<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / 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 AND 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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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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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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
[LOGO]
2000
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
<PAGE>
[LOGO]
<TABLE>
<S> <C> <C>
Dear MMC Stockholder:
You are cordially invited to attend our annual meeting of stockholders at 10:00 a.m. on Thursday,
May 18, 2000 in the auditorium on the second floor at 1221 Avenue of the Americas, New York, New
York.
In addition to the matters described in the attached proxy statement, we will report on our
Company's activities during 1999. You will have an opportunity to ask questions and to meet your
directors and executives.
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, sign, date and return the enclosed proxy card
promptly. You also may vote by telephone, or electronically over the Internet, by following the
instructions on your proxy card.
We look forward to seeing you at the meeting. Your vote is important to us.
Very truly yours,
/s/ A.J.C. SMITH
Chairman of the Board
March 29, 2000
</TABLE>
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
<TABLE>
<S> <C>
TIME:
10:00 a.m. Local Time
DATE:
May 18, 2000
PLACE:
Second Floor Auditorium
1221 Avenue of the Americas
New York, New York
PURPOSE:
- Elect six persons to serve as Class III directors and one
person to serve as a Class I director
- Approve the 2000 Senior Executive Incentive and Stock
Award Plan
- Adopt an Amendment to the Stock Investment Plan
- Ratify the appointment of Deloitte & Touche LLP as
independent auditors
- Conduct other business if properly raised
</TABLE>
Only stockholders of record on March 22, 2000 may vote at the meeting. This
proxy solicitation material is being mailed to stockholders on or about
March 29, 2000 with a copy of MMC's 1999 Annual Report, which includes financial
statements for the period ended December 31, 1999.
YOUR VOTE IS IMPORTANT. YOU MAY CAST YOUR VOTE BY MAIL, TELEPHONE OR OVER
THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD.
/S/ GREGORY VAN GUNDY
GREGORY VAN GUNDY
March 29, 2000
1
<PAGE>
GENERAL INFORMATION
WHO MAY VOTE
Holders of our common stock, as recorded in our stock register on March 22,
2000, may vote at the meeting. As of that date, there were 268,450,307 shares of
common stock outstanding and entitled to one vote per share. A list of
stockholders will be available for inspection for at least ten days prior to the
meeting at the principal executive offices of MMC at 1166 Avenue of the
Americas, New York, New York.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
Most stockholders have a choice of voting by using a toll free number, over
the internet or by completing a proxy card and mailing it in the postage-paid
envelope provided. Please refer to your proxy card or the information forwarded
by your bank, broker or other holder of record to see which options are
available to you.
HOW PROXIES WORK
The Company's Board of Directors is asking for your proxy. Giving us your
proxy means you authorize us to vote your shares at the meeting, or at any
adjournment thereof, in the manner you direct. You may vote for all, some, or
none of our director candidates. You may also vote for or against the other
proposals or abstain from voting.
If you sign and return the enclosed proxy card but do not specify how to
vote, we will vote your shares in favor of our director candidates and in favor
of items 2, 3 and 4.
As of the date hereof, we do not know of any other business that will be
presented at the meeting. If other business shall properly come before the
meeting, including any proposal submitted by a stockholder which was omitted
from this Proxy Statement in accordance with applicable federal securities laws,
the persons named in the proxy will vote according to their best judgment.
SOLICITATION
In addition to this mailing, our employees may solicit proxies personally,
electronically or by telephone. We pay the costs of soliciting this proxy. We
also reimburse brokers and other nominees for their expenses in sending these
materials to you and getting your voting instructions.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy with
a later date; by voting in person at the meeting; or by notifying the Company's
Secretary in writing.
QUORUM
In order to carry on the business of the meeting, we must have a quorum.
This means at least a majority of the outstanding shares eligible to vote must
be represented at the meeting, either by proxy or in person.
VOTES NEEDED
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
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 meeting require the affirmative vote
of a majority of MMC stock present or represented and entitled to vote at the
meeting to constitute the action of the stockholders. In accordance with
Delaware law, abstentions will be treated as present and entitled to vote for
purposes of the preceding sentence, while broker nonvotes will not.
2
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
The Board is divided into three classes. The regular terms of office for the
Class III, Class I and Class II directors expire at the 2000, 2001 and 2002
annual meetings of stockholders, respectively. Six persons are to be elected at
the 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 meeting to hold office as a Class I director for a term expiring
in 2001 and until his successor is elected and qualified. The remaining Class I
and Class II directors will not be elected at the meeting as their respective
terms will continue.
Mr. Mathis Cabiallavetta is a new nominee standing for election as a
Class I director and Mr. Charles A. Davis is a new nominee standing for election
as a Class III director.
Each director has served as a director since the year indicated. Mr. Saxon
Riley, a Class II director, retired from the Board in March 2000. Mr. Frank J.
Tasco and Mr. W.R.P. White-Cooper, both Class III directors and Mr. Norman
Barham, a Class I director, are retiring from the Board at the meeting.
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 meeting for any reason, the persons designated as proxies
reserve full discretion to cast their votes for another person whom the Board
might designate in substitution.
The Board recommends you vote FOR each of the following candidates:
<TABLE>
<S> <C>
NOMINEE FOR CLASS I DIRECTOR
(TERM EXPIRING IN 2001)
MATHIS CABIALLAVETTA NEW NOMINEE
[PHOTO] Mr. Cabiallavetta, age 55, was appointed Vice Chairman of
MMC in April 1999. Mr. Cabiallavetta is the former chairman
of the board of directors of UBS A.G. He is a past member of
the board of the Swiss National Bank, the International
Capital Markets Advisory Committee of the Federal Reserve
Bank and the International Advisory Board of the World
Economic Forum, Davos. He also served as a vice chairman of
the board of directors of the Swiss Bankers Association.
NOMINEES FOR CLASS III DIRECTORS
(TERMS EXPIRING IN 2003)
PETER COSTER DIRECTOR SINCE 1988
[PHOTO] Mr. Coster, age 60, is President of Mercer Consulting
Group, Inc., a subsidiary of MMC. He joined Mercer in 1984
upon its acquisition of a U.K. benefits consulting firm that
Mr. Coster had joined in 1962. He is a trustee of The
Foundation Fighting Blindness.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
CHARLES A. DAVIS NEW NOMINEE
[PHOTO] Mr. Davis, age 51, was appointed Vice Chairman of MMC in
September 1999 and has been serving as president of Marsh &
McLennan Capital, Inc., a subsidiary of MMC, since 1998 and
as its chief executive officer since 1999. Prior to joining
MMC, Mr. Davis was a senior director and limited partner at
Goldman Sachs. During his 23-year career at Goldman Sachs,
he had been head of investment banking services worldwide, a
member of the international executive committee and a
general partner. Mr. Davis is a director of Media
General, Inc., Progressive Corporation, Lechters, Inc. and
Merchants Bancshares, Inc. He is a trustee of the University
of Vermont.
GWENDOLYN S. KING** DIRECTOR SINCE 1998
[PHOTO] Ms. King, age 59, was senior vice president, corporate and
public affairs at Peco Energy from 1992 until her retirement
in 1998. From 1989 to 1992, she served as commissioner of
the Social Security Administration in the U.S. Department of
Health and Human Services. Ms. King is a director of Erie
Indemnity Co., Lockheed Martin Corporation, Monsanto Company
and the National Adoption Center and a member of the George
Washington University National Council for Political
Management.
LAWRENCE J. LASSER DIRECTOR SINCE 1987
[PHOTO] Mr. Lasser, age 57, is President and Chief Executive Officer
of Putnam Investments, Inc., a subsidiary of MMC. He joined
Putnam in 1969. Mr. Lasser is a trustee of the various
mutual funds managed by Putnam Investment Management, Inc.,
a subsidiary of MMC. He is a member of the Board of
Governors and Executive Committee of the Investment Company
Institute, a member of the Board of Trustees of the Museum
of Fine Arts (Boston), a trustee of Beth Israel/Deaconess
Medical Center in Boston, a member of the Commercial Club of
Boston and the Council on Foreign Relations, and a member of
the Board of Directors of the United Way of Massachusetts
Bay.
DAVID A. OLSEN DIRECTOR SINCE 1997
[PHOTO] Mr. Olsen, age 62, served as Vice Chairman of MMC from
May 1997 until December 1997. Prior to MMC'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, and an honorary director of the
New York City Partnership. He is also a member of the boards
of U.S. Trust Corporation, Sharon (Connecticut) Hospital,
India House, and New York's South Street Seaport Museum.
JOHN T. SINNOTT DIRECTOR SINCE 1992
[PHOTO] Mr. Sinnott, age 60, became Chairman and Chief Executive
Officer of Marsh Inc., a subsidiary of MMC, in 1999.
