<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
SALOMON INC
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
SALOMON INC
SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 212 783-7000
Robert E. Denham
Chairman and
Chief Executive Officer
April 4, 1997
Dear Stockholder:
Attached are materials related to the annual meeting of stockholders, to be
held in New York on May 7.
I encourage you to attend the annual meeting. The meeting provides an
opportunity for shareholders to question management about issues of significance
to the Company. By actively participating with thoughtful questions, you can
contribute to the quality of the meeting.
Sincerely,
/s/ Robert E. Denham
ROBERT E. DENHAM
<PAGE> 3
SALOMON INC
SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 212 783-7000
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
April 4, 1997
To Our Stockholders:
The Annual Meeting of Stockholders of Salomon Inc will be held in the
Salomon Brothers Auditorium, Seven World Trade Center, New York, New York 10048,
on Wednesday, May 7, 1997, at 10:00 a.m. for the following purposes:
1. To elect directors,
2. To transact such other business as may properly come before the
meeting.
The record date for the determination of the stockholders entitled to vote
at the meeting or at any adjournment thereof is the close of business on March
17, 1997.
All stockholders are urged to attend the meeting. However, in order to make
sure that your shares are represented at the meeting, you are requested to sign,
date and return the enclosed proxy promptly in the accompanying envelope, which
requires no postage if mailed in the United States. This will not limit your
right to vote in person.
By Order of the Board of Directors
ARNOLD S. OLSHIN
Secretary
<PAGE> 4
SALOMON INC
SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 212 783-7000
PROXY STATEMENT FOR THE 1997
ANNUAL MEETING OF STOCKHOLDERS
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy, being mailed to the stockholders on or about April 4,
1997, is solicited by the Board of Directors of the Company. If a proxy is duly
received by the Secretary before the meeting, the shares represented by it will
be voted on all matters to be acted upon at the meeting unless the proxy is
revoked by written notice to the Secretary of the Company before the meeting or
by voting by ballot at the meeting.
Holders of the Company's Series A Cumulative Convertible Preferred Stock
(the "Preferred Stock, Series A") and Common Stock as of the close of business
on March 17, 1997 will be entitled to receive notice of and to vote at the
meeting and any adjournment thereof. On that date, there were outstanding and
entitled to vote 420,000 shares of Preferred Stock, Series A, each of which is
entitled to 26.31579 votes with respect to each matter to be voted on at the
meeting, voting together with the holders of the Common Stock, and 109,327,648
shares of Common Stock (exclusive of 50,024,028 shares held in the treasury) of
the Company, each of which is entitled to one vote with respect to each matter
to be voted on at the meeting. The presence at the meeting in person or by proxy
of the holders of Preferred Stock, Series A, and Common Stock holding in the
aggregate a majority of the outstanding shares of the Company's stock entitled
to vote shall constitute a quorum for the transaction of business. All matters
to be acted upon at the meeting shall be approved by the affirmative vote of a
majority of the votes cast. Abstentions and broker non-votes will count for
purposes of establishing a quorum but will not count as votes cast.
The cost of soliciting proxies in the form enclosed will be borne by the
Company. In addition to the solicitation by mail, proxies may be solicited
personally or by telephone by employees of the Company. The Company will
reimburse brokers holding stock in their names, or in the names of their
nominees, for their expenses in sending proxy material to the beneficial owners
of such stock.
1. ELECTION OF DIRECTORS
Eleven directors are to be elected at the Annual Meeting, each to serve for
one year and until his or her successor is elected and qualifies. All of the
nominees indicated below, except Wesley S. Williams, Jr. and A. Thomas Young,
are presently members of the Board of Directors. Dwayne O. Andreas, John L.
Haseltine, William F. May and Robert G. Zeller, who are currently directors, are
not standing for reelection. In the event any one or more of the following
nominees are unable to serve, it is the intention of the persons named in the
proxy to vote for the election of substitutes proposed by the Board of Directors
or, if no substitute is proposed, for the remaining nominees. The Board of
Directors has no reason to believe that any of the nominees will be unable to
serve, except that Mr. Young's service on the Board of Directors is subject to
approval of the Federal Energy Regulatory Commission.
Information follows with regard to the nominees and their principal
occupations during the past five years and board and committee memberships.
<PAGE> 5
- - --------------------------------------------------------------------------------
WARREN E. BUFFETT
Mr. Buffett, age 66, has been Chairman of the Board and Chief Executive Officer
of Berkshire Hathaway Inc., a holding company, for more than five years.(1) He
also served as interim Chairman and Chief Executive Officer of the Company
between August 18, 1991 and June 3, 1992 and interim Chairman and Chief
Executive Officer of Salomon Brothers Inc between August 18, 1991 and May 27,
1992. Mr. Buffett is also a director of The Coca-Cola Company, The Washington
Post Company and The Gillette Company.
Mr. Buffett has been a director of the Company since 1987 and is currently
Chairman of the Executive Committee.
- - --------------------------------------------------------------------------------
ROBERT E. DENHAM
Mr. Denham, age 51, has been Chairman and Chief Executive Officer of the Company
since June 1992, after serving as General Counsel of the Company from September
1991. For eighteen years prior thereto, he was a partner in the law firm of
Munger, Tolles & Olson, Los Angeles, California. He rejoined Munger, Tolles &
Olson as a partner in August 1992 and resigned from that firm on December 31,
1993.
Mr. Denham has been a director of the Company since 1992 and is currently
Chairman of the Environmental Committee and a member of the Executive Committee.
- - --------------------------------------------------------------------------------
CLAIRE M. FAGIN
Dr. Fagin, age 70, has been Leadership Professor and Dean Emeritus, School of
Nursing, University of Pennsylvania, since 1992. Prior thereto, she was
Professor and Margaret Bond Simon Dean, School of Nursing, University of
Pennsylvania, for more than five years. She also served as Interim President of
the University of Pennsylvania from 1993 to 1994. Dr. Fagin is also a director
and a member of the compensation committee of CMAC Corporation.
Dr. Fagin has been a director of the Company since 1994 and is currently a
member of the Audit and Compliance Committee and the Environmental Committee.
- - --------------------------------------------------------------------------------
GEDALE B. HOROWITZ
Mr. Horowitz, age 64, has been an Executive Vice President of the Company for
more than five years. Mr. Horowitz has been a director of the Company since
1981.
