Westvaco
December 29, l995
Dear Fellow Shareholders:
We cordially invite you to join us at the l996 Annual
Meeting of Shareholders of Westvaco Corporation to be held
at 10 a.m. on Tuesday, February 27, l996. The meeting will
be held in the Stuyvesant Room of The New York Marriott East
Side Hotel, Lexington Avenue at 49th Street, New York, New
York. Whether or not you expect to attend the meeting,
however, please date, sign and promptly return the enclosed
proxy.
This year our proxy material includes three proposals. We
ask for your support in voting FOR Proposal 1, the election
of directors; FOR Proposal 2, the appointment of
independent accountants; and FOR Proposal 3, the approval of
the Annual Incentive Compensation Plan.
Westvaco's compensation programs have created a well
motivated and loyal organization. The introduction of a
modest variable component of compensation, as proposed in
Proposal 3, is intended to allow the company to reward
members of senior management appropriately with competitive
compensation based on their performance and contribution to
the company's financial success, and to maintain such
compensation as fully tax deductible to the company. This
approach places a portion of a senior executive's
compensation visibly at risk, and closely tied to company
and personal performance.
Your interest in your company as demonstrated by the
representation of your shares at our annual meeting is a
great source of strength for your company. Your vote is
very important to us and, accordingly, we ask that you date,
sign and return the enclosed proxy as soon as conveniently
possible.
Sincerely,
/s/David L. Luke, 3rd /s/John A. Luke, Jr.
David L. Luke, 3rd John A. Luke, Jr.
Chairman of the Board President and Chief Executive Officer
Westvaco Building
299 Park Avenue
New York, NY 10171
Telephone 212 688 5000
<PAGE>
WESTVACO
Paper, packaging and chemicals
Notice of 1996 Annual Meeting of Shareholders
and Proxy Statement
The Annual Meeting of Shareholders of Westvaco Corporation
will be held in the Stuyvesant Room of The New York Marriott
East Side Hotel, Lexington Avenue at 49th Street, New York,
New York, on Tuesday, February 27, l996, at ten o'clock in
the morning for the following purposes:
1. To elect three directors for terms of three years
each;
2. To consider and vote upon a proposal to ratify the
action of the Board of Directors in appointing Price
Waterhouse LLP as independent accountants for the
corporation for the fiscal year 1996; and
3. To consider and vote upon approval of the Annual
Incentive Compensation Plan.
All holders of common stock of record at the close of
business on December 29, 1995 will be entitled to receive
notice of and to vote at the annual meeting. Whether or not
you expect to be at the meeting, please date, sign, and
promptly return the enclosed proxy.
By Order of the Board of Directors
John W. Hetherington
Vice President and Secretary
December 29, 1995
<PAGE>
Proxy statement
Westvaco Corporation
299 Park Avenue
New York, New York 10171
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Westvaco Corporation for the Annual Meeting of Shareholders
to be held on February 27, 1996. Only holders of Westvaco
common stock of record at the close of business on December
29, 1995 will be entitled to vote at the meeting, each share
of such stock being entitled to one vote. Directors will be
elected by a plurality of the shares present in person or by
proxy at the meeting. The ratification of independent
accountants, and approval of the Annual Incentive
Compensation Plan, will be decided by the vote of a
majority of such shares. A majority of the total number of
shares outstanding must be present in person or by proxy to
constitute a quorum. In determining shares present, only
those shares voting and those shares actually abstaining
will be included. The Proxy Statement and enclosed form of
proxy are being mailed on or about Wednesday, January 3,
1996 to each shareholder entitled to vote.
On December 29, 1995 there were outstanding 101,589,409
shares of Westvaco common stock. The only entity believed by
the company to be the beneficial owner (as defined for
certain purposes by the Securities and Exchange Commission)
of more than 5% of its stock is Invesco PLC, 11 Devonshire
Sq., London, England, which, principally through its
subsidiary, Invesco Capital Management, 1315 Peachtree
Street, Atlanta, GA 30309, an SEC registered investment
adviser, is reported to have investment authority with
respect to 9,514,294 shares and voting authority with
respect to a portion of such shares. The Westvaco savings
and investment plans for salaried and hourly employees held,
as of October 31, 1995, a total of 12,344,965 shares, or
12%, for which full voting rights are exercisable by members
of the plans. As of that date there were 11,890 current or
former employees of Westvaco and its subsidiaries
participating in such plans. All directors and officers as a
group owned 5,919,661 shares, or 5.7%, of Westvaco common
stock, including shares in the Savings and Investment Plan
for Salaried Employees and including shares in which they
had the right to acquire beneficial interest within 60 days
through the exercise of stock options. In addition to the
stock beneficially owned by each executive officer who is
also a director, as shown hereinafter in connection with the
election of directors, the following executive officer named
in the Summary Compensation Table on page 15 held the
following number of shares: Jack A. Hammond, 105,095
shares. All information concerning such share ownership is
as of the most recent practicable date.
Attendance at the meeting will be limited to holders of
record as of the record date, or their authorized
representatives (not to exceed one per shareholder), and
guests of management.
Management has been gratified by the interest in Westvaco
shown by its shareholders as evidenced by the
representation, in person or by proxy, of more than 90 % of
its outstanding stock at each of the annual meetings held
during the past 28 years.
It is important that your stock be represented at the
meeting. Whether or not you plan to attend, please date,
sign and return the enclosed proxy promptly in order to be
sure that your shares will be voted. You may revoke your
proxy at any time before it is voted at the meeting by
submitting a written revocation or a new proxy, or by
attending and voting at the annual meeting.
In addition to solicitation by mail, officers and assistant
officers of Westvaco may solicit proxies by telephone or
other electronic communication, or by personal contact. The
cost of solicitation of proxies will be borne by Westvaco.
Westvaco may engage the services of D. F. King & Co., Inc.
for the solicitation of proxies on a limited basis at a cost
which is estimated not to exceed $11,500 in fees, and
somewhat more than half that amount in expenses.
1
<PAGE>
1. Election of directors
Three directors are to be elected to hold office for the
terms set forth below and, in all cases, until their
successors are elected and shall qualify. There is no
provision for cumulative voting in the election of
directors. At the meeting, one of the persons named in the
enclosed proxy (or a substitute) will, if authorized, vote
the shares covered by such proxy for election of the three
nominees for directors listed on the following pages.
The Chairman, David L. Luke III, has reached the age for
retirement as set forth in the company's bylaws and
therefore will not serve beyond this meeting. Directors
John C. Bierwirth and Walter H. Brown, for the same reason,
are not candidates for re-election. George E. Cruser, a
Senior Vice President, is retiring as an employee and as a
director.
The present nominees, W.L. Lyons Brown, Jr., John A. Luke,
Jr., and William R. Miller, if elected, will be elected for
a term expiring at the Annual Meeting of Shareholders to be
held in 1999. The Board of Directors unanimously recommends
a vote FOR the named nominees and, unless otherwise
specified by the shareholder, the Board intends the
accompanying proxy to be voted for the election of these
nominees. Should any of these nominees become unavailable
for election for any reason presently unknown, a person
named in the enclosed proxy (or a substitute) will vote for
the election of such other person or persons as the Board of
Directors may recommend.
Samuel W. Bodman III, Thomas W. Cole, Jr., Rudolph G.
Johnstone, and John A. Luke, will continue to serve for a
term expiring at the annual meeting to be held in 1997.
David L. Hopkins, Jr., Katherine G. Peden, and Richard A.
Zimmerman, will continue to serve for a term expiring at the
annual meeting to be held in 1998. John A. Luke is the
father of John A. Luke, Jr., the brother of David L. Luke
III and the father-in-law of John W. Hetherington.
