<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Aon Corporation
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(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):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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>
AON CORPORATION
- - - - - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF HOLDERS OF COMMON STOCK
AND SERIES C PREFERRED STOCK TO BE HELD APRIL 16, 1999
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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 16, 1999, 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. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF ALL
NOMINEES.
2. To adopt a resolution ratifying the appointment of Ernst & Young LLP as
the Company's independent auditors for the year 1999. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE RESOLUTION.
3. To transact such other business as may properly come before the meeting.
The close of business on Wednesday, February 24, 1999 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
[SIGNATURE]
Kevann M. Cooke
VICE PRESIDENT--CORPORATE SECRETARY
March 8, 1999
<PAGE>
AON CORPORATION
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 16, 1999
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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 16, 1999. 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, 1998, including financial statements, as well as an announcement regarding
the Company's new interactive stockholder information services, is being mailed
to stockholders together with this Proxy Statement beginning on or about March
8, 1999. No part of such Annual Report or such announcement 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
validate the enclosed proxy by mail, by telephone or by using the Internet so
that your shares will be represented. To validate a proxy by mail, please sign
the enclosed proxy and return it in the accompanying envelope. The envelope is
addressed and requires no postage. To validate a proxy by telephone or by using
the Internet please follow the instructions located on the proxy card. You may
revoke your proxy at any time before it is voted at the meeting. Each proxy duly
validated and received prior to the meeting and not otherwise revoked 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 validate
all such proxies in order to be sure that all of the shares so owned are voted.
All proxy procedures are designed to authenticate a stockholder's identity,
allow voting instructions to be given and confirm that instructions have been
properly recorded consistent with the requirements of applicable law. There may
be costs incurred by a stockholder for use of the Internet and the telephone
which are charged by Internet access providers and telephone companies.
If no specific direction is marked on a duly validated proxy as to the
manner of voting the proxy will be voted in accordance with the recommendations
of the Board of Directors set forth herein. Please see page 22 of this Proxy
Statement for more details regarding voting procedures.
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 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 of the Company.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on February 24, 1999, which is the record date
fixed for determination of stockholders entitled to vote at the meeting, there
were 170,793,734 Common Shares and 1,000,000 Preferred Shares outstanding, each
entitled to one vote.
As of February 24, 1999, 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
Name and Address Shares of Class
- - - - - - - - - - - - - - - - - - ----------------------------------------------------- ---------------- -----------
<S> <C> <C>
Patrick G. Ryan 20,572,146(1) 12.0
c/o Aon Corporation
123 North Wacker Drive
Chicago, IL 60606
Brinson Partners, Inc. 11,687,000(2) 6.8
209 S. LaSalle Street
Chicago, IL 60604
Capital Research and
Management Company 8,531,000(2) 5.0
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
<TABLE>
<CAPTION>
No. of Preferred Percent
Name and Address Shares of Class
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<S> <C> <C>
W. Clement Stone 400,000 40
c/o W. Clement Stone
Enterprises, Inc.
P.O. Box 649
Lake Forest, IL 60045
Jessie V. Stone 600,000 60
c/o W. Clement Stone
Enterprises, Inc.
P.O. Box 649
Lake Forest, IL 60045
</TABLE>
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(1) Includes 14,909,625 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"), 2,531
shares beneficially owned under the ESOP Account of the Aon Savings Plan and
allocated to Mr. Ryan, and 197,120 shares beneficially owned and attributed
to Mr. Ryan pursuant to his investment in the Aon Common Stock Fund of the
Aon Savings Plan. Mr. Ryan, Mrs. Ryan and their 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 867,500 Common Shares held of record and
beneficially owned by Mrs. Ryan; Mr. Ryan disclaims any beneficial interest
in those shares. Under the terms of the separate ESOP Account of the Aon
Savings Plan and under other terms of the Aon Savings Plan, as a participant
in such plans Mr. Ryan is entitled to direct the manner in which the
trustees will vote the shares allocated to him. Also includes 177,000 shares
which Mr. Ryan has the right to acquire pursuant to presently exercisable
stock options and options which will become exercisable within 60 days of
February 24, 1999.
(2) Includes to the best knowledge of the Company all shares beneficially owned
by its parents, subsidiaries and affiliates.
2
<PAGE>
AGENDA ITEM NO. 1
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 seventeen 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
nominees are currently Directors of the Company, except Mr. Knight and Mr.
O'Halleran, who have 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 affect 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, 1998. There are no nominees
for the Board other than the management nominees.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ELECTION OF ALL NOMINEES.
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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. He is a director of the
Tribune Company and Sears, Roebuck and Co. and serves as Chairman of the Board
of Trustees of Northwestern University and as a Trustee of Rush-Presbyterian-St.
Luke's Medical Center. He serves as Chairman of the Executive Committee of the
Company.
Age: 61
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DANIEL T. CARROLL Director since 1980
Mr. Carroll has been Chairman of The Carroll Group, a management consulting
firm, since 1982. 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.; Diebold, Inc.; Oshkosh Truck
Corporation; Wolverine World Wide, Inc.; and Woodhead Industries, Inc. He serves
as a member of the Audit Committee and the Investment Committee of the Company.
Age: 72
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3
<PAGE>
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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 CNA Income Shares, Inc.; Duff & Phelps
Utilities Income Inc.; and Local Initiatives Support Corporation. He is a Life
Trustee of Northwestern University and Chairman of The Human Relations
Foundation of Chicago. He serves as a member of the Audit Committee and the
Investment Committee of the Company.
Age: 72
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EDGAR D. JANNOTTA Director since 1995
On January 2, 1996, William Blair & Company, L.L.C., an international investment
banking firm, converted from a partnership at which time Mr. Jannotta was named
Senior Director. 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;
Molex Incorporated; Oil-Dri Corporation of America; and Unicom Corporation. He
serves as a member of the Organization and Compensation Committee and the
Investment Committee of the Company.