- - --------------------------------------------------------------------------------
DERYCK C. MAUGHAN
Mr. Maughan, age 49, has been an Executive Vice President of the Company since
1993. Additionally, he has been Chairman and Chief Executive Officer of Salomon
Brothers Inc since May 1992, after having served as its Chief Operating Officer
from August 1991.
Mr. Maughan has been a director of the Company since 1991.
- - --------------------------------------------------------------------------------
DAVID O. MAXWELL
Mr. Maxwell, age 66, has been retired since 1991 after serving as Chairman of
the Board and Chief Executive Officer of Federal National Mortgage Association.
Mr. Maxwell is also a director and a member of the compensation committees of
Financial Security Assurance Holdings Ltd., Potomac Electric Power Company and
SunAmerica Inc.
Mr. Maxwell has been a director of the Company since February 7, 1996 and is
currently a member of the Audit and Compliance Committee and the Compensation
and Employee Benefits Committee.
- - --------------------------------------------------------------------------------
2
<PAGE> 6
- - --------------------------------------------------------------------------------
CHARLES T. MUNGER
Mr. Munger, age 73, has been Vice Chairman of the Board of Berkshire Hathaway
Inc. for more than five years.(1) He is also Chairman and a director of Daily
Journal Corporation, Chairman and a director of Wesco Financial Corporation and
a director of Costco Companies, Inc.
Mr. Munger has been a director of the Company since 1987 and is currently a
member of the Audit and Compliance Committee, the Compensation and Employee
Benefits Committee and the Nominating Committee.
- - --------------------------------------------------------------------------------
SHIGERU MYOJIN
Mr. Myojin, age 47, has been a Managing Director of Salomon Brothers Inc for
more than five years and its Vice Chairman and a member of its Operating
Committee since 1995. He is also Chairman of the Company's Risk Management
Group.
Mr. Myojin has been a director of the Company since February 7, 1996.
- - --------------------------------------------------------------------------------
LOUIS A. SIMPSON
Mr. Simpson, age 60, has been President and Chief Executive Officer-Capital
Operations of GEICO Corporation, an insurance organization, since 1993 after
having served as Vice Chairman of the Board of GEICO Corporation for more than
five years.(1) He is also a director of Potomac Electric Power Company and
Pacific American Income Shares, Inc. and a director and a member of the
compensation committees of Thompson PBE, Inc. and COHR Inc.
Mr. Simpson has been a director of the Company since 1993 and is currently
Chairman of the Audit and Compliance Committee and a member of the Executive
Committee and the Nominating Committee.
- - --------------------------------------------------------------------------------
WESLEY S. WILLIAMS, JR.
Mr. Williams, age 54, has been a partner in the law firm of Covington & Burling,
Washington, DC, for more than five years. He is also a trustee of Penn Mutual
Life Insurance Company, a director of the Federal Reserve Bank of Richmond and a
director and a member of the compensation committee of CarrAmerica Realty
Corporation.
- - --------------------------------------------------------------------------------
A. THOMAS YOUNG
Mr. Young, age 58, is retired after serving as Executive Vice President of
Lockheed Martin Corporation, an aeronautics and defense company, from April 1995
to July 1995 and, prior thereto, as President and Chief Operating Officer of
Martin Marietta Corporation, a defense, aerospace, energy and information
systems company, for more than five years. He is also a director of The B.F.
Goodrich Company and Potomac Electric Power Company and a director and a member
of the compensation committees of Cooper Industries, Inc., Dial Corporation,
Memotec Corporation and Science Applications International Corporation.
- - --------------------------------------------------------------------------------
(1) For information with respect to Berkshire Hathaway Inc., see "Information as
to Certain Stockholdings" below at Page 6. GEICO Corporation is a
wholly-owned subsidiary of Berkshire Hathaway Inc.
3
<PAGE> 7
BOARD OF DIRECTORS' ROLE, MEETINGS, COMMITTEES AND FEES
ROLE. The business of the Company is managed under the supervision of the Board
of Directors. The Company's By-Laws provide that, subject to the direction of
the Board, the Chairman shall have the general and active management of the
Company's business. The Board has adopted a policy pursuant to which the
Chairman should be a business-wise, shareholder-oriented person who does not
have personal dependence on or loyalty to management personnel of any of the
principal subsidiaries of the Company by virtue of long service with any of
those organizations. He is responsible, among other things, for organizing Board
process and information flow so that the Board can effectively perform its
functions.
A key function of the Board is the appointment and evaluation of senior
officers who have the direct responsibility for conducting or supervising the
business of the Company and its principal subsidiaries. The Board specifically
articulates objectives for the Chairman and evaluates his performance against
them. In addition, together with the Chairman, it sets objectives for the Chief
Executive Officer of Salomon Brothers Inc and evaluates his performance in light
of these objectives.
The Board believes that its primary responsibility is to see that the
Company is managed in the long-term interests of shareholders. The Board
discharges this responsibility by meeting directly or through its committees
with senior management to discuss, review and, where appropriate, approve
policies and actions relating to significant issues including: (i) maintaining
high standards for compliance and for ethical behavior toward customers and
counterparties, (ii) determining the amount and structure of capital, (iii)
maintaining appropriate risk management systems, (iv) developing and applying
pro-shareholder compensation systems, and (v) providing fair reporting to
shareholders about the Company and its results.
MEETINGS AND COMMITTEES. The Board of Directors of the Company held nine
meetings in 1996. The Executive Committee of the Board of Directors held no
meetings during the year. The Company's By-Laws provide that the Executive
Committee may exercise most of the powers of the Board in the general and active
management of the business and affairs of the Company.
In addition to the Executive Committee, the standing committees of the
Board of Directors include the Audit and Compliance Committee, the Compensation
and Employee Benefits Committee, the Nominating Committee and the Environmental
Committee.
The Audit and Compliance Committee, which consists entirely of non-employee
directors, holds regular meetings at which the Company's independent accountants
and its internal auditors report directly to the Committee. The Audit and
Compliance Committee monitors and provides oversight with respect to the
Company's accounting policies, internal accounting controls and the scope and
results of the independent accountants' examination of the financial statements.
Additionally, the Audit and Compliance Committee establishes and reviews
policies and their administration with respect to the compliance of the Company
and its subsidiaries with regulatory and internal procedures and requirements
and the Committee receives regular reports on regulatory and compliance matters
from the Company's General Counsel. While it is inevitable that there will be
instances in which such procedures or requirements are not fully met, the
Committee seeks to minimize the risk that regulations and compliance policies
are not followed. The Audit and Compliance Committee held fourteen meetings in
1996.
