<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/ / 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 Rule 14a-11(c) or Rule 14a-12
AON CORPORATION
----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
AON CORPORATION
----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 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:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
-----------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------------
(4) Date filed:
-----------------------------------------------------------------------
<PAGE> 2
AON CORPORATION
- --------------------------------------------------------------------------------
Notice of Annual Meeting of Holders of Common Stock
and Series C Preferred Stock . . . April 19, 1996
- --------------------------------------------------------------------------------
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
Friday, April 19, 1996, 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 ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year 1996.
3. To transact such other business as may properly come before the meeting.
The close of business on February 28, 1996, 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
/S/ ARTHUR F. QUERN
---------------------------------
Arthur F. Quern
Corporate Secretary
March 9, 1996
<PAGE> 3
AON CORPORATION
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
- --------------------------------------------------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS ON APRIL 19, 1996
- --------------------------------------------------------------------------------
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 19, 1996. 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, 1995, including financial statements, is being mailed to stockholders,
together with this Proxy Statement, beginning on or about March 9, 1996. 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 if mailed from within the United States. 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> 4
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on February 28, 1996, the record date fixed for
determination of stockholders entitled to vote at the meeting, there were
108,413,284 Common Shares and 1,000,000 Preferred Shares outstanding, each
entitled to one vote.
As of February 28, 1996, the beneficial owners of 5% or more of any class
of the Company's securities entitled to vote at the meeting and which were known
to the Company were:
<TABLE>
<CAPTION>
No. of Common Percent of
Name and Address Shares Class
- --------------------------------- ---------------- ----------
<S> <C> <C>
Patrick G. Ryan 13,463,051(1) 12.4%
c/o Aon Corporation
123 N. Wacker Drive
Chicago, IL 60606
Brinson Partners, Inc. 6,579,672(2) 6.1%
209 South LaSalle Street
Chicago, Illinois 60604
</TABLE>
<TABLE>
<CAPTION>
No. of Preferred Percent of
Name and Address Shares Class
- --------------------------------- ---------------- ----------
<S> <C> <C>
Jessie V. Stone 600,000 60%
c/o W. Clement Stone
Enterprises, Inc.
P.O. Box 649
Lake Forest, IL 60045
W. Clement Stone 400,000 40%
c/o 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 1,291
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 Mrs.
Ryan. 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.
(2) Includes to the best knowledge of the Company all shares beneficially owned
by Brinson Partners, Inc., its parent, subsidiaries and affiliates.
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. 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
2
<PAGE> 5
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 Insurance
Company of America ("Combined Insurance"), a subsidiary of the Company, or Ryan
Insurance Group, Inc. ("Ryan Group"), which merged with the Company in 1982.
Ages shown for all Directors are as of December 31, 1995. 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 Group 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 NBD Corporation, Chairman of the Board of Trustees of
Northwestern University and a Trustee of Rush-Presbyterian-St. Luke's Medical
Center. He serves as Chairman of the Executive Committee.
Age: 58
- --------------------------------------------------------------------------------
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.; Oshkosh Truck Corporation; Wolverine World
Wide, Inc.; and Woodhead Industries, Inc. He serves as a member of the
Organization and Compensation and the Nominating Committees.
Age: 69
- --------------------------------------------------------------------------------
3
<PAGE> 6
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 and Chairman of The
Chicago Human Relations Foundation. He serves as a member of the Investment and
Audit Committees.
Age: 69
- --------------------------------------------------------------------------------
EDGAR D. JANNOTTA Director since 1995
On January 2, 1996, William Blair & Company, L.L.C. converted from a partnership
at which time Mr. Jannotta was named Senior Principal. Prior to this conversion,
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; Molex
Incorporated; New York Stock Exchange, Inc.; Oil-Dri Corporation of America; and
Safety-Kleen Corp. He serves as a member of the Investment and the Organization
and Compensation Committees.
Age: 64
- --------------------------------------------------------------------------------
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.; Quaker Fabric Corporation; Tyler
Corporation; ITI Technologies, Inc.; Evergreen Media Corporation; and Stuart
Entertainment, Inc. He serves as a member of the Investment and Executive
Committees.
