<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
[ ] Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
DILLARD DEPARTMENT STORES, INC.
(Name of Registrant as Specified In Its Charter)
DILLARD DEPARTMENT STORES, INC.
(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)(1)
and 0-11.
1) Title or 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:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
<PAGE>
[ ] 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>
DILLARD
DEPARTMENT STORES
PROXY STATEMENT
DILLARD DEPARTMENT STORES, INC.
POST OFFICE BOX 486
LITTLE ROCK, ARKANSAS 72203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 1997
<PAGE>
PROXY STATEMENT
DILLARD DEPARTMENT STORES, INC.
POST OFFICE BOX 486
LITTLE ROCK, ARKANSAS 72203
TO THE HOLDERS OF CLASS A AND Little Rock, Arkansas
CLASS B COMMON STOCK: April 25, 1997
Notice is hereby given that the annual meeting of Stockholders
of Dillard Department Stores, Inc., will be held at the auditorium
of Dillard's Corporate Office, 1600 Cantrell Road, Little Rock,
Arkansas on Saturday, May 17, 1997, at 9:30 a.m. for the following
purposes:
1. To elect 15 Directors of the Company (five Directors to
represent Class A Stockholders and 10 Directors to represent Class
B Stockholders).
2. To consider and act upon a proposal to amend the Certificate of
Incorporation to change the name of the Company from
Dillard Department Stores, Inc. to Dillard's, Inc.
3. To consider and act upon a proposal to amend the 1990 Incentive and
Nonqualified Stock Option Plan.
4. To consider and act upon proposals by certain Stockholders.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The stock transfer books of the Company will not be closed, but
only stockholders of record at the close of business on March 31, 1997,
will be entitled to notice of, and to vote at, the meeting.
Your participation in the meeting is earnestly solicited. If
you do not expect to be present in person at the meeting, please
sign, date, and fill in the enclosed Proxy and return it by mail in
the enclosed envelope to which no postage need be affixed if mailed
in the United States of America.
By Order of the Board of Directors
JAMES E. DARR, JR.
Secretary
<PAGE>
DILLARD DEPARTMENT STORES, INC.
POST OFFICE BOX 486
LITTLE ROCK, ARKANSAS 72203
Telephone (501) 376-5200
April 25, 1997
PROXY STATEMENT
The enclosed Proxy is solicited by and on behalf of the
management of Dillard Department Stores, Inc. (the "Company"), a
Delaware corporation, for use at the annual meeting of stockholders
to be held on Saturday, May 17, 1997, at 9:30 a.m. at the
auditorium of Dillard's Corporate Office, 1600 Cantrell Road,
Little Rock, Arkansas, or at any adjournment or adjournments thereof.
Any stockholder giving a Proxy has the power to revoke it, at
any time before it is voted, by written revocation delivered to the
Secretary of the Company. Proxies solicited herein will be voted
in accordance with any directions contained therein, unless the
Proxy is received in such form or at such time as to render it
ineligible to vote, or unless properly revoked. If no choice is
specified, the shares will be voted in accordance with the
recommendations of the Board of Directors as described herein.
If matters of business other than those described in the Proxy
properly come before the meeting, the persons named in the Proxy
will vote in accordance with their best judgment on such matters.
The Proxies solicited herein shall not confer any authority to vote
at any meeting of stockholders other than the meeting to be held on
May 17, 1997, or any adjournment or adjournments thereof.
The cost of soliciting Proxies will be borne by the Company.
The Company will reimburse brokers, custodians, nominees and other
fiduciaries for their charges and expenses in forwarding proxy
material to beneficial owners of shares. In addition to
solicitation by mail, certain officers and employees of the Company
may solicit Proxies by telephone, telegraph and personally. These
persons will receive no compensation other than their regular
salaries. The Company has retained D.F. King & Co., Inc., a
professional proxy solicitation firm, to assist in the solicitation
of proxies. The fees of such firm are not expected to exceed $6,500.
OUTSTANDING STOCK; VOTING RIGHTS;
VOTE REQUIRED FOR APPROVAL
The stock transfer books of the Company will not be closed, but
only stockholders of record at the close of business on March 31,
1997, will be entitled to notice of, and to vote at, the meeting.
At that date, there were 108,293,001 shares of Class A Common Stock
outstanding and 4,016,929 shares of Class B Common Stock
outstanding.
Each holder of Class A Common Stock and each holder of Class
B Common Stock shall be entitled to one vote on the matters
presented at the meeting for each share standing in his name except
that the holders of Class A Common Stock are empowered as a class
to elect one-third of the Directors and the holders of Class B
Common Stock are empowered as a class to elect two-thirds of the
Directors. Nominees for director of each class, to be elected,
must receive a plurality of the votes cast within that class.
Cumulative voting for Directors is not permitted. Approval of the
proposal to amend the Certificate of Incorporation to change the
name of the Company requires the affirmative vote of a majority of
the Company's outstanding shares of Common Stock. Approval of each
of the proposal to amend the 1990 Incentive and Nonqualified Stock
Option Plan and the Stockholder proposals require the affirmative
vote of the holders of a majority of the shares of Common Stock
represented at the meeting and entitled to vote. If shares are
held by a broker that has indicated that it does not have
discretionary authority to vote on a particular matter, those
shares will not be considered as present and entitled to vote with
respect to that matter, but such shares will be counted with
respect to determining whether a quorum is present. Abstentions
will not be counted as votes cast, and with respect to each of the
proposal to change the Company's name, the proposal to amend the
Company's stock option plan, and the Stockholder proposals will
have the effect of a vote against such proposal.
The last date for the acceptance of Proxies by management is
the close of business on May 16, 1997, and no Proxy received after
that date will be voted by management at the meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information regarding
persons who beneficially owned five percent (5%) or more of a class
of the Company's outstanding voting securities at the close of
business on February 1, 1997.
No. of Percent
Name and Address Class Shares Owned of Class(1)
Ark Asset Management Co., Inc. Class A 8,198,160(2) 7.5%
One New York Plaza
New York, New York 10004
FMR Corp. Class A 5,685,001(2) 5.2%
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance Class A 5,792,464(2) 5.3%
Company of America
751 Broad Street
Newark, New Jersey 07102
W.D. Company, Inc.(3) Class A 41,496 *
Little Rock, Arkansas Class B 3,985,776 99.2%
*Denotes less than 0.1%
<PAGE>
(1) At February 1, 1997 there were a total of 109,594,496 shares
of the Company's Class A Common Stock and 4,016,929 shares of
the Company's Class B Common Stock outstanding.
(2) Based on information contained in a Schedule 13G filed with
the Securities and Exchange Commission.
(3) William Dillard, Chairman of the Board of Directors of the
Company, William Dillard II, President, Alex Dillard,
Executive Vice President, and Mike Dillard, Executive Vice
President, are officers and directors of W.D. Company, Inc.
and own 21.3%, 25.1%, 23.3% and 22.0%, respectively, of the
outstanding voting stock of W.D. Company, Inc.