The Compensation and Employee Benefits Committee establishes corporate
policy on the compensation of officers and key employees of the Company. The
report of the Compensation and Employee Benefits Committee regarding the 1996
compensation policies applicable to the Company's executive officers, including
the specific relationship of corporate performance to executive compensation, is
set forth below at Page 11. The Compensation and Employee Benefits Committee
consisted in 1996 entirely of non-employee directors and held nine meetings in
that year.
The Nominating Committee considers and makes recommendations to the Board
with respect to the size and composition of the Board and candidates for
membership on the Board. The Board has directed the Nominating Committee to
consider for nomination to the Board persons with the following qualities: (1)
Owner-oriented. The director should be overwhelmingly focused on promoting the
interests of owners.
4
<PAGE> 8
Generally this owner-orientation is likeliest to be found in individuals who
have an investment in Salomon's Common Stock that is significant to them. (2)
Business-wise. The director should be highly talented in thinking about business
issues in a creative and cooperative way and should be able to react quickly and
with sound judgment to business ideas. He or she should be able and willing to
express himself/herself effectively (and forcefully, if needed) on issues
discussed by the Board. (3) Time Commitment. The director should be willing to
make a sufficient time commitment to be an effective director, including likely
service on at least one Board Committee.
In considering candidates for Board vacancies, the Nominating Committee
intends to make a wide canvass of possible nominees, including women and persons
of diverse racial and cultural backgrounds. The Board believes that its
procedure for seeking Board members and the qualifications it has set for Board
service should over time produce a strong and diverse board membership. Although
the Committee has not established procedures for the submission by shareholders
of proposed candidates for its consideration, the Committee will consider a
candidate when accompanied by sufficient, reliable information on the candidate.
The Nominating Committee held one meeting in 1996.
The Environmental Committee oversees adherence to the Company's
environmental commitment as set forth in the Environmental Policy Statement
adopted by the Board in 1992. The Environmental Committee held two meetings in
1996.
ATTENDANCE. In 1996, all of the directors of the Company attended at least 75%
of the aggregate number of meetings of the Board and meetings of Committees of
the Board on which they served.
FEES. On February 5, 1997, the Board of Directors established a new schedule of
directors' fees, effective May 7, 1997. Each non-employee director is entitled
to an annual retainer of $40,000. In addition, the following directors' fees
have been set: a $2,000 attendance fee for each board meeting and a $1,500
attendance fee for each committee meeting attended (if a committee meeting is
held on the same day as a board meeting, a committee meeting attendance fee of
$500 is paid); a $5,000 annual retainer for each committee member and a $5,000
additional annual retainer to each chairman of a committee. An unfunded deferred
compensation plan for non-employee directors permits participants to elect, on
or before December 31 of each year, to have all or a portion of the following
year's fees deferred, with such deferred compensation accruing interest, at the
election of the participant, at a rate equal to either the prime rate or a rate
based on one or more designated deemed "investments", calculated on a quarterly
basis. Amounts deferred (adjusted for deemed investment returns) are paid
generally on a date selected by the participant at the time the deferral
election is made. Additionally, a synthetic equity plan for non-employee
directors permits such directors to elect, subject to the subsequent approval of
the Board, on or before December 31 of each year to have all or a portion of the
following year's fees deferred, which fees are converted quarterly into phantom
shares of Common Stock of the Company at quarter-end prices. The deferral period
generally is the earlier of five years or cessation of Board membership. At the
end of such deferral period, participants receive a dollar amount equal to the
value of a share of Common Stock on such day multiplied by the number of phantom
shares of Common Stock credited to their accounts. Directors who are employees
of the Company are not entitled to an annual retainer or to any attendance fees
or fees for service on a committee.
5
<PAGE> 9
INFORMATION AS TO CERTAIN STOCKHOLDINGS
The following are the only persons known to the Company who own
beneficially more than five per cent of any class of the Company's voting
securities as of March 5, 1997:
<TABLE>
<CAPTION>
TITLE OF SHARES PER CENT
CLASS BENEFICIALLY OF CLASS
OF STOCK OWNED OF STOCK
------------------- ----------- --------
<S> <C> <C> <C>
Berkshire Hathaway Inc.(1)(2).............. Common 10,317,806 9.4
and affiliates Preferred, Series A 420,000 100.0
1440 Kiewit Plaza
Omaha, Nebraska 68131
Ross Financial Corporation................. Common 6,953,500 6.4
and affiliates
P.O. Box 31363 SMB
Mirco Commerce Center
Grand Cayman
Cayman Islands, BWI
</TABLE>
- - ---------------
(1) The Company has been informed by Berkshire Hathaway Inc. ("Berkshire"), a
Delaware corporation, and by Warren E. Buffett, as follows: Berkshire is a
holding company, the capital stock of which is beneficially owned
approximately 38.8% by Warren E. Buffett and three trusts of which he is a
trustee but in which he has no beneficial economic interest and 3.0% by Mr.
Buffett's wife, Susan T. Buffett. Additionally, approximately 1.5% of such
capital stock is beneficially owned by Charles T. Munger. Mr. Buffett may be
deemed to control Berkshire and thus to own beneficially the Company's stock
owned beneficially by it. As of March 5, 1997, Berkshire owned beneficially
(and, through wholly- or majority-owned subsidiaries, owned of record)
420,000 shares of Preferred Stock, Series A, of the Company, which shares
are entitled to 11,052,631 votes, constituting approximately 9.1% of the
votes entitled to be cast by the outstanding voting securities of the
Company. The Preferred Stock, Series A, is convertible on the basis of
26.31579 shares of Common Stock for each share of Preferred Stock, Series A,
(subject to adjustment), or, in the aggregate, for 11,052,631 shares of
Common Stock. Under Berkshire's Stock Purchase Agreement, dated September
27, 1987, with the Company, pursuant to which affiliates of Berkshire
acquired the Preferred Stock, Series A, (the "Purchase Agreement"), the
Company undertook to use its best efforts to nominate and elect Messrs.
Buffett and Munger, or two other Berkshire representatives, to the Company's
Board of Directors. For a description of the other terms of the Purchase
Agreement, see "Compensation Committee Interlocks and Insider Participation"
below at Pages 10-11. The Company has been informed by Berkshire that, on
January 2, 1996, GEICO Corporation ("GEICO") became an indirect wholly-owned
Berkshire subsidiary as a result of a merger of GEICO with an indirect
wholly-owned subsidiary of Berkshire. Louis A. Simpson, a director and a
nominee for director of the Company, is President and Chief Executive
Officer-Capital Operations of GEICO.
