December 26, l997
Dear Fellow Shareholders:
We cordially invite you to join us at the l998 Annual Meeting of Shareholders
of Westvaco Corporation to be held at 10 o'clock in the morning on Tuesday,
February 24, 1998. 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
sign, date and promptly return the enclosed proxy.
This year our proxy material includes two proposals. We ask for your support
in voting FOR Proposal 1, the election of our directors; and FOR Proposal 2,
the appointment of our independent accountants.
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 sign,
date and return the enclosed proxy as soon as conveniently possible.
Sincerely,
John A. Luke, Jr.
Chairman, President and
Chief Executive Officer
Westvaco
Paper, packaging and specialty chemicals
Notice of 1998 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 24, 1998, at
ten o'clock in the morning for the following purposes:
1. To elect four 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 1998.
All holders of common stock of record at the close of business on December
26, 1997, 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 sign, date
and promptly return the enclosed proxy.
By Order of the Board of Directors
John W. Hetherington
Vice President, Assistant General Counsel
and Secretary
December 26, 1997
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 24, 1998. Only holders of
Westvaco common stock of record at the close of business on December 26,
1997, will be entitled to vote at the meeting, each share of such stock
being entitled to one vote. The Proxy Statement and enclosed form of
proxy are being mailed on or about Monday, January 5, 1998, to each
shareholder entitled to vote.
The presence of a majority of the outstanding shares of common stock,
represented in person or by proxy at the meeting, will constitute a
quorum. The nominees receiving the highest vote totals will be elected
directors. Accordingly, abstentions and broker non-votes will not
affect the outcome of the election. All other matters to be voted on
will be decided by the affirmative vote of a majority of the shares
present or represented at the meeting and entitled to vote. On any such
matter, an abstention will have the same effect as a negative vote but,
because shares held by brokers will not be considered entitled to vote
on any matters as to which the brokers lack authority to vote, a broker
non-vote will have no effect on the vote.
On December 26, 1997, there were outstanding 101,946,427 shares of
Westvaco common stock. The following investment advisers are believed
to have beneficial ownership (as defined for certain purposes by the
Securities and Exchange Commission) of more than 5% of the company's
common stock by virtue of having investment authority and, to some
extent, voting authority over the number of shares indicated below:
Percent
Shares of Class
Invesco Capital Management 8,572,450 8.4%
1315 Peachtree Street, N.E.
Atlanta, GA 30309
A subsidiary of Invesco PLC
11 Devonshire Square
London, England
Capital Research & Management 6,648,900 6.5%
333 South Hope Street
Los Angeles, CA 10153
Sanford C. Bernstein & Co. 5,200,353 5.1%
767 Fifth Avenue
New York, NY 10153
The Westvaco savings and investment plans for salaried and hourly
employees held, as of October 31, 1997, a total of 12,441,123 shares, or
12%, for which full voting rights are exercisable by members of the
plans. As of that date there were 12,400 current or former
employees of Westvaco and its subsidiaries participating in such plans.
All directors and officers as a group owned 4,340,972 shares, or 4.1%,
of Westvaco common stock, including shares in the Savings and Investment
Plan for Salaried Employees as of October 31, 1997, 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 officers named in the Summary Compensation Table on
page 19 held the following number of shares: Philip H. Emery, Jr.,
181,502 shares, Frederick C. Haas, 277,210 shares, and Jack A. Hammond,
219,260 shares. All information concerning share ownership, unless
otherwise stated, 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 30 years.
It is important that your stock be represented at the meeting. Whether or not
you plan to attend, please sign, date 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. Election of directors
Four 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 four nominees for directors listed on the following pages.
