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[LOGO OF MARSH & MCLENNAN COMPANIES APPEARS HERE]
1994
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
<PAGE>
[LOGO OF MARSH & MCLENNAN COMPANIES APPEARS HERE]
Dear Marsh & McLennan Stockholder:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders
of Marsh & McLennan Companies, Inc., which will be held at 10:00 a.m. on
Tuesday, May 17, 1994 in the auditorium on the second floor at 1221 Avenue of
the Americas, New York, New York.
The major items of business, as outlined in this Proxy Statement, will be the
election of six persons to serve as Class III directors and one person to serve
as a Class I director, the approval of the Senior Management Incentive
Compensation Plan, the approval of the 1994 Employee Stock Purchase Plan and
the ratification of the appointment of Deloitte & Touche as independent public
accountants for 1994.
Whether you plan to come to the Annual Meeting or not, your representation
and vote are important and your shares should be voted. Please complete, date,
sign and return the enclosed proxy card promptly.
As usual, we will send each stockholder a summary of the Annual Meeting. We
hope to see you at the meeting.
Very truly yours,
/S/ A.J.C. Smith
Chairman of the Board
March 31, 1994
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
OF
MARSH & MCLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
The Annual Meeting of Stockholders of Marsh & McLennan Companies, Inc., a
Delaware corporation (the "Company"), will be held on Tuesday, May 17, 1994 at
10:00 a.m. (local time) in the second floor auditorium at 1221 Avenue of the
Americas, New York, New York for the following purposes:
(1) To elect six persons to serve as Class III directors and one person
to serve as a Class I director;
(2) To approve the Marsh & McLennan Companies Senior Management Incentive
Compensation Plan;
(3) To approve the Marsh & McLennan Companies 1994 Employee Stock
Purchase Plan;
(4) To ratify the appointment of Deloitte & Touche as independent public
accountants for the Company for its fiscal year ending December 31, 1994;
and
(5) To transact such other business as may properly be brought before the
meeting.
Only stockholders of record at the close of business on March 18, 1994 are
entitled to vote at the Annual Meeting or any adjournment thereof. As of that
date, 73,670,277 shares of common stock were outstanding and entitled to one
vote on all matters submitted to stockholders. A list of stockholders will be
available for inspection for at least ten days prior to the Annual Meeting at
the principal executive offices of the Company at 1166 Avenue of the Americas,
New York, New York.
This proxy solicitation material is being mailed on or about March 31, 1994
to stockholders as of the record date with a copy of the Company's 1993 Annual
Report to Stockholders, which includes financial statements for the period
ended December 31, 1993.
The matters to be acted upon are described in this Notice of Annual Meeting
of Stockholders and Proxy Statement. Proxies will be voted at the Annual
Meeting, or at any adjournment thereof, at which a quorum is present, in
accordance with the directions on the proxy card. The holders of a majority of
the Company's common stock outstanding and entitled to vote who are present
either in person or represented by proxy constitute a quorum for the Annual
Meeting.
Unless otherwise directed in the proxy, the persons named therein will vote
FOR the election of the director nominees listed below, FOR approval of the
Senior Management Incentive
<PAGE>
Compensation Plan, FOR the approval of the 1994 Employee Stock Purchase Plan,
and FOR the ratification of the appointment of Deloitte & Touche as the
Company's independent public accountants for its fiscal year ending December
31, 1994.
Directors are elected by a plurality of the votes cast. "Plurality" means
that the individuals who receive the largest number of votes cast "For" are
elected as directors up to the maximum number of directors to be chosen at the
Annual Meeting. Consequently, any shares not voted "For" a particular director
(whether as a result of a direction to withhold or a broker nonvote) will not
be counted in such director's favor.
All other matters to be acted on at the Annual Meeting require the
affirmative vote of a majority of the shares present at the meeting to
constitute the action of the stockholders. In accordance with Delaware law,
abstentions will, while broker nonvotes will not, be treated as present for
purposes of the preceding sentence. A broker nonvote is a proxy submitted by a
broker in which the broker fails to vote on behalf of a client on a particular
matter for lack of instruction when such instruction is required by the New
York Stock Exchange.
As of the date hereof, the Board of Directors knows of no other business that
will be presented for consideration at the Annual Meeting. If other business
shall properly come before the Annual Meeting, the persons named in the proxy
will vote according to their best judgment.
DIRECTORS
The Board of Directors is divided into three classes. The regular terms of
office for the Class III, Class I and Class II directors expire at the 1994,
1995 and 1996 annual meetings of stockholders, respectively. Six persons are to
be elected at the Annual Meeting to hold office as Class III directors for a
term of three years and until their respective successors are elected and
qualified. One person is to be elected at the Annual Meeting to hold office as
a Class I director for a term expiring in 1995 and until his successor is
elected and qualified. The remaining Class I and the Class II directors will
not be elected at the Annual Meeting as their respective terms will continue.
Each director has served as a director of the Company since the year
indicated. Mr. Dean R. McKay, a Class II director, is retiring from the Board
at the Annual Meeting. He has been a director since 1982.
It is intended that shares represented by the proxies will be voted for the
election of all of the Class III nominees and the Class I nominee listed below.
In the unexpected event that any nominee should become unavailable to serve as
a director prior to the Annual Meeting for any reason, the persons designated
as proxies reserve full discretion to cast their votes for another person whom
the Board of Directors of the Company might designate in substitution.
2
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NOMINEES FOR CLASS III DIRECTORS
(TERMS EXPIRING IN 1997)
PETER COSTER DIRECTOR SINCE 1988
[PHOTO OF Mr. Coster, age 54, is President of Mercer Consulting
PETER COSTER Group, Inc. and of William M. Mercer Companies, Inc.,
APPEARS HERE] subsidiaries of the Company. He joined Mercer in 1984 upon
its acquisition of a U.K. benefits consulting firm Mr.
Coster joined in 1962.
LAWRENCE J. LASSER DIRECTOR SINCE 1987
[PHOTO OF Mr. Lasser, age 51, is President and Chief Executive
LAWRENCE LASSER Officer of Putnam Investments, Inc., a subsidiary of the
APPEARS HERE] Company. He joined Putnam in 1969. Mr. Lasser is a trustee
of the various mutual funds managed by Putnam Investment
Management, Inc., a subsidiary of the Company. He is a
director of INROADS/Central New England Inc., and a member
of the Boards of Overseers of the Museum of Fine Arts, and
of The Isabella Stewart Gardner Museum, all in Boston. He
is also a trustee of Beth Israel Hospital in Boston, MA and
of the Buckingham, Browne and Nichols School in Cambridge,
MA.
RICHARD M. MORROW** DIRECTOR SINCE 1991
[PHOTO OF Mr. Morrow, age 68, served as Chairman of the Board of
RICHARD MORROW Westinghouse Electric Corporation during part of 1993. He
APPEARS HERE] retired as Chairman and Chief Executive Officer of Amoco
Corporation in 1991. Mr. Morrow is a director of First
Chicago Corporation and its subsidiary, The First National
Bank of Chicago, and of R.R. Donnelley & Sons Company,
Potlatch Corporation, Seagull Energy Corporation and
Westinghouse Electric Corporation. He is also Chairman of
the National Academy of Engineering and a trustee of the
University of Chicago.
3
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JOHN T. SINNOTT DIRECTOR SINCE 1992
[PHOTO OF Mr. Sinnott, age 54, became President in 1990 and Co-Chief
JOHN SINNOTT Executive Officer in 1992 of Marsh & McLennan,
APPEARS HERE] Incorporated, a subsidiary of the Company, which he joined
in 1963. Mr. Sinnott is a trustee of The College of
Insurance in New York City.
FRANK J. TASCO* DIRECTOR SINCE 1979
[PHOTO OF Mr. Tasco, age 66, became Chairman of Borden, Inc. in
FRANK TASCO December 1993. He also serves as Chairman of the Executive
APPEARS HERE] Committee of the Company. He retired in 1992 as Chairman of
the Board and Chief Executive Officer of the Company, a
position he had held since 1986. Mr. Tasco is a director of
Borden, Inc., The Travelers Corporation and New York
Telephone Company. He is also Chairman of Phoenix House
Foundation.
R.J. VENTRES*** DIRECTOR SINCE 1988
[PHOTO OF Mr. Ventres, age 69, is a director of Banc One Corporation
R.J. VENTRES and Schering-Plough Corp., and a trustee of St. Clare's
APPEARS HERE] Hospital and Health Center in New York City. He served as
Chairman and Chief Executive of Borden, Inc. through March
1992 and as Chairman of the Executive Committee of Borden
from March 1992 until December 31, 1993.
4
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NOMINEE FOR CLASS I DIRECTOR
(TERM EXPIRING IN 1995)
R. J. GROVES NEW NOMINEE
[PHOTO OF Mr. Groves, age 58, is the Chairman and Chief Executive
R.J. GROVES Officer of Ernst & Young. He is a member of the Board of
APPEARS HERE] Trustees of the Business Council of the United Nations and
of the New York Public Policy Institute. He is also a
member of the Board of Directors of the New York State
Business Council and a Managing Director of the
Metropolitan Opera Association in New York City.
CLASS I DIRECTORS
(TERMS EXPIRING IN 1995)
LEWIS W. BERNARD*** DIRECTOR SINCE 1992
[PHOTO OF Mr. Bernard, age 52, is Chairman of Classroom, Inc., a non-
LEWIS BERNARD profit educational corporation. He retired in 1991 from
APPEARS HERE] Morgan Stanley & Co., Inc. where for almost 30 years he
held numerous positions, most recently chief administrative
and financial officer. Mr. Bernard is a director of Morgan
Stanley Group Inc., and a trustee of the American Museum of
Natural History, the Central Park Conservancy, The
Commonwealth Fund, the Educational Broadcasting
Corporation, the Harvard Management Company, and the John
and Mary R. Markle Foundation.
RICHARD H. BLUM DIRECTOR SINCE 1985
[PHOTO OF Mr. Blum, age 55, became Chairman and Chief Executive of
RICHARD H. BLUM Guy Carpenter & Company, Inc., a subsidiary of the Company,
APPEARS HERE] in 1990, having previously served as President and Chief
Executive. He joined Carpenter in 1958. He is also a
trustee of the College of Insurance in New York City.
5
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FRANK J. BORELLI DIRECTOR SINCE 1988
[PHOTO OF Mr. Borelli, age 58, has been Senior Vice President and
FRANK J. BORELLI Chief Financial Officer of the Company since 1984. He is a
APPEARS HERE] director of Mid Ocean Reinsurance Company Ltd. and United
Water Resources, Inc. Mr. Borelli is Treasurer and a
director of the Financial Executives Institute and is also
a trustee of the New York City Chapter of the National
Multiple Sclerosis Society and the Nyack Hospital.