ELECTION OF DIRECTORS
Five Directors representing Class A Stockholders and 10 Directors
representing Class B Stockholders are to be elected by the Class A
Stockholders and the Class B Stockholders, respectively, at the
annual meeting for a term of one year and until the election and
qualification of their successors. The Proxies solicited hereby
will be voted "FOR" the election as Directors of the 15 persons
hereinafter identified under "Nominees for Election as Directors"
if not specified otherwise. Management does not know of any nominee
who will be unable to serve, but should any nominee be unable or decline
to serve, the discretionary authority provided in the Proxy will be
exercised to vote for a substitute or substitutes. Management has no
reason to believe that any substitute nominee will be required.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
AS DIRECTORS OF THE 15 PERSONS HEREINAFTER IDENTIFIED.
NOMINEES FOR ELECTION AS DIRECTORS
The following table briefly indicates the principal occupation
of each nominee, the approximate number of shares of Class A and
Class B Common Stock of the Company beneficially owned by each
nominee as of February 1, 1997, and the year each nominee first was
elected as a Director. The table also indicates the approximate
number of shares of Class A and Class B Common Stock of the Company
beneficially owned by the executive officers named under
"Compensation of Directors and Executive Officers" and the number
of shares beneficially owned by the directors and executive
officers, as a group, as of February 1, 1997.
Shares of
Common Stock
Beneficially Percent
Principal Director Owned as of of
Name Age Occupation Since 2/01/97(1) Class
William Dillard 82 Chairman of 1964 Class A 709,046 (3) .6%
(b)(2) the Board and Class B 3,985,776 (3) 99.2%
Chief Executive
Officer of the
Company
Calvin N. Clyde, Jr. 76 Chairman of 1985 Class A 6,987 *
(b) the Board, Class B None
T. B. Butler
Publishing
Co., Inc.,
Tyler, TX
Robert C. Connor 55 Investments 1987 Class A 13,033 (4) *
(a) Class B None
Drue Corbusier 50 Vice Presi- 1994 Class A 288,138 (5) .3%
(b) dent of the Class B None
Company
Will D. Davis 67 Partner, 1972 Class A 11,040 *
(a) Heath, Davis Class B None
& McCalla,
Attorneys,
Austin, TX
Alex Dillard 47 Executive 1975 Class A 744,810 (3) .7%
(b)(2) Vice President Class B 3,985,776 (3) 99.2%
of the Company
Mike Dillard 45 Executive 1976 Class A 645,311 (3) .6%
(b)(2) Vice President Class B 3,985,776 (3) 99.2%
of the Company
William Dillard II 52 President and 1967 Class A 891,410 (3) .8%
(b)(2) Chief Operating Class B 3,985,776 (3) 99.2%
Officer of the
Company
James I. Freeman 47 Senior Vice 1991 Class A 187,559 (6) .2%
(b) President and Class B None
Chief Financial
Officer of the
Company
John Paul Hammerschmidt 74 Retired Member 1992 Class A None
(a) of Congress Class B None
<PAGE>
William B. Harrison, Jr. 53 Vice Chairman, 1985 Class A 6,000 (7) *
(a) Chase Manhattan Class B None
Corporation,
New York, NY
John H. Johnson 79 President 1986 Class A 3,000 (8) *
(b) and Publisher, Class B None
Johnson
Publishing
Company, Inc.,
Chicago, IL
E. Ray Kemp 72 Retired Vice 1970 Class A 76,887 (9) .1%
(b) Chairman of the Class B None
Board and Chief
Administrative
Officer of the
Company
Jackson T. Stephens 73 Chairman, - Class A 5,000 *
(a) Stephens Class B None
Group, Inc.
Little Rock, AR
William H. Sutton 66 Managing 1994 Class A 1,000 *
(b) Partner, Class B None
Friday, Eldredge
& Clark, Attorneys
Little Rock, AR
All Nominees and Class A 4,648,588(10)(11) 4.2%
Executive Officers Class B 3,985,776(10) 99.2%
as a Group (a total
of 25 persons)
(a) Class A Director
(b) Class B Director
*Denotes less than 0.1%
(1) Based on information furnished by the respective individuals.
(2) William Dillard is a director and officer of W. D. Company,
Inc. and owns 21.3% of the outstanding voting stock of such
company. William Dillard II, Alex Dillard and Mike Dillard
are sons of William Dillard and are directors and officers
of W. D. Company, Inc. and own 25.1%, 23.3% and 22.0%,
respectively, of the outstanding voting stock of such company.
(3) Includes 41,496 shares of Class A Common Stock and 3,985,776 of Class B
Common Stock owned by W. D. Company, Inc., in which shares William
Dillard, William Dillard II, Alex Dillard and Mike Dillard are each
deemed to have a beneficial interest due to their respective relationships
with W. D. Company, Inc. See "Principal Holders of Voting Securities."
William Dillard and his wife individually own 320,293 and 2,772 shares,
respectively, of Class A Common Stock; he has sole voting power with
respect to 19,485 shares held in trust for three minor children and has
the right to acquire beneficial ownership of 325,000 shares pursuant to
currently exercisable options granted under Company stock option plans.
William Dillard II individually owns 534,337 shares of Class A Common
Stock and has the right to acquire beneficial ownership of 315,577 shares
pursuant to currently exercisable options granted under Company stock
option plans. Alex Dillard and his wife individually own 351,726 and
36,011 shares, respectively, of Class A Common Stock, and he has the right
to acquire beneficial ownership of 315,577 shares pursuant to currently
exercisable options granted under Company stock option plans.
Mike Dillard individually owns 262,278 shares of Class A Common Stock,
has sole voting power with respect to 25,960 shares held in trust for
three minor children and has the right to acquire beneficial ownership
of 315,577 shares pursuant to currently exercisable options
granted under Company stock option plans.
(4) Includes nine shares owned by his wife and 24 shares owned by his child.
(5) Drue Corbusier and her husband individually own 129,719 and 14,400 shares,
respectively, of Class A Common Stock, and she has the right to acquire
beneficial ownership of 144,019 shares pursuant to currently exercisable
options granted under Company stock option plans.
(6) James I. Freeman individually owns 54,453 shares, has sole voting power
with respect to 4,000 shares held in trust for a minor child and has the
right to acquire beneficial ownership of 129,146 shares pursuant to
currently exercisable options granted under Company stock option plans.
(7) Includes 3,300 shares owned by his wife.
(8) These shares are held by Johnson Publishing Company, Inc.,
of which John H. Johnson is President and Publisher.
(9) E. Ray Kemp and his wife individually own 27,693 and 37,119 shares,
respectively, of Class A Common Stock, and he has sole voting power with
respect to 12,075 shares held in trust for a minor child.
(10)The shares in which William Dillard, William Dillard II, Alex Dillard and
Mike Dillard are deemed to have a beneficial interest due to their
respective relationships with W. D. Company, Inc. have been included in
this computation only once and were not aggregated for such purpose.
(11)Includes the right to acquire beneficial ownership of 2,330,462 shares
pursuant to currently exercisable options granted under Company stock
option plans.
<PAGE>
The following nominees for director also hold directorships in
the designated companies:
Name Director of
William Dillard II Acxiom Corporation, Barnes & Noble, Inc.,
and Simon Debartolo Group, Inc.
