<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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
The May Department Stores Company
----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The May Department Stores Company
----------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2)*
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
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<PAGE>
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
________________________________________________________________
/ / 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.
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4) Date Filed:
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<PAGE>
<PAGE>
MAY
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101-1799
April 12, 1995
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
The annual meeting of the shareowners of The May Department
Stores Company, a New York corporation, will be held at the
Adam's Mark Hotel, Fourth Street and Chestnut, St. Louis,
Missouri, on Friday, May 19, 1995, at 10:00 a.m. Central Daylight
Time. Directions to the Adam's Mark Hotel can be found on the
last page of the accompanying proxy statement. The meeting will
be to consider and act upon the following matters:
1. The election of four directors;
2. The ratification of the appointment of independent auditors;
3. Proposal to approve the Executive Incentive Compensation
Plan for Corporate Executives, as amended; and
4. Proposals by certain shareowners.
These matters are described in the accompanying proxy statement.
All common shareowners and owners of ESOP preference shares of
record at the close of business on March 30, 1995 (the "Record
Date") are entitled to vote at the meeting.
It is important that your shares be represented at this meeting.
Even if you plan to attend, we encourage you to promptly sign,
date and return your proxy in the enclosed postage-paid envelope.
PLEASE NOTE: Directions to the Adam's Mark Hotel in downtown St.
Louis can be found on the last page of the accompanying proxy
statement.
<PAGE>
PROXY STATEMENT
This proxy statement is furnished to shareowners of common stock
of The May Department Stores Company (the "Company") and to
owners of ESOP (Employee Stock Ownership Plan) preference shares
of the Company ("ESOP stock") in connection with the solicitation
by the board of directors of proxies for use at the annual
meeting of shareowners and at all adjournments thereof. This
proxy statement and the enclosed form of proxy are being mailed
to shareowners on or about April 12, 1995.
Management knows of no matters to be presented at the meeting
other than as mentioned below. However, if any matter not
specifically set forth in the foregoing notice properly comes
before the meeting, it is intended that the holders of the
proxies will vote thereon in their discretion. Any shareowner has
the power to revoke his or her proxy at any time during or prior
to the annual meeting.
Owners of common stock are entitled to cast one vote for each
share owned. The outstanding voting securities of the Company as
of the Record Date, which carry 263,530,598 votes, consisted of
(i) 248,474,157 shares of common stock (excluding 65,162,839
shares of treasury stock), and (ii) 734,807 shares of ESOP stock
which carry 15,056,441 votes. The owners of the outstanding
common stock and of the ESOP stock are entitled to vote together
as a single class.
As of the Record Date, the Company's Profit Sharing Plan
beneficially owned 11,650,488 shares of common stock (4.69% of
the outstanding shares of common stock) and 100% of the
outstanding shares of ESOP stock which carry 15,056,441 votes.
Members direct the voting of all shares held by the Profit
Sharing Plan. Together, the ESOP stock and the common stock owned
by the Profit Sharing Plan represent 10.13% of the votes which
can be cast at the meeting. Except for the Profit Sharing Plan,
the Company knows of no person who beneficially owns more than 5%
of the Company's voting securities.
1996 Shareowner Proposals. Shareowner proposals for the 1996
annual meeting of shareowners must be received at the Company's
principal executive offices, 611 Olive Street, St. Louis,
Missouri 63101-1799, prior to December 18, 1995, for inclusion in
the Company's proxy statement and the form of proxy for such
meeting.
<PAGE>
THE ELECTION OF DIRECTORS
Proposal (a) on the accompanying proxy card.
Nominees. The board of directors proposes the election of four
directors. These four directors, together with the nine directors
whose terms continue beyond this year's annual meeting, will
comprise the board of directors.
The shares represented by the accompanying proxy card will be
voted (unless voting authority is withheld) in favor of electing
the persons named below as directors. Such proxies will be voted
to elect David C. Farrell, Helene L. Kaplan, Edward H. Meyer and
Murray L. Weidenbaum to serve as directors for a term expiring at
the 1998 annual meeting of shareowners and until their respective
successors have been elected and qualified. Messrs. Battram,
Pearson, Storey and Whitacre were previously elected to serve as
directors for terms expiring at the 1996 annual meeting of
shareowners, and Messrs. Hays, Loeb, Palmer, Quinlan and Stiritz
were previously elected to serve as directors for terms expiring
at the 1997 annual meeting of shareowners and, accordingly, these
directors do not stand for election at the 1995 annual meeting.
If any nominee should subsequently become unavailable for
election, the holders of proxies may, in their discretion, vote
for a substitute or the board of directors may reduce the number
of directors to be elected. The ages shown on the following pages
are as of May 19, 1995, and the shares shown are the shares of
common stock of the Company over which the director had sole or
shared voting and investment power as of March 20, 1995. No
director reported beneficial ownership of any shares of preferred
stock of the Company other than ESOP stock owned by the Profit
Sharing Plan. The shares reported reflect interests in shares
owned by the Company's Profit Sharing Plan.
The executive officers and directors, as a group (22
individuals), (i) have, as of March 20, 1995, sole voting and
investment power over 2,019,143 shares of common stock (less than
1% of common shares outstanding) and disclaim beneficial
ownership as to 4,384 of such shares and (ii) have the right to
acquire sole or shared voting and investment power over 719,259
shares on or before May 19, 1995, and disclaim beneficial
ownership as to all of such shares. Included among this group is
Mr. Anthony J. Torcasio, who is listed in the Summary
Compensation Table on page 5, who beneficially owns 93,392
<PAGE>
shares of common stock and has the right to acquire an additional
41,883 shares on or before May 19, 1995. The figures in this
paragraph include the shares reported on the following pages with
respect to each of the nominees.
1
[PHOTO] David C. Farrell, Director Since 1974, Age 61
(Standing for election at this meeting)
Mr. Farrell, Chairman of the Board and Chief Executive
Officer of the Company, joined the Company in 1956. He
became Chief Executive Officer in 1979 and Chairman of
the Board in 1985. He is also a director of Emerson
Electric Co. and Ralston Purina Company. Mr. Farrell
beneficially owns 838,465 shares and has the right to
acquire an additional 389,396 shares on or before May
19, 1995.
[PHOTO] Richard L. Battram, Director Since 1984, Age 60
Mr. Battram, Vice Chairman of the Company, joined the
Company in 1972. He became Vice Chairman of the Company
in 1984. Mr. Battram is also a director of Boatmen's
Bancshares, Inc. Mr. Battram beneficially owns 202,548
shares and has the right to acquire an additional
70,019 shares on or before May 19, 1995.
[PHOTO] Thomas A. Hays, Director Since 1983, Age 62
Mr. Hays, Deputy Chairman of the Company, joined the
Company in 1969. He served as President of the Company
from 1985 to 1993, when he became Deputy Chairman. Mr.
Hays is also a director of Mercantile Bancorporation
Inc. and Union Electric Company. Mr. Hays beneficially
owns 267,460 shares and has the right to acquire an
additional 49,195 shares on or before May 19, 1995.
[PHOTO] Helene L. Kaplan, Director Since 1985, Age 61
(Standing for election at this meeting)
Mrs. Kaplan is Of Counsel to the law firm of Skadden,
Arps, Slate, Meagher & Flom. She was a partner in the
law firm of Webster & Sheffield from 1978 to 1985 and
served as Counsel to Webster & Sheffield from 1986 to
<PAGE>
1990. She is a director of Chemical Banking
Corporation, Chemical Bank, Metropolitan Life Insurance
Company, Mobil Corporation and NYNEX Corporation. Mrs.
Kaplan also serves as a trustee or director of many
non-profit cultural, educational and scientific
organizations. Mrs. Kaplan beneficially owns 7,600
shares.
[PHOTO] Jerome T. Loeb, Director Since 1984, Age 54
Mr. Loeb, President of the Company, joined the Company
in 1964. He served as Vice Chairman from 1986 to 1993,
when he became President. Mr. Loeb also serves as the
Company's chief financial officer. Mr. Loeb
beneficially owns 284,390 shares (and disclaims
beneficial interest in 4,384 of those shares) and has
the right to acquire an additional 60,859 shares on or
before May 19, 1995.
[PHOTO] Edward H. Meyer, Director Since 1979, Age 68 (Standing
for election at this meeting)
Mr. Meyer is Chairman of the Board of Directors,
President and Chief Executive Officer of Grey
Advertising Inc. Mr.Meyer joined Grey Advertising Inc.
in 1956 and became President in 1968, Chief Executive
Officer in 1970 and Chairman of the Board in 1972. Mr.
