom has been nominated to stand for reelection as Directors
at the 1997 Annual Meeting to hold office until the 2000 Annual Meeting of
Stockholders and until their successors are elected and qualify.

Should any one or more of these nominees become unable to serve for any
reason, or for good cause will not serve, which is not anticipated, the Board of
Directors may, unless the Board by resolution provides for a lesser number of
Directors, designate substitute nominees, in which event the persons named in
the enclosed proxy will vote proxies that would otherwise be voted for all named
nominees for the election of such substitute nominee or nominees.

RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH NOMINEE AS
A DIRECTOR TO HOLD OFFICE UNTIL THE 2000 ANNUAL MEETING AND UNTIL HIS OR HER
SUCCESSOR IS ELECTED AND QUALIFIES. PROXIES RECEIVED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.

<PAGE>

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NOMINEES FOR ELECTION TO TERM EXPIRING 2000 (CLASS I)
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[PHOTO] Fred H. Langhammer Director since 1996
Age 53

Mr. Langhammer has been President of the Company since 1995
and Chief Operating Officer of the Company since 1985. He was
Executive Vice President from 1985 until 1995. Mr. Langhammer
joined the Company in 1975 as President of its operations in
Japan and, in 1982, he was appointed Managing Director of the
Company's operations in Germany. He is a member of the Board
of Directors of the Cosmetics, Toiletries and Fragrance
Association, the German American Chamber of Commerce, Inc.,
the American Institute for Contemporary German Studies at
Johns Hopkins University and RSL Communications, Ltd. He is
also a Senior Fellow of the Foreign Policy Association.

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[PHOTO] Faye Wattleton Director since 1996
Age 54

Ms. Wattleton is the President of the Center for Gender
Equality and is an author, lecturer and consultant to
businesses, health organizations and non-profit entities. She
is the past President of Planned Parenthood Federation of
America, Inc. (from 1978 to 1992). She is a Director of Empire
Blue Cross & Blue Shield, the Henry J. Kaiser Family
Foundation, the Quidel Corporation, Bio-Technology General and
Thirteen/WNET. She is also a Director of the Institute for
International Education and a member of the Advisory Council
of Columbia University School of Public Health. She was
inducted into the National Women's Hall of Fame in 1993.

Ms. Wattleton is Chairman of the Audit Committee.

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INCUMBENT DIRECTORS -- TERM EXPIRING 1998 (CLASS II)
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[PHOTO] William P. Lauder Director since 1996
Age 37

Mr. Lauder is President of Origins Natural Resources Inc., and
has been the senior officer of such division since its
inception in 1990. Prior thereto, he served in various
positions since joining the Company in 1986. He is a member of
the Board of Trustees of The Trinity School in New York City
and the Board of Directors of the Educational Foundation for
the Fashion Industries.

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[PHOTO] P. Roy Vagelos, M.D. Director since 1996
Age 67

Dr. Vagelos is Chairman of the Board of Regeneron
Pharmaceuticals. He was the Chairman and Chief Executive
Officer of Merck & Co., Inc. from 1985 to 1994. Dr. Vagelos is
also a director of PepsiCo and Prudential Insurance Co. of
America. He is also Chairman of the Board of Trustees of The
University of Pennsylvania.

Dr. Vagelos is Chairman of the Compensation Committee and a
member of the Audit Committee.

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<PAGE>

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INCUMBENT DIRECTORS -- TERM EXPIRING 1999 (CLASS III)
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[PHOTO] Leonard A. Lauder Director since 1958
Age 64

Mr. Lauder has served as Chief Executive Officer of the
Company since 1982 and as President from 1972 until 1995. He
became Chairman of the Board of Directors of the Company in
1995. Mr. Lauder formally joined the Company in 1958 after
serving as an officer in the United States Navy. Since joining
the Company, he has served in various positions, including
executive officer positions other than those described above.
He is Chairman of the Board of Trustees of the Whitney Museum
of American Art, a Charter Trustee of the University of
Pennsylvania, a Trustee of The Aspen Institute and a Director
of RSL Communications, Ltd. He also served as a member of the
White House Advisory Committee on Trade Policy and
Negotiations under President Reagan.

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[PHOTO] Ronald S. Lauder Director since 1988 and
from 1968 to 1986
Age 53

Mr. Lauder has served as Chairman of Clinique Laboratories,
Inc. and Chairman of Estee Lauder International, Inc. since
returning from government service in 1987. Mr. Lauder joined
the Company in 1964 and has served in various capacities,
including those described above, since then. From 1983 to

1986, Mr. Lauder served as Deputy Assistant Secretary of
Defense for European and NATO Affairs. From 1986 to 1987, he
served as U.S. Ambassador to Austria. He is the co-founder,
controlling investor and Chairman of the Board of Directors of
Central European Media Enterprises Ltd. and RSL
Communications, Ltd. He is Chairman of the Board of Trustees
of the Museum of Modern Art.

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[PHOTO] Marshall Rose Director since 1996
Age 60

Mr. Rose is a managing partner of The Georgetown Group, a
privately held real estate development and financial service
group. He is a Trustee of BRT Realty Trust and a Director of
One Liberty Properties Inc. and Golden Books Family
Entertainment, Inc. Among his numerous civic activities, he is
Chairman of the Executive Committee and Chairman Emeritus of
The New York Public Library and a member of the Executive
Committee of the Board of Advisors of The Graduate School and
University Center of the City University of New York.

Mr. Rose is a member of the Audit Committee and the
Compensation Committee.

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<PAGE>

OWNERSHIP OF SHARES

The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock and Class B Common Stock as of
September 19, 1997 by (i) each person known by the Company to own beneficially
more than 5% of either the outstanding shares of Class A Common Stock or Class B
Common Stock, (ii) each of the Company's directors, (iii) each of the executive
officers whose names appear in the summary compensation table and (iv) all
directors and executive officers as a group. Except as set forth in the notes to
the table, the business address of each 5% stockholder is 767 Fifth Avenue, New
York, New York 10153. AS DESCRIBED IN THE NOTES TO THE TABLE, VOTING AND/OR
INVESTMENT POWER WITH RESPECT TO CERTAIN SHARES OF COMMON STOCK IS SHARED BY THE
NAMED INDIVIDUALS. CONSEQUENTLY, SUCH SHARES ARE SHOWN AS BENEFICIALLY OWNED BY
MORE THAN ONE PERSON.

<TABLE>
<CAPTION>
CLASS A COMMON CLASS B VOTING
STOCK(1) COMMON STOCK POWER
DIRECTORS, EXECUTIVE OFFICERS ------------------ ------------------ ------
AND 5% STOCKHOLDERS NUMBER % NUMBER % %
- ----------------------------------------------------------- ---------- ---- ---------- ---- ------
<S> <C> <C> <C> <C> <C>
The Estee Lauder 1994 Trust(2)(3).......................... 7,755,053 12.6 6,094,926 10.7 10.9
Leonard A. Lauder (3)(4)................................... 25,620,140 41.7 29,370,773 51.7 50.7
Ronald S. Lauder(3)(5)..................................... 21,550,982 35.1 26,451,455 46.5 45.4
Ira T. Wender, as trustee(3)(6)............................ 7,764,745 12.6 8,018,003 14.1 14.1
William P. Lauder(3)(7).................................... 3,557,444 5.8 1,914,608 3.4 3.6
Gary M. Lauder(3)(8)....................................... 2,793,393 4.5 1,914,608 3.4 3.5
Joel S. Ehrenkranz, as trustee (3)(9)...................... 2,740,824 4.5 4,981,139 8.8 8.3
Richard D. Parsons, as trustee (3)(10)..................... 6,643,532 11.0 7,900,457 13.9 13.6
Fred H. Langhammer(11)..................................... 25 * -- -- *
Marshall Rose(12).......................................... 16,226 * -- -- *
P. Roy Vagelos, M.D........................................ 22,226 * -- -- *
Faye Wattleton............................................. 1,226 * -- -- *
Daniel J. Brestle(13)...................................... 9,272 * -- -- *
Robin R. Burns(13)......................................... 4,760 * -- -- *
Saul H. Magram(13)......................................... 32 * -- -- *
Jeanette S. Wagner(13)..................................... 11,775 * -- -- *
All directors and executive officers
as a group (19 persons)(14).............................. 32,297,068 52.6 49,718,833 87.5 84.1
</TABLE>

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<TABLE>
<S> <C>
* Less than 0.1 %

(1) Each share of Class B Common Stock is convertible at the option of the holder into one share of Class A
Common Stock and is automatically converted into a share of Class A Common Stock upon transfer to a person
who is not a Lauder Family Member (as defined below). The number of shares of Class A Common Stock and

percentages contained under this heading do not account for such conversion right.

(2) The Estee Lauder 1994 Trust borrowed an aggregate of 5,500,000 shares of Class A Common Stock from Leonard A.
Lauder which the Trust sold in the Company's initial public offering. The Trust is obligated to repay the
borrowing by delivering to Mr. Lauder shares equal in number to the borrowed shares. This obligation is
secured by a pledge of an equal number of shares owned by the Trust. Leonard A. Lauder, Ronald S. Lauder and
Ira T. Wender are trustees of the Trust.

(3) Leonard A. Lauder, Ronald S. Lauder, William P. Lauder, Gary M. Lauder, each individually and as trustees of
various trusts, Ira T. Wender, as trustee, Joel S. Ehrenkranz, as trustee, and Richard D. Parsons, as
trustee, are parties to a Stockholders' Agreement, pursuant to which each has agreed to vote his shares for
the election of Leonard A. Lauder, Ronald S. Lauder and their
</TABLE>

(Footnotes continued on next page)

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<TABLE>
<S> <C>
respective designees as directors of the Company. Shares owned by each such individual are not attributed to
the others by reason of such voting arrangement.