RICHARD E. HECKERT* ** DIRECTOR SINCE 1989
[PHOTO OF Mr. Heckert, age 70, retired as Chairman of the Board and
RICHARD E. HECKERT Chief Executive Officer of E.I. du Pont de Nemours and
APPEARS HERE Company in 1989, having joined that company in 1949. He is
a director of du Pont, The Seagram Company Ltd., and
Remington Arms Company, Inc. and its parent, RACI Holding,
Inc. Mr. Heckert is also a member of the Board of Trustees
of the Carnegie Institution of Washington.
ROBERT M. G. HUSSON DIRECTOR SINCE 1985
[PHOTO OF Mr. Husson, age 56, is Chairman of Faugere & Jutheau S.A.,
ROBERT M.G. HUSSON an insurance broking subsidiary of the Company in France.
APPEARS HERE] He has been employed in various capacities by Faugere &
Jutheau S.A. since 1972. He is also chairman of several
insurance broking firms in Africa and in the Principality
of Monaco, in which country he is also an insurance general
agent and a director of Societe des Bains de Mer and of
Credit Foncier de Monaco, a local subsidiary of the Suez
Group.
6
<PAGE>
GEORGE PUTNAM DIRECTOR SINCE 1987
[PHOTO OF Mr. Putnam, age 67, is Chairman of the Board of Trustees
GEORGE PUTNAM and President of the various mutual funds managed by Putnam
APPEARS HERE] Investment Management, Inc., a subsidiary of the Company,
and is Chairman of Putnam Investment Management, Inc. He is
a director of The Boston Company, Inc., The Boston Safe
Deposit & Trust Company, Freeport-McMoRan, Inc., General
Mills, Inc., Houghton Mifflin Company and Rockefeller
Group, Inc. He is also Chairman of the WGBH Educational
Foundation, President of McLean Hospital, and a trustee of
the Museum of Fine Arts (Boston), Massachusetts General
Hospital and Colonial Williamsburg Foundation.
CLASS II DIRECTORS
(TERMS EXPIRING IN 1996)
ROBERT CLEMENTS DIRECTOR SINCE 1981
[PHOTO OF Mr. Clements, age 61, became Chairman and Chief Executive
ROBERT CLEMENTS Officer of Marsh & McLennan Risk Capital Corp., a
APPEARS HERE] subsidiary of the Company, in January 1994. Prior thereto
he served as President of the Company since 1992, having
been Vice Chairman during 1991. He was Chairman of Marsh &
McLennan, Incorporated, a subsidiary of the Company, from
1988 until March 1992. He joined Marsh & McLennan, Ltd., a
Canadian subsidiary of the Company, in 1959. Mr. Clements
is a director of EXEL Limited and Mid Ocean Reinsurance
Company Ltd. He is also an Overseer of the Institute for
Civil Justice and a trustee of The College of Insurance.
RICHARD S. HICKOK** DIRECTOR SINCE 1983
[PHOTO OF Mr. Hickok, age 68, is Chairman of Hickok Associates, Inc.,
RICHARD S. HICKOK a financial consulting firm. He retired in 1983 from KMG
APPEARS HERE] Main Hurdman, Certified Public Accountants, where he had
been Chairman. Mr. Hickok is a director of Alpine Lace
Brands, Inc., Comstock Resources Inc., Geonex Corporation,
Projectavision, Inc. and Marcam Corporation.
7
<PAGE>
DAVID D. HOLBROOK DIRECTOR SINCE 1992
[PHOTO OF Mr. Holbrook, age 55, became President in 1988 and Co-Chief
DAVID D. Executive Officer in 1992 of Marsh & McLennan,
HOLBROOK Incorporated, a subsidiary of the Company, which he joined
APPEARS HERE] in 1960. Mr. Holbrook is Chairman of the Board of Directors
of the Theatre Development Fund in New York City, a
director of Security Equity Life Insurance Company, and a
trustee of The Millbrook School, Millbrook, N.Y., St.
Luke's/Roosevelt Hospital Center in New York and Outward
Bound, U.S.A.
ADELE SMITH SIMMONS** DIRECTOR SINCE 1978
[PHOTO OF Mrs. Simmons, age 52, became President of the John D. and
ADELE SMITH Catherine T. MacArthur Foundation in 1989. Prior thereto
SIMMONS she was President of Hampshire College, Amherst,
APPEARS HERE] Massachusetts. She is a director of First Chicago
Corporation and its subsidiary, The First National Bank of
Chicago, the Synergos Institute and the Union of Concerned
Scientists. She is also a member of the international
Commission on Global Governance.
A. J. C. SMITH* DIRECTOR SINCE 1977
[PHOTO OF Mr. Smith, age 59, became Chairman of the Board and Chief
A.J.C. SMITH Executive Officer of the Company in 1992. He also assumed
APPEARS HERE] the duties of President in January 1994. He previously
served as President from 1986 to 1992. He joined William M.
Mercer Limited, a Canadian subsidiary of the Company, in
1961. Mr. Smith is a trustee of the various mutual funds
managed by Putnam Investment Management, Inc., a subsidiary
of the Company. He is also a member of the Board of
Trustees of the Central Park Conservancy and the Carnegie
Hall Society, both in New York City.
8
<PAGE>
PHILIP L. WROUGHTON DIRECTOR SINCE 1988
[PHOTO OF Mr. Wroughton, age 60, became Chairman of Marsh & McLennan,
PHILIP L. Incorporated, a subsidiary of the Company, in 1992, having
WROUGHTON been Deputy Chairman since 1990. He is also Chairman of
APPEARS HERE] C.T. Bowring & Co. Limited, a subsidiary of the Company. He
joined C.T. Bowring & Co. (Insurance) Limited in 1961. He
is a member of the Council of Lloyd's of London, which is
the governing body of the Lloyd's insurance market, and of
the Lloyd's Market Board.
* Member of the Executive Committee, of which Mr. Tasco is Chairman.
** Member of the Audit Committee, of which Mr. Hickok is Chairman.
*** Member of the Compensation Committee, of which Mr. McKay, a director who is
retiring at the Annual Meeting, is the Chairman.
The Executive Committee has all the powers of the Board of Directors, when it
is not in session, in the management of the business and affairs of the
Company, except as otherwise provided in the Company's by-laws or in
resolutions of the Board of Directors and under applicable law. The Executive
Committee held one meeting during 1993.
The Audit Committee submits recommendations to the Board of Directors with
respect to the selection of the Company's independent public accountants and on
any other matters it deems appropriate. It reviews the annual financial
statements of the Company with the Company's independent public accountants,
the practices and procedures adopted by the Company in the preparation of such
statements, and the independent public accountant's annual scope of audit. The
Audit Committee is required to meet at least annually with such accountants and
at any time when considered appropriate by the Audit Committee or such
accountants. The Audit Committee conducted six meetings during 1993.
The Compensation Committee determines the compensation of the Company's Chief
Executive Officer, approves the compensation of other senior executives of the
Company and approves the retention by the Company's management of consultants
on matters relating to the compensation of the Chief Executive Officer and
senior executives of the Company. In addition, the Compensation Committee
oversees general compensation policies and practices and administers the
Company's stock-based award plans. No member of the Compensation Committee may
be an employee of the Company or be eligible to receive grants under any plan
that the Compensation Committee administers. The Compensation Committee
conducted five meetings during 1993.
The Board of Directors conducted five meetings during 1993. The average
attendance by directors at the meetings of the Board of Directors and
committees thereof was 99% and all directors attended more than 75% of the
meetings of the Board of Directors and committees on which they served.
9
<PAGE>
DIRECTORS' COMPENSATION
As compensation for their services, Messrs. Bernard, Heckert, Hickok, Morrow,
Putnam, Tasco and Ventres, and Mrs. Simmons, each receive, and upon election
Mr. Groves will receive, a retainer of $35,000 per year plus a fee of $1,000
for each meeting of the Board of Directors or committee thereof attended or
participated in, and reimbursement of related expenses. The chairman of each
committee receives an additional retainer of $5,000 per year; other members of
committees receive an additional retainer of $2,000 per year. Directors
receiving compensation may enter into agreements with the Company deferring
payment to specified dates. Moreover, upon retirement from the Board, these
directors typically become advisory directors, available for consultation with
management, and receive, until age 80, an annual amount equal to their Board
retainer at the time of retirement. The remaining directors receive no specific
compensation for their services as directors or members of any committee.
Upon his retirement from the Company on September 1, 1992, the Company
engaged Mr. Tasco as a consultant for specific business-related matters. He
received $325,000 for such services in 1993.
EMPLOYMENT AGREEMENT
Marsh & McLennan Risk Capital Corp. ("MMRCC"), a wholly-owned subsidiary of
the Company, entered into an employment agreement effective January 1, 1994,
with Mr. Robert Clements. In connection with this Agreement, Mr. Clements
resigned from his position as President and a member of the Executive Committee
of the Board of Directors of the Company, effective December 31, 1993, and
became Chairman and Chief Executive Officer of MMRCC.
Under the Agreement, the term of which expires on September 30, 1997, Mr.
Clements is entitled to a base salary of $800,000 per year; a stipend of
$450,000 per year as a consultant to the Company with respect to insurance-
related matters and such matters as may be assigned to him by the Chief
Executive Officer of the Company; minimum bonuses of $800,000 per year for the
years 1994 through 1996 and $600,000 for 1997; and continued participation in
the Company's various retirement and welfare plans. In addition, Mr. Clements
will be entitled to certain performance payments based on the extent to which
the annual rate of return on The Trident Partnership, L.P., a Cayman Islands
limited partnership ("Trident") exceeds 15%. Such payments will be based upon
specified percentages of MMRCC's capital raising fee and, if the annual rate of
return exceeds 20%, specified percentages of amounts received by the Company
from Trident.
The Agreement also provides for Mr. Clements to provide consulting services
for the period October 1997 through September 30, 1999, with potential annual
extensions thereafter, for which he will be compensated at the rate of $300,000
per year. The Company has guaranteed MMRCC's obligations under the Agreement.
If Mr. Clements' employment or consultancy is terminated by MMRCC (other than
for cause or disability) or if Mr. Clements terminates his employment or
consultancy for "Good Reason", Mr. Clements will be entitled to receive his
base salary and stipend for the remainder of the employment
10
<PAGE>
period, as well as annual bonuses for the remainder of such period (at the rate
of $1,000,000 per year or $750,000 for the nine-month period ending September
30, 1997). In addition, he will be entitled to his post-employment consulting
fee through September 30, 1999 (or, if the consultancy has been extended beyond
that date, through the September 30 next following the date of termination) and
receipt of the performance payments on the basis described above. "Good Reason"
is defined to include a reduction in compensation; the failure to continue Mr.