The present nominees, David L. Hopkins, Jr., Douglas S. Luke, Jane L. Warner,
and Richard A. Zimmerman, if elected, will be elected for a term expiring at
the Annual Meeting of Shareholders to be held in the year 2001. The Board of
Directors unanimously recommends a vote FOR the named nominees and, unless
otherwise specified by the shareholder, the Board of Directors 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, Dr. Thomas W. Cole, Jr., and Rudolph G. Johnstone, Jr.,
will continue to serve for a term expiring at such meeting to be held in
2000. W.L. Lyons Brown, Jr., John A. Luke, Jr., and William R. Miller will
continue to serve for a term expiring at the annual meeting to be held in
1999.
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. All information
in this Proxy Statement concerning share ownership by nominees or continuing
directors is as of the most recent practicable date.
Nominees for election as directors for a term of three years expiring in 2001
David L. Hopkins, Jr.: Managing Director, BT
Alex. Brown; Head, Alex Brown Asset Management,
since 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: The Maryland Historical Society. Age
69.
Westvaco shares owned 48,706 (Notes 1, 2). Term
to expire: 2001
Douglas S. Luke: President and Chief Executive
Officer, WLD Enterprises, Inc., a private
investment company with diversified interests in
marketable securities, real estate and operating
businesses, since 1991. Westvaco Director since
October 1996. B.A., University of Virginia,
1964. M.B.A., The Darden School, University of
Virginia, 1966. Managing Director and Officer
of Rothschild, Inc. and its predecessor, New
Court Securities Corporation, 1979-1990.
Director: Orbital Sciences Corporation, Regency
Realty Corporation. Age 56.
Westvaco shares owned 46,960 (Notes 1, 2). Term
to expire: 2001
Jane L. Warner: President, Randall Textron and
Executive Vice President, Textron Automotive
Company, since 1994, both of which businesses
are part of the Automotive Division of Textron,
Inc., a global, multi-industry company with
aircraft, automotive, industrial and financial
businesses. Westvaco Director since November
1997. B.A., Michigan State University, 1970,
M.A., 1973. M.B.A., Stanford University, 1988.
Joined General Motors Corporation in 1973.
Became General Superintendent, Chevrolet-Pontiac
Canada Group in 1988 and Assistant Chief
Engineer and Future Product Manager,
Camaro/Firebird Platform, 1991 prior to joining
Textron, Inc. Director: GMI Engineering and
Management Institute. Age 50.
Westvaco shares owned (Note 3). Term to expire:
2001
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.
Served as President, 1976-1985; Chief Operating
Officer, 1976-1984; Chief Executive Officer,
1984-1993; and Chairman, 1985-1993. Director:
Eastman Kodak Corporation, Lance, Inc. Trustee
and Chairman of the Board: United Theological
Seminary, Pennsylvania State University. Age 65.
Westvaco shares owned 7,650 (Note 1). Term to
expire: 2001
Directors whose terms of office continue
Samuel W. Bodman III: Chairman and Chief
Executive Officer, Cabot Corporation, a
chemical, energy and materials company, since
1988. Westvaco Director since 1987. B.Ch.E.,
Cornell University, 1961. 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 59.
Westvaco shares owned 34,500 (Note 1). Term to
expire: 2000
Dr. Thomas W. Cole, Jr.: President, Clark
Atlanta University since l989. 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
1982. Chancellor of the West Virginia Board of
Regents, 1986-1988, President of Clark College,
1988, and President of Atlanta University, 1988.
Director: West Virginia Wesleyan College,
Atlanta Chamber of Commerce, Central Atlanta
Progress, Atlanta Committee for Public
Education, First Union Bank of Georgia, Atlanta
Action Forum. Vice President: Atlanta Area
Council, Boy Scouts of America; Eagle Scout.
Age 56.
Westvaco shares owned 4,850 (Note 1). Term to
expire: 2000
Rudolph G. Johnstone, Jr.: Executive Vice
President, Westvaco; Director since 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, 1970 and Assistant Division
Manager, 1980. 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. Director: Direct Marketing
Association, Foreign Policy Association. Age 61.