Brief statements appear on the following pages setting forth
the age, principal occupation, and other biographical
information concerning each nominee and continuing director.
Such statements include the number of shares of Westvaco
common stock owned, representing in the case of each nominee
and continuing director less than 1% of the outstanding
shares as of the most recent practicable date.
Nominees for election as directors
for a term of three years expiring in l999
W.L. Lyons Brown, Jr.: Former Chairman of the
Board and Chief Executive Officer,
Brown-Forman Corporation, a diversified
consumer products company. Westvaco Director
since 1994. B.A. University of Virginia, l958.
B.S. American Graduate School of International
Management, 1960. Joined Brown-Forman
Corporation in l960. Became a Director, 1964;
Executive Vice President, 1972; President,
1975; and Chairman of the Board, 1983; Chief
Executive Officer, 1975-1993. Director: Brown-
Forman Corp., Pennzoil Company, National
Policy Forum. Advisory Director: Bessemer
Holdings, L.P. Member: President's Advisory
Committee for Trade Policy and Negotiations.
Trustee: Winterthur Museum, World Monuments
Fund. Trustees' Council: National Gallery of
Art. Age 59
Westvaco shares owned 6,000 (Note 1).
Term to expire: 1999
2
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John A. Luke, Jr.: President and Chief
Executive Officer, Westvaco; Director since
1989. B.A., Lawrence University, 1971. M.B.A.,
The Wharton School, University of
Pennsylvania, 1979. Joined Westvaco in 1979.
Became Assistant Treasurer, 1982; Treasurer,
1983; Vice President and Treasurer, 1986;
Senior Vice President, 1987; Executive Vice
President, 1990; and President and Chief
Executive Officer, l992. Director: American
Forest and Paper Association, The Americas
Society, Inc., Arkwright Mutual Insurance Co.,
United Negro College Fund, Clupak, Inc.
Trustee: Lawrence University, Tinker
Foundation. Governor: National Council of The
Paper Industry for Air and Stream Improvement,
Inc. Age 47.
Westvaco shares owned 333,632 (Notes 1,2).
Term to expire: 1999
William R. Miller: Corporate Director.
Westvaco Director since l992. B.A., St. Edmund
Hall, Oxford University, l952, M.A., l956.
Joined Bristol-Myers Company (now
Bristol-Myers Squibb Company), a
pharmaceutical company, in l964. Became
President International Division, l972;
President Pharmaceutical and Nutrition Group,
l981; Vice Chairman of the Board, l985-1990.
Former Chairman and Director: Pharmaceutical
Manufacturers Association. Chairman of the
Board: Onco Rx Inc. Director: ISIS
Pharmaceuticals, Inc., St. Jude Medical, Inc.
Advisory Director: Chugai Biopharmaceuticals,
Inc. Trustee: Cold Spring Harbor Laboratory,
Manhattan School of Music, Metropolitan Opera
Association, Opera Orchestra of New York,
Richard Tucker Music Foundation. Member of
Oxford University Chancellor's Court of
Benefactors; Honorary Fellow of St. Edmund
Hall. Age 67.
Westvaco shares owned 3,000 (Note 1).
Term to expire: l999
Directors whose terms of office continue
David L. Hopkins, Jr.: Managing Director, Alex
Brown & Sons, Incorporated; Head, Alex Brown
Asset Management, since December 6, 1993.
Retired Managing Director, Morgan Guaranty
Trust Company of New York. Westvaco Director
since 1969. A.B., Princeton University, 1950.
Director: Metropolitan Opera Association.
Trustee: Episcopal Church Foundation. Age 67.
Westvaco shares owned 46,707 (Note 1,2).
Term to expire: 1998
Katherine G. Peden: President, Katherine G.
Peden & Associates, Inc., industrial and
community development consultants, since 1968.
Westvaco Director since 1977. Commissioner of
Commerce and Member of the Governor's Cabinet,
Commonwealth of Kentucky, 1964-1968. Director:
Kentucky Science & Technology Council,
International Federation of Business &
Professional Women. Advisory Board: Norfolk
Southern Corporation. Age 70.
Westvaco shares owned 4,505 (Note 1).
Term to expire: 1998
3
<PAGE>
Richard A. Zimmerman: Retired Chairman and
Chief Executive Officer, Hershey Foods
Corporation, a manufacturer of food products.
Westvaco Director since 1989. B.A.,
Pennsylvania State University, 1952. Joined
Hershey Foods Corporation in 1958. Became
President and Chief Operating Officer, 1976;
and Chief Executive Officer, 1984. Director:
Eastman Kodak Corporation, Lance, Inc.
Trustee: United Theological Seminary (Chairman
of the Board), Pennsylvania State University.
Board of Governors: United Way of America,
Inc. Age 63.
Westvaco shares owned 4,650 (Note 1).
Term to expire: 1998
Samuel W. Bodman III: Chairman and Chief
Executive Officer, Cabot Corporation, a
chemical, energy and materials company, since
1988. Westvaco Director since 1987. B.S.,
Cornell University, 1960. Sc.D., M.I.T., 1964.
Joined FMR Corporation in 1970 and served as
President and Chief Operating Officer from
1983-1986 prior to joining Cabot Corporation
as President and Chief Operating Officer.
Director: Cabot Oil and Gas Corporation, John
Hancock Mutual Life Insurance Co., Security
Capital Group Incorporated. Trustee:
Massachusetts Institute of Technology,
Isabella Stewart Gardner Museum. Age 57.
Westvaco shares owned 31,500 (Note 1).
Term to expire: l997
Dr. Thomas W. Cole, Jr.: President, Clark
Atlanta University. Westvaco Director since
1994. B.S. Wiley College, 1961. Ph.D,
University of Chicago, 1966. Joined faculty of
Atlanta University in l966 and became
Chairman, Department of Chemistry, Fuller E.
Callaway Professor of Chemistry, Provost and
Vice President for Academic Affairs prior to
becoming President of West Virginia State
College in l982. Chancellor of the West
Virginia Board of Regents, 1986-1988 and
President of Clark College in l988. Director:
West Virginia Weslyan College, National Center
on Education and the Economy, National
Association of Independent Colleges and
Universities (NAICU), National Board for
Professional Teaching Standards, Atlanta
Chamber of Commerce, Woodruff Arts Center,
Atlanta Committee for Public Education, First
Union Bank of Georgia. Age 54.
Westvaco shares owned 1,650 (Note 1).
Term to expire: 1997
Rudolph G. Johnstone: Executive Vice
President, Westvaco; Director since November
1995. B.S. and M.S. North Carolina State
University, 1958, 1960. Advanced Management
Program, Wharton School, University of
Pennsylvania, 1989. Joined Westvaco in 1957.
Container Division Regional Manager, l970 and
Assistant Division Manager, l980. Became Vice
President and Container Division Manager,
1985; Senior Vice President and Envelope
Division Manager, 1990; Senior Vice President
with responsibilities for Corporate Data
Processing, Marketing Services and Human
Resources, 1992; Executive Vice President,
1995. Director and Executive Committee Member:
National Association of Manufacturers, Clupak
Inc. Director: Direct Marketing Association.
Age 59.
Westvaco shares owned 127,388 (Note 1).
Term to expire 1997
4
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John A. Luke: Retired President and Chief
Executive Officer, Westvaco; Director since
1960. A.B., Yale University, 1949. Joined
Westvaco in 1949 at the Charleston, South
Carolina, mill. Appointed Manager of the Luke,
Maryland, mill in 1955 and Manager, Fine
Papers Division, 1960. Became Vice President,
1966; Senior Vice President, 1974; Executive
Vice President, 1976; President, 1980. Served
as President and Chief Executive Officer,
1988-l992. Advisory Director: Chemical Bank.
Trustee and Chairman: Yale-China Association.
