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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MARSH & MCLENNAN COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[LOGO]
1998
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
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[LOGO]
Dear Marsh & McLennan Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Marsh & McLennan Companies, Inc., which will be held at 10:00 a.m. on
Wednesday, May 20, 1998 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 the following Notice of Annual
Meeting of Stockholders and Proxy Statement, will be the election of seven
persons to serve as Class I directors and one person to serve as a Class II
director, the approval of an amendment to the Marsh & McLennan Companies Stock
Investment Plan and the ratification of the appointment of Deloitte & Touche LLP
as independent public accountants for 1998.
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.
We look forward to seeing you at the meeting.
Very truly yours,
[LOGO]
Chairman of the Board March 31, 1998
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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 Wednesday, May 20, 1998 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 seven persons to serve as Class I directors and one person
to serve as a Class II director;
(2) To approve an amendment to the Marsh & McLennan Companies Stock
Investment Plan;
(3) To ratify the appointment of Deloitte & Touche LLP as independent
public accountants for the Company for its fiscal year ending December 31,
1998; and
(4) To transact such other business as may properly be brought before
the meeting.
Only stockholders of record at the close of business on March 23, 1998 are
entitled to vote at the Annual Meeting or any adjournment thereof. As of that
date, 169,889,258 shares of common stock were outstanding and entitled to one
vote each 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, 1998
to stockholders as of the record date with a copy of the Company's 1997 Annual
Report to Stockholders, which includes financial statements for the period ended
December 31, 1997.
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 the approval of the
amendment to the Marsh & McLennan Companies Stock Investment Plan and FOR the
ratification of the appointment of Deloitte &
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Touche LLP as the Company's independent public accountants for its fiscal year
ending December 31, 1998.
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. 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.
All other matters to be acted on at the Annual Meeting require the
affirmative vote of a majority of the shares present and entitled to vote 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 and entitled to vote for purposes of the preceding sentence.
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, including any proposal
submitted by a stockholder which was omitted from this Proxy Statement in
accordance with applicable provisions of the federal securities laws, 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 I, Class II and Class III directors expire at the 1998,
1999 and 2000 annual meetings of stockholders, respectively. Seven persons are
to be elected at the Annual Meeting to hold office as Class I 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 II director for a term expiring in 1999 and until his successor is elected
and qualified. The remaining Class II and Class III 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. Richard S. Hickok, a Class II director, and Mr. Richard M.
Morrow, a Class III director, are retiring from the Board at the Annual Meeting.
Mr. John D. Ong is a new nominee standing for election as a Class II director.
It is intended that shares represented by the proxies will be voted for the
election of all of the Class I nominees and the Class II 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.
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NOMINEES FOR CLASS I DIRECTORS
(TERMS EXPIRING IN 2001)
NORMAN BARHAM DIRECTOR SINCE 1997
[PHOTO] Mr. Barham, age 56, became a Vice Chairman of J&H Marsh & McLennan,
Inc., a subsidiary of the Company, in 1997 following the Company's
business combination with Johnson & Higgins. Mr. Barham joined
Johnson & Higgins in 1975 and was selected to lead the Johnson &
Higgins Global Business Group in 1992. He was elected an Executive
Vice President of Johnson & Higgins in 1995 and President in 1996.
Mr. Barham is a trustee of The College of Insurance and a member of
the board of New York City Outward Bound.
LEWIS W. BERNARD*** DIRECTOR SINCE 1992
[PHOTO] Mr. Bernard, age 56, is Chairman of Classroom, Inc., a non-profit
educational corporation. He retired in 1991 from Morgan Stanley &
Co., Inc. where for almost 30 years he held numerous positions,
including that of chief administrative and financial officer. Mr.
Bernard is a trustee or director of the American Museum of Natural
History, The Commonwealth Fund, the Harvard Management Company, and
the John and Mary R. Markle Foundation.
RICHARD H. BLUM DIRECTOR SINCE 1985
[PHOTO] Mr. Blum, age 59, became Vice Chairman of J&H Marsh & McLennan,
Inc., a subsidiary of the Company, in 1997. He previously served as
Chairman and Chief Executive Officer of Guy Carpenter & Company,
Inc., a subsidiary of the Company, which he joined in 1958. Mr. Blum
is a trustee of The College of Insurance and a Director of The
Bermuda Commodities Exchange.
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FRANK J. BORELLI DIRECTOR SINCE 1988
[PHOTO] Mr. Borelli, age 62, has been Senior Vice President and Chief
Financial Officer of the Company since 1984. He is a director of The
Interpublic Group of Companies, Inc., Mid Ocean Limited and United
Water Resources, Inc. Mr. Borelli is the immediate past Chairman and
a director of the Financial Executives Institute, a director of the
Private Sector Council, and a trustee of the New York City Chapter
of the National Multiple Sclerosis Society and the Nyack Hospital.
ROBERT F. ERBURU*** DIRECTOR SINCE 1996
[PHOTO] Mr. Erburu, age 67, retired as Chairman of the Board of The Times
Mirror Company, a Los Angeles-based news and information company, on
January 1, 1996, a position he had held since 1986. Mr. Erburu
served as Chief Executive Officer of The Times Mirror Company from
1981 to 1995. Mr. Erburu is a director of The Times Mirror Company,
the Tejon Ranch Company, Cox Communications, Inc., the Pacific
Council on International Policy, the Tomas Rivera Center, the Los
Angeles Annenberg Metropolitan Project and the Skirball Institute of
American Values. He is Chairman of the Board of Trustees of The
Huntington Library, Art Collections and Botanical Gardens and of the
J. Paul Getty Trust, as well as a trustee of the National Gallery of
Art, The Flora and William Hewlett Foundation and The Ahmanson
Foundation, and a Fellow of the American Academy of Arts and
Sciences. Mr. Erburu is also a member of the Business Council.
RAY J. GROVES*** DIRECTOR SINCE 1994
[PHOTO] Mr. Groves, age 62, is Chairman of Legg Mason Merchant Banking, Inc.
He retired in 1994 from Ernst & Young where he had held numerous
positions for 37 years, including the last 17 years as Chairman and
Chief Executive Officer. He is a director of Consolidated Natural
Gas Company, Electronic Data Systems Corporation, Lamalie
Associates, Inc. and RJR Nabisco, Inc. Mr. Groves is a member of the
Board of Trustees of the Business Council of the United Nations and
of the New York Public Policy Institute. He is also a managing
director and treasurer of the Metropolitan Opera Association and a
trustee of The Ohio State University Foundation.
