SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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
Lincoln National Corporation
(Name of Registrant as Specified in Its Charter)
______________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.
3) Filing Party:
4) Date Filed:
April 9, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Lincoln National Corporation ("LNC") scheduled for Thursday, May 14, 1998, at
the Grand Wayne Center, 120 West Jefferson Boulevard, Fort Wayne, Indiana, at
10:00 a.m., local time. LNC's Board of Directors and Management look forward to
greeting you if you can attend.
The enclosed Notice of Meeting and Proxy Statement describe the matters to be
acted upon at the Meeting. Please review these documents carefully.
It is important that you vote your shares of LNC stock, either in person or
through a proxy. If you are unable to attend, please sign, date and mail the
enclosed proxy card in the envelope provided.
On behalf of the Board of Directors, thank you for your continued support.
Sincerely,
Ian M. Rolland
Chairman
<PAGE>
LINCOLN NATIONAL CORPORATION
FORT WAYNE, INDIANA
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
April 9, 1998
The Annual Meeting of Shareholders of LINCOLN NATIONAL CORPORATION will be held
on Thursday, May 14, 1998, at 10:00 a.m., local time, at the Grand Wayne Center,
120 West Jefferson Boulevard, Fort Wayne, Indiana.
The items of business are:
1. to elect four directors for three-year terms expiring in 2001, and
2. to consider and act upon such other matters as may properly come before
the meeting.
You have the right to receive this notice and vote at the Annual Meeting if you
were a shareholder of record at the close of business on March 20, 1998. Please
remember that your shares cannot be voted unless you sign and return a proxy
card, vote in person at the Annual Meeting, or make other arrangements to vote
your shares.
For the Board of Directors,
C. Suzanne Womack
Secretary
<PAGE 1>
LINCOLN NATIONAL CORPORATION
200 East Berry Street
FORT WAYNE, INDIANA 46802
PROXY STATEMENT
Annual Meeting of Shareholders
May 14, 1998
The Board of Directors (the "Board") of Lincoln National Corporation ("LNC" or
the "Corporation") is soliciting proxies in order to obtain support for the
proposals to be voted on at the annual meeting of LNC shareholders scheduled for
May 14, 1998 (the "Annual Meeting"). The matters to be voted upon are set forth
in the enclosed Notice of Annual Meeting of Shareholders (the "Notice").
We encourage you to vote your shares, either by voting in person at the Annual
Meeting or by granting a proxy (i.e., authorizing someone to vote your shares).
If you execute the attached proxy card, the individuals designated on that card
(Ian M. Rolland, Jill S. Ruckelshaus, and C. Suzanne Womack) will vote your
shares according to your instructions. If any matter other than Item 1 listed in
the Notice is presented at the Annual Meeting, the designated individuals will
vote all proxies in the manner they perceive to be in the best interests of the
Corporation.
To assist you in deciding how to vote, this Proxy Statement includes narrative
information about the Corporation, its officers and directors, nominees for
director, and related matters. In addition, a Performance Graph showing the
Corporation's performance over a five year period is included on page 23. We
have supplemented the narrative disclosure in this Proxy Statement with the
following information, all of which is set forth in Tables A through G
(beginning on page 26):
Table Name of Table or Graph
A Security Ownership of Directors, Nominees And
Executive Officers
B Security Ownership of Certain Beneficial Owners
C Summary Compensation Table
D Long-Term Incentive Plans -- Awards In Last Fiscal Year
E Option/SAR Grants in Last Fiscal Year
F Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
G Pension Table
Whenever we refer in this Proxy Statement to the "Annual Meeting," we are also
referring to any meeting that results from an adjournment of the Annual Meeting.
We are first mailing this Proxy Statement to our shareholders on or about
April 9, 1998.
<PAGE 2>
SOLICITATION OF PROXIES
Introduction
The attached proxy card allows you to instruct the designated individuals how to
vote your shares. You may vote in favor of, against, or abstain from voting on
any proposal. In addition, with respect to Item 1 (the election of directors),
you may, if you desire, indicate on the proxy card that you are not authorizing
the designated individuals to vote your shares for one or more particular
nominees.
If you sign a proxy card and deliver it to us, but then want to change your
vote, you may revoke your proxy at any time prior to the Annual Meeting by
sending us a written revocation or a new proxy, or by attending the Annual
Meeting and voting your shares in person.
Who May Solicit Proxies
Directors, officers and employees of the Corporation may solicit proxies on
behalf of the Board via mail, telephone, fax, and personal contact. The
Corporation may, if necessary, retain a proxy solicitation firm to assist it in
the solicitation process, although it has not yet done so.
Costs of Soliciting Proxies
The Corporation will pay the cost of soliciting proxies. Directors, officers and
employees of the Corporation will receive no additional compensation for
soliciting proxies. If the Corporation retains a proxy solicitation firm, the
Corporation will incur additional expenses relating to the solicitation of
proxies, the amount of which will depend upon the services to be provided. The
Corporation will reimburse certain brokerage firms, banks, custodians and other
fiduciaries for the reasonable mailing and other expenses they incur in
forwarding proxy materials to the beneficial owners of stock that those
brokerage firms, banks, custodians and fiduciaries hold of record.
VOTING
Shareholders Entitled to Vote and Shares Outstanding
You may vote your shares at the Annual Meeting only if you were a shareholder of
record at the close of business on March 20, 1998 (the "Record Date"). As of the
Record Date, 100,361,657 shares of capital stock of the Corporation were issued,
outstanding, and entitled to vote as follows: 100,327,254 shares of Common Stock
and 34,403 shares of $3.00 Cumulative Convertible Preferred Stock, Series A (the
"Preferred Stock"). You are entitled to one vote for each share of Common Stock
and Preferred Stock you own. The number of shares you own (and may vote) is
listed on the proxy card.
Information for Participants In Certain Plans
If you participate in the Lincoln National Corporation Employees' Savings and
Profit-Sharing Plan or The Lincoln National Life Insurance Company Agents'
Savings and Profit-Sharing Plan, the enclosed proxy card, when executed and
returned by you, will instruct the trustees of your plan how to vote the shares
of LNC Common Stock allocated to your account. If the Corporation's stock books
contain identical account information regarding Common Stock that you own
directly and Common Stock that you own through one or more of those plans, you
will receive a single proxy card representing all shares owned by you. If you
participate in an LNC plan and do not return a proxy card to the Corporation,
the trustees of your plan will vote the shares in your account in proportion to
shares held by your plan for which voting directions have been received.
<PAGE 3>
If you own shares of the Corporation through an employee benefit plan other than
those plans mentioned above, you should contact the administrator of your plan
if you have questions regarding how to vote your shares.
Quorum
A majority of all outstanding shares entitled to vote at the Annual Meeting
constitutes a quorum (i.e., the minimum number of shares that must be present or
represented by proxy at the Annual Meeting in order to transact business).
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present. ("Broker non-votes" are proxies returned by
brokerage firms for which no voting instructions have been received from their
principals.) Once a share is represented for any purpose at the Annual Meeting,
it will be deemed present for quorum purposes for the remainder of the meeting
(including any meeting resulting from an adjournment of the Annual Meeting,
unless a new record date is set).
Votes Necessary to Adopt Proposals
A plurality of the votes cast is required for the election of directors (Item
1), which means that the four open director seats will be filled by the four
director nominees receiving the highest number of votes. If any other matters
are properly presented at the meeting, a particular proposal will be approved if
the number of votes cast in favor of the proposal exceeds the number of votes
cast against the proposal. Abstentions, broker non-votes and, with respect to
the election of directors, instructions on a proxy card to withhold authority to
vote for one or more of the director nominees will have no effect on the outcome
of the relevant vote.
Certain Shareholder-Related Matters
No shareholder proposals are included in this Proxy Statement. See "No
Qualifying Shareholder Proposals" on page 25. For information regarding
inclusion of shareholder proposals in future proxy statements, see "Shareholder
Proposals" on page 24. If shareholders at the Annual Meeting approve the minutes
of the 1997 annual meeting of shareholders, that approval will not constitute
approval of the matters referred to in those minutes.
ITEM 1 - ELECTION OF DIRECTORS
During 1998, the size of the Board was expanded from twelve to thirteen members,
and Jon A. Boscia was appointed to fill that vacancy. Two of the Board's current
members, Earl L. Neal and Gordon A. Walker, will retire pursuant to the
Corporation's Board retirement policy; their terms will expire on May 14, 1998.
Eric G. Johnson has been nominated to fill one vacancy. The second vacancy may
be filled by the board or by shareholders when a candidate has been found, or
the size of the board may be reduced. If you sign the enclosed proxy card and
return it to the Corporation, your proxy will be voted for Jon A. Boscia, Eric
G. Johnson, John M. Pietruski, and Gilbert R. Whitaker, Jr. (in each case for a
term expiring in the year 2001), unless you specifically indicate on the proxy
card that you are withholding authority to vote for one or more of those
nominees.
All nominees, other than Mr. Johnson, are current directors of the Corporation
and all have agreed to serve on the Board if they are elected. If any nominee is
unable (or for whatever reason declines) to serve as a director at the time of
the Annual Meeting, proxies will be voted for the election of a qualified
substitute nominee or else the size of the Board will be reduced.
More information concerning security ownership, compensation of officers and
directors, performance of the Corporation, and other important matters are set
forth below under "Additional Information" starting on page 9.
<PAGE 4
NOMINEES FOR TERMS EXPIRING IN 2001
Nominated for a Term Expiring in May 2001
PRINCIPAL OCCUPATION:
President of the Corporation [January 1998 - present]
[Picture] FIVE YEAR BUSINESS HISTORY:
President and Chief Executive Officer, The Lincoln
National Life Insurance Company
[October 1996 - January 1998]
President and Chief Operating Officer, The Lincoln
National Life Insurance Company
[May 1994 - October 1996]
President, Lincoln Investment Management, Inc.
