<PAGE>
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Gillette Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[Gillette Logo]
The
Gillette
Company
World-Class Brands, Products, People Prudential Tower Building
Boston, MA 02199
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
The 1999 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 15, 1999, at 10:00 a.m. for the
following purposes:
1. To elect four directors for terms to expire at the 2002 Annual
Meeting of the stockholders.
2. To vote on the approval of the appointment of auditors for the
year 1999.
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 February 26,
1999, 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.
This year we are also offering most stockholders the opportunity to
vote electronically via the Internet or by telephone. Please follow the
detailed instructions enclosed.
WHETHER OR NOT YOU EXPECT TO ATTEND, WE URGE YOU TO VOTE EITHER
ELECTRONICALLY, BY TELEPHONE, OR BY SIGNING AND DATING THE ENCLOSED
PROXY AND RETURNING IT PROMPTLY IN THE ENVELOPE PROVIDED.
By order of the Board of Directors
Jill C. Richardson, Secretary
Boston, Massachusetts
March 12, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
Notice of Annual Meeting of the Stockholders
Introduction .............................................................. 1
ELECTION OF DIRECTORS (PROPOSAL NUMBER 1) ................................. 1
Board Meetings and Committees ............................................. 5
Director and Officer Stock Ownership ...................................... 6
Company Transactions with Directors and Officers .......................... 7
Personnel Committee Report on Executive Compensation ...................... 8
Comparative Five-Year and Ten-Year Investment Performance ................. 12
Executive Compensation .................................................... 14
APPOINTMENT OF AUDITORS (PROPOSAL NUMBER 2) ............................... 17
STOCKHOLDER PROPOSAL (PROPOSAL NUMBER 3) .................................. 17
Additional Information .................................................... 20
<PAGE>
[Gillette Logo]
The
Gillette
Company
World-Class Brands, Products, People Prudential Tower Building
Boston, MA 02199
March 12, 1999
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors for the 1999 Annual Meeting
of the stockholders of the Company on April 15, 1999. The Notice of
Annual Meeting, this proxy statement and the accompanying proxy are being
mailed to stockholders on or about March 12, 1999. 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, or for most
stockholders, by casting your vote electronically via the Internet or by
telephone by following the detailed instructions enclosed. Casting your
vote in advance 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
written notification to the Company's Transfer Agent, BankBoston, N.A.,
c/o EquiServe, P.O. Box 9374, Boston, Massachusetts 02205-9945, or by
submitting a subsequent 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 8, 1999, the shares allocated to the participant's
account(s) and plan 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 2002 ANNUAL
MEETING OF THE STOCKHOLDERS
The Board of Directors has nominated Warren E. Buffett, Michael B.
Gifford, Carol R. Goldberg and Marjorie M. Yang to serve for terms that
expire at the 2002 Annual Meeting of the stockholders. Information
regarding the Board's four nominees to this class is set forth at page
2. Information regarding the directors whose terms expire in 2000 and
2001 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 ITS
NOMINEES FOR DIRECTORS FOR TERMS TO EXPIRE AT THE 2002 ANNUAL MEETING
OF THE STOCKHOLDERS, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE
ENCLOSED PROXY.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS TO EXPIRE AT THE 2002 ANNUAL MEETING OF THE STOCKHOLDERS
[Photo of Warren E. Buffett]
WARREN E. BUFFETT Director since 1989
Mr. Buffett, 68 years of age, is Chairman of the Board and Chief
Executive Officer of Berkshire Hathaway Inc., a company engaged
in a number of diverse business activities, the most important
of 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 The Washington Post Company.
[Photo of Michael B. Gifford]
MICHAEL B. GIFFORD Director since 1993
Mr. Gifford, 63 years of age, was Managing Director and Chief
Executive of The Rank Organization plc, London, England, a
leisure and entertainment company, from 1983 to 1996. 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.
[Photo of Carol R. Goldberg]
CAROL R. GOLDBERG Director since 1990
Mrs. Goldberg, 67 years of age, is President of The Avcar Group,
Ltd., a management consulting firm. She was President and Chief
Operating Officer of The Stop & Shop Companies, Inc., a retail
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., The Forum
Corporation and Selfcare, Inc.
[Photo of Marjorie M. Yang]
MARJORIE M. YANG Director since 1998
Ms. Yang, 46 years of age, is Chairman of the Esquel Group of
Companies, the largest garment manufacturer in Hong Kong,
servicing the high-end cotton goods apparel market, since 1995.
She has held various management positions within the Esquel
Group since joining the company in 1978. She is a director of
Wuxi International Service Pte. Ltd. She is also business
advisor to the Chairman of SembCorp Industries Ltd. of
Singapore; Director of Associates of Harvard Business School;
and a member of the Advisory Board of the MIT/China
International Management Education Project.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 2000 ANNUAL MEETING OF THE STOCKHOLDERS
[Photo of Michael C. Hawley]
MICHAEL C. HAWLEY Director since 1995
Mr. Hawley, 61 years of age, is President and Chief Operating
Officer. On February 18, 1999, the Board of Directors elected
Mr. Hawley Chairman of the Board and Chief Executive Officer
effective following the 1999 Annual Meeting of the stockholders
on April 15, 1999. He joined the Company in 1961 and was named
Business Development Manager for Gillette International in the
United 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 Arthur D. Little,
Inc., the John Hancock Mutual Life Insurance Company and Texaco,
Inc.
[Photo of Herbert H. Jacobi]
HERBERT H. JACOBI Director since 1981
Mr. Jacobi, 64 years of age, is Chairman of the Supervisory
Board of Trinkaus & Burkhardt KGaA, a German bank, since 1998.
He was Chairman of the Managing Partners of Trinkaus & Burkhardt
KGaA, from 1981 to 1998. The Bank is a member of the HSBC 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 Atlanta AG; Braun GmbH, a Gillette subsidiary; Deutsche Borse
AG; DROEGE & Comp.; Guyerzeller Bank AG; MADAUS AG; MPCT
Solutions Corporation; and WILO-Salmson AG. He is also a member
of the Partnership Council of Freshfields, a U.K. law firm. He
is President of Deutsch-Amerikanische Vereinigung Steuben-Schurz
e.v. and of the North Rhine-Westfalia Stock Exchange in
Duesseldorf.