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GEORGE PUTNAM DIRECTOR SINCE 1987
[PHOTO] Mr. Putnam, age 71, is Chairman of Putnam Investment Management,
Inc., a subsidiary of the Company, and is Chairman of the Board of
Trustees and President of the various mutual funds managed by
Putnam. He is a director of Houghton Mifflin Company and
Freeport-McMoran Copper & Gold, Inc. Mr. Putnam is also Chairman of
the WGBH Educational Foundation, a trustee of the Museum of Fine
Arts (Boston), McLean Hospital, Massachusetts General Hospital,
Vincent Memorial Hospital, Trustees of Reservations and New England
Aquarium, and an overseer of the Boston Museum of Science,
Northeastern University and College of the Atlantic.
NOMINEE FOR CLASS II DIRECTOR
(TERM EXPIRING IN 1999)
JOHN D. ONG NEW NOMINEE
[PHOTO] Mr. Ong, age 64, retired as Chairman and Chief Executive Officer of
The BFGoodrich Company, on July 1, 1997, after more than 36 years
with BFGoodrich. He is also a director of Ameritech Corporation,
ASARCO Inc., Cooper Industries, Defiance, Inc., The Geon Company,
The Kroger Company and TRW Inc. Mr. Ong is a trustee of the
University of Chicago and the John S. and James L. Knight Foundation
and is Chairman of the Board of the Musical Arts Association
(Cleveland Orchestra). He is a former Chairman of The Business
Roundtable.
CONTINUING CLASS II DIRECTORS
(TERMS EXPIRING IN 1999)
JEFFREY W. GREENBERG DIRECTOR SINCE 1996
[PHOTO] Mr. Greenberg, age 46, became Chairman and Chief Executive Officer
of Marsh & McLennan Risk Capital Corp., a subsidiary of the Company,
in 1996. From 1978 to 1995, he was employed by American
International Group, Inc., including serving from 1991 as executive
vice president with responsibility for its domestic brokerage group.
Mr. Greenberg is a director of ACE Limited and a trustee of Brown
University, the Spence School in New York City and the Children's
Oncology Society of New York.
</TABLE>
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THE RT. HON. LORD LANG OF MONKTON** DIRECTOR SINCE 1997
[PHOTO] Lord Lang, age 57, is a citizen of the United Kingdom and was a
member of the British Parliament from 1979 to 1997, serving in the
cabinet as Secretary of State for Scotland from 1990 to 1995 and as
President of the Board of Trade and Secretary of State for Trade and
Industry from 1995 to 1997. Lord Lang was appointed to the Queen's
Privy Council in 1990. He is deputy chairman of European Telecom
plc, chairman of Murray Ventures plc and a non-executive director of
Lithgows Ltd., General Accident plc and Second Scottish National
Trust plc.
ADELE SMITH SIMMONS* ** DIRECTOR SINCE 1978
[PHOTO] Mrs. Simmons, age 56, has been President of the John D. and
Catherine T. MacArthur Foundation since 1989. She is a director of
First Chicago/NBD Corporation, the Synergos Institute and the Union
of Concerned Scientists and a member of the Council on Foreign
Relations.
A. J. C. SMITH* DIRECTOR SINCE 1977
[PHOTO] Mr. Smith, age 63, has been Chairman of the Board and Chief
Executive Officer of the Company since 1992. He 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 Vice Chairman of the Central
Park Conservancy and a member of the Board of Trustees of The
Carnegie Hall Society, Inc. and the Educational Broadcasting
Corporation in New York City.
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CONTINUING CLASS III DIRECTORS
(TERMS EXPIRING IN 2000)
PETER COSTER DIRECTOR SINCE 1988
[PHOTO] Mr. Coster, age 58, is President of Mercer Consulting Group, Inc., a
subsidiary of the Company. He joined Mercer in 1984 upon its
acquisition of a U.K. benefits consulting firm that Mr. Coster had
joined in 1962.
LAWRENCE J. LASSER DIRECTOR SINCE 1987
[PHOTO] Mr. Lasser, age 55, is President and Chief Executive Officer of
Putnam Investments, Inc., a subsidiary of the 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 member of the Board of Governors and Executive
Committee of the Investment Company Institute, a member of the Board
of Overseers of the Museum of Fine Arts (Boston), a Trustee of Beth
Israel/Deaconess Medical Center in Boston, a Trustee of the Vineyard
Open Land Foundation, a member of the Council on Foreign Relations,
and a member of the Board of Directors of the United Way of
Massachusetts Bay.
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DAVID A. OLSEN DIRECTOR SINCE 1997
[PHOTO] Mr. Olsen, age 60, served as Vice Chairman of the Company from May
1997 until December 1997. Prior to the Company's business
combination with Johnson & Higgins, he was Chairman and Chief
Executive Officer of Johnson & Higgins, which he joined in 1966. Mr.
Olsen is a member of the Board of Trustees of Bowdoin College, a
director of the New York City Partnership, a trustee and member of
the executive committee of the United States Council for
International Business, a trustee of The College of Insurance, and a
member of the Board and Executive Committee of the American
Institute for Chartered Property Casualty Underwriters and the
Insurance Institute of America. He is also a member of the boards of
U.S. Trust Corporation, Sharon (Connecticut) Hospital, United Way of
New York City and India House, and he serves as Vice Chairman of New
York's South Street Seaport Museum and Chairman of its Development
Committee.
JOHN T. SINNOTT DIRECTOR SINCE 1992
[PHOTO] Mr. Sinnott, age 58, became Vice Chairman of J&H Marsh & McLennan,
Inc., a subsidiary of the Company, in 1997 and its Chief Executive
Officer in January 1998. He previously served Marsh & McLennan,
Incorporated as Chief Executive Officer from 1995 and as President
and Co-Chief Executive from 1990 and 1992, respectively. He joined
Marsh & McLennan, Incorporated in 1963. Mr. Sinnott is a trustee of
the Insurance Institute of America.
FRANK J. TASCO* ** DIRECTOR SINCE 1979
[PHOTO] Mr. Tasco, age 70, retired in 1992 as Chairman of the Board and
Chief Executive Officer of the Company, a position he had held since
1986. From December 1993 to December 1994, he served as Chairman of
Borden, Inc. Mr. Tasco is Chairman of Angram, Inc. and a director of
The Travelers Corporation, Travelers/Aetna Property & Casualty Corp.
and Mid Ocean Limited.
</TABLE>
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* Member of the Executive Committee, of which Mr. Smith is Chairman. Mr.
Morrow, a director who is retiring at the Annual Meeting, also has been a
member.
