<PAGE>
INTERNATIONAL RECTIFIER CORPORATION
233 KANSAS STREET, EL SEGUNDO, CA 90245 (310) 726-8000
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 23, 1998
---------------------
The Annual Meeting of Stockholders of INTERNATIONAL RECTIFIER CORPORATION
will be held on Monday, November 23, 1998 at 10 o'clock a.m. Pacific Standard
Time at the HEXFET America facility of the Company at 41915 Business Park Drive,
Temecula, California.
The meeting will consider and act upon the following business:
1. Election of three Directors.
2. Ratification of PricewaterhouseCoopers as independent auditors of the
Company to serve for fiscal year 1999.
3. Such other business as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on September 25, 1998
as the record date for determining those Stockholders who will be entitled to
vote at the meeting.
By order of the Board of Directors
L. Michael Russell
Secretary
October 7, 1998
IMPORTANT: PLEASE FILL IN DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE
POST-PAID ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO
EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE>
PROXY STATEMENT
GENERAL
The accompanying Proxy is solicited by the Board of Directors of
International Rectifier Corporation ("Company") for use at the Annual Meeting of
Stockholders to be held on November 23, 1998 and any adjournments thereof. The
close of business on September 25, 1998 has been fixed as the record date for
the determination of Stockholders entitled to notice of and to vote at the
meeting. As of September 25, 1998, there were 51,527,602 shares issued and
outstanding of $1.00 par value common stock of the Company ("Common Stock"), the
only class of voting securities outstanding. Each share of Common Stock is
entitled to one vote; there is no cumulative voting. This Proxy Statement and
the accompanying Proxy will be first mailed to Stockholders on or about October
7, 1998.
Any Stockholder who gives a Proxy has the power to revoke it at any time
before it is exercised. Revocation is affected by delivery of written notice of
revocation to the Secretary of the Company prior to commencement of the Annual
Meeting. Stockholders attending the Annual Meeting may vote their shares in
person whether or not a Proxy has been previously executed and returned. The
Company will bear the cost of solicitation of proxies.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by Proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. Abstentions will be counted toward the
tabulation of "votes cast" and will have the same effect as negative votes.
2
<PAGE>
SECURITY OWNERSHIP
The following table shows, as of September 25, 1998, the beneficial
ownership of the Common Stock by owners of more than five percent of the Common
Stock, by each director or nominee, by each Named Executive Officer (as defined
in the "Executive Compensation" Section below) and by all directors and Named
Executive Officers as a group.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS
- ------------------------------------------------------------ ------------------ ---------------
<S> <C> <C>
Prudential Insurance Co. of America ........................ 5,327,831 10.34%
751 Broad Street, Newark, NJ 07102
Jennison Associates Capital Corporation .................... 5,171,600 10.04%
466 Lexington Avenue, New York, NY 10017
ICM Asset Management, Inc. ................................. 5,130,586 9.96%
601 W. Main Ave., Ste. 600, Spokane, WA 99201
FMR Corp. .................................................. 3,257,400 6.32%
82 Devonshire Street, Boston, MA 02109
Lazard Freres & Co. LLC .................................... 3,086,765 5.99%
30 Rockefeller Plaza, New York, NY 10020
Eric Lidow(1)............................................... 2,439,697(2) 4.73%
Alexander Lidow (1)......................................... 1,377,812(2) 2.67%
Derek B. Lidow (1).......................................... 781,789(2) 1.52%
Donald S. Burns (3)......................................... 46,000(2) *
George Krsek................................................ 54,000(2) *
Minoru Matsuda.............................................. 8,000(2) *
Michael P. McGee............................................ 78,933(2) *
Robert J. Mueller........................................... 90,000(2) *
James D. Plummer............................................ 38,000(2) *
L. Michael Russell.......................................... 5,602(2) *
Jack O. Vance............................................... 77,900(2) *
Rochus E. Vogt.............................................. 69,000(2) *
All Directors and Named Executive Officers
as a Group (12 persons)................................... 5,066,733(2) 9.83%
</TABLE>
- ------------------------
* Less than 1%
(1) Members of the Lidow family other than Messrs. Eric Lidow, Alexander Lidow
and Derek B. Lidow are the beneficial owners of 210,314 shares. The Messrs.