Age: 57
- --------------------------------------------------------------------------------
4
<PAGE> 7
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 Big Flower Press 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 as a member of the Audit Committee.
Age: 63
- --------------------------------------------------------------------------------
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 printer, converter, producer
and distributor of packaging and promotional materials; and a director of Dean
Foods Company, The First National Bank of Chicago, McDonald's Corporation,
Skyline Corporation, and the Tribune Company. He is Chairman of the Board of
Trustees of the University of Notre Dame and 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 Lyric Opera. He serves as a member of the
Investment and the Organization and Compensation Committees.
Age: 66
- --------------------------------------------------------------------------------
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: 69
- --------------------------------------------------------------------------------
5
<PAGE> 8
PEER PEDERSEN Director since 1974
Mr. Pedersen is an attorney at law and is Chairman and Managing Partner of the
Chicago law firm of Pedersen & Houpt, P.C. He is a director of Boston Chicken,
Inc.; Chr. Hansen's Laboratory, Inc.; Extended Stay America, Inc.; H2O Plus,
Inc.; Latin America Gross Fund, Inc.; 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
Boards 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 as a member of the Organization
and Compensation Committee.
Age: 70
- --------------------------------------------------------------------------------
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 & Telegraph Company, and
following the split-up of American Telephone & Telegraph on or about April 1,
1996, will be a director of Lucent Technologies, one of the successor companies;
Cummins Engine Company, Inc.; Current Assets; Illinova Corporation; Inland Steel
Industries, Inc.; 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. He serves as Chairman of the Organization
and Compensation Committee and as a member of the Investment Committee.
Age: 68
- --------------------------------------------------------------------------------
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 Chicago Symphony Orchestra and is a Trustee of
Rush-Presbyterian-St. Luke's Medical Center. He serves as a member of the Audit
and Investment Committees.
Age: 37
- --------------------------------------------------------------------------------
6
<PAGE> 9
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 the Organization and Compensation Committees.
Age: 67
- --------------------------------------------------------------------------------
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
serves as a member of the Executive Committee.
Age: 56
- --------------------------------------------------------------------------------
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: 62
- --------------------------------------------------------------------------------
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 University. 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 Santa Fe Corporation; Inland
Steel Industries, Inc.; PepsiCo, Inc.; Deere & Company; and the Tribune Company.
He serves as a member of the Investment and the Organization and Compensation
Committees.
Age: 66
- --------------------------------------------------------------------------------
7
<PAGE> 10
OWNERSHIP OF COMMON SHARES BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of Common Shares beneficially
owned February 28, 1996 by each Director including Patrick G. Ryan and Raymond
I. Skilling, by each of the other three most highly compensated executive
officers, and by all Directors and the Named Executives (as hereinafter defined)
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 the 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 under the Outside Director Deferred Compensation and
Stock Award Plans (see "Compensation of the Board of Directors"), the Aon
Deferred Compensation Plan (see "Executive Compensation"), or the Aon Stock
Award Plan (see "Organization and Compensation Committee Report--Long Term
Incentive Compensation--Aon Stock Award Plan").
<TABLE>
<CAPTION>
No. of Shares Percent of
Directors Beneficially Owned(1) Class(2)
- --------- --------------------- ----------
<S> <C> <C>
Patrick G. Ryan................................................ 13,463,477(4) 12.4
Daniel T. Carroll.............................................. 1,100 *
Franklin A. Cole............................................... 1,800 *
Edgar D. Jannotta.............................................. 24,900 *
Perry J. Lewis................................................. 2,000 *
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.(6)......................................... 1,875 *
George A. Schaefer............................................. 3,900 *
Raymond I. Skilling(7)......................................... 273,183(4) *
Fred L. Turner................................................. 2,137 *
Arnold R. Weber................................................ 1,050 *
Executive Officers
- ------------------
Michael A. Conway(7)(8)........................................ 9,899(4) *
Daniel T. Cox(7)............................................... 39,089(4) *
Harvey N. Medvin(7)............................................ 326,288(4) *
----------
All Directors and Executive Officers as a group (18 persons)... 14,230,776 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:
<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
Arnold R. Weber....................................... 900 Shared Shared
Michael A. Conway..................................... 7,350 Shared Shared
All Directors and Executive Officers as a group (other
than as indicated in note (3))...................... 9,949,800
</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.