Age: 67
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LESTER B. KNIGHT Nominee
Mr. Knight became Vice Chairman and a director of Cardinal Health, Inc., a
diversified healthcare service company, in February 1999 when Cardinal merged
with Allegiance Corporation, the 1996 spin-off company from Baxter
International, Inc. Mr. Knight was Chairman of the Board and Chief Executive
Officer of Allegiance from 1996 until February 1999, and had been with Baxter
from 1981 until 1996 where he served as corporate vice president from 1990,
executive vice president from 1992, and as a director from 1995. He is Chairman
and a director of The Baxter Allegiance Foundation. He is a director of Evanston
Northwestern Healthcare and Junior Achievement of Chicago. He is a Trustee of
Northwestern University and the Lincoln Foundation for Business Excellence.
Age: 40
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4
<PAGE>
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PERRY J. LEWIS Director since 1972
Mr. Lewis has been a Partner of Morgan Lewis Githens & Ahn, an investment
banking firm, for more than sixteen years. 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 Chancellor Media Corporation; Gradall Industries, Inc.; ITI
Technologies, Inc.; and Stuart Entertainment, Inc. Mr. Lewis is President of the
Performing Arts Center Foundation, Inc. and serves as a director of The Aldrich
Museum of Contemporary Art. He serves as a member of the Audit Committee and the
Investment Committee of the Company.
Age: 60
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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 has been Chairman of
Schwarz Paper Company, a printer, converter, producer and distributor of
packaging and promotional materials, since 1979, Chief Executive Officer since
1967 and served as President from 1964 to 1995. He serves as a director of Dean
Foods Company, 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 Emeritus and a Trustee 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 Chairman of the Nominating Committee and as a member of the
Executive Committee and the Organization and Compensation Committee of the
Company.
Age: 69
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NEWTON N. MINOW Director since 1990
Mr. Minow, since 1991, has been 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 Big
Flower Press Holdings Inc.; and Manpower, Inc. Mr. Minow is former Chairman of
the Carnegie Corporation of New York, an Advisory 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 Life Trustee of the University of Notre Dame and is
the Annenberg Professor of Communications and Law at Northwestern University. He
serves as a member of the Organization and Compensation Committee and the
Nominating Committee of the Company.
Age: 72
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5
<PAGE>
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RICHARD C. NOTEBAERT Director since 1998
Mr. Notebaert has been Chairman of the Board, President and Chief Executive
Officer of Ameritech Corporation, a full-service communications company, since
April 1994. Mr. Notebaert served as President and Chief Executive Officer of
Ameritech Corporation from January 1994 to April 1994, as President and Chief
Operating Officer from June 1993 to January 1994 and as Vice Chairman from
January 1993 to June 1993. Mr. Notebaert is a director of Sears, Roebuck and
Co., a Charter Trustee of Northwestern University, a Trustee of the University
of Notre Dame and the Chicago Symphony Orchestra. He is currently a member of
The Business Council, The Business Roundtable, The Council on Competitiveness,
The Chicago Council on Foreign Relations, The Civic Committee of The Commercial
Club of Chicago and The Economic Club of Chicago. He serves as a member of the
Organization and Compensation Committee and the Investment Committee of the
Company.
Age: 51
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MICHAEL D. O'HALLERAN Nominee
Mr. O'Halleran is President and Chief Operating Officer of Aon Group, Inc., the
global insurance brokerage and consulting unit of the Company. He has held his
current position since 1995, served in other significant senior management
positions within the Aon group of companies since 1987 and has more than 25
years of experience in the insurance and reinsurance industries. Mr. O'Halleran
is a director of Cardinal Health, Inc. and served as a director of Allegiance
Corporation prior to its merger with Cardinal Health in February, 1999. He is
also a director of Optimark Technologies, Inc. and the College of Insurance. He
serves on the Arts and Letters Advisory Board at the University of Notre Dame
and is a trustee of Dublin City University in Dublin.
Age: 48
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DONALD S. PERKINS Director since 1983
Mr. Perkins retired from Jewel Companies Inc., a diversified retailer, 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 its
Executive Committee until his retirement. He is a director of Cummins Engine
Company, Inc.; LaSalle Hotel Properties; LaSalle Street Fund, Inc.; LaSalle U.S.
Realty Income & Growth Fund, Inc.; Lucent Technologies; Nanophase Technologies;
The Putnam Funds; Ryerson Tull, Inc.; and Springs Industries, 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
Nominating Committee of the Company.
Age: 71
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6
<PAGE>
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JOHN W. ROGERS, JR. Director since 1993
Mr. Rogers is President of Ariel Capital Management, Inc., an institutional
money management firm which he founded in 1983. Ariel Capital Management also
serves as the investment advisor, administrator and distributor for Ariel Mutual
Funds. He is also a director of Bank One Corporation; Burrell Communications
Group Inc.; and GATX Corporation. Mr. Rogers is President of the Board of
Commissioners of the Chicago Park District; Director of the Chicago Urban
League; Former Member of the Board of Governors of the National Association of
Securities Dealers, Inc.; Trustee of Rush-Presbyterian-St. Luke's Medical
Center; Board Member of the Chicago Symphony Orchestra; Director of Family
Focus, Inc.; Member of the Council on the Graduate School of Business of the
University of Chicago; and a former member of the Board of Trustees of Princeton
University. He serves as a member of the Audit Committee and the Investment
Committee of the Company.
Age: 40
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GEORGE A. SCHAEFER Director since 1991
Mr. Schaefer is a Director of Caterpillar Inc., the construction machinery and
equipment manufacturing company. He served as Chairman and Chief Executive
Officer of Caterpillar from 1985 until his retirement in July, 1990 and served
in other senior management positions during the course of his career with
Caterpillar which began in 1951. He is a director of Helmerich & Payne, Inc. and
an honorary member of The Business Council. He serves as Chairman of the Audit
Committee and as a member of the Organization and Compensation Committee of the
Company.
Age: 70
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RAYMOND I. SKILLING Director since 1977
Mr. Skilling has served as Executive Vice President and Chief Counsel of the
Company since 1980. Between 1976 and 1980 he served as Executive Vice
President--Planning and Implementation. Prior to that 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 of the Company.
