<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
WESTVACO
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[LOGO OF WESTVACO]
December 29, 2000
Dear Fellow Shareholders:
We cordially invite you to join us at the 2001 Annual Meeting of Shareholders
of Westvaco Corporation to be held at 10 o'clock in the morning on Tuesday,
February 27, 2001. The meeting will be held in the Astor Salon, on the third
floor of The Waldorf=Astoria Hotel, 301 Park Avenue (at 49th Street), New York,
New York.
This year our proxy material includes three proposals. We ask for your support
in voting FOR Proposal 1, the election of our directors; FOR Proposal 2, the
appointment of our independent accountants; and FOR Proposal 3, the approval of
the Westvaco Corporation Annual and Long-Term Incentive Plan.
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, whether or not you expect
to attend the meeting, we ask that you sign, date and return the enclosed proxy
promptly.
Sincerely,
/s/ John A. Luke, Jr.
John A. Luke, Jr.
Chairman, President and
Chief Executive Officer
Westvaco Corporation
299 Park Avenue
New York, NY 10171
<PAGE>
[LOGO OF WESTVACO]
Packaging, paper and specialty chemicals
Notice of 2001 Annual Meeting of Shareholders
and Proxy Statement
The Annual Meeting of Shareholders of Westvaco Corporation will be held in the
Astor Salon, on the third floor of The Waldorf=Astoria Hotel, 301 Park Avenue
(at 49th Street), New York, New York, on Tuesday, February 27, 2001, at 10
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 PricewaterhouseCoopers LLP as independent
accountants for the corporation for the fiscal year 2001; and
3. To consider and vote upon the Westvaco Corporation Annual and Long-Term
Incentive Plan.
All holders of common stock of record at the close of business on December 29,
2000 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 29, 2000
<PAGE>
Proxy Statement
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Your Board of Directors is providing you with this Proxy Statement in
connection with the Board's solicitation of proxies for Westvaco's Annual
Meeting of Shareholders to be held on February 27, 2001. On or about January
12, 2001, we will mail the Proxy Statement, a proxy card, and the Annual Report
of Westvaco Corporation to shareholders of record of Westvaco common stock at
the close of business on December 29, 2000. Only those holders of record will
be entitled to vote, each share of stock being entitled to one vote. Although
the Annual Report and Proxy Statement are being mailed together, the Annual
Report should not be deemed to be part of the Proxy Statement.
A majority of the outstanding shares of common stock, represented in person or
by proxy at the meeting, will constitute a quorum. The three director nominees
receiving the highest number of all votes cast for directors will be elected.
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 a majority
vote of the shares 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, even though represented, are not 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 29, 2000 there were outstanding 100,759,502 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. The number of shares was obtained in each case from public
filings or directly from the adviser.
<TABLE>
<CAPTION>
Percent
Shares* of Class*
---------- ---------
<S> <C> <C>
Sanford C. Bernstein & Co. 12,345,000 12.3%
757 Fifth Avenue
New York, NY 10153
Capital Research & Management 10,185,000 10.1%
333 South Hope Street
Los Angeles, CA 90071-1406
</TABLE>
--------
*As of December 8, 2000
The Westvaco savings and investment plans for salaried and hourly employees
held, as of October 31, 2000, a total of 14,303,823 shares, or 14%, 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 these plans.
1
<PAGE>
OWNERSHIP BY OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Shares Options
Beneficially Exercisable Percent of
Name Owned(1) Within 60 days Shares
---- ------------ -------------- ----------
<S> <C> <C> <C>
Directors
Samuel W. Bodman III..................... 15,000 9,000 *
W. L. Lyons Brown, Jr.................... 4,500 9,000 *
Michael E. Campbell...................... 1,000 3,000 *
Dr. Thomas W. Cole, Jr................... 550 9,000 *
David F. D'Alessandro (2)................ 0 0 *
David L. Hopkins, Jr. ................... 40,600 9,000 *
Douglas S. Luke.......................... 47,490 6,000 *
William R. Miller........................ 6,000 4,500 *
Jane L. Warner........................... 1,200 4,500 *
Richard A. Zimmerman..................... 3,350 9,000 *
Named Executive Officers
Rudolph G. Johnstone, Jr................. 91,636 338,135 *
John A. Luke, Jr......................... 155,268 726,247 *
David E. McIntyre........................ 8,321 145,000 *
Karen R. Osar............................ 1,426 25,000 *
Wendell L. Willkie, II................... 10,836 157,499 *
All Directors and Officers as a Group.... 1,306,679 3,665,769 4.8%
</TABLE>
*Less than 1% of Westvaco common stock.
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(1) Information concerning beneficial ownership of shares is as of November 30,
2000, the most recent practicable date, except for equivalent shares in the
Westvaco Savings and Investment Plan for Salaried Employees which is as of
October 31, 2000.
(2) Became a Westvaco director in October 2000.
Attendance at the meeting will be limited to holders of record as of December
29, 2000, or their authorized representatives (not to exceed one per
shareholder), and guests of management.
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 Orion Investor Relations for the
solicitation of proxies on a limited basis at a cost which is estimated not to
exceed $5,000 in fees, and somewhat more than half that amount in expenses.
1. Election of directors
Three directors will 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.
2
<PAGE>
The present nominees, Douglas S. Luke, Jane L. Warner, and Richard A.
Zimmerman, if elected, will be elected for terms expiring at the 2004 Annual
Meeting of Shareholders. The Board of Directors unanimously recommends a vote
FOR the named 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 L. Bodman III, Dr. Thomas W. Cole, Jr., and David F. D'Alessandro, will
continue to serve for a term expiring at the 2003 Annual Meeting.
W.L. Lyons Brown, Jr., Michael E. Campbell, and John A. Luke, Jr., will
continue to serve for a term expiring at the 2002 Annual Meeting.
Nominees for election as directors
for a term of three years expiring in 2004
<TABLE>
<CAPTION>
Westvaco
Director
Name Age Since
---- --- --------
<S> <C> <C>
DOUGLAS S. LUKE 59 1996
President and CEO, HL Capital, Inc., since 1999, a
private investment company with diversified interests
in marketable securities and private equities.
President and CEO, WLD Enterprises, Inc. 1991-1998, a
private investment company with generally similar
interests. Director: Orbital Sciences Corporation;
Regency Realty Corporation.
JANE L. WARNER 53 1997
Managing Director, Global Automotive Industry Group
EDS, since 2000. Served as President, Kautex Textron,
North America, 1998-1999. Executive Vice President,
Textron Automotive Company, 1994-1999. Director:
Kettering University, Automotive Industry Action Group
(AIAG).