8
<PAGE> 11
(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 Employee
Stock Ownership Plan ("ESOP"), but excludes beneficial interest in the Aon
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, totaled
6,366,057 Common Shares as of February 28, 1996. 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 held by it
as directed by its participants.
(5) Excludes 3,049,650 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) Ariel Capital Management, Inc., of which Mr. Rogers is President and
founder, does not beneficially own any Common Shares nor has it
beneficially owned any Common Shares during Mr. Roger's tenure on the Board
of the Company.
(7) Does not include shares awarded under the Aon Stock Award Plan which are not
yet vested. See "Summary Compensation Table."
(8) Excludes 569,100 Common Shares currently held by Aon Pension Plan for which
Mr. Conway is a trustee and has shared voting and investment power. The Aon
Pension Plan held 569,100 Common Shares as of December 31, 1994 and 569,100
Common Shares as of December 31, 1993.
Based on the Company's review of copies of Forms 3, 4 and 5 and amendments
thereto furnished to the Company since January 1, 1995 pursuant to the rules
promulgated under the Securities Exchange Act of 1934, the Company believes that
since January 1, 1995 all Directors and officers of the Company have timely
reported all transactions to the Securities and Exchange Commission subject only
to two exceptions. Both exceptions were due to administrative errors on the part
of the Company and not to any inadvertence on the part of any reporting person.
First, during 1995 all outside Directors other than Mr. Schaefer elected to
defer their compensation by the use of phantom stock accounts which do not
result in any immediate receipt of common stock in the Company and represent
only an unsecured right to receive Company stock or cash upon retirement from
the Board. The Company recently became aware that the SEC considers that such
arrangements should be reported, and accordingly the Forms 5 filed for all
relevant outside Directors for 1995 reported, albeit late, the election to defer
receipt of such compensation for 1993 and/or 1994. Second, the Form 3 for Mr.
Edgar D. Jannotta's initial report of his holding of common stock in the Company
was filed on May 16, 1995, being a few days later than the relevant date for
filing after his election to the Board less than one month earlier, on April 20,
1995.
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, the
Audit and the 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 ("outside Directors") receive $750 for each Board and Board
Committee meeting attended. Under the Aon Outside Director Stock Award Plan,
outside Directors are granted 450 Common Shares each year following their
election at the Annual Meeting of Stockholders (any outside Director elected to
the Board other than at the Annual Stockholders' Meetings receives a pro rata
number of Common Shares).
9
<PAGE> 12
Outside Directors may elect to defer cash compensation earned pursuant to
the Outside Director Deferred Compensation Plan (the "Plan"). Under the Plan,
outside 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 outside Directors' benefit. The
outside Directors' stock accounts are credited with the number of phantom shares
that could have been purchased at the average of the high and low price of the
Common Shares 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 outside 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
outside Director specifies a payout schedule, including a commencement date,
pursuant to which the Company will distribute to the outside Director the amount
in the outside Director's cash account and either the cash equivalent of the
amount in the outside Director's phantom stock account, or Aon common stock
equal to the number of shares of phantom stock.
Outside Directors may also elect to defer receipt of the Common Shares
received pursuant to the Outside Director Stock Award Plan 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 outside
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.
The following table shows, as of February 28, 1996, the total number of
Common Shares credited to the outside Directors' respective phantom stock
accounts under the Outside Director Deferred Compensation Plan and under the
Outside Director Stock Award Plan, in each case as described above.
<TABLE>
<CAPTION>
Number of
Phantom
Director Shares
-------- ---------
<S> <C>
Daniel T. Carroll............................................. 15,542
Franklin A. Cole.............................................. 20,101
Edgar D. Jannotta............................................. 1,052
Perry J. Lewis................................................ 3,069
Joan D. Manley................................................ 9,048
Andrew J. McKenna............................................. 15,451
Newton N. Minow............................................... 3,069
Peer Pedersen................................................. 16,567
Donald S. Perkins............................................. 8,374
John W. Rogers, Jr............................................ 2,646
Fred L. Turner................................................ 5,153
Arnold R. Weber............................................... 3,607
-------
Total............................................... 103,679
=======
</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 outside Directors, to recognize the mutual interest of the Company and its
outside 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 Bequest Plan primarily through life insurance
policies on its outside
10
<PAGE> 13
Directors. The charitable donations by the Company will be directed to
charitable institutions designated by the outside Directors. The Bequest Plan is
designed so that upon the deaths of specified outside Directors, it will then
donate a total of $100,000 per outside Director each year for ten years in the
name of the outside Director to tax qualified institutions designated by the
outside Director. Individual outside Directors derive no financial benefit from
the Bequest Plan since any and all insurance proceeds and tax deductible
charitable donations accrue solely to the Company. An outside Director is not
eligible to participate in the Bequest 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.