Clements in his positions of Chairman and Chief Executive Officer of MMRCC
during the employment period; a change in duties materially inconsistent with
the status of those positions; and a change in control of the Company (as
described in footnote 1 to the "Stock Option Grants in 1993" table herein) or
of MMRCC (defined to mean that the Company no longer owns at least 50% of
MMRCC).
11
<PAGE>
SECURITY OWNERSHIP
The following table reflects as of February 28, 1994 (except with respect to
interests in the Company's Stock Investment Plan, which are as of December 31,
1993) the number of shares of common stock which each director, each nominee
and each named executive officer has reported as owning beneficially, and
which all directors, nominees and executive officers of the Company have
reported as owning beneficially as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
---------------------------------------------------
OTHER
SOLE VOTING THAN SOLE SUBJECT TO
AND VOTING AND EXERCISABLE
INVESTMENT INVESTMENT STOCK
NAME POWER POWER(2) OPTIONS TOTAL
- ---- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Lewis W. Bernard............ 1,000 -- -- 1,000
Richard H. Blum............. -- 97,251 67,500 164,751
Frank J. Borelli............ 10,963 25,750 70,388 107,101
Robert Clements............. 15,204 42,670 115,000 172,874
Peter Coster................ 5,513 21,101 58,000 84,614
R. J. Groves................ 500 -- -- 500
Richard E. Heckert.......... 500 -- -- 500
Richard S. Hickok........... -- 1,000 -- 1,000
David D. Holbrook........... 18,516 29,171 43,750 91,437
Robert M.G. Husson(3)....... -- 200 -- 200
Lawrence J. Lasser.......... 274 38,200 57,500 95,974
Dean R. McKay............... 3,400 -- -- 3,400
Richard M. Morrow........... 1,000 500 -- 1,500
George Putnam............... 152,825 23,000 -- 175,825
Adele Smith Simmons......... 77,399 48,685 -- 126,084
John T. Sinnott............. 9,858 34,592 46,750 91,200
A. J. C. Smith.............. 98,368 49,300 155,375 303,043
Frank J. Tasco.............. 99,599 28,720 180,000 308,319
R.J. Ventres................ 2,500 -- -- 2,500
Philip L. Wroughton......... 12,418 19,012 62,500 93,930
All directors and executive
officers as a group,
including the above
(22 individuals)........... 527,570 482,780 898,263 1,908,613
</TABLE>
- --------
(1) As of February 28, 1994, no director, nominee or named executive officer
beneficially owned more than 1% of the outstanding common stock, and all
directors, nominees and executive officers as a group beneficially owned
approximately 2.55% of the outstanding common stock.
(2) Includes the number of shares (i) of restricted stock that may in the
future vest to such individuals, (ii) that are held indirectly for the
benefit of such individuals or directly or indirectly for certain members
of such individuals' families, with respect to
12
<PAGE>
which shares beneficial ownership is, in certain cases, disclaimed and (iii)
that represent such individuals' interests as of December 31, 1993 in the
Company's Stock Investment Plan but not any such interests which may have
accrued since that date.
(3) Excludes 40,000 shares owned by the estate of Mr. Husson's late father-in-
law. Mr. Husson's wife is one of the beneficiaries of the estate, and Mr.
Husson, who disclaims beneficial ownership of the shares, is a co-
executor.
The following table reflects the number of shares of common stock
beneficially owned by persons known to the Company to own more than 5% of the
outstanding shares:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF COMMON
BENEFICIAL STOCK OUTSTANDING AT
NAME AND ADDRESS OWNERSHIP DECEMBER 31, 1993
---------------- ---------- --------------------
<S> <C> <C>
Marsh & McLennan Companies Stock Investment
Plan(1)...................................... 4,714,885 6.41%
1166 Avenue of the Americas
New York, New York 10036
Invesco PLC(2)................................ 4,628,829 6.29%
</TABLE>
- --------
(1) Under the provisions of the Stock Investment Plan, voting rights are
passed through to the employees in proportion to their interests. Unvoted
shares will be voted by the trustee in proportion to the shares voted.
Shares held in the Plan are registered in the name of the Plan's trustee
and not in the names of the individual participants. Of the 4,714,885
shares held in the Plan at December 31, 1993, 54,003 or 1.1 % were held
for directors and executive officers of the Company and are included in
the security ownership table above.
(2) Based upon a Schedule 13G filed by Invesco PLC, dated February 10, 1994,
on behalf of itself and affiliated entities.
13
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth cash and other compensation paid or accrued
for services rendered in 1993, 1992 and 1991 (except as otherwise provided) to
the Chief Executive Officer and each of the four most highly compensated
executive officers of the Company (other than the Chief Executive Officer)
whose cash compensation exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- ----------------------
RESTRICTED
OTHER ANNUAL STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS UNDERLYING COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) ($)(4) OPTIONS (#) ($)(5)
- --------------------- ---- --------- --------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. J. C. Smith 1993 1,000,000 675,000 82,911 449,400 100,000 40,000
Chairman and Chief 1992 893,750 1,160,000 154,542 814,320 30,000 9,177
Executive Officer(1)
Marsh & McLennan
Companies, Inc.
Lawrence J. Lasser 1993 770,000 3,200,000 -- 346,413 50,000 3,115,500
President 1992 725,000 1,650,000 -- 325,050 -- 108,750
Putnam Investments, 1991 685,000 1,300,000 -- 809,559 30,000 --
Inc.
Robert Clements 1993 800,000 500,000 67,848 1,292,025 60,000 32,000
President 1992 708,333 900,000 102,855 618,536 25,000 9,155
Marsh & McLennan 1991 570,000 330,000 -- 411,951 40,000 --
Companies, Inc.
Richard H. Blum 1993 540,000 250,000 -- 243,425 30,000 21,599
Chairman 1992 540,000 330,000 61,624 336,166 -- 9,155
Guy Carpenter & 1991 510,000 200,000 -- 230,006 25,000 --
Company, Inc.
Peter Coster 1993 575,000 210,000 80,346 262,150 40,000 22,999
President 1992 540,000 550,000 -- 336,166 -- 9,155
Mercer Consulting 1991 495,000 200,000 -- 359,715 30,000 --
Group, Inc.
</TABLE>
- --------
(1) In accordance with applicable Securities and Exchange Commission rules,
information regarding cash and other compensation paid or accrued to Mr.
Smith is provided only since 1992, the year in which he became the Chief
Executive Officer.
(2) As more fully explained in last year's proxy statement, a portion of the
1992 bonuses included an additional cash amount, which in other years is
paid in the form of long term compensation and which appears under the
heading "Restricted Stock Awards." This accounted for $580,000 of Mr.
Smith's 1992 bonus, $450,000 of Mr. Clements' 1992 bonus, $110,000 of Mr.
Blum's 1992 bonus, and $275,000 of Mr. Coster's 1992 bonus. The
Compensation Committee changed the form of these
14
<PAGE>
payments in 1992 because of anticipated changes in the federal tax laws for
1993 that were expected to be unfavorable to the Company and its executives.
The 1993 bonuses do not include these additional cash awards. In 1994, the
Compensation Committee returned to the practice of awarding long term
compensation in the form of restricted stock units to each of these
individuals. The restricted stock units are considered part of 1994
compensation and, therefore, will be reported in next year's Summary
Compensation Table.
(3) Represents the amount of payments in applicable years to the affected
individuals to cover tax liabilities arising from the funding of annuities
under the Benefit Equalization Plan, which is part of the U.S. Retirement
Program.
(4) At December 31, 1993, each individual in the Summary Compensation Table had
outstanding shares of restricted stock with an aggregate value as follows:
Mr. Smith, 49,300 shares worth $4,005,625; Mr. Lasser, 38,200 shares worth
$3,103,750; Mr. Clements, 41,390 shares worth $3,362,938; Mr. Blum, 29,770
shares worth $2,418,813; and Mr. Coster, 19,260 shares worth $1,564,875.
Holders of shares of restricted stock receive the same dividends as those
paid on the outstanding shares of common stock and such shares are subject
to vesting over a period of up to ten years. Vesting of such shares may be
accelerated upon a change of control.
Under the Special Severance Pay Plan, holders of restricted stock with at
least 10 years of service will receive a cash payment upon forfeiture of
their restricted stock if their employment with the Company terminates. The
amount of such payment is based on years of service, with the individual
receiving up to a maximum of 90% of the value of the restricted shares
after 25 years of service, and is conditioned upon execution of a non-
solicitation agreement.
As discussed in footnote 2 above, the individuals in the Summary
Compensation Table did not receive restricted stock unit awards in 1993 but
did receive awards of restricted stock. In 1992, the Company accelerated
the vesting of all outstanding restricted stock units (formerly called
incentive units) that were awarded under the 1988 Incentive and Stock Award
Plan to the individuals listed in the Summary Compensation Table. Such
units, which are included in the totals in the "Restricted Stock Awards"
column for 1992 and 1991, originally were scheduled to vest three years
from the date of grant. As a result of the accelerated vesting, Mr. Smith
received 5,760 shares of common stock from his 1992 award. Mr. Lasser
received 6,760 shares from his 1991 award; he was not awarded any units in
1992. Mr. Clements received 4,140 and 2,030 shares from his 1992 and 1991
awards, respectively. Mr. Blum received 1,250 shares from his 1992 award;
he was not awarded any units in 1991. Mr. Coster received 1,250 and 1,860
shares from his 1992 and 1991 awards, respectively. Because of these
actions, the individuals in the Summary Compensation Table had no
outstanding restricted stock units at December 31, 1993.
(5) Represents for 1993 (a) Company matching contributions under the Stock
Investment Plan for Messrs. Coster and Blum of $9,433 each, and under the
Stock Investment Supplemental Plan of $40,000 for Mr. Smith, $32,000 for
Mr. Clements, $12,166 for Mr. Blum, and $13,566 for Mr. Coster, and (b)
contributions by Putnam Investments, Inc. of $30,000 to the Putnam Profit
Sharing Plan and $85,500 to the Putnam Excess Contribution Plan for Mr.
Lasser. In addition, Mr. Lasser received in 1993 a special payment of $3
million reflecting his contributions to Putnam's performance over several
years and not related to the annual incentive compensation program in which
he participates.
15
<PAGE>
STOCK OPTION GRANTS IN 1993
The following table sets forth certain information concerning stock options
granted during 1993 by the Company to the Chief Executive Officer and each of
the four most highly compensated executive officers of the Company (other than
the Chief Executive Officer).