RICHARD A. ZIMMERMAN 68 1989
Retired after serving as Chairman and CEO, Hershey
Foods Corporation, 1985-1993. Director: Eastman Kodak
Corporation, Stabler Companies, Inc. Trustee: United
Theological Seminary.
</TABLE>
Directors Whose Terms Expire 2003
<TABLE>
<CAPTION>
Westvaco
Director
Name Age Since
---- --- --------
<S> <C> <C>
SAMUEL W. BODMAN III 62 1987
Chairman and CEO, Cabot Corporation, since 1988.
Director: Security Capital Group Incorporated, Thermo
Electron, Inc., John Hancock Financial Services, Inc.,
Cabot Microelectronics Corp. Trustee: Massachusetts
Institute of Technology.
DR. THOMAS W. COLE, JR. 59 1994
President, Clark Atlanta University, since 1989.
Director: First Union Bank of Georgia, West Virginia
Wesleyan College. Trustee: Knoxville College.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Westvaco
Director
Name Age Since
---- --- --------
<S> <C> <C>
DAVID F. D'ALESSANDRO 49 2000
President and CEO, John Hancock Financial Services,
Inc., since 1998; Senior Executive Vice President in
charge of John Hancock's Retail Section 1991-1998.
Westvaco Director since October 2000. Director: John
Hancock Financial Services, Inc. Chairman of the Board
of Trustees: Wang Center for The Performing Arts.
</TABLE>
Directors Whose Terms Expire 2002
<TABLE>
<CAPTION>
Westvaco
Director
Name Age Since
---- --- --------
<S> <C> <C>
W. L. LYONS BROWN, JR. 64 1994
Retired after serving as Chairman of the Board and
CEO, Brown-Forman Corporation; CEO, 1975-1993;
Chairman of the Board, 1983-1995. Former member of the
President's Advisory Committee for Trade Policy and
Negotiations. Director: Pennzoil-Quaker State Company,
The France Growth Fund, Inc.
MICHAEL E. CAMPBELL 53 1998
Chairman, President and CEO, Arch Chemicals, Inc.,
since 1999. Executive Vice President, Olin
Corporation, 1996-1999; Corporate Vice President and
President, Microelectronic Materials Division before
becoming Executive Vice President of Olin.
JOHN A. LUKE, JR. 52 1989
Chairman, President and CEO, Westvaco Corporation,
since 1996; President and CEO, 1992-1996. Director:
American Forest and Paper Association, The Bank of New
York, The Timken Company, United Negro College Fund.
Trustee: Lawrence University, American Enterprise
Institute for Public Policy Research. Governor:
National Council for Air and Stream Improvement, Inc.
</TABLE>
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 fiscal year.
Certain Transactions
Michael E. Campbell, a director of Westvaco, is Chairman, President and CEO of
Arch Chemicals, Inc. From the beginning of fiscal year 2000 through December
29, 2000, Westvaco purchased approximately $1,478,000 in products from Arch
Chemicals. David F. D'Alessandro, also a Westvaco director, is President and
CEO of John Hancock Financial Services, Inc. Its wholly-owned subsidiary,
Independence Investment Associates, Inc., manages a portion of the equity
assets of Westvaco's pension plans. During the same period, Independent
Investment Associates charged approximately $1,509,000 for investment
management services. Freya Block, wife of Richard H. Block, a Senior Vice
President of Westvaco Corporation since July 2000, is President of Freya Block
Design, Inc., which has performed architectural and interior design
4
<PAGE>
services at the offices of Westvaco and its subsidiaries in connection with
several projects at a total cost of approximately $113,000 through December 29,
2000. The above transactions were in the ordinary course of business, at
competitive prices, and independent of service on Westvaco's Board of Directors
or as an executive officer of Westvaco.
Director Compensation
<TABLE>
<S> <C>
Annual Board Retainer............................................. $30,000
Board Meeting Attendance Fee...................................... $ 1,000
Committee Meeting Attendance Fee.................................. $ 1,000
Annual Option Grant (Shares)...................................... 1,500
</TABLE>
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Only directors who are not employees of the corporation receive a retainer and
meeting fees. A retirement plan for non-employee directors was terminated in
1997, preserving only benefits already accrued.
Board Committees
2000 Committee Membership
<TABLE>
<C> <S>
Audit Nominating and Governance
William R. Miller, Chairman W.L. Lyons Brown, Jr., Chairman
Michael E. Campbell Samuel W. Bodman III
Thomas W. Cole, Jr. David L. Hopkins, Jr.
David F. D'Alessandro John A. Luke, Jr.
David L. Hopkins, Jr. Richard A. Zimmerman
Jane L. Warner
Richard A. Zimmerman
(all non-employee directors)
Compensation Environment, Safety and Health
Richard A. Zimmerman, Chairman Samuel W. Bodman III, Chairman
Samuel W. Bodman III Thomas W. Cole, Jr.
W.L. Lyons Brown, Jr. Douglas S. Luke
Thomas W. Cole, Jr. John A. Luke, Jr.
David L. Hopkins, Jr. William R. Miller
(all non-employee directors) Jane L. Warner
Finance International
David L. Hopkins, Jr., Chairman Douglas S. Luke, Chairman
W.L. Lyons Brown, Jr. Samuel W. Bodman III
Michael E. Campbell W.L. Lyons Brown, Jr.
David F. D'Alessandro Michael E. Campbell
Douglas S. Luke John A. Luke, Jr.
John A. Luke, Jr. William R. Miller
William R. Miller Richard A. Zimmerman
Jane L. Warner
</TABLE>
Board and Committee Meetings
The Board of Directors held ten meetings, one each month except December and
July, and 28 committee meetings during fiscal year 2000. Average attendance by
directors at meetings of the Board and its committees was 96.3%.
5
<PAGE>
Audit Committee 3 meetings in fiscal 2000
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. Please refer to the Report of the Audit Committee which follows.
Compensation Committee 9 meetings in fiscal 2000
Receives regular reports on industrial relations, approves 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. Please refer to the Report of
the Compensation Committee which follows.
Nominating and Governance Committee 7 meetings in fiscal 2000
Reviews and makes recommendations concerning the qualifications of all
directors, including those considered for re-election, and persons to fill
vacancies on the Board of Directors, as well as the levels of compensation paid
to non-employee directors. The committee also reviews and considers matters of
corporate governance, including trends and evolving best practices and offers
recommendations.
Finance Committee 7 meetings in fiscal 2000
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.
Committee on the Environment, Safety and Health 1 meeting in fiscal 2000
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.
International Committee 1 meeting in fiscal 2000
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.