[Photo of Henry R. Kravis]
HENRY R. KRAVIS Director since 1996
Mr. Kravis, 55 years of age, is a General Partner of Kohlberg
Kravis Roberts & Co., L.P. and KKR Associates, L.P. He is a
director of Accuride Corporation; Act III Cinemas, Inc. Amphenol
Corporation; Borden, Inc.; The Boyd's Collection Ltd.; Bruno's
Inc.; Evenflo Company, Inc.; IDEX Corporation; KinderCare
Learning Centers, Inc.; KSL Recreation Corporation; Newsquest
PLC; Owens- Illinois, Inc.; PRIMEDIA, Inc.; Randall's Food
Markets, Inc.; Regal Cinemas, Inc.; RELTEC Corporation; Safeway
Inc.; Sotheby's Holdings, Inc.; and Spalding Holdings
Corporation.
[Photo of Alexander B. Trowbridge]
ALEXANDER B. TROWBRIDGE Director since 1990
Mr. Trowbridge, 69 years of age, is President of Trowbridge
Partners Inc., a management consulting firm. He was President of
the National Association of Manufacturers, a trade organization,
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; IRI
International; New England Life Insurance Company; The Rouse
Company; Sunoco, Inc.; and E.M. Warburg Pincus Counsellors
Funds.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 2001 ANNUAL MEETING OF THE STOCKHOLDERS
[Photo of Wilbur H. Gantz]
WILBUR H. GANTZ Director since 1992
Mr. Gantz, 61 years of age, is Chairman of the Board and Chief
Executive Officer of PathoGenesis Corporation, a
biopharmaceutical company. He served as President of Baxter
International, Inc., a 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; Harris Bankcorp and
Harris Trust and Savings Bank.
[Photo of Jorge Paulo Lemann]
JORGE PAULO LEMANN Director since 1998
Mr. Lemann, 59 years of age, is the founder and former Senior
Partner of Banco de Investimentos Garantia S.A., a Brazilian
investment bank, from 1976 to 1998. He is a board member and
controlling stockholder of Compania Cervejaria Brahma, Brazil's
largest brewery, Lojas Americanas S.A., a Brazilian discount
department store chain, and G.P. Investimentos, a buyout and
restructuring firm. He is also a board member of Fundacao
Estudar, a provider of scholarships to needy students. Mr.
Lemann is Chairman of the Latin American Advisory Board of the
New York Stock Exchange and an International Advisory Board
Member of Daimler-Chrysler.
[Photo of Richard R. Pivirotto]
RICHARD R. PIVIROTTO Director since 1980
Mr. Pivirotto, 68 years of age, is President of Richard R.
Pivirotto Co., Inc., a management consulting firm. He served as
President of Associated Dry Goods Corporation, a retail
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 CBS Corporation; General American Investors Company,
Inc.; Greenwich Health Care Services, Inc., Immunomedics, Inc.;
Infinity Broadcasting Company; New York Life Insurance Company;
The Greenwich Bank & Trust Company; and Yale New Haven Health
Services Corp.
[Photo of Alfred M. Zeien]
ALFRED M. ZEIEN Director since 1980
Mr. Zeien, 69 years of age, will retire as Chairman of the Board
and Chief Executive Officer following the 1999 Annual Meeting of
the stockholders on April 15, 1999. He plans to complete his
current term as a director. He joined the Company in 1968 and
served as Chairman of the Board of Management of Braun AG, a
Gillette 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
BankBoston Corporation; BankBoston, N.A.; Massachusetts Mutual
Life Insurance Company; Polaroid Corporation; and Raytheon
Company.
<PAGE>
BOARD MEETINGS
The Board of Directors held eleven meetings in 1998.
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. Trowbridge (Chairman), Mr. Gifford, Mr. Kravis, Mr. Lemann
and Ms. Yang.
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. Three meetings of the Committee were held in
1998.
Executive Committee
The members are Mr. Buffett (Chairman), Mrs. Goldberg, Mr. Pivirotto, Mr.
Trowbridge and Mr. Zeien*.
The Executive Committee reviews and makes recommendations on the nature and
scope of the Company's business, plans for future growth, senior management
succession, governance, stockholder relations and, acting with the Finance
Committee, significant capital investment proposals. The Committee has the
added functions of recommending the composition and responsibilities of the
Board and its committees and 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. Eleven
meetings of the Committee were held in 1998.
Finance Committee
The members are Mr. Jacobi (Chairman), Mr. Gantz, Mr. Gifford, Mr. Kravis, Mr.
Lemann and Ms. Yang.
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. Seven meetings of the Committee were held in
1998.
Personnel Committee
The members are Mr. Pivirotto (Chairman), Mr. Gantz, Mrs. Goldberg and Mr.
Jacobi.
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.
Nine meetings of the Committee were held in 1998.
*Mr. Hawley will succeed Mr. Zeien effective following the Annual Meeting of
stockholders on April 15, 1999.
OUTSTANDING VOTING SECURITIES
On February 26, 1999, the record date for the 1999 Annual Meeting of the
stockholders, there were outstanding and entitled to vote 1,107,183,549 shares
of the $1 par value common stock of the Company, entitled to one vote per
share, and 147,862 shares of Series C ESOP Convertible Preferred Stock,
entitled to 80 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 1999 Annual Meeting.
STOCK OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT AS OF
FEBRUARY 26, 1999
A "beneficial owner" of stock is a person who has the power to control the
voting decisions ("voting power") or the power to cause the sale of the stock
("investment power") directly, by contract or through other arrangements.