In 1994, the Company amended and restated the Outside Directors Stock Award
Plan (the "Plan") to include certain benefits for outside Directors when they
retire from the Board. The Plan provides that each outside Director will have
credited to his 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 outside Director attains mandatory retirement age
of 72. The benefit for the years of service commencing in 1994 will accrue in
full on each service anniversary date. The aggregate Retirement Account is
subject to vesting at a rate of 10% for each annual period of service.
Upon retirement from the Board, or upon death or disability, the value
accumulated in the Retirement Account as of that date will be distributed in ten
substantially equal installments consisting of Common Shares. Set forth below
are retirement benefits to which each nominee outside Director would be entitled
if such Director were to resign on April 19, 1996 or upon reaching mandatory
retirement age of 72.
<TABLE>
<CAPTION>
Annual Vested Annual Projected Benefit
Accrued Benefit as of Mandatory
Director as of 04/19/96(1) Retirement Age(1)
- -------- ----------------- ------------------------
<S> <C> <C>
Daniel T. Carroll...................................... 205 375
Franklin A. Cole....................................... 182 409
Edgar D. Jannotta...................................... 4 302
Perry J. Lewis......................................... 120 814
Joan D. Manley......................................... 133 627
Andrew J. McKenna...................................... 148 517
Newton N. Minow........................................ 82 200
Peer Pedersen.......................................... 243 344
Donald S. Perkins...................................... 182 409
John W. Rogers, Jr. ................................... 28 1,395
George A. Schaefer..................................... 55 340
Fred L. Turner......................................... 52 490
Arnold R. Weber........................................ 54 377
</TABLE>
- ------------
(1) Share balance calculated based upon the February 28, 1996 average of the
high and low market price of Aon common stock.
11
<PAGE> 14
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 since the last annual
meeting of the Board in 1995 has been 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 Edgar D. Jannotta Edgar D. Jannotta
Newton N. Minow Perry J. Lewis Andrew J. McKenna
John W. Rogers, Jr. Andrew J. McKenna Peer Pedersen
George A. Schaefer Newton N. Minow George A. Schaefer
Fred L. Turner Donald S. Perkins Arnold R. Weber
John W. Rogers,
Jr.
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 1995, but acted by unanimous written consent on three 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 four times during
1995.
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 1995.
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, stock holdings 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 met once during 1995 and
in connection therewith recommended to the Board that Mr. Jannotta be nominated
to serve on the Board of Directors for the term beginning April 20, 1995.
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 to the Chairman, President and Chief Executive Officer
12
<PAGE> 15
on the selection of senior officers of the Company and key executives of the
Company's major subsidiaries. The Organization and Compensation Committee met
three times during 1995 and acted by unanimous written consent on one occasion.
During 1995, 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 eight times during 1995.
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, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other Long- All
Annual Restrictive term Other
Compen- Stock Incentive Options/ Compen-
Name and Principal sation Award(s) Payouts SARs sation
Position Year Salary $ Bonus $ ($)(1) ($)(2) ($) (#) ($)(3)
------------------ ---- -------- ------- ------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick G. Ryan........... 1995 886,968(4) 742,500 163,697 50,000 53,396
Chairman, President, 1994 832,233 495,000 56,991 90,000 23,250
Chief Executive Officer 1993 822,013 310,000 64,732 29,764
& Director
Michael A. Conway......... 1995 339,512 120,000 15,000 19,562
Senior Vice President & 1994 297,267 168,000 14,315
Senior Investment 1993 278,288 79,500 14,108
Officer
Daniel T. Cox............. 1995 401,305 365,500 15,000 29,650
Executive Vice President 1994 401,447 205,400 16,543
1993 392,811 185,379 18,588
Harvey N. Medvin.......... 1995 428,600 361,250(4) 375,500 30,000 30,332
Executive Vice 1994 432,201 255,000 17,741
President, Chief 1993 426,328 160,000 18,661
Financial Officer &
Treasurer
Raymond I. Skilling....... 1995 428,600 361,250 375,500 15,000 30,332
Executive Vice 1994 430,904 255,000 17,741
President, Chief Counsel 1993 423,772 160,000 18,661
& Director
</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 1995, was in the
total amount of $163,697, consisting of $123,742 for use of Company aircraft
and $39,955 for the use of a Company car and driver.