Report of the Audit Committee of the Board of Directors
Membership and Role of the Audit Committee
The Audit Committee consists of seven members of the company's Board of
Directors. Each member of the Audit Committee is independent and possesses
other qualifications as required by the New York Stock Exchange. The Audit
Committee operates under a written charter adopted by the Board of Directors,
which is included in this Proxy Statement as Exhibit A.
The primary function of the Audit Committee is to assist the Board of Directors
in monitoring (1) the integrity of the financial statements of the company, (2)
the compliance by the company with legal and regulatory requirements, and (3)
the independence and performance of the company's internal and external
auditors.
6
<PAGE>
Review of the Company's Audited Financial Statements for the Fiscal Year ended
October 31, 2000
The Audit Committee has reviewed, and by its Chairman has discussed with
management, the audited financial statements of the company for the fiscal year
ended October 31, 2000. The Audit Committee has discussed with
PricewaterhouseCoopers LLP, the company's independent public accountants, the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Audit Committee has also received the written disclosures and the letter
from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussion with Audit Committees), and the Audit
Committee has discussed the independence of PricewaterhouseCoopers LLP with
that firm. Based on the Audit Committee's review and discussions noted above,
the Audit Committee recommended to the Board of Directors that the company's
audited financial statements be included in the company's Annual Report on Form
10-K for the fiscal year ended October 31, 2000 for filing with the SEC.
Submitted by:
<TABLE>
<C> <S>
Michael E. Campbell William R. Miller, Chairman
Dr. Thomas W. Cole, Jr. Jane L. Warner
David F. D'Alessandro* Richard A. Zimmerman
David L. Hopkins, Jr.
</TABLE>
--------
*Joined the committee on October 24, 2000.
Compensation Committee Interlocks and Insider Participation
No employee of the company served as a member of the Compensation Committee or
as a member of the compensation committee of the board of any company where an
executive officer of such company is a member of the Compensation Committee.
7
<PAGE>
Executive Compensation
Report of the Compensation Committee
The Committee
We are the members of the Compensation Committee, 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. We administer the Westvaco Executive Compensation Program
which is designed to attract and retain distinctly capable and highly motivated
individuals who can create and execute plans that will produce sound long-term
rewards for shareholders. We also determine the compensation of all executive
officers and Senior Vice Presidents, and inform the Board of any action taken
with respect to the compensation of the CEO.
Performance Factors
Westvaco's principal objective is to increase the value of the company for its
shareholders over the long term. The company is pursuing this objective through
a business strategy which is designed to achieve leading positions in global
markets for certain high quality packaging, paper and specialty chemical
products. In doing so, it is also striving to minimize the impact of the
business cycle on its earnings. The success of this business strategy, as well
as the company's continuing cost containment and productivity improvement
initiatives, are regularly monitored within the company and by the Board. The
contribution of an individual to the execution of corporate strategies, and the
pursuit of the foregoing objectives, remain the principal basis on which we
evaluate job performance and, therefore, are significant factors in our
determining salaries, awards of bonuses, and grants of stock options.
Cash Compensation
The Westvaco Annual Incentive Compensation Plan, approved by shareholders in
1996, places a portion of a senior executive's compensation at risk and ties it
to company and personal performance. 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 Plan is designed to meet IRS
requirements for tax deductibility. In determining awards, we carefully
appraise the performance of each individual and of the company, and also
consider current and anticipated competitive compensation in equivalent
positions within the industry. Key criteria for individual performance focus on
improved shareholder value through financial and operating performance,
advancement of the company's business strategy, and support of our strategic
focus on those markets with the highest growth and profitability potential. No
one executive can receive more than 20% of the available bonus pool. Improved
performance in 2000 created a pool of funds for incentive compensation awards.
The committee's targets for performance were met and bonus payments were made.
We believe 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 paid by the
eight companies which comprise the Dow Jones Paper Index in the proxy
performance graphs on pages 11 and 12, (the "Peer Paper Group") 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 executive 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
8
<PAGE>
any bonus, paid to comparable officers of the companies in a somewhat broader
group encompassing companies comparable to Westvaco both within and outside of
our industry.
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 subsequent
appreciation in the 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. Stock options are the
only form of long-term incentive offered by the company. The value of the
option grants is also compared with the value of grants of options and other
long-term incentives within the Peer Paper Group, and with similar long-term
incentives provided 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, 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. These plans reflect the company's long commitment to equity
ownership by employees and the linking of the interests of employees to the
interests of the shareholders as a whole. For fiscal 2000, there was a regular
company match of 75 percent on employee contributions up to the limit set forth
in the plans. Additionally, a supplemental match of 15 percent was also paid
reflecting the company's improvement in year-over-year earnings of more than
20%. This percentage reflects an established milestone for supplemental
matching.
Compensation for the Past Year
Improvement in Westvaco's 2000 earnings performance reflects strength in our
markets as well as benefits from strategic initiatives including acquisitions.
During the year Westvaco continued to take important steps in support of its
business strategies. Sustained by the efforts of a highly focused management
team, earnings for 2000 exceeded the threshold for bonuses under the Westvaco
Annual Incentive Compensation Plan which relates variable compensation directly
to corporate performance. Targets for performance established by the committee
were also exceeded.
Base salaries for the executive officers listed in the Summary Compensation
Table compare favorably to the respective median base salaries of the Peer
Paper Group. As a result, no increase in base salary was made for any of these
individuals in 2000.
As noted, established performance objectives were exceeded in 2000 and the
committee approved bonuses for each of the listed executives. The amount of the
bonus reflected individual personal performance and contribution to the
enterprise.
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 annual cash compensation of the company's Chief Executive Officer includes
a base salary and variable compensation. His base salary is above the median of
the Peer Paper Group, and no adjustment was made in this part of Mr. Luke's
compensation in 2000. With regard to variable
9
<PAGE>
cash compensation, the Westvaco Annual Incentive Compensation Plan reflects a
disciplined focus on shareholder returns and directly relates funding for
variable compensation awards to company performance to the exclusion of more
generalized factors. In 2000, Westvaco exceeded the performance targets
established by the committee for the award of bonuses to Mr. Luke and other
executive officers under the company's Annual Incentive Compensation Plan. The
committee approved a bonus for Mr. Luke of $500,000.
In November 1999 the committee granted stock options to Mr. Luke for 120,000
shares and simultaneously made grants to 442 other officers and salaried
employees, all of which were granted at market value on the date of grant. At
no time have any stock options been repriced. The value of the 1999 stock
option awards to the Chief Executive Officer is below the median of the option
awards for similar positions in the Peer Paper Group companies.