Meyer is also a director of Bowne & Co., Inc., Ethan
Allen Interiors, Inc. and Harman International
Industries, Incorporated, and he is a director/trustee
of 31 mutual funds advised by Merrill Lynch Asset
Management, Inc. Mr.Meyer beneficially owns 13,840
shares.
2
[PHOTO] Russell E. Palmer, Director Since 1984, Age 60
Mr. Palmer is the Chairman and Chief Executive Officer
of The Palmer Group, a corporate investment firm. He is
the retired managing director and Chief Executive
Officer of Touche Ross International and the retired
Dean of The Wharton School and Reliance Professor of
Management and Private Enterprise at the University of
<PAGE>
Pennsylvania. Mr. Palmer is also a director of
Allied-Signal Inc., Bankers Trust New York Corporation,
Contel Cellular, Inc., Federal Home Loan Mortgage
Corporation, GTE Corporation, Imasco Limited and
Safeguard Scientifics, Inc. Mr. Palmer beneficially
owns 4,200 shares.
[PHOTO] Andrall E. Pearson, Director Since 1982, Age 69
Mr. Pearson is a general partner in Clayton, Dubilier
and Rice, a private investment firm, and has served as
the Chairman of the Board of Kraft Foodservice, Inc.
since February 13, 1995. He is the retired President
and Chief Operating Officer of PepsiCo, Inc. He also
served as the Class of 1958 Professor of Business
Administration, Harvard University Graduate School of
Business Administration. Mr. Pearson is also a director
of Homeland Stores, Inc., PepsiCo, Inc., Lexmark
International and Travelers, Inc. Mr. Pearson
beneficially owns 4,200 shares.
[PHOTO] Michael R. Quinlan, Director Since 1993, Age 50
Mr. Quinlan is Chairman and Chief Executive Officer of
McDonald's Corporation. He joined McDonald's in 1963
and served as Chief Operating Officer from 1982 to 1987
and as President from 1982 to 1989. He became Chief
Executive Officer in 1987 and Chairman in 1990. Mr.
Quinlan is also a director of Dun & Bradstreet and a
member of the board of trustees of Ronald McDonald
Children's Charities and Loyola University of Chicago.
Mr. Quinlan beneficially owns 2,500 shares.
[PHOTO] William P. Stiritz, Director Since 1983, Age 60
Mr. Stiritz is Chairman of the Board of Directors and
Chief Executive Officer of Ralston Purina Company. Mr.
Stiritz is also a director of Angelica Corporation,
Ball Corporation, Boatmen's Bancshares, Inc., General
American Life Insurance Company, Ralcorp Holdings,
Inc., Reinsurance Group of America, Inc. and S.C.
Johnson & Son, Inc. Mr. Stiritz beneficially owns 4,200
shares.
<PAGE>
[PHOTO] Robert D. Storey, Director Since 1989, Age 59
Mr. Storey is a partner in the law firm of Thompson,
Hine and Flory in Cleveland, Ohio. Prior to joining his
present law firm in 1993, Mr. Storey was a partner for
19 years in the law firm of Burke, Haber & Berick, also
in Cleveland. Mr.Storey is also a director of Bank One,
Cleveland, GTE Corporation and The Procter & Gamble
Company and a trustee of the Kresge Foundation. Mr.
Storey beneficially owns 4,409 shares.
[PHOTO] Murray L. Weidenbaum, Director 1978-1981 and Since
1982, Age 68 (Standing for election at this meeting)
Dr. Weidenbaum is Chairman of the Center for the Study
of American Business and is the Mallinckrodt
Distinguished University Professor at Washington
University. He joined the faculty of Washington
University in 1964, and from time to time served in
certain governmental positions, including Chairman of
the Council of Economic Advisers in 1981 and 1982. Dr.
Weidenbaum is also a director of Harbour Group, Ltd.,
Medicine Shoppe International, Inc. and Tesoro
Petroleum. Dr. Weidenbaum beneficially owns 4,200
shares.
[PHOTO] Edward E. Whitacre, Jr., Director Since 1989, Age 53
Mr. Whitacre is Chairman and Chief Executive Officer of
SBC Communications, Inc. (formerly Southwestern Bell
Corporation) and has served in this capacity since
January 1990. In addition, he served as President and
Chief Operating Officer from October 1988 through
December 1989. Mr.Whitacre is also a director of
Anheuser-Busch Companies, Inc., Burlington Northern
Inc. and Emerson Electric Co. Mr. Whitacre beneficially
owns 4,200 shares.
3
Executive Compensation. The Summary Compensation Table on the
next page shows the compensation in each of the last three fiscal
years of the executive officers whose compensation is required to
be disclosed pursuant to current proxy rules.
<PAGE>
Performance Based Bonus Plans. The Company has three performance
based bonus plans that cover approximately 3,100 associates. Each
plan links a major portion of the associates' potential total pay
to the associates' performance and to the Company's performance.
Executive Incentive Compensation Plan for Corporate Executives.
The Executive Incentive Compensation Plan for Corporate
Executives applies to seven individuals, including the five
individuals named in the Summary Compensation Table. Participants
may receive annual cash awards (for individual fiscal years) and
long-term cash awards (for three-year long-term performance
periods). These awards are based upon attaining earnings per
share and return on net assets (RONA) performance standards
relating to the Company as a whole and are also based on the
performance of the Company's stock price over the long-term
performance periods. In addition, awards are subject to an
automatic upward or downward adjustment to reflect the Company's
performance as compared to the performance of the group of
competitors included in the Company's performance graph on page
8. The plan is administered by the executive compensation and
development committee of the board of directors (the
"Committee"), which is comprised solely of non-management
directors. The performance standards are set by the Committee at
the beginning of the measurement periods and are measured by the
Committee after the close of the measurement periods. For 1994,
the maximum annual award payable under the plan's formula is 30%
(60% for the Chief Executive Officer) of the executive's base
salary, and the maximum long-term award payable under the plan's
formula is 45% (90% for the Chief Executive Officer) of the
executive's average base salary over the three-year period. The
awards for the named executive officers can be adjusted downward
on a discretionary basis by the Committee. (See the Long-Term
Incentive Plan table below and the proposal to approve the plan,
as amended, beginning on page 11.)
Executive Incentive Compensation Plan for Company Principals.
The Executive Incentive Compensation Plan for Company Principals
applies to the 18 presidents and chairmen of the Company's
operating divisions. Participants may receive annual cash awards
(for individual fiscal years) and long-term cash awards (for
three-year long-term performance periods). These awards are based
upon attaining earnings growth and RONA performance standards
relating to the participants' respective divisions and are also
based on the performance of the Company's stock price over the
long-term performance periods. The plan is administered by the
<PAGE>
executive compensation and development committee of the board,
which may (and has) delegated certain decisions regarding the
implementation of the plan to a management committee comprised of
the Chief Executive Officer, the Deputy Chairman and certain
other management executives, none of whom can be participants in
the plan (the "Management Committee"). The performance standards
are set by the Management Committee at the beginning of the
measurement periods and are measured by the Management Committee
after the close of the measurement periods. The maximum annual
award payable under the plan's formula is 30% of the
participants' base salary, and the maximum long-term award
payable under the plan's formula is 45% of the participants'
average base salary over the three-year period. The Management
Committee may adjust any of the awards upward or downward, in its
sole and absolute discretion. Awards are reviewed annually by the
executive compensation and development committee.
Performance Incentive Plan. The Performance Incentive Plan
applies to over 3,050 associates of the Company and its
subsidiaries. Participants may receive annual cash awards based
upon attaining certain measures of performance tailored to the
participant's job. Performance standards are set at the beginning
of the fiscal year and measured after the close of the fiscal
year. The maximum annual award payable under the plan's formula
ranges from 15% to 50% of the associate's base salary.
Approximately $30.7 million was awarded to all participants in
the three plans for the performance periods ending in the last
fiscal year. Amounts awarded under these plans are reflected in
the Summary Compensation Table.
During the last fiscal year, each of the five executive
officers named in the Summary Compensation Table became eligible
to receive a potential long-term cash award for the three fiscal
years 1994 to 1996. The table below shows the maximum long-term
cash awards payable to each of them for that long-term period.
<PAGE>
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
Performance
or Other Estimated Maximum
Period Until Future Payouts
Maturation Under Non-Stock
Name or Payout Price Based Plan (1)
David C. Farrell Earned over $990,000
Thomas A. Hays three fiscal $436,688
Jerome T. Loeb years (1994-1996) $381,863
Richard L. Battram ending 2/1/97 $335,550
Anthony J. Torcasio $265,200
1 Payouts may range from $0 to the "maximum" award value. The
estimate above assumes that the individual remains eligible
to participate throughout the three-year period, the maximum
performance goals have been met and that the stock price has
increased sufficiently to result in the maximum stock price
adjustment.