[July 1991 - May 1994]
Jon A. Boscia OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1998 None
Age 45
Nominated for a Term Expiring in May 2001
PRINCIPAL OCCUPATION:
President and Chief Executive Officer of Baldwin
Richardson Foods Company (a manufacturer of dessert
products and liquid condiments for retail and the
food service industry) [December 1997 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
President and Chief Executive Officer, Tristar
Industries, Inc. [March 1992 - December 1997]
Eric G. Johnson OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Age 47 None
Nominated for a Term Expiring in May 2001
PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS HISTORY:
Chairman of Texas Biotechnology Corporation (a
research and development company) [ May 1990 -
present]
[Picture]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Hershey Foods Corporation [April 1987 - present]
GPU, Inc. [January 1989 - present]
McKesson Corporation [July 1990 - present]
John M. Pietruski
Director since 1989
Age 65
<PAGE 5>
Nominated for a Term Expiring in May 2001
PRINCIPAL OCCUPATION:
Dean and Professor of Business Economics, Jones
Graduate School of Administration,
Rice University [July 1997 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Professor of Business Economics, School of Business
Administration, University of
Michigan [January 1979 - July 1997]
Provost and Executive Vice President of Academic
Affairs, University of Michigan
[September 1990 - August 1995]
Gilbert R. OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Whitaker, Jr. Handleman Company [June 1990 - present]
Director since 1986 Structural Dynamics Research Corporation
Age 66 [July 1988 - present]
Johnson Controls, Inc. [January 1986 - present]
OTHER DIRECTORS OF THE CORPORATION
The identity of, and certain biographical information relating to, the directors
of the Corporation who will continue in office after the Annual Meeting are set
forth below. As noted above, Earl L. Neal and Gordon A. Walker will retire
pursuant to the Corporation's Board retirement policy and their terms will
expire on May 14, 1998; accordingly, no biographical information regarding those
directors is required to be set forth below.
Continuing in Office for a Term Expiring in May 2000
PRINCIPAL OCCUPATION:
Chief Financial Officer and Executive Vice President
of Eastman Kodak Company (a global imaging products
and services company) [February 1994 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Vice President, International Business Machines
Corporation (an information/handling systems,
equipment and services company) [1989 - December
1993]
President, IBM Credit Corporation (a finance company
which finances IBM products and services for IBM
customers) [1986 - October 1993]
Harry L. Kavetas OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1990 Eastman Kodak Company [May 1997 - present]
Age 60
<PAGE 6>
Continuing in Office for a Term Expiring in May 2000
PRINCIPAL OCCUPATION:
Managing Director of Schroder Real Estate Associates
(a national real estate investment management firm)
[April 1987 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Managing Director, Schroder Mortgage Associates (a
national commercial mortgage investment firm)
[April 1993 - present]
M. Leanne Lachman OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1985 Liberty Property Trust [June 1994 - present]
Age 55
Continuing in Office for a Term Expiring in May 2000
PRINCIPAL OCCUPATION:
Director of Seattle First Bank Corporation
[September 1977 - present]
[Picture] FIVE YEAR BUSINESS HISTORY:
Director, Costco, Inc. (a membership warehouse
retailer) [January 1996 - present]
Consultant, William D. Ruckelshaus Associates
(environmental consultants)
[concluded January 1, 1997]
Jill S. Ruckelshaus OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1975 Sea-First Corporation [September 1977 - present]
Age 61
Continuing in Office for a Term Expiring in May 1999
PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS HISTORY:
Chairman and Chief Executive Officer of CARPAT
Investments (a private investment company)
[1987 - present]
[Picture]
OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
None
J. Patrick Barrett
Director since 1990
Age 61
<PAGE 7>
Continuing in Office for a Term Expiring in May 1999
PRINCIPAL OCCUPATION:
President and Chief Executive Officer of Burson-
Marsteller (a perception management firm)
[May 1995 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Chairman and Chief Executive Officer, Diversified
Communications Group [November 1997 - present]
Vice-Chairman, Gulfstream Aerospace Corporation (a
manufacturer of business aircraft) [March 1994 -
May 1995]
Vice-Chairman, Chief Operating Officer and Director,
Burson-Marsteller [June 1989 - March 1994]
Thomas D. Bell, Jr. OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1988 Gulfstream Aerospace Corporation
Age 48 [October 1996 - present]
Continuing in Office for a Term Expiring in May 1999
PRINCIPAL OCCUPATION:
President and Treasurer of Real Silk Investments,
Inc.(a closed-end investment company)
[January 1989 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
First Vice President and Director, Moriah Fund, Inc.
(a private foundation) [1993 - present]
Daniel R. Efroymson OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1993 Real Silk Investments, Inc. [January 1989 - present]
Age 56 NBD Bank, N.A. Indiana [December 1985 - present]
<PAGE 8>
Continuing in Office for a Term Expiring in May 1999
PRINCIPAL OCCUPATION:
Executive Vice President of Philips Electronics
(a manufacturer and media company of varied
consumer and business electronics products and
services) [February 1998 - present]
[Picture]
FIVE YEAR BUSINESS HISTORY:
Senior Vice President and General Manager, Worldwide
Sales, Marketing, Service and Support, Compaq
Computer Corporation (a manufacturer of computers)
[September 1997 - January 1998]
President, Chief Executive Officer and Director,
Tandem Computers, Inc. (a manufacturer of computer
hardware, servers and networks)
[January 1996 - September 1997]
President and Chief Executive Officer, UB Networks,
Inc. (a computer networking company)
[September 1993 - January 1996]
President and Chief Executive Officer, AT&T Unix
Systems Laboratories (a communications company)
[January 1991 - September 1993]
Roel Pieper OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1996 General Magic, Inc. [February 1996 - present]
Age 41 Veritas Software Corporation [April 1992 - present]
UNIFY [February 1997 - present]
Continuing in Office for a Term Expiring in May 1999
PRINCIPAL OCCUPATION:
Chairman and Chief Executive Officer of the
Corporation
[Picture]
FIVE YEAR BUSINESS HISTORY:
Chairman, The Corporation [January 1992 - present]
Chief Executive Officer, The Corporation [May 1977 -
present] President, The Corporation [December 1975 -
December 1991, January 1997 - January 1998]
Ian M. Rolland OTHER DIRECTORSHIPS OF PUBLIC COMPANIES:
Director since 1975 Tokheim Corporation [March 1981 - present]
Age 64 NIPSCO Industries, Inc. [April 1978 - present]
Norwest Corporation [April 1993 - present]
<PAGE 9>
ADDITIONAL INFORMATION
SECURITY OWNERSHIP
Security Ownership of Directors, Nominees and Executive Officers
The Corporation has two classes of equity securities: Common Stock and Preferred
Stock. Table A on page 26 shows the number of shares of Common Stock and stock
units (i.e., non-transferable accounting-entry "units," the value of which is
the same as the value of the corresponding number of shares of Common Stock)
beneficially owned by each director, nominee for director, and "Named Executive
Officer," individually, and by all directors and executive officers as a group
(in each case as of February 27, 1998). As of that date, none of the persons
listed in that table owned more than 1% of the Corporation's issued and
outstanding Common Stock, nor did any of those persons own any Preferred Stock.
Whenever we refer in this Proxy Statement to the "Named Executive Officers," we
are referring to those executive officers of the Corporation that the
Corporation is required to identify in the Summary Compensation Table on page
28. Those individuals are: Ian M. Rolland, Robert A. Anker, Jon A. Boscia,
Richard C. Vaughan, Jack D. Hunter, and Gabriel L. Shaheen. For more information
regarding those officers, see Table C and "Summary Annual and Long-Term
Compensation" below.
Security Ownership of Certain Beneficial Owners
Table B on page 27 sets forth the names of persons known by the Corporation to
own beneficially more than 5% of its Common Stock. Those stockholders include
The Dai-ichi Mutual Life Insurance Company (6.7%), The Capital Guardian
Companies, Inc. (together with its subsidiary, Capital Research and Management
Company) (9.9%), and Sanford C. Bernstein & Co., Inc. (5.6%). The Corporation
knows of no one who beneficially owns more than 5% of its Preferred Stock.
THE BOARD OF DIRECTORS
COMPOSITION OF THE BOARD OF DIRECTORS; COMPENSATION OF DIRECTORS
The members of the Board, their relevant term of office, and certain
biographical information are set forth above under "Item 1 -- Election of
Directors." Compensation of the Corporation's directors is discussed below under
"Executive Compensation."
COMMITTEES
The Board currently has four standing committees (i.e., committees composed
entirely of Board members): the Audit Committee, the Compensation Committee, the
Development Committee and the Nominating and Governance Committee. A brief
description of each committee is set forth below.
Audit Committee
The members of the Audit Committee are:
Earl L. Neal (Chairperson) Daniel R. Efroymson
J. Patrick Barrett Harry L. Kavetas
Thomas D. Bell, Jr.
<PAGE 10>
Each of the foregoing individuals is a "Non-Employee Director" (i.e., not an
officer or employee of the Corporation or its subsidiaries). The principal
functions of the Audit Committee are to:
o review audits performed by independent auditors of the Corporation's
consolidated financial statements
o confer with the Corporation's officers and independent auditors
regarding accounting and financial statement matters
o recommend to the Board the selection, retention, or termination of the
independent auditors
o review the Corporation's accounting and
auditing procedures
o perform such other related functions as are necessary and desirable
Compensation Committee
The members of the Compensation Committee are:
John M. Pietruski (Chairperson) Jill S. Ruckelshaus
Thomas D. Bell, Jr. Gordon A. Walker
Earl L. Neal
Each of the foregoing individuals is a Non-Employee Director. The principal
functions of the Compensation Committee are to:
o review and confer on the selection and development of officers and
key personnel
o select and recommend to the Board for approval candidates for chairman
of the board and chief executive officer
o establish salaries for executive officers and approve salaries for
other officers and key personnel
o approve the payment of bonuses (both discretionary and contractual)
for officers and key personnel
o approve employment contracts and agreements for officers and key
personnel
o recommend to the Board the establishment of employee and officer
retirement, group insurance and other benefit plans
o approve certain modifications to employee benefit plans if the
present value of all such modifications over the five calendar
years after their effectiveness is not, according to actuarial
estimates, greater than $10 million
o administer benefit plans of the Corporation that are designed
to comply with the provisions of Rule 16b-3(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
o perform such other related functions as are necessary or desirable
Development Committee
The members of the Development Committee are:
M. Leanne Lachman (Chairperson) Roel Pieper
J. Patrick Barrett John M. Pietruski
Daniel R. Efroymson Gilbert R. Whitaker, Jr.
<PAGE 11>
The Development Committee generally may authorize the following transactions and
expenditures having a value greater than $5 million but not more than $10
million:
o acquisitions or divestitures of companies, assets or blocks of
business, mergers, strategic investments and joint ventures
o capital commitments or expenditures for leases and asset purchases
o sale of an equity interest in a company
o purchases by the Corporation or its affiliates of securities issued
by the Corporation or any of its affiliates
o issuance of securities by the Corporation or any of its affiliates
o acquisitions or dispositions of information systems development
projects
o other transactions referred to the Development Committee by the chief
executive officer
The Development Committee also may authorize capital transactions between
affiliates (excluding dividends) having a value greater than $40 million but not
more than $100 million.