(2) Included are 240,600 shares of Preferred Stock, Series A, constituting
approximately 5.2% of the votes entitled to be cast by the Company's
outstanding voting securities, owned of record by National Indemnity
Company, a wholly-owned subsidiary of Berkshire. As of March 5, 1997,
National Indemnity Company also owned 8,744,126 shares of the Company's
Common Stock which are shown as beneficially owned by Berkshire.
The following is the ownership, as of March 5, 1997, of shares of Common
Stock and Preferred Stock, Series A, of the Company by all directors, nominees
for director, the Executive Officers named in the table on Page 8 and the
ownership as of such date by Executive Officers and directors of the Company as
a group. Common Stock which is referred to as "beneficially owned," and the
number of the Company's shares deemed to be outstanding, include any shares
which may be purchased by any director or Executive Officer of the Company under
the Company's 1984 Non-Qualified Stock Option Plan within sixty days from March
5, 1997 and any shares which may be acquired by any director or Executive
Officer of the Company upon conversion of the Company's Restricted Convertible
Subordinated Notes within sixty days from March 5, 1997. Common Stock which is
referred to as "beneficially owned" also includes any shares owned by a spouse
or minor child and any shares over which the individual directly or indirectly
holds sole or shared voting or investment power. In addition, included are
shares which have been allocated to the account of any director or Executive
Officer of the Company under the Company's Equity Partnership Plans and a
proportionate
6
<PAGE> 10
number of the 1,025,279 unallocated shares, as of March 5, 1997, in the trusts
under the Equity Partnership Plans which directors and Executive Officers may
direct the trustee of such trusts to vote at the Annual Meeting ("Unallocated
Shares"). The Preferred Stock, Series A, as owned by Berkshire and deemed owned
by Mr. Buffett, comprises 100% of the class outstanding and 12.2% of the
outstanding voting power of the Company. All directors and Executive Officers as
a group (17 persons) beneficially own 100% of the Preferred Stock, Series A
10.6% of the Common Stock and 18.7% of the outstanding voting power of the
Company.
Except for Mr. Buffett, no individual nominee for director beneficially owns as
much as 1.0% of outstanding Common Stock or voting securities having 1.0% of the
outstanding voting power of the Company.
<TABLE>
<CAPTION>
TITLE OF SHARES
CLASS BENEFICIALLY
OF STOCK OWNED
----------
<S> <C> <C>
Dwayne O. Andreas....................................... Common 100,000
Jerome H. Bailey........................................ Common 42,292(4)
Warren E. Buffett....................................... Common 10,317,806(1)
Preferred, Series A 420,000(1)
Robert E. Denham........................................ Common 46,915(4)
Claire M. Fagin......................................... Common 405
John L. Haseltine....................................... Common 252,606(4)
Gedale B. Horowitz...................................... Common 343,496(3)(4)
Deryck C. Maughan....................................... Common 362,725(2)(4)
David O. Maxwell........................................ Common 1,000
William F. May.......................................... Common 4,548
Charles T. Munger....................................... Common --(5)
Shigeru Myojin.......................................... Common 53,446(4)
Louis A. Simpson........................................ Common 25,000
Wesley S. Williams, Jr.................................. Common --
A. Thomas Young......................................... Common 1,000
Robert G. Zeller........................................ Common 6,450
17 Directors and Executive Officers as a Group.......... Common 11,632,802(6)(7)
Preferred, Series A 420,000
</TABLE>
- - -------------
(1) With respect to voting securities which may be deemed to be beneficially
owned by Mr. Buffett, see footnotes (1) and (2) to the Table above on Page
6.
(2) Shares beneficially owned by Mr. Maughan include 54,600 shares subject to
options granted under the Company's 1984 Non-Qualified Stock Option Plan
which may be exercised within sixty days from March 5, 1997.
(3) Shares beneficially owned by Mr. Horowitz include 329,429 shares into which
the Company's Restricted Convertible Subordinated Notes (see "Certain
Transactions" below at Page 14) may be converted within sixty days from
March 5, 1997.
(4) Shares beneficially owned include Unallocated Shares as follows: Mr.
Bailey, 2,019; Mr. Denham, 2,219; Mr. Haseltine, 11,153; Mr. Horowitz, 258;
Mr. Maughan, 13,385 and Mr. Myojin, 2,483.
(5) Mr. Munger is Vice Chairman of the Board of Berkshire. With respect to
voting securities beneficially owned by Berkshire, see footnotes (1) and
(2) to the Table above at Page 6.
(6) Includes 54,600 shares of Common Stock subject to options granted under the
Company's 1984 Stock Option Plan which may be exercised by directors and
Executive Officers of the Company within sixty days from March 5, 1997,
329,429 shares of Common Stock into which the Company's Restricted
Convertible Subordinated Notes may be converted by directors and Executive
Officers of the Company within sixty days from March 5, 1997, 125 shares
owned by a family member in which shares a person in the group disclaims
any beneficial interest and 35,313 Unallocated Shares.