** Member of the Audit Committee, of which Mr. Hickok, a director who is
retiring at the Annual Meeting, has been Chairman. Mr. Morrow also has been
a member.
*** Member of the Compensation Committee, of which Mr. Bernard is Chairman.
BOARD COMMITTEES AND MEETINGS
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
no meetings during 1997.
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 accountants' 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 held five meetings during 1997.
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 of consultants, as may be
required, 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. Pursuant to the Company's by-laws, 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
other than grants that are part of the usual compensation of directors. The
Compensation Committee held twelve meetings during 1997.
The Board of Directors conducted eight meetings during 1997. The average
attendance by directors at the meetings of the Board of Directors and committees
thereof was 98% and all directors other than Mr. Olsen attended at least 75% of
the meetings of the Board of Directors and committees on which they served.
DIRECTORS' COMPENSATION
As compensation for their services, Messrs. Bernard, Erburu, Groves, Hickok,
Lang, Morrow, Olsen, Putnam and Tasco, and Mrs. Simmons, each receive a basic
retainer of $40,000 per year and an annual grant of 600 shares of the Company's
stock (the "Annual Stock Grant"). These directors
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also receive a fee of $1,000, and reimbursement of related expenses for each
meeting of the Board of Directors or a committee thereof they attend. The
chairman of each committee (other than Mr. Smith as Chairman of the Executive
Committee) receives an additional retainer of $5,000 per year; other members of
committees receive an additional retainer of $2,000 per year. The remaining
directors receive no specific compensation for their services as directors or
members of any committee.
Under the terms of the Company's Directors Stock Compensation Plan, the
directors receive twenty-five percent of the basic retainer in shares of the
Company's stock at the fair market value thereof, as well as their Annual Stock
Grant on each June 1. The balance of their compensation (including attendance
fees and committee retainers) is paid in shares of the Company's stock or cash
as the director elects. The directors may defer receipt of all or a portion of
their compensation to be paid in shares until the year following either their
date of retirement from the Board or a specified earlier date.
On May 21, 1997 the Company's Board of Directors discontinued, with respect
to current and future directors, the provision for payment under the Advisory
Director program pursuant to which members of the Board upon retirement became
advisory directors, available for consultation with management, and received
until age 80 an annual amount equal to their Board retainer at the time of
retirement. In recognition of the discontinuance of the Advisory Director
payments, the Board granted 4,000 shares of the Company's common stock (giving
effect to the Company's two for one stock split on June 27, 1997) to each
director who had been receiving compensation as a member of the Board with the
expectation that they would be compensated for participating in the Advisory
Director program. These shares, together with shares purchased with dividends
paid thereon, are held by the Company in a custodial account for delivery upon
the director's retirement from the Board or, if later, upon reaching age 72,
subject to further deferral at the election of the director. The directors
receiving this grant were Messrs. Bernard, Erburu, Groves, Hickok, Morrow,
Putnam, Tasco and Ventres and Mrs. Simmons. Payments under the Advisory Director
Program continue for four former directors who retired prior to 1997.
EMPLOYMENT AGREEMENTS
Marsh & McLennan Risk Capital Corp. ("MMRCC"), a wholly-owned subsidiary of
the Company, has an employment agreement with Mr. Jeffrey W. Greenberg, its
Chairman and Chief Executive Officer (the "Greenberg Agreement"). The Company
has certain obligations and has guaranteed MMRCC's obligations under this
agreement.
Under the Greenberg Agreement, the term of which expires on September 30,
2000 (and, unless notice is given not later than October 1 of the preceding
year, will be extended for annual periods), Mr. Greenberg receives an annual
salary of at least $750,000 per year and is eligible to participate in the
Company's Senior Management Incentive Compensation Plan. He also is entitled to
receive annual awards of restricted stock or restricted stock units of the
Company with an aggregate value
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equal to 65% of his salary and options to acquire additional shares of Company
stock. In addition, Mr. Greenberg may receive certain contingent performance
payments based on the extent of the Company's investment return and fees from
the Trident Partnership, L.P., a Cayman Islands limited partnership ("Trident")
for which MMRCC is an investment advisor, relating to the period from October 1,
1995 until he is no longer Chairman and Chief Executive Officer of MMRCC.
If Mr. Greenberg's employment is terminated by MMRCC (other than for cause
or disability) or if he terminates his employment for "Good Reason", Mr.
Greenberg will be entitled to receive his base salary for a period of two years
after the termination of employment, as well as bonuses (at the annual rate of
not less than $750,000), continuation of benefits during such period, and the
vesting of unvested stock awards and the contingent performance payments
described above. "Good Reason" is defined in the Greenberg Agreement generally
to include a reduction in compensation; the failure to continue Mr. Greenberg in
his position during the employment period; a change in duties materially
inconsistent with the status of his position; a change in control of the Company
(as described in footnote 2 to the "Summary Compensation Table" below) or of
MMRCC (defined to mean that the Company no longer owns at least 50% of MMRCC);
and Mr. Greenberg's voluntary termination in 1999 under specified circumstances
(in which case, he would receive, in lieu of his base salary and bonus for two
years as described above, a cash lump sum of $500,000).
Putnam Investments, Inc. ("Putnam"), a subsidiary of the Company, has an
employment agreement with Mr. Lawrence J. Lasser, its President and Chief
Executive Officer (the "Lasser Agreement") dated December 31, 1997 and which
expires on December 31, 2001. The Company has certain obligations and has
guaranteed Putnam's obligations under the Lasser Agreement. The Company has also
agreed to use its best efforts to include Mr. Lasser on the management slate of
nominees for directors when his current term expires at the year 2000 annual
meeting.
Under the Lasser Agreement, Mr. Lasser receives an annual salary of
$1,000,000 and is eligible for annual bonuses under the Company's Senior
Management Incentive Compensation Plan, a portion of which may be paid in the
form of restricted stock units of Putnam. As set forth in the Summary
Compensation Table, at the commencement of the Lasser Agreement, Mr. Lasser
received 100,000 restricted stock units of the Company, options to acquire
100,000 shares of Company stock, 300,000 restricted stock units of Putnam
("Putnam restricted stock units") relating to Class B Common Stock of Putnam
("Class B Shares") and options ("Putnam options") expiring on November 1, 2007
to acquire 325,000 Class B Shares of Putnam. Mr. Lasser is entitled to
additional awards of Putnam restricted stock units and Putnam options in the
first quarters of 1999 and 2000 in amounts to be determined by the Compensation
Committee.