4
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual
Compensation (2) Long-Term Compensation
Awards Payouts
Restricted Long-Term All Other
Name and Stock Stock Incentive Compen-
Principal Position Year Salary(1)(3) Bonus(1)(4) Awards(5) Options(6) Payouts(1)(7) sation(8)
<S> <C> <C> <C> <C> <C> <C> <C>
David C. Farrell 1994 $1,100,000 $532,820 $0 35,000 $827,584 $5,329
Chairman of the Board and 1993 $1,100,000 $660,000 $0 40,000 $896,076 $10,729
Chief Executive Officer 1992 $1,100,000 $408,112 $0 40,000 $312,088 $9,814
Thomas A. Hays 1994 $961,250 $236,136 $0 23,500 $344,985 $5,329
Deputy Chairman 1993 $910,000 $276,000 $0 26,680 $362,504 $10,729
1992 $880,000 $256,960 $0 26,680 $196,500 $9,814
Jerome T. Loeb 1994 $812,500 $199,807$2,062,500 73,500 $277,351 $5,329
President 1993 $739,952 $232,500 $749,376 26,680 $275,187 $10,729
1992 $660,000 $195,640 $0 20,000 $140,906 $9,814
Richard L. Battram 1994 $713,750 $175,588 $343,125 17,500 $254,076 $5,329
Vice Chairman 1993 $672,500 $204,000 $0 20,000 $262,035 $10,729
1992 $640,000 $189,800 $0 20,000 $138,656 $9,814
Anthony J. Torcasio(9) 1994 $550,000 $145,314 $0 17,500 $181,818 $5,329
Chief Executive Officer 1993 $503,205 $150,000 $0 20,000 $168,354 $10,729
May Merchandising Co.
<PAGE>
1. Total Cash Compensation. As supplemental information, the
following table shows the total cash compensation (Salary, Bonus
and Long-Term Incentive Payouts) paid to the named executive
officers for the fiscal year.
Year Mr. Farrell Mr. Hays Mr. Loeb Mr. Battram Mr. Torcasio
1994 $2,460,404 $1,542,371 $1,289,658 $1,143,414 $877,132
1993 $2,656,076 $1,548,504 $1,247,639 $1,138,535 $821,559
1992 $1,820,200 $1,333,460 $ 996,546 $968,456
2. The Summary Compensation Table does not reflect certain
non-cash compensation made available to the named executive
officers for the last three fiscal years because the aggregate
amounts of such compensation are below the required disclosure
thresholds.
3. The table reflects salary paid or deferred during the
respective fiscal years shown. Annual salary changes for each of
the named executives and for all salaried associates normally
occur on May 1 of each year, but occurred on August 1 in 1992.
4. "Bonus" reflects the annual portion of the bonus payable
under the Company's Executive Incentive Compensation Plan for
Corporate Executives. See "Performance Based Bonus Plans" on page
4. The bonuses were paid or were deferred under the Company's
Deferred Compensation Plan, which provides that all deferrals
will be distributed to participants in lump sum cash payments
immediately following a change in control of the Company (as
defined in the plan).
5. Restricted Stock is valued at the average price of the common
stock on the date of grant. The aggregate value of the restricted
stock owned by each of the named executive officers as of the end
of the last fiscal year (at $35.125 per share) was $3,143,969 for
Mr. Farrell (89,508 shares), $2,941,649 for Mr. Hays (83,748
shares), $4,179,875 for Mr. Loeb (119,000 shares), $1,053,750 for
Mr. Battram (30,000 shares), and $983,500 for Mr. Torcasio
(28,000 shares). Dividends are paid on these shares quarterly.
Mr. Battram's 1994 grant of 10,000 shares vests one year after
the date of the grant. Shares of restricted stock are included
in the common stock ownership numbers on pages 1 through 3. Under
some circumstances, restricted shares continue to be forfeitable
for up to 10 years from the date of grant. The restricted stock
plan and
<PAGE>
the 1994 Stock Incentive Plan provide that, upon a change in
control of the Company (as defined in the plans), restricted
stock grants will be fully vested and all restrictions will be
waived.
6. "Stock Options" represent non-qualified 10-year options under
the Company's 1976 and 1987 stock option plans and the 1994 Stock
Incentive Plan. Generally, one-fourth of the options become
exercisable on each of the first through fourth anniversaries of
the grant date. The plans provide that all outstanding options
become fully exercisable upon the occurrence of a change in
control of the Company (as defined in the plans). 1992 and 1993
option numbers are adjusted to reflect the June 1, 1993 2-for-1
stock split.
7. "Long-Term Incentive Payouts" represents the long-term
portion of the bonus payable under the Executive Incentive
Compensation Plan for Corporate Executives. Such amounts were
paid or were deferred under the Company's Deferred Compensation
Plan. See "Performance Based Bonus Plans" on page 4 and note 4
above.
8. "All Other Compensation" represents the Company's effective
matching allocation to the named individuals' accounts in the
Company's Profit Sharing Plan. See "Profit Sharing Plan" on page
6.
9. Mr. Torcasio became an executive officer for reporting
purposes for the first time in 1993 and, therefore, no
information is provided for 1992.
</TABLE>
5
Profit Sharing Plan. During 1994, over 44,000 associates
invested $62.9 million in the Profit Sharing Plan, $41.8 million
of which was invested in the Company's common stock. In addition,
$29.0 million of the Company's common stock and ESOP stock was
added to associates' accounts as a result of the matching
formula. As of the Record Date, the plan beneficially owned 4.69%
(11,650,488 shares) of the outstanding common stock and 100%
(equivalent to 15,056,441 shares of common stock) of the
outstanding ESOP stock, which together represent 10.13% of the
voting power of the Company.
The plan links its benefits to the Company's performance each
<PAGE>
year and to the value of the Company's common stock. Generally,
the Company matches up to the first 5% of pay each paycheck that
an associate invests in the plan. In 1994, our associates made
$40.9 million of "matchable" contributions to the plan. The
matching rate for any year is variable and discretionary. The
matching rate is based on the Company's earnings per share (EPS)
performance. If the EPS increases by 6% from one year to the
next, the matching rate is 50% (i.e., $.50 for every matchable
dollar invested). The matching rate increases by 1.25 percentage
points over 50% for every one percentage point by which the EPS
increase exceeds 6%; the matching rate also decreases based on
the same formula if the EPS change is less than a 6% increase. In
addition, if the price of the Company's common stock exceeds
$24.74 per share, the effective matching rate will be higher as a
result of the operation of the ESOP feature of the plan (added in
April 1989). The effective matching rate for 1994 was 71.1% and
has averaged 68.7% over the last five years.
Associates with one year of service (with at least 1,000 hours
of paid employment) and who are at least 21 years old may
participate. The plan offers associates four professionally
managed investment funds for associate contributions: a money
market fund, a fixed income index fund, a common stock index fund
and a Company common stock fund.
Retirement Plans. The Company has a noncontributory retirement
plan covering substantially all associates who are paid for 1,000
or more hours per year.
In addition, the Company has a supplementary retirement plan
(the "Supplementary Plan") covering, generally, associates who,
at one time, had compensation in a calendar year equal to at
least twice the amount of "wages" then subject to the payment of
old age, survivor and disability insurance Social Security taxes.
Under the Supplementary Plan, covered associates become entitled
to a single life annuity retirement benefit equal to (i) 2% of
the average of the highest three out of the last five fiscal
years of final annual salary and bonuses (reported as salary,
bonus and long-term incentive payouts in the Summary Compensation
Table) multiplied by their years of service, up to a maximum of
25 years (ii) reduced by primary Social Security benefits,
Company-provided benefits provided under the Company's
retirement, profit sharing and disability plans and, if
appropriate, by amounts to reflect early retirement. The minimum
benefit under the Supplementary Plan is the amount of
<PAGE>
Company-provided benefits which would have been payable under the
Company's retirement and profit sharing plans, determined without
regard to any statutory limits, less the amount of
Company-provided benefits actually payable under those plans.
The Supplementary Plan provides that, in the event of a change
in control (as defined in the plan), vesting would be accelerated
in limited circumstances and benefits would not be forfeitable.
The Company established a trust which would be funded upon a
potential change in control to provide accrued benefits under the
Supplementary Plan and which would, upon an actual change in
control, become irrevocable.