Nominating and Governance Committee
The members of the Nominating and Governance Committee are:
Gilbert R. Whitaker, Jr. (Chairperson)
Ian M. Rolland
Jill S. Ruckelshaus
Gordon A. Walker
The principal functions of the Nominating and Governance Committee are to:
o nominate directors for election by shareholders
o nominate directors to fill vacancies on the Board
o compensate and reimburse directors
o establish the retirement policy and benefit plans for directors
o determine the size of the Board
o review committee appointments
o develop Board governance principles
Although the Nominating and Governance Committee does not solicit shareholder
recommendations regarding director nominees to be proposed by the Board, it will
consider such recommendations if they are made. Recommendations regarding
director nominees to be proposed by the Board, along with relevant
qualifications and biographical material, should be sent to the Secretary of the
Corporation.
Director nominees to be proposed by a shareholder at a shareholders' meeting
must comply with the provisions of the Corporation's Bylaws (see "Shareholder
Proposals" on page 24).
ATTENDANCE AT MEETINGS
During 1997, the Board held 5 regularly scheduled meetings and 5 special
meetings. In addition, the Audit Committee and Compensation Committee each met 6
times; the Development Committee met 7 times; and the Nominating and Governance
Committee met 5 times. All directors, except Roel Pieper, attended 75% or more
of the aggregate meetings of the Board and Board committees which he or she was
eligible to attend. The Corporation believes attendance at meetings is only one
criterion for judging the contribution of individual directors, and all
directors have made substantial and valuable contributions to the management of
the Corporation.
<PAGE 12>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Corporation's Compensation
Committee during the 1997 fiscal year: Thomas D. Bell, Jr., Earl L. Neal, John
M. Pietruski, Jill S. Ruckelshaus and Gordon A. Walker. No member of the
Compensation Committee had an "interlock" reportable under Section 402(j) of
Regulation S-K, and no member was an employee, officer or former officer of the
Corporation or its subsidiaries.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Corporation's directors, its
executive officers (including all Named Executive Officers), and any persons
beneficially owning more than ten percent of any class of the Corporation's
equity securities (collectively, "Reporting Persons") are required to report
their initial ownership of such securities (on Form 3) and any subsequent
changes in that ownership (on Form 4 or 5) to the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange. Those reports must be filed
within a certain time period, and a copy of each report must be sent to the
Corporation. Based solely on written representations of the Reporting Persons,
and copies of the reports that were filed with the SEC, the Corporation is not
aware of any failure by a Reporting Person to timely file a Section 16(a)
report.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
Responsibilities and Composition of the Compensation Committee
The Corporation's executive compensation programs are administered by the
Compensation Committee (the "Committee"), a committee of the Board of Directors
comprised exclusively of Non-Employee Directors. The Committee approves all
compensation plans and awards for the Corporation's executive officers. None of
these Non-Employee Directors have any interlocking or other relationships that
would call into question their independence as Committee members, nor have any
ever served as officers of the Corporation.
Compensation Philosophy
The Committee believes that the Company's executive officers' compensation
should be determined according to the following principles:
o Maximize long-term shareholder value creation. To accomplish
this objective, the Committee develops executive compensation
policies which are consistent with and linked to the
Corporation's strategic business objectives.
o Provide a direct link between executive compensation and the
Corporation's financial performance and total long-term
shareholder return.
o Focus management on the long-term interests of shareholders. A
significant portion of compensation for executive officers is
long-term and at-risk. Less emphasis is placed on annual
compensation.
o Attract and retain the best individuals in the financial services
industry.
<PAGE 13>
o Make base pay competitive with selected companies within the
Corporation's market. Total direct compensation will be
average or below average for average or below average
financial performance but will be in the top quartile for top
quartile financial performance. The market to which we compare
includes the Peer Group included in the Performance Graph on
page 23, as well as other companies in our industry.
o Align the financial interests of executive officers with those
of shareholders by providing significant equity-based
long-term incentives. The Corporation requires officers to
meet specific share ownership requirements based upon a
multiple of their base salary, as set forth below:
Title of Officer Multiple of Base Salary
---------------- -----------------------
Chief Executive Officer 8 times
President 7 times
Executive Vice President 6 times
Senior Vice President 4 times
Vice President 2 times
Below Vice President 1 time
These guidelines were established in 1993 and officers currently in the
same positions as then are expected to meet them no later than the end
of 1998. Newly appointed officers have five years to achieve the
guideline. All of the Named Executive Officers have exceeded their
guideline.
Compensation Methodology
The Corporation strives to provide a comprehensive executive compensation
program that is both innovative and competitive in order to attract and retain
superior executive talent.
Each year the Committee reviews market data and assesses the Corporation's
competitive position in each component of executive compensation, including base
salary and incentive compensation.
The primary market comparison is a broad-based survey of thirty-nine (39)
companies in the financial services industry conducted by a well-known and
respected compensation consulting firm. Target compensation is based on the
average of actual compensation, adjusted to reflect differences in size among
these companies.
This survey was selected because the companies in the survey operate in
businesses similar to the Corporation's and compete for executives with
experience and skills similar to those the Corporation requires. The Committee
also considered the technical competence of the survey firm. Several additional
broad-based surveys are also consulted for purposes of verifying the findings of
the primary survey and for a broader analysis of trends in executive
compensation.
Compensation decisions regarding individual executives are also based on factors
such as individual performance, level of responsibility and unique skills.
Compensation Components and Process
The primary components of executive compensation used by the Committee are:
o Base Pay
o Long-term Incentives
o Benefits
These components are discussed below.
<PAGE 14>
Base Pay
The Corporation has established executive base pay "bands" and assigned
each executive to a band of compensation based on his or her job
responsibilities.
Compensation recommendations for each executive officer (except the CEO)
are provided to the Committee by the CEO.
Annual base salary is designed to compensate executives for their sustained
performance. Salary is based on: (1) market compensation data; (2)
individual performance; and (3) increase guidelines approved by the
Committee. The Committee approves in advance all salary increases for
executive officers. Salaries for executive officers for 1997 were projected
to be slightly below the median of the compensation peer group.
Long-term Incentives
Long-term incentives comprise the largest portion of total compensation for
executive officers. These incentives are provided through annual grants of
stock options and cash incentive awards. For 1997, approximately 65% of the
value of the Named Executive Officers' total compensation was variable. The
Committee has the authority to convert cash incentive awards into
restricted stock or restricted stock units, thus creating three forms of
long-term incentives utilized for key executives: stock options, restricted
stock or stock units, and cash awards. In any given year, an executive may
receive a combination of all or some of these incentives, depending on
circumstances such as individual and corporate performance.
The long-term incentive plans are discussed below:
Stock Options: Stock option grants provide the opportunity to purchase
shares of the Corporation's Common Stock at Fair Market Value (the
average of the high and low trading prices on the day preceding the
date of the grant). The objective of these grants is to increase
executive officers' equity interest in the Corporation and to allow
them to share in the appreciation of the Corporation's Common Stock.
Stock options only have value for the executive officers if the stock
price appreciates in value from the date the options are granted. Stock
options become exercisable in four equal annual installments beginning
on the first anniversary of the grant and have a ten-year term. The
Committee has typically granted stock options each year to executive
officers at its May meeting. The option grants are for shares of Common
Stock authorized under shareholder-approved plans.
Executives are encouraged to hold shares received upon the exercise of
the options, linking their interests to those of shareholders.
Executives who sell shares prior to reaching the share ownership
guidelines (discussed above) may have future stock option awards
reduced or eliminated.
In granting stock options to executive officers, including the Named
Executive Officers, the Committee takes into account the executive's
level of responsibility, individual contribution and appropriate total
compensation relative to the market. In addition, the Committee takes
into account the Chief Executive Officer's award recommendation for the
Named Executive Officers. The Committee considers the amounts and terms
of option grants as an important component in designing a competitive
total compensation package.
Executive Value Sharing Plan ("EVSP"): In May, 1994, the shareholders
of the Corporation approved the amended and restated EVSP so that
payments made under the EVSP to the Named Executive Officers might not
be subject to the one million dollar limit on deductibility that was
enacted by the Omnibus Budget Reconciliation Act of 1993 ("OBRA").
Under the EVSP, participants are awarded bonuses if specified
performance objectives are attained. The amounts of these awards depend
on the Corporation's or a designated business segment's performance
over three-year "Performance Cycles" relative to the performance of
other companies contained in a designated "Peer Group." New three-year
<PAGE 15>
cycles began in 1995 and 1996. Newly promoted or newly hired
executives may participate in cycles that are currently running. The
Committee approves the participants, establishes the performance goals
or formula for measuring the Corporation's or a business segment's
performance, determines the Peer Groups, establishes the maximum
amounts which can become payable, certifies the extent to which such
performance goals or formulas have been attained, and determines
the actual award. The first payment under the 1994 shareholder
approved plan was made in 1997.
Those Named Executive Officers who had not yet met their share
ownership requirement received restricted stock awards or restricted
stock unit awards in lieu of a cash payment for 50% of their awards
under the EVSP in 1997. Shares of restricted stock typically are
restricted from sale or trade for three years after the end of the
Performance Cycle for which they were granted, except in certain
situations relating to death, disability or change of control of the
Corporation. Executives may vote the shares during the period that the
shares are issued but restricted and are compensated (when the
restrictions lapse) for dividends that would have been paid if the
shares had not been restricted.
Restricted stock units are a form of deferred compensation, the value
of which mirrors the value of a corresponding number of shares of
Common Stock. The "restrictions" on restricted stock units lapse three
years from the date of grant. Restricted stock units have no voting
rights and dividend equivalents are converted to additional stock
units.
The EVSP award for the 1994--1996 Performance Cycle was determined in
May 1997. The major considerations by the Committee in determining the
awards were the Corporation's 1994--1996 performance at the 70th
percentile for increase in adjusted book value (VROE) relative to the
Peer Group.
The 1994--1996 Performance Cycle Peer Group included the following
companies: Allstate Corp., American General Corp., CIGNA Corp., The
Equitable Companies, Inc., First Colony Corp., Provident Life &
Accident, Providian Corporation (formerly Capital Holding Corp.),
Reliastar (formerly The NWNL Companies), SAFECO Corp., Torchmark Corp.,
Transamerica Corp., Travelers Inc., USF&G Corp., and USLIFE Corp.
The Performance Cycles ending in 1997 and 1998 remain in effect, as
discussed below under "Adoption of 1997 Incentive Compensation Plan."
Performance Cycle information on the Peer Group will not be available
until the end of April 1998; therefore, the EVSP award will be
determined after the date of this proxy statement and discussed (along
with the composition of the relevant Peer Group) in the Compensation
Committee Report in the 1999 proxy statement.
Benefits
Benefits offered to key executives are largely those that are offered to
the general employee population (with some variation, largely to promote
tax efficiency and replacement of benefit opportunities lost due to
regulatory limits). In general, they provide a safety net for protection
against the financial catastrophes that can result from illness, disability
or death.