13
<PAGE> 16
(2) As of December 31, 1995, the Named Executives held the following number of
unvested shares of restricted stock, the vesting schedule for which and the
market value (the average high and low price on the relevant date) of which
on the dates of grant and as of year-end 1995, respectively are set forth
below:
<TABLE>
<CAPTION>
Date of Last
No. Shares Grant December 31, 1995 Vesting
Unvested Value ($) Value Date
---------- --------- ----------------- ----------
<S> <C> <C> <C> <C>
Michael A. Conway..................... 13,500 $ 287,438 $ 671,625 11/16/2000
Daniel T. Cox......................... 36,000 826,125 1,791,000 04/19/2001
Harvey N. Medvin...................... 39,250 901,436 1,952,688 03/16/2005
Raymond I. Skilling................... 25,000 634,375 1,243,750 03/16/2005
</TABLE>
No dividends are paid on shares of unvested restricted stock.
(3) The amounts disclosed in this column include:
(a) Company contributions of $4,500 in fiscal 1995 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 $4,928 in fiscal year 1995 under the ESOP, on
behalf of each of the Named Executives.
(c) Company contributions of the following amounts in fiscal 1995 under the
Aon Supplemental ESOP on behalf of Mr. Ryan, $48,468; Mr. Conway,
$10,134; Mr. Cox, $20,222; Mr. Medvin, $20,904; and Mr. Skilling,
$20,904.
(4) Mr. Ryan deferred receipt of $651,462 of this amount and Mr. Medvin deferred
receipt of $90,313 of this amount pursuant to the Company's Deferred
Compensation Plan.
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 1995 by Named Executives.
<TABLE>
<CAPTION>
Number of Value of Unexercised In-
Shares Acquired Value(1) Options at the-Money Options/SAR's at
Name on Exercise Realized Fiscal Year-End Fiscal Year End(2)
---- --------------- -------- --------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Patrick G. Ryan........ -- $-0- -- 140,000 -- $2,121,253
Michael A. Conway...... -- $-0- -- 15,000 -- 236,875
Daniel T. Cox.......... -- $-0- -- 15,000 -- 236,875
Harvey N. Medvin....... -- $-0- -- 30,000 -- 413,751
Raymond I. Skilling.... -- $-0- -- 15,000 -- 236,875
</TABLE>
- ------------
(1) Based upon the average high and low price of the Common Shares as of the
date exercised.
(2) Based upon the average high and low price of the Common Shares as of
December 31, 1995.
14
<PAGE> 17
OPTION GRANTS IN 1995 FISCAL YEAR
During 1995, Mr. Ryan was the only Named Executive to be granted options to
purchase the Company's common stock. Subject to the terms of the Aon Stock
Option Plan as approved by Shareholders, additional information regarding these
options is set forth in the table below:
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
- ---------------------------------------------------------------------------------------- ----------------
Number of Percent of
securities total options
underlying granted to Exercise or
option employees base price Expiration Grant Date
Name granted in fiscal year ($/Sh) date Present Value(1)
- ---- --------- -------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Patrick G. Ryan.................. 50,000 6.2841 35.7500 03/16/02 $773,589
</TABLE>
- ------------
(1) Based upon the Black-Scholes Option Pricing Model assuming a risk free
interest rate of 5.75%, a dividend yield of 3.0% and that 392 days on
average elapse between vesting and exercise.