(4) Includes shares beneficially owned or deemed to be owned beneficially by Leonard A. Lauder as follows:
7,380,741 shares of Class A Common Stock directly and with respect to which he has sole voting and investment
power (including 5,500,000 and 1,697,493 shares of Class A Common Stock which are pledged to Mr. Lauder by
The Estee Lauder 1994 Trust and Ronald S. Lauder, respectively); 7,048,423 shares of Class A Common Stock and
21,352,770 shares of Class B Common Stock as the sole individual general partner and the majority stockholder
of the sole corporate general partner of a limited partnership and with respect to which he has sole voting
and investment power; 7,755,053 shares of Class A Common Stock and 6,094,926 shares of Class B Common Stock
as co-trustee of The Estee Lauder 1994 Trust with respect to which he shares voting power with Ronald S.
Lauder, as a co-trustee, and investment power with Ronald S. Lauder and Ira T. Wender, as co-trustees; 7,692
shares of Class A Common Stock and 1,923,077 shares of Class B Common Stock as an individual general partner
of a limited partnership and as co-trustee of a trust (the 'LAL Trust'), which is a general partner of the
same limited partnership, and with respect to which he shares voting power with Ronald S. Lauder, who also is
an individual general partner of the limited partnership and co-trustee of another trust (the 'RSL Trust'),
which is a general partner of the limited partnership, and investment power with Ronald S. Lauder, as an
individual general partner of the limited partnership and as co-trustee of the RSL Trust, Richard D. Parsons
and Ira T. Wender, as co-trustees of the RSL Trust, and Joel S. Ehrenkranz and Ira T. Wender, as co-trustees
of the LAL Trust; 418,231 shares of Class A Common Stock as a director of The Lauder Foundation and with
respect to which he shares voting and investment power; and 260,000 shares of Class A Common Stock owned by
Evelyn H. Lauder. Leonard A. Lauder disclaims beneficial ownership of the shares of Class A Common Stock
owned by The Lauder Foundation and Evelyn H. Lauder. The shares of Class A Common Stock include 2,750,000
shares of Class A Common Stock subject to a proxy granted to Mr. Lauder by Ronald S. Lauder in connection
with Mr. Lauder's loan to The Estee Lauder 1994 Trust. Excludes shares of Class A Common Stock underlying
stock options granted to Mr. Lauder pursuant to his employment agreement.

(5) Includes shares beneficially owned or deemed to be owned beneficially by Ronald S. Lauder as follows:
12,913,615 shares of Class A Common Stock and 18,431,861 shares of Class B Common Stock directly and with
respect to which he has sole voting and investment power (including 600,000 shares of Class B Common Stock

subject to call options granted to Richard D. Parsons, as trustee); 1,591 shares of Class A Common Stock and
1,591 shares of Class B Common Stock as sole trustee of a trust for the benefit of his children and with
respect to which he has sole voting and investment power; 7,755,053 shares of Class A Common Stock and
6,094,926 shares of Class B Common Stock as co-trustee of The Estee Lauder 1994 Trust with respect to which
he shares voting power with Leonard A. Lauder, as a co-trustee, and investment power with Leonard A. Lauder
and Mr. Wender, as co-trustees; 7,692 shares of Class A Common Stock and 1,923,077 shares of Class B Common
Stock as an individual general partner of a limited partnership and as co-trustee of the RSL Trust, which is
a general partner of the same limited partnership, and with respect to which he shares voting power with
Leonard A. Lauder, who also is an individual general partner of the limited partnership and co-trustee of the
LAL Trust, which is a general partner of the limited partnership, and investment power with Leonard A.
Lauder, as an individual general partner of the limited partnership and as co-trustee of the LAL Trust,
Richard D. Parsons and Ira T. Wender, as co-trustees of the RSL Trust, and Joel S. Ehrenkranz and Ira T.
Wender, as co-trustees of the LAL Trust; 418,231 shares of Class A Common Stock as a director of The Lauder
Foundation and with respect to which he shares voting and investment power;
</TABLE>

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

<TABLE>
<S> <C>
250,700 shares of Class A Common Stock as a Director of the Ronald S. Lauder Foundation with respect to which
he shares voting and investment power; and 204,100 shares of Class A Common Stock as a Director of The Jewish
Renaissance Foundation with respect to which he shares voting and investment power. Ronald S. Lauder
disclaims beneficial ownership of the shares of Class A Common Stock and Class B Common Stock owned by trusts
for the benefit of one or more of his children, The Lauder Foundation, the Ronald S. Lauder Foundation and
The Jewish Renaissance Foundation. Mr. Lauder borrowed an aggregate of 8,333,333 shares of Class A Common
Stock from certain Family Controlled Trusts and Leonard A. Lauder which he sold in the Company's initial
public offering. Mr. Lauder is obligated to repay the loans by delivering to the lending Family Controlled
Trusts and Leonard A. Lauder shares equal in number to the borrowed shares. This obligation is secured by a
pledge of an equal number of shares owned by Mr. Lauder as to which he has sole voting power and shares
investment power with the respective pledgees. In addition, in connection with the loan to The Estee Lauder
1994 Trust by Leonard A. Lauder, Ronald S. Lauder granted a proxy to Leonard A. Lauder for 2,750,000 shares
of Class A Common Stock as to which shares Ronald S. Lauder retains sole investment power. Excludes shares of
Class A Common Stock underlying options (a) granted to Mr. Lauder pursuant to his employment agreement and
(b) granted to, and received from, Richard D. Parsons, as trustee in February 1997.

(6) Includes shares beneficially owned or deemed to be owned beneficially by Ira T. Wender as follows: 2,000
shares of Class A Common Stock owned by his wife; 7,755,053 shares of Class A Common Stock and 6,094,926
shares of Class B Common Stock as co-trustee of The Estee Lauder 1994 Trust and with respect to which he
shares investment power with Leonard A. Lauder and Ronald S. Lauder; and 7,692 shares of Class A Common Stock
and 1,923,077 shares of Class B Common Stock as co-trustee of the LAL Trust and as co-trustee of the RSL
Trust, each of which trusts are general partners of a limited partnership, which owns the shares and with
respect to which he shares investment power with Leonard A. Lauder, as co-trustee of the LAL Trust and who
also is an individual general partner of the limited partnership, Ronald S. Lauder, as co-trustee of the RSL
Trust and who also is an individual general partner of the limited partnership, Joseph S. Ehrenkranz, as
co-trustee of the LAL Trust, and Richard D. Parsons, as co-trustee of the RSL Trust. Mr. Wender disclaims
beneficial ownership of such shares. The shares of Class A Common Stock held by The Estee Lauder 1994 Trust
include 5,500,000 shares pledged to Leonard A. Lauder to secure a loan from Mr. Lauder to the Trust. Mr.

Wender's business address is 1133 Avenue of the Americas, New York, New York 10036.

(7) Includes shares beneficially owned or deemed to be owned beneficially by William P. Lauder as follows:
1,573,785 shares of Class A Common Stock directly and with respect to which he has sole voting and investment
power; 1,565,428 shares of Class A Common Stock and 1,914,608 shares of Class B Common Stock as co-trustee of
a trust and with respect to which he shares voting power with Gary M. Lauder, as co-trustee, and investment
power with Gary M. Lauder and Joel S. Ehrenkranz, as co-trustees; and 418,231 shares of Class A Common Stock as
a director of The Lauder Foundation with respect to which he shares voting and investment power. William P.
Lauder disclaims beneficial ownership with respect to shares of Class A Common Stock owned by The Lauder
Foundation. Excludes shares of Class A Common Stock subject to options granted to Mr. Lauder pursuant to the
Company's Share Incentive Plan.

(8) Includes shares beneficially owned or deemed to be owned beneficially by Gary M. Lauder as follows: 1,227,965
shares of Class A Common Stock directly and with respect to which he has sole voting and investment power and
1,565,428 shares of Class A Common Stock and 1,914,608 shares of Class B Common Stock as co-trustee of a
trust and with respect to which he shares voting power with William P. Lauder, as co-trustee, and investment
power with William P.
</TABLE>

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<PAGE>

(Footnotes continued from previous page)

<TABLE>
<S> <C>
Lauder and Mr. Ehrenkranz, as co-trustees. Mr. Lauder's business address is ICTV Inc., 14600 Winchester
Boulevard, Los Gatos, California 95030.

(9) Includes shares beneficially owned or deemed to be owned beneficially by Joel S. Ehrenkranz as follows:
10,000 shares of Class A Common Stock directly and with respect to which he has sole voting and investment
power; 1,157,704 shares of Class A Common Stock and 1,143,454 shares of Class B Common Stock as trustee of a
trust for the benefit of William P. Lauder and Gary M. Lauder and with respect to which he shares voting and
investment power with Carol S. Boulanger, as co-trustee; 1,565,428 shares of Class A Common Stock and
1,914,608 shares of Class B Common Stock as co-trustee of a trust and with respect to which he shares
investment power with William P. Lauder and Gary M. Lauder, as co-trustee; and 7,692 shares of Class A Common
Stock and 1,923,077 shares of Class B Common Stock as co-trustee of the LAL Trust, which is a general partner
of a limited partnership, which owns the shares and with respect to which he shares investment power with
Leonard A. Lauder, who is an individual general partner of the limited partnership and also a co-trustee of
the LAL Trust, Ronald S. Lauder, who is an individual general partner of the limited partnership and also a
co-trustee of the RSL Trust, Richard D. Parsons and Ira T. Wender, as co-trustees of the RSL Trust, and Ira
T. Wender, as co-trustee of the LAL Trust. Mr. Ehrenkranz disclaims beneficial ownership of all such shares
other than those he owns directly. Mr. Ehrenkranz's business address is 375 Park Avenue, New York, New York
10152.