1997 Compensation for the Chief Executive Officer
The Chief Executive Officer's base salary was increased by 7.0% effective July
7, 1997. The Committee also awarded Mr. Rolland options to purchase 78,000
shares of Common Stock at the then "fair market price" of $58.94 per share on
May 14, 1997. The Committee determined Mr. Rolland's EVSP award for the
1994--1996 Performance Cycle following methodology adopted pursuant to the EVSP,
as approved by shareholders in 1994. This award was $1,450,000. Mr. Rolland
exceeded his share ownership requirement. Therefore, the award was paid in cash.
<PAGE 16>
In making 1997 compensation decisions for the Chief Executive Officer, the
Committee reviewed the Corporation's positive financial performance during the
performance cycle 1994--1996. During this performance cycle, income from
operations increased 50% or 14.47% per year in current businesses. Net income
increased 94.8% or 24.89% per year in current businesses. Assets increased 50%.
The Committee also considered the Chief Executive Officer's leadership in
continuing to strategically position the Corporation for the future. During
1997, Mr. Rolland continued to reposition the Corporation which led to the sale
of its controlling interest in American States Financial Corporation to SAFECO
Corporation and completion of plans to acquire CIGNA's individual life and
annuity business (transaction closed on January 2, 1998).
The Committee also considered the Corporation's 1994--1996 performance at the
70th percentile for increase in adjusted book value (VROE) compared to the
relevant Peer Group.
Impact of Tax Deduction Limitations on Executive Compensation
The Committee is responsible for addressing tax deduction limitations which make
"non-performance-based" compensation to certain executives of the Corporation in
excess of $1,000,000 nondeductible to the Corporation. To qualify as
"performance-based" compensation, payments must be based on achieving objective
performance goals established under an employee benefit plan that is
administered by a committee of "outside directors." In addition, the material
terms of the plan must be disclosed to and approved by shareholders and the
Committee must certify that the performance goals were achieved before payments
may be made.
The Committee has taken several steps to minimize the effect of these tax
deduction limits on the Corporation's deduction for compensation to be paid to
the Named Executive Officers listed on the Summary Compensation Table. The Stock
Option Plan was amended to place maximums on the amount of stock options awarded
to any officer and the EVSP was approved by shareholders in 1994 (as discussed
above). Stock options awarded under the Stock Option Plan and awards paid under
the amended EVSP are designed not to count toward the $1,000,000 limit. In
addition, instead of amounts being paid in restricted stock for EVSP Performance
Cycles that began before 1994, some officers received these amounts as
restricted stock units under a deferred compensation arrangement designed to
assure deductibility by the Corporation.
Although the Plans meet the requirements for payments to be deductible, the
Committee may make payments of compensation to executives that are not
deductible in order to recognize exceptional service or to correct below market
compensation. Should compliance with the $1,000,000 limit conflict with the
Committee's compensation philosophy, the Committee will act in the manner it
perceives to be in the best interests of shareholders. The Committee continues
to monitor the level of compensation paid to executive officers in order to take
any steps which may be appropriate to comply with applicable tax deduction
limitations relating to executive compensation.
Adoption of 1997 Incentive Compensation Plan
The Corporation's shareholders approved the Incentive Compensation Plan ("ICP")
on May 15, 1997. Although the ICP has superseded the EVSP and the Stock Option
Plan, it did not impact awards made in 1997 to the Named Executive Officers.
Awards under the ICP will be based upon Performance Cycles established by the
Committee. Compensation decisions relating to the Performance Cycle ending
December 31, 1997 will be made in May 1998 and reported in next year's proxy
statement. As noted above, Performance Cycles under the EVSP remain in effect
for comparative purposes when determining the applicable maximum award payable
for the Performance Cycles ending in 1997 and 1998. Regardless of the applicable
maximum awards, however, the Committee has discretion to award a lower amount
than the maximum.
<PAGE 17>
Relationship With American States Financial Corporation
During 1997, compensation decisions concerning the executive officers of
American States Financial Corporation and its subsidiaries ("ASFC"), including
Mr. Anker, were made by ASFC's compensation committee (the "ASFC Committee").
However, prior to the sale of ASFC to SAFECO Corporation on October 1, 1997, the
ASFC Committee coordinated with the Committee in order to align its compensation
programs as nearly as practicable with those of the Corporation.
Conclusion
Executive Compensation is designed to be linked to, and commensurate with, the
Corporation's corporate performance, and the Committee believes that the
Corporation's performance validates the success of its compensation philosophy.
As a result, the Committee believes that its executive compensation policies and
programs serve the best interests of the Corporation and its shareholders.(1)
John M. Pietruski, Chairperson
Thomas D. Bell, Jr.
Earl L. Neal
Jill S. Ruckelshaus
Gordon A. Walker
SUMMARY ANNUAL AND LONG-TERM COMPENSATION
The Corporation's compensation program for executive officers for the fiscal
year ended December 31, 1997 consisted primarily of salaries, bonuses, and other
compensation. Table C on page 28 includes information concerning the annual
compensation for services in all capacities to the Corporation and its
subsidiaries for the fiscal years ended December 31, 1997, 1996, and 1995 of the
Corporation's Named Executive Officers. Under SEC rules, the "Named Executive
Officers" include:
o any person who acted as the Corporation's chief executive officer at
any time during 1997,
o the four other most highly compensated executive officers employed by
the Corporation on December 31, 1997, and
o up to two additional executive officers who would have been required to
be listed in the Summary Compensation Table had they been employed by
the Corporation (or its subsidiaries) on December 31, 1997
The amount of the awards under the ICP for the Performance Cycle ending in 1997
are not yet available and are not included for 1997 in the Summary Compensation
Table on page 28, but will be included in next year's proxy statement. (For
estimated payouts, see "Long-Term Incentive Plans" below.)
LONG-TERM INCENTIVE PLANS
As noted above, the awards for the Performance Cycle ending in 1997 under the
ICP are not yet available. However, the Performance Cycles under the EVSP remain
in effect for comparative purposes in determining
(1) Pursuant to item 402(a)(9) of Regulation S-K promulgated by the Securities
and Exchange Commission ("SEC"), the "Compensation Committee Report" shall
not be deemed to be filed with the SEC for purposes of the Securities
Exchange Act nor shall such report or such material be deemed to be
incorporated by reference in any past or future filing by the Corporation
under the Securities Exchange Act or the Securities Act of 1933, as
amended.
<PAGE 18>
the maximum award payable for that period. The estimated future payouts for the
Performance Cycle ending December 31, 1997, based on the EVSP Performance Cycle,
are set forth in Table D on page 30.
STOCK OPTION PLANS
Set forth in Table E on page 31 is information on grants of stock options
pursuant to the Stock Option Plan during fiscal year 1997 to the Named Executive
Officers. No stock appreciation rights were granted under those Plans during
fiscal 1997.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Table F on page 32 includes information with respect to option exercises in
fiscal year 1997 and unexercised options to purchase the Corporation's Common
Stock granted to the Named Executive Officers in fiscal year 1997 under the
Stock Option Plan and in prior years under the Stock Option Plan and the
Corporation's 1982 Stock Option Incentive Plan.
RETIREMENT PLANS
Table G on page 33 shows the estimated annual retirement benefits payable on a
straight life annuity basis to participating employees, including the Named
Executive Officers, under the Corporation's retirement plans which cover most
officers and other employees on a non-contributory basis. Such benefits reflect
a reduction to recognize in part the Corporation's cost of Social Security
Benefits related to service for the Corporation.
SUPPLEMENTAL RETIREMENT ARRANGEMENTS
Certain officers of the Corporation and its subsidiaries, including all the
Named Executive Officers, have entered into salary continuation agreements under
the terms of either the Salary Continuation Plan for Executives of Lincoln
National Corporation and Affiliates or the American States Executive Salary
Continuation Plan ("Salary Continuation Plans"). Under the Salary Continuation
Plans, the amount each officer is entitled to receive upon retirement is 2% of
his or her final monthly compensation multiplied by the number of years the
agreement has been in effect (up to a maximum of 10% of final monthly salary),
so long as the officer agrees to an exclusive consulting arrangement with the
Corporation until the earlier of the waiver of such arrangement or attainment of
age 65. This amount will be paid in the form of a 120-month certain and life
annuity. In the event of death prior to retirement, a designated beneficiary of
executives who were participating in the Salary Continuation Plans on December
31, 1991, will instead receive annual payments each equal to 25% of the
employee's final annual salary until the later of the date on which the employee
would have attained age 65 or the date on which a minimum of ten payments have
been made. These agreements automatically terminate upon the officer's
termination of service for reasons other than death, disability or retirement;
except that in the event of a change in control of the Corporation, as defined
in the Severance Plan (discussed below), and a subsequent voluntary or
involuntary termination of the employee's employment within 2 years of the
change in control, such employee shall be treated as continuing employment with
the Corporation and its affiliates until age 65 at which time benefits shall
begin. The Salary Continuation Plan caps compensation used to determine benefits
at the greater of $200,000 or the annual base compensation in effect on December
31, 1991 for executives participating on that date. Effective December 31, 1993,
the exclusive consulting arrangement was waived for Mr. Rolland. In connection
with the transfer of Mr. Anker's employment from LNC to ASFC, his participation
in the LNC plan was transferred to ASFC. As discussed elsewhere in this Proxy
Statement, ASFC was sold to SAFECO Corporation on October 1, 1997.
CHANGE-IN-CONTROL ARRANGEMENTS
Recognizing that an unforeseen change of control is unsettling to the
Corporation's key executives, the Board adopted the Lincoln National
Corporation Executives' Severance Benefit Plan (the "Severance Plan"). The
<PAGE 19>
objectives of the Severance Plan are to:
o attract certain qualified executives and encourage their continued
employment in the face of an actual or threatened change of control
o enable such executives to help the Board assess any proposed change of
control of the Corporation and advise the Board regarding whether such
proposal is in the best interests of the Corporation, its shareholders,
and the policyholders and customers of its affiliates without being
unduly influenced by the uncertainty of continued employment
o demonstrate to those executives the Corporation's desire to treat them
fairly
o provide those executives with compensation and benefits upon a change
of control which are designed to ensure that expectations of the
executives will be satisfied
Executives eligible for participation in the Severance Plan ("Eligible
Executives") are the members of the Corporation's Senior Management Committee
and other employees as determined by the Compensation Committee. All Named
Executive Officers were Eligible Executives during 1997. Pursuant to the
Severance Plan, the Corporation may enter into agreements (which are not
employment agreements) with Eligible Executives to provide severance benefits in
the event that, within three years after a change of control of the Corporation
has occurred (i) the Corporation terminates their employment for any reason
other than cause, death or disability, or (ii) the Eligible Executive terminates
employment for good reason, such as a change in the Eligible Executive's
responsibilities, a reduction in salary or benefits, or relocation. Any
termination of employment by the chief executive officer or the chief operating
officer during such three-year period is deemed to be for good reason under the
Severance Plan.