(7) Participants in the Equity Partnership Plans generally are entitled to
direct voting of a proportional number of unvoted allocated shares held
under the Equity Partnership Plans. While participants are deemed to have
beneficial ownership of such shares, the Table does not reflect such shares
because the number of such shares cannot be determined.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table shows the compensation in 1996, 1995 and 1994 of the
Chief Executive Officer and the four most highly compensated Executive Officers
of the Company who were serving as Executive Officers on December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS
ANNUAL COMPENSATION ---------------------
----------------------- RESTRICTED OPTIONS/ ALL OTHER
BONUS STOCK AWARD SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) ($)(1) (#) ($)(2)(3)
- - -------------------------------------------- ----- ---------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
ROBERT E. DENHAM............................ 1996 1,000,000 0 858,847 0 887,011
Chairman and Chief Executive Officer 1995 1,000,000 0 0 0 9,963
1994 1,000,000 0 0 0 9,170
JEROME H. BAILEY............................ 1996 250,000 750,000 496,757 40,000/0 353,998
Chief Financial Officer 1995 250,000 750,000 343,549 0 7,867
1994 250,000 750,000 456,821 0 6,436
JOHN L. HASELTINE........................... 1996 250,000 3,250,000 0 0 6,542,531
Managing Director of Salomon Brothers Inc -- -- -- -- -- --
and member of its Operating Committee(4) -- -- -- -- -- --
DERYCK C. MAUGHAN........................... 1996 825,000 8,595,000 2,061,232 0 40,013
Executive Vice President 1995 825,000 13,000 185,516 0 38,624
and Chairman and Chief Executive 1994 825,000 13,000 148,010 0 36,966
Officer of Salomon Brothers Inc
SHIGERU MYOJIN.............................. 1996 520,000 10,038,000 2,061,232 0 18,827,071
Vice Chairman of Salomon Brothers Inc -- -- -- -- -- --
and member of its Operating Committee -- -- -- -- -- --
</TABLE>
- - ---------------
(1) Restricted stock awards are shown at market value on the date of grant. The
number and value of the aggregate restricted stock holdings at December 31,
1996 for each of the persons named is as follows: Mr. Denham, 40,932 shares
with a value of $1,928,921; Mr. Bailey, 37,242 shares with a value of
$1,755,029; Mr. Haseltine, 205,536 shares with a value of $9,685,884; Mr.
Maughan, 246,701 shares with a value of $11,625,785; and Mr. Myojin 45,805
shares with a value of $2,158,561. Such restricted stock was awarded to the
persons named under the Company's Equity Partnership Plan for Key Employees
("EPP"). Awards under the EPP represent an unfunded, unsecured promise of
the Company. Awards made prior to 1996 are generally distributed to
participants five years after the date of grant, subject to acceleration in
some circumstances and further deferral or forfeiture in others. Awards made
in 1996 and thereafter are generally distributable to participants three
years after the date of grant, subject to acceleration in some circumstances
and further deferral or forfeiture in others. The EPP incorporates a
dividend reinvestment structure, pursuant to which the Company contributes
an additional 17.65% of any dividend in order to effect a 15% discount on
all dividend reinvestments with respect to awards made prior to 1996. The
EPP does not provide a discount for dividend reinvestments with respect to
awards made in 1996 and thereafter. Participants' accounts in the EPP are
held in a grantor trust established by the Company.
(2) In 1996, the Company awarded additional bonus compensation, the payment of
which is required to be deferred in order to preserve the Company's
compensation deduction under Section 162(m) of the Internal Revenue Code, as
follows: Mr. Denham $875,000, Mr. Bailey $343,500, Mr. Haseltine $6,500,000
and Mr. Myojin $18,812,000. For a discussion of the Company's policy
regarding Section 162(m), see the report of the Compensation and Employee
Benefits Committee below at page 11.
8
<PAGE> 12
(3) Amounts reported for 1996 also include a 17.65% contribution which the
Company made in order to effect a 15% discount on all dividend reinvestments
with respect to awards made prior to 1996 under the EPP for the named
executives as follows: Mr. Denham $2,440, Mr. Bailey $2,927, Mr. Haseltine
$22,960, Mr. Maughan $22,442; and also include contributions by the Company
under the Salomon Inc Retirement Plan to the account of each of the named
executives as follows: Mr. Denham $9,500, Mr. Bailey $7,500, Mr. Haseltine
$19,500, Mr. Maughan $17,500 and Mr. Myojin $15,000; and also include $71 of
term life insurance premium for each of the named executives which the
Company pays.
(4) Mr. Haseltine resigned as a member of Salomon Brothers Inc's Operating
Committee, effective January 1, 1997.
The Company made no SAR grants or awards under long-term incentive plans in
1996 to any named Executive Officer or any other person.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO TERM OF OPTION
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- - ---------------------------- ---------- ------------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ROBERT E. DENHAM............ 0 0 -- -- -- --
JEROME H. BAILEY............ 40,000* 2.5 $ 44.875 12/4/01 $497,200 $1,094,960
JOHN L. HASELTINE........... 0 0 -- -- -- --
DERYCK C. MAUGHAN........... 0 0 -- -- -- --
SHIGERU MYOJIN.............. 0 0 -- -- -- --
</TABLE>
- - ---------------
* All options were granted under the Salomon Inc Stock Incentive Plan which was
approved by stockholders on May 4, 1994. All such options vest on December 4,
1999 and may be exercised in whole or in part on or after that date. Options
are subject to cancellation prior to exercise upon termination of employment
in certain specified circumstances.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUE(1)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES ------------- --------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- - --------------------------------------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
ROBERT E. DENHAM............................. -- -- -0-/-0- -0-/-0-
JEROME H. BAILEY............................. -- -- -0-/-0- -0-/-0-
JOHN L. HASELTINE............................ -- -- -0-/-0- -0-/-0-
DERYCK C. MAUGHAN............................ -- -- 54,600/-0- $1,554,581/-0-
SHIGERU MYOJIN............................... -- -- -0-/-0- -0-/-0-
</TABLE>
- - ---------------
(1) The 1996 year-end value of the Company's Common Stock was $47.125. The
dollar value shown in the Table is calculated by determining the difference
between the year-end value of the Company's Common Stock and the exercise
price of the options exercisable at year-end.
9
<PAGE> 13
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL PROVISIONS
None of the Executive Officers named in the table on page 8 has an
employment contract with the Company.
In 1988, the Board of Directors approved amendments to certain of the
Company's benefit plans, including the Salomon Inc Profit Sharing Plan, now the
Salomon Inc Retirement Plan, (the "Retirement Plan"), and the 1984 Stock Option
Plan. These amendments provide for the vesting and, under most circumstances,
distribution of benefits and credits made under such Plans upon the occurrence
of certain change of control events not approved by the Board of Directors. Upon
such a change of control (as defined in the Plans), employees will be entitled
to receive the immediate cash payment of the excess of the fair market value (as
defined) of a share of Common Stock over the exercise price of each share
covered by an option or a stock appreciation right under the 1984 Stock Option
Plan. Similarly, the Company's Equity Partnership Plan for Key Employees
provides for accelerated distributions to participants upon a change of control.
