ROCKWELL INTERNATIONAL CORP, DEF 14A, 1998-12-29

ROCKWELL INTERNATIONAL CORP
DEF 14A, 1998-12-29
ELECTRONIC COMPONENTS & ACCESSORIES

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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 Commission Only
[ X ] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

Rockwell International Corporation
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Rockwell International Corporation
- --------------------------------------------------------------------------------
(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)(4) and 0-11.

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

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-1 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:
---------------

(5) Total fee paid:
------------------------------------------------

[ ] Fee paid previously with preliminary materials.

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

(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration No.:
--------------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------

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[LOGO]

December 29, 1998

Dear Shareowner:

You are cordially invited to attend the annual meeting of shareowners of the
Corporation.

The meeting will be held in The Plaza Ballroom at The Westin South Coast Plaza,
686 Anton Boulevard, Costa Mesa, California, on Wednesday, February 3, 1999, at
10 a.m. At the meeting there will be a current report on the activities of the
Corporation followed by discussion and action on the matters described in the
Proxy Statement. Shareowners will have an opportunity to comment on or to
inquire about the affairs of the Corporation that may be of interest to
shareowners generally.

If you plan to attend the meeting, please request an admittance card in one of
the ways described in the box on the last page of the proxy statement.

It is sincerely hoped that as many shareowners as can conveniently attend will
do so.

Sincerely yours,

/s/ DON H. DAVIS, JR.

Don H. Davis, Jr.
Chairman of the Board and Chief Executive Officer
<PAGE> 3

ROCKWELL INTERNATIONAL CORPORATION
------------------------------------------------------------
600 Anton Boulevard, Suite 700, Costa Mesa, California 92626

Notice of 1999 Annual Meeting of Shareowners

TO THE SHAREOWNERS OF
ROCKWELL INTERNATIONAL CORPORATION:

NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareowners of
Rockwell International Corporation will be held in The Plaza Ballroom at The
Westin South Coast Plaza, 686 Anton Boulevard, Costa Mesa, California, on
Wednesday, February 3, 1999, at 10 a.m. (Pacific Standard Time) for the
following purposes:

(a) to elect four members of the Board of Directors of the Corporation with
terms expiring at the Annual Meeting in 2002 and one member of the
Board of Directors of the Corporation with a term expiring at the
Annual Meeting in 2000;

(b) to consider and vote upon a proposal to approve the selection by the
Board of Directors of the firm of Deloitte & Touche LLP as auditors of
the Corporation; and

Only shareowners of record at the close of business on December 11, 1998,
will be entitled to notice of, and to vote at, the meeting.

By order of the Board of Directors.

/s/ WILLIAM J. CALISE, JR.

William J. Calise, Jr.
Secretary

December 29, 1998

NOTE: THE BOARD OF DIRECTORS SOLICITS VOTES BY THE EXECUTION AND PROMPT RETURN
OF THE ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE OR BY USE OF
THE CORPORATION'S TELEPHONE OR INTERNET VOTING PROCEDURES.

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Proxy Statement

The 1999 Annual Meeting of Shareowners of Rockwell International
Corporation will be held on February 3, 1999, for the purposes set forth in the
accompanying Notice of 1999 Annual Meeting of Shareowners. This statement and
the accompanying proxy, which are first being sent to shareowners on or about
December 29, 1998, are furnished in connection with the solicitation by the
Board of Directors of proxies to be used at such meeting and at any adjournment
thereof. If a shareowner duly executes and returns a proxy in the accompanying
form or uses the Corporation's telephone or internet voting procedures to
authorize the named proxies to vote the shareowner's shares, those shares will
be voted as specified, and if no specification is made, the shares will be voted
in accordance with the recommendations of the Board of Directors. The proxy and
any votes cast using the Corporation's telephone or internet voting procedures
may be revoked prior to its exercise by delivering written notice of revocation
to the Secretary of the Corporation, by executing a later dated proxy, by
casting a later vote using the telephone or internet voting procedures or by
attending the meeting and voting in person.

The Corporation, which was incorporated in 1996, is the successor to the
former Rockwell International Corporation, which was incorporated in 1928, as
the result of a tax-free reorganization completed December 6, 1996. References
in this Proxy Statement to the Corporation, Board of Directors and executive
officers of the Corporation with respect to periods on or prior to December 6,
1996 shall mean, unless otherwise stated, the predecessor corporation and its
Board of Directors and executive officers.

It is the Corporation's policy to keep confidential proxy cards, ballots
and voting tabulations that identify individual shareowners except as may be
necessary to meet any applicable legal requirements and, in the case of any
contested proxy solicitation, as may be necessary to permit proper parties to
verify the propriety of proxies presented by any person and the results of the
voting. The judges of election and any employees associated with processing
proxy cards or ballots and tabulating the vote are required to acknowledge their
responsibility to comply with this policy of confidentiality.

For shareowners participating in the ChaseMellon Investor Services Program
for Rockwell shareowners, the administering bank will vote the shares that it
holds for the participant's account only in accordance with the proxy returned
by the participant to the Corporation, or in accordance with instructions given
pursuant to the Corporation's telephone or internet voting procedures or in
accordance with other written instructions.

VOTING SECURITIES

On December 11, 1998, the Corporation had outstanding 189,763,008 shares of
Common Stock. Each holder of Common Stock is entitled to one vote for each share
held. On December 11, 1998, Wells Fargo Bank, N.A., Los Angeles, California, as
trustee under the Corporation's Savings Plans for its participating employees
and former employees of the Corporation or its predecessor, held 36,943,816
shares of Common Stock, representing approximately 19.5% of the total
outstanding Common Stock. Shares held by the trustee on account of participants
will be voted by the trustee in accordance with written instructions from the
participants, or instructions from the participants given pursuant to the
Corporation's telephone or internet voting procedures, and where no instructions
are received, as the trustee deems proper.

ELECTION OF DIRECTORS

The Corporation's Restated Certificate of Incorporation provides that the
Board of Directors shall consist of three classes of directors with overlapping
three-year terms. One class of directors is to be elected each year with terms
extending to the third succeeding Annual Meeting after election. The Restated
Certificate of Incorporation provides that the Board shall maintain the three
classes so as to be as nearly equal in number as the then total number of
directors permits.

There are four directors whose terms expire at the 1999 Annual Meeting. In
addition, two directors whose terms would have expired at the 2000 Annual
Meeting resigned during the year. Ms. Judith L. Estrin, a member of the
Environmental and Social Responsibility and the Science and Technology
Committees of the Board, resigned effective August 15, 1998, and Richard M.
Bressler, Chairman of the Board Composition Committee and a member of the Audit,
Compensation and Management Development and Executive Committees of the Board,
resigned effective December 31, 1998. Accordingly, the Board of Directors has
decreased the number of directors of the Corporation to eleven, effective
immediately prior to the Annual

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Meeting, four of whom will be directors in each of the classes with terms
extending to the 2001 and 2002 Annual Meetings, respectively, and three of whom
will be directors in the class with terms extending to the 2000 Annual Meeting,
and until their successors are elected and qualify. In light of the retirement
of Dr. Lew Allen, Jr. following the 1998 Annual Meeting and the resignations of
Ms. Estrin and Mr. Bressler, the Board requested Mr. William S. Sneath, whose
term expires at the 1999 Annual Meeting and who would otherwise not stand for
re-election in accordance with the Board's policy on retirement of directors,
and he agreed, to stand for election as a director with a term expiring at the
2000 Annual Meeting and until his successor is elected and qualifies.

It is intended that proxies in the accompanying form properly executed and
returned to the Corporation's proxy tabulator or shares properly authorized to
be voted in accordance with the Corporation's telephone or internet voting
procedures will be voted at the meeting, unless authority to do so is withheld,
for the election as directors of the four nominees specified in Nominees for
Directors with Terms Expiring in 2002 and the one nominee specified in Nominee
for Director with Term Expiring in 2000 below, all of whom, except Mr. Robert B.
Shapiro, now serve as directors with terms extending to the 1999 Annual Meeting
and until their successors are elected and qualify. If for any reason any of
those nominees is not a candidate (which is not expected) when the election
occurs, it is expected that proxies in the accompanying form will be voted at
the meeting for the election of the other nominees and may be voted for the
election of a substitute nominee or, in lieu thereof, the Board of Directors may
reduce the number of directors.

INFORMATION AS TO NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS

There is shown below for each nominee for director and each continuing
director, as reported to the Corporation, the name, age and principal
occupation; the position, if any, with the Corporation; the period of service as
a director of the Corporation (or a predecessor corporation); other
directorships held; and the committees of the Board of Directors on which the
nominee or continuing director serves.