Former Director and Executive Committee
Member, Former Chairman International Business
Committee: American Paper Institute. Former
Chairman and Governor: National Council of The
Paper Industry for Air and Stream Improvement,
Inc. Age 70.
Westvaco shares owned 538,762 (Note 1).
Term to expire: l997
Notes with respect to nominees' and continuing directors'
shareholdings
(l) The total shares shown include shares of Westvaco
common stock in which the nominees and continuing directors
had a right to acquire beneficial interest within 60 days by
the exercise of stock options.
(2) The shares shown also include the following shares: John
A. Luke, Jr. is a co-trustee of three trusts which held a
total of 6,571 shares of Westvaco common stock. David L.
Hopkins, Jr. is a co-trustee of a trust which held a total
of 44,888 shares of Westvaco common stock.
Section l6(a) of the Securities Exchange Act of l934
requires reporting by directors and certain officers of the
company concerning their holdings and transactions in
Westvaco common stock. A review of the company's records
indicates that all reports required under the Section l6(a)
rules were filed in a timely manner during the year.
Certain relationships and related transactions
W.L. Lyons Brown, Jr., is a former Chairman of the Board and
Chief Executive Officer, as well as a 10% beneficial
shareholder, of Brown-Forman Corporation, a diversified
consumer products company. Together with members of his
family, Mr. Brown controls in excess of 50% of the voting
stock of Brown-Forman Corporation. In Westvaco's most recent
fiscal year, Brown-Forman purchased from Westvaco materials
in the amount of approximately $415,000. Such transactions,
in the case of both companies, were made in the ordinary
course of business and represent an insignificant percentage
of Brown-Forman's total costs of sales and of Westvaco's
total sales.
5
<PAGE>
Board and committee meetings
The Board of Directors held twelve meetings, one each month,
and 24 committee meetings during fiscal year 1995. Average
attendance by directors at meetings of the board and its
committees was 90%.
The Audit Committee, which met three times in fiscal year
1995, has as its members Walter H. Brown, Chairman, Thomas
W. Cole, Jr., David L. Hopkins, Jr., William R. Miller,
Katherine G. Peden and Richard A. Zimmerman, none of whom is
an officer or employee of the corporation. The Audit
Committee reviews the audit examination and annual financial
reports of the corporation, and meets with and remains
accessible to the internal auditors and independent
accountants of the corporation. It reviews in advance the
appointment of the independent accountants, the scope of
their work, and the fees for all services provided. It also
reviews annually with the General Counsel the status of the
company's legal compliance program.
The Compensation Committee, which met eight times in fiscal
year 1995, has as its members John C. Bierwirth, Chairman;
Samuel W. Bodman III, Walter H. Brown, Thomas W. Cole, Jr.,
David L. Hopkins, Jr., Katherine G. Peden and Richard A.
Zimmerman, none of whom is an officer or employee of the
corporation. The Compensation Committee receives regular
reports on industrial relations, approves or reviews all
compensation of senior management, will determine awards
under the Annual Incentive Compensation Plan, if such is
approved by shareholders, oversees matters relating to the
corporation's stock option and stock appreciation rights
plans and its unfunded benefit plans, and the level of
company contributions to its savings and investment plans.
The Committee on Board Membership, which met five times in
fiscal year 1995 has as its members Richard A. Zimmerman,
Chairman; John C. Bierwirth, Samuel W. Bodman III, W.L.
Lyons Brown, Jr., David L. Luke III, John A. Luke and
Katherine G. Peden. The Committee on Board Membership
reviews and makes recommendations concerning the
qualifications of individuals for re-election and to fill
vacancies on the Board of Directors, as well as the levels
of compensation paid to non-salaried directors.
A Westvaco bylaw requires nominations for the Board from any
shareholder to be delivered to the Board Membership
Committee, c/o Westvaco's Secretary, not less than 90 days in
advance of an annual meeting nor less than the seventh day
following the date notice of a special meeting is first
given to shareholders. The bylaw also requires the
nomination to contain specified information about the
nominee and the shareholder making the nomination, as well
as a consent to serve by the nominee. In addition to such
nominations, the Board Membership Committee will consider
such suggestions for nominations as may be sent by
shareholders to the Committee. Westvaco's bylaws also
contain detailed procedures, including time limitations,
which a shareholder must comply with in order to introduce
an item of business at an annual meeting.
The Finance Committee, which met four times in fiscal year
1995, has as its members David L. Luke III, Chairman; John
C. Bierwirth, W.L. Lyons Brown, Jr., Walter H. Brown, David
L. Hopkins, Jr., John A. Luke, John A. Luke, Jr., and
William R. Miller. The Finance Committee reviews the
financial condition of the corporation and its requirement
for funds, studies its credit and financing policies,
considers the dividend policy of the corporation and makes
recommendations concerning these matters, and reviews
funding recommendations for the salaried and hourly pension
plans together with the investment performance of such
plans.
6
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The Committee on the Environment, which met three times in
fiscal year 1995, has as its members Samuel W. Bodman III,
Chairman; John C. Bierwirth, Thomas W. Cole, Jr., David L.
Luke III, John A. Luke, William R. Miller and Katherine G.
Peden. The Committee on the Environment oversees the
stewardship of the corporation with respect to the
conservation of the natural resources and its ability to
protect the natural environment. This committee receives
regular reports from management, reviews environmental
matters with management and makes recommendations as needed.
The International Committee, which met one time in fiscal
year l995, has as its members John A. Luke, Chairman; Samuel
W. Bodman III, W.L. Lyons Brown, Jr., David L. Luke III,
John A. Luke, Jr., William R. Miller and Richard A.
Zimmerman. The International Committee shares its knowledge
and expertise on opportunities outside of the United States
which may be of interest to the company. The committee
serves as a resource for management in discussing
opportunities which appear attractive to Westvaco and which
lie outside the United States or outside areas where the
company has direct experience.
Director compensation
Only directors who are not employees of the corporation
receive fees. Since January 1, 1992, fees paid to each
outside director consist of an annual retainer of $24,000
plus an attendance fee of $1,000 for each meeting of the
board and committee meeting of the board at which the
director is present. Each director may elect to defer
payment of a percentage of his or her fees, with interest,
to a later date or dates. In addition, each outside director
who retires after January 1, 1992 will receive each year an
amount determined as follows: $24,000 less $2,400 X (70
minus the director's age at the time of retirement) and also
less $2,400 X (l0 minus the director's years of service
prior to age 72 at the time of retirement.) Options and
stock appreciation rights covering 1,500 shares were
granted to directors in February 1995 and similar grants
will be made in December each year up to the limit of shares
in a plan approved by shareholders in 1995.
7
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Executive compensation
Report of the Compensation Committee
The Committee
The Westvaco Executive Compensation Program (the "Program")
is administered by the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") which
has general oversight of the company's compensation and
benefit plan structure. It is composed entirely of
independent outside directors, none of whom has been at any
time a salaried employee of the company or receives any
compensation from the company other than as a director. The
Committee determines the compensation of all employees,
including executive officers, whose annual compensation
exceeds $275,000, and informs the Board on any action taken
with respect to the compensation of the CEO. The Committee
also administers and makes all grants under the company's
stock option and sdstock appreciation rights plans, reviews
and recommends to the Board the benefit levels for the
salaried and hourly pension plans, oversees matters relating
to nonqualified benefit plans, and has the authority to
establish the performance criteria for company matching
contributions to the savings and investment plans for
salaried and hourly employees.
The Cash Compensation Program
The Program is designed to attract and retain an
organization of able and motivated individuals who can
create and execute programs that will produce sound,
long-term gains in shareholder value. Over a long period of
time Westvaco has relied solely on well-designed salary
compensation programs to provide attractive and competitive
levels of cash compensation for its salaried employees at
all management levels. Traditionally, bonuses have not been
a part of this compensation program. The program has worked
well and has created a well-motivated and loyal organization.