John Paul Hammerschmidt Southwestern Energy Co.
William B. Harrison, Jr. Chase Manhattan Corporation, Freeport-
McMoran Inc., Freeport-McMoran Copper
and Gold, Inc., and McMoran Oil and Gas Co.
The business associations of the nominees as shown in the table under
"Nominees for Election as Directors" have been continued for more than five
years, with the exception of Robert C. Connor, who prior to 1993 was President
of a national banking association located in Arkansas, which, through a series
of transactions, is now controlled by NationsBank. Each nominee for Director
was elected to the Board of Directors at the annual meeting of stockholders
held May 18, 1996 with the exception of Jackson T. Stephens.
The Board of Directors met five times during the last 12 months,
on May 18, August 24, and November 16, 1996, and February 21 and
March 8, 1997.
Audit Committee members are Calvin N. Clyde, Jr., Chairman; John
H. Johnson; E. Ray Kemp; and William H. Sutton. The Audit Committee held
three meetings during the year.
The Executive Compensation and Stock Option Committee members
are Robert C. Connor; Will D. Davis, Chairman; John Paul Hammerschmidt;
and William B. Harrison. The Executive Compensation and Stock Option
Committee held three meetings during the year.
Of the nominees for director, only William B. Harrison, Jr.
attended fewer than 75% of the aggregate of (1) the total number of
meetings of the board of directors and (2) the total number of
meetings held by all committees of the board on which he served.
Mr Harrison attended 71% of the board of directors and committee
meetings. He was unable to attend two board of directors meetings
because of his responsibilities in effecting the merger of Chemical
Banking Corporation and Chase Manhattan Corporation.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Cash and Other Compensation
The following table sets forth, for the fiscal years indicated,
the cash and other compensation provided by the Company and its
subsidiaries to the Chief Executive Officer and each of the four
most highly compensated executive officers (the "named executive
officers") of the Company in all capacities in which they served.
Summary Compensation Table
<TABLE>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities All Other
Other Annual Restricted Underlying LTIP Compensation
Name and Principal Year Salary($) Bonus($) Compensation($) Stock Award(s)($) Options/SARs(#) Payouts ($)(1)
Position
<S> <C> <C> <C> <S> <C> <S> <C>
William Dillard 1996 $910,000 $ 685,000 - - 150,000 - $170,166
Chairman of the Board 1995 885,000 660,000 - - 150,000 - 190,245
and Chief Executive 1994 860,000 1,040,000 - - 150,000 - 173,313
Officer
William Dillard II 1996 610,000 900,000 - - 150,000 - 122,630
President and Chief 1995 585,000 660,000 - - 150,000 - 188,520
Operating Officer 1994 560,000 1,040,000 - - 150,000 - 152,305
Alex Dillard 1996 520,000 900,000 - - 150,000 - 110,420
Executive Vice 1995 495,000 660,000 - - 150,000 - 176,970
President 1994 470,000 1,040,000 - - 150,000 - 164,187
Mike Dillard 1996 465,000 550,000 - - 150,000 - 83,800
Executive Vice 1995 445,000 440,000 - - 150,000 - 134,950
President 1994 425,000 695,000 - - 150,000 - 106,132
James I. Freeman 1996 410,000 250,000 - - 60,000 - 45,500
Senior Vice President 1995 395,000 135,000 - - 60,000 - 65,650
and Chief Financial 1994 380,000 205,000 - - 60,000 - 53,640
Officer
(1) Amounts represent the Company's defined contributions for the benefit of
the named executive officers pursuant to its Retirement Plan.
</TABLE>
<PAGE>
<TABLE>
Stock Option Grants
The following table sets forth information concerning stock options
granted under the Company's 1990 Stock Option Plan to the named executive
officers:
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Underlying Options/SARs Exercise or
Options/SARs Granted to Employees Base Price Expiration
Name Granted (#)(1) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
William Dillard 150,000 7.5% $37.375 5/22/2003 $2,282,100 $5,318,700
William Dillard II 150,000 7.5 37.375 5/22/2003 2,282,100 5,318,700
Alex Dillard 150,000 7.5 37.375 5/22/2003 2,282,100 5,318,700
Mike Dillard 150,000 7.5 37.375 5/22/2003 2,282,100 5,318,700
James I. Freeman 60,000 3.0 37.375 5/22/2003 912,840 2,127,480
</TABLE>
(1) These options are exercisable on or after May 22, 1998. If payment for
shares upon exercise of any of these options is made with shares of the
Company's common stock owned by the optionee, the optionee shall be
granted on that date an option ("Reload Option") to purchase a number of
shares equal to the number of shares tendered to the Company.
The exercise price of the Reload Option shall be the market price of the
Company's common stock on the Reload Option grant date, and the expiration
date of the Reload Option shall be the same as that of the original option.
Stock Option Exercises and Holdings
The following table sets forth information concerning stock
options exercised during the last fiscal year and stock options held
as of the end of the last fiscal year by the named executive officers.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities
Underlying Value of Unexercised
Shares Acquired Value Unexercised Options/ In-the-Money Options/
Name on Exercise (#) Realized ($) SARs at FY-End (#) SARs at FY-End ($)(1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
William Dillard 75,000 $137,250 325,000 300,000 $0 $393,750
William Dillard II 0 0 315,577 300,000 0 393,750
Alex Dillard 0 0 315,577 300,000 0 393,750
Mike Dillard 0 0 315,577 300,000 0 393,750
James I. Freeman 60,000 590,313 129,146 120,000 0 157,500
(1) Represents the amount by which the market price at fiscal year end of the
shares underlying unexercised options exceeds the exercise price for such
shares.
</TABLE>
<PAGE>
Pension Plan
The following table shows the estimated annual benefits payable pursuant
to the Company's pension plan to persons in specified compensation and years
of service categories upon retirement.
Pension Plan Table
Years of Service
Remuneration 15 20 25 30 35
300,000 67,500 92,066 117,066 142,066 167,066
350,000 79,566 108,733 137,900 167,066 196,233
400,000 92,066 125,400 158,733 192,066 225,400
450,000 104,566 142,066 179,566 217,066 254,567
500,000 117,066 158,733 200,400 242,067 283,733
550,000 129,566 175,400 221,233 267,067 312,900
600,000 142,066 192,066 242,067 292,067 342,067
650,000 154,566 208,733 262,900 317,067 371,233
A participant's compensation covered by the Company's pension
plan is his average salary (as reported in the Summary Compensation
Table) for the last five years of his employment with the Company.
The credited years of service for each of the named executive
officers is as follows: William Dillard, 0 years; William Dillard
II, 27 years; Alex Dillard, 24 years; Mike Dillard, 24 years; and
James I. Freeman, 8 years. Benefits shown are computed as a single
life annuity with five years term certain beginning at age 65 and are
not subject to deduction for social security or other offset amounts.
Compensation of Directors
Directors who are not officers of the Company each receive an
annual retainer of $27,500, $1,250 for attendance at each board
meeting, $250 for each committee meeting, and actual travel expenses.