Also, the Company's Stock Incentive Plan provides that all options become
immediately exercisable upon a change of control. Additionally, the deferred
compensation arrangements with Messrs. Denham, Bailey, Haseltine and Myojin
described at footnote (2) on page 8 provide that all deferred amounts (adjusted
for deemed investment gains and losses) will be distributed within 30 business
days of a change of control. Finally, in the event of a change of control, each
employee will be entitled to receive an amount not less than the year-end bonus
paid to him in the year preceding the change of control, prorated for the number
of months elapsed up to the change of control. If a change of control would have
occurred on March 1, 1997, for example, Messrs. Denham, Bailey, Haseltine,
Maughan and Myojin would have been entitled to receive at least the following
amounts of cash compensation with respect to their 1996 year-end bonuses (in
addition to benefits under the Company's other benefit plans described above):
$145,833, $182,250, $1,625,000, $1,432,500 and $4,808,333, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, the Compensation and Employee Benefits Committee consisted of Mr.
Robert G. Zeller, as Chairman, and Messrs. William F. May, David O. Maxwell and
Charles T. Munger. All of the members of the Committee were non-employees of the
Company.
Mr. Munger, a nominee for director of the Company, is Vice Chairman of the
Board of Berkshire. Among the Company's transactions, in the ordinary course of
its business in 1996, Salomon Brothers Inc sold to Berkshire and its affiliates
(including GEICO) marketable securities having a value of approximately
$4,015,659,000 and purchased from Berkshire and such affiliates marketable
securities having a value of approximately $3,714,255,000. Additionally, in
1996, Berkshire and such affiliates paid commissions, fees, service charges and
interest of $10,373,702 to Salomon Brothers Inc in connection with securities
transactions and advisory services. The Company believes that its transactions
with Berkshire and its affiliates are upon terms which are comparable to those
the Company applies in transactions with other similar customers and
counterparties.
In addition, Berkshire and its subsidiaries own substantial equity
positions in a number of other corporations, and have equity positions amounting
to 10% or more of the voting power of American Express Company, The Gillette
Company, USAir Group, Inc., PS Group Holdings, Inc. and The Washington Post
Company. From time to time Salomon Brothers Inc engages in the ordinary course
of its business in transactions with some or all of such entities as an
underwriter of securities, as a broker of or dealer in securities, or otherwise.
Additionally, other subsidiaries of the Company may engage in transactions with
such entities from time to time. The Company believes that any such transactions
are on terms comparable to those on which the Company deals with other third
parties.
In 1987, the Company entered into the Purchase Agreement with Berkshire
pursuant to which affiliates of Berkshire acquired 700,000 shares of the
Preferred Stock, Series A, for $700 million. On October 31, 1995, the Company
redeemed 140,000 shares of the Preferred Stock, Series A in accordance with the
terms of such
10
<PAGE> 14
Preferred Stock. On October 29, 1996, Berkshire converted 140,000 shares of the
Preferred Stock, Series A into 3,684,206 shares of the Company's Common Stock in
accordance with the terms of such Preferred Stock. In the Purchase Agreement,
Berkshire (which for purposes of the Purchase Agreement includes the affiliates
of Berkshire) agreed that (i) Berkshire will not sell any of the Company
securities owned by it to a third party without first giving the Company or its
designee a reasonable opportunity to purchase such securities at the same price
and on the same terms and conditions proposed with respect to an anticipated
sale by Berkshire to a third party; and (ii) if the Company does not exercise
its right of first refusal and buy Company securities which Berkshire proposes
to sell, Berkshire will not knowingly sell to any one entity or group acting in
concert Company securities giving such entity or group securities which amount
in the aggregate to over 5% of the Company voting stock outstanding at the time
of the sale. In the Purchase Agreement, the Company agreed to use its best
efforts to nominate and elect Warren E. Buffett and Charles T. Munger, or two
other Berkshire representatives, to the Company's Board of Directors. In
addition, in connection with the distribution by the Company on February 18,
1988 of Preferred Share Purchase Rights to its stockholders, the Company issued
Preferred Share Purchase Rights to the holders of the Preferred Stock, Series A,
on the basis of one Right for each share of Common Stock into which a share of
Preferred Stock, Series A, is convertible, and the holders of the Preferred
Stock, Series A, waived the conversion adjustment they would otherwise have been
entitled to under the terms of the Preferred Stock, Series A.
In December 1996, Berkshire issued $500,000,000 aggregate principal amount
of 1.00% Senior Exchangeable Notes due December 2, 2001 (the "Notes"). Such
Notes may be exchanged at Berkshire's option at maturity or upon redemption or,
at the holder's option, during certain periods for up to an aggregate of
8,825,000 shares of the Company's Common Stock. The Company's Board of Directors
concluded, after reviewing the proposed terms of the Notes, that it was in the
best interest of the Company to waive the Company's right of first refusal with
respect to the shares of Common Stock into which the Notes are exchangeable.
REPORT OF
THE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
The Board's Compensation and Employee Benefits Committee (the "Committee")
makes compensation decisions with respect to the Company's Chief Executive
Officer and other executive officers including Messrs. Bailey, Haseltine,
Myojin, and Maughan.
In years prior to the enactment of Section 162(m) of the Internal Revenue
Code, the "Million Dollar Limit", the Committee determined the compensation of
senior officers in relation to a review of their performance with payment made
in the same manner as other employees. As a result of this new provision, the
Committee reviewed its procedures with the objectives that compensation continue
to be based upon performance and be deductible by the Company. As a result of
this review, the Committee presently intends to preserve the Company's deduction
for compensation paid to senior executive officers by continuing to determine
total compensation for such persons (other than Mr. Maughan, as explained below)
based primarily upon a subjective performance evaluation and providing that any
compensation subject to the Million Dollar Limit be paid in a manner that will
preserve deductibility primarily by deferring the payment of such compensation.
The Committee has determined not to apply exclusively formulae to determine the
compensation of these individuals because it believes evaluation for senior
executives in a complex business can be best made by the application of business
judgment.
In measuring financial performance, the Committee has established a
"compensation year" commencing on October 1 and ending on September 30.
Utilizing a "compensation year", rather than the Company's fiscal year which
coincides with the calendar year, permits the Committee to evaluate results for
an entire 12-month period in sufficient time to make final compensation
decisions in December of each calendar year. Compensation year results often
differ substantially from the results for the calendar year. For example,
Salomon Inc earned $132 million in the compensation year ended September 30,
1995, while it earned $457 million for the calendar year 1995 and $847 million
in the 1996 compensation year, while earning $907 million for the 1996 calendar
year.
