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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:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
GTE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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(LOGO)GTE CORPORATION
One Stamford Forum
Stamford, Connecticut 06904
Telephone: 203-965-2000
CHARLES R. LEE
Chairman and Chief Executive Officer March 8, 1996
To Our Shareholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1996 Annual Meeting of Shareholders of GTE Corporation. The Annual Meeting will
be held from 2:00 P.M. to 4:00 P.M., Local Time, on Wednesday, April 17, 1996,
in the Wisteria Room of the Italian Center, 1620 Newfield Avenue, Stamford,
Connecticut. The formal notice of the Annual Meeting appears on the next page
and directions to the Annual Meeting are printed on the back cover.
The attached Proxy Statement describes matters that we expect will be acted
upon at the Annual Meeting. Shareholders who are present at the Annual Meeting
will have the opportunity to ask questions.
It is important that your views be represented whether or not you are able
to be present at the Annual Meeting. Please sign and date the enclosed proxy
card and promptly return it in the postage prepaid envelope. The Board of
Directors recommends that shareholders vote FOR Items 1 and 2, and AGAINST Items
3 through 11, as listed on the proxy card.
We are gratified by our shareholders' continued interest in GTE and pleased
that in the past so many of you have voted your shares either in person or by
proxy. We hope that you will continue to do so and urge you to return your proxy
card as soon as possible.
Sincerely,
/s/ Charles R. Lee
<PAGE> 3
(GTE LOGO)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 1996
Stamford, Connecticut
March 8, 1996
The Annual Meeting of Shareholders of GTE Corporation will be held in the
Wisteria Room of the Italian Center, 1620 Newfield Avenue, Stamford,
Connecticut, on Wednesday, April 17, 1996, at 2:00 P.M., Local Time, for the
following purposes:
1. To elect four Class I directors and two Class II directors to the
Board of Directors;
2. To ratify the appointment of auditors;
3. To consider and act upon the following nine shareholder proposals
described in the accompanying Proxy Statement:
(a) eliminate the staggered election of directors,
(b) establish a policy of reporting on GTE's foreign military sales,
(c) establish a policy of reporting on GTE's equal employment
opportunity/affirmative action program,
(d) endorse the CERES Principles,
(e) require shareholder approval of bonuses to executive officers in
excess of $30,000,
(f) require shareholder approval of agreements with officers and
directors providing for the payment of benefits upon a change in
control,
(g) eliminate non-employee directors' retirement plan and pensions
previously granted under the plan,
(h) establish criteria to limit executive officers' compensation so
that it does not exceed 75 times the wages of the average hourly
employee and to more closely link wages and compensation to
company profits, and
(i) limit increases in executive officers' total annual cash
compensation to an amount no greater than the average annual
percentage pay increases to employees; and
4. To act upon any other matters properly coming before the Annual
Meeting and any adjournment thereof.
Only shareholders of record at the close of business on February 27, 1996
will be entitled to vote at the Annual Meeting.
By order of the Board of Directors,
MARIANNE DROST
Secretary
PLEASE SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THAT PURPOSE.
<PAGE> 4
(GTE LOGO)
ONE STAMFORD FORUM, STAMFORD, CONNECTICUT 06904
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 17, 1996
This Proxy Statement is furnished to shareholders of GTE Corporation ("GTE"
or the "Corporation") in connection with GTE's Annual Meeting of Shareholders
(the "Annual Meeting"). The Annual Meeting will be held from 2:00 P.M. to 4:00
P.M., Local Time, on Wednesday, April 17, 1996, at the Italian Center, 1620
Newfield Avenue, Stamford, Connecticut, and at any adjournment thereof. The
board of directors of GTE (the "Board of Directors" or the "Board") is
soliciting proxies to be voted at the Annual Meeting.
This Proxy Statement and Notice of Meeting, the proxy card and GTE's Annual
Report to shareholders were mailed to shareholders beginning March 8, 1996.
RECORD DATE
Only shareholders of record at the close of business on February 27, 1996
are entitled to vote in person or by proxy at the Annual Meeting.
PROXY PROCEDURE
The Board of Directors solicits proxies so that each shareholder has the
opportunity to vote on the proposals to be considered at the Annual Meeting.
When a proxy card is returned properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a shareholder attends the Annual Meeting, he or she may vote by ballot.
If a shareholder does not return a signed proxy card or does not attend the
Annual Meeting and vote in person, his or her shares will not be voted.
If a shareholder returns a signed proxy card but does not mark the boxes,
the shares represented by that proxy card will be voted as recommended by the
Board of Directors. Otherwise, the signed proxy card will be voted as indicated
on the card. The proxy card also gives the individuals named as proxies
discretionary authority to vote the shares represented on any other matter that
is properly presented for action at the Annual Meeting. A shareholder may revoke
his or her proxy at any time before it is voted by: (i) giving notice in writing
to the Secretary of GTE (the "Secretary"); (ii) granting a subsequent proxy; or
(iii) appearing in person and voting at the Annual Meeting.
If a shareholder participates in the GTE Shareholder Systematic Investment
Plan (the "SSIP"), his or her proxy card represents both the number of shares
registered in that shareholder's name and the number of full shares credited to
his or her SSIP account. All such shares will be voted in accordance with the
instructions on the proxy card.
Participants in the GTE Savings Plan, the GTE Corporation Savings,
Investment & Tax-Deferral Plan for Hourly Employees, the GTE Hourly Savings
Plan, the AGCS Savings Plan and the AGCS Hourly Savings Plan (collectively, the
"Savings Plans") and the Consolidated Employee Stock Ownership Plan of GTE
Corporation (the "CESOP") who are also holders of additional shares of the
Corporation's common stock (the "GTE Common Stock") will receive one proxy card
representing all holdings registered in a similar manner. Accordingly, the
executed proxy card also will provide instructions to the trustees of the
Savings Plans and the CESOP for the voting of shares held in those plans. If
their accounts are not registered in a similar manner, shareholders will receive
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a separate proxy card for their individual and plan holdings. Unvoted shares of
the CESOP are voted at the discretion of the trustee of the CESOP. Unvoted
shares of the Savings Plans are voted by the trustee in the same proportion as
shares for which the trustee has received voting instructions.
COST OF SOLICITATION
GTE is responsible for the cost of soliciting proxies. Proxies may be
solicited by directors, officers or regular employees of GTE in person or by
telephone, or by other means. In addition, GTE has retained D.F. King & Co.,
Inc., New York, New York, to assist in the solicitation of proxies, and it is
estimated their charges and expenses will not exceed $30,000. GTE also will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their expenses in accordance with the regulations of the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange, Inc. (the "NYSE")
concerning the sending of proxies and proxy material to the beneficial owners of
stock.
VOTING
Shares Outstanding
As of January 31, 1996, the outstanding voting stock of GTE consisted of
975,598,047 shares of GTE Common Stock. Each share of GTE Common Stock is
entitled to one vote.
It is GTE's policy that all proxies, ballots and tabulations that identify
the vote of individual shareholders are kept confidential. These items are not
seen by nor reported to the Corporation, except where shareholders write
comments on their proxy cards, as necessary to meet legal requirements or in a
contested proxy solicitation.
Vote Required
The nominees for directors who receive a plurality of the votes cast by the
holders of the outstanding GTE Common Stock entitled to vote at the Annual
Meeting will be elected. An affirmative majority of the votes cast is required
to ratify the appointment of auditors and to approve each of the shareholder
proposals. Abstentions and broker non-votes are not counted in determining the
number of shares voted for or against any nominee for director or any proposal.
Abstentions are counted toward determining whether a quorum has been obtained.
However, shares represented by broker non-votes are not considered present at
the meeting and, accordingly, are not counted towards quorum.
PROXY STATEMENT PROPOSALS
At the Annual Meeting each year, the Board of Directors submits to
shareholders its nominees for election as directors. The shareholders also vote
to ratify or reject the auditors selected by the Audit Committee and approved by
the Board of Directors. In addition, the Board of Directors may submit other
matters to the shareholders for action at the Annual Meeting.
Shareholders of GTE also may submit proposals for inclusion in the proxy
material. These proposals must meet the shareholder eligibility and other
requirements of the SEC. In order to be included in GTE's 1997 proxy material, a
shareholder's proposal must be received no later than November 8, 1996 at GTE's
Corporate Headquarters, One Stamford Forum, Stamford, Connecticut 06904,
Attention: Secretary.
In addition, GTE's By-Laws (the "By-Laws") provide that in order for
business to be brought before the Annual Meeting, a shareholder must deliver
written notice to the Secretary not less than 30 nor more than 60 days prior to
the date of the Annual Meeting. The notice must state the shareholder's name,
address and number of shares of GTE Common Stock held, and briefly describe the
business to be brought before the meeting, the reasons for conducting such
business at the Annual Meeting and any material interest of the shareholder in
the proposal.
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The By-Laws also provide that if a shareholder intends to nominate a
candidate for election as a director, the shareholder must deliver written
notice of his or her intention to the Secretary. The notice must be delivered
not less than 30 nor more than 60 days before the date of a meeting of
shareholders. The notice must set forth the following: the name and address of
and number of shares of GTE Common Stock owned by the shareholder (and that of
any other shareholders known to be supporting said nominee) and the nominee for
election as a director; the age of the nominee; the nominee's business address
and experience during the past five years; any other directorships held by the
nominee; the nominee's involvement in certain legal proceedings during the past
five years; and such other information concerning the nominee as would be
required to be included in a proxy statement soliciting proxies for the election
of the nominee. In addition, the notice must include the nominee's consent to
serve as a director of GTE if elected.
BOARD OF DIRECTORS
The Board of Directors manages the business of GTE. It establishes the
overall policies and standards for GTE and reviews the performance of
management. The directors are kept informed of GTE's operations at meetings of
the Board and committees of the Board (the "Committees") and through reports and
analyses and discussions with management.
The Board of Directors meets on a regularly scheduled basis and, during
1995, met on thirteen occasions. In addition, significant communications between
the directors and the Corporation occur apart from regularly scheduled meetings
of the Board and its Committees. Accordingly, management does not regard
attendance at meetings to be the primary criterion in evaluating the
contributions a director makes to GTE. For the Board of Directors as a whole,
average attendance at meetings of the Board and its Committees (the aggregate of
the total number of meetings of the Board of Directors and the total number of
meetings of all Committees on which each director served) during 1995 was 94.1%.
During 1995, none of the incumbent directors attended less than 75% of the
aggregate of the total number of Board meetings and the total number of meetings
of all Committees on which he or she served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established six standing Committees and has
assigned certain responsibilities to each of those Committees.
Audit Committee
The Audit Committee had five meetings in 1995. The Audit Committee
recommends the appointment of independent public accountants for GTE, reviews
the scope of audits proposed by the independent public accountants, reviews
internal audit reports on various aspects of corporate operations and
periodically consults with the independent public accountants on matters
relating to internal financial controls and procedures.
Executive Compensation and Organizational Structure Committee
The Executive Compensation and Organizational Structure Committee had
eleven meetings during 1995. The functions of this Committee include the review
and approval of compensation of employees above a certain salary level, the
review of management recommendations relating to incentive compensation plans,
the administration of the GTE Corporation Executive Incentive Plan and the GTE
Corporation 1991 Long-Term Incentive Plan, the review of and recommendations
concerning directors' compensation and consultation on senior executive
continuity and organizational matters.
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Nominating Committee
The Nominating Committee had two meetings during 1995. The functions of
this Committee include the consideration of the size and composition of the
Board, review and recommendation of individuals for election as directors or
officers of GTE, review of criteria for selecting directors, evaluation of
directors, as appropriate, and consideration of policies and practices with
respect to the functioning of the Board. In carrying out its responsibilities
for recommending candidates to fill vacancies on the Board and in recommending a
slate of directors for election by the shareholders at the Annual Meeting, this
Committee will consider candidates suggested by other directors, employees and
shareholders. Suggestions for candidates, accompanied by biographical material
for evaluation, may be sent to the Secretary at GTE's Corporate Headquarters.
Individuals suggested as candidates should have high level management experience
in a large, relatively complex organization or have experience dealing with
complex problems. A candidate also must indicate a willingness to attend
scheduled meetings of the Board and its Committees.
Pension Trust Coordinating Committee
The Pension Trust Coordinating Committee is responsible for reviewing the
performance of the portfolios of and investment advisors to GTE's pension plans,
approving overall investment policy relating to the assets of the pension plans
and monitoring the actuarial soundness of those plans. This Committee had two
meetings during 1995.
Public Policy Committee
The Public Policy Committee, which had two meetings during 1995, reviews
the policies and practices of GTE as to corporate contributions, employee safety
and health and assumes such other duties as the Board may from time to time
delegate.
Strategic Issues, Planning and Technology Committee
The Strategic Issues, Planning and Technology Committee is responsible for
reviewing the long-term strategic objectives and goals of the Corporation and
the external and internal issues related to those goals and to technology. This
Committee had two meetings during 1995.
DIRECTORS' COMPENSATION
Retainer and Meeting Fees
Directors who are also employees of GTE are not paid any fees or other
remuneration, as such, for service on the Board or any of its Committees.
Each non-employee director receives an annual retainer of $30,000 plus 200
shares of GTE Common Stock awarded pursuant to the GTE Corporation 1991
Long-Term Incentive Plan ("LTIP"). Non-employee directors receive a retainer of
$1,500 for each Committee on which they serve. A director who chairs a Committee
receives a retainer of $2,500. In addition, non-employee directors receive
$1,200 for each Board or Committee meeting they attend. Non-employee directors
are those directors who are not otherwise employees of GTE or its subsidiaries
and thus are not otherwise eligible to fully participate in the GTE employee
incentive programs, savings plans, or stock purchase plans.
Other Compensation
Under the Deferred Compensation Plan for Non-Employee Members of the Board
of Directors of GTE Corporation (the "Deferred Compensation Plan"), any
non-employee director may elect annually to defer all or any portion of his or
her current cash compensation as a director and receive future payments in one
or more installments. Amounts deferred under the Deferred Compensation Plan are
treated as if held in GTE Common Stock and are accounted for in units with each
unit equal
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to the value of one share of GTE Common Stock ("Common Stock Units"). Common
Stock Units increase or decrease in value based on the fair market value of an
equivalent number of shares of GTE Common Stock. In addition, cash equal to the
dividends on an equivalent number of shares of GTE Common Stock is credited to a
non-employee director's account each time a dividend is paid. The cash is then
converted into additional Common Stock Units. All payments under the Deferred
Compensation Plan are made in cash. A director may elect a payment schedule that
begins either on fixed dates in the future at least six months after the close
of the year for which the deferral is made, or at any time commencing at least
six months after the director retires from the Board.