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
----------------------------------------- ----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED IN 1993 ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
A.J.C. Smith............ 100,000 2.8 93.625 3/15/03 5,888,026 14,921,414
Lawrence J. Lasser...... 50,000 1.4 93.625 3/15/03 2,944,013 7,460,707
Robert Clements......... 60,000 1.7 93.625 3/15/03 3,532,816 8,952,848
Richard H. Blum......... 30,000 0.9 93.625 3/15/03 1,766,408 4,476,424
Peter Coster............ 40,000 1.1 93.625 3/15/03 2,355,210 5,968,566
MMC Stockholders(3)..... 4,353,112,083 11,031,640,698
</TABLE>
- --------
(1) The options described above are non-qualified options that vest 25% a year
beginning one year from March 16, 1993, the date of grant. The exercise
price of these options may be paid in cash or in shares of common stock,
including shares of restricted stock. In the event of a change in control
of the Company, all stock options will become fully exercisable and
vested, and any restrictions contained in the terms and conditions of the
option grants shall lapse. If any payments made in connection with a
change in control are subject to the excise tax imposed under the Federal
tax laws, the Company will increase the option holder's payment as
necessary to restore such option holder to the same after-tax position he
would have had if the excise tax had not been imposed. "Change in Control"
of the Company means generally any "person" owning securities with 50% or
more of the voting power of the Company; within a two-year period (with
certain exceptions) a change in directors constituting a majority of the
Board of Directors; and mergers resulting in the Company's stockholders
not constituting 50% or more in voting power of the surviving entity.
(2) The dollar amounts are the result of calculations at the 5% and 10% growth
rates set by the SEC; the rates are not intended to be a forecast of
future stock price appreciation. A zero percent stock price growth rate
will result in a zero gain for optionees. A grant date valuation method
was not used as the Company does not know of any formula that produces a
reasonably accurate present value for employee stock options.
(3) The dollar amounts reflected herein are included for comparative purposes
to show the gain that would be achieved by the holders of the outstanding
common stock at the assumed appreciation rates at the end of the 10-year
term of the options granted in 1993 at an exercise price of $93.625.
AGGREGATED STOCK OPTION EXERCISES IN 1993 AND STOCK OPTION VALUE AT DECEMBER
31, 1993
The following table sets forth certain information concerning stock options
exercised during 1993 by the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company (other than the Chief
Executive Officer) and the number and value of specified unexercised options
at December 31, 1993. The value of unexercised in-the-money stock options at
December 31, 1993 shown below is presented pursuant to SEC rules and is based
on the December 31, 1993 closing price of the common stock on the New York
Stock Exchange of $81.25 per share. The actual amount, if any, realized upon
exercise of stock options will depend upon the market price of the common
stock relative to the exercise price per share at the time the stock option is
exercised. There is no assurance that the values of unexercised in-the-money
stock options reflected in this table will be realized.
16
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1993 DECEMBER 31, 1993
------------------------- -------------------------
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A.J.C. Smith............ -- -- 115,375 115,000 749,031 110,625
Lawrence J. Lasser...... -- -- 45,000 50,000 245,625 --
Robert Clements......... 20,000 726,250 87,500 72,500 711,938 92,188
Richard H. Blum......... -- -- 60,000 30,000 821,063 --
Peter Coster............ -- -- 48,000 40,000 210,750 --
</TABLE>
UNITED STATES RETIREMENT PROGRAM
The Company maintains a United States retirement program consisting of the
Marsh & McLennan Retirement Plan, a non-qualified Benefit Equalization Plan and
a non-qualified Supplemental Retirement Plan.
The following table shows the estimated annual straight-life annuity benefit
payable (or in the case of those covered by the Benefit Equalization Plan, the
pre-tax equivalents of the after-tax benefits received) under this retirement
program to employees with the specified Maximum Average Salary (average salary
over the 60 consecutive months of employment that produces the highest average)
and specified years of service upon retirement at age 65, including any
adjustment for Social Security benefits:
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
MAXIMUM
AVERAGE SALARY 15 20 25 30 35
- ----------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 500,000......................... $141,742 $188,988 $236,236 $276,236 $301,236
$ 550,000......................... $156,742 $208,988 $261,236 $305,236 $332,736
$ 600,000......................... $171,742 $228,988 $286,236 $334,236 $364,236
$ 650,000......................... $186,742 $248,988 $311,236 $363,236 $395,736
$ 700,000......................... $201,742 $268,988 $336,236 $392,236 $427,236
$ 750,000......................... $216,742 $288,988 $361,236 $421,236 $458,736
$ 800,000......................... $231,742 $308,988 $386,236 $450,236 $490,236
$ 850,000......................... $246,742 $328,988 $411,236 $479,236 $521,736
$ 900,000......................... $261,742 $348,988 $436,236 $508,236 $553,236
$ 950,000......................... $276,742 $368,988 $461,236 $537,236 $584,736
$1,000,000......................... $291,742 $388,988 $486,236 $566,236 $616,236
$1,050,000......................... $306,742 $408,988 $511,236 $595,236 $647,736
$1,100,000......................... $321,742 $428,988 $536,236 $624,236 $679,236
$1,150,000......................... $336,742 $448,988 $561,236 $653,236 $710,736
$1,200,000......................... $351,742 $468,988 $586,236 $682,236 $742,236
</TABLE>
17
<PAGE>
The compensation of participants used to calculate the retirement benefit
consists of regular salary as disclosed in the "Salary" column of the Summary
Compensation Table and excludes bonuses and other forms of compensation not
regularly received. For the five individuals named above, other than Mr.
Lasser who participates in the Putnam Profit Sharing Plans and not in the
Company's U.S. retirement program, the 1993 compensation used to calculate the
Maximum Average Salary and the number of years of credited service are as
follows: Mr. Smith, $1,000,000, 31 years; Mr. Clements, $800,000, 35 years;
Mr. Blum, $540,000, 36 years; and Mr. Coster, $575,000, 32 years.
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY, POLICIES AND PLANS FOR EXECUTIVE OFFICERS
The Company is a professional services firm with businesses having distinct
economic characteristics, marketplaces and operating conditions. The
leadership position attained over time by the Company's operating subsidiaries
in their respective industries--in terms of services rendered, market share,
revenue, profitability and rate of growth--has been earned largely through the
selection, training and development of top caliber executive, managerial and
professional talent. Ongoing investment in the firm's human capital has
produced favorable long-term returns to Company stockholders. Therefore, it is
critical to the ongoing success of the Company that its executives continue to
be among the most highly qualified and talented available in their respective
business segments to lead the organization in the creation of stockholder
value.
The Compensation Committee of the Board of Directors, all of whose members
are disinterested outside directors, is charged by the Company's by-laws with
ensuring that the Company's compensation philosophy and policies, which are
intended to attract, retain and motivate a strongly competitive staff, are "in
the Corporation's best interests." To that end, the Company's executive
compensation program is designed to reinforce business strategies, reflect
marketplace practices and dynamics, and provide cost and tax effective forms
of remuneration. The Committee reviews the program annually to consider and
implement any changes necessary to achieve these ongoing objectives.
The Company has a pay-for-performance philosophy, which is implemented
through compensation policies and plans intended to enhance financial
performance in a highly competitive marketplace, which includes competition
from privately-held firms offering attractive equity ownership opportunities.
In terms of compensation data, the Committee periodically reviews the levels
of executive compensation from a number of general survey sources, with a
focus on available pay data relating to strong competition for professional
talent in the Company's lines of business. In addition, the Committee
periodically evaluates Chief Executive Officer pay by comparing it to a report
prepared by an external consultant, with the data derived from a selected
group of 25-30 major corporations in diversified financial, banking, insurance
and industrial business sectors. This selective grouping is broader than the
peer grouping in the Comparison of Cumulative Total Shareholder Return in
order to obtain a more meaningful representation of competitive compensation
practices and levels for senior executive positions.
18
<PAGE>
The Chief Executive Officer of the Company heads a group of senior management
officers, most of whom are executives of the Company's operating subsidiaries.
These senior officers participate in a common set of compensation plans and are
remunerated in accordance with award guidelines and performance criteria that
reflect overall Company and individual operating unit performance. The plans,
which include short-term and long-term elements, are intended to be
retrospective, reflecting prior individual and organizational performance, as
well as prospective, providing motivation and rewards for achieving future
success. Such compensation is designed to vary directly with the combined
annual and long-term performance of the employee, the operating subsidiary and
the Company. Moreover, individual contributions by these executives are
assessed in the context of a top management team that views itself as a
professional partnership.
Short-Term Compensation (Salary and Annual Incentive Awards)
With regard to short-term compensation, salaries are reviewed annually and
increases granted by the Committee on a discretionary basis in consideration of
current individual and organizational performance, length of service,
affordability and the competitive marketplace. Organizational performance
refers to the business unit's success in achieving business objectives and
addressing conditions affecting long-term growth and profits. For participants
in the senior management compensation program, salaries are compared to the top
quartile of the relevant marketplace, with aggregate annual cash compensation
adjusted to reflect Company performance. Salaries comprised 47% of total
compensation (excluding stock options) in 1993.
The size of the incentive award pool for senior management cash bonuses is
based on profit and reflects the Company's growth in net operating income.
However, the Committee may, in its sole discretion, authorize a payout of less
than the full bonus pool as it did for 1993. In this regard, a specific target
level is not established for the award pool, nor are minimum award levels
guaranteed for bonus recipients. With respect to individual award
determinations, such assessments by the Committee are largely judgmental, not
formulaic, and reflect the executive's level within the organization and
relative contribution (compared to the internal peer group) to the firm's
earnings growth. For 1993, bonus awards to executives at Putnam Investments,
Inc. reflect exceptional financial performance, while awards to individuals in
the Company's other business sectors were, on average, similar to the prior
year. In the senior management group, individual bonuses, which may range from
no award to two times salary, averaged 31% of total compensation (excluding
stock options) for 1993.
Long-Term Compensation (Restricted Stock, Restricted Stock Unit and Stock
Option Awards)
It is the Committee's strong belief that the continuing success of the
Company is dependent on the effective retention and motivation of its
executives. Accordingly, long-term compensation is designed to recognize the
individual's past and potential contributions to the organization, and to align
the executive's financial interests with those of the Company's stockholders by
fostering Company stock ownership. Such equity opportunities for Company
executives are made available through stockholder-
19
<PAGE>
approved plans that provide for restricted stock, restricted stock unit and
stock option grants. Moreover, in order to help promote retention of key talent
through stock ownership that is at risk, ownership rights to restricted stock,
restricted stock units and stock options are acquired over time.
Within this framework, the size of each executive officer's equity grant is
determined at the sole discretion of the Committee. Such determinations include
consideration of the Company's future profit performance and the individual's
organizational role, current performance and potential to contribute to the
long-term success of the Company, as well as a review of competitive practices
on which award guidelines are based. The Committee also intends to provide for
equity awards that approximate the median range of awards, according to data
provided by an external consultant. These considerations, and not prior stock-
based awards or Company stock ownership targets, determine the size of
restricted stock grants to individuals.
Most members of the senior management group are eligible to receive annual
discretionary restricted stock grants on the basis described above. In 1993,
such awards for this group accounted for 22% of total compensation (excluding
stock options).
