SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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the Securities Exchange Act of 1934 (Amendment No. )
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<PAGE>
[Letterhead of Watson Wyatt & Company Holdings]
November 17, 2000
Dear Fellow Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders
that will be held this year at the Hilton Philadelphia Airport, 4509 Island
Avenue, Philadelphia, Pennsylvania 19153, Philadelphia, Pennsylvania, on Monday,
December 18, 2000 at 9:30 a.m. (EST). On the following pages you will find the
Notice of Annual Meeting of Stockholders and the accompanying Proxy Statement.
Your vote is important. We encourage you to vote by proxy so that your
shares will be represented and voted upon at the meeting even if you cannot
attend. Accordingly, please sign, date and return the enclosed proxy card
promptly.
Sincerely,
/s/ John J. Haley
John J. Haley
President and Chief Executive Officer
<PAGE>
[LOGO] Watson Wyatt
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 18, 2000
Washington, D.C.
The First Annual Meeting of Stockholders of Watson Wyatt & Company Holdings, a
Delaware corporation, (the "Company" or "Watson Wyatt") will be held on Monday,
December 18, 2000, at 9:30 a.m. (EST), at the Hilton Philadelphia Airport, 4509
Island Avenue, Philadelphia, Pennsylvania 19153, for the following purposes:
I. To elect sixteen members of the Board of Directors of the Company to
serve until the next Annual Meeting of Stockholders and until the
election and qualification of their successors.
II. To transact such other business as may properly come before the
annual meeting or any postponement or adjournment thereof.
The close of business on November 10, 2000, has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting.
WE STRONGLY URGE YOU TO REVIEW THIS PROXY STATEMENT AND TO COMPLETE AND RETURN
THE ENCLOSED PROXY BALLOT AS SOON AS POSSIBLE. YOUR VOTE IS IMPORTANT NO MATTER
HOW MANY SHARES YOU OWN.
TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY BALLOT PROMPTLY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
By Order of the Board of Directors
/s/ Walter W. Bardenwerper
----------------------------------------
Walter W. Bardenwerper
Vice President, General Counsel and Secretary
Washington, D.C.
November 17, 2000
<PAGE>
[LOGO] Watson Wyatt
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 18, 2000
This Proxy Statement, Notice of Annual Meeting and the accompanying Proxy are
being furnished to stockholders ("Stockholders") of Watson Wyatt & Company
Holdings, a Delaware corporation (the "Company" or "Watson Wyatt") on or about
November 17, 2000, in connection with the Annual Meeting of Stockholders of the
Company to be held on December 18, 2000, at the time and place and for the
purposes set forth in the accompanying Notice of the meeting.
The accompanying Proxy is solicited on behalf of the management of the Company.
Stockholders who execute proxies retain the right to revoke them at any time
prior to them being voted by giving notice to the Company in writing or in
person at the meeting. All shares of the Company's Class A, Class B-1 and Class
B-2 common stock ("Common Stock") represented by properly executed and unrevoked
proxies received by First Union National Bank, the Company's Transfer Agent, for
the Annual Meeting will be voted.
FINANCIAL DATA AND OTHER INFORMATION
A copy of the Annual Report to Stockholders of the Company for the fiscal year
ended June 30, 2000 is being delivered to each stockholder contemporaneously
with this Proxy Statement. The Annual Report includes descriptions of the
operations of the Company and presents the Company's audited financial
statements. An annual report will also be made available to any stockholder upon
request.
OUTSTANDING STOCK ENTITLED TO VOTE
Stockholders of record at the close of business on November 10, 2000, will be
entitled to notice of, and to vote the shares of Class A Common Stock of the
Company $.01 par value ("Class A Common Stock"), the shares of Class B-1 Common
Stock of the Company, $.01 par value ("Class B-1 Common Stock") and the shares
of Class B-2 Common Stock of the Company, $.01 par value ("Class B-2 Common
Stock"), held by them on such date, at the Annual Meeting or any and all
postponements or adjournments thereof. The Class A Common Stock, the Class B-1
Common Stock and the Class B-2 Common Stock are the Company's only classes of
outstanding voting securities. Each share of Class A Common Stock, Class B-1
Common Stock and Class B-2 Common Stock entitles the holder thereof to one vote.
On November 10, 2000, there were 32,928,710 shares of Common Stock outstanding
and entitled to vote at the Annual Meeting.
<PAGE>
If the accompanying proxy card is properly signed and returned in the enclosed
envelope and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the accompanying proxy card will vote for the
Board of Directors' nominees for director, and in their own discretion as to all
other matters as may properly come before the Annual Meeting. Each such proxy
granted may be revoked by the stockholder giving such proxy at any time before
it is exercised by filing with the Secretary of the Company, at the address set
forth above, a revoking instrument or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if the person who
executed a proxy attends the Annual Meeting and votes in person.
The presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock outstanding at the close of
business on November 10, 2000 will constitute a quorum.
Proxies submitted which contain abstentions or broker non-votes will be deemed
present at the Annual Meeting in determining the presence of a quorum.
Abstentions will be counted toward the presence of a quorum, but abstentions and
broker non-votes will have no effect on the outcome of the election of directors
or issues requiring approval of a majority of the votes cast. Shares subject to
broker non-votes with respect to any matter will not be considered cast with
respect to that matter.
A list of Stockholders will be available for inspection at least ten days prior
to the Annual Meeting at the Office of the Secretary, 1717 H. Street, N.W.,
Washington, D.C. 20006.
CORPORATE REORGANIZATION
On October 11, we commenced an initial public offering of our Class A Common
Stock. In conjunction with this offering, on October 16, 2000 we completed
changes in our corporate structure involving the merger of Watson Wyatt &
Company with WW Merger Subsidiary, Inc., a wholly owned subsidiary of Watson
Wyatt & Company Holdings. As a result, Watson Wyatt & Company is now a wholly
owned subsidiary of Watson Wyatt & Company Holdings.
At the time of the reorganization, each share of Watson Wyatt & Company's
redeemable common stock was converted into one share of Class B-1 Common Stock
and one share of Class B-2 Common Stock of Watson Wyatt & Company Holdings. The
Class B Common Stock is divided into two classes to accommodate two different
transfer restriction periods. The class B-1 shares are subject to a transfer
restriction period of 12 months following the public offering date, while the
class B-2 shares are subject to a transfer restriction period of 24 months
following the public offering date, unless waived by the Board of Directors. The
Company waived the transfer restrictions on a total of 1,559,250 class B-1 and
1,559,250 class B-2 shares to allow for conversion into the class A shares sold
by selling stockholders in the initial public offering described below.
Following the expiration or waiver of the respective transfer restriction
periods, the remaining class B-1 and class B-2 shares will automatically convert
into Class A Common Stock.
A total of 5,600,000 shares of Class A Common Stock were offered and sold in our
initial public offering at an offering price of $12.50 per share. Of the shares
included in this transaction, Watson Wyatt & Company Holdings offered 2,800,000
newly-issued shares and the selling stockholders offered the remaining 2,800,000
shares. On November 8, 2000, our underwriters
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exercised their over allotment option. As a result, the underwriters purchased
840,000 shares of Class A Common Stock from us and from the selling stockholders
at the initial public offering price of $12.50 per share less the underwriting
discount. Of the shares included in this transaction, Watson Wyatt & Company
Holdings sold 521,500 newly-issued shares and the selling stockholders sold
318,500 shares.