(10) Includes shares beneficially owned or deemed to be owned beneficially by Richard D. Parsons as follows:
6,635,840 shares of Class A Common Stock and 5,977,380 shares of Class B Common Stock as trustee of trusts
for the benefit of Aerin Lauder Zinterhofer and Jane Lauder and with respect to which Mr. Parsons has sole
voting and investment power (excluding 600,000 shares of Class B Common Stock subject to call options granted
to one of the Trusts by Ronald S. Lauder); and 7,692 shares of Class A Common Stock and 1,923,077 shares of
Class B Common Stock as co-trustee of the RSL Trust, which is a general partner of a limited partnership,

which owns the shares and with respect to which he shares investment power with Ronald S. Lauder, who is an
individual general partner of the limited partnership and also a co-trustee of the LAL Trust, Leonard A.
Lauder, who is an individual general partner of the limited partnership and also a co-trustee of the LAL
Trust, Ira T. Wender, as co-trustee of the RSL Trust, and Joel S. Ehrenkranz and Ira T. Wender, as
co-trustees of the LAL Trust. Mr. Parsons disclaims beneficial ownership of all such shares. All of the
shares of Class A Common Stock owned by trusts for the benefit of Aerin Lauder Zinterhofer and Jane Lauder
represent shares pledged to the trusts by Ronald S. Lauder to secure repayment of stock loans made to him at
the time of the Company's initial public offering. Mr. Parson's business address is 75 Rockefeller Plaza, New
York, New York 10019.

(11) Excludes stock options in respect of 900,000 shares of Class A Common Stock, restricted stock units payable
in shares in respect of 126,600 shares of Class A Common Stock granted to Mr. Langhammer under his employment
agreement and restricted stock units payable in cash in respect of 77,824 shares of Class A Common Stock
which are part of his deferred compensation balance.

(12) Includes shares of Class A Common Stock beneficially owned by Mr. Rose as follows: 10,000 shares directly and
5,000 shares as trustee of one of his children's trusts, in each case with respect to which he has sole
voting and investment power. Mr. Rose disclaims beneficial ownership of shares owned by his child's trust.
</TABLE>

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

<TABLE>
<S> <C>
(13) Excludes stock options in respect of shares of Class A Common Stock granted to the executive under his or her
employment agreement or the Share Incentive Plan as follows: Mr. Brestle (200,000); Ms. Burns (200,000); Mr.
Magram (25,000); and Mrs. Wagner (300,000).

(14) See notes (2) through (7) and notes (11) through (13). Also excludes stock options in respect of an aggregate
of 565,000 shares of Class A Common Stock granted to the executive officers whose names do not appear in this
table.
</TABLE>

ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS

Stockholders' Agreement. Lauder Family Members (other than The Lauder
Foundation, Aerin Lauder Zinterhofer and Jane Lauder) who own shares of Common
Stock have agreed pursuant to the Stockholders' Agreement to vote all shares
beneficially owned by them for Leonard A. Lauder, Ronald S. Lauder and one
person (if any) designated by each as directors of the Company. Leonard A.
Lauder's nominee is William P. Lauder. Such stockholders beneficially owned, in
the aggregate, on September 19, 1997, shares of Common Stock having 96.5% of the
voting power of the Company. The rights of each of Leonard A. Lauder and Ronald
S. Lauder to designate a nominee exists only when such stockholder (including
his descendants) beneficially owns (other than by reason of the Stockholders'
Agreement) shares of Common Stock with at least 10% of the total voting power of
the Company. The right of the individual stockholder to be nominated will exist
so long as he (including his descendants) beneficially owns shares of Common

Stock with at least 5% of the total voting power of the Company. In the event
that Leonard A. Lauder ceases to be a member of the Board of Directors by reason
of his death or disability, then his sons, William P. Lauder and Gary M. Lauder,
will succeed to his rights to be nominated as a director. If either son is
unable to serve by reason of his death or disability, the other son will have
the right to designate a nominee. Similarly, Aerin Lauder Zinterhofer and Jane
Lauder, Ronald S. Lauder's daughters, will succeed to their father's rights if
he should cease to be a director by reason of his death or disability. If either
daughter is unable to serve by reason of her death or disability, the other
daughter will have the right to designate a nominee. In the event none of
Leonard A. Lauder and his sons and Ronald S. Lauder and his daughters are able
to serve as directors by reason of death or disability, then the rights under
the Stockholders' Agreement to be a nominee and to designate a nominee will
cease.

Board Committees. The Board of Directors has established two
committees--the Audit Committee and the Compensation Committee.

The Audit Committee members are Marshall Rose, P. Roy Vagelos, M.D. and
Faye Wattleton. Ms. Wattleton is the Chairman of the Committee. The Committee,
among other things, makes recommendations to the Board of Directors regarding
the independent auditors to be nominated for ratification by the stockholders,
reviews the independence of such auditors, approves the scope of the annual
audit activities of the independent auditors and reviews audit results.

The Compensation Committee members are Marshall Rose and P. Roy Vagelos,
M.D. Dr. Vagelos is the Chairman of the Committee. The Committee, among other
things, has the authority to approve compensation plans and arrangements with
respect to the Company's executive officers and administers certain employee
benefit plans, including the Share Incentive Plan.

Board and Board Committee Meetings. In fiscal 1997, there were seven
meetings of the Board of Directors. The Compensation Committee met twice and the
Audit Committee met five times in fiscal 1997. The total combined attendance for
all Board and Committee meetings was 99%. Each Director attended more than 75%
of the aggregate of all meetings of the Board of Directors and the Committees on
which they served during fiscal 1997.

<PAGE>

Compensation of Directors. Each non-employee director receives an annual
retainer of $40,000. During each of the first five years of service, $10,000 of
the annual retainer is payable in shares (or stock units) of Class A Common
Stock. The number of shares or shares underlying units to be awarded is
determined by dividing the dollar amount by the average closing price for the
Class A Common Stock on the twenty trading days next preceding the date of
grant. In addition, on the date of the first annual meeting of stockholders
which is more than six months after a non-employee director's initial election
to the Board, he or she will be granted 1,000 shares of Class A Common Stock
(plus a related cash amount for reimbursement of taxes). Any shares of Class A
Common Stock granted to non-employee directors as compensation, while not
restricted, are expected to be held by such persons until they are no longer

serving as a director. Non-employee directors also receive $1,000 for each board
or committee meeting attended plus reimbursement of travel expenses to such
meetings. Each of the Chairman of the Audit Committee and the Chairman of the
Compensation Committee receives an additional $3,000 per year. Non-employee
directors may elect to defer receipt of all or part of their cash-based
compensation. Directors who are also employees of the Company receive no
additional compensation for service as a director.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Family Relationships. The Company was founded by Estee Lauder ('Mrs.
Lauder') and her late husband, Joseph Lauder. Until September 1995, Mrs. Lauder
was Chairman of the Board of Directors of the Company. She is currently Founding
Chairman, an honorary position. Her son, Leonard A. Lauder, is the Chief
Executive Officer and Chairman of the Board of Directors of the Company. Her
other son, Ronald S. Lauder, is a director of the Company and Chairman of Estee
Lauder International, Inc. and Clinique Laboratories, Inc. Leonard A. Lauder's
wife, Evelyn H. Lauder, is a Senior Corporate Vice President of the Company.
Leonard A. Lauder and his wife have two sons, William P. Lauder and Gary M.
Lauder. William P. Lauder is President of Origins Natural Resources Inc. and a
Director of the Company. Ronald S. Lauder and his wife, Jo-Carole Lauder, have
two daughters, Aerin Lauder Zinterhofer and Jane Lauder. Aerin Lauder
Zinterhofer is a Director of Creative Product Development of Estee Lauder
(U.S.A.). Jane Lauder is currently Manager--Promotional Marketing for Clinique
(U.S.A.). Although not currently employed by the Company, Gary M. Lauder was
employed by the Company in the past.

As used in this Proxy Statement, the term 'Lauder Family Members' includes
only the following persons: (i) Mrs. Lauder and her estate, guardian,
conservator or committee; (ii) each descendant of Mrs. Lauder (a 'Lauder
Descendant') and their respective estates, guardians, conservators or
committees; (iii) each 'Family Controlled Entity' (as defined below); and (iv)
the trustees, in their respective capacities as such, of each 'Family Controlled
Trust' (as defined below). The term 'Family Controlled Entity' means (i) any
not-for-profit corporation if at least 80% of its board of directors is composed
of Mrs. Lauder and/or Lauder Descendants; (ii) any other corporation if at
least 80% of the value of its outstanding equity is owned by Lauder Family
Members; (iii) any partnership if at least 80% of the value of its partnership
interests are owned by Lauder Family Members; and (iv) any limited liability or
similar company if at least 80% of the value of the company is owned by Lauder
Family Members. The term 'Family Controlled Trust' includes certain trusts
existing on November 16, 1995 and trusts the primary beneficiaries of which are
Mrs. Lauder, Lauder Descendants, spouses of Lauder Descendants and/or charitable
organizations provided that if the trust is a wholly charitable trust, at least
80% of the trustees of such trust consist of Mrs. Lauder and/or Lauder
Descendants.