Westvaco shares owned 258,961 (Note 1). Term to
expire: 2000
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, 1958. B.S. American
Graduate School of International Management,
1960. Joined Brown-Forman Corporation, 1960.
Became a Director, 1964 and Executive Vice
President, 1972. Served as President, 1975-1983;
Chief Executive Officer, 1975-1993; and Chairman
of the Board, 1983-1995. Director: Pennzoil
Company, Essex International Inc. Advisory
Director: Bessemer Holdings, L.P. Former Member:
President's Advisory Committee for Trade Policy
and Negotiations. Chairman and Trustee:
Winterthur Museum. Trustee: World Monuments
Fund. Alumni Trustee: University of Virginia
Endowment Fund. Trustees' Council: National
Gallery of Art. Age 61.
Westvaco shares owned 9,000 (Note 1). Term to
expire: 1999
John A. Luke, Jr.: Chairman, 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; President
and Chief Executive Officer, 1992; Chairman,
President and Chief Executive Officer, 1996.
Director: American Forest and Paper Association,
The Americas Society, Inc., Arkwright Mutual
Insurance Co., The Bank of New York, United
Negro College Fund. Chairman of the Board of
Trustees: Lawrence University. Trustee: Tinker
Foundation. Governor: National Council of The
Paper Industry for Air and Stream Improvement,
Inc. Age 49.
Westvaco shares owned 562,088 (Notes 1, 2).
Term to expire: 1999
William R. Miller: Corporate Director. Westvaco
Director since 1992. B.A., St. Edmund Hall,
Oxford University, 1952, M.A., l956. Joined
Bristol-Myers Company (now Bristol-Myers Squibb
Company), a pharmaceutical company, in 1964.
Became President International Division, 1972;
President Pharmaceutical and Nutrition Group,
1981; Vice Chairman of the Board, 1985-1990.
Former Chairman and Director: Pharmaceutical
Manufacturers Association. Chairman of the
Board: Vion Pharmaceuticals, Inc. (formerly
OncoRx), SIBIA Neurosciences, Inc. Director:
ImClone Systems, Inc., ISIS Pharmaceuticals,
Inc., St. Jude Medical, Inc., Transkaryotic
Therapies, Inc., Xomed Surgical Products, Inc.
Advisory Director: Chugai Pharmaceuticals, Inc.
Vice Chairman of the Board: Cold Spring Harbor
Laboratory. Trustee: Manhattan School of Music,
Metropolitan Opera Association, Opera Orchestra
of New York. Member: Oxford University
Chancellor's Court of Benefactors, Honorary
Fellow: St. Edmund Hall. Chairman of the
English-Speaking Union of the United States.
Age 69.
Westvaco shares owned 6,000. Term to expire:
1999
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: Douglas S. Luke is a
co-trustee of a trust which held a total of 24,998 shares of Westvaco common
stock. John A. Luke, Jr., is a co-trustee of two trusts which held a total of
9,328 shares of Westvaco common stock. David L. Hopkins, Jr., is a co-trustee
of a trust which held a total of 43,887 shares of Westvaco common stock.
(3) Jane L. Warner, who became a director in November 1997, did not own
shares or hold exercisable options at the time of her election.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 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 16(a) rules were filed
in a timely manner during the year, except for one report of one transaction
by Samuel L. Torrence, a Senior Vice President. This was an exercise of
stock appreciation rights and did not involve any transaction in the public
market. A report has now been filed.
Board and committee meetings
The Board of Directors held eleven meetings, one each month except July, and
24 committee meetings during fiscal year 1997. Average attendance by
directors at meetings of the Board and its committees was 94%.
The Audit Committee, which met two times in fiscal year 1997, has as its
members William R. Miller, Chair; Dr. Thomas W. Cole, Jr., David L. Hopkins,
Jr., Katherine G. Peden, Jane L. Warner, 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, as well as
significant issues in litigation.