ELECTION OF DIRECTORS
A Board of sixteen directors is to be elected at the Annual Meeting. Under the
Company's certificate of Incorporation, the directorships are to be divided into
three classes. At this annual meeting, stockholders will elect three classes of
directors. The directorships in the first class will expire as of the annual
stockholders' meeting in 2001 and every three years thereafter, the
directorships in the second class will expire as of the annual stockholders'
meeting in 2002 and every three years thereafter, and the directorships in the
third class will expire as of the annual stockholders' meeting in 2003 and every
three years thereafter. As the initial terms of each of the classes of directors
expires, directors of the Company will be elected to serve for a three-year
period and until their respective successors have been duly elected and
qualified. The Board of Directors has nominated to serve as directors the
following sixteen nominees for the following terms:
Nominees Length of Initial Term
-------- ----------------------
Class I:
--------------------------------------------------------------
Paula A. DeLisle One year term, expiring at the
David B. Friend, M.D. Annual Stockholders' meeting in
R. Michael McCullough 2001.
Gail E. McKee
Paul N. Thornton
--------------------------------------------------------------
Class II:
--------------------------------------------------------------
Thomas W. Barratt Two year term, expiring at the
John J. Gabarro Annual Stockholders' meeting
John J. Haley in 2002.
Eric P. Lofgren
Kevin L. Meehan
Charles P. Wood, Jr.
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Class III:
--------------------------------------------------------------
Elizabeth M. Caflisch Three year term, expiring at the
Barbara Hackman Franklin Annual Stockholders' meeting
David P. Marini in 2003.
J.P. Orbeta
Gilbert T. Ray
--------------------------------------------------------------
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The Board of Directors has nominated the sixteen individuals listed above for
election to the Board of Directors. Directors must be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors.
If any nominee for a directorship is unable to serve as a Director at the time
of the Annual Meeting, the proxies may be voted for a substitute nominee
selected by the Board of Directors. Management has no reason to believe, at this
time, that any of the nominees listed above will be unable to serve if elected,
but if any of them should become unavailable to serve as a director or be
withdrawn from nomination, and if the Board of Directors shall designate a
substitute nominee, the persons named as proxy holders will vote for the
substitute nominee.
The Company's Bylaws provide that the number of directors shall be not less than
seven nor more than twenty-five and give the Board of Directors the authority to
determine the actual number of Directors within that limit. The Board of
Directors has set the size of the Board at sixteen. The Board of Directors
recommends that the Stockholders vote FOR each of the sixteen nominees listed
below:
NOMINEES TO SERVE AS DIRECTORS FOR A TERM EXPIRING AT THE 2001 ANNUAL MEETING OF
STOCKHOLDERS (FIRST CLASS)
Paula A. DeLisle (age 46) has served as Vice President and as a Director since
1997. Ms. DeLisle joined Watson Wyatt in 1982 and is the Managing Consultant of
our Hong Kong office. Ms. DeLisle is responsible for Watson Wyatt's China
operations, for the Asia-Pacific operations of Watson Wyatt Data Services, and
is a frequent speaker at international conferences on human resources issues in
the Asia-Pacific region. She is the Vice-Chairman of the American Chamber of
Commerce in Hong Kong and is the Hong Kong representative to the Pacific
Economic Cooperation Council's Human Resources Development Task Force. She has a
B.A. from Saint Mary's College and a Master's degree from Loyola University of
Chicago.
David B. Friend, M.D. (age 44) has served as Vice President and Regional Manager
(U.S. East) since 1997 and has served as a Director since 1997. He formerly was
the Practice Director of Watson Wyatt's Group and Health Care Practice. Prior to
joining Watson Wyatt in 1995, Dr. Friend served on the medical staff at Malden
Hospital in Malden, Massachusetts. Prior to attending medical school, Dr. Friend
was an Executive Vice President with High Voltage Engineering, a specialty
industrial manufacturing conglomerate. Dr. Friend is the author of
Healthcare.com: Rx for Reform (St. Lucie Press), and also serves on the Advisory
Board of the Schneider Institute for Health Policy at Brandeis University. He
has an A.B. in Economics from Brandeis University, an M.D. from the University
of Connecticut and an M.B.A. from The Wharton School of the University of
Pennsylvania.
R. Michael McCullough (age 61) has served as a Director since 1996. Mr.
McCullough is the retired Chairman of the management consulting firm of Booz,
Allen & Hamilton. He joined Booz, Allen & Hamilton in 1965 as a consultant, was
elected a Partner in the firm in 1971, became Managing Partner of the firm's
Technology Center and was elected to the position of Chairman in 1984. Mr.
McCullough is a member of the Boards of Capital Auto Real Estate Investment
Trust, an automobile property real estate investment trust, Charles E. Smith
Residential Real Estate Trust, a residential property real estate investment
trust and is Chairman of Ecutel, Inc., a private Internet communications
products and services firm.
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Gail E. McKee (age 41) has served as Vice President and as a Director since
1997. Prior to joining Watson Wyatt in 1992, Ms. McKee was with the Walt Disney
Company, an entertainment conglomerate, where she served as the Manager of
International Compensation and Benefits from 1991 to 1992. From 1982 to 1990,
she was an Account Manager with Hewitt Associates, a competing human resources
consulting firm, in New York and Los Angeles. She has a B.A. from the University
of Washington.
Paul N. Thornton (age 50) is the Senior Partner-designate of Watson Wyatt
Partners. He joined Watson Wyatt Partners in 1974, qualified as a Fellow of the
Institute of Actuaries in 1975 and became a Partner of the firm in 1977. Mr.
Thornton has been elected to the position of Senior Partner of Watson Wyatt
Partners effective May 1, 2001. He was a Chairman of the Pensions Board of the
Faculty and Institute of Actuaries in the U.K. from 1994 to 1996, Chairman of
the Association of Consulting Actuaries from June 1997 until June 1998 and
President of the Institute of Actuaries from July 1998 to July 2000. Mr.
Thornton is a member of the Executive Committee of the International Actuarial
Association, Chairman of the Pensions Committee of the Groupe Consultatif of
European Actuaries, Chairman of the Committee of the International Actuarial
Association dealing with the International Accounting Standard on Employee
Benefits and a member of the Committee of the International Association of
Consulting Actuaries. He holds an honours degree in Mathematics from Oxford
University.
NOMINEES TO SERVE AS DIRECTORS FOR A TERM EXPIRING AT THE 2002 ANNUAL MEETING OF
STOCKHOLDERS (SECOND CLASS)
Thomas W. Barratt (age 58) has served as Vice President and Regional Manager
(U.S. Central) since 1997 and has served as a Director since 1998. Mr. Barratt
rejoined Watson Wyatt in 1994 after serving as the Managing Consultant of the
Detroit office of Towers Perrin, a competing human resources consulting firm,
from 1987 through 1993. He began his career with Watson Wyatt in 1976 and was a
consultant with the Company through 1986. He has a B.B.A. from Western Michigan
University and was graduated from Northwestern University's National Trust
School in 1966.
John J. Gabarro (age 61) has served as a Director since 1999 and was previously
a director from 1995 to 1998. Mr. Gabarro has been a professor at the Harvard
Business School since 1972. Mr. Gabarro is the UPS Foundation Professor of Human
Resource Management at the Harvard Business School, where he has taught in
Harvard's M.B.A., Advanced Management, and Owner-President Management Programs.
He has also served as faculty chairman of Harvard's International Senior
Management Program and as chairman of its Organization Behavior and Human
Resource Management faculty. Mr. Gabarro is the author of six books, the most
recent of which include Breaking Through: The Making of Minority Executives in
Corporate America (Harvard, 1999), Managing People in Organizations (Harvard,
1992) and The Dynamics of Taking Charge (Harvard, 1987), which won the 1988 New
Directions in Leadership Award and was named one of the best business books of
the year by The Wall Street Journal. Mr. Gabarro is also a recipient of the 1980
McKinsey Foundation Prize, the 1986 Center for Creative Leadership Distinguished
Scholar Colloquium and the 1988 Johnson Smith and Knisely Award for research on
leadership. Mr. Gabarro has an M.B.A. and a Ph.D. from Harvard University.