Mr. Sinnott has held various executive positions with MMC
including most recently as Vice Chairman and Chief Executive
Officer of J&H Marsh & McLennan, Inc., and prior to that as
President and Chief Executive Officer of Marsh & McLennan,
Incorporated. He joined Marsh & McLennan, Incorporated in
1963.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
CONTINUING CLASS I DIRECTORS
(TERMS EXPIRING IN 2001)
LEWIS W. BERNARD* *** DIRECTOR SINCE 1992
[PHOTO] Mr. Bernard, age 58, 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, the John and Mary R. Markle Foundation and the J.
Paul Getty Trust.
FRANK J. BORELLI DIRECTOR SINCE 1988
[PICTURE] Mr. Borelli, age 64, has been Senior Vice President of MMC
since 1984, and served as Chief Financial Officer from 1984
until January 2000. He is a director of Express
Scripts, Inc., The Interpublic Group of Companies, Inc. and
United Water Resources, Inc. Mr. Borelli is a past national
chairman and a director of the Financial Executives
Institute. He is also Co-Chairman of the New York City
Chapter of the National Multiple Sclerosis Society and Vice
Chairman of the Nyack Hospital and the Private Sector
Council and a director of the New York City Public/Private
Initiatives, Inc.
ROBERT F. ERBURU*** DIRECTOR SINCE 1996
[PHOTO] Mr. Erburu, age 69, 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 Cox Communications, Inc. He is
Chairman of the Boards of the Skirball Institute of American
Values, The Huntington Library, Art Collections and
Botanical Gardens, the J. Paul Getty Trust, the Pacific
Council on International Policy and the Board of Councilors
of the College of Letters, Arts and Science of the
University of Southern California. He is also a trustee of
the National Gallery of Art, The Flora and William Hewlett
Foundation and the Ahmanson Foundation. Mr. Erburu is also a
graduate member of the Business Council.
RAY J. GROVES* *** DIRECTOR SINCE 1994
[PHOTO] Mr. Groves, age 64, 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 Allegheny Technologies Incorporated, American
Water Works Company, Inc., Boston Scientific Corporation,
Dominion Resources, Inc., Electronic Data Systems
Corporation and Nabisco Group Holdings, Inc. Mr. Groves is a
member of the Board of Trustees of the New York Public
Policy Institute. He is also a managing director, treasurer
and secretary of the Metropolitan Opera Association and
Chairman of The Ohio State University Foundation.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
CONTINUING CLASS II DIRECTORS
(TERMS EXPIRING IN 2002)
JEFFREY W. GREENBERG* DIRECTOR SINCE 1996
[PICTURE] Mr. Greenberg, age 48, became President of MMC in
January 1999, and Chief Executive Officer in November 1999.
Mr. Greenberg became Chairman of Marsh & McLennan
Capital, Inc., a subsidiary of MMC, in 1996. He joined MMC
in 1995. 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 trustee of
Brown University, the Spence School in New York City and New
York Presbyterian Hospital.
STEPHEN R. HARDIS** DIRECTOR SINCE 1998
[PHOTO] Mr. Hardis, age 64, is Chairman and Chief Executive Officer
of Eaton Corporation which he joined in 1979. Mr. Hardis is
a director of American Greetings Corporation, KeyCorp,
Lexmark International Corporation, Nordson Corporation, and
Progressive Corporation and a trustee of the Cleveland
Clinic.
THE RT. HON. LORD LANG OF MONKTON** DIRECTOR SINCE 1997
[PHOTO] Lord Lang, age 59, 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 Investment Trust plc, Thistle
Mining Inc. and The British American Film Academy Inc. Lord
Lang is also a non-executive director of Lithgows Ltd., CGU
plc and Second Scottish National Trust plc.
JOHN D. ONG** DIRECTOR SINCE 1998
[PHOTO] Mr. Ong, age 66, is Chairman Emeritus of The BFGoodrich
Company. He retired as Chairman of The BFGoodrich Company in
1997, after more than 36 years of service, including as
Chairman and Chief Executive Officer from 1979 to 1996. He
is also a director of Cooper Industries 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 and a graduate member of The Business Council.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
ADELE SIMMONS* ** DIRECTOR SINCE 1978
[PHOTO] Mrs. Simmons, age 58, is Vice Chair and Senior Executive of
Chicago Metropolis 2020 and a senior associate of the Center
for International Studies at the University of Chicago. She
served as President of the John D. and Catherine T.
MacArthur Foundation from 1989 to 1999. She is a director of
The Field Museum, Environmental Defense Fund, Synergos
Institute, the Rocky Mountain Institute, the Global Fund for
Women, the Chicago Public Education Fund and the Union of
Concerned Scientists. She is Chair of the Committee to Visit
the Graduate School of Education at Harvard and a member of
the Advisory Board of the World Bank Institute.
A. J. C. SMITH* DIRECTOR SINCE 1977
[PHOTO] Mr. Smith, age 65, has been Chairman of the Board of MMC
since 1992. He served as Chief Executive Officer from 1992
to 1999 and as President from 1986 to 1992. He joined
William M. Mercer Limited, a Canadian subsidiary of MMC, in
1961. Mr. Smith is a trustee of the various mutual funds
managed by Putnam Investment Management, Inc., a subsidiary
of MMC. He is also Chairman of the Central Park Conservancy,
a member of the Board of Trustees of the Carnegie Hall
Society, Inc., the Educational Broadcasting Corporation in
New York City and the National Museums of Scotland
(Edinburgh). Mr. Smith is also a member of the Board of
Overseers of the Joan and Sanford I. Weill Graduate School
of Medical Sciences of Cornell University.
</TABLE>
- --------------------------
* Member of the Executive Committee, of which Mr. Greenberg is Chairman.
** Member of the Audit Committee, of which The Rt. Hon. Lord Lang of Monkton is
Chairman.
*** Member of the Compensation Committee, of which Mr. Bernard is Chairman.
7
<PAGE>
DIRECTORS' COMPENSATION
As compensation for their services, Messrs. Bernard, Erburu, Groves, Hardis,
Lang, Olsen, Ong and Tasco, and Ms. King and Mrs. Simmons, each receive a basic
retainer of $40,000 per year and an annual grant of 900 shares of stock (the
"Annual Stock Grant"). These directors also receive a fee of $1,000, and
reimbursement of related expenses for each meeting of the Board or a committee
they attend. The chairman of each committee (other than Mr. Greenberg 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. Directors who are also employees receive no specific compensation for
their services as directors or members of any committee.
Under the terms of MMC's Directors Stock Compensation Plan, the directors
receive twenty-five percent of the basic retainer in shares of 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 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 retirement from the Board or a
specified earlier date.
BOARD COMMITTEES AND MEETINGS
THE EXECUTIVE COMMITTEE has all the powers of the Board, when it is not in
session, in the management of the business and affairs of MMC, except as
otherwise provided in MMC's by-laws or in resolutions of the Board and under
applicable law. The Executive Committee held three meetings during 1999.
THE AUDIT COMMITTEE submits recommendations to the Board with respect to the
selection of MMC's independent auditors and on any other matters it deems
appropriate. It reviews the annual financial statements of MMC with MMC's
independent auditors, the practices and procedures adopted by MMC in the
preparation of such statements, and the independent auditors' annual scope of
audit. The Audit Committee is required to meet at least annually with such
auditors and at any time when considered appropriate by the Audit Committee or
such auditors. The Audit Committee held seven meetings during 1999.
THE COMPENSATION COMMITTEE determines the compensation of MMC's Chief
Executive Officer, approves the compensation of other senior executives of MMC
and approves the retention by MMC of consultants, as may be required, on matters
relating to the compensation of the Chief Executive Officer and senior
executives of MMC. In addition, the Compensation Committee administers MMC's
stock-based award plans. Pursuant to our by-laws, no member of the Compensation
Committee may be an employee 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 eight
meetings during 1999.
THE BOARD conducted six meetings during 1999. The average attendance by
directors at the meetings of the Board and committees thereof was 93.7% and all
directors attended at least 75% of the meetings of the Board and committees on
which they served, other than Mr. Hardis.
EMPLOYMENT AGREEMENT
Putnam Investments, Inc. ("Putnam"), a subsidiary of MMC, has an employment
agreement with Lawrence J. Lasser, its President and Chief Executive Officer
(the "Lasser Agreement") dated December 31, 1997, which expires on December 31,
2001. MMC has certain obligations and has guaranteed Putnam's obligations under
the Lasser Agreement. MMC 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 this year's annual meeting.