Retirement Contract
The Company has entered into a retirement contract with William
Dillard, Chairman of the Board, providing for voluntary retirement
upon 90 days notice. Following retirement and in return for
providing consulting services to the Company, Mr. Dillard will
receive annual compensation equal to 1-1/2% of the average of the
five highest amounts of total annual compensation paid to Mr. Dillard
by the Company for his employment during such fiscal years multiplied
by his total years of employment with the Company. Mr. Dillard's
employment with the Company began on January 1, 1938. Such
retirement compensation shall be adjusted every three years based on
the Consumer Price Index. The payments will be continued in the
event of disability, and will be paid to Mr. Dillard's wife for life
upon his death.
Compensation Committee Interlocks and Insider Participation
The Company's Executive Compensation and Stock Option Committee
is composed of Robert C. Connor; Will D. Davis; John Paul
Hammerschmidt; and William B. Harrison. Mr. Davis is a partner of
the law firm Heath, Davis & McCalla, which is retained by the Company
for legal services.
Report of Executive Compensation and Stock Option Committee
The following report addressing the Company's compensation
policies for executive officers for fiscal 1996 is submitted by the
Executive Compensation and Stock Option Committee (the "Compensation
Committee") of the Board of Directors.
General
The Compensation Committee, which is composed of independent
directors who are not employees of the Company, establishes policies
relating to the compensation of employees and oversees the
administration of the Company's employee benefit plans. The
compensation program of the Company has been designed (1) to provide
compensation opportunities that are equivalent to those offered by
comparable companies, thereby allowing the Company to compete for and
retain talented executives who are critical to the Company's long-
term success, (2) to motivate key senior officers by rewarding them
for attainment of profitability of the Company, and (3) to align the
interests of executives with the long-term interests of stockholders
by awarding stock options to executives as part of the compensation
provided to them.
In order to develop a competitive compensation package for the
executive officers of the Company, the Compensation Committee
compares the Company's compensation package with those of a
comparison group. The comparison group is composed of department
stores, specialty stores and other public companies that were family-
founded and continue to be family-managed. Not all of the companies
in the comparison group are included in the Standard & Poor's
Department Store Index. The Compensation Committee believes that the
companies in the comparison group are comparable to the Company in
management style and management culture. Although the Compensation
Committee has made these comparisons, it also has taken into account
that as the Company has grown in size, the number of senior
executives has not grown proportionately, so that the number of
senior executives retained by the Company is lower than the number
of senior executives at other companies of similar size.
<PAGE>
Currently, the Company's compensation program consists of salary,
annual cash performance bonus based on the profitability of the
Company, and long-term incentive opportunities in the form of stock
options. The compensation program is focused both on short-term and
long-term performance of the Company, rewarding executives for both
achievement of profitability and growth in stockholder value.
Salary -- Each year the Compensation Committee makes a recommendation
to the Board establishing the salary for all executive officers.
Such salary recommendations are made at the discretion of the
Compensation Committee and are not specifically related to any
company performance criteria as are both the cash performance bonus
and stock option portions of the compensation program, which are
discussed below. The Compensation Committee does, however, base any
increase in salary recommendations on target salaries based on a
regression analysis of salaries paid versus total revenues for the
comparison group. For fiscal 1996, the salary recommendations made
by the Compensation Committee were slightly below the target salaries
produced by this analysis.
Cash Performance Bonus -- Cash performance bonuses may be paid
annually to senior management. For bonuses to be paid, however, the
Company must have income before federal and state income taxes ("pre-
tax income") for the fiscal year. The Compensation Committee, within
ninety (90) days after the start of a fiscal year, designates those
individuals in senior management eligible to receive a cash
performance bonus. Bonuses are paid at the conclusion of a fiscal
year from a bonus pool which is equal to one and one-half percent (1-
1/2%) of the Company's pre-tax income plus three and one-half (3-
1/2%) of the increase in pre-tax income over the prior fiscal year.
When the Compensation Committee designates the individuals eligible
to participate in the cash performance bonus program, it also
designates the percent of the bonus pool each individual will be
entitled to receive. The Compensation Committee retains at all times
the authority to adjust downward the amount of bonus any individual
may receive pursuant to the above-described formula. For fiscal
1996, the Company experienced a pre-tax income of $378,761,000 and
an increase in pre-tax income of $109,108,000 over the prior fiscal
year.
After analyzing the primary cause for the increase in pre-tax income,
the Compensation Committee made a decision to adjust downward by
approximately $6,000,000 the amount of bonus which the named
executive officers would receive for fiscal 1996 pursuant to the cash
performance bonus program.
Stock Options -- Stock option grants under the Company's 1990
Incentive and Non-Qualified Stock Option Plan are utilized by the
Company for long-term incentive compensation for executive officers.
Prior to fiscal 1996, the Compensation Committee utilized a formula
for determining the number of stock options granted to executive
officers. Under such formula, each named executive officer in the
Summary Compensation Table received a grant covering a number of
shares approximately equal to ten percent (10%) of the officer's
total compensation for the previous fiscal year. Because the cash
bonus portion of an individual's total compensation is tied directly
to the Company's pre-tax income for the fiscal year plus the increase
in pre-tax income over the prior fiscal year, the stock option
portion of the Company's compensation program is partially tied to
Company performance. For 1996 the Compensation Committee decided to
grant the same number of options to each named executive officer as
was granted in 1995. The exercise price for the options granted is
one hundred percent (100%) of the fair market value of the shares
underlying such options on the date of grant. The stock options are
exercisable on or after May 22, 1998. When making option grants, the
Compensation Committee does not consider the number of options
already held by an executive officer.
As discussed in previous Compensation Committee Reports, the Omnibus
Budget Reconciliation Act of 1993 prevents public corporations from
deducting as a business expense that portion of compensation
exceeding $1 million paid to a named executive officer in the Summary
Compensation Table. This deduction limit does not apply to
"performance-based compensation." The Compensation Committee
believes that the necessary steps have been taken to qualify as
performance-based compensation the compensation paid under the cash
performance bonus and stock option portions of the Company's
compensation program.
Chief Executive Officer
In setting the Chief Executive Officer's compensation, the
Compensation Committee makes the same determination with regard to
salary, cash performance bonus and stock options as discussed above
for the other named executive officers. For fiscal 1996, the
increase in the Chief Executive Officer's salary over the prior
fiscal year resulted in a salary slightly lower than the target
salary produced by the regression analysis discussed above. When
targeting the Chief Executive Officer's salary, and when establishing
the portion of the bonus pool to which the Chief Executive Officer
would be entitled, the Compensation Committee took into account the
Chief Executive Officer's contribution and leadership as well as his
vision in founding the Company.
Robert C. Connor
John Paul Hammerschmidt
William B. Harrison
Will D. Davis, Chairman
<PAGE>
Company Performance
The graph below compares for each of the last five fiscal years
the cumulative total returns on the Company's Class A Common Stock,
the Standard & Poor's 500 Index and the Standard & Poor's Department
Stores Index. The cumulative total return on the Company's Class A
Common Stock assumes $100 invested in such stock on January 31, 1992
and assumes reinvestment of dividends.