Conclusion
We remain convinced that the caliber and motivation of the company's executives
and all of its employees are extremely important to the company's ability to
meet future challenges and to deliver long-term value to its shareholders. We
believe Westvaco's improved performance in fiscal year 2000 provides further
assurance that the company's Executive Compensation Program is sound and
provides appropriate incentive to key management personnel to meaningfully
affect earnings and returns in future years.
As noted in this proxy statement, the Annual Incentive Compensation Plan for
Senior Executives is being restructured to focus more directly on specific
performance goals that will enhance shareholder value and drive the effective
implementation of the company's strategy. A new long-term incentive component
has also been added to strengthen the focus on and achievement of the company's
longer term strategic objectives. The committee and the Board have unanimously
endorsed this restructured plan.
Richard A. Zimmerman, Chairman
Samuel W. Bodman III
W.L. Lyons Brown, Jr.
Dr. Thomas W. Cole, Jr.
David L. Hopkins, Jr.
10
<PAGE>
Total Return to Shareholders
(as of October 31, 2000)
[GRAPH]
1995 1996 1997 1998 1999 2000
Westavaco Corp 100.00 105.84 125.49 97.88 121.25 119.77
S&P 500 Index 100.00 124.09 163.94 200.00 251.33 266.65
Dow Jones Paper Index 100.00 108.00 121.30 106.69 137.60 112.84
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, 2000 with the return on
the Standard & Poor's 500 Stock Index (S&P 500) and the Dow Jones Paper Index.
11
<PAGE>
Long-Term Total Return to Shareholders
(as of October 31, 2000)
[GRAPH]
Westvaco Corp S&P 500 Index Dow Jones Paper Index*
1967 100.00 100.00 100.00
1968 162.03 113.61 151.13
1969 149.72 110.27 165.53
1970 115.31 98.04 127.74
1971 99.16 114.53 112.16
1972 142.36 139.58 108.87
1973 220.20 139.52 149.87
1974 150.26 99.41 122.30
1975 208.96 125.33 175.73
1976 294.55 150.47 237.67
1977 301.82 141.17 184.41
1978 295.39 150.05 201.35
1979 376.36 173.02 223.18
1980 418.36 228.59 249.18
1981 448.61 229.85 243.18
1982 547.62 267.39 295.22
1983 716.72 341.93 366.93
1984 904.79 363.48 400.65
1985 898.00 433.77 415.67
1986 1,436.00 577.57 633.02
1987 1,645.51 614.53 651.00
1988 1,752.80 705.48 806.22
1989 1,739.83 891.73 924.15
1990 1,547.58 825.03 787.13
1991 2,581.20 1,101.41 1,197.65
1992 2,482.08 1,211.00 1,197.30
1993 2,309.58 1,391.93 1,255.84
1994 2,511.90 1,445.80 1,544.44
1995 3,073.56 1,828.06 1,928.85
1996 3,253.05 2,268.45 2,083.15
1997 3,856.82 2,996.84 2,339.80
1998 3,008.32 3,655.85 2,057.85
1999 3,726.41 4,594.30 2,654.22
2000 3,680.94 4,874.10 2,176.46
* The Dow Jones Paper Index was not available prior to 1987. For the years prior
to 1987, the graph represents the total returns for the group of companies
that currently comprise the Dow Jones Paper Index. The Dow Jones Paper Index
was reweighted in September 2000 and historical data was updated back to 1992.
Data from years prior to 1992 have been unaffected.
Data source: Standard & Poor's Compustat Services, a division of McGraw-Hill
Companies, except for Dow Jones Paper Index data from 1987-1999
which comes from Dow Jones & Company, Inc.
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.
12
<PAGE>
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, 2000.
<TABLE>
<CAPTION>
Long-term
Annual Compensation
Compensation Awards
Name and ----------------- Other ------------ All Other
Principal Position Year* Salary Bonus(1) Compensation(2) Options(#) Compensation(3)
------------------------ ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John A. Luke, Jr. 2000 $875,000 $500,000 -- 120,000 $74,250
Chairman, President 1999 875,000 -- -- 95,000 39,375
and CEO 1998 875,000 -- -- 95,000 39,375
Rudolph G. Johnstone, 2000 625,000 400,000 -- 60,000 55,350
Jr. 1999 625,000 -- -- 60,000 28,125
Executive Vice President 1998 625,000 -- -- 60,000 28,125
David E. McIntyre 2000 550,000 300,000 $90,825 50,000 45,900
Group Vice President 1999 491,667 -- 71,086 45,000 22,125
1998 388,333 -- 39,060 30,000 17,475
Wendell L. Willkie, II 2000 400,000 360,000 -- 35,000 41,040
Senior Vice President 1999 398,333 -- -- 30,000 17,925
and General Counsel 1998 387,500 -- -- 30,000 17,438
Karen R. Osar** 2000 441,923 300,000 -- 25,000 36,450
Senior Vice President
and CFO
</TABLE>
*Fiscal years ended October 31.
**Joined Westvaco in November 1999.
--------------------------------------------------------------------------------
(1) Represents the variable component of total annual compensation under the
Westvaco Annual Incentive Plan as discussed in the Report of the
Compensation Committee, except for $60,000 of the amount received by
Wendell L. Willkie, II.
(2) Other Compensation includes perquisites paid to David E. McIntyre during
the year for temporary housing and relocation costs.
(3) Represents company contributions of $8,640 and $65,610 for John A. Luke,
Jr.; $8,640 and $46,710 for Rudolph G. Johnstone, Jr.; $8,640 and $37,260
for David E. McIntyre; $7,170 and $33,870 for Wendell L. Willkie, II; and
$8,640 and $27,810 for Karen R. Osar, to the Savings and Investment Plan
and the unfunded Savings and Investment Restoration Plan, respectively. The
five executive officers named above hold interests equivalent to 137,569
shares under such plans as of October 31, 2000.
13
<PAGE>
Option/SAR Grants in the Fiscal Year Ended October 31, 2000
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Appreciation
Individual Grants for Option Term(1)
------------------------------------------- ------------------------------
% of
Total
Options
Number of Granted
Securities to
Underlying Employees
Options in Fiscal Exercise Expiration
Name Granted Year(2) Price($/Sh) Date 5% 10%
---- ---------- --------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John A. Luke, Jr. 120,000 11.26% $30.6250 11/23/2009 $ 2,311,171 $ 5,856,995
Rudolph G. Johnstone,
Jr. 60,000 5.63% $30.6250 11/23/2009 1,155,585 2,928,497
David E. McIntyre 50,000 4.69% $30.6250 11/23/2009 962,988 2,440,414
Wendell L. Willkie, II 35,000 3.28% $30.6250 11/23/2009 674,092 1,708,290
Karen R. Osar 25,000 2.35% $30.6250 11/23/2009 481,494 1,220,207
---------------------------------------------------------------------------------------------------
All Optionees 1,065,955 100% $30.6250 11/23/2009 $ 20,530,034 $ 52,027,438
All shareholders(3) $1,938,733,461 $4,913,159,799
Optionees gain as % of
all shareholder gain 1.06% 1.06%
</TABLE>
(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) All options are granted at market value on the date of grant and become
exercisable twelve months from the date of grant.