Berkshire Hathaway Inc. of 1440 Kiewit Plaza, Omaha, Nebraska 68131, through
subsidiaries, is the largest beneficial owner of the Company's common stock
with 96,000,000 shares or 8.7% of the outstanding common stock (and 8.6% of
the voting power). One of its subsidiaries, National Indemnity Company of 3024
Harney Street, Omaha, Nebraska 68131, owns 60,000,000 shares or 5.4% of the
outstanding common stock (and 5.4% of the voting power). Warren E. Buffett, a
director of the Company, and trusts of which he is trustee but has no economic
interest, beneficially own 31.5% of the capital stock of Berkshire Hathaway
Inc. His wife, Susan T. Buffett, owns 2.4% of the capital stock of Berkshire
Hathaway Inc.
State Street Bank and Trust Company ("State Street") P. O. Box 5029, Boston,
Massachusetts 02101 is trustee of The Gillette Company Employee Stock
Ownership Plan ("ESOP") and holds, for the accounts of plan participants,
147,862 shares of Series C ESOP Convertible Preferred Stock of the Company or
100% of that class of stock. This represents 1.1% of the voting power of the
outstanding voting stock of the Company. State Street as trustee shares
beneficial ownership of this class of stock with the plan participants.
The following table sets forth the number of Gillette shares beneficially
owned on February 26, 1999, or such other date as noted, by (i) each director,
(ii) each of the executive officers named in the Summary Compensation Table at
page 14 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.
<TABLE>
<CAPTION>
Unrestricted Stock, Option Shares Deferred Stock and
Beneficially Owned Exercisable Supplemental Savings
Name Title of Class(1) Excluding Options Within 60 days Plan Units(2)(3)
- ---- ----------------- ------------------ -------------- --------------------
<S> <C> <C> <C> <C>
Warren E. Buffett(4) Common 96,001,873 28,000 7,698
Edward F. DeGraan(6) Common 42,733 302,000 12,344
Series C Pfd. 23 -- --
Wilbur H. Gantz Common 8,673 28,000 3,230
Michael B. Gifford Common 3,039 24,000 2,779
Carol R. Goldberg(5) Common 18,687 28,000 7,703
Michael C. Hawley(6) Common 141,640 741,332 8,918
Series C Pfd. 23 -- --
Herbert H. Jacobi Common 28,281 28,000 7,261
Robert G. King(6)(8) Common 71,349 280,000 6,783
Series C Pfd. 21 -- --
Henry R. Kravis(7) Common 51,399,198 8,000 2,669
Jorge Paulo Lemann Common 172,300 4,000 1,103
Archibald Livis(6) Common 351,455 29,332 19,967
Series C Pfd. 21 -- --
Richard R. Pivirotto Common 8,272 28,000 9,948
Alexander B. Trowbridge Common 3,873 27,200 5,582
Marjorie M. Yang Common 4,000 0 899
Alfred M. Zeien(6) Common 1,559,224 2,609,666 92,234
Series C Pfd. 21 -- --
All directors and current Common 149,941,403 4,948,977 216,731
executive officers as a group(6)(9)(10) Series C Pfd. 181 -- --
</TABLE>
- ------------
(1) Except as indicated in notes (4), (7) and (10) below, the total number of
shares beneficially owned in each class constitutes less than 1% of the
outstanding shares in that class.
(2) Fifty percent of Board retainer fees is paid to directors in deferred
stock units and directors may elect to defer payment of up to 100% of
cash retainers and fees to a deferred stock unit account or to a cash
account as described on page 8. Those directors who were entitled to
pension benefits under the terminated retirement plan for directors, have
converted the value of those vested benefits into deferred stock units.
Deferred stock units have no voting power. The directors are fully at
market risk with respect to their deferred stock units.
(3) Includes Supplemental Savings Plan units held under the Company's
Supplemental Savings Plan, an excess benefit plan. The Supplemental
Savings Plan units have no voting power. The executive officers are fully
at market risk with respect to the units under the Supplemental Savings
Plan.
(4) Mr. Buffett shares voting and investment power over the 96,000,000 shares
(8.7%) of the common stock of the Company owned by subsidiaries of
Berkshire Hathaway Inc.
(5) Mrs. Goldberg shares voting and investment power, as a trustee of family
charitable trusts and foundations in which she has no economic interest,
over 9,910 shares as of January 31, 1999, and disclaims beneficial
ownership with respect to such shares.
(6) Includes common stock held under the Employees' Savings Plan. Plan
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 plan's trustees in accordance with the
terms of the plan.
(7) Mr. Kravis is a general partner of KKR Associates, L.P. which owns,
through two partnerships, 51,308,798 shares or 4.6% of the Company's
outstanding common stock. 90,400 shares are held by a trust for the
benefit of Mr. Kravis' family. Mr. Kravis disclaims beneficial ownership
with respect to all the shares.
(8) Mr. King disclaims beneficial ownership over 16,600 shares.
(9) Another executive officer shares voting and investment power, as a
trustee of a charitable trust in which he has no economic interest, over
2,940 shares, and disclaims beneficial ownership over 9,902 shares.
(10) The number of common shares beneficially owned by all directors and
current executive officers as a group represents 13.9% of the outstanding
common stock.
COMPANY TRANSACTIONS WITH DIRECTORS AND OFFICERS
Berkshire Hathaway Inc.
The Company and Berkshire Hathaway Inc. ("Berkshire Hathaway") entered into an
agreement on July 20, 1989 under which Berkshire Hathaway acquired $600
million worth of Convertible Preferred Stock of the Company. That stock was
later converted to common stock. At the time of the agreement, the Company's
management consulted with independent advisors concerning the terms of the
agreement and determined that the terms were fair to the Company. The key
terms of the agreement are as follows:
o Until July 20, 1999, Berkshire Hathaway will not purchase additional
Company stock which will give it more than 14.1% of the total voting
power, unless approved by the Board;
o Until July 20, 1999, Berkshire Hathaway will not participate with another
group in a proxy contest with respect to the Company, unless approved by
the Board;
o Berkshire Hathaway will not knowingly sell Company stock representing more
than 3% of the voting power to any one person, except under certain
circumstances related to a change of control;
o The Company has the right of first refusal to buy Company stock held by
Berkshire Hathaway;
o If the Company does not exercise its right of first refusal, Berkshire
Hathaway can demand that the Company register the Company stock held by
Berkshire Hathaway for public offerings under the Securities Act of 1933;
and
o While Berkshire Hathaway owns at least 5% of the voting power of the
Company's stock, the Company's directors will use their best efforts to
secure the election to the Board of Mr. Buffett, or another person
nominated by Berkshire Hathaway acceptable to the Company.
