<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Gillette Company
(Name of Registrant as Specified in Its Charter)
The Gillette Company
(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)(l)(ii), 14a-6(i)(1), 14a-6(j)(2)
[ ] $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 transactions applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
[ ] 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:
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined
<PAGE>
Prudential Tower Building
Boston, MA 02199
THE Prudential Tower Building
[LOGO] GILLETTE Boston, MA 02199
COMPANY
World-Class Brands, Products, People
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
The 1996 Annual Meeting of the stockholders of The Gillette Company will be held
at the John F. Kennedy Library and Museum, Columbia Point, Boston,
Massachusetts, on Thursday, April 18, 1996, at 10:00 a.m. for the following
purposes:
1. To elect four directors for terms to expire at the 1999 Annual
Meeting of the stockholders.
2. To vote on the approval of the appointment of auditors for the
year 1996.
3. To vote on the stockholder proposal described in the
accompanying proxy statement, if the proposal is presented at
the meeting.
4. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on March 1, 1996, as the
record date for the determination of the stockholders entitled to notice of and
to vote at the meeting. A list of such stockholders will be available at the
time and place of the meeting and, during the ten days prior to the meeting, at
the office of the Secretary of the Company at the above address.
If you would like to attend the meeting and your shares are held by a broker,
bank or other nominee, you must bring to the meeting a recent brokerage
statement or a letter from the nominee confirming your beneficial ownership of
the shares. You must also bring a form of personal identification. In order to
vote your shares at the meeting, you must obtain from the nominee a proxy issued
in your name.
Whether or not you expect to attend, WE URGE YOU TO SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors
Jill C. Richardson, Secretary
Boston, Massachusetts
March 14, 1996
<PAGE>
Prudential Tower Building
Boston, MA 02199
THE Prudential Tower Building
[LOGO] GILLETTE Boston, MA 02199
COMPANY
World-Class Brands, Products, People
March 14, 1996
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors for the 1996 Annual Meeting of the
stockholders of the Company on April 18, 1996. The Notice of Annual Meeting,
this proxy statement and the accompanying proxy are being mailed to stockholders
on or about March 14, 1996. You can ensure that your shares are voted at the
meeting by signing and dating the enclosed proxy and returning it in the
envelope provided. Sending in a signed proxy will not affect your right to
attend the meeting and vote in person. You may revoke your proxy at any time
before it is voted by notifying the Company's Transfer Agent, The First National
Bank of Boston, c/o Boston EquiServe, P.O. Box 471, Boston, Massachusetts
02102-9901 in writing, or by executing a subsequent proxy, which revokes your
previously executed proxy.
The enclosed proxy will also serve as a confidential voting instruction with
respect to the Company's employees' savings plans, Employee Stock Ownership Plan
("ESOP") and Global Employee Stock Ownership Plan ("GESOP"). If voting
instructions have not been received from a participant by April 10, 1996, the
shares allocated to the participant's account(s) and ESOP and GESOP shares that
have not been allocated to participant accounts will be voted on each issue in
proportion to the shares as to which voting instructions have been returned by
other participants of each respective plan.
1. ELECTION OF DIRECTORS FOR TERMS TO EXPIRE AT THE 1999 ANNUAL MEETING
OF THE STOCKHOLDERS
At the meeting, four directors, Warren E. Buffett, Michael B. Gifford, Carol R.
Goldberg and Joseph E. Mullaney, are to be elected to serve for terms that
expire at the 1999 Annual Meeting of the stockholders. Information regarding the
Board's four nominees to this class is set forth at page 2. Information
regarding the eight directors whose terms expire in 1997 and 1998 is set forth
at pages 3 and 4.
The accompanying proxy will be voted for the election of the Board's nominees
unless contrary instructions are given. If any nominee is unable to serve, which
is not anticipated, the persons named as proxies intend to vote for the
remaining Board nominees and, unless the number of directors is reduced by the
Board of Directors, for such other person as the Board of Directors may
designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS, WHICH IS
DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY.
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE
AT THE 1999 ANNUAL MEETING OF THE STOCKHOLDERS
- ------------ WARREN E. BUFFETT Director since 1989
Mr. Buffett, 65 years of age, is Chairman of the Board and Chief
Picture Executive Officer of Berkshire Hathaway Inc., a company engaged
Warren E. in a number of diverse business activities, the most important of
Buffett which is the property and casualty insurance business. Prior to
assuming those positions in 1970, he was a general partner of
Buffett Partnership, Ltd. He is a director of The Coca-Cola
- ------------ Company and Salomon Inc.
- ------------ MICHAEL B. GIFFORD Director since 1993
Mr. Gifford, 60 years of age, is Managing Director and Chief
Picture Executive of The Rank Organisation Plc, London, England, a
Michael B. leisure and entertainment company. He has served in that capacity
Gifford since 1983. He was Finance Director of Cadbury Schweppes plc from
1978 to 1983 and Chief Executive of Cadbury Schweppes Australia
- ------------ from 1975 to 1978. He is a director of English China Clays plc.
- ------------ CAROL R. GOLDBERG Director since 1990
Mrs. Goldberg, 64 years of age, is President of The Avcar Group,
Picture Ltd., a management consulting firm. She was President and Chief
Carol R. Operating Officer of The Stop & Shop Companies, Inc., a retail
Goldberg store chain, from 1985 to 1989. She joined Stop & Shop in 1959
and served in various management positions prior to her election
as Executive Vice President and Chief Operating Officer in 1982.
She served as a director of that Company from 1972 to 1989. She
serves as a director of America Service Group, Inc., Boston
- ------------ Municipal Research Bureau and the Kennedy Library Foundation.
- ------------ JOSEPH E. MULLANEY Director since 1990
Mr. Mullaney, 62 years of age, is Vice Chairman of the Board. He
Picture joined the Company in 1972 as Associate General Counsel and was
Joseph E. elected General Counsel in 1973, Vice President in 1975, Senior
Mullaney Vice President with responsibilities for legal and governmental
affairs in 1977 and Vice Chairman in 1990. He serves as a
director of Boston Municipal Research Bureau, the Greater Boston
Legal Services Corporation, the Greater Boston Chamber of
Commerce, the New England Legal Foundation and the World Affairs
Council of Boston. He is also a member of the Board of Trustees
- ------------ of the Massachusetts Taxpayers Foundation, Inc.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE TERMS EXPIRE AT THE 1997
ANNUAL MEETING OF THE STOCKHOLDERS
- ------------ HERBERT H. JACOBI Director since 1981
Mr. Jacobi, 61 years of age, has been Chairman of the Managing
Picture Partners of Trinkaus & Burkhardt, a German bank, since 1981. The
Herbert H. Bank is affiliated with Britain's Midland Bank plc, a member of
Jacobi the Hongkong Bank Group. He was a managing partner of Berliner
Handels- und Frankfurter Bank from 1977 until 1981 and an
Executive Vice President of Chase Manhattan Bank from 1975 to
1977. Mr. Jacobi is a director of Amtrol, Inc.; Atlanta AG; Braun
AG, a Gillette subsidiary; Midland Bank plc.; and Oplaender GmbH.
He is also a member of the Partnership Council of Freshfields, a
U.K. law firm, and Vice Chairman of Midland Bank France S.A. He
is President of the North Rhine-Westfalia Stock Exchange in
- ------------ Duesseldorf and a director of Deutsche Boerse AG in Frankfurt.
- ------------ ALEXANDER B. TROWBRIDGE Director since 1990
Mr. Trowbridge, 66 years of age, is President of Trowbridge
Picture Partners Inc., a management consulting firm. He was President of
Alexander B. the National Association of Manufacturers, a trade organization,
Trowbridge from 1980 through 1989. He was Vice Chairman of Allied Chemical
Corporation (now Allied-Signal Corporation) from 1976 to 1980;
President of The Conference Board, Inc. from 1970 to 1976;
President of American Management Association from 1968 to 1970;
and U.S. Secretary of Commerce from 1967 to 1968. Mr. Trowbridge
is a director of Harris Corporation; ICOS Corporation; New
England Mutual Life Insurance Company; PHH Corporation; The Rouse
Company; The Sun Company, Inc.; SunResorts International N.A.
Ltd.; E.M. Warburg Pincus Counsellors Funds; and WMX Technologies
- ------------ Inc. He is a charter trustee of Phillips Academy, Andover.