The following table is submitted in lieu of the required graph:
1992 1993 1994 1995 1996
Dillard Department
Stores, Inc. 119.26 87.50 64.25 70.65 73.63
Standard & Poor's
500 Index 110.58 124.82 125.48 174.00 219.83
Standard & Poor's
Department Stores Index 111.64 128.01 113.47 135.52 145.60
CERTAIN RELATIONSHIPS AND TRANSACTIONS
William Dillard II, Drue Corbusier, Alex Dillard and Mike Dillard
are children of William Dillard.
Mr. William H. Sutton is Managing Partner of the law firm Friday,
Eldredge & Clark, which is retained by the Company for legal services.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more
than 10% of the Company's Class A Common Stock, to file with the
Securities and Exchange Commission and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of
stock of the Company.
To the Company's knowledge, based solely on a review of copies of
reports provided by such individuals to the Company and written
representations of such individuals that no other reports were
required, during the fiscal year ended February 1, 1997, all Section
16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with except as
follows: one report, covering one transaction, was filed late by
each of Calvin N. Clyde, Jr., John A. Franzke, T.R. Gastman and Roy J. Grimes.
PROPOSAL TO CHANGE THE NAME OF THE COMPANY FROM
DILLARD DEPARTMENT STORES, INC. TO DILLARD'S, INC.
On March 8, 1997, the Board of Directors unanimously adopted a
resolution, subject to stockholder approval, setting forth a proposed
amendment to the Company's Certificate of Incorporation that would
change the name of the Company from Dillard Department Stores, Inc.
to Dillard's, Inc. The Board of Directors believes that it is in the
best interest of the Company to effect this name change to more
accurately reflect the operations of the Company. Many of the stores
which the Company currently operates are more accurately described
as specialty stores rather than department stores.
The proposal to amend the Certificate of Incorporation to change
the Company's name will be presented to stockholders in the form of
a resolution as follows:
RESOLVED, that Article FIRST of the Certificate of Incorporation of
this Corporation be amended so that such Article, as amended, shall be and
read as follows:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is DILLARD'S, INC.
<PAGE>
The proposal to approve an amendment to the Certificate of Incorporation
to change the name of the Company requires the affirmative vote of a majority
of the outstanding shares of Common Stock of the Company, and it will become
effective upon the filing of a Certificate of Amendment with the Secretary of
State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF
THE COMPANY FROM DILLARD DEPARTMENT STORES, INC. TO DILLARD'S, INC.
PROPOSAL TO AMEND THE 1990 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
In 1990 stockholders approved the Company's 1990 Incentive and
Nonqualified Stock Option Plan (the "Plan") pursuant to which options
may be granted to certain key employees of the Company (the "Optionees")
for the purchase from time to time of shares of the Company's Class A Common
Stock during the term of the Plan. 2,906,760 shares remain available for
issuance under the Plan.
On March 8, 1997, the Company's Board of Directors adopted a
proposal to seek stockholder approval of an amendment to the Plan
which would place a limit on the number of shares with respect to
which options may be granted to any participant. Under the proposed
amendment, no Optionee may receive options covering more than
1,000,000 shares in any single fiscal year under the Plan. This
amendment is being proposed for stockholder approval pursuant to the
requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), which prevents the Company from deducting
as a business expense that portion of compensation exceeding $1
million paid to a named executive officer in the Summary Compensation
Table appearing herein. This deduction limit does not apply,
however, to "performance-based compensation," which is compensation
paid solely on account of the attainment of one or more
preestablished, objective performance goals. Stock options granted
pursuant to plans which, among other things, place a limit on the
amount any one individual may receive under the plan over a period
of time are deemed to be performance-based compensation. If
stockholders fail to approve the proposed amendment, no options will
be granted to named executive officers under the Plan.
The purpose of the Plan is to encourage ownership of stock in the
Company by key employees, and thereby cause such key employees to
increase their efforts on behalf of the Company. The Plan is
administered by the Executive Compensation and Stock Option Committee
(the "Committee") which currently consists of two or more directors
of the Company who are non-employee directors, as defined in Rule
16b-3 of the Securities and Exchange Commission, and who are outside
directors as defined in applicable Treasury Regulations. The
Committee makes the determination as to whom options shall be
granted, the terms of such options, and the number of shares to be
covered by such options. In making these determinations, the
Committee takes into account the duties and responsibilities of the
proposed Optionees, their present and potential contribution to the
success of the Company, their past record, and such other factors as
the Committee deems relevant in connection with accomplishing the
purposes of the Plan.
Pursuant to the terms of the Plan, the Committee may grant either
incentive stock options ("ISOs") or nonqualified stock options
("NQSOs"). ISOs are options that meet the requirements of Section
422A of the Code. NQSOs are options taxed pursuant to Section 83 of
the Code and that do not receive the special tax treatment received
by ISOs.
In the case of ISOs granted under the Plan, the exercise price
shall not be less than 100% of the fair market value of an equivalent
number of shares of the Company's Class A Common Stock on the date
the option is granted. If the Optionee owns 10% or more of the total
combined voting power of all classes of stock of the Company, the
exercise price for an ISO granted under the Plan shall not be less
than 110% of the fair market value of an equivalent number of shares
of the Company's Class A Common Stock on the date the option is
granted. ISOs granted pursuant to the Plan shall not be exercisable
after the expiration of ten (10) years from the date such option is
granted or, if the Optionee owns 10% or more of the total combined
voting power of all classes of stock of the Company, five (5) years
from the date such option is granted. To the extent that an optionee
has currently exercisable ISOs at the beginning of the calendar year
with an aggregate fair market value exceeding $100,000, the excess
over $100,000 cannot be treated as ISOs. The aggregate fair market
value is determined by the exercise price of the option at the time
of granting.
The exercise price for NQSOs granted pursuant to the Plan shall
be determined by the Committee in its complete discretion, but in no
event shall the exercise price of an NQSO granted to a named
executive officer be less than 100% of the fair market value of an
equivalent number of shares of the Company's Class A Common Stock on
the date the option is granted.
The option price shall be payable to the Company in cash or by
delivery of already-owned shares of Class A Common Stock of the
Company, or by a combination of the foregoing. Additionally, the
Company may, but shall not be required to, cooperate in cashless
exercises of options whereby the optionee through the use of a
brokerage firm makes payment to the Company of the option price
either from the proceeds of a loan obtained through the brokerage
firm or from the proceeds of the sale of stock issued pursuant to the
exercise of the option. If payment for exercise of an option is made
in the form of shares of the Company's Class A Common Stock, the
Optionee shall be granted on the date of exercise a reload option to
purchase the number of shares that equals the number of shares
tendered to the Company. The price per share at which each reload
option may be exercised shall be equal to the fair market value of
a share on the date of grant of the reload option. The term of each
reload option shall expire on the same date as that of the original
option.