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NOMINEES FOR DIRECTORS WITH TERMS EXPIRING IN 2002
- --------------------------------------------------------------------------------

DONALD R. BEALL DIRECTOR SINCE 1978 AGE 60

[PICTURE] Retired Chairman of the Board and Chief Executive Officer.
Mr. Beall is Chairman of the Executive Committee of the Board
and a member of the Board Composition and Science and
Technology Committees of the Board. He retired as Chairman of
the Board in February 1998 after serving as Chief Executive
Officer from February 1988 to September 1997 and as President
and Chief Operating Officer from 1979 to 1988. He is a
director of Conexant Systems, Inc., Meritor Automotive, Inc.,
The Procter & Gamble Company and The Times Mirror Company. He
is a trustee of the California Institute of Technology, a
member of the Foundation Board of Trustees at the University
of California-Irvine and an Overseer of the Hoover
Institution. He is also a member of The Business Council and
numerous professional, civic and entrepreneurial
organizations.

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BRUCE M. ROCKWELL DIRECTOR SINCE 1969 AGE 59

[PICTURE] Vice Chairman, First of Michigan Corporation (Investment
Banking). Mr. Rockwell is Chairman of the Environmental and
Social Responsibility Committee and a member of the Board
Composition and Compensation and Management Development
Committees of the Board. He joined First of Michigan
Corporation in 1961 and in 1965 was appointed Assistant Vice
President and manager of the bond underwriting department. Mr.
Rockwell was elected Vice President in 1967, and Senior Vice
President in 1983, assuming his present position in March
1998. He is past chairman of the Municipal Advisory Council of
Michigan and past President of the Bond Club of Detroit. He
also serves as a board member of a number of civic and
community organizations.

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ROBERT B. SHAPIRO AGE 60

[PICTURE] Chairman and Chief Executive Officer, Monsanto Company
(Agricultural Products, Pharmaceuticals and Food Ingredients).
Mr. Shapiro has been Chairman and Chief Executive Officer of
Monsanto Company since 1995. He previously served as President
and Chief Operating Officer from 1993 to 1995; Executive Vice
President and President of the Agricultural Group of Monsanto
Company from 1990 to 1993. Mr. Shapiro is a member of the
Board of Directors of Citigroup Inc., Silicon Graphics, Inc.,
and Barnes-Jewish Hospital. He also is a Trustee of Washington
University and a member of The Business Council and The
Business Roundtable.

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JOSEPH F. TOOT, JR. DIRECTOR SINCE 1977 AGE 63

[PICTURE] Chairman of the Executive Committee--Board of Directors, The
Timken Company (Tapered Roller Bearings and Specialty Steel).
Mr. Toot is Chairman of the Audit Committee and a member of
the Board Composition and Compensation and Management
Development Committees of the Board. He joined The Timken
Company in 1962 and served in various senior executive
positions until his election as Vice President-International
Operations in 1967. Mr. Toot became a director of Timken in
1968, was elected Executive Vice President in 1973, President
in 1979 and Chief Executive Officer in 1992. He retired as
President and Chief Executive Officer in December 1997. Mr.
Toot has also served as a director, officer, trustee or member
of various community, charitable and philanthropic
organizations.

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NOMINEE FOR DIRECTOR WITH TERM EXPIRING IN 2000
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WILLIAM S. SNEATH DIRECTOR SINCE 1979 AGE 72

[PICTURE] Retired Chairman of the Board and Chief Executive Officer,
Union Carbide Corporation (Chemicals). Mr. Sneath is Chairman
of the Compensation and Management Development Committee and a
member of the Audit, Board Composition, and Executive
Committees of the Board. He joined Union Carbide Corporation
in 1950, was elected Treasurer in 1961, became a Vice
President and Chief Financial Officer in 1965, a director in
1969 and President and Chief Operating Officer in 1971. Mr.
Sneath served as Chairman of the Board and Chief Executive
Officer of Union Carbide from January 1977 until his
retirement in December 1981. Mr. Sneath is a member of The
Business Council.

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CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2000
- --------------------------------------------------------------------------------

JAMES CLAYBURN LA FORCE, JR. DIRECTOR SINCE 1980 AGE 70

[PICTURE] Dean Emeritus, John E. Anderson Graduate School of Management,
University of California, Los Angeles. Dr. La Force is a
member of the Audit, Environmental and Social Responsibility
and Science and Technology Committees of the Board. After
joining the UCLA faculty as an Assistant Professor of
Economics in 1962, he became an Associate Professor in 1967
and a full Professor in 1971. He was Chairman, Department of
Economics from 1969 until 1978, and Dean, John E. Anderson
Graduate School of Management from 1978 until June 1993. He is
a director of The BlackRock Funds, Imperial Credit Industries,
Inc., Jacobs Engineering Group, Inc., Motor Cargo Industries,
Inc., Payden & Rygel Investment Trust, Provident Investment
Council Mutual Funds and The Timken Company.

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JOHN D. NICHOLS DIRECTOR SINCE 1988 AGE 68

[PICTURE] Retired Chairman of the Board and Chief Executive Officer,
Illinois Tool Works Inc. (Engineered Components and Industrial
Systems and Consumables). Mr. Nichols is Chairman of the
Science and Technology Committee and a member of the Audit and
Compensation and Management Development Committees of the
Board. He joined Illinois Tool Works in 1980 as Executive Vice
President and was named President, Chief Operating Officer and
a director in 1981 and Chairman in 1986. He served as Chief
Executive Officer from 1982 through August 1995. From 1969
through 1979, he was Executive Vice President and Chief
Operating Officer of Aerojet-General Corporation. He is a
director of Household International and Philip Morris
Companies Inc. He serves as Chairman of the Art Institute of
Chicago and an Overseer of Harvard University.

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CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2001
- --------------------------------------------------------------------------------

GEORGE L. ARGYROS DIRECTOR SINCE 1997 AGE 61

[PICTURE] Chairman and Chief Executive Officer, Arnel & Affiliates
(Diversified Investment Company). Mr. Argyros is a member of
the Board Composition and Science and Technology Committees of
the Board. Mr. Argyros has been Chairman and Chief Executive
Officer of Arnel & Affiliates since 1968. Currently he is also
a General Partner and the principal financial partner of
Westar Capital, a private investment company. Mr. Argyros was
a co-owner of AirCal from 1981 to 1987 and owner of the
Seattle Mariners Baseball Team from 1981 to 1989. From 1990 to
1993, he served on the Board of the Federal Home Loan Mortgage
Corporation. Mr. Argyros is a board member of First American
Financial Corporation, The Newhall Land and Farming Company
and USCS International, Inc. He also serves as a board member
of a number of civic and community organizations.

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DON H. DAVIS, JR. DIRECTOR SINCE 1995 AGE 59

[PICTURE] Chairman of the Board and Chief Executive Officer. Mr. Davis
is a member of the Executive Committee of the Board. He has
been Chairman of the Board since February 1998 and Chief
Executive Officer since October 1997. He was President from
July 1995 to October 1997. He was named Senior Vice
President--Automation of the Corporation in June 1993 and an
Executive Vice President and Chief Operating Officer in
January 1994. Mr. Davis is a director of Ingram Micro, Inc.
and Sybron International Corporation. He is a member of The
Business Council, The Business Roundtable, former Chairman of
the Board of Governors of the National Electrical
Manufacturers Association and also a director, trustee or
member of a number of other business, educational and civic
organizations.

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WILLIAM H. GRAY, III DIRECTOR SINCE 1994 AGE 57

[PICTURE] President and Chief Executive Officer, The College Fund/UNCF
(Educational Assistance). Mr. Gray is a member of the Board
Composition and Environmental and Social Responsibility
Committees of the Board. He has been President of The College
Fund/UNCF since September 1991 and senior minister, Bright
Hope Baptist Church in Philadelphia since 1972. He served in
Congress from 1979 to 1991, as House Majority Whip, Chair of
the Democratic Caucus and the House Budget Committee and on
the House Appropriations Committee. In addition, he has taught
at St. Peter's College and Temple University. Mr. Gray is a
director of CBS Corporation, Chase Manhattan Corporation,
Electronic Data Systems Corporation, MBIA, Inc., Prudential
Insurance Company of America, Union Pacific Corporation and
Warner-Lambert Company.

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

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

WILLIAM T. McCORMICK, JR. DIRECTOR SINCE 1989 AGE 54

[PICTURE] Chairman of the Board and Chief Executive Officer, CMS Energy
Corporation (Diversified Energy Company). Mr. McCormick is a
member of the Compensation and Management Development and
Science and Technology Committees of the Board. He has been
Chairman of the Board and Chief Executive Officer of CMS
Energy Corporation since November 1985. Before joining CMS, he
had been Chairman and Chief Executive Officer of American
Natural Resources Company and Executive Vice President and a
director of its parent corporation, The Coastal Corporation.
Mr. McCormick is a director of Bank One Corporation and
Schlumberger Ltd. Among his other activities, he serves as a
director of the Edison Electric Institute and the National
Petroleum Council.