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John J. Haley (age 50) has served as President and Chief Executive Officer since
January 1, 1999 and as a Director since 1992, and is a member of the Partnership
Board of Watson Wyatt Partners. Mr. Haley joined Watson Wyatt in 1977. Prior to
becoming President and Chief Executive Officer, he was the Global Director of
the Benefits Consulting Group. Mr. Haley is a Fellow of the Society of Actuaries
and is a co-author of Fundamentals of Private Pensions (University of
Pennsylvania Press). He has an A.B. in Mathematics from Rutgers College and
studied under a Fellowship at the Graduate School of Mathematics at Yale
University.
Eric P. Lofgren (age 49) has served as Vice President, Global Director--Benefits
Consulting Group and as a Director since 1998. Prior to joining Watson Wyatt in
1989, Mr. Lofgren spent seven years with William M. Mercer, a competing human
resources consulting firm, and seven years at The Mutual of New York Insurance
Company. Mr. Lofgren is a recognized authority in the areas of retirement plan
design, the effects of demographics on benefit systems and asset liability
management. He is widely credited with developing the Pension Equity Plan (PEP),
one of the three primary families of defined benefit pension design. Mr. Lofgren
is a Fellow of the Society of Actuaries, and holds a B.A. in Mathematics from
New College in Sarasota, Florida and studied at the Graduate School of Logic at
the University of California at Berkeley.
Kevin L. Meehan (age 55) has served as Vice President since 1994 and as a
Director since 1999. Mr. Meehan joined Watson Wyatt in 1983, and has been
instrumental in developing our flexible benefits operations, our Human Resources
Technologies Group and our Account Management system. Mr. Meehan is a frequent
speaker on employee benefits tax and legal issues, and regularly testifies
before the IRS, the Department of Labor and Committees of Congress on employee
benefit plan issues. Mr. Meehan has a B.A. from the College of the Holy Cross
and a J.D. from St. John's University Law School.
Charles P. Wood, Jr. (age 56) has served as Vice President since 1998, as
Regional Manager (U.S. West) since 1999 and as a Director since 1999. Mr. Wood
joined Watson Wyatt in 1975 and is a specialist in matters relating to
Retirement, Group and Health Care, and Compensation consulting. Mr. Wood, a
Fellow of the Society of Actuaries and the Casualty Actuarial Society, has a
B.S. in Engineering Science and Mathematics from the U.S. Air Force Academy and
an S.M. in Applied Mathematics from Harvard University.
NOMINEES TO SERVE AS DIRECTORS FOR A TERM EXPIRING AT THE 2003, ANNUAL MEETING
OR STOCKHOLDERS (THIRD CLASS)
Elizabeth M. Caflisch (age 46) is currently a consulting actuary and the
Retirement Practice Leader in our Washington, D.C. office. Ms. Caflisch joined
Watson Wyatt in 1979 and has served on the Finance Committee since 1997. Ms.
Caflisch is a Fellow of the Society of Actuaries and an Enrolled Actuary under
ERISA. She holds a B.A. degree in mathematics and economics from Trinity
College.
Barbara Hackman Franklin (age 60) was appointed as a Director in May, 2000. Ms.
Franklin has been President and Chief Executive Officer of Barbara Franklin
Enterprises, an international trade consulting and investment firm, since 1995.
Ms. Franklin previously served as U.S. Secretary of Commerce in the Bush
Administration. Ms. Franklin is a director of four companies--Aetna, Inc., a
health insurance provider, The Dow Chemical Company, a chemical manufacturer,
Milacron, Inc., a manufacturing technologies company, and MedImmune, Inc., a
biotechnology company. Ms. Franklin is currently a distinguished visiting fellow
at the Heritage
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Foundation, vice chair of the Atlantic Council, a director of the National
Committee on United States-China Relations. She is also a trustee of the
Economic Club of New York and a member of the Board of Directors of the
Associates of the Harvard Business School.
David P. Marini (age 44) has served as Vice President since 1998 and Global
Director--HR Technologies Group since 1997. Prior to assuming his current
responsibilities, he led several of the firm's technology projects involving
reengineering administrative client services. Prior to joining Watson Wyatt in
1994, Mr. Marini spent 13 years at the insurance company CIGNA Corporation, most
recently as the President of the Iowa division of Trilog Inc., a wholly-owned
401(k) recordkeeping subsidiary, and he was previously a CPA with the accounting
firm Coopers & Lybrand. He has a B.S. in business administration from Western
New England College.
J.P. Orbeta (age 39) has served as Vice President since 1998 and as Global
Practice Leader--Human Capital Group since 1998. Prior to joining Watson Wyatt
in April 1986, Mr. Orbeta was a faculty member of the Mathematics Department and
director of Computer Education and Services at the Ateneo de Manila University.
Mr. Orbeta is a member and Certified Compensation Professional (CCP) of the
American Compensation Association and is the first practitioner in the
Philippines to have earned this designation. He is a member of the Industrial
Relations Committees of the American Chamber of Commerce of the Philippines, the
Personnel Management Association of the Philippines and is currently the
President of the Compensation Management Society of the Philippines. Mr. Orbeta
has a B.S. in Economics from Ateneo de Manila University in the Philippines.
Gilbert T. Ray (age 56) was appointed a Director in March, 2000. Mr. Ray is
retired senior partner of the law firm O'Melveny & Myers LLP. He joined
O'Melveny & Myers in 1972, and was named a partner in 1981. After practicing
corporate law for over 28 years, Mr. Ray retired from active practice in
January, 2000. Mr. Ray is a member of the boards of Host Marriott Services
Corporation, a concessions provider, Automobile Club of Southern California, a
provider of emergency road and travel services and insurance, and is Chair of
the Board of Sierra Monolithics, Inc. a high speed communications systems
company. Mr. Ray is also the recipient of the Fred Snowden Humanitarian
Award--Greater Los Angeles African American Chamber of Commerce, the Outstanding
Alumni Award--Ashland University, the NAACP Legal Defense Fund--Civil Rights
Advocate of the Year, and the Central City Association--Leadership and
Achievement Award.
STANDING COMMITTEES OF THE BOARD
Audit Committee
The Audit Committee operates pursuant to a charter amended by the Board of
Directors on September 20, 2000. A copy of the charter is included as Appendix A
to this Proxy Statement. The Committee, on behalf of the Board, oversees our
financial reporting process. It also reviews (in cooperation with our internal
auditors, independent accountants and management) our internal accounting
procedures and controls, and the adequacy of the accounting services provided by
our Finance and Administration office. The Audit Committee is currently composed
of Barbara Hackman Franklin, John J. Gabarro, R. Michael McCullough (Chair) and
Gilbert T. Ray. The Committee (including its predecessor committee of the Board
of Watson Wyatt & Company) held four meetings during fiscal year 2000. (The
predecessor committee consisted of Brian E. Kennedy, Chair, Paula A. DeLisle, R.
Michael McCullough and Sylvester J. Schieber.)
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Report of the Audit Committee
The Audit Committee reviews the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of our
audited financial statements to generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed with management
and the independent auditors the audited financial statements. The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). In addition, the Audit Committee has received from the independent
auditors the written disclosures required by Independence Standards Board No. 1
(Independence Discussions with Audit Committees) and discussed with them their
independence from the Company and its management.
In reliance on the reviews and discussions referred to above, the Audit
Committee members reviewed and approved the audited financial statements to be
included in the Company's Annual Report on SEC Form 10-K for the year ended June
30, 2000, for filing with the Securities and Exchange Commission.
Submitted by the Watson Wyatt & Company Holdings Audit Committee:
R. Michael McCullough - Chair
Barbara Hackman Franklin
John J. Gabarro
Gilbert T. Ray
Compensation Committee
The Compensation Committee oversees executive compensation policies, including
the compensation of the chief executive officer and the 2000 Long Term Incentive
Plan. The Compensation Committee is currently composed of Barbara Hackman
Franklin, John J. Gabarro, R. Michael McCullough and Gilbert T. Ray, as Chair.
