<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934 (AMENDMENT NO. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AON CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)2 of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes: None
<PAGE>
AON CORPORATION
- --------------------------------------------------------------------------------
Notice of Annual Meeting of Holders of Common Stock
and Series C Preferred Stock . . . April 20, 1995
- --------------------------------------------------------------------------------
To the Stockholders of
AON CORPORATION
NOTICE IS HEREBY GIVEN that the annual meeting of the holders of shares of
Common Stock and Series C Preferred Stock of Aon Corporation will be held on
Thursday, April 20, 1995, at 10:00 A.M., at The First Chicago Center, One First
National Plaza, Chicago, Illinois, for the following purposes:
1. To elect directors pursuant to the By-Laws.
2. To Approve the Company's Adoption of the 1995 Senior Officer Incentive
Compensation Plan
3. To Approve the Amendment of the Company's 1994 Amended and Restated
Outside Director Stock Award Plan to include retirement benefits in the
form of Company common stock.
4. To Approve the Company's Adoption of a Deferred Compensation Plan.
5. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year 1995.
6. To transact such other business as may properly come before the meeting.
The close of business on February 28, 1995, has been fixed as the record date
for the determination of stockholders entitled to vote at the stockholders'
meeting. Only those stockholders of record at the close of business on such
date will be entitled to vote at the meeting.
Aon Corporation
LOGO
Arthur F. Quern
Corporate Secretary
March 8, 1995
<PAGE>
AON CORPORATION
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
- --------------------------------------------------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS ON APRIL 20, 1995
- --------------------------------------------------------------------------------
The annual meeting of the stockholders of Aon Corporation (the "Company")
will be held at The First Chicago Center, One First National Plaza, Chicago,
Illinois, at 10:00 A.M. on April 20, 1995. This Proxy Statement is being sent
to each holder of the issued and outstanding shares of the Company's Common
Stock ("Common Shares") and each holder of the issued and outstanding shares of
the Company's Series C Cumulative Preferred Stock ("Preferred Shares" and,
together with the Common Shares, the "Shares") entitled to vote at the meeting
in order to furnish information relating to the business to be transacted at
the meeting. The Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1994, including financial statements, is being mailed to
stockholders, together with this Proxy Statement, beginning on or about March
8, 1995. No part of such Annual Report shall be regarded as proxy-soliciting
material or as a communication by means of which any solicitation is made.
We hope that you will be present at the meeting. If you cannot attend, please
complete, sign and send to us the enclosed proxy in the accompanying envelope
so that your shares will be represented. The envelope is addressed to the
Company and requires no postage. You may revoke your proxy at any time before
it is voted at the meeting. Each proxy duly executed and received prior to the
meeting will be voted according to its terms. Stockholders who receive more
than one proxy card--due to the existence of multiple Common Share accounts--
should sign and return all proxies received in order to be sure that all shares
so owned are voted.
If no direction as to the manner of voting the proxy is made, the proxy will
be voted in accordance with the recommendations of the Board of Directors set
forth herein.
The Company will bear the cost of the preparation and solicitation of
proxies, including the reasonable charges and expenses of brokerage firms or
other nominees for forwarding proxy material to beneficial owners of Common
Shares. In addition to solicitation by mail, proxies may be solicited by
telephone, by facsimile, or personally by certain officers and regular
employees of the Company and its subsidiaries without extra compensation. The
Company has retained Georgeson & Co., 100 Wall Street, New York, New York to
aid in the solicitation of proxies for a fee estimated at $7,500. The enclosed
proxy is solicited by and on behalf of the Board of Directors.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on February 28, 1995, the record date fixed for
determination of stockholders entitled to vote at the meeting, there were
108,305,662 Common Shares and 1,000,000 Preferred Shares outstanding, each
entitled to one vote.
As of February 28, 1995, the only persons known by the Company to be a
beneficial owner of 5% or more of any class of the Company's voting securities
were:
<TABLE>
<CAPTION>
Percent of
Name and Address No. of Common Shares Class
---------------- ----------------------- ----------
<S> <C> <C>
Patrick G. Ryan 13,463,008 12.4%
c/o Aon Corporation
123 N. Wacker Drive
Chicago, Illinois 60606
<CAPTION>
Percent of
Name and Address No. of Preferred Shares Class
---------------- ----------------------- ----------
<S> <C> <C>
Jessie V. Stone 600,000 60%
445 Sheridan Rd.
Winnetka, IL 60093
W. Clement Stone 400,000 40%
W. Clement Stone
Enterprises, Inc.
P.O. Box 649
Lake Forest, IL 60045
</TABLE>
- --------
(1) Includes 9,939,750 Common Shares owned by Ryan Enterprises Corporation of
Illinois or its wholly-owned subsidiaries ("REC") or by Ryan Holding
Corporation of Illinois or its wholly-owned subsidiaries ("RHC") and 1,078
shares owned by the Company's Employee Stock Ownership Plan and allocated
to Mr. Ryan. Mr. Ryan, his wife and his children own all of the outstanding
common stock of REC and RHC, and Mr. and Mrs. Ryan and two of their sons
are the sole Directors of REC and RHC. Accordingly, the Common Shares held
by REC and RHC are included in the shares beneficially owned by Mr. Ryan.
Also includes 576,600 Common Shares held of record and beneficially owned
by Mr. Ryan's spouse. Mr. Ryan disclaims any beneficial interest in these
shares. Under the terms of the Employee Stock Ownership Plan, Mr. Ryan is
entitled to direct the manner in which the Plan's Trustees will vote the
shares allocated to Mr. Ryan.
ELECTION OF DIRECTORS
Unless a proxy directs to the contrary, it is intended that the proxies will
be voted for the election as Directors of the fifteen nominees named on the
following pages to hold office until the next succeeding annual stockholders'
meeting or until their respective successors are duly elected and qualify. All
the nominees are currently Directors of the Company except Mr. Jannotta, who
has been nominated for the first time. While management has no reason to
believe that any of the nominees will not be available to serve as a Director,
if for any reason any of them should become unavailable, the proxies will be
voted for such substitute nominees as may be designated by the Board of
Directors. The directors shall be elected by the vote of the majority of votes
present in person or represented by proxy at the meeting. Accordingly, since
votes withheld will count as present at the meeting (and will therefore also
count towards the establishment of a quorum), a vote withheld for a nominee
will adversely effect that nominee's ability to secure the necessary majority
of the votes present at the meeting.
Set forth on the following pages is biographical information concerning each
management nominee for election as a Director, the nominee's principal
occupation, the period during which the nominee has served as a Director of the
Company including service as a Director or employee of Combined
2
<PAGE>
Insurance Company of America, ("Combined Insurance") or Ryan Insurance Group,
Inc. ("Ryan Group"), which are subsidiaries of the Company. Ages shown for all
directors are as of December 31, 1994. There are no nominees for the Board
other than the management nominees.
- --------------------------------------------------------------------------------
PATRICK G. RYAN Director since 1965
Patrick G. Ryan has been Chairman of the Board of the Company since 1990 and
President and Chief Executive Officer of the Company since the merger of the
Company and Ryan in 1982. Prior to the merger, Mr. Ryan served as Chairman of
the Board and Chief Executive Officer of Ryan Group. Mr. Ryan is a Director of
First Chicago Corporation and its wholly owned subsidiary, The First National
Bank of Chicago. He is a Trustee of Rush-Presbyterian-St. Luke's Medical Center
and Northwestern University.
Age: 57
- --------------------------------------------------------------------------------
DANIEL T. CARROLL Director since 1980
Mr. Carroll is Chairman and President of The Carroll Group, Inc. From early
1980 until early 1982 he was President and Chief Executive Officer and a
Director of Hoover Universal, Inc. From 1975 until early 1980 he was President
of Gould Inc. He is a Director of A. M. Castle Co., American Woodmark
Corporation, Comshare, Inc., DeSoto, Inc., Diebold, Inc., Michigan National
Bank, Michigan National Corporation, Oshkosh Truck Corporation, UDC Homes,
Inc., Wolverine World Wide, Inc. and Woodhead Industries, Inc. He serves as a
member of the Organization and Compensation and Nominating Committees.