The following table shows the estimated aggregate annual
benefits payable upon retirement (assuming a retirement in 1994)
for persons in specified compensation and years of service
classifications covered by the Company's retirement plan and, if
eligible, the Supplementary Plan. (The individuals named in the
Summary Compensation Table had, as of December 31, 1994, the
following years of service, respectively: David C. Farrell, 39
years; Thomas A. Hays, 26 years; Jerome T. Loeb, 31 years;
Richard L. Battram, 22 years; and Anthony J. Torcasio, 25 years.)
Average
Annual Years of Service
Earnings
(000's) 20 25 30 35 40
$800 163,907 195,932 227,958 259,984 292,009
$1,000 207,227 247,436 287,647 327,857 368,066
$1,300 272,208 324,693 377,179 429,665 482,151
$1,600 337,188 401,950 466,712 531,474 596,236
$1,900 402,169 479,207 556,246 633,284 710,322
$2,200 467,150 556,464 645,778 735,092 824,407
$2,500 532,130 633,720 735,311 836,901 938,491
$2,800 597,111 710,978 824,844 938,711 1,052,577
With respect to the last fiscal year, the expense to the Company
of the Company's retirement plans for associates aggregated $31.3
million.
Employment Contracts, Termination of Employment and Change in
Control Arrangements. More than five years ago, the Company
entered into severance agreements with the five executive
officers named in the Summary Compensation Table. The agreements
provide that the executive is entitled to benefits if (i) a
<PAGE>
change in control of the Company (as defined in the agreement)
occurs and (ii) during the 180 days following such change in
control, the executive determines in good faith that as a result
of the change in control he is unable to execute his duties
effectively. Following such 180-day period, employment must be
actually or constructively terminated other than for cause or
disability during the term of the agreement for benefits to be
payable. Under the severance agreements, a change in control
6
would include any of the following events: (i) any "person," as
defined in the Securities Exchange Act of 1934, as amended,
acquires 50% or more of the Company's voting securities; (ii) a
majority of the Company's directors are replaced during a
two-year period; or (iii) shareowners approve certain mergers, or
a liquidation, or sale of all or substantially all of the
Company's assets. The severance agreements provide a lump sum
payment equal to three times the sum of (i) base salary at
termination or, if greater, base salary immediately prior to the
change in control plus (ii) target bonus with maximum share price
adjustment for the year in which the change in control occurs.
Each agreement also provides 36 months of continued medical and
life insurance benefits and, if the terminated executive is
within five years of his or her eligibility date, eligibility in
the Company's post-retirement life and medical insurance
benefits. The agreements with officers who are subject to
Section 16(b) of the Securities Exchange Act of 1934 provide for
a cash payment in cancellation of stock options. The agreement
with the Chairman of the Board and Chief Executive Officer
provides a "tax gross-up" payment to ensure that the
above-mentioned payments are not subject to net reduction due to
imposition of excise taxes which are payable under Section 4999
of the Internal Revenue Code. The agreement with the Deputy
Chairman provides for 50% of such payment. The Company
established a trust which would be funded upon a potential change
in control to provide the benefits under the severance agreements
and which would, upon an actual change in control, become
irrevocable.
Messrs. Farrell, Loeb and Torcasio have individual contracts of
employment with the Company which expire at various dates on or
before September 30, 2000 and which provide for annual base
salaries at rates not less than the amounts reported in the
Summary Compensation Table.
<PAGE>
<TABLE>
STOCK OPTION GRANTS IN FISCAL 1994
<CAPTION>
Percent of
Options Total Options Exercise or Expiration Grant Date
Name Granted(1) Granted Base Price(2) Date Present Value(3)
<S> <C> <C> <C> <C> <C>
David C. Farrell 35,000 2.30% $39.4375 5/11/2004 $490,000
Thomas A. Hays 23,500 1.54% $39.4375 5/11/2004 $329,000
Jerome T. Loeb 23,500 1.54% $39.4375 5/11/2004 $329,000
50,000 3.28% $39.4375 5/11/2004 $700,000
Richard L. Battram 17,500 1.15% $39.4375 5/11/2004 $245,000
Anthony J. Torcasio 17,500 1.15% $39.4375 5/11/2004 $245,000
<PAGE>
1. One fourth of the options become exercisable on May 11,
1995, the first anniversary of the date of the grant, and on
each of the second through fourth anniversaries thereafter,
except for Mr. Loeb's grant of 50,000 options; 10,000 of
those options become exercisable on April 30, 1997, 15,000
on April 30, 1998 and 25,000 on April 30, 1999.
2. The exercise price is the market price on the date the
options were granted.
3. Grant date present values were determined using the
Black-Scholes option pricing model. The estimated values
under the model are based on assumptions as to variables
such as option term, interest rates, stock price volatility
and dividend yield. The actual value, if any, the option
holder may realize will depend on the excess of the actual
market price of the stock over the exercise price on the
date the option is exercised. The Grant Date Present Value
calculation is presented in accordance with SEC proxy
disclosure requirements, and the Company has no way to
determine whether the Black-Scholes model can properly
determine the value of an option. There is no assurance that
the value that may be realized by the option holder will be
at or near the value estimated by the Black-Scholes model.
The model assumes: (a) an option term of 10 years, which
represents the length of time between grant date of options
under the Company's plans and their exercise date for the
named executive officers; (b) an interest rate that
represents the interest rate on a U.S. Treasury Bond with a
maturity date corresponding to that of the option's term;
(c) volatility calculated using daily stock prices for the
250 trading days prior to the grant date; and (d) dividends
at the rate of $1.04 per share, the annual dividend rate
with respect to a share of stock at the time of grant.
</TABLE>
<PAGE>
<TABLE>
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1994
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Total Number of Value of Unexercised
Shares Total Unexercised Options Held In-the-Money Options(2)
Acquired Gain
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
David C. Farrell 10,324 $222,258 250,646 295,000 $3,106,417 $3,123,436
Thomas A. Hays 13,340 $215,941 26,895 63,520 $169,303 $157,369
Jerome T. Loeb 14,000 $217,301 38,314 108,510 $259,880 $117,968
Richard L. Battram 11,420 $224,441 50,644 47,500 $389,681 $117,968
Anthony J. Torcasio 8,258 $179,329 26,758 42,000 $172,564 $63,875
<PAGE>
1. The amounts "realized" reflect the appreciation on the date
of exercise (based on the excess of the fair market value of
the shares on the date of exercise over the exercise price).
However, because the executive officers may keep the shares
they acquired upon the exercise of the option (or sell them
at different prices), these amounts do not reflect cash
realized upon sale of those shares.
2. "In-the-Money options" are options outstanding at the end of
the last fiscal year for which the fair market value of the
Company's common stock at the end of the last fiscal year
($35.125 per share) exceeded the exercise price of the
options.
</TABLE>
7
Stock Price Performance. The graph below compares the Company's
cumulative total shareowner return against the returns of the
S&P's 500 stock index and of an index of the competitors used in
determining bonuses under the Company's performance based bonus
plans.
Comparison of 5-Year Cumulative Return
May, S&P 500 Index and Competitor Group Index
1989 1990 1991 1992 1993 1994
May $100.0 $108.5 $132.6 $174.6 $200.6 $183.0
S&P 500 $100.0 $108.4 $133.0 $147.1 $166.0 $166.9
Competitor Group $100.0 $ 98.0 $112.4 $134.4 $137.7 $124.7
The graph assumes $100 invested on January 29, 1989 (the
beginning of fiscal 1989) in Company common stock, in the S&P 500
Index and in an index of the competitors (which is comprised of
Dayton Hudson, Dillard's, J.C. Penney, Melville, Mercantile and
Nordstrom) used in determining bonuses under the Company's
performance based bonus plans and assumes dividends are
reinvested.
Executive Stock Ownership. The Company encourages all of its
associates to make a personal investment in Company stock,
further aligning their interests with those of shareowners. In
1994, the Company adopted the following minimum stock ownership
guidelines for the Company's top management group:
<PAGE>
Ownership
Guideline
(Multiple of
Executive Level Base Salary)
Chief Executive Officer 5.0 times
Corporate Senior Management
Committee(a) 3.5 times
Presidents and Chairmen of Operating
Divisions 2.5 times
Corporate Executive Vice Presidents and
Senior Vice Presidents and the
Senior Management Committees of
Operating Divisions 1.5 times
(a) Currently, Messrs. Farrell (whose guideline is the CEO
guideline above), Hays, Loeb, Battram and Torcasio.