Age: 59
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7
<PAGE>
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FRED L. TURNER Director since 1991
Mr. Turner is Senior Chairman and a director of McDonald's Corporation, the
international fast food restaurant franchising company. 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 a member of Ronald McDonald House Charities. He serves as a member of the
Organization and Compensation Committee and as Chairman of the Investment
Committee of the Company.
Age: 65
- - - - - - - - - - - - - - - - - - --------------------------------------------------------------------------------
ARNOLD R. WEBER Director since 1991
Dr. Weber is President Emeritus of Northwestern University, where he served as
President from 1985 until 1994 and as Chancellor from January 1, 1995. From 1980
to 1985, Dr. Weber was President of the University of Colorado. Dr. Weber has
also held various senior federal 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 is a trustee of the University of Notre Dame. He serves
as a member of the Audit Committee and the Investment Committee of the Company.
Age: 69
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DR. CAROLYN Y. WOO Director since 1998
Dr. Woo assumed the deanship of the College of Business at the University of
Notre Dame in July 1997. From 1995 to 1997, she served as Associate Executive
Vice President of Academic Affairs at Purdue University and from 1993 to 1995 as
Director of the Professional Master's Programs in the Krannert School of
Management at Purdue University. She joined Purdue University as an Assistant
Professor in 1981 and was promoted to Full Professor in 1991. Dr. Woo currently
serves on the Board of Directors of Arvin Industries Inc.; Bindley-Western
Industries, Inc.; and of NIPSCO Industries, Inc. She serves as a member of the
Audit Committee and the Nominating Committee of the Company.
Age: 44
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8
<PAGE>
OWNERSHIP OF COMMON SHARES
The following table sets forth the number of Common Shares beneficially
owned as of February 24, 1999 by each Director, each nominee for Director, by
the Chief Executive Officer Patrick G. Ryan and by each of the other four most
highly compensated executives (the "Named Executives"), and by all Directors,
nominees and the Named Executives combined. Named Executives are indicated by a
double asterisk. As used in this Proxy Statement, "beneficially owned" means a
person has, or may have within 60 days, 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,
the Aon Supplemental Savings Plan (see "Executive Compensation"), or the Aon
Stock Award Plan (see "Organization and Compensation Committee Report--Long Term
Incentive Compensation") except as noted in footnote 8.
<TABLE>
<CAPTION>
No. of Shares
Beneficially Percent of
Name of Beneficial Owner Owned(1) Class(2)
- - - - - - - - - - - - - - - - - - -------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Patrick G. Ryan**(3)(4)(8)...................................................... 20,572,146 12.0
Daniel T. Carroll(9)............................................................ 2,475 *
Franklin A. Cole(9)............................................................. 2,700 *
Daniel T. Cox**(3)(4)(7)(8)..................................................... 67,730 *
Edgar D. Jannotta(9)............................................................ 37,350 *
Lester B. Knight(9)............................................................. 10,000 *
Perry J. Lewis(9)............................................................... 4,500 *
Andrew J. McKenna(9)............................................................ 17,850 *
Harvey N. Medvin**(3)(4)(7)(8)(10).............................................. 641,617 *
Newton N. Minow(3)(9)........................................................... 90,030 *
Richard C. Notebaert(9)......................................................... 1,000 *
Michael D. O'Halleran**(3)(4)(7)................................................ 104,991 *
Donald S. Perkins(5)(9)......................................................... 6,975 *
John W. Rogers, Jr.(6)(9)....................................................... 3,762 *
George A. Schaefer(9)........................................................... 5,850 *
Raymond I. Skilling**(3)(4)(7)(8)............................................... 452,669 *
Fred L. Turner(9)............................................................... 3,205 *
Arnold R. Weber(9).............................................................. 1,575 *
Carolyn Y. Woo(9)............................................................... 675 *
All Directors and Named Executives combined (19 persons)........................ 22,025,098 12.8
</TABLE>
- - - - - - - - - - - - - - - - - - ---------
(1) The Directors and Named Executives, and all Directors and the Named
Executives combined, 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.................................................. 14,909,625 Shared Shared
Franklin A. Cole................................................. 2,700 Shared Shared
Arnold R. Weber.................................................. 1,575 Shared Shared
Michael D. O'Halleran............................................ 25,992 Shared Shared
</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.
9
<PAGE>
(3) Includes the following Common Shares beneficially owned by members of the
immediate family of the directors and Named Executives: 867,500 by Mrs.
Ryan; 3,650 by Mrs. Cox; 650 by Mr. Cox's son; 3,375 by Mrs. Medvin; 33,750
by Mrs. Minow; 67,734 by Mrs. O'Halleran; and 249,889 by Mrs. Skilling (Mrs.
Skilling and Mrs. Ryan are sisters). As to the Common shares so held, the
directors and Named Executives disclaim beneficial ownership.
(4) Includes beneficial interest in the allocated shares of the ESOP Account of
the Aon Savings Plan, and includes beneficial interest in attributable
shares of the Aon Common Stock Fund of the Aon Savings Plan. The shares of
the ESOP Account and the Aon Common Stock Fund of the Aon Savings Plan are
voted by the trustees as directed by their respective participants.
(5) Excludes 6,921,857 Common Shares held in trust by The Putnam Funds 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 of 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." Also does not include shares
awarded which have vested but receipt of which have been deferred under the
Aon Stock Award Plan. Such shares are credited to a bookkeeping account on a
dividend reinvested basis. Accumulated balances as of December 31, 1998 were
as follows: Mr. Cox, 21,669; Mr. Medvin, 13,652; Mr. O'Halleran, 4,581.
(8) Includes the following number of Common Shares which the respective
Directors and Named Executives will have the right to acquire pursuant to
presently exercisable employee stock options, or stock options or stock
awards which will become exercisable or vested within 60 days following
February 24, 1999: Patrick G. Ryan, 177,000; Daniel T. Cox, 24,375; Harvey
N. Medvin, 41,875; Raymond I. Skilling, 10,500.
(9) Does not include the number of Common Shares equal to $50,000 which each
Outside Director will be awarded on April 16, 1999 pursuant to the Aon
Outside Director Stock Award Plan. See "Compensation of the Board of
Directors."