The benefit to which an Eligible Executive would be entitled under the terms of
the Severance Plan is the greater of (1) 299.9% of the Eligible Executive's
average annual compensation for the period consisting of the five most recent
taxable years ending before the change in control and (2) 200% of the Eligible
Executive's annual compensation (including all forms of compensation reportable
on a Form W-2) based on the highest amount of consideration paid during (a) the
calendar year preceding termination or (b) either of the two calendar years
immediately preceding the year in which the change of control occurred. In
addition, an Eligible Executive would be entitled to benefits such as the
continuation of certain benefits under the welfare benefit plans in which he or
she participates, immediate and 100% vesting in all retirement benefits, the
value of certain unexercisable stock options and restricted stock, relocation
benefits, outplacement services and a lump sum payment equal to 40.6% of any
amount paid which is deemed an "excess parachute payment" under the Code. The
Corporation must reimburse an Eligible Executive any and all legal fees and
expenses incurred by the Eligible Executive relating to enforcing the
Corporation's obligations under the Severance Plan. The Severance Plan
supplements and does not supersede other plans, contracts of employment, or
other arrangements which Eligible Executives may have with the Corporation or
its affiliates.
In connection with Mr. Anker's transfer of employment from the Corporation to
ASFC, the Corporation retained certain obligations and granted Mr. Anker certain
rights relating to his employment with the Corporation, including the right to
receive EVSP awards for Performance Cycles started (but not completed) during
his employment with the Corporation and continued eligibility for the LNC
Medical Plan for Retired Employees. Most other obligations of the Corporation
and rights of Mr. Anker relating to his employment were transferred to ASFC.
In connection with the exploration of strategic options involving ASFC, the LNC
Compensation Committee and the ASFC Board adopted change of control, retention
incentive and severance arrangements with certain key employees, including Mr.
Anker. Under his agreements, upon a change of control, Mr. Anker became
immediately vested in all LNC restricted phantom stock units and restricted
stock and dividend equivalent rights of ASFC. His agreement with ASFC also
provided for a cash payment by ASFC upon a change of
<PAGE 20>
control of ASFC based upon the per share sales price of ASFC, which amount would
become payable upon the earlier of 12 months after a change of control of ASFC
or termination of Mr. Anker's employment. Based on the per share sales price of
ASFC stock on October 1, 1997 (the date on which ASFC was sold), the award
calculated under the foregoing formula amounted to a payment of 3.75 times base
salary. ASFC also committed to pay an amount necessary to gross up the amounts
paid and benefits provided to Mr. Anker in order to compensate him for any
liability for federal excise taxes, if any such taxes were applicable.
EMPLOYMENT CONTRACTS
The Corporation has no employment agreement with any Named Executive Officer.
However, ASFC, a subsidiary of the Corporation, had an employment agreement with
Mr. Anker during 1997. Mr. Anker was named CEO of ASFC on January 1, 1997, and
his employment agreement was scheduled to terminate on December 31, 1997. ASFC
was sold to SAFECO Corporation on October 1, 1997, and is no longer a subsidiary
of the Corporation.
Mr. Anker's employment agreement provided for the capacities in which he would
serve as an employee of ASFC, his responsibilities, compensation, benefits,
eligibility for stock option and restricted stock awards, and certain other
benefits (e.g., early retirement and outplacement benefits in certain
circumstances). In his employment agreement, Mr. Anker agreed not to disclose or
reveal any trade secrets or other confidential information relating to ASFC both
during and after the term of his employment agreement.
Under the employment agreement, Mr. Anker's 1997 base salary was to be not less
than $565,000. Subject to that minimum, the ASFC Committee had the discretion to
adjust Mr. Anker's base salary as it saw fit. The actual compensation paid to
Mr. Anker during 1997 prior to the sale of ASFC on October 1, 1997 is set forth
in the Summary Compensation Table on page 28.
Mr. Vaughan has a severance agreement which provides that from June 18, 1996
until the first month following his 55th birthday, if his employment is
involuntarily terminated by the Corporation, he will be entitled to one year of
severance pay at his then base salary. This arrangement does not apply to
voluntary termination or if termination is for cause.
COMPENSATION OF DIRECTORS
Compensation Philosophy
The Board considers a variety of outside sources (e.g., comparisons with peer
companies and third party studies on director compensation) when determining the
levels and types of compensation to be paid to directors. Of particular
relevance, the Board endorses each of the six "Best Practices" recommended in
the Report of the Blue Ribbon Commission on Director Compensation of the
National Association of Corporate Directors. Consistent with those practices,
the Board adheres to the following guidelines in establishing director
compensation:
o a substantial portion of each director's compensation is paid in LNC
Common Stock or stock units
o in order to avoid the appearance of employee-like tenure or
compromised independence, directors are not eligible for defined
benefit pensions
o directors are expected to achieve stock ownership of 5 times their
annual retainer within 5 years of election to the Board
<PAGE 21>
LNC pays retainer and meeting fees only to Non-Employee Directors. Non-Employee
Directors are also eligible to receive bonus awards and service awards or
certain other retirement benefits. The Board believes that the fees of
Non-Employee Directors are comparable to the fees paid to directors of similar
companies.
Retainer and Meeting Fees
The Corporation pays retainer fees under the 1993 Stock Plan for Non-Employee
Directors (the "Stock Plan"). Under the Stock Plan, the Corporation pays each
Non-Employee Director an annual retainer of $35,000 ($18,000 in cash and $17,000
in LNC restricted stock). If a Non-Employee Director is elected to a new
three-year term, the Corporation pays that director an additional $10,000 in
restricted stock (rounded up to the nearest whole share). The restrictions on
shares awarded under the Stock Plan will lapse on the earliest of the
Non-Employee Director's death, disability, retirement from the Board at age 70
or, if specifically approved by the Board, other events of resignation or
retirement from the Board.
In addition to the retainer fee, the Corporation paid each Non-Employee Director
$1,100 for each Board and Board committee meeting he or she attended during
1997. Committee chairpersons received an additional fee of $5,000 for their
services. The Corporation also reimburses directors (and sometimes their
spouses) for the reasonable travel expenses they incur when attending Board and
Board committee meetings.
Non-Employee Directors may defer the cash portion of their annual retainer and
fees in stock units, as provided in the Stock Plan. When the director retires,
he or she can receive the value of those units in LNC Common Stock or in cash,
either in a lump sum payment or in annual installments over a period of up to
fifteen years.
Bonus Awards, Service Awards and Other Benefits
Non-Employee Directors are eligible to receive Bonus Awards, Service Awards, and
certain other benefits under the Directors' Value Sharing Plan (the "DVSP").
Bonus Awards. The Corporation may award Bonus Awards if the total
shareholder return of LNC Common Stock over a three-year period exceeds the
median shareholder return of the companies in a particular peer group over
the same period. (During the transition to the three-year cycle, the first
cycle was one year (1996), the second cycle was two years (1996--1997), and
future cycles will be three years.) Bonus Awards range from $0 (if the
Corporation's total shareholder return is not above the median) to $41,000
(if the Corporation outperforms the relevant Peer Group), and are awarded
as LNC stock units and credited to a non-qualified deferred compensation
account established for each Non-Employee Director. For the cycle ended in
1997, Bonus Awards were calculated based on the Corporation's two-year
performance, as compared to the performance of the following companies:
Allstate Insurance Companies SAFECO Corporation
American General Corporation SunAmerica, Inc.
CIGNA Corporation The Equitable Companies, Inc.
Protective Life Insurance Company Torchmark Corporation
Provident Companies, Inc. Transamerica Corporation
Reinsurance Group of America, Inc. Travelers Inc.
Reliastar Financial Corp. USF&G Corporation
There was no award for the 1996--1997 cycle.
Service Awards. Except as discussed below under "Retirement Benefits," each
Non-Employee Director receives a quarterly Service Award in the form of LNC
stock units (up to a maximum of 40 Service Awards). As with Bonus Awards,
Service Awards are credited to a non-qualified deferred compensation
account established for each Non-Employee Director. Service Awards are
<PAGE 22>
based upon a formula that takes into account the Non-Employee Director's
age upon election to the Board, the annual retainer, and an assumed minimum
return on LNC Common Stock.
Certain Death Benefits. If a Non-Employee Director was a director on
January 1, 1996, he or she could choose either to receive Service Awards
under the DVSP or to continue participating in the Retirement Plan
(described below). However, if a Non-Employee Director has elected to
receive Service Awards, but dies prior to retirement from the Board, the
value of his or her Service Award account will not be less than the lump
sum death benefit that would have been payable under the Retirement Plan.
Retirement Benefits
Non-Employee Directors who were directors on January 1, 1996 and did not elect
to receive Service Awards under the DVSP continue to be eligible for retirement
benefits under the Retirement Plan. The annual benefit payable to a Non-Employee
Director under the Retirement Plan is 0.833% of the director's retainer during
the last year he or she was a director, multiplied by the number of months he or
she served on the Board (up to a maximum of 120 months). A director may receive
his or her retirement benefit under the Retirement Plan either in a single lump
sum or in monthly payments beginning at the later of retirement or age 65. If
the director dies prior to the date retirement benefits start, the death benefit
will be paid to his or her beneficiary. Only two directors participate in the
Retirement Plan. Non-Employee Directors who were first elected to the Board
after January 1, 1996 have no right to retirement benefits other than Service
Awards, as discussed above.
<PAGE 23>
COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN
The graph set forth below shows a five-year comparison of the yearly performance
of the Corporation's cumulative total shareholder return (change in the year-end
stock price plus reinvested dividends), based on a hypothetical investment of
$100, with the S&P 500 Composite Index and an index of peer companies selected
by the Corporation (the "Peer Group")
<TABLE>
<CAPTION>
PERFORMANCE GRAPH
AMONG LNC, S&P 500 and PEER GROUP
[LINE GRAPH AVAILABLE IN PRINTED MATERIAL]
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
LNC 100.00 122.13 102.34 163.90 166.37 255.87
S&P 500 100.00 110.08 111.54 153.45 188.69 251.64
PEER Group 100.00 120.85 107.37 171.58 227.31 352.22
</TABLE>
Source: Media General Financial Services
Companies in the Peer Group are as follows:
The Allstate Corporation SAFECO Corporation
American General Corporation Torchmark Corporation
CIGNA Corporation Transamerica Corporation
Equitable Companies, Inc. Travelers Group Inc.