PENSION PLAN TABLE
The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age (65 years) under the Company's
qualified defined benefit pension plan, (the "Aon Pension Plan"), as well as
under the non-qualified supplemental pension plan, (the "Excess Benefit Plan").
The Excess Benefit Plan provides benefits that would otherwise be denied
participants by reason of certain Internal Revenue Code limitations on qualified
plan benefits, based on remuneration that is covered under the plans and years
of service with the Company and its subsidiaries:
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------------------
Remuneration($) 10 15 20 25 30 35 40
- --------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000.................... $ 30,500 $ 40,500 $ 50,500 $ 60,500 $ 70,500 $ 80,500 $ 90,500
400,000................... 61,000 81,000 101,000 121,000 141,000 161,000 181,000
600,000................... 91,500 121,500 151,500 181,500 211,500 241,500 271,500
800,000................... 122,000 162,000 202,000 242,000 282,000 322,000 362,000
1,000,000................... 152,500 202,500 252,500 302,500 352,500 402,500 452,500
1,200,000................... 183,000 243,000 303,000 363,000 423,000 483,000 543,000
1,400,000................... 213,500 283,500 353,500 423,500 493,500 563,500 633,500
1,600,000................... 244,000 324,000 404,000 484,000 564,000 644,000 724,000
1,800,000................... 274,500 364,500 454,500 544,500 634,500 724,500 814,500
</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 1995, and the aggregate of base salary and certain eligible bonus payments
for the 1993 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, 1995 is: Mr. Ryan $1,625,192 and 17 years; Mr. Conway $458,462 and
21 years; Mr. Cox $765,500 and 9 years; Mr. Medvin $786,250 and 17 years; and
Mr. Skilling $786,250 and 19 years. The annual pension amounts included in the
table above are based upon the following assumptions: (1) amounts are before
integration of Social Security benefits which, based upon maximum coverage in
effect on December 31, 1995, would reduce the annual amounts shown by: 10
years--$1,296; 15 years--$1,944; 20 years--$2,592; 25 years--$3,240; 30
years--$3,888; 35 years--$4,536; and 40 years--$4,536, (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.
15
<PAGE> 18
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"). In this capacity 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 1995 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.
The Compensation Committee regards the evaluation of the Chief Executive
Officer, Mr. Ryan, as a critical Board of Directors responsibility. As such, Mr.
Ryan's compensation is determined following an annual review of the Company's
performance conducted collectively, without Mr. Ryan, by all outside Directors
of the Company, which includes each of the seven independent members 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
achieved certain goals agreed to by Mr. Ryan and the outside Directors at the
beginning of such fiscal year.
In addition to the determination of the Chief Executive Officer's
compensation, as discussed above, the compensation of the other Named
Executives, Michael A. Conway, Daniel T. Cox, Harvey N. Medvin and Raymond I.
Skilling, is determined by the Compensation Committee in consultation with Mr.
Ryan.
The Compensation Committee has diligently promoted, over the last several
years, the belief that the compensation of the Company's executives should be
materially linked with the interests of shareholders. To this end, various
programs have been either formally adopted or utilized to a greater extent.
Specifically, the total compensation program is comprised of Base Salary, Short
Term Incentive Compensation, and Long Term Incentive Compensation.
Furthermore, in order to ensure that the compensation program is
competitive and appropriate, the Compensation Committee annually retains a
nationally recognized compensation consultant (the "Compensation Consultant")
unaffiliated with the Company. The Compensation Consultant assists the
Compensation Committee by providing an in-depth analysis of the compensation
policies and practices of the peer group companies and a comparison thereof to
the Company's. The peer group consists of the companies used to prepare the
Performance Graph following this report (the "Peer Group").
BASE SALARY
As previously disclosed 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. As a result of these findings the Committee decided to keep base salaries
essentially at prior year levels with some exceptions where performance or the
Named Executive's compensation relative to that of comparably situated
executives dictated otherwise. Retaining base salaries at essentially current
levels provided the Compensation Committee the opportunity and ability to shift
a greater portion of total compensation for the Named Executives to variable
performance based compensation in the form of Short Term and Long Term
Incentives.
SHORT TERM INCENTIVE COMPENSATION
Each Named Executive was eligible for an annual incentive award of up to
120% of the prior year's Base Salary. Such awards 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
16
<PAGE> 19
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.