(10) Excludes 6,500 shares owned by a charitable foundation for which Mrs.
Medvin acts as a trustee and has shared voting and investment control.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of copies of Forms 3, 4 and 5 and amendments
thereto furnished to the Company since January 1, 1998, all Directors and
officers of the Company have timely reported all transactions to the Securities
and Exchange Commission, except only that the Form 4 concerning Mr. Medvin's
exercise of an option to purchase 1,000 Common Shares in May, 1998 was filed the
following month after the tenth day of that month.
COMPENSATION OF THE BOARD OF DIRECTORS
CASH COMPENSATION AND STOCK AWARDS
Prior to October 1, 1998, each Director not a salaried employee of the
Company (an "outside Director") received a $20,000 yearly retainer for services
to the Board of Directors. In addition, the Chairman of each of the Nominating,
the Organization and Compensation, the Audit, and the Investment committees
received an additional $2,500 annual retainer for services in such capacity, and
each outside Director received $750 for each Board and Board Committee meeting
attended. Effective
10
<PAGE>
October 1, 1998, each outside Director receives a $30,000 yearly retainer for
services to the Board of Directors. No additional fees are payable for Board or
committee meeting attendance or for service chairing a committee.
Under the Aon Outside Director Stock Award Plan (as amended) (the "Award
Plan"), each outside Director is granted a number of Common Shares equal to
$50,000 each year following their election to the Board of Directors at the
annual meeting of stockholders. Any outside Director elected to the Board other
than at the annual stockholder's meeting receives a pro rata number of Common
Shares based upon the number of full months of service. Previously, each outside
Director was granted 675 Common Shares (as adjusted for the May 1997 stock
split).
In addition, under the Award Plan, outside Directors are also entitled to
certain deferred benefits when they retire from the Board. The Award Plan
provides for an amount to be credited to an account on behalf of each outside
Director, as follows:
(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 will accrue pro rata over the number of years between 1994
and the April of the year following each Director's 72nd birthday. The benefit
for the years of service commencing in 1994 will accrue in full on each service
anniversary date. Upon retirement from the Board, or upon death or disability,
the vested value accumulated in the account as to a particular outside Director
(the "Accrued Vested Retirement Amount") will be distributed in ten
substantially equal installments consisting of Common Shares.
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 generally through the maintenance of
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 Bequest Plan is designed so that upon the deaths of
specified outside Directors, it will then donate a maximum 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. 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.
DEFERRED COMPENSATION
Pursuant to the outside Director Deferred Compensation Plan (the "Deferred
Plan"), and pursuant to the Award Plan, outside Directors may defer cash
compensation and Common Shares earned into phantom stock accounts, the value of
which is measured by reference to Common Shares.
Under the Deferred Plan, outside Directors elect that portion of the annual
retainer (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
11
<PAGE>
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 and paid on 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 Common Shares equal to the number of shares of phantom stock.
Under the Award Plan, outside Directors may also elect to defer receipt of
annual award of Common Shares and instead maintain a phantom stock account. As
dividends are declared on 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 received and the funds so credited
are treated as if reinvested in Common Shares. 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.
Although not required under relevant proxy rules, each year since 1993 the
Company has voluntarily reported to stockholders the total number of shares
credited to the outside Directors' respective phantom stock accounts under the
Deferred Plan and under the Award Plan ("Phantom Shares"), and the number of
Common Shares representing the Accrued Vested Retirement Amount (the "Retirement
Shares") for each outside Director under the Award Plan. The following table
shows all such account balances as of December 31, 1998:
<TABLE>
<CAPTION>
Phantom Retirement
Director Shares Shares
- - - - - - - - - - - - - - - - - - ---------------------------------------------------------------- --------- -----------
<S> <C> <C>
Daniel T. Carroll............................................... 28,710 4,750
Franklin A. Cole................................................ 36,247 4,222
Edgar D. Jannotta............................................... 5,849 392
Lester B. Knight................................................ n/a n/a
Perry J. Lewis.................................................. 6,980 2,771
Andrew J. McKenna............................................... 28,953 3,430
Newton N. Minow................................................. 8,685 3,166
Richard C. Notebaert............................................ 1,141 n/a
Donald S. Perkins............................................... 17,637 4,222
John W. Rogers, Jr. ............................................ 7,351 1,070
George A. Schaefer.............................................. 3,900 1,794
Fred L. Turner.................................................. 12,474 1,679
Arnold R. Weber................................................. 9,377 1,755
Carolyn Y. Woo.................................................. n/a n/a
--------- -----------
Total................................................... 167,304 29,251
</TABLE>
The Company intends to continue to make this voluntary disclosure in future
years.
12
<PAGE>
THE BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Board of Directors of the Company has appointed standing committees,
including Executive, Audit, Investment, Organization and Compensation, and
Nominating committees. Membership on the committees since the last annual
meeting of the Board in 1998 has been as follows:
<TABLE>
<CAPTION>
Organization and
Executive Audit Investment Compensation Nominating
- - - - - - - - - - - - - - - - - - ------------------ -------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Patrick G. Ryan(1) George A. Fred L. Turner(1) Donald S. Andrew J. McKenna(1)
Schaefer(1) Perkins(1)
Andrew J. McKenna Daniel T. Carroll Daniel T. Carroll Edgar D. Jannotta Newton N. Minow
Raymond I. Franklin A. Cole Franklin A. Cole Andrew J. McKenna Donald S. Perkins
Skilling
Perry J. Lewis Edgar D. Jannotta Newton N. Minow Carolyn Y. Woo
John W. Rogers Jr. Perry J. Lewis Richard C.
Notebaert
Arnold R. Weber Richard C. George A. Schaefer
Notebaert
Carolyn Y. Woo John W. Rogers Jr. Fred L. Turner
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 met twice
during 1998, and 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 three times during
1998.
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 1998.