The most senior members of the executive group are also eligible for an
annual discretionary grant of restricted stock units, which are deferred stock-
based awards. The awards reflect the Company's earnings and growth, with
individual grants based on the subjective factors outlined above including each
executive's organizational level and performance. Historically, the grant value
of individual awards has ranged from approximately 50% to 100% of the
executive's cash bonus. Units earned are distributable in shares and generally
vest after completion of three years of service from the date of grant. No such
restricted stock units were granted during 1993.
Stock options are another element of senior management compensation. Options
are generally granted on a three-year cycle (i.e., 1993, 1996). Mid-cycle
grants may be awarded to promoted employees, new hires and individuals
recognized for major contributions. Grants are made without reference to
present holdings of unexercised options or appreciation thereon. The size of an
individual grant reflects the factors discussed above including organization
level, performance and marketplace practices.
Tax Considerations
As noted above, the Company's executive compensation program is designed to
be cost and tax effective. Accordingly, in light of recent U.S. tax law
changes, the Committee modified the Company's bonus program at its March 1994
meeting. These modifications are submitted for stockholder approval under the
heading "Proposal to Approve Senior Management Incentive Compensation Plan" in
this Proxy Statement, and reflect the Committee's policy of maximizing
corporate tax deductions where appropriate. With regard to future executive
compensation modifications, the Committee's policy is to take actions which it
deems to be in the best interest of the Company and its stockholders,
recognizing,
20
<PAGE>
however, that payment of the compensation may not in all instances qualify for
tax deductibility because of the restrictions set forth in Section 162(m) of
the Internal Revenue Code.
BASIS FOR CEO COMPENSATION
Both the quantitative and qualitative criteria referenced above are applied
in assessing the performance and determining the compensation of the Chairman
and Chief Executive Officer of the Company, A.J.C. Smith. The current and long-
term financial performance of the Company-information which is available to all
Company stockholders-are major factors in the judgmental compensation
determinations made by the Committee relative to Mr. Smith. Consideration is
also given to his leadership and the impact of his decision-making on the long-
term health and performance of the Company. Critical aspects considered in this
performance evaluation include: (1) mastery of the market and economic dynamics
of each operating subsidiary, thus enabling the Chief Executive Officer to
effectively evaluate and approve business strategies intended to exploit
business opportunities; (2) the selection, assignment and motivation of
executives at the Company and operating subsidiary levels; and (3) providing
perspective and counsel to business heads to foster initiatives that enhance
the position of the Company and the value of its services on a global basis.
1993 was Mr. Smith's first full year as Chief Executive Officer. On January
1, 1993, Mr. Smith's annual base salary was increased by $50,000, or 5.3%, from
its previous level of $950,000, as part of the Company's annual merit
increases. With regard to cash bonus, Mr. Smith participates in the same
Company annual incentive plan as other senior management officers. His 1993
award under the plan was $675,000, an increase of $95,000, or 16.4%, from the
prior year. Based on the previously referenced survey conducted in 1993 on
Chief Executive Officer compensation for 1992, Mr. Smith's 1993 cash
compensation was positioned at about the 45th percentile of the 1992 survey
market.
In connection with long-term compensation, Mr. Smith was granted 4,800 shares
of restricted stock in 1993 under terms previously described and valued at 45%
of his base salary at grant. This is the same number of shares he was awarded
in 1992. In addition, Mr. Smith was granted a stock option in 1993 to acquire
100,000 shares at the then fair market value of $93.625 per share. Based on the
1993 survey, on an annualized basis the size of this 1993 option grant was at
about the 60th percentile of the comparison group for such awards during 1992.
The number of option shares awarded to Mr. Smith is consistent with that
granted to his predecessor on becoming Chief Executive Officer. Such a grant
near the beginning of his tenure as Chief Executive Officer is intended to
provide Mr. Smith with substantial motivation to enhance stockholder value.
Total compensation for Mr. Smith, which includes all elements of pay from the
Summary Compensation Table except stock options grants, was $2,247,311 in 1993.
Based on the 1993 survey, such compensation for Mr. Smith was at about the 40th
percentile of the 1992 marketplace.
Lewis W. Bernard Dean R. McKay R. J. Ventres
21
<PAGE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its common stock (assuming reinvestment
of dividends) with the cumulative total return on the published Standard &
Poor's 500 Stock Index and the cumulative total return on a Company-constructed
composite industry index, consisting of Alexander & Alexander Services Inc.,
Aon Corporation, Arthur J. Gallagher & Co., Sedgwick Group PLC and Willis
Corroon Group PLC, over the five-year period from December 31, 1988 through
December 31, 1993.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG THE COMPANY, S&P 500 INDEX AND COMPOSITE INDUSTRY INDEX
<CAPTION>
Composite
Measurement period S&P 500 Industry
(Fiscal year Covered) The Company Index Index
- --------------------- ----------- ------- ---------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $ 100 $ 100 $ 100
FYE 12/31/89 $ 144 $ 132 $ 144
FYE 12/31/90 $ 149 $ 128 $ 127
FYE 12/31/91 $ 161 $ 166 $ 128
FYE 12/31/92 $ 187 $ 179 $ 141
FYE 12/31/93 $ 171 $ 197 $ 142
</TABLE>
22
<PAGE>
PROPOSAL TO APPROVE SENIOR MANAGEMENT
INCENTIVE COMPENSATION PLAN
The Board of Directors of the Company (the "Board") has placed a proposal to
adopt the Marsh & McLennan Companies Senior Management Incentive Compensation
Plan (the "Plan") on the agenda for the Annual Meeting. The Plan is intended to
be a continuation of the Company's partners bonus plan, which was established
in 1988 to provide annual incentive awards to those members of senior
management who are directly responsible for the Company's profitability and
growth, modified in part to incorporate such changes necessary to qualify for
tax deductibility under Section 162(m) of the United States Internal Revenue
Code (the "Code"). Had the Plan been in effect in 1993, the Compensation
Committee of the Board would have been under no obligation to pay more than the
amounts set forth in the bonus column of the Summary Compensation Table.
The Plan was unanimously adopted by the Company's Compensation Committee and
the Board at their respective meetings on March 15, 1994. Stockholder approval
of the Plan is recommended by the Board in order to maintain the tax-deductible
status of such incentive payments to the Company's Chief Executive Officer and
the four most highly compensated executive officers.
The affirmative vote of a majority of the Company's shares of common stock
present or represented and entitled to vote at the Annual Meeting is required
to approve the proposal set forth herein. Unless otherwise directed in the
proxy, the persons named in the proxy will vote for the proposal to approve the
Plan, which is described in greater detail below.
With adoption of the Plan, the Company will preserve tax-effectiveness among
existing award vehicles. Such awards are intended to foster a partnership
orientation among selected members of senior management, to align their
interests with those of Company stockholders by offering significant variable
compensation opportunities payable in the form of cash or equity awards, and to
promote and reinforce achievement of corporate, organizational, financial and
business development goals.
The Plan will be administered by the Compensation Committee of the Board of
Directors or a sub-committee thereof that is qualified under Section 162(m) of
the Code (the "Committee"), which shall determine the overall bonus pool and
individual awards under the Plan.
Senior executives of the Company and its subsidiaries who are selected by the
Committee, will participate in the Plan. As of December 31, 1993, approximately
50 individuals were eligible to participate in the Plan.
The Plan provides for a total award pool to be based on a percentage of
actual pre-tax net operating income (defined as consolidated pre-tax income of
the Company and its subsidiaries, before any
23
<PAGE>
provision for amounts paid or accrued in respect of annual incentive awards
under the Plan or other bonus plans of the Company or its subsidiaries and
before extraordinary adjustments) ("Pre-Tax Income") during the particular Plan
year, with the percentage varying based on the Company's annualized growth in
Pre-Tax Income. The size of the award pool in respect of a Plan year shall be
an amount equal to the sum of (i) 5% of Pre-Tax Income for such year plus (ii)
an additional .2% of Pre-Tax Income for each full percent growth in Pre-Tax
Income compared to the prior Plan year; provided, however, that in no event
shall the award pool exceed 10% of Pre-Tax Income in any given Plan year.
The maximum award that may be granted to any individual who is a "covered
employee", as that term is defined in Section 162(m)(3) of the Code, in any
given Plan year is 20% of the total award pool for that year. The Compensation
Committee, in its discretion, may decide to allocate less than the maximum
amount of an award to any individual participant, as well as less than the
maximum amount of the total award pool to all participants in the aggregate. In
determining the individuals to whom awards shall be granted, and the size of
such awards, the Compensation Committee shall take into account such factors as
it shall deem appropriate to accomplish the purposes of the Plan.
Payment of awards under the Plan may be made in cash or in the form of awards
of restricted stock, restricted stock units or other stock-based award provided
for under the 1992 Incentive and Stock Award Plan, or a successor to such plan.
The Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; provided that, no amendment that
requires stockholder approval in order for the Plan to continue to comply with
Code Section 162(m) shall be effective unless the same shall be approved by the
requisite vote of Company stockholders.
The Plan became effective as of January 1, 1994, subject to approval of the
stockholders at the 1994 Annual Meeting. If the Plan had been in effect during
1993, the maximum award pool would have approximated $47 million. Mr. Smith and
the four most highly compensated executive officers of the Company would have
received the same awards under the Plan as they received under the Company's
partners bonus plan in 1993.
PROPOSAL TO APPROVE 1994 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company has placed a proposal to adopt the
Marsh & McLennan Companies 1994 Employee Stock Purchase Plan (the "New Plan")
on the agenda for the Annual Meeting. The New Plan, which is substantially
identical to the 1990 Employee Stock Purchase Plan (the "1990 Plan"), is
intended to replace the 1990 Plan after the end of the 1993-1994 offering
period thereunder. The New Plan was unanimously adopted by the Company's Board
of Directors at its meeting on March 15, 1994.
24
<PAGE>
The affirmative vote of a majority of the Company's shares of common stock
present or represented and entitled to vote at the Annual Meeting is required
to approve the proposal set forth herein. Unless otherwise directed in the
proxy, the persons named in the proxy will vote for the proposal to approve
the New Plan, which is described in greater detail below.
The New Plan will be administered by the Compensation Committee of the Board
of Directors. None of the members of the Compensation Committee may
participate in the New Plan.
The purpose of the New Plan is to provide eligible employees, including
those who have been participants in the 1990 Plan, a convenient opportunity to
purchase common stock of the Company through annual offerings financed by
payroll deductions. Under the New Plan a maximum of four million (4,000,000)
shares of the Company's common stock, plus the amount of shares (not to exceed
600,000) remaining in the 1990 Plan at the end of the 1993-1994 offering
period thereunder, may be sold. All full-time employees with at least six
months of service who are employed by the Company or a participating
subsidiary will be eligible to participate in the New Plan. As of December 31,
1993, the Company and its subsidiaries had approximately 25,500 full-time
employees worldwide.