Under the Lasser Agreement, Mr. Lasser receives an annual salary of
$1,000,000 and is eligible for annual bonuses under MMC's Senior Management
Incentive Compensation Plan, a portion of which may be paid in the form of
restricted stock units of Putnam ("Putnam restricted stock units") relating to
Class B Common Stock of Putnam ("Class B Shares").
8
<PAGE>
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. The estimated present equivalent of this
benefit, $15,000,000, was deemed invested, from December 31, 1997 in various
Putnam funds. Mr. Lasser will receive the special retirement benefit except in
the 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 MMC without cause or if he
terminates his employment for "Good Cause", Mr. Lasser will receive a payment
equal to his 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, MMC restricted stock units and
MMC options in the event that Mr. Lasser's employment is terminated due to
death, disability, by MMC 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 MMC stock or (iv) the restricted stock units of MMC
are subject to the excise tax imposed under the Federal tax laws, MMC 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 generally to include (a) an uncured breach by Putnam
or MMC 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 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 MMC (as described in footnote 2 to the "Summary
Compensation Table" below); or (f) a change in control of Putnam (defined to
mean that MMC no longer owns more than 50% of Putnam).
SECURITY OWNERSHIP
The following table reflects the number of shares of stock beneficially owned by
persons known to MMC to own more than 5% of the outstanding shares:
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY PERCENT OF STOCK OUTSTANDING
NAME AND ADDRESS OWNED AT DECEMBER 31, 1999
- ---------------- ------------------- ----------------------------
<S> <C> <C>
Wellington Management Company, LLP(1)............... 17,246,549 6.46%
75 State Street
Boston, MA 02109
</TABLE>
- --------------------------
(1) Based upon the number of shares listed in a Schedule 13G filed with the
Securities and Exchange Commission by Wellington Management Company, LLP on
February 11, 2000.
9
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table reflects as of February 29, 2000 (except with respect to
interests in MMC's Stock Investment Plan and Stock Investment Supplemental Plan,
which are as of December 31, 1999) 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 MMC have reported as owning
beneficially as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
--------------------------------------------------------
SOLE VOTING OTHER THAN
AND SOLE VOTING SUBJECT TO
INVESTMENT AND INVESTMENT EXERCISABLE
NAME POWER POWER (2) STOCK OPTIONS TOTAL
- ---- ----------- -------------- ------------- ---------
<S> <C> <C> <C> <C>
Norman Barham................................ 231,688 35,839 28,750 296,277
Lewis W. Bernard............................. 3,000 21,500 0 24,500
Frank J. Borelli............................. 124,801 194,218 317,500 636,519
Mathis Cabiallavetta......................... 0 17,222 12,500 29,722
Peter Coster................................. 17,360 126,979 305,000 449,339
Charles A. Davis............................. 4,275 52,016 42,500 98,791
Robert F. Erburu............................. 0 13,744 0 13,744
Jeffrey W. Greenberg......................... 27,597 122,449 322,500 472,546
Ray J. Groves................................ 1,684 18,212 0 19,896
Stephen R. Hardis............................ 1,000 1,904 0 2,904
Gwendolyn S. King............................ 0 1,444 0 1,444
Lord Lang.................................... 1,755 0 0 1,755
Lawrence J. Lasser........................... 1,726 289,434 202,500 493,660
David A. Olsen............................... 247,580 115,018 0 362,598
John D. Ong.................................. 0 3,269 0 3,269
Adele Simmons................................ 142,528 169,096 0 311,624
John T. Sinnott.............................. 48,355 189,789 275,000 513,144
A.J.C. Smith................................. 327,135 456,225 1,065,000 1,848,360
Frank J. Tasco............................... 265,138 130,647 200,000 595,785
W.R.P. White-Cooper.......................... 0 29,563 17,355 46,918
All directors, nominees and executive
officers as a group, including the above
(23 individuals)........................... 1,505,773 2,146,362 3,103,105 6,755,239
</TABLE>
- --------------------------
(1) As of February 29, 2000, no director, nominee or named executive officer
beneficially owned more than 1% of the outstanding stock, and all directors,
nominees and executive officers as a group beneficially owned approximately
2.10% of the outstanding stock.
(2) Includes the number of shares of 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 MMC'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, 8,501 shares, Mr. Bernard, 21,500
shares, Mr. Borelli, 83,617 shares, Mr. Cabiallavetta, 17,222 shares,
Mr. Coster, 34,814 shares, Mr. Davis, 36,280 shares, Mr. Erburu, 13,744
shares, Mr. Greenberg, 60,498 shares, Mr. Groves, 18,212 shares,
Mr. Hardis, 1,904 shares, Ms. King, 1,244 shares, Mr. Lasser, 190,699
shares, Mr. Ong, 3,269 shares, Mrs. Simmons, 9,808 shares, Mr. Sinnott,
67,946 shares, Mr. Smith, 456,130 shares, Mr. Tasco, 21,171 shares,
Mr. White-Cooper, 29,563 shares and all directors and executive officers as
a group, 1,111,253 shares.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth cash and other compensation paid or accrued for
services rendered in 1999, 1998 and 1997 to the individuals who served as MMC's
Chief Executive Officer during 1999 and each of the other four most highly
compensated executive officers of MMC. Mr. Smith was Chief Executive Officer
until November 1999 and was also one of the four most highly compensated
executive officers at the end of 1999. All grants or awards of MMC stock or
stock units (including the stock underlying options) prior to June 26, 1998 and
June 27, 1997 have been adjusted to give effect to MMC's three for two stock
split and two for one stock split on those dates, respectively.
<TABLE>
LONG TERM COMPENSATION
ANNUAL COMPENSATION -------------------------------------------
----------------------------------------- SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL COMPENSATION STOCK OPTIONS PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS ($)(2) (#) ($) ($)(3)
- ------------------------ ---- --------- ---------- ------------ -------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.J.C. Smith............ 1999 1,500,000 5,000,000 -- 2,898,878 -- -- 85,500
Chairman 1998 1,200,000 1,500,000 -- 3,795,930 300,000 -- 68,400
Marsh & McLennan 1997 1,200,000 1,000,000 133,519 2,056,721 300,000 -- 48,000
Companies, Inc.
Jeffrey W. Greenberg.... 1999 1,000,000 1,300,000 -- 1,181,528 150,000 1,467,374(4) 41,750
President and Chief 1998 850,000 900,000 -- 782,788 60,000 -- 34,835
Executive Officer 1997 787,500 775,000 -- 702,876 60,000 -- 30,517
Marsh & McLennan
Companies, Inc.
Lawrence J. Lasser...... 1999 1,000,000 26,000,000 -- 77,139 -- -- 150,000
President 8,081,850(5) 105,000(6) --
Putnam Investments, Inc. 1998 1,000,000 17,000,000 -- -- -- -- 150,000
1997 870,000 12,000,000 -- 7,758,700 210,000 130,000
14,394,000(5) 325,000(6)
Peter Coster............ 1999 850,000 650,000 230,329 813,634 50,000 -- 49,088
President 1998 775,000 600,000 198,993 710,000 45,000 -- 44,175
Mercer Consulting Group, 1997 700,000 480,000 160,116 509,610 60,000 -- 28,000
Inc.
John T. Sinnott......... 1999 850,000 550,000 226,347 892,066 50,000 -- 48,450
Chairman 1998 775,000 600,000 156,312 781,580 45,000 -- 44,175
Marsh Inc. 1997 650,000 480,000 38,273 520,798 60,000 -- 26,000
</TABLE>
- --------------------------
(1) Represents payments to cover tax liabilities arising from funding annuities
under the Benefit Equalization and Supplemental Retirement Programs, which
are part of MMC's United States retirement program.
(2) At December 31, 1999, each individual in the Summary Compensation Table had
outstanding shares of restricted stock and restricted stock units of MMC
with an aggregate value as follows: Mr. Smith, 434,871 units worth
$41,611,719; Mr. Greenberg, 27,599 shares and 62,321 units worth $2,640,879
and $5,963,341, respectively; Mr. Lasser, 101,681 shares and 190,699 units
worth $9,729,601 and $18,247,511, respectively; Mr. Coster, 93,380 shares
and 23,483 units worth $8,935,299 and $2,247,030, respectively; and
Mr. Sinnott, 78,018 shares and 53,651 units worth $7,465,347 and $5,133,730,
respectively. Holders of shares of restricted stock receive the same
dividends as those paid on the outstanding shares of 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
restricted stock and restricted stock units may be accelerated upon a change
in control. "Change in Control" of MMC means generally any "person" owning
securities with 50% or more of the voting power of MMC; within a two-year
period (with certain exceptions) a change in directors constituting a
majority of the Board; a merger or consolidation of MMC resulting in MMC
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 MMC's assets. Under the MMC 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
11
<PAGE>
in shares of stock upon forfeiture of their award if their employment with
MMC 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 1999 (a) MMC matching contributions under the Stock
Investment Plan of $9,500 for Mr. Smith, $6,630 for Mr. Greenberg, $9,388
for Mr. Coster and $7,279 for Mr. Sinnott, and under the Stock Investment
Supplemental Plan of $76,000 for Mr. Smith, $35,120 for Mr. Greenberg,
$39,700 for Mr. Coster and $41,171 for Mr. Sinnott, and (b) contributions by
Putnam Investments, Inc. of $24,000 to the Putnam Profit Sharing Retirement
Plan and $126,000 to the Putnam Executive Deferred Compensation Plan for
Mr. Lasser.