Lidow disclaim any beneficial ownership in any of such shares. The 4,809,612
shares beneficially owned by members of the Lidow family constitute 9.33% of
the shares outstanding. In addition, the Lidow Foundation, of which Eric
Lidow is a director, owns 97,634 shares. The Messrs. Lidow disclaim any
beneficial ownership in any such shares.
(2) Amounts include, in the aggregate, 925,400 options exercisable under the
Company's stock option plans by Named Executive Officers and directors on or
within 60 days of the record date.
(3) A member of the Burns family other than Mr. Burns is the beneficial owner of
600 shares. Mr. Burns disclaims any beneficial ownership in any such shares.
The business address of each Director and Named Executive Officer is 233 Kansas
Street, El Segundo, CA 90245.
3
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
There are ten directors on the Company's Board of Directors. The directors
are divided into three classes, and the directors in each class serve three-year
terms expiring in successive years. At the 1998 Annual Meeting, the term of
office of the directors in Class One expires. Three directors are to be elected
with terms expiring upon the election and qualification of their successors at
the 2001 Annual Meeting of Stockholders.
It is intended that Proxies received by the Board of Directors will be voted
for the election of the nominees for directors named below, unless authority to
do so is withheld. Drs. George Krsek and Derek B. Lidow, and Mr. Jack O. Vance,
the nominees, are presently directors of the Company. It is not contemplated
that any nominee will be unable to serve as a director, but if that contingency
should occur prior to the Annual Meeting, the holders of Proxies reserve the
right to substitute and vote for another person of their choice.
The affirmative vote of holders of a majority of shares of the Company's
Common Stock represented at the meeting in person or by Proxy is required to
elect any nominee for director.
NOMINEES FOR DIRECTORS
The following persons are nominees for director with terms expiring in 2001.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------- --- ---------------------------------------------------------------- -----------
<S> <C> <C> <C>
CLASS ONE
TERM ENDING 1998
George Krsek.................... 77 President and Chairman of the Board, Konec, Inc., a management
consulting firm 1979
Jack O. Vance(1)................ 73 Managing Director, Management Research, a management consulting
firm 1988
Derek B. Lidow(2)(3)............ 45 Chief Executive Officer of the Company 1994
- ----------------------------------------------------------------------------------------------------------------------------
CLASS TWO
TERM ENDING 1999
Rochus E. Vogt.................. 68 R. Stanton Avery Distinguished Service Professor and Professor
of Physics, California Institute of Technology 1984
Robert J. Mueller............... 69 Executive Vice President of the Company
External Affairs and Business Development 1990
Alexander Lidow(2)(4)........... 43 Chief Executive Officer of the Company 1994
Minoru Matsuda.................. 61 Professor, Kanazawa Institute of Technology
Ishikawa, Japan 1997
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------- --- ---------------------------------------------------------------- -----------
CLASS THREE
TERM ENDING 2000
<S> <C> <C> <C>
Eric Lidow...................... 85 Chairman of the Board of the Company 1947
Donald S. Burns(5).............. 73 Chairman of the Board, President and Chief Executive Officer,
Prestige Holding, Ltd. 1993
James D. Plummer................ 53 John M. Fluke Professor of Electrical Engineering, Director of
The Stanford Nanofabrication Laboratory, and Chairman of the
Electrical Engineering Department, Stanford University 1994
</TABLE>
- ------------------------
(1) Mr. Vance is also a director of The Olson Company, University Restaurant
Group, FCG Enterprises, Inc., Semtech Corporation, Flowline Inc., Mathers
Fund, Inc., and Atol Holdings, Inc. He was formerly a director of McKinsey &
Co., Inc., a management consulting firm.
(2) Drs. Alexander Lidow and Derek B. Lidow are brothers and sons of Eric Lidow.
(3) Dr. Derek B. Lidow serves as a member of the Leadership Council of the
School of Engineering of Princeton University and is a Trustee of the Los
Angeles Philharmonic.
(4) Dr. Alexander Lidow is on the Board of Overseers for the RAND Corporation
and on the Board of Trustees of the California Institute of Technology.
(5) Mr. Burns is also a director of Atol Holdings, Inc.
The above named directors have held their respective employment positions
during the past five years except for George Krsek and Minoru Matsuda. Dr. Krsek
was President of Houba, Inc., a pharmaceutical firm, from 1975 to July 1994. In
August 1994, Dr. Krsek became Managing Member of Konec L.L.C., a management
consulting company and in December 1997, Konec, L.L.C. became Konec, Inc. and
Dr. Krsek became the President and Chairman of that Board. Mr. Matsuda was
employed by Hitachi Ltd. from 1960 to March, 1997, most recently as Senior
Counsel - Intellectual Property. Since April, 1997, Mr. Matsuda has been a
professor at Kanazawa Institute of Technology in Japan. Mr. Mueller and Drs.