- ------------ JOSEPH F. TURLEY Director since 1980
Mr. Turley, 70 years of age, was President and Chief Operating
Picture Officer of the Company until his retirement in 1988. He joined
Joseph F. the Company in 1960 and served as General Manager of the Gillette
Turley subsidiary in Spain, as President of Gillette Canada and, from
1971 to 1976, as President of the Safety Razor Division. He was
Executive Vice President in charge of Gillette North America from
1976 to February 1981, when he became President and Chief
Operating Officer. Mr. Turley is a director of Copley Properties,
- ------------ Inc. and is a trustee of New England Zenith Funds.
- ------------ MICHAEL C. HAWLEY Director since 1995
Mr. Hawley, 58 years of age, is President and Chief Operating
Picture Officer. He joined the Company in 1961 and was named Business
Michael C. Development Manager for Gillette International in the United
Hawley Kingdom in 1970. He served as General Manager of Gillette
Colombia from 1972 until 1976, when he became Group General
Manager of the Asia-Pacific Group, based in Sydney, Australia. In
1985 he was elected a Corporate Vice President responsible for
all blade, razor and writing instrument engineering, as well as
technical support for Gillette factories worldwide. He served as
President of Oral-B Laboratories from June 1989 until his
election as Executive Vice President, International Group, in
November 1993. In April 1995 he was elected President and Chief
Operating Officer. Mr. Hawley is a director of John Hancock
- ------------ Mutual Life Insurance Company and Texaco, Inc.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE TERMS EXPIRE AT THE 1998
ANNUAL MEETING OF THE STOCKHOLDERS
- ------------ WILBUR H. GANTZ Director since 1992
Mr. Gantz, 58 years of age, is President, Chief Executive Officer
Picture and a director of PathoGenesis Corporation, a biopharmaceutical
Wilbur H. company. He served as President of Baxter International, Inc., a
Gantz manufacturer and marketer of health care products, from 1987 to
1992. He joined Baxter International, Inc. in 1966 and held
various management positions prior to becoming its Chief
Operating Officer in 1983. Mr. Gantz is a director of W.W.
Grainger and Company; Bank of Montreal; Harris Bankcorp; and
- ------------ Harris Trust and Savings Bank.
- ------------ RICHARD R. PIVIROTTO Director since 1980
Mr. Pivirotto, 65 years of age, is President of Richard R.
Picture Pivirotto Co., Inc., a management consulting firm. He served as
Richard R. President of Associated Dry Goods Corporation, a retail
Pivirotto department store chain, from 1972 to 1976 and as Chairman of its
Board of Directors from 1976 to February 1981. He is a director
of General American Investors Company, Inc.; Immunomedics, Inc.;
New York Life Insurance Company; and Westinghouse Electric
- ------------ Corporation.
- ------------ JUAN M. STETA Director since 1987
Mr. Steta, 69 years of age, is of counsel to the law firm of
Picture Santamarina y Steta, Mexico City, which is engaged in a general
Juan M. business practice. He joined the firm in 1949, was elected a
Steta partner in 1956 and served in that capacity until 1992. He is
Chairman of the Board of Quimicos y Derivados and T & N de Mexico
and is a director of several other Mexican corporations,
including General Motors de Mexico, SKF de Mexico and Grupo
IDESA. He is also a director of Barnes Group Inc. in Bristol,
- ------------ Connecticut.
- ------------ ALFRED M. ZEIEN Director since 1980
Mr. Zeien, 66 years of age, is Chairman of the Board and Chief
Picture Executive Officer. He joined the Company in 1968 and served as
Alfred M. Chairman of the Board of Management of Braun AG, a Gillette
Zeien subsidiary, from 1976 to 1978 and as Senior Vice President,
Technical Operations, from 1978 to 1981. He was elected Vice
Chairman of the Board in 1981. In that capacity, he served as the
Company's senior technical officer and headed the new business
development group until November 1987, when he assumed
responsibility for Gillette International and the Diversified
Companies. He was elected President and Chief Operating Officer
in January 1991 and Chairman and Chief Executive Officer in
February 1991. Mr. Zeien is a director of Bank of Boston
Corporation; The First National Bank of Boston; Massachusetts
Mutual Life Insurance Company; Polaroid Corporation; Raytheon
- ------------ Company; and Repligen Corporation.
<PAGE>
BOARD MEETINGS
The Board of Directors held eight meetings in 1995.
COMMITTEES OF THE BOARD
The Board of Directors has the following standing committees, which are composed
entirely of directors who are not employees of the Company, except that the
Chief Executive Officer is an ex officio member of the Executive Committee.
Audit Committee
The members are Mr. Steta (Chairman), Mr. Gifford, Mrs. Goldberg and Mr. Turley.
The Audit Committee recommends the appointment of the Company's independent
auditors, meets with the auditors to review their report on the financial
operations of the business, and approves the audit services and any other
services to be provided. It reviews the Company's internal audit function and
the performance and adequacy of the fund managers for the Company's benefit
plans. It also reviews compliance with the Company's statement of policy as to
the conduct of its business. Four meetings of the Committee were held in 1995.
Executive Committee
The members are Mr. Buffett (Chairman), Mrs. Goldberg, Mr. Steta, Mr. Turley and
Mr. Zeien.
The Executive Committee, acting with the Finance Committee, reviews and makes
recommendations on significant capital investment proposals. It is also
available to review and make recommendations to the Board with respect to the
nature of the business, plans for future growth, senior management succession
and stockholder relations. The Committee has the added functions of reviewing
the composition and responsibilities of the Board and its committees and
recommending to the Board nominees for election as directors. It will consider
nominations by stockholders, which should be submitted in writing to the
Chairman of the Committee in care of the Secretary of the Company. Nine meetings
of the Committee were held in 1995.
Finance Committee
The members are Mr. Jacobi (Chairman), Mr. Gantz, Mr. Gifford, Mr. Pivirotto and
Mr. Trowbridge.
The Finance Committee reviews and makes recommendations with respect to the
Company's financial policies, including cash flow, borrowing and dividend policy
and the financial terms of acquisitions and dispositions. Acting with the
Executive Committee, it reviews and makes recommendations on significant capital
investment proposals. Eight meetings of the Committee were held in 1995.
Personnel Committee
The members are Mr. Pivirotto (Chairman), Mr. Gantz, Mr. Jacobi and Mr.
Trowbridge.
The Personnel Committee reviews and makes recommendations to the management or
Board on personnel policies and plans or practices relating to compensation. It
also administers the Company's executive incentive compensation plans and
approves the compensation of all officers and certain other senior executives.
Eight meetings of the Committee were held in 1995.
OUTSTANDING VOTING SECURITIES
On March 1, 1996, the record date for the 1996 Annual Meeting of the
stockholders, there were outstanding and entitled to vote 444,793,019 shares of
the $1 par value common stock of the Company, entitled to one vote per share,
and 160,405 shares of Series C ESOP Convertible Preferred Stock, entitled to 40
votes per share. The holders of the Company's common and preferred stock vote
together as one class on all matters being submitted to a vote of the
stockholders at the 1996 Annual Meeting. All references in this proxy statement
to numbers of common shares and prices per common share have been adjusted for
stock splits, including the two-for-one stock split effective June 22, 1995.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND EMPLOYEES
Stock ownership by directors, officers and other employees is encouraged in
order to align even more closely their interests with those of stockholders. In
that regard, fifty percent of each director's annual retainer is paid in
Gillette stock, and each of the directors owns stock with a current value in
excess of twice the annual retainer for Board service. Each of the executive
officers owns stock, either directly or through Company savings plans, with a
value of at least twice his current salary, and the level of stock ownership for
the group of executive officers exceeds twelve times the group's combined
salaries. There is also broad-based employee stock ownership. Approximately
11,000 employees worldwide own over 20,000,000 shares through participation in
the Company's employees' savings and stock ownership plans.
The following table sets forth the number of Gillette shares beneficially owned
on March 1, 1996, by (i) each director, (ii) each of the executive officers
named in the Summary Compensation Table at page 13 and (iii) all directors and
current executive officers as a group. All individuals listed in the table have
sole voting and investment power over the shares reported as owned, except as
otherwise stated.