Age: 68
- --------------------------------------------------------------------------------
FRANKLIN A. COLE Director since 1984
Mr. Cole, since 1984, has been Chairman of Croesus Corporation, a personal
investment company. From 1971 to 1984 he was Chairman and Chief Executive
Officer of Walter E. Heller International Corporation (renamed Amerifin
Corporation in January 1984), a worldwide diversified financial services
company. Mr. Cole is also a Director of American National Corporation and its
subsidiary, American National Bank and Trust Company of Chicago, CNA Income
Shares, Inc., Duff & Phelps Utilities Income Inc., GATX Corporation, Local
Initiatives Support Corporation and Peoples Energy Corporation. He is Vice
Chairman of the Board of Trustees of Northwestern University, past President
and a Director of the Chicago Central Area Committee and Chairman of The
Chicago Human Relations Foundation. He is a member of the Investment and Audit
Committees and serves as a Director of the Aon Foundation.
Age: 68
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
EDGAR D. JANNOTTA
Mr. Jannotta joined William Blair & Company in May 1959 as an Associate, became
a Partner in January 1965, Assistant Managing Partner in June 1973, Managing
Partner in September 1977, and Senior Partner in January 1995. He is a director
of AAR Corp., Bandag, Incorporated, Commonwealth Edison Company, Encyclopedia
Britannica, Inc., Molex Incorporated, New York Stock Exchange, Inc., Oil-Dri
Corporation of America, Safety-Kleen Corp., and Sloan Valve Company.
Age: 63
- --------------------------------------------------------------------------------
PERRY J. LEWIS Director since 1972
Mr. Lewis is a Managing Director of Morgan Lewis Githens & Ahn, Inc., a New
York investment banking firm. Until October 1, 1979, Mr. Lewis was Senior Vice
President and a Director of Smith Barney, Harris Upham & Co., Inc. He is a
Director of Haynes International, Inc., Broadcasting Partners, Inc., Quaker
Fabric Corporation, Tyler Corporation and Stuart Entertainment, Inc. He serves
as a member of the Investment and Executive Committees.
Age: 57
- --------------------------------------------------------------------------------
JOAN D. MANLEY Director since 1984
From 1960 to 1984, Mrs. Manley was with Time Incorporated, serving as a Group
Vice-President from 1975 onwards and as a Director from 1978 to 1984. She is
also a Director of BFP Holdings, Inc., Sara Lee Corporation, Scholastic, Inc.,
and Viking Office Products, Inc. She sits on the boards of the Keystone Center
and The Summit Foundation. She serves as Chairman of the Nominating Committee
and is a member of the Audit Committee.
Age: 62
- --------------------------------------------------------------------------------
ANDREW J. MCKENNA Director since 1970
Mr. McKenna served as a Director of Ryan Group from 1970 until 1982 when he was
elected to the Board of Directors of the Company. He is Chairman, President and
Chief Executive Officer of Schwarz Paper Company, a distributor and printer of
packaging materials, and a Director of Dean Foods Company, First Chicago
Corporation and its wholly owned subsidiary, The First National Bank of
Chicago, McDonald's Corporation, Skyline Corporation, The Tribune Company and
the Board of Governors of the Chicago Stock Exchange. He is Chairman of the
Board of Trustees of the University of Notre Dame and Vice Chairman of the
Board of Trustees of the Museum of Science and Industry. Mr. McKenna is also a
Director of Children's Memorial Hospital and the Association of Governing
Boards of Universities and Colleges. He serves as a member of the Investment
and Organization and Compensation Committees.
Age: 65
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
NEWTON N. MINOW Director since 1990
Mr. Minow is Counsel to the Chicago law firm of Sidley & Austin where he served
as Partner from 1965 to 1991. He served as Chairman of the Federal
Communications Commission from 1961 to 1963. He is a director of True North
Communications, Inc., Manpower, Inc., Sara Lee Corporation and The Tribune
Company. Mr. Minow is also Chairman of the Carnegie Corporation of New York, a
Trustee and former Chairman of the Board of Trustees of The RAND Corporation,
and former Chairman of the Board of Governors of the Public Broadcasting
Service. He is a Life Trustee of Northwestern University, a Trustee of the
University of Notre Dame and Director of the Annenberg Washington Program of
Northwestern University. He serves as a member of the Audit and Investment
Committees.
Age: 68
- --------------------------------------------------------------------------------
PEER PEDERSEN Director since 1974
Mr. Pedersen is an attorney at law and Chairman of the Board of the Chicago law
firm of Pedersen & Houpt, P.C. He is a Director of Arrington Travel Center;
Boston Chicken, Inc.; Chemical Waste Management, Inc.; Chr. Hansen's
Laboratory, Inc.; Discovery Zone, Inc.; H20 Plus, Inc.; HPBM, Inc.; Orange &
Blue Distributing Company, Inc.; Peterson Products Corporation; Spraying
Systems Co.; Tempel Steel Company; Tennis Corporation of America; WMX
Technologies, Inc.; Western Cities Broadcasting, Inc.; and the Western Golf
Association. He also serves on the Board of Children's Memorial Hospital; St.
Joseph Carondelet Child Care, Rehabilitation Institute of Chicago and the Boys
and Girls Clubs of Chicago and is President of the Robert R. McCormick Boys and
Girls Club of Chicago. He serves as Chairman of the Audit Committee and is a
member of the Organization & Compensation Committee.
Age: 69
- --------------------------------------------------------------------------------
DONALD S. PERKINS Director since 1983
Mr. Perkins retired from Jewel Companies Inc. in 1983. He had been with Jewel
since 1953, serving as President from 1965 to 1970, as Chairman of the Board of
Directors from 1970 to 1980, and as Chairman of the Executive Committee until
his retirement. He is a Director of American Telephone and Telegraph Company,
Cummins Engine Company, Inc., Illinova, Inland Steel Industries, Inc., K-mart
Corporation (of which he is Chairman of the Board), LaSalle Street Fund, Inc.,
The Putnam Funds, Springs Industries, Inc., and Time Warner, Inc. He is Vice
Chairman of the Board of Trustees of Northwestern University and Chairman of
the Health Research and Education Trust. He serves as Chairman of the
Organization and Compensation Committee and is a member of the Investment
Committee.
Age: 67
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
JOHN W. ROGERS, JR. Director since 1993
Mr. Rogers is President and founder of Ariel Capital Management, Inc., an
institutional money management firm. Mr. Rogers is a director of American
National Bank and Trust Company of Chicago, Burrell Communications, Inc., and
Morrison Knudsen Corporation. In addition to serving as President of the Board
of the Chicago Park District, Mr. Rogers serves as a director of the Chicago
Urban League, The National Association of Securities Dealers, The Chicago
Symphony Orchestra and is a Trustee of Rush Presbyterian-St. Lukes Medical
Center. He is a member of the Audit and Investment Committees.
Age: 36
- --------------------------------------------------------------------------------
GEORGE A. SCHAEFER Director since 1991
Mr. Schaefer served as Chairman and Chief Executive Officer of Caterpillar Inc.
from 1985 until his retirement in July, 1990. Mr. Schaefer is a director of
Caterpillar Inc., Helmerich & Payne, Inc., McDonnell Douglas Corporation and
Morton International, Inc. He is a member of The Business Council. He serves as
a member of the Audit and Organization and Compensation Committees.
Age: 66
- --------------------------------------------------------------------------------
RAYMOND I. SKILLING Director since 1977
Mr. Skilling is an attorney at law and a Solicitor of the English Supreme
Court. He serves as Executive Vice President and Chief Counsel of the Company.