Royalty Arrangements. In 1969, the Company acquired from Mrs. Lauder
ownership of the trademark Estee Lauder outside the United States in exchange
for royalty payments on sales of Estee Lauder brand products during Mrs.
Lauder's lifetime. The royalty with respect to those sales (the 'International
Royalty') continues to be an obligation of the Company until Mrs. Lauder's
death. The International Royalty paid to Mrs. Lauder for fiscal 1997 amounted to
$15.1 million.

<PAGE>

Master Registration Rights Agreement. Leonard A. Lauder, Ronald S. Lauder,
The Estee Lauder 1994 Trust, William P. Lauder, Gary M. Lauder, Aerin Lauder
Zinterhofer, Jane Lauder, certain Family Controlled Entities and other Family
Controlled Trusts, Morgan Guaranty and the Company are parties to a Registration
Rights Agreement (the 'Master Registration Rights Agreement'), pursuant to which
each of Leonard A. Lauder, Ronald S. Lauder and Morgan Guaranty have three
demand registration rights and The Estee Lauder 1994 Trust has six demand
registration rights in respect of shares of Class A Common Stock (including
Class A Common Stock issued upon conversion of Class B Common Stock) held by
them. Three of the demand rights granted to The Estee Lauder 1994 Trust may be
used only by a pledgee of The Estee Lauder 1994 Trust's shares of Common Stock.
All the parties to the Master Registration Rights Agreement (other than the
Company) also have an unlimited number of piggyback registration rights in
respect of their shares. The rights of Morgan Guaranty and any pledgee of The
Estee Lauder 1994 Trust under the Master Registration Rights Agreement will be
exercisable only in the event of a default under certain loan arrangements.
Leonard A. Lauder and Ronald S. Lauder may assign their demand registration
rights to Lauder Family Members. The Company is not required to effect more than
one registration for Class A Common Stock in any twelve calendar month period.
The piggyback registration rights allow the holders to include their shares of
Class A Common Stock in any registration statement filed by the Company, subject
to certain limitations.

The Estee Lauder 1994 Trust is entitled to six demand registration rights,
three of which may be used only by a pledgee of The Estee Lauder 1994 Trust's
shares of $6.50 Cumulative Redeemable Preferred Stock, and an unlimited number
of piggyback registration rights with respect to the shares of the $6.50
Cumulative Redeemable Preferred Stock. The LAL 1995 Trust has one demand
registration right and an unlimited number of piggyback registration rights with
respect to shares of the $6.50 Cumulative Redeemable Preferred Stock under the
Master Registration Rights Agreement. These rights are exercisable by the Estee
Lauder 1994 Trust and the LAL 1995 Trust until the later of June 30, 2000 and
Mrs. Lauder's death.

The Company is required to pay all expenses (other than underwriting
discounts and commissions of the selling stockholders, taxes payable by the
selling stockholders and the fees and expenses of the selling stockholders'
counsel) in connection with any demand registrations, as well as any
registration pursuant to the exercise of piggyback rights. The Company has
agreed to indemnify such persons against certain liabilities, including
liabilities arising under the Securities Act of 1933.

Stockholders' Agreement. All Lauder Family Members (other than The Lauder
Foundation, Aerin Lauder Zinterhofer and Jane Lauder) that beneficially own
shares of Common Stock are parties to a stockholders' agreement with the Company
(the 'Stockholders' Agreement'). The stockholders who are parties to the
Stockholders' Agreement (who beneficially owned, in the aggregate, shares of
Common Stock having 96.5% of the voting power of the Company on September 19,
1997) have agreed to vote in favor of the election of Leonard A. Lauder and

Ronald S. Lauder and one designee of each as directors. See 'Additional
Information Regarding the Board of Directors--Stockholders' Agreement.' The
Stockholders' Agreement also contains certain limitations on the transfer of
shares of Class A Common Stock and Class B Common Stock. In addition, each
stockholder who is a party to the Stockholders' Agreement (the 'Offering
Stockholder') has granted the other parties (the 'Offerees') a right of first
offer to purchase shares of Class A Common Stock the Offering Stockholder
intends to sell to a person (or group of persons) who is not a Lauder Family
Member, except in certain circumstances, such as sales in a widely distributed
underwritten public offering or sales made in compliance with Rule 144. Each
Offeree has the opportunity to purchase the Offeree's pro rata portion of the
shares to be offered by the Offering Stockholder, as well as additional shares
not purchased by other Offerees. Any shares not purchased pursuant to the right
of first offer may be sold at or above 95% of the price offered to the Offerees.
The Stockholders' Agreement will terminate upon the occurrence of certain
specified events, including the transfer of shares of Common Stock by a party to
the Stockholders' Agreement that causes all parties thereto immediately after
such transaction to own beneficially in the aggregate shares having less than
10% of the total voting power of the Company.

<PAGE>

Other Arrangements. The Company has subleased certain of its office space
in New York to an affiliate of Ronald S. Lauder. In fiscal 1997, the rent paid
was approximately $1 million, which equals the Company's lease payments for that
space. In connection with the sublease, and subject to certain conditions, the
Company has agreed to make certain improvements, the cost of which will be
amortized over the term of the sublease and be payable by the sublessee. The
Company also has agreed to provide such affiliate with certain services, such as
phone systems, payroll service and office and administrative services, which are
reimbursed at a rate approximating the Company's incremental cost thereof. For
fiscal 1997, the affiliate paid the Company approximately $10.6 million pursuant
to such agreement.

The Lauder Foundation is a tax-exempt private foundation established by
members of the Lauder Family in 1962. The directors of The Lauder Foundation are
Estee Lauder, Leonard A. Lauder, Ronald S. Lauder, William P. Lauder and Aerin
Lauder Zinterhofer. During fiscal 1997, the Company contributed $250,000 to The
Lauder Foundation.

In fiscal 1997, Joseph Gubernick, Senior Vice President--Research and
Development, was in the second year of a three-year installment loan and owed
the Company $200,000. Interest accrues on the loan at a rate of 6.36% per annum,
which was the applicable federal rate at the time the loan was made.

In fiscal 1997, Andrew J. Cavanaugh, Senior Vice President--Corporate Human
Resources, borrowed $300,000 from the Company. The loan is due in September
1998. Interest accrues on the loan at a rate of $6.85% per annum, which was the
applicable federal rate at the time the loan was made.

Lynn Gubernick, a specialist in cosmetics product development and a former
management employee of the Company, was retained by the Company as a consultant

in connection with her areas of expertise. She is a spouse of the Company's
Senior Vice President--Research and Development and, during fiscal 1997, she was
paid approximately $108,000 by the Company for her services.

<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth a summary of all compensation awarded or
paid to or earned by the chief executive officer and the five other most highly
compensated executive officers of the Company in the last fiscal year for
services rendered in all capacities to the Company (including its subsidiaries)
for the fiscal years ended June 30, 1995, 1996 and 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
AWARDS
--------------------------- PAYOUTS
RESTRICTED SECURITIES ---------
ANNUAL COMPENSATION STOCK UNDERLYING LTIP
NAME AND PRINCIPAL -------------------------- AWARDS OPTIONS PAYOUTS ALL OTHER
POSITION ---------------- YEAR SALARY ($) BONUS ($) ($) (#) ($) COMPENSATION ($)
---- ---------- --------- ---------- ---------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
LEONARD A. LAUDER ....... 1997 1,680,000 2,773,500 -- 500,000 -- 885,087(a)
Chairman of the Board and 1996 1,600,000 1,700,700 -- 600,000 -- 993,835
Chief Executive Officer 1995 1,522,477 787,500 -- -- -- 1,080,488

FRED H. LANGHAMMER ...... 1997 1,575,000 1,575,000 1,500,000 (b) 200,000 -- 14,826(c)
President and Chief 1996 1,500,000 1,500,000 1,500,000 (b) 500,000 -- 15,418
Operating Officer 1995 900,000 3,550,000(e) -- -- -- 15,040

DANIEL J. BRESTLE ....... 1997 800,000 780,100 -- 50,000 -- 20,932(c)
President of Clinique 1996 750,000 727,500 -- 100,000 -- 21,537
Laboratories, Inc. 1995 600,000 380,000 -- -- -- 21,229

ROBIN R. BURNS .......... 1997 973,700(d) 450,000 -- 50,000 -- 4,000(c)
President of Estee Lauder 1996 923,700(d) 884,000 -- 100,000 -- 4,510
(U.S.A. and Canada) 1995 898,700(d) 819,958 -- -- 1,362,776(f) 3,881

SAUL H. MAGRAM .......... 1997 1,204,787 525,000 -- -- -- 11,116(c)
Senior Vice President, 1996 1,146,214(d) 500,000 -- 25,000 -- 2,195
General Counsel and 1995 1,091,250(d)(e) 472,500 -- -- -- 11,981
Secretary

JEANETTE S. WAGNER ...... 1997 904,400(d) 900,000 -- 62,500 -- 11,968(c)
President of Estee Lauder 1996 863,200(d) 850,000 -- 125,000 -- 13,025
International, Inc. 1995 1,043,200(d)(e) 850,000 -- -- -- 13,110
</TABLE>

- ------------------
(a) Amounts reported under 'All Other Compensation' in fiscal 1997 for Mr.
Lauder include the estimated dollar value of the benefit to him of
Company-paid premiums on split dollar life insurance in the amount of

$880,337. A trust established by Mr. Lauder pays the term-life portion of
the policy. The Company will recover all premiums paid by it at the time
death benefits are paid thereon, and may recover such amounts earlier under
certain circumstances. The maximum potential value is calculated as if the
fiscal year premiums were advanced to Mr. Lauder without interest until the
time the Company expects to recover the premium (i.e., upon his death). The
amount reported for Mr. Lauder in fiscal 1997 also includes $4,750 of
matching contributions made pursuant to the Company's qualified defined
contribution plan.