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 regarding 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 8, 1999 in
order to be considered in connection with the annual meeting of the Company's
stockholders in the spring of 2000. The Nominating Committee met twice during
1998 to consider an increase in the authorized number of directors from fifteen
to seventeen, to be effective April 16, 1999, and to consider nominees for the
two new director positions. The Committee members, together with the full Board,
unanimously approved the increase in the number of authorized directors and
recommended Lester B. Knight and Michael D. O'Halleran as nominees for election
at the annual meeting of the Company to be held on April 16, 1999.
The Organization and Compensation Committee annually reviews and determines
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 Aon Stock Option Plan, the Aon Stock Award Plan and the Aon 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
13
<PAGE>
Compensation Committee also renders advice and counsel 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 1998.
The Board of Directors met six times during 1998 and acted by unanimous
written consent on two occasions. 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.
EXECUTIVE COMPENSATION
The following table discloses compensation received by the Company's Chief
Executive Officer and the other Named Executives for the three fiscal years
ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------------------- ----------------------------------
Other All
Annual Restrictive Other
Compen- Stock Compen-
Name and Principal sation Award(s) Options sation
Position Year Salary $ Bonus $ $ ($)(1) (#) ($)(2)
- - - - - - - - - - - - - - - - - - --------------------------------------- --------- ---------- ---------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Patrick G. Ryan........................ 1998 1,088,461 1,890,000 271,635(3) 215,000 363,771
Chairman, President, Chief 1997 1,032,692 731,250 258,114 225,000 187,637
Executive Officer & Director 1996 957,692 1,620,000 178,659 100,000 184,513
Daniel T. Cox.......................... 1998 464,230 600,750 20,000 132,927
Executive Vice President 1997 439,231 456,750 91,617
1996 415,385 528,000 515,000 72,244
Harvey N. Medvin....................... 1998 533,076 765,000 20,000 145,219
Executive Vice President, 1997 501,923 356,250 25,000 95,893
Chief Financial Officer & Treasurer 1996 463,462 637,500 772,500 22,500 86,142
Michael D. O'Halleran(4)............... 1998 884,615 1,125,000 2,615,625 241,090
President & Chief Operating 1997 750,000 582,500 125,623
Officer of Aon Group, Inc. 1996 750,000 850,000 302,630 1,490,625 525,611
Raymond I. Skilling.................... 1998 529,230 765,000 164,430
Executive Vice President, 1997 501,923 356,250 650,625 35,000 97,376
Chief Counsel & Director 1996 463,462 637,500 87,550
</TABLE>
- - - - - - - - - - - - - - - - - - ---------
(1) As of December 31, 1998, the Named Executives held the following number of
unvested shares of restricted stock granted pursuant to the Aon Stock Award
Plan, 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 1998 are respectively set forth below:
<TABLE>
<CAPTION>
No. Shares Date of Grant December 31, 1998 Last Vesting
Unvested Value ($) Value Date
----------- ------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Patrick G. Ryan............................. -0- -0- -0- -0-
Daniel T. Cox............................... 34,125 836,375 1,889,672 March 14, 2006
Harvey N. Medvin............................ 39,000 1,136,500 2,159,625 March 14, 2006
Michael D. O'Halleran....................... 193,128 6,153,910 10,694,462 January 2, 2008
Raymond I. Skilling......................... 27,000 936,625 1,495,125 March 20, 2007
</TABLE>
No dividends are paid on shares of unvested restricted stock.
(2) Amounts disclosed in this column include:
(a) Company contributions of $15,446 in fiscal year 1998 under the Aon
Savings Plan, a defined contribution plan, on behalf of each of the Named
Executives.
14
<PAGE>
(b) Company contributions of the following amounts in fiscal year 1998 under
the Aon Supplemental Savings Plan on behalf of Mr. Ryan, $272,091; Mr.
Cox, $87,366; Mr. Medvin, $91,406; Mr. O'Halleran, $178,560; and Mr.
Skilling, $109,497.
(c) Company contributions of the following amounts in fiscal year 1998 under
the Aon Executive Life Insurance Plan, a split-dollar arrangement, on
behalf of Mr. Ryan, $76,234; Mr. Cox, $30,115; Mr. Medvin, $38,368; Mr.
O'Halleran, $47,084; and Mr. Skilling $39,487.
(3) Represents the value of personal use of a company-owned automobile and
aircraft.
(4) Mr. O'Halleran and a subsidiary of the Company have entered into an
employment contract which provides for employment terminable with or without
cause, and: an annual base salary of not less than $750,000; stock awards in
the amount of 20,000 shares (subject to subsequent stock splits) which were
made on January 1 of 1994, 1996 and 1998; restrictive covenants and
confidentiality provisions for the benefit of the Company; additional
compensation upon death or disability or upon termination without cause
equal to one times annual base salary; and additional compensation of
$750,000 per year for two years upon termination without cause conditioned
on compliance with the restrictive covenants. The contract renews each year
unless notice of non-renewal is given not less than 30 days prior to
December 31 of each year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
The following table provides information on stock option exercises in fiscal
1998 by each of the Named Executives:
<TABLE>
<CAPTION>
Value of Unexercised
Shares Subject to In-the-Money Options
Shares Value Options Fiscal Year-End at Fiscal Year End($)(2)
Acquired Realized -------------------------- --------------------------
Name on Exercise ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- - - - - - - - - - - - - - - - - - ------------------------------ ------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Patrick G. Ryan............... -0- -0- 90,000 710,000 2,919,375 9,721,881
Daniel T. Cox................. -0- -0- 11,250 31,250 368,281 368,281
Harvey N. Medvin.............. 3,500 149,889 19,000 90,000 621,986 1,268,593
Michael D. O'Halleran......... -0- -- -0- -0- -- --
Raymond I. Skillilng.......... -0- -- 4,500 46,250 147,312 450,311
</TABLE>
- - - - - - - - - - - - - - - - - - ---------
(1) Based upon the average high and low price of the Common Shares as of the
date exercised.
(2) Based upon the average high and low price of the Common Shares as of
December 31, 1998.
15
<PAGE>
OPTION GRANTS IN 1998 FISCAL YEAR
Information regarding options to purchase shares of the Company's Common
Stock which were granted to Named Executives during 1998 is set forth below. All
such options are subject to the terms of the Aon Stock Option Plan (1).