Under the Phantom Stock Plan for Non-Employee Members of the Board of
Directors of GTE Corporation (the "PSP"), non-employee directors are awarded 300
Common Stock Units annually. Common Stock Units increase or decrease in value
based on the fair market value of an equivalent number of shares of GTE Common
Stock. The Common Stock Units are held in an account for the director and, each
time a dividend is paid, an equivalent amount is converted to Common Stock Units
and credited to the director's PSP account. Payments under the PSP are made in
cash and a director may elect a schedule of payments beginning no earlier than
six months after the director retires from the Board.
Directors may also elect to invest the balance of their Deferred
Compensation Plan account and their PSP account in a variety of investment
options other than Common Stock Units beginning six months after the director
retires from the Board.
Messrs. Johnson and Palmer, directors of GTE, also received $4,000 each in
meeting and retainer fees during 1995 for serving as directors of Contel
Cellular Inc. ("Contel Cellular") until June 1995 and September 1995,
respectively. Mr. Johnson also received $8,465 in meeting and retainer fees for
serving as a director of BC TEL until April 1995. GTE indirectly owns 50.7% of
the voting stock of BC TEL and the balance is held by public shareholders.
Retirement Plan For Non-Employee Directors
The Retirement Plan for Non-Employee Members of the Board of Directors of
GTE Corporation (the "Directors' Retirement Plan") is designed to provide
competitive compensation arrangements for GTE's non-employee directors.
Directors who are employees of GTE do not participate in this plan.
Under the terms of the Directors' Retirement Plan, a non-employee director
who retires is eligible to receive annual payments equal to the value of the
annual cash retainer in effect on the date of his or her retirement, the value
of the most recent award of Common Stock Units under the PSP prior to the
director's retirement and the cash equivalent of the most recent award of GTE
Common Stock under the LTIP prior to the director's retirement. Payments are
made for the lesser of the remainder of the director's life or a period equal to
the length of his or her Board service. If a director retires from the Board
before reaching age 65, the annual payment is reduced by 5% for each year the
director's age is below age 65 up to a maximum of 50%.
If a director dies before retirement, his or her spouse will receive the
director's benefit, unreduced on account of age, for the lesser of the remainder
of the spouse's life or a period equal to the length of the director's Board
service. If a director dies after retirement, the spouse will continue to
receive the benefit being received by the director at the time of his or her
death for the lesser of the remainder of the spouse's life or a period equal to
the length of the director's Board service.
One director, Mr. Sloan, who serves on the Board does not participate in
the Directors' Retirement Plan. He was formerly a director of Contel Corporation
("Contel"), which merged with a subsidiary of GTE in 1991. Under the terms of
the Contel merger agreement, Mr. Sloan continues to participate in the
Retirement Plan for Outside Directors of Contel Corporation (the "Contel
Directors' Plan"). However, his retirement benefit will be based upon the
greater of the annual retainer previously paid by Contel or that paid by GTE at
the time of retirement. The Contel
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Directors' Plan provides eligible directors who retired from Contel's Board
after attaining age 65 and completing five years of service with, among other
things, an annual benefit for the remainder of their life equal to the basic
annual retainer for members of the Board in effect during the last full year of
the director's service.
CHARITABLE AWARDS PROGRAM
Non-employee directors and designated senior executives of GTE, including
the individuals named in the Summary Compensation Table on page 11, participate
in a charitable awards program. Under this program, the Corporation will donate
an aggregate of $1 million to up to four tax-exempt educational institutions or
public charities designated by the participant. The donations will be paid in
five equal annual installments after a participant's death. Generally, the
donations will only be paid if: (1) the participant dies while a director or a
designated senior officer; or (2) the participant was either (a) a director who
separated from service with GTE after completing five or more years of service
as a director or (b) a designated senior officer who separated from service
after attaining age 65 and completing five or more years of service as an
employee of GTE and who was not involuntarily separated from service for cause;
or (3) a change in control occurs while the participant is a director or
designated senior executive of GTE. The program is financed through the purchase
of life insurance by GTE. Participants derive no financial benefit from this
program since all charitable deductions accrue solely to GTE.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
As members of the Executive Compensation and Organizational Structure
Committee (the "Committee"), we review and approve annual salary range
adjustments for GTE's executive employee group and administer GTE's executive
short- and long-term incentive plans including approving grant and payout
targets and awards under those plans. The Committee also evaluates the
performance of senior management, including the Chief Executive Officer, and
reviews and approves changes to the base salary of executive management of GTE
and its subsidiaries. The Committee periodically reports to the Board on its
activities.
Compensation Philosophy
The Committee works with senior management to develop and approve GTE's
executive compensation philosophy and policies, which then form the basis for
the Committee's decisions. GTE's executive compensation philosophy relates the
level of compensation to GTE's success in meeting its annual and long-term
performance goals and achieving long-term returns for shareholders, rewards
individual achievement, and seeks to attract and retain executives of the
highest caliber. GTE's philosophy is to pay average compensation (including
base, bonus and long-term incentives) for average results and above-average
compensation for above-average results. The Corporation's comparator group for
benchmarking competitiveness includes other major companies, both in
telecommunications and general industry. The companies used as comparators have
a reputation for excellence and are comparable to GTE in terms of such
quantitative measures as revenues, assets, market value and total shareholder
return and are viewed as direct competitors for executive talent in the overall
labor market. Compensation data for the comparator companies are obtained from
benchmarking surveys conducted by nationally recognized independent compensation
consultants. These surveys cover more companies than those used in the peer
group performance comparison shown in the Performance Graph on page 15. In
reviewing the survey data, GTE takes into account how its compensation policies
and overall performance compare to similar indices for the comparator group.
GTE has compared its ratio of base salary to total executive compensation
to the practices of the comparator companies. Under GTE's compensation
philosophy, base salary is intended to
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represent less than 40% of executive compensation. The remaining compensation is
paid under incentive plans. Payments under these incentive plans are based upon
the achievement of annual and long-term performance goals and, accordingly, are
"at risk".
Executive Compensation
In determining whether to adjust the base salary of an executive, including
the Chief Executive Officer, the Committee takes into account individual
performance, performance of the operations directed by that executive and the
position of compensation in relation to the established salary range. In
evaluating whether an executive's total compensation package (base salary plus
incentive compensation) should be adjusted, the Committee also takes into
account changes in the executive's responsibilities and GTE's competitive
philosophy.
The Committee reviewed Mr. Lee's 1995 performance based upon GTE's
financial performance in terms of earnings per share, revenue growth, return on
equity ("ROE"), operating cash flow margin ("OCFM"), total shareholder return,
asset deployment, and the complexity of managing a multinational corporation in
an industry that is experiencing enormous change, as well as his leadership role
in the Corporation's restructuring/reorganization. The Committee also based its
review upon Mr. Lee's performance with respect to further implementing plans to
control costs and streamline operations; providing leadership in the development
of legislative reform and regulatory strategies that will lead to increased
flexibility; establishing, in anticipation of potential regulatory changes, the
capability to offer a full range of wireline, wireless, data and video services;
pursuing international telecommunications alliances; enhancing GTE's position
with respect to telecommunications technology; and continuing the pursuit of
quality, reliability and customer value enhancement. Based on these factors,
together with the relative scope of Mr. Lee's job and pay compared to Senior
Executive Officers in similar companies, the Committee approved a salary range
adjustment and a base salary increase for Mr. Lee.
Incentive Compensation
Certain executives are also eligible to receive payments under two
incentive plans in addition to their base salary.
Under the Executive Incentive Plan (the "EIP"), awards are made based upon
GTE's performance during the last fiscal year and upon the individuals'
achievement of certain goals for their business unit and other individual
objectives. At the conclusion of each plan year, the Committee compares GTE's
overall performance and that of its business units to established objectives.
The Committee then arrives at an overall rating of the Corporation and the
business units to determine the percentage payout of incentive awards for each
unit and the individual awards for certain senior executives.
No awards under the EIP are made for any year in which GTE's ROE does not
exceed 8%. However, under the terms of the EIP, the Committee shall also take
into consideration unusual or extraordinary items or circumstances affecting
GTE's financial performance, such as the impact of mandated accounting changes
or unusual charges related to acquisitions or divestitures. GTE's 1995 ROE
exceeded 8%, excluding the adjustment for Financial Accounting Standard No. 71,
and awards under the EIP were made.
Mr. Lee's EIP award for 1995 is based upon the performance of GTE as a
whole and Mr. Lee's performance with respect to critical qualitative and
quantitative objectives approved by the Committee. Although GTE does not use
specific weighting factors with respect to performance measures, the Committee
considered the Corporation's financial and operational performance in 1995, and
Mr. Lee's achievement of other non-quantitative objectives. Specifically, Mr.
Lee's 1995 objectives included quantitative goals related to earnings per share,
total return to shareholders, ROE, operating and net income, revenues, OCFM, and
return on investment and asset deployment. Mr. Lee's goals also included
significant qualitative objectives such as: progress toward attainment
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of GTE's five strategic thrusts (voice, video services, data services, wireless
business and international telecommunications); continuing re-engineering
efforts in all operating units to streamline processes; implementing plans with
respect to market leadership programs aimed at taking full advantage of the
changing regulatory structure, including speeding up the rollout of new products
and services such as video, Tele-Go and Personal Communications Services, and
entering into selective joint ventures; effecting operational and financial
performance improvements at GTE's international operations; improving certain
qualitative financial results including the capital structure; updating and
implementing plans relating to GTE's investment in its human resources,
including upgrading internal communications, increasing training efforts and
aggressive healthcare cost containment; and other goals related to the
advancement of technology and the securing of favorable national
telecommunications legislation and local regulatory flexibility and, based on
the regulatory relief, the establishment of capability to offer a full range of
wireline voice, wireless, data and video services.
EIP awards for the five most highly compensated executives of GTE are
included in the "Bonus" column of the Summary Compensation Table on page 11.
Certain GTE executives also have an opportunity to earn incentive payments
under GTE's 1991 Long-Term Incentive Plan (the "LTIP"). The primary purpose of
the LTIP is to offer participants an incentive to cause GTE to achieve superior
financial performance, thereby helping assure superior performance for the
shareholders. Two types of grants are currently used under the provisions of the
LTIP -- performance bonuses and stock options, which may include tandem stock
appreciation rights.
Senior executives of GTE, including the five executives named in the
Summary Compensation Table, are eligible to receive annual grants of performance
bonuses which are earned during a 36-month performance cycle. Awards for the
three-year performance cycle ending in 1995 were based on GTE's financial
performance during the relevant cycle as measured by GTE's average ROE against
pre-established target levels. In 1994, the Committee established an additional
measure of corporate performance -- operating cash flow margin ("OCFM"). To
transition from awards based solely on performance against ROE targets to awards
based on a combination of ROE and OCFM performance, and to bring opportunities
to competitive levels, the Committee established a special performance period of
a two-year duration to run concurrently with the final two years of the
three-year ROE performance cycle ending in 1995. The awards for the additional
period were based on GTE's performance against ROE and OCFM goals for the
two-year period. The Committee also authorized grants for the three-year
performance cycle ending in 1997. The payments under this cycle will be based on
GTE's performance against the ROE and OCFM targets established for the full
three-year cycle. 75% of the award will be determined based on ROE performance
and 25% of the award will be determined based on OCFM performance.
The Committee established minimum and target award opportunities for each
cycle based upon competitive practices. In establishing the targeted performance
objectives for ROE and OCFM, the Committee considered past performance, the
strategic goals of the Corporation and the plans for implementing those goals.
The established targets are designed to facilitate implementing strategic plans
and improving performance.
At the time the performance targets for the current LTIP cycles were
established, a Common Stock Unit account was set up for each participant in the
LTIP. An initial dollar amount for each account ("Target Award") was determined
based on the competitive performance bonus grant practices of the market
comparator group. That amount was then divided by the average market price for
GTE Common Stock for the calendar week preceding the day the account was
established to determine the number of Common Stock Units in the account. The
value of the account increased or decreased based on the market price of the GTE
Common Stock. An amount equal to the dividends paid on an equivalent number of
shares of GTE Common Stock was added on each dividend payment date. This amount
was then converted into a number of Common Stock Units
8
<PAGE> 12
obtained by dividing the amount of the dividend by the average price of the GTE
Common Stock on the composite tape of the New York Stock Exchange on the
dividend payment date and added to the Common Stock Unit Account.
If the minimum level of the targeted performance range is not attained, no
award is paid. If the minimum of the performance target range is achieved,
participants receive a payment of 20% of the Target Award for that performance
measure. If the target value of the performance range is attained, participants
receive a payment of 100% of the Target Award for that performance measure.
Superior performance, achieving results in excess of the target value, results
in a payment in excess of 100% of the Target Award based upon a formula, as
exhibited in footnote 4 under the Long-Term Incentive Plan Table. The formula is
applied separately for each performance measure.
Payouts to the named executives for the 1993-1995 award cycle and 1994-1995
award period are shown in the Summary Compensation Table on page 11. Also shown
are historical awards for the 1991-1993, 1992-1994 cycles and 1994 supplement.
The awards shown reflect the following combinations of performance: the
1993-1995 ROE goal was not met completely, while the goal for the 1994-1995
award period was exceeded. With respect to these three-year cycles, the
Committee had the discretion to adjust targets or performance results to reflect
unusual items that the Committee determined were extraordinary, nonrecurring and
unrelated to the normal operations of the business and unanticipated or not
contemplated at the time the targets were originally established. Grants for the
1995-1997 award cycle are shown in the Long-Term Incentive Plan Awards Table on
page 13.
Under the LTIP, the Committee normally approves grants of stock options,
which may include tandem stock appreciation rights ("SARs"). These options are
granted to a substantially larger group of executives, including the five
executives named in the Summary Compensation Table, than those who are eligible
to receive performance bonuses under the LTIP.