(b) Reflects the dollar value (without consideration of the restrictions) of
restricted stock units granted to Mr. Langhammer pursuant to his employment
agreement. The stock units are accompanied by dividend equivalent rights
which are payable in additional units. At the end of fiscal 1997, Mr.
Langhammer held 96,557 restricted stock units. Based on the closing price at
the end of fiscal 1997, the value of such units (without consideration of
the restrictions) was $4,852,000. The stock units are payable in shares of
Class A Common Stock within 90 days after Mr. Langhammer's termination of
employment. Pursuant to his employment agreement, he received an additional
grant of 30,043 restricted stock units on July 1, 1997.

(c) Amounts reported in fiscal 1997 include: (i) the estimated dollar value of
the benefit to the named executive officer of Company-paid premiums for
split dollar life insurance (calculated on the same basis as disclosed in
note (a)) as follows: Mr. Langhammer, $10,076; Mr. Brestle, $16,182;

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

Mr. Magram, $6,366; and Mrs. Wagner, $7,218; and (ii) matching contributions
made on behalf of the named executive officer pursuant to the Company's
qualified defined contribution plan as follows: Mr. Langhammer, $4,750; Mr.
Brestle, $4,750; Ms. Burns, $4,000; Mr. Magram, $4,750; and Mrs. Wagner,
$4,750.

(d) Includes cash received in lieu of executive perquisites.

(e) Includes amounts deferred by (i) Mr. Langhammer in fiscal 1995 equal to
$1,500,000, (ii) Mr. Magram equal to $191,587 in fiscal 1997, $184,000 in
fiscal 1996 and $174,000 in fiscal 1995, and (iii) Mrs. Wagner equal to
$350,000 in fiscal 1995.

(f) Includes amounts paid out to Ms. Burns pursuant to an individual plan
covering the period fiscal 1992 through fiscal 1995.

OPTION GRANTS IN FISCAL 1997

INDIVIDUAL GRANTS
--------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
GRANTED (#)(1) FISCAL YEAR ($/SH) DATE VALUES ($) (2)
-------------- ------------ -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Leonard A. Lauder............................. 500,000 28.3 42.75 7/1/06 7,241,000
Fred H. Langhammer............................ 200,000 11.3 42.75 7/1/06 2,896,000
Daniel J. Brestle............................. 50,000 2.8 42.75 7/1/06 724,000
Robin R. Burns................................ 50,000 2.8 42.75 7/1/06 724,000
Saul H. Magram................................ -- -- -- -- --
Jeanette S. Wagner............................ 62,500 3.5 42.75 7/1/06 905,000
</TABLE>

- ------------------
(1) The options granted in fiscal 1997 to the named executive officers have a
term of 10 years and were granted pursuant to the executive officers'
respective employment agreements.

(2) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the Grant Date
Present Value of the options set forth in this table. The Company's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option models require a prediction about the
future movement of the stock price. The following assumptions were made for
purposes of calculating Grant Date Present Values: expected average time of
exercise of seven years, volatility of 23%, dividend yield of 1% and average
risk free rate of return of 6.58%. The real value of the options in this
table depends upon the actual performance of the Company's stock during the
applicable period and upon when they are exercised.

AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND 1997 FISCAL YEAR-END OPTION
VALUES (1)

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUES OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END ($)(2)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Leonard A. Lauder....................................... 0 1,100,000 0 18,300,000
Fred H. Langhammer...................................... 0 700,000 0 13,625,000
Daniel J. Brestle....................................... 0 150,000 0 2,800,000
Robin R. Burns.......................................... 0 150,000 0 2,800,000
Saul H. Magram.......................................... 0 25,000 0 606,250
Jeanette S. Wagner...................................... 0 187,500 0 3,500,000
</TABLE>

- ------------------
(1) No options were exercised by any of the named executive officers in fiscal
1997.
(2) The closing price on June 30, 1997, the last trading day in fiscal 1997, was
$50.25.

<PAGE>

Pension Plans. The Company provides retirement benefits to its employees
in the United States through a defined benefit plan, which is intended to be
qualified under Section 401 of the Code, and a related non-qualified restoration
plan. In general, for employees who were at least 50 years old and had five
years of Company qualifying employment on January 1, 1993 or who had ten years
of Company qualifying employment as of that date (which include all the named
executive officers except Ms. Burns), retirement benefits pursuant to the plans
are calculated as a multiple of years of qualifying Company employment, times
final qualifying average compensation, times a percentage (currently 1.5%),
offset by certain amounts calculated with reference to Social Security
entitlements. For other employees, retirement benefits under the plans are the
aggregate amount of annual credits (calculated with reference to total annual
compensation, with certain items excluded) plus interest credits thereon. The
benefits payable to Leonard A. Lauder, Fred H. Langhammer, Saul H. Magram and
Jeanette S. Wagner are calculated with reference to supplemental undertakings.

Leonard A. Lauder currently has 39 years of qualifying Company employment.
Assuming Mr. Lauder retires at the end of his current contract term (i.e., at
age 67) with 42 years of qualifying Company employment, his projected annual
retirement benefits would be approximately $798,000. Pursuant to his employment
agreement, Mr. Lauder (or his wife, estate or designee) also will be paid
approximately $1.8 million per year, assuming he retires at the end of his
contract term. Payments under such arrangement will commence upon the earliest
to occur of his retirement, his death or his 70th birthday and will continue for
ten years thereafter.

Mr. Langhammer currently has 22 years of qualifying Company employment.
Assuming that he retires at normal retirement age with 34 years of qualifying
Company employment, his projected annual retirement benefit would be
approximately $1.4 million payable during his lifetime.

Mr. Brestle currently has 19 years of qualifying Company employment.
Assuming that he retires at normal retirement age with 32 years of qualifying
Company employment, his projected annual retirement benefit would be
approximately $401,000 payable during his lifetime.

Ms. Burns currently has 7 years of qualifying Company employment. Assuming
that she retires at normal retirement age with 27 years of qualifying Company
employment, her projected retirement benefit would be a single sum amount of
approximately $3,767,000.

Mr. Magram currently has 28 years of qualifying Company employment.
Assuming that he retires at the end of his current contract term at age 67 with
28 years of qualifying Company employment, his projected initial annual

retirement benefit would be approximately $794,000 payable during his lifetime.

Mrs. Wagner currently has 22 years of qualifying Company employment.
Assuming that she retires at the end of her contractual period at age 68 she
will have 23 years of qualifying Company employment and her projected annual
retirement income would be approximately $532,000 payable during her lifetime.

Employment Agreements. Set forth below are descriptions of the Company's
employment agreements with Leonard A. Lauder, Fred H. Langhammer, Robin R.
Burns, Daniel J. Brestle, Saul H. Magram, and Jeanette S. Wagner.

Leonard A. Lauder. Mr. Lauder's employment agreement provides for his
employment as Chief Executive Officer and Chairman of the Board of the Company
through June 30, 2000, unless earlier terminated. The agreement provides for a
base salary of $1.76 million for fiscal 1998, which will be increased by $80,000
each successive fiscal year during the term of the agreement. Mr. Lauder is
entitled to participate in standard benefit plans, such as the Company's pension
and medical plans, and has a supplemental pension arrangement discussed above.
Mr. Lauder's annual bonus under the Annual Incentive Plan is determined
according to a formula, which provides Mr. Lauder a bonus equal to a percentage
of the amount by which the Company's net earnings exceed 3.5% of net sales (or
4.0% of net sales in fiscal 1999 and 2000). The agreement also provides for
periodic grants of stock options. At the time of initial public offering, Mr.
Lauder was granted options in respect of 600,000 shares of Class A Common Stock,
each with an exercise price equal to $26.00 per share (i.e., the initial public
offering price per share). In addition, he has received grants of stock options
in respect of

<PAGE>

500,000 shares of Class A Common Stock on July 1, 1996 and July 1, 1997 (with
exercise prices of $42.75 per share and $49.50 per share, respectively). He will
receive additional grants of stock options in respect of 500,000 shares of Class
A Common Stock on July 1, 1998 and July 1, 1999. Mr. Lauder may elect to defer
certain of his cash compensation. The Company may terminate Mr. Lauder's
employment at any time if he becomes 'permanently disabled', in which event Mr.
Lauder will be entitled to (i) receive his base salary for a period of two years
after termination, (ii) receive bonus compensation at an annual rate equal to
the average of the actual bonuses paid to him during the term of the agreement
prior to such termination (the 'Leonard Lauder Bonus Compensation') and (iii)
participate in the Company's benefit plans for two years. In the event of Mr.
Lauder's death during the term of his employment, for a period of one-year from
the date of Mr. Lauder's death, his beneficiary or legal representative will be
entitled to receive his base salary and the Leonard Lauder Bonus Compensation.
Mr. Lauder may terminate his employment at any time upon six months' written
notice to the Company, in which event Mr. Lauder will be entitled to receive his
base salary and the Leonard Lauder Bonus Compensation for the six-month period
following termination. In addition, the Company may terminate Mr. Lauder's
employment for any reason upon 60 days written notice. In the event of
termination by the Company (other than for 'cause'), (a) Mr. Lauder, for a
period of three years from the date of termination, will be entitled to (i)
receive his base salary in effect at the time of termination, (ii) receive the

Leonard Lauder Bonus Compensation and (iii) participate in the Company's benefit
plans and (b) Mr. Lauder will not be subject to a non-competition covenant set
forth in the employment agreement.