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
- - - - - - - - - - - - - - - - - - ------------------------------------------------------------------------------------------------- ---------------
Number of Percent of
securities total options
underlying granted to Exercise or Grant Date
option employees in base price Expiration Present
Name granted fiscal year ($/Sh) Date Value($)(2)
- - - - - - - - - - - - - - - - - - ------------------------------------------ ----------- ------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Patrick G. Ryan........................... 215,000 14.70 65.00 3/20/2008 3,539,397
Daniel T. Cox............................. 20,000 1.37 65.00 3/20/2008 329,246
Harvey N. Medvin.......................... 20,000 1.37 65.00 3/20/2008 329,246
Michael D. O'Halleran..................... -0- -0- -- -- --
Raymond I. Skilling....................... -0- -0- -- -- --
</TABLE>
- - - - - - - - - - - - - - - - - - ---------
(1) The total amount of shares disclosed in the above table will vest for each
person in accordance with the normal vesting schedule as follows: On March
20, 2001, 30% of the total granted; on March 20, 2002, 20% of the total
granted; on March 20, 2003, 20% of the total granted; and on March 20, 2004,
30% of the total granted.
(2) Based upon the Black-Scholes Option Pricing Model assuming a volatility rate
of 20%, a risk-free interest rate of 6%, a dividend yield of 2% and that
1.35 years on average elapse between vesting and exercise.
PENSION PLAN TABLE
The following table shows the estimated annual pension benefits payable to a
covered participant at normal retirement age (65 years) under the Company's
qualified defined benefit pension plan (the "Aon Pension Plan"), as well as
under the non-qualified supplemental pension plan (the "Excess Benefit Plan").
The Excess Benefit Plan provides benefits that would otherwise be denied
participants by reason of certain Internal Revenue Code limitations on qualified
plan benefits, based on remuneration that is covered under the plans and years
of service with the Company and its subsidiaries:
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------------------------------------
Remuneration ($) 10 15 20 25 30 35 40
- - - - - - - - - - - - - - - - - - ----------------------- --------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1,000,000.............. 156,138 200,783 245,428 290,073 334,718 375,411 420,708
1,250,000.............. 195,574 251,584 307,593 363,603 419,613 470,649 527,310
1,500,000.............. 235,010 302,385 369,760 437,134 504,509 565,887 633,913
1,750,000.............. 274,446 353,186 431,925 510,665 589,404 661,124 740,515
2,000,000.............. 313,882 403,987 494,091 584,196 674,300 756,362 847,118
2,250,000.............. 353,318 454,788 556,257 657,727 759,196 851,600 953,721
2,500,000.............. 392,755 505,589 618,423 731,257 844,092 946,837 1,060,323
2,750,000.............. 432,191 556,390 680,589 804,788 928,987 1,042,075 1,166,926
3,000,000.............. 471,627 607,191 742,755 878,319 1,013,883 1,137,313 1,273,528
</TABLE>
A participant's remuneration covered by the Aon Pension Plan and the Excess
Benefit Plan is the average of 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
16
<PAGE>
period of employment with the Company and its subsidiaries. Covered compensation
and the estimated years of service for each individual comprising the Named
Executives as of December 31, 1998 are: Mr. Ryan $2,978,461 and 20 years; Mr.
Cox $1,064,980 and 12 years; Mr. Medvin $1,298,076 and 20 years; Mr. O'Halleran
$2,009,615 and 10 years; and Mr. Skilling $1,294,230 and 22 years. The annual
pension amounts included in the table above are based upon the following
assumptions: (1) retiring participants have attained age 65 and are fully
vested, and (2) retiring participants have chosen to have benefits payable as
straight life annuities.
ORGANIZATION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
PHILOSOPHY
The Company's executive compensation program is designed to attract, retain
and motivate top quality and experienced individuals. The program provides
competitive compensation opportunities while supporting a pay for performance
culture that emphasizes at risk compensation. As such the program is heavily
oriented toward incentive compensation tied to both short and long term
financial goals which are considerably linked to the interests of stockholders.
The executive compensation program is administered by the Organization and
Compensation Committee of the Board (the "Compensation Committee") consisting
entirely of outside Directors. In this capacity the Compensation Committee
determines the compensation for the Company's Chief Executive Officer, Patrick
G. Ryan, and the compensation of the other Named Executives in consultation with
Mr. Ryan. In addition, the Compensation Committee advises and consults with Mr.
Ryan regarding the compensation of other officers and key employees.
COMPONENTS
There are three distinct components to the executive compensation program:
- Base Salary
- Short Term Incentive Compensation
- Long Term Incentive Compensation
BASE SALARY
Base salaries for the Named Executives are established at levels considered
appropriate in light of the executives' responsibilities and performance versus
the competitive market. In 1998, the median increase in base salary for the
Named Executive Officers as a group was 5.62% which reflected both the
competitive labor market and the Company's favorable performance during 1997.
SHORT TERM INCENTIVE COMPENSATION
During 1995, the stockholders approved 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
qualify as performance based compensation as that term is defined in Section
162(m) of the Internal Revenue Code of 1986, thereby enhancing the ability of
the Company to deduct the full amount paid to the Named Executive even though
any such individual's total compensation may exceed $1,000,000.
Under the terms of the Incentive Plan each Named Executive was eligible to
receive a maximum award of 180% of the prior year's Base Salary. However, in no
event could an award exceed $3,000,000. Payment of awards is further conditioned
on the Company's achievement of annually established performance thresholds
which are materially linked to the interests of stockholders. It is important to
17
<PAGE>
note that the Incentive Plan provides the Compensation Committee the discretion
to grant awards which are less than the amounts provided for on an aggregate or
individual basis, based upon objective and subjective performance criteria
tailored to each individual as discussed below.
Objective criteria include, but are 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 in part as
to those executives responsible for a specific operating unit.
Subjective performance criteria encompass evaluation of the initiative and
contribution to the overall Company performance and any special projects that
each Named Executive may have undertaken or was assigned.