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BOARD OF DIRECTORS AND COMMITTEES

The business of the Corporation is managed by or under the direction of the
Board of Directors. The Board has established several committees whose principal
functions are briefly described below. In the 1998 fiscal year, the Board held
eight meetings. Average attendance by incumbent directors at Board and Committee
meetings was 95%, and all of the directors attended 81% or more of the meetings
of the Board and the Committees on which they served.

The Audit Committee is composed of five non-employee directors. Among its
functions, it reviews the scope and effectiveness of audits of the Corporation
by the independent public accountants and by the Corporation's internal
auditors; selects and recommends to the Board of Directors the employment of
independent public accountants for the Corporation, subject to approval of the
shareowners; reviews the audit plans of the independent public accountants and
the Corporation's internal auditors; reviews and approves the fees charged by
the independent public accountants; reviews the Corporation's annual financial
statements before their release; reviews the adequacy of the Corporation's
system of internal controls and recommendations of the independent public
accountants with respect thereto; reviews and acts on comments and suggestions
by the independent public accountants and by the internal auditors with respect
to their audit activities; and monitors compliance by the employees of the
Corporation with the Corporation's standards of business conduct policies. The
Committee met four times during the 1998 fiscal year.

The principal functions of the Board Composition Committee are to consider
and recommend to the Board qualified candidates for election as directors of the
Corporation and periodically to prepare and submit to the Board for adoption the
Committee's selection criteria for director nominees. The Committee also
periodically assesses the performance of the Board of Directors and reports
thereon to the Board. The Committee, which is composed of five non-employee
directors, met once during the 1998 fiscal year. Shareowners wishing to
recommend candidates for consideration by the Committee can do so by writing to
the Secretary of the Corporation at its World Headquarters in Costa Mesa,
California, giving the candidate's name, biographical data and qualifications.
Any such recommendation should be accompanied by a written statement from the
individual of his or her consent to be named as a candidate and, if nominated
and elected, to serve as a director.

The six members of the Compensation and Management Development Committee
are non-employee directors and are ineligible to participate in any of the plans
or programs which are administered by the Committee except the Directors Stock
Plan. The principal functions of the Compensation and Management Development
Committee are to evaluate the performance of the Corporation's senior executives
and plans for management succession and development, to consider the design and
competitiveness of the Corporation's compensation plans, to review and approve
senior executive compensation and to administer the Corporation's incentive,
deferred compensation, stock option and long-term incentives plans including the
Annual Incentive Compensation Plan for Senior Executive Officers, pursuant to
the terms of the respective plans. The Committee met four times during the 1998
fiscal year.

The Environmental and Social Responsibility Committee, which is composed of
three non-employee directors, reviews and assesses the Corporation's policies
and practices in the following areas: employee

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relations, with emphasis on equal employment opportunity and advancement; the
protection and enhancement of the environment and energy resources; product
integrity and safety; employee health and safety; and community and civic
relations including programs for and contributions to health, educational,
cultural and other social institutions. The Committee met twice during the 1998
fiscal year.

The Executive Committee, which is composed of the Chairman of the Board and
three non-employee directors of the Corporation, has and is empowered to
exercise, when the Board of Directors is not in session, all the powers of the
Board except certain reserved powers. The powers reserved to the full Board of
Directors include (1) fixing the number of directors, (2) filling vacancies in
the Board, (3) amending the By-Laws or Certificate of Incorporation, (4)
declaring dividends, (5) forming committees of the Board, (6) adopting a merger
agreement or (7) recommending to shareowners a sale of all or substantially all
the Corporation's assets or its dissolution. The Committee, which was formed
following the 1998 Annual Meeting, did not meet during fiscal 1998 but acted on
one occasion by unanimous written consent in lieu of a meeting.

The principal function of the Science and Technology Committee, which is
composed of six non-employee directors, is to review and monitor science and
technological activities of the Corporation. The Committee met twice during the
1998 fiscal year.

During the 1998 fiscal year, non-employee directors of the Corporation
received an annual retainer of $33,000 for Board service, together with a
retainer for service on each Board committee at the annual rate of $4,000
($5,000 for Chairmen) for service on the Audit and Compensation and Management
Development Committees and $2,000 ($3,000 for Chairmen) for service on each
other Board committee. Each non-employee director (except Mr. Beall) also
received a grant of 400 shares of Common Stock immediately after the 1998 Annual
Meeting of Shareowners. At the same date, each non-employee director (other than
Messrs. La Force and Sneath, who are ineligible for option grants) received a
grant of options under the Directors Stock Plan to purchase 1,000 shares of
Common Stock. Mr. Beall, who became a non-employee director upon his retirement
as an employee of the Corporation in June 1998, received a grant of 300 shares
of Common Stock and options to purchase 750 shares of Common Stock at that time.
In accordance with the Directors Stock Plan, the options granted to Mr. Beall
and each other director to whom an option grant was made were exercisable at
$48.4375 per share and $56.9375 per share, respectively, the closing market
prices on the respective dates of grant, and become exercisable in three
substantially equal installments on the first, second and third anniversaries of
the respective grant dates. The average of retainer fees (including the annual
stock grants) paid or deferred to non-employee directors for the 1998 fiscal
year was $66,200 (determined by valuing the February and June 1998 stock grants
at $56.9375 and $48.4375 per share, respectively, the closing price on the
respective dates the shares were issued). In addition, the stock options granted
under the Directors Stock Plan to Mr. Beall and to each other director to whom a
grant was made had a grant date value of $16.65 and $18.93 per option share,
respectively, based on the number of option shares granted and Black-Scholes
option pricing methodology using the following assumptions and inputs: options
exercised after 7-1/2 years, five-year weighted average stock price volatility
and dividend yield of 0.2990 and 2.13% (for the June grant) and 0.2890 and 2.21%
(for the February grant), respectively, and an interest rate of 5.54% (for the
June grant) and 5.53% (for the February grant), which was the zero coupon 7-1/2
year Treasury bond rate at the respective dates of grant.

Under the terms of the directors' deferred compensation plan, a director
may elect to defer all or part of the cash payment of retainer fees until such
time as shall be specified, with interest on deferred amounts accruing quarterly
at 120% of the federal long-term rate set each month by the Secretary of the
Treasury. In addition, under the Directors Stock Plan, each director has the
opportunity each year to defer all the annual grant of shares and all or any
portion of the cash retainers by electing to receive restricted shares valued at
the closing price on the New York Stock Exchange--Composite Transactions on the
date of the annual grant and the date each retainer payment would otherwise be
made in cash.

Under the directors' retirement policy in effect prior to December 1995 and
continued only for then retired directors and then current directors who were at
least age 67 (including Messrs. La Force and Sneath) and thus not eligible to
receive stock option grants under the Directors Stock Plan, the Corporation
enters into consulting agreements with retired directors who had at least five
years of Board service and had not been employees of the Corporation during the
ten years prior to retirement. The consulting agreements

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provide an annual fee equal to the Board retainer fee and continue for the
lesser of ten years (or if less, the number of years of Board service of a
director who retires before age 72) or life.

The Corporation has entered into an agreement with Mr. Beall providing for
his continued availability as an advisor to the Corporation's management
following his retirement through September 30, 1999 (subject to extension) with
compensation at an annual rate of $600,000. In addition, Mr. Beall will continue
to be covered under certain medical benefit plans, to have the use of an
automobile and, subject to availability, the use of the Corporation's aircraft
for business travel. He also will be reimbursed for memberships in certain clubs
and will have the use of office facilities and secretarial assistance.

The Corporation and its subsidiaries during the 1998 fiscal year had
purchases of approximately $18.7 million in the normal course of business from
The Timken Company, of which Mr. Toot was President and Chief Executive Officer
through December 1997. Based on the Corporation's knowledge of prevailing market
conditions and prices for the goods and services involved, the Corporation
believes that such transactions were on terms as favorable to the Corporation as
those which might have been obtained from entities with which a director of the
Corporation was not associated.

OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES

The following table shows the beneficial ownership, reported to the
Corporation as of December 4, 1998, of the Corporation's Common Stock, including
shares as to which a right to acquire ownership within 60 days exists (for
example, through the exercise of stock options, conversions of securities or
through various trust arrangements) within the meaning of Rule 13d-3(d)(1) under
the Securities Exchange Act, of each director, each nominee for director, each
executive officer listed in the table on page 10 and, as a group, of such
persons and other executive officers.