Unrestricted
Stock Beneficially Option Shares
Title of Owned, Excluding Exercisable
Name Class(1) Options Within 60 days
---- --------- ----------------- --------------
Warren E. Buffett Common 48,000,741(2) 8,000
Wilbur H. Gantz Common 4,141 8,000
Michael B. Gifford Common 1,339 6,000
Carol R. Goldberg Common 3,141(3) 8,000
Michael C. Hawley Common 69,610(4) 174,000
Series C Pfd. 16 --
Herbert H. Jacobi Common 9,922 8,000
Jacques Lagarde Common 24,490(4) 239,536
Series C Pfd. 14 --
Joseph E. Mullaney Common 108,459(4) 204,600
Series C Pfd. 14 --
Robert J. Murray Common 76,274(5) 129,060
Series C Pfd. 14 --
Richard R. Pivirotto Common 3,940 8,000
Juan M. Steta Common 12,373 8,000
Alexander B. Trowbridge Common 1,741 7,600
Joseph F. Turley Common 105,083 8,000
Alfred M. Zeien Common 721,185(4) 740,000
Series C Pfd. 14 --
All directors and current Common 49,241,503(4) 2,018,736
executive officers as a group Series C Pfd. 109 --
- ----------
(1) Except as indicated in note (2) below, the total number of shares
beneficially owned in each class constitutes less than 1% of the outstanding
shares in that class.
(2) The shares reported as owned by Mr. Buffett represent 10.8% of the
outstanding common stock, as described on page 7. Mr. Buffett shares voting
and investment power over 48,000,000 of the shares, which are owned by
insurance subsidiaries of Berkshire Hathaway Inc., a company which he may be
deemed to control.
(3) Mrs. Goldberg has no voting and investment power over 400 of the shares
reported as owned and disclaims beneficial ownership with respect to those
shares.
(4) Includes common shares held under the Company's Employees' Savings Plan as
follows: Mr. Hawley 53,610 shares; Mr. Lagarde 12,526 shares; Mr. Mullaney
31,968 shares; Mr. Zeien 176,717 shares; and the total of all employee
directors and all current executive officers, including the named current
executive officers as a group, 360,436 shares. Under the Employees' Savings
Plan and ESOP, participants may direct the voting of shares held in their
accounts in accordance with the shared voting procedure described at page 1
and share investment power with the plans' trustees in accordance with the
terms of the plans. In addition, Mr. Mullaney shares voting and investment
power over 20,548 of the common shares reported as owned by him; one
executive officer shares voting and investment power over 41,766 of the
total number of common shares reported as owned by the group; and one
executive officer has no voting and investment power over 30,664 of the
common shares reported as owned by the group and disclaims beneficial
ownership with respect to those 30,664 shares.
(5) Includes 30,950 shares held under the Company's Employees' Savings Plan. Mr.
Murray has no voting and investment power over 612 of the shares reported as
owned by him and disclaims beneficial ownership with regard to those shares
As of March 1, 1996, Berkshire Hathaway Inc., located at 1440 Kiewit Plaza,
Omaha, Nebraska 68131, beneficially owned, through six insurance subsidiaries,
48,000,000 shares, which constitute 10.8% of the outstanding common stock of the
Company and 10.6% of the votes entitled to be cast by the holders of the
outstanding voting securities of the Company. One of the six Berkshire Hathaway
Inc. subsidiaries, National Indemnity Company, 3024 Harney Street, Omaha,
Nebraska 68131, owned directly 30,000,000 of the 48,000,000 shares, or 6.7% of
the outstanding common stock and 6.6% of the votes entitled to be cast by the
holders of the outstanding voting securities of the Company. The capital stock
of Berkshire Hathaway Inc. is beneficially owned approximately 40.2% by Mr.
Buffett and a trust of which he is trustee but in which he has no economic
interest and 3.1% by his wife, Susan T. Buffett.
As of March 1, 1996, State Street Bank and Trust Company, P.O. Box 5259, Boston,
Massachusetts 02101 ("State Street") held as Trustee of The Gillette Company
Employee Stock Ownership Plan on behalf of Plan participants, 160,405 shares of
Series C ESOP Convertible Preferred Stock which represent 100% of that class and
1.4% of the votes entitled to be cast by the holders of the Company's
outstanding voting securities. State Street exercises shared voting and
dispositive power over the shares.
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS
Berkshire Hathaway Inc. and the Company continue to be subject to their
agreement of July 20, 1989. Management, after consultation with legal and
financial advisors, determined that the terms of the agreement, as described
below, were fair to the Company.
The agreement provides that, without the approval of the Company's Board of
Directors, until July 20, 1999, Berkshire Hathaway Inc. will not acquire shares
giving it a total of more than 14.1% of the voting power of the Company's
outstanding voting securities (other than through the exercise of rights,
warrants or convertible securities received by Berkshire Hathaway Inc. with
respect to its common stock) or become a participant in a proxy solicitation or
a member of another group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934 with respect to the Company.
Berkshire Hathaway Inc. also remains subject to its agreement to use its best
efforts not to knowingly sell securities representing more than 3% of the voting
power of the Company's outstanding voting securities to any one entity or group
except in certain specified circumstances related to a change in control of the
Company, and to give the Company certain rights of first refusal in the event of
sales of the Company's voting securities by Berkshire Hathaway Inc. If the
Company does not exercise its right of first refusal, Berkshire Hathaway Inc.
has the right to have the Company register, either in its entirety or in
increments of $100,000,000 or more from time to time, one or more public
offerings of the Gillette common stock held by Berkshire Hathaway Inc.
While Berkshire Hathaway Inc. owns at least 5% of the voting power of the
Company's securities, the Company's directors will also continue to be subject
to their agreement to use their best efforts to secure the election to the Board
by the stockholders of Mr. Buffett or such other individual reasonably
acceptable to the Company as Berkshire Hathaway Inc. might nominate.
Fees paid during 1995 to the law firm of Santamarina y Steta, of which Mr. Steta
is of counsel, are reported below.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries are paid an
annual Board retainer fee of $28,000 ($25,000 prior to October 1995) plus a fee
of $1,200 ($1,000 prior to October 1995) for attendance at each meeting of the
Board of Directors or of its committees. Under the Outside Directors' Stock
Ownership Plan one half of all annual Board retainer fees is paid in common
stock of the Company. Committee Chairmen receive an additional retainer of
$4,000 ($3,000 prior to October 1995) a year. The directors may defer payment of
all or any portion of cash retainers or fees until after retirement or
resignation from the Board or until an earlier change in control. Deferred
amounts accrue interest equivalents. Upon the death of a director, any unpaid
amounts become payable in a lump sum.
Directors who are not employees of the Company or its subsidiaries also may be
paid for service as directors of Company subsidiaries. During 1995 Mr. Jacobi
received standard outside director fees totaling $13,039 for his services as a
director of Braun AG.
Each non-employee director receives an automatic stock option grant, effective
two business days following the date of the annual meeting of the stockholders,
to purchase 2,000 shares of the common stock of the Company at a price equal to
the fair market value on the date of grant. In 1995 the grants were made on
April 24 at a price of $40.905 per share. Options granted to non-employee
directors are designated as non-ISO's, the terms of which are generally similar
to those granted to employees, which are described at page 15.
A director who has attained age 70 cannot stand for reelection to the Board.
Directors who have served as Board members for five or more years receive an
annual retirement benefit which is equal to the annual retainer in effect when
they leave the Board and is payable for a period equal to their years of
service. No credit is given for service as a director while an employee of the
Company. Payment of the benefit commences when service ends, or at age 65 if a
director leaves the Board at an earlier age. Upon the death of a director, the
present value of any unpaid amount becomes payable in a lump sum. In the event
of a change in control, a director leaving the Board would be entitled to
receive immediate payment of the present value of the full retirement benefit. A
director who at any time acts in a manner contrary to the best interests of the
Company risks forfeiture of the future retirement benefit.
During 1995 the Company and its Mexican subsidiaries received legal advice from
the law firm of Santamarina y Steta, of which Mr. Steta is of counsel, and paid
the firm a total of $277,014 for its services. The Company believes that all
such services were provided on terms at least as favorable to the Company as
those of comparable firms retained to provide similar legal services to the
Company. It is expected that Santamarina y Steta will continue to provide legal
services to the Company and its subsidiaries during 1996.
GILLETTE COMPARATIVE FIVE-YEAR INVESTMENT PERFORMANCE
The following chart compares the total return on $100 invested in Gillette
common stock for the five-year period from December 31, 1990 through December
31, 1995 with a similar investment in the Standard & Poor's 500 Stock Index and
with a peer group consisting of ten consumer products companies of generally
similar size. The cumulative return includes reinvestment of dividends. S&P 500
Stock Index sourced from The Wyatt Company.