He has been employed by the Company since 1976, prior to which he was a partner
in the international law firm now called Clifford Chance, headquartered in
London, England. Mr. Skilling has been a legal advisor to the Company since
1967. He is a member of the Executive Committee.
Age: 55
- --------------------------------------------------------------------------------
FRED L. TURNER Director since 1991
Mr. Turner is Senior Chairman, Chairman of the Executive Committee and a
Director of McDonald's Corporation. Mr. Turner joined McDonald's Corporation in
1956 and assumed his current position in 1990, after serving that Company as
Chairman of the Board and Chief Executive Officer. Mr. Turner is also a
director of Baxter International, Inc., W.W. Grainger, Inc. and Ronald McDonald
Children's Charities. He serves as a member of the Audit Committee and is
Chairman of the Investment Committee.
Age: 61
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
ARNOLD R. WEBER Director since 1991
Dr. Weber served as President of Northwestern University from 1985 until 1994.
On January 1, 1995 he became Chancellor of Northwestern. From 1980 to 1985, Dr.
Weber was President of the University of Colorado. Dr. Weber has also held
various senior government positions including Executive Director of the Cost of
Living Council and Associate Director of the Office of Management and Budget.
He is a director of Burlington Northern Inc., Household Receivables Funding
Corporation, Inland Steel Industries, Inc., PepsiCo, Inc., John Deere and The
Tribune Company. He serves as a member of the Investment and the Organization
and Compensation Committees.
Age: 65
- --------------------------------------------------------------------------------
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of Common Shares beneficially owned
February 28, 1995 by each Director including the Company's Chief Executive
Officer, Patrick G. Ryan and Raymond I. Skilling, by each of the other three
most highly compensated executive officers, and by all Directors and Executive
Officers as a group. As used in this Proxy Statement, "beneficially owned"
means the sole or shared power to vote or direct the voting of a security
and/or sole or shared investment power with respect to a security (i.e. the
power to dispose or direct the disposition of a security). The table therefore
does not include the "phantom stock" shares held by outside directors under the
Outside Director Deferred Compensation and Stock Award Plans. See "Compensation
of Directors" for a description of these plans and the Outside Directors'
interest therein.
<TABLE>
<CAPTION>
No. of Shares Percent of
Beneficially Owned(1) Class(2)
--------------------- ----------
Directors
- ---------
<S> <C> <C>
Patrick G. Ryan............................... 13,463,008(4) 12.4
Daniel T. Carroll............................. 1,650 *
Franklin A. Cole.............................. 1,800 *
Perry J. Lewis................................ 3,000 *
Joan D. Manley................................ 4,050 *
Andrew J. McKenna............................. 6,900 *
Newton N. Minow............................... 50,000 *
Peer Pedersen................................. 14,478 *
Donald S. Perkins(5).......................... 4,650 *
John W. Rogers, Jr............................ 1,875 *
George A. Schaefer............................ 3,000 *
Raymond I. Skilling(6)........................ 268,918(4) *
John E. Swearingen............................ 18,750 *
Fred L. Turner................................ 2,137 *
Arnold R. Weber............................... 450 *
<CAPTION>
Executive Officers
- ------------------
<S> <C> <C>
Michael A. Conway(6).......................... 8,074(4) *
Daniel T. Cox(6).............................. 44,587(4) *
Harvey N. Medvin(6)........................... 321,808(4) *
----------
All Directors and Executive Officers as a
group (18 persons)........................... 14,219,135 13.1
</TABLE>
- --------
(1) The Directors and Executive Officers, and all Directors and Executive
Officers of the Company as a group, have sole voting power and sole
investment power over the Common Shares listed, except as indicated in note
(3) and in the table below:
7
<PAGE>
<TABLE>
<CAPTION>
Number of
Common Voting Investment
Shares Power Power
--------- ------ ----------
<S> <C> <C> <C>
Patrick G. Ryan................................. 9,939,750 Shared Shared
Franklin A. Cole................................ 1,800 Shared Shared
All Directors and Executive Officers as a group
(other than as indicated in note (3)).......... 9,941,550
</TABLE>
(2) An asterisk indicates that the percentage of shares beneficially owned by
the named individual does not exceed one percent (1%) of the Company's
shares.
(3) Includes the following Common Shares beneficially owned by immediate family
of the nominees: 576,600 by Mrs. Ryan; 20,000 by Mrs. Minow; and 166,590 by
Mrs. Skilling. (Mrs. Skilling and Mrs. Ryan are sisters.) As to the Common
Shares so held, the nominees disclaim beneficial ownership.
(4) Includes beneficial interest in the allocated portion of the Aon
Corporation Employee Stock Ownership Plan ("ESOP"), but excludes beneficial
interest in the Aon Corporation Savings Plan (the "Savings Plan") and the
unallocated portion of the ESOP. Unallocated shares owned by the ESOP and
shares owned by the Savings Plan, which are owned for the benefit of all
participating employees, totalled 6,624,167 Common Shares as of January 31,
1995. The Common Shares owned by the plans (other than the allocated
portion of the ESOP, which has pass-through voting rights) are voted by the
respective plans' trustees. The ESOP requires that such trustees vote all
unallocated shares in the same proportions as such trustees were directed
by the plan participants to vote the allocated shares, and the Savings Plan
requires that such trustees vote all unallocated shares held by the Plan as
directed by the Plan participants.
(5) Excludes 284,000 Common Shares held in trust for which Mr. Perkins is a
trustee and has shared voting and investment power. As to the Common Shares
so held, Mr. Perkins disclaims beneficial ownership.
(6) Does not include shares awarded under the Aon Stock Award Plan which are
not yet vested. See "Summary Compensation Table."
COMPENSATION OF THE BOARD OF DIRECTORS
Each Director who is not a salaried employee of the Company or any of its
subsidiaries receives a $20,000 yearly retainer for services to the Board of
Directors. In addition, the Chairman of the Organization and Compensation,
Audit and Investment Committees, respectively, receives an additional $2,500
annually for services in such capacities. In addition to the above retainers,
Directors who are not salaried employees of the Company or any of its
subsidiaries receive $750 for each Board and Board Committee meeting attended.
Under the Aon Outside Director Stock Award Plan, non-employee directors are
granted 450 Common Shares each year following their election at the Annual
Meeting of Stockholders (any director elected to the Board other than at the
Annual Stockholders' Meetings receives a pro rata number of Common Shares).
Directors may elect to defer receipt of the Common Shares and instead maintain
a phantom stock account. "Dividends" earned on the share equivalent balance in
the phantom stock account are treated as though reinvested, and directors may
choose a time and schedule for pay-out of the phantom stock account in Common
Shares plus the cash equivalent of any fractional shares. Officers of the
Company (or its subsidiaries) receive no additional compensation for membership
on the Board of Directors or any of its Committees.
Directors may elect to defer cash compensation earned pursuant to the Outside
Director Deferred Compensation Plan (the "Plan"). Under the Plan, Directors
elect that portion of the annual retainer and fees (collectively referred to as
"Fees") which will be credited to either a cash account, the earnings of which
are based on one-year Treasury bills, or a stock account whose value is based
upon the performance of the Common Shares on a dividend reinvested basis. The
cash account is a bookkeeping device only and no funds are actually invested or
set aside for the directors' benefit. The Directors' stock accounts are
credited with the number of phantom shares that could have been
8
<PAGE>
purchased at the average of the high and low price of the Common Share on the
date the Fees are earned. The phantom stock account does not consist of actual
shares, but is maintained for bookkeeping purposes only. As dividends are
declared on the Common Shares, each Director's phantom stock account, for
bookkeeping purposes, is credited with the dividends which would have been
earned if Common Shares had been purchased and the funds so credited are
treated as if reinvested in Common Shares. Each participating Director
specifies a payout schedule, including a commencement date, pursuant to which
the Company will distribute to the Director the amount in the Director's cash
account and the cash equivalent of the amount in the Director's phantom stock
account.