<TABLE>
<CAPTION>
Beneficial Ownership on
December 4, 1998
-----------------------------------
Percent of
Name Shares(1) Class(2)
---- --------- --------
<S> <C> <C>
George L. Argyros........................................... 11,774(3) --
Donald R. Beall............................................. 1,784,132(4,5,6) 0.9
Richard M. Bressler......................................... 11,652(3,5) --
Don H. Davis, Jr............................................ 647,112(4,5,7) 0.3
William H. Gray, III........................................ 3,634(3,5) --
James Clayburn La Force, Jr................................. 2,700(3,8) --
William T. McCormick, Jr.................................... 9,187(3,5) --
John D. Nichols............................................. 12,862(3,5) --
Bruce M. Rockwell........................................... 43,499(5) --
Robert B. Shapiro........................................... -- --
William S. Sneath........................................... 4,600 --
Joseph F. Toot, Jr.......................................... 16,428(3,5) --
W. Michael Barnes........................................... 488,977(3,4,5) 0.3
William J. Calise, Jr....................................... 170,273(3,4,5) 0.1
Dwight W. Decker............................................ 77,202(4,5,9) --
Jodie K. Glore.............................................. 177,288(4,5,9) 0.1
All of the above and other executive
officers as a group (30 persons).......................... 4,184,957(4,5,8) 2.2
</TABLE>

- ---------

(1) Each person has sole voting and investment power with respect to the shares
listed unless otherwise indicated.

(2) The shares owned by each person, and by the group, and the shares included
in the number of shares outstanding have been adjusted, and the percentage
of shares owned (where such percentage exceeds 0.1%) has been computed, in
accordance with Rule 13d-3(d)(1) under the Securities Exchange Act.

(3) Includes 1,189, 1,784, 728, 1,200, 1,200, 2,490 and 800 shares granted as
restricted stock under the Directors Stock Plan for Messrs. Argyros,
Bressler, Gray, La Force, McCormick, Nichols and Toot, respectively, and
4,000 shares granted in December 1996 as restricted stock under the 1995
Long-Term Incentives Plan to each of Messrs. Barnes and Calise.

(4) Includes shares held under the Corporation's savings plans as of November
30, 1998. Does not include 11,450, 6,665, 1,925, 838, 2,204, 1,003 and
31,138 share equivalents for Messrs. Beall, Davis, Barnes, Calise, Decker,
Glore and the group, respectively, held under the Corporation's supplemental
savings plans as of November 30, 1998.

9
<PAGE> 11

(5) Includes shares which may be acquired upon the exercise of outstanding stock
options within 60 days as follows: 1,176,091, 7,668, 556,684, 1,187, 1,187,
7,668, 1,187, 4,428, 421,637, 154,536, 71,537, 143,229 and 3,127,121 for
Messrs. Beall, Bressler, Davis, Gray, McCormick, Nichols, Rockwell, Toot,
Barnes, Calise, Decker, Glore and the group, respectively.

(6) Includes shares, as to which beneficial ownership is disclaimed, as follows:
251,012 shares (including 230,858 shares underlying stock options) held for
the benefit of family members and 10,000 shares owned by The Beall Family
Foundation, of which Mr. Beall is President and a director. Does not include
288,209 shares that may be acquired on exercise of stock options assigned to
family members who are the beneficial owners.

(7) Includes 14,166 shares granted as restricted stock in partial payment of a
bonus for fiscal year 1995 and a long-term incentive payment earned for a
three-year performance period ended September 30, 1995 and 7,792 shares
granted as restricted stock in partial payment of a bonus for fiscal year
1997.

(8) Includes shares held jointly, or in other capacities, as to which in some
cases beneficial ownership is disclaimed.

(9) Includes 8,205 and 23,359 shares granted to Messrs. Decker and Glore,
respectively, as restricted stock in partial payment of long-term incentive
payments earned for three-year performance periods ended September 30, 1997.

EXECUTIVE COMPENSATION

There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Corporation for the fiscal
years ended September 30, 1998, 1997, and 1996, of those persons who were (i)
the chief executive officer at any time during fiscal 1998, (ii) the other four
most highly compensated executive officers of the Corporation at September 30,
1998 and (iii) any other persons who were executive officers at any time during
fiscal 1998 and would have been included under clause (ii) if they had remained
executive officers at September 30, 1998 (the Named Officers):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
All Other
Annual Compensation Long-Term Compensation Compensation(1)
-------------------------------------------- -------------------------------------- ---------------
Awards Payouts
------------------------- -------
Restricted
Other Stock Stock Long-Term
Name and Principal Annual Awards Options Incentive
Position Year Salary Bonus(2) Compensation (Shares) (Shares)(3) Payouts(4)
-------- ---- ------ -------- ------------ -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don H. Davis, Jr....... 1998 $ 775,000 $ -0- $21,502 -- 200,000 $ -0- $ -0-
Chairman of the 1997 641,667 875,000(5) 26,005 -- 131,205 -0- 64,709
Board & Chief 1996 600,000 760,000 35,189 -- 151,879 -0- 57,234
Executive Officer(6)

W. Michael Barnes...... 1998 440,000 -0- 25,369 -- 70,000 -0- -0-
Senior Vice 1997 417,500 525,000 62,293(7) 4,000 79,864 -0- 78,243
President, 1996 393,333 475,000 25,220 -- 97,203 -0- 37,406
Finance & Planning
& Chief Financial
Officer

William J. Calise, Jr.. 1998 364,167 -0- 46,296 -- 50,000 -0- 13,623
Senior Vice 1997 345,417 360,000 23,525 4,000 51,341 -0- 29,686
President, 1996 328,333 325,000 22,354 -- 54,676 -0- 18,437
General Counsel and
Secretary

Dwight W. Decker....... 1998 357,405 -0- 16,998 -- 30,000 -0- -0-
Senior Vice President 1997 305,039 300,000 17,278 -- 85,568 1,041,013(8) 39,558
and President, 1996 247,116 350,000 9,952 -- 127,577 600,000 18,504
Rockwell
Semiconductor
Systems(9)

Jodie K. Glore......... 1998 415,000 240,000 16,635 -- 40,000 751,870 -0-
Senior Vice President 1997 385,000 375,000 16,610 -- 39,931 1,715,225(8) 29,640
and President and 1996 361,667 300,000 16,596 -- 48,601 560,000 23,620
Chief Operating
Officer, Rockwell
Automation(10)
</TABLE>

- ---------

(1) Amounts contributed or accrued for fiscal years 1998, 1997 and 1996 for
the Named Officers (other than Mr. Glore) under the Corporation's Savings
Plan and the related supplemental savings plan and amounts contributed or
accrued for Mr. Glore under Allen-Bradley's Employee Savings Plan for
Salaried Employees and the related supplemental savings plan.

(2) Amounts awarded, even if deferred, out of general corporate funds for Mr.
Glore for fiscal 1998; under the Annual Incentive Compensation Plan for
Senior Executive Officers for Messrs. Davis, Barnes, Decker and Glore for
fiscal 1997 and for

10
<PAGE> 12

Messrs. Davis, Barnes, Calise and Glore for fiscal 1996; and under the
Incentive Compensation Plan for Mr. Calise for fiscal 1997 and for Mr.
Decker for fiscal 1996.

(3) Shares reflect anti-dilution adjustments made December 6, 1996 and
September 30, 1997 to preserve the intrinsic value of options following
the reorganization of the Corporation in connection with the divestiture
of the Aerospace and Defense businesses and the pro-rata distribution of
shares of Meritor Automotive, Inc., respectively.

(4) Cash and market value of Common Stock paid in respect of performance units
granted under business unit long-term incentive plans for the three-year
performance periods ended September 30, 1998, 1997 and 1996 for Mr. Glore
and September 30, 1997 and 1996 for Mr. Decker.

(5) Mr. Davis's bonus for 1997 was paid in part by delivery of 7,792 shares of
restricted Common Stock, valued at the closing price on the New York Stock
Exchange--Composite Transactions on December 3, 1997, the date of the
bonus award and payment ($48.125).

(6) President & Chief Executive Officer from October 1997 to February 1998;
and President & Chief Operating Officer from July 1995 to October 1997.

(7) Includes amounts paid in connection with the relocation of Mr. Barnes's
residence as a result of the relocation of the Corporation's World
Headquarters from Seal Beach to Costa Mesa, California, consisting of
$18,877 in respect of a portion of the loss on the sale of his residence
and $17,217 in respect of taxes incurred on that payment under the
Corporation's relocation policy. These were paid in addition to amounts
payable under the Corporation's relocation policy applicable to all
eligible salaried employees in connection with the relocation of the
Corporation's World Headquarters.