These minimum guidelines are expected to be satisfied over the
next four years and may be satisfied through direct ownership of
shares, share equivalents under the Company's Profit Sharing Plan
or phantom stock under the Deferred Compensation Plan.
Executive Compensation and Development Committee Report. The
executive compensation and development committee (the
"Committee") reviews and approves, among other things, the
compensation payable to each of the executive officers named in
the Summary Compensation Table. Each member of the Committee is
an independent, non-management director.
Compensation Philosophy. The Company's basic compensation
philosophy is that the compensation program should:
- - attract, retain and motivate highly qualified executives;
- - be competitive;
- - align the executive's compensation with the Company's
objectives; and
- - be meaningfully related to the value created for
shareowners.
Compensation for senior executives is comprised of a base salary,
bonus opportunities (a significant portion of total compensation)
and long-term stock related incentives. The Committee reviews
compensation based on the foregoing philosophy, on the
performance
<PAGE>
of the Company and on competitive practices. As part of its
review of competitive pay levels, the Committee looks at the base
salary levels, annual bonus levels and long-term related
incentives at a broad group of companies, including the companies
which are included in the Company's performance graph on this
page, other retail companies and companies in other industries of
similar size and complexity to the Company. The Committee did not
target a specific percentage level of compensation within the
group, but, as discussed under the "Additional Information"
heading below, determined, based on that review, that the
Company's current overall compensation program is consistent with
and furthers the compensation philosophy described above.
Base Salary. Base salaries are reviewed by the Committee on an
annual basis and may be increased at that time based on (i) the
individual's contribution to the Company, (ii) competitive pay
levels and (iii) management's recommendations. As a result of its
overall review, the annual rate of the base salaries for the
named executives increased in May 1994 by an average of 5.0% and,
for Mr. Torcasio, increased again in November 1994. Based on the
Committee's review of all elements of his compensation, the base
salary for Mr. Farrell was unchanged in 1994.
Bonus Opportunities. The Company has three performance based
bonus plans that cover approximately 3,100 associates. Each plan
links a major portion of the associates' potential total pay to
the associates' performance and to the Company's performance. The
three plans are described on page 4. The bonus opportunities for
the most senior executives and executive
8
officers include both annual and long-term opportunities. Each
named executive participates in the Executive Incentive
Compensation Plan for Corporate Executives, which provides an
opportunity for both an annual bonus and a long-term bonus. A
proposal that shareowners approve that plan, as amended, is
described beginning on page 11.
For 1994, the annual bonus opportunity was for up to 30% (60%
for Mr. Farrell) of base salary, and was determined based on
whether the Company achieved certain performance levels
(threshold, target or maximum) determined in advance by the
Committee for (i) earnings per share ("EPS") and (ii) return on
<PAGE>
net assets ("RONA") over the year. The annual bonus is subject to
an automatic upward or downward adjustment based on the Company's
performance relative to the EPS and RONA performances of the
predetermined group of competitors included in the Company's
performance graph on page 8. While return on equity is the
Company's principal measure in evaluating its performance for
shareowners and its ability to profitably invest shareowners'
funds, the bonus plans use RONA in evaluating this element of
bonus opportunity in order to facilitate industry comparisons
without having to make adjustments for different levels of
leverage among the competitor group. The Company's rank relative
to the competitor group is determined based on data provided to
the Committee by the Company's independent public accountants.
The annual bonus also can be adjusted downward on a discretionary
basis by the Committee. For 1994, the Company exceeded the target
performance level set by the Committee for EPS and exceeded the
target performance level for RONA (no adjustment was made based
on the Company's relative rank in the competitor group). Based on
these results, the annual bonus represented approximately 48.4%
of base salary for Mr. Farrell and 24.2% of base salary for each
of the other named executive officers.
For the three-fiscal-year period ended in 1994, the long-term
bonus opportunity was for up to 45% (90% for Mr. Farrell) of
average base salary, and was determined based on whether the
Company achieved certain performance levels (threshold, target or
maximum) determined in advance by the Committee for (i) compound
growth rate for EPS and (ii) average RONA over the
three-fiscal-year period. The long-term bonus is subject to an
automatic upward or downward adjustment (i) based on
predetermined levels of changes in the common stock price over
the period and (ii) based on the Company's performance as
compared to the EPS and RONA performances of the predetermined
group of competitors included in the Company's performance graph
on page 8. The Company's rank relative to the competitor group is
determined based on data provided to the Committee by the
Company's independent public accountants. The long-term bonus
also can be adjusted downward on a discretionary basis by the
Committee. For the three-year period ending in 1994, the Company
exceeded the maximum performance level set by the Committee for
compound growth rate for EPS and exceeded the maximum performance
level for average RONA (no adjustment was made based on the
Company's relative rank in the competitor group), and the common
stock price increased by 25.4%, resulting in a 25.4% increase in
the long-term bonuses. Based on these results, the long-term
<PAGE>
bonuses awarded for the three-fiscal-year period which ended in
1994, represented approximately 75.2% of average base salary for
Mr.Farrell and 37.6% of average base salary for each of the other
named executive officers.
Long-Term Stock Related Incentives. The Company provides
long-term stock related incentives with stock options and
restricted stock, which are designed to attract, retain and
motivate management associates and relate their compensation
directly to the performance of the Company's stock. Stock options
are granted at fair market value on the date of the grant and
will only have value to the executives if the Company's stock
price increases. The Committee establishes guidelines for the
grant of options for all executives and specifically approves any
grants to executive officers. The Committee has established
option guidelines for annual grants based on competitive
practices and position levels. Restricted stock grants are
approved by the Committee in special circumstances.
The 1994 annual option grants to the named executive officers
(including Mr. Farrell) were consistent with the normal annual
grant levels previously established for those executive officers.
In addition, during 1994, the Committee approved grants to Mr.
Loeb of 50,000 options and 50,000 shares of performance
restricted stock and a grant of restricted stock to Mr.Battram of
10,000 shares. Except as described above, no other grants were
made to the named executive officers in 1994.
Additional Information. During 1993 and 1994, the Company
selected and retained independent, professional compensation
experts to study the compensation of the executive group in the
Company's operating divisions and of the senior management
committee in the corporate office. The experts reported to the
Committee on the Company's base salary levels, annual bonus
levels and long-term incentives as compared with the compensation
packages of a broad group of companies, including the companies
which are included in the Company's performance graph on page 8,
other retail companies and companies in other industries of
similar size and complexity to the Company. Based on the experts'
reports, the Committee has determined that the Company's current
compensation program, taking into account base compensation,
bonus opportunities and long-term incentive opportunities, is
consistent with and furthers the compensation philosophy
described above. The
Committee recommended, and the Company adopted, minimum stock
<PAGE>
ownership guidelines for the Company's top management group in
the operating divisions and in the corporate office.
9
The guidelines are described on page 8.
During 1994, the Committee continued to review the new tax law
and proposed IRS regulations limiting the tax deductibility of
executive compensation in excess of $1 million. The Committee
also reviewed the exceptions that permit tax deductions on such
compensation, including exceptions for performance based
compensation. Final regulations are expected in the future. The
Committee's policy continues to be that the Company should
attempt, wherever reasonably possible, to qualify future
compensation to be tax deductible. In response to proposed
amendments to the proposed IRS regulations, an amended Executive
Incentive Compensation Plan for Corporate Executives is being
submitted to the shareowners to permit the Company to deduct
future compensation under that plan.
Executive Compensation and Development Committee:
Edward H. Meyer, Chairman
Helene L. Kaplan Andrall E. Pearson
Russell E. Palmer Edward E. Whitacre, Jr.
Miscellaneous. On December 11, 1994, the Company paid
approximately $755,000 in premiums to purchase policies of
directors' and officers' liability insurance from Federal
Insurance Company, National Union Fire Insurance Company and
Continental Casualty Company providing coverage for a one-year
period. Such policies cover all directors and officers of the
Company and its subsidiaries. As of March 30, 1995, no claims
have been made nor have any sums been paid under policies of
directors' and officers' liability insurance purchased by the
Company.
Executive officers and directors are required to report to the
Securities and Exchange Commission, pursuant to Section 16(a) of
the Securities Exchange Act of 1934, ownership of and
transactions in Company common stock. Based solely on a review of
copies of reports provided to it by such individuals, the Company
believes that all reporting requirements were satisfied.
<PAGE>
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The board of directors held eight meetings during the last fiscal
year. Each incumbent director attended at least 75% of the
aggregate of (i) the total number of board meetings held during
the period for which such director held such office and (ii) the
total number of meetings held by all board committees on which
such director served during the periods that such director
served. Overall, the average percentage for all directors'
attendance was 95%.