(4) Prior to Mr. Greenberg becoming Chief Executive Officer of MMC he received
various carried interest awards under the Long Term Incentive Plan ("LTIP")
of Marsh & McLennan Capital, Inc. ("Marsh Capital"). The LTIP operates as an
incentive compensation pool that varies in amount based on the extent of
MMC's investment return and fees from originating, structuring and managing
certain insurance and related industry investments, including The Trident
Partnership L.P. ("Trident I"). In addition, Mr. Greenberg receives a
carried interest in Trident II, L.P. ("Trident II"), a successor investment
fund to Trident I, as a result of owning partnership interests in the
general partner of Trident II. As of December 31, 1999, the estimated value
of Mr. Greenberg's carried interest in any future payouts under the LTIP and
Trident II aggregated approximately $1.8 million, subject to realization of
such returns and fees.
(5) At December 31, 1999, Mr. Lasser had 330,000 restricted stock units of
Putnam Class B Shares with an estimated aggregate value of $28,686,900. All
grants of Putnam restricted stock units include the right to dividend
equivalents that are equal in value to dividends paid on the outstanding
Class A Common Stock of Putnam. The Putnam restricted stock units vest at a
rate of 25% a year beginning with the first anniversary of the date of the
grant, except with respect to 150,000 units granted on December 31, 1997
which vest on the fourth anniversary of the date of grant. Upon the
happening of certain corporate events affecting Putnam or MMC, vesting of
shares of Putnam restricted stock units may be accelerated.
(6) Mr. Lasser was granted Putnam options, which become exercisable 25% a year
beginning one year from the date of grant. The exercise price of the Putnam
options may be paid in cash or in Class B Shares of Putnam. Upon the
happening of certain corporate events affecting Putnam or MMC, all Putnam
options will become fully exercisable.
12
<PAGE>
STOCK OPTION GRANTS IN 1999
The following table sets forth certain information concerning MMC stock options
granted during 1999 to the Chief Executive Officer and each of the other four
most highly compensated executive officers of MMC. The table also sets forth
certain information concerning stock options to purchase Putnam Class B Shares
granted to Mr. Lasser in 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------------------
NAME GRANTED IN 1999 ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------- -------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A.J.C. Smith.......... -- -- -- -- -- --
Jeffrey W.
Greenberg........... 150,000 1.9% $60.84375 1/20/09 5,739,646 14,545,390
Lawrence J. Lasser.... 105,000(3) 6.3% $ 76.97 3/17/09 5,082,632 12,880,388
Peter Coster.......... 50,000 0.6% $75.53125 3/17/09 2,375,060 6,018,868
John T. Sinnott....... 50,000 0.6% $75.53125 3/17/09 2,375,060 6,018,868
MMC Stockholders(4)... $12,684,045,062 $32,143,860,545
</TABLE>
- --------------------------
(1) The MMC stock options become exercisable 25% a year beginning one year from
the date of grant. The option exercise price 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 MMC (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, MMC 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.
(3) Mr. Lasser was granted an option to acquire Putnam Class B Shares which
become exercisable 25% a year beginning on March 18, 2000. The fair market
value of each Putnam Class B Share on the date of the grant was $76.97
(4) The dollar amounts are included for comparative purposes to show the gain
that would be achieved by the holders of the outstanding stock of MMC at the
assumed stock price appreciation rates at the end of the 10-year term of the
MMC options granted on March 18, 1999 at an exercise price of 75.53125.
13
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN 1999 AND STOCK OPTION VALUE AT
DECEMBER 31, 1999
The following table sets forth certain information concerning stock options
exercised during 1999 by the Chief Executive Officer and each of the other four
most highly compensated executive officers of MMC and the number and value of
specified unexercised options at December 31, 1999. The value of unexercised
in-the-money stock options at December 31, 1999 shown below is presented
pursuant to SEC rules and, with respect to MMC stock, is based on the
December 31, 1999 closing price on the New York Stock Exchange of $95.6875 per
share and, with respect to the Putnam Class B Shares, is based on an agreed
valuation methodology for determining fair market value which at December 31,
1999 was $86.93 per share. The actual amount, if any, realized upon exercise of
stock options will depend upon the market price of the stock relative to the
exercise price per share at the time the stock option is exercised. There is no
assurance that the values of unexercised in-the-money stock options reflected in
this table will be realized.
<TABLE>
NUMBER OF SECURITIES
UNDERLYING
SHARES UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
ACQUIRED DECEMBER 31, 1999 IN-THE-MONEY OPTIONS AT
ON VALUE --------------------------- DECEMBER 31, 1999
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE ---------------------------------------
NAME (#) ($) (#) (#) EXERCISABLE ($) UNEXERCISABLE($)
- ----------------------------- --------- --------- ----------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
A.J.C. Smith................. 252,000 8,460,375 877,500 412,500 54,184,687 18,535,938
Jeffrey W. Greenberg......... -- -- 240,000 240,000 15,053,437 9,413,749
Lawrence J. Lasser........... -- -- 172,500 120,000 9,571,562 6,087,812
-- -- 162,500(1) 267,500(1) 14,126,125(1) 23,253,775(1)
Peter Coster................. -- -- 251,250 128,750 15,776,170 4,796,327
John T. Sinnott.............. 45,000 2,216,250 225,000 125,000 14,088,984 4,556,328
</TABLE>
- --------------------------
(1) Represents options to acquire Putnam Class B Shares.
14
<PAGE>
UNITED STATES RETIREMENT PROGRAM
MMC 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>
$800,000............................... $ 76,561 $153,122 $306,243 $ 446,804 $ 526,804
$900,000............................... $ 86,561 $173,122 $346,243 $ 504,804 $ 594,804
$1,000,000............................. $ 96,561 $193,122 $386,243 $ 562,804 $ 662,804
$1,100,000............................. $106,561 $213,122 $426,243 $ 620,804 $ 730,804
$1,200,000............................. $116,561 $233,122 $466,243 $ 678,804 $ 798,804
$1,300,000............................. $126,561 $253,122 $506,243 $ 736,804 $ 868,804
$1,400,000............................. $136,561 $273,122 $546,243 $ 794,804 $ 934,804
$1,500,000............................. $146,561 $293,122 $586,243 $ 852,804 $1,002,804
$1,600,000............................. $156,561 $313,122 $626,243 $ 910,804 $1,070,804
$1,700,000............................. $166,561 $333,122 $666,243 $ 968,804 $1,138,804
$1,800,000............................. $176,561 $353,122 $706,243 $1,026,804 $1,206,804
</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 MMC's
U.S. retirement program, the 1999 compensation used to calculate the Maximum
Average Salary and the number of years of credited service are as follows:
Mr. Smith, $1,500,000, 37 years; Mr. Greenberg, $1,000,000, 4 years;
Mr. Coster, $850,000, 38 years; and Mr. Sinnott, $850,000, 37 years. Mr. Lasser
is also entitled to receive a special retirement benefit in accordance with the
terms of the Lasser Agreement. See "Employment Agreement" above.
15
<PAGE>
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY, POLICIES AND PLANS FOR EXECUTIVE OFFICERS
MMC is a professional services firm with businesses having distinct economic
characteristics, marketplaces and operating conditions. The leadership position
attained over time by MMC'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 MMC stockholders. Therefore, it is critical to the ongoing success of
MMC 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, all of whose members are
disinterested outside directors, is charged by MMC's by-laws with ensuring that
MMC's compensation philosophy and policies, which are intended to attract,
retain and motivate highly capable and productive employees, are in MMC's best
interests. To that end, MMC'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. MMC'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 among MMC's
businesses. In addition, the Committee periodically evaluates chief executive
officer compensation by comparing it to data developed from a selected group of
20-25 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 Stockholder Return in order to
obtain a meaningful representation of competitive compensation practices and
levels for senior executive positions.
The Chief Executive Officer of MMC heads a group of senior management
officers, most of whom are executives of MMC'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
MMC 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-term performance of MMC, 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 MMC'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
16
<PAGE>
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 MMC's performance.
Salaries accounted for 36% of total compensation (excluding stock options) in
1999 for MMC's senior management group.