Employees who elect to participate in the New Plan may have up to twelve
percent (12%) of their base compensation deducted from their pay and
accumulated with interest until the end of the offering period. Participating
employees may at any time withdraw from an offering and receive their
contributions with interest. At the end of each offering period, each
employee's payroll deduction account will be applied to the purchase of up to
twenty-five thousand dollars ($25,000) (based upon the undiscounted price as
of the beginning of the offering period) worth of shares of the Company's
common stock. In addition, the maximum number of shares which a participating
employee may purchase in any one offering period shall be the number of shares
determined by dividing (i) such employee's annual base compensation as of the
pay period immediately preceding the start of an offering period by (ii) the
fair market value of a share of stock on such date.
The price of such shares will be a price set by or on the basis of a formula
determined by the Compensation Committee at the inception of the offering.
Under the United States Internal Revenue Code and the New Plan, the price may
not be less than the lesser of 85% of the fair market value of the Company's
common stock at either the beginning or the end of the offering period. The
New Plan also provides that if there is a change in control (as defined in the
New Plan) and the Compensation Committee decides to terminate the New Plan,
each participant will be paid an amount equal to the highest price paid per
share in connection with the change in control for each share the participant
could have purchased with his or her contributions at the trading price per
share as of the first day of the offering period.
The first offering under the New Plan will begin on October 1, 1994. Based
upon the payroll deductions of the following people during the 1992-1993
offering period under the 1990 Plan, which
25
<PAGE>
ended on September 30, 1993, the following number of shares were purchased by
the individuals listed in the table below at a dollar value based upon the
undiscounted fair market value of $87.06 per share on such date:
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF SHARES (#)
----------------- ---------------- --------------------
<S> <C> <C>
A.J.C. Smith............................. 23,855 274
Lawrence J. Lasser....................... 23,855 274
Robert Clements.......................... 23,855 274
Richard H. Blum.......................... 23,855 274
Peter Coster............................. 23,855 274
All Executive Officers as a Group (11 in-
dividuals).............................. 245,726 2,823
All Current Directors who are not
Executive Officers as a Group (10
individuals)............................ 23,855 274
All Employees, including non-Executive
Officers, as a Group.................... 49,965,352 573,919
</TABLE>
For United States federal income tax purposes, an employee does not realize
income at the time of entry into the New Plan or at the time a share is
purchased. If no disposition of the stock is made within two years from the
beginning of an offering period, and one year elapses from the date the share
was transferred to the employee, upon subsequent disposition of the stock
ordinary income will be realized to the extent of the lesser of (i) the excess
of the fair market value on the offering date over the option price or (ii)
the excess of the net proceeds of sale over the price paid. Any further gain
will be treated as capital gains. No income tax deduction will be allowed the
Company for shares transferred to an employee, provided such shares are held
for the required periods described above.
If shares are disposed of without satisfying both holding period
requirements, ordinary income will be realized at the time of such disposition
in an amount equal to the difference between the fair market value of the
shares as of the time such shares were purchased and the purchase price of
such shares. In addition, any difference between the disposition price and the
fair market value of the shares as of the time the shares were purchased will
be treated as capital gain or loss. The Company will be allowed a deduction in
an amount equal to the ordinary income recognized by the participant.
TRANSACTIONS WITH MANAGEMENT AND OTHERS; OTHER INFORMATION
During 1993, subsidiaries of the Company employed in the ordinary course of
business individuals related to executive officers and directors of the
Company. In addition, corporations and other entities with which directors are
or were associated had insurance or other transactions with the Company and
certain of its subsidiaries and affiliates in the ordinary course of business,
all of which transactions were on substantially the same terms as those
prevailing at the time for comparable transactions with others. None of such
insurance or other transactions involved during 1993, or is expected to
involve in 1994, payments to the Company and its subsidiaries and affiliates
for property or services in excess of 5% of the Company's consolidated gross
revenue during 1993.
26
<PAGE>
Mr. Husson has a consulting agreement with Marsh & McLennan, Incorporated, a
subsidiary of the Company, which provides for Mr. Husson to act as a consultant
to and managing director of Marsh & McLennan, Incorporated for compensation in
addition to that as Chairman of Faugere & Jutheau S.A., a subsidiary of the
Company, of at least $100,000 per year. The agreement also provides Mr. Husson
with certain indemnity payments if he is dismissed prior to 1997. The Company
also has an equity interest in certain insurance broking firms in Africa in
which the Husson family has an equity interest, and Faugere & Jutheau maintains
an exclusive correspondent relationship with an insurance broker in Monaco
controlled by the Husson family.
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected the firm of Deloitte & Touche, independent public accountants, to
audit the financial statements of the Company for the fiscal year ending
December 31, 1994. Deloitte & Touche acted as the Company's independent public
accountants for the fiscal year ended December 31, 1993. Representatives of
Deloitte & Touche will attend the Annual Meeting, will have an opportunity to
make a statement if desiring to do so and will be available to answer any
pertinent questions.
SOLICITATION OF PROXIES
The Board of Directors of the Company hereby solicits proxies for use at the
1994 Annual Meeting and at any adjournment thereof. Stockholders who execute a
proxy may still attend the Annual Meeting and vote in person. A proxy may be
revoked at any time before it is voted by giving to the Secretary of the
Company, at the Company's principal executive offices indicated above, written
notice bearing a later date than the proxy, by submission of a later dated
proxy or by voting in person at the Annual Meeting. Executors, administrators,
trustees, guardians, attorneys and other representatives should indicate the
capacity in which they are signing and corporations should sign by an
authorized officer whose title should be indicated. Mere attendance at the
Annual Meeting will not revoke a proxy which was previously submitted to the
Company.
The cost of this proxy solicitation is borne directly by the Company.
Georgeson & Company Inc. has been retained to assist in the proxy solicitation
at a fee of approximately $10,000, plus expenses. In addition to solicitation
of proxies by mail, proxies may be solicited by personal, telephonic and
telegraphic communications by the Company's directors, officers and other
employees. Such persons will receive no additional compensation for such
services. The Company will also request brokers and other nominees to forward
soliciting material to the beneficial owners of shares which are held of record
by them, and will pay the necessary expenses.
27
<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder wishing to present a proposal at the 1995 Annual Meeting of
Stockholders of the Company, expected to be held on Tuesday, May 16, 1995, may
submit such proposal in writing to the Company in care of the Secretary, Marsh
& McLennan Companies, Inc., 1166 Avenue of the Americas, New York, New York
10036-2774. Such proposal must be received no later than December 1, 1994.
By order of the Board of Directors,
/s/ Gregory Van Gundy
Gregory Van Gundy
Secretary
28
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
1. Purposes.
--------
The purposes of the Marsh & McLennan Companies, Inc. Senior Management
Incentive Compensation Plan are to foster a partnership orientation among
selected members of senior management; to align the interests of these
employees with those of MMC's shareholders by offering significant variable
compensation opportunities payable in the form of cash or equity awards; to
promote and reinforce achievement of corporate, organizational, financial and
business development goals; and to qualify the compensation paid under this
Plan as "qualified performance based compensation" within the meaning of
Section 162(m) of the Code.
2. Definitions.
-----------
The following terms, as used herein, shall have the following meanings:
(a) "Award" shall mean an annual incentive compensation award granted
pursuant to this Plan with respect to a Performance Period.
(b) "Award Pool" shall mean the aggregate amount available for Awards
under this Plan in respect of a Performance Period, the size of which
shall be based upon the percentage of Pre Tax NOI determined
pursuant to Section 5(a) hereof.
(c) "Board" shall mean the Board of Directors of MMC.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including the regulations and other guidance issued thereunder.
(e) "Committee" shall mean those members of the Compensation Committee
of the Board who satisfy the requirements of "outside directors"
within the meaning of Section 162(m) of the Code, and who shall not
be fewer than two in number.
(f) "Common Stock" shall mean the common stock, par value $1.00 per
share, of MMC.
(g) "Company" shall mean, collectively, MMC and its subsidiaries.
(h) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
<PAGE>
(i) "Deferral Plan" shall mean the Marsh & McLennan Companies, Inc.
Cash Bonus Award Voluntary Deferral Plan, as amended from time to
time, or any successor plan thereto, or other deferred compensation
plans or arrangements of the Company.
(j) "Extraordinary Adjustments" shall mean unusual or nonrecurring
events affecting MMC or any subsidiary, or any business division or
unit or the financial statements of MMC or any subsidiary, such as
major restructurings, reorganizations, special dividends,
consolidations, spinoffs, combinations or other corporate
transactions or events or in response to changes in applicable laws
and regulations (including interpretations thereof), accounting
principles, tax rates and regulations or business conditions. The
foregoing adjustments are intended to be objectively determinable
and nondiscretionary and, as such, consistent with the qualification
of Awards as "qualified performance based compensation" under
Section 162(m) of the Code, and shall be construed accordingly. To
the extent it shall be determined that any such adjustment would
likely cause compensation relating to an Award to a Covered
Employee to fail to be deductible under Section 162(m) of the Code,
such adjustment shall not be authorized or made, unless otherwise
determined by the Committee.
(k) "Fair Market Value" on any given date shall mean the arithmetic mean
of the high and low prices of the Common Stock on the New York
Stock Exchange on the last trading day preceding such date.
(l) "MMC" shall mean Marsh & McLennan Companies, Inc., a Delaware
corporation.
(m) "1992 Plan" shall mean the Marsh & McLennan Companies, Inc. 1992
Incentive and Stock Award Plan, as amended from time to time, or any
successor plan thereto.
(n) "Participant" shall mean a senior management employee of the Company
who is, pursuant to Section 4 of this Plan, selected to participate
herein.
(o) "Performance Period" shall mean each fiscal year of the Company, or
such other period as may be established by the Committee in a manner
consistent with the requirements of Section 162(m) of the Code.
(p) "Plan" shall mean this Marsh & McLennan Companies, Inc. Senior
Management Incentive Compensation Plan, as amended from time to time.
-2-
<PAGE>
(q) "Pre-Tax-Income" for a Performance Period shall mean, except as
otherwise provided herein, the consolidated pre-tax net operating
income of the Company, as determined in accordance with generally
accepted accounting principles and reported in the Company's audited
financial statements for such Performance Period, before any
provision for amounts paid or accrued in respect of annual incentive
awards under this Plan and other bonus plans of the Company and
before provision for any Extraordinary Adjustments.
3. Administration.
--------------
This Plan shall be administered by the Committee. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent
with the express provisions of this Plan, to administer this Plan and to
exercise all the powers and authorities either specifically granted to it
under this Plan or necessary or advisable in the administration of this Plan,
including, without limitation, the authority to grant Awards; to determine the
persons to whom and the time or times at which Awards shall be granted; to
determine the terms, conditions and restrictions relating to any Award; to
determine whether, to what extent, and under what circumstances an Award may
be settled, cancelled, forfeited, or surrendered; to determine the form and
timing of payment in settlement of an Award; to construe and interpret this
Plan and any Award; to prescribe, amend and rescind rules and regulations
relating to this Plan; and to make all other determinations deemed necessary
or advisable for the administration of this Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on all
persons, including the Company, the Participant (or any person claiming any
rights under this Plan from or through any Participant) and any shareholder
of MMC.