Subjective performance criteria encompassed evaluation of each Named
Executive's initiative and contribution to overall corporate performance and any
special projects that the executive may have undertaken or was assigned.
Early in 1995 the Compensation Committee reviewed the 1994 performance of
each Named Executive in light of both the objective and subjective criteria
described above. Although in individual cases, the relative importance of
attaining certain goals in determining each Named Executive's annual incentive
award was weighted, there was no single weighting which applied to all Named
Executives. Furthermore, in conducting these reviews, the Compensation Committee
discussed with the Chief Executive Officer the performance of each of the Named
Executives.
With respect to the Chief Executive Officer in 1995, the Compensation
Committee placed the greatest weight on certain agreed upon goals relating to
the financial performance of the Company, for fiscal year 1994, which directly
related to the interests of shareholders. The Compensation Committee also
utilized, to a lesser extent, the Chief Executive Officer's achievement of
certain subjective performance goals that the Board of Directors, including the
members of the Compensation Committee, and the Chief Executive Officer believed
would contribute to the Company's long term performance. The Committee continues
to be impressed by the ability of Mr. Ryan to achieve short term results while
implementing a long term vision for the growth of the Company.
Accordingly, it is believed that the annual incentive awards paid in 1995
to Mr. Ryan, and the other Named Executives, are consistent with the Peer Group
considering both the Company's financial performance and the individuals'
respective performances and that in the aggregate the amount of awards fell
below the median of the Peer Group.
Finally, last year the stockholders approved the adoption of the 1995
Senior Officer Incentive Compensation Plan (the "Incentive Plan"). The Incentive
Plan is designed to permit amounts to be paid thereunder during fiscal year 1996
and thereafter to be excluded from compensation for purposes of determining
whether a given Named Executive's annual compensation exceeds the $1,000,000
threshold set forth in Section 162(m) of the Internal Revenue Code of 1986,
thereby enhancing the ability of the Company to deduct the full annual amount
paid to a Named Executive even though such Named Executive's total compensation
may exceed $1,000,000.
LONG TERM INCENTIVE COMPENSATION
Both the Aon Stock Award Plan and the Aon Stock Option Plan reward
executives for long term strategic management and subsequent enhancement of
shareholder value by providing the executive with an opportunity to acquire an
appropriate ownership interest in the Company.
Aon Stock Award Plan
Awards under the Aon Stock Award Plan are made based on the Compensation
Committee's and the Chief Executive Officer's assessment of an executive's past
performance, the Compensation Committee's appraisal of executive's skills and
other strengths, and the long term contribution the executive can make to the
Company's performance. In addition, in making awards the Compensation Committee
takes into consideration awards previously made to an executive, and the number
of awards outstanding in the aggregate to all award recipients.
The Compensation Committee and the Chief Executive Officer believe that the
attraction and retention of key individuals is vital to the long term
performance of the Company. The Aon Stock Award Plan has become a critical
factor in attaining this result. For example, awards are subject to a vesting
schedule which is designed to provide award recipients with a significant
incentive to continue their service with the Company.
17
<PAGE> 20
During fiscal year 1995, grants under the Aon Stock Award Plan were made to
two Named Executives as detailed in the Summary Compensation Table, while the
following Common Shares became vested pursuant to grants made in years prior to
1995.
<TABLE>
<CAPTION>
Shares(1) Values($)
--------- ---------
<S> <C> <C>
Patrick G. Ryan......................................................... -0- -0-
Michael A. Conway....................................................... 2,250 101,391
Daniel T. Cox........................................................... 6,750 266,157
Harvey N. Medvin........................................................ 6,750 246,000
Raymond I. Skilling..................................................... 3,750 161,484
</TABLE>
- ------------
(1) Includes shares which vested, but receipt of which was deferred pursuant to
the Aon Stock Award Plan. During 1995 Mr. Cox so deferred receipt of 6,750
shares and Mr. Medvin deferred receipt of 1,688 shares. Such shares are
credited to a bookkeeping account on a dividend reinvested basis. Mr. Cox's
and Mr. Medvin's balances as of December 31, 1995 were 6,869 shares and
1,718 shares, respectively.