- -------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Gillette $100 $181 $186 $197 $251 $353
Peer Group $100 $146 $134 $133 $148 $217
S&P 500 $100 $130 $140 $154 $156 $215
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Peer Group Companies: Bristol-Myers Squibb Company Procter & Gamble Company
American Home Products Corporation Colgate-Palmolive Company Rubbermaid Incorporated
Avon Products, Inc. Johnson & Johnson Warner-Lambert Company
The Black & Decker Corporation Pfizer Inc.
- --------------------------------------------------------------------------------------------
</TABLE>
PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overall Objectives and Programs
- -------------------------------
The objective of the Company's executive compensation program is to provide
compensation that will attract and retain executives, to motivate each executive
toward the achievement of the Company's short and long-term financial and other
goals, as reflected in its statement of mission and values and in its strategic
business plan, and to recognize individual contributions as well as overall
business results. In order to achieve this objective, the primary focus of the
Personnel Committee has been on the competitiveness of each of the key elements
of executive compensation -- base salary, bonus and stock option grants -- and
the compensation package as a whole. In general, the Committee also believes
that total compensation should reflect the fact that the Company's performance
compares very favorably with that of the peer group companies and with that of
the broader group of companies represented in the Standard & Poor's 500 Stock
Index.
Overall executive compensation is dependent upon performance against goals
assigned to each executive under the Company's management by objectives program.
These objectives are designed to further the Company's strategic business plan
and mission and values. Objectives include quantitative factors that directly
improve the Company's short-term financial performance, as well as qualitative
factors that strengthen the Company's ability to enhance profitable growth over
the long term, such as demonstrated leadership ability, management development,
insuring compliance with law and Company policies, and anticipating and
responding to changing market and economic conditions.
Each year the Committee reviews a report prepared by independent compensation
consultants assessing the competitiveness of the Company's program for the past
year with the peer group used for compensation comparisons ("the Compensation
Peer Group") to determine whether the Company has achieved its executive
compensation program objective and to help the Committee determine whether there
is a need to make prospective adjustments in the compensation of executive
officers. The Compensation Peer Group includes most of the companies listed on
page 9, as well as a number of other companies with which the Company competes
for executive talent. Despite the substantial similarities between the two
groups, the companies included in the Compensation Peer Group are not identical
to those included in the peer group index in the Investment Performance Graph
included in this proxy statement because the Committee believes that the group
of companies with which the Company competes for executive talent is broader
than and not identical to that appropriate for comparing investment performance.
Over the last several years the Personnel Committee has sought to relate an
increasingly greater percentage of total executive compensation directly to the
financial performance of the Company and to the part each executive played in
achieving that performance. This has resulted in a compensation package in which
a greater portion of each executive officer's compensation is contingent upon
the achievement of specific financial targets for the year. For 1995 the bonus
represented approximately 40% of total direct compensation (base salary plus
bonus), a proportion believed to be generally in line with that of the
Compensation Peer Group.
It has also been the Committee's objective that, in any year in which a budgeted
bonus pool is earned under the Incentive Bonus Plan and the Company's
performance compares favorably with those shown on the Investment Performance
Graph, the total direct compensation of the executive officers should be well
above the median of direct compensation paid by the Compensation Peer Group. For
the most recent period for which information is available, the total direct
compensation of the executive officers was well above the median of direct
compensation of the Compensation Peer Group.
The Personnel Committee approves the base salaries of the executive officers
and, at its discretion, awards bonuses under the Incentive Bonus Plan and grants
stock options under the Stock Option Plan.
Base Salary
In determining the salary of an executive officer, a salary range is assigned
under a worldwide system of job evaluation based upon the level of
responsibility, the qualifications and experience required and the need to
provide, together with the Incentive Bonus Plan, competitive direct
compensation. Salary increases are based upon periodic reevaluations of these
factors and the performance of the executive in meeting individually assigned
objectives.
Incentive Bonus Plan
Under the Incentive Bonus Plan, the Personnel Committee establishes bonus pools
based on budgeted goals set at the outset of the year relating to profit from
operations, return on assets, and sales (weighted 70%, 15% and 15%,
respectively, for 1995) and establishes the minimum, budgeted, and maximum
Company-wide aggregate bonus pools that may be earned based upon the achievement
of those Company goals. For 1996 the weighting of the factors remains unchanged.
In order for a bonus pool to be earned, a minimum profit from operations goal
for the Company must be met. The actual amount of any pool is determined based
upon the level of achievement of Company goals for the year. Company goals are
translated to operating unit, staff and individual objectives and assigned to
executives under the Company's management by objectives program. For the year
1995, the plan provided for awards ranging from 5% to 70% of year-end salary
based upon the performance of each executive officer against individually
assigned objectives for the year, with the Committee having discretion to award
a higher amount under special circumstances.
At the time goals are set, a reserve equivalent to no more than 35% of the
amount of the budgeted bonus pool may be established by the Committee from which
bonuses may be awarded to eligible employees in operating units that achieve
assigned objectives even if the overall minimum profit from operations goal for
the Company is not met. In addition, the Committee may, within certain limits,
carry forward a portion of the bonus pool earned in any year for its
discretionary use in the future.
Stock Option Plan
Stock option grants are intended to provide long-term incentives for the
achievement of the Company's strategic business plan and mission and values and
to align the executive officers' interests with those of the stockholders. The
Stock Option Plan is the Company's sole long-term incentive plan for executive
officers. Under the plan, the Personnel Committee may award stock options for
terms not to exceed ten years at no less than the fair market value of Gillette
common stock on the date of grant. The size of any stock option grant is related
to the individual's level of responsibility within the organization, and awards
are made on a basis designed to be at or above the median value of grants under
similar programs of companies in the Compensation Peer Group.
Other Benefits
In order to attract, motivate and retain employees, the Company also maintains a
competitive benefits package, participation in which is not dependent upon
performance. In general, executive officers participate on the same basis as
other employees in the Company's broad-based employee benefit plans: the
Employees' Savings Plans, the Employee Stock Ownership Plan, and the Retirement
Plans. Information on these plans is provided on pages 14 through 17.
The executive officers, along with certain other executives, participate in an
Executive Life Insurance Program and Estate Preservation Plan. Information on
these programs is included in the footnotes to the Summary Compensation Table at
page 13.
The Personnel Committee has reviewed the impact of Section 162 (m) of the
Internal Revenue Code which, beginning in 1994, limits the deductibility of
certain otherwise deductible compensation in excess of $1 million paid to the
CEO and the next four most highly compensated executive officers. It is the
practice of the Committee to attempt to have all compensation treated as
tax-deductible compensation wherever, in the judgement of the Committee, to do
so would be consistent with the objectives of the compensation plan under which
the compensation is paid. Accordingly, the Stock Option and Stock Equivalent
Unit Plans fulfill the requirements for treatment as tax-deductible
compensation.
The Committee has determined that to attempt to amend the Incentive Bonus Plan
so that bonuses meet the definition of tax-deductible compensation would require
changes which would be contrary to the compensation philosophy underlying that
plan and which would seriously impede the Committee's ability to administer the
plan as designed in accordance with the judgement of the Committee. The
Incentive Bonus Plan was deliberately designed so that individual bonuses were
not to be dependent solely on objective or numerical criteria, thus allowing the
Committee the flexibility to apply its independent judgement to reflect
performance against qualitative strategic objectives.
Compensation of Chief Executive Officer
- ---------------------------------------
As Chairman and Chief Executive Officer, Mr. Zeien's compensation, like that of
the other executive officers of the Company, is set in accordance with the
foregoing policies.
Base Salary
Mr. Zeien's base salary represents an effort by the Personnel Committee, after
consideration of data contained in a report from the independent compensation
consultants, to place his base salary at or above the median of salaries of
chief executive officers of the companies in the Compensation Peer Group.
Incentive Bonus Plan
Mr. Zeien is responsible for the entire scope of the Company's worldwide
business. His 1995 bonus was based upon his successful leadership in managing
the business and balancing the Company's long and short-term objectives as
described below.
The Company's sales grew by 12% to $6.8 billion in 1995, a record level. Sales
growth was broadly based, with all three operating groups reporting double digit
sales gains. As compared with 1994, profit from operations in 1995 was $1,371
million, a 12% increase from the $1,227 million reported a year earlier; net
income of $824 million was 18% higher than the $698 million in 1994; and
earnings per common share rose at the rate of 18% over those of 1994. Return on
average assets for 1995 improved one point to 14%. The total market value of
Gillette common stock increased 40% in 1995 to $23.2 billion. Net debt grew by
$236 million to $1,277 million, primarily due to two strategic acquisitions made
late in the year. Stockholders' equity grew more than $500 million to $2,513
million, a 25% increase.