Alexander Lidow and Derek B. Lidow have been employed by the Company for more
than five years in various executive officer positions.
5
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors has Audit, Compensation and Stock Option
("Compensation Committee"), and Executive Committees, but not a Nominating
Committee. Both the Audit Committee and the Compensation Committee currently
consist of Messrs. Burns, Krsek, Plummer, Vance, and Vogt, each of whom is a
director but not an officer or employee of the Company ("Non-Employee
Director"). The Executive Committee consists of Messrs. E. Lidow, A. Lidow, D.
Lidow, Mueller, and Vance. The Audit Committee monitors the Company's basic
accounting policies, reviews audit and management reports, and makes
recommendations regarding the appointment of the independent auditors. The Audit
Committee held three meetings during the last fiscal year. The Compensation
Committee has the responsibility for setting the compensation of the Named
Executive Officers and reviews (but does not set) the salaries of all employees
having annual compensation of $150,000 or more. The Compensation Committee also
has the responsibility for granting stock options. (See "Compensation Committee
Report" below). The Compensation Committee met or took action six times during
the last fiscal year. The Executive Committee exercises many of the powers of
the Board in the management of the business affairs of the Company. The
Executive Committee met four times during the last fiscal year. The Board of
Directors met four times during the last fiscal year. No director attended fewer
than 75% of meetings of the Board of Directors and of each committee on which he
served during the fiscal year.
Non-Employee Directors receive fees of $35,000 per annum for participation
on the Board and its Committees. Mr. Vance receives an additional $3,000 per
meeting for participation on the Executive Committee ($12,000 for the 1998
fiscal year). Under the Company's Amended and Restated Stock Incentive Plan of
1992 ("Plan"), Non-Employee Directors are automatically granted stock options
for 5,000 shares of Common Stock on each January 1 during the term of the Plan.
Each Non-Employee Director in office on August 9, 1994 was automatically
granted, in addition to the option to purchase 20,000 shares granted to him upon
initial Stockholder approval of the Plan, an option to purchase 20,000 shares.
Each Non-Employee Director elected after the 1994 Annual Meeting of Stockholders
is automatically granted upon initial election an option to purchase 40,000
shares. However, the aggregate number of shares for which options may be granted
to any Non-Employee Director under both the Plan and the Company's Stock Option
Plan of 1984 cannot exceed 120,000 shares. Non-Employee Directors are not
eligible to receive any other options. Non-Employee Director options become
exercisable at the rate of 20% per annum commencing on the first anniversary of
the date of grant; vesting may accelerate upon death, voluntary resignation
after five years of continuous service or decision not to stand for re-election
after five years of continuous service.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table and accompanying notes summarize the aggregate
compensation of the Company, and the stock option grants awarded to each of the
Chief Executive Officers and the other four highest paid executive officers
("Named Executive Officers") for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE--ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
SECURITIES
OTHER UNDERLYING ALL OTHER
FISCAL SALARY BONUS ANNUAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION($) (#) ($)
- ---------------------------- ----------- -------------- ----------- --------------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Lidow(1)............... 1998 664,027(2)(3) -- -- 100,000 1,534,682(4)
Chairman of the Board 1997 639,700 -- -- 123,000 --
1996 639,700 420,000(5) -- -- --
Alexander Lidow............. 1998 365,469(2)(3) -- -- 100,000 --
Chief Executive Officer 1997 352,200 -- -- 134,000 --
1996 352,200 411,000(5) -- -- --
Derek B. Lidow.............. 1998 365,469(2)(3) -- -- 100,000 --
Chief Executive Officer 1997 352,200 -- -- 134,000 --
1996 352,200 411,000(5) -- -- --
Robert J. Mueller........... 1998 324,182(2)(3) -- -- 40,000 12,912(6)
Executive Vice President 1997 315,100 -- -- 40,000 19,546(6)
External Affairs and 1996 340,100 200,000(5) -- 20,000 19,768(6)
Business Development
Michael P. McGee............ 1998 234,104(2)(3) -- -- 120,000 --
Vice President, 1997 225,700 -- -- 65,000 --
Chief Financial Officer 1996 225,700 197,000(5) -- 35,000 --
L. Michael Russell.......... 1998 223,941(3) 13,850(8) -- 20,000 --
Vice President, Secretary 1997 80,069(7) 20,000(8) -- 10,000 --
and General Counsel 1996 -- -- -- -- --
</TABLE>
- --------------------------
(1) The Company entered into an executive agreement with Eric Lidow dated May
15, 1991. See "Executive Agreement" below.