Provident Companies, Inc. USF&G Corporation
Reliastar Financial Corporation
Companies in the Peer Group are publicly traded insurance holding companies with
business units which are considered to be significant competitors of major
business units of the Corporation, and their returns have been weighted for
stock market capitalization.
<PAGE 24>
The following companies were acquired during 1997 and/or are no longer
publicly-held companies, and have been removed from the Performance Graph Peer
Group which appeared in last year's proxy statement: Equitable of Iowa
Corporation, Providian Corporation, and USLIFE Corporation.
On October 1, 1997, the Corporation exited the property casualty line of
business when it sold ASFC to SAFECO Corporation. Accordingly, beginning in next
year's proxy statement, the following companies will be removed from the
Performance Graph Peer Group in order to more accurately reflect that the
Corporation no longer competes in that industry: CIGNA Corporation, SAFECO
Corporation, The Allstate Corporation, Travelers, Inc., and USF&G Corporation.
Currently, it is anticipated that the foregoing companies will be replaced with
the following companies, assuming no changes to the Corporation's or those
companies' current lines of business, or any other changes that would result in
those companies not being considered appropriate peers: AmerUS Life Holdings,
Inc., Conseco, Inc., Hartford Life, Inc., Jefferson-Pilot Corporation, Liberty
Financial Companies, Inc., Life Re Corporation, and Nationwide Financial
Services, Inc.
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Corporation specifically incorporates this
graph by reference, and shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Corporation's stock performance will continue
into the future with the same or similar trends depicted in the preceding graph.
The Corporation will not make or endorse any predictions as to future stock
performance.
GENERAL
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP has been selected by the Board to be the independent auditors
to audit the consolidated financial statements of the Corporation for fiscal
year 1998. This firm has been employed by the Corporation in that capacity
continuously since January 17, 1968. Representatives of Ernst & Young LLP will
be present at the annual meeting of shareholders, will be given an opportunity
to make a statement if they so desire, and will be available to respond to
appropriate questions relating to the audit of the Corporation's 1997
consolidated financial statements.
SHAREHOLDER PROPOSALS
To Be Included in the Corporation's Proxy Materials
Any shareholder proposals intended to be considered for inclusion in the proxy
materials for the Corporation's 1999 annual meeting of shareholders must be
received by the Corporation no later than December 15, 1998.
All such proposals should be sent to the Secretary of the Corporation.
To Be Presented In-Person at Shareholder Meetings
Shareholders wishing to propose matters for consideration at a meeting of
shareholders or to propose nominees for election as directors must follow the
procedures contained in the Corporation's Bylaws. Such procedures include giving
notice to the Secretary of the Corporation at least 50 and not more than 90 days
prior to the meeting. However, in the event that less than 60 days' notice of
the date of the meeting is given to shareholders, notice by the shareholder to
be timely must be received not later than the close of business on the 10th day
following the day on which notice of the date of the meeting was given. That
notice must include:
<PAGE 25>
o the name and address of the proposing shareholder (as it appears on
the Corporation's stock records)
o a brief description of the business desired to be brought before the
meeting
o the class and number of shares of the Corporation which are
beneficially owned by the proposing shareholder
o a description of any interest of such proposing shareholder in the
business proposed
In the case of a shareholder-proposed nominee for director, the required notice
must also contain as to each person whom the shareholder proposes to nominate
for election or re-election as a director:
o the name, age, business address and residence address of such person
o the principal occupation or employment of such person
o the class and number of shares of the Corporation which are
beneficially owned by such person
o any other information relating to such person that is required
to be disclosed in solicitation of proxies for election of
directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including without
limitation such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if
elected)
o the qualifications of the nominee to serve as a director of the
Corporation
The person presiding at a meeting of shareholders is authorized by the Bylaws,
if the facts warrant, to determine that the proposed business was not properly
brought before the meeting, or was not lawful or appropriate for consideration
at the meeting or that a nomination for director was not properly made. Upon a
declaration of such determination by the chairman, the proposed business shall
not be transacted or the defective nomination shall be disregarded, as the case
may be.
No Qualifying Shareholder Proposals
No shareholder complied with the requirements for inclusion of a proposal in
this Proxy Statement. Similarly, no shareholder has raised an issue which is
proper for consideration at the Annual Meeting. Your proxy will be voted in the
discretion of the proxy holders with respect to each matter properly brought
before the meeting that has not been enumerated in this Proxy Statement or for
which no specific direction was given on the proxy card.
ANNUAL REPORT
The Corporation's Annual Report to Shareholders, together with its Annual Report
on Form 10-K filed with the SEC, for the fiscal year 1997 have previously been
mailed to shareholders of record to the relevant addresses appearing on the
Corporation's stock books. An additional copy of the Annual Report on Form 10-K
will be provided on written request and without charge to each shareholder.
Write to Donald Van Wyngarden, Second Vice President and Controller, Lincoln
National Corporation, 200 East Berry Street, Fort Wayne, Indiana, 46802-2706.
For the Board of Directors,
C. Suzanne Womack
Secretary
April 9, 1998
<PAGE 26>
<TABLE>
TABLE A
SECURITY OWNERSHIP OF
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
<CAPTION>
NAME AMOUNT OF LNC LNC STOCK TOTAL OF LNC
COMMON STOCK UNITS COMMON STOCK
AND NATURE OF AND STOCK
BENEFICIAL UNITS
OWNERSHIP<F1><F2>
========================= ================ ========= ============
<S> <C> <C> <C>
Robert A. Anker 184,896 50,716 235,612
J. Patrick Barrett 6,393 2,822 9,215
Thomas D. Bell, Jr. 1,393 1,026 2,419
Jon A. Boscia 105,765 14,104 119,869
Daniel R. Efroymson 1,006,689 2,569 1,009,258
Harry L. Kavetas 1,931 3,177 5,108
Jack D. Hunter 103,476 1,069 104,545
M. Leanne Lachman 2,331 4,542 6,873
Earl L. Neal 2,403 7,221 9,624
Roel Pieper 742 164 906
John M. Pietruski 3,403 2,908 6,311
Ian M. Rolland 276,489 12,930 289,419
Jill S. Ruckelshaus 3,331 110 3,441
Gabriel L. Shaheen 40,522 6,956 47,478
Richard C. Vaughan 40,119 17,800 57,919
Gordon A. Walker 2,062 5,603 7,665
Gilbert R. Whitaker, Jr. 3,403 4,250 7,653
Directors and Executive 1,977,030 193,873 2,170,903
Officers as a group - 27
persons
<FN>
<F1> Each of these amounts represents less than 1% of the outstanding shares
of the Corporation's Common Stock as of February 27, 1998. As to shares
beneficially owned, each person, other than Mr. Efroymson, has sole voting and
investment power except that the following persons each share voting and
investment power with another person as to the number of shares indicated: Mr.
Boscia, 11,720 shares; Mr. Rolland, 174 shares; Ms. Ruckelshaus, 200 shares; and
Mr. Shaheen, 10,541 shares. In addition, the following persons have sole voting
power (and no investment power) as to the number of shares indicated: Mr.
Barrett, 1,393 shares; Mr. Bell, 1,393 shares; Mr. Boscia, 5,065 shares; Mr.
Efroymson, 1,393 shares; Mr. Kavetas, 1,331 shares; Mr. Hunter, 3,752 shares;
Ms. Lachman, 1,331 shares; Mr. Neal, 1,403 shares; Mr. Pieper, 742 shares; Mr.
Pietruski, 1,403 shares; Ms. Ruckelshaus, 1,331 shares; Mr. Shaheen, 4,455
shares; Mr. Vaughan, 5,045 shares; Mr. Walker, 1,403 shares; and Dr. Whitaker,
1,403 shares. Of the shares reported for Mr. Efroymson, he has sole voting and
investment power with respect to 4,430 shares, shared voting and investment
power with respect to 995,966 shares. Of the shares reported for Mr. Efroymson,
427,560 shares are held in various trusts and 577,736 are held by Moriah Fund,
Inc., a private foundation of which Mr. Efroymson is First Vice President and a
Director. Mr. Efroymson disclaims beneficial ownership of all but 7,081 shares.
<F2> This table includes the following shares which are subject to acquisition
within 60 days by the exercise of outstanding stock options: Mr. Anker, 144,000
shares; Mr. Boscia, 69,750 shares; Mr. Hunter, 49,125 shares; Mr. Rolland,
206,750 shares; Mr. Shaheen, 19,288 shares; and Mr. Vaughan, 27,125 shares.
</FN>
</TABLE>
<PAGE 27>
<TABLE>
TABLE B
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS <F1>
<CAPTION>
TITLE OF NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF PERCENT
CLASS OWNER BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C> <C>
Common The Dai-ichi Mutual Life 6,754,311 shares 6.7%
Insurance Company [sole voting and sole
1-13-1-Yuraku-Cho dispositive power of
Chiyoda-ku all shares]
Tokyo, Japan 100-84-11
Common The Capital Guardian Companies, 9,895,970 shares 9.9%
Inc. (formerly, The Capital Group, [sole dispositive power -
Inc.) and its subsidiary, Capital 9,895,970 shares;
Research and Management sole voting power
Company - 970 shares]
333 South Hope Street
Los Angeles, California 90071
Common Sanford C. Bernstein & Co.,Inc. 5,677,229 shares 5.6%
767 Fifth Avenue [sole voting power
New York, NY 10153 - 3,092,788 shares;
shared voting power
- 681,793 shares;
sole dispositive power
- 5,577,229 shares]
<FN>
<F1> The information set forth in this Table is based solely on a review by the
Corporation of the filings of Schedules 13G and D filed with the Securities and
Exchange Commission and provided to the Corporation by the above named
beneficial owners. Information regarding the amount and nature of beneficial
ownership is to the best of the Corporation's knowledge as of December 31, 1997;
the percentages, however, have been calculated by the Corporation as of the
record date, March 20, 1998.