KKR Associates, L.P.
As a result of the merger of Duracell International Inc. ("Duracell") into the
Company on December 31, 1996, KKR Associates, L.P., of which Mr. Kravis is a
general partner, and its limited partnerships, KKR Partners II, L.P. and D.I.
Associates, L.P. ("KKR"), and the Company entered into agreements with the
following key terms:
o KKR can demand on no more than five occasions (four remaining) that the
Company register its stock held by KKR under the Securities Act of 1933,
or KKR can "piggyback" on other registrations filed by the Company;
o The Company will indemnify KKR against certain liabilities arising out of
the merger with Duracell; and
o The Company will indemnify the former officers, employees and directors of
Duracell, including Mr. Kravis, against certain liabilities arising out of
the merger.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Compensation of non-employee directors consists of the following components:
o Annual retainer: $35,000 in 1998 ($42,000 in 1999)
o Meeting attendance fee: $1,200 per meeting of the Board and Committees
o Additional annual retainer of Committee chairpersons: $4,000 in 1998
($5,000 in 1999)
In order to align the interests of the directors with those of the
stockholders, 50% of annual Board retainer fees is paid in deferred stock
units. In addition, the directors may elect to defer payment of all or any
portion of the cash retainers or cash fees to a deferred stock unit account or
to a cash account until after retirement or resignation from the Board or
until an earlier change in control. Each deferred stock unit is treated as
equivalent to one share of the Company's common stock, and the directors
receive dividend equivalent units as dividends are paid and appreciation or
depreciation, if any, in the market value of the stock. Deferred cash accounts
accrue interest equivalents.
As an additional way of increasing the directors' stake in the Company, since
1992 non-employee directors receive an automatic stock option grant to
purchase 4,000 shares (adjusted for stock splits in 1995 and 1998) of common
stock effective two business days following the date of the annual meeting of
the stockholders at a price equal to the fair market value on the date of
grant. In 1998 the grants were made on April 20 at a price of $59.83 per
share. The terms of the options are generally similar to those granted to
employees as described at page 15.
In 1998, Mr. Jacobi received director fees totaling $12,218 for his services
as a director of Braun GmbH, formerly Braun AG.
PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
The Company's executive compensation program consists of both fixed
compensation (salary and benefits) and short and long-term incentive
compensation (bonus, stock options) designed to achieve the following
objectives:
o attract and retain highly qualified executives;
o motivate the executives to achieve the Company's short and long-term
financial and other qualitative goals;
o recognize individual contributions as well as overall business results;
o link total executive compensation to the overall business results.
Each executive's total compensation depends upon the executive's performance
against specific objectives assigned at the beginning of each year. These
objectives are designed to achieve the goals of the Company's Strategic
Business Plan. These objectives include both quantitative factors related to
the Company's short-term financial objectives and qualitative factors such as
(a) demonstrated leadership ability, (b) management development, (c)
compliance with Company policies and (d) anticipation of and response to
changing market and economic conditions, which will enhance the Company's
ability to sustain its profit growth over the long-term.
The specific components of the Company's executive compensation program are:
o Base salary -- a salary range is assigned under a world-wide system of job
evaluation based on level of responsibility, qualifications and
experience, and the need to provide, together with the Incentive Bonus
Plan, competitive direct compensation.
o Incentive Bonus Plan -- awards may be granted to eligible employees based
upon the level of achievement against individually assigned objectives and
Company goals for the year.
o Stock Option Plan -- grants are intended to provide long-term incentives
for the achievement of the Company's Strategic Business Plan.
In addition, each executive may participate in Company benefit plans including
the Executive Life Insurance Program and Estate Preservation Plan as well as
broad-based plans including the Employees' Savings Plan, Employee Stock
Ownership Plan and Retirement Plans. Information on these plans and programs
is found in the footnotes to the Summary Compensation Table at page 14.
The Personnel Committee approves the base salary of all executive officers
and, in its discretion, awards bonuses under the Incentive Bonus Plan and
grants stock options under the Stock Option Plan.
Under the Incentive Bonus Plan, the Personnel Committee establishes bonus
pools based on budgeted goals set at the beginning of each year relating to
profit from operations, return on assets and sales, and establishes the
minimum, budgeted and maximum Company-wide aggregate bonus pools that may be
earned depending upon the level of achievement of the goals.
Company goals are translated to operating unit, staff and individual
objectives and assigned to executives under the Company's management by
objectives program. Each year a range is established (as a percentage of year-
end salaries) for the bonus awards 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 the goals are set, a reserve may be established by the Committee
from which bonuses may be awarded to eligible employees who have made
significant contributions toward achievement of assigned objectives even if
the Company goals are 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.
Each year the Personnel Committee receives a report prepared by independent
compensation consultants (Hewitt Associates) which assesses the
competitiveness of the Company's executive compensation program when compared
to the Company's Compensation Peer Group which includes most of the companies
listed on page 12 of this proxy statement plus other companies with which the
Company competes for executive talent. This information is used to help the
Committee determine whether there is a need to make prospective adjustments to
the compensation of executive officers.