The Compensation Committee, which met eight times in fiscal year 1997, has as
its members Richard A. Zimmerman, Chair; Samuel W. Bodman III, W.L. Lyons
Brown, Jr., Dr. Thomas W. Cole, Jr., David L. Hopkins, Jr., and Katherine G.
Peden, 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, determines awards
under the Annual Incentive Compensation Plan, oversees matters relating to
the corporation's stock option plans and various issues related to the
management of its savings and investment plans. In addition, the Committee
reviews the management of, and proposed changes to, the corporation's various
employee benefit plans.
The Committee on Board Membership, which met five times in fiscal year 1997,
has as its members Katherine G. Peden, Chair; Samuel W. Bodman III, W.L.
Lyons Brown, Jr., John A. Luke, John A. Luke, Jr., and Richard A. Zimmerman.
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, Westvaco's Secretary, not
less than 90 days in advance of an annual meeting nor later than the seventh
day following the date that 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 possible
nominations as may be sent by shareholders to the Committee.
The Finance Committee, which met five times in fiscal year 1997, has as its
members David L. Hopkins, Jr., Chair; W. L. Lyons Brown, Jr., Douglas S.
Luke, 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.
The Committee on the Environment, Safety and Health, which met three times in
fiscal year 1997, has as its members Samuel W. Bodman III, Chair; Dr. Thomas
W. Cole, Jr., Douglas S. Luke, John A. Luke, John A. Luke, Jr., William R.
Miller, Katherine G. Peden, and Jane L. Warner. The Committee on the
Environment, Safety and Health oversees the stewardship of the corporation
with respect to conservation of the natural resources and its ability to
protect the natural environment. It also oversees implementation of the
company's workplace safety and health program. The committee receives regular
reports from management, reviews environmental, safety and health matters
with management, and makes recommendations as needed.
The International Committee, which met one time in fiscal year 1997, has as
its members John A. Luke, Chair; Samuel W. Bodman III, W. L. Lyons Brown,
Jr., Douglas S. Luke, John A. Luke, Jr., William R. Miller, and Richard A.
Zimmerman. The International Committee serves as a resource for management,
sharing its knowledge and expertise on opportunities outside of the United
States which may be of interest to the company.
Director compensation
Only directors who are not employees of the corporation receive fees. Since
March 1, 1997, fees paid to each outside director have consisted of an annual
retainer of $30,000 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 accordance with the provisions of
our incentive stock plan for non-employee directors approved by shareholders,
stock options covering 1,500 shares are granted each year to each non-employee
director up to the limit of shares in the plan.
Executive Compensation
Report of the Compensation Committee
The Committee
The Compensation Committee is a Board committee composed entirely of outside
directors, none of whom is or has been at any time an employee of the company
or is receiving any compensation from the company other than as a director.
The Committee administers the Westvaco Executive Compensation Program (the
"Program") which is designed to attract and retain distinctly capable and
highly motivated individuals who can create and execute programs that will
produce sound, long-term rewards for shareholders. The compensation of all
employees, including executive officers, whose annual salary exceeds
$275,000, is determined by the Committee which informs the Board on any
action taken with respect to the compensation of the CEO.
Performance Factors
A major Westvaco objective is to increase the value of the company for its
shareholders over the long term. 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 18 , show a high degree of success in creating
long-term shareholder value.
Another major company objective has been 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.
The contribution of an individual to the execution of corporate strategies,
including the foregoing objectives, remains the principal basis on which job
performance is evaluated and, therefore, is a significant factor in
determining salaries, incentive compensation for the most senior executives
as hereafter described, and grants of stock options.