No member of the Board or the Committee shall be liable for any action
taken or determinations made in good faith with respect to this Plan or any
Award granted hereunder.
4. Eligibility.
-----------
Awards may be granted to senior management employees of the Company in
the sole discretion of the Committee, including for this purpose senior
management employees whose employment with the Company commences or terminates
during the Performance Period. In determining the persons to whom Awards
shall be granted, the Committee shall take into account such factors as the
Committee shall deem appropriate in connection with accomplishing the purposes
of this Plan.
-3-
<PAGE>
5. Award Pool; Payment of Awards.
-----------------------------
(a) The size of the Award Pool in respect of a Performance Period shall
be an amount equal to the sum of (a) five percent (5%) of Pre Tax Income for
such Performance Period plus (b) an additional two tenths of one percent
(.2%) of Pre-Tax Income for each full percentage increase in Pre-Tax Income
over the preceding Performance Period; provided, however, that in no event
-----------------
shall the Award Pool in respect of any Performance Period exceed ten percent
(10%) of Pre-Tax Income for such Performance Period. To the extent permitted
by Section 162(m) of the Code, if the Committee establishes a Performance
Period other than a fiscal year of the Company, then (1) the Award Pool for
such Performance Period shall be based upon annualized Pre-Tax Income and the
annualized in crease in Pre-Tax Income for such Performance Period, and (2)
annualized Pre-Tax Income for such Performance Period shall be utilized for
purposes of applying clause (b) above for the next succeeding Performance
Period. Annualized Pre-Tax Income and the annualized increase in Pre-Tax
Income shall be determined in accordance with the books and records of the
Company and in a manner consistent with the terms of this Plan.
(b) Awards granted to Participants in respect of a Performance Period
shall consist of such portion of the Award Pool as the Committee may
determine; provided, however, that no Participant who is a Covered Employee
-----------------
for the calendar year with which or in which the Perfor mance Period ends may
be allocated an amount in excess of twenty percent (20%) of such Award Pool.
Unless other wise determined by the Committee, no payment shall be made to any
such Covered Employee unless the Committee shall have previously certified
that the performance goals necessary to the establishment and size of the
Award Pool had been attained. The Committee shall not be obligated to grant
Awards representing the entire Award Pool.
(c) Except as hereinafter provided, all payments in respect of Awards
granted under this Plan shall be made within a reasonable period after the end
of the Performance Period. Such payment shall be made, in the sole discretion
of the Committee, in the form of (1) cash, (2) an award of shares of
restricted stock, restricted stock units or a similar stock based award,
pursuant to and subject to the terms and conditions of the 1992 Plan, or (3) a
combination of the foregoing. For purposes of the preceding sentence, the
value of shares of Common Stock represented by the restricted stock,
restricted stock units or other stock-based form of payment shall be
determined based on the Fair Market Value per share of Common Stock on the
date of payment. Amounts otherwise payable in cash under this Plan may be
deferred in accordance with the terms and conditions of the Deferral Plan.
-4-
<PAGE>
6. General Provisions.
------------------
(a) Compliance with Legal Requirements. This Plan and the granting and
----------------------------------
payment of Awards and the other obligations of the Company under the Plan
shall be subject to all applicable federal and state laws, rules and
regulations, and to such approvals by any regulatory or governmental agency as
may be required.
(b) Nontransferability. Awards shall not be transferable by a
------------------
Participant.
(c) No Right to Continued Employment. Nothing in this Plan or in any
--------------------------------
Award granted under this Plan shall confer upon any Participant the right to
continue in the employ of the Company or to be entitled to any remuneration or
benefits not set forth in this Plan or to interfere with or limit in any way
the right of the Company to terminate such Participant's employment.
(d) Withholding Taxes. In the event a Participant or other person is
-----------------
entitled to receive an Award under this Plan, the Company shall withhold from
payment of such Award the amount of any taxes that the Company is required to
withhold with respect to such payment.
(e) Amendment, Termination and Duration of this Plan. The Committee may
------------------------------------------------
at any time and from time to time alter, amend, suspend, or terminate this
Plan in whole or in part; provided that, no amendment that requires
-------------
shareholder approval in order for this Plan to continue to comply with Code
Section 162(m) shall be effective unless the same shall be approved by the
requisite vote of the shareholders of MMC. Notwithstanding the foregoing, no
amendment shall affect adversely any of the rights of any Participant, without
such Participant's consent, under any Award theretofore granted under this
Plan.
(f) Participant Rights. No Participant shall have any claim to be
------------------
granted any Award under this Plan, and there is no obligation for uniformity
of treatment among Participants.
(g) Unfunded Status of Awards. This Plan is in tended to constitute an
-------------------------
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing
contained in this Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
(h) Governing Law. This Plan and all determinations made and actions
-------------
taken pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
-5-
<PAGE>
(i) Effective Date. This Plan shall become effective as of January 1,
--------------
1994, subject to the requisite approval of the shareholders of MMC in order to
comply with Section 162(m) of the Code. In the absence of such approval, this
Plan (and any Awards theretofore made pursuant to this Plan) shall be null and
void.
(j) Interpretation. This Plan is designed and intended to comply, to the
--------------
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply. If any provision of this Plan
shall be determined by the Internal Revenue Service or a court of competent
jurisdiction to be contrary to said Section 162(m), said provision shall be
limited to the extent necessary so that such provision complies with said
Section 162(m) and such determination shall not affect any other provisions of
this Plan, which provisions shall remain in full force and effect.
-6-
<PAGE>
MARSH & McLENNAN COMPANIES
1994 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide eligible
-------
employees a convenient opportunity to purchase Stock through annual offerings
financed by payroll deductions.
2. Definitions. The following terms, when used in the Plan, shall
-----------
have the following meanings:
(a) "Base Compensation" -- Base Compensation shall be an employee's
total compensation received during an offering period as determined under the
Code for computing taxes for FICA purposes, including contributions made by
the Company on behalf of each employee to any tax-qualified pension benefit
plan pursuant to Section 401(k) of the Code, but shall exclude any bonus,
incentive or other similar extraordinary remuneration received by such
employee. In addition, "Base Compensation" shall include that portion of
commissions earned by those employees of Putnam Investments, Inc. or its
subsidiaries who are wholesalers or defined contribution plan sales
representatives, which portion, for any such employee, when added to other
compensation included in this definition, does not exceed $125,000, or such
other figure as may subsequently be approved by the Committee.
(b) "Board" -- The Board of Directors of MMC.
(c) "Code" -- The Internal Revenue Code of 1986, as amended.
(d) "Committee" -- The Compensation Committee of the Board.
(e) "Company" -- MMC and its Subsidiaries.
(f) "Exchange Act" -- The Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" -- Fair Market Value of a share of Stock on
a given date shall be the average of the high and low prices of the Stock on
the New York Stock Exchange, Inc. composite tape on such date, or if no sales
of the Stock were made on said Exchange on that date, the average of the high
and low prices of the Stock on the next preceding day on which sales were made
on said Exchange.
(h) "MMC" -- Marsh & McLennan Companies, Inc., a Delaware
corporation.
(i) "Plan" -- this Marsh & McLennan Companies 1994 Employee Stock
Purchase Plan.
<PAGE>
(j) "Stock" -- Common stock, par value $1.00 per share, of MMC.
(k) "Subsidiary" -- a corporation is a Subsidiary of MMC if it
meets the test of Section 424(f) of the Code and the regulations promulgated
thereunder.
3. Administration. The Plan shall be administered by the Committee,
--------------
which shall be composed of disinterested persons as such term is defined in
the rules of the Securities and Exchange Commission, and whose actions and
determinations on matters related to the Plan shall be conclusive. Subject to
the express provisions of the Plan, the powers of the Committee include having
the authority, in its discretion, to:
(a) define, prescribe, amend and rescind rules, regulations,
procedures, terms and conditions relating to the Plan;
and
(b) make all other determinations necessary or advisable for
administering the Plan, including, but not limited to, interpreting the Plan,
correcting defects, reconciling inconsistencies and resolving ambiguities.
4. Stock Subject to the Plan. (a) The aggregate number
-------------------------
of shares of Stock which may be sold under the Plan shall not exceed four
million (4,000,000), plus the number of shares of Stock (not to exceed 600,000
shares) remaining unsold under the MMC 1990 Employee Stock Purchase Plan after
the end of the 1993-1994 offering period thereunder.
(b) If the number of shares of Stock that participating employees
become entitled to purchase is greater than the shares of Stock offered in a
particular offering period or remaining available, the available shares of
Stock shall be allocated by the Committee among such participating employees
in such manner as it deems fair and equitable.
(c) In the event of any change in the Stock, through
recapitalization, merger, consolidation, stock dividend or split, combination
or exchanges of shares or otherwise, the Committee may make such equitable
adjustments in the Plan and the then outstanding offerings as it deems
necessary and appropriate, including but not limited to changing the number of
shares of Stock reserved under the Plan, and the price of the current
offering.
(d) Shares of Stock which are to be delivered under the Plan may be
obtained by MMC from its treasury, by purchases on the open market or from
private sources, or by issuing authorized but unissued shares of its Stock.
Any issuance of authorized but unissued Stock shall be approved by the Board
or the Committee. Shares of authorized but unissued Stock may not be delivered
under the Plan if the purchase price thereof is less than the par value of the
Stock. Subject to the provisions of Section 8(b) below, fractional shares of
Stock may be issued and sold under the Plan.
-2-
<PAGE>
5. Eligibility. All employees of MMC or such of its Subsidiaries as
-----------
shall be designated by MMC will be eligible to participate in the Plan, in
accordance with such rules as may be prescribed from time to time; provided,
however, that such rules shall neither permit nor deny participation in the
Plan contrary to the requirements of the Code (including, but not limited to,
Section 423(b)(3), (4) and (8) thereof) and regulations promulgated
thereunder. No employee shall be eligible to participate in the Plan if his or
her customary employment is less than 20 hours per week or if he or she has
been employed by the Company for less than six months. No employee may be
granted an option under the Plan if such employee, immediately after the
option is granted, owns 5% or more of the total combined voting power or value
of the Stock of MMC or any subsidiary. For purposes of the preceding sentence,
the rules of Section 424(d) of the Code shall apply in determining the stock
ownership of an employee, and stock which the employee may purchase under
outstanding options shall be treated as stock owned by the employee.