</FN>
</TABLE>
<PAGE 28>
<TABLE>
TABLE C
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS PAYOUT
================================ ========================= =======
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL YEAR SALARY BONUS SATION<F2> AWARDS<F3> SARs PAYOUT(S) SATION<F8>
POSITION ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IAN M. ROLLAND 1997 1,062,308 -0- -0- ---- 88,425 -----<F6> 20,523
Chairman and CEO 1996 1,003,077 -0- -0- -0- 75,000 1,739,078<F7> 148,597<F9>
of LNC 1995 958,461 -0- -0- -0-<F4> 39,000 1,309,806<F4> 113,238
ROBERT A. ANKER<F1> 1997 450,915 65,192 -0- ---- -0- -----<F6> 51,708
Former Chairman and 1996 563,846 -0- -0- -0- 40,000 884,418<F7> 65,588<F9>
CEO of American 1995 534,038 -0- -0- -0-<F4> 25,000 704,915<F4> 84,151
States Insurance
Company
JON A. BOSCIA 1997 434,094 -0- -0- ---- 26,000 -----<F6> 22,041
President of LNC 1996 384,768 -0- -0- -0- 18,000 796,430<F7> 63,576<F9>
1995 375,384 -0- -0- 257,019 16,000 312,975<F5> 39,635
RICHARD C. 1997 394,076 -0- -0- ---- 26,074 -----<F6> 23,690
VAUGHAN 1996 343,653 -0- -0- 275,053 14,500 550,053<F7> 59,303<F9>
Executive Vice 1995 312,577 -0- -0- 385,247 12,000 200,000<F5> 36,514
President and CFO of
LNC
JACK D. HUNTER 1997 367,692 -0- -0- ---- 28,464 -----<F6> 33,095
Executive Vice 1996 351,443 -0- -0- -0- 14,500 591,301<F7> 36,953
President and General 1995 323,231 -0- -0- 200,026 11,000 200,000 39,690
Counsel of LNC
GABRIEL L. 1997 350,192 -0- 411,243 ---- 26,000 -----<F6> 18,476
SHAHEEN 1996 338,019 -0- -0- -0- 17,250 680,127<F7> 28,787
President and CEO of 1995 301,077 -0- -0- 237,505 14,000 237,500 31,042
The Lincoln National
Life Insurance Co.
<FN>
<F1> During 1997, Mr. Anker's compensation was paid by American States Financial
Corporation ("ASFC"), which, until October 1, 1997, was a subsidiary of the
Corporation. The amounts shown for 1997 reflect compensation paid to Mr. Anker
while ASFC was a subsidiary of the Corporation and do not reflect any amounts
that were paid or became payable after October 1, 1997. Prior to his employment
with ASFC, Mr. Anker was employed by, and participated in various plans of the
Corporation. The amounts set forth in columns (f) and (g) reflect awards made
under the Corporation's plans. No awards were made to Mr. Anker under ASFC plans
during the time ASFC was a subsidiary of the Corporation.
<F2> The amounts included represent amounts reimbursed during the fiscal year
for payment of taxes. Perquisites and other personal benefits of the Named
Executive Officers, other than Mr. Shaheen, did not exceed the lesser of $50,000
or 10% of the total of base salary and annual bonus for the Named Executive
Officers during the years reported in the table and, therefore, were not
included in the table. Amounts in this column for Mr. Shaheen represent
compensation related to Mr. Shaheen's overseas assignment, including United
Kingdom taxes ($238,750) and tax "gross-ups" ($117,058); the remaining $55,436
is attributable to related matters, including automobile reimbursement, tuition
and a one-time award relating to overseas service.
<F3> Represents the Fair Market Value on the date of grant of the award of
restricted shares of Common Stock awarded under the Executive Value Sharing Plan
("EVSP") for the periods ending in 1995 and 1996. No dividends are payable on
the restricted shares; however, when the restrictions lapse, a "dividend
equivalency" bonus is paid and reported in the "LTIP Payouts" column. The
restrictions on the shares awarded under the EVSP lapse on the third anniversary
of January 1 of the year next succeeding the applicable performance cycle.
Restricted stock awards for 1997 will not be available until late April or early
May 1998. Those awards will be included for the applicable year in next year's
proxy statement. The number and
<PAGE 29>
aggregate value of restricted stock holdings, including restricted stock units,
of the Named Executive Officers as of December 31, 1997, are as follows: Mr.
Rolland, 12,930 shares ($1,010,156); Mr. Anker, 0 shares; Mr. Boscia, 5,065
shares ($395,703); Mr. Vaughan, 9,024 shares ($705,000); Mr. Hunter, 3,752
shares ($293,125); and Mr. Shaheen, 10,776 shares ($841,875). As of December 31,
1997, the number and value of the aggregate restricted stock holdings (including
restricted stock units) of all employees of the Corporation were 500,053 shares
representing a total value of $39,066,640.
<F4> Because of 162(m) of the Code, the 1995 awards to Messrs. Rolland and Anker
were made in restricted stock units in lieu of restricted stock. The value of
these stock units is reflected in the "LTIP Payout(s)" column. Mr. Anker's
restricted stock units vested on the sale of ASFC.
<F5> The LTIP Payout includes cash payments under the EVSP for 1995.
<F6> The awards for 1997 are not yet available and will be reported in next
year's proxy statement. The amount of the awards reported in next year's proxy
statement will include the dividend equivalencies paid in cash (or credited to
the Corporation's deferred compensation plan) during 1997 with respect to
restricted stock or restricted stock units which vested in 1997, as follows: Mr.
Rolland, $157,328; Mr. Anker, $161,478; Mr. Boscia, $61,053; Mr. Vaughan,
$19,409; Mr. Hunter, $49,313; and Mr. Shaheen, $10,988. Mr. Anker's award will
be prorated, based on the period during which he was employed by the Corporation
and its subsidiaries.
<F7> The amount shown in last year's table (which consisted solely of dividend
equivalencies paid in cash (or credited to the Corporation's deferred
compensation plan) during 1996 with respect to restricted stock or restricted
stock units which vested in 1996) was increased by the following amounts, which
were awarded by the Board at its May, 1997, meeting and were not available for
inclusion in last year's proxy statement for the cash portion of the 1996 EVSP:
Mr. Rolland, $1,450,000; Mr. Anker, $769,000; Mr. Boscia, $725,000 and Mr.
Vaughan, $275,000. The cash portion of the EVSP award comprises $550,000 of the
amount shown for Mr. Hunter and $337,500 of the amount shown for Mr. Shaheen. An
additional $337,533 of the amount reported for Mr. Shaheen is comprised of the
portion of his EVSP that was made in restricted stock units. The remaining
amounts ($41,301, in the case of Mr. Hunter, and $5,094, in the case of Mr.
Shaheen) are attributable to dividend equivalencies paid in cash during 1996
with respect to restricted stock or restricted stock units that vested in 1996.
<F8> Amounts included in the All Other Compensation column are amounts
contributed or accrued for the Named Executive Officers under the Corporation's
Employees' Savings and Profit-Sharing Plan, the related supplemental savings
plans and the dollar value of insurance premiums paid by the Corporation. The
amounts contributed to the Profit-Sharing Plan and accrued supplements for
fiscal 1997 are as follows: Mr. Rolland, $15,935; Mr. Anker, $8,475; Mr. Boscia,
$6,511; Mr. Vaughan, $5,911; Mr. Hunter, $5,515; and Mr. Shaheen, $5,253;
however, the Board is expected to determine the additional profit-sharing amount
for 1997 at its May, 1998, board meeting, and this amount will be disclosed in
the 1999 proxy statement. The amounts of insurance premiums for fiscal 1997 are
as follows: Mr. Rolland, $95,323 (paid in February 1998 for 1997 premium); Mr.
Anker, $41,000; Mr. Boscia, $13,504; Mr. Vaughan, $15,779; Mr. Hunter, $14,855;
and Mr. Shaheen, $11,461.
<F9> The additional profit-sharing amounts for 1996 which were not available for
last year's proxy statement and which were awarded by the Board at its May,
1997, meeting were as follows: Mr. Rolland, $76,494; Mr. Anker, $34,542; Mr.
Boscia, $29,343; and Mr. Vaughan, $26,208.
</FN>
</TABLE>
<PAGE 30>
TABLE D
Effective January 1, 1994, Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), generally disallows deductions for
"non-performance-based" compensation in excess of $1,000,000 paid to the
executive officers who are listed in the Summary Compensation Table for the tax
year in which the Corporation would be entitled to the deduction. The
Corporation adopted, and shareholders approved, a restatement of the
Corporation's Executive Value Sharing Plan (the "EVSP") at its May 1994 annual
meeting of shareholders. Pursuant to the recommendation of the Compensation
Committee, after that Committee's consideration of a study by an outside
consultant in the field of executive compensation, the Corporation adopted and
shareholders approved at the May 1997 annual meeting of shareholders a new 1997
Incentive Compensation Plan (the "ICP"), affording the Compensation Committee
greater flexibility in tailoring awards to satisfy the Corporation's business
needs and objectives. The Corporation believes that incentive awards under both
the EVSP and the ICP can qualify for a "performance-based compensation"
exception to the Section 162(m) deduction disallowance rule. In order to effect
a transition from the EVSP to the ICP with respect to EVSP performance periods
that began with 1995 and 1996, the maximum amount payable for the 1997 ICP award
will be the greater of the amounts determined under the ICP maximums established
by the Compensation Committee in 1997 or the EVSP maximums established by that
Committee for the 1995-1997 period in 1995. The table below reflects the EVSP
maximums, which are the higher of the two previously established. Actual awards
have not yet been determined.
<TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<CAPTION>
Performance Estimated future payouts under
Number of or other non-stock price-based plans
shares, period until ============================================
units or other maturation or Threshold<F2>
Name rights<F1># payout $ or # Target<F3> Maximum<F4>
<S> <C> <C> <C> <C> <C>
Rolland N/A 1995 - 1997 870,000 2,200,000 3,800,000
Anker <F5> N/A 1995 - 1997 350,000 873,333 1,533,333
Boscia N/A 1995 - 1997 400,000 1,000,000 1,800,000
Vaughan N/A 1995 - 1997 320,000 790,000 1,400,000
Hunter N/A 1995 - 1997 320,000 790,000 1,400,000
Shaheen N/A 1995 - 1997 370,000 930,000 1,620,000
<FN>
<F1> The EVSP permits the Compensation Committee to establish performance goals.
Under the EVSP, goals for the Named Executive Officers relate the Corporation's
performance to a selected group of companies (the "Peer Group") which is not the
same as the peer group in the performance graph on page 23. If the increase in
the dividend-adjusted value sharing return on equity of the Corporation for the
three-year performance cycle exceeds the average performance of selected
companies, then an award will be made according to a pre-established formula
with Compensation Committee discretion to adjust downward. The selected
companies for the 1995--1997 cycle include: Allstate Corp., Aetna, Inc.,
American General Corp., CIGNA Corp., The Equitable Companies, Inc.,
Jefferson-Pilot Corporation, Provident Life & Accident, Providian Corporation
(formerly Capital Holding, Inc.), Reinsurance Group of America, Inc., Reliastar
Financial Corp. (formerly The NWNL Companies), SAFECO Corp., SunAmerica, Inc.,
Torchmark Corp., Transamerica Corp., Travelers Inc., USF&G Corp. and USLIFE
Corp.
<F2> The basic philosophy is to make no payment if performance is equal to or
below the average performance of the selected companies; however, the maximums
produced by the formula and payable at threshold are established at higher
levels than zero in order to permit the Compensation Committee the discretion to
adjust downward to comply with Section 162(m) of the Code. The average
performance is determined for each of the three years in a performance cycle by
deleting the top three and bottom three companies to determine an annual average
and then averaging the three years to determine the Corporation's ranking.