Cash Compensation
The Westvaco Annual Incentive Compensation Plan (the "Plan") which places a
portion of a senior executive's compensation at risk, and ties it to company
and personal performance, was approved by the shareholders at the company's
1996 Annual Shareholders' Meeting. The Plan is administered by the
Compensation Committee. Funding for awards is based on a formula tied to the
overall performance of the company. The formula, which provides funding
based on 2% of net income in excess of 6% return on shareholders' equity, is
designed so that 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. The Committee uses
its discretion under the Plan carefully, taking into account anticipated
competitive compensation for various job levels, and in appraising the
performance of the company and of the individuals in senior management in
determining awards to each individual considered. Key criteria for
individual performance focus on improved shareholder value through financial
and operating performance, advancing the company's strategy of product and
service differentiation, and organizational development. Under the Plan no
one executive can receive more than 20% of the available pool. It is
anticipated that in many 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 pool for a subsequent year.
Based on 1997 fiscal year performance, the funding formula provided a total
available pool of $561,000 for incentive compensation. The total payout for
eight executives after the close of fiscal year 1997 was $330,000,
representing 59% of the total available award pool.
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 total annual cash compensation (salary +
incentive compensation) paid by the seven peer paper companies, which along
with Westvaco comprise the Dow Jones Paper Index in the proxy performance
graphs on pages 17 and 18, and by other companies comparable in size 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 any incentive compensation, paid
to comparable officers of the companies in a somewhat broader group
encompassing companies comparable to Westvaco both within and without the
paper industry. A midpoint is determined with reference to the median of
this group. 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.
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 Dow Jones Paper Index.
Compensation at Westvaco is inclined to be more level throughout the
organization than is generally seen in most companies, and the compensation
philosophy at Westvaco tends to be conservative. In 1996, four of the seven
other companies reporting with Westvaco in the Dow Jones Paper Index provided
more total cash compensation than Westvaco to their five highest paid
executives.
Equity-Based Compensation
Stock Options
Grants of stock options are made by the Committee to create a direct tie
between the interests of key employees and shareholders of the company. Such
options are usually 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 Dow Jones Paper Index, and by other companies
comparable in revenues to Westvaco in other industries. The Committee does
not consider the number of options already held by an individual in making
additional grants.
The Savings and Investment Plans
The savings and investment plans for Westvaco employees, (the "S&I Plans"),
with company matching, provide an attractive way for all employees, including
executive officers, to acquire and hold stock in the company by contributing
a percentage of their compensation. They reflect the company's strong
commitment to equity ownership by employees, thus tying the interests of all
members of the Westvaco organization to the interests of the shareholders as
a whole. The S&I Plans provide specific and pre-established
performance-based criteria to determine the level of supplemental company
matching. While the company's strategy of differentiated products and
services contributed to greater stability of earnings as compared with its
competitors, less favorable market conditions caused the company not to meet
or exceed each of these pre-established reference points for fiscal 1997. As
a result, there was no supplemental match for fiscal 1997 above the regular
company match of 75 percent.
Recent Performance
Westvaco's differentiated product strategy continues to yield benefits. A
comparison of the company's total return to shareholders over the past two
years with that of the Dow Jones Paper Index, as reviewed by the Committee,
is reflected on the following graph:
Total Return to Shareholders
1995 1996 1997
Westvaco 100.00 105.84 125.49
S&P 500 Index 100.00 124.09 163.94
Dow Jones Paper Index 100.00 103.09 116.28
Data source: Standard & Poor's Compustat Services, a division of McGraw-Hill
Companies except for Dow Jones Paper Index data which comes from Dow Jones &
Company, Inc.
The company's earnings performance under the very challenging business
conditions which have confronted the paper industry since 1995, compares very
favorably with the other companies in the Dow Jones Paper Index.
Compensation for the Chief Executive Officer
Specific performance criteria are established against which the Committee
measures the performance of the Chief Executive Officer. These same criteria
are used by the Chief Executive Officer in evaluating the company's other
senior officers.