The following table shows, as of February 28, 1995, the total number of
Common Shares credited to the directors' respective phantom stock accounts
under the Outside Director Deferred Compensation Plan and under the Aon
Corporation Outside Director Stock Award Plan, in each case as described above:
<TABLE>
<CAPTION>
Number of
Phantom
Director Shares
-------- ---------
<S> <C>
Daniel T. Carroll............................................... 13,904
Franklin A. Cole................................................ 18,203
Perry J. Lewis.................................................. 2,521
Joan D. Manley.................................................. 7,956
Andrew J. McKenna............................................... 12,238
Peer Pedersen................................................... 14,798
Donald S. Perkins............................................... 7,046
John E. Swearingen.............................................. 0
Newton N. Minow................................................. 2,521
Arnold R. Weber................................................. 2,784
George A. Schaefer.............................................. 0
Fred L. Turner.................................................. 3,686
John W. Rogers, Jr.............................................. 1,724
------
Total......................................................... 87,381
======
</TABLE>
In 1994 the Company established an Outside Director Bequest Plan (the
"Bequest Plan"). The purpose of the Bequest Plan is to acknowledge the service
of directors, to recognize the mutual interest of the Company and its directors
in supporting worthy charitable institutions and to assist the Company in
attracting and retaining outside directors of the highest caliber. The Company
is funding the program primarily through life insurance policies on its outside
directors. The charitable donations by the Company will be directed to
charitable institutions designated by the outside directors. The plan is
designed so that upon the deaths of specified directors, it will then donate
$100,000 per director per year for ten years in the name of the director to a
designated tax qualified institution(s). Individual directors derive no
financial benefit from the Plan since any and all insurance proceeds and tax
deductible charitable donations accrue solely to the Company. A director is not
eligible to participate in the plan until he or she has completed one full year
of service on the Board and the Board retains at all times the right to
terminate the Bequest Plan and to decline to make any requested bequest if in
the Board's judgment doing so is in the best interests of the Company and its
stockholders.
9
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has appointed standing committees,
including Executive, Audit, Organization and Compensation, Investment and
Nominating Committees. Membership on the committees during 1994 was as follows:
<TABLE>
<CAPTION>
Organization and
Executive Audit Investment Compensation Nominating
--------- ----- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Patrick G. Ryan(1) Peer Pedersen(1) Fred L. Turner(1) Donald S. Perkins(1) Joan D. Manley(1)
Perry J. Lewis Franklin A. Cole Franklin A. Cole Daniel T. Carroll Daniel T. Carroll
Raymond I. Skilling Joan D. Manley Perry J. Lewis Andrew J. McKenna John E. Swearingen
Newton N. Minow Andrew J. McKenna Peer Pedersen
John W. Rogers, Jr. Newton N. Minow George A. Schaefer
George A. Schaefer Donald S. Perkins Arnold R. Weber
Fred L. Turner John W. Rogers, Jr.
John E. Swearingen
Arnold R. Weber
</TABLE>
- --------
(1) Chairman.
When the Board of Directors is not in session, the Executive Committee is
empowered to exercise such powers and authority in the management of the
business and affairs of the Company as would be exercised by the Board of
Directors, subject to certain exceptions. The Executive Committee did not meet
during 1994 but did act by Unanimous Written Consent on two occasions.
The Audit Committee provides assistance to the Board of Directors in
discharging its responsibilities in connection with the financial and
accounting practices of the Company and the internal controls related thereto,
and represents the Board of Directors in connection with the services rendered
by the Company's independent auditors. The Audit Committee met two times during
1994.
The Investment Committee is responsible for the formation of broad investment
policy applicable to the operating subsidiaries of the Company. This policy is
implemented by all subsidiaries based on the specific financial requirements of
the individual units. The Investment Committee met five times during 1994.
The Nominating Committee recommends nominees to the Board to fill vacancies
or as additions to the Board of Directors. Although the Committee does not
specifically solicit suggestions from stockholders as to possible candidates,
the Committee will consider stockholders' recommendations. Suggestions,
together with a description of the proposed nominee's qualifications,
stockholdings in the Company, other relevant biographical information, and an
indication of the willingness of the proposed nominee to serve, should be sent
to the Corporate Secretary of the Company. Suggestions may be submitted at any
time of year but should be received by November 15 of each year in order to be
considered in connection with the regular annual meeting of the Company's
stockholders in the spring of the following year. The Nominating Committee did
not meet in 1994, but did meet in January 1995, at which time it recommended to
the Board that the Board nominate Mr. Jannotta to fill the vacancy that would
result from Mr. Swearingen's retirement, which will become effective as of
April 20, 1995. The Board accepted the recommendation of the Organization and
Compensation Committees and is hereby recommending that the stockholders vote
for the election of Mr. Jannotta.
The Organization and Compensation Committee annually reviews and makes
recommendations to the Board of Directors regarding the compensation of the
Chairman, President and Chief Executive Officer of the Company. The
Organization and Compensation Committee also reviews, advises and consults with
the Chairman, President and Chief Executive Officer on the compensation of
other officers and key employees and as to the Company's policy on
compensation. The Organization and Compensation Committee also administers the
Company's Stock Option Plan, Stock Award Plan and Deferred Compensation Plan,
including granting stock options and stock awards and interpreting the plans,
and has general oversight responsibility with respect to the Company's other
employee benefit programs. In addition, the Organization and Compensation
Committee also renders advice and counsel
10
<PAGE>
to the Chairman, President and Chief Executive Officer on the selection of
senior officers of the Company and key executives of the Company's major
subsidiaries. The Organization and Compensation Committee met five times during
1994.
During 1994, all incumbent Directors attended at least 75% of the meetings of
the Board and all committees of the Board on which the respective Directors
served. The Board of Directors met seven times during 1994.
EXECUTIVE COMPENSATION
The following table discloses compensation received by the Company's Chief
Executive Officer and the four most highly paid executive officers (the "Named
Executives") for the three fiscal years ended December 31, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other
Annual Restrictive Long-term All Other
Compen- Stock Incentive Compen-
Name and Principal sation Award(s) Payouts Options/ sation(3)
Position Year Salary $ Bonus $ ($)(1) ($)(2) ($) SARs (#) ($)
------------------ ---- ---------- ------- ------- ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick G. Ryan......... 1994 832,233(4) 495,000 56,991 90,000 23,250
Chairman, President,
Chief 1993 822,013 310,000 64,732 -- 29,764
Executive Officer & 1992 796,350 214,500 67,642 -- 36,244
Director
Michael A. Conway....... 1994 297,267 168,000 15,000 14,315
Senior Vice President 1993 278,288 79,500 -- 14,108
& Senior Investment 1992 272,785 75,000 -- 17,160
Officer
Daniel T. Cox........... 1994 401,447 205,400 15,000 16,543
Executive Vice 1993 392,811 185,379 -- 18,588
President 1992 384,786 155,750 -- 22,761
Harvey N. Medvin........ 1994 432,201 255,000 30,000 17,741
Executive Vice
President, 1993 426,328 160,000 -- 18,661
Chief Financial Officer 1992 408,691 105,000 -- 21,852
& Treasurer
Raymond I. Skilling..... 1994 430,904 255,000 15,000 17,741
Executive Vice
President, 1993 423,772 160,000 -- 18,661
Chief Counsel &
Director 1992 410,388 109,500 -- 22,102
</TABLE>
- --------
(1) Represents non-cash benefits related to the personal use of company-owned
automobiles and aircraft, and miscellaneous personal services provided for
business purposes considered to be reasonable and necessary business
expenses of the Company which, in the case of Mr. Ryan for 1994, was in the
total amount of $56,991, consisting of $18,008 for use of Company aircraft
and $38,982 for the use of a Company car and driver.