In addition, Mr. Lasser will receive, on or after November 1, 2002, a
special retirement benefit in consideration for a non-competition covenant and
post-employment consulting arrangement. This special retirement benefit has a
gross value estimated at $1,500,000 per year for Mr. Lasser's lifetime; the
estimated present equivalent of this amount, $15,000,000, is deemed invested,
from December 31, 1997 in various Putnam funds. Mr. Lasser will receive the
special retirement benefit except in the
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case of termination for cause. Mr. Lasser may elect to be paid in a lump sum,
installments or as a lifetime annuity.
In the event of Mr. Lasser's death or disability, he or his estate will
receive his base salary and annual bonus for the remainder of that year. If Mr.
Lasser's employment is terminated by Putnam or the Company without cause or if
he terminates his employment for "Good Cause", Mr. Lasser will receive a payment
equal to his base salary and annual bonus for the balance of the term of the
Lasser Agreement.
The Lasser Agreement contains various provisions relating to vesting of
Putnam restricted stock units, Putnam options, Company restricted stock units
and Company options in the event that Mr. Lasser's employment is terminated due
to death, disability, by the Company or Putnam without cause, or by Mr. Lasser
for Good Cause.
If any payments under the Lasser Agreement attributable to (i) the Putnam
options to acquire 175,000 Class B Shares granted on December 31, 1997, (ii) the
150,000 Putnam restricted stock units vesting on December 31, 2001, (iii) the
options to acquire Company stock or (iv) the restricted stock units of the
Company are subject to the excise tax imposed under the Federal tax laws, the
Company will increase the payment to Mr. Lasser as necessary to restore him to
the same after-tax position had the excise tax not been imposed.
"Good Cause" is defined in the Lasser Agreement generally to include (a) an
uncured breach by Putnam or the Company of a material term of the Lasser
Agreement; (b) a relocation of Putnam's executive offices or a reassignment of
Mr. Lasser to a location outside of the Boston area; (c) the failure to pay Mr.
Lasser a minimum annual bonus equal to the sum of (1) a cash amount equal to (I)
in the case of the bonus for 1997, $12,000,000 and (II) in the case of the
annual bonus payable with respect to future years, two times the average annual
cash bonus received under the Putnam Partners Incentive Compensation Plan by the
three participants who received the highest such bonus with respect to such
year, plus (2) the total fair market value of the Putnam restricted stock units
which relate to such year's annual bonus; (d) failure to grant additional Putnam
options in 1999 and 2000 with respect to, in the aggregate, 105,000 or more
Class B Shares or failure to grant additional Putnam restricted stock units in
1999 and 2000 with respect to, in the aggregate, 105,000 or more Class B Shares;
(e) a change in control of the Company (as described in footnote 2 to the
"Summary Compensation Table" below); or (f) a change in control of Putnam
(defined to mean that the Company no longer owns more than 50% of Putnam).
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SECURITY OWNERSHIP
The following table reflects as of February 28, 1998 (except with respect to
interests in the Company's Stock Investment Plan and Stock Investment
Supplemental Plan, which are as of December 31, 1997) the number of shares of
common stock which each director, each nominee and each named executive officer
has reported as owning beneficially or otherwise having a pecuniary interest in,
and which all directors, nominees and executive officers of the Company have
reported as owning beneficially as a group. As of February 28, 1998, there are
no persons known to the Company who own more than 5% of the outstanding shares
of the Company's common stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
----------------------------------------------
OTHER
THAN
SOLE SOLE
VOTING VOTING SUBJECT TO
AND AND EXERCISABLE
INVESTMENT INVESTMENT STOCK
NAME POWER POWER(2) OPTIONS TOTAL
- -------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Norman Barham........................................... 264,434 2,059 -- 266,493
Lewis W. Bernard........................................ 2,000 11,251 -- 13,251
Richard H. Blum......................................... -- 221,101 147,500 368,601
Frank J. Borelli........................................ 58,359 106,241 177,500 342,100
Peter Coster............................................ 5,648 79,234 125,000 209,882
Robert F. Erburu........................................ -- 6,465 -- 6,465
Jeffrey W. Greenberg.................................... 6,293 47,148 80,000 133,441
Ray J. Groves........................................... 1,070 9,239 -- 10,309
Richard S. Hickok....................................... 1,800 11,974 -- 13,774
Lord Lang............................................... -- -- -- --
Lawrence J. Lasser...................................... -- 240,600 115,000 355,600
Richard M. Morrow....................................... 2,000 13,905 -- 15,905
David A. Olsen.......................................... 306,934 133,718 -- 440,652
John D. Ong............................................. -- -- -- --
George Putnam........................................... 305,422 63,482 -- 368,904
Adele Smith Simmons..................................... 115,213 101,260 -- 216,473
John T. Sinnott......................................... 22,270 115,817 140,000 278,087
A.J.C. Smith............................................ 209,581 272,899 578,000 1,060,480
Frank J. Tasco.......................................... 165,273 82,105 240,000 487,378
All directors, nominees and executive officers as a
group, including the above (21 individuals)........... 1,503,696 1,589,508 1,731,000 4,824,204
</TABLE>
13
<PAGE>
- ------------------------
(1) As of February 28, 1998, 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 2.43% of the outstanding common stock.
(2) Includes the number of shares of common stock: (i) that are held in the form
of shares of restricted stock that may in the future vest to such
individuals; (ii) that are held indirectly for the benefit of such
individuals or jointly, or directly or indirectly for certain members of
such individuals' families, with respect to which beneficial ownership in
certain cases may be disclaimed; (iii) that represent such individuals'
interests in the Company's Stock Investment Plan; and (iv) that are subject
to issuance in the future with respect to the Directors Stock Compensation
Plan, cash bonus deferral plans, the Stock Investment Supplemental Plan or
restricted stock units in the following aggregate amounts: Mr. Barham, 2,059
shares, Mr. Bernard, 11,251 shares, Mr. Blum, 48,315 shares, Mr. Borelli,
39,368 shares, Mr. Coster, 21,714 shares, Mr. Erburu, 6,465 shares, Mr.
Greenberg, 23,208 shares, Mr. Groves, 9,239 shares, Mr. Hickok, 11,774
shares, Mr. Lasser, 138,280 shares, Mr. Morrow, 12,905 shares, Mr. Putnam,
17,482 shares, Mrs. Simmons, 4,850 shares, Mr. Sinnott, 40,933 shares, Mr.
Smith, 244,827 shares, Mr. Tasco, 11,095 shares, and all directors, nominees
and executive officers as a group, 660,321 shares.