In approving the number of options and SARs awarded under the LTIP, the
Committee compares GTE's grant levels to competitive practices with respect to
such grants over a period of time. GTE's philosophy is to be at or near a median
grant posture of the comparator group of companies. The number of options
currently held by any individual participant was not a factor in determining
individual grants for 1995. In 1995, Mr. Lee and the other four most highly
compensated officers received the awards shown in the Summary Compensation Table
on page 11.
Mr. Lee's supplemental award was the result of the range adjustment, as
discussed earlier.
Internal Revenue Service Rules Relating to Deductibility of Compensation
In late December 1995, the Internal Revenue Service ("IRS") issued final
regulations that apply to the provision in the Internal Revenue Code limiting
the tax deduction a publicly held corporation may take for compensation paid to
its chief executive officer and its four other most highly compensated
employees. The IRS regulations limit the amount that a company may deduct to one
million dollars per person unless the compensation constitutes "performance
based" compensation. The regulations contain transition rules which companies
generally may rely on until the first shareholder meeting in 1997.
In order to comply with the IRS regulations, the Committee has adopted
certain procedures to provide for the deductibility of future amounts received
under the EIP for 1995 and LTIP for cycles commencing in 1994. The provisions
include, but are not limited to, limiting positive discretion and establishing
the maximum award payable to any individual participant under the EIP. However,
performance bonuses paid under the LTIP for 3-year performance cycles beginning
prior to 1994, do not qualify for the performance-based exemption to the one
million dollar limit.
9
<PAGE> 13
Other Compensation Plans
GTE also has various broad-based employee benefit plans. Executives
participate in these plans on the same terms as eligible, non-executive
employees, subject to any legal limits on the amounts that may be contributed or
paid to executives under the plans. GTE offers an Employees' Stock Plan pursuant
to the provisions of Section 423 of the Internal Revenue Code of 1986 as amended
(the "Code") under which employees may purchase GTE Common Stock at a discount.
The GTE Savings Plan (the "Savings Plan"), pursuant to the provisions of Section
401(k) of the Code, permits employees to invest in a variety of funds on a pre-
or after-tax basis. Matching contributions under the Savings Plan are made in
GTE Common Stock.
GTE also maintains pension, insurance and other benefit plans for its
employees.
<TABLE>
<S> <C>
Russell E. Palmer, Chairman Edward H. Budd
James R. Barker James L. Ketelsen
</TABLE>
March 8, 1996
10
<PAGE> 14
EXECUTIVE COMPENSATION TABLES
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of the
Chief Executive Officer and each of the other four most highly compensated
executive officers of GTE for services in all capacities to GTE and its
subsidiaries.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------
AWARDS
----------------------------- PAYOUTS
ANNUAL COMPENSATION SECURITIES ----------
----------------------------------- RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY OTHER ANNUAL STOCK OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($)(1) BONUS($) COMPENSATION($) AWARDS(2) SARS(#) ($)(3) ($)(4)
- ----------------------------- ---- ------- --------- --------------- --------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles R. Lee............... 1995 897,500 1,403,600 0 0 247,100 1,347,500 10,613
Chairman & Chief 1994 784,615 1,219,500 0 0 182,300 698,100 7,075
Executive Officer 1993 728,846 1,016,800 0 0 86,000 207,100 7,067
Kent B. Foster............... 1995 762,604 953,200 0 0 187,900 848,300 10,613
President(5) 1994 687,608 837,900 0 0 138,100 397,800 7,075
1993 603,659 531,700 0 0 58,800 117,100 6,502
Michael T. Masin............. 1995 633,230 797,400 0 0 163,100 683,200 10,613
Vice Chairman and 1994 564,577 706,500 0 0 117,800 364,600 5,690
President - 1993 95,192 119,100 0 0 100,000 130,800 0
International(6)
Thomas W. White.............. 1995 418,884 443,800 0 0 98,800 331,800 10,613
President - GTE Telephone
Operations Group(7)
William P. Barr.............. 1995 382,500 316,400 0 0 47,600 255,100 10,613
Senior Vice President and 1994 183,577 149,400 0 0 60,000 140,100 0
General Counsel(8)
</TABLE>
- ---------------
(1) The data in the table includes fees of $20,604, $22,896 and $21,944,
respectively, received by Mr. Foster when he served as a director of BC TEL
during 1995, 1994 and 1993. Mr. Masin and Mr. White received fees of $6,730
and $16,607, respectively, for serving as directors of BC TEL during 1995.
BC TEL is an indirectly-owned subsidiary of GTE.
(2) Neither Messrs. Lee, Foster, Masin, White nor Barr own any restricted shares
of GTE Common Stock.
(3) 1995 LTIP Payouts include transition awards for the 1994-95 performance
period, which were established by the Committee as a special grant to allow
for the smooth transitioning from a single measure of long-term performance
(return on equity) to a combined measure (return on equity and operating
cash flow margin).
(4) All other compensation for 1995 includes company contributions to the GTE
Savings Plan of $6,750 for each of Messrs. Lee, Foster, Masin, White and
Barr and company contributions to the GTE Executive Salary Deferral Plan of
$3,863 for each of Messrs. Lee, Foster, Masin, White and Barr.
(5) Mr. Foster was elected President in June 1995. He served as Vice Chairman
and President -- GTE Telephone Operations Group from October 1993 until June
1995. He had been President -- GTE Telephone Operations Group since 1989.
(6) Mr. Masin joined GTE as Vice Chairman effective October 1993. He was also
elected President -- International in June 1995. Prior to joining GTE he was
a partner with the law firm of O'Melveny & Myers.
(7) Mr. White was elected President -- GTE Telephone Operations Group in July
1995. He served as an Executive Vice President of GTE Telephone Operations
Group since 1991 and had been a Senior Vice President of GTE Telephone
Operations Group since 1989.
11
<PAGE> 15
(8) Mr. Barr was elected Senior Vice President and General Counsel effective
July 1994. Prior to joining GTE, he was a partner in the Washington, D.C.
office of the law firm of Shaw, Pittman, Potts & Trowbridge since 1993. He
served as Attorney General of the United States from 1991 to 1993. Mr. Barr
joined the Department of Justice as Assistant Attorney General in charge of
the office of Legal Counsel in 1989, and subsequently served as Deputy
Attorney General prior to his appointment as Attorney General.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options and tandem stock
appreciation rights ("SARs") to the named executive officers of GTE in 1995. The
options and SARs were granted under the LTIP. Pursuant to SEC rules, the table
also shows the value of the options granted at the end of the option terms (ten
years) if the stock price were to appreciate annually by 5% and 10%,
respectively. There is no assurance that the stock price will appreciate at the
rates shown in the table. The table also indicates that if the stock price does
not appreciate, there will be no increase in the potential realizable value of
the options granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE AT
NUMBER OF OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASE TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 0% 5% 10%
- ---------------------------- ------------ ------------ -------- ---------- --- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles R. Lee.............. 215,500 3.81% 33.38 02-13-05 $ 0 $4,523,207 $11,462,694
31,600 0.56% 41.00 11-08-05 0 814,514 2,063,975
Kent B. Foster.............. 163,100 2.89% 33.38 02-13-05 0 3,423,364 8,675,477
24,800 0.44% 34.44 07-02-05 0 536,922 1,360,557
Michael T. Masin............ 139,000 2.46% 33.38 02-13-05 0 2,917,521 7,393,570
24,100 0.43% 34.44 07-02-05 0 521,766 1,322,155
Thomas W. White............. 63,500 1.12% 33.38 02-13-05 0 1,332,824 3,377,638
35,300 0.62% 35.75 07-30-05 0 793,375 2,010,409
William P. Barr............. 47,600 0.84% 33.38 02-13-05 0 999,093 2,531,899
</TABLE>
- ---------------
(1) Each option was granted in tandem with a SAR, which will expire upon
exercise of the option. Under the LTIP, one-third of these grants vest
annually commencing one year after the date of grant.
If the price of the GTE Common Stock appreciates, the value of GTE Common
Stock held by the shareholders will also increase. For example, the market value
of GTE Common Stock on February 14, 1995 was approximately $32.03 billion based
upon the market price on that date. If the share price of GTE's Common Stock
increases by 5% per year, the market value on February 14, 2005 of the same
number of shares would be approximately $52.18 billion. If the price of GTE's
Common Stock increases by 10% per year, the market value on February 14, 2005
would be approximately $83.09 billion.
12
<PAGE> 16
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information as to options and SARs exercised
by each of the named executive officers of GTE during 1995. The table sets forth
the value of options and SARs held by such officers at year end measured in
terms of the closing price of GTE Common Stock on December 29, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT FY-END AT FY-END($)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Lee......... 18,600 367,738 553,399 397,301 7,891,305 3,874,739
Kent B. Foster......... 0 0 251,331 299,569 2,836,272 3,071,409
Michael T. Masin....... 0 0 105,932 274,968 826,501 2,714,980
Thomas W. White........ 19,800 227,700 105,566 142,134 1,227,717 1,428,689
William P. Barr........ 0 0 20,000 87,600 261,250 1,022,300
</TABLE>
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The LTIP provides for awards, currently in the form of stock options with
tandem SARs, other stock-based awards and dollar denominated awards, to
participating employees. The stock options and tandem SARs awarded under the
LTIP to the five most highly compensated individuals in 1995 are shown in the
table on page 12. The LTIP is described in more detail on pages 8 and 9.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLAN(1)
SHARES, UNITS OTHER PERIOD UNTIL --------------------------------------
OR OTHER MATURATION OR THRESHOLD(2) TARGET(3)
NAME RIGHTS PAYOUT (# OF UNITS) (# OF UNITS) MAXIMUM(4)
- ------------------------------- ------------- ------------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Charles R. Lee(5).............. 21,600 3 Years 4,946 24,732
3,085 30 Months 687 3,436
1,900 18 Months 406 2,028
950 6 Months 194 972
Kent B. Foster(6).............. 15,400 3 Years 3,527 17,633
2,415 30 Months 538 2,690
1,450 18 Months 310 1,548
610 6 Months 125 624
Michael T. Masin(7)............ 13,000 3 Years 2,977 14,885
2,000 30 Months 446 2,228
1,200 18 Months 256 1,281
485 6 Months 99 496
Thomas W. White(8)............. 5,900 3 Years 1,351 6,755
2,495 29 Months 556 2,779
1,465 17 Months 313 1,564
370 5 Months 76 378
William P. Barr................ 4,700 3 Years 1,076 5,381
</TABLE>
- ---------------
(1) It is not possible to predict future dividends and, accordingly, estimated
Common Stock Unit accruals in this table are calculated for illustrative
purposes only and are based upon the dividend rate and price of GTE Common
Stock at the close of business on December 29, 1995. The target award is the
dollar amount derived by multiplying the Common Stock Unit balance at the
end of the award cycle by the price of GTE Common Stock.
(2) The Threshold is the level of the average return on equity ("ROE") and the
average operating cash flow margin ("OCFM") during the relevant cycle which
represents the minimum acceptable performance level for both the ROE and
OCFM performance measures. If the Threshold is attained with respect to both
performance measures, the award will be equal to 20% of the
13
<PAGE> 17
combined target award for ROE and OCFM. Because ROE and OCFM are separate
performance measures, it is possible to receive an award if the Threshold is
achieved with respect to only one of the performance measures. If the actual
results for one, but not both, performance measures is at the Threshold
level, the portion of the award determined by the measure performing at the
Threshold level will be at 20% of the target award for that performance
measure, and no award will be made for the portion of the award determined
by the measure performing at less than the Threshold level. However, if the
actual results for both performance measures are below the minimum
acceptable performance level, no award will be earned.
(3) The Target is the level of the average ROE and the average OCFM during the
cycle which represents outstanding performance for both the ROE and OCFM
performance measures. If the Target is attained with respect to both
performance measures, the award will be equal to 100% of the target award
for ROE and OCFM. If the actual results for one, but not both, performance
measures is at the Target level, the portion of the award determined by the
measure performing at the Target level will be at 100% of the target award
for that performance measure, and the portion of the award determined by the
measure performing at less than 100% will be determined accordingly.
(4) This column has intentionally been left blank because it is not possible to
determine the maximum award until the award cycle has been completed. The
maximum amount of the award is limited by the amount the actual ROE and the
actual OCFM exceed the targeted ROE and the targeted OCFM. If GTE's average
ROE and OCFM during the cycle exceed their respective performance targets,
additional bonuses may be earned according to the following schedule:
<TABLE>
<CAPTION>
PERFORMANCE INCREMENT
ABOVE MAXIMUM ADDED PERCENTAGE
PERFORMANCE TARGET TO MAXIMUM AWARDS
------------------------------------------ -----------------
<S> <C>
First and Second 0.1%..................... +2%
Third and Fourth 0.1%..................... +3%
Fifth and above 0.1%...................... +4%
</TABLE>
For example, if average ROE and OCFM performance each exceed the ROE and
OCFM targets by .5%, respectively, the performance bonus will equal 114% of
the combined target award.
(5) The award of 21,600 units to Mr. Lee represents the grant for the 1995-97
performance period made in his position as Chairman and Chief Executive
Officer. Pursuant to GTE's compensation policies, the other grants shown are
incremental, prorated awards made in 1995 when his position was reclassified
and apply to the original targets under the 1995-97, 1994-96 and 1993-95
performance periods.
(6) The award of 15,400 units to Mr. Foster represents the grant for the 1995-97
performance period made while he was Vice Chairman and President of GTE
Telephone Operations Group. Pursuant to GTE's compensation policies, the
other grants shown are incremental, prorated awards made when he was
promoted to President and his position was reclassified and apply to the
original targets under the 1995-97, 1994-96 and 1993-95 performance periods.
(7) The award of 13,000 units to Mr. Masin represents the grant for the 1995-97
performance period made while he was Vice Chairman. Pursuant to GTE's
compensation policies, the other grants shown are incremental, prorated
awards made when he took on the additional responsibilities of
President -- International and his position was reclassified and apply to
the original targets under the 1995-97, 1994-96 and 1993-95 performance
periods.
(8) The award of 5,900 units to Mr. White represents the grant for the 1995-97
performance period made while he was an Executive Vice President of GTE
Telephone Operations Group. Pursuant to GTE's compensation policies, the
other grants shown are incremental, prorated awards made when he was
promoted to President -- GTE Telephone Operations Group and apply to the
1995-97, 1994-96, and 1993-95 performance periods.