In 1998, there were a number of notable achievements that positioned the
Company for strong growth in the near and long term, even though world
economic conditions had an impact on 1998 results.
o As a truly global company, Gillette markets its products in virtually
every country. Much of the recent growth in sales and profits has been
driven by the phenomenal results achieved by the Company's operations in
emerging markets such as Russia, Asia Pacific and the former Eastern Bloc
countries. Economic chaos in these and certain other key markets such as
Brazil was unpredictable and longer lived than expected. However, under
Mr. Zeien's leadership, and due to the international experience of the
senior management team, the strength of the local management and the
Company's long experience dealing with economic uncertainties, the
fundamentals of the Company's business remain strong. It is anticipated
that Gillette's operations in those countries most severely affected by
this year's economic difficulties will emerge well positioned to enter the
new millennium.
o One of the most notable accomplishments during 1998 was the highly
successful introduction of the MACH3 shaving system in the U.S. and
Europe. By the end of 1998, MACH3 had achieved a 15% share of the U.S.
blade market and a 55% share of the U. S. razor market with comparable or
higher shares in the European markets where it was launched, eclipsing the
results achieved by the very successful Sensor shaving system when it was
launched in 1990. In the first six months, worldwide sales of the MACH3
razor have exceeded the cumulative sales of the original Sensor razor in
its first two years.
o The successful May launch in the U.S. and roll out into Europe of Duracell
Ultra, the first battery specifically designed for high technology
consumer devices, represents the initial step in the implementation of a
tiered product line strategy in the consumer battery business. This
strategy resulted in improved market share for Duracell in the highly
competitive alkaline market segment.
o New product activity continued at a record pace in 1998, with more than 20
major new product introductions. In 1998, for the fifth consecutive year,
more than 40% of the Company's sales came from products introduced in the
last five years, reflecting the effectiveness of the ongoing investment in
the three key growth drivers: research and development, capital spending
and advertising.
o In 1998, the business continued to expand through acquisitions including
the Geep battery business in India and the Rocket battery business in
South Korea, the world's fifth largest consumer battery market.
o In September, the Company announced a major reorganization that includes a
new management structure, a consolidation of commercial and administrative
operations, and a realignment of worldwide manufacturing operations. This
new management structure will strengthen the Company's well-established
global business management focus for each of the six core business
categories. Global Business Management groups will have responsibility for
global product line strategies, consumer marketing, research and
development, manufacturing and technical support operations, allowing the
Company to more effectively leverage its resources and respond more
quickly to changing business conditions. The new structure also includes
two commercial operations groups, responsible for selling the entire range
of Gillette products in their respective geographic regions.
Section 162(m) of the Internal Revenue Code
This section limits the deductibility of certain compensation to the chief
executive officer and the next four most highly paid executive officers in
excess of $1 million. Wherever possible, the Personnel Committee seeks to have
all compensation treated as tax-deductible compensation. The grants under the
Stock Option Plan are treated as tax-deductible compensation. However, the
Personnel Committee has determined that an amendment of the Incentive Bonus
Plan to meet the requirements for tax-deductibility under this section would
require changes which would be inconsistent with the compensation policies
underlying the plan, specifically, in addition to objective financial
criteria, performance against qualitative criteria which are established to
ensure profitable growth in the long-term.
Compensation of Chief Executive Officer
Mr. Zeien's compensation, like that of the other executive officers of the
Company, is determined in accordance with the policies set forth above. As the
Company's Chief Executive Officer, his leadership has been a significant
factor in the achievement of the Company's goals. In addition, Mr. Zeien has
been an exceptionally effective spokesman for the Company to its numerous
external constituencies concerning the Company's many strengths and prospects
for the future. Under his leadership, the Company has a well-developed
management succession plan and Mr. Zeien continues to lead the Company in the
fulfillment of its mission as established at the outset of his tenure.
The Committee set Mr. Zeien's base salary at or above the median of salaries
of chief executive officers of the companies in the Compensation Peer Group.
Mr. Zeien's 1998 bonus was based on his successful leadership in managing the
Company's worldwide business through a particularly difficult world economic
situation and in consideration of the additional factors set forth above.
The June 1998 stock option granted to Mr. Zeien was based on the Committee's
judgment that, as the only long-term incentive offered to executive officers,
it was competitive in value with long-term incentives granted to the chief
executive officers of the companies in the Compensation Peer Group as well as
other leading chief executive officers.
Richard R. Pivirotto (Chairman)
Wilbur H. Gantz
Carol R. Goldberg
Herbert H. Jacobi
<PAGE>
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, 1993 through December
31, 1998, with a similar investment in the Standard & Poor's 500 Stock Index
and with a peer group consisting of eight consumer products companies that
have one or more product lines which compete against the Company's products on
a global basis. The cumulative return includes reinvestment of dividends.
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Gillette $100 $127 $179 $269 $351 $338
Peer Group $100 $114 $155 $197 $288 $372
S&P 500 $100 $101 $139 $171 $228 $293
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Peer Group Companies:
- ---------------------
Colgate-Palmolive Company Philips Electronics N.V. Unilever N.V.
Johnson & Johnson Procter & Gamble Company Warner-Lambert Company
Newell Co. Ralston-Purina Company
- --------------------------------------------------------------------------------
The list of Peer Group companies has been updated to reflect changes in the
business of the Peer Group and the Company over time. It is the Company's
intention to include companies that have one or more product lines which
compete against the Company's products on a global basis. The following
companies have been deleted from the Peer Group for the reasons indicated:
Avon Products, Inc. (since the sale of Jafra, the Company no longer competes
in the sale of cosmetics products); The Black & Decker Corporation (sold its
line of small household appliances in 1998); Bristol-Myers Squibb (sold its
Ban deodorant product line in 1998); Pfizer Inc. (focused its business on
pharmaceutical products); and Rubbermaid Incorporated (sold its office
products business and announced its merger with Newell Co.). The following
companies have been added to the Peer Group for the reasons indicated: Philips
Electronics N.V. (markets electric shavers and small household appliances and
consumer batteries); Unilever N.V. (markets several lines of toiletries); and
Newell Co. (markets a full range of stationery products). Had the former Peer
Group been used for the performance graph in this year's proxy statement, the
values of the cumulative return to investors in the Peer Group index would
have been as follows: 1993 (100), 1994 (112), 1995 (164), 1996 (211), 1997
(330) and 1998 (452). A ten-year graph using the new Peer Group has also been
added for a longer-term comparison.