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth cash and other compensation paid or accrued
for services rendered in 1997, 1996 and 1995 to the Chief Executive Officer and
each of the other four most highly compensated executive officers of the Company
whose cash compensation exceeded $100,000. All grants or awards of the Company's
common stock or stock units (including the common stock underlying options)
prior to June 27, 1997 have been adjusted to give effect to the Company's two
for one stock split on that date.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- -------------------------
OTHER RESTRICTED
ANNUAL STOCK SECURITIES ALL OTHER
NAME AND COMPENSATION AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS (#) ($)(3)
- --------------------------------------- ---- --------- ---------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
A.J.C. Smith........................... 1997 1,200,000 1,000,000 133,519 2,056,721 200,000 48,000
Chairman and Chief 1996 1,200,000 850,000 375,420 1,687,766 100,000 48,000
Executive Officer 1995 1,125,000 775,000 337,348 1,339,208 100,000 45,000
Marsh & McLennan
Companies, Inc.
Lawrence J. Lasser..................... 1997 870,000 12,000,000 -- 7,758,700 140,000 130,500
President 14,394,000(4) 325,000(5)
Putnam Investments, Inc. 1996 870,000 9,500,000 -- 389,756 40,000 130,500
1995 820,000 5,500,000 -- 4,537,125 30,000 123,000
Jeffrey W. Greenberg................... 1997 787,500 775,000 -- 702,876 40,000 30,517
Chairman 1996 862,500 600,000 -- 43,791 40,000 7,500
Marsh & McLennan
Risk Capital Corp.
Peter Coster........................... 1997 700,000 480,000 160,116 509,610 40,000 28,000
President 1996 675,000 400,000 214,598 509,498 40,000 27,000
Mercer Consulting 1995 625,000 350,000 130,037 422,780 30,000 25,000
Group, Inc.
John T. Sinnott........................ 1997 650,000 480,000 38,273 520,798 40,000 26,000
Vice Chairman 1996 590,000 400,000 163,983 467,488 30,000 23,600
J&H Marsh & 1995 560,000 350,000 191,468 289,946 30,000 22,400
McLennan, Inc.
</TABLE>
- ------------------------
(1) 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 and Supplemental Retirement Programs, which
are part of the Company's United States retirement program.
15
<PAGE>
(2) At December 31, 1997, each individual in the Summary Compensation Table had
outstanding shares of restricted stock and restricted stock units of the
Company with an aggregate value as follows: Mr. Smith, 113,964 shares and
111,118 units worth $8,497,441 and $8,285,236, respectively; Mr. Lasser,
109,120 shares and 138,280 units worth $8,136,260 and $10,310,503,
respectively; Mr. Greenberg, 23,400 shares and 19,474 units worth $1,744,763
and $1,452,030, respectively; Mr. Coster, 59,720 shares and 16,654 units
worth $4,452,873 and $1,241,764, respectively; and Mr. Sinnott, 51,000
shares and 23,952 units worth $3,802,688 and $1,785,921, respectively.
Holders of shares of restricted stock receive the same dividends as those
paid on the outstanding shares of common stock and such shares generally
vest on the January 1 next following the tenth anniversary of the date of
grant. Holders of restricted stock units receive dividend equivalents that
are equal in value to dividends paid on the outstanding shares of common
stock and such units generally vest three years from the date of grant
(except with respect to the restricted stock units granted to Mr. Lasser on
December 31, 1997, which vest on February 1, 2002). Vesting of shares of
restricted stock and restricted stock units may be accelerated upon a change
in control. "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; a merger or consolidation
of the Company resulting in the Company's stockholders not owning securities
with 50% or more of the voting power of the surviving entity; or an
agreement for the sale or disposition of all or substantially all of the
Company's assets.
Under the Special Severance Pay Plan, holders of restricted stock or awards
in lieu of restricted stock with at least 10 years of service will receive
payment in shares of stock upon forfeiture of their award 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 subject
to execution of a non-solicitation agreement.
(3) Represents for 1997 (a) Company matching contributions under the Stock
Investment Plan of $6,333 for Mr. Greenberg, $6,400 for Mr. Coster and
$4,797 for Mr. Sinnott, and under the Stock Investment Supplemental Plan of
$48,000 for Mr. Smith, $24,184 for Mr. Greenberg, $21,600 for Mr. Coster and
$21,203 for Mr. Sinnott and (b) contributions by Putnam Investments, Inc. of
$24,000 to the Putnam Profit Sharing Retirement Plan and $106,500 to the
Putnam Executive Deferred Compensation Plan for Mr. Lasser.
(4) Mr. Lasser received a grant of 300,000 restricted stock units with respect
to Class B Shares of Putnam on December 31, 1997, including the right to
dividend equivalents that are equal in value to dividends paid on the
outstanding Class A Common Stock of Putnam. The Putnam restricted stock
units will vest with respect to 150,000 units on the fourth anniversary of
the date of grant and will vest with respect to 150,000 units at the rate of
25% per year beginning on December 31, 1998. Upon the happening of certain
corporate events affecting Putnam or the Company, vesting of shares of
restricted stock units may be accelerated in accordance with the terms of
the Putnam Investments, Inc. Equity Partnership Plan ("Putnam Equity
Partnership Plan").
(5) Mr. Lasser was granted Putnam options, which become exercisable 25% a year
beginning one year from December 31, 1997, the date of grant. The exercise
price of the Putnam options may be paid in cash or in Class B Shares of
Putnam. Upon the happening of certain corporate events affecting Putnam or
the Company, all Putnam options will become fully exercisable in accordance
with the terms of the Putnam Equity Partnership Plan.
16
<PAGE>
STOCK OPTION GRANTS IN 1997
The following table sets forth certain information concerning options to
purchase common stock of the Company granted during 1997 by the Company to the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company. The table also sets forth certain information
concerning stock options to purchase Class B Shares of Putnam granted to Mr.
Lasser in 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED IN 1997 ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------------------- ---------- ---------- --------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
A.J.C. Smith.................................. 200,000 5.8% $61.90625 3/19/07 7,786,502 19,732,524
Lawrence J. Lasser............................ 40,000 1.2% $61.90625 3/19/07 1,557,300 3,946,505
100,000 2.9% $73.62500 11/01/07 4,630,237 11,733,929
150,000(3) 6.6% $41.51000 11/01/07 3,915,812 9,923,437
175,000(3) 7.7% $47.98000 11/01/07 5,280,514 13,381,859
Jeffrey W. Greenberg.......................... 40,000 1.2% $61.90625 3/19/07 1,557,300 3,946,505
Peter Coster.................................. 40,000 1.2% $61.90625 3/19/07 1,557,300 3,946,505
John T. Sinnott............................... 40,000 1.2% $61.90625 3/19/07 1,557,300 3,946,505
MMC Stockholders(4)........................... 6,616,593,009 16,767,745,772
</TABLE>
- ------------------------
(1) The options to purchase the Company's common stock described above are
non-qualified options that become exercisable 25% a year beginning one year
from March 20, 1997, the date of grant (except with respect to the option to
acquire 100,000 shares of the Company's common stock granted to Mr. Lasser
on December 31, 1997, which becomes exercisable 25% a year beginning on
December 31, 1998). 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 (as described in footnote 2 to
the "Summary Compensation Table" above), 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 had the excise tax not been imposed.