11
<PAGE> 15
In determining compensation for Mr. Denham and the other executive officers
(except for Mr. Maughan) in December 1996, the Committee adhered to the approach
of linking the interests of management with those of the owners by causing the
individual manager's compensation to depend significantly upon his performance
in relation to the performance (including financial and other results), over
time, of the business unit or function for which he is responsible. Weight was
also given to the overall results in the compensation year of Salomon Inc and
Salomon Brothers Inc. Except in the case of Mr. Denham, salaries were low in
comparison to total compensation so that the bulk of compensation was awarded on
a performance basis as a year-end bonus. This approach, which is in accordance
with industry practice, has the effect of limiting compensation to reflect poor
business performance and increasing compensation to recognize significant
results. After the Committee determined the total compensation for each
executive officer, a portion of such total compensation was awarded in Company
stock, (other than Mr. Haseltine) generally payable in three years, and subject
to certain forfeiture provisions, under the Company's Equity Partnership Plan
for Key Employees (which generally applies to highly compensated employees,
including Executive Officers). The market value of the restricted stock awarded
to each of the Executive Officers in 1996 is set forth in the Summary
Compensation Table in the Company's 1997 Proxy Statement. Dividends paid on the
restricted stock are reinvested for all Plan participants, including Executive
Officers, pursuant to the terms of the Plan.
In setting the 1996 compensation of Robert E. Denham, the Company's
Chairman and Chief Executive Officer, the Committee took into account the
Board's evaluation of Mr. Denham's performance in relation to the following
factors (in order of importance):
- Management of the Board of Directors process by insuring that the Board
timely received the appropriate level of information to discharge its
decision-making responsibilities;
- Supervision of the senior officers of Salomon Inc and its major
subsidiaries;
- Supervision of the management of the Company's market and credit risks to
insure that various business units were following appropriate risk/reward
criteria;
- Management of the allocation of the Company's capital to the various
business segments, as well as the Company's overall level of capital.
In addition to these criteria, the Committee also considered the Board's
evaluation of Mr. Denham's performance in communicating with creditors and
shareholders, maintaining a positive control environment, his role in dealing
with special situations and otherwise building shareholder value.
The Committee concluded that, based on their subjective judgment, Mr.
Denham had performed well with respect to each of these factors and noted the
significant increase in earnings in 1996. Taking into account these results, the
Committee determined that Mr. Denham's total compensation in 1996 would be
$2,500,000, an increase of 250% over his 1995 and 1994 compensation.
Because Mr. Maughan is The Chairman and Chief Executive Officer of Salomon
Brothers Inc and thus accountable for its performance, the Committee had
previously determined that linking compensation by formula to the performance of
Salomon Brothers provides an appropriate relationship between his total
compensation and Salomon Brothers performance, while at the same time
effectively responding to the issues raised by the Million Dollar Limit.
Therefore, effective as of January 1, 1994, the Committee adopted, subject to
approval by the Company's stockholders, which was obtained at the 1994 Annual
Meeting, the Executive Officer Performance Bonus Plan to provide Mr. Maughan an
appropriate performance incentive in a form intended to constitute
"performance-based incentive compensation" pursuant to Section 162(m)(4)(C) of
the Code. The basic premise of the Performance Bonus Plan is that Mr. Maughan's
incentive compensation should be determined by two factors: the return on equity
of Salomon Brothers, which he manages, and the relationship that Salomon
Brothers' return on equity has to that of certain key competitors. The Committee
12
<PAGE> 16
certified that, under the formula in the Performance Bonus Plan, Mr. Maughan's
1996 compensation would be $10,920,000, consisting of salary and a
non-performance based bonus of $1,000,000 and an award under the Performance
Bonus Plan of $9,920,000.
The Committee concluded that, based on their subjective judgment, Mr.
Bailey performed well as Chief Financial Officer of the Company. The Committee
recognized Mr. Bailey's continuing efforts to reduce costs through a process
redesign effort.
The Committee reviewed Mr. Haseltine's performance as the head of Global
Fixed Income at Salomon Brothers and as a member of Salomon Brothers Operating
Committee. The Committee noted the significant improvement in Fixed Income
results for the compensation year, and based upon their subjective judgment
recognized that Mr. Haseltine performed well by improving the quality of
personnel and morale within his group, and as a member of the Operating
Committee.
The Committee reviewed Mr. Myojin's performance as the leader of the
Company's Risk Management Group, and as the Head of Proprietary Trading for
Salomon Brothers and a member of Salomon Brothers' Operating Committee. In
particular, in light of Mr. Myojin's position as head of Proprietary Trading for
Salomon Brothers, the Committee determined that it was appropriate that Mr.
Myojin's compensation be determined, in large part, pursuant to a formula that
was directly related to the profits resulting from Salomon Brothers' proprietary
trading activities during the 1996 compensation year. Accordingly, Mr. Myojin's
compensation is a direct reflection of the strong year in Proprietary Trading.
In addition to this objective criterion, Mr. Myojin's compensation also was
based, to a lesser extent, on the Committee's subjective determination that he
had performed well not only as Head of Proprietary Trading but also in his roles
as the leader of the Company's Risk Management Group and as a member of Salomon
Brothers' Operating Committee.
Mr. Bailey's, Mr. Haseltine's and Mr. Myojin's compensation levels were
also positively affected by the significant improvement in Salomon Inc results
for the compensation year.
The Committee also reviewed and approved awards of options to acquire
Company shares under the 1994 Salomon Inc Stock Incentive plan, to forty
Managing Directors of Salomon Brothers. The award recipients were recommended by
the Operating Committee of Salomon Brothers based upon their evaluation of the
current performance and future potential of the Managing Directors of Salomon
Brothers. The Operating Committee recommended and the Committee agreed that
members of the Operating Committee did not need the incentives provided by an
award and thus they were excluded from consideration.
COMPENSATION AND EMPLOYEE
BENEFITS COMMITTEE
Robert G. Zeller, Chairman
William F. May
David O. Maxwell
Charles T. Munger
13
<PAGE> 17
PERFORMANCE GRAPH
SALOMON INC VS. S&P INVESTMENT BANKING/BROKERAGE VS. S&P 500
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN: 1991-1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P INVESTMENT
(FISCAL YEAR COVERED) BANKING/BROKERAGE S&P 500 SALOMON INC
<S> <C> <C> <C>
1991 100 100 100
1992 105.87 107.43 126.58
1993 142.77 118.11 160.25
1994 120.99 119.63 128.33
1995 162.11 164.03 123.25
1996 245.52 201.24 166.42
</TABLE>
TOTAL RETURN INDEX (DIVIDENDS RE-INVESTED AT THE END OF PERIOD)
In 1995, the S&P Brokerage Index was discontinued and replaced by the S&P
Investment Banking and Brokerage Index. The companies presently included in the
S&P Investment Banking and Brokerage Index are Salomon Inc, Merrill Lynch & Co.,
Inc., and Morgan Stanley Group Inc.