14
<PAGE> 18
PERFORMANCE GRAPH
The following table shows a comparison of five year cumulative total return
to shareholders for GTE Common Stock, Standard & Poor's ("S&P") 500 Index, and
Standard & Poor's Telephone Index.
<TABLE>
<CAPTION>
Measurement Period GTE COMMON S & P 500 S & P TELE-
(Fiscal Year Covered) STOCK INDEX PHONE INDEX
<S> <C> <C> <C>
1/1/91 $100 $100 $100
12/31/91 $125 $130 $108
12/31/92 $132 $140 $118
13/31/93 $140 $154 $136
12/31/94 $129 $156 $130
12/31/95 $196 $215 $197
</TABLE>
- Assumes $100 Invested on January 1, 1991.
- S&P Telephone Index is comprised of the common stocks of the Regional
Bell Holding Companies plus GTE and Alltel Corporation.
EXECUTIVE AGREEMENTS
GTE has entered into agreements (the "Agreements") with Messrs. Lee,
Foster, Masin, White and Barr regarding benefits to be paid in the event of a
change in control of GTE (a "Change in Control").
A Change in Control is deemed to have occurred if a majority of the members
of the Board do not consist of members of the Incumbent Board (as defined in the
Agreements) or if, in any 12-month period, three or more directors are elected
without the approval of the Incumbent Board. An individual whose initial
assumption of office occurred pursuant to an agreement to avoid or settle a
proxy or other election contest is not considered a member of the Incumbent
Board. In addition, a director who is elected pursuant to such a settlement
agreement will not be deemed a director who is elected or nominated by the
Incumbent Board for purposes of determining whether a Change in Control has
occurred. A Change in Control will not occur in the following situations: (1)
certain merger transactions in which there is at least 50% GTE shareholder
continuity in the surviving corporation, at least a majority of the members of
the board of directors of the surviving corporation consist of members of the
Board and no person owns more than 20% (or under certain circumstances, a lower
percentage, not less than 10%) of the voting power of the surviving corporation
following the transaction, and (2) transactions in which GTE's securities are
acquired directly from GTE.
15
<PAGE> 19
The Agreements provide for benefits to be paid in the event these
individuals separate from service and have a "good reason" for leaving or are
terminated without "cause" within two years after a Change in Control of GTE.
Good reason for leaving includes but is not limited to the following
events: demotion, relocation or a reduction in total compensation or benefits,
or the new entity's failure to expressly assume obligations under the
Agreements. Termination for cause includes certain unlawful acts on the part of
the executive or a material violation of his or her responsibilities to the
Corporation resulting in material injury to the Corporation.
An executive who experiences a qualifying separation from service will be
entitled to receive up to two times the sum of (i) base salary and (ii) the
average of his percentage awards under the EIP for the previous three years. The
executive will also continue to receive medical and life insurance coverage for
up to two years and will be provided with financial and outplacement counseling.
In addition, any member of the Office of the Chairman with less than 10
years of service with GTE will receive the following special service credit in
the following amounts: two times years of service otherwise credited if the
executive has five or fewer years of credited service; 10 years if credited
service is more than five and not more than 10 years; and, if the executive's
credited service exceeds 10 years, the actual number of credited years of
service. These additional years of service will apply towards vesting,
retirement eligibility, benefit accrual and all other purposes under the
Supplemental Executive Retirement Plan ("SERP") and the Executive Retired Life
Insurance Plan. In addition, each executive covered under an Agreement will be
considered to have not less than 76 points and 15 years of accredited service
for the purpose of determining his eligibility for early retirement benefits.
The Agreements provide that there will be no duplication of benefits.
In order to replace certain pension entitlements that would have been
payable to Mr. Masin had he remained with his former employer, he will also
receive a single life annuity pension of $200,000 per year (the "Special
Pension") with an unreduced surviving spouse benefit when he leaves GTE. He will
only be eligible to receive the Special Pension if he meets certain eligibility
criteria when he separates from GTE. If he is separated involuntarily after age
60 or a Change in Control occurs at any age and Mr. Masin separates for "good
reason" or is terminated without "cause," he will be eligible for postretirement
medical benefits.
Each of the Agreements remains in effect until July 1, 1999 unless
terminated earlier pursuant to its terms. The Agreements will be automatically
renewed on each successive July 1 unless, not later than December 31 of the
preceding year, one of the parties notifies the other that he does not wish to
extend his respective Agreement. If a Change in Control occurs, the Agreements
will remain in effect until the obligations of GTE (or its successor) under the
Agreements have been satisfied.
RETIREMENT PROGRAMS
Pension Plans
The estimated annual benefits payable, calculated on a single life annuity
basis, under GTE's defined benefit pension plans at normal retirement at age 65,
based upon final average earnings (integrated with social security as described
below) and years of service, is illustrated in the following table:
16
<PAGE> 20
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------------------
EARNINGS 15 20 25 30 35
- ------------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 64,085 $ 85,446 $106,808 $ 128,169 $ 149,531
400,000 85,835 114,446 143,058 171,669 200,281
500,000 107,585 143,446 179,308 215,169 251,031
600,000 129,335 172,446 215,558 258,669 301,781
700,000 151,085 201,446 251,808 302,169 352,531
800,000 172,835 230,446 288,058 345,669 403,281
900,000 194,585 259,446 324,308 389,169 454,031
1,000,000 216,335 288,446 360,558 432,669 504,781
1,200,000 259,835 346,446 433,058 519,669 606,281
1,500,000 325,085 433,446 541,808 650,169 758,531
2,000,000 433,835 578,446 723,058 867,669 1,012,281
2,500,000 542,585 723,446 904,308 1,085,169 1,266,031
2,750,000 596,960 795,946 994,933 1,193,919 1,392,906
</TABLE>
All executive officers of GTE are employees of GTE Service Corporation, a
wholly-owned subsidiary, which maintains the GTE Service Corporation Plan for
Employees' Pensions (the "Service Corporation Plan"), a noncontributory pension
plan for the benefit of all of its employees based on years of service. Pension
benefits to be paid from the Service Corporation Plan and contributions to the
Service Corporation Plan are related to basic salary exclusive of overtime,
differentials, incentive compensation (except as otherwise described) and other
similar types of payments. Under the Service Corporation Plan, pensions are
computed on a two-rate formula basis of 1.15% and 1.45% for each year of
service, with the 1.15% service credit being applied to that portion of the
average annual salary for the five highest consecutive years that does not
exceed the Social Security Integration Level (the portion of salary subject to
the Federal Social Security Act), and the 1.45% service credit being applied to
that portion of the average annual salary that exceeds said level. As of March
8, 1996, the credited years of service under the Service Corporation Plan for
Messrs. Lee, Foster, Masin, White and Barr are 12, 25, 2, 27, and 1,
respectively.
Under federal law, an employee's benefits under a qualified pension plan,
such as the Service Corporation Plan, are limited to certain maximum amounts.
GTE maintains a SERP, which supplements the benefits of any participant in the
Service Corporation Plan in an amount by which any participant's benefits under
the Service Corporation Plan are limited by law. In addition, the SERP includes
a provision permitting the payment of additional retirement benefits determined
in a similar manner as under the Service Corporation Plan on remuneration
accrued under management incentive plans as determined by the Executive
Compensation and Organizational Structure Committee. SERP benefits are payable
in a lump sum or an annuity.
Executive Retired Life Insurance Plan
The GTE Corporation Executive Retired Life Insurance Plan ("ERLIP")
provides Messrs. Lee, Foster, Masin, White and Barr a postretirement life
insurance benefit of three times final base salary. Upon retirement, ERLIP
benefits may be paid as life insurance or, optionally, an equivalent amount
equal to the present value of the life insurance amount (based on actuarial
factors and the interest rate then in effect), as a lump sum payment, as an
annuity or as installment payments.
17
<PAGE> 21
CERTAIN TRANSACTIONS
During 1995, The Boston Consulting Group, Inc. received fees from GTE's
subsidiaries of approximately $2,884,000 for consulting services. Dr. Sandra O.
Moose is a director of GTE and a Senior Vice President, Chair of the East Coast
Practice and Director of The Boston Consulting Group, Inc.
GTE's subsidiaries utilized the services of Thompson, Hine and Flory during
1995. Mr. Robert D. Storey is a director of GTE and a partner in that law firm.
The investment banking firm of PaineWebber Incorporated received
underwriting commissions and fees from GTE and its subsidiaries on the sale of
securities and financial advisory services during 1995. It is possible that
PaineWebber may have received additional brokerage commissions from trustees of
the various pension, retirement, savings or similar plans of GTE and its
subsidiaries; but any such commissions would not have been as a result of
direction by GTE or its subsidiaries with regard to such orders. Mr. Richard W.
Jones is a director of GTE and a business consultant for PaineWebber
Incorporated.
Mr. Charles Wohlstetter, who was Vice Chairman and a director of GTE, died
during 1995. After Contel merged with a subsidiary of GTE in 1991, GTE assumed
and modified Mr. Wohlstetter's agreement with Contel to serve as a consultant
for the remainder of his life. The agreement provided that he would be
compensated at an annual rate of $824,828 plus the payments he received under
the Contel Senior Executive Supplemental Income Plan and pension plan. In the
event of Mr. Wohlstetter's death, such agreement provided that GTE would pay his
wife during her lifetime one-half of the amounts which would have been payable
to Mr. Wohlstetter under the agreement. During 1995, Mr. and Mrs. Wohlstetter
each received $274,944, and Mr. Wohlstetter also received miscellaneous
compensation from GTE (including personal automobile and aircraft related
expenses, club memberships and tax assistance services) valued at $65,079.
OWNERSHIP OF STOCK BY DIRECTORS, NOMINEES FOR DIRECTORS AND EXECUTIVE OFFICERS
Voting Stock and Stock-Based Holdings
The table below sets forth (a) the shares of GTE Common Stock beneficially
owned by each director, nominee for director, the Chief Executive Officer and
the other four most highly compensated executive officers, and by all directors
and executive officers as a group; and (b) the total GTE stock-based holdings of
the named individuals and the group. No director, nominee for director or
executive officer owns as much as one-tenth of one percent of the total
outstanding shares of GTE Common Stock, and all directors and executive officers
as a group own less than one-half of one percent of the total outstanding shares
of GTE Common Stock. Unless otherwise indicated, all persons named in the table
have sole voting and investment power with respect to the shares shown.
The last column of the table combines beneficial ownership of shares of GTE
Common Stock (including shares which may be acquired within 60 days pursuant to
the exercise of stock options) with holdings of Common Stock Units by
nonemployee directors (which are payable in cash under the Deferred Compensation
Plan and the PSP) and by executive officers (which are payable in cash pursuant
to deferrals under the EIP and the LTIP). This column indicates the alignment of
the named individuals and group with the interests of GTE's shareholders because
the value of their total holdings will increase or decrease in line with the
price of GTE Common Stock.
18
<PAGE> 22
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY GTE STOCK-BASED
OWNED AS OF HOLDINGS AS OF
NAME OF DIRECTOR OR NOMINEE MARCH 8, 1996 MARCH 8, 1996
- ---------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Edwin L. Artzt............................................ 2,501 4,304
James R. Barker........................................... 4,200 84,150
Edward H. Budd............................................ 4,181 14,085
Robert F. Daniell......................................... 200 200
Kent B. Foster(1)(2)...................................... 422,748 459,858
James L. Johnson(2)....................................... 673,543 675,204
Richard W. Jones.......................................... 12,288 156,205
James L. Ketelsen......................................... 1,800 3,461
Charles R. Lee(1)(2)...................................... 796,562 828,285
Michael T. Masin(1)(2)(4)................................. 195,133 206,070
Sandra O. Moose........................................... 1,800 3,461
Russell E. Palmer......................................... 2,200 3,861
Howard Sloan(3)........................................... 54,799 56,460
Robert D. Storey.......................................... 700 2,361
--------- ---------
2,172,655 2,497,965
========= =========
<CAPTION>
OFFICERS(1)(2)
- ----------------------------------------------------------
Charles R. Lee............................................ 796,562 828,285
Kent B. Foster............................................ 422,748 459,858
Michael T. Masin(4)....................................... 195,133 206,070
Thomas W. White........................................... 116,841 116,841
William P. Barr........................................... 98,436 98,436
--------- ---------
1,629,720 1,709,490
========= =========
All directors and executive officers as a group(1)(2)..... 2,754,038 3,093,749
========= =========
</TABLE>
- ---------------
(1) Includes shares acquired through participation in GTE's Consolidated
Employee Stock Ownership Plan and/or the GTE Savings Plan.
(2) Included in the number of shares beneficially owned by Messrs. Lee, Foster,
Masin, White, Barr and Johnson and all directors and executive officers as a
group are 695,165, 367,865, 191,531, 106,699, 97,600, 596,900, and
2,369,497, respectively, which such persons have the right to acquire within
60 days pursuant to the exercise of stock options.
(3) Includes 10,797 shares held in trusts on behalf of a member of Mr. Sloan's
family. Mr. Sloan has voting and investment power with respect to these
shares but disclaims any beneficial interest therein.
(4) Mr. Masin participated in the Deferred Compensation Plan and the PSP while
he was a non-employee director of GTE. In October 1993, Mr. Masin became an
employee of GTE. He is no longer eligible to receive or defer additional
compensation under the Deferred Compensation Plan or to receive new grants
under the PSP.
DIRECTOR AND EXECUTIVE OFFICER SECURITIES REPORTS
The Federal securities laws require GTE's directors and executive officers,
and persons who own more than 10% of a registered class of GTE's equity
securities, to file with the SEC and the NYSE initial reports of ownership and
reports of changes in ownership of any equity securities of the Corporation.
To GTE's knowledge, based solely on review of the copies of such reports
furnished to GTE and representations that no other reports were required, all
persons subject to these reporting requirements filed the required reports on a
timely basis.
19
<PAGE> 23
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class of
directors is elected for a three-year term. Messrs. Budd, Johnson, Ketelsen and
Lee are nominated for election by GTE's shareholders as Class I directors. Mr.
Daniell was elected a director in March 1996 but was not assigned to a specific
class. He is nominated for election by GTE's shareholders as a Class II
director. In order to better balance the number of directors in each class, Mr.