The Committee's predecessor, the Compensation & Stock Committee, held four
meetings during fiscal year 2000. The Committee is in concurrence with the
actions/recommendations of such committee.
Executive Committee
The Executive Committee oversees and reviews long-range corporate and strategic
planning. Additionally, it meets throughout the year between meetings of the
Board of Directors to review, consider and make decisions affecting general
management policies of our company, to approve significant business decisions
not requiring full board approval and to make recommendations to the executive
officers and the board. The Executive Committee is currently composed of John J.
Haley, Brian E. Kennedy (Chair), Ira T. Kay, Eric P. Lofgren and A. Grahame
Stott. The Committee held nine meetings during fiscal year 2000.
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Finance Committee
The Finance Committee reviews and considers issues relating to our capital
structure. This includes strategic determinations regarding the financing of our
future growth and development. The Finance Committee is currently composed of
David B. Friend, M.D. (Chair), Elizabeth M. Caflisch, Carl D. Mautz, John A.
Steinbrunner, Charles P. Wood, Jr. and A. Grahame Stott. Mr. Mautz and Ms.
Caflisch are non-director members. The Committee held nine meetings during
fiscal year 2000.
Members of these committees may change after this annual meeting. The Company
does not have a Nominating Committee.
DIRECTORS' MEETINGS
The Board of Directors conducted seven meetings during fiscal year 2000. All
directors attended 75% or more of the meetings of the Board and the Committees
on which they served except Mr. Gabarro. None of the current Directors who are
associates of the Company is compensated separately for their services as
Directors or as members of any Committee of the Board. The Bylaws of the
Company, however, allow Directors who are not active associates to receive
compensation. Outside Directors of Watson Wyatt & Company in fiscal 2000 were
paid a quarterly retainer of $6,250 plus $1,500 per day for Board meetings,
$1,000 per day for regular Committee meetings ($750 if held in conjunction with
a Board meeting), and $2,000 per day for Committee meetings if the outside
Director chaired that Committee ($1,000 if held in conjunction with a Board
meeting). Telephone meetings of less than four hours duration were compensated
at 50% of the applicable per day fee. In fiscal 2000 the fees paid were paid in
shares of Watson Wyatt & Company's Common Stock (up to 7,500 shares), and the
balance was paid in cash. Watson Wyatt & Company established the Voluntary
Deferred Compensation Plan to enable outside Directors, at their election, to
defer receipt of any or all of their Director's fees until they are no longer
serving as a Director of the Company. The Company's Amended and Restated Bylaws
provide that a Director need not be a stockholder of the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us concerning the shares of
Common Stock, beneficially owned as of November 10, 2000 by (i) the directors
during the last fiscal year and nominees for director of the Company; (ii) the
executive officers named in the Summary Compensation Table herein under
"Executive Compensation"; and (iii) all executive officers and directors as a
group. Except as otherwise indicated in the footnotes to the tables below, the
Company believes that the beneficial owners of the Common Stock, based on
information furnished by such owners, have sole investment power and voting
power with respect to such shares.
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<TABLE>
<CAPTION>
Number of Outstanding
Shares Beneficially Owned
On November 10, 2000
--------------------
(Note: The totals shown for shares
owned are comprised of 50% Class
B-1 and 50% Class B-2 shares)
Name of Beneficial Owner Number Percent(b)
------------------------ ------ ----------
<S> <C> <C>
John J. Haley 455,498 1.4%
Charles P. Wood, Jr. 360,782 1.1%
A. Grahame Stott 248,000 *
Eric P. Lofgren 218,730 *
John A. Steinbrunner 184,844 *
Kevin L. Meehan 179,120 *
Thomas W. Barratt (c) 159,300 *
Ira T. Kay 144,046 *
David B. Friend, M.D(c) 126,900 *
Paula A. DeLisle 101,800 *
Brian E. Kennedy 89,100 *
Gail E. McKee 48,376 *
Barbara Hackman Franklin (d) 0 *
John J. Gabarro 15,000 *
R. Michael McCullough 15,000 *
Robert D. Masding (e) 0
Gilbert T. Ray (d) 0 *
Elizabeth M. Caflisch 107,512 *
David P. Marini 69,000 *
J. P. Orbeta 53,510 *
Paul N. Thornton (e) 0
All directors and executive officers as a group: 26 3,919,504 11.9%
</TABLE>
--------------------------
(a) Unless noted otherwise, the address for each of the beneficial owners
identified in this table is c/o of Watson Wyatt & Company Holdings, 1717 H
Street, N.W., Washington, D.C. 20006.
(b) Beneficial ownership of 1% or less of all of the outstanding Common Stock
is indicated with an asterisk.
(c) Included in the totals for Mr. Barratt and Dr. Friend are the following
numbers of shares held in trust for the benefit of family members or other
entities they control: Mr. Barratt: 40,000 shares; and Dr. Friend: 60,000
shares.
(d) As a result of their joining the Board during the pendency of the
Company's initial public offering, the Company has not yet issued any
shares to Ms. Franklin and Mr. Ray.
10
<PAGE>
(e) Watson Wyatt Partners, in which Messrs. Masding and Thornton are partners,
beneficially owns 726,000 shares (2.2%) of our Common Stock. Messrs.
Masding and Thornton do not own any shares in their individual capacities
and disclaim beneficial ownership of these shares. Pursuant to our
alliance agreement, if Watson Wyatt Partners holds more than 800,000
shares of our Common Stock, it has an option to sell to us any number of
shares that exceed 600,000. We, in turn, have an option to purchase from
Watson Wyatt Partners any number of shares of our Common Stock in excess
of 800,000 shares if Watson Wyatt Partners holds more than 1,000,000
shares of our Common Stock.
BIOGRAPHICAL INFORMATION FOR OTHER EXECUTIVE OFFICERS OF THE COMPANY
Walter W. Bardenwerper (age 49) has served as Vice President and General Counsel
since joining Watson Wyatt in 1987 and has served as Secretary since 1992. Mr.
Bardenwerper was a Director of Watson Wyatt from 1992 to 1997. He serves as
chairman of the Global Quality Committee of Watson Wyatt Worldwide, and is
President and a director of Professional Consultants Insurance Company. He has a
B.A. in Economics from the University of Virginia and a J.D. from the University
of Virginia Law School.
Jorge V. Bou (age 58) has served as Vice President since 1998 and Regional
Manager (Latin America) since 1994. Prior to joining Watson Wyatt in 1986, Mr.
Bou was a Vice President with the Martin E. Segal Company, an actuarial and
benefits consulting firm, and was previously with the American International
Group, an insurance organization. He has been providing consulting services to
various clients in Latin America since 1969. Mr. Bou is an Associate of the
Society of Actuaries. He has a B.S. in Mathematics from Georgia State
University.
James A. Gargiulo (age 41): has served as Vice President, Human Resources since
1999. Mr. Gargiulo has been an Account Manager in the Eastern Region for the
past two years. Prior to joining Watson Wyatt in 1997, he was the Regional
Director for the Compensation practice at Aon Corporation, an insurance and
consulting organization, and has held various human resources positions for the
investment banking firm of Salomon Brothers, The Gap, retailer, and Banque
Paribas. Mr. Gargiulo has a B.A. in Business Administration from Bernard Baruch
College in New York.