(2) As of December 31, 1994, the Named Executives held the following number of
unvested shares of restricted stock, the vesting schedule for which and the
market value of which on the dates of grant and as of year-end 1994,
respectively, are set forth below:
<TABLE>
<CAPTION>
Date of Last
No. Shares Grant December 31, 1994 Vesting
Unvested Value($) Value Date
---------- -------- ----------------- ----------
<S> <C> <C> <C> <C>
Michael Conway.............. 15,750 356,636 504,000 11/16/2000
Daniel Cox.................. 42,750 974,750 1,368,000 04/19/2001
Harvey Medvin............... 36,000 664,749 1,152,000 04/19/2001
Raymond Skilling............ 18,750 346,093 600,000 10/12/1998
</TABLE>
No dividends are paid on shares of unvested restricted stock.
11
<PAGE>
(3) The amounts disclosed in this column include:
(a) Company contributions of $4,613.62 in fiscal 1994 under the Aon Savings
Plan, a defined contribution plan, on behalf of each of the Named
Executives except Mr. Ryan who has waived participation in the Plan.
(b) Company contributions of $2,372.47 in fiscal year 1994 under the ESOP,
on behalf of each of the Named Executives.
(c) Company contributions of the following amounts in fiscal 1994 under the
Aon Supplemental ESOP on behalf of Mr. Ryan, $20,878; Mr. Conway, $7,329;
Mr. Cox, $9,557; Mr. Medvin, $10,755; and Mr. Skilling, $10,755.
(4) Mr. Ryan deferred $375,308 of this amount.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
The following table provides information on stock option exercises in fiscal
1994 by Daniel T. Cox, the only Named Executive to have exercised a stock
option during fiscal year 1994.
<TABLE>
<CAPTION>
Number of
Options at
Fiscal Year-End
Shares Acquired Value(1) -------------------------
Name on Exercise Realized Exercisable Unexercisable
---- --------------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel T. Cox................ 10,500 $171,032 0 15,000
</TABLE>
- --------
(1) Based upon the average high and low price of Aon Corporation Common Shares
as of the date exercised.
OPTION GRANTS IN 1994 FISCAL YEAR
During 1994, each Named Executive was granted options to purchase the
Company's common stock. Subject to the terms of the Aon Stock Option Plan as
approved by Shareholders, additional information regarding these options is set
forth in the table below:
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
- ---------------------------------------------------------------------- -------------
Number of Percent of
securities total options Exercise
underlying granted to or base Grant Date
option employees price Expiration Present
Name granted in fiscal year ($/Sh) date Value(1)
---- ---------- -------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Patrick G. Ryan......... 90,000.00 8.0676 $33.9583 03/17/01 $1,312,741.06
Michael A. Conway....... 15,000.00 1.3429 33.9583 03/17/01 218,790.18
Daniel T. Cox........... 15,000.00 1.3429 33.9583 03/17/01 218,790.18
Harvey N. Medvin........ 30,000.00 2.6868 33.9583 03/17/01 437,580.35
Raymond I. Skilling..... 15,000.00 1.3429 33.9583 03/17/01 218,790.18
</TABLE>
- --------
(1) Based upon the Black-Scholes Option Pricing Model assuming a risk free
interest rate of 7.5%, a dividend yield of 4% and that 406 days on average
elapse between vesting and exercise.
PENSION PLAN TABLE
The following table shows the estimated annual pension benefits payable to a
covered participant at normal retirement age (65 years) under the Company's
qualified defined benefit pension plan, (the "Aon Pension Plan"), as well as
under the non-qualified supplemental pension plan, (the "Excess Benefit Plan").
The Excess Benefit Plan provides benefits that would otherwise be denied
participants by reason of certain Internal Revenue Code limitations on
qualified plan benefits, based on remuneration that is covered under the plans
and years of service with the Company and its subsidiaries:
12
<PAGE>
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------
Remuneration ($) 10 15 20 25 30 35 40
- ---------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000...... $ 29,000 $ 39,000 $ 49,000 $ 59,000 $ 69,000 $ 79,000 $ 89,000
400,000...... 58,000 78,000 98,000 118,000 138,000 158,000 178,000
600,000...... 87,000 117,000 147,000 177,000 207,000 237,000 267,000
800,000...... 116,000 156,000 196,000 236,000 276,000 316,000 356,000
1,000,000...... 145,000 195,000 245,000 295,000 345,000 395,000 445,000
1,200,000...... 174,000 234,000 294,000 354,000 414,000 474,000 534,000
1,400,000...... 203,000 273,000 343,000 413,000 483,000 553,000 623,000
1,600,000...... 232,000 312,000 392,000 472,000 552,000 632,000 712,000
</TABLE>
A participant's remuneration covered by the Aon Pension Plan and the Excess
Benefit Plan is the average of his or her base salary for each fiscal year
prior to 1994, and the aggregate of base salary and certain eligible bonus
payments for the 1994 fiscal year and each fiscal year thereafter, for the five
consecutive calendar plan years during the last ten years of the participant's
career for which such average is the highest or, in the case of a participant
who has been employed for less than five full calendar years, the period of his
or her employment with the Company and its subsidiaries. Covered compensation
and the estimated years of service for each of the Named Executives as of
December 31, 1994 is: Mr. Ryan $1,320,000 and 16 years; Mr. Conway $463,385 and
20 years; Mr. Cox $604,246 and 8 years; Mr. Medvin $680,000 and 16 years; and
Mr. Skilling $680,000 and 18 years. The annual pension amounts included in the
table above are based upon the following assumptions: (1) amounts are before
the integration of Social Security benefits which, based upon maximum coverage
in effect on December 31, 1994, would reduce the annual amounts shown by: 10
years-$1,230; 15 years-$1,845; 20 years-$2,460; 25 years-$3,075; 30 years-
$3,690 and 40 years-$3,690, (2) retiring participants have attained age 65 and
are fully vested, and (3) retiring participants have chosen to have benefits
payable as straight life annuities.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
The Company's executive compensation programs are administered by the
Organization and Compensation Committee of the Board (the "Compensation
Committee"). The Compensation Committee is comprised of six independent non-
employee directors.
The Compensation Committee determines the compensation for the Company's
Chief Executive Officer, Patrick G. Ryan, and for the Company's other four
executive officers, who in 1994 were the Company's most highly paid executive
officers (collectively the "Named Executives"), and advises and consults with
the Chief Executive Officer regarding the compensation of other officers and
key employees. In 1994, the Named Executives consisted of, in addition to Mr.
Ryan, Michael A. Conway, Daniel T. Cox, Harvey N. Medvin and Raymond I.
Skilling. The compensation of the Named Executives other than Mr. Ryan is
determined by the Compensation Committee in consultation with Mr. Ryan.
The Compensation Committee regards the evaluation of the Chief Executive
Officer, Mr. Ryan, as a critical Board of Directors responsibility. Therefore,
Mr. Ryan's compensation is determined following an annual review of the
Company's performance conducted collectively, without Mr. Ryan, by all non-
employee directors of the Company, which includes each member of the
Compensation Committee. During this review, the outside directors discuss in
detail the extent to which during the most recent fiscal year the Company has
achieved certain goals agreed to by Mr. Ryan and the outside directors at the
beginning of such fiscal year.
The Compensation Committee and the Company believe that compensation of its
executive officers and senior management should be directly and materially
linked with the interests of stockholders. Specifically the compensation
program is designed to:
. Reward executives for long-term strategic management and the enhancement
of stockholder value by providing them with an opportunity to acquire an
appropriate ownership interest in the Company.
13
<PAGE>
. Support a performance-oriented environment that rewards performance with
respect to Company goals but also Company performance as compared to that
of the performance of comparable companies in the same industry.
. Attract and retain key executives critical to the long-term success of
the Company.