Masin, who is presently serving as a Class I director, is nominated for election
by GTE's shareholders as a Class II director. All nominees for both Class I and
Class II directors are currently directors and, other than Mr. Daniell, were
previously elected by the shareholders. The Class I directors will serve for a
term of three years which expires at the Annual Meeting of Shareholders in 1999
or when their successors are elected and qualified. The newly-elected Class II
directors, Messrs. Daniell and Masin, will serve for a term of one year which
expires at the Annual Meeting of Shareholders in 1997 or when their successors
are elected and qualified. Each nominee is at present available for election.
Prior to the Annual Meeting, Mr. Howard Sloan, a Class II director, will
reach the mandatory age for retirement. Accordingly, he will retire from the
Board at the conclusion of the Annual Meeting.
If all the nominees for directors are elected by GTE's shareholders at the
Annual Meeting, the Board of Directors will then consist of 13 directors, 10
directors whose principal occupations are outside GTE and 3 directors who are
presently employees of GTE. The following provides information about the
nominees for directors and the continuing directors.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES.
20
<PAGE> 24
BIOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
NOMINEE, AGE AND
YEAR ELECTED A DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ---------------------------------------------------------------------------------------------
NOMINEES FOR CLASS I DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
- ---------------------------------------------------------------------------------------------
<S> <C>
EDWARD H. BUDD Retired Chairman of the Board of The Travelers Corporation. From
62 1985 January 1994 to September 1994, Mr. Budd was Chairman of
- ------------------ Travelers Insurance Group, Inc. Mr. Budd was elected President
and Chief Operating Officer of The Travelers Corporation in 1976,
Chief Executive Officer in 1981 and Chairman in 1982. He is a
Director of the Travelers Group Inc., Delta Air Lines, Inc. and a
[PHOTO] member of The Business Council. He is Chairman of the Audit
Committee and a member of the Nominating Committee and the
Executive Compensation and Organizational Structure Committee of
GTE.
- ------------------
- ---------------------------------------------------------------------------------------------
JAMES L. JOHNSON Retired Chairman and Chief Executive Officer. Mr. Johnson, who
68 1985 retired in 1992, has been designated Chairman Emeritus by the
- ------------------ Board. He joined GTE in 1949 and has held a variety of management
positions within the Telephone Operations Group. He was elected
President of the GTE Telephone Operations Group in 1981, Senior
Vice President of GTE and President and Chief Operating Officer
[PHOTO] of its Telephone Operations Group in December 1983, President and
Chief Operating Officer of GTE in March 1986 and became Chairman
and Chief Executive Officer in May 1988. Mr. Johnson is a
Director of MONY (The Mutual Life Insurance Company of New York),
- ------------------ Valero Energy Corporation, Harte-Hanks Communications, Inc., The
Finover Group, Walter Industries, Inc. and CellStar Corporation.
He is also a Trustee of the Joint Council on Economic Education.
Mr. Johnson is a member of the Audit Committee, the Pension Trust
Coordinating Committee and the Strategic Issues, Planning and
Technology Committee of GTE.
- ---------------------------------------------------------------------------------------------
JAMES L. KETELSEN Retired Chairman of Tenneco Inc. Mr. Ketelsen retired as Chairman
65 1986 of Tenneco in 1992. He was elected Executive Vice
- ------------------ President -- Finance of Tenneco Inc. in 1972 and was appointed
Chairman and Chief Executive Officer in 1978. He is a Director of
J.P. Morgan & Co. Incorporated and its principal subsidiary,
Morgan Guaranty Trust Company of New York, and of Sara Lee
[PHOTO] Corporation and a Trustee of Northwestern University. Mr.
Ketelsen is Chairman of the Pension Trust Coordinating Committee
and a member of the Executive Compensation and Organizational
Structure Committee and the Public Policy Committee of GTE.
- ------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 25
BIOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
NOMINEE, AGE AND
YEAR ELECTED A DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ---------------------------------------------------------------------------------------------
NOMINEES FOR CLASS I DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
- ---------------------------------------------------------------------------------------------
<S> <C>
CHARLES R. LEE Chairman and Chief Executive Officer. Mr. Lee joined GTE in 1983
56 1989 as Senior Vice President -- Finance and in 1986 he was named
- ------------------ Senior Vice President -- Finance and Planning. He was elected
President and Chief Operating Officer, effective January 1, 1989,
and became Chairman and Chief Executive Officer in 1992. Prior to
joining GTE, he held various financial and management positions
[PHOTO] in the steel, transportation and entertainment industries. Mr.
Lee is a Director of United Technologies Corporation, USX
Corporation and The Procter & Gamble Company. He is a member of
the Business Roundtable, a Trustee of the Board of Trustees of
- ------------------ Cornell University, a Trustee of the National Planning
Association and Chairman of the New American Realities Committee
of the National Planning Association, a member of The Conference
Board, Harvard Business School's Board of Directors of the
Associates, and a Director of the Stamford Hospital Foundation.
Mr. Lee is a Personal Trustee of the GTE Foundation and a member
of the Strategic Issues, Planning and Technology Committee of
GTE.
</TABLE>
<TABLE>
<CAPTION>
NOMINEE, AGE AND
YEAR ELECTED A DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ---------------------------------------------------------------------------------------------
NOMINEES FOR CLASS II DIRECTORS
TERM EXPIRING AT 1997 ANNUAL MEETING
- ---------------------------------------------------------------------------------------------
<S> <C>
ROBERT F. DANIELL Chairman, United Technologies Corporation. Mr. Daniell was
62 1996 elected Chairman, United Technologies Corporation, effective
- ------------------ January 1, 1987. He relinquished the offices of President and
Chief Operating Officer in February 1992 and the office of Chief
Executive Officer in April 1994. Mr. Daniell was elected
President and Chief Operating Officer in 1984 and named to the
[PHOTO] additional post of Chief Executive Officer effective January 1,
1986. He was elected Senior Vice President -- Defense Systems in
1983 and had served as Vice President of United Technologies from
1982 to 1983 and President of Sikorsky Aircraft from 1981 to
- ------------------ 1983. He is a director of Shell Oil Co. and Travelers Group Inc.
- ---------------------------------------------------------------------------------------------
<S> <C>
MICHAEL T. MASIN Vice Chairman of the Board and President -- International. Mr.
51 1989 Masin was elected Vice Chairman in October 1993 and President --
- ------------------ International in June 1995. Prior to that, he was Managing
Partner of the New York office of the law firm of O'Melveny &
Myers and Co-chair of the firm's International Practice Group.
Mr. Masin joined the firm in 1969 and became a partner in 1977.
[PHOTO] He is a Director of TCW Management Co., BC Telecom Inc., BC TEL,
Compania Anonima Nacional Telefonos de Venezuela (CANTV) and
VenWorld. Mr. Masin is a member of the Board of Trustees of
Carnegie Hall, the Board of Directors of the China America
- ------------------ Society, the Dean's Advisory Council of Dartmouth College, the
US-Canada Private Sector Advisory Council of the Inter-American
Development Board, the Business Committee of the Board of
Trustees of the Museum of Modern Art, the Council on Foreign
Relations, and a Personal Trustee of the GTE Foundation.
- ---------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 26
The following provides information about the members of the Board of
Directors who are continuing in office, as well as Mr. Sloan, who will retire
from the Board at the conclusion of the Annual Meeting.
BIOGRAPHICAL INFORMATION
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- --------------------------------------------------------------------------------
CLASS II DIRECTORS
TERM EXPIRING AT 1997 ANNUAL MEETING
- --------------------------------------------------------------------------------
JAMES R. BARKER Chairman of The Interlake Steamship Co. and Vice
60 1976 Chairman of Mormac Marine Group, Inc. and the Moran
Towing Company. Mr.Barker is also a Director and a
principal owner of Meridian Aggregates, Inc., a producer of aggregate products
for the construction and railroad industries. Mr. Barker was formerly Chairman
of the Board of Moore McCormack Resources, Inc. and Chairman of that company's
operating subsidiaries since April 1971. He was also Chief Executive Officer of
Moore McCormack Resources, Inc. from 1971 to January 1987. In 1969, Mr. Barker
co-founded a management consulting firm, Temple, Barker & Sloane, Inc., and
served in the capacity of Executive Vice President. He is a Director of The
Pittston Company and Eastern Enterprises and is Vice Chairman of the Board of
Trustees of Stamford Hospital. Mr. Barker is Chairman of the Nominating
Committee and a member the Executive Compensation and Organizational Structure
Committee and the Strategic Issues, Planning and Technology Committee of GTE.
RICHARD W. JONES Business Consultant, PaineWebber Incorporated. From
70 1966-1974 1977 to 1988 he was Managing Director and Executive
JANUARY 1975 Vice President of the investment banking firm of
E.F. Hutton & Company, Inc. Prior to assuming that
position, Mr. Jones was associated with Paine, Webber, Jackson & Curtis
Incorporated, investment bankers, having served as Senior Vice President and a
Director of that firm from 1973 to 1977. Mr. Jones was also associated with
Mitchum, Jones & Templeton Incorporated, investment bankers, having served as
President of that firm from 1961 through 1970 and Chairman of the Board from
1970 through 1973. He is a member of the Audit Committee and the Public Policy
Committee of GTE.
HOWARD SLOAN Mr. Sloan is a private investor. Prior to joining
72 1991 GTE's Board he was a Director of Contel Corporation.
Mr. Sloan is a Director of Melville Biologies Inc.,
a Trustee and Chairman of the Board of the New York Blood Center and a Trustee
of Lincoln Center Theater. He is a member of the Audit Committee, the Public
Policy Committee and the Pension Trust Coordinating Committee of GTE.
23
<PAGE> 27
BIOGRAPHICAL INFORMATION
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- --------------------------------------------------------------------------------
CLASS III DIRECTORS
TERM EXPIRING AT 1998 ANNUAL MEETING
- --------------------------------------------------------------------------------
EDWIN L. ARTZT Chairman of the Executive Committee and Director of
65 1984 The Procter & Gamble Company. Mr. Artzt was
Chairman of the Board and Chief Executive Officer
from January 1990 until July 1995. Mr. Artzt had served as Vice Chairman of the
Board of The Procter & Gamble Company and President of Procter & Gamble
International since 1984. Prior to that, he was an Executive Vice President
since 1980 and had served as Group Vice President for European operations. Mr.
Artzt is a Director of Teradyne, Inc., Delta Air Lines, Inc., American Express
Company, Barilla S.p.A. and a member of the Business Council. Mr. Artzt is
Chairman of the Strategic Issues, Planning and Technology Committee, and a
member of the Nominating Committee and the Pension Trust Coordinating Committee
of GTE.
KENT B. FOSTER President. Mr. Foster served as Vice Chairman of
52 1992 the Board of Directors from October 1993 until June
1995 and President of GTE Telephone Operations
Group from January 1989 until June 1995. Since joining GTE in 1970, Mr. Foster
served in a number of positions of increasing responsibility throughout the GTE
system. Mr. Foster serves on the Board of Directors of New York Life Insurance
Company, NationsBank of Texas and the Dallas Symphony Orchestra. He is a
Trustee of The Dallas Museum of Art and a member of the Dallas Opera Executive
Board. Mr. Foster is also a Personal Trustee of the GTE Foundation.
SANDRA O. MOOSE Senior Vice President, Director and Chair of the
54 1978 East Coast Practice, The Boston Consulting Group,
Inc. She is a Director of Rohm and Haas Company and
twenty-seven investment companies sponsored by The New England Funds, a
Corporator of New England Deaconess Hospital, a member of the Dana-Farber
Cancer Institute and a Director of the Harvard University Graduate School
Alumni Association. She is Chairperson of the Public Policy Committee and a
member of the Audit Committee and the Strategic Issues, Planning and Technology
Committee of GTE.
RUSSELL E. PALMER Chairman and Chief Executive Officer, The Palmer
61 1984 Group. Mr. Palmer was formerly Dean, The Wharton
School, University of Pennsylvania from 1983 until
June 1990. Prior to that, he was Managing Director and Chief Executive Officer
of Touche Ross International (now Deloitte and Touche), a worldwide accounting
firm. Mr. Palmer joined Touche Ross in 1956 and was elected Managing Director
of Touche Ross International in 1974. Mr. Palmer is a Director of Bankers Trust
New York Corporation and its subsidiary, Bankers Trust Company, May Department
Stores Company, Allied-Signal, Inc., Safeguard Scientifics, Inc., Imasco
Limited and Federal Home Loan Mortgage Corporation. He has been President of
the Financial Accounting Foundation and a member of the Board of Directors of
the American Institute of Certified Public Accountants. Mr. Palmer is a former
member of the Presidential Commission on Management Improvement and serves on
the boards of a number of charitable and civic organizations. He is Chairman of
the Executive Compensation and Organizational Structure Committee and a member
of the Nominating Committee and the Strategic Issues, Planning and Technology
Committee of GTE.
24
<PAGE> 28
BIOGRAPHICAL INFORMATION
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- --------------------------------------------------------------------------------
CLASS III DIRECTORS
TERM EXPIRING AT 1998 ANNUAL MEETING
- --------------------------------------------------------------------------------
ROBERT D. STOREY Partner with the Cleveland law firm of Thompson,
59 1985 Hine and Flory. Mr. Storey previously was a partner
with the Cleveland law firm of McDonald, Hopkins,
Burke & Haber Co., L.P.A. Mr. Storey joined its predecessor firm in 1967 and
became a partner in 1971. In 1964 he began his career as an attorney with The
East Ohio Gas Company and in 1966 he became Assistant Director of The Legal Aid
Society of Cleveland. He is a Director of Bank One, Cleveland, The Procter &
Gamble Company and May Department Stores Company. Mr. Storey is a Trustee of
Case Western Reserve University and the Kresge Foundation and a former Trustee
of Phillips Exeter Academy, Cleveland State University and Overseer of Harvard
University. He is a member of the Audit Committee, the Nominating Committee and
the Public Policy Committee of GTE.
ITEM 2.