The size of the incentive award pool for senior management cash bonuses is
based on earnings and reflects MMC'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 1999. 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 1999, bonus
awards at Putnam Investments, Inc. reflected continued exceptional financial
performance of that business, while awards to executives in MMC's other
businesses were, on average, nine percentage points above 1998 (excluding bonus
compensation for the Chairman of MMC) as a percentage of salary. For MMC's
senior management group, individual bonuses constituted 38% of total
compensation (excluding stock options) for 1999.
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
MMC 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 MMC 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 MMC's future profit performance
expectations and the individual's organizational role, current performance and
potential to contribute to the long-term success of MMC, 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 MMC stock ownership
targets, determine the size of stock grants to individuals.
Most members of MMC's senior management group are eligible to receive annual
discretionary restricted stock grants on the basis described above. In 1999,
such awards for this group accounted for 19% (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 MMC'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 1999 to MMC'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.
17
<PAGE>
TAX CONSIDERATIONS
As noted above, MMC'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 MMC 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 earlier are
applied in assessing the performance and determining the compensation of the
Chief Executive Officer of MMC. Current and long-term financial performance of
MMC, information which is available to all MMC stockholders, are major factors
in arriving at the compensation determinations made by the Committee relative to
the Chief Executive Officer. Consideration is also given to his leadership and
influence on the long-term strength and performance of MMC.
Mr. Smith was the Chief Executive Officer until November 1999, when he was
succeeded by Mr. Greenberg. Mr. Greenberg's compensation was established in
January of 1999, prior to his becoming Chief Executive Officer, and remained
unchanged throughout the year except for his annual grant of restricted stock,
which was awarded in March of 1999. Therefore, the comparative data referenced
below apply to Mr. Smith only.
On January 1, 1999, Mr. Smith's annual base salary was increased by
$300,000, or 25%, from its previous level of $1,200,000, as part of MMC's annual
consideration of merit increases. Mr. Smith's base salary had remained unchanged
since January 1, 1996. With regard to cash bonus, Mr. Smith participates in the
same MMC annual incentive plan as MMC's senior management group. His 1999 cash
bonus award under the plan was $5 million.
In connection with long-term compensation, Mr. Smith was granted 11,900
shares of restricted stock in 1999 under terms previously described. In
addition, Mr. Smith was granted 32,872 restricted stock units in connection with
his 1998 cash bonus award. The combined value of his restricted stock and
restricted stock unit grants was $2,898,878.
Based on the previously referenced review of chief executive officer
compensation for 1998 (latest data available), Mr. Smith's 1999 cash
compensation was positioned at approximately the 75th percentile of the 1998
market survey group, and his long-term compensation (including any long-term
incentive plan payouts but excluding stock options) was also at about the 75th
percentile of the 1998 survey market. Total compensation for Mr. Smith, which
includes all elements of pay from the Summary Compensation Table except stock
option grants, was $9,484,378 in 1999. Total compensation for Mr. Smith was at
about the 70th percentile of the 1998 survey market.
On January 1, 1999, Mr. Greenberg's annual base salary was increased by
$150,000, or 17.6%, from its previous level of $850,000, to reflect new
responsibilities following his appointment as President of MMC. With regard to
cash bonus, Mr. Greenberg participates in the same MMC annual incentive plan as
MMC's senior management group. His 1999 cash bonus award under the plan was
$1.3 million.
With respect to long-term compensation, Mr. Greenberg was granted 7,900
shares of restricted stock in 1999 under terms previously described. In
addition, Mr. Greenberg was granted 7,396 restricted stock units in connection
with his 1998 cash bonus award and received 2,295 restricted stock units for
deferring receipt of vesting shares of restricted stock. The combined value of
his restricted stock and restricted stock unit grants was $1,181,528. In
addition, Mr. Greenberg was granted 150,000 stock options during 1999.
Mr. Greenberg also participates in the Marsh Capital Long Term Incentive
Plan, which is structured to reflect compensation practices in the private
equity investment industry. Pursuant to the terms of that plan, he received cash
payments totaling $1,467,374 in 1999. In addition, Mr. Greenberg receives a
carried interest in Trident II as a result of owning partnership interests in
the general partner of Trident II.
Total compensation for Mr. Greenberg, which includes all elements of pay
from the Summary Compensation Table except stock option grants, was $4,990,652
in 1999.
Lewis W. Bernard Robert F. Erburu Ray J. Groves
18
<PAGE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
The following graph compares MMC's cumulative total stockholder return on
its 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., Franklin Resources, Inc. and T. Rowe
Price Associates, Inc., over the five-year period from December 31, 1994 through
December 31, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
MMC 100 116 140 207 250 419
S&P 500 100 138 169 226 290 307
Composite Industry Index 100 152 208 341 351 338
</TABLE>
Assumes $100 invested on December 31, 1994 with dividends reinvested.
19
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND
OTHERS; OTHER INFORMATION
From time to time, MMC's subsidiaries may provide services, in the ordinary
course of business and on commercial terms, to investment funds and their
portfolio companies managed or advised by Marsh Capital, in which various
executive officers and directors of MMC have direct or indirect interests. In
the aggregate, the gross amount of all such services rendered in 1999 by all of
MMC's subsidiaries did not exceed $2 million.
In April 1999, Sedgwick Group plc, a subsidiary of MMC, entered into an
agreement to sell all of the outstanding stock of Sedgwick Oakwood Lloyd's
Underwriting Agency to Sedgwick Oakwood Capital for approximately $7.1 million
in cash and the assumption of $0.5 million in related liabilities. At the time
of the transaction, Mr. Saxon Riley, then a director of MMC, owned approximately
.5% of the outstanding capital stock of Sedgwick Oakwood Capital and was a
member of its Board of Directors. The terms of the transaction were approved by
the Executive Committee of the Board which received an opinion from the
investment banking firm of Hales & Company that the price paid by Sedgwick
Oakwood Capital was fair from a financial point of view to MMC.
As part of its private equity investment activities, Marsh Capital manages
Trident II, as well as a technology fund and certain co-investment funds.
Mr. Charles A. Davis, President of Marsh Capital and a nominee for Director, has
a limited partnership interest in certain of those funds and receives a carried
interest as a result of owning partnership interests in the funds' general
partners. In October 1999, a subsidiary of MMC sold a 40% interest in Sedgwick
Claims Management Services ("SCMS") to Trident II and its co-investment funds
for approximately $32 million in cash and received $30 million in preferred
stock of SCMS. This transaction was approved by the Executive Committee of the
Board which had previously received an opinion from the investment banking firm
of Banc of America Securities LLC that the price was fair from a financial point
of view to MMC. Also in November 1999, a subsidiary of MMC transferred ownership
interests in various technology related portfolio companies to the technology
fund upon its formation and its co-investment funds (including Trident II) at
the MMC subsidiary's cost of such interests of approximately $40.5 million.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires MMC's
directors and executive officers, and persons who own more than ten percent of
the common stock of MMC, to file with the SEC and the New York Stock Exchange
initial reports of beneficial ownership and reports of changes in beneficial
ownership of MMC stock. Such persons are also required by SEC regulation to
furnish MMC with copies of all Section 16(a) forms they file. To MMC's
knowledge, based solely on a review of the copies of such reports furnished to
MMC and written representations that no other reports were required, during 1999
all Section 16(a) filing requirements applicable to such individuals were
complied with except for a report covering one transaction filed late by each of
Messrs. Barham, Cabiallavetta, Olsen and White-Cooper.
20
<PAGE>
ITEM 2
PROPOSAL TO APPROVE THE 2000 SENIOR EXECUTIVE
INCENTIVE AND STOCK AWARD PLAN
The Board has placed on the agenda for the meeting a proposal to approve the
Marsh & McLennan Companies 2000 Senior Executive Incentive and Stock Award Plan
(the "2000 Plan"). The 2000 Plan was adopted by MMC's Board on March 16, 2000.
The affirmative vote of a majority of the shares of MMC stock present or
represented and entitled to vote at the meeting is required to approve this
proposal. Unless otherwise directed in the proxy, the persons named in the proxy
will vote FOR the proposal to approve the 2000 Plan, which is described below.
The following summary of certain features of the 2000 Plan is qualified in
its entirety by reference to the full text of the 2000 Plan, which has been
filed with the SEC as an exhibit to MMC's 1999 Annual Report on Form 10-K.