In order to ensure that the compensation program is competitive, the
Compensation Committee retained a nationally recognized compensation consultant
(the "Compensation Consultant") unaffiliated with the Company. The Compensation
Consultant developed a compensation peer group (the "Peer Group") which
consists of the companies comprising the peer group used to prepare the
Performance Graph following this Report. The criteria for selecting companies
for the Peer Group were (i) to choose companies whose insurance underwriting or
insurance brokerage business, or mix thereof, most closely resembled that of
the Company's, including, where possible, the Company's principal competitors
and (ii) to restrict the group to a manageable size, thereby facilitating an in
depth analysis of the Peer Group companies' compensation policies and a
comparison thereof to the Company's.
For fiscal year 1994, the compensation program consisted of base salary,
short-term incentive pay (annual bonus arrangements) and long-term incentive
compensation.
BASE SALARY
The Compensation Consultant found that base salaries for the Named Executives
were competitive with those of comparable Peer Group executives, and, in the
aggregate, slightly below the median for the Peer Group. The Consultant also
found that the Company was not competitive with the Peer Group in its use of
performance based incentive compensation. In light of these findings, the
Committee determined that there should be a greater focus on both Annual Bonus
Arrangements and Long-Term Incentive Compensation.
Therefore, the Committee decided to keep base salaries essentially at 1993
levels except where performance or the Named Executive's compensation relative
to that of comparably situated executives in the industry clearly dictated
otherwise. For 1994, the aggregate increase in base salaries over those being
paid following their adjustment in April 1993 was 1.06% for the Named
Executives. Retaining base salaries for the Named Executives essentially at
1993 levels provided an opportunity to shift a greater portion of total
compensation for the Named Executives to Annual Bonus Arrangements and long-
term incentive compensation in the form of Stock Options.
ANNUAL BONUS ARRANGEMENTS
Each Named Executive was eligible for an annual bonus of up to 60% of Base
Salary. Such annual bonuses for the Named Executives are reported in the
Summary Compensation Table and were based on both objective and, to a lesser
degree, subjective performance criteria tailored to each individual. Objective
criteria included but were not limited to achievement of profit objectives,
actual versus target annual operating budget performance and actual versus
target revenue growth, either as to the Company as a whole or, for those
executives responsible for a specific operating unit, as to that executive's
particular operating unit. Target annual revenue growth and target annual
operating budgets utilized for purposes of determining annual bonuses were
based on business plans established prior to the beginning of the year.
Subjective performance criteria encompassed evaluation of each officer's
initiative and contribution to overall corporate performance and any special
projects that the officer may have undertaken. For purposes of determining the
1993 bonus compensation, payable in 1994, goals with respect to certain of
these and other matters, for both the Company as a whole and for certain of the
Named Executives, were agreed to in advance between the Compensation Committee
and the Chief Executive Officer. Although in individual cases, the relative
importance of attaining certain goals in determining each Named Executive's
bonus was weighted, there was no single weighting which applied to all Named
Executives. With respect to the Chief Executive Officer in 1994, the
Compensation Committee placed the greatest weight on certain agreed upon goals
relating to the financial performance of the Company for the 1993 fiscal year.
The Compensation Committee also relied to a lesser extent on the Chief
Executive Officer's achievement of certain non-quantifiable short term goals
that the Board of Directors, the Compensation Committee and the Chief Executive
Officer believed would contribute to the Company's long term performance. No
specific formula was used to determine the Chief Executive Officer's bonus or
the bonus of any of the other four Named Executives.
14
<PAGE>
Early in 1994 the Compensation Committee reviewed the 1993 performance of
each Named Executive in light of both the objective and subjective criteria
discussed above. In conducting these reviews, the Compensation Committee
discussed with the Chief Executive Officer the performance of each of the other
four Named Executives. According to the Compensation Consultant, the bonus paid
in 1994 to Mr. Ryan, and the bonuses paid to all of the Named Executives in the
aggregate, fell at the low end of the range of bonus compensation paid by the
Peer Group companies to their comparably situated executives.
LONG-TERM INCENTIVE COMPENSATION
The long-term incentive component of officer compensation is tied to the
opportunity to acquire Common Shares under the Aon Stock Award Plan and the Aon
Stock Option Plan. Both plans are designed to align a significant portion of
the executive compensation program with stockholder interest and to assist in
retention of executives.
Aon Stock Award Plan
Awards under the Aon Stock Award Plan are made based on the Compensation
Committee's and the Chief Executive Officer's assessment of an executive's past
performance, their subjective appraisal of the executive's skills and other
strengths, and the long term contribution the executive can make to the
Company's performance. Awards are also subject to a vesting schedule designed
to give recipients an incentive to continue their service with the Company.
When an award vests, the Common Shares vested are delivered to the recipient at
no consideration and free of all restrictions other than those imposed by
applicable securities laws. Taxes are withheld on the value of the Common
Shares delivered in accordance with the Company's customary payroll practices.
In making awards, the Compensation Committee takes into consideration awards
previously made to a potential recipient, the vesting schedule of such awards,
and the number of awards outstanding in the aggregate to all recipients.
During fiscal year 1994, no grants were made to the Named Executives under
this Plan. However, during 1994, the following Common Shares became vested and
were delivered to the following Named Executives.
<TABLE>
<CAPTION>
Shares Value($)
------ --------
<S> <C> <C>
Patrick G. Ryan................................................. 0 0
Michael A. Conway............................................... 2,250 72,844
Daniel T. Cox................................................... 8,250 268,875
Harvey N. Medvin................................................ 7,500 249,000
Raymond I. Skilling............................................. 3,750 123,750
</TABLE>
Aon Stock Option Plan
Options under the Aon Stock Option Plan are granted on the basis of criteria
similar to, and for similar purposes as, those for the granting of awards under
the Aon Stock Award Plan. During 1994, the Compensation Committee and the
Company elected to shift a greater portion of total compensation to long term
incentive compensation mechanisms such as grants under the Stock Option Plan as
a means to align the executives interest with that of the shareholders. As a
result, during 1994 the Named Executives were in the aggregate granted options
to purchase 165,000 Common Shares with an exercise price equal to the Common
Shares market value on the day of grant. For detailed information regarding the
options granted during 1994, see above at page 12, "Executive Compensation--
Option Grants in 1994 Fiscal Year."
SUBMITTED BY THE ORGANIZATION AND COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS:
Donald S. Perkins Daniel T. Carroll Andrew J. McKenna
(Chairman) George A. Schaefer Arnold J. Weber
Peer Pedersen
15
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
AON CORPORATION AND PEER GROUP INDICES
FISCAL YEARS ENDED DECEMBER 31
LOGO
(1) The Peer Group consists of: Alexander & Alexander Services Inc., American
International Group, Inc., American General Corporation, The Chubb
Corporation, General Re Corporation, Marsh & McLennan, Travelers, Inc.,
Torchmark, Transamerica Corporation and UNUM Corporation. Assumes that the
value of the investment in Aon Common Stock and the Peer Group index was
$100 on December 31, 1989, that the $100 invested in the Peer Group Index
was allocated pro rata among the Peer Group companies according to their
respective market capitalizations, that the value of the Peer Group Index
was determined by weighting the contribution of the constituent companies
according to their respective market capitalizations as of the beginning of
each annual period, and that all dividends were reinvested.
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. McKenna, a director of the Company and a member of the Organization and
Compensation Committee of the Company, and Mr. Medvin, the Company's executive
vice president, chief financial officer and treasurer, serve on the board of
directors of a private company, Schwarz Paper Company. Mr. McKenna is also the
chairman, president, chief executive officer and principal stockholder of
Schwarz Paper Company.