Significant progress was made during 1995 toward achievement of the Company's
long-term growth goals -- clear worldwide leadership in core business categories
and geographic expansion. The Company's ongoing emphasis on technology-driven
new products also continued to be apparent in 1995. In addition to strong growth
in the newer geographic areas, new product activity continued at a record pace
in 1995, with more than 20 new products introduced. Investment in the three
principal "growth drivers" -- research & development, capital spending and
advertising -- in combination rose 16% over 1994 levels, well above the
Company's sales growth rate. As an indicator of the effectiveness of this
investment in "growth drivers", 42% of the Company's 1995 sales came from
products introduced in the last five years. This 1995 new product percentage
does not include the original Sensor razor and cartridges which were introduced
in 1990.
Mr. Zeien is also responsible for insuring the Company's compliance with
applicable laws and Company policies.
Stock Option Plan
The June 1995 stock option grant to Mr. Zeien was based upon the Committee's
judgement that stock options are designed as the Company's sole long-term
incentive for executive officers and that the option granted, which was the same
in 1994, represents an amount believed by the Committee to be competitive in
value with long-term incentives granted other chief executive officers of the
companies in the Compensation Peer Group. An additional stock option grant made
to Mr. Zeien is described on page 13.
Incentive Payment and Award
At its meeting on February 15, 1996, the Personnel Committee recommended and the
Board approved an additional compensation package for Mr. Zeien, to provide an
incentive to him not to retire and to continue his employment as Chairman of the
Board and Chief Executive Officer of the Company, consisting of a payment to Mr.
Zeien of $500,000 if he continues in these capacities through February 28, 1997,
with any such amount being payable to Mr. Zeien after his retirement, and made
an option grant to Mr. Zeien effective February 15, 1996, of 100,000 shares at
an exercise price of $56.25 per share, the fair market value of the stock on
that date, which will become exercisable on February 15, 1997. The additional
compensation package for Mr. Zeien was reviewed by the Company's independent
compensation consultants who have advised the Personnel Committee that both its
design and level are well within current marketplace practices in similar
situations. This additional compensation package is similar to the one- year
package approved by the Board of Directors on February 16, 1995, and disclosed
in the March 16, 1995, Proxy Statement, consisting of a payment of $500,000 to
be made to Mr. Zeien after his retirement and a stock option on 150,000 shares.
Richard R. Pivirotto
(Chairman)
Wilbur H. Gantz
Herbert H. Jacobi
Alexander B. Trowbridge
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by or paid or awarded
to the Chief Executive Officer and the next four most highly compensated
executive officers of the Company for all services rendered in all capacities
for the periods shown.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------------------- --------------------------
Other # of Stock Long-Term
Name and Principal Annual Options Incentive All Other
Position Year Salary Bonus Compensation(1) Granted Payouts(2) Compensation(3)
- --------------------- ---- ------ ----- --------------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred M. Zeien 1995 $1,125,000 $1,300,000 -- 350,000 -- $176,741
Chairman and Chief 1994 1,000,000 1,000,000 -- 200,000 -- 147,110
Executive Officer 1993 908,333 675,000 -- 150,000 -- 157,273
Michael C. Hawley 1995 $ 514,375 $ 390,000 $ 3,354 120,000 -- $ 59,112
President & Chief 1994 377,917 250,000 5,488 64,000 -- 38,864
Operating Officer 1993 324,600 190,000 228,233 45,000 -- 33,371
Joseph E. Mullaney 1995 $ 475,000 $ 220,000 -- 50,000 -- $ 60,382
Vice Chairman of 1994 445,000 200,000 -- 50,000 -- 52,287
the Board 1993 415,000 180,000 -- 50,000 -- 55,238
Jacques Lagarde 1995 $ 531,313 $ 300,000 $ 14,274 68,000 -- $ 53,171
Executive VP 1994 473,750 240,000 109,399 64,000 -- 43,084
1993 417,250 170,000 772 60,000 $ 74,053 46,049
Robert J. Murray 1995 $ 550,000 $ 330,000 $ 9,976 68,000 $254,076 $113,425
Executive VP 1994 510,000 315,000 1,567 68,000 229,930 54,837
1993 470,000 265,000 14,135 64,000 385,267 52,824
</TABLE>
----------
(1) Other Annual Compensation amounts represent taxes reimbursed by the Company
relating to non-deductible relocation expenses incurred by the named
individuals.
(2) Long-Term Incentive Payouts represent Stock Equivalent Unit Plan amounts
paid or payable but deferred with respect to segments of awards vesting in
1995, plus amounts representing the growth in 1995 on prior years'
deferrals. Awards granted to executive officers after 1984 were contingent
upon the achievement of future performance goals. In 1990, it was decided
to utilize larger grants of stock options as long-term incentives for
executive officers and to discontinue granting Stock Equivalent Unit Plan
awards to this group of officers.
(3) The amounts reported as All Other Compensation include the following
payments or accruals under the Company's benefit and incentive plans:
(i) Company contributions during 1995 under the Employees' Savings Plan
and Supplemental Savings Plan as follows: Mr. Zeien $56,250, Mr.
Hawley $38,219, Mr. Mullaney $33,750, Mr. Lagarde $38,566 and Mr.
Murray $30,673. Under the plans, the Company contributes 50 cents for
each dollar up to a maximum of 10% of salary and bonus saved by
participants. In general, regular U.S. employees are eligible to
participate. Certain limitations on the amount of benefits under
tax-qualified plans such as the Employees' Savings Plan were imposed
by the Employee Retirement Income Security Act of 1974, the Tax
Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of
1986 and the Revenue Reconciliation Act of 1993. The Company adopted
the Supplemental Savings Plan, as permitted by law, for the payment
of amounts to employees who may be affected by those limitations, so
that, in general, total benefits will continue to be calculated as
before on the basis approved by the stockholders.
(ii) Savings plan equivalents credited on the 1995 Incentive Bonus Plan
deferral of $65,000 for Mr. Zeien. Before being selected to receive a
bonus, participants have the option to defer until a future year or
retirement, or until an earlier change in control, payment of all or
a portion of any bonus that may be awarded. Savings plan equivalents
represent amounts which would have been credited as Company
contributions under the Employees' Savings Plan or Supplemental
Savings Plan had payment of the bonuses not been deferred.
(iii) The value of Series C ESOP preferred shares allocated under the
Employee Stock Ownership Plan ("ESOP") to each of their accounts as
follows: Mr. Zeien $4,711, Mr. Hawley $4,805, Mr. Mullaney $4,711,
Mr. Lagarde $4,711 and Mr. Murray $4,692. The ESOP was adopted in
January 1990 as part of the Company's modified U.S. retiree medical
benefit program. Since September 30, 1990, Series C ESOP preferred
shares have been allocated quarterly to the accounts of eligible
employees, generally on the basis of an equal amount per participant.
In general, regular U.S. employees participate in the ESOP after
completing one year of service with the Company.
(iv) Company cost for the Executive Life Insurance Program as follows: Mr.
Zeien $35,556, Mr. Hawley $7,647, Mr. Mullaney $9,693, Mr. Lagarde
$3,404 and Mr. Murray $7,634. The program provides coverage during
employment equal to four times annual salary, subject to a $600,000
minimum and a $2,000,000 maximum, with the participant paying the
premium for coverage equal to two times salary or $250,000, whichever
is less. During retirement, a Company-paid death benefit equal to
annual salary, subject to a $150,000 minimum and a $500,000 maximum,
continues in effect for the life of the participant.
(v) Company cost for the Estate Preservation Plan as follows: Mr. Zeien
$15,224, Mr. Hawley $8,441, Mr. Mullaney $12,228, Mr. Lagarde $6,490
and Mr. Murray $6,964. The executive officers, as well as certain
other officers, may participate in the Estate Preservation Program,
under which the Company and the executive officer will share equally
the cost of life insurance in the amount of $1,000,000 payable on the
death of the survivor of each executive and his or her spouse, with
the Company recovering its contribution at the end of a 15-year
period, or if earlier, when the survivor of the executive and the
executive's spouse dies.
(vi) Accrued vacation pay of $63,462 was received by Mr. Murray upon his
retirement as described in footnote 4 on page 15.