(3) As of October 31, 2000, there were 100,662,409 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
$30.6250 on November 23, 1999, when the above options were granted.
14
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and October 31, 2000 Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options At Options At
Acquired on Value October 31, 2000(2) October 31, 2000(2)
Name Exercise Realized(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John A. Luke, Jr. 7,183 $222,644 606,247/120,000 $1,317,023/$0
Rudolph G. Johnstone,
Jr. 14,605 116,022 278,135/60,000 299,767/0
David E. McIntyre -- -- 95,000/50,000 13,750/0
Wendell L. Willkie, II -- -- 122,499/35,000 110,467/0
Karen R. Osar -- -- 0/25,000 0/0
</TABLE>
(1) The value realized on stock option exercises represents the difference
between the grant price of the options and the market price of the shares
of underlying stock as of the date of exercise multiplied by the number of
options exercised. All grants are made at the fair market value of the
stock on the date of grant.
(2) The value of unexercised in-the-money options represents the difference
between the grant price of the options and the market price of $28.125 at
October 31, 2000, multiplied by the number of in-the-money options
outstanding.
Pension Plan Table Fiscal Year 2000
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------
Remuneration 15 25 30 35 40 45
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
500,000 $104,300 $173,800 $208,600 $243,300 $278,100 $313,800
660,000 138,600 231,000 277,100 323,300 369,500 416,700
820,000 172,900 288,100 345,700 403,300 461,000 519,500
980,000 207,200 345,300 414,300 483,400 552,400 622,400
1,140,000 241,400 402,400 482,900 563,400 643,900 725,300
1,300,000 275,700 459,600 551,500 643,400 735,300 828,200
</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 compensation levels and
years of service. As of December 31, 2000, the executive officers named in the
Summary Compensation Table set forth on page 13 will have the following years
of credited service: John A. Luke, Jr., 21.7; Rudolph G. Johnstone, Jr., 40.3;
David E. McIntyre, 8.7; Wendell L. Willkie, II, 6; and Karen R. Osar, 1.2. The
amounts of covered compensation under the Plan during 2000 for each of the
individuals named in the Summary Compensation Table 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 62 or 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
15
<PAGE>
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 formal severance pay plans for salaried employees who are
involuntarily terminated as a result of normal business occurrences (job
elimination and discharge) for reasons other than gross misconduct. The plans
provide severance pay ranging from 2 weeks to 104 weeks of an employee's salary
(including any incentive compensation). The maximum benefit ranges from 26
weeks to 104 weeks. Terminated employees also receive unused and vested
vacation pay. An employee may continue medical, dental, disability, accidental
death and dismemberment and life insurance coverage for a specified period of
time. The individuals named in the Summary Compensation Table set forth on page
13, would be eligible for severance benefits should they experience a job
elimination or be discharged.
Executive Agreements
The Board of Directors has authorized employment agreements with the executive
officers named in the Summary Compensation Table and with other executive
officers. These agreements provide that in the event that a Change-of-Control
of Westvaco occurs during the term of an agreement, then the agreement becomes
operative for a fixed three-year period. Each agreement provides generally that
the executive's terms and conditions of employment (including position,
location, compensation and benefits) will not be adversely changed during the
three-year period after a Change-of-Control of the company. Generally, if the
company terminates the executive's employment (other than for cause, death or
disability), or if the executive terminates for good reason during such three-
year period, the executive is entitled to receive (i) three times (a) the
executive's annual base salary plus (b) the executive's annual bonus amount (as
determined pursuant to the agreement); (ii) accrued but unpaid compensation;
(iii) welfare benefits for three years; and (iv) a lump sum payment having an
actuarial present value equal to the additional pension benefits the executive
would have received if he or she had continued to be employed by the company
for an additional three years. In addition, the executive is entitled to
receive a payment in an amount sufficient to make the executive whole for any
excise tax on excess parachute payments imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended.
2. Proposal to ratify appointment of independent accountants
The Board of Directors, pursuant to the recommendation of its Audit Committee,
has appointed PricewaterhouseCoopers LLP to serve as independent accountants
for the corporation for the 2001 fiscal year subject to approval by the
shareholders at the 2001 Annual Meeting. PricewaterhouseCoopers LLP currently
serves as the corporation's independent accountants and received $2,387,900 in
fees and expenses during fiscal year 2000 for audit-related services. The Audit
Committee has been advised by PricewaterhouseCoopers 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 PricewaterhouseCoopers 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 PricewaterhouseCoopers LLP as independent accountants.
16
<PAGE>
3. Proposal to approve the Westvaco Corporation Annual and
Long-Term Incentive Plan
Introduction. You are being asked to approve a new Annual and Long-Term
Incentive Plan for designated senior executives of the company. The purpose of
this incentive plan is to provide performance-based cash bonuses in order to
motivate key executives to achieve the company's business goals and to retain
them as employees over an extended period, while preserving the ability of the
company to deduct the bonuses for federal income tax purposes. In order to
achieve this full deductibility, the company's shareholders must approve the
material terms and conditions of this incentive plan, which are described
below. A copy of the plan is attached to this proxy statement as Exhibit B.
Administration and Participation. This incentive plan will be administered by
the Compensation Committee of our Board of Directors. The participants in the
plan will be our Chief Executive Officer, and other executive officers
selected by the committee each year.
Types of Awards. The incentive plan allows the Compensation Committee to award
two types of awards: annual bonuses and long-term bonuses. Annual bonuses will
be earned based upon achievement of performance goals during a given fiscal
year, and paid soon after the committee has determined the degree to which the
goals have been met. Long-term bonuses will also be earned based upon
achievement of performance goals; however, the goals may relate to performance
during a single fiscal year, or a longer period, or both. In addition, the
payment of long-term awards will be made over an extended period of time, and
participants will generally forfeit any unpaid installments if their
employment terminates, with certain exceptions that are described below. The
committee may establish procedures allowing participants to elect to defer
payments beyond the scheduled payment date.