GENERAL
The purpose of the 2000 Plan is to advance the interests of MMC and its
stockholders by providing a means to attract, retain and motivate senior
executives of MMC and its subsidiaries and affiliates and to qualify certain
performance awards for tax deductibility under the exception for performance
based compensation contained in Section 162(m) of the United States Internal
Revenue Code (the "Code"). The 2000 Plan is intended to replace, in part, the
1997 Senior Executive Incentive and Stock Award Plan (the "1997 Plan"), under
which approximately 50 senior executives have participated. The 2000 Plan would
also be limited to senior executives. MMC expects the Board to adopt an
additional stock award plan as a replacement for the 1997 Employee Incentive and
Stock Award Plan with respect to those employees, including officers, who do not
participate in the 2000 Plan. Awards relating to not more than four million
shares of stock, plus such number of shares remaining unused under pre-existing
stock plans approved by MMC's stockholders, may be made over the life of the
2000 Plan.
Senior executives of MMC, its subsidiaries and affiliates will be eligible
to be granted awards under the 2000 Plan. It is expected that approximately 50
senior executives shall be eligible to receive awards under the 2000 Plan. The
Compensation Committee of the Board (the "Compensation Committee") will
determine which eligible senior executives will receive awards, the types of
awards to be received and the terms and conditions thereof. Although there is no
explicit formula for making such awards, guidelines exist and the past and
potential performance of the employee may be considered in making such
decisions.
ADMINISTRATION
The Plan will be administered by the Compensation Committee. None of the
members of the Compensation Committee may participate in the 2000 Plan. At any
time that a member of the Compensation Committee is not a "Non-Employee
Director" within the meaning of Rule 16b(3) of the Securities Exchange Act of
1934 (the "Exchange Act") or an "outside director" for purposes of
Section 162(m) of the Code (together, a "Qualified Member"), any action relating
to an award to be granted to a participant who is then subject to Section 16 of
the Exchange Act or relating to an award intended to constitute "qualified
performance based compensation" for purposes of Section 162(m) of the Code, may
be taken either (i) by a subcommittee composed solely of two or more Qualified
Members or (ii) by the entire Compensation Committee with any members who are
not Qualified Members abstaining.
The Compensation Committee may grant any type of award permitted under the
terms of the 2000 Plan, including stock options, stock appreciation rights
("SARs"), restricted stock, restricted stock units payable in MMC stock or cash,
stock awards in lieu of cash awards, dividend equivalents, performance awards
(including unit-based awards) and other awards payable in or based on the stock
or other securities of MMC or a subsidiary or affiliate.
ANNUAL LIMIT
For each fiscal year a participant may not be granted stock options, SARs
and stock-based performance awards, in the aggregate, relating to more than two
million shares of stock (subject to adjustment) of MMC. In the case of a
performance award not relating to MMC's stock, the maximum payment to a
participant for any fiscal year shall be the greater of the fair market value of
the
21
<PAGE>
number of shares of the stock of MMC specified in the preceding sentence at the
date of grant or the date of settlement of such award.
STOCK OPTIONS
At the discretion of the Compensation Committee, stock options may be
granted under the 2000 Plan and may be incentive stock options ("ISOs"), as
defined in the Code, or non-qualified stock options. The Compensation Committee
shall determine at the date of grant or thereafter the term of the option, the
time or times at which an option may be exercised, the methods by which such
exercise price may be paid, the form of such payment, including without
limitation, cash, stock, shares or units valued by reference to shares issued
under any other plan of MMC or a subsidiary or affiliate, or notes or other
property, and the methods by which such stock will be delivered to participants.
Except under certain limited circumstances in connection with substitutions
of awards under other MMC plans or plans of acquired companies as described in
the 2000 Plan, no stock option may be granted under the 2000 Plan with an
exercise price of less than the Fair Market Value (as defined below) of the
stock at the time that the stock option is granted. For the purposes of the 2000
Plan, the Fair Market Value of Stock as of any given date generally shall mean
the per share value of stock as determined by using the mean between the high
and low selling prices of such stock on the immediately preceding date as
reported on the New York Stock Exchange Composite Transactions table in The Wall
Street Journal. On March 22, 2000, the stock closed at $94.875 on the New York
Stock Exchange.
SARS
The Compensation Committee is also authorized to grant SARs to participants
in the 2000 Plan. An SAR shall confer on the participant a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one share of
stock on the date of exercise, over (B) the grant price of the SAR, which shall
be not less than the Fair Market Value of one share of stock on the date of
grant (or, in the case of an SAR granted in tandem with an option, the exercise
price of the underlying option). In addition, the Compensation Committee shall
determine, at the time of grant or thereafter, the term of the SAR, the time or
times at which an SAR may be exercised, the method of exercise, the method of
settlement, the form of consideration payable in settlement, the method by which
stock will be delivered to participants, whether or not an SAR will be in tandem
with any other award, and any other terms and conditions of any SAR.
Under the Code, the grant of stock options and SARs is not a taxable event
to either the recipient or MMC. If an ISO is exercised and the shares upon the
exercise thereof are held for at least one year after the exercise and two years
after the grant of the option, the optionee will not incur any tax liability by
reason of the exercise and may treat the difference between the exercise price
and the sale price of the shares as a long-term capital gain, and MMC will
receive no deduction. If shares of stock received on the exercise of an ISO are
sold less than one year after exercise or two years after the grant of such
option, a disqualifying disposition will occur and the optionee will recognize
ordinary taxable income in an amount equal to the difference between the
exercise price and the lesser of the fair market value of the stock on the date
of exercise or the amount realized on the subsequent sale, and MMC may deduct
the amount of such ordinary income recognized by the optionee. The difference
between the sale price realized by reason of a disqualifying disposition and the
fair market value of the stock on the date of exercise will be treated as a
long-term or short-term capital gain or loss as appropriate. For purposes of the
alternative minimum tax, upon exercise of an ISO, the difference between the
exercise price and the fair market value of the stock on the date of exercise
will be a tax preference item.
In the case of a non-qualified stock option, the optionee, upon exercise of
the option, will recognize ordinary income in the amount equal to the difference
between the then fair market value of the stock acquired and the exercise price
of the option, and MMC may deduct the amount of such ordinary income recognized
by the optionee.
Upon the exercise of an SAR payable in cash or stock, the holder will
recognize ordinary income in the amount of the cash plus the fair market value
of any stock received, and MMC may deduct the amount of such ordinary income
recognized by the holder.
22
<PAGE>
RESTRICTED STOCK
Restricted stock may also be awarded under the 2000 Plan, and shall be
subject to such restrictions on transferability and other restrictions, if any,
as the Compensation Committee may impose at the date of grant or thereafter. The
Compensation Committee may also determine when and under what circumstances the
restrictions may lapse and whether the participant shall have the rights of a
stockholder, including, without limitation, the right to vote and receive
dividends. Unless the Compensation Committee determines otherwise, restricted
stock that is still subject to restrictions shall be forfeited upon termination
of employment, provided, however, that the Compensation Committee may waive
restrictions or forfeiture conditions in certain instances. The grant of a
restricted stock award is not a taxable event to either the recipient or MMC
under U.S. law, unless the recipient elects to be taxed at the time of award. In
the absence of such an election, when an award vests in a recipient, in whole or
in part, he or she will recognize ordinary income in an amount equal to the fair
market value of the shares as to which vesting occurs and MMC will generally be
entitled to a corresponding deduction.
RESTRICTED STOCK UNITS
Restricted stock units, payable in stock or cash, may be awarded under the
2000 Plan. The Compensation Committee shall determine the restrictions on such
units, when the restrictions shall lapse, when the shares of stock shall vest
and be paid and upon what terms the units shall be forfeited. A participant will
recognize as ordinary income, on the date of payment, the amount of cash and the
fair market value of other property received in payment of such units, and MMC
may generally deduct the amount of taxable income recognized by the participant.
OTHER AWARDS
The Compensation Committee may grant other awards under the terms of the
2000 Plan that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, the common stock of MMC or
other securities, including securities of a subsidiary or affiliate. The
Compensation Committee may grant unit-based awards with value or payment
contingent upon performance of MMC, a subsidiary, affiliate or upon any other
factor or performance condition designated by the Compensation Committee. The
Compensation Committee shall determine the terms and conditions of such awards
at the date of grant or thereafter.
Under the 2000 Plan, the Compensation Committee may also grant stock as a
bonus or in lieu of cash awarded under other plans, dividend equivalents and
other stock-based or cash awards with or without restrictions. Such awards will
be taxable as ordinary income to the participants upon payment, and MMC will
generally be able to deduct the amount of taxable income recognized by the
participant.
PERFORMANCE GOALS
Awards granted under the 2000 Plan may be subject to certain performance
conditions as may be specified by the Compensation Committee. The Compensation
Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
award subject to performance conditions, except as limited by the terms of the
2000 Plan in the case of a performance award intended to qualify under
Section 162(m) of the Code.
If the Compensation Committee determines that a performance award to be
granted to a person, who is designated as likely to be a "covered employee" (as
defined in Section 162(m) of the Code), should qualify as "qualified
performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in the 2000 Plan.