(2) The dollar amounts are the result of calculations at the 5% and 10% growth
rates set by the Securities and Exchange Commission ("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 all
optionees, except for Mr. Lasser's option to purchase 150,000 Class B Shares
of Putnam at an exercise price of $41.51 per share which had a potential
realizable value on the date of the grant of $970,500.
17
<PAGE>
(3) Mr. Lasser was granted two options to acquire Class B Shares of Putnam which
become exercisable 25% a year beginning on December 31, 1998. The fair
market value of each Class B Share of Putnam on the date of the grant was
$47.98.
(4) 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 of the Company at the assumed stock price appreciation rates at
the end of the 10-year term of the options granted on March 20, 1997 at an
exercise price of $61.90625.
AGGREGATED STOCK OPTION EXERCISES IN 1997 AND
STOCK OPTION VALUE AT DECEMBER 31, 1997
The following table sets forth certain information concerning stock options
exercised during 1997 by the Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company and the number and
value of specified unexercised options at December 31, 1997. The value of
unexercised in-the-money stock options at December 31, 1997 shown below is
presented pursuant to SEC rules and, with respect to the Company's common stock,
is based on the December 31, 1997 closing price on the New York Stock Exchange
of $74.5625 per share and, with respect to Putnam's Class B shares, is based on
an agreed to valuation methodology for determining fair market value, which at
December 31, 1997 was $47.98 per share. The actual amount, if any, realized upon
exercise of stock options will depend upon the market price of the stock
relative to the exercise price per share at the time the stock option is
exercised. There is no assurance that the values of unexercised in-the-money
stock options reflected in this table will be realized.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997
ACQUIRED ON VALUE -------------------------- ----------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ----------------------------- ----------- --------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
A.J.C. Smith................. -- -- 503,000 325,000 16,263,844 6,322,656
Lawrence J. Lasser........... 90,000 2,432,344 95,000 185,000 2,629,062 1,940,156
-- -- -- 325,000(1) -- 970,500(1)
Jeffrey W. Greenberg......... -- -- 60,000 120,000 1,826,562 2,873,437
Peter Coster................. 30,000 908,438 165,000 85,000 5,113,906 1,846,406
John T. Sinnott.............. 20,000 804,063 122,500 77,500 3,721,640 1,643,672
</TABLE>
- ------------------------
(1) Represents options to acquire Class B Shares of Putnam granted to Mr. Lasser
on December 31, 1997. See "Employment Agreements" above.
18
<PAGE>
UNITED STATES RETIREMENT PROGRAM
The Company maintains a United States retirement program consisting of the
Marsh & McLennan Companies Retirement Plan, a non-qualified Benefit Equalization
Program and a non-qualified Supplemental Retirement Program.
The following table shows the estimated annual straight-life annuity benefit
payable (or in the case of those covered by the Benefit Equalization and
Supplemental Retirement Programs, the before-tax equivalents of the after-tax
benefits received) under these retirement programs 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, after giving effect to adjustments for Social
Security benefits:
<TABLE>
<CAPTION>
YEARS OF SERVICE
MAXIMUM -----------------------------------------------------
AVERAGE SALARY 5 10 20 30 40
- --------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 600,000................................................ 56,779 113,558 227,116 331,896 391,896
$ 700,000................................................ 66,779 133,558 267,116 389,896 459,896
$ 800,000................................................ 76,779 153,558 307,116 447,896 527,896
$ 900,000................................................ 86,779 173,558 347,116 505,896 595,896
$1,000,000............................................... 96,779 193,558 387,116 563,896 663,896
$1,100,000............................................... 106,779 213,558 427,116 621,896 731,896
$1,200,000............................................... 116,779 233,558 467,116 679,896 799,896
$1,300,000............................................... 126,779 253,558 507,116 737,896 867,896
$1,400,000............................................... 136,779 273,558 547,116 795,896 935,896
</TABLE>
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 and related plans and not in the
Company's U.S. retirement program, the 1997 compensation used to calculate the
Maximum Average Salary and the number of years of credited service are as
follows: Mr. Smith, $1,200,000, 35 years; Mr. Greenberg, $787,500, 2 years; Mr.
Coster, $700,000, 36 years; and Mr. Sinnott, $650,000, 35 years. Mr. Lasser is
also entitled to receive a special retirement benefit in accordance with the
terms of the Lasser Agreement. See "Employment Agreements" above.
19
<PAGE>
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 businesses in terms of services provided, 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 professionals 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 highly capable and productive
employees, are in the Company'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 regularly to consider
and implement any changes necessary to achieve these ongoing objectives. The
Company's philosophy regarding incentives and rewards 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 pay data
available relating to professional talent in the Company's businesses. In
addition, the Committee periodically evaluates chief executive officer
compensation by comparing it to data developed from a selected group of 25-30
major corporations in professional services, diversified financial, banking and
insurance sectors. This selective grouping is broader than the peer grouping in
the Comparison of Cumulative Total Shareholder Return in order to obtain a
meaningful representation of competitive compensation practices and levels for
senior executive positions.
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 various compensation plans
and are paid 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 reflect the combined annual and long-
20
<PAGE>
term performance of the Company, the operating subsidiary and the employee.
Moreover, individual contributions by these executives are assessed in the
context of a top management team that views itself as a professional
partnership.
Members of the senior management group of Putnam Investments, Inc.
participate in a different compensation program, which is based on competitive
practices in the investment management industry. In terms of annual incentives,
these employees are eligible for bonuses that are determined based on the
absolute and incremental profit of Putnam. With regard to long-term incentives,
these employees are eligible to receive periodic awards of Putnam restricted
stock and stock options with respect to Class B Shares of Putnam. Since
employees of Putnam participate in a separate compensation program, statistics
included in the following sections of this report relating to the compensation
of the Company's senior management group exclude Putnam employees.
SHORT-TERM COMPENSATION (SALARY AND ANNUAL INCENTIVE AWARDS)
With regard to short-term compensation, salaries are reviewed annually, and
increases are granted by the Committee on a discretionary basis in consideration
of current individual and organizational performance, length of service,
affordability and marketplace practices. 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 accounted for 43% of total
compensation (excluding stock options) in 1997 for the Company's senior
management group.