Aon Stock Option Plan
In general, options under the Aon Stock Option Plan are granted on a
similar criteria to, and for similar purposes as, those for the granting of
awards under the Aon Stock Award Plan. For 1995, the Compensation Committee
continued its established practice of providing a portion of total compensation
in the form of Long Term Incentive Compensation such as grants under the Stock
Option Plan. As a result, in 1995, Mr. Ryan was granted options to purchase
50,000 Common Shares with an exercise price equal to the Common Shares market
value on the grant date. For more detailed information regarding the options
granted to Mr. Ryan refer to the table "Executive Compensation--Option Grants in
1995 Fiscal Year."
SUBMITTED BY THE ORGANIZATION AND COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS:
<TABLE>
<S> <C> <C>
Donald S. Perkins Daniel T. Carroll Edgar D. Jannotta
(Chairman) Andrew J. McKenna Peer Pedersen
George A. Schaefer Arnold R. Weber
</TABLE>
18
<PAGE> 21
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
AON CORPORATION AND PEER GROUP INDICES
FISCAL YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AON CORPO-
(FISCAL YEAR COVERED) RATION S&P 500 PEER GROUP
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 118.96 130.47 129.35
1992 168.13 140.41 158.24
1993 155.81 154.56 168.71
1994 160.77 156.60 171.31
1995 259.63 214.86 245.19
</TABLE>
(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 Companies, Inc.;
Travelers, Inc.; Torchmark; Transamerica Corporation; and UNUM Corporation.
Assumes that the value of the investment in Aon Common Shares and the Peer
Group index was $100 on December 31, 1990, 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.
19
<PAGE> 22
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, P.C., a law
firm of which Peer Pedersen is Chairman and Managing Partner, to perform certain
legal services during the year 1995 and anticipates that such firms may be
retained to perform legal services in 1996. Mr. Ryan has substantial ownership
interests in certain automobile dealerships which, during 1995, received
commissions of $80,201 from the sale of credit life and credit accident and
health insurance written by Company subsidiaries and paid premiums of $100,733
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 1995 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 1995, or is
expected to involve in 1996, 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 1995.
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 1996. 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 1996. 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 1997. Because of the difficulty
and expense of making any substitution of auditors for 1996 following the 1996
Annual Meeting, it is contemplated that the appointment for the year 1996 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 1996 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
20
<PAGE> 23
desires to do so, and is expected to be available to respond to any questions
which may be submitted at the meeting.
1997 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 1997,
stockholder proposals conforming to applicable rules and regulations must be
received by the Company not later than November 15, 1996. Such proposals should
be sent to the Corporate Secretary of the Company at the address listed on page
1 hereof.
AVAILABILITY OF 10-K REPORT
The Company will file its Annual Report on Form 10-K for the year ended
December 31, 1995, with the Securities and Exchange Commission on or before
April 1, 1996. 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
/s/ ARTHUR F. QUERN
---------------------------------
Arthur F. Quern
Corporate Secretary
Dated: March 9, 1996
21
<PAGE> 24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AON CORPORATION
Notice of
Annual Meeting of Stockholders
and Proxy Statement
FIRST CHICAGO CENTER
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS
APRIL 19, 1996 AT 10:00 A.M.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINTED IN THE U.S.A.
<PAGE> 25
<PAGE> 26
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 19, 1996.
The undersigned hereby appoints P.G. Ryan or R.I. Skilling, 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.,
Friday, April 19, 1996, 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 ITEM 2
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.
Jannotta, Joan D. Manley, Andrew J. McKenna, Newton N. Minow,
Perry J. Lewis, Peer Pedersen, Donald S. Perkins, 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 1996 COMMON SEE REVERSE
SIDE
PLEASE SIGN AND RETURN YOUR PROXY CARD PROMPTLY
IMPORTANT
THIS IS YOUR
PROXY CARD
CAREFULLY FOLD AND TEAR
ALONG PERFORATION
PLEASE RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED
- -------------------------------------------------------------------------------
[x] Please mark your 4909
votes as in this
example.
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 and 2.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- -------------------------------------------------------------------------------
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. Appointment of Ernst & Young as FOR AGAINST ABSTAIN
Company's independent auditors. [ ] [ ] [ ]
3. 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