Ira T. Kay (age 50) has served as Vice President since 1996. He was appointed
Director of the U.S. Compensation Practice in September 2000. Prior to assuming
his current responsibilities he was North America Practice Director of the Human
Capital Group since 1998 and as a Director from 1996 to 2000. Prior to joining
Watson Wyatt in 1993, Mr. Kay was a Managing Director and served on the
Partnership Management Committee of The Hay Group, a competing human resources
consulting firm, and prior to that, he was a Managing Director in the Human
Resources Department of the investment banking firm Kidder Peabody. Mr. Kay is
the author of CEO Pay and Stockholder Value (St. Lucie Press). Mr. Kay has a
B.S. in Industrial and Labor Relations from Cornell University and a Ph.D. in
Economics from Wayne State University.
11
<PAGE>
Brian E. Kennedy (age 57) has served as Vice President and Regional Manager
(Canada) since 1995 and as a Director from 1996 to 2000. Prior to joining Watson
Wyatt in 1995, Mr. Kennedy spent 18 years with the Alexander Consulting Group,
an insurance and benefits consulting firm, most recently as Chairman and Chief
Executive Officer of Alexander Clay, their U.K. and European operations.
Carl D. Mautz (age 53) has served as Vice President and Chief Financial Officer
since February 1999 and previously served as Controller. Prior to joining Watson
Wyatt in 1997, Mr. Mautz served as the Controller for Tactical Defense Systems,
Loral Corporation, which merged into defense contractor Lockheed Martin
Corporation. From 1990 to 1994, Mr. Mautz held operating and corporate finance
positions at the computer firm Unisys Corporation and from 1972 to 1984 was a
CPA with the accounting firm of KPMG Peat Marwick. Mr. Mautz has a B.S. and an
M.A.S. in accounting from the University of Illinois.
Sylvester J. Schieber (age 54) has served as Vice President and Director of the
Watson Wyatt Research and Information Center (RIC) since 1983, and as a Director
of Watson Wyatt from 1989 to 1996. Mr. Schieber joined Watson Wyatt in 1983 as
Director of RIC, and from 1994-1996, he served on the Advisory Council on Social
Security for the Clinton Administration. He is currently serving a six-year term
on the Social Security Advisory Board, to which he was appointed by the U.S.
Senate Majority Leader. Mr. Schieber has served on the Board of the Pension
Research Council of the Wharton School, University of Pennsylvania since 1985.
He has authored or co-authored four books on retirement issues, including
Fundamentals of Private Pensions (University of Pennsylvania Press), The Real
Deal: The History and Future of Social Security (Yale University Press, 1999),
and he has co-edited four other volumes on a broad range of human resources
issues. Mr. Schieber is a frequent speaker on pension and Social Security policy
issues throughout the world. He has a Ph.D. in Economics from the University of
Notre Dame.
A. Grahame Stott (age 46) has served as Vice President since 1995 and Regional
Manager (Asia-Pacific) since 1995 and as a Director from 1995 to 2000. Mr. Stott
joined Watson Wyatt in 1982 and is a member of the Hang Seng Index Advisory
Committee, a past President of the Actuarial Association of Hong Kong and has
been a member of a number of Hong Kong Government working parties in the areas
of Social Security and pension legislation. Mr. Stott, a Fellow of the Faculty
of Actuaries, has a B.Sc. in Mathematics from the University of Manchester
Institute of Science and Technology.
COMMON STOCK PURCHASE ARRANGEMENTS
Prior to our initial public offering in October 2000, to encourage ownership of
common stock by associates, Watson Wyatt & Company had historically maintained a
stock purchase plan. Under the stock purchase plan, Watson Wyatt & Company
regularly sold common stock to associates on or about March 1 of each year,
except in 1998 and 2000. Historically, ownership of the common stock had been
spread widely among associates, with no individual stockholder owning more than
2% of the total number of shares outstanding. Before 1996, it was the policy of
Watson Wyatt & Company not to sell shares to stockholders who, as a result of
such sales, would have purchased more than 300,000 shares under the stock
purchase plan. In 1996, Watson Wyatt & Company reduced this number to 200,000.
The stock purchase plan was terminated upon completion of the initial public
offering. The stock purchase plan permitted associates to borrow
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<PAGE>
up to the full amount of the purchase price of the common stock from Watson
Wyatt & Company's lenders, and Watson Wyatt & Company guaranteed repayment of
all such loans. The loans provided for full recourse to the individual borrower
and were secured by a pledge of the stock purchased. Officers, directors and
executive officers had access to this credit facility on the same basis as other
associates. As of November 10, 2000, 2,973,393 shares of Common Stock were
pledged to our lenders to secure loans to stockholders, representing
approximately 9.0% of the outstanding shares of Common Stock. As of the same
date, the aggregate amount of outstanding loans was approximately $10,581,230.
This loan program has continued in effect to accommodate the amortization of
existing loans at the time of the initial public offering, but has been amended
and is not used to create new loans.
Class A and Class B Common Stock
Shares of Class B-1 Common Stock and Class B-2 Common Stock are not transferable
or otherwise convertible into shares of Class A Common Stock, until the relevant
transfer restriction period expires or is otherwise waived by the Board of
Directors. The board has not yet determined any conditions under which it would
waive these transfer restrictions, except that the stockholders who participated
in the initial public offering were permitted to exchange an equal number of
shares of Class B-1 and Class B-2 Common Stock into shares of Class A Common
Stock.
The class B transfer restriction periods, provided in our certificate of
incorporation, will expire 12 months following the public offering date for the
Class B-1 Common Stock and 24 months after the public offering date for the
Class B-2 Common Stock. Once these transfer restrictions expire or are waived by
the Board of Directors, the shares of Class B Common Stock automatically will
convert into shares of Class A Common Stock.
13
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
(U.S. Dollars)
<TABLE>
<CAPTION>
Fiscal Total All Other
Name and Principal Position Year Salary Bonus SIBP(a) Salary/Bonus/SIBP Compensation(b)(c)
--------------------------- ------ ------ ----- ------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Haley 2000 $612,500 $570,000 $725,514 $1,908,014 $54,932
President, 1999 543,750 422,625 491,000 1,457,375 25,255
Chief Executive 1998 440,000 320,000 -- 760,000 19,300
Officer and Director
Eric P. Lofgren 2000 430,000 350,000 367,736 1,147,736 23,107
Vice President, 1999 390,000 290,000 260,960 940,960 19,170
Global Director, 1998 331,500 250,000 -- 581,500 15,035
Benefits Consulting
Group and Director
Charles P. Wood, Jr 2000 390,000 250,000 413,750 1,053,750 22,969
Vice President, Western 1999 290,000 190,000 325,351 805,351 12,476
Regional Manager and 1998 246,750 125,000 -- 371,750 12,760
Director
Kevin L. Meehan 2000 350,500 318,600 379,243 1,048,343 21,146
Vice President and 1999 326,250 300,000 290,425 916,675 17,690
Director 1998 280,150 250,000 -- 530,150 5,110
David B. Friend, M.D 2000 435,000 325,000 239,704 999,704 32,746
Vice President, 1999 415,000 315,000 175,270 905,270 21,380
Eastern Regional 1998 387,500 270,000 -- 657,500 17,125
Manager and
Director
</TABLE>
(a) In 1996, Watson Wyatt & Company adopted a supplemental bonus plan called
the stock incentive bonus plan. Following the initial public offering, the
stock incentive bonus plan was terminated and replaced with equity based
incentives more customary to publicly traded companies.
(b) "All Other Compensation" consists of the following: (1) company matching
contributions of 50% of the first 6% of total compensation contributed to
our 401(k) plan as a 401(k) salary deferral by the named executive up to
the IRS maximum; (2) an additional company matching contribution to a
non-qualified savings plan of 3% of total compensation above the IRS
compensation limit of $160,000 if individual 401(k) contributions equal
the IRS maximum; and (3) payment for the annual cash out of excess unused
vacation, as required by our paid time off policy, as amended in 1999. All
associates were subject to the same accrued vacation limits.
(c) No other columns are included because no other forms of compensation were
paid.