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
stockholder value by providing the executive with an opportunity to acquire an
appropriate ownership interest in the Company.
The Aon Stock Award Plan has become an effective tool in the attraction and
retention of key individuals. The awards are subject to a ten year vesting
schedule which by design provides for a significant incentive for award
recipients to continue their service with the Company.
In addition, awards are made based on the Compensation Committee's and the
Chief Executive Officer's assessment of an executive's past performance, an
appraisal of the executive's talents and other strengths, and most significantly
the long term contribution the executive can make to the Company's performance.
Furthermore, 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.
During fiscal year 1998, grants under the Aon Stock Award Plan were made to
one of the Named Executives as detailed in the Summary Compensation Table, while
the following shares of Common Stock became vested pursuant to grants made in
years prior to 1998:
<TABLE>
<CAPTION>
Vesting
Vested Date
Shares Value ($)
--------- -----------
<S> <C> <C>
Patrick G. Ryan........................................................................... (1) (1)
Daniel T. Cox............................................................................. 14,625 862,735
Harvey N. Medvin.......................................................................... 22,125 1,414,594
Michael D. O'Halleran..................................................................... 25,297 1,525,154
Raymond I. Skilling....................................................................... 14,250 812,227
</TABLE>
- - - - - - - - - - - - - - - - - - ---------
(1) Mr. Ryan, though eligible, is not currently participating in the Aon Stock
Award Plan.
In general, options under the Aon Stock Option Plan are granted on a
criteria similar to, and for similar purposes as, those for the granting of
awards under the Aon Stock Award Plan. For more detailed information regarding
the options granted to the Named Executives refer to the table Executive
Compensation--Options Grants in 1998 Fiscal Year. For more detailed information
regarding options exercised by the Named Executives during 1998 please refer to
the table Executive Compensation--Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values.
CEO COMPENSATION
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 components are determined following an annual review of his
and the Company's performance conducted collectively, without
18
<PAGE>
Mr. Ryan, by all outside Directors of the Company. During this review, the
Compensation Committee and the other outside Directors discuss in detail the
extent to which Mr. Ryan had achieved both his objective and subjective
performance goals.
As a result of Mr. Ryan's outstanding performance for 1997 the Compensation
Committee, in consultation with the other outside Directors, has determined that
Mr. Ryan merits the maximum annual incentive award payable under the Incentive
Plan. Furthermore, it is believed that the annual incentive award paid in 1998
to Mr. Ryan is consistent with the Peer Group considering both the Company's
financial performance and Mr. Ryan's individual performance.
For 1998 Mr. Ryan was granted an option to purchase 215,000 Common Shares
subject to the normal provisions of the Aon Stock Option Plan. The Compensation
Committee believes that this grant is an integral component of Mr. Ryan's total
compensation package and provides a direct link to the interests of
stockholders. In fact for 1998, 54% of Mr. Ryan's total compensation package was
associated with long term incentives in the form of stock options. For more
detailed information regarding Mr. Ryan's grant please refer to the table
Executive Compensation--Option Grants in 1998 Fiscal Year.
COMPENSATION CONSULTANT AND COMPETITIVE DATA
In order to ensure that the compensation program is competitive and
appropriate, the Compensation Committee annually reviews the levels of executive
compensation from a number of general survey sources, with a focus on available
data relating to the Named Executives being considered. In addition, the
Compensation Committee periodically retains a nationally recognized 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 with specific emphasis on the position of Chief Executive Officer.
The Peer Group consists of the companies used to prepare the Performance Graph
following this report.
SUBMITTED BY THE ORGANIZATION AND COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS:
<TABLE>
<S> <C> <C>
Donald S. Perkins Andrew J. McKenna George A. Schaefer
(Chairman) Newton N. Minow Fred L. Turner
Edgar D. Jannotta Richard C. Notebaert
</TABLE>
19
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
AON CORPORATION, STANDARD & POOR'S AND PEER GROUP INDICES
FISCAL YEARS ENDED DECEMBER 31
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AON CORP S & P 500 PEER GROUP
<S> <C> <C> <C>
1993 $100.00 $100.00 $100.00
1994 $103.18 $101.32 $101.04
1995 $166.63 $139.40 $127.91
1996 $213.20 $171.41 $166.64
1997 $308.31 $228.59 $232.81
1998 $296.41 $293.92 $308.38
</TABLE>
(1) The "Peer Group" of the Company is comprised of issuers which are, taken as
a whole, in the same industry or which have similar lines of business. The
Peer Group comprises: AFLAC Incorporated; Arthur J. Gallagher & Co.; E.W.
Blanch Holdings Inc.; Marsh & McLennan Companies, Inc.; Poe & Brown Inc.;
and Provident Companies, Inc. The performance graph assumes that the value
of the investment of Aon Common Shares and 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 weighing 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. Results for
Sedgwick Group P.L.C., which in prior years had been included in the Peer
Group and performance graphs, are no longer available as a result of the
acquisition of it by Marsh & McLennan Companies Inc. (which is also one of
the Peer Group companies) in 1998. Results for Willis Coroon Group P.L.C.,
which in prior years had been included
20
<PAGE>
in the Peer Group and performance graph through its ADR's, are no longer
available as a result of the acquisition of it by a private company in 1998.
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 and chief financial officer, serve on the board of directors of a
private company, Schwarz Paper Company. Mr. McKenna is also the chairman and
chief executive officer 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, to perform certain legal services
during the year 1998 and anticipates that the firm may be retained to perform
legal services in 1999. During 1998, 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 1998, or is
expected to involve in 1999, 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 1998.
AGENDA ITEM NO. 2
RATIFICATION OF APPOINTMENT OF 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 1999. Ernst & Young LLP was first retained as the
Company's independent auditors in February 1986. 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
1999. 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 2000. Because of the difficulty and expense of making any substitution
of auditors for 1999 following the 1999 annual meeting, it is contemplated that
the appointment for the year 1999 will be permitted to stand unless the Board
finds other good reason for making a change.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE FOLLOWING
RESOLUTION--AGENDA ITEM NO. 2:
RESOLVED, that the appointment of Ernst & Young LLP by the Board of
Directors as the Company's independent auditors for the year 1999 is
hereby ratified.