(2) Base salaries for FY98 were the same as in FY97. See "Compensation Committee
Report" below.
(3) Each year's salary includes an automobile allowance granted to key employees
and an amount reflecting a difference in pay periods.
(4) Includes Pension Trust payout of $1,500,000 in fiscal 1998 (see "Executive
Agreement"), and a cash payment of $34,682 for vacation hours that are
accumulated beyond 240 hours at the end of the calendar year, pursuant to
Company vacation policy.
(5) Bonus paid in FY97 for services rendered in FY96.
(6) Represents cash payment for vacation hours that are accumulated beyond 240
hours at the end of the calendar year, pursuant to Company vacation policy.
(7) Mr. Russell joined the Company in January 1997.
(8) Reflects bonuses agreed to be paid to Mr. Russell upon his joining the
Company.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table and accompanying notes summarize options granted to each
Named Executive Officer of the Company in fiscal 1998 and projects potential
realizable gains at hypothetical assumed annual compound rates of appreciation.
All options granted in fiscal 1998 were non-qualified stock options under the
Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
PERCENT OF RATES
TOTAL OPTIONS OF STOCK PRICE
GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(4)
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
NAME (#)(1)(2) YEAR ($/SH) DATE(3) 5% ($) 10% ($)
- ---------------------------------------- ----------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eric Lidow.............................. 100,000 6.3 21.25 8/24/07 1,336,401 3,386,703
Alexander Lidow......................... 100,000 6.3 21.25 8/24/07 1,336,401 3,386,703
Derek B. Lidow.......................... 100,000 6.3 21.25 8/24/07 1,336,401 3,386,703
Robert J. Mueller....................... 40,000 2.5 21.25 8/24/07 534,560 1,354,681
Michael P. McGee........................ 75,000 4.7 21.25 8/24/07 1,002,301 2,540,027
" " 45,000 2.8 14.125 2/22/08 399,741 1,013,023
L. Michael Russell...................... 10,000 .6 21.25 8/24/07 133,640 338,670
" " 10,000 .6 14.125 2/22/08 88,831 225,116
</TABLE>
In addition, 1,116,960 options were granted to other employees of the
Company under stock option plans. Each Non-Employee Director was granted 5,000
options on January 1, 1998. Minoru Matsuda was also granted 40,000 shares on
September 4, 1997 upon election to the Board.
- ------------------------
(1) Options become exercisable at a rate of 20% per annum commencing on the
first anniversary of the date of grant.
(2) Under the terms of the Plan, stock options were granted as ten year options
at market price. Options under the Plan may be exercised for specified
periods of time following the resignation, retirement or other termination
of employment with the Company or its subsidiaries, or as a result of a
change in control of the Company (as defined in the Plan). The Plan also
permits the Compensation Committee, which administers the Plan, to
accelerate, extend or otherwise modify benefits payable under the applicable
awards in various circumstances, including a termination of employment or
certain reorganizations. Under the Plan, if there is a change in control of
the Company (as defined in the Plan), the Compensation Committee of the
Board may accelerate the receipt of benefits.
(3) Subject to earlier termination in certain events related to termination of
employment.
(4) These values are solely the mathematical results of hypothetical assumed
appreciation of the market value of the underlying shares at an annual rate
of 5% and 10% over the full ten-year term of the options, less the exercise
price. Actual gains, if any, will depend on future stock market performance
of the Common Stock, market factors and conditions, and each optionee's
continued employment with the Company through the applicable vesting
periods. The Company makes no prediction as to the future value of these
options or of its Common Stock, and these values are provided solely as
examples required by the proxy reporting rules of the Securities and
Exchange Commission.