LONG TERM INCENTIVE PLAN
Under the terms of the 2000 Long Term Incentive Plan, which was approved by our
stockholders on June 26, 2000, Watson Wyatt & Company Holdings is permitted to
grant options to associates and directors, allowing them to purchase shares of
Class A Common Stock at fair market value on the date of grant. Options to
purchase an aggregate of 4,500,000 shares are authorized under
14
<PAGE>
the plan. Concurrent with the initial public offering, we granted options to our
associates to purchase approximately 1,800,000 shares of Class A Common Stock at
an exercise price equal to the public offering price. Each associate was granted
options to purchase stock valued at 40% of their target bonus amount, subject to
a minimum grant of 100 options. These options will expire after seven years,
subject to early termination in specified circumstances, and will vest on a
pro-rata basis over five years.
DEFINED BENEFIT PLANS
Pension Plan for U.S. Associates. The following table sets forth the estimated
annual benefits payable on a five-year certain and life basis under the
Company's qualified pension plan and non-qualified excess pension plans to a
U.S. associate who qualifies for normal retirement in 2000 with the specified
average compensation equal to the average of the highest 36 consecutive months
of compensation prior to retirement and the specified years of continuous
service:
Annual Benefit Amounts(a)
<TABLE>
<CAPTION>
Average Annual Years of Continuous Service
Compensation
for 36 Consecutive Months
with the Highest Average(b)
Preceding Retirement 5 10 15 20 25
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 150,000 15,048 30,096 45,144 60,192 75,240
250,000 25,548 51,096 76,644 102,192 127,740
350,000 36,048 72,096 108,144 144,192 180,240
450,000 46,548 93,096 139,644 186,192 232,740
550,000 57,048 114,096 171,144 228,192 285,240
650,000 67,548 135,096 202,644 270,192 337,740
750,000 78,048 156,096 234,144 312,192 390,240
850,000 88,548 177,096 265,644 354,192 442,740
950,000 99,048 198,096 297,144 396,192 495,240
1,050,000 109,548 219,096 328,644 438,192 547,740
1,150,000 120,048 240,096 360,144 480,192 600,240
1,250,000 130,548 261,096 391,644 522,192 652,740
</TABLE>
(a) The annual benefit at normal retirement (age 65) under the qualified plan
is equal to 1.7% times the associate's average compensation for the 36
consecutive months with the highest compensation plus 0.4% times the
associate's average compensation for the 36 consecutive months with the
highest compensation that exceeds Social Security Covered Compensation,
all times the number of completed years and months of continuous service
up to 25 years. The annual benefit is not subject to reduction for social
security benefits or any other offset amounts.
(b) As required by Section 415 of the IRC, qualified plan payments may not
provide annual benefits exceeding a maximum amount, currently $135,000.
For those associates who are covered under the excess plans, amounts above
this maximum will be paid under the terms of the excess plans, up to the
amounts shown in the table above. Pursuant to Section 401(a)(17) of the
IRC, annual compensation in excess of $170,000 cannot be taken into
account in determining qualified plan benefits.
15
<PAGE>
The years of credited service for the associates named in the cash compensation
table as of June 30, 2000 are: Mr. Haley - 23.17 years; Mr. Lofgren - 11.00
years; Mr. Wood 24.75 years; Mr. Meehan 17.17 years; and Dr. Friend - 5.00
years. Benefits are based solely on the compensation shown in the "Salary" and
in the "Bonus" columns of the Summary Compensation Table.
Supplemental Retirement Program for U.S. Associates. This non-qualified program
provides additional retirement benefits to eligible associates who retire from
active employment with the Company. Prior to January 1, 1997, the qualified
pension plan recognized base pay only, with this Supplemental Retirement Program
("SRP") recognizing total pay. Associates eligible for benefits under this
program were those who had total annual average compensation in excess of a
minimum compensation level ($125,948 as of June 30, 2000 and indexed in the
future) and who had attained age 50 with 10 or more years of service.
Effective January 1, 1997, the qualified pension plan was amended to recognize
salary and bonus; therefore, the SRP will be phased out over a transition period
that will extend for five years through December 31, 2001. Associates eligible
for transition benefits must meet all of the following criteria: total pay
exceeds the minimum compensation level described previously; age 45 or older
with 10 years or more of service as of December 31, 1996 and 60 or more "points"
as of December 31, 1996 (sum of age and service is 60 or greater).
For purposes of the SRP, annual compensation refers to compensation amounts
shown in the "Salary" and in the "Bonus" columns of the Summary Compensation
Table. Transition benefits will equal the amount of total retirement benefits
that would have been paid under the qualified plan, excess plans and SRP
formulas in effect prior to January 1, 1997, less any benefits paid under the
qualified and excess plans in effect after that date. Prior to January 1, 1997,
the qualified plan provided a benefit equal to 2.5% times the participant's
average salary (base pay only) for the three consecutive years with the highest
annual salaries for each completed year and month of continuous service up to 20
years, plus 2% of such compensation for each completed year and month of
continuous service over 20 years, up to a maximum of 8-1/3 years, less 30/17% of
the participant's estimated Social Security benefit for each completed year and
month of continuous service, up to a maximum of 28-1/3 years. Prior to January
1, 1997, the SRP formula was approximately the same as the qualified plan,
except bonus compensation was also recognized. For determining benefits under
the prior plans, no pay increases after December 31, 1996 will be recognized.
The form of benefit under the SRP is a temporary annuity from the retirement
date until the eligible associate reaches age 65. Any pension effect related to
this program has not been considered in the preceding table, which assumes
normal retirement (age 65).
Other Pension Plans. The Company also has other pension plans that have been
established in various countries for the benefit of eligible associates in those
jurisdictions.
Pension Arrangements with Named Executive Officer. The Company has an agreement
with Dr. Friend to provide a supplemental pension benefit. At the time of his
retirement, Dr. Friend will receive an additional service credit (for the
purposes of calculating benefits only) so that his total service credit will be
calculated as follows: (actual years of service + 1) multiplied by 1.5. In
addition, if, prior to the date on which Dr. Friend would be entitled to receive
an early retirement benefit, there is a change in control of the Company and Dr.
Friend leaves the employ of the Company within six months of the change in
control, his pension will be calculated as if he had reached early retirement.
16
<PAGE>
General Employment Arrangements. Generally, executive officers are not parties
to employment agreements with us. Non-employee directors are paid pursuant to a
compensation plan approved on an annual basis. Executives and other associates
in salary bands 4, 5, 6 and higher are required to sign non-competition and
confidentiality agreements to protect our proprietary information.
Compensation Committee Interlocks and Insider Participation. The members of our
Compensation and Stock Committee, predecessor to the current Compensation
Committee, for the last completed fiscal year were: Thomas W. Barratt, Paula A.
DeLisle, Ira T. Kay, Kevin L. Meehan and John A. Steinbrunner. All are officers
of the company. The committee members did not participate in decisions regarding
their own compensation. No interlocking relationship exists between our Board of
Directors or our Compensation Committee and any member of any other company's
board of directors or their compensation committee, nor has any interlocking
relationship existed in the past.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation Philosophy. Our compensation program is designed to attract,
motivate and retain quality associates by providing competitive total
compensation based on individual and company performance factors. In addition,
the program is designed to be flexible in order to permit adjustments
necessitated by general economic conditions or individual circumstances. Our
compensation philosophy is applied to all associates, including executive
officers. Compensation of the CEO, and administration of the 2000 Long Term
Incentive Plan, are overseen by the Compensation Committee. Specifically, the
compensation program is designed to:
1. Create a performance-oriented environment with variable compensation
based upon achievement of annual and long-term results;
2. Focus management on maximizing stockholder value while at the same
time adequately compensating all associates; and
3. Provide compensation that reflects the Company's performance
relative to its key competitors and changes in its own performance
over time.