(8) Long-term incentive payments to Messrs. Decker and Glore for three-year
performance periods ended September 30, 1997 were paid in part by delivery
of 8,205 and 23,359 shares, respectively, of restricted Common Stock,
valued at the closing price on the New York Stock Exchange--Composite
Transactions on November 28, 1997, the date specified for that purpose in
the Corporation's 1995 Long-Term Incentives Plan ($48.75).

(9) Senior Vice President and President, Rockwell Semiconductor Systems and
Electronic Commerce from March 1997 through June 1998; President, Rockwell
Semiconductor Systems prior to March 1997.

(10) Mr. Glore resigned in October 1998 to pursue other career interests. He
will be eligible to receive payments in respect of outstanding performance
units under the 1995 Long-Term Incentives Plan, prorated for his service
through October 1998. Through October 1999, Mr. Glore will continue to
receive salary payments, to be covered under certain medical benefit
plans, to have the use of an automobile and to be reimbursed for certain
club memberships.

OPTION GRANTS

Shown below is further information on grants to the Named Officers of stock
options pursuant to the 1995 Long-Term Incentives Plan during the fiscal year
ended September 30, 1998, which are reflected in the Summary Compensation Table
on page 10. No stock appreciation rights were granted during fiscal 1998.

<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
- ----------------------------------------------------------------------------------------------------- ----------
Number of
Securities Percentage of
Underlying Total Options
Options Granted to Exercise or
Granted Employees in Base Price Expiration Grant Date
Name (Shares)(1) Fiscal 1998 (Per Share) Date Present Value(2)
---- ----------- ----------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Don H. Davis, Jr...................... 200,000 6.60% $48.125 12/3/07 $3,244,000
W. Michael Barnes..................... 70,000 2.31% 48.125 12/3/07 1,135,400
William J. Calise, Jr................. 50,000 1.65% 48.125 12/3/07 811,000
Dwight W. Decker...................... 30,000 .99% 48.125 12/3/07 486,600
Jodie K. Glore........................ 40,000 1.32% 48.125 12/3/07 648,800
</TABLE>

- ---------

(1) All the Named Officers were granted options on December 3, 1997 that become
exercisable in three substantially equal annual installments beginning
December 3, 1998.

(2) These values are based on the Black-Scholes option pricing model which
produces a per option share value of $16.22 for the December 3, 1997 grant,
using the following assumptions and inputs: options exercised after 7-1/2
years, five-year weighted average stock price volatility and dividend yield
of 0.2877 and 2.26% and an interest rate of 5.895%, which was the zero
coupon 7-1/2-year Treasury bond rate at date of grant. The actual value, if
any, the executive officer may realize from these options will depend solely
on the gain in stock price over the exercise price when the options are
exercised.

The Black-Scholes option pricing methodology, on which the present value of
the stock options granted to the Named Officers is based, attempts to portray
the value of an option at the date of grant. While the options have no value if
the stock price does not increase, were the $16.22 present value of the possible
future gains on the options granted December 3, 1997 used to derive a future
stock price at the end of the 7-1/2-year period when it is assumed the options
would be exercised, the shareowners of the approximately 204 million shares
outstanding on the grant date of those options (assuming that number of shares
remains outstanding) would realize aggregate appreciation of $5,086 million
compared to aggregate appreciation on the options of $10 million for the Named
Officers (assuming that they held their options or the shares acquired on
exercise thereof for the whole 7-1/2-year period).

11
<PAGE> 13

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES

Shown below is information with respect to (i) exercises by the Named
Officers during fiscal 1998 of options to purchase the Corporation's Common
Stock granted under the 1995 Long-Term Incentives Plan or the 1988 Long-Term
Incentives Plan and (ii) the unexercised options to purchase the Corporation's
Common Stock granted to the Named Officers in fiscal 1998 and prior years under
any of those plans and held by them at September 30, 1998.

<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held At In-the-Money Options At
Shares September 30, 1998 September 30, 1998(1)
Acquired Value --------------------------- -------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Don H. Davis, Jr......... -- -- 425,657(2) 308,097(3) $2,574,963(2) --(3)
W. Michael Barnes........ 46,710 $1,351,980 360,615 125,645(3) 2,430,190 --(3)
William J. Calise, Jr.... -- -- 102,529 102,454 355,344 --
Dwight W. Decker......... -- -- 41,905 213,389 141,688 --
Jodie K. Glore........... -- -- 100,386 82,821 285,166 --
</TABLE>

- ---------

(1) Based on the closing price on the New York Stock Exchange--Composite
Transactions of the Corporation's Common Stock on September 30, 1998
($36.25).

(2) Excludes 36,450 exercisable options with a value of $252,609 granted to Mr.
Davis, that have been assigned to or for the benefit of family members and
are not attributable to him pursuant to Rule 13d-3(d)(1) under the
Securities Exchange Act.

(3) Excludes 30,000 unexercisable options with a zero value granted to each of
Messrs. Davis and Barnes, that have been assigned to or for the benefit of
family members and are not attributable to them pursuant to Rule 13d-3(d)(1)
under the Securities Exchange Act.

LONG-TERM INCENTIVE PLAN

Shown below is information with respect to grants made to Messrs. Decker
and Glore under the Rockwell Semiconductor Systems and Rockwell Automation
business unit long-term incentive plans, respectively, during the fiscal year
ended September 30, 1998. No grants of performance units under any long-term
incentive plan were made to any of the other Named Officers during fiscal 1998.

<TABLE>
<CAPTION>
Performance
or Other Estimated Future Payouts Under
Number of Period Until Non-Stock-Price Based Plans
Shares, Units Maturation ----------------------------------
Name or Other Rights(1,2) or Payment Threshold Target(2) Maximum(2)
---- -------------------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Dwight W. Decker(3)................ $500,000 10/1/97-9/30/00 $0 $500,000 $1,639,000
Jodie K. Glore..................... $560,000 10/1/97-9/30/00 $0 560,000 1,680,000
</TABLE>

- ---------

(1) Potential awards for target performance expressed as cash payouts.

(2) Before application of stock price change modifier.

(3) The potential awards granted in 1997 and 1998 to Mr. Decker for the three
year performance periods ending September 30, 1999 and 2000, respectively,
will be cancelled without payment upon completion of the spin-off of the
Semiconductor Systems business.

Under the plans, which are supplementary performance plans established
pursuant to the Corporation's 1995 Long-Term Incentives Plan, the Corporation's
Compensation and Management Development Committee establishes performance
periods of at least three fiscal years duration and performance objectives
therefor and grants potential awards expressed as cash payouts to key employees
of the respective businesses. Participants, including Messrs. Decker and Glore,
earn awards upon conclusion of the applicable performance period (which may vary
from 0% to 327.8% and 300% of the potential award for the Rockwell Semiconductor
Systems and Rockwell Automation plans, respectively) based on achieving levels
of consolidated net sales and return on sales, modified by levels of return on
assets, set by the Compensation and Management Development Committee for the
performance period, provided that these businesses achieve at least minimum
threshold levels established by the Committee. The award payouts are further
modified by the percentage change in Rockwell's stock price over the three-year
performance period of the plans, which may increase or decrease the payout
finally awarded. At the discretion of the Committee, payouts may be made wholly
or partly by delivering shares of the Corporation's stock valued at the current
fair market value on the payment date.

12
<PAGE> 14

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation and Management Development Committee of the Board of
Directors, which consists entirely of non-employee directors, has furnished the
following report on executive compensation:

COMPENSATION PHILOSOPHY

Under the Committee's supervision, the Corporation has developed and
implemented compensation policies, plans and programs intended to "pay for
performance." The Committee sets base salaries generally somewhat below the
median of other major U.S. industrial companies, and provides opportunity for
above-median compensation through the Corporation's annual and long-term
incentive plans which depend heavily on corporate, business unit and individual
performance. The Committee considers the total compensation (earned or
potentially available) of each of the Named Officers and the other senior
executives in establishing each element of compensation. The Committee also
considers advice it periodically receives from independent compensation
consultants concerning the Corporation's compensation programs in comparison
with those of other companies which the consultants believe compete with the
Corporation for executive talent.