TRANSACTIONS WITH MANAGEMENT
The Company and one or more of its subsidiaries retained Sidley & Austin, a
law firm to which Newton N. Minow is Counsel, and Pedersen & Houpt, a law firm
of which Peer Pedersen is Chairman of the Board, to perform certain legal
services during the year 1994 and anticipates that such firms may be retained
to perform legal services in 1995. Mr. Ryan has substantial ownership
interests in certain automobile dealerships which, during 1994, received
commissions of $89,005 from the sale of credit life and credit accident and
health insurance written by Company subsidiaries and paid premiums of $120,298
for automobile mechanical repair insurance to Virginia Surety Company, Inc., a
subsidiary of the Company. The commissions received and premiums paid by these
dealerships were on terms no more favorable than those generally offered to
unrelated dealerships. During 1994 corporations and other entities with which
Directors are or were associated had insurance or other transactions with the
Company and certain of its subsidiaries and affiliates in the ordinary course
of business. All of these transactions were on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated
parties. None of such insurance or other transactions involved during 1994, or
is expected to involve in 1995, payments from or to the Company and its
subsidiaries and affiliates for property and services in excess of 5% of the
Company's or the other entity's consolidated gross revenues during 1994.
APPROVAL OF AON CORPORATION 1995 SENIOR OFFICER
INCENTIVE COMPENSATION PLAN (THE "INCENTIVE PLAN")
Background. In January 1995, the Board of Directors adopted the Incentive
Plan, subject to shareholder approval. If approved, the Incentive Plan will be
employed to partially determine the compensation of senior management, as
selected by the Organization and Compensation Committee, beginning with
calendar year 1995.
Prior to 1994, all cash payments made pursuant to the Annual Bonus
Arrangement as well as all other cash compensation paid to the named executive
officers/1/ were deductible by the Company for federal income tax purposes.
However, the Omnibus Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended. Section 162(m) prohibits publicly
held corporations, such as the Company, from deducting as compensation
"applicable remuneration" paid to "covered employees" to the extent it exceeds
$1 million for a taxable year.
The Incentive Plan is designed to permit amounts paid thereunder to be
excluded from compensation for purposes of determining whether a given named
executive officer's annual compensation exceeds the $1,000,000 Section 162(m)
threshold, thereby enhancing the ability of the Company to deduct the full
annual amount paid to a named executive officer even though such officer's
total compensation may exceed $1,000,000.
- --------
/1/Throughout this Proxy Statement "Named Executive" refers specifically to
the Chief Executive Officer and the other four most highly compensated
executive officers for 1994 and "named executive officers" refers generally to
the chief executive officer and the other four most highly compensated
executive officers from year to year. "Covered Employee" as defined in Section
162(m) includes a corporation's named executive officers.
17
<PAGE>
Section 162(m) permits corporations to exclude from "applicable remuneration"
amounts paid based on performance as long as the following certain conditions
are met: (i) such performance related compensation must be payable on account
of the attainment of one or more pre-established performance goals set by a
compensation committee of a corporation's board of directors comprised solely
of two or more outside directors; (ii) the material terms of the compensation
and the performance goals must be disclosed to and approved by a corporation's
shareholders; and (iii) the compensation committee must certify that the
performance goals have been satisfied.
Terms of the Incentive Plan. Participation in the Incentive Plan is limited
to salaried employees of the Company selected by Organization and Compensation
Committee ("Incentive Plan Participants").
Each Incentive Plan Participant will be eligible to receive an annual
Incentive Plan award (an "Award") equal to 180% of Base Salary, but in no event
more than $3,000,000. (See "Report of the Organization and Compensation
Committee" for the definition of and a discussion of Base Salary). Within 90
days of the beginning of each calendar year, the Organization and Compensation
Committee (which is currently comprised of six outside directors) will
determine specific standards ("Specific Corporate Performance Thresholds") that
must be attained with respect to the year in question before any Award will be
paid to any Incentive Plan Participant. The Specific Corporate Performance
Thresholds may include the Company's earnings per share, return on equity,
total shareholder return, or operating income. For any given year, the
Organization and Compensation Committee may select a single Specific Corporate
Performance Threshold or some combination of such measures.
Following the year with respect to which the bonus is to be awarded, the
Organization and Compensation Committee will meet to determine whether the
applicable Specific Corporate Performance Thresholds have been attained. If so,
the Organization and Compensation Committee will so certify to the Board and
will calculate the Award for which each Participant is eligible. The
Organization and Compensation Committee will then review such amount and the
performance of the Incentive Plan Participant and determine in its sole
discretion whether the maximum Award for which such Participant is eligible
should be paid in full or whether a lesser amount should be paid, and, if so,
how much.
Payments under the Incentive Plan will be made in a lump sum subject to the
Company's customary payroll and tax withholding practices.
The Board of Directors recommends a vote FOR approval of the 1995 Senior
Officer Incentive Compensation Plan. If the shareholders fail to approve the
plan, the Board of Directors current intention would be to defer payment of any
compensation not deductible because of Section 162(m).
APPROVAL OF THE AON CORPORATION 1994 OUTSIDE DIRECTORS
AMENDED AND RESTATED STOCK AWARD PLAN
Under this Plan, non-employee Directors, are entitled to receive 450 Common
Shares per annum as described above (See "Compensation of the Board of
Directors"). In 1994, the Company amended this Plan (the "Retirement
Amendments") to include certain benefits for directors when they retire from
the Board.
The Retirement Amendments provide that each director will have credited to
his retirement account (the "Retirement Account"):
(i) $10,000 for each annual period of Board service prior to 1994, but not
more than $100,000 in the aggregate; and
(ii) $20,000 per annum for each annual period of service commencing with
April 15, 1994.
The pre-1994 amount, however, will accrue pro rata over the number of years
between 1994 and the year the Director attains the age of seventy-two. The
benefit for the years of service commencing in 1994 will accrue in full on each
service anniversary date. The Retirement Account vests at a rate of 10% for
each annual period of service.
18
<PAGE>
On the day a Director ceases serving on the Board, the vested amount in his
Retirement Account will be divided by the average of the high and low market
price of the Common Shares on such day (or, if such day is not a business day,
on the most recent trading day) and one-tenth of the resulting number of shares
will be distributed to the Director annually during the following ten year
period. Set forth below are retirement benefits to which each nominee outside
director (other than Mr. Jannotta, who, if elected, will commence his service
on the Board on April 20, 1995) and to which Mr. Swearingen (who will resign
from the Board effective as of April 20, 1995) would be entitled if he were to
resign on April 20, 1995 and upon reaching mandatory retirement age (72).
<TABLE>
<CAPTION>
Annual
Annual Projected
Vested Benefit
Accrued as of
Benefit Mandatory
as of Retirement
DIRECTOR 04/20/95(1) Age(1)
-------- ----------- ----------
<S> <C> <C>
Daniel T. Carroll.................................. 130 527
Franklin A. Cole................................... 116 579
Perry J. Lewis..................................... 76 1,215
Joan D. Manley..................................... 84 926
Andrew J. McKenna.................................. 94 752
Newton N. Minow.................................... 43 347
Peer Pedersen...................................... 154 463
Donald S. Perkins.................................. 116 579
John W. Rogers, Jr................................. 12 2,112
George A. Schaefer................................. 28 492
John E. Swearingen................................. 347 347
Fred L. Turner..................................... 26 723
Arnold R. Weber.................................... 27 550
</TABLE>
- --------
(1) Share balance calculated based upon the February 28, 1995 average of the
high and low market price of Aon common stock.
The Board of Directors recommends a vote FOR approval of the Aon Outside
Directors Compensation Plan as Amended.
APPROVAL OF THE AON DEFERRED COMPENSATION PLAN
In 1994, the Company adopted the Aon Deferred Compensation Plan (the "1994
Deferred Compensation Plan") for United States based employees with annual
earnings of at least $125,000 ("Eligible Employees").
