<PAGE> 1
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LOGO
LETTER TO
LOGO STOCKHOLDERS
NOTICE OF 1997
ANNUAL MEETING
AND
PROXY STATEMENT
MAY 19, 1997
THE THEATER AT
MADISON SQUARE GARDEN
<PAGE> 2
LOGO
Consolidated Edison Company of New York, Inc.
4 Irving Place, New York, N.Y. 10003
- - --------------------------------------------------------------------------------
EUGENE R. MCGRATH
CHAIRMAN OF THE BOARD
April 7, 1997
Dear Stockholder:
I hope that you will join the Board of Trustees and management of your
Company at The Theater at Madison Square Garden, Seventh Avenue between 31st and
33rd Streets, New York City for the Annual Meeting of Stockholders on Monday,
May 19, 1997 at 1:30 p.m.
Whether or not you plan to attend the Annual Meeting, please sign and
return the enclosed proxy. It is very important that as many shares as possible
be represented at the meeting.
If after signing and returning your proxy you come to the meeting, you may
vote in person even though you have previously sent in a proxy.
Sincerely,
/s/ Eugene R. McGrath
---------------------
Eugene R. McGrath
<PAGE> 3
LOGO
Consolidated Edison Company of New York, Inc.
4 Irving Place, New York, N.Y. 10003
- - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
The Annual Meeting of Stockholders of Consolidated Edison Company of New
York, Inc. ("Con Edison") will be held at The Theater at Madison Square Garden,
Seventh Avenue between 31st and 33rd Streets, New York, New York, on Monday, May
19, 1997 at 1:30 P.M., E.D.S.T. for the following purposes:
a. To elect thirteen members of the Board of Trustees;
b. To ratify and approve the appointment of Price Waterhouse LLP as
independent accountants for the year 1997; and
c. To act upon such other matters, including two stockholder proposals
as set forth in the Proxy Statement (attached hereto and incorporated
herein by reference), as may properly come before the meeting, or any
adjournment thereof.
You are cordially invited to attend this meeting. IF YOU PLAN TO ATTEND,
please mark the appropriate box on the enclosed proxy card and we will send you
an admission ticket.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO
VOTE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. WE WILL SINCERELY APPRECIATE YOUR DOING SO.
By Order of the Board of Trustees,
ARCHIE M. BANKSTON
Secretary
Dated: April 7, 1997
<PAGE> 4
PROXY STATEMENT
SOLICITATION OF PROXIES
This proxy statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Trustees of
Consolidated Edison Company of New York, Inc. (the "Company" or "Con Edison"),
which has its principal executive offices at 4 Irving Place, New York, New York
10003, for use at the 1997 Annual Meeting of Stockholders to be held on Monday,
May 19, 1997. This proxy statement and the enclosed form of proxy are being
mailed to stockholders on or about April 7, 1997.
This solicitation of proxies for the Annual Meeting of Stockholders is
being made by the management on behalf of the Board of Trustees of the Company
and will be made by mail and by telephone, facsimile or overnight delivery. The
expense of the solicitation will be borne by the Company. The expense will
include reimbursement for postage and clerical expenses to brokerage houses and
other custodians, nominees or fiduciaries for forwarding proxy material and
other documents to beneficial owners of stock held in their names. In addition,
Morrow & Co. of New York, New York, has been retained to assist in the
solicitation of proxies by the means described above. The estimated cost of
Morrow's services is $17,000, plus out-of-pocket expenses.
RECORD DATE, OUTSTANDING
VOTING SECURITIES AND VOTING RIGHTS
Only the holders of record of $5 Cumulative Preferred Stock or of Common
Stock as of the close of business on April 1, 1997 (the "record date") are
entitled to notice of and to vote at the annual meeting or any adjournment
thereof. On the record date, there were outstanding 1,915,319 shares of $5
Cumulative Preferred Stock and 235,022,874 shares of Common Stock, each entitled
to one vote per share upon all propositions to be presented at the meeting.
Copies of the 1996 Annual Report are being mailed to all persons who as of
the record date were holders of record of any shares of any class of stock of
the Company.
The enclosed proxy card is for the number of shares registered in your name
with the Company together with any additional full shares held in your name in
Con Edison's Automatic Dividend Reinvestment and Cash Payment Plan. The
instructions on the proxy card provide that any shares registered in your name
and any full shares held for your account in the Plan will be voted in the same
manner.
In all matters other than the election of Trustees the affirmative vote of
a majority of the shares present in person or represented by proxy at the annual
meeting, entitled to vote and voting
1
<PAGE> 5
on the subject matter, shall be the act of the stockholders. Abstentions and
broker non-votes are voted neither "for" nor "against", and have no effect on
the vote, but are counted in the determination of a quorum. Trustees will be
elected by a plurality of the votes present in person or represented by proxy at
the annual meeting, entitled to vote and voting on the election of Trustees.
EXECUTION AND REVOCATION OF PROXY
Shares represented by proxies properly signed and returned will be voted at
the meeting. Each proxy will be exercised in accordance with the stockholder's
specifications thereon. If the proxy is signed but no specification is made, the
shares represented by the proxy will be voted for the election of Trustees and
in accordance with the recommendations of the Board of Trustees on other
proposals.
A stockholder who gives a proxy may revoke it at any time before the proxy
is voted at the meeting. The proxy is revocable by a written instrument signed
in the same manner as the proxy and received by the Secretary of the Company at
or before the annual meeting. Also, a stockholder who attends the meeting in
person may vote by ballot at the meeting, thereby cancelling any proxy
previously given.
ATTENDANCE AND PROCEDURES AT ANNUAL MEETING
Attendance at the annual meeting will be limited to stockholders of record,
beneficial owners of Con Edison stock entitled to vote at the meeting having
evidence of ownership, the authorized representative (one only) of an absent
stockholder, and invited guests of the management. Any person claiming to be an
authorized representative of a stockholder must, upon request, produce written
evidence of such authorization. In order to assure the holding of a fair and
orderly meeting and to accommodate as many stockholders as possible who may wish
to speak at the meeting, management will limit the General Discussion portion of
the meeting to one hour and permit only stockholders or their authorized
representatives to address the meeting. In addition, management will require
that all signs, banners, placards and protest-type materials be left outside the
meeting room.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
ELECTION OF TRUSTEES
Thirteen Trustees are to be elected at the Annual Meeting of Stockholders
to hold office until the next annual meeting and until their respective
successors shall have been elected and qualified. Of the thirteen Board members
standing for election, two (the Chairman of the Board, President and Chief
Executive Officer -- Eugene R. McGrath and the Senior Vice President and Chief
Financial Officer -- Joan S. Freilich) are officers of the Company. The current
non-officer nominee Trustees (who include a former Chairman of the Board and
Chief Executive Officer) bring to the Company the benefit of their broad
expertise and experience in many diverse fields.
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<PAGE> 6
All of the nominees except Stephen R. Volk and Ms. Freilich were elected
Trustees at the last annual meeting. The Company's management believes that all
of the nominees will be able and willing to serve as Trustees of the Company.
Mr. Volk, who was elected to the Board of Trustees effective September 1,
1996, is the Senior Partner of the law firm of Shearman & Sterling. He has been
a partner in Shearman & Sterling since 1968. Ms. Freilich was elected to the
Board of Trustees, effective April 1, 1997. She was elected Senior Vice
President and Chief Financial Officer of the Company, effective July 1, 1996.
She served as Vice President, Controller and Chief Accounting Officer from
September 1994 through June 1996, Vice President and Controller from July 1992
through August 1994 and Vice President - Corporate Planning from December 1990
through June 1992.
Raymond J. McCann retired as a member of the Board on December 31, 1996
following over forty years of dedicated service and exemplary leadership as an
employee, officer and Trustee of the Company during a period of extraordinary
change and challenge to Con Edison and the utility industry. On March 31, 1997,
Myles V. Whalen retired from the Board of Trustees following more than twenty
years of distinguished service to the Company. His wise counsel and expert
judgement will be missed in the deliberations of the Board.
Since the last annual meeting, the number of Trustees constituting the
entire Board of Trustees was increased from thirteen to fourteen by amendment to
Section 8 of the bylaws, effective September 1, 1996 with the election of Mr.
Volk and was reduced from fourteen to thirteen, effective December 31, 1996,
with the retirement of Mr. McCann. The pertinent portion of Section 8 as amended
provides that "The affairs of the Company shall be managed under the direction
of a Board consisting of thirteen Trustees. . . ".
Shares represented by every properly signed proxy will be voted at the
Annual Meeting for the election as Trustees of the persons nominated by
management, except where the right to vote such shares is withheld as provided
in the proxy or otherwise instructed. If one or more of such nominees is unable
or unwilling to serve, the shares represented by the proxies will be voted for
the other nominees and for any substitute nominee or nominees as shall be
designated by management.
3
<PAGE> 7
INFORMATION ABOUT NOMINEES
The name and age of each of the nominees, the year in which each was first
elected a Trustee of Con Edison, the principal occupation and business
experience of each during the past five years, the number of shares of Common
Stock of the Company beneficially owned by each as of the close of business on
January 31, 1997, their directorships in other publicly-held business
corporations and the more significant of their directorships in charitable and
educational organizations as of that date are set forth below, based on
information provided by the nominees.
<TABLE>
<CAPTION>
NAME, AGE, YEAR IN WHICH FIRST ELECTED TRUSTEE
AND PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS
<S> <C>
PHOTO E. VIRGIL CONWAY, 67--1970
Chairman, Metropolitan Transportation Authority, New York, N.Y. (public
transportation) since April 1995. Mr. Conway was Chairman of the Financial
Accounting Standards Advisory Council from 1992 to July 1995. Director or
Trustee, Accuhealth, Inc., Atlantic Mutual Insurance Company, Centennial
Insurance Company, HRE Properties, certain mutual funds managed by Phoenix
Home Life Mutual Insurance Company, Trism, Inc., Union Pacific Corporation,
Josiah Macy, Jr. Foundation, Pace University, and Chairman, New York Housing
Partnership Development Corporation.
Shares owned: 12,998
PHOTO ARTHUR HAUSPURG, 71--1975
Former Chairman of the Board and Chief Executive Officer of the Company. Mr.
Hauspurg was Chairman of the Board and Chief Executive Officer from September
1982 through August 1990. He was President from 1975 through January 1989.
Director, COMSAT Corporation and Member, National Academy of Engineering.
Shares owned: 17,468
PHOTO DONALD K. ROSS, 71--1977
Retired Chairman of the Board, President and Chief Executive Officer, New
York Life Insurance Company, New York, N.Y. Director or Trustee,
Mackay-Shields Financial Corporation and The Mainstay Funds.
Shares owned: 800
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME, AGE, YEAR IN WHICH FIRST ELECTED TRUSTEE
AND PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS
<S> <C>
PHOTO PETER W. LIKINS, 60--1978
President, Lehigh University, Bethlehem, Pa. Director or Trustee, COMSAT
Corporation, Parker-Hannifin Corporation, Safeguard Scientific, Inc., St.
Luke's Hospital and Communities In Schools -- Pennsylvania. Member, National
Academy of Engineering.
Shares owned: 1,706
PHOTO RUTH M. DAVIS, 68--1981
President and Chief Executive Officer, The Pymatuning Group, Inc.,
Alexandria, Va. (technology management). Director or Trustee, Air Products
and Chemicals, Inc., BTG, Inc., Ceridian Corporation, Giddings & Lewis, Inc.,
Premark International, Inc., Principal Mutual Life Insurance Company, Sprint
Corp., Tupperware Corporation, Varian Associates and The Aerospace
Corporation (Chairman). Member, American Academy of Arts and Sciences,
National Academy of Engineering and University of Maryland Board of Visitors.
Shares owned: 2,878
PHOTO EUGENE R. MCGRATH, 55--1987
Chairman of the Board, President and Chief Executive Officer of the Company
since September 1, 1990. Director or Trustee, Atlantic Mutual Insurance
Company, Federal Reserve Bank of N.Y., Business Council of New York State,
Inc., New York City Partnership and Chamber of Commerce, American Museum of
Natural History, Barnard College, National Action Council for Minorities in
Engineering, Inc., American Woman's Economic Development Corporation, The
Fresh Air Fund, the Wildlife Conservation Society and the United Way of New
York City. Member, National Academy of Engineering.
Shares owned: 13,585
PHOTO GORDON J. DAVIS, 55--1989
Partner, LeBoeuf, Lamb, Greene & MacRae, Attorneys at Law, New York, N.Y.
since October, 1994. Mr. Davis was previously a Partner, Lord Day & Lord,
Barrett Smith, Attorneys at Law, New York, N.Y. Director or Trustee, Phoenix
Home Life Mutual Insurance Company, certain mutual funds managed by the
Dreyfus Corporation, Dance Theater of Harlem, Lincoln Center for the
Performing Arts, Inc. and New York Public Library.
Shares owned: 1,254
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME, AGE, YEAR IN WHICH FIRST ELECTED TRUSTEE
AND PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS
<S> <C>
PHOTO ELLEN V. FUTTER, 47--1989
President and Trustee, American Museum of Natural History, New York, N.Y.
since November, 1993. Ms. Futter was previously President of Barnard College.
Director, Trustee or Member, Bristol-Myers Squibb Company, Committee for
Economic Development, Council on Foreign Relations and New York City
Partnership.
Shares owned: 1,722
PHOTO ROBERT G. SCHWARTZ, 69--1989
Director and former Chairman of the Board, President and Chief Executive
Officer, Metropolitan Life Insurance Company, New York, N.Y. Mr. Schwartz
served as Chairman of the Board of Metropolitan Life from 1983, and President
and Chief Executive Officer from 1989, to April 1, 1993. Director or Trustee,
COMSAT Corporation, Lone Star Industries, Inc., Lowe's Companies Inc., Mobil
Corporation, Potlatch Corporation, Reader's Digest Association, Inc.,
Committee for Economic Development and Smeal College of Business
Administration at Penn State University (Board of Visitors).
Shares owned: 2,000
PHOTO RICHARD A. VOELL, 63--1990
Private investor and retired President and Chief Executive Officer of The
Rockefeller Group, New York, N.Y. (real estate, real estate services and
communications and communications services) from 1982 to June 30, 1995.
Trustee or Member, Municipal Art Society, Council on Foreign Relations, New
York City Partnership, and Executive Committee and Chairman of the Nominating
Committee, Wildlife Conservation Society. Chairman, Business Council for the
United Nations and Past Chairman, Economic Club of New York.
Shares owned: 3,191
</TABLE>
6
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<TABLE>
<CAPTION>
NAME, AGE, YEAR IN WHICH FIRST ELECTED TRUSTEE
AND PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS
<S> <C>
PHOTO SALLY HERNANDEZ-PINERO, 44--1994
Of Counsel, Kalkines, Arky, Zall & Bernstein, Attorneys at Law, New York,
N.Y. since 1994. Mrs. Hernandez-Pinero served as Chairwoman of the New York
City Housing Authority from 1992 through 1993, New York City Deputy Mayor for
Finance and Economic Development from 1990 to 1992 and Commissioner and
Chairwoman of the Board of Directors of the Financial Services Corporation of
New York City. Director or Trustee, Accuhealth, Inc., The Dime Savings Bank,
Blue Shield Association, National Income Realty Trust and The Metropolitan
Museum of Art.
Shares owned: 1,280
PHOTO STEPHEN R. VOLK, 60--1996
Senior Partner, Shearman & Sterling, Attorneys at Law, New York, N.Y.
Trustee, St. Luke's Hospital. Member, Council on Foreign Relations.
Shares owned: 1,112*
PHOTO JOAN S. FREILICH, 55--1997
Senior Vice President and Chief Financial Officer of the Company since July
1, 1996. A description of prior business experience is shown on page 3.
Director or Trustee, Citizens Budget Commission and Public Utilities Reports,
Inc. Member, Financial Executives Institute and Steering Committee, New York
State Women in Communications and Energy.
Shares owned: 1,694
</TABLE>
A complete list of directorships of the nominees in charitable and
educational organizations is available to any stockholder who requests one from
the Secretary of the Company.
- - ---------------
* As of March 31, 1997.
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The number of shares of Common Stock of the Company beneficially owned as
of January 31, 1997, by each of the executive officers named in the compensation
table on page 16 who are not also nominees is set forth below.
<TABLE>
<CAPTION>
NAME SHARES OWNED
-------------
<S> <C>
Charles F. Soutar............................................ 4,502
J. Michael Evans............................................. 1,132
Stephen B. Bram.............................................. 4,183
Peter J. O'Shea, Jr.......................................... 130*
</TABLE>
- - -----
* As of March 31, 1997.
As of January 31, 1997, no nominee or officer was the beneficial owner of
any other class of equity securities of the Company or beneficially owned more
than .007 percent of the total outstanding Common Stock of the Company. As of
the same date all officers and Trustees as a group beneficially owned 146,893
shares (.062 percent) of the outstanding Common Stock of the Company. Each
officer and Trustee held his or her shares with sole voting power and sole
investment power, except for shares as to which voting power, or investment
power, or both, were shared with a spouse or a relative of such person.
To the best knowledge of the management of the Company, no person owned
beneficially as of January 31, 1997, more than 5 percent of any class of voting
securities of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon its review of the reports furnished to the Company for 1996
pursuant to Section 16 of the Securities Exchange Act of 1934, the Company
believes that all of the reports were filed on a timely basis.
TRUSTEES' FEES AND ATTENDANCE
Those Trustees who are not employees of the Company are paid an annual
retainer of $24,000 and a fee of $1,000 for each meeting of the Board or a
Committee of the Board attended, except that if the Committee meeting is held on
the same day as the Board meeting, the fee paid for attending the Committee
Meeting is $800. Con Edison will reimburse members of the Board of Trustees who
are not currently officers of the Company for expenses incurred in attending
Board and Committee meetings.
The Chairs of the Audit, Budget and Contracts, Environmental, Executive
Personnel and Pension, Finance, Nominating and Planning Committees each receive
an annual retainer fee of $4,000, provided, however, that if any Trustee is
serving at the same time as the Chairman of the Budget and Contracts Committee
and the Finance Committee he or she is paid only one such annual retainer. The
Acting Chairman of any Board Committee is paid an additional meeting fee of $200
for any Committee meeting at which he or she presides. Trustees may participate
in the
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<PAGE> 12
Company's Discount Stock Purchase Plan, the Deferred Compensation Plan and the
Retirement Plan for non-officer Trustees described below. Members of the Board
who are Company officers receive no retainer or meeting fees for their service
on the Board.
The Company has a deferred compensation plan applicable to non-officer
members of the Board. A Trustee who elects to participate in the plan may defer
all or a portion of the compensation paid by the Company with interest. As of
April 1, 1997, two former Trustees were participants in the plan.
The Company has a retirement plan for those Trustees who are not entitled
to receive employee pension benefits from the Company. The plan provides that a
Trustee who retires from the Board and who has completed ten full years of
service on the Board, shall receive annually, for life, commencing at age 65, or
the date of retirement, whichever is later, a benefit in an amount equal to the
then annual retainer being paid to the active members of the Board of Trustees,
changing as and when such annual retainer changes. The benefits for a Trustee
who retires with less than ten years of service are prorated. As of April 1,
1997, five former Trustees were participants in the plan.
The Company's Discount Stock Purchase Plan permits employees, including
executive officers of the Company, to contribute up to 20 percent of their
salaries into the plan, but not more than $25,000 per year. Non-officer members
of the Board of Trustees are eligible to participate and may contribute up to
$1,000 per month. Also, dividends may be reinvested. The Company contributes
one-ninth of the participant's contributions, including reinvested dividends.
The contributions are used to purchase outstanding shares of Common Stock of the
Company for the participants. The Company pays brokerage and other expenses
relating to the plan.
Mr. Hauspurg has a consulting agreement with the Company pursuant to which
he is paid $900 per day for services rendered to the Company. He received no
payments under this agreement in 1996. The law firm of Le Boeuf, Lamb, Greene &
MacRae of which Mr. Davis is a partner provided services to the Company in 1996
and may provide services in 1997.
The Board of Trustees held eleven regular meetings and one special meeting
in 1996. During 1996 each incumbent Trustee attended more than 75 percent of the
combined meetings of the Board of Trustees and the Board Committees on which he
or she served.
STANDING COMMITTEES OF THE BOARD
The Audit Committee, composed of four non-officer Trustees (Mrs.
Hernandez-Pinero, Chair, Dr. Davis, Ms. Futter and Mr. Ross), meets with the
Company's management, including its General Auditor, and its independent
accountants several times a year to discuss internal controls and accounting
matters, the Company's financial statements and the scope and results of
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<PAGE> 13
the auditing programs of the independent accountants and of the Company's
internal auditing department. The Audit Committee also recommends to the Board
of Trustees the appointment of the independent accountants for the Company,
subject to stockholders' approval at the annual meeting. The Committee held
three meetings in 1996.
The Budget and Contracts Committee, composed of seven non-officer Trustees
(Mr. Ross, Chair, Dr. Davis and Messrs. Conway, Davis, Hauspurg, Likins and
Schwartz), examines into and makes recommendations to the Board with respect to
the annual construction budget of the Company, major purchase authorizations and
contractual commitments, and the annual operating budget, receives a five-year
forecast of construction expenditures and reviews major real estate transactions
and litigation settlements. The Committee held eleven meetings during 1996.
The Environmental Committee, composed of five non-officer Trustees (Ms.
Futter, Chair, Dr. Davis, Mrs. Hernandez-Pinero and Messrs. Davis and Likins),
provides advice and counsel to the Company's management on corporate
environmental policy and on such other environmental matters as from time to
time the Committee deems appropriate; reviews significant new developments in
environmental laws and governmental agency actions as they affect the Company's
corporate environmental policy; reviews significant issues relating to the
Company's compliance with environmental laws and regulations and corporate
environmental policy; meets annually with the Planning Committee to review and
evaluate planning and environmental issues; submits recommendations to the Board
with respect to environmental related matters; and makes such other reviews and
recommends to the Board such other actions as it may deem necessary or desirable
to help promote sound planning by the Company with due regard to the protection
of the environment. The Committee held four meetings in 1996.
The Executive Committee, which is composed of Mr. McGrath, the Chairman of
the Board and of the Committee, and four non-officer Trustees (Messrs. Conway,
Hauspurg, Likins and Ross), may exercise during intervals between the meetings
of the Board all the powers vested in the Board, except for certain specified
matters. The Committee held one meeting in 1996.
The Executive Personnel and Pension Committee, composed of five non-officer
Trustees (Mr. Conway, Chair, Mrs. Hernandez-Pinero and Messrs. Ross, Schwartz
and Voell), reports and makes recommendations to the Board relating to officer
and senior management appointments and compensation. In addition, the Committee
makes incentive compensation awards to officers participating in the Company's
Executive Incentive Plan, subject to confirmation by the Board and administers
the Company's Stock Option Plan, including determining the recipients of, and
the number of shares covered by, stock option grants. The Committee also reviews
and makes recommendations as necessary to provide for orderly succession and
transition in the executive management of the Company and receives reports and
makes recommendations with respect to
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<PAGE> 14
minority and female recruitment, employment and promotion. It also oversees and
makes recommendations to the Board with respect to compliance with the Employee
Retirement Income Security Act of 1974 ("ERISA"), and reviews and makes
recommendations with respect to new benefit plans and plan amendments, the
selection of plan trustees and the funding policy and contributions to the
funded plans, and reviews the performance of the funded plans. The Committee
held seven meetings during 1996.
The Finance Committee, which is composed of seven non-officer Trustees (Mr.
Schwartz, Chair, Dr. Davis and Messrs. Conway, Davis, Hauspurg, Likins and
Ross), reviews and makes recommendations to the Board with respect to the
Company's financial condition and policies, its dividend policy, bank credit
arrangements, financings, investments, nuclear decommissioning funds, and other
financial matters, and reviews a five-year financial forecast. The Committee
held twelve meetings during 1996.
The Nominating Committee, composed of five non-officer Trustees (Mr. Voell,
Chair, Ms. Futter and Messrs. Conway, Schwartz and Volk), is responsible for
recommending candidates to fill vacancies on the Board of Trustees. In addition,
the Committee assists with respect to the composition and size of the Board and
of all Committees of the Board. The Committee also makes recommendations to the
Board as to the compensation of Board members and members of the Board
Committees as well as other corporate governance matters. The Committee held
four meetings in 1996. The Committee has no formal procedures for consideration
of recommendations for nominations to the Board. It will consider candidates
proposed by stockholders. Nominations for candidates, accompanied by
biographical material for evaluation, may be sent to the Secretary of the
Company. Each nomination should include information as to the qualifications of
the candidate and should be accompanied by a written statement (presented to the
Secretary of the Company) from the suggested candidate, to the effect that the
candidate is both willing and affirmatively desirous of serving.
The Planning Committee, composed of seven non-officer Trustees (Dr. Likins,
Chair, Dr. Davis, Ms. Futter, Mrs. Hernandez-Pinero and Messrs. Davis, Hauspurg
and Volk), examines into and makes recommendations to the Board regarding long
range planning for the Company's electric, gas and steam businesses. The
Committee held four meetings in 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mrs. Hernandez-Pinero and Messrs. Conway, Ross, Schwartz and Voell were
members of the Company's Executive Personnel and Pension Committee in 1996. The
Company believes that there are no interlocks with the members that serve on
this Committee.
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<PAGE> 15
MANAGEMENT PROPOSAL
PROPOSAL NO. 1--Approval of Appointment of Price Waterhouse LLP as Independent
Accountants for the Year 1997
At the Annual Meeting, the Board of Trustees will recommend that the
stockholders ratify and approve the selection of Price Waterhouse LLP as
independent accountants for the Company for the year 1997. Price Waterhouse LLP
has acted in the same capacity for many years.
Before the Audit Committee recommended to the Board of Trustees the
appointment of Price Waterhouse LLP, it considered that firm's qualifications.
This included a review of their performance in prior years, as well as their
reputation for integrity and for competence in the fields of accounting and
auditing. The Audit Committee has expressed its satisfaction with Price
Waterhouse LLP in these respects. The Audit Committee reviewed information
provided by Price Waterhouse LLP concerning litigation involving that firm and
the existence of any investigations by the Securities and Exchange Commission
into the financial reporting practices of companies audited by them. As to these
matters, the Audit Committee has concluded that the ability of Price Waterhouse
LLP to perform services in 1997 for the Company is not in any way adversely
affected by any litigation or investigations reflected in such information.
Representatives of Price Waterhouse LLP will be present at the Annual
Meeting and will be afforded the opportunity to make a statement if they desire
to do so and to respond to appropriate questions.
In connection with the 1996 audit, Price Waterhouse LLP reviewed the
Company's annual report and examined the related financial statements, reviewed
interim financial statements and certain of the Company's filings with the
Federal Energy Regulatory Commission, the New York State Public Service
Commission and the Securities and Exchange Commission. Price Waterhouse LLP also
performed audits of the financial statements of the Company's pension and
certain other benefit plans. Payments to Price Waterhouse LLP for audit services
in 1996 totalled $731,000.
Adoption of Proposal No. 1 requires the affirmative vote of a majority of
the shares of the Common Stock and $5 Cumulative Preferred Stock (voting
together as a single class) voted on the proposal at the meeting.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSAL NO. 1.
STOCKHOLDER PROPOSALS
PROPOSAL NO. 2--John J. Gilbert, 29 East 64th Street, New York, N.Y. 10021-7043,
owning 125 shares, Margaret R. Gilbert, owning 124 shares, and both Executors
of the Estate of Lewis D.
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<PAGE> 16
Gilbert for 100 shares and/or Edith and/or Edward Rudy, owning 1,914.756
shares of Common Stock have submitted the following proposal:
"RESOLVED: That the stockholders of Consolidated Edison Company of New
York, Inc., assembled in annual meeting in person and by proxy, hereby
request the Board of Directors to take the steps necessary to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal the number of
shares he or she owns multiplied by the number of directors to be elected,
and he or she may cast all of such votes for a single candidate, or any two
or more of them as he or she may see fit."
The statement made in support of this proposal is as follows:
"Continued strong support along the lines we suggest were shown at the last
annual meeting when 23.6%, an increase over the previous year, 11,099 owners of
34,951,375 shares, were cast in favor of this proposal. The vote against
included 12,558 unmarked proxies.
"A California law provides that all state pension holdings and state
college funds, invested in shares must be voted in favor of cumulative voting
proposals, showing increasing recognition of the importance of this democratic
means of electing directors.
"The National Bank Act provides for cumulative voting. In many cases
companies get around it by forming holding companies without cumulative voting.
Banking authorities have the right to question the capability of directors to be
on banking boards. In many cases authorities come in after and say the director
or directors were not qualified. We were delighted to see the SEC has finally
taken action to prevent bad directors from being on boards of public companies.
The SEC should have hearings to prevent such persons becoming directors before
they harm investors.
"We think cumulative voting is the answer to find new directors for various
committees. Some recommendations have been made to carry out the CERES 10
points. The 11th, in our opinion, should be having cumulative voting and ending
staggered boards.
"When Alaska became a state it took away cumulative voting over our
objections. The Valdez oil spill might have been prevented if environmental
directors were elected through cumulative voting. The huge derivative losses
might have also been prevented with cumulative voting.
"Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Ingersoll-Rand, also having cumulative
voting, won two awards. FORTUNE magazine ranked it second in its industry as
"America's Most Admired Corporations" and the
13
<PAGE> 17
WALL STREET TRANSCRIPT noted "on almost any criteria used to evaluate
management, Ingersoll-Rand excels." In 1994 and 1995 they raised their dividend.
"Lockheed-Martin, as well as VWR Corporation now have a provision that if
anyone has 40% or more of the shares cumulative voting applies, it does at the
latter company.
"In 1995 American Premier adopted cumulative voting. Allegheny Power System
tried to take away cumulative voting, as well as put in a stagger system, and
stockholders defeated it, showing stockholders are interested in their rights.
"If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain."
THE BOARD OF TRUSTEES RECOMMENDS A VOTE AGAINST PROPOSAL NO. 2 FOR THE
FOLLOWING REASONS:
The same proposal was submitted by Mr. Gilbert to Con Edison's 1996, 1995,
1994, 1987, 1986, 1985 and 1984 annual meetings of stockholders, to each of six
annual meetings held from 1974 through 1979 and to several prior meetings and
was overwhelmingly defeated each time. The proposal, in the opinion of the Board
of Trustees, is contrary to the best interests of the Company and its
stockholders. The Trustees, in administering the affairs of the Company, should
function for the benefit of all stockholders. The present system of voting for
the election of Trustees, under which the holders of a plurality of the votes
cast at a meeting of stockholders elect a Board of Trustees to represent all the
stockholders, has served well. If this proposal were adopted, a Trustee who was
elected only because of cumulative voting might represent and act for the
benefit of a special interest rather than for the benefit of all stockholders.
In the opinion of counsel, this resolution, if adopted, would not
constitute an amendment of the Certificate of Incorporation of the Company
permitting cumulative voting, but would constitute a formal request by the
stockholders that the Board of Trustees submit to a later meeting of the
stockholders a proposal to amend the Company's Certificate of Incorporation so
as to permit cumulative voting by the Company's stockholders in voting for the
election of members of the Board of Trustees.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE AGAINST PROPOSAL NO. 2.
PROPOSAL NO. 3--Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia
Avenue, N.W., Suite 215, Washington, D.C. 20037, who owns 200 shares of Common
Stock, has submitted the following proposal:
"RESOLVED: That the shareholders recommend that the Board take the
necessary step that Con Edison specifically identify by name and corporate title
in all future proxy statements
14
<PAGE> 18
those executive officers, not otherwise so identified, who are contractually
entitled to receive in excess of $100,000 annually as a base salary, together
with whatever other additional compensation bonuses and other cash payments were
due them."
The statement made in support of this proposal is as follows:
"In support of such proposed Resolution, it is clear that the shareholders
have a right to comprehensively evaluate the management in the manner in which
the Corporation is being operated and its resources utilized. At present only a
few of the most senior executive officers are so identified, and not the many
other senior executive officers who should contribute to the ultimate success of
the Corporation. Through such additional identification the shareholders will
then be provided an opportunity to better evaluate the soundness and efficacy of
the overall management.
"Last year the owners of 18,294,485 shares, representing approximately
12.4% of shares voting, voted FOR this proposal.
"If you AGREE, please mark your proxy FOR this proposal."
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL NO. 3 FOR
THE FOLLOWING REASONS:
Disclosure of executive compensation is governed by the Securities and
Exchange Commission's proxy solicitation rules. In accordance with those rules
the Company currently provides information on pages 16 through 25 of the Proxy
Statement concerning compensation for the five highest paid executive officers.
The proposal would impose on the Company more stringent disclosure
requirements than those imposed on other companies by the Commission's rules.
The Board believes that any changes in the disclosure requirements should
emanate from the Commission and should be uniformly applicable to all companies
subject to the proxy rules.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE AGAINST PROPOSAL NO. 3.
- - --------------------------------------------------------------------------------
Adoption of the preceding stockholder resolutions (Proposals 2 and 3) would
require the affirmative vote of a majority of shares of Common Stock and $5
Cumulative Preferred Stock (voting together as a single class) voted thereon at
the meeting.
- - --------------------------------------------------------------------------------
15
<PAGE> 19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Company's Chief
Executive Officer and its four most highly compensated executive officers other
than the Chief Executive Officer who were serving as executive officers at the
end of 1996.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- ------------
OTHER
NAME AND PRINCIPAL ANNUAL OPTION ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SHARES COMPENSATION(1)
- - ------------------------ ----- --------- --------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Eugene R. McGrath........ 1996 $ 721,667 $ 422,663 $ 17,513 70,000 $25,582
Chairman of the Board, 1995 $ 660,000 $ 409,500 $ 16,077 $24,651
President and Chief 1994 $ 603,333 $ 353,600 $ 14,515 $23,406
Executive Officer
Charles F. Soutar........ 1996 $ 351,333 $ 115,000 -- 16,000 $ 7,350
Executive Vice President-- 1995 $ 331,333 $ 120,000 -- $ 7,350
Central Services 1994 $ 311,333 $ 120,000 -- $ 7,268
J. Michael Evans......... 1996 $ 329,667 $ 115,000 -- 20,000 $ 7,350
Executive Vice President-- 1995 $ 311,000 $ 120,000 -- $ 7,350
Customer Service 1994 $ 292,333 $ 110,000 -- $ 7,268
Stephen B. Bram.......... 1996 $ 291,500 $ 90,000 -- 16,000 $ 7,350
Senior Vice President-- 1995 $ 273,500 $ 100,000 -- $ 7,350
Central Operations 1994 $ 243,000 $ 110,000 -- $ 7,143
Peter J. O'Shea, Jr.(2).. 1996 $ 295,000 $ 80,000 -- 16,000 $ 6,738
Senior Vice President
and General Counsel
</TABLE>
- - ------------
(1) The amounts shown in this column consist of amounts contributed by the
Company under its Discount Stock Purchase Plan (DISCOP) and Thrift Savings Plan
for Management Employees (Thrift Plan) and amounts paid for life insurance for
Mr. McGrath, as follows: For 1996, Mr. McGrath, life insurance--$17,941, Thrift
Plan--$7,350, DISCOP--$291; Mr. Soutar, Thrift Plan--$7,350; Mr. Evans, Thrift
Plan--$7,350; Mr. Bram, Thrift Plan--$7,350; Mr. O'Shea, Thrift Plan--$6,738;
For 1995, Mr. McGrath, life insurance--$16,212, DISCOP--$1,089, Thrift
Plan--$7,350; Mr. Soutar, Thrift Plan--$7,350; Mr. Evans, Thrift Plan--$7,350;
Mr. Bram, Thrift Plan--$7,350; For 1994, Mr. McGrath--life insurance--$15,154,
DISCOP--$984, Thrift Plan--$7,268; Mr. Soutar, Thrift Plan--$7,268; Mr. Evans,
Thrift Plan--$7,268; Mr. Bram, Thrift Plan--$7,143.
(2) Mr. O'Shea joined the Company as Senior Vice President and General
Counsel on January 1, 1996.
16
<PAGE> 20
EMPLOYMENT CONTRACTS OF EXECUTIVE OFFICERS LISTED IN THE SUMMARY COMPENSATION
TABLE
Mr. McGrath has an agreement with the Company which provides for his
employment on a year-to-year basis with automatic one-year extensions unless
either party terminates the agreement upon at least twelve prior months' notice.
The agreement provides for Mr. McGrath to receive an annual salary of $740,000
(effective September 1, 1996), plus annual deferred compensation of $25,000 with
interest. Mr. McGrath's salary is reviewed annually by the Executive Personnel
and Pension Committee and, with the concurrence of the Board, may be increased
as a result of that review. The agreement also provides for the Company to
purchase supplemental term life insurance for Mr. McGrath, the premiums for
which are included in the Summary Compensation Table.
Mr. O'Shea has an agreement with the Company which provides for his
employment through December 31, 1998 at an annual salary of $315,000 (effective
January 1, 1997). Mr. O'Shea's salary is reviewed annually by the Executive
Personnel and Pension Committee and, with the concurrence of the Board, may be
increased as a result of that review. The agreement also provides that if Mr.
O'Shea is in the Company's employ on January 1, 1999, he will receive a
supplemental pension calculated as if his period of service with the Company
were equal to two times his actual years of service. The supplemental pension is
reduced by any pension payable to Mr. O'Shea under the Company's pension plans.
See "Pension Plans" on page 24.
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation policies are administered by the
Executive Personnel and Pension Committee of the Board of Trustees. This
Committee was composed of five Trustees in 1996. All action by the Committee
pertaining to executive compensation, except for awards under the 1996 Con
Edison Stock Option Plan, is submitted to the full Board of Trustees for
approval. The Committee submits the following report related to compensation
matters for 1996.
The Committee's compensation policy -- The Committee believes that total
executive compensation should be such as to attract to Con Edison, motivate and
reasonably reward individuals of the highest professional and personal
qualifications and, at the same time, secure substantial and proportionate value
for the Company. In 1996, compensation of Con Edison's executive officers
consisted primarily of base salary, which is reviewed by the Committee annually,
a potential award under Con Edison's Executive Incentive Plan, which is shown in
the Summary Compensation Table on page 16 under the caption "Bonus" and a
potential award under the Con Edison 1996 Stock Option Plan (the "Stock Option
Plan"), which was approved
17
<PAGE> 21
by stockholders at the 1996 Annual Meeting. In addition, in order to better
align Con Edison's executive compensation plans with those of other companies in
the utility industry, the Committee recommended and the Board of Trustees
approved in 1996 an amendment to Con Edison's supplemental pension plan to
include in pension calculations the awards made under the Executive Incentive
Plan as described under the caption "Pension Plans" on page 24. In making its
recommendations to the Board of Trustees, with respect to salaries of officers
other than Mr. McGrath, and awards under the Executive Incentive Plan of
officers other than Mr. McGrath, and in making awards under the Stock Option
Plan for officers other than Mr. McGrath, the Committee considers
recommendations made to it by Mr. McGrath. The Committee initiates the
recommendations that it makes to the Board of Trustees with respect to Mr.
McGrath's salary, any award under the Executive Incentive Plan and any grants
the Committee makes to him under the Stock Option Plan.
Individual performance is the primary factor considered in determining base
salary, within a range appropriate to that individual's position, although in
some cases corporate performance may also be relevant to base salary
determinations. Awards under the Executive Incentive Plan are based on both
individual and corporate performance. Grants under the Stock Option Plan are
based on individual performance and on an assessment of the individual's
responsibility for the success and growth of the Company. Base salary ranges are
identified for the Company's officers with reference to salaries paid by other
utilities and industry in general, as reflected in surveys by such organizations
as the Edison Electric Institute and in general industry studies conducted by
compensation consulting firms. These surveys are not identical to the surveys
referred to in the next paragraph. In addition, an attempt is made to assure
internal equity by maintaining appropriate salary relationships. Increases for
individuals are based on the current salary's relationship to the range for the
position (but not to any specific level within the range) and the individual's
performance with respect to the requirements of the individual's position.
In considering the level of Mr. McGrath's compensation, the Committee
reviewed surveys of the total compensation, including base salary and incentive
compensation, paid to the chief executive officers of other utilities with
revenues exceeding $2 billion and a survey by the Edison Electric Institute of
the compensation paid to the chief executive officers in the electric utility
industry. The Committee does not target Mr. McGrath's compensation to any
specific level within the ranges of compensation paid by these comparison
companies but uses the surveys as references. The utilities included in the
surveys referred to in this paragraph and the previous paragraph are some but
not all of the utilities included in the Standard & Poor's Electric Utilities
Index shown on the performance graph on page 26. None of the non-utility
companies in the surveys are in the Index.
18
<PAGE> 22
The Committee believes that an evaluation of corporate performance must
take account of many factors affecting Con Edison's operations, over some of
which management has total or considerable control and over others of which it
has little or no control. In this context it looks not only to current reported
financial operating results and financial condition (as reflected in such
factors as earnings per share, return on common equity, and debt ratings), but
also to a wide range of other information relating to the quality of service
provided to customers, the efficiency of operations, the development and
management of personnel and the effectiveness of management's efforts to
strengthen the Company for the future. In recommending the base salaries or
awards under the Executive Incentive Plan or grants under the Stock Option Plan,
the Committee does not have a predetermined list of criteria nor does it have a
formula for weighing or applying the criteria the Committee members consider.
The process is neither arithmetic nor formulaic, but judgmental.
1996 Base Salary Determinations -- In 1996 individual performance and
overall compensation ranges relevant to Company officers were the factors
considered by the Committee in determining the base salaries recommended for
such individuals.
1996 Executive Incentive Plan Awards -- Each year under the Executive
Incentive Plan, a maximum fund is established by the Committee, subject to the
approval of the Board of Trustees, based on the salaries of the eligible
participants at the end of the prior year. This maximum fund may not exceed one
half of one percent of the Company's net income for the year. Awards may be made
by the Committee, subject to approval by the Board, to eligible executives based
on their performance during the year. Payment of one-third of the award is
deferred for five years and is subject to forfeiture in certain circumstances.
Portions of awards that are required to be deferred are treated during the
mandatory deferral period as if portions were invested in the Company's Common
Stock and are credited with dividend equivalents and credited or debited for
increases or decreases in the market value of an equivalent number of shares.
In recommending the amount awarded under the Executive Incentive Plan for
plan year 1996, the Committee considered the following financial factors:
Earnings per share in 1996 of $2.93 equaled 1995 earnings per share which were
the second highest on record; controllable expenses in 1996 were $1,280 million
or 2.3% less than budgeted; the dividend was increased in 1996 by four cents per
share or 2%, compared to an industry average increase of 2.1%; the Common Stock
price on December 31, 1996 was 8.3% lower than December 31, 1995; over the
five-year period ended December 31, 1996, the total return on the Company's
Common Stock, measured on the basis of a $100 investment with dividends
reinvested was $141.90, compared to $203.00 for the Standard and Poor's 500
Stock Index, and $135.70 for the Standard and Poor's Electric Utilities Index;
the Company remains one of the financially strongest utilities in the U.S., with
ratings of A1 by Moody's and A+ by Standard and Poor's; interest coverage on the
SEC
19
<PAGE> 23
book basis method decreased from 4.20 times at year-end 1995 to 4.18 times at
year-end 1996; uncollectible bills were down in 1996, compared to 1995, and of
the major combination electric and gas utilities in New York State, the Company
has the second lowest net loss per $100 of revenue and is well below the average
of $0.80; the Equivalent Number of Days of Revenue Outstanding (ENDRO) for the
year increased by one day, from 25.8 days in 1995 to 26.8 days in 1996, the
lowest in New York State (the average ENDRO for the state is 35.9 days); the
Company earned a total of $64.4 million in incentives in 1996 under the
provisions of the electric and gas rate agreements; in October 1996, the Company
entered into a gas rate settlement agreement with the Public Service
Commission's staff which contains provisions for base rates to remain at
September 30, 1996 levels through September 30, 2000; the Company successfully
negotiated a four-year labor agreement with Local 1-2, U.W.U.A.; and the Company
executed a tender for several preferred stock issues and redeemed two additional
issues resulting in the retirement of approximately $317 million of preferred
stock and the replacement of the preferred stock with the issuance of Quarterly
Income Capital Securities, with a net present value savings of approximately $42
million for customers. The Committee also considered the following additional
factors: The Company developed a comprehensive plan for the transition of the
regulated electric industry in New York State to a more competitive environment,
which formed the basis for the Company's response to the Public Service
Commission's Competitive Opportunities Order on October 1, 1996; the Company met
all of the regulatory commitments required by the 1994 Consent Order with the
New York State Department of Environmental Conservation; the Company implemented
an Environmental Managers training program, an Environmental and Safety
Ombudsman program, an Environmental Excellence Management System and a
comprehensive communications campaign to make employees aware of the Company's
commitment to Environmental Excellence under its new corporate environmental
policy; the total gas leak backlog reached an all-time record low level at year
end 1996; Indian Point No. 2 sustained a high level of performance during 1996,
completing the year with a capacity factor of 94.9%; customer service complaints
to the PSC decreased from 3,100 in 1995 to 2,600 in 1996; on May 21, 1996, a
sequence of events involving equipment failures and extremely hot weather
resulted in load shedding of a portion of Queens; the Company's safety
performance declined from 1995, due primarily to the severe winter weather in
early 1996 which adversely impacted both vehicle and industrial accidents; and
the Company purchased more than $78 million worth of goods and services from
minority-owned firms in 1996 and increased the percentage of minority and female
representation in its workforce.
Based on the Committee's review of Con Edison's performance in 1996, as
reflected in the factors mentioned above, for 1996 the Committee recommended,
and the Board of Trustees
20
<PAGE> 24
approved, that the total amount awarded under the Executive Incentive Plan to
all participants as a group be 85 percent of the maximum amount provided by the
Plan.
CEO Compensation -- In making its recommendations to the Board of Trustees
with respect to both the base salary and the Executive Incentive Plan award for
1996 of Mr. McGrath and the Stock Option grant made to him in 1996, the
Committee considered among other things, the Company's good financial and
operating results; the Company's strong financial condition; the efficiency and
high level of reliability of the Company's generating system during the year;
the Company's compliance with environmental laws and regulations and its
progress in developing new environmental policies and programs; the Company's
success in earning incentives under the provisions of the Company's electric and
gas rate agreements; the continued good performance of Indian Point No. 2; Mr.
McGrath's leadership in developing the Company's comprehensive plan for the
transition to a more competitive utility environment; and compensation levels of
the chief executive officers of the other companies included in the compensation
surveys referred to on page 18.
I.R.S. Limitations on Deductibility of Executive Compensation -- Federal
law restricts the deductibility, for federal income tax purposes, of certain
executive compensation above a specified threshold. No Company executives
currently receive annual compensation reaching the threshold. Nevertheless, the
tax law provisions are complex, and under certain circumstances could restrict
Con Edison's deduction in a given year. The Committee intends to take into
account these tax law provisions in structuring the Company's executive
compensation in future years.
The Executive Personnel and Pension
Committee
E. Virgil Conway (Chairman)
Sally Hernandez-Pinero
Donald K. Ross
Robert G. Schwartz
Richard A. Voell
21
<PAGE> 25
STOCK OPTIONS
The Board of Trustees approved the adoption of the Consolidated Edison
Company of New York, Inc. 1996 Stock Option Plan (the "Stock Option Plan") on
January 23, 1996 and the stockholders approved the plan on May 20, 1996. The
purpose of the Stock Option Plan, which provides for granting options to
purchase shares of the Company's Common Stock ($2.50 par value), is to promote
the interests of the Company and its shareholders by providing long-term
incentives to those persons with significant responsibility for the success and
growth of the Company, by strengthening the Company's ability to attract and
retain officers and other employees of the Company, and by aligning the
interests of such persons with those of the Company's stockholders by
facilitating their purchase of equity interest in the Company. All grants of
stock options outstanding under Con Edison's 1996 Stock Option Plan have a term
of 10 years from date of grant and an exercise price equal to 100 percent of
fair market value on the date of grant. The stock options are non-transferable
and become exercisable three years after the date of grant. In the event of a
change in control of the Company, the Executive Personnel and Pension Committee
of the Board may provide for appropriate adjustments, including accelerating any
exercisability or expiration dates, and settlement of option grants. The
following table provides information on stock option grants made to the named
executive officers in 1996.
OPTION GRANTS IN LAST FISCAL YEAR (1996)
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE OR EXPIRATION PRESENT
NAME GRANTED IN 1996 BASE PRICE DATE VALUE(1)
- - ---------------------------------- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Eugene R. McGrath................. 70,000 9.9% $27.875 5/23/06 $181,300
Charles F. Soutar................. 16,000 2.3% $27.875 5/23/06 $ 41,440
J. Michael Evans.................. 20,000 2.8% $27.875 5/23/06 $ 51,800
Stephen B. Bram................... 16,000 2.3% $27.875 5/23/06 $ 41,440
Peter J. O'Shea, Jr............... 16,000 2.3% $27.875 5/23/06 $ 41,440
</TABLE>
- - ------------
(1) The grant date present values were calculated using the Black-Scholes
option pricing model applied as of the grant date, May 24, 1996. The values
generated by this model depend upon the following assumptions: an option
exercise date of May 23, 2006, a constant dividend yield on underlying stock of
7.46 percent, an assumed annual volatility of the underlying stock of 17.24
percent; and a risk-free rate of return for the option period of 6.87 percent.
The market value of the grant date is the closing price of the Common Stock on
the day preceding the grant date. The Company made no assumptions regarding
restrictions on vesting or the likelihood of vesting.
22
<PAGE> 26
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1996)
AND FISCAL YEAR-END OPTION VALUES (12/31/96)
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN THE MONEY OPTIONS AT
SHARES AT FISCAL YEAR END FISCAL YEAR END (1)
ACQUIRED VALUE ----------------------------- -----------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eugene McGrath........... 0 0 0 70,000 0 $87,500
Charles F. Soutar........ 0 0 0 16,000 0 $20,000
J. Michael Evans......... 0 0 0 20,000 0 $25,000
Stephen B. Bram.......... 0 0 0 16,000 0 $20,000
Peter J. O'Shea, Jr...... 0 0 0 16,000 0 $20,000
</TABLE>
- - ------------
(1) Represents difference between market price of Con Edison common stock
and the exercise price of the option at 12/31/96. Such amounts may not be
realized. Actual values, if any, will be realized at the time of any such
exercise.
23
<PAGE> 27
PENSION PLANS
The following table shows, for the salary levels and years of service
indicated, the annual pension benefit payable commencing at age 65 under the
Company's Retirement Plan for Management Employees (the "Management Plan"), a
funded, tax-qualified, defined benefit pension plan, and Con Edison's
Supplemental Retirement Income Plan, an unfunded, non-qualified plan (together
referred to as the "Plans"), as supplemented in the case of Messrs. McGrath,
Evans and O'Shea by separate agreements.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE
AVERAGE --------------------------------------------------------------------------------------
SALARY 15 20 25 30 35 40 45
- - ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 11,250 $ 15,000 $ 19,000 $ 24,000 $ 25,250 $ 26,500 $ 27,750
$ 100,000 $ 24,317 $ 32,422 $ 41,028 $ 51,633 $ 54,133 $ 56,633 $ 59,133
$ 200,000 $ 52,067 $ 69,422 $ 87,778 $110,133 $115,133 $120,133 $125,133
$ 300,000 $ 79,817 $106,422 $134,528 $168,633 $176,133 $183,633 $191,133
$ 400,000 $107,567 $143,422 $181,278 $227,133 $237,133 $247,133 $257,133
$ 500,000 $135,317 $180,422 $228,028 $285,633 $298,133 $310,633 $323,133
$ 600,000 $163,067 $217,422 $274,778 $344,133 $359,133 $374,133 $389,133
$ 700,000 $190,817 $254,422 $321,528 $402,633 $420,133 $437,633 $455,133
$ 800,000 $218,567 $291,422 $368,278 $461,133 $481,133 $501,133 $521,133
$ 900,000 $246,317 $328,422 $415,028 $519,633 $542,133 $564,633 $587,133
$1,000,000 $274,067 $365,422 $461,778 $578,133 $603,133 $628,133 $653,133
$1,100,000 $301,817 $402,422 $508,528 $636,633 $664,133 $691,633 $719,133
$1,200,000 $329,567 $439,422 $555,278 $695,133 $725,133 $755,133 $785,133
$1,300,000 $357,317 $476,422 $602,028 $753,633 $786,133 $818,633 $851,133
$1,400,000 $385,067 $513,422 $648,778 $812,133 $847,133 $882,133 $917,133
$1,500,000 $412,817 $550,422 $695,528 $870,633 $908,133 $945,633 $983,133
</TABLE>
The Plans provide pension benefits based on (i) the participant's highest
average salary for 60 consecutive months within the 120 consecutive months prior
to retirement ("final average salary"), (ii) the portion of final average salary
in excess of the Social Security taxable wage base in the year of retirement,
and (iii) the participant's length of service. For purposes of the Plans, a
participant's salary for a year is deemed to include any award under Con
Edison's Executive Incentive Plan (See "Report on Executive Compensation" above)
for that year; provided that the portions of awards that are required to be
deferred will not be included in the pension calculation
24
<PAGE> 28
if such portions are forfeited in accordance with the plan. Participants in the
Plans whose age and years of service equal 75 are entitled to an annual pension
benefit for life, payable in equal monthly installments. Participants may earn
increased pension benefits by working additional years. Benefits payable to a
participant who retires between ages 55 and 59 with less than 30 years of
service are subject to a reduction of 1 1/2 percent for each full year of
retirement before age 60. Early retirement reduction factors are not applied to
pensions of employees electing retirement at age 55 or older with at least 30
years of service. However, benefits payable on the portion of final average
salary in excess of the Social Security taxable wage base to a participant who
retires before age 65 are subject to IRS reduction factors. The years of service
covered by the Plans are for Mr. McGrath, 34 years; Mr. Soutar, 39 years; Mr.
Evans, 23 years, Mr. Bram, 34 years and Mr. O'Shea, 1 year. Current compensation
rates covered by the Plans for Messrs. McGrath, Soutar, Evans, Bram and O'Shea
are approximately equal to the sum of the amounts set forth under the captions
"Salary" and "Bonus" in the summary compensation table on page 16. The Plans
provide an annual adjustment equal to the lesser of 3% or 3/4 of the annual
increase in the Consumer Price Index to offset partially the effects of
inflation.
Mr. McGrath's agreement provides that under certain circumstances, if he
elects upon termination of his employment to defer the commencement of his
pension as permitted by the Plans, the Company will accrue and later pay with
interest the amounts that Mr. McGrath would have been entitled to receive under
the Plans during the deferral period, as supplemented by his agreement.
25
<PAGE> 29
PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its common stock for a five year period (December 31, 1991
to December 31, 1996) with the cumulative total return of the Standard & Poor's
Electric Utilities index and the Standard & Poor's 500 Stock index.
COMPARISON OF FIVE YEAR TOTAL CUMULATIVE RETURN*
CON EDISON, S&P ELECTRIC UTILITIES INDEX AND S&P 500 INDEX
DECEMBER 31, 1991 TO DECEMBER 31, 1996
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) CON EDISON S&P ELECTRICS S&P 500
<S> <C> <C> <C>
1991 100.0 100.0 100.0
1992 121.5 105.9 107.6
1993 126.4 119.2 118.5
1994 109.2 103.6 120.0
1995 144.2 135.9 165.1
1996 141.9 135.7 203.0
</TABLE>
* Based on $100 invested at December 31, 1991; reinvestment of all dividends in
equivalent shares of stock; and market price changes on all such shares.
26
<PAGE> 30
CERTAIN INFORMATION AS TO INSURANCE AND INDEMNIFICATION
No stockholder action is required with respect to the following information
which is included to fulfill the requirements of Sections 725 and 726 of the
Business Corporation Law of the State of New York.
Effective December 2, 1996, Con Edison purchased insurance providing for
reimbursement, with certain exclusions and deductions, to (a) Con Edison for
payments it makes to indemnify Trustees, directors, officers and assistant
officers of Con Edison and its subsidiaries (b) Trustees, directors, officers
and assistant officers for losses, costs and expenses incurred by them in
actions brought against them in connection with their acts in those capacities
for which they are not indemnified by the Company and (c) the Company and its
subsidiaries for any payments it makes resulting from a securities claim. The
insurers are: Aetna Casualty and Surety Company, A.C.E. Insurance Company, Ltd.,
Continental Casualty Company, X.L. Insurance Company, Ltd. and Zurich Insurance
Company. The cost of this insurance was $1,250,450 for a one year term. Con
Edison also purchased from Federal Insurance Company, Aetna Casualty and Surety
Company and A.C.E. Insurance Company, Ltd. additional insurance coverage, for
one year effective January 1, 1997, insuring the Trustees, officers and
employees of Con Edison and certain other parties against certain liabilities
which could arise in connection with the administration of Con Edison's employee
benefit plans. The cost of such coverage was $285,575.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order to be included in the Company's proxy statement and form of proxy
relating to its 1998 Annual Meeting, stockholder proposals must be received by
Company at its principal office at 4 Irving Place, New York, New York 10003,
Attention: Corporate Secretary, by December 8, 1997.
OTHER MATTERS TO COME BEFORE THE MEETING
Management intends to bring before the meeting only the election of
Trustees and Proposal No. 1 above and knows of no matters to come before the
meeting other than the matters set forth herein. If other matters or motions
come before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote such proxy in accordance with their judgment
on such matters or motions, including any matters dealing with the conduct of
the meeting.
27
<PAGE> 31
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE. Stockholders planning to attend the meeting but
choosing not to return the proxy card should send a note requesting an admission
ticket in the envelope provided.
By Order of the Board of Trustees,
ARCHIE M. BANKSTON
Secretary
New York, N.Y.
April 7, 1997
28
<PAGE> 32
[CON ADMISSION
EDISON TICKET FOR
LOGO] 1997
ANNUAL MEETING OF STOCKHOLDERS
Please detach here
Dear Stockholder:
Attached is the admission ticket you requested for the forthcoming
Annual Meeting of Stockholders. It will save you unnecessary delay if you
present the admission ticket when you arrive at the meeting.
Very truly yours,
ARCHIE M. BANKSTON
Secretary
The Theater at Madison Square Garden
New York, N.Y. Enter building on Seventh Avenue 1:30 p.m. May 19, 1997
between 31st and 33rd Streets.
<PAGE> 33
CONFIDENTIAL VOTING INSTRUCTIONS
DISCOP
TO STATE STREET BANK AND TRUST COMPANY
AS AGENT FOR CONSOLIDATED EDISON
DISCOUNT STOCK PURCHASE PLAN
I hereby instruct the State Street Bank and Trust Company to vote (in
person or by proxy) all shares of Common Stock of Consolidated Edison Company of
New York, Inc. which are credited to my account under the above Plan, at the
Annual Meeting of Stockholders of the Company to be held May 19, 1997 and at any
adjournment thereof, on the following matters more fully set forth in the proxy
statement, as checked on the reverse side, and in its discretion upon such other
matters as may properly come before the meeting or any adjournment thereof.
Your vote for the election of Trustees may be indicated on the reverse
side. Nominees are: E.V. Conway, G.J. Davis, R.M. Davis, J.S. Freilich, E.V.
Futter, A. Hauspurg, S. Hernandez-Pinero, P.W. Likins, E.R. McGrath, D.K. Ross,
R.G. Schwartz, R.A. Voell and S.R. Volk.
YOUR SHARES WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF THIS CARD IS
SIGNED AND RETURNED AND NO CHOICE IS MADE, YOUR SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES FOR TRUSTEES LISTED ABOVE; "FOR" PROPOSAL 1; AND
"AGAINST" PROPOSALS 2 AND 3.
Continued, and to be signed and dated, on the other side.
<PAGE> 34
/ /
- - --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES RECOMMENDS
A VOTE FOR THE FOLLOWING
- - --------------------------------------------------------------------------------
ELECTION OF TRUSTEES--See list on other side
FOR all nomi- WITHHELD (INSTRUCTION: To withhold au-
nees (except for all thority to vote for any Individual
as indicated nominees nominee(s), write that nominee's
at the right). name(s) in the space below.)
/ / / /
---------------------------------
1. Ratification of appointment of independent accountants.
For Against Abstain
/ / / / / /
- - --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES RECOMMENDS A VOTE AGAINST
THE FOLLOWING STOCKHOLDER PROPOSALS (NOS. 2 AND 3):
- - --------------------------------------------------------------------------------
2. Cumulative voting.
For Against Abstain
/ / / / / /
3. Additional compensation information.
For Against Abstain
/ / / / / /
PLEASE MARK YOUR BOXES / / OR /X/ IN BLUE OR BLACK INK.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE(S) SHOULD CORRESPOND WITH THE
NAME(S) AS PRINTED. NO WITNESS IS REQUIRED.
Dated__________________________, 1997
X___________________________________
Signature(s)
____________________________________
<PAGE> 35
[CON EDISON LETTERHEAD]
April 7, 1997
BELOW IS YOUR PROXY CARD. PLEASE READ BOTH SIDES, SIGN, VOTE AND RETURN IT IN
THE ENCLOSED ENVELOPE.
The Board of Trustees Recommends a Vote FOR the Following:
ELECTION OF TRUSTEES WITHHELD
FOR Authority to vote for all
all nominees listed on the nominees on the reverse side
reverse side (except as
marked to the contrary
below)
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name in the space provided below.)
FOR AGAINST ABSTAIN
(1) Ratification of appointment of [ ] [ ] [ ]
independent accountants.
The Board of Trustees Recommends a Vote AGAINST the
Following Shareholder Proposals (Nos. 2 and 3):
FOR AGAINST ABSTAIN
(2) Cumulative voting: [ ] [ ] [ ]
FOR AGAINST ABSTAIN
(3) Additional compensation information [ ] [ ] [ ]
If you plan to attend the meeting and want an admission ticket, check here. [ ]
PLEASE PLEASE
SIGN, Mark
DATE Your
AND Ballot
RETURN [X]
THIS
PROXY
PROMPTLY.
- - ------------------------------ -----, 1997 SIGNATURE(S) SHOULD CORRESPOND
SIGNATURE(S) OF STOCKHOLDER(S) DATED WITH THE NAME(S) AS PRINTED.
NO WITNESS IS REQUIRED.
<PAGE> 36
Consolidated Edison Company of New York, Inc.
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF TRUSTEES
- - --------------------------------------------------------------------------------
PLEASE DATE AND
SIGN ON REVERSE
SIDE. TO VOTE IN
ACCORDANCE WITH
THE RECOMMENDA-
TIONS OF THE
BOARD OF TRUSTEES
NO BOXES NEED
BE CHECKED.
The undersigned hereby appoints E. Virgil Conway, Donald K. Ross, Joan S.
Freilich and Peter J. O'Shea, Jr. and each or any of them with power of
substitution, proxies to vote all stock of the undersigned (including any shares
held through the Company's Automatic Dividend Reinvestment and Cash Payment
Plan) at the Annual Meeting of Stockholders on Monday, May 19, 1997 at 1:30
P.M. at The Theatre at Madison Square Garden, Seventh Avenue between 31st and
33rd Streets, New York, N.Y. or at any adjournments thereof, as specified on
the reverse side in the election of Trustees and on the proposals more fully
set forth in the proxy statement, and in their discretion on any matters that
may come before the meeting.
Your vote for the election of Trustees may be indicated on the reverse side.
Nominees are: E.V. Conway, G.J. Davis, R.M. Davis, J.S. Freilich, E.V. Futter,
A. Hauspurg, S. Hernandez-Pinero, P.W. Likins, E.R. McGrath, D.K. Ross, R.G.
Schwartz, R.A. Voell and S.R. Volk.
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF NO CHOICE IS
MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR TRUSTEES
LISTED ABOVE; "FOR" PROPOSAL 1; AND "AGAINST" PROPOSALS 2 AND 3.
CON
EDISON
<PAGE> 37
CON Consolidated Edison Company of New York, Inc.
EDISON 4 Irving Place, New York, N.Y. 10003
April 7, 1997
BELOW IS YOUR PROXY CARD. PLEASE READ BOTH SIDES, SIGN, VOTE AND RETURN IT IN
THE ENCLOSED ENVELOPE.
- - -------------------------------------------------------------------------------
The Board of Trustees Recommends a Vote FOR the Following:
- - -------------------------------------------------------------------------------
ELECTION OF TRUSTEES WITHHELD
FOR Authority to vote for all
all nominees listed on the nominees on the reverse side
reverse side (except as
marked to the contrary
below)
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name in the space provided below.)
- - -------------------------------------------------------------------
FOR AGAINST ABSTAIN
(1) Ratification of appointment of [ ] [ ] [ ]
independent accountants.
The Board of Trustees Recommends a Vote AGAINST the
Following Shareholder Proposals (Nos. 2 and 3):
FOR AGAINST ABSTAIN
(2) Cumulative voting. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
(3) Additional compensation information. [ ] [ ] [ ]
- - -------------------------------------------------------------------------------
If you plan to attend the meeting and want an admission ticket, check here. [ ]
- - -------------------------------------------------------------------------------
PLEASE PLEASE
SIGN, MARK
DATE YOUR
AND BALLOT
RETURN [X]
THIS
PROXY
PROMPTLY.
------------------------------ ---------, 1997
SIGNATURE(S) OF STOCKHOLDER(S) DATED
SIGNATURE(S) SHOULD CORRESPOND WITH THE NAME(S) AS PRINTED. NO WITNESS IS
REQUIRED.
<PAGE> 38
Consolidated Edison Company of New York, Inc. THIS PROXY IS SOLICITED ON BEHALF
$5 CUMULATIVE PREFERRED STOCK OF THE BOARD OF TRUSTEES
- - --------------------------------------------------------------------------------
PLEASE DATE AND
SIGN ON REVERSE
SIDE. TO VOTE IN
ACCORDANCE WITH
THE RECOMMENDATIONS
OF THE BOARD OF
TRUSTEES NO BOXES
NEED BE CHECKED.
The undersigned hereby appoints E. Virgil Conway, Donald K. Ross, Joan S.
Freilich and Peter J. O'Shea, Jr. and each or any of them with power of
substitution, proxies to vote all stock of the undersigned (including any shares
held through the Company's Automatic Dividend Reinvestment and Cash Payment
Plan) at the Annual Meeting of Stockholders on Monday, May 19, 1997 at 1:30 P.M.
at The Theatre at Madison Square Garden, Seventh Avenue between 31st and 33rd
Streets, New York, N.Y. or at any adjournments thereof, as specified on the
reverse side in the election of Trustees and on the proposals more fully set
forth in the proxy statement, and in their discretion on any matters that may
come before the meeting.
Your vote for the election of Trustees may be indicated on the reverse side.
Nominees are: E.V. Conway, G.J. Davis, R.M. Davis, J.S. Freilich, E.V. Futter,
A. Hauspurg, S. Hernandez-Pinero, P.W. Likins, E.R. McGrath, D.K. Ross, R.G.
Schwartz, R.A. Voell and S.R. Volk.
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF NO CHOICE IS
MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR TRUSTEES
LISTED ABOVE; "FOR" PROPOSAL 1; AND "AGAINST" PROPOSALS 2 AND 3.