<F3> The target is the estimated maximum that would be paid in 1998 for the
1995--1997 three-year cycle (assuming the EVSP was still in effect) if the
Corporation's performance is at the 75th percentile compared to the Peer Group.
Upon completion of the cycle, any award may be paid in restricted stock or stock
units, cash or any combination thereof.
<F4> The maximum is the most that would be awarded if the Corporation was the top
company among the selected group of competitors for the 1995-1997 Performance
Cycle. If there is no increase in book value for a performance cycle, no payment
is made.
<F5> The estimated future payouts for Mr. Anker show threshold, target, and
maximum awards that have been prorated to reflect service during only a portion
of the period.
</FN>
</TABLE>
<PAGE 31>
<TABLE>
TABLE E
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
Individual Grants of Stock Price Appreciation
for Option Term
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or
Granted<F1><F2> Fiscal Year<F3> Base Price<F4> Expiration
Name (#) ($/Shares) Date<F5> 5%($) 10%($)
<S> <S> <C> <C> <C> <C> <C> <C>
Rolland 78,000 7.1676 58.94 05/14/07 2,890,912 7,326,438
10,425 0.9579 67.63 05/11/99 68,788 140,676
------ ------ --------- ---------
total: 88,425 8.1255 2,959,700 7,467,115
Anker -0- -0- -0- -0- -0- -0-
Boscia 26,000 2.3892 58.94 05/14/07 963,637 2,442,146
Vaughan 25,000 2.2973 58.94 05/14/07 926,574 2,348,217
1,074 0.0986 72.22 05/13/02 20,322 44,641
------ ------ --------- ---------
total: 26,074 2.3959 946,896 2,392,858
Hunter 25,000 2.2973 58.94 05/14/07 926,574 2,348,217
3,464 0.3183 67.63 05/10/00 35,713 74,845
------ ------ --------- ---------
total: 28,464 2.6156 962,287 2,423,062
Shaheen 26,000 2.3892 58.94 05/14/07 963,637 2,442,146
<FN>
<F1> Options granted on May 14, 1997 are exercisable starting 12 months after
the grant date with respect to 25% of the shares granted and with an additional
25% of the option shares granted becoming exercisable on each successive
anniversary, with full vesting occurring on the date of the first to occur of
death, disability, retirement or a change of control of the Corporation.
<F2> Mr. Rolland received a reload grant of 10,425 options on June 13, 1997 in
connection with his exercise of 30,000 options granted on May 10, 1989. Mr.
Vaughan received a reload grant of 1,074 options on August 5, 1997 in connection
with his exercise of 2,800 options granted on May 13, 1992. Mr. Hunter received
a reload grant of 3,464 options on June 13, 1997 in connection with his exercise
of 9,000 options granted on May 9, 1990. Reload options are exercisable two
years from the date of grant of the reload option if the fair market value of
LNC stock is 125% or more of the reload option price, with earlier exercise
permitted on the date of the first to occur of death, disability, retirement,
one month prior to the end of the ten-year term of the initial option or a
change of control of the Corporation.
<F3> The Corporation granted options representing 1,088,229 shares to employees in
fiscal year 1997.
<F4> The exercise price and tax withholding obligations related to exercise may be
paid by delivery of mature shares or by offset of the underlying shares, subject
to certain conditions.
<F5> The options granted May 14, 1997 were granted for a term of 10 years, subject
to earlier forfeiture in certain events related to termination of employment.
The reload options discussed in footnote 2 above were granted for the term of
the initial options, subject to earlier forfeiture in certain events related to
termination of employment.
</FN>
</TABLE>
<PAGE 32>
<TABLE>
TABLE F
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
(a) (b) (c) (d) (e)
Number of Unexercised Value of Unexercised in-the-money
Options held at December 31, Options Held at December 31,
1997 1997 <F1>
Shares
Name Acquired Value Realized Exercisable Unexercisable Exercisable Unexercisable
on Exercise ($)
<S> <C> <C> <C> <C> <C> <C>
Rolland 30,000 1,323,750 206,750 171,675 9,114,584 4,430,037
Anker 40,000 1,699,244 144,000 0 5,720,290 0
Boscia 7,000 263,535 69,750 51,250 3,061,419 1,369,896
Vaughan 2,800 124,597 32,325 45,449 1,306,784 1,151,751
Hunter 9,000 374,355 49,125 47,839 2,119,513 1,183,359
Shaheen 2,500 76,899 19,288 47,062 696,781 1,214,418
<FN>
<F1> Based on the closing price on the New York Stock Exchange Composite
Transactions ("NYSE") of the Corporation's Common Stock on December 31, 1997
($78.125).
</FN>
</TABLE>
<PAGE 33>
<TABLE>
TABLE G
PENSION TABLE
ESTIMATED ANNUAL RETIREMENT BENEFIT FOR CREDITED YEARS OF SERVICE<F1>,<F3>
<CAPTION>
Final
Average
Salary<F2> 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 49,755 $ 74,632 $ 99,510 $124,387 $149,265 $174,142 $181,642 $189,142
350,000 58,255 87,382 116,510 145,637 174,765 203,892 212,642 221,392
400,000 66,755 100,132 133,510 166,887 200,265 233,642 243,642 253,642
450,000 75,255 112,882 150,510 188,137 225,765 263,392 274,642 285,892
500,000 83,755 125,632 167,510 209,387 251,265 293,142 305,642 318,142
550,000 92,255 138,382 184,510 230,637 276,765 322,892 336,642 350,392
600,000 100,755 151,132 201,510 251,887 302,265 352,642 367,642 382,642
650,000 109,255 163,882 218,510 273,137 327,765 382,392 398,642 414,892
700,000 117,755 176,632 235,510 294,387 353,265 412,142 429,642 447,142
750,000 126,255 189,382 252,510 315,637 378,765 441,892 460,642 479,392
800,000 134,755 202,132 269,510 336,887 404,265 471,642 491,642 511,542
850,000 143,255 214,882 286,510 358,137 429,765 501,392 522,642 543,892
900,000 151,755 227,632 303,510 379,387 455,265 531,142 553,642 576,142
950,000 160,255 240,382 320,510 400,637 480,765 560,892 584,642 608,392
1,000,000 168,755 253,132 337,510 421,887 506,265 590,642 615,642 640,642
1,050,000 177,255 265,882 354,510 443,137 531,765 620,392 646,642 672,892
1,100,000 185,755 278,632 371,510 464,387 557,265 650,142 677,642 705,142
1,150,000 194,255 291,382 388,510 485,637 582,765 679,892 708,642 737,392
<FN>
<F1> This table assumes retirement at age 65 (current normal retirement date),
and at age 65, the following individuals will have the number of years credited
service indicated: Mr. Rolland, 42; Mr. Anker, 32; Mr. Boscia, 34;
Mr. Vaughan, 24; Mr. Hunter, 40; and Mr. Shaheen, 41. Mr. Anker does not
participate in the Lincoln pension plan.
<F2> Final average salary is the average of an employee's base salary paid in
any consecutive 60-month period during an employee's last ten years of active
employment which produces the highest average salary. The base salary for the
Named Executive Officers is reflected in Column (c) of the Summary Compensation
Table on page 28.
<F3> As a result of limitations under the Internal Revenue Code, a portion of
these amounts will be paid under supplemental benefit plans established by the
Corporation to provide benefits (included in this table) which would exceed
these limits.
</FN>
</TABLE>
<PAGE>
[Front of Proxy Card]
LINCOLN NATIONAL CORPORATION
FORT WAYNE, INDIANA
The undersigned shareholder in LINCOLN NATIONAL CORPORATION (the
"Corporation"), an Indiana corporation, hereby constitutes and appoints IAN M.
ROLLAND, JILL S. RUCKELSHAUS and C. SUZANNE WOMACK or any one or more of them,
the true and lawful attorney in fact and proxy of the undersigned, with full
power of substitution to all or any one or more of them, to vote as proxy for
and in the name, place and stead of the undersigned at the ANNUAL MEETING of the
shareholders of the Corporation, to be held at the Grand Wayne Center, 120 West
Jefferson Boulevard, Fort Wayne, Indiana at 10:00 a.m., local time, Thursday,
May 14, 1998, or at any adjournment thereof, all the shares of stock in the
corporation shown on the other side (whether Common Stock or $3.00 Cumulative
Convertible Preferred Stock, Series A) which the undersigned would be entitled
to vote if then personally present, hereby revoking any proxy heretofore given.
A majority of such attorneys and proxies who shall be present and shall act
as such at the meeting or any adjournment thereof, or if only one such attorney
and proxy be present and act, then that one, shall have and may exercise all the
powers hereby conferred.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND AUTHORIZATION WILL BE
GIVEN TO THE NAMED PROXIES, OR ANY ONE OR MORE OF THEM, IN THEIR DISCRETION TO
ACT OR VOTE UPON OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
[SEE REVERSE
(Continued, and to be Signed, on reverse side) SIDE]
FOLD AND DETACH HERE
[Back of Proxy Card]
[X] Please mark your
votes as in this
example.
The Board of Directors recommends a vote for the following:
FOR WITHHELD
1. To elect directors [ ] [ ] Nominees for three year terms
expiring 2001:
For all nominees except Jon A. Boscia, Eric G. Johnson,
as noted below: John M. Pietruski and Gilbert R.
Whitaker, Jr.
________________________
2. In their discretion, to act or vote FOR AGAINST ABSTAIN
upon other matters which may [ ] [ ] [ ]
properly come before the meeting
or any adjournment thereof.
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT ANNUAL MEETING
All of the above in accordance with the Notice of
Annual Meeting of Shareholders and Proxy Statement
for the meeting, receipt of which is hereby
acknowledged.
Signature must be that of the shareholder. If shares
are held jointly, each shareholder named should sign.
If the signer is a corporation, please sign full
corporate name by duly authorized officer. If the
signer is a partnership, please sign partnership
name by authorized person. Executors, administrators,
trustees, guardians, attorneys in fact, etc. should
so indicate when signing.
_________________________________________________
_________________________________________________
SIGNATURE DATE
FOLD AND DETACH HERE
LINCOLN NATIONAL CORPORATION
Company Highlights During 1997
o Income from operations, excluding special charges, and net income set
records in 1997.
o The quarterly dividend on LNC's Common Stock was increased at the November
1997 Board of Directors meeting to $.52 per share, the 15th consecutive year
of increased dividends.
o Completed the sale of American States Financial Corporation and announced
the acquisition of the individual life insurance and annuities business from
CIGNA Corp. These were the largest sale and purchase, respectively, in the
Company's history.