In 1993 Congress changed the tax laws so that, in general, a
corporation could not deduct for tax purposes the
compensation of any senior executive in excess of $1 million
in a single year unless that part of the compensation occurs
as a consequence of a shareholder-approved
pay-for-performance compensation program. This law is
expected to remain in effect for the indefinite future.
In 1995 Westvaco clearly emerged from a very difficult
competitive period with earnings exceeding previous record
levels by a considerable margin. In addition, during the
recent difficult period, the company outperformed virtually
all of its North American competitors in earnings stability
versus prerecession highs, and it has very good prospects
for the period ahead. Under these circumstances, the
Committee believes that it is timely to take a fresh look at
senior management compensation after an extended period of
salary freezes and voluntary cuts at the most senior level.
Because of the relatively recent tax legislation affecting
the deductibility of senior executive compensation, as well
as the need to consider competitive compensation increases
for senior Westvaco personnel, the Committee believes that
it is appropriate for the company to modify its compensation
program to supplement base salaries for senior management
members with variable bonus compensation for the first time.
The introduction of a modest variable component of
compensation, as proposed in Proposal 3, is intended to
allow the company to reward senior management appropriately
with competitive compensation based on their performance and
contribution to the company's financial success, and to
allow the company to deduct the compensation for tax
purposes. This approach places a portion of a senior
executive's compensation visibly at risk, and ties it to
company and personal performance.
8
<PAGE>
The first step in this change was taken by the Committee in
1995 through the use of an informal bonus program under
which the nineteen seniormost managers were considered and,
to varying degrees based on their individual performance,
participated in a supplemental bonus program. The total
bonus payout for the nineteen executives was $1,040,000.
The next step involves a formal Westvaco annual incentive
plan which has been developed and approved by the Committee
and the Board of Directors. This plan is being presented to
our shareholders for their consideration at Westvaco's 1996
Annual Shareholders' Meeting. The plan will be administered
by the Compensation Committee. Funding for awards is based
on a formula tied to the overall performance of the company.
The formula is designed so that in years of sound or
excellent performance a pool of money will be available for
use by the Committee to provide annual cash compensation for
senior managers in the then-current competitive range as
indicated by regular annual studies. The plan is designed
to meet IRS requirements for tax deductibility. It is
expected that the Committee will use its discretion under
the Plan carefully, taking into account anticipated
competitive compensation for various job levels, and use
good and rigorous judgement in appraising the performance of
the company and of the individuals in senior management in
determining awards to each individual considered. It is
very likely that in most years something less than the total
amount of the available pool will be used. Any amounts that
are not awarded in a particular year may not be carried over
to the Bonus Pool for a subsequent year.
The Committee believes that, by continuing to use sound
discretion in base salary compensation and by supplementing
this with a variable compensation component at the senior
level, the company can, in a way that is mechanically
different from the past, still provide the opportunity for
attractive, fully competitive compensation based on
performance for individuals at all levels of the
organization while still maintaining the tax deductibility
of such compensation.
It is expected that for most levels in the organization, the
present salary compensation program will continue to provide
very competitive pay levels. The variable compensation will
be reserved for a limited number of individuals where it may
be necessary to assure tax deductibility and where it is
desirable to have a portion of their compensation visibly at
risk.
The details of the proposed Westvaco Annual Incentive
Compensation Program are presented elsewhere in this Proxy
Statement.
The Committee believes that it is important that total cash
compensation for Westvaco's executive officers be at a level
that is competitive with that paid by comparable companies.
The competitiveness of the compensation of the CEO and the
other executive officers identified in the Summary
Compensation Table is evaluated through an assessment of
annual cash compensation (salary + annual bonus) paid by the
eight peer paper companies that comprise the Peer Group
Companies (the "Peer Group") in the proxy performance graphs
on pages 13 and 14, and by other well-regarded companies
comparable to Westvaco. Such assessments are supported by
executive compensation surveys performed for the Committee
each year. Using this frame of reference as a general
guideline, actual compensation levels are determined by an
annual evaluation of individual job performance, without
attempting to target a specific level within the competitive
frame of reference.
Salaries for the other senior officers are determined on a
similar basis, except that a salary range is established for
each such officer based upon total annual cash compensation
including bonus paid to comparable officers of the companies
in the Peer Group. A midpoint is determined with reference
to the median of the Peer Group and annual cash compensation
paid by other companies comparable to Westvaco both within
and without the paper industry. Individual salaries are
reviewed annually under a formal performance appraisal
program and adjusted relative to the midpoint within the
range, as appropriate, based on individual job performance.
9
<PAGE>
The Committee regularly reviews the cash compensation of the
company's executive officers named in the Summary
Compensation Table relative to the annual cash compensation
paid by companies in the Peer Group. For example, a recent
review revealed that the combined 1994 five highest salaries
paid by the company fell in approximately the 63rd
percentile of the Peer Group, while the company's 1994 net
income fell in approximately the 81st percentile and the
stability of Westvaco's earnings versus prerecession highs
ranked very favorably with other companies in the Peer Group
during the recent difficult period in the paper industry.
Stock options and stock appreciation rights
Grants of stock options and stock appreciation rights are
made by the Committee to create a direct tie between the
interests of key employees and shareholders of the company.
Such options and rights are normally granted each year with
an exercise price equal to the market price of the related
shares on the date of grant, so that individuals receiving
such grants benefit only if shareholders benefit through
appreciation in the post-grant value of Westvaco shares.
Position responsibility, job performance, and salary level
are principal factors considered by the Compensation
Committee in determining the size of grants. Grants are
also compared with the grants of options and other long-term
incentives within the Peer Group, and by other companies
comparable in revenues to Westvaco in other industries. The
Committee does not consider the number of options and rights
already held by an individual in making additional grants.
Other compensation
The Savings and Investment Plan for Salaried Employees, (the
"Plan") with company matching, provides an attractive way
for salaried employees, including executive officers, to
acquire and hold stock in the company by contributing a
percentage of their salaries. This Plan reflects the
company's very strong feelings about equity ownership and
tying the interests of salaried employees to the interests
of the shareholders as a whole. The Plan has had excellent
participation by salaried employees since its adoption in
1968. In 1995 the company made an identical plan available
to its hourly employees as well (together the "Plans"). The
level of participation by the hourly employees has also been
excellent. The Plans provide specific and pre-established
performance-based criteria to determine the level of
supplemental company matching. For fiscal 1995 the company
met or exceeded each of these pre-established reference
points resulting in a cumulative increased supplemental
match of 35 percent and a total company match of 110 percent
for fiscal 1995.
Performance factors
A major Westvaco objective is to create long-term rewards
for its shareholders. Beginning in July 1967, the company
began to measure the performance of its stock against major
market indices as well as against its peers and other
leading industrial companies. The results which are shown
on page 14 show a high degree of success in creating
long-term shareholder values over this measuring period.
Another major company objective has been to try to minimize
the impact of the business cycle on its earnings through an
extensive emphasis on distinctive and differentiated
products and services. This program was initiated in 1984
and has been described since then in company literature
distributed to shareholders. The success of this product
strategy, as well as the company's cost containment and
productivity improvement strategies, is regularly monitored
within the company and at the Board level.
10
<PAGE>
The contribution of an individual to the execution of
corporate strategies, including the foregoing objectives, is
the principal basis on which job performance is evaluated
and, therefore, is a significant factor in determining
salary, awards of bonuses to the most senior executives as
previously described, and grants of stock options and stock
appreciation rights.