(4) Mr. Murray retired from the Company as of January 1, 1996. Pursuant to a
noncompetition agreement ending December 31, 2000, or upon his earlier
death, Mr. Murray will receive $450,000 per annum in 1996 and 1997 and
$320,000 per annum in 1998, 1999 and 2000.
Stock Options Granted in 1995
<TABLE>
<CAPTION>
Individual Grants Grant Date
- ------------------------------------------------------------------------------------------------------------- Value
% Of Total ------------
Options Granted Grant Date
Number of To Employees Per Share Present Value
Name Options Granted(1) in 1995 Exercise Price Expiration Date ($)(2)
- ---- ------------------ -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Alfred M. Zeien 150,000 3.80% $39.440 02/20/05 $1,815,000
200,000 5.07% 41.970 06/14/05 2,146,000
Michael C. Hawley 40,000 1.01% 40.905 04/23/05 478,000
80,000 2.03% 41.970 06/14/05 858,400
Joseph E. Mullaney 50,000 1.27% 41.970 06/14/05 536,500
Jacques Lagarde 68,000 1.72% 41.970 06/14/05 729,640
Robert J. Murray 68,000 1.72% 41.970 01/01/96 0(3)
</TABLE>
- ----------
(1) These awards were made pursuant to the 1971 Stock Option Plan. The options
become exercisable one year from date of grant and generally remain
exercisable for ten years from the grant date provided the recipient
remains employed throughout that period. The exercise price is equal to
the average of the high and low prices of Gillette shares traded on the
date the options were granted. At the time of grant, options may be
designated as incentive stock options ("ISOs"), a type of option
authorized under the 1981 amendments to the Internal Revenue Code. Options
not so designated are granted as "non-ISOs". The post-retirement exercise
period is generally three months for an ISO and three years for a non-ISO.
If termination of employment occurs within one year after a change in
control, as that term is described at page 17, any options held by the
optionee that were not otherwise exercisable when employment ceased would
become immediately exercisable.
(2) The options were valued using a Black-Scholes-based option pricing model,
which generates a theoretical value based upon certain factors and
assumptions. Therefore, the value which is calculated is not intended to
predict future prices of the Corporation's common stock. The actual value
of a stock option, if any, is dependent on the future price of the stock,
overall stock market conditions and continued service with the Company,
since options remain exercisable for only a limited period following
retirement, death or disability. There can be no assurance that the values
reflected in this table or any other value will be achieved. The
assumptions and calculations used were provided by independent
compensation consultants. In addition to stock value at the date of grant
and the exercise price, which are identical, and the ten-year term of each
option, the following assumptions were used to calculate the values
reflected in the table: for options with an exercise price of $39.44,
stock price volatility of 18% based on a one year daily stock price
history, annualized dividend rate of 50 cents, and risk-free rate of
return of 7.5% equal to the yield on a 10-year U.S. Treasury bond with a
maturity matching the option term; for options with an exercise price of
$41.97, stock price volatility of 17%, annualized dividend rate of
60 cents, and risk-free rate of return of 6%; and for options with an
exercise price of $40.905, stock price volatility of 17%, annualized
dividend rate of 50 cents, and risk-free rate of return of 7%.
(3) Due to Mr. Murray's retirement on January 1, 1996, this option will not
become exercisable and, therefore, no grant date present value is shown.
Aggregated Stock Option Exercises During 1995 And 1995 Year-End Stock Option
Values
<TABLE>
<CAPTION>
Total Value
Of Unexercised
Number Of Number Of Unexercised In-The-Money Stock
Shares Underlying Value Stock Options Held Options Held At
Name Options Exercised Realized(1) At Fiscal Year-End Fiscal Year-End
- ---- ----------------- ----------- -------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Alfred M. Zeien 100,000 $2,922,070 Exercisable 590,000 $15,132,850
Unexercisable 350,000 3,802,500
Michael C. Hawley 38,000 1,239,360 Exercisable 134,000 3,024,250
Unexercisable 120,000 1,216,200
Joseph E. Mullaney 28,400 1,016,679 Exercisable 204,600 5,689,954
Unexercisable 50,000 489,000
Jacques Lagarde 19,464 712,127 Exercisable 239,536 6,677,247
Unexercisable 68,000 665,040
Robert J. Murray 209,600 7,210,225 Exercisable 132,000 2,975,000
Unexercisable 0(2) 0
</TABLE>
- ----------
(1) The amounts shown are the total values realized by the named persons on
exercises of options held for periods ranging from 5 to 9 years. The
annualized values for the options exercised, calculated by dividing the
total value realized by the number of years from the date of grant to the
date of exercise, are as follows: Mr. Zeien $526,435, Mr. Hawley $225,142,
Mr. Mullaney $153,588, Mr. Lagarde $117,656 and Mr. Murray $1,188,772.
(2) Due to Mr. Murray's retirement on January 1, 1996, his June 15, 1995,
option on 68,000 shares will not become exercisable.
RETIREMENT PLAN
The following table sets forth the total annual pension benefits payable in
the form of a straight-life annuity before reduction for social security
benefits for employees who retire at or after age 65 under the Company's
Retirement Plan and Supplemental Retirement Plan.
Annual Pension
Average Annual Compensation ------------------------------------------
Used as Basis for 15 Years of 20 Years of 25 Years or More
Computing Pension Service Service of Service
--------------------------- ----------- ----------- ----------------
$ 400,000 $120,000 $160,000 $ 200,000
600,000 180,000 240,000 300,000
800,000 240,000 320,000 400,000
1,000,000 300,000 400,000 500,000
1,200,000 360,000 480,000 600,000
1,400,000 420,000 560,000 700,000
1,600,000 480,000 640,000 800,000
1,800,000 540,000 720,000 900,000
2,000,000 600,000 800,000 1,000,000
In general, the benefit upon retirement at or after age 65 with 25 years or
more of service is equal to 50% of the employee's average annual compensation
(salary plus bonus, if any, as reported in the Summary Compensation Table at
page 13) during the five calendar years of highest compensation included in
the last ten calendar years of employment, minus 75% of primary social
security benefits.
Certain limitations on the amount of benefits under tax-qualified plans, such
as the Retirement Plan, were imposed by the Employee Retirement Income
Security Act of 1974, the Tax Equity and Fiscal Responsibility Act of 1982,
the Tax Reform Act of 1986 and the Revenue Reconciliation Act of 1993. The
Company adopted the Supplemental Retirement Plan, as permitted by law, for the
payment of amounts to employees who may be affected by those limitations, so
that, in general, total benefits will continue to be calculated on the basis
approved by the stockholders, as described above.
As of December 31, 1995, the persons named in the Summary Compensation Table at
page 13 had the following years of service under the Retirement Plan: Mr. Zeien
28 years; Mr. Mullaney 24 years; Mr. Hawley 32 years; Mr. Lagarde 25 years and
Mr. Murray 35 years.
Change in Control and Severance Arrangements
The Board of Directors has adopted a severance pay and benefit arrangement to
become effective in the event of a change in control. In general, the
arrangement would obligate any acquirer to continue long-standing Gillette
practice regarding severance payments to terminated employees. Severance
payments to U.S. employees whose employment is terminated under certain
circumstances after a change in control would be based on seniority and
position level, subject to a minimum for certain key employees, including
certain executive officers. Severance payments to employees in foreign
countries would comply with local law and follow past Gillette practice.
The maximum amount payable under the severance pay arrangement, including any
benefit plan payments resulting from a change in control, is 2.99 times average
annual compensation for the five-year period preceding termination of
employment. For most employees, including the named persons, it is unlikely that
payments would reach the maximum. The aggregate of severance pay excluding
benefit plan payments to the persons named in the Summary Compensation Table at
page 13 on December 31, 1995, in the event of a change in control on that date,
would have been $6,560,000, or 2 times the amount of their base salary on that
date. In general, benefit plan payments resulting from a change in control are
dependent upon salary, but vary with seniority and position level.
A change in control is defined in certain of the Company's benefit plans and, in
general, means those events by which control of the Company passes to another
person or corporation. Those events include a purchase of the Company's stock
pursuant to a tender offer, the acquisition of 20% or more of the Company's
stock by a person or group, a merger, or a sale of substantially all of the
assets of the Company. In addition, a change in control would occur if, during
any two-year period, the individuals who were serving on the Board of Directors
of the Company at the beginning of the period or who were nominated for election
or elected to the Board during the period with the affirmative vote of at least
two-thirds of such individuals still in office, ceased to constitute a majority
of the Board.