Fred H. Langhammer. Mr. Langhammer's employment agreement provides for his
employment as President and Chief Operating Officer of the Company through June
30, 2000, unless earlier terminated. The agreement provides for a base salary of
$1.65 million for fiscal 1998, which will be increased by $75,000 each
successive fiscal year during the term of the agreement. Mr. Langhammer is
entitled to participate in standard benefit plans, such as the Company's pension
and medical plans. Mr. Langhammer is entitled to additional pension payments
under a supplemental undertaking by the Company. See 'Pension Plans' above. Mr.
Langhammer's annual bonus under the Annual Incentive Plan will be limited to
100% of his base salary in any fiscal year. Mr. Langhammer may elect to defer
certain of his cash compensation. At the time of the initial public offering,
Mr. Langhammer converted a portion of his deferred compensation balance to stock
units payable in cash. These units are accompanied by dividend equivalents
payable in additional stock units. All such units will be paid to Mr. Langhammer
in cash at a time to be determined by the Company, but no later than ninety days
after termination of his employment. Mr. Langhammer received an initial grant of
stock options in respect of 500,000 shares of Class A Common Stock, each with an
exercise price equal $26.00 per share. In addition, he received grants of stock
options in respect of 200,000 shares of Class A Common Stock on July 1, 1996 and
July 1, 1997 (with an exercise price of $42.75 per share and $49.50 per share,
respectively). He will receive additional grants of stock options in respect of
200,000 shares of Class A Common Stock on July 1, 1998 and July 1, 1999. In
November 1995, Mr. Langhammer also received 57,692 stock units, which amount is
equal to $1.5 million divided by the initial public offering price per share. In
addition, on July 1, 1996 and July 1, 1997, Mr. Langhammer received additional
stock units in respect of 37,920 shares and 30,043 shares, respectively. On July
1, 1998 and July 1, 1999, Mr. Langhammer will receive additional stock units in
respect of that number of shares, not to exceed 100,000, equal to $1.5 million
divided by the average closing price of the Class A Common Stock for the twenty
trading days prior to the award date. An amount equal to the excess, if any, of
$1.5 million over the value of 100,000 shares of Class A Common Stock will be
mandatorily deferred and paid to Mr. Langhammer on a date chosen by the Company,
but no later than ninety days after the termination of his employment. The stock
units awarded to Mr. Langhammer are accompanied by dividend equivalents which
are payable in additional stock units. Stock units awarded in any fiscal year
may be forfeited under certain circumstances if Mr. Langhammer is terminated
during such year. These stock units will be paid out in shares of Class A Common
Stock at a time to be determined by the Company, but in no event later than
ninety days after the termination of Mr. Langhammer's employment. The Company
may terminate Mr. Langhammer's employment at any time if he becomes 'permanently
disabled', in which event Mr. Langhammer, for a period of one year

<PAGE>

from the date of termination, will be entitled to (i) receive his base salary in
effect at the time of termination (the 'Langhammer Base Salary'), (ii) receive
bonus compensation equal to the average of the actual bonuses paid to him during
the term of the agreement prior to such termination (the 'Langhammer Bonus

Compensation') and (iii) participate in the Company's benefit plans. In the
event of Mr. Langhammer's death during the term of his employment, his
beneficiary or legal representative will be entitled to receive for a period of
one year from the date of death the Langhammer Base Salary and the Langhammer
Bonus Compensation. Mr. Langhammer may terminate his employment agreement at any
time upon six months written notice to the Company, in which event Mr.
Langhammer will be entitled to receive the Langhammer Base Salary and the
Langhammer Bonus Compensation for a period of six months from the date of
termination. In addition, the Company may terminate the employment agreement for
any reason upon 60 days' written notice. In the event of the Company's
termination of the agreement (other than for 'cause') or if Mr. Langhammer
terminates the agreement as a result of the Company's material breach thereof,
which would include a material reduction in Mr. Langhammer's duties or
responsibilities, (a) Mr. Langhammer, for a period of two years from the date of
termination, will be entitled to (i) receive the Langhammer Base Salary, (ii)
receive the Langhammer Bonus Compensation and (iii) participate in the Company's
benefit plans and (b) Mr. Langhammer will not be subject to a covenant not to
compete provided for in such agreement. In the event the Company does not offer
to extend the term of Mr. Langhammer's employment, Mr. Langhammer will be
entitled for a period of one year from expiration of his employment agreement to
(i) receive the Langhammer Base Salary, (ii) receive the Langhammer Bonus
Compensation and (iii) participate in the Company's benefit plans.

Daniel J. Brestle. Mr. Brestle's employment agreement provides for his
employment as President of Clinique Laboratories, Inc. through June 30, 1998,
unless earlier terminated. The agreement provides for a base salary of $850,000
for fiscal 1998. Mr. Brestle is entitled to participate in standard benefit
plans, such as the Company's pension and medical plans. Mr. Brestle's annual
bonus under the Annual Incentive Plan will be limited to 100% of his base
salary. However, Mr. Brestle's base salary and bonus compensation will in no
event be less than $1.2 million for fiscal 1998. Mr. Brestle may elect to defer
certain of his cash compensation. Mr. Brestle received an initial grant of stock
options in respect of 100,000 shares of Class A Common Stock, each with an
exercise price equal to $26.00 per share. In addition, he received grants of
stock options in respect of 50,000 shares of Class A Common Stock on July 1,
1996 and July 1, 1997 (with an exercise price of $42.75 per share and $49.50 per
share, respectively). The Company may terminate Mr. Brestle's employment at any
time if he becomes 'permanently disabled', in which event Mr. Brestle will be
entitled to (i) receive for a period of one year from the date of termination
his base salary in effect at the time of termination, (ii) receive bonus
compensation prorated to the date of termination and (iii) participate in the
Company's benefit plans for such one year period. In the event of Mr. Brestle's
death during the term of his employment, his beneficiary or legal representative
will be entitled to (i) receive his base salary in effect at the time of death
to the last day of the month in which his death occurs and (ii) receive bonus
compensation prorated to the date of death. Mr. Brestle may terminate his
employment agreement at any time upon six months written notice to the Company,
in which event Mr. Brestle, for a period of six months from the date of
termination, will be entitled to receive, (i) his base salary in effect at the
time of termination and (ii) bonus compensation equal to 25% of the average of
incentive compensation bonuses previously paid or payable to him during the
contract term or, if no such bonuses have been paid or are payable as of the
date of termination, 25% of the base salary paid during such six month period.
In addition, the Company may terminate his employment agreement for any reason

upon 60 days written notice. In the event of the Company's termination of the
agreement (other than for 'cause'), Mr. Brestle, for a period of one year from
the date of termination, will be entitled to (i) receive his base salary in
effect at the time of termination, (ii) receive bonus compensation equal to 50%
of the average of incentive compensation bonuses previously paid or payable to
him during the contract term or, if no such bonuses have been paid or are
payable as of the date of termination, 50% of the base salary paid during such
one year period and (iii) participate in the Company's benefit plans. If Mr.
Brestle terminates the agreement as a result of the Company's material breach
thereof, which would include a material reduction in his duties or
responsibilities, he will receive the same benefits as if he had

<PAGE>

terminated his employment agreement and will not be subject to a covenant not to
compete provided for in such agreement.

Robin R. Burns. Ms. Burns' employment agreement provides for her
employment as President and Chief Executive Officer of Estee Lauder USA and
Canada through June 30, 1998, unless earlier terminated. The agreement provides
for a base salary of $950,000 for fiscal 1998. Ms. Burns is entitled to
participate in standard benefit plans, such as the Company's pension and medical
plans and receives cash in lieu of executive perquisites of $73,700 annually.
Ms. Burns' annual bonus under the Annual Incentive Plan will be limited to 100%
of her base salary in any fiscal year. However, Ms. Burns' base salary and bonus
compensation will in no event be less than $1.4 million for fiscal 1998 (the
'Burns Annual Compensation'). Ms. Burns may elect to defer certain of her cash
compensation. Ms. Burns received an initial grant of stock options in respect of
100,000 shares of Class A Common Stock, each with an exercise price equal to
$26.00 per share. In addition, she received grants of stock options in respect
of 50,000 shares of Class A Common Stock on July 1, 1996 and July 1, 1997 (with
an exercise price of $42.75 per share and $49.50 per share, respectively). The
Company may terminate Ms. Burns' employment at any time if she becomes
'permanently disabled', in which event Ms. Burns, for a period of one year from
the date of termination, will be entitled (i) to receive the Burns Annual
Compensation and (ii) to participate in the Company's benefit plans. In the
event of Ms. Burns' death during the term of employment, her beneficiary or
legal representative will be entitled to receive the Burns Annual Compensation
to the last day of the month in which her death occurs. Ms. Burns may terminate
her employment agreement at any time upon six months' written notice to the
Company, in which event Ms. Burns, for a period of six months from the date of
termination, will be entitled to receive (i) her base salary at the rate in
effect at the time of such termination and (ii) bonus compensation equal to 25%
of the base salary paid for such six month period. In addition, the Company may
terminate the employment agreement for any reason upon 60 days written notice.
In the event of the Company's termination of the agreement (other than for
'cause') or if Ms. Burns terminates the agreement as a result of the Company's
material breach thereof, which would include a material reduction in Ms. Burns'
duties or responsibilities or the appointment of any person other than Leonard
Lauder or Fred Langhammer as the Chief Executive Officer of the Company, (a) Ms.
Burns, for a period of one year from the date of termination, will be entitled
to (i) receive her base salary in effect at the time of termination, (ii)

receive bonus compensation equal to 50% of the base salary paid during such one
year period, (iii) receive bonus compensation in respect of the contract year in
which such termination occurs equal to her base salary paid for such contract
year and (iv) participate in the Company's benefit plans and (b) Ms. Burns will
not be subject to a covenant not to compete provided for in such agreement.