8
<PAGE>
OPTIONS
The following table shows for each of the Named Executive Officers the
shares acquired on exercise of options in fiscal 1998 and certain other required
information regarding outstanding options held by them at the end of fiscal
1998.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END(#) AT FY-END($)(1)
----------------- ---------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Eric Lidow..................................... -- -- 180,600/262,400 96,000/24,000
Alexander Lidow................................ -- -- 150,800/263,200 64,000/16,000
Derek B. Lidow................................. -- -- 150,800/263,200 64,000/16,000
Robert J. Mueller.............................. -- -- 40,000/90,000 24,000/6,000
Michael P. McGee............................... -- -- 43,000/199,000 24,000/10,000
L. Michael Russell............................. -- -- 2,000/20,000
-----/-----
</TABLE>
- ------------------------
(1) Based on the market value of $8.50 at the end of fiscal 1998, minus the
exercise price of "in the money" options. The exercise price of outstanding
options ranges from $5.50 to $23.81. These options are subject to the same
terms and conditions as options granted to other employees under the
Company's current stock option plans, including 20% annual vesting,
adjustments upon change in control or reorganization and expiration at or
following termination of employment.
EXECUTIVE AGREEMENT
The Company entered into an executive agreement with Eric Lidow dated May
15, 1991. The agreement set Mr. Lidow's annual salary at $500,000, granted the
Board discretion to increase his salary and to pay him bonuses, and established
a pension. Mr. Lidow's salary was increased in May 1992 to $550,000 and in
August 1994 to $632,500. Mr. Lidow was not awarded a bonus in fiscal year 1998.
The agreement may be terminated by either party upon 90 days written notice.
Under the Agreement, prior to its amendment described below, Mr. Lidow would
have been entitled to begin receiving the pension payments when his employment
with the Company ceased for any reason (except termination for cause). The
pension would have been payable in annual installments, equal to the sum of 90%
of his then current salary and the average of his prior three years' cash
bonuses, if any. If Mr. Lidow's wife survived him, she would have received, for
the remainder of her life, annual payments in an amount equal to two-thirds of
the amount of the pension payment that would have been payable to Mr. Lidow.
Before the amendments to the agreement described below, if Mr. Lidow had retired
at fiscal year end, the pension would have been equal to $821,250 per year for
the remainder of Mr. Lidow's life and $547,500 per year for the remainder of
Mrs. Lidow's life, if she had survived him. The Company had funded a trust to
cover its liability for the pension based on actuarial assumptions established
by
9
<PAGE>
Coopers & Lybrand, L.L.P. However, the Company's actual liability for the
pension in ensuing years could have been more or less than the funding depending
upon whether actual events mirrored the actuarial assumptions.
In 1998, the Company's Compensation Committee and Mr. Lidow renegotiated his
executive agreement. The Compensation Committee then recommended adoption of the
renegotiated agreement by the Board, which the Board approved. In taking these
actions, the Compensation Committee and the Board considered, among other
things, their and Mr. Lidow's desire to limit the sale of his shares of IR
Common Stock to meet commitments and their concerns about the uncertainty of the
Company's liability for the pension. In connection with the former
consideration, the Company also made certain loans to Mr. Lidow, which have
since been repaid. See "Transaction with Management." The amendments to Mr.
Lidow's agreement canceled all of the Company's obligations with respect to the
pension. As consideration, the corpus of the trust of $8,096,663 was distributed
to Mr. Lidow in several installments, $1,500,000 of which was distributed to Mr.
Lidow in fiscal 1998. Based on actuarial analysis, the consideration was less
than the amount needed to purchase the retirement benefit from a third party
company. Mr. Lidow and his wife are no longer entitled to receive any payments
under the agreement after Mr. Lidow's employment with the Company ceases.
The funding of the pension had been expensed in prior years, and the lump
sum distribution did not trigger any further expense. Because Internal Revenue
Code Section 162(m) imposes certain restrictions on the deductibility of
non-performance based compensation in excess of $1,000,000, the Company will not
be able to deduct any compensation in excess of $1,000,000 paid to Mr. Lidow in
fiscal 1998 and may not be able to deduct any such amount in fiscal 1999.
TRANSACTION WITH MANAGEMENT
In June 1998, after discussing with Eric Lidow his desire to limit the sale
of shares of IR Common Stock to meet commitments, the Board approved two
unsecured loans to him aggregating $1,200,000, with interest at the annual rate
of eight and one-half percent (8.5%). The loans were disbursed in two
installments of $600,000, in June and July 1998. Both loans were due December
31, 1998 and on September 23, 1998 Mr. Lidow repaid them with accrued interest
of $23,497. Contemporaneously with the approval of the loans, the Company
amended his executive agreement. See "Executive Agreement."