The following resolution will be offered by the Board of Directors at the
meeting:
RESOLVED: That the appointment of Arthur Andersen LLP by the Board of
Directors of the Corporation to conduct the annual audit of the financial
statements of GTE Corporation and its subsidiary companies for the year ending
December 31, 1996 is ratified, confirmed and approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING PROPOSAL FOR THE
FOLLOWING REASONS:
The Board of Directors first appointed Arthur Andersen LLP ("Arthur
Andersen"), independent public accountants, as its auditors in 1935 and has
reappointed the firm as auditors each succeeding year to date. As a result of
Arthur Andersen's knowledge of GTE's operations and reputation in the auditing
field, the Board of Directors is convinced that the firm has the necessary
personnel, professional qualifications and independence to act as GTE's
auditors. The Board has again selected Arthur Andersen as GTE's auditors for the
year 1996 and recommends that the shareholders ratify and approve the selection.
Arthur Andersen's fees for recurring auditing and tax services for GTE and all
of its subsidiaries for the year ended December 31, 1995 are estimated at $10.4
million.
In the event this resolution does not receive the necessary vote for
adoption, or if for any reason Arthur Andersen ceases to act as auditors for
GTE, the Board of Directors will appoint other independent public accountants as
auditors. Representatives of Arthur Andersen will attend the Annual Meeting.
They will have the opportunity to make a statement and also will be available to
respond to appropriate questions from shareholders at the Annual Meeting.
ITEM 3.
Mr. John J. Gilbert, representing 300 shares of GTE Common Stock and/or
Margaret R. Gilbert, representing 300 shares of GTE Common Stock and Margaret R.
Gilbert and John J. Gilbert, co-trustees under the will of Caston J. Gilbert for
300 shares of GTE Common Stock, and representing an additional family interest
of 800 shares of GTE Common Stock, and also representing Corporate Democracy,
Inc. (a not-for-profit-corporation), 29 East 64th Street, New York, New York
10021-7043, for 300 shares of GTE Common Stock; and Margaret R. and/or John J.
Gilbert trustees under the will of Samuel Rosenthal for 1,400 shares of GTE
Common Stock; and M. Allan Frank, 6882 East Center Avenue, Denver, Colorado
80224-1503, representing 100 shares of GTE Common Stock; and Edward and/or Edith
Rudy, Box 7077, Yorkville Station, New York, New York 10128-7077, who state that
they are the beneficial owners of 519.262 shares of GTE Common Stock, have
informed GTE that they intend to propose the following resolution at the Annual
25
<PAGE> 29
Meeting. The proposed resolution and supporting statement, for which the Board
of Directors and GTE accept no responsibility, are as follows:
"RESOLVED: That the stockholders of GTE Corporation, assembled in annual
meeting in person and by proxy, hereby request that the Board of Directors take
the needed steps to provide that at future elections of directors new directors
be elected annually and not by classes as is now provided and that on expiration
of present terms of directors their subsequent election shall also be on an
annual basis."
The following is the statement submitted in support of this proposal:
"Continued, very strong support along the lines we suggest were shown at
the last annual meeting when 38%, a large increase over the previous year,
37,363 owners of 254,832,548 shares, were cast in favor of this proposal. The
vote against included 43,860 unmarked proxies.
ARCO to its credit, voluntarily ended theirs stating that when a very high
percentage (34.6%) desired it to be changed to an annual election it was reason
enough for them to change it. Several other companies have also followed suit
such as Pacific Enterprises, Katy Industries, Hanover Direct and others. Also,
Lockheed-Martin in the recent merger ended the stagger system.
Because of the normal need to find new directors and because of
environmental problems and the avalanche of derivative losses and many groups
desiring to have directors who are qualified on the subjects, we think that
ending the stagger system of electing directors is the answer. In addition, some
recommendations have been made to carry out the CERES 10 points. The 11th, in
our opinion, should be to end the stagger system of electing directors and to
have cumulative voting.
Equitable Life Insurance Company, which is now called Equitable Companies,
converted from a policy owned company to a public stockholder meeting. Thanks to
AXA, the comptrolling French insurance company not wanting it, they now do not
have a staggered board.
Orange and Rockland Utility Company had a terrible time with the stagger
system and its 80% clause to recall a director. The chairman was involved in a
scandal effecting the company. Not having enough votes the meeting to get rid of
the chairman had to be adjourned. Finally, at the adjourned meeting enough votes
were counted to recall him.
If you agree, please mark your proxy FOR; if you disagree mark AGAINST.
NOTE: PROXY OR PROXIES NOT MARKED WILL BE VOTED FOR THIS RESOLUTION."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors believes that a staggered board where approximately
one-third of the directors are elected annually, is in the best interests of the
Corporation and its shareholders. Unlike companies that have had a staggered
board since their incorporation, GTE submitted the creation of a staggered board
to the vote of its shareholders at a special meeting in 1986. Approximately
75.6% of the Corporation's shares voted at that meeting voted to approve the
creation of a staggered board. This proposal seeks to reverse that action.
GTE continues to believe that this system is in the best interests of the
Corporation and its shareholders. This system helps provide continuity and
stability of GTE's management and policies because a majority of the directors
at any one time will have prior experience as directors of GTE and in-depth
knowledge of the Corporation. This system permits directors to effectively
represent the interests of all shareholders in a variety of circumstances,
including those created by a minority shareholder.
Approximately 44% of the companies listed in the "Forbes Super 50" have a
staggered board. The Board recommends a vote against this proposal.
26
<PAGE> 30
ITEM 4.
GTE has been notified by the Ursuline Provincialate, Eastern Province of
the United States, 323 East 198th Street, Bronx, New York 10458-3105, which
states that it is the owner of 3,100 shares of GTE Common Stock; the
Congregation of the Sisters of Charity of the Incarnate Word, 6510 Lawndale,
Houston, Texas 77223-0969, which states that it is the owner of 1,400 shares of
GTE Common Stock; the Dominican Congregation of Our Lady of the Rosary,
Sparkill, New York 10976, which states that it is the owner of 2,000 shares of
GTE Common Stock; the Sisters of Charity of Saint Vincent de Paul, Mount St.
Vincent Motherhouse, 150 Bedford Highway, Halifax, Nova Scotia B3M3J5, Canada,
which states that it is the owner of 6,000 shares of Common Stock; the Domestic
and Foreign Missionary Society of the Protestant Episcopal Church in the United
States of America, 815 Second Avenue, New York, New York 10017-4594, which
states that it is the owner of 25,000 shares of GTE Common Stock; the General
Board of Pension and Health Benefits of the United Methodist Church, 1201 Davis
Street, Evanston, Illinois 60201, which states that it is the owner of 564,835
shares of GTE Common Stock; the Sisters of Charity of Saint Elizabeth, P.O. Box
476, Convent Station, New Jersey 07961-0476, which states that it is the owner
of 869 shares of GTE Common Stock; and the Sisters of Loretto (Loretto Literary
and Benevolent Institution), 3126 South Osceola, Denver, Colorado 80236-2332,
which states that it is the owner of 120 shares of GTE Common Stock, that they
intend to propose the following resolution at the Annual Meeting. The proposed
resolution and supporting statement, for which the Board of Directors and GTE
accept no responsibility, are as follows:
"WHEREAS in fiscal year 1994, the United States controlled 55 -- 70% of the
world's arms market, delivering $12 billion in weapons. Since the fall of the
Berlin Wall, the U.S. delivered over $62 billion in weapons -- almost half of
the total worldwide exports. ('Arms Trade News', 7/95).
WHEREAS the last three times the U.S. sent troops into combat in
significant numbers, in Panama, Iraq and Somalia, they faced adversaries that
received U.S. weapons or military technology in the period leading to the
conflict. U.S. weapons supplied to anti-Communist rebels in Angola and
Afghanistan under the Reagan Doctrine have been used for devastating civil wars;
in the Afghan case, U.S.-supplied Stinger missiles turned up on the
international black market as prized items sought by all manner of rebel groups
and terrorist organizations. ('Sale of the Century', Commonweal, William
Hartung, 5/20/94).
'U.S. Weapons at War: United States Arms Deliveries to Regions of
Conflict', (World Policy Institute, 1995) shows the U.S. was a major arms
supplier in one-third of the 50 ethnic and territorial conflicts currently
raging. The study says some 45 parties involved in the conflicts purchased over
$42 billion in U.S. arms in the last ten years.
WHEREAS our company ranked 20 among Department of Defense leading
corporations with contracts in excess of $788 million.
RESOLVED the shareholders request the Board of Directors to provide a
comprehensive report on GTE's foreign military sales. The report, prepared at
reasonable cost, should be available to all shareholders by December, 1996, and
may omit classified and proprietary information."
The following is the statement submitted in support of this proposal:
"Global security is security of people. The cold-war notion of using arms
sales to maintain balances of power or support allies has been discredited by
1990s experience, when alliances, governments and boundaries in large parts of
the world are in flux.
We are disturbed at industry's claims and lobbying efforts asserting the
only way to keep jobs is to promote foreign military sales. We believe such
statements are inconsistent with co-production agreements and transfer of
technology to foreign companies. Offset arrangements on major sales often give
business to overseas suppliers. Such contracts with foreign
companies/governments
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have harsh repercussions on U.S. workers during this time of accelerated
down-sizing of our workforce.
Therefore, it is reasonable for shareholders to ask:
1. Criteria used to promote foreign sales.
2. Procedures used to negotiate sales directly with foreign governments or
through the U.S. government. For example, what determines which weapons are
direct commercial arms sales and what must be negotiated through the Pentagon?
What percentage is commercial arms sales and what is foreign military sales?
3. Categories of military equipment exported for the past three years, with
as much statistical information as is permissible; contracts for
servicing/maintaining equipment; offset agreements; and licensing and/or
co-production with foreign governments.
4. Analysis of legislation establishing a code for U.S. arms transfers,
e.g., no sales to governments that violate human rights of their own citizens,
engage in aggression against neighbors, come to power through undemocratic means
or ignore international arms control arrangements."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
GTE believes that the defense needs and foreign policy of the United States
are properly the responsibility of our government and our duly elected public
officials. GTE is proud to be able to supply communications and electronic
systems which help to protect the United States, its military forces and our
allies. Foreign military sales represent a very small percentage of GTE's
overall sales and revenues. Moreover, as a responsible corporate citizen, GTE
expects to continue to support the U.S. Government and to offer its products and
services in defense of the United States, the American people and their
interests.
GTE does not manufacture or sell weapons to any government in the United
States or abroad. GTE has acted and will continue to act as a socially
responsible and ethical corporate citizen not only in its military contracting
but in all its business activities. GTE has in place a comprehensive ethics
program which requires compliance with U.S. laws as well as laws of any foreign
country with which it does or proposes to do business. GTE conducts ongoing
training programs to ensure that its employees understand and are aware of the
requirements under this program.
Accordingly, GTE does not believe that the report requested would provide
significant, relevant information.
ITEM 5.
GTE has been notified by the National Council of the Churches of Christ in
the U.S.A., 475 Riverside Drive, Room 880, New York, New York 10115-0050, which
states that it is the owner of 2,000 shares of GTE Common Stock, that it intends
to propose the following resolution at the Annual Meeting. The proposed
resolution and supporting statement, for which the Board of Directors and GTE
accept no responsibility, are as follows:
"Be it resolved: A report shall be prepared at reasonable cost, by September,
1996, excluding confidential information and shall focus on the following areas:
1. A copy of the consolidated EEO-1 report for 1993, 1994 and 1995
available to shareholders upon request.
2. Report the number of discrimination complaints and lawsuits
concerning race, gender and the physically challenged. The cost to the
company and shareholders from discrimination lawsuits and alternatives to
resolve the issue.
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3. Report any federal audit, corporate management review, and letter
of compliance with corrective measures enacted to protect the company's
government contracts and legal penalties.
4. Report to shareholders on race, ethnicity and gender among top
management.
5. A description of any policies and programs utilizing the purchase
of goods and services from minority-and/or female-owned business
enterprises."
The following is the statement submitted in support of this proposal:
"In 1994 corporations spent more than $2.2 billion on legal fees and
related discrimination settlements. Also, the Equal Employment Opportunity
Commission (EEOC) reported that over 155,000 discrimination complaints were
filed in 1994. The high cost of legal expenses, the potential loss of government
contracts and both the social and financial consequences of a damaged corporate
image from discrimination allegations place this issue high upon a priority list
for shareholders. Companies must better reflect the market-place, the customer,
trading partners, and the diverse workforce through all levels of its
organization.
CEOs from 28 major companies have cited changing demographics of the labor
force, the diverse national consumer market, and rapid globalization of the
marketplace as reasons for expanding diversity. Over 100 major employers
publicly report on work diversity and EEO-1 information. Corporate publications
available to their shareholders such as: Capital Cities/ABC's Commitment Report
for shareholders, Kmart Corporation's Reflections of America, U.S. Air's
Affirming Workplace Diversity, Amoco's Diverse Work Force and Sears' Corporate
Responsibility Report, just to name a few, are disclosing EEO statistics for
public review.
Many California corporations provide this data voluntarily, including all
of the regulated utilities and most of the major banks. Southern California
Edison, for example, has informed the Glass Ceiling Commission that it supports
public reporting of this kind.
The bi-partisan Glass Ceiling Commission was established to study and make
recommendations on the Glass Ceiling by 1995. Concerned investors have closely
watched the development of this study. Secretary of Labor, Robert Reich and a 21
member Glass Ceiling Commission released a report called "Good For Business:
Making Full Use of The Nation's Human Capital." This report is an important
analysis for shareholders because it shows that in the U.S. we select from less
than 1/2 the total talent in our workforce. For example, women and minorities
who represent over 57% of the workforce represent only 3% of the executive
management positions. This is a serious deficiency in our ability to select the
most talented people for our top management positions. It affects our
competitive position if we stifle this gifted portion of our workforce.
Through this resolution we are asking our company to report to shareholders
the progress we have made and the obstacles we still have to overcome."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
GTE is strongly committed to equal employment opportunity as evidenced by
its policies and programs. GTE has taken and continues to take a variety of
actions in support of that goal. These actions include adopting an equal
employment policy that is communicated to employees and reinforced in a variety
of communications; establishing a corporate-wide Workforce Diversity Forum in
1992; designating a senior member of management to lead workforce diversity
efforts; conducting focus groups; conducting training programs for managers in a
variety of areas including employment law and workforce diversity; establishing
relationships with numerous minority organizations and educational institutions
to enhance GTE's efforts to attract talented candidates for employment; and a
variety of other initiatives. GTE is also a significant contributor to
educational initiatives designed to enhance educational and employment
opportunities for minorities.