The base salary of the company's Chairman, President and Chief Executive
Officer, John A. Luke, Jr., was, at his request, not increased in 1997. A
base salary adjustment was granted in 1997 to only one executive officer
named in the Summary Compensation Table. The CEO's incentive compensation
for 1997 was $90,000. The total incentive compensation paid in 1997 under the
Westvaco Annual Incentive Compensation Plan to the other executive officers
listed in the Summary Compensation Table was $130,000. The Committee
believes the total cash compensation of John A. Luke, Jr., is appropriate
when compared to the total cash compensation for similar positions in the Dow
Jones Paper Index companies. In December 1996, the Committee granted stock
options to John A. Luke, Jr., for 95,000 shares and simultaneously made
grants to 361 other officers and salaried employees.
Conclusion
The Committee remains convinced that the caliber and motivation of the
company's executives and all of its employees is extremely important to the
company's ability to meet future challenges and to continue to deliver
long-term value to its shareholders. The Committee also believes that the
Westvaco Executive Compensation Program is making an important contribution
to the company's performance, and is deserving of shareholder support.
Richard A. Zimmerman, Chair
Samuel W. Bodman III
W. L. Lyons Brown, Jr.
Dr. Thomas W. Cole, Jr.
David L. Hopkins, Jr.
Katherine G. Peden
Total Return to Shareholders
1992 1993 1994 1995 1996 1997
Westvaco 100.00 93.05 101.20 123.83 131.06 155.39
S&P 500 Index 100.00 114.94 119.39 150.95 187.32 247.47
DJ Paper Index 100.00 97.97 120.60 145.19 149.68 168.82
Data source: Standard & Poor's Compustat Services, a division of McGraw-Hill
Companies except for Dow Jones Paper Index data which comes from Dow Jones &
Company, Inc.
This graph compares the cumulative total return to shareholders on Westvaco
common stock for a five-year period ended October 31, 1997, with the return
on the Standard & Poor's 500 Stock Index (S&P 500) and the Dow Jones Paper
Index.
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 Dow Jones Paper Index over a long-term
period.
Westvaco S&P 500 DJPI
1967 100 100 100
1968 162 114 151
1969 150 110 166
1970 115 98 128
1971 99 115 112
1972 142 140 109
1973 220 140 150
1974 150 99 122
1975 209 125 176
1976 295 150 238
1977 302 141 184
1978 295 150 201
1979 376 173 223
1980 418 229 249
1981 449 230 243
1982 548 267 295
1983 717 342 367
1984 905 363 401
1985 898 434 416
1986 1,436 578 633
1987 1,646 615 651
1988 1,753 705 806
1989 1,740 892 924
1990 1,548 825 787
1991 2,581 1,101 1,198
1992 2,482 1,211 1,145
1993 2,310 1,392 1,122
1994 2,512 1,446 1,381
1995 3,074 1,828 1,663
1996 3.253 2,268 1,714
1997 3,857 2,997 1,934
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 indices, is presented to show comparative
cumulative return over a long term. 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.
Summary Compensation Table
The following shows the compensation paid or accrued by Westvaco to or for each
of its five most highly compensated executive officers for all periods during
the fiscal year ended October 31, 1997.
Long-term
Compensation
Annual Awards
Name and Compensation Options/ All Other
Principal Position Year* Salary Bonus(1) SARs (#)(2) Compensation(3)
John A. Luke, Jr. 1997 $874,167 $90,000 95,000 $43,388
Chairman, President and 1996 862,500 150,000 85,000 45,563
Chief Executive Officer 1995 783,333 200,000 75,000 64,957
Rudolph G. Johnstone,Jr. 1997 620,000 60,000 60,000 30,600
Executive Vice President 1996 583,333 100,000 50,000 30,750
1995 475,000 125,000 37,500 39,613
Frederick C. Haas 1997 499,167 35,000 45,000 24,038
Senior Vice President 1996 490,000 45,000 45,000 24,075
1995 429,167 50,000 30,000 31,659
Philip H. Emery, Jr. 1997 449,167 35,000 45,000 21,788
Senior Vice President 1996 437,500 40,000 40,000 21,488
1995 356,667 50,000 27,000 26,879
Jack A. Hammond 1997 449,167 - 45,000 20,213
Senior Vice President 1996 450,000 40,000 40,000 22,050
1995 437,500 75,000 30,000 33,838
*Fiscal years ended October 31.