GILLETTE COMPARATIVE TEN-YEAR INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
1988 1990 1992 1994 1996 1998
---- ---- ---- ---- ---- ----
Gillette $100 $196 $363 $490 $1,038 $1,300
Peer Group $100 $168 $216 $261 $ 452 $ 852
S&P 500 $100 $128 $179 $199 $ 337 $ 577
- --------------------------------------------------------------------------------
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.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------------------------- ------------
Other # of Stock All Other
Name and Principal Annual Options Compensation
Position Year Salary Bonus Compensation(1) Granted (2),(iv),(v)
- ----------------- ---- ------ ----- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred M. Zeien 1998 $1,625,000 $1,375,000 -- 800,000 $662,525
Chairman and Chief 1997 1,466,667 1,950,000 -- 700,000 737,497
Executive Officer 1996 1,275,000 1,700,000 -- 700,000 690,367
Michael C. Hawley 1998 $ 770,000 $ 475,000 -- 250,000 $ 81,604
President and Chief 1997 683,333 675,000 -- 250,000 84,392
Operating Officer 1996 606,666 535,000 -- 200,000 84,172
Edward F. DeGraan 1998 $ 423,000 $ 210,000 -- 100,000 $ 41,376
Executive Vice President 1997 388,000 240,000 -- 100,000 66,218
Robert G. King 1998 $ 502,083 $ 175,000 -- 120,000 $ 46,508
Executive Vice President 1997 463,750 260,000 -- 150,000 47,025
1996 385,000 240,000 -- 120,000 42,912
Archibald Livis 1998 $ 530,000 $ 170,000 $128,219 130,000 $ 46,466
Executive Vice President
</TABLE>
- ------------
(1) Other Annual Compensation amounts represent taxes reimbursed by the
Company relating to non-deductible relocation expenses incurred by the
named individuals.
(2) The amounts reported as All Other Compensation include the following
payments or accruals under the Company's benefit and incentive plans:
<TABLE>
<CAPTION>
Company Savings Plan Value of Value of Executive
Contributions to Match on Series C ESOP Life Insurance
Savings Plans(i) Deferred Bonuses Shares Allocated(ii) Premiums(iii)
---------------- ---------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Alfred M. Zeien $81,250 $68,750 $7,705 $4,820
Michael C. Hawley 72,250 -- 7,804 1,550
Edward F. DeGraan 33,150 -- 7,804 422
Robert G. King 38,104 -- 7,705 699
Archibald Livis 37,000 -- 7,705 1,761
</TABLE>
(i) Company contributions during 1998 under the Employees' Savings Plan and
Supplemental Savings Plan.
(ii) Company contribution during 1998 of Series C preferred shares under the
Employee Stock Ownership Plan.
(iii) Value of premiums paid by the Company during 1998 under the Executive
Life Insurance Program. The program provides coverage during employment
equal to 4 times annual salary, subject to a minimum and maximum
($2,000,000) with the participant paying the premium for the lesser of
two times salary or $250,000. During retirement, a Company-paid death
benefit equal to annual salary, subject to a maximum ($500,000),
continues in effect.
(iv) The named executives are eligible to participate in a Company sponsored
Estate Preservation Plan. The Company and the executive officer share
equally the cost of a $1,000,000 life insurance policy payable on the
death of the survivor of each executive and his or her spouse. The
Company contributes its share of the premiums during the first five
years of the policy and recovers 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. No premiums were paid by the Company for
the named executives during 1998.
(v) Includes an additional payment of $500,000 awarded to Mr. Zeien on
February 20, 1997, and vesting on February 28, 1998, by the Personnel
Committee and approved by the Board, as an incentive for him to remain
as Chairman of the Board and Chief Executive Officer of the Company
through February 28, 1998. Similar amounts were reported in 1997 and
1996.
<PAGE>
<TABLE>
Stock Options Granted in 1998
<CAPTION>
Grant Date
Individual Grants Value
- ------------------------------------------------------------------------------------------------------------- --------------
% Of Total
Number Of Options Granted Grant Date
Options To Employees Per Share Present Value
Name Granted(1) In 1998 Exercise Price Expiration Date ($)(2)
- ---- ---------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alfred M. Zeien 300,000 2.74% $53.78 2/22/08 $4,044,416
500,000 4.57% 56.41 6/17/08 7,068,010
Michael C. Hawley 250,000 2.28% 56.41 6/17/08 3,534,005
Edward F. DeGraan 100,000 0.91% 56.41 6/17/08 1,413,602
Robert G. King 120,000 1.10% 56.41 6/17/08 1,696,322
Archibald Livis 30,000 0.27% 58.44 4/30/08 450,333
100,000 0.91% 56.41 6/17/08 1,413,602
</TABLE>
- ------------
(1) Options granted in 1998, the material terms of which follow, were made
under the 1971 Stock Option Plan.
o Grants to executive officers were a combination of incentive stock options
(subject to limitations imposed by U.S. tax law) and non-incentive stock
options, while grants to non-employee directors were non-incentive
options.
o Exercise price is the average of the high and low prices of Gillette
common stock on the date of grant.
o Options granted to employees become exercisable in one third increments
over the first three anniversaries of the grant. Options granted to
non-employee directors fully vest one year from grant.
o Options remain exercisable for ten years from the date of grant during
employment. The post retirement exercise period for employees is five
years and for non- employee directors is three years, subject to the
maximum ten year life noted above. If employment is terminated within one
year of a change in control, options not otherwise exercisable at
termination of employment become immediately exercisable.
(2) The grant date value for each option was determined using a Black-Scholes
option pricing model.
The principal assumptions used in the model were:
Expiration Date 2/22/08 4/30/08 6/17/08
--------------- ------- ------- -------
Stock Price Volatility 19.03% 19.28% 19.19%
Dividend Yield 0.95% 0.87% 0.90%
Risk Free Rate of Return 5.80% 5.90% 5.68%
Expected Life 4.53 Years 4.53 Years 4.53 Years
The model generates a theoretical value based on the above
assumptions.
The value is not intended to predict future prices of the Company's
common stock.