Compensation for the past year
Westvaco's differentiated product strategy continues to
yield clear benefits. The company's economic performance in
the recent difficult business environment, as measured by
the stability of earnings against the company's prerecession
earnings peak, as well as the company's earnings during the
recent economic recovery, compare very favorably with the
Peer Group.
While the stability of Westvaco's earnings relative to the
Peer Group earnings in the recession period through fiscal
1993 was very favorable, and long-term performance remained
strong, the company's earnings nonetheless suffered in
absolute terms during this period. The Committee
accordingly did not increase the salary of any executive
officer in fiscal years 1993 or 1994, except in cases of
promotion.
In the latter half of 1994 and through 1995 Westvaco has
demonstrated strong earnings recovery and for the fiscal
year 1995 earnings have exceeded by a considerable margin
previous record levels. Base salary adjustments were
granted in early 1995 to the executive officers named in the
Summary Compensation Table. The base salary of the
company's President and Chief Executive Officer, John A.
Luke, Jr., was increased to $800,000 on January 1, 1995. As
indicated earlier in this report, the Committee instituted
an informal bonus program in 1995 under which the executive
officers listed in the Summary Compensation Table, including
the President and CEO, were awarded a supplemental bonus
based on their individual performance and contribution to
the company's overall record results. The company's
President and CEO, John A. Luke, Jr., received an award of
$200,000. The total bonus payout to the executive officers
listed in the Summary Compensation Table was $625,000.
Taking into account the supplemental bonus, John A. Luke,
Jr.'s total cash compensation for 1995 is still modest when
compared to the total cash compensation for similar
positions in the peer paper group.
In February 1995 the Committee granted stock options to John
A. Luke, Jr. for 75,000 shares and simultaneously made
grants to 348 other officers and salaried employees. At the
request of the company's Chairman, David L. Luke III, no
options or rights were granted to him in 1992, 1993, 1994,
or 1995.
In determining 1995 compensation of all executive officers,
the Committee carefully evaluated the contribution by
individual executive officers to the success of corporate
strategies, and to the performance of the company and the
impact of these contributions on shareholder values. The
Committee considered in particular the relative earnings
stability resulting from the development of new and
differentiated products.
Proposed action
The Committee and the Board believe that the company's use
of salary as the only component of annual cash compensation
has served it well over a long period of time.
Nevertheless, in view of tax law changes and the need to
ensure the ability to provide appropriate competitive
compensation based on performance, the Committee and its
Board believe that it is timely to modify the company's cash
compensation program for senior executives to include a
modest variable cash compensation component based on
performance.
11
<PAGE>
The Committee and Board have developed and approved a
proposed Westvaco Annual Incentive Compensation Plan, which
is described in detail on pages 18 to 20 of this Proxy
Statement. This performance-based Westvaco Annual Incentive
Compensation Plan is being submitted to the company's
shareholders for their consideration and approval at the
1996 Annual Shareholders Meeting.
In crafting this program the Committee, for what it believes
are sound reasons, intends to maintain the salary component
of total cash compensation at a higher percentage level than
is common in many other companies. However, the total
annual cash compensation, depending on performance, is
expected to be well in line with similar compensation in the
peer group companies.
Conclusion
The Committee believes that the caliber and motivation of
its executives, and of all its employees, is extremely
important to the company's ability to meet future challenges
and to continue to deliver long-term value to shareholders.
The Committee further believes that the company's
compensation program is making an important contribution to
Westvaco's performance and is deserving of shareholder
support.
John C. Bierwirth, Chairman
Richard A. Zimmerman, Vice-Chairman
Samuel W. Bodman III
Walter H. Brown
Thomas W. Cole, Jr.
David L. Hopkins, Jr.
Katherine G. Peden
12
<PAGE>
<TABLE>
Total Return to Shareholders
<CAPTION>
The performance graph required by Regulation
S-K Item 402(1) is filed in paper form
simultaneously with this electronic filing
under cover of Form SE.
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Westvaco 100.00 166.78 160.37 149.22 162.30 198.59
S&P 500 Index 100.00 133.50 146.79 168.72 175.25 221.58
Peer Group 100.00 152.33 148.40 147.85 181.11 213.51
Data Source: Standard & Poor's Compustat Services, a division of McGraw-Hill
Companies.
</TABLE>
This graph compares the cumulative total return to
shareholders on Westvaco common stock for a five-year period
ended October 31, l995 with the return on the Standard &
Poor's 500 Stock Index (S&P 500) and the average return on
the stock of a group consisting of companies in the paper
industry (the "Peer Group"). The total return shown in the
graph assumes reinvested dividends and is weighted on the
basis of market capitalization at the beginning of each year
of measurement. The companies included in the Peer Group
are: Boise Cascade Corp., Champion International Corp.,
Consolidated Papers, Inc., Federal Paper Board Co.,
International Paper Company, Mead Corp., Potlatch Corp., and
Union Camp Corp. The Peer Group is the same group referred
to in the Report of the Compensation Committee.
13
<PAGE>
Long-Term Total Return to Shareholders
This optional graph of the long-term total return
on Westvaco common stock in comparison to the
S&P 500 and the average return on the peer
groups over a long-term period is filed in paper
form simultaneously with this electronic filing
under cover of Form SE.
Creating long-term rewards for shareholders is a major
Westvaco objective. Accordingly this graph, using the same
method of measuring return as in the five-year graph and
using the same Peer Group, is presented to show comparative
cumulative return over a long term. The period was selected
because the beginning of that period marks the point at
which Westvaco began a second five-year program to further
enhance the earning power of the company after a successful
first five-year program had more than doubled the previous
earnings per share of the company. During 1967 the company
decided to measure the return on its stock against major
market indices as well as against its peers and other
leading industrial companies. Neither this graph, nor the
graph for the five-year period, should be taken to imply any
assurance that past performance is predictive of future
performance.
14
<PAGE>
<TABLE>
Summary Compensation Table
The following shows the compensation paid by Westvaco to
each of its five most highly compensated executive officers
for all periods during the fiscal year ended October 31,
1995.
<CAPTION>
Long-term
Annual Compensation
Compensation Awards
Name and Options/ All Other
Principal Position Year* Salary Bonus SARs(#)(1) Compensation(2)
<S> <C> <C> <C> <C> <C>
John A. Luke, Jr. 1995 $783,333 $200,000 75,000 $61,075
President and CEO 1994 700,000 - 52,500 31,500
1993 700,000 - 41,250 31,500
David L. Luke III 1995 495,276 150,000 - 280,967
Chairman of the Board 1994 750,000 - - 33,750
1993 765,000 - - 34,425
Rudolph G. Johnstone 1995 475,000 125,000 37,500 25,706
Executive Vice President 1994 350,000 - 24,000 15,750
1993 350,000 - 18,750 15,750
George E. Cruser 1995 518,333 75,000 37,500 24,994
Senior Vice President 1994 460,000 - 30,000 20,700
1993 460,000 - 24,000 20,700
Jack A. Hammond 1995 437,500 75,000 30,000 31,789
Senior Vice President 1994 375,000 - 24,000 16,875
1993 375,000 - 18,750 16,875
*Fiscal years ended October 31.
<FN>
(1) The number of Options/SARs reflect the adjustment for
the three-for-two stock split approved by the Board of
Directors on August 22, 1995.
(2) Represents company contributions of $10,164 and $50,911
for John A. Luke, Jr., and $8,885 and $22,904 for Jack A.