Saul H. Magram. Mr. Magram's employment agreement provides for his
employment as Senior Vice President, General Counsel and Secretary of the
Company through December 31, 1998, unless earlier terminated. The agreement
provides for a base salary of $1.025 million and mandatory deferred salary of
$191,587 for the 1997 calendar year, and an annual bonus of $550,000 (which
represents the target bonus opportunity) for the 1998 fiscal year. Mr. Magram's
base salary and mandatory deferred salary is increased by approximately 5% each
successive calendar year during the term of the agreement. Mr. Magram's target
bonus opportunity during the term of his employment agreement increases by
approximately 5% each successive fiscal year. Mr. Magram's mandatory deferred
salary is credited with interest at an annual rate not to exceed 9% and is
payable on an annuity basis from the first January 1 after termination of Mr.
Magram's employment through the remainder of his life. Mr. Magram is entitled to
participate in standard benefit plans, such as the Company's pension and medical
plans. Mr. Magram is also entitled to receive a supplemental pension benefit.
See 'Pension Plans' above. Mr. Magram may elect to defer certain of his annual
bonus. The Company may terminate Mr. Magram's employment at any time if he
becomes 'disabled' or engages in conduct that constitutes 'cause'. Mr. Magram
may terminate the employment agreement upon six months' written notice to the
Company. If the Company terminates the employment agreement without 'cause'
then, for the remaining term of the employment agreement, Mr. Magram will be
entitled to (i) his base salary, (ii) his mandatory deferred compensation and
(iii) bonus compensation at an annual rate equal to the average of actual bonus
paid to him in the three fiscal years immediately prior to such termination. In

<PAGE>

addition, upon such termination, Mr. Magram shall be entitled to receive for a
period of approximately two years from the date of such termination his base
salary (including the mandatory deferred amount) provided that he complies with
certain confidentiality and non-competition covenants during such period.

Jeanette S. Wagner. Mrs. Wagner's employment agreement provides for her
employment as President of Estee Lauder International, Inc. through June 30,
1998, unless earlier terminated. The agreement provides for a base salary of
$950,000 for fiscal 1998. Mrs. Wagner is entitled to participate in standard
benefit plans, such as the Company's pension and medical plans. Mrs. Wagner's
annual bonus under the Annual Incentive Plan will be limited to 100% of her base
salary in any fiscal year. However, Mrs. Wagner's base salary and bonus
compensation will in no event be less $1.4 million for fiscal 1998. Mrs. Wagner
may elect to defer certain of her cash compensation. Mrs. Wagner received an
initial grant of stock options in respect of 125,000 shares of Class A Common
Stock, each with an exercise price equal to $26.00 per share. In addition, she
received grants of stock options in respect of 62,500 shares of Class A Common
Stock on July 1, 1996 and July 1, 1997 and an additional grant of stock
options in respect of 50,000 shares on August 21, 1997 (with an exercise price
of $42.75 per share, $49.50 per share and $48.00 per share, respectively). The

Company may terminate Mrs. Wagner's employment at any time if she becomes
'permanently disabled', in which event Mrs. Wagner will be entitled to
(i) receive for a period of one year from the date of termination her
base salary in effect at the time of termination (ii) receive bonus
compensation prorated to the date of termination and (iii) participate
in the Company's benefit plans for such one year period. In the event of
Mrs. Wagner's death during the term of her employment, her beneficiary
or legal representative will be entitled to (i) receive her base salary
in effect at the time of death to the last day of the month in which her
death occurs and (ii) receive bonus compensation prorated to the date of
death. Mrs. Wagner may terminate the employment agreement at any time
upon six months written notice to the Company, in which event Mrs.
Wagner, for a period of six months from the date of termination, will be
entitled to receive (i) her base salary in effect at the time of
termination and (ii) bonus compensation equal to 25% of the average of
incentive compensation bonuses previously paid or payable to her during
the contract term or, if no such bonuses have been paid or are payable
as of the date of termination, 25% of the base salary paid during such
six month period. In addition, the Company may terminate her employment
agreement for any reason upon 60 days' written notice. In the event of
the Company's termination of the agreement (other than for 'cause'),
Mrs. Wagner, for a period of one year from the date of termination, will
be entitled to (i) receive her base salary in effect at the time of
termination, (ii) receive bonus compensation equal to 50% of the average
of incentive compensation bonuses previously paid or payable to her
during the contract term or, if no such bonuses have been paid or are
payable as of the date of termination, 50% of the base salary paid
during such one year period and (iii) participate in the Company's
benefit plans. If Mrs. Wagner terminates the agreement as a result of
the Company's material breach thereof, which would include a material
reduction in her duties or responsibilities, she will receive the same
benefits as if she had terminated her employment agreement and will not
be subject to a covenant not to compete provided for in such agreement.

Each employment agreement described above also provides that the Company
may require the executive to defer certain amounts to be received by him or her
to the extent such amounts may not be deductible by reason of Section 162(m) of
the Code. Each agreement provides that the Company may reduce severance payments
to be received by the executive to an amount that would avoid imposition of the
excise tax imposed by Section 4999 of the Code on certain types of severance
payments. Each agreement also contains certain confidentiality and
non-competition provisions.

COMPENSATION COMMITTEE REPORT

The Company's executive compensation program is designed to attract and
retain high quality senior executives, and to motivate them to achieve both
short-term and long-term Company, divisional and individual goals. The program
currently in place is essentially a continuation of the program existing prior
to Company's initial public offering, but for the introduction of stock-based
elements. It was formalized in fiscal 1996 by the Board of Directors (as it was
then constituted) after review by two compensation consultants, and consists
primarily of employment agreements (which include option

<PAGE>

and restricted unit grants to certain executives), the Share Incentive Plan
(which provides for stock-based compensation) and the Annual Incentive Plan (for
cash bonuses).

The Compensation Committee, consisting solely of outside Directors, was
appointed in early 1996, coincident with the first appointment of outside
directors. The Committee oversees and approves compensation arrangements for the
executive officers of the Company (including awards made under the Annual
Incentive Plan) and administers the Company's Share Incentive Plan.

Salary and Bonuses

The Compensation Committee has endorsed the central elements of the
compensation program established by the Company prior to the initial public
offering by applying these principles in its oversight and approval of ongoing
and new executive officer arrangements. Specifically, the Committee believes
that Company tenure and the level of responsibility undertaken by individual
executives should be appropriately reflected in the establishment of base salary
amounts. Additionally, the Committee believes that the performance-based bonus
structure provided under the Company's Annual Incentive Plan is of key
importance. Accordingly, for executive officers in charge of sales divisions, a
material portion of total bonus eligibility is tied to year-to-year improvement
in financial and operational indicators measured at the divisional level. For
executive officers in charge of corporate departments, bonuses are based in
large part on improvements in the Company's net earnings. The Committee believes
that both measurement standards serve to align the interests of executives with
those of stockholders.

Stock Based Compensation

In fiscal 1997, the Compensation Committee granted stock options under the
Share Incentive Plan to certain executive officers. In each case, the size of
the award reflected the recipient's position and anticipated level of future
contribution. The Company also granted stock options to certain of the named
executives and restricted units to Mr. Langhammer during the last fiscal year.
These grants were made pursuant to the such officers' respective employment
agreements entered into prior to the initial public offering.

Compensation of the Chief Executive Officer

Mr. Lauder's base salary reflects his long service with the Company and his
stature in the industry. His bonus is determined by the application of an
objective formula based on the amount that net earnings of the Company exceed
certain hurdles (as described in more detail in the summary of his employment
agreement included in this Proxy Statement). His option grant, also set forth in
his employment agreement, reflects the same principles as those described for
grants to all officers.

The Company is aware of the limitations on deductibility for income tax
purposes of certain compensation paid to its highest paid executive officers.
The Company's compensation program as it applies to such persons was designed to
take advantage of regulations applicable to newly public companies. Furthermore,
each employment agreement with the named executive officers provides that

amounts payable pursuant thereto may be deferred to the extent such amounts
would not be deductible. The Compensation Committee will consider the deduction
limitation as one of the factors in determining compensation.

Members of the Compensation Committee

P. Roy Vagelos, M.D. (Chairman)
Marshall Rose
20
<PAGE>

PERFORMANCE GRAPH

The following graph compares the cumulative total stockholder return (stock
price appreciation plus dividends) on the Company's Class A Common Stock with
the cumulative total return of the S&P 500 Index and a market weighted index of
publicly traded peers. The returns are calculated by assuming an investment in
the Class A Common Stock and each index of $100 on November 16, 1995 (the date
the Class A Common Stock was priced in connection with the Company's initial
public offering). The publicly traded companies included in the peer group are:
Avon Products, Inc., Clarins, L'Oreal S.A., LVMH Moet Hennessy Louis Vuitton,
The Procter & Gamble Company, Elf Sanofi S.A., Shiseido Company, Ltd. and
Unilever N.V. Shares of Clarins, L'Oreal S.A. and Elf Sanofi S.A. are not traded
in U.S. dollars. For purposes hereof, the stock prices of such companies were
converted into dollars on the measurement dates.