There can be no assurance that the above values or any other value
will be achieved.
The actual value will be dependent upon:
o The future price of the stock.
o Overall stock market conditions.
o Continued service with the Company.
Aggregated Stock Option Exercises During 1998 And 1998 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 125,000 $5,328,098 Exercisable 2,509,666 $58,913,046
Unexercisable 1,133,334 271,667
Michael C. Hawley 0 0 Exercisable 741,332 17,555,771
Unexercisable 416,668 135,834
Edward F. DeGraan 11,000 523,669 Exercisable 302,000 8,036,815
Unexercisable 160,000 48,900
Robert G. King 64,120 2,240,011 Exercisable 280,000 4,968,050
Unexercisable 200,000 65,200
Archibald Livis 237,000 8,410,135 Exercisable 29,332 23,906
Unexercisable 188,668 47,814
</TABLE>
- ------------
(1) The amounts shown are the total values realized by the named persons on
exercises of options held for periods ranging from 2 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 $888,016, Mr. DeGraan $58,185,
Mr. King $642,747 and Mr. Livis $2,964,761.
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 25 Years or
Used as Basis for 15 Years of 20 Years of More
Computing Pension Service Service of Service
--------------------------- ----------- ----------- ------------
$ 400,000 $ 120,000 $ 160,000 $ 200,000
800,000 240,000 320,000 400,000
1,200,000 360,000 480,000 600,000
1,600,000 480,000 640,000 800,000
2,000,000 600,000 800,000 1,000,000
2,400,000 720,000 960,000 1,200,000
2,800,000 840,000 1,120,000 1,400,000
3,200,000 960,000 1,280,000 1,600,000
3,600,000 1,080,000 1,440,000 1,800,000
4,000,000 1,200,000 1,600,000 2,000,000
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 and bonus) during the five calendar years of highest compensation
included in the last ten calendar years of employment, minus 75% of primary
social security benefits.
*Since the Retirement Plan was adopted, certain limitations have been imposed
on the amount of benefits which may be paid under tax-qualified plans. As
permitted by law, the Company adopted the Supplemental Retirement Plan 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, 1998, the persons named in the Summary Compensation Table
at page 14 had the following years of service under the Retirement Plan: Mr.
Zeien 31 years; Mr. Hawley 35 years; Mr. DeGraan 31 years; Mr. King 30 years
and Mr. Livis 39 years.
Change in Control and Severance Arrangements
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. 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 14 on December 31, 1998, in the event of a change
in control on that date, would have been $7,856,000, 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.
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 1999,
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 1999 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
Certain stockholders have submitted the proposal set forth below that will be
voted upon at the 1999 Annual Meeting of stockholders if presented by its
proponents. The Company will furnish the names and addresses of the
stockholders submitting the proposal to any person requesting such
information.
"ENDORSEMENT OF THE CERES PRINCIPLES FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS:
All leaders of industry in the United States, including leaders of The
Gillette Company, now acknowledge their obligation to pursue superior
environmental performance and to disclose information about that performance
to their investors and other stakeholders.
The integrity, utility, and comparability of environmental disclosure depends
on the creation of environmental reports that employ a common format, use
credible metrics, and follow a set of generally accepted environmental
disclosure standards.
The Coalition for Environmentally Responsible Economies (CERES), a ten year
old partnership among some of the largest investors, environmental groups, and
corporation in the country, has established what we believe is the most
thorough and well-respected environmental disclosure form in the United
States.
CERES has also gathered leading international organizations, including the
United Nations Environmental Programme, into a collaborative Global Reporting
Initiative to guide and accelerate the worldwide trend toward standardized
environmental reporting.
The CERES Principles and the CERES Report have already been adopted by leading
firms in highly diverse industries such as Bank America, BankBoston, Baxter
International, Bethlehem Steel, Coca-Cola, General Motors, Interface, ITT
Industries, Pennsylvania Power and Light, Polaroid, and Sun Company.
We believe endorsing the CERES Principles commits a company to the prudent
oversight of its financial and physical resources through:
1) protection of the biosphere;
2) sustainable use of natural resources;
3) waste reduction;
4) energy conservation;
5) risk reduction;
6) safe products and services;
7) informing the public;
8) management commitment;
9) audits and reports.
(The full text of the CERES Principles and accompanying CERES Report form are
obtainable from CERES; 11 Arlington Street; Boston, Massachusetts 02116; (617)
247-0700; or at www.ceres.org).
RESOLVED: Shareholders request that Gillette endorse the CERES Principles as a
reasonable and beneficial component of their corporate commitment to be
publicly accountable for environmental performance.
SUPPORTING STATEMENT
Recent studies show that the integration of environmental commitment into
business operations provides a competitive advantage and improves long-term
financial performance for companies. In addition, the depth of a firm's
environmental commitment and the quality with which it manages its
environmental performance provide us with indicators of the foresight of its
management.
Given investors" needs for credible information about a firm's environmental
performance, and given the large number of companies that have already
endorsed the CERES Principles and adopted its report format, endorsement of
the CERES Principles is a reasonable, widely accepted step for any company
wishing to demonstrate its seriousness about superior environmental
performance.
The goal of the CERES Principles is continuous improvement in corporate
environmental performance, coupled with public accountability. One cannot
measure improvement without having data over time. Standardizing that data
enables investors to assess environmental progress within and across
industries. By endorsing the CERES Principles, a company agrees to a single
consistent standard for environmental reporting. An endorsing company works
with CERES and other endorsing companies in setting that reporting standard.
Your vote FOR this resolution serves the best interests of Gillette and its
shareholders."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE REASONS
SET FORTH BELOW.
The Company has long been recognized as an innovative leader in protecting the
environment. This is attested to by awards and acknowledgments from the U.S.