Benefits generally comparable to those applicable in the event of a change in
control of the Company have been extended to employees, including officers,
whose employment terminates pursuant to the Company's Realignment Plan announced
in January 1994.
2. APPOINTMENT OF AUDITORS
On the recommendation of the Audit Committee of the Board of Directors, the
Board has appointed KPMG Peat Marwick LLP as auditors for the year 1996,
subject to approval by the stockholders. KPMG Peat Marwick LLP has audited the
books of the Company for many years.
Representatives of KPMG Peat Marwick LLP will attend the 1996 Annual Meeting
of the stockholders, where they will have the opportunity to make a statement
if they wish to do so and will be available to answer appropriate questions
from the stockholders. Should the appointment of auditors be disapproved by
the stockholders, the Board of Directors will review its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT
OF AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY.
3. STOCKHOLDER PROPOSAL
This proposal was submitted by People for the Ethical Treatment of Animals,
Inc., 4928 Wyaconda Road, Rockville, Maryland, 20852, which is the owner of 64
shares of the common stock of the Company.
"WHEREAS, the Gillette Company has claimed for more than ten years that it
is working to end the use of animals in product tests; and
WHEREAS, the Gillette Company has never applied for approval of any drug;
and
WHEREAS, in 1998, provided that passage of the European Cosmetics Testing
Directive is not delayed, Gillette products will not be permitted to be
imported or sold in Europe if Gillette still uses animal tests; and
WHEREAS, the number of animals killed in tests by Gillette is rising,
having increased to 2,364 in 1994 from 2,304 in 1993 and;
WHEREAS, nearly 550 companies (including many that produce the same types
of products as Gillette) maintain high standards of profitability, product
safety, and product innovation without performing animal tests; and
WHEREAS, to be in good faith compliance with the Company's publicly stated
claims and objectives;
NOW THEREFORE BE IT RESOLVED, that the Gillette Company include as part of
its existing annual "Report on Research with Laboratory Animals" a report
delineating Company plans to achieve the goal of eliminating all animal
tests by 1998, and information on all steps it has taken to promote,
develop or validate alternative test methods."
The following statement has been submitted by the proponent in support of the
resolution:
"The Gillette Company has made numerous claims to consumers and stockholders
regarding its purported move away from animal tests and commitment to finding
other test methods. For example, a 1989 document on product safety testing
describes "efforts" Gillette has made "to minimize the use of animals in
testing."
A Gillette publication titled, "A Question and Answer Guide to Your Safety"
(April, 1995) states, "Gillette continues to be an industry leader in efforts
to develop non-animal tests."
A July, 1995 letter from Gillette to a consumer states, "You should know that
Gillette is an industry leader not only in reducing testing but also in
developed (sic) technology that ultimately may eliminate the need to use
laboratory animals."
In spite of an industry wide transition to non-animal tests, evidenced by the
hundreds of companies relying on modern alternatives, Gillette's use of
animals has increased by 55% since 1987. The European Directive provides
additional impetus for Gillette's stated intent to find alternatives to animal
testing. To be able to continue to market its products in Europe, Gillette
must come into compliance with the European Directive's animal testing ban by
1998.
Although Gillette makes claims as to its commitment to finding alternatives to
animal testing, and although the ability to maximize shareholder value through
the sale of Gillette products in other countries may increasingly depend on
non-animal product tests, Gillette seems to be making no overall progress
toward the goal of eliminating animal tests.
Thus, we ask for your support in requesting that the Gillette Company issue
annual reports to stockholders and consumers, on its plans for, and legitimate
progress toward, the elimination of all animal tests by the 1998 effective
date of the European Directive.
Please vote FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE REASONS
SET FORTH BELOW.
The proponent has submitted similar proposals in the past which have been
overwhelmingly rejected by the stockholders. Most recently, in 1992, the
proponent received only 4.1% of the votes properly cast.
The Company has consistently held to the principles that its products must be
safe to use by its customers and safe to manufacture by its employees. Animal
research is only used as a last resort, but it is one important component of
the safety assurance process. The very limited number of tests using animals
which are performed for the Company are conducted in laboratories that meet or
exceed the highest federal standards for the humane treatment of research
animals.
These limited number of animal tests are primarily for advanced research and
can vary from year to year. From a low starting point compared to others in
the consumer products industry, the Company has shown an overall decline in
the number of animal tests conducted, despite accelerated new product
development. As reported by the Company, animal research, excluding limited
research related to prescription drug products, consisted of:
* 2,627 rodents and 1,153 rabbits in 1986 (first year reported),
* 641 rodents and 146 rabbits in 1991,
* 379 rodents and 9 rabbits in 1995.
Since 1991, the Company's Medical Evaluation Laboratories has granted almost
6,000 medical safety approvals for (a) testing on paid human volunteers, (b)
marketing products and (c) using chemicals in the manufacturing process.
* 88.8% (94.8% in 1995) were based on similarity to previously tested or
marketed products, or review of available safety information.
* 9.8% (5.1% in 1995) were based in part on new testing of the formula or
component on paid human volunteers.
* Only 1.4% (0.1% in 1995) of all medical safety approvals were based on new
animal testing of the formula or ingredients.
None of the Company's razor and blade products are tested on animals. No
finished cosmetic product of the Company has been tested on animals for several
years. And, for the past two years, no animal tests have been conducted for the
Company on any cosmetic ingredient.
The Company is committed to discontinuing the limited number of animal tests
it conducts if and when validated and accepted alternatives to such tests
become available. However, at the present time, such alternatives do not
exist. Confirming this fact, Dr. Mary Ann Danello of the U.S. Consumer Product
Safety Commission, in a letter dated October 31, 1995 to the Cosmetic,
Toiletry and Fragrance Association, of which the Company is a member, stated:
The Commission actively monitors the progress of alternatives
to animal testing. However, at the present time, we do not
know of adequate non-animal replacements for the eye
irritation test or other acute toxicity tests.
Further, Dr. Neil L. Wilcox, Special Assistant to the Associate Commissioner
for Science of the U.S. Food and Drug Administration, in comments to the
Special Workshop on Interagency Regulatory Alternatives Group at the annual
meeting of the American College of Toxicology on November 15, 1995, stated:
. . . no single test or group of tests could be identified as
a replacement for use in eye irritancy testing, and,
therefore, totally obviate the current need for animal testing
. . .
Until validated and accepted non-animal test alternatives become available,
the Company is supporting a number of research programs to reduce, refine and
replace the use of animals in its product testing:
* in partnership with the Humane Society of the United States, the Company is
awarding research grants to scientists at Harvard University Medical School
and Case Western Reserve Medical School to develop alternatives to animal
tests;
* the Company is a sponsor and is represented on the Advisory Board of the
Center for Alternatives to Animal Testing at Johns Hopkins University;
* in its own laboratories, the Company is conducting research on in vitro
alternatives to eye and skin irritancy tests on animals;
* the Company is part of a large validation study for the SKIN\2/ test, a
potential replacement for animal irritation testing.
Proponent's Arguments and the Company's Responses
- -------------------------------------------------
The proponent's key argument for its proposal is that the ban included in the
Sixth Amendment to the European Union's Directive on Cosmetic Products will
become effective on January 1, 1998, and that the Company will have
jeopardized its cosmetic sales in Europe by not adopting a compliance plan to
meet that deadline. The Company's response is that the Sixth Amendment also
contains a material qualification to the proposed ban:
If there has been insufficient progress in developing
satisfactory methods to replace animal testing, and in
particular in those cases where alternative methods of
testing, despite all reasonable endeavors, have not been
scientifically validated as offering an equivalent level of
protection for the consumer . . . the Commission shall, by 1
January 1997, submit draft measures to postpone the date of
implementation of this provision, for a sufficient period, and
in any case for no less than two years . . .
Dr. Fritz Kemper, Chairman of the Scientific Committee on Cosmetology which
will advise the Commission on the availability of validated alternative test
protocols as required by the Sixth Amendment, has advised the Company, in a
letter dated December 13, 1995, that:
. . . At present I am not aware of any validated substitutes,
e.g. for the eye irritancy or acute dermal toxicity test on
animals . . . (t)his situation makes it very unlikely that
validated alternatives, at least in this part of toxicological
evaluation, will be available before the foreseen date of the
Sixth Amendment or in a near future thereafter . . .