Compensation of Directors. Non-management directors receive an
annual fee of $30,000 and, in addition, $2,500 for attending each
board meeting and $2,000 for attending each committee meeting. A
non-management chairperson of a committee receives an additional
annual fee of $5,000. Non-management directors may defer all or
any portion of their cash fees under a deferred compensation plan
that is substantially similar to the Deferred Compensation Plan
for management associates. Each non-management director who first
became a director prior to 1989 will be entitled to a retirement
pension upon retirement from the board. Other non-management
directors will become eligible for benefits upon retirement after
age 60 with five years of board service. The pension will be
equal to the base annual fee then in effect and will be payable
for the life of the director or, if shorter, for the number of
years (up to 15) of the director's board service. The Company has
a restricted stock plan for non-management directors, under which
shares of stock may be issued which are subject to restrictions
on transferability and to forfeiture. Each non-management
director receives 2,000 shares upon joining the board and 500
shares per year of continued board service. Management board
members receive no compensation or fees for attending board or
committee meetings.
The board of directors has an audit committee, an executive
committee, an executive compensation and development committee, a
finance committee and a nominating committee, each of which is
described below.
Audit Committee. The audit committee is comprised of Messrs.
Meyer, Palmer (chairman), Quinlan, Stiritz, Storey and
Weidenbaum. The committee met four times during the last fiscal
year. The audit committee makes recommendations to the board of
directors as to the selection of and proposed arrangements with
the firm of independent public accountants and auditors that
<PAGE>
examines the books and accounts of the Company for each fiscal
year, reviews the results of audits, and the coordination between
the independent public accountants and auditors and the Company's
internal auditing staff and oversees the Company's policies
concerning sensitive payments and conflict of interest.
Executive Committee. The executive committee is comprised of
Messrs. Farrell (chairman), Hays, Loeb, Meyer, Palmer, Pearson
and Stiritz. The committee did not meet during the last fiscal
year, but did act by unanimous written consent on one occasion.
The executive committee exercises, on a "standby" or "emergency"
basis, and subject to the direction of the full board of
directors, all of the powers of the board of directors (with
certain specified exceptions required by law) during intervals
between meetings.
10
Executive Compensation and Development Committee. The executive
compensation and development committee is comprised of Messrs.
Meyer (chairman), Palmer, Pearson and Whitacre and Mrs. Kaplan.
The committee met five times during the last fiscal year and
acted by unanimous written consent on several other occasions.
The committee considers and recommends to the board the Company's
overall compensation programs, reviews and approves the
compensation payable to all senior management personnel, reviews
the compensation payable to store company principals, reviews and
approves new compensation programs that involve Company stock or
affect compensation to senior management personnel and store
company principals, advises management on all other executive
compensation matters as requested, and reviews and monitors
management development efforts to assure development of a group
of executives that would provide for adequate and orderly
management succession. The committee also administers (directly,
or in some circumstances by delegation or the establishment of
operating guidelines) the 1994 Stock Incentive Plan, the
Executive Incentive Compensation Plan for Corporate Executives,
the Executive Incentive Compensation Plan for Company Principals
and the Deferred Compensation Plan.
Finance Committee. The finance committee is comprised of Messrs.
Hays, Loeb, Quinlan, Pearson (chairman), Stiritz, Weidenbaum and
Whitacre and Mrs. Kaplan. The committee met two times during the
last fiscal year. The finance committee reviews the financial
<PAGE>
policies, plans and structure of the Company and reviews and
recommends to the board the Company's long-range financial plans,
the Company's capital expenditure program, specific debt and
equity placement activities, financial public relations and
communications programs, financial aspects of proposed
acquisitions or divestitures, and the administration and
evaluation of the retirement and profit sharing plans'
investments.
Nominating Committee. The nominating committee is comprised of
Messrs. Stiritz (chairman), Storey and Whitacre and Mrs. Kaplan.
The committee met one time during the last fiscal year. In
addition, frequent telephone conversations occurred among the
committee members. The nominating committee recommends to the
board nominees for directors, nominees for the successor to the
chief executive officer when a vacancy in that office occurs, and
nominees for chairpersons and members of all committees of the
board. The committee also advises the board with respect to
criteria relating to director tenure and compensation of
non-management directors. The committee considers suggestions as
to nominees for directors from any source, including any
shareowner. Nominations by shareowners should be submitted in
writing to the Company's Secretary, 611 Olive Street, St. Louis,
Missouri 63101-1799 and, to be effective, must comply with the
notice procedures set forth in the Company's by-laws. A copy of
the notice procedures is available upon request to the Company's
Secretary.
THE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Proposal (b) on the accompanying proxy card.
Upon recommendation of the audit committee, the board of
directors appointed Arthur Andersen LLP, independent public
accountants, as auditors of the Company and its subsidiaries for
the fiscal year ending February 3, 1996, subject to ratification
by the shareowners at the annual meeting. It is intended that,
unless otherwise directed by shareowners, proxies will be voted
for the ratification of this appointment. A member of the firm of
Arthur Andersen LLP will be present at the meeting to make such
statements as that firm may desire and to answer any questions by
shareowners. The aggregate amount of fees paid in fiscal 1994 by
the Company to Arthur Andersen LLP was $3.5million. The board of
directors unanimously recommends a vote FOR Proposal (b), and
your proxy will be so voted unless you specify otherwise.
<PAGE>
PROPOSAL TO APPROVE THE EXECUTIVE INCENTIVE COMPENSATION PLAN FOR
CORPORATE EXECUTIVES, as amended
Proposal (c) on the accompanying proxy card.
The May Department Stores Company Executive Incentive
Compensation Plan for Corporate Executives (the "Plan") was
approved by shareowners at the 1994 annual meeting. In December
1994, the Internal Revenue Service issued additional proposed
regulations under Section 162(m) of the Internal Revenue Code
which must be satisfied in order to assure that future bonus
payments under the Plan will be tax deductible. The proposed
regulations require that plans that have bonuses based on a
percentage of salary must provide a "maximum dollar amount" that
may be payable under the plan at the time that the performance
goals are established. On March 17, 1995, the Plan was amended,
subject to shareowner approval, to provide that the maximum
dollar amounts which may be paid to a participant for any annual
award or for any long-term award are each $1.5 million. The Plan,
as amended, is described below. Management recommends that the
shareowners approve the Plan, as amended.
Overview. The Plan provides for annual performance and long-term
(three-year) awards. The Plan is administered by the executive
compensation and development committee of the board of directors,
whose members are "outside directors" under Section 162(m) of the
Internal Revenue Code (the "Committee").
11
The benefits that will be received by individual persons are
not currently determinable. However, the Summary Compensation
Table on page 5 sets forth the compensation paid in 1994 pursuant
to the Plan for the named executive officers under the columns
labeled "Bonus" and "Long-Term Incentive Payouts." In 1994, the
seven Plan participants (including the five named executive
officers) received $1,493,105 in annual bonuses and $2,168,678 in
long-term bonuses.
Eligibility. Management employees of the Company are eligible to
participate in the Plan. For 1995 and for long-term performance
periods which include 1995, the only participants in the Plan are
the executive officers named in the Summary Compensation Table
and two other executives. The Committee designates participants
for a particular annual and/or long-term performance period.
<PAGE>
Performance periods are measured on a fiscal year basis.
Annual Awards. Annual awards are calculated as a percentage of
the participant's base salary on November 1 of the fiscal year.
The Plan requires the Committee to establish a maximum percentage
that a participant may earn under the Plan as an annual award for
any annual performance period. This maximum percentage may not be
greater than 45% (90% for the Chief Executive Officer). The
maximum dollar amount of any annual award is $1.5 million.
Performance Measures. The financial performance measures for
annual awards are annual earnings per share growth ("EPS Growth")
and return on net assets ("RONA") as disclosed in the Company's
annual report and as RONA may be adjusted by the Company's
independent certified public accountants to exclude non-recurring
or extraordinary items that the Committee determines are not
representative of the Company's ongoing operations.
The Committee establishes threshold, target and maximum
performance objectives with respect to EPS Growth and RONA for
each participant for each annual performance period. For actual
performance that falls between the threshold and maximum annual
objectives, the percentage of base salary earned will be
prorated.