Performance goals for such awards shall consist of one or more business criteria
for MMC and/or a specified subsidiary, affiliate, business unit or business
venture and a target level or levels of performance with respect to each such
criteria. The business criteria selected by the Compensation Committee may
include, (1) earnings per share; (2) revenues; (3) cash flow; (4) cash flow
return on investment; (5) return on assets, return on investment, return on
capital, return on equity; (6) identification and/or consummation of investment
opportunities or completion of specified projects in accordance with corporate
business plans; (7) operating margin; (8) net income; net operating income;
pretax earnings; pretax earnings before interest, depreciation and amortization;
pretax operating earnings
23
<PAGE>
after interest expense and before incentives, service fees, and extraordinary or
special items; operating earnings; (9) total stockholder return; and (10) any of
the above goals as compared to the performance of a published or special index
deemed applicable by the Compensation Committee including, but not limited to,
the Standard & Poor's 500 Stock Index or other indexes or groups of comparable
companies referenced above under the section entitled "Comparison of Cumulative
Total Stockholder Return".
CHANGE IN CONTROL
The 2000 Plan generally provides that in the event of a change in control of
MMC, an award carrying a right to exercise that was not previously exercisable
and vested shall become fully exercisable and vested, and the restrictions,
deferral limitations and forfeiture conditions applicable to any other awards
shall lapse and such awards shall be deemed fully vested, any performance
conditions shall be deemed to be fully achieved and payment of such awards shall
be made in accordance with the terms of the award agreements. For the purposes
of the 2000 Plan, a "change in control" shall be deemed to have occurred if
(i) any "person" (as defined in the 2000 Plan), other than MMC, a trustee or
other fiduciary holding securities under an employee benefit plan of MMC or
certain affiliates of MMC, is or becomes the beneficial owner, directly or
indirectly of fifty percent (50%) or more of the combined voting power of MMC's
then outstanding voting securities; (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board and
any new director whose election by the Board or nomination for election by MMC's
stockholders was approved by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were 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; (iii) the
stockholders approve a merger or consolidation of MMC with any other
corporation, other than certain designated transactions; or (iv) the
stockholders approve a plan of complete liquidation of MMC or an agreement for
the sale of all or substantially all of the assets of MMC. In addition, in the
event that any payment made in connection with a change in control is subjected
to the excise tax imposed under Section 4999 of the Code, MMC will increase the
participant's payment as necessary to restore such participant to the same
after-tax position he or she would have been in if the excise tax had not been
imposed.
AMENDMENT, TERMINATION
The Board may amend, alter, suspend, discontinue or terminate the 2000 Plan
or the Compensation Committee's authority to grant awards thereunder without the
consent of stockholders or participants unless stockholder approval is required
by law, regulation or rules of any stock exchange on which the stock is listed.
In addition, without the consent of an affected participant, no amendment,
alteration, suspension, discontinuation or termination of the 2000 Plan may
materially adversely affect the rights of such participant under any award
granted to him or her. Following the occurrence of a change in control, the
Board may not terminate or amend the 2000 Plan with respect to awards that have
already been granted in any manner adverse to employees.
Awards to be made under the terms of the 2000 Plan are not presently
determinable. The "Summary Compensation Table" above sets forth awards made
under the 1997 Plan to the named executive officers during the past three years.
The 2000 Plan shall become effective upon receipt of the affirmative vote of
a majority of the shares of MMC stock present or represented and entitled to
vote at the meeting.
24
<PAGE>
ITEM 3
PROPOSAL TO AMEND THE STOCK INVESTMENT PLAN
The Board has placed on the agenda for the meeting a proposal to amend the
Marsh & McLennan Companies Stock Investment Plan (the "Plan") to eliminate the
requirement of submitting certain plan amendments to stockholders for approval.
The Plan is a tax-qualified savings plan qualifying under section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code") and also qualifies as an
employee stock ownership plan. The Plan (including a predecessor plan) has been
in effect continuously since 1966.
On March 16, 2000, the Board adopted an amendment to the Plan, subject to
stockholder approval, to eliminate the requirement of submitting certain plan
amendments to stockholders for approval. The Plan currently provides that the
Board may amend the Plan at any time provided that no amendment shall be adopted
without the approval of MMC's stockholders where such amendment would alter the
allocation of benefits to the directors or officers of MMC as a group and to
participating employees as a group or would increase the percentage of
participating company matching contributions.
The limitations placed on qualified plan benefits under the Code--which
restrict both the amount of benefits that may be derived by corporate officers
and other highly compensated employees and the aggregate level of benefits that
may be paid under tax-qualified plans--effectively eliminate the need for this
restriction on the Board's amendment power. In the past, this provision has
required submitting to stockholders plan amendments that in fact have reduced
the costs of the Plan to MMC. We have been advised that most standard 401(k)
plans for large companies like MMC do not require stockholder approval of any
amendments except as required by law.
The Board is not currently considering any amendments to the Plan that would
materially increase the level or cost of company contributions or otherwise
alter the benefits under the Plan.
The following is a brief summary of the material features of the Plan.
All U.S. salaried employees of MMC and participating subsidiaries who are
eighteen years or older are eligible to participate in the Plan (currently,
approximately 18,800 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 MMC for at least one year, MMC
currently contributes to the Plan amounts equal to 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 MMC match is 66 2/3%. For participants who have attained age 55, or
whose age and years of Plan participation total at least 65, the matching
contribution increases to 95% of the first 6% of the participant's salary (or to
100% of the first 6% of the participant's salary in the case of a participant
who participates in the Plan's "dividend plus" feature), provided however, that
such increased matching contribution over the prior match must be invested, to
the maximum extent permissible under the Code, in the stock of MMC and is not
subject to the diversification election described below.
All contributions to the Plan are generally invested in shares of MMC's
stock, except that employees who are either age 55 and over 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 MMC shares in the Plan are either credited to participants' accounts or, at
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, MMC is allowed a tax deduction with respect to
those dividends that are paid out.
The Board recommends that the stockholders vote FOR the proposal to allow
the Board to amend the Plan in the future without stockholder approval except as
required by law. The affirmative vote of a majority of the shares of MMC stock
present or represented and entitled to vote at the meeting is required for the
approval of the amendment to the plan. Unless otherwise directed in the proxy,
the persons named in the proxy will vote FOR the proposal to amend the Stock
Investment Plan.
25
<PAGE>
ITEM 4
RATIFICATION OF DELOITTE & TOUCHE LLP
AS INDEPENDENT AUDITORS
The Board upon the recommendation of the Audit Committee, has selected
Deloitte & Touche LLP, independent auditors, to audit the financial statements
of MMC for the fiscal year ending December 31, 2000. Deloitte & Touche LLP acted
as MMC's independent auditors for the year ended December 31, 1999.
Representatives of Deloitte & Touche LLP will attend the meeting, will have an
opportunity to make a statement if desiring to do so and will be available to
answer any pertinent questions.
The affirmative vote of a majority of the shares of MMC stock present or
represented and entitled to vote at the meeting is required to ratify the
appointment of Deloitte & Touche LLP. Unless otherwise directed in the proxy,
the persons named in the proxy will vote FOR the ratification of Deloitte &
Touche LLP. The Board recommends you vote FOR this proposal.
SOLICITATION OF PROXIES
The Board hereby solicits proxies for use at the 2000 Annual Meeting and at
any adjournment thereof. Stockholders who execute a proxy may still attend the
meeting and vote in person. A proxy may be revoked at any time before it is
voted by giving to the Secretary of MMC, at MMC'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 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 meeting will not revoke a proxy which was
previously submitted to MMC.
The cost of this proxy solicitation is borne directly by MMC.
Georgeson Shareholder Communications 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 MMC's directors, officers and other employees.
Such persons will receive no additional compensation for such services. MMC 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 and have it considered for
inclusion in MMC's proxy materials for the 2001 Annual Meeting of Stockholders
of MMC must submit such proposal in writing to MMC in care of the Secretary of
MMC on or before November 30, 2000. Stockholders who wish to present a proposal
at the 2001 Annual Meeting that has not been included in MMC's proxy materials
must submit such proposal in writing to MMC in care of the Secretary of MMC and
should note that any such notice received by the Secretary of MMC on or after
February 16, 2001 shall be considered untimely under the provisions of MMC's
by-laws governing the presentation of proposals by stockholders. In addition,
the by-laws of MMC contain further 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
26
<PAGE>
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
<PAGE>
PROXY PROXY
MARSH & McLENNAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2000 ANNUAL MEETING
FOR ALL STOCKHOLDERS
The undersigned hereby appoints A.J.C. Smith, Jeffrey W. Greenberg 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 Thursday, May 18, 2000 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.