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More specifically, GTE's Associate Development, College Relations and
Summer Intern Programs serve as a prime source of attracting, hiring and
retaining qualified females and minorities. For example, women and minorities
account for a significant number of all Associates hired as potential future
management personnel. A conscientious effort is made on an on-going basis to
establish a high ratio of both females and minorities.
To further accelerate our efforts to attract, hire and retain female and
minority employees, GTE maintains active membership in a variety of
organizations and regularly attends career fairs conducted by associations of
minority professionals.
Other initiatives which demonstrate GTE's commitment to the hiring and
advancement of women and minorities can be found throughout the business units
in activities which include: mentor program, career counseling, cultural
awareness, diversity symposiums and workshops, flexible leaves of absence for
dependent care, flexible work schedules, telecommuting, job sharing, child care
initiatives and cross-functional training (job swapping).
GTE will continue to implement these and other initiatives, enhancing our
position as a global business leader in the area of diversity. Communications
which highlight our many accomplishments will be published as deemed
appropriate.
The foregoing affirms GTE's commitment and efforts towards equal employment
opportunity and the recruiting, hiring and retaining of women and minorities for
management positions throughout the organization. Therefore, the Board of
Directors does not believe that the additional reporting requested by the
proponent would serve any useful purpose.
ITEM 6.
GTE has been notified by the Missionary Oblates of Mary Immaculate, 8818
Cameron Street, Silver Spring, Maryland 20910-4113, which states that it is the
beneficial owner of 2,000 shares of GTE Common Stock; and Lois Van Lear, c/o
Progressive Securities, 2435 S.W. Fifth Avenue, Portland, Oregon 97201, who
states that she is the beneficial owner of 676 shares of GTE Common Stock, that
they intend to propose the following resolution at the Annual Meeting. The
proposed resolution and supporting statement, for which the Board of Directors
and GTE accept no responsibility, are as follows:
"WHEREAS WE BELIEVE:
The responsible implementation of a sound, credible environmental policy
increases long-term shareholder value by raising efficiency, decreasing clean-up
costs, reducing litigation, and enhancing public image and product
attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than following standards created by industry alone.
For maximum credibility and usefulness, such standards should reflect what
investors and other stakeholders want to know about the environmental records of
their companies;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. These help investors
and the public to understand environmental progress and problems.
Uniform standards for environmental reports permit comparisons of
performance over time. It also allows companies to attract new capital from
investors seeking investments which are environmentally responsible and
responsive and which minimize risk of environmental liability.
WHEREAS: The Coalition for Environmentally Responsible Economies
(CERES) -- which comprises large institutional investors (including shareholders
of this Company) with $160 billion in stockholdings, public interest
representatives, and environmental experts -- consulted with corporations and
produced comprehensive public standards for both environmental performance and
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reporting. Over 80 companies, including Sun (Oil), General Motors, H.B. Fuller,
Polaroid, and Arizona Public Service Company have endorsed the CERES Principles
to demonstrate their commitment to public environmental accountability. Fortune
500 endorsers speak enthusiastically about the benefits that flow from working
with CERES: increasing public credibility; adding 'value' to the company's
environmental initiatives; and advancing the company's own environmental plans
and agenda.
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere
2. Sustainable use of natural resources
3. Waste reduction and disposal
4. Energy conservation
5. Risk reduction
6. Safe products and services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports.
(Full text of the CERES Principles and accompanying CERES Report Form
obtainable from CERES, 711 Atlantic Avenue, Boston, MA 02110, Tel.:
617-451-0927.)
RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a part of its commitment to be publicly accountable for its environmental
impact."
The following is the statement submitted in support of this proposal:
"Concerned investors are asking the Company to be publicly accountable for
its environmental impact, including collaborating with this
corporate-environmental-investor-community coalition to develop: standards for
environmental performance and disclosure; methods for measuring progress toward
these goals; and a format for public reporting of progress. We believe this is
comparable to the European Community regulation for voluntary participation in
verified and publicly-reported eco-management and auditing.
We invite our Company to endorse the CERES Principles by (1) stating its
endorsement in a letter signed by a senior officer; (2) committing to implement
the Principles; and (3) annually publishing an environmental report in the
format of the CERES Report. This will complement -- not supplant -- internal
corporate environmental policies and procedures.
Without such public scrutiny, corporate environmental policies and reports
lack the critical component of adherence to standards upheld by management and
stakeholders alike. Shareholders are asked to vote FOR this resolution to
encourage our Company to demonstrate environmental leadership and
accountability."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
GTE is concerned about the environment and the ways in which its operations
affect the environment. GTE takes environmental issues seriously and is
committed to a clean and safe environment.
As stated in the Corporation's Standards of Business Conduct, GTE and its
operating units are committed to complying with all laws, environmental
regulations and reporting requirements. In
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addition to complying with governmental laws and regulations, GTE strives to
improve the environment by avoiding or reducing:
-- Use of materials which may harm the environment;
-- Environmentally sensitive discharges; and
-- Fuel consumption, energy usage, and emissions.
GTE's business units continue to accomplish these objectives in many ways,
including: reducing the use of hazardous materials by substituting non-hazardous
materials as new technologies become available; by promoting recycling; by
upgrading material containment and disposal operations; and by utilizing
environmentally friendly, low-energy consuming products.
The Board of Directors believes that implementation of the proposal, though
well-intentioned, would serve to burden the Corporation and its shareholders
with additional requirements and costs while not providing any greater
environmental protection than already exists.
GTE finds the CERES Principles to be ambiguous in several respects and also
to cause some concerns to be raised. For example, implementation of the
Principles would require GTE to complete a CERES environmental report. However,
no generally accepted environmental audit standards by which to create such a
report presently exist. Additionally, the CERES report form does not relate to
the majority of GTE's businesses which are of a service nature.
In summary, the Board of Directors believes that the environment is
important and that the Corporation continues to take significant steps to ensure
that it contributes in a meaningful way to the preservation and enhancement of a
safe and healthy environment for the present and future generations.
Accordingly, the Board recommends a vote against this proposal.
ITEM 7.
GTE has been notified by Fred Wilson and Mazie M. Wilson, 3011 North Miles
Drive, Edmond, Oklahoma 73034-4112, representing 100 shares of GTE Common Stock,
that they intend to propose the following resolution at the Annual Meeting. The
proposed resolution and supporting statement, for which the Board of Directors
and GTE accept no responsibility, are as follows:
"RESOLVED: That all bonuses in excess of $30,000 be approved by the
stockholders at the Annual Stockholders Meeting."
The following is the statement submitted in support of this resolution:
"IT IS MY OPINION THAT THE EXECUTIVES ARE NOT JUSTIFIED IN RECEIVING THE
UNUSUALLY LARGE INCENTIVES AND BONUSES WHICH ARE APPARENTLY AWARDED BY THE BOARD
OF DIRECTORS. IT SEEMS THAT THE FINE SALARIES THAT THEY ALREADY RECEIVE SHOULD
BE SUFFICIENT JUSTIFICATION AND INCENTIVE FOR DOING A GOOD JOB. IF THE
EXECUTIVES CANNOT GET ALONG ON THE FANTASTIC SALARIES THAT THEY ARE BEING PAID,
THEN LET THEM MOVE ON TO 'GREENER PASTURES."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors believes that GTE has established criteria for
setting competitive compensation levels, including incentive awards. The
Executive Compensation and Organizational Structure Committee (the "Compensation
Committee") has adopted a compensation philosophy that relates employees'
compensation levels to GTE's success in meeting both annual and long-term goals,
and is competitive with other major companies in the telecommunications and
general industry groups. GTE believes that this philosophy aligns the employees'
interest with that of GTE's shareholders in promoting strong operational results
and shareholder returns.
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As discussed in the report of the Compensation Committee, a key element of
GTE's compensation philosophy is that a large portion of an executive's
compensation is "at risk." This means that there is a significant upside as well
as downside risk in such an individual's compensation depending on GTE's
performance, financial and otherwise. In determining the amount of awards, the
Compensation Committee evaluates performance against specific criteria
established under GTE's employee compensation plans. Each of the plans under
which bonuses are awarded has been approved by shareholders. Frequently, the
criteria upon which the Compensation Committee makes its evaluations are based
on confidential information which, for competitive reasons, should not be shared
with the public.
Because GTE believes that the availability of incentive compensation
encourages superior operating results, GTE has greatly expanded the number of
employees eligible to receive incentive compensation. Under this proposal,
shareholders could be required to consider awarding bonuses to several thousand
employees. Accordingly, the Board believes that the proposal is impractical. The
Board recommends a vote against this proposal.
ITEM 8.
GTE has been notified by Mr. Kenneth Steiner, 14 Stoner Avenue, Suite 2-M,
Great Neck, New York 11021, representing 508 shares of GTE Common Stock, that he
intends to propose the following resolution at the Annual Meeting. The proposed
resolution and supporting statement, for which the Board of Directors and GTE
accept no responsibility, are as follows:
"RESOLVED, that the shareholders recommend that the board of directors
adopt a policy against entering into future agreements with officers and
directors of this corporation which provide compensation contingent on a change
of control of the corporation, unless such compensation agreements are submitted
to a vote of the shareholders and approved by a majority of shares present and
voting on the issue."
The following is the statement submitted in support of this resolution:
"At last year's annual meeting of stockholders a similar resolution was
approved by a significant number of voting shares.
Lucrative severance contracts awarded to senior corporate executives which
provide compensation contingent on a change of control, usually through a merger
or acquisition of the corporation, are known as 'golden parachutes'. These
contracts are awarded without shareholder approval.
The practice of providing these large cash awards to a small group of
senior corporate managers without shareholder approval has been a subject of
public outcry. In 1988, the U.S. Senate in emphasizing the potential conflict of
interest between management and shareholders created by these agreements voted
ninety eight to one to require shareholder approval of golden parachutes which
exceed three times annual compensation.
Although final action was not taken, it is clear to me that the
overwhelming vote in favor of the measure reflects public sentiment against
golden parachutes. A shareholder vote would allow the corporation's owners to
decide for themselves whether golden parachutes are in their best interests.
I am a founding member of the Investors Rights Association of America and
it is clear to me that requiring a shareholder vote is necessary to address the
conflicts of interest between management and shareholders that arise in the
awarding of golden parachutes.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors believes that agreements with key executives that
provide a reasonable, but not excessive, contingent benefit in the event of a
change in control of GTE that results in the elimination of an executive's job
or that otherwise adversely affects him or her are an appropriate element of
sound corporate governance and serve the best interest of the shareholders.
Agreements of this type are common among major corporations and are an important
component in being able to compete for top management talent.
The separation benefits under the GTE agreements (which are described on
pages 15 and 16 of this Proxy Statement) are modest when compared to similar
types of separation benefits that are payable under agreements that have been
adopted by many other companies. It is important to note that under the GTE
agreements, no benefit is paid unless (1) a change in control occurs, and (2)
thereafter, the executive is discharged from employment or is otherwise
adversely affected by the change in control. Thus, it is the potential
acquirer -- and not the executive -- who controls whether the termination
benefits will be owed. Moreover, it is common for these types of agreements to
provide that upon a change in control, an executive will receive benefits
relating to compensation of up to three times his or her compensation. GTE's
agreements limit the payment to two times compensation.
GTE's change in control agreements are designed to ensure that management
objectively assesses any proposal relating to a change in control of GTE, and
advises the Board as to whether the proposal is in the best interest of GTE and
its shareholders without undue concern for personal financial loss or other
uncertainties. Therefore, the agreements are intended to minimize rather than
create a conflict of interest for executives in the event of a proposal for a
change in control. As a result, the Board strongly believes that the executives
covered by the agreements do not have any financial or other incentive to act
detrimentally to the shareholders' interest. Moreover, the agreements have no
current cost to GTE or its shareholders.
The Board believes that requiring shareholder approval of these agreements
may weaken the Board's flexibility to act promptly, decisively and with a
competitive edge with respect to attracting and retaining seasoned executives,
thereby potentially depriving the Corporation and the shareholders of the
strength and leadership necessary to strive for long-term maximization of
shareholder value.
ITEM 9.
GTE has been notified by Mr. William Steiner, 4 Radcliff Drive, Great Neck,
New York 11024, representing 900 shares of GTE Common Stock, that he intends to
propose the following resolution at the Annual Meeting. The proposed resolution
and supporting statement, for which the Board of Directors and GTE accept no
responsibility, are as follows:
"RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted pension
benefits and (ii) current non-employee directors voluntarily relinquish their
pension benefits."
The following is the statement submitted in support of this resolution:
"At last year's annual meeting of stockholders a similar resolution was
approved by a significant number of voting shares.
Aside from the usual reasons, presented in the past, regarding 'double
dipping', that is outside (non-employee) directors who are in almost all cases
amply rewarded with their pension at their primary place of employment, and in
many instances serving as outside pensioned directors with other companies,
there are other more cogent reasons that render this policy as unacceptable.
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Traditionally, pensions have been granted in both the private and public
sectors for long term service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside directors' service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
But more importantly, outside directors, although retained by corporate
management, namely the C.E.O., are in reality representatives of shareholders.
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grants to
outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interests. Thus, pensions become another device to enhance and entrench
management's controls over corporate policies while being accountable only to
themselves. I am a founding member of the Investors Rights Association of
America and I feel this practice perpetuates a culture of corporate management
'cronyism' that can easily be at odds with shareholder and company interest.
A final note in rebuttal to management's contention that many companies
offer their outside directors pensions, so they can attract and retain persons
of the highest quality. Since there are also companies that do not offer their
outside directors pensions, can management demonstrate that those companies that
offer pensions have a better performance record then their non-pensioned peers?
In addition, do we have any evidence of a significant improvement in corporate
profitability with the advent of pensions for outside directors?
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The best interests of GTE and its shareholders are served by having the
most talented, experienced and committed individuals serving as outside
directors. In order to attract and retain highly sought after individuals for
its Board service, GTE must provide a competitive total compensation program.
GTE views this benefit as a form of deferred compensation based upon the years
of service of the director on GTE's Board. GTE regularly examines its
compensation package and compares it to other major companies. GTE has
determined that paying a portion of total compensation in the form of a benefit
paid after retirement is appropriate.