Because no validated alternatives to animal testing presently exist, or are
likely to exist before the initial effective date of the ban, it is expected
that the effective date of the ban will be postponed. In addition, the ban
would not apply to Company products or ingredients tested on animals before
the effective date, or to Company products or ingredients not tested on
animals after that date. When alternatives to animal testing do become
validated and accepted, the Company is committed to using those tests in place
of animal testing. Therefore, the proposed ban, whenever it becomes effective,
is not expected to have an impact on the sales of Gillette cosmetic products
in Europe.
------------------------
The proponent argues that the Company has never applied for approval of any
drug. The Company's response is that this is not an accurate statement.
Generally, the applications filed by the Company are considered confidential
commercial information and are not publicly available.
------------------------
The proponent argues that "nearly 550 companies (including many that produce
the same types of products as Gillette) maintain high standards of
profitability, product safety, and product innovation without performing
animal tests." The Company's response is that the proponent fails to mention
that most of those companies do not actually manufacture, as Gillette does,
cosmetic ingredients, over-the-counter drugs, medical devices, office products
or writing instruments. They either depend on contract fillers to conduct the
safety tests or they rely on safety data generated by Gillette and others.
Many of them are not directly engaged in new product development.
Further, the National Consumers League, a private, not-for-profit consumer
group, recently sponsored a national survey, funded in part by the Company,
which concluded that a large number of consumers have been misled by the
claims of certain companies that their products are "cruelty-free," "not
tested on animals," and similar statements. Commenting on the survey's
results, Linda Golodner, league president, said that "(n)ot tested on animals
doesn't mean never tested on animals . . . half of the consumers we surveyed
thought that not tested on animals meant that both the product and the
ingredients weren't tested on animals . . ." It was also found that many of
those consumers have paid a premium for products bearing such misleading
labels. Also commenting on the survey, Irene Malbin of the Cosmetic, Toiletry
and Fragrance Association stated ". . . practically every ingredient used in
cosmetics was at some time tested on animals to ensure safety . . ." The
League has petitioned both the Food and Drug Administration and the Federal
Trade Commission for regulations to prevent the further use of such deceptive
claims, and the Federal Trade Commission has responded by soliciting comments
from the industry.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL,
WHICH IS DESIGNATED AS PROPOSAL NO. 3 ON THE ENCLOSED PROXY.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, solicitations may also be made by personal interview,
telegram and telephone. The Company has retained Georgeson & Company Inc., New
York, New York, to assist in the solicitation of proxies using the means
referred to above at a cost of $18,000 plus reasonable expenses. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals, and the
Company will reimburse them for their expenses in so doing. In addition,
directors, officers and other regular employees of the Company may request the
return of proxies by telephone or telegram, or in person.
VOTING OF PROXIES
Under the by-laws of the Company, as permitted by Delaware law, the required
quorum for the meeting is 33 1/3% in interest of the shares outstanding and
entitled to vote at the meeting, a plurality of the votes properly cast for
the election of directors by the stockholders attending the meeting in person
or by proxy will elect directors to office and an affirmative majority of the
votes properly cast at the meeting in person or by proxy is required for
approval of proposals 2 and 3.
When your proxy is returned properly signed, the shares represented will be
voted in accordance with your directions. Where specific choices are not
indicated, proxies will be voted for proposals 1 and 2 and against proposal 3.
If a proxy or ballot indicates that a stockholder, broker, or other nominee
abstains from voting or that shares are not to be voted on a particular
proposal, the shares will not be counted as having been voted on that
proposal, although such shares will be counted as in attendance at the meeting
for purposes of a quorum. Abstentions will not be reflected in the final tally
of the votes cast with regard to whether any of the proposals are approved
under Delaware law and the by-laws of the Company.
CONFIDENTIAL VOTING
The Board of Directors has determined that the Company's confidential voting
policy employed for the last several years will apply to the 1996 Annual
Meeting. The Company's policy requires that proxies and ballots be kept
confidential from officers, directors and employees of the Company and from
third parties. Certain outside agents, such as those serving as proxy
solicitors, who have agreed to comply with this policy, but not Company
employees, directors or officers, may be permitted access to proxies and
ballots to facilitate their participation in soliciting proxies and conducting
the meeting. The policy will not prevent Company officers, directors or other
employees or representatives from determining which stockholders have not
voted so that they can be urged to vote. The policy will not apply in the
event of a proxy contest or other solicitation based on an opposition proxy
statement.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1995, is
being mailed with this proxy statement.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the 1997 Annual Meeting must be received by the
Company in advance of November 15, 1996.
In general, stockholder proposals intended to be presented at an annual
meeting, including proposals for the nomination of directors, must be received
by the Company 60 days in advance of the meeting, or prior to February 16,
1997, to be considered for the 1997 Annual Meeting. The requirements for
submitting such proposals are set forth in the Company's by-laws.
OTHER MATTERS
Except for matters described in this proxy statement, the Board of Directors
does not know of any matter that will or may be presented at the meeting. With
respect to any such proposals not now known to the Board of Directors, the
persons named as proxies intend to vote the shares they represent in
accordance with their judgement.
<PAGE>
[Logo] THE
GILLETTE
COMPANY
World-Class Brands, Products, People
March 14, 1996
Gillette Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of the stockholders
of The Gillette Company to be held at 10:00 a.m. on Thursday, April 18, 1996, at
the John F. Kennedy Library and Museum, Columbia Point, Boston, Massachusetts.
At the meeting, we will vote on the proposals described in the accompanying
Notice and Proxy Statement and report to you on the operations of the Company.
You will have the opportunity to ask questions about the business that may be of
general interest to other stockholders.
Your vote is important regardless of how many shares you own. Please take a few
minutes now to review the proxy statement and to sign and date your proxy and
return it in the envelope provided. You may attend the meeting and vote in
person even if you have previously returned your proxy.
If you indicate that you plan to attend the meeting by marking the appropriate
space on the proxy, an admission ticket will be sent to you approximately one
week in advance of the meeting.
I look forward to seeing you at the meeting.
Sincerely,
Alfred M. Zeien
Chairman of the Board
and Chief Executive Officer
DETACH HERE GIL 2F
<PAGE>
[Logo] THE
GILLETTE PRUDENTIAL TOWER BUILDING
COMPANY BOSTON, MASSACHUSETTS 02199
P
R
O THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
X The undersigned (a) revokes all prior proxies and appoints and
Y authorizes Jill C. Richardson and Robert E. DiCenso and each of them with
power of substitution, as the Proxy Committee, to vote the stock of the
undersigned at the 1996 Annual Meeting of the stockholders of The Gillette
Company on April 18, 1996, and any adjournment thereof, as specified on the
reverse side of this card on proposals 1 through 3 and in their discretion
on all other matters coming before the meeting and, if applicable, (b)
directs, as indicated on the reverse, the voting of the shares allocated to
the account(s) of the undersigned at the 1996 Annual Meeting and at any
adjournment thereof. Plan shares for which no directions are received, and
ESOP and GESOP shares which have not been allocated to participant
accounts, will be voted on each issue in proportion to those shares
allocated to participant accounts of the same plan for which voting
instructions on that issue have been received. Each trustee is authorized
to vote in its judgment or to empower the Proxy Committee to vote in
accordance with the Proxy Committee's judgment on such other business as
may properly come before the meeting and any adjournment thereof.
-----------
SEE REVERSE
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE) SIDE
-----------
<PAGE>
[X} Please mark
votes as in
this example.
This proxy will be voted as directed by the stockholder, but if no choice is
specified, it will be voted FOR proposals 1 and 2 and AGAINST proposal 3.
----------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1 and 2.
----------------------------------------------------------------------------
1. Election of directors for 3-year terms:
W.E. Buffett, M.B. Gifford, C.R. Goldberg,
J.E. Mullaney
FOR WITHHELD 2. Approval of the FOR AGAINST ABSTAIN
ALL [ ] FROM ALL [ ] appointment of KPMG Peat [ ] [ ] [ ]
NOMINEES NOMINEES Marwick LLP as Auditors.
For, except withhold vote from the following nominee(s).
[ ]
----------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Board of Directors recommends a
vote AGAINST proposal 3.
----------------------------------------------------------------------------
3. Stockholder proposal - FOR AGAINST ABSTAIN
Animal Testing. [ ] [ ] [ ]
----------------------------------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign name exactly as it appears hereon. When signing as
attorney, executor, trustee or in other representative capacity,
state full title. (IMPORTANT - FILL IN DATE)