The size of the incentive award pool for senior management cash bonuses is
based on earnings and reflects the Company's net operating income growth.
However, the Committee may, in its sole discretion, authorize a payout of less
than the full bonus pool, as it did for 1997. In this regard, a specific target
level is not established for the award pool, nor, absent any contractual
obligations, are minimum award levels guaranteed for bonus recipients. With
respect to individual award determinations, such assessments by the Committee
are largely judgmental, not formulaic, weighing the Chief Executive Officer's
recommendation and evaluation as to the executive's managerial and professional
role within the organization, relative contribution (compared with the internal
peer group) to the firm's earnings growth, and marketplace compensation levels.
For 1997, bonus awards at Putnam Investments, Inc. reflected continued
exceptional financial performance of that business, while awards to executives
in the Company's other businesses were, on average, nine percentage points above
1996 (as a percentage of salary). For the Company's senior management group,
individual bonuses constituted 32% of total compensation (excluding stock
options) for 1997.
21
<PAGE>
LONG-TERM COMPENSATION (RESTRICTED STOCK, RESTRICTED STOCK UNIT AND STOCK OPTION
AWARDS)
It is the Committee's strongly held belief that the continuing success of
the Company is dependent on the effectiveness of programs intended to retain and
motivate its executives. Accordingly, long-term compensation is designed to
recognize the individual's past and potential future contributions to the
organization, and to link the executive's financial interests with those of
stockholders by fostering stock ownership. Such equity ownership opportunities
for Company executives are made available through 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. In addition, under voluntary deferral programs,
a supplemental equity award with vesting requirements may be granted as an
incentive for long-term stock ownership.
Within this framework, absent a contractual obligation, the size of each
executive's equity grants is determined at the sole discretion of the Committee.
Such determinations include consideration of the Company's future profit
performance expectations and the individual's organizational role, current
performance and potential to contribute to the long-term success of the Company,
as well as review and consideration of the competitive practices on which award
guidelines are based. These considerations, and not prior stock-based awards or
Company stock ownership targets, determine the size of stock grants to
individuals.
Most members of the Company's senior management group are eligible to
receive annual discretionary restricted stock grants on the basis described
above. In 1997, such awards for this group accounted for 18% (including
supplemental equity awards as described above) of total compensation (excluding
stock options).
A select number of participants from 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 150% 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. The
restricted stock units granted in 1997 to the Company's senior management group
made up 7% of total compensation (excluding stock options) for the year.
Stock options are another equity element of senior management compensation.
Members of the executive group are eligible for option grants on an annual
basis. Such grants are made without reference to present holdings of unexercised
options or appreciation thereon. The size of an individual grant reflects the
factors discussed earlier including organizational level, performance and
marketplace practices.
22
<PAGE>
TAX CONSIDERATIONS
As noted above, the Company's executive compensation program is designed to
be cost and tax effective. The Committee's policy is to take actions that it
deems to be in the best interest of the Company and its stockholders,
recognizing, however, that payment of 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 arriving at the compensation
determinations made by the Committee relative to Mr. Smith. Consideration is
also given to his leadership and influence on the long-term strength and
performance of the Company.
The annual base salary for Mr. Smith has been $1,200,000 since January 1,
1996. With regard to cash bonus, Mr. Smith participates in the same Company
annual incentive plan as the Company's senior management group. His 1997 cash
bonus award under the plan was $1,000,000. Based on the previously referenced
review of chief executive officer compensation for 1996 (latest data available),
Mr. Smith's 1997 cash compensation was positioned at about the 25th percentile
of the 1996 market survey group.
In connection with long-term compensation, Mr. Smith was granted 8,800
shares of restricted stock in 1997 under terms previously described. In
addition, Mr. Smith was granted 23,642 restricted stock units in connection with
his 1996 cash bonus award, as well as 2,000 restricted stock units in lieu of a
salary increase. He also received 3,000 restricted stock units for deferring
receipt of vested shares of restricted stock. The combined value of his
restricted stock and restricted stock unit grants was $2,056,721. Based on the
data regarding chief executive officers described above, Mr. Smith's 1997
long-term compensation (including any long-term incentive plan payouts but
excluding stock options) was at about the 65th percentile of the 1996 survey
market. Mr. Smith was granted 200,000 stock options during 1997, and the size of
this grant approximated the 75th percentile of the 1996 survey market.
Total compensation for Mr. Smith, which includes all elements of pay from
the Summary Compensation Table except stock option grants, was $4,438,240 in
1997. Based on the data from the comparison group referenced above, such
compensation for Mr. Smith was at about the 50th percentile of the 1996 survey
market.
Lewis W. Bernard Robert F. Erburu Ray J. Groves
23
<PAGE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
The following graph compares 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 Aon Corporation, Arthur J. Gallagher & Co., Sedgwick Group PLC,
Willis Corroon Group PLC, Franklin Resources, Inc. and T. Rowe Price Associates,
Inc., over the five-year period from December 31, 1992 through December 31,
1997.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PROXY PERFORMANCE CHART
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
Company 100 92 93 107 130 192
S&P 500 100 110 112 153 189 252
ComplndIndex 100 107 97 139 200 332
Assumes $100 invested on December 31, 1992 with dividends
reinvested
</TABLE>
24
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS; OTHER INFORMATION
During 1997, 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 1997, or is expected to involve in 1998, 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 1997.
MMRCC has a consulting agreement with Mr. Robert Clements, its former
Chairman and Chief Executive Officer, pursuant to which he received an
investment advisory and consulting fee of $1,937,500 for 1997. Mr. Clements
served as a director of the Company until October of 1997.
On March 27, 1997, the Company completed a strategic business combination
with Johnson & Higgins, a privately held firm, pursuant to which Johnson &
Higgins became a wholly owned subsidiary of the Company. Transaction payments
made by the Company in connection with the negotiated transaction approved by
the Company's Board of Directors totaled approximately $1.8 billion, with
approximately 55% of such transaction payments being paid to the stockholders of
Johnson & Higgins, which included Messrs. Barham and Olsen.
PROPOSAL TO AMEND THE STOCK INVESTMENT PLAN
The Board of Directors of the Company has placed on the agenda for the
Annual Meeting a proposal to amend the Marsh & McLennan Companies Stock
Investment Plan (the "Plan"). The Plan is an employee stock ownership plan and
is intended to qualify under the relevant sections of the Internal Revenue Code
of 1986, as amended (the "Code"). The Plan (including a predecessor plan) has
been in effect continuously since 1966.
