WESTVACO
January 27, 1995
We are surprised that Institutional Shareholder Services, Inc.
recommends a vote against our 1995 Salaried Employee Stock
Incentive Plan. We ask for your support for the plan by voting
FOR Proposal 3 on our proxy.
The 1995 plan seeks authorization for less than 5% of the
outstanding shares to maintain our conventional program of equity-
based incentive compensation. Our last stock incentive plan was
approved in 1988 by over 85% of the outstanding shares.
The 1995 plan, approved by a committee of independent directors,
contains no unusual features, such as option reloads, option
repricing or discount options. It reaches deep into our salaried
organization, and provides incentive for more than 300 employees
each year. The plan also provides the flexibility of offering a
limited number of restricted stock grants. We have no present
intention of making restricted stock grants. These were provided
in response to uncertainty as to action contemplated by the
Financial Accounting Standards Board with respect to option
plans.
It is important to state that the 1995 plan and its predecessors
have represented our only form of incentive compensation,
designed so that eligible employees do not benefit unless
shareholders do. Westvaco does not pay bonuses.
We are proud of the long-term performance of the company in terms
of shareholder rewards. As noted in our proxy statement, the
total return to our shareholders over a 28-year period was more
than one and one-half times that of the S&P 500 and excellent in
terms of performance in our industry.
We are troubled by ISS' calculations which are difficult to
understand and impossible for us to duplicate. Several of the
claims made in ISS' report conflict with our experience
and with logic. For example, the $79 million ISS calculates
as a Potential Shareholder Wealth Transfer overlooks the fact
that, if eligible employees actually benefited by $25.00
per option share, then the holders of 67 million shares
would receive a $1.7 billion increase in value. That would be a
wonderful generation of shareholder wealth in which eligible
employees would benefit only in proportion to the benefit to
shareholders.
We are an organization with conservative compensation policies,
and we are convinced of the benefits of our conventional option
program which ties our eligible employees' interests directly to
those of our shareholders. Accordingly we believe Proposal 3
deserves strong shareholder support.
/s/John W. Hetherington
John W. Hetherington
Vice President and
Corporate Secretary
Westvaco Building
299 Park Avenue
New York, NY 10171
Telephone 212 688 5000