Criteria for Awards. Within the first 90 days of the start of each fiscal
year, beginning with fiscal year 2001, the Compensation Committee will
establish the award opportunities and associated performance goals for bonuses
that are to be earned based upon performance during that fiscal year,
including the levels of awards that will be earned for different levels of
achievement. At the end of the fiscal year, the committee will evaluate
performance and determine the resulting annual incentive payments and file
their determination in a written document. The committee will have the ability
to reduce any particular bonus below the amount generated by the pre-
established formulae, but not to increase it. In addition, the maximum amount
that may be earned for any one annual bonus or long-term bonus award is $2
million.
Performance Goals. The committee will be able to choose goals for bonuses
under the incentive plan, based on one or more of the following performance
measures: revenues, profits, returns, shareholder value, cash flow, working
capital, safety and environmental measures. The goals may be measured at the
corporate level or at a business unit level, and may be calculated on a pre-
or post-tax basis and on an aggregate or a per-share basis. When evaluating
performance, the committee will ignore the impact of regulatory changes, for
example, changes to the accounting rules since the goals were adopted and will
ignore the impact of extraordinary items.
Effect of Termination of Employment. If a participant voluntarily terminates
his or her employment or is terminated for cause, any annual bonus that he or
she might have earned for the fiscal year in which the termination occurs will
be forfeited and any unpaid installments of long-term bonuses will be
forfeited. If a participant's employment is terminated due to retirement,
death or disability, the committee may in its discretion authorize payment of
an annual bonus for that fiscal year, and any remaining unpaid installments of
long-term bonuses that have already been earned will be paid as soon as
practical. Payments for other terminations will be in the committee's
discretion.
Amendments. The incentive plan may be amended by our Board of Directors, but
no amendment may adversely affect the terms and conditions of any award
opportunity that has been established before the amendment is acted upon, nor
may any such amendment be made
17
<PAGE>
that would cause the affected award opportunity or award to cease to qualify
for the exemption from Section 162(m) described below under "Effect of Vote."
Effectiveness of Plan. The incentive plan became effective as of November 28,
2000, with the first awards being established for fiscal year 2001, subject to
shareholder approval of the plan. If approved, the Plan will remain in effect
until it is terminated by our Board of Directors. If the plan is not approved,
these awards will be void and no further awards will be made under the plan.
Outstanding Awards. The Compensation Committee has established award
opportunities outlined below, to be earned based upon achievement of goals
relating to return on capital invested during fiscal 2001:
<TABLE>
<CAPTION>
Name Types of Award Minimum* Target Maximum
---- -------------- -------- ------- ---------
<S> <C> <C> <C> <C>
John A. Luke, Jr. Annual 300,000 600,000 1,200,000
Long-Term 500,000 625,000 750,000
James A. Buzzard Annual 150,000 300,000 600,000
Long-Term 300,000 375,000 450,000
David E. McIntyre Annual 125,000 250,000 500,000
Long-Term 200,000 250,000 300,000
Karen R. Osar Annual 100,000 200,000 400,000
Long-Term 150,000 187,500 225,000
Richard H. Block Annual 125,000 250,000 450,000
Long-Term 200,000 250,000 300,000
Wendell L. Willkie, II Annual 100,000 200,000 400,000
Long-Term 150,000 187,500 225,000
</TABLE>
--------------------------------------------------------------------------------
*If minimum performance is not achieved, no award will be paid.
Effect of Vote. Section 162(m) of the Internal Revenue Code disallows
Westvaco's federal tax deduction for compensation in excess of $1 million in
any one year to our Chief Executive Officer or any of the other five named
executive officers, unless the compensation is paid based upon the achievement
of objective performance goals established by a committee of outside directors
under a shareholder-approved plan. A vote in favor of approving the plan will
be a vote approving all the material terms and conditions of the plan for
purposes of this exemption under Section 162(m). 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 approval of the
plan.
The Board of Directors unanimously recommends a vote FOR the approval of the
Westvaco Corporation Annual and Long-Term Incentive Plan.
Shareholder proposals and nominations
Shareholder proposals intended for inclusion in next year's Proxy Statement
must be received by the Secretary of the company not later than August 31,
2001. In addition, Westvaco's bylaws outline procedures that a shareholder must
follow to nominate directors or to bring other business before shareholders'
meetings. For a shareholder to nominate a candidate for director at the 2002
Annual Meeting of Shareholders, notice of such nomination must be given to the
Secretary of the company not later than November 28, 2001. The notice must
describe various matters regarding the nominee and conform to requirements
specified in the company's bylaws. For a shareholder to bring other business
before the 2002 Annual Meeting of Shareholders, notice must be given to the
Secretary of the company between October 29, 2001, and November 28, 2001 and
must include a description of the proposed business, the reason for conducting
such business and other specified matters.
John W. Hetherington
Vice President,
Assistant General Counsel and Secretary
December 29, 2000
18
<PAGE>
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 31, 2001 by
writing to: Secretary, Westvaco Corporation, One High Ridge Park, Stamford,
Connecticut 06905. Exhibits to the Form 10-K are also available at a cost of
twenty-five cents per page. The Form 10-K is also available in the Investment
Services Section of Westvaco's internet site at www.westvaco.com.
19
<PAGE>
EXHIBIT A
WESTVACO CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the company, (2) the
compliance by the company with legal and regulatory requirements, and (3) the
independence and performance of the company's internal and external auditors.
The members of the Audit Committee shall be appointed by the Board and shall
possess the independence and other qualifications required by the New York
Stock Exchange. The Audit Committee shall have the authority to retain special
legal, accounting or other consultants to advise the Committee. It may also
request any officer or employee of the company, or the company's outside
counsel or independent auditor, to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
In discharge of its responsibilities, the Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.
2. Review the annual audited financial statements and major issues with
management, including those issues regarding accounting and auditing
principles and practices as well as the adequacy of internal controls that
could significantly affect the company's financial statements.
3. Discuss with management and the independent auditor significant financial
reporting issues and judgements made in connection with the preparation of
the company's annual and interim financial statements.
4. Be available each quarter to review as necessary with management and the
independent auditor, either by the full committee or by its Chairman, the
company's quarterly financial statements prior to the filing of its Form
10-Q.
5. Meet periodically with management to review the company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
6. Review major changes to the company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors or
management.
7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and, if so
determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the auditor.
10. Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
11. Review the appointment and replacement of the senior internal auditing
executive.
12. Review the significant reports to management prepared by the internal
auditing department and management's responses.
<PAGE>
13. Meet with the independent auditor prior to the annual audit to review the
planning and staffing of the audit.
14. Obtain from the independent auditor assurance that it will inform the
company's management concerning any information coming to the auditor's
attention indicating that an illegal act has or may have occurred, and
assure that such information has been conveyed, as appropriate, to the
Audit Committee.