CERTAIN TRANSACTIONS
Warren E. Buffett, a director and a nominee for director of the Company, is
Chairman, Chief Executive Officer and the principal shareholder of Berkshire and
a director of The Coca-Cola Company, The Washington Post Company and The
Gillette Company. For information regarding the Company's transactions in 1996
with Berkshire, The Coca-Cola Company, The Washington Post Company and The
Gillette Company, see "Compensation Committee Interlocks and Insider
Participation" above at Pages 10-11.
Among the Company's transactions in 1996, during the period in which Ross
Financial Corporation and its affiliates ("Ross") beneficially owned more than
five percent of the Company's outstanding Common Stock, Salomon Brothers Inc, in
the ordinary course of its business, sold to Ross marketable instruments having
a value of approximately $1,787,590 and purchased from Ross marketable
instruments having a value of approximately $21,451,252. The Company believes
that such transactions with Ross were upon terms which
14
<PAGE> 18
are comparable to those the Company applies in similar transactions with other
customers and counterparties. As of March 5, 1997, Ross beneficially owned more
than five percent of the Company's outstanding Common Stock.
On October 1, 1981, the Company and Salomon Brothers, an investment banking
and securities trading partnership, combined their businesses. Pursuant to such
combination, the Company issued an aggregate of $250,000,000 of 9% Restricted
Convertible Subordinated Notes, due October 1, 1991 (the "Notes"), to Salomon
Brothers, which Notes were subsequently distributed to certain of its partners.
Upon issuance, the Notes were convertible, in accordance with their respective
terms, into an aggregate of 18,000,000 shares of Common Stock (adjusted for the
2 for 1 stock split declared in 1983). The conversion period commenced October
1, 1982. Gedale B. Horowitz, who was a General Partner of Salomon Brothers prior
to October 1, 1981 and is a director and a nominee for director of the Company,
was a payee of Notes, as of December 31, 1996, in the principal amount of
$4,575,406. From time to time, the Board of Directors has extended the maturity
date of Notes held by then-current employees of the Company. On May 4, 1994, the
Board of Directors approved an extension, until October 1, 1997, of the maturity
date of such Notes, provided that the annual rate of interest on such Notes be
reduced from and after October 1, 1994 to 5.5%. On March 5, 1997, the Board of
Directors approved an extension, until October 1, 1999, of the maturity date of
Mr. Horowitz's Notes, provided that the annual rate of interest on such Notes be
reduced from and after October 1, 1997 to 5.25%. Mr. Horowitz is the only
current employee of the Company holding Notes.
In November 1993, the Company loaned Robert H. Mundheim, an Executive
Officer of the Company, the sum of $900,000 to purchase a residence in New York
City in connection with Mr. Mundheim's planned relocation from Philadelphia. The
loan, of which $400,000 has been repaid, is interest-free.
Since January 1, 1996, Salomon Brothers Inc, as agent or principal, has
handled purchases and sales of securities (including different forms of
repurchase transactions) from time to time for various of the directors and
employees of the Company. The Company believes that such transactions were in
the ordinary course of business, were at substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other customers and did not involve more than normal risk of
collectibility or present other features unfavorable to the Company.
2. OTHER MATTERS
The By-Laws of the Company provide that stockholders are required to give
written notice, not less than 30 days nor more than 60 days in advance of an
Annual Meeting of Stockholders, in order to bring business before the meeting or
nominate a person for election to the Board of Directors.
Arthur Andersen LLP served as the Company's independent public accountants
for 1996. Representatives from that Firm will be at the meeting of stockholders,
will be given the opportunity to make a statement if they so desire, and will be
available to take appropriate questions. The Company has not selected auditors
for the current year since its practice is for the Board of Directors to make
such selection after mid-year.
At the date of this Proxy Statement, the management has no knowledge of any
business other than that described herein which will be presented for
consideration at the meeting. In the event any other business is properly
presented at the meeting, it is intended that the persons named in the enclosed
proxy will have authority to vote such proxy in accordance with their judgment
on such business.
Stockholders desiring to have any proposal considered for inclusion in
proxy material for the 1998 Annual Meeting of Stockholders should submit such
proposal to the Company not later than December 5, 1997.
By Order of the Board of Directors,
ARNOLD S. OLSHIN
Secretary
April 4, 1997
15
<PAGE> 19
SALOMON INC
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING MAY 7, 1997
P
R The undersigned hereby constitutes and appoints Robert E. Denham, Robert H.
Mundheim and Arnold S. Olshin, and each of them, his true and lawful agents
O and proxies with full power of substitution in each, to represent, and to
vote the shares of the undersigned at the Annual Meeting of Stockholders
X of SALOMON INC to be held in the Salomon Brothers Auditorium, Seven World
Trade Center, New York, New York, on Wednesday, May 7, 1997 at 10:00 a.m.
Y and at any adjournments thereof on all matters coming before said meeting.
Election of Directors. Nominees:
Warren E. Buffett, Robert E. Denham, Claire M. Fagin,
Gedale B. Horowitz, Deryck C. Maughan, David O. Maxwell,
Charles T. Munger, Shigaru Myojin, Louis A. Simpson,
Wesley S. Williams, Jr., A. Thomas Young
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The Proxy
Committee cannot vote your shares unless you sign and return this card.
------------
SEE REVERSE
SIDE
-----------
*FOLD AND DETACH HERE*
<PAGE> 20
Please mark your
X votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR election of each nominee.
- - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF EACH NOMINEE.
- - --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of
Directors.
(see reverse)
For, except vote withheld from the following nominee(s):
------------------------------------------------------
- - --------------------------------------------------------------------------------
This Proxy Must Be Signed Exactly as Name
Appears Hereon. Executors, administrators,
trustees, etc., should give full title as
such. If the signer is a corporation, please
sign full corporate name by duly authorized
officer.
---------------------------------------------
---------------------------------------------
SIGNATURE(S) DATE
FOLD AND DETACH HERE
PLEASE SIGN, DETACH AND RETURN
YOUR PROXY PROMPTLY