10
<PAGE>
THE FOLLOWING INFORMATION CONTAINED UNDER THE CAPTIONS "COMPENSATION
COMMITTEE REPORT" AND "STOCK PRICE PERFORMANCE" SHALL NOT BE DEEMED "SOLICITING
MATERIAL" OR "FILED" WITH THE SECURITIES AND EXCHANGE COMMISSION AND SHALL NOT
BE DEEMED TO BE INCORPORATED INTO ANY FILING BY INTERNATIONAL RECTIFIER
CORPORATION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934 IN THE ABSENCE OF SPECIFIC REFERENCE TO SUCH CAPTIONS AND INFORMATION.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors currently consists of
five Non-Employee Directors of the Company. The compensation of the Named
Executive Officers, who comprise the top management operating group of the
Company, is determined by the Compensation Committee (see "Executive
Compensation" above). The Compensation Committee also reviews (but does not set)
the salaries of all other employees having annual compensation of $150,000 or
more.
In August 1998, the Compensation Committee recommended to the Board that it
approve an amendment to Mr. Eric Lidow's executive agreement. See "Executive
Agreement" above.
The Company's executive compensation program consists of base salaries,
annual bonus opportunity, and long-term incentives in the form of stock options.
The Compensation Committee's policy is to set base salaries generally within the
mid-point of the competitive range for similar positions in high technology
companies, based on information of a broad range of such companies obtained from
an independent survey of executive compensation. Award determinations under the
annual bonus plan are not made on a formula basis, but rather are based on
discretionary and subjective judgments of the Compensation Committee. However,
in making the awards, the Compensation Committee considers such factors as
annual profitability, revenue growth, outstanding achievements such as new
product introductions, improvement in market share and industry position, and
individual performance.
Long-term incentives are intended to reward for Company performance longer
than one year. The Compensation Committee has determined that stock options are
an effective incentive to reward for sustained long-term growth as reflected in
the Company's stock price. Stock options are granted at exercise prices that are
at not less than fair market value on the date of grant. Outstanding options
become exercisable at a rate of 20% per year commencing on the first anniversary
of the date of grant and expire ten years after the date of grant. In fiscal
year 1998 the Compensation Committee, based on recommendations of the Company's
compensation consultant, granted options at a level below the midpoint for
options granted to executive officers of the companies in the survey referred to
above.
Drs. Alexander Lidow and Derek B. Lidow were elected Directors in 1994, and
subsequently were elected Chief Executive Officers on March 6, 1995, after more
than 17 years of service in various managerial positions of increasing
responsibility within the Company. The Company has no employment contract with
either officer. The base compensation of these officers is from the low to
mid-point for executive officers in comparable high technology companies. A
substantial part of their total compensation package is made up of stock
options. Based upon fiscal 1998 performance, no cash bonuses were paid to either
officer. In making the stock option awards, the Compensation Committee
considered the performance of the Company under their management as well as
subjective factors. The compensation of these two officers is maintained at the
same level (see "Summary Compensation Table" above) as a matter of policy.
Base salaries of the Named Executive Officers for fiscal 1998 are listed
above under "Executive Compensation." The base salary payable to Eric Lidow is
described under "Executive Agreement" above.
11
<PAGE>
Because the amount of cash compensation paid to any executive officer does
not ordinarily exceed one million dollars, the Company has not adopted any
policy with respect to Section 162(m) of the Internal Revenue Code of 1986.
<TABLE>
<S> <C>
Donald S. Burns Jack O. Vance
George Krsek Rochus E. Vogt
James D. Plummer
</TABLE>
12
<PAGE>
STOCK PRICE PERFORMANCE
The following graph compares the Company's cumulative stockholder return on
its Common Stock (i.e. change in stock price plus reinvestment of dividends)
measured against the cumulative total return of the Standard and Poor's 500
Stock Index and Standard and Poor's High Technology Composite Index peer group.