15. Discuss with management, the company's senior internal auditing executive
and the independent auditor any condition which comes to their attention
indicating that the company's subsidiaries and affiliated entities,
domestic and foreign, are not conforming to applicable legal requirements
or to the company's Code of Conduct.
16. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61.
17. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the company's response to that letter. Such review should
include:
a) Any difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities or access to required
information.
b) Any changes required in the planned scope of the internal audit.
c) The internal audit department's support of the annual independent
audit.
18. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the company's annual proxy statement.
19. Advise the Board with respect to the company's policies and procedures
regarding compliance with applicable laws and regulations and with the
company's Code of Conduct.
20. Review with the company's General Counsel legal matters that may have a
material impact on the financial statements, the company's compliance
policies, and any material reports or inquiries received from regulators or
governmental agencies.
21. Meet at least annually with the company's financial management, the senior
internal auditing executive, and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the company's Code of Conduct.
2
<PAGE>
EXHIBIT B
WESTVACO CORPORATION ANNUAL AND LONG-TERM INCENTIVE PLAN
Article I
Purpose and General Provisions
Section 1.1 Purpose and Effective Date of Plan. The purpose of the Plan is to
provide the Company with a method of rewarding and retaining senior management
employees by providing them with cash incentive compensation in a form that
qualifies for the exemption from the limitations on tax deductibility imposed
by Section 162(m) of the Code (the "Section 162(m) Exemption"). The Plan shall
be effective November 28, 2000, subject to the approval of the Company's
shareholders at its annual meeting in 2001.
Section 1.2 Definitions. The following terms shall have the meanings set forth
below for purposes of the Plan.
Award: the amount (if any) that a Participant earns pursuant to an Award
Opportunity, as determined by the Committee pursuant to Section 2.2.
Award Opportunity: the opportunity given to a Participant to earn a cash
incentive payment, in a specified amount or amounts, based upon the
achievement of one or more specified Performance Goals.
Board: the Board of Directors of the Company.
Code: the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations thereunder.
Committee: the Compensation Committee of the Board.
Company: Westvaco Corporation, a Delaware corporation.
Deferral: as defined in Section 3.1.
Disability: the absence of the Participant from his or her duties with the
Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company.
Employment Agreement: an individual employment agreement between the
Company and a Participant.
Long-Term Award: as defined in Section 2.1.
Participant: the Chief Executive Officer of the Company and any other
executive officer of the Company who is designated by the Committee as a
Participant.
Performance Goal: a performance goal established by the Committee, based on
one or more of the following performance measures: revenues, profits,
returns, shareholder value, cash flow, working capital, safety and
environmental measures. Performance Goals may be measured at the corporate
level or at a business unit level, and may be calculated on a pre-or post-
tax basis and on an aggregate or a per-share basis.
Plan: the Westvaco Corporation Annual and Long-Term Incentive Plan, as set
forth herein.
Retirement: retirement under any qualified pension plan of the Company in
which the Participant participates.
Section 162(m) Exemption: as defined in Section 1.1.
<PAGE>
Short-Term Award: as defined in Section 2.1.
Termination for Cause: with respect to any Participant, a Termination of
Employment because of (1) the Participant's willful and continued failure
to perform substantially the Participant's duties with the Company or one
of its affiliates (other than such failure resulting from incapacity due to
physical or mental illness) as determined by the Committee or, in the case
of a Participant other than the Chief Executive Officer of the Company, by
the Chief Executive Officer, in its or his sole discretion, as applicable,
or (2) the Participant's willful engaging in illegal conduct, gross
misconduct or a clearly established violation of the Company's Code of
Conduct.
Termination of Employment: with respect to any Participant, the date on
which the Participant ceases, for any reason, to be an employee of the
Company or any of its subsidiaries or affiliates. Without limiting the
generality of the foregoing, unless the Committee determines otherwise, a
Participant shall be deemed to have a Termination of Employment if the
entity by which he or she is employed ceases to be a subsidiary or
affiliate of the Company as a result of a sale, spin-off or other corporate
transaction.
Section 1.3 Administration. The Committee shall be responsible for
administering the Plan in all respects, including without limitation
designating the Participants (other than the Chief Executive Officer of the
Company, who shall automatically be a Participant), establishing rules and
regulations for the operation of the Plan, and interpreting the Plan and all
associated documentation. The Committee may delegate to one or more of its
members or to appropriate employees of the Company the responsibility to carry
out any purely ministerial responsibilities in connection with the Plan.
However, in no event shall the following responsibilities be considered
ministerial, and they shall be carried out only by the Committee acting by
decision of the majority of its members: (i) the designation of Participants;
(ii) the establishment of the terms and conditions of Award Opportunities;
(iii) the certification of the achievement of Performance Goals; (iv) the
determination of the actual Awards to be paid to Participants; and (v) any
other responsibilities that must be carried out by a committee of outside
directors for purposes of the Section 162(m) Exemption. All actions and
determinations of the Committee shall be taken in its sole discretion, and
shall be binding and conclusive on Participants and all other parties.
Section 1.4 Unfunded Plan. The Plan is intended to be an unfunded plan.
Participants are and shall at all times be general creditors of the Company
with respect to their Awards and Award Opportunities. If the Committee or the
Company chooses to set aside funds in a trust or otherwise for the payment of
Awards under the Plan, such funds shall at all times be subject to the claims
of the creditors of the Company in the event of its bankruptcy or insolvency.
Section 1.5 Non-Transferability. None of the rights of Participants under the
Plan or with respect to their Awards or Award Opportunities shall be
transferable, except as specifically provided in Section 3.2(b) in the event of
a Participant's death. Without limiting the generality of the foregoing, no
such rights shall be transferable pursuant to a domestic relations order.
Article II
Establishment of Award Opportunities; Determination of Awards
Section 2.1 Establishment of Award Opportunities. Within the period required to
qualify for the Section 162(m) Exemption, the Committee shall establish the
terms and conditions (including without limitation the applicable Performance
Goals) of all Award Opportunities for Participants for each fiscal year. Each
Participant may be granted, for each fiscal year of the Company, one Award
Opportunity payable shortly following the end of the current fiscal year (a
"Short-Term Award") and one Award Opportunity payable shortly following the end
of one or more subsequent fiscal years (a "Long-Term Award").
2
<PAGE>
Section 2.2 Determination of Awards. Following completion of the period during
which the Performance Goal(s) for a particular Award Opportunity are to be
achieved, the Committee shall evaluate and certify in writing the degree to
which the Performance Goal(s) have been met, and shall determine the actual
amount of the Award that will be considered earned by the Participant (whether
payable shortly following such determination or later, as provided in the terms
of the Award Opportunity). In determining the achievement of Performance Goals,
the Committee shall disregard the impact of regulatory changes (such as changes
to applicable accounting rules) made after the Performance Goals were
established, as well as the impact of extraordinary items. The Committee may
determine that such actual Award amount will be less, but not more, than the
amount determined in accordance with the terms and conditions of the Award
Opportunity when it was originally established.