Under the 1994 Deferred Compensation Plan, an Eligible Employee may in any
given year (the "Deferral Year") defer payment of any whole percentage of such
employee's current compensation and any whole percentage of any performance
bonus to be paid the following year with respect to performance during the
Deferral Year (collectively, the "Deferred Amount"). Payment of the Deferred
Amount may be deferred for any period longer than 12 months.
At the time that an Eligible Employee elects to defer compensation, the
Employee must also specify a distribution method consisting of the date on
which payments are to begin (the "Initial Payment Date") and a payment period
that may range from a lump sum distribution on the Initial Payment Date up to
10 consecutive annual distributions. The election of the amount to defer, the
deferral period and distribution method must be made prior to December 15th of
the year prior to the Deferral Year and may not be changed except upon a
finding by the Organization and Compensation Committee that such a change is
warranted because the Eligible Employee has encountered an unexpected hardship
sufficiently severe to justify an exception.
19
<PAGE>
Eligible Employees may "invest" the Deferred Amount in either an Aon Common
Stock Account or an Aon General Account. The Aon Common Stock Account is a
bookkeeping account the value of which is determined by assuming that all
Deferred Amounts are invested in Aon Common Shares on a dividend reinvestment
basis. The Aon General Account is a bookkeeping account the value of which is
determined by assuming all Deferred Amounts earn annual interest at the average
yield for one-year treasury bills.
Eligible Employees may reallocate amounts between the Aon Common Stock
Account and the Aon General Account annually. The balances in an Eligible
Employee's Common Stock Account and General Account are bookkeeping entries
only. No Company funds are segregated with respect to these accounts and
payment of the amounts owed to Eligible Employees in respect of compensation
deferred under the Deferred Compensation Plan is a general unsecured obligation
of the Company. The only Named Executive who deferred compensation under the
Deferred Compensation Plan in 1994 and his Deferred Amount is set forth below:
Patrick G. Ryan $375,308.
The Board of Directors recommends a vote FOR approval of the Deferred
Compensation Plan.
INDEPENDENT AUDITORS
The Board of Directors of the Company, following the recommendation of the
Audit Committee, has appointed Ernst & Young LLP as the Company's independent
auditors for the year 1995. Ernst & Young LLP was first retained as the
Company's independent auditors in February 1986. No relationship exists between
the firms other than the usual relationship between independent auditors and
their clients.
Although this appointment is not required to be submitted to a vote of the
stockholders, the Board of Directors believes it appropriate as a matter of
policy to request that the stockholders ratify the appointment of the
independent auditors for the year 1995. In the event a majority of the votes
cast at the meeting are not voted in favor of the following resolution, the
adverse vote will be considered as a direction to the Board of Directors of the
Company to select another auditor for the year 1996. Because of the difficulty
and expense of making any substitution of auditors for 1995 following the 1995
Annual Meeting, it is contemplated that the appointment for the year 1995 will
be permitted to stand unless the Board finds other good reason for making a
change.
The Board of Directors has proposed that the stockholders adopt the following
resolution:
RESOLVED, that the appointment of Ernst & Young LLP by the Board of
Directors as the Company's independent auditors for the year 1995 is hereby
ratified.
The proxies will be voted in favor of the ratification of the appointment
unless otherwise specifically indicated thereon.
The Company anticipates that a representative of Ernst & Young LLP will be
present at the Annual Meeting. Such representative will be given the
opportunity to make a statement if he or she desires to do so, and is expected
to be available to respond to any questions which may be submitted at the
meeting.
1996 PROPOSALS OF STOCKHOLDERS
In order to be considered for inclusion in the proxy statement for the
regular annual meeting of the stockholders of the Company in the year 1996,
stockholder proposals must have been received by the Company not later than
November 15, 1995. Such proposals should be sent to the Corporate Secretary of
the Company at the address listed on page 1 hereof.
20
<PAGE>
AVAILABILITY OF 10-K REPORT
The Company will file its Annual Report on Form 10-K for the year ended
December 31, 1994, with the Securities and Exchange Commission on or before
March 31, 1995. A copy of the report, including any financial statements and
schedules, and a list describing any exhibits not contained therein, may be
obtained without charge by any stockholder. The exhibits are available upon
payment of charges which approximate the Company's cost of reproduction of the
exhibits. Requests for copies of the report should be sent to the Office of the
Corporate Secretary at the address listed on page 1 hereof.
OTHER MATTERS
Management is not aware of any business to be acted upon at this meeting
other than that which is described in this Proxy Statement, but in the event
any other business should properly come before the meeting calling for a vote
of the stockholders, the proxy holders (as indicated on the accompanying proxy
card or cards) will vote the proxies according to their best judgment in the
interests of the Company.
Please exercise your right to vote by completing and signing the enclosed
proxy card and returning it promptly in the enclosed envelope. In the event
that you attend the meeting, you may revoke your proxy and vote your Shares in
person.
Aon Corporation
LOGO
Arthur F. Quern
Corporate Secretary
Dated: March 8, 1995
21
<PAGE>
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- --------------------------------------------------------------------------------
AON CORPORATION
Notice of
Annual Meeting of Stockholders
and Proxy Statement
FIRST CHICAGO CENTER
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS
APRIL 20, 1995 AT 10:00 A.M.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINTED IN U.S.A.
<PAGE>
Aon Corporation
123 North Wacker Drive
Chicago, Illinois 60606
PLEASE SIGN AND RETURN YOUR PROXY CARD PROMPTLY
[ART LOGO]
PLEASE RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. 4909
----
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
- --------------------------------------------------------------------------
1. Election of directors.
FOR* [_] WITHHELD [_]
*To withhold authority to vote for any nominee(s), mark the "FOR" box and write
the name of such nominee on line provided below
- --------------------------------------------------------------------------------
2. To approve the Company's adoption of the 1995 Senior Officer Incentive
Compensation Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3. To approve the amendment of the Company's 1994 Amended and Restated Outside
Directors Stock Award Plan to include retirement benefits in the form of
Company common stock.
FOR [_] AGAINST [_] ABSTAIN [_]
4. To approve the Company's adoption of a Deferred Compensation Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
5. Appointment of Ernst & Young as Company's independent auditors.
FOR [_] AGAINST [_] ABSTAIN [_]
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
SIGNATURE (IF JOINTLY HELD) DATE
<PAGE>
Aon Corporation PROXY/VOTING INSTRUCTION CARD
Chicago, Illinois
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON APRIL 20, 1995.
The undersigned hereby appoints P. G. RYAN or R. I. SKILLING, the attorneys and
agents of the undersigned, each with powers of substitution, as proxies for the
undersigned to vote all the Common Shares and/or Preferred Shares the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Aon Corporation called to be held at 10:00 A.M., Thursday, April 20, 1995, or
any adjournment thereof in the manner indicated on the reverse side of this
proxy, and upon such other business as may lawfully come before the meeting. IF
NO DIRECTION AS TO THE MANNER OF VOTING THE PROXY IS MADE, THE PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND FOR ITEMS 2, 3, 4 AND 5 AS INDICATED ON
THE REVERSE SIDE HEREOF. This card also constitutes voting instructions for all
shares votable by the undersigned as a participant in the Aon Employee Stock
Ownership Plan and held of record by the trustees of the Plan. The trustees
intend to cause all undirected and unallocated common shares held under the
Plan to be voted in the same proportion as are voted the shares of all
participants who have timely delivered voting instructions to the trustees. All
voting instructions with respect to shares held of record by the Plan shall be
confidential.
Election of Directors
Nominees:
Patrick G. Ryan, Daniel T. Carroll, Franklin A. Cole, Edgar D.
Jamotta, Perry J. Lewis, Joan D. Manley, Andrew J. McKenna, Newton
N. Minow, Donald S. Perkins, Peer Pedersen, John W. Rogers, Jr.,
George A. Schaefer, Raymond I. Skilling, Fred L. Turner, Arnold R.
Weber.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
CODE 1995 COMMON
SEE REVERSE
SIDE