All U.S. salaried employees of the Company and participating subsidiaries
who are eighteen years or older are eligible to participate in the Plan
(currently, approximately 15,700 employees) by electing to contribute up to 15%
of their base salary to the Plan on either a before-tax (pursuant to Section
401(k) of the Code) or after-tax basis, subject to limits imposed by law. For
participants who have been employed with the Company for at least one year, the
Company currently contributes to the Plan amounts equal to 71 2/3% of the
employee's contribution, up to a maximum of 71 2/3% of 6% of the employee's
salary for those employees who elect to participate in the "dividend plus"
feature of the Plan. For those employees not participating in "dividend plus,"
the Company match is 66 2/3%.
All contributions to the Plan are generally invested in shares of the
Company's common stock, except that employees who are either over age 55 or
whose age plus years of Plan participation equals or exceeds 65 may elect to
direct their account balances to the other investment options. Dividends payable
with respect to Company shares in the Plan are either credited to participants'
accounts or, at
25
<PAGE>
their individual election, paid out to such participants. The "dividend plus"
feature of the Plan allows participants who elect, to have all or a portion of
the dividends on their Plan shares paid out to them and to make an additional
before-tax contribution to their Plan account in an amount equal to the amount
of the dividends. Under the Code, the Company is allowed a tax deduction with
respect to those dividends that are paid out.
Following the Company's 1997 business combination with Johnson & Higgins,
the Company analyzed the features and economics of both firms' benefit plans,
with a goal of implementing an integrated U.S. employee benefit program as of
January 1, 1998. On November 20, 1997 the Company's Board of Directors approved
the merger of the Johnson & Higgins Cash Accumulation Plan into the Marsh &
McLennan Companies Stock Investment Plan and adopted a particular amendment to
the Plan, subject to stockholder approval. That amendment provides for an
increase in the Company's matching contribution for participants who are
employees of the Company or its subsidiaries on or after June 1, 1998 (a) who
have attained age 55, or (b) whose age and years of Plan participation total at
least 65. The matching contribution would be increased to ninety-five percent
(95%) of the first six percent (6%) of the participant's compensation (or to one
hundred percent (100%) of the first six percent (6%) of the participant's
compensation in the case of a participant who participates in the Plan's
"dividend plus" feature), provided, however, that such increased matching
contribution over the current match would be invested, to the maximum extent
permissible under the Code, in the stock of this Company and would not be
subject to any diversification election. If the amendment is approved, the
contribution rate increase will be implemented retroactive to January 1, 1998.
The maximum additional allocation that would be made to any participant is
limited by the Code. Based on limitations in effect for 1998, the maximum
additional allocation per employee under the amended Plan would be $2,720.
The Plan currently provides that the Board of Directors may amend the plan
at any time provided that no amendment shall be adopted without the approval of
the Company's stockholders where, among other things, such amendment, as now
proposed, would increase the percentage of the Company's matching contributions.
The Board of Directors recommends that the stockholders vote FOR the
proposal to increase the Company's matching contribution to the Plan under the
circumstances described above, retroactive to January 1, 1998. The affirmative
vote of at least a majority of the shares of the Company's common stock present
and entitled to vote at the Annual Meeting is required for the approval of the
amendment to the Plan.
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 LLP, independent public accountants, to
audit the financial statements of
26
<PAGE>
the Company for the fiscal year ending December 31, 1998. Deloitte & Touche LLP
acted as the Company's independent public accountants for the fiscal year ended
December 31, 1997. Representatives of Deloitte & Touche LLP 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
1998 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 personally, by telephone and by
facsimile 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.
STOCKHOLDER AND OTHER PROPOSALS
Stockholders who wish to present a proposal at the 1999 Annual Meeting of
Stockholders of the Company must submit such proposal in writing to the Company
in care of the Secretary of the Company on or before November 30, 1998 to be
considered for inclusion in the proxy materials for that meeting. In addition,
the by-laws of the Company contain requirements relating to the timing and
content of the notice which stockholders must provide to the Secretary for any
nomination or matter to be properly presented at a stockholders meeting.
By order of the Board of Directors,
/s/Gregory Van Gundy
Gregory Van Gundy
Secretary
27
<PAGE>
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
<PAGE>
PROXY PROXY
MARSH & MCLENNAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1998 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 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 Wednesday, May 20, 1998 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.
P 1. Election of Directors:
R Norman Barham, Lewis W. Bernard, Richard H. Blum, Frank J. Borelli,
Robert F. Erburu, Ray J. Groves, George Putnam, John D. Ong
O
For all--- Withhold all--- For All Except-------------
X Nominee Exception(s)
Y 2. Approval of an amendment to the Marsh & McLennan Companies Stock
Investment Plan
For--- Against--- Abstain---
3 Ratification of Deloitte & Touche LLP as auditors for 1998
For--- Against--- Abstain---
Sign here as name(s) appear on card.
- ------------------------------------
- ------------------------------------
Date:-------------------, 1998
The signer hereby revokes all proxies heretofore
given by the signer to vote at 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.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN. IF NO DIRECTIONS ARE MADE, THEY WILL BE VOTED
FOR ITEMS 1,2 AND 3 AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON
ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
PLEASE RETURN THIS 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 20, 1998
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
20, 1998 and at any adjournment thereof.
Provided this card is received by May 15, 1998, 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.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
PLEASE MARK VOTE IN OVAL
IN THE FOLLOWING MANNER USING DARK INK ONLY.
1998
1. Election of Directors:
Norman Barham, Lewis W. Bernard, Richard H. Blum, Frank J. Borelli,
Robert F. Erburu, Ray J. Groves, George Putnam, John D. Ong.
For all---- Withhold all--- For All Except-----------
Nominee Exception(s)
2. Approval of an amendment to the Marsh & McLennan Companies Stock
Investment Plan
For--- Against--- Abstain---
3 Ratification of Deloitte & Touche LLP as auditors for 1998
For--- Against--- Abstain---
Sign here as name(s) appear on card.
- ------------------------------------------
- ------------------------------------------
Date:------------------, 1998
The signer hereby revokes all proxies heretofore
given by the signer to vote at 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.
THE ALLOCATED SHARES WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTIONS ARE MADE, THEY WILL
BE VOTED FOR ITEMS 1,2 AND 3, AND ACCORDING TO THE DISCRETION OF BANKERS
TRUST COMPANY ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING
OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
PLEASE RETURN THIS CARD PROMPTLY USING THE ACCOMPANYING ENVELOPE
<PAGE>