Hammond to the salaried Savings and Investment Plan and
unfunded Savings and Investment Restoration Plan,
respectively. Represents company contributions to only the
unfunded Savings and Investment Restoration Plan for
Rudolph G. Johnstone, and George E. Cruser, and represents,
in the case of David L. Luke III, such contributions of
$26,244 together with $254,723 paid under the company's
retirement plans for salaried employees.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
Option/SAR Grants in the Fiscal Year Ended October 31, 1995
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Appreciation
Individual Grants for Option Term (1)
Number of % of Total
Securities Option/SARs
Underlying Granted to
Options/SARs Employees in Exercise Expiration
Name Granted(#)(2) Fiscal Year(3) Price($/Sh) Date
<S> <C> <C> <C> <C>
5% 10%
<C> <C>
John A. Luke, Jr. 75,000 8.13%/11.31% $26.50 02/28/2005
$1,249,919 $3,167,558
David L. Luke III - - - -
- -
Rudolph G. Johnstone 37,500 4.06%/5.65% 26.50 02/28/2005
624,959 1,583,779
George E. Cruser(4) 37,500 4.06%/5.65% 26.50 02/28/2005
325,515 736,001
Jack A. Hammond 30,000 3.25%/4.52% 26.50 02/28/2005
499,968 1,267,023
All Optionees 922,650 100% $26.50 02/28/2005
$15,376,502 $38,967,302
All Shareholders (5)
$1,692,410,339 $4,288,925,016
Optionees gain as % of all shareholder gain
0.91% 0.91%
<FN>
(1) The dollar amounts under these columns are not intended
to and may not accurately forecast possible future
appreciation, if any, of Westvaco's common stock price.
These are purely hypothetical amounts resulting from
calculations at the 5% and 10% rates required by the
Securities and Exchange Commission.
(2) The number of options/SARs reflect the adjustment for
the three-for-two stock split approved by the Board of
Directors on August 22, 1995.
(3) Executive Officers are granted options in tandem with
stock appreciation rights (SARs). Tandem limited stock
appreciation rights (LSARs) are also granted to executive
officers and are exercisable in the event of a change in
control. All options are granted at market value on the date
of grant and become exercisable six to twelve months from
the date of grant. Exercise of an option, SAR or LSAR
cancels any tandem grant. For each of the named executives
the percentage on the left represents the percent of total
options granted to all employees and the percentage on the
right represents the percent of total SARs granted to all
employees.
(4) While options are granted for a term of ten years, under
the terms of the company's stock option plans, options
expire three to five years from the date of retirement.
Potential realizable values for George E. Cruser reflect
maximum option terms of four to six years, assuming
retirement at age 65.
(5) As of October 31, l995, there were 101,551,211 shares of
common stock outstanding. The calculations shown are based
on the assumed rates of appreciation, compounded annually,
from the stock's fair market value of $26.50 on February 28,
1995 when the above options were granted.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and October 31, l995 Option/SAR Values(1)
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Number of Securities 10/31/95(#) 10/31/95(3)
Underlying Options/ Value Exercisable/ Exercisable/
Name SARs Exercised (#) Realized(2) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
John A. Luke, Jr. - - 248,266/71,227 $1,621,611/89,034
David L. Luke III 161,082 $2,591,471 423,164/0 3,578,667/0
Rudolph G. Johnstone 23,292 153,858 65,227/33,727 314,374/42,159
George E. Cruser 68,076 727,578 158,648/33,727 995,625/42,159
Jack A. Hammond - - 65,270/26,227 250,302/32,784
<FN>
(1) The number of options/SARs reflect the adjustment for
the three-for-two stock split approved by the Board of
Directors on August 22, 1995.
(2) The value realized on stock option and SAR exercises
represents the difference between the grant
price of the options/SARs and the market price of the
shares of underlying stock as of the date of exercise
multiplied by the number of options/SARs exercised. All
grants are made at the fair market value of the stock on
the date of grant.
(3) The value of unexercised in-the-money options/SARs
represents the difference between the grant
price of the options/SARs and the market price of $27.75
at October 31, 1995 multiplied by the number of in-the-
money options/SARs outstanding.
</FN>
</TABLE>
<TABLE>
Pension Plan Table
<CAPTION>
Years of Service
Remuneration
25 30 35 40 45
<S> <C> <C> <C> <C> <C>
$ 490,000 $171,000 $205,200 $239,400 $273,600 $308,600
660,000 231,700 278,100 324,400 370,800 417,900
830,000 292,500 350,900 409,400 467,900 527,200
1,000,000 353,200 423,800 494,500 565,100 636,500
1,140,000 403,200 483,800 564,500 645,100 726,500
1,200,000 424,600 509,500 594,500 679,400 765,100
</TABLE>
The corporation's contributions to its Retirement Plan for
Salaried Employees are computed on an aggregate actuarial
basis with no specific allocation of contributions to
individuals. The table above shows the approximate annual
retirement benefits net of social security benefits that
would be received under current plan provisions based upon
the noted salary levels and years of service. As of December
31, 1995, the executive officers named in the Summary
Compensation Table set forth on page 15 will have the
following years of credited service: John A. Luke, Jr.,
l6.6; David L. Luke III, 43.9; Rudolph G. Johnstone, 32.6;
George E. Cruser, 35.3; and Jack A. Hammond, 34.6. The
amounts of covered compensation under the plan during 1995
for each of the individuals named in the Summary
Compensation Table set forth on page 15 were approximately
the same as set forth in the salary and bonus columns of
that table.
These approximated annual retirement benefits have been
calculated under the plan's 50% joint and survivor annuity
form of pension and on the assumption of retirement benefits
beginning at age 65. To the extent that an employee's
retirement benefit as computed in accordance with the plan
exceeds maximum amounts permitted under the Internal Revenue
Code, the difference will be paid by Westvaco under an
unfunded benefit plan approved by the Board of Directors.
17
<PAGE>
Benefit Assurance Trusts. The company has entered into four
benefit assurance trusts in connection with the company's
unfunded benefit plans in order to preserve the benefits
earned under the plans in the event of a significant change
in corporate structure. Upon the occurrence of any
potentially significant change in corporate structure, the
company will contribute additional funds to the trusts which
will be sufficient to pay, in accordance with the terms of
the plans, the benefits authorized under the plans. If the
funds in the trusts are insufficient to pay amounts due
under the plans, the company remains obligated to pay any
deficiency.
Severance pay plans
Westvaco has implemented two severance pay plans for
salaried employees who are involuntarily terminated. One
plan, which covers normal business occurrences of job
elimination and discharge for reasons other than gross
misconduct, provides severance pay ranging from 2 weeks to
52 weeks of an employee's salary (including any bonus) based
on years of service. Terminated employees also receive
unused and accrued vacation pay. In the case of job
elimination, an employee may continue medical, dental,
disability, accidental death and dismemberment and life
insurance coverage for specified periods of time ranging
from 1 to 6 months.
The other plan provides that if any salaried employee is
involuntarily terminated (including, in the case of
employees above a determined senior grade, certain actions
constituting constructive discharge) for any reason other
than fraud, misappropriation or embezzlement within two
years after a significant change (a 30 percent acquisition
of the company's voting securities, a merger, sale or
dissolution of the company in certain circumstances, or
certain changes in the composition of the company's Board of
Directors), the employee is entitled to severance pay
ranging from 2 weeks to 104 weeks of any employee's salary
(including any bonus) based on years of service, plus an
additional 20 percent. In addition, employees will receive
the value of lost benefits under the company's retirement,
savings and investment, medical, dental, disability,
accidental death and life insurance plans and any unused and
accrued vacation pay.
2. Proposal to ratify appointment of independent
accountants
The Board of Directors, pursuant to the recommendation of
its Audit Committee, has appointed Price Waterhouse LLP to
serve as independent accountants for the corporation for the
1996 fiscal year subject to approval of the shareholders at
the annual meeting. Price Waterhouse LLP currently serves as
the corporation's independent accountants and received
$2,296,097 in fees during fiscal year 1995. The Audit
Committee has been advised by Price Waterhouse LLP that
neither the firm, nor any of its partners or staff, has any
direct financial interest or material indirect financial
interest in the corporation or any of its subsidiaries.