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.
21
<PAGE>
VOTING PROCEDURES
A quorum for the transaction of business at any meeting of the stockholders
of the Company shall consist of the holders of at least a majority of the issued
and outstanding Shares entitled to vote, presented in person or by proxy. At all
meetings at which a quorum is present, all matters, except as otherwise provided
by law or in the certificate of incorporation of the Company, shall be decided
by the vote of the holders of a majority of the Shares representing the quorum.
All matters included for consideration by the stockholders in this Proxy
Statement shall be decided by the vote of the holders of a majority of the
Shares representing the quorum. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum at the annual
meeting for the transaction of business. If a duly executed proxy is marked to
indicate that all or a portion of the Shares represented by such proxy are not
being voted with respect to a particular matter, such non-voted Shares will not
be considered present and entitled to vote on such matters.
You may revoke your proxy at any time before it is voted at the meeting.
Each proxy duly validated by mail, telephone or by using the Internet prior to
the meeting and not otherwise revoked will be voted according to its terms. If
no specific direction is indicated on a duly validated proxy as to the manner of
voting, the proxy will be voted in accordance with the recommendations of the
Board of Directors set forth herein. Stockholders who receive more than one
proxy card--due to the existence of multiple Common Share accounts--should
validate all such proxies in order to be sure that all of the shares so owned
are voted. A proxy may be revoked by (a) delivering to the Company a duly
executed written notice of revocation dated later than the date of the proxy
which is being revoked; (b) delivering to the Company by mail, by telephone or
by using the Internet a duly validated replacement proxy relating to the same
shares and dated later than the date of the proxy which is being replaced; or
(c) by attending the annual meeting of stockholders and voting in person.
Written revocations should be sent to the Office of the Corporate Secretary of
the Company at the address listed on page one of this Proxy Statement.
PROPOSALS OF STOCKHOLDERS FOR 2000 ANNUAL MEETING
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 2000,
stockholder proposals conforming to applicable rules and regulations must be
received by the Company not later than November 8, 1999. Such proposals should
be sent to the Office of the Corporate Secretary of the Company at the address
listed on page one of this Proxy Statement, with a copy of such proposal to be
sent to the Office of the Chief Counsel of the Company at that same address.
AVAILABILITY OF 10-K REPORT
The Company will file its Annual Report on Form 10-K for the year ended
December 31, 1998 with the Securities and Exchange Commission on or before March
31, 1999. 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
The Board of Directors 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 which requires
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 interest of the Company.
22
<PAGE>
Please exercise your right to vote by validating your proxy by mail, by
telephone or by using the Internet. To validate a proxy by mail please sign and
return it promptly in the enclosed envelope. To validate a proxy by telephone or
by using the Internet please follow the instructions located on your proxy card.
In the event that you attend the meeting, you may revoke your proxy and vote
your Shares in person if you so desire.
By Order of the Board of Directors
[SIGNATURE]
Kevann M. Cooke
VICE PRESIDENT--CORPORATE SECRETARY
Dated: March 8, 1999
23
<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 16, 1999 AT 10:00 A.M.
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- - - - - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<PAGE>
AON CORPORATION PROXY/VOTING INSTRUCTION CARD
CHICAGO, ILLINOIS
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING ON APRIL 16, 1999.
The undersigned hereby appoints Patrick G. Ryan, Raymond I. Skilling or
Kevann M. Cooke, 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 on April 16, 1999 at First Chicago Center,
One First National Plaza, Chicago, Illinois at 10:00 A.M. CST, 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 by the
undersigned to the trustees of the ESOP Account of the Aon Savings Plan, and
the trustees of the Aon Stock Fund of the Aon Savings Plan, respectively, for
all shares votable by the undersigned and held of record by such trustees,
if any. If there are any shares for which instructions are not timely received,
and as respects the unallocated shares held under the ESOP Account, the
trustees of each plan will cause all such shares to be voted in the same
manner and proportion as the shares of the respective plans for which timely
instructions have been received. All voting instruction for shares held of
record by the plans shall be confidential.
Election of Directors
Nominees: (01) Patrick G. Ryan, (02) Daniel T. Carroll,
(03) Franklin A. Cole, (04) Edgar D. Jannotta,
(05) Lester B. Knight, (06) Perry J. Lewis, (07) Andrew J.
McKenna, (08) Newton N. Minow,
(09) Richard C. Notebaert, (10) Michael D. O'Halleran,
(11) Donald S. Perkins, (12) John W. Rogers Jr.,
(13) George A. Schaefer, (14) Raymond I. Skilling,
(15) Fred L. Turner, (16) Arnold R. Weber,
(17) Carolyn Y. Woo.
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.
|See Reverse Side|
<PAGE>
Aon Corporation stockholders can now give proxies to vote their shares by
mail, by telephone or by using the Internet. To use the telephone or the
Internet you will need your proxy card and the tax identification number
associated with your stockholder account. If you use the telephone or the
Internet, there is no need for you to return the proxy card.
- - - - - - - - - - - - - - - - - - - To use the telephone, you will need a touch-tone telephone. Dial
1-800-OK2-VOTE (1-800-652-8683), 24 hours a day, seven days a week.
- - - - - - - - - - - - - - - - - - - To use the Internet, log on to the Internet and go to the following website:
WWW.VOTE-BY-NET.COM
- - - - - - - - - - - - - - - - - - - To use the mails, fold and detach the proxy card and use the enclosed
envelope, which is already addressed and requires no postage.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
/X/ PLEASE MARK YOUR | 4909
VOTES AS IN THIS |
EXAMPLE. ----
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2
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FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Appointment of / / / / / /
Directors. Ernst & Young
as Company's
Independent
Auditors.
TO WITHHOLD AUTHORITY TO VOTE FOR
ANY NOMINEE(S), MARK THE "FOR" BOX AND WRITE
THE NAME OF SUCH NOMINEE ON LINE PROVIDED
BELOW:
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3. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before the
meeting.
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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