(1) Represents the variable component of total annual compensation
under the Westvaco Annual Incentive Plan as discussed in the
Report of the Compensation Committee.
(2) All SARs held by officers were cancelled during 1997.
(3) Represents company contributions and accruals of $7,125 and
$36,263 for John A. Luke, Jr.; $7,125 and $23,475 for Rudolph G.
Johnstone, Jr.; $6,863 and $14,925 for Philip H. Emery, Jr.; and
$6,282 and $13,931 for Jack A. Hammond, to the Salaried Savings
and Investment Plan and unfunded Savings and Investment
Restoration Plan, respectively. Represents company accruals for
only the unfunded Savings and Investment Restoration Plan in the
case of Frederick C. Haas in 1997. The five executive officers
named above hold interests equivalent to a total 247,147 shares
under such plans.
Option/SAR Grants in the Fiscal Year Ended October 31, 1997
Individual Grants
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Expiration
Name Granted(2) Fiscal Year(2) Price($/Sh) Date
John A. Luke, Jr. 95,000 9.99%/14.01% $27.4375 12/17/2006
Rudolph G. Johnstone, Jr. 60,000 6.31%/8.85% 27.4375 12/17/2006
Frederick C. Haas 45,000 4.73%/6.64% 27.4375 12/17/2006
Philip H. Emery, Jr. 45,000 4.73%/6.64% 27.4375 12/17/2006
Jack A. Hammond 45,000 4.73%/6.64% 27.4375 12/17/2006
All Optionees 950,515 100% $27.4375 12/17/2006
Potential Realizable Value at Assumed Annual Rates of Stock
Appreciation for Option Term (1)
5% 10%
John A. Luke, Jr. $1,639,241 $4,154,183
Rudolph G. Johnstone, Jr. 1,035,310 2,623,695
Frederick C. Haas 776,483 1,967,771
Philip H. Emery, Jr. 776,483 1,967,771
Jack A. Hammond 776,483 1,967,771
All Optionees $16,401,297 $41,564,349
All shareholders(3) $1,758,819,811 $4,457,220,636
Optionees gain as %
of all shareholder gain 0.93% 0.93%
(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) Executive officers were granted options in tandem with stock appreciation
rights (SARs). 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 percentage of total SARs granted to all
employees. All SARs held by officers were cancelled during 1997. Tandem limited
stock appreciation rights (LSARs) were also granted to executive officers which
remain in effect and are exercisable in the event of a change in control.
Exercise of an option or LSAR cancels any tandem grant. All options were granted
at market value on the date of grant and become exercisable twelve months from
the date of grant.
(3) As of October 31, l997, there were 101,930,023 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
$27.4375 on December 17, 1996, when the above options were granted.
Aggregated Option/SAR Exercises in Last Fiscal Year
and October 31, l997 Option Values
Number of Unexercised
Number of Options At
Securities October 31, 1997(2)
Underlying Options/ Value Exercisable/
Name SARs Exercised Realized(1) Unexercisable
John A. Luke, Jr. 16,874 $163,116 $377,494/95,000
Rudolph G. Johnstone, Jr. 16,546 217,308 132,408/60,000
Frederick C. Haas 77,835 929,433 105,718/45,000
Philip H. Emery, Jr. 27,202 290,532 100,177/45,000
Jack A. Hammond - - 127,353/45,000
Value of Unexercised In-the-Money Options
At October 31, 1997(3)
Exercisable/Unexercisable
John A. Luke, Jr. $3,459,721/489,848
Rudolph G. Johnstone, Jr. 1,007,802/309,378
Frederick C. Haas 796,719/232,033
Philip H. Emery, Jr. 751,611/232,033
Jack A. Hammond 992,436/232,033
(l) 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.