Under currently applicable provisions of the Code, an Optionee
will not be deemed to receive any income for federal income tax
purposes upon the grant of any option under the Plan, nor will the
Company be entitled to a tax deduction at that time. Upon the
exercise of a NQSO, the Optionee will be deemed to have received
ordinary income in an amount equal to the difference between the
exercise price and the market price of the shares on the exercise
date. The Company will be allowed an income tax deduction equal to
the excess of market value of the shares on the date of exercise
<PAGE>
over the cost of such shares to the Optionee. Upon the exercise of an
ISO, there is no regular income tax recognized by the Optionee at the
time of exercise, except if the exercise price is less than the
stock's fair market value at the time of exercise, the difference is
a tax preference item for minimum tax purposes. If the stock is held
at least one year following the exercise date and at least two years
from the date of grant of the option, the Optionee will realize a
capital gain or loss upon sale, measured as the difference between
the exercise price and the sale price. If both of these holding
period requirements are not satisfied, ordinary income tax treatment
will apply to the amount of gain and sale or exercise, whichever is
less. If the actual gain exceeds the amount of ordinary income, the
excess will be considered a short-term or long-term capital gain
depending on how long the shares are actually held. No income tax
deduction will be allowed by the Company with respect to shares
purchased by an optionee upon the exercise of an ISO, provided such
shares are held for the above-described periods.
This proposal to approve an amendment to the Plan requires the
affirmative vote of the holders of a majority of the shares of common
stock present in person or represented by proxy and entitled to vote
at the annual meeting. Abstentions will not be counted as
affirmative votes.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE 1990 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN.
STOCKHOLDER PROPOSAL CONCERNING EMPLOYMENT REPORT
The School Sisters of St. Francis - U.S. Province, 1515 S. Layton
Blvd., Milwaukee, WI 53251, owners of 50 shares of Class A Common
Stock, have indicated that they intend to propose the following
resolution for action at the meeting:
"Be it resolved: A report shall be prepared at reasonable cost,
by September, 1997, excluding confidential information
and shall focus on the following areas:
1. A copy of the consolidated EEO-1 report for 1994, 1995, 1996
available to shareholders upon request.
2. Report the number of discrimination complaints and lawsuits
concerning race, gender and the physically challenged. The
cost to the company and shareholders from discrimination
lawsuits and alternatives to resolve the issue.
3. Report any federal audit, corporate management review, and
letter of compliance with corrective measures enacted to
protect the company's government contracts and legal penalties.
4. Report to shareholders on the race, ethnicity and gender among top
management.
5. A description of any policies and programs utilizing the
purchase of goods and services from minority- and/or female-
owned business enterprises."
The following statement was submitted in support of such resolution:
SUPPORTING STATEMENT
"In 1994 corporations spent more than $2.2 billion on legal fees
and related discrimination settlements. The Equal Employment
Opportunity Commission (EEOC) reported that over 155,000
discrimination complaints were filed in 1994. The high cost of legal
expenses, the potential loss of government contracts and the
financial consequences of a damaged corporate image from
discrimination allegations is placing this issue high upon a priority
list for shareholders. Companies must better reflect the market-
place, the customer, trading partners, and the diverse workforce
through all levels of its organization.
CEOs from 28 major companies have cited changing demographics of the
labor force, the diverse national consumer market, and rapid
globalization of the marketplace as reasons for expanding diversity.
Over 100 major employers publicly report on work diversity and EEO-1
information. Corporate publications available to their shareholders
such as: Capital Cities/ABC's Commitment Report for shareholders,
Kmart Corporation's Reflections of America, U.S. Air's Affirming
Workplace Diversity, Amoco's Diverse Work Force and Sears' Corporate
Responsibility Report, just to name a few, are disclosing EEO
statistics for public review.
Many California corporations provide this data voluntarily, including
all of the regulated utilities and most of the major banks. Southern
California Edison, for example, has informed the Glass Ceiling
Commission that it supports public reporting of this kind.
The bi-partisan Glass Ceiling Committee was established to study and
make recommendations on the Glass Ceiling by 1995. Concerned
investors have closely watched the development of this study.
Secretary of Labor, Robert Reich and a 21 member Glass Ceiling
Commission released a report called "Good for Business: Making Full
Use of The Nation's Human Capital." This report is an important
analysis for shareholders because it shows that in the U.S. we select
from less than 1/2 the total talent in our workforce. For example
women and minorities who represent over 57% of the workforce
represent only 3% of the executive management positions. This is a
serious deficiency in our ability to select the most talented people
for our top management positions. It affects our competitive
position if we stifle this gifted portion of our workforce.
Through this resolution we are asking the Company to report to
shareholders the progress we have made and the obstacles we still
have to overcome."
<PAGE>
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Company firmly supports and believes it is in full
compliance with federal and state employment opportunity laws.
Your Board of Directors supports management's policy of recruiting,
hiring, training and promoting the most qualified individuals
available at each job level without regard to race, color, religion,
sex, national origin, age, handicap or veteran status. The Company's
employment statistics as well as its record of vindication in the
defense of employment litigation provide clear evidence of
management's commitment to this policy.
Your Board of Directors further supports the Company's policy
of selecting vendors and suppliers based on the quality and value of
their products to our customers, as well as their reliability in past
dealings with the Company. Your Board feels this policy is in the
best interest of the shareholders and that a further statement to
shareholders of this policy is unnecessary.
The Board of Directors does not believe that the public
dissemination of reports that contain sensitive information protected
from public disclosure by federal law, promotes the ends of social
equality and equal opportunity in any meaningful way. The Company
compiles and files federally mandated statistical reports regarding
employment practices at significant time and expense to the Company.
While the information in these reports in fact illustrates the
Company's commitment to equal opportunity, the compilation and
dissemination of these reports, of themselves, would do nothing to
promote this commitment. Additional reports, as requested by the
proponents, would increase the Company's expenditures, and will not
assist management in providing a workplace where each individual is
judged fairly according to his or her efforts and abilities.
The information that the proponents seek is sensitive and
potentially susceptible to misinterpretation by persons who may, for
whatever reason, be interested in distracting management or
initiating unfounded legal action. In fact, the requested reporting
could provide unsophisticated activist groups with the false
impression of statistical underutilization and encourage them to
harass management or to initiate baseless legal actions. The results
may prove costly to the Company and distracting to management.
The Company strives to respond meaningfully to all legitimate
shareholder concerns. To this end, management has continued a
dialogue with respect to this shareholder proposal. The open
communication of information about relevant Company policies and
procedures between senior executives and concerned shareholders has
been and will continue to be fruitful and enlightening. Although the
Company may be in agreement and compliance with the ultimate
objectives of the shareholder proponents in many respects, the
Directors of the Company do not believe it is in the shareholders'
best interest to increase the burdens already placed on management
or expose the Company to potentially costly litigation by requiring
the preparation and dissemination of the requested reports.