Adjustment for Relative Rank. Annual awards are subject to an
automatic upward or downward adjustment to reflect the Company's
performance as compared to a group of competitors designated in
advance by the Committee. The Company's relative rank is
determined based on data provided by the Company's independent
public accountants. The relative rank adjustment varies depending
on the number of competitors designated by the Committee. For
example, if the Committee designated six other competitors, then,
if the Company were to rank first or second, the award for that
measure would not be less than target level; if the Company were
to rank third or fourth, the award for that measure would not be
less than threshold level; and if the Company were to rank sixth
or seventh, the award for that measure would not be more than
threshold level.
Long-Term Awards. Each long-term performance period consists of
three consecutive fiscal years. Long-term performance periods
operate concurrently (that is, a new performance period commences
annually). For example, fiscal years 1994, 1995 and 1996
constitute one performance period; 1995, 1996 and 1997 a second
<PAGE>
performance period; and 1996, 1997, and 1998 a third performance
period.
Long-term awards are calculated as a percentage of the
participant's average base salary over the three-year period. The
maximum percentage that a participant may earn under the Plan as
a long-term award for any long-term performance period (before
any share price adjustment) is 30% (60% for the Chief Executive
Officer); the maximum is then subject to the share price
adjustment described below. The maximum dollar amount of any
long-term award is $1.5 million.
Performance Measures. The financial performance measures for
long-term awards are EPS Growth and RONA. EPS Growth is measured
by the compound annual growth rate over the three-year
performance period. RONA is measured by averaging the returns for
each of the three fiscal years of the performance period. The
adjustments for relative rank as compared to competitors with
respect to annual awards also apply to each long-term award.
As with the annual award portion of the Plan, the Committee
establishes threshold, target and maximum performance objectives
with respect to EPS Growth and RONA for each participant for each
long-term performance period. For actual performance that falls
between the threshold and maximum performance objectives, the
percentage of average base salary over the three-year period
earned will be prorated.
Adjustments for Relative Rank and Change in Market Price. As
with the annual award portion of the Plan, long-term awards are
subject to adjustment based on the Company's relative ranking
compared to a group of competitors designated by the Committee.
Long-term awards are also adjusted to reflect changes in the
market value of the Company's common stock over the three-year
performance period. The award earned is increased or decreased in
direct proportion to the percentage increase or decrease in the
market price, subject to a maximum increase of 50% of such award
and a maximum decrease of 25% of such award.
11
Discretionary Adjustments of Awards and Percentages. The
<PAGE>
Committee may adjust the annual and long-term awards of any
participant upward or downward in its sole and absolute
discretion. The Committee may not, however, make upward
adjustments in awards of a participant whose compensation for the
particular year is subject to the limits on tax deductibility in
Section 162(m) of the Internal Revenue Code.
The affirmative vote of the holders of a majority of the votes
cast on the proposal is required to approve the Plan. The board
of directors unanimously recommends a vote FOR Proposal (c), and
your proxy will be so voted unless you specify otherwise.
PROPOSAL BY A SHAREOWNER CONCERNING A CLASSIFIED BOARD
Proposal (d) on the accompanying proxy card.
Evelyn Y. Davis, Watergate Office Building, Suite 215, 2600
Virginia Ave., N.W., Washington, D.C., who is the owner of 200
shares of common stock of the Company, has advised the Company
that she plans to introduce the following resolution at the
annual meeting:
Resolved, that the shareholders of The May Department Stores
Company recommend that the Board of Directors take the
necessary steps to reinstate the election of directors
annually, instead of the stagger system which was recently
adopted.
This shareowner has submitted the following statement in support
of this resolution:
Until recently, directors of May were elected annually by
all shareholders.
The great majority of New York Stock Exchange listed
corporations elect all their directors each year.
This insures that all directors will be more accountable
to all shareholders each year and to a certain extent
prevents the self-perpetuation of the Board.
Last year, the owners of 99,198,736 shares, representing
48.6% of shares voting, voted FOR this proposal.
If you agree, please mark your proxy FOR this resolution.
The board of directors opposes the foregoing resolution. The
Company's shareowners decided in 1985 to install a classified
system of electing directors, with three classes of directors
<PAGE>
serving staggered three-year terms. This shareowner decision has
been challenged with this same resolution at every annual meeting
since 1988. On each of these occasions, the shareowners confirmed
that they wanted to retain the classified system of electing
directors by voting against the proposal for annual elections.
The board of directors agrees with the results of previous
shareowner voting on this issue and continues to believe that the
classified system is advantageous to the Company and its
shareowners because, by providing that the directors will serve
three-year terms rather than one-year terms, it enhances the
likelihood of continuity and stability in the composition of the
Company's board of directors and in the policies formulated by
the board. This, in turn, permits the board to represent more
effectively the interests of all shareowners, including
responding to circumstances created by demands or actions by a
single shareowner or a small group of shareowners. The board of
directors unanimously recommends a vote AGAINST Proposal (d), and
your proxy will be so voted unless you specify otherwise.
PROPOSAL BY A SHAREOWNER CONCERNING RETIREMENT PLANS FOR
DIRECTORS
Proposal (e) on the accompanying proxy card.
Howard W. Witsma, 665 S. Skinker Blvd., St. Louis, Mo., who is
the beneficial and voting trustee of two trusts holding in excess
of 5,000 shares of common stock, has advised the Company that he
plans to introduce the following resolution at the annual
meeting:
RESOLVED: We the stockholders assembled in person and by
proxy, do request that the Board of Directors take all
necessary steps to abolish the pension system established
for "outside" directors, and request that no further
pensions be made without the direct and specific approval of
the shareholders assembled in Annual Meeting.
This shareowner has submitted the following statement in support
of this resolution:
REASONS: Although it has become commonplace for "outside"
directors to be pensioned, these people are the employees of
the stockholders and not the Company. These ladies and
gentlemen are currently being handsomely remunerated for
<PAGE>
their services in the form of retainers, per diems, and
expenses for their work for the Company. Further, these same
ladies and gentlemen are otherwise employed, or are retired
with pensions, and are being paid for their services at
their place of primary employment. Such "double dipping" is
not in the interests of we, the stockholders and owners of
the Corporation, nor fair to us. While we certainly require
top talent as our directors, there are many corporations
today, despite what management may say to the contrary,
where this practice is not permitted.
13
Last year, this proposition received 50,694,079 of shares
voted in favor, representing 24.9% of the votes cast.
Your vote in favor is requested. If you fail to mark your
proxy, management will vote against this motion.
The board of directors opposes the foregoing resolution. The
board believes that it is in the best interests of the Company
and its shareowners to attract and retain exceptional individuals
who are recognized for their leadership, knowledge, experience
and ability to serve as outside directors. To do this, the
Company must provide a compensation package that is fair and
competitive with that offered by other major companies.
Compensation may take many forms and one normal type of
compensation that the Company has elected to provide is
retirement benefits. The Company believes that retirement
benefits are a preferred form of compensation because the right
to receive them is not automatic. A director must earn the right
to receive retirement benefits by providing service to the
Company for at least five years. This encourages directors to
remain with the Company and promotes greater continuity and
stability within the board. In addition, the Company's pension
plan for non-management directors provides a pension that is
proportionate to the length of the director's service. It limits
the maximum number of years that an annuity may be paid to the
number of years (up to 15 years) that a director has served on
the board. The Company believes that the directors' retirement
plan is consistent with industry standards and is fair and
appropriate. The board of directors unanimously recommends a vote
AGAINST Proposal (e), and your proxy will be so voted unless you
specify otherwise.
<PAGE>
GENERAL
Vote Required. The election of directors requires a plurality of
votes cast. The affirmative vote of the owners of a majority of
the
votes cast at the meeting is required to approve the ratification
of auditors, the proposal to approve the amended Executive
Incentive Compensation Plan and the shareowner proposals. The
shares represented by abstentions and broker non-votes will be
considered present at the meeting for quorum purposes.
Abstentions and broker non-votes (i) will not be counted as
either FOR or AGAINST a nominee or a matter, and (ii) will have
no effect upon the election of directors or the other matters.
Solicitation of Proxies. Your signature on the accompanying proxy
card is solicited by the Company's board of directors. The
expenses of solicitation of proxies hereunder will be paid by the
Company. Proxies may be solicited by directors, officers and
regular employees of the Company personally, by mail, telegraph
and telephone from and through registered holders, nominees and
others acting as principals and as intermediaries. The Company
may reimburse persons holding shares in their names or those of
their nominees for their expenses in sending proxies and proxy
material to principals. In addition, the Company has retained D.
F. King & Co., Inc., to assist in the solicitation of proxies for
a fee of $18,000, plus out-of-pocket expenses.
Whether or not you plan to attend the annual meeting, please
complete, sign and return the enclosed proxy card in the enclosed
envelope, which requires no postage if mailed in the United
States. Your cooperation in giving this matter your immediate
attention will be appreciated.