Representatives of Price Waterhouse LLP will attend the
annual meeting, will have an opportunity to make a statement
if they desire and will be available to respond to
appropriate questions. If the shareholders do not ratify
this appointment, the appointment of other independent
public accountants will be considered by the Audit
Committee.
The Board of Directors unanimously recommends a vote
FOR the ratification of the appointment of independent
accountants. Unless otherwise specified by the shareholder,
the Board intends the accompanying proxy to be voted for
such ratification.
3. Proposal to Approve the Annual Incentive Compensation Plan
Under the Omnibus Budget Reconciliation Act of l993 (the
"1993 Tax Act"), Section 162(m) was added to the Internal
Revenue Code to limit corporate federal income tax
deductions previously allowed for compensation of certain
executive officers of the company to the extent that each
18
<PAGE>
officer's compensation exceeds $1 million. The legislation,
however, provides an exemption from this limit for
compensation paid under a shareholder-approved performance-
based compensation plan.
The tax law changes, and the continuing need to provide
appropriate and competitive cash compensation for the
company's senior executives, have prompted Westvaco to
consider supplementing base salaries for senior management
members with a variable compensation component. The Annual
Incentive Compensation Plan (the "Plan"), the full text of
which is annexed to this Proxy Statement as Appendix A, is
proposed for adoption by the shareholders in order to
maintain competitive compensation levels and to recognize
and reward on an annual basis the company's officers for
their contributions to the overall profitability of the
company, while preserving the company's tax deductions for
the compensation paid to executive officers subject to the
limitations of Section 162(m). The Report of the
Compensation Committee contained in this Proxy Statement
sets forth a detailed explanation of the considerations that
resulted in the proposed Plan.
Description of the plan
Eligibility and determination of plan awards
The Compensation Committee of the Board of Directors (the
"Compensation Committee") will administer the Plan. All
officers at the level of Senior Vice President and above
(the "Participants") will be eligible to participate in the
Plan. Currently, 12 individuals are eligible to
participate.
The Plan sets a minimum performance threshold based on the
company's after tax net income (as defined in the Plan)
which must be exceeded before any bonuses can be considered
for the Participants. Under the Plan the amount available
as a potential bonus pool (the "Award Pool") is based on a
formula which provides two percent (2%) of the company's
after tax net income after deducting an amount equal to six
percent (6%) of average shareholders equity ("ASE") as
defined in the Plan. Six percent of ASE is a minimum level
of earnings below which nothing is generated for the Award
Pool. As earnings increase above 6% of ASE the size of the
Award Pool increases proportionally. The Compensation
Committee may award less but not more than the amount in the
Award Pool. Any amounts that are not awarded in a
particular year may not be carried over to the Award Pool
for a subsequent year.
The maximum potential share of the Award Pool available to a
Participant who might be subject to the limitations imposed
by IRC Section 162(m) will be established within 90 days
after the beginning of the fiscal year ("Potential Awards").
The sum of the individual percentages of the Award Pool
established as the maximum shares of the Award Pool
potentially available to the Participants whom the Committee
has identified as subject to the limitations imposed by IRC
Section 162(m) for an Award Year shall not exceed 100%.
Other Participants will be selected and evaluated after the
end of the fiscal year. Under no circumstances may any
Participant receive an award exceeding 20% of the Award
Pool. It will be the role of the Compensation Committee to
exercise its discretion and make individual awards based on
several factors including company performance, performance
of the individual and competitive pay practices. The
Committee in its discretion may award an individual less but
not more than a designated Potential Award.
The amount of any awards, including Potential Awards, that
may be payable under the Plan in future years cannot
currently be determined. It will depend on the level of the
company earnings and the discretion of the Compensation
Committee. If the Plan had been in effect in 1995, a record
earnings year, the Award Pool would have been approximately
$3,300,000 and $660,000 would have been the maximum amount
that could have been awarded to any Participant. If the
Plan had been in effect during the period 1991 - 1994, the
Award Pool would have been $-0- in 1993 and 1994, $1,060,000
in 1991 and $630,000 in 1992. The maximum amount that could
have been awarded to any Participant would have been $-0- in
1993 and 1994, $210,000 in 1991 and $126,000 in 1992.
19
<PAGE>
In 1995, all individuals eligible to participate under the
Plan as a group, received bonus awards under an informal
plan with respect to 1995 performance of $915,000. The
highest award paid to any individual eligible to participate
under the Plan was $200,000 paid to John A. Luke, Jr.,
President and CEO. See report of Compensation Committee
elsewhere in this Proxy Statement.
Subject to shareholder approval of the Plan, the
Compensation Committee, to meet the requirements of Section
162(m), selected John A. Luke, Jr., as a Participant for
1996 with a maximum of 20% of the Award Pool potentially
available to him. Other Participants will be selected at
the end of the 1996 fiscal year. All Participants will be
evaluated and awards will be made after the end of the 1996
fiscal year.
Administration of the plan
The Plan is to be administered by the Compensation Committee
of the Board of Directors. The Compensation Committee shall
have at least three members, each of which shall qualify as
an "outside director" under the 1993 Tax Act and the
regulations promulgated thereunder. The Compensation
Committee shall have the power to exercise all of the
authority of the company to administer the Plan.
Form of plan award
The Plan awards may be made in the form of cash, deferred
cash, or any combination of such forms. Awards shall have
such terms, including the procedure for election of
deferral, the length of the deferral period, and the
interest to be credited during such deferral period, as the
Compensation Committee shall determine.
Effective date, amendment and termination
The Plan became effective as of November 1, 1995, subject to
receiving approval by the company's shareholders. The
Board of Directors of the company has the power to amend the
Plan at any time. It is intended, however, that no proposed
amendment which, under the 1993 Tax Act or the rules
promulgated thereunder, requires shareholder approval in
order to preserve the tax deductibility of payments under
the Plan will be adopted without obtaining such shareholder
approval. Also, no amendment shall expand the class of
eligible employees, increase the funding formulas, or the
maximum benefit to individual participants without obtaining
shareholder approval.
Income tax consequences
Under current law, Plan awards will be included for federal
income tax purposes in the recipient's income as taxable
compensation in the year paid, and the company will receive
a federal income tax deduction at the same time and for the
same amount.
Vote required
The affirmative vote of a majority of the votes cast by the
shareholders present, in person or by proxy, and entitled to
vote at the Annual Meeting is required for adoption of the
Plan.
The Board of Directors unanimously recommends a vote FOR
approval of the Annual Incentive Compensation Plan. Unless
otherwise specified by the shareholder, the Board intends
the accompanying proxy to be voted for such approval.
Other matters
The Board of Directors knows of no other matters to be
brought before the meeting. However, if any other matters do
properly come before the meeting, a person named in the
accompanying proxy (or a substitute) will vote thereon in
accordance with his best judgment.
20
<PAGE>
Shareholder proposal date
Proposals which shareholders intend to present at the l997
Annual Meeting of Shareholders must be received by the
corporation by September 2, 1996 to be considered for
inclusion in the corporation's Proxy Statement and form of
proxy relating to the 1997 annual meeting.
John W. Hetherington
Vice President and Secretary
December 29, 1995
Form 10-K available without charge
The corporation's annual report on Form 10-K filed with the
Securities and Exchange Commission may be obtained at no
charge after January 29, l996 by writing to: Secretary,
Westvaco Corporation, 299 Park Avenue, New York, New York
10171. Exhibits to the Form 10-K are also available at a
cost of twenty-five cents per page.