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
SHAREHOLDER PROPOSAL CONCERNING CHILD/CONVICT LABOR
The Amalgamated Bank of New York LongView Collective Investment Fund-
11-15 Union Square, New York, NY 10003, owners of 28,400 of Class A
Common Stock, have indicated that they intend to propose the
following resolution for action at the meeting:
"RESOLVED: The shareholders of Dillard Department Stores (the "Company")
request the Board of Directors to prepare a report at
reasonable expense describing the Company's actions to ensure
that it does not and will not do business with foreign suppliers
who manufacture items for sale in the United States using
forced labor, convict labor, or illegal child labor, or who
fail to satisfy all applicable laws and standards protecting
their employees' wages, benefits, working conditions, freedom
of association, and other rights."
The following statement was submitted in support of such resolution:
SUPPORTING STATEMENT
"As U.S. companies import more goods, concern is growing about
working conditions in many nations that fall far below basic
standards of fair and humane treatment. Several years ago, a
controversy arose after reports that goods made by convicts in
Chinese prisons were being imported into the United States for sale
to consumers. The Tariff Act of 1930 makes it illegal to import any
goods made by forced labor, including convict labor. China's use of
prison labor and its record on human rights generally were issues in
the debate about whether China should enjoy "most favored nation"
trading status with the United States.
Public concern has also been voiced in the wake of reports that
retail items were manufactured using illegal child labor, unsafe or
unhealthy working conditions, and similar conditions. In 1996, the
White House issued a set of sourcing principles that is it urging
American businesses to follow when dealing with overseas suppliers.
When questions about such practices first arose, many companies
denied any knowing involvement with suppliers who engage in them.
Nonetheless, some companies adopted "sourcing" standards stating that
the company will not do business with foreign suppliers who exploit
workers manufacturing items for sale in the United States.
Dillard imports many goods into this country, and we believe that
the shareholders have a strong interest in learning what steps the
Company is taking to monitor and control the conditions under which
the goods it sells are produced. Reports that overseas suppliers are
exploiting workers may damage a company's reputation and generate a
consumer backlash.
In our view too, it makes good business sense to enforce strict
sourcing standards. For example, there are subterfuges that
suppliers can use to import goods made by forced labor into the
United States. Also, when the federal government enforces applicable
laws, it may hold companies liable for actions of their suppliers.
<PAGE>
Strict standards and an active enforcement policy are thus vital
for a company such as Dillard's. We therefore ask the Board to
prepare a report giving investors data about Dillard's efforts to
assure that it is not doing business with overseas suppliers that
exploit workers.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!"
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Company recognizes the importance, as both an ethical and a
business responsibility, of obtaining assurances that the products
it sells are manufactured in accordance with all applicable laws and
that the rights and welfare of workers around the world are
respected.
The Company has always been committed to the highest ethical
conduct and strict compliance with the law in all its business
dealings, including its relationships with its many suppliers. The
Company is deeply concerned about the issues raised in the Proposal
and believes it has already adequately addressed such issues as
described below.
Products sold at Dillard stores are supplied by independent
suppliers who also supply other retail stores and chains. To a much
lesser degree, the Company is also supplied by sources contracted
with by buying agents for the Company. Dillard does not engage
directly in manufacturing.
The Company has previously addressed the concerns raised in the
Proposal by implementation of the following policies and procedures:
* The Company has developed a formal business policy (the
"Policy") which focuses on the workplace conditions of, and legal
compliance by, foreign vendors and suppliers. The Policy was
distributed to all of the Company's foreign vendors and suppliers
to restate and reemphasize the Company's longstanding philosophy
that no merchandise purchased by the Company will be manufactured
with the use of illegal labor conditions.
* In furtherance of the Policy, the Company has
renegotiated its agreements with foreign buying agents (including
a buying office). These new buying agency agreements include
prohibitions against illegal child labor and other forms of
illegal employment, manufacturing, customs and environmental
practices. Under the contract, a buying agent must use its best
efforts to ensure that each vendor is in full compliance with any
current, or later adopted, law of either the country of
manufacture or the United States governing the use of child
labor, prison labor, and/or governing the importation into the
United States of merchandise produced with child labor as well as
any other similar human rights statute, regulation or law.
Buying agents must also follow policies and procedures which
Dillard implements to ensure that all such statutes, laws or
regulations are followed. If a buying agent discovers a
violation of such prohibitions or discovers evidence that causes
it to suspect a violation of such prohibitions, the buying agent
must immediately notify Dillard of such violation(s) or evidence
of violation(s), so that appropriate action can be taken to
rectify such violation(s). Under these agreements, among other
measures, buying agents are required to periodically inspect
factories to ensure compliance with these standards.
Additionally, company employees personally inspect selected
factories to verify compliance.
* Dillard's philosophy also appears in the Company's
Purchase Order Terms, Conditions & Instructions, which is the
Company's standard form of purchase order and which is applicable
to all transactions between the Company and all of its suppliers.
The document explicitly requires each supplier to warrant and
represent that its merchandise is manufactured in compliance with
laws governing illegal working conditions.
* The Company has previously issued a press release
announcing its business policy, which policy contains
prohibitions against workplace abuse and also contains the steps
taken by the Company to implement the policy. Furthermore, the
Company has furnished a copy of that policy to interested
shareholders, and will continue to so provide copies of that
policy.
The Company believes that it has already addressed the concerns
raised in the Proposal without further expenditure of valuable time
and funds. As the above reflects, the Company is committed to
assuring that its suppliers treat their employees properly.
FOR THE ABOVE REASONS, THE BOARD RECOMMENDS VOTING AGAINST THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
SHAREHOLDER PROPOSAL CONCERNING CLASS "A" INDEPENDENT DIRECTORS
The National Electrical Benefit Fund - 1125 15th Street N.W.,
Washington, D.C. 20005, owners of 12,000 shares of Class A Common
Stock, have indicated that they intend to propose the following
resolution for action at the meeting:
"BE IT RESOLVED: That the Class "A" shareholders of Dillard Department
stores ("Company") hereby request that the Company's
Board of Directors take the steps necessary to amend the
company's bylaws, effective after the 1997 Annual
Meeting, to provide ALL the Board of Directors elected
by the Class "A" stockholders shall consist of
independent directors. For these purposes, the
definition of independent director shall mean a director
who:
<PAGE>
* has not been employed by the Company or an affiliate in an
executive capacity within the last five years;
* was not, and is not a member of a corporation or firm that
is one of the Company's paid advisers or consultants;
* is not employed by a significant customer, supplier or
provider of professional services;
* has no personal services contract with the Company;
* is not employed by a foundation or university that receives
significant grants or endowments from the Company;
* is not a relative of the management of the Company;
* is not a shareholder who has signed shareholder agreements
legally binding him to vote with management; and
* is not the chairman of a company on which Dillard Department
Stores' Chairman or Chief Executive Officer is also a board member."
SUPPORTING STATEMENT
"The purpose of this proposal is to incorporate with the Board of
Directors a basic standard of independence that we believe will
permit clear and objective decision-making in the best long-term
interests of all shareholders. A Board of Directors must formulate
corporate policies and monitor the activities of management in
implementing those policies. Given those functions, we believe that
it is in the best interest of the Class "A" stockholders that ALL our
representatives be independent. This is particularly true at Dillard
where we only elect 1/3 of the total directors.
The benefits of such independence, we think, are well accepted.