6. Offerings, Participation. (a) MMC may make one or more offerings
------------------------
of 12 months' duration each, to eligible employees to purchase Stock under the
Plan, and an eligible employee may participate in such offering at such
time(s) as determined by the Committee by authorizing a payroll deduction for
such purpose in terms of whole number percentages up to a maximum of twelve
percent (12%) of his or her Base Compensation. The Committee may at any time
suspend an offering if required by law or the best interests of the Company.
MMC's obligation to sell and deliver Stock under the Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such Stock.
(b) Each participant in an Offer may be requested to notify the
Company of any disposition of shares of Common Stock purchased pursuant to the
Plan prior to the expiration of the holding periods set forth in section
423(a) of the Code.
7. Deductions. (a) The Company will maintain payroll deduction
----------
accounts for all participating employees, and shall credit such accounts with
interest at such rate as the Committee may from time to time determine. All
funds received or held by the Company under the Plan need not be segregated
from other corporate funds and may be used for any corporate purpose.
(b) Subject to rules, procedures and forms adopted by or at the
direction of the Committee, an employee may at any time increase, decrease or
suspend his or her payroll deduction or may withdraw the balance of his or her
payroll deduction account and thereby withdraw from participation in an
offering.
(c) Any balance remaining in any employee's payroll deduction
account at the end of an offering period will be repaid to such employee.
-3-
<PAGE>
(d) In the event of a participating employee's retirement, death or
termination of employment, his or her participation in any offering under the
Plan shall cease, no further amounts shall be deducted pursuant to the Plan,
and the balance in the employee's account shall be paid to the employee, or,
in the event of the employee's death, to the employee's beneficiary under the
MMC basic group life insurance program.
8. Purchase, Limitations. (a) Within the limitations of Section 8(d)
---------------------
below, each employee participating in any offering under the Plan will be
granted an option, upon the effective date of such offering, for as many
shares of Stock as the amount of the employee's payroll deduction account at
the end of any offering can purchase.
(b) As of the last day of the offering period, the payroll deduction
account of each participating employee shall be totaled. Subject to the
provisions of Section 7(b) above, if such account contains sufficient funds to
purchase one or more shares of Stock as of that date, the employee shall be
deemed to have exercised an option to purchase the largest number of shares of
Stock at the price determined under Section 8(c) below; such employee's
account will be charged, on that date, for the amount of the purchase, and for
all purposes under the Plan the employee shall be deemed to have acquired the
shares of Stock on that date. The registrar for MMC will make an entry on its
books and records evidencing that such shares (including any partial share)
have been duly issued as of that date; provided, however, that an employee may
in the alternative elect in writing prior thereto to receive a stock
certificate representing the amount of such full shares acquired (the value of
any partial share to be returned to such employee by check).
(c) On or before the effective date of each offering, the Committee
shall determine the purchase price of the shares of Stock which are to be sold
under the offering or the formula for determining such price; provided,
however, that no such price may be less than the lesser of (i) an amount equal
to 85 percent of the Fair Market Value of the Stock at the time such option is
granted, or (ii) an amount equal to 85 percent of the Fair Market Value of the
Stock at the time such option is exercised.
(d) No employee may be granted an option under the Plan which
permits his or her rights to purchase Stock under the Plan, and any other
stock purchase plan of MMC and its subsidiaries qualified under Section 423 of
the Code, to accrue at a rate which exceeds $25,000 (or such amount as may be
adjusted from time to time under pertinent regulations of the Code) of the
Fair Market Value of such Stock (determined at the effective date of the
offering) for each calendar year in which the option is outstanding at any
time. In addition, the maximum number of shares which a participating employee
may purchase pursuant to any one offering period shall be the number of shares
determined by (i) multiplying the amount of the participating employee's Base
Compensation as of the pay period immediately preceding the date he or she is
first granted an option pursuant to such offering period by the number of pay
periods from such date to the end of the offering period, and (ii) dividing
that product by the Fair Market Value of a share of Stock on such date.
-4-
<PAGE>
(e) None of the rights or privileges of a stockholder of MMC,
including without limitation rights to vote and receive dividends, shall exist
with respect to shares of Stock purchased under the Plan until the date on
which the shares of Stock are deemed to be acquired pursuant to Section 8(b)
above.
(f) (i) Notwithstanding anything in the Plan to the contrary, in the
event of a change in control of the Company, if the Committee determines that
the operation or administration of the Plan could prevent participating
employees from obtaining the benefit of the timely exercise of their options
under the Plan, the Plan may be terminated in any manner deemed by the
Committee to provide equitable treatment to participating employees. Equitable
treatment may include, but is not limited to, the payment to each
participating employee of the amount of contributions and interest standing to
such participating employee's account as of the date of the change in control,
plus an additional amount determined by (A) calculating the number of full
shares of stock that could have been purchased for the participating employee
immediately prior to the change in control with such amount at the purchase
price (determined under Section 8(c)) at the time the option is granted (the
"Purchase Price") and (B) multiplying that number of Shares by the difference
between the Purchase Price per Share and the highest price paid per share of
Stock in connection with the change in control of the Company.
(ii) For purposes of the Plan, a "change in control" of the
Company shall have occurred if:
(A) any "person", as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of
the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities;
(B) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (A),
(C) or (D) of this Section) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
-5-
<PAGE>
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least a majority thereof;
(C) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent of the
Company or such surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquired more than 50% of the combined voting power
of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
9. No Transfer. (a) No option, right or benefit under the Plan may
-----------
be transferred by a participating employee other than by will or the laws of
descent and distribution, and all options, rights and benefits under the Plan
may be exercised during the participating employee's lifetime only by such
employee.
(b) Book entry accounts, or certificates for Stock purchased under
the Plan may be maintained, or registered, as the case may be, only in the
name of the participating employee, or, if such employee so indicates on an
appropriate form provided by the Company, in his or her name jointly with a
member of his or her family, with right of survivorship. An employee who is a
resident of a jurisdiction which does not recognize such a joint tenancy may
have such account maintained, or such certificates registered, in the
employee's name as tenant in common with a member of the employee's family,
without right of survivorship.
10. Effective Date of the Plan. The Plan shall become effective
--------------------------
upon its approval by the affirmative vote of the holders of a majority of the
outstanding shares of Stock present, or represented, and entitled to vote at
the meeting of stockholders of MMC to be held on May 17, 1994, or any
adjournment thereof.
11. Amendment and Termination. Subject to the provisions of Section
-------------------------
4(b) above, the Plan shall terminate coincident with the completion of any
offering under which the limitation on the total number of shares in Section
4(a) above has been reached. The Board may at any time terminate the Plan, or
make such amendment of the Plan as it may deem advisable.
-6-
<PAGE>
12. Governing Law. The Plan shall be interpreted, construed and
-------------
administered in accordance with the laws of the State of Delaware, without
giving effect to principles of conflict of laws, to the extent not preempted
by federal law.
-7-
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1994 ANNUAL MEETING
The undersigned hereby appoints A.J.C. Smith and Gregory Van Gundy proxies
(each with power to act alone and with the power of substitution) of the
undersigned to vote as directed below all shares which the undersigned would be
entitled to vote at the Annual Meeting of Stockholders of Marsh & McLennan
Companies, Inc. to be held on Tuesday, May 17, 1994 at 10:00 a.m. (New York
City time) in the Auditorium, 2nd Floor, 1221 Avenue of the Americas, New York,
New York and at any adjournment thereof.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Election of Directors. For all
Nominees: Peter Coster, For Withheld Except Nominee(s)
Lawrence J. Lasser, Richard M. Morrow, Written Below
1994 John T. Sinnott, Frank J. Tasco,
R.J. Ventres, R.J. Groves [ ] [ ] [ ]___________
For Against Abstain
2. Approval of Senior Management
P Incentive Compensation Plan. [ ] [ ] [ ]
R For Against Abstain
O 3. Approval of 1994 Employee
Stock Purchase Plan. [ ] [ ] [ ]
X
For Against Abstain
Y
4. Ratification of Deloitte & Touche
as auditors for 1994. [ ] [ ] [ ]
For Against Abstain
Sign here as name(s) appears on reverse side
of card.
Dated ___________, 1994
(x)
----------------------------------------------
THIS PROXY WHEN PROPERLY (x)
EXECUTED WILL BE VOTED ----------------------------------------------
IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTIONS
ARE MADE, THIS PROXY The signer hereby revokes all proxies
WILL BE VOTED FOR ITEMS heretofore given by the signer to vote at
1, 2, 3, AND 4. said meeting or any adjournments thereof. If
signing for a corporation or partnership or
as agent, attorney or fiduciary, indicate
capacity in which you are signing.
RETURN THIS PROXY CARD PROMPTLY USING THE ACCOMPANYING ENVELOPE.
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
MARSH & MCLENNAN COMPANIES STOCK INVESTMENT PLAN
MARSH & MCLENNAN COMPANIES, INC.
ANNUAL MEETING OF STOCKHOLDERS, MAY 17, 1994
By signing and returning this card, the undersigned directs Bankers Trust
Company, Trustee under the Marsh & McLennan Companies Stock Investment Plan, to
vote in person or by proxy all shares of stock of Marsh & McLennan Companies,
Inc. (the "Company") allocated to the undersigned under said Plan upon all
matters at the Annual Meeting of Stockholders of the Company on May 17, 1994
and at any adjournment thereof.
Provided this card is received by May 13, 1994, voting rights will be
exercised by the Trustee as directed or, if not specifically directed, FOR the
Items stated herein. Under the Plan, the Trustee shall vote all other shares in
the same proportion as those shares for which it has received a signed
instruction card.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Election of Directors. For all
Nominees: Peter Coster, For Withheld Except Nominee(s)
Lawrence J. Lasser, Richard M. Morrow, Written Below
John T. Sinnott, Frank J. Tasco,
R.J. Ventres, R.J. Groves [ ] [ ] [ ]___________
For Against Abstain
2. Approval of Senior Management
Incentive Compensation Plan. [ ] [ ] [ ]
For Against Abstain
3. Approval of 1994 Employee
Stock Purchase Plan. [ ] [ ] [ ]
For Against Abstain
4. Ratification of Deloitte & Touche
as auditors for 1994. [ ] [ ] [ ]
For Against Abstain
Sign here as name(s) appears on reverse side
of card.
Dated ___________, 1994
(x)
----------------------------------------------
THE ALLOCATED SHARES WILL (x)
BE VOTED IN THE MANNER ----------------------------------------------
DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO
DIRECTIONS ARE MADE, THEY The signer hereby revokes all proxies
WILL BE VOTED FOR heretofore given by the signer to vote at
ITEMS 1, 2, 3, AND 4. said meeting or any adjournments thereof. If
signing for a corporation or partnership or
as agent, attorney or fiduciary, indicate
capacity in which you are signing.
RETURN THIS PROXY CARD PROMPTLY USING THE ACCOMPANYING ENVELOPE.