For the fiscal year ended June 30, 2000, the compensation of our executive
officers and all other bonus-eligible associates was comprised primarily of
three elements: base salary, fiscal year-end bonus, and a Stock Incentive Bonus
Plan (SIBP) payment. Our compensation system establishes target bonuses for all
bonus-eligible associates based on their compensation band level. After the end
of our fiscal year, bonus-eligible associates are allocated a percentage of
their target bonus based on individual, practice, region and company
performance. For fiscal years before the initial public offering, the SIBP was
paid in January of the following year to those eligible associates still
employed by the company. The amount of the SIBP paid was based on the SIBP
funding level approved by the Board of Directors, and the actual fiscal year end
bonus and actual stock ownership as compared to each associate's career stock
ownership target. (The SIBP was discontinued at the time of the initial public
offering and will not be accrued for fiscal year 2001.) At the time of the
merger and the initial public offering the Company also implemented the 2000
Long Term Incentive Plan (stock option plan).
17
<PAGE>
Determination of Compensation of the CEO.
Mr. Haley's base salary was adjusted on October 1, 2000 by the Board of
Directors upon recommendation by the President's Pay Committee of Watson Wyatt &
Company and the concurrence of the Compensation Committee, after taking into
account the following factors:
1. Mr. Haley's level of base salary received in fiscal year 2000 ;
2. The average basic merit increase for the Company overall;
3. The average salary increases in general industry and in the
consulting industry;
4. Mr. Haley's performance as CEO since assuming the position on
January 1, 1999; and
5. The appropriate level of salary for our CEO based on general
industry standards, consulting industry standards and our past CEO
pay practices.
The CEO's bonus was determined by the Board of Directors, upon recommendation of
the President's Pay Committee of Watson Wyatt & Company and the concurrence of
the Compensation Committee. For fiscal 2000 the President's Pay Committee
consisted of Mr. McCullough (Chair), Mr. Kennedy (the Chair of the Executive
Committee) and Mr. Barratt (the Chair of the Compensation and Stock Committee).
For fiscal year 2000 year-end bonus, the President's Pay Committee recommended,
and the Board approved, a bonus equal to 130% of Mr. Haley's target bonus. The
President's Pay Committee's recommendation, and the Board's decision, took into
account the following:
1. The average overall bonus funding for fiscal 2000 , which was 115%
of target.
2. The firm's accomplishments during the fiscal year, including the
outstanding financial performance of the Company's core consulting
businesses.
Mr. Haley's SIBP payment was determined by a formula that took into account his
fiscal year end bonus and his stock ownership level.
Determination of Compensation of Other Executive Officers. The base salary and
fiscal year-end bonuses of the Company's other Executive Officers are determined
by the CEO consistent with the factors described above and also taking into
account the performance of the business units managed by these individuals.
18
<PAGE>
Fiscal 2000 Watson Wyatt & Company Fiscal 2000 Watson Wyatt & Company
President's Pay Committee Compensation and Stock Committee
R. Michael McCullough - Chair Thomas W. Barratt - Chair
Thomas W. Barratt Paula A. DeLisle
Brian E. Kennedy Ira T. Kay
Kevin L. Meehan
John A. Steinbrunner
Watson Wyatt & Company Holdings
Compensation Committee
Gilbert T. Ray - Chair
Barbara Hackman Franklin
John J. Gabarro
R. Michael McCullough
STOCKHOLDER RETURN GRAPH
The graph set forth below depicts total cumulative stockholder return and
assumes $100 invested on July 1, 1995 in Watson Wyatt & Company's common stock,
the New York Stock Exchange Broad Market Index, and an independently compiled
industry peer group index comprised of the common stock of companies within the
management consulting services standard industrial classification code. The
graph assumes reinvestment of dividends. Please note that returns on Watson
Wyatt & Company's common stock were calculated based upon the formula net book
value of Watson Wyatt & Company's common stock pursuant to its Bylaws as of June
30, 2000, whereas the returns shown for the indices are based on the value of
shares traded on an open market. On October 11, 2000, in connection with the
Company's initial public offering, each share of Watson Wyatt & Company's common
stock was converted into two shares of Class B Common Stock of the Company.
The independently compiled peer group index was utilized because the Company's
most direct competitors do not make their financial information publicly
available.
19
<PAGE>
[The following table was depicted as a mountain graph in the printed material.]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Watson Wyatt &
Company Common Stock
(Formula Net Book Value) 100.00 109.53 117.52 134.15 148.12 172.95
Peer Group Index 100.00 167.87 119.84 144.82 101.61 108.69
NYSE Broad Market Index 100.00 125.11 163.42 208.25 236.73 235.07
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 1, 1995, Watson Wyatt & Company transferred its United Kingdom
operations to R Watson & Sons (subsequently renamed Watson Wyatt Partners) and
received a beneficial interest and a 10% interest in a defined profit pool of
the partnership. Watson Wyatt & Company also transferred its Continental
European operations to a newly formed holding company owned by a subsidiary of
Watson Wyatt & Company and Watson Wyatt Partners in exchange for 50.1% of its
shares. Effective July 1, 1998, Watson Wyatt & Company sold one-half of its
investment in the holding company to Watson Wyatt Partners. Mr. Robert D.
Masding, Senior Partner of Watson Wyatt Partners, is currently a member of our
Board of Directors, but is not standing for re-election. Mr. Paul N. Thornton,
also a partner of Watson Wyatt Partners, is a nominee to our
20
<PAGE>
Board of Directors and Mr. Haley is a member of the Watson Wyatt Partners
Partnership Board. Watson Wyatt Partners and Watson Wyatt & Company provide
various services to and on behalf of each other in the ordinary course of
business.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 furnished to us, all Section
16(a) filing requirements applicable to such officers and directors have been
complied with.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee, pursuant to the authority delegated to it by the Board,
selects the independent public accountants to audit the financial statements of
the Company. PricewaterhouseCoopers LLP acted as the Company's independent
public accountants for the fiscal year ended June 30, 2000.
PricewaterhouseCoopers LLP will continue to provide this service to the Company
for the fiscal year ended June 30, 2001. Representatives of
PricewaterhouseCoopers LLP are not expected to attend the Annual Meeting. If a
representative of PricewaterhouseCoopers LLP attends the Annual Meeting, he or
she will have an opportunity to make a statement if he or she desires to do so.
Also, if such representative chooses to attend the Annual Meeting, they are
expected to be available to respond to appropriate questions.
MANNER IN WHICH THE PROXIES WILL BE SOLICITED AND VOTED
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing, personal conversations, or by telephone, electronically or by
facsimile. The Company will, upon request, reimburse brokerage firms and others
for their reasonable expenses in forwarding solicitation material to the
beneficial owners of its Common Stock.
Management knows of no other matter that may come up for action at the meeting.
However, if any other matter properly comes before the meeting, the proxies
named on the Proxy form enclosed will vote in accordance with their judgment
upon such matter. Individual proxies will be counted by First Union in an effort
to ensure the confidentiality and anonymity of each stockholder's votes. Whether
or not you expect to be present at the meeting, you are urged to sign, date and
promptly return the attached Proxy in the enclosed envelope. Please return your
Proxy in accordance with the directions on the Proxy form.
21
<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder wishing to present a proposal to be included in the Proxy
Statement for the 2001 Annual Meeting of the Company, currently expected to be
held on or about November 15, 2001, may submit such proposal in writing to
Watson Wyatt & Company Holdings, Office of the Secretary, 1717 H Street, N.W.,
Washington, D.C. 20006. Such proposals must be received no later than July 15,
2001.
By Order of the Board of Directors
/s/ Walter W. Bardenwerper
---------------------------------------------
Walter W. Bardenwerper
Vice President, General Counsel and Secretary
Washington, D.C.