By order of the board of directors.
14
<PAGE>
Directions to Annual Shareowners Meeting
Adam's Mark Hotel
Fourth Street and Chestnut
St. Louis, Missouri
St. Louis Ballroom, 4th Floor
May 19, 1995, 10:00 a.m.
[MAP]
The main entrance to the Adam's Mark Hotel is on Chestnut. There
is a pedestrian entrance on Fourth.
A limited amount of parking has been reserved for you in the
hotel's under-ground parking garage, which can be entered from
Chestnut. Handicapped-accessible parking is available in the
garage. Additional parking has been reserved for you at the
Kiener Plaza East, Kiener Plaza West and Famous-Barr parking
garages. You may enter the Kiener Plaza garages from Pine Street
and the Famous-Barr garage from Seventh Street. Please note that
many of the downtown streets run one way.
15
<PAGE>
MAY
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101-1799
April 12, 1995
To Our Shareowners:
The annual meeting of May shareowners will be held at the Adam's
Mark Hotel, Fourth Street and Chestnut, St. Louis, Missouri, on
Friday, May 19, 1995, at 10:00 a.m. Central Daylight Time. The
enclosed proxy statement provides you with information regarding
the meeting, including the Board's recommendations on each issue
and the reasons for the recommendations.
In 1994, we achieved our 20th consecutive year of record sales
and earning per share. Few retailers achieve this significant
milestone. During the year we continued to focus our efforts on
delivering more value to customers. We improved our buying
processes and enhanced our ability to develop products
internally. We worked closely with suppliers to improve our in-
stock position on wanted merchandise. We increased store hours
and staffing to meet our customers' service expectations. We
appreciate the support you have given to our efforts, and we are
committed to growth and enhancing the value of your investment.
It is important that your shares be represented at this meeting.
Even if you plan to attend, we encourage you to promptly sign,
date and return your proxy in the enclosed postage-paid envelope.
Very truly yours,
/s/ DAVID C. FARRELL
David C. Farrell
Chairman of the Board and
Chief Executive Officer
<PAGE>
ADMISSION TICKET
(Please detach the proxy card below and return it in the
enclosed envelope. If you are planning to attend the annual
meeting, please save this letter and bring it to the meeting. It
is your admission ticket.)
DETACH PROXY CARD HERE
- -------------------------------------------------------------
<PAGE>
/ /
To vote your shares for all listed nominees, please mark the FOR
box in item (a). To withhold voting for all nominees, please mark
the WITHHOLD box. If you do not wish your shares voted FOR a
particular nominee, please mark the EXCEPTION box and enter the
name of the exception(s) in the space provided.
- -----------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS (a), (b) AND (c).
- -----------------------------------------------------------------
For Withhold
Exception
(a) Election of Directors
Exception(s)________________
____________________________ For Against
Abstain
(b) Ratification of the appointment of
independent auditors
(c) Proposal to approve the Exec-
utive Incentive Compensation
Plan for Corporate Executives,
as amended
- -----------------------------------------------------------------
- -----------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE AGAINST ITEMS (e) AND (f).
- -----------------------------------------------------------------
For Against
Abstain
(e) Proposal by a shareowner concerning
a classified board
(f) Proposal by a shareowner concerning
retirement plans for directors
- -----------------------------------------------------------------
<PAGE>
If you plan to attend the annual
meeting, please mark here.
Address change and/or comments,
please mark here.
Please sign name(s) exactly as shown on this card. If
signing in a representative capacity, please indicate.
Date:_________________________________________, 1995
____________________________________________________
____________________________________________________
Signature(s)
Please mark boxes in blue
or black ink as in the example. X
<PAGE>
Directions to Annual Shareowners Meeting
Adam's Mark Hotel
Fourth Street and Chestnut
St. Louis, Missouri
St. Louis Ballroom, 4th Floor
May 19, 1995, 10:00 a.m.
[MAP]
The main entrance to the Adam's Mark Hotel is on Chestnut. There
is a pedestrian entrance on Fourth.
A limited amount of parking has been reserved for you in the
hotel's under-ground parking garage, which can be entered from
Chestnut. Handicapped-accessible parking is available in the
garage. Additional parking has been reserved for you at the
Kiener Plaza East, Kiener Plaza West and Famous-Barr parking
garages. You may enter the Kiener Plaza garages from Pine Street
and the Famous-Barr garage from Seventh Street. Please note that
many of the downtown streets run one way.
<PAGE>
MAY PROXY
THE MAY DEPARTMENT STORES COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL
MEETING ON MAY 19, 1995.
By signing this card, the undersigned appoints each of David C.
Farrell, Louis J. Garr, Jr., and Richard A. Brickson, as proxy,
with full power of substitution, to vote all common shares of
the undersigned in The May Department Stores Company at the May
19, 1995 annual meeting of shareowners, and at any adjournment of
the meeting, on all subjects that may properly come before the
meeting, subject to the directions on the other side of this
card. This card is also the undersigned's voting instruction for
any and all shares held of record by The Bank of New York for the
undersigned's account in the Company's Dividend Reinvestment
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL
LISTED DIRECTOR NOMINEES, FOR PROPOSALS (b) AND (c) AND AGAINST
PROPOSALS (e) and (f) LISTED ON THE OTHER SIDE OF THIS CARD. If
no directions are given and this signed card is returned, the
undersigned understands that the proxies will vote in accordance
with the recommendations of the board of directors and in each
proxy's discretion on any other matter that may properly come
before the meeting.
The nominees for the board of directors are David C. Farrell,
Helene L. Kaplan, Edward H. Meyer and Murray L. Weidenbaum.
Please sign on the reverse side of this card and return it
promptly to the address shown on the right in the enclosed return
envelope.
THE MAY DEPARTMENT STORES COMPANY
P.O. BOX 11002
NEW YORK, N.Y. 10203-0002
<PAGE>
MAY
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101-1799
April 12, 1995
Dear Fellow Member of the Profit Sharing Plan:
Enclosed please find the Company's 1994 Annual Report to
Shareowners which summarizes a year of strong performance for
May. Also enclosed are the proxy statement for the 1994 Annual
Meeting, a confidential voting instruction card and a return
envelope. It is important that you vote. Management's
recommendations on each issue and the reasons for the
recommendations are described in the proxy statement. I
encourage you to read it carefully.
In 1994, we achieved our 20th consecutive year of record sales
and earning per share. Few retailers achieve this significant
milestone. During the year we continued to focus our efforts on
delivering more value to customers. We improved our buying
processes and enhanced our ability to develop products
internally. We worked closely with suppliers to improve our in-
stock position on wanted merchandise. We increased store hours
and staffing to meet our customers' service expectations. In
this year's annual report, we salute you and your commitment to
treating the customer right, featuring (on pages 10 and 11)
several associates who represent the thousands of May associates
whose high level of performance has enabled us to achieve another
year of progress toward our mission of Excellence in Retailing.
Please complete, sign and return the confidential voting
instruction card; the Profit Sharing Plan trustee (The Bank of
New York) will follow your instructions. These instructions
cannot by disclosed by the trustee.
Again, I thank you for your unflagging efforts.
Very truly yours,
/s/ DAVID C. FARRELL
David C. Farrell
Chairman of the Board and
Chief Executive Officer
<PAGE>
DETACH VOTING INSTRUCTION CARD HERE
- -----------------------------------------------------------------
/ /
To vote your shares for all listed nominees, please mark the FOR
box in item (a). To withhold voting for all nominees, please mark
the WITHHOLD box. If you do not wish your shares voted FOR a
particular nominee, please mark the EXCEPTION box and enter the
name of the exception(s) in the space provided.
- -----------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS (a), (b) AND (c).
- -----------------------------------------------------------------
For Withhold
Exception
(a) Election of Directors
Exception(s)____________________
________________________________ For Against
Abstain
(b) Ratification of the appointment of
independent auditors
(c) Proposal to approve the Exec-
utive Incentive Compensation
Plan for Corporate Executives,
as amended
- -----------------------------------------------------------------
- -----------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE AGAINST ITEMS (e) AND (f).
- -----------------------------------------------------------------
For Against
Abstain
(e) Proposal by a shareowner concerning
a classified board
<PAGE>
(f) Proposal by a shareowner concerning
retirement plans for directors
- -----------------------------------------------------------------
Please sign name(s) exactly as shown on this card.
Date:_____________________________________, 1995
________________________________________________
________________________________________________
Signature(s)
Please mark boxes in blue
or black ink as in