(2) During 1997, all SARs held by officers were cancelled.
(3) The value of unexercised in-the-money options represents the difference
between the grant price of the options and the market price of $32.5938 at
October 31, 1997, multiplied by the number of in-the-money options
outstanding.
Pension Plan Table
Years of Service
Remuneration 25 30 35 40 45
$ 500,000 $174,100 $209,000 $243,800 $279,100 $314,800
660,000 231,300 277,500 323,800 370,500 417,700
820,000 288,400 346,100 403,800 461,900 520,500
980,000 345,600 414,700 483,800 553,400 623,400
1,140,000 402,700 483,300 563,800 644,800 726,300
1,300,000 459,900 551,900 643,900 736,300 829,200
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 compensation levels and
years of service. As of December 31, 1997, the executive officers named in
the Summary Compensation Table set forth on page 19 will have the following
years of credited service: John A. Luke, Jr., 18.7; Rudolph G. Johnstone,
Jr., 34.6; Frederick C. Haas, 34.8; Jack A. Hammond, 36.5; and Phillip H.
Emery, Jr., 32. The amounts of covered compensation under the plan during
1997 for each of the individuals named in the Summary Compensation Table set
forth on page 19 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.
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 vested 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 2 years after a
significant change (a 20 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 incentive compensation)
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 vested 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 1998 fiscal year subject to approval
by the shareholders at the annual meeting. Price Waterhouse LLP currently
serves as the corporation's independent accountants and received $1,389,900
in fees and expenses during fiscal year 1997 for audit-related services. 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 Price Waterhouse LLP as independent accountants. Unless
otherwise specified by the shareholder, the Board intends the accompanying
proxy to be voted for such ratification.
Other matters
Westvaco's bylaws 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 Board of Directors knows of no such other matters to be brought before
this meeting. However, if any other matters were to properly come before the
meeting, a person named in the accompanying proxy (or a substitute) would
vote thereon in accordance with his best judgment.
Shareholder proposal date
Proposals which shareholders intend to present at the 1999 Annual Meeting of
Shareholders must be received by the corporation by August 28, 1998, to be
considered for inclusion in the corporation's Proxy Statement and form of
proxy relating to the 1999 annual meeting.
John W. Hetherington
Vice President, Assistant General Counsel
and Secretary
December 26, 1997
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, 1998, 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.
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
Westvaco on the World Wide Web,
earnings, corporate news releases,
product information, financial and
environmental reports and other
company information can be found
on Westvaco's Internet site:
http://www.westvaco.com
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.
The following is the text of the proxy card for individual shareholders
mailed with the proxy statement.
WESTVACO CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints John A. Luke, Jr., Rudolph G. Johnstone, 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 24, 1998
and at any adjournment of the meeting.
(Continued and to be signed on the reverse side)
Westvaco Westvaco Building PROXY
299 Park Avenue
New York, NY 10171 Solicited on Behalf of the Board
of Directors Annual Meeting of
Shareholders February 24, 1998
-------------- ----------------
ACCOUNT NUMBER COMMON
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees listed below and
FOR proposals 2.
1. Election of Directors: David L. Hopkins, Jr., Douglas S. Luke, Jane L.
Warner and Richard A. Zimmerman.
___FOR ___WITHHELD WITHHELD for the following
nominee(s) only, write name(s)
below.
all nominees for all nominees ____________________________
2. Appointment of Price Waterhouse LLP as independent accountants for
1998. ___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.
Please date, sign and return this proxy promptly.
Dated____________________, 1998
Signature______________________
_______________________________
_______________________________
Please sign exactly as your name appears on this proxy. If signing for
estates, trusts or corporations, title or capacity should be stated.