[PERFORMANCE GRAPH]

Measurement PeriodS&P 500Peer Group
(Fiscal Year Covered) CompanyIndexIndex

11/16/95100100100
6/30/96163.21113.73114.33
6/30/97195.48153.19167.92

<TABLE>
<CAPTION>
VALUE ON
JUNE 30, 1997
-------------
<S> <C>
The Estee Lauder Companies Inc....................................... $195.48
S&P 500 Index........................................................ $153.19
Peer Group Index..................................................... $167.92
</TABLE>

<PAGE>

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

(ITEM 2)

The Board of Directors of the Company, upon recommendation of the Audit
Committee, has appointed the firm of Arthur Andersen LLP to serve as independent
auditors of the Company for the fiscal year ending June 30, 1998, subject to
ratification of this appointment by the stockholders of the Company. Arthur
Andersen LLP has served as independent auditors of the Company for many years
and is considered by management of the Company to be well qualified. The Company
has been advised by that firm that neither it nor any member thereof have any
financial interest, direct or indirect, in the Company.

One or more representatives of Arthur Andersen LLP will be present at the
1997 Annual Meeting of Stockholders, will have an opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.

Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the votes cast by the holders of the shares of
Class A Common Stock and Class B Common Stock of the Company voting in person or
by proxy at the 1997 Annual Meeting of Stockholders. If the stockholders do not
ratify the appointment of Arthur Andersen LLP, the Board of Directors will
reconsider the appointment.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1998. PROXIES RECEIVED BY THE BOARD
OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXIES A
CONTRARY CHOICE.

PROXY PROCEDURE AND EXPENSES OF SOLICITATION

The Company will hold the votes of all stockholders in confidence from the
Company, its Directors, officers and employees except: (i) as necessary to meet
applicable legal requirements and to assert or defend claims for or against the
Company; (ii) in case of a contested proxy solicitation; (iii) in the event that
a stockholder makes a written comment on the proxy card or otherwise
communicates his/her vote to management; or (iv) to allow the independent
inspectors of election to certify the results of the vote. The Company will also
retain an independent tabulator to receive and tabulate the proxies and
independent inspectors of election to certify the results.

All expenses incurred in connection with the solicitation of proxies will
be borne by the Company. The Company will reimburse brokers, fiduciaries and
custodians for their costs in forwarding proxy materials to beneficial owners of
Common Stock held in their names.

Solicitation may be undertaken by mail, telephone and personal contact by
Directors, officers and employees of the Company without additional

compensation.

STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company on or before June 1,
1998, to be eligible for inclusion in the Company's Proxy Statement and proxy
relating to that meeting.

According to the Amended and Restated Bylaws of the Company, a proposal for
action to be presented by any stockholder at an annual or special meeting of
stockholders shall be out of order unless specifically described in the
Company's notice to all stockholders of the meeting and the matters to be acted
upon thereat or unless the proposal shall have been submitted in writing (in the
form specified in the Bylaws) to the Chairman of the Board of Directors and
received at the principal

<PAGE>

executive offices of the Company at least 60 days (and no more than 90 days)
prior to the first anniversary of the date of the last annual meeting of
stockholders, and such proposal is, under law, an appropriate subject for action
by stockholders. In addition to the notice requirement, the stockholder is
required to appear in person, or through a qualified representative, at the
meeting to present his or her proposal.

OTHER INFORMATION

Management of the Company does not know of any matters other than those
referred to in the accompanying Notice of Annual Meeting of Stockholders which
may properly come before the meeting or other matters incident to the conduct of
the meeting. As to any other matter or proposal that may properly come before
the meeting, including voting for the election of any person as a Director in
place of a nominee named herein who becomes unable to serve or for good cause
will not serve and voting on a proposal omitted from this Proxy Statement
pursuant to the rules of the Securities and Exchange Commission, it is intended
that proxies received will be voted in accordance with the discretion of the
proxy holders.

The form of proxy and the Proxy Statement have been approved by the Board
of Directors and are being mailed and delivered to stockholders by its
authority.

Saul H. Magram
Secretary

New York, New York
September 30, 1997

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

THE ANNUAL REPORT TO STOCKHOLDERS OF THE COMPANY FOR THE FISCAL YEAR ENDED

JUNE 30, 1997, WHICH INCLUDES FINANCIAL STATEMENTS, HAS BEEN MAILED TO
STOCKHOLDERS OF THE COMPANY. THE ANNUAL REPORT DOES NOT FORM ANY PART OF THE
MATERIAL FOR THE SOLICITATIONS OF PROXIES.

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

<PAGE>

ESTEE
LAUDER
COMPANIES

[Recycling LOGO]

<PAGE>

THE ESTEE LAUDER COMPANIES INC.

CLASS A COMMON STOCK

PROXY

ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
-------------------------------------------------

The undersigned, revoking all previous proxies, hereby constitutes and
appoints Fred H. Langhammer, Robert J. Bigler and Saul H. Magram, and each of
them, proxies with full power of substitution to vote for the undersigned all
shares of Class A Common Stock of The Estee Lauder Companies Inc. which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of the Stockholders to be held on November 12, 1997, at The Essex House,
Grand Salon, 160 Central Park South, New York, New York at 10:00 a.m. (local
time), and at any adjournment thereof, upon the matters described in the
accompanying Proxy Statement and upon any other business that may properly come
before the meeting or any adjournment thereof. Said proxies are directed to vote
or refrain from voting as checked on the reverse side upon the matters listed on
the reverse side, and otherwise in their discretion.

THIS PROXY IS CONTINUED ON THE REVERSE SIDE.

PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.

- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^

<PAGE>
________________________________________________________________________________
Plese mark
your votes as
indicated in /x/
this example

Item 1 -- Election of two (2) Class 1 Directors: Fred H. Langhammer and Faye
Wattleton.

FOR ALL WITHHOLD
NOMINEES AUTHORITY Withheld for the following only:
with exceptions FOR ALL (Write the name(s) of the Nominee(s) in the
noted NOMINEES space below)

/ / / / _______________________________________________

Item 2 -- Ratification of appointment of Arthur Andersen LLP as independent
auditors for the 1998 fiscal year.

FOR AGAINST ABSTAIN

/ / / / / /

THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR MANAGEMENT'S NOMINEES FOR
DIRECTOR ABOVE IN ACCORDANCE WITH RECOMMENDATIONS OF THE COMPANY'S BOARD OF
DIRECTORS

Please mark, date and sign exactly as your name appears hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If shares are
held jointly, each stockholder named should sign.

Dated:____________________________________________________________________, 1997

________________________________________________________________________________
SIGNATURE(S) OF STOCKHOLDER(S)

________________________________________________________________________________
SIGNATURE(S) OF JOINT STOCKHOLDER(S)

________________________________________________________________________________
TITLE

I plan to attend the
Annual Meeting / /

- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^

NOTICE: IF YOU PLAN ON ATTENDING THE 1997 ANNUAL MEETING,
PLEASE CHECK THE BOX ON THE PROXY CARD ABOVE.

AN ADMISSION TICKET WILL BE MAILED TO YOU.

NO ADMISSION WILL BE GRANTED WITHOUT AN ADMISSION TICKET.

[LOGO OF ESTEE LAUDER COMPANIES]

The Estee Lauder Companies Inc.
Annual Meeting Of Stockholders
November 12, 1997, 10:00 a.m. (local time)
The Essex House
Grand Salon
160 Central Park South
New York, New York

<PAGE>

THE ESTEE LAUDER COMPANIES INC.

CLASS B COMMON STOCK

PROXY

ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
-------------------------------------------------

The undersigned, revoking all previous proxies, hereby constitutes and
appoints Fred H. Langhammer, Robert J. Bigler and Saul H. Magram, and each of
them, proxies with full power of substitution to vote for the undersigned all
shares of Class B Common Stock of The Estee Lauder Companies Inc. which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of the Stockholders to be held on November 12, 1997, at The Essex House,
Grand Salon, 160 Central Park South, New York, New York at 10:00 a.m. (local
time), and at any adjournment thereof, upon the matters described in the
accompanying Proxy Statement and upon any other business that may properly come
before the meeting or any adjournment thereof. Said proxies are directed to vote
or refrain from voting as checked on the reverse side upon the matters listed on
the reverse side, and otherwise in their discretion.

THIS PROXY IS CONTINUED ON THE REVERSE SIDE.

PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.

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^ FOLD AND DETACH HERE ^

<PAGE>
________________________________________________________________________________
Plese mark
your votes as
indicated in /x/
this example

Item 1 -- Election of two (2) Class 1 Directors: Fred H. Langhammer and Faye
Wattleton.

FOR ALL WITHHOLD
NOMINEES AUTHORITY Withheld for the following only:
with exceptions FOR ALL (Write the name(s) of the Nominee(s) in the
noted NOMINEES space below)

/ / / / _______________________________________________

Item 2 -- Ratification of appointment of Arthur Andersen LLP as independent
auditors for the 1998 fiscal year.

FOR AGAINST ABSTAIN

/ / / / / /

Dated:____________________________________________________________________, 1997

________________________________________________________________________________
SIGNATURE(S) OF STOCKHOLDER(S)

________________________________________________________________________________
SIGNATURE(S) OF JOINT STOCKHOLDER(S)

________________________________________________________________________________
TITLE

I plan to attend the
Annual Meeting / /

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^ FOLD AND DETACH HERE ^

NOTICE: IF YOU PLAN ON ATTENDING THE 1997 ANNUAL MEETING,
PLEASE CHECK THE BOX ON THE PROXY CARD ABOVE.

AN ADMISSION TICKET WILL BE MAILED TO YOU.

NO ADMISSION WILL BE GRANTED WITHOUT AN ADMISSION TICKET.

[LOGO OF ESTEE LAUDER COMPANIES]

The Estee Lauder Companies Inc.
Annual Meeting Of Stockholders
November 12, 1997, 10:00 a.m. (local time)
The Essex House
Grand Salon
160 Central Park South
New York, New York