EMPLOYEE STOCK OWNERSHIP

The Committee believes the focus on "pay for performance" is sharpened by
aligning closely the financial interests of the Corporation's key executives
with those of the shareowners. Accordingly, it has set the following minimum
Ownership Guidelines (multiple of base salary):

<TABLE>
<CAPTION>
Common Stock
Market Value
------------
<S> <C>
- Chief Executive Officer 5
- Major Business Unit Heads and Senior Vice
Presidents 3
- Other Business Unit Heads and other senior
executives 1.5
</TABLE>

Only shares owned directly (including restricted shares) or through the
Corporation's savings plans, but not shares subject to unexercised stock
options, are considered for determining whether an executive meets the
Guidelines. At September 30, 1998, the 31 executives subject to the Guidelines
owned an aggregate of 398,366 shares (including share equivalents under the
Corporation's supplemental savings plans) of the Corporation's Common Stock,
with an aggregate market value of $14.4 million. The ownership by 29% of the
executives meets the Guidelines. All of the executives who do not meet the
Guidelines had received a significant promotion or were newly hired and thus
were within the eight-year transition period for meeting the Guidelines.

COMPONENTS OF THE CORPORATION'S COMPENSATION PLANS

- BASE SALARY--The Committee reviewed and approved the Chief Executive
Officer's base salary and an annual salary plan for the Corporation's other
senior executives near the beginning of the 1998 fiscal year. In its review of
salary actions, the Committee considers the following: (1) industry, peer group
and national surveys of other major U.S. industrial companies; (2) reports of
the independent compensation consultants who advise the Committee; and (3)
performance judgments as to the past and expected future contributions of the
individual senior executives.

- ANNUAL INCENTIVES--In the early part of each fiscal year, the Committee
reviews with the Chief Executive Officer the Corporate Goals and Objectives.
These include measurable financial return and shareowner value creation
objectives as well as long-term leadership goals that in part require more
subjective assessments. After the end of the year, the Committee evaluates the
Corporation's performance and considers the results together with the
contributions made by and the levels of responsibility of the individual
executives in awarding annual incentive compensation. The incentive compensation
for executives responsible for the management of business units is largely
determined by the extent to which the respective business unit achieves goals
established at the beginning of each year tailored to the particular business
unit.

13
<PAGE> 15

The following table shows the Corporation's performance against its
principal 1998 financial goals:

<TABLE>
<CAPTION>
Corporate Continuing Semiconductor Other
Performance Measure Goal Operations(1) Systems Business(2) Items(3) Total Rockwell
------------------- --------- -------------- -------------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Operating earnings (loss)
(in millions)..................... $ 879 $ (274) $ (904)(5) $ (299)(5)
Net income (loss) (in millions).... $ 462 $ (159) $ (730) $ (427)
Earnings per Share................. $ 3.05 $2.33 $(0.80) $(3.69) $(2.16)
Return on Equity................... 13% 16%(4) (15)% (10.6)%
Operating cash flow
(in millions).................... $1,000 $ 723 $ 102 $ 825
Sales growth....................... 5% 6% (14)% 2%
</TABLE>

- ---------

(1) Before charges for purchased research and development and special charges
aggregating $700 million before tax ($571 million after tax) and the
cumulative effect of an accounting change of $27 million before tax ($17
million after tax).

(2) Excludes $57 million before tax ($36 million after tax) accrued in respect
of estimated operating losses and special charges for the first quarter of
fiscal 1999, $147 million ($90 million after tax) of special charges and $18
million ($16 million after tax) of spin-off related costs.

(3) Includes the charges for purchased research and development, special charges
and accounting change related to continuing operations and the first quarter
operating loss, special charges and spin-off related costs related to
discontinued operations.

(4) Excludes the equity from the Semiconductor Systems business.

(5) The Semiconductor Systems spin-off transaction costs and accounting change
are excluded from operating earnings (loss) amounts.

Although the Corporation's 1998 operating earnings and net income from
continuing operations, in each case before the charges for purchased research
and development and special charges, including those for restructurings, were
$879 million and $462 million, respectively, the formulas under the
Corporation's annual incentive plans, which are based on net income before
income taxes, provided no incentive funds for payment of bonuses for 1998 due to
the restructuring charges. After careful consideration, the Committee concluded
that the Corporation's 1998 results merit significant reductions but not total
elimination of annual incentive compensation payments. The Committee noted that
the special charges which caused the elimination of the formula incentive funds
were nonrecurring charges associated with strategic restructuring actions
intended to position the Corporation for growth and greater profitability.
Moreover, the Company's two largest businesses approached or exceeded their
goals before special charges. The Committee also recognized the importance of
retaining key executives. Accordingly, the Committee determined to award most
executives annual incentive compensation out of general corporate funds. In the
aggregate, annual incentive compensation awards to all executives for 1998 were
58% of the aggregate awards for 1997.

In view of the disappointing performance of the Corporation in fiscal 1998,
the Committee determined to award no annual bonuses to the Named Officers
responsible for the management of the Corporation as a whole (Messrs. Davis,
Barnes and Calise) or to Mr. Decker, who is responsible for the management of
the Semiconductor Systems business.

- LONG-TERM INCENTIVES--The Corporation's 1995 Long-Term Incentives Plan
provides the flexibility to grant long-term incentives in a variety of forms,
including performance units, stock options, stock appreciation rights and
restricted stock. Annually, the Committee evaluates the type of long-term
incentive it believes is most likely to achieve the Corporation's total
compensation objectives.

From 1992 through 1998, long-term incentives for senior and
middle-management corporate staff executives have been provided through stock
option grants, and long-term incentives for key executives in the Corporation's
businesses have been provided through business unit performance plans, with the
business unit presidents receiving their long-term incentive opportunities
one-half through stock option grants and one-half through grants under the
respective performance plan.

In December 1997, the Committee established four business unit performance
plans for three-year performance periods ending September 30, 2000 under which
potential compensation is determined by achieving levels of sales growth, return
on sales and return on assets and further modified by the change in the Rockwell
stock price during the performance period.

14
<PAGE> 16

In determining the grants of stock options in fiscal 1998 to the individual
senior executives, including the Named Officers other than the Chief Executive
Officer (whose award was separately determined by the Committee), the Committee
reviewed with the Chief Executive Officer the recommended individual awards,
taking into account relevant survey data and the respective scope of
accountability, strategic and operational goals, and anticipated contributions
of each of the members of the senior management group.

As a result of the sale of the Aerospace and Defense businesses, the
spin-off of the Automotive business and the planned spin-off of the
Semiconductor Systems business, the Corporation has become more focused. The
Committee therefore determined to change the form of future long-term incentives
for senior and middle-management executives. Beginning with grants made for
fiscal 1999, long-term incentives for all senior and middle-management
executives will be provided solely through stock option grants, and those grants
will be made near the beginning of the fiscal year. The Committee believes that
stock option grants will better meet the objectives of the long-term incentive
plans, including particularly alignment of management's interests with those of
the shareowners.

- COMPENSATION DEDUCTIBILITY--Under Internal Revenue Code Section 162(m), a
publicly held company may not deduct in any taxable year compensation in excess
of one million dollars paid in that year to its Named Officers unless the
compensation is "performance based." Grants of stock options and awards under
the Annual Incentive Compensation Plan for Senior Executive Officers are
considered "performance based" compensation. Since the Committee retains
discretion with respect to base salaries, other annual incentive compensation
awards and awards under the business unit long-term incentive plans, those
elements would not qualify as "performance based" compensation for these
purposes. During fiscal 1998, none of the Named Officers received compensation
that is not deductible under this provision except Mr. Glore, a portion
($423,505) of whose award under the Rockwell Automation Long-Term Incentive Plan
for the three-year period ended September 30, 1998 will not be deductible.

COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

Mr. Davis' base salary was fixed at $775,000 effective October 1997 in
connection with his election as Chief Executive Officer. His total annual cash
compensation is substantially dependent on annual incentive compensation tied to
the Committee's assessment of his and the Corporation's performance. As
discussed previously, the Committee determined to award Mr. Davis no annual
incentive compensation for fiscal 1998.

In determining the number of options granted to Mr. Davis in December 1997
as future long-term incentives, the Committee took into account advice of
independent compensation consultants and levels of option grants based on data
as to long-term compensation (e.g., options, restricted stock, performance
plans) from two surveys of other major United States industrial companies. His
grant was at approximately the 33rd percentile of the companies surveyed
according to the Sibson & Co. survey and at approximately the 40th percentile in
the F. W. Cook & Co. Inc. survey. The Committee also considered information on
Mr. Davis' total compensation and historical information regarding his long-term
compensation opportunities, as well as Mr. Davis' past and expected future
contributions to the Corporation's achievement of its long-term performance
goals.

The Board in Executive Session (when Mr. Davis was not present), as
provided in the Corporation's Corporate Governance Guidelines, received and
discussed the Committee's evaluation of the Corporation's and Mr. Davis'
performance in the 1998 fiscal year.