Section 2.3 Limitation on Awards. Notwithstanding any other provision of the
Plan, the actual amount of any single Short-Term Award or Long-Term Award paid
to any Participant may not exceed $2,000,000.
Article III
Payment of Awards
Section 3.1 Normal Payment Schedule. If a Participant becomes entitled to a
payment with respect to any Award Opportunity, such payment shall be made to
the Participant in cash, as soon as practicable following the satisfaction of
all requirements for receipt of such payment; provided, that such payment (a)
shall not be made earlier than the time provided for in the applicable Award
Opportunity, (b) may be deferred by the Participant in accordance with the
terms of any deferred compensation plan of the Company in which he or she
participates, to the extent allowed by such plan (a "Deferral"), and (c) shall
be subject to all applicable tax and other withholding.
Section 3.2 Termination of Employment. The consequences for a Participant's
Awards and Award Opportunities of a Termination of Employment shall be as set
forth below, unless otherwise provided in the terms and conditions of the
applicable Award Opportunity.
(a) Voluntary Termination; Termination for Cause. If a Participant
experiences a Termination of Employment by the Participant's voluntary
action (other than as a result of the Participant's death, Disability or
Retirement), or by the Company for Cause, the Participant shall forfeit all
Award Opportunities and all rights to receive payments of Awards that have
been earned but not previously been paid to him or her (except to the
extent not paid by reason of a Deferral, in which event the consequences of
such Termination of Employment shall be governed by the applicable deferred
compensation plan).
(b) Death, Disability and Retirement. If a Participant experiences a
Termination of Employment as a result of the Participant's death,
Disability or Retirement, or by the Company for Cause, then (i) if the
Committee so determines, in its sole discretion, the Participant, or the
Participant's estate, shall be entitled to receive payments with respect to
Award Opportunities for which the performance period has not yet ended at
the date of such Termination of Employment, at such times and in such
amounts as would have applied, had the Participant not experienced a
Termination of Employment (provided, that the amounts so paid may, in the
Committee's discretion, be pro-rated to reflect the timing of the
Termination of Employment); and (ii) any payments with respect to Awards
that have been earned but not yet paid at the time of the Termination of
Employment shall be paid to the Participant, or the Participant's estate,
as soon as practicable after the Termination of Employment (except to the
extent not paid by reason of a Deferral, in which event the consequences of
such Termination of Employment shall be governed by the applicable deferred
compensation plan).
3
<PAGE>
(c) Other Terminations. If the Participant experiences a Termination of
Employment for any reason not described in Sections 3.2(a) and (b) above,
the Committee shall determine, in its sole discretion, the extent to which
the Participant may receive payments with respect to any then-outstanding
Awards and Award Opportunities; provided, that in no event shall such
payments exceed the amounts that would have been paid had the Participant
not experienced a Termination of Employment; and provided, further, that
with respect to any Awards that have been earned but not paid by reason of
a Deferral, the consequences of such Termination of Employment shall be
governed by the applicable deferred compensation plan.
Article IV
Amendment and Termination of Plan
The Plan may be amended or terminated at any time by resolution of the Board of
Directors of the Company; provided, that no such amendment or termination may
alter the terms and conditions of any then-outstanding Award Opportunity or
Award in a manner adverse to the Participant without the Participant's consent,
and no such amendment or termination may alter the terms and conditions of any
then-outstanding Award Opportunity or Award in a manner favorable to the
Participant or that would otherwise cause such Award Opportunity or Award to
cease to qualify for the Section 162(m) Exemption.
4
<PAGE>
NOTES
<PAGE>
[LOGO OF WESTVACO]
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Corporate Secretary
203 461 7500
For shareholder information
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
[LOGO OF RECYCLED PAPER]
50% recovered fiber
10% postconsumer fiber
The proxy statement is printed on American Eagle(R)
web dull paper manufactured at Westvaco's
Tyrone, PA, fine papers mill.
<PAGE>
WESTVACO
Dear Fellow Shareholders:
We cordially invite you to join us at the 2001 Annual Meeting of Shareholders of
Westvaco Corporation to be held at 10 o'clock in the morning on Tuesday,
February 27, 2001. The meeting will be held in the Astor Salon of The
Waldorf-Astoria Hotel, 301 Park 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 three proposals. We ask for your support
in voting FOR Proposal 1, the election of our directors; FOR Proposal 2, the
appointment of our independent accountants; and FOR Proposal 3, approval of the
proposed Westvaco Corporation Annual and Long-Term Incentive Plan.
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 promptly.
Sincerely,
John A. Luke, Jr.
Chairman, President and Chief Executive Officer
Detach Proxy Card Here
--------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" all nominees listed below, "FOR"
proposal 2 and "FOR" proposal 3.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Election of Directors FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] FOR ALL [X]
listed below for all nominees listed below EXCEPT
</TABLE>
Nominees: Douglas S. Luke, Jane L. Warner, and Richard A. Zimmerman
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "For All Except" box and strike a line through that nominee's name)
(2) Appointment of PricewaterhouseCoopers LLP as independent accountants
for 2001.
FOR [X] AGAINST [X] ABSTAIN [X]
(3) Approval of the proposed Westvaco Corporation Annual and Long-Term Incentive
Plan.
FOR [X] AGAINST [X] ABSTAIN [X]
Change of Address and
or Comments Mark Here [X]
The proxies are directed to vote
as specified above and in their
discretion 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, FOR
Proposal 2 and FOR Proposal 3.
Please date, sign, and return
this proxy promptly. Please sign
exactly as your name appears on
this proxy. If signing for
estates, trusts or corporations,
title or capacity should be
stated.
Dated:_____________, 2001
_______________________________
Signature(s)
_______________________________
Signature(s)
Votes MUST be indicated
(x) in Black or Blue ink. [X]
Please Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.
<PAGE>
WESTVACO CORPORATION
Proxy Solicited on behalf of the Board of Directors of Westvaco Corporation
The undersigned appoints John A. Luke, Jr., Rudolph G. Johnstone, Jr., and
John W. Hetherington, successively, with full power of substitution, to
represent 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, 2001 and at any adjournment of such
meeting.
WESTVACO CORPORATION
P.O. BOX 11326
NEW YORK, N.Y. 10203-0326
(continued, and to be signed on the reverse side.)