The stock price performance shown in this graph which assumes $100 was invested
on June 30, 1993, is not necessarily indicative of and is not intended to
suggest future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FISCAL YEARS THE COMPANY S&P 500 S&P HIGH TECH
<S> <C> <C> <C>
1993 $100 $100 $100
1994 $118.82 $101.41 $108.30
1995 $257.45 $127.84 $176.20
1996 $255.47 $161.08 $209.95
1997 $295.07 $216.98 $319.17
1998 $134.66 $282.42 $428.82
June 30
</TABLE>
13
<PAGE>
INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
The Board of Directors, on the recommendation of the Audit Committee,
proposes that PricewaterhouseCoopers, independent auditors, be elected as
independent auditors of the Company to serve until the Annual Meeting of
Stockholders in 1999. A representative of PricewaterhouseCoopers is expected to
be present at the Annual Meeting, will be given the opportunity to make a
statement if he or she so desires, and will be available to respond to
appropriate questions. PricewaterhouseCoopers was formed as a result of a merger
between Price Waterhouse & Co. and Coopers & Lybrand. Coopers & Lybrand had been
auditors of the Company for many years prior to the merger.
Although this appointment is not required to be submitted to a vote of the
Stockholders, the Board believes it is appropriate as a matter of policy to
request that the Stockholders ratify the appointment. If the Stockholders do not
ratify the appointment by the affirmative vote of a majority of the shares
represented either in person or by proxy at the Annual Meeting, the selection of
another independent auditor will be considered by the Board of Directors.
The Board of Directors recommends a vote FOR this proposal.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that executive
officers, directors, and holders of more than 10% of a company's registered
class of securities file reports of their ownership of a company's securities
with the SEC. Based on a review of these reports, the Company believes that its
reporting persons complied with all applicable filing requirements during the
fiscal year ended June 30, 1998.
STOCKHOLDER PROPOSALS FOR 1999
Eligible Stockholders' proposals for the 1999 Annual Meeting of Stockholders
of the Company must be received at the Company's office at 233 Kansas Street, El
Segundo, California 90245 no later than June 11, 1999.
NOTICE OF BUSINESS
For business to be properly brought before the Annual Meeting by a
Stockholder of record, the Stockholder must give notice in writing to the
Secretary of the Company. Such notice must be delivered to or mailed and
received at the principal executive office of the Company not less than thirty
(30) days nor more than ninety (90) days prior to the meeting.
14
<PAGE>
MISCELLANEOUS
Management does not know of any business to be presented other than the
matters set forth in the Notice of Meeting. However, if other matters properly
come before the meeting, it is the intention of the Proxies to vote in
accordance with their best judgment on such matters.
The expense of preparing, assembling, printing and mailing the Proxy and the
material used in the solicitation of Proxies will be borne by the Company. It is
contemplated that Proxies will be solicited principally through the use of the
mails, but the officers and regular employees of the Company may solicit Proxies
personally, by telephone or by special letter. The Company will reimburse banks,
brokerage houses, and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy material to their principals.
A copy of the Annual Report of the Company for the year ended June 30, 1998,
including financial statements for the year then ended, is transmitted herewith.
By Order of the Board of Directors
L. Michael Russell
Secretary
October 7, 1998
15
<PAGE>
[MAP]
<PAGE>
- -------------------------------------------------------------------------------
INTERNATIONAL RECTIFIER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING NOVEMBER 23, 1998
The undersigned hereby constitutes and appoints Eric Lidow and L.
Michael Russell, and each of them, his true and lawful agents and proxies
with full power of substitution in each, to represent the undersigned at the
Annual Meeting of Stockholders of International Rectifier Corporation to be
held at the HEXFET America facility of the Company, 41915 Business Park
Drive, Temecula, California, at 10:00 a.m., Pacific Standard Time, on the
23rd day of November, 1998, and at any adjournment thereof, on all matters
coming before said meeting.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
- -------------------------------------------------------------------------------
Please mark
your votes as / X /
indicated in
this example
VOTE FOR all VOTE WITHHELD
nominees listed below from all nominees
1. Election of Directors
Nominees: George Krsek, / / / /
Jack O. Vance, Derek B. Lidow
VOTE WITHHELD from the following nominee(s)
- -----------------------------------------------------
FOR AGAINST ABSTAIN
2. To ratify PricewaterhouseCoopers as
independent auditors of the Company to / / / / / /
serve for fiscal year 1999.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
PLEASE MARK, SIGN, DATE, AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature of Stockholder ______________________________ Dated ___________,1998
This Proxy Must be Signed Exactly as Name Appears Hereon. Executors,
administrators, trustees, etc. should give full title as such. If signer is a
corporation, please sign full corporate name by duly authorized officer.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTPAID ENVELOPE