21
<PAGE>
Appendix A
WESTVACO CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
The purpose of the Westvaco Corporation (the "Company")
Annual Incentive Compensation Plan (the "Plan") is to
continue to encourage the Company's senior executives to
achieve a sustained, high level of financial success for the
Company; to place a portion of the senior executives'
compensation at risk based on Company and individual
performance; and to allow the Company to reward senior
management appropriately with compensation competitive with
other companies and in compliance with the requirements for
tax deductibility imposed by Internal Revenue Code (IRC)
Section 162(m).
Administration
The Plan will be administered by the Compensation Committee
of the Board of Directors (the "Committee"), and decisions
regarding the Plan will be made solely by the Committee's
"outside directors" as defined in IRC Section 162(m), none
of whom has been at any time a salaried employee of the
Company. The Committee shall have the authority to select
participants, determine the amount of incentive funds
available and to be spent within the funding formula
described below, grant awards, determine payment conditions,
interpret the Plan and recommend to the Board appropriate
amendments to the Plan, except that no amendment shall
expand the class of eligible employees or increase the
funding formula or the maximum benefit to individual
participants without the consent of the Company's
shareholders. The Committee may delegate to management
administrative functions that do not involve discretionary
decisions. The interpretation or decision by the Committee
with regard to any questions arising under the Plan shall be
final and conclusive on all participants in the Plan.
Eligibility
All officers at the Senior Vice President level and above,
(the "Participants") will be eligible to participate in the
Plan. Within 90 days after the beginning of the Company's
fiscal year (the "Award Year"), the Committee will identify
the Participants who might receive compensation that is
subject to the limitations imposed by IRC Section 162(m) and
establish the maximum share of the Award Pool potentially
available to each of those Participants ("Potential
Awards"). The sum of the individual percentages of the
Award Pool established as the maximum shares of the Award
Pool potentially available to the Participants whom the
Committee has identified as subject to the limitations
imposed by IRC Section 162(m) for an Award Year shall not
exceed 100%. Other Participants will be selected and
evaluated after the end of the Award Year.
Formula
The amount available for awards, including Potential Awards,
under the Plan for each Award Year (the "Award Pool") will
be two percent (2%) of the Company's consolidated after-tax
net income after deducting six percent (6%) of average
consolidated shareholder equity. Net income shall be the
net income as reported to shareholders in the Company's
Annual Report, excluding the following items from the
calculation of net income unless the Committee chooses to
include an item that causes the Award Pool to be reduced:
extraordinary or non-recurring items, changes in tax laws,
accounting changes, discontinued operations, restatement of
prior period financial results and any other unusual, non-
recurring gain or loss that is separately identified and
quantified in the Company's consolidated statement of
income. Average consolidated shareholder equity shall be
the average shareholder common equity for the Award Year for
which the award is granted, defined as the average of (a)
and (b) where (a) is the amount of shareholder equity at the
end of the prior year and (b) is the amount of shareholder
equity at the end of the Award Year, in each case as
reported in the Company's Annual Report.
22
<PAGE>
Payments
At its first meeting after the end of the Company's Award
Year, the Committee will evaluate the Company's financial
results, determine the Award Pool, and certify these results
in writing.
In determining the amounts to be actually paid to
Participants, the Committee will exercise discretion after
taking into account the Company's financial performance,
performance of the Participant, and competitive compensation
levels. It is expected that the Committee will use its
discretion carefully and apply good and rigorous judgment in
appraising the performance of the Company and the
contributions of the Participant to the Company's
performance. The maximum award to any individual shall be
20 percent of the Award Pool. The Committee may use
discretion to pay an individual less than a designated
Potential Award, but it may not increase other individual
designated Potential Awards allowed under the Plan. Any
reductions in designated Potential Awards may be used for
other awards allowed under the Plan.
The Committee may exercise its discretion and authorize
total payments of less than the maximum Award Pool, but may
not increase the total available pool beyond the maximum
allowable under the Plan. Any amount not awarded will be
returned to the earnings of the Company in each year and
will not be carried over.
Awards will be paid in cash as soon as practical or may, at
the election of the Participant and under procedures adopted
by the Committee, be deferred.
Tax withholding
The Company will deduct any required withholding taxes from
the payments under the Plan.
Termination of employment
Any Participant who is not an employee of the Company on
October 31 of the Award Year for which an award could be
granted will forfeit the award. If a Participant's employment
terminates due to retirement, death, disability,
or with the Company's consent, the Committee may at its
discretion authorize payment of an award at the time other
award payments are authorized.
No right to awards or continued employment
No person shall have any claim or right to be granted an
award and the granting of an award shall not be construed as
giving a Participant the right to be retained in the employ
of the Company.
Other plans
The existence of this Plan does not preclude the Company
from adopting other annual incentive plans for other
employees not eligible to participate in the Plan. The
Company may from time to time, at its discretion, award
informal bonuses to selected employees.
Interpretation and amendments
The Plan is designed to comply with IRC Section 162(m), and
all provisions in the Plan shall be construed in a manner
consistent with that intent. The Company's Board of
Directors may amend or terminate the Plan at any time, but
no amendment shall expand the class of eligible employees or
increase either the funding formula for determining the
Award Pool or the maximum award to an individual Participant
without the consent of the Company's shareholders. Subject
to the foregoing restrictions, the Plan may be amended to
meet the conditions required, or to remove conditions no
longer required, by IRC Section 162(m).
Plan term
The Plan shall be effective as of November 1, 1995, subject
to receiving shareholder approval at the February 27, 1996
Annual Shareholders Meeting, and shall remain in effect
until terminated by the Company's Board of Directors.
23
<PAGE>
WESTVACO
Westvaco Corporation
Westvaco Building, 299 Park Avenue
New York, New York 10171
212 688 5000
For shareholder information
outside of New York City, call toll free
1 800 432 9874
50% recovered fiber
10% postconsumer fiber
The proxy statement is printed on American Eagle
web dull paper manufactured at Westvaco's
Tyrone, PA, fine papers mill.
<PAGE>
The following is the text of the proxy card for individual shareholders
mailed with the proxy statement.
<FRONT>
WESTVACO CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints David L. Luke III, John A. Luke, Jr., and John
W. Hetherington, successively, with full power of substitution, to represent
the undersigned and to vote all Common Stock of Westvaco Corporation which
the undersigned would be entitled to vote at the Annual Meeting of
Shareholders of the Corporation to be held on February 27, 1996 and at
any adjournment of the meeting.
(Continued and to be signed on the reverse side)
<BACK>
Westvaco Westvaco Building PROXY
299 Park Avenue Solicited on Behalf of the Board of Directors
New York, NY 10171 Annual Meeting of Shareholders February 27, 1996
-------------- ----------------
ACCOUNT NUMBER COMMON
- ------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees listed below and
FOR proposals 2 and 3.
1. Election of Directors: W.L. Lyons Brown, Jr., John A. Luke, Jr.,
William R. Miller.
WITHHELD for the following nominee(s)
___FOR ___WITHHELD only, write name(s) below.
all nominees for all nominees ____________________________________
2. Appointment of Price Waterhouse as
independent accountants for 1996. ___FOR ___AGAINST ___ABSTAIN
3. Approval of the Annual Incentive
Compensation Plan. ___FOR ___AGAINST ___ABSTAIN
- ------------------------------------------------------------------------------
The proxies are directed to vote as specified above and on any matters
properly coming before the meeting and any adjournment thereof. If no
direction is made, the proxies will vote FOR all nominees listed above
and FOR Proposals 2 and 3. Please date, sign and return this proxy
prompty.
Dated____________________, 1996
Signature______________________
_______________________________
_______________________________
Please sign exactly as your name
appears on this proxy. If signing
for estates, trusts or corporations,
title or capacity should be stated.