The retirement benefit that is payable under the Retirement Plan for
Non-Employee Members of the Board of Directors (the "Directors Retirement Plan")
is only paid for a period equal to the number of years that the director served
on GTE's Board and is based upon the annual directors' compensation in effect at
the time he or she retires. The annual compensation includes three
components -- the cash retainer, the value of certain shares awarded to
directors under the PSP and the value of shares awarded to directors under the
LTIP. Two of the three components of compensation are stock based and,
accordingly, the retirement benefit is closely tied to GTE's stock and
re-enforces the mutual interest of GTE's directors and shareholders. Moreover,
the design of this plan ensures that this commonality of interest is long-term
and continues beyond a director's retirement date. Therefore, the Board of
Directors recommends a vote against the proposal.
ITEM 10.
GTE has been notified by the International Brotherhood of Electrical
Workers, 6603 East Chelsea Street, Tampa, Florida 33610, and sponsors Guy A.
Langlais, 5158 Lancewood Drive, Sarasota, Florida 34232, Harrison L. Thornhill,
3200 Lucerne Park Road, Winter Haven, Florida, 33880, Richard O'Lone, 1833
Oakdale Lane S., Clearwater, Florida 34624, and Linda K. Shirley, 3605 W.
Reynolds, Plant City, Florida, 33567, each representing at least 100 shares of
GTE Common Stock, that they intend to propose the following resolution at the
Annual Meeting. The
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proposed resolution and supporting statement, for which the Board of Directors
and GTE accept no responsibility, are as follows:
"WHEREAS, in 1991 GTE's outside board of directors received an approximate
44% increase in their retainer which automatically increased their retirement by
approximately 44%;
WHEREAS, in 1994 Mr. Lee, C.E.O. of GTE, did in fact enjoy an increase in
total compensation of approximately $1,465,114 (55.0%)(including the difference
in the value of options granted in 1993 and 1994 as determined using a
Black-Scholes model);
WHEREAS, in 1994 Mr. Foster, President of GTE's Telops Group, did in fact
enjoy an increase in total compensation of approximately $1,253,262
(72.0%)(including the difference in the value of options granted in 1993 and
1994 as determined using a Black-Scholes model);
WHEREAS, we believe that the top executives are not sharing in cost cutting
measures and in fact are enhancing their pay with business efficiencies which
adversely affect rank and file employees;
WHEREAS, we believe the employees feel that all business efficiencies are
not being shared equally;
RESOLVED, that the shareholders request the board of directors:
Take all necessary steps to establish criteria to guide management in
setting fair executive compensation levels whereby (a) any individual executive
officer's compensation (wages, bonuses, and stock grants, options and rights)
would not exceed 75 times the wages of GTE's average hourly employee and (b)
that executive wages and compensation be more closely linked to company
profits."
The following is the statement submitted in support of this proposal:
"This proposal is submitted by members and/or officers of Local 824,
International Brotherhood of Electrical Workers.
1. The economic health and viability of GTE and its shareholders is
intrinsically linked to the economic health and viability of the United States
economy.
GTE's success is, in large part, dependent on the corporation's ability to
sell its goods and services to an affluent society. Year after year, GTE's
hourly employees have had an adjusted-for-inflation wage decrease. In effect
GTE's corporate strategy is denying GTE itself a segment of affluent society
necessary for GTE's future success.
The huge disparity in the compensation of the Board of Directors and GTE's
hourly employees is counter-productive in establishing a team approach to the
competitive and technological challenges GTE faces now and in the future. By
establishing a link between the Board of Directors compensation and the hourly
employees compensation, all GTE employees and shareholders will share equitably
in the fruits of GTE's labors and in the promise of a prosperous future.
2. In order to remain competitive in a world market and limit demands on
the resources of the company, top executives must become 'lean and mean' in a
like manner with their employees.
The 1992 10-K report states 'access lines increased by approximately 4%,
these lines were serviced by 5% fewer employees.' The 1993 10-K report states
that access lines increased by 15% from 1988 to 1992 while GTE's United States
employment has decreased 27% in the same time period. As shareholder/employees
we witness daily that 'increased productivity' has come at the expense of GTE's
customers.
The years 1993, 1994 saw dramatic fluctuation in executive compensation
levels without any appreciable increases in GTE's executive productivity. It is
in the best interest of GTE and its' shareholders to establish criteria to
insure all compensation is earned not granted."
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR THE
FOLLOWING REASONS:
The Board of Directors strongly believes that GTE has established criteria
for setting competitive compensation levels. As discussed in the Report of the
Executive Compensation and Organizational Structure Committee of GTE's Board of
Directors (the "Executive Compensation Committee"), the Executive Compensation
Committee approves the salary ranges for executives and reviews the salary and
increases in base salary for all senior executives of GTE's subsidiaries and for
all senior executives of GTE.
The Executive Compensation Committee has adopted a compensation philosophy
that relates the level of compensation to GTE's success in meeting annual and
long-term goals, rewards individual achievement and is competitive with other
major companies in the telecommunications and general industry. GTE believes
that this philosophy enables it to attract and retain the most qualified
individuals to lead GTE's business undertakings. In determining executives'
compensation, the Executive Compensation Committee relies on competitive data
and carefully assesses GTE's overall performance and individual achievement.
Accordingly, the Board of Directors believes that criteria are already in
place to ensure that the compensation of GTE's executives is competitive and
closely linked to GTE's performance. As shown in the Summary Compensation Table
on page 11, the cash compensation for Messrs. Lee and Foster increased in 1994
by approximately 38.4% and 53.6%, respectively. The increases in total
compensation specified in the proposal include values assigned to the options
awarded to Messrs. Lee and Foster. Options can be valued by using a number of
methods, which can yield very different results. Moreover, the options represent
unrealized value to an executive unless the price of GTE Common Stock increases.
The Board of Directors recommends a vote against the proposal establishing a
limit on compensation based upon a stated multiple of other employee
compensation.
ITEM 11.
GTE has been notified by the International Brotherhood of Electrical
Workers Telephone Coordinating Counsel No. 2, Neal M. Davis, Schuchat, Cook &
Werner, The Shell Building, Second Floor, 1221 Locust Street, Saint Louis,
Missouri 63103-2364, representing 60 shares of GTE Common Stock, that it intends
to propose the following resolution at the Annual Meeting. The proposed
resolution and supporting statement, for which the Board of Directors and GTE
accept no responsibility, are as follows:
"RESOLVED: The Shareholders of the GTE Corporation recommend that the Board
of Directors consider the following nonbinding proposal: With respect to future
compensation of active executive officers of GTE, the GTE shareholders recommend
that the Board of Directors voluntarily take whatever steps it deems necessary
and proper to implement a plan which would limit the total annual cash
compensation (salary plus bonuses awarded under the Executive Incentive Plan) of
GTE executive officers so that this compensation will not be increased by an
amount greater than the average percentage pay increases granted to GTE
employees annually."
The following is the statement submitted in support of this proposal:
"In recent years, there has been widespread public debate concerning
executive compensation policies and practices. Often this debate has focused on
what is perceived by many to be excessive salaries, bonuses and incentives
granted to senior executive officers in America, particularly when compared to
compensation packages of their counterparts in Japan and Germany. The debate
over excessive executive compensation is also a part of a larger concern over
the growing inequity in income distribution in America. An article in the New
York Times reported on figures made public by the U.S. Census Bureau showing
that the typical American household saw its income decline in
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1993 by about $300, even though the economy grew by 3%. From 1989 to 1993, the
typical American household lost $2,344 in annual income, a fall of 7%. While the
Census Bureau reported that average per capita income was up by 1.8% in 1993,
most of the benefits flowed to the wealthiest Americans. The Census Report
showed record levels of inequality, with the top fifth of American households
earning 48.2% of the nation's income, while the bottom fifth earned just 3.6%.
This Shareholder Proposal is a modest attempt to address this unfortunate trend.
This proposal recommends that the Board of Directors implement a plan to
limit annual executive compensation so that this compensation increases no more
than the average annual pay increase granted to other GTE employees. The
proposal is intended to assure shareholders and employees that GTE's hard earned
profits will be used for research and development, equipment modernization, and
other endeavors which build a stronger, more profitable, and more competitive
corporation. Furthermore, this proposal could establish GTE as a leader in
creatively addressing the issue of executive compensation, thereby enhancing its
corporate image.
If you agree, please mark your proxy FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board believes that arbitrary limits on executive compensation called
for in the proposal would interfere with GTE's ability to attract, retain and
reward key executives in a manner commensurate with their contributions to GTE
and, accordingly, recommends a vote against the proposal.
GTE's executive compensation structure is designed to attract and retain
talented executives who can lead GTE and direct its business efforts in an
increasingly competitive environment. As discussed in the Report of the
Executive Compensation and Organizational Structure Committee of GTE's Board of
Directors (the "Executive Compensation Committee"), a key element of executive
compensation structure is that no less than 60% of an executive's compensation
is "at risk." This means that there is a significant upside as well as downside
risk in such an individual's compensation depending on GTE's performance,
financial and otherwise. Accordingly, it is not practical to establish an
arbitrary limit on the total increase in compensation in a given year.
The amount of wage increases for employees represented by unions is based
upon negotiations between the company and the union. The Executive Compensation
Committee sets the executive pay ranges based upon comparative data from similar
companies. The ranges are generally broad and allow for recognition of
individual experience and performance. The Executive Compensation Committee
reviews the salary and increases in base salary for all senior executives of
GTE's subsidiaries and for all senior officers of the Corporation. The Board of
Directors believes that adequate review and controls on executive salaries are
already in place. Moreover, it believes that the amount of increases granted to
executives is consistent with GTE's performance.
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OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the notice of the
Annual Meeting and knows of no matters to be brought before the Annual Meeting
by others. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to vote such proxy
or proxies in accordance with the judgment of the Board of Directors.
Financial statements for GTE and its consolidated subsidiaries are included
in GTE's Annual Report to shareholders for the year 1995 which was mailed to
shareholders beginning March 8, 1996.
A COPY OF GTE'S 1995 ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WILL BE AVAILABLE AFTER MARCH 31, 1996 WITHOUT CHARGE TO
THOSE SHAREHOLDERS WHO WOULD LIKE MORE DETAILED INFORMATION CONCERNING GTE. TO
OBTAIN A COPY, PLEASE WRITE TO: MARIANNE DROST, SECRETARY, GTE CORPORATION, ONE
STAMFORD FORUM, STAMFORD, CONNECTICUT 06904.
By order of the Board of Directors,
MARIANNE DROST
Secretary
Dated: March 8, 1996
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[ROUTES TO GTE CORPORATION
ANNUAL SHAREHOLDERS MEETING GRAPHIC]
<PAGE> 44
[GTE LOGO]
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
Telephone: 203-965-2000
March 8, 1996
The Annual Meeting of Shareholders of GTE Corporation will be held at 2:00
P.M., Local Time, on Wednesday, April 17, 1996, at the Italian Center, 1620
Newfield Avenue, Stamford, Connecticut.
The Proxies will vote your shares in accordance with your directions on this
card. If you return the card and do not indicate your choices on this card, the
Proxies will vote your shares in accordance with the directors'
recommendations.
Please fill in the boxes on the proxy card to indicate how your shares should
be voted, sign and date your proxy card and return it as soon as possible in the
enclosed postpaid envelope. If you do not sign and return your proxy card, the
Proxies cannot vote your shares at the Annual Meeting.
Marianne Drost
Secretary
PLEASE DETACH AT PERFORATION
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
- --------------------------------------------------------------------------------
GTE'S DIRECTORS RECOMMEND A VOTE "FOR" PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
1. Election of directors:
Edward H. Budd,
Robert F. Daniell,
James L. Johnson,
James L. Ketelsen,
Charles R. Lee,
Michael T. Masin.
FOR / / WITHHELD / /
For all nominees except as noted below:
- ---------------------------------------
2. Ratification of appointment of auditors.
FOR / / AGAINST / / ABSTAIN / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GTE'S DIRECTORS RECOMMEND A VOTE "AGAINST" PROPOSALS 3 THROUGH 11.
- --------------------------------------------------------------------------------
3. Eliminate the staggered election of directors.
FOR / / AGAINST / / ABSTAIN / /
4. Report on foreign military sales.
FOR / / AGAINST / / ABSTAIN / /
5. Report on EEO/Affirmative Action Program.
FOR / / AGAINST / / ABSTAIN / /
6. Endorse the CERES Principles.
FOR / / AGAINST / / ABSTAIN / /
7. Require shareholder vote on executives' bonuses in excess of $30,000.
FOR / / AGAINST / / ABSTAIN / /
8. Require shareholder vote on contracts paying compensation on a change in
control.
FOR / / AGAINST / / ABSTAIN / /
9. Eliminate non-employee directors' retirement plan.
FOR / / AGAINST / / ABSTAIN / /
10. Limit executives' compensation.
FOR / / AGAINST / / ABSTAIN / /
11. Limit executives' pay increases.
FOR / / AGAINST / / ABSTAIN / /
- --------------------------------------------------------------------------------
Change of address. / /
If you have commented on reverse side. / /
To discontinue duplicate mailings. / /
MARK ABOVE FOR
- --------------------------------------------------------------------------------
Signature ________________________________ Date ___________________
Signature ________________________________ Date ___________________
PLEASE SIGN THIS PROXY AS NAME(S) APPEAR ABOVE.
<PAGE> 45
PLEASE DETACH AT PERFORATION
[GTE CORPORATION LOGO] P
R
O
X
Y
PROXY SOLICITED BY BOARD OF DIRECTORS FOR GTE'S ANNUAL MEETING
OF SHAREHOLDERS ON APRIL 17, 1996.
The owner of the shares represented by this proxy hereby appoints Charles R.
Lee and Marianne Drost, or either of them, Proxies to vote at GTE's Annual
Meeting of Shareholders on April 17, 1996 and any adjournments or postponements
thereof on matters which may properly come before the Annual Meeting, in
accordance with and as more fully described in the Notice of Meeting and Proxy
Statement, receipt of which is acknowledged.
THE PROXIES WILL VOTE YOUR SHARES IN ACCORDANCE WITH YOUR DIRECTIONS ON THIS
CARD. IF YOU DO NOT INDICATE YOUR CHOICES ON THIS CARD, THE PROXIES WILL VOTE
YOUR SHARES IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS.
------------
PLEASE SIGN ON THE OPPOSITE SIDE AND RETURN SEE OPPOSITE
THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. SIDE
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