Compensation and Management Development Committee

William S. Sneath, Chairman John D. Nichols
Richard M. Bressler Bruce M. Rockwell
William T. McCormick, Jr. Joseph F. Toot, Jr.

15
<PAGE> 17

SHAREOWNER RETURN PERFORMANCE PRESENTATION

Set forth below is a line graph comparing the cumulative total shareowner
return on the Corporation's Common Stock against the cumulative total return of
the S&P Composite-500 Stock Index and the S&P Electrical Equipment Index for the
period of five fiscal years which commenced October 1, 1993 and ended September
30, 1998, assuming in each case a fixed investment of $100 at the respective
closing prices on September 30, 1993, reinvestment of all cash dividends and
retention of all stock exchanges and distributions.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ROCKWELL, S&P COMPOSITE-500 & S&P ELECTRICAL EQUIPMENT

<TABLE>
<CAPTION>
S&P
MEASUREMENT PERIOD ELECTRICAL S&P 500
(FISCAL YEAR COVERED) ROCKWELL EQUIPMENT INDEX
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 97.78 104.50 103.69
1995 138.48 135.00 134.53
1996 168.71 192.81 161.88
1997 206.60 279.86 227.36
1998 137.20 314.57 247.92
</TABLE>

THE CUMULATIVE TOTAL RETURNS ON ROCKWELL COMMON STOCK AND EACH INDEX AS OF EACH
SEPTEMBER 30, 1993-1998 PLOTTED IN THE ABOVE GRAPH ARE AS FOLLOWS:

<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Rockwell*........................... $100.00 $ 97.78 $138.48 $168.71 $206.60 $137.20
S&P 500 Index....................... 100.00 103.69 134.53 161.88 227.36 247.92
S&P Electrical Equipment............ 100.00 104.50 135.00 192.81 279.86 314.57

Closing market price at fiscal
year end............................. 36.00 34.25 47.25 56.38 67.82** 44.15**
Dividends per common share during
fiscal year ended September 30....... 0.96 1.02 1.08 1.16 1.20*** 1.21***
</TABLE>

- ---------

* Includes the value of 0.084 share of Boeing common stock which was received
on December 6, 1996 (adjusted for the 2 for 1 Boeing stock split on June 6,
1997) for each Rockwell share then owned, and dividends thereon. Also
includes the value of 0.333 share of Meritor common stock which was received
on September 30, 1997 for each Rockwell share then owned, and dividends
thereon.

** Includes the value of 0.084 share of Boeing common stock and the value of
0.333 share of Meritor common stock.

*** Includes dividends earned on 0.042 share (0.084 share after June 6, 1997) of
Boeing common stock and (in fiscal 1998) dividends earned on .333 share of
Meritor common stock.

16
<PAGE> 18

RETIREMENT PLANS

The following table shows the estimated annual retirement benefits payable
on a straight life annuity basis to participating employees, including officers,
in the earnings and years of service classifications indicated, under the
Corporation's retirement plans which cover most officers and other salaried
employees on a non-contributory basis. Such benefits reflect a reduction to
recognize in part the Corporation's cost of Social Security benefits related to
service for the Corporation. The Corporation's plans also provide for the
payment of benefits to an employee's surviving spouse or other beneficiary.

<TABLE>
<CAPTION>
Average Estimated Annual Retirement Benefits for Years of Service Indicated
Annual ------------------------------------------------------------------------------------
Earnings 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000 ............ $131,934 $197,874 $ 209,985 $ 222,096 $ 234,207 $ 246,318 $ 246,318
1,000,000 ............ 265,284 397,874 422,485 447,096 471,707 496,318 496,318
1,500,000 ............ 398,634 597,874 634,985 672,096 709,207 746,318 746,318
2,000,000 ............ 531,984 797,874 847,485 897,096 946,707 996,318 996,318
2,500,000 ............ 665,334 997,874 1,059,985 1,122,096 1,184,207 1,246,318 1,246,318
</TABLE>

Covered compensation includes salary and annual bonus. The calculation of
retirement benefits under the plans generally is based upon average earnings for
the highest five consecutive years of the ten years preceding retirement.

The credited years of service for Messrs. Davis, Barnes, Calise, Decker and
Glore are 36, 30, 4, 13 and 10, respectively.

Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, the Corporation has supplemental plans which authorize the payment out of
general funds of the Corporation of any benefits calculated under provisions of
the applicable retirement plan which may be above the limits under these
sections.

SELECTION OF AUDITORS

The directors of the Corporation have selected the firm of Deloitte &
Touche LLP as the auditors of the Corporation subject to the approval of the
shareowners. Deloitte & Touche LLP, and its predecessors, have acted for the
Corporation as auditors since 1934.

Before the Audit Committee recommended to the full Board the appointment of
Deloitte & Touche LLP, it carefully considered the qualifications of that firm,
including their performance in prior years and their reputation for integrity
and for competence in the fields of accounting and auditing. Representatives of
Deloitte & Touche LLP are expected to be present at the meeting to respond to
appropriate questions and to make a statement if they desire to do so.

VOTE REQUIRED

The four nominees for election as directors to succeed the directors whose
terms expire at the 1999 Annual Meeting of Shareowners and the one nominee for
election as a director to fill the vacancy in the class of directors with terms
that expire at the 2000 Annual Meeting of Shareowners who receive the greatest
number of votes cast for the election of directors in the respective classes at
that meeting by the holders of the Corporation's Common Stock entitled to vote
at the meeting, a quorum being present, shall become directors at the conclusion
of the tabulation of votes. An affirmative vote of the holders of a majority of
the voting power of the Corporation's Common Stock, present in person or
represented by proxy and entitled to vote at the meeting, a quorum being
present, is necessary to approve the action proposed in item (b) of the
accompanying Notice of 1999 Annual Meeting of Shareowners.

Under Delaware law and the Corporation's Restated Certificate of
Incorporation and By-Laws, the aggregate number of votes entitled to be cast by
all shareowners present in person or represented by proxy at the meeting,
whether those shareowners vote "for", "against" or abstain from voting
(including broker non-votes), will be counted for purposes of determining the
minimum number of affirmative votes required for approval of item (b) and the
total number of votes cast "for" that matter will be counted for purposes of

17
<PAGE> 19

determining whether sufficient affirmative votes have been cast. The shares of a
shareowner who abstains from voting on a matter or whose shares are not voted by
reason of a broker non-vote on a particular matter will be counted for purposes
of determining whether a quorum is present at the meeting so long as the
shareowner is present in person or represented by proxy. An abstention from
voting or a broker non-vote on a matter by a shareowner present in person or
represented by proxy at the meeting has no effect in the election of directors
(assuming a quorum is present) and has the same legal effect as a vote "against"
any other matter even though the shareowner or interested parties analyzing the
results of the voting may interpret such a vote differently.

OTHER MATTERS

The Board of Directors does not know of any other matters which may be
presented at the meeting. In the event of a vote on any matters other than those
referred to in items (a) and (b) of the accompanying Notice of 1998 Annual
Meeting of Shareowners, it is intended that proxies in the accompanying form
will be voted thereon in accordance with the judgment of the person or persons
voting such proxies. The Corporation contemplates sending to all shareowners
after the meeting a report of the action taken at the meeting.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

Section 16(a) of the Securities Exchange Act requires the Corporation's
officers and directors, and persons who own more than ten percent of a
registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (SEC) and the New York Stock Exchange. Officers, directors
and greater than ten percent shareowners are required by SEC regulation to
furnish the Corporation with copies of all Forms 3, 4 and 5 they file.

Based solely on the Corporation's review of the copies of such forms it has
received and written representations from certain reporting persons confirming
that they were not required to file Forms 5 for specified fiscal years, the
Corporation believes that all its officers, directors and greater than ten
percent beneficial owners complied with all filing requirements applicable to
them with respect to transactions during fiscal 1998.

ANNUAL REPORTS

The Corporation's Annual Report to Shareowners and Annual Report on Form
10-K, including financial statements, for the fiscal year ended September 30,
1998, have been mailed to shareowners in advance of this Proxy Statement.

SHAREOWNER PROPOSALS FOR ANNUAL MEETING IN 2000

To be eligible for inclusion in the Corporation's proxy statement,
shareowner proposals for the 2000 Annual Meeting of Shareowners must be received
on or before August 31, 1999 at the Office of the Secretary at the Corporation's
World Headquarters, 600 Anton Boulevard, Suite 700, P.O. Box 5090, Costa Mesa,
California 92628-5090. In addition, the Corporation's By-Laws require a
shareowner desiring to propose any matter for consideration of the shareowners
at the 2000 Annual Meeting of Shareowners to notify the Corporation's Secretary
in writing at the address listed in the preceding sentence on or after October
7, 1999 and on or before November 5, 1999.

EXPENSES OF SOLICITATION

The cost of the solicitation of proxies will be borne by the Corporation.
In addition to the use of the mails, proxies may be solicited personally, or by
telephone or by telegraph, by a few regular employees of the Corporation without
additional compensation. The Corporation does not expect to pay any compensation
for the solicitation of proxies but will reimburse brokers and other persons
holding stock in their names, or in the names of nominees, for their expenses
for sending proxy material to principals and obtaining their proxies.

December 29, 1998

18
<PAGE> 20

If you plan to attend the Annual Meeting of Shareowners TO BE HELD IN COSTA
MESA, CALIFORNIA on February 3, 1999, please be sure to request an admittance
card by:

- - marking the appropriate box on the proxy card and mailing the card using the
enclosed envelope;

- - indicating your desire to attend the meeting through the Corporation's
telephone or internet voting procedure; or

- - returning the enclosed request for an admittance card.
<PAGE> 21

PROXY
ROCKWELL INTERNATIONAL CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints D.R. Beall, D.H. Davis and W.S. Sneath,
jointly and severally, proxies, with full power of substitution, to vote shares
of capital stock which the undersigned is entitled to vote at the Annual Meeting
of Shareowners to be held at The Westin South Coast Plaza, 686 Anton Boulevard,
Costa Mesa, California, on February 3, 1999, or any adjournment thereof; such
proxies being directed to vote as specified or, if no specification is made, FOR
the election of four nominees proposed for election as directors with terms
expiring at the Annual Meeting in 2002 and election of the one nominee proposed
for election as a director with term expiring at the Annual Meeting in 2000 and
FOR proposal (b), and to vote in accordance with their discretion on such other
matters as may properly come before the meeting.

To vote in accordance with the Board of Directors' recommendations just
sign and date the other side; no boxes need to be checked.

Comments: ______________________________________________________________________

______________________________________________________________________

______________________________________________________________________
(If you have written in the above space, please mark the "Comments"
box on the other side)

(continued and to be signed, on the other side)

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:

1. CALL TOLL FREE 1-800-435-6710 on a Touch-Tone Telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.

OR
--
2. Vote by internet at our Internet Address: http://www.eproxy.com/rok

OR
--
3. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.

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

If you wish to view Rockwell International Corporation's Annual Report and Proxy
Statement on-line, and receive your proxy card via e-mail in the future, please
visit ChaseMellon's web site registration page at HTTP://WWW.EPROXY.COM/ROK

If you wish to provide ChaseMellon with your on-line consent and e-mail address,
in order to receive proxy materials on-line in the future, please sign below and
return this form in the postage paid envelope provided.

[ ] I CONSENT TO RECEIVE ON-LINE ROCKWELL INTERNATIONAL PROXY MATERIALS IN THE
FUTURE.

SIGNATURE: _____________________________________________________________________

INTERNET E-MAIL ADDRESS: _______________________________________________________

<PAGE> 22
<TABLE>
<S> <C>
PLEASE MARK
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE [X}

COMMENTS
NOTED ON
OTHER SIDE [ ]
Where a vote is not specified, the proxies will vote the shares represented by the proxy FOR the election of
directors and FOR proposal (b) and will vote in accordance with their discretion on such other matters as may
properly come before the meeting.

THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR (a) AND (b).

FOR WITHHOLD
all nominees AUTHORITY to vote
listed for all nominees listed
(a) The election of five
directors-Nominees:
(b) The selection of auditors FOR AGAINST ABSTAIN
01 D.R. Beall 02 B.M. Rockwell
03 R.B. Shapiro 04 W.S. Sneath [ ] [ ] [ ] [ ] [ ]
05 J.F. Toot, Jr.

(Instruction: To withhold authority to vote for any
individual nominee, write that nominee's name in the
space provided below.)

I/we plan to attend the meeting. YES NO
Please send Admittance Card. [ ] [ ]
- --------------------------------------------------------------------------------

Signature_________________________________________ Signature if held jointly___________________________ Date:_______________ , 1999

In signing as attorney, executor, administrator, trustee or guardian, please give full title as such, and, if signing for a
corporation, please give your title. When shares are in the name of more than one person each should sign the proxy. PLEASE SIGN,
DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:

1. CALL TOLL FREE 1-800-435-6710 on a Touch-Tone Telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.

OR
--
2. Vote by internet at our Internet Address: http://www.eproxy.com/rok

OR
--
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.

FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
[GRAPHIC] VOTE BY TELEPHONE OR INTERNET [GRAPHIC]
QUICK * * * EASY * * * IMMEDIATE

- --------------------------------------------------------------------------------
** IF YOU WISH TO VOTE YOUR SHARES BY TELEPHONE OR INTERNET,
PLEASE FOLLOW THE INSTRUCTIONS BELOW **
- --------------------------------------------------------------------------------

YOUR TELEPHONE OR INTERNET INSTRUCTION WILL AUTHORIZE THE NAMED PROXIES IN THE
SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD
o You will be asked to enter a Control Number which is located in the
box in the lower right hand corner of this form.
o After voting your shares you will be asked if you wish to attend the
meeting. If you indicate yes, you will automatically be mailed an
admittance card and DO NOT need to mail in the attached Card.
VOTE BY PHONE: FOR U.S. SHAREOWNERS ONLY, CALL TOLL-FREE ON A TOUCH-TONE
- ------------- TELEPHONE 1-800-435-6710 ANYTIME. THERE IS NO CHARGE TO YOU
FOR THIS CALL.
After entering your Control Number you will hear these instructions.

OPTION #1: To vote as the Board of Directors recommends on ALL
proposals: Press 1
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.

OPTION #2: If you choose to vote on each proposal separately, press
2. You will hear these instructions:
PROPOSAL 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 2
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 3 and listen
to the instructions
Proposal 2: To vote FOR, press 1; AGAINST, press 2; ABSTAIN, press 3
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.

VOTE BY INTERNET: THE WEB ADDRESS IS: HTTP://WWW.EPROXY.COM/ROK
- ----------------
If you vote by telephone or internet,
there is no need for you to mail in your proxy.
THANK YOU FOR VOTING.

CALL **TOLL FREE** ON A TOUCH TONE TELEPHONE
1-800-435-6710 -- ANYTIME
THERE IS NO CHARGE TO YOU FOR THIS CALL.
<PAGE> 23
[WELLS FARGO LOGO]

December 29, 1998

TO THE PARTICIPANTS IN THE:

ALLEN-BRADLEY EMPLOYEE SAVINGS AND INVESTMENT PLANS
RELIANCE ELECTRIC COMPANY SAVINGS AND INVESTMENT PLAN
ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN
ROCKWELL RETIREMENT SAVINGS PLAN FOR CERTAIN EMPLOYEES

In connection with the Annual Meeting of Shareowners of Rockwell International
Corporation to be held February 3, 1999, enclosed are the following:

o Rockwell International Corporation Notice of 1999 Annual Meeting and
Proxy Statement, together with a Direction Card and a return envelope

The enclosed Direction Card should be used to instruct us with respect to our
voting of the shares which we are holding for your account in the Rockwell
International Corporation Savings Plans (Rockwell International Corporation
Savings Plan, Rockwell Retirement Savings Plan for Certain Employees,
Allen-Bradley Employee Savings and Investment Plans and Reliance Electric
Company Savings and Investment Plan).

You should note that telephone and internet voting has been made available to
you. Please follow the telephone or internet instructions on the Direction Card
or sign, date and return the Direction Card in the enclosed pre-addressed
stamped envelope by January 29, 1999 so that we may vote the shares of Rockwell
International Corporation that are held for your account in accordance with your
instructions. If you do not properly complete your telephone or internet vote or
properly complete and return the enclosed Direction Card by the above date,
Wells Fargo Bank, N.A., as Trustee, will vote such shares as it deems proper.

Sincerely,

/s/ SUSANA R. RYAN
Susana R. Ryan
Vice President

<PAGE> 24
DIRECTION CARD

ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN

TO: WELLS FARGO BANK, N.A., TRUSTEE

You are hereby directed to vote, with respect to the proposals listed on
the other side of this Direction Card, the number of shares of Rockwell capital
stock held for my account in the Rockwell International Corporation Savings Plan
at the Annual Meeting of Shareowners of Rockwell International Corporation to be
held at The Westin South Coast Plaza, 686 Anton Boulevard, Costa Mesa,
California, on February 3, 1999, and at any adjournment thereof, as follows:

TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS CHECK
THE BOXES FOR EACH PROPOSAL LISTED ON THE OTHER SIDE, THEN SIGN, DATE AND RETURN
CARD.

(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)