The New York Stock Exchange for instance, requires each of its listed
companies to have a least two members of the Board of Directors and
all members of the audit committee who meet New York Stock Exchange
standards of independence. We also note studies which reflect that
a majority of directors of publicly-held companies are not employees
of the companies on whose boards they serve. This trend is supported
by the Business Roundtable in its publication Corporate Governance
and American Competitiveness, prepared by a committee of the
Roundtable, which states, in part, that:
Board of Directors of large publicly-held corporations should be
composed predominately of independent directors who do not hold
management responsibilities within the corporation... In order to
underscore their independence, non-management directors should
not be dependent financially on the companies on whose boards they serve.
WE URGE YOU TO VOTE FOR THIS PROPOSAL"
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF
THIS PROPOSAL FOR THE FOLLOWING REASONS:
The Company's Board of Directors (the "Board") believes
that the Proposal would limit the availability of talented and
knowledgeable individuals to serve as Class A directors by
imposing unduly rigid eligibility requirements and would,
thus, not be in the best interests of the shareholders.
The Class A directors include senior executives of other
companies, outside counsel, bankers and other distinguished
individuals. Accordingly, the Board already represents
constituencies which are vitally concerned with the long-term
economic performance and general success of the Company.
The Board is concerned that adoption of the shareholder
proposal would limit the ability of individuals familiar with
the Company and its needs as well as those familiar with the
retail industry from serving as Class A directors.
The Company has benefitted over the years from the skill
and wisdom of those who have served as Class A directors.
During this time, the Board has recognized, and continues to
recognize, the importance of having independent directors. In
this regard, it has endeavored to establish a board which
includes distinguished individuals from outside the Company.
The Board believes that these persons provide an effective
combination of Company knowledge, business acumen, historical
perspective and independent judgment. Finally, in considering
the Board's position, it should be noted that (1) all of the
Class A directors are non-management, (2) all of the Executive
Compensation and Stock Option Committee members are non-
management and satisfy the definition of "outside directors"
for purposes of Section 162(m) of the Internal Revenue Code,
and (3) all of the Audit Committee members are non-management
in addition to satisfying the guidelines set forth for
independent directors in the New York Stock Exchange listing
requirements.
FOR THE ABOVE REASONS, THE BOARD RECOMMENDS VOTING AGAINST THE PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
OTHER MATTERS
Management of the Company knows of no other matters that
may come before the meeting. However, if any matters other
than those referred to herein should properly come before the
meeting, it is the intention of the persons named in the
enclosed Proxy to vote the Proxy in accordance with their
judgment.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the
Company's annual meeting of stockholders in 1998 must be
received by the Company at its principal executive offices not
later than December 26, 1997 in order to be included in the
Company's Proxy Statement and form of Proxy relating to that
meeting.
<PAGE>
ANNUAL REPORTS
The Company's annual report for the fiscal year ended February 1, 1997
is being mailed with this Proxy Statement but is not to be considered
as a part hereof.
INDEPENDENT PUBLIC ACCOUNTANTS
A representative of Deloitte & Touche LLP, the Company's
independent public accountants for fiscal year 1996 and the
current year, will be present at the meeting, will have the
opportunity to make a statement, and also will be available to
respond to appropriate questions.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO,
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER
WHOSE PROXY IS SOLICITED UPON WRITTEN REQUEST TO:
DILLARD DEPARTMENT STORES, INC.
Post Office Box 486
Little Rock, Arkansas 72203
Attention: James E. Darr, Jr., Secretary
By Order of the Board of Directors
JAMES E. DARR, JR.
Secretary
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
Dillard Department Stores, Inc.
Post Office Box 486
Little Rock, Arkansas 72203 PROXY The undersigned hereby appoints
Telephone No.(501)376-5200 William Dillard and James E. Darr, Jr. as
Proxies, each with the power to appoint his
substitute, and hereby authorizes them to
represent and vote, as designated below, all
the shares of the Class A Common Stock of
Dillard Department Stores, Inc., held of
record by the undersigned on March 31, 1997,
at the annual meeting of stockholders to be
held on May 17, 1997, or any adjournment
thereof.
1. ELECTION OF DIRECTORS. / / FOR all Class A / / WITHHOLD AUTHORITY
nominees listed to vote for all
below (except as Class A nominees
marked to the con-
trary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Class A Nominees
Robert C. Connor * Will D. Davis * John Paul Hammerschmidt * William B.
Harrison, Jr. * Jackson T. Stephens
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF
THE COMPANY FROM DILLARD DEPARTMENT STORES, INC. TO DILLARD'S INC.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO AMEND THE 1990 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
4. STOCKHOLDER PROPOSAL REQUESTING PREPARATION OF EMPLOYMENT PRACTICES
REPORT.
(Management of the Company opposes this proposal.)
/ / FOR / / AGAINST / / ABSTAIN
5. SHAREHOLDER PROPOSAL CONCERNING CHILD/CONVICT LABOR.
(Management of the Company opposes this proposal.)
/ / FOR / / AGAINST / / ABSTAIN
6. SHAREHOLDER PROPOSAL CONCERNING CLASS "A" INDEPENDENT DIRECTORS
(Management of the Company opposes this proposal.)
/ / FOR / / AGAINST / / ABSTAIN
7. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6. Please sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: , 1997
Signature
Signature, if jointly held
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
Dillard Department Stores, Inc.
Post Office Box 486
Little Rock, Arkansas 72203 PROXY The undersigned hereby appoints
Telephone No.(501)376-5200 William Dillard and James E. Darr, Jr. as
Proxies, each with the power to appoint his
substitute, and hereby authorizes them to
represent and vote, as designated below, all
the shares of the Class B Common Stock of
Dillard Department Stores, Inc., held of
record by the undersigned on March 31, 1997,
at the annual meeting of stockholders to be
held on May 17, 1997, or any adjournment
thereof.
1. ELECTION OF DIRECTORS. / / FOR all Class B / / WITHHOLD AUTHORITY
nominees listed to vote for all
below (except as Class B nominees
marked to the con-
trary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Class B Nominees
William Dillard * Calvin N. Clyde, Jr. * Drue Corbusier * Alex Dillard * Mike
Dillard * William Dillard II * James I. Freeman * John H. Johnson * E. Ray
Kemp * William H. Sutton
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF
THE COMPANY FROM DILLARD DEPARTMENT STORES, INC. TO DILLARD'S INC.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO AMEND THE 1990 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
4. STOCKHOLDER PROPOSAL REQUESTING PREPARATION OF EMPLOYMENT PRACTICES
REPORT.
(Management of the Company opposes this proposal.)
/ / FOR / / AGAINST / / ABSTAIN
5. SHAREHOLDER PROPOSAL CONCERNING CHILD/CONVICT LABOR.
(Management of the Company opposes this proposal.)
/ / FOR / / AGAINST / / ABSTAIN
6. SHAREHOLDER PROPOSAL CONCERNING CLASS "A" INDEPENDENT DIRECTORS
(Management of the Company opposes this proposal.)
/ / FOR / / AGAINST / / ABSTAIN
7. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6. Please sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: , 1997
Signature
Signature, if jointly held
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