November 17, 2000
22
<PAGE>
Appendix A
Audit Committee Charter
WATSON WYATT & COMPANY HOLDINGS
Audit Committee Charter
The Audit Committee is established by the Board of Directors to assure that
financial control and reporting measures are established and implemented to
protect the financial interests of the stockholders of the Company.
Committee Membership
The Committee shall consist of at least three (3) independent directors, all of
whom shall have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company. Each Committee
member shall be financially literate, as the Board of Directors interprets such
qualification in its business judgment, or shall become financially literate
within a reasonable period of time after his or her appointment to the
Committee.
At least one (1) member of the Committee shall have accounting or related
financial management expertise, as the Board of Directors interprets such
qualification in its business judgment.
Primary Committee Responsibilities
The scope of the Committee's responsibilities includes:
1. Assisting the Board of Directors in fulfilling its oversight
responsibilities as they relate to the financial reporting process and the
internal control structure.
2. Holding regularly scheduled meetings as a means of maintaining direct
lines of communications between the Board of Directors, the independent
accountant, and the internal audit function for the purpose of assuring
the integrity of financial reporting and control.
3. Overseeing development of financial statements and related SEC filings
through discussions with management, internal audit, and the independent
accountant. This includes:
o Reviewing of proposed changes in accounting policies as they arise;
o Reviewing the basis for significant financial estimates and changes
in those estimates, and other judgments affecting the financial
statements;
o Reviewing the accounting for and disclosure of significant events
and transactions affecting the income or financial condition of the
Company;
o Reviewing the current and potential future business, financial, and
control risks identified by management, the internal audit function,
and the independent auditor and the plans to deal with such risks.
4. Assuring reasonable disclosure of information necessary for fair
presentation of the Company's financial affairs to the stockholders and
the SEC.
23
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5. Assuring consistency of other financial and nonfinancial information
distributed inside or outside the Company with the information in the
financial statements.
6. Reviewing financial reporting systems, processes, and related controls and
other systems that may indirectly impact financial reporting.
7. Reviewing and approving the annual business plan of the internal audit
function, periodically reviewing internal audit results, and participating
in the annual review of the head of internal audit.
8. Recommending to the Board of Directors and management the annual selection
or replacement of the independent auditor.
9. Annually reviewing and reassessing the adequacy of the Audit Committee
Charter.
Committee's Relationship with the Independent Auditor
1. The independent auditor, in its capacity as an independent public
accountant, shall be responsible to the Board of Directors and the
Committee as representatives of the stockholders.
2. The independent auditor shall report all relevant issues to the Committee
responsive to agreed-on Committee expectations. In executing its oversight
role, the Board of Directors or the Committee shall review the work of the
independent auditor.
3. The Committee shall annually review the performance (effectiveness,
objectivity, and independence) of the independent auditor. The Committee
shall ensure receipt of a formal written statement from the independent
auditor delineating all relationships between the independent auditor and
the Company on a periodic basis. Additionally, the Committee shall discuss
with the independent auditor relationships or services that may affect the
independent auditor's objectivity or independence. If the Committee is not
satisfied with the independent auditor's assurances of independence, it
shall take or recommend to the Board of Directors appropriate action to
ensure the independence of the independent auditor.
* Independence Requirements of Audit Committee Members are further described on
the attached Exhibit A.
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<PAGE>
EXHIBIT A
Independence Requirement of Audit Committee Members
In addition to independence as described in the first sentence of the Audit
Committee Charter under "Committee Membership," the following restrictions shall
apply to every Committee member:
(a) Employees. A director who is an employee (including non-employee executive
officers) of the Company or any of its affiliates may not serve on the audit
committee until three (3) years following the termination of his or her
employment. In the event the employment relationship is with a former parent or
predecessor of the Company, the director could serve on the Committee after
three years following the termination of the relationship between the Company
and the former parent or predecessor.
(b) Business Relationship. A director (i) who is a partner, controlling
shareholder, or executive officer of an organization that has a business
relationship with the Company, or (ii) who has a direct business relationship
with the Company (e.g., a consultant) may serve on the Committee only if the
Company's Board of Directors determines in its business judgment that the
relationship does not interfere with the director's exercise of independent
judgment. In making a determination regarding the independence of a director
pursuant to this paragraph, the Board of Directors should consider, among other
things, the materiality of the relationship to the Company, to the director,
and, if applicable, to the organization with which the director is affiliated.
"Business relationships" can include commercial, industrial, banking,
consulting, legal, accounting and other relationships. A director can have this
relationship directly with the Company, or the director can be a partner,
officer or employee of an organization that has such a relationship. The
director may serve on the Committee without the above-referenced Board of
Directors' determination after three years following the termination of, as
applicable, either (1) the relationship between the organization with which the
director is affiliated and the Company, (2) the relationship between the
director and his or her partnership status, shareholder interest or executive
officer position, or (3) the direct business relationship between the director
and the Company.
(c) Cross Compensation Committee Link. A director who is employed as an
executive of another corporation where any of the Company's executives serves on
that corporation's compensation committee may not serve on the Committee.
(d) Immediate Family. A director who is an Immediate Family member of an
individual who is an executive officer of the Company or any of its affiliates
cannot serve on the Committee until three years following the termination of
such employment relationship.
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Watson Wyatt
Watson Wyatt & Company Holdings
Annual Meeting of Stockholders
Hilton Philadelphia Airport
Penrose Room
4509 Island Avenue
Philadelphia, Pennsylvania
Monday, December 18, 2000
9:30 a.m.
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o FOLD AND DETACH HERE o
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MANAGEMENT PROXY WATSON WYATT & COMPANY HOLDINGS
The undersigned hereby appoints John J. Haley and Walter W. Bardenwerper, and
each of them, as his or her proxies, each with full power of substitution, to
vote all of the undersigned's shares of capital stock of the Company at the
Annual Meeting of Stockholders of Watson Wyatt & Company Holdings to be held on
Monday, December 18, 2000, and at any adjournments thereof, with the same
authority as if the undersigned were personally present, as specified below:
THE DIRECTORS OF THE COMPANY RECOMMEND A VOTE "FOR" ALL NOMINEES BELOW
|X| PLEASE MARK VOTE AS IN THIS EXAMPLE
I. Election of Directors
CLASS I DIRECTORS (TERM EXPIRES IN 2001): Paula A. DeLisle, David B.
Friend, M.D., R. Michael McCullough, Gail E. McKee and Paul N. Thorton
CLASS II DIRECTORS (TERM EXPIRES IN 2002): Thomas W. Barralf, John J.
Gabarro, John J. Haley, Eric P. Lofgren, Kevin L. Mechan and Charles P.
Wood, Jr.
CLASS III DIRECTORS (TERM EXPIRES IN 2003): Elizabeth M. Caflisch, Barbara
Hackman Franklin, David P. Marini, J.P. Orbeta and Gilbert T. Ray
|_| FOR all sixteen nominees listed above (except as otherwise directed
below);
|_| WITHHOLD AUTHORITY TO VOTE FOR all sixteen nominees listed above
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
write the individual(s) name(s) on the following blank line
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II. In their discretion, the proxies are authorized to consider and act
upon all other matters that may properly come before the meeting or
any and all postponements or adjournments thereof
(Please date and sign on other side)
<PAGE>
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o FOLD AND DETACH HERE o
(continued from other side)
UNLESS A CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NAMED NOMINESS FOR DIRECTORS OF THE COMPANY. THE UNDERSIGNED
HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES RECEIPT OF THE NOTICE
AND PROXY STATEMENT FOR THE ANNUAL MEETING.
When signing in any representative capacity, please insert your title and attach
papers showing your authority unless already on file with the Company.
__________________________________________
Signature of Stockholders
__________________________________________
Date Signed
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS. Stockholders must
deliver their signed Proxy in the enclosed
envelope.