FOR STOCKHOLDERS WHO ARE ALSO PARTICIPANTS IN MARSH & McLENNAN COMPANIES STOCK
INVESTMENT PLAN AND SEDGWICK SAVINGS AND INVESTMENT PLAN
This card also constitutes the confidential voting instructions of the
participants in the Marsh & McLennan Companies Stock Investment Plan and
Sedgwick Savings and Investment Plan. By signing and returning this card, the
undersigned directs Bankers Trust Company, Trustee under each 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 Plans upon all matters at the
Annual Meeting of Stockholders of the Company on May 18, 2000 and at any
adjournment thereof. Provided this card is received by May 12, 2000, voting
rights will be exercised by the Trustee as directed or, if not specifically
directed, FOR the items stated herein. Under the Plans, the Trustee shall vote
all other shares in the same proportion as those shares for which it has
received a signed instruction card.
INSPECTORS OF ELECTION
P.O. BOX 11466
NEWARK, N.J. 10203-0466
<PAGE>
<TABLE>
<S> <C>
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *FOR ALL
listed below _____ for all nominees listed below _____ EXCEPT _____
Nominees: Mathis Cabiallavetta, Peter Coster, Charles A. Davis, Gwendolyn S. King, Lawrence J. Lasser, David A.
Olsen, John T. Sinnott
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
*Exceptions ____________________________________________________________________
2. Approval of Marsh & McLennan Companies 2000 Senior Executive Incentive
and Stock Award Plan.
FOR _____ AGAINST _____ ABSTAIN ______
3. Adopt an amendment to the Marsh & McLennan Companies Stock Investment
Plan.
FOR _____ AGAINST _____ ABSTAIN ______
4. Ratification of Deloitte & Touche LLP as independent auditors for 2000.
FOR _____ AGAINST _____ ABSTAIN ______
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, 3
AND 4 AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT
THEREOF.
</TABLE>
CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE ____
Sign here as name(s) appear on card.
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.
Dated: ________________________ , 2000
______________________________________
______________________________________
Votes must be indicated
(x) in Black or Blue ink. _____
PLEASE RETURN THS CARD PROMPTLY USING THE ACCOMPANYING ENVELOPE
<PAGE>
PUTNAM INVESTMENTS, INC. PROFIT SHARING RETIREMENT PLAN
2000 ANNUAL MEETING OF STOCKHOLDERS OF
MARSH & McLENNAN COMPANIES, INC.
NOTICE TO PARTICIPANTS
By signing and returning this card, the undersigned hereby directs the
Trustees of the Putnam Investments, inc. Profit Sharing Retirement Plan to vote
in person or by proxy all of the shares of common stock of Marsh & McLennan
Companies, Inc. (the "Company") allocated to the undersigned under the Plan upon
all matters at the Annual Meeting of Stockholders of the Company, on May 18,
2000 and at any adjournment thereof. Information regarding the Annual Meeting is
set forth in the enclosed Proxy Statement. Also enclosed is Marsh & McLennan's
1999 Annual Report.
Please specify how your shares are to be voted by completing and
signing the Confidential Voting Instructions on the reverse side hereof and
returning them in the envelope provided. Your instructions to the Trustees will
be kept confidential. Instructions must be received by May 12, 2000 in order for
them to be tabulated for voting by the Trustees.
Very truly yours,
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
Dated: March 29, 2000
INSPECTORS OF ELECTION
P.O. BOX 11294
NEW YORK, N.Y. 10203-0294
<PAGE>
Putnam Investments Inc. Profit Sharing Retirement Plan
Confidential Voting Instructions
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1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *FOR ALL
listed below _____ for all nominees listed below _____ EXCEPT _____
Nominees: Mathis Cabiallavetta, Peter Coster, Charles A. Davis, Gwendolyn S.
King, Lawrence J. Lasser, David A. Olsen, John T. Sinnott
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"FOR ALL EXCEPT" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions ____________________________________________________________________
2. Approval of Marsh & McLennan Companies 2000 Senior Executive Incentive and
Stock Award Plan.
FOR _____ AGAINST _____ ABSTAIN ______
3. Adopt an amendment to the Marsh & McLennan Companies Stock Investment Plan.
FOR _____ AGAINST _____ ABSTAIN ______
4. Ratification of Deloitte & Touche LLP as independent auditors for 2000.
FOR _____ AGAINST _____ ABSTAIN ______
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, 3 AND 4 AND ACCORDING TO THE DISCRETION OF THE TRUSTEES ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT
THEREOF.
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CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE ____
Sign here as name(s) appear on card.
The signer hereby revokes all
instructions 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.
Dated: ________________________ , 2000
______________________________________
______________________________________
Votes must be indicated
(x) in Black or Blue ink. _____
PLEASE RETURN THS CARD PROMPTLY USING THE ACCOMPANYING ENVELOPE
<PAGE>
MARSH & McLENNAN STOCK INVESTMENT PLAN
FOR BERMUDA EMPLOYEES
2000 ANNUAL MEETING OF STOCKHOLDERS OF
MARSH & McLENNAN COMPANIES, INC.
NOTICE TO PARTICIPANTS
As a participant in the Marsh & McLennan Stock Investment Plan for
Bermuda Employees, you have the right to direct The Bank of Butterfield Executor
& Trustee Company Ltd., the Custodian under the Plan, how to vote the shares of
Marsh & McLennan common stock allocated to your account at the 2000 Annual
Meeting of Stockholders of Marsh & McLennan Companies, Inc.
The Annual Meeting will be held on May 18, 2000. Information regarding
the Annual Meeting is set forth in the enclosed Proxy Statement. Also enclosed
is Marsh & McLennan's 1999 Annual Report.
Please specify how your shares are to be voted by completing and
signing the Confidential Voting Instructions on the reverse side hereof and
returning them to the Custodian in the envelope provided. Your instructions to
the Custodian will be kept confidential. Instructions must be received by May
12, 2000 in order for them to be tabulated for voting by the Custodian at the
Annual Meeting.
Very truly yours,
The BANK OF BUTTERFIELD EXECUTOR &
TRUSTEE COMPANY LTD. - Custodian
Dated: March 29, 2000
<PAGE>
MARSH & McLENNAN STOCK INVESTMENT PLAN
FOR BERMUDA EMPLOYEES
CONFIDENTIAL VOTING INSTRUCTIONS
2000
The undersigned hereby directs the Custodian to vote all of the shares
of common stock of Marsh & McLennan Companies, Inc. allocated to the undersigned
under the Plan as follows:
IF NO DIRECTION IS MADE, THE CUSTODIAN WILL VOTE THE SHARES FOR ITEMS 1, 2, 3
AND 4.
1. To elect seven persons to serve as directors - Nominees:
Mathis Cabiallavetta, Peter Coster, Charles A. Davis, Gwendolyn S.
King, Lawrence J. Lasser, David A. Olsen, John T. Sinnott
(Mark one)
/ / FOR all nominees
/ / FOR all nominees except ______________________
/ / WITHHOLD for all nominees
2. Approval of Marsh & McLennan Companies 2000 Senior Executive Incentive
and Stock Award Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Adopt an amendment to the Marsh & McLennan Companies Stock Investment
Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Ratification of Deloitte & Touche LLP as independent auditors for 2000.
/ / FOR / / AGAINST / / ABSTAIN
And to vote on such other business as may properly be brought before the
meeting.
Signed.........................................
...............................................
Dated..................................., 2000
<PAGE>
[MMC VOTE BY TELEPHONE OR INTERNET OR MAIL
LOGO] 24 HOURS A DAY, 7 DAYS A WEEK
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TELEPHONE INTERNET
800-650-4886 OR HTTP://PROXY.SHAREHOLDER.COM/MMC OR MAIL
- ------------------------------------- ---------------------------------- ----------------------------------
- - Use any touch-tone telephone. - Go to the website address - Mark, sign and date your
- - Have your Proxy Form in hand. listed above. Proxy Form.
- - Enter the control number, - Have your Proxy Form in - Detach card from Proxy Form
located in the box below. hand. - Return the card in the
- - Follow the simple directions. - Enter the control number, postage-paid envelope provided.
located in the box below.
- Follow the simple
instructions.
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Your telephone or Internet vote
authorizes the named proxies to
vote your shares in the same
manner as if you marked, signed
and returned your Proxy Form. If
you have submitted your proxy by
telephone or the Internet there is
no need for you to mail back your
Proxy Form.
800-650-4886
CALL TOLL-FREE TO VOTE
-----------------------------------
CONTROL NUMBER
FOR TELEPHONE / INTERNET VOTING
-----------------------------------
- DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET -
- --------------------------------------------------------------------------------