Environmental Protection Agency, the Massachusetts Department of Environmental
Protection and many other agencies and organizations. The Company has been a
model of environmental self-regulation and innovative solutions, frequently
consulted by the governments and other organizations around the world for its
advice on self-audit and compliance programs. THE COMPANY'S ENVIRONMENTAL
STANDARDS ARE FAR MORE STRINGENT THAN THOSE CURRENTLY ESPOUSED BY CERES. There
is a wide range of organizations and agencies throughout the world with
equally effective environmental principles and guidelines. It is the Company's
policy to choose the best of those guidelines appropriate to its industry
segments and its own unique operations. The Company has published its own
environmental report every two years since 1992 using the Public Environmental
Reporting Initiative report format. Based upon independent assessments, the
Company believes that its report is more informative, accountable and user-
friendly than the CERES report.
For the following reasons the Company believes that endorsement of the CERES
principles would not be in the best interest of its stockholders:
o THE VAST MAJORITY OF LEADING COMPANIES HAVE NOT ENDORSED THE CERES
ORGANIZATION. CERES has been unable to obtain support from more than a
handful of companies. It bears noting that CERES is not governed in a
participative manner; the affected companies have no role in determining
CERES policies.
o ON ENVIRONMENTAL MATTERS, THE COMPANY SEEKS TO HAVE THE FRUITS OF ITS
INVESTMENTS BENEFIT THE ENTIRE COMMUNITY RATHER THAN A PRIVATE
ORGANIZATION, by partnering with public organizations as it has in the
following projects:
- Environmental Protection Agency's Environmental Leadership Program
(1997).
- Massachusetts Department of Environmental Protection joint audit of the
Company's Andover, MA and S. Boston, MA plants showcasing the Company's
auditing program.
o GILLETTE IS AN INNOVATOR IN ENVIRONMENTAL PROTECTION:
- Adopted a Pollution Prevention Control Code in 1970.
- Adopted world-wide environmental standards and auditing programs in
1974.
- In 1991, declared an explicit corporate mission to "conserve natural
resources and ... continue to invest in a better environment."
- Internally developed and installed at all blade manufacturing plants
world- wide an aqueous blade-washing system replacing solvents.
- Adopted a Pollution Prevention Program in 1990 that achieved a 50%
reduction in emissions in 1992 - five years ahead of the plan.
- One of the first Standard & Poor's 500 companies to report its
environmental record - beginning in 1992.
o GILLETTE IS AN ENVIRONMENTAL LEADER:
- One of only 10 companies nationally to be invited by the U.S.
Environmental Protection Agency to participate in the first phase of its
Environmental Leadership Program.
- Received the New England Council's Global Environmental Award in 1995.
- Was named one of the Environmental Protection Agency's New England
Environmental Champions for Energy Efficiency in 1995.
- Received a Certificate of Performance from the U.S. Environmental
Protection Agency in 1998 for enhancing energy efficiency and reducing
greenhouse gasses as a Partner in the "Climate Wise" program.
o GILLETTE'S ENVIRONMENTAL HEALTH AND SAFETY REPORT IS SUPERIOR TO THE CERES
REPORT:
- Includes other issues such as "environmentally sensitive" transportation
and packaging programs and employee health and safety programs.
- Is verified by a third party.
- Includes negative issues.
o THE COSTS OF REPORTING IN THE CERES FORMAT CANNOT BE JUSTIFIED.
o The Company publishes other specialized reports including, from an
environmental standpoint, its Energy and Water Usage Report.
o The Company was ranked 24th in the 1998 Fortune List of Most Admired
Companies in the category of "responsibility to the community and
environment."
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, telefax and telephone. The Company has retained Georgeson & Company
Inc., a proxy solicitation firm, 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, telefax 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 or you have voted via the Internet
or telephone, 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 1999 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. The voting instructions of participants in employee benefit plans
will be kept confidential from officers, directors and employees of the
Company and from third parties.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1998, 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 2000 Annual Meeting of the stockholders must
be received by the Company on or before November 12, 1999.
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 45 days in advance of the mail date of the prior year's proxy
statement, or by January 27, 2000, to be considered for the 2000 Annual
Meeting of the stockholders. The requirements for submitting such proposals
are set forth in the Company's by-laws.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On two occasions Mrs. Goldberg filed late reports covering previously
unreported transactions involving the common stock of the Company made without
her knowledge and contrary to her instructions by family partnerships and her
spouse's IRA. She notified the Company of the inadvertent violations of
Section 16(b) and has paid the short swing profit generated by the
transactions to the Company.
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 judgment.
<PAGE>
[Recycle Logo] Printed on Recycled Paper 450-PS-98
<PAGE>
[Logo] The Gillette Company PROXY Prudential Tower Building
Boston, MA 02199
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned (a) revokes all prior proxies and appoints and
P 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 1999 Annual Meeting of the stockholders of The Gillette
R Company on April 15, 1999, 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 incident to the conduct of the meeting
O and, if applicable, (b) directs, as indicated on the reverse, the voting
of the shares allocated to the benefit plan account(s) of the undersigned
at the 1999 Annual Meeting and at any adjournment thereof. Plan shares for
X which no directions are received and unallocated plan shares 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
Y 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 other matters incident to the conduct of the
meeting and any adjournment thereof.
- --------------- ---------------
SEE REVERSE SEE REVERSE
SIDE SIDE
- --------------- ---------------
(Important - To be signed and dated on reverse side)
<PAGE>
[X] Please Mark
votes as in
this example.
This proxy will be voted and will be voted as specified 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 and AGAINST
proposal 3.
- --------------------------------------------------------------------------------
1. Election of directors for
3-year terms
(01) W.E. Buffett,
(02) M.B. Gifford,
(03) C.R. Goldberg,
(04) M.M. Yang FOR AGAINST ABSTAIN
For All Withhold from 2. Approval of the
Nominees [ ] [ ] all Nominees appointment of
KPMG Peat
Marwick LLP
as Auditors [ ] [ ] [ ]
For, except withhold vote from
the following nominee(s): 3. Shareholder
Proposal -
CERES
Principles [ ] [ ] [ ]
[ ] __________________________
- --------------------------------------------------------------------------------
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND 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
Signature: _________________________________ Date: ________________
Signature: _________________________________ Date: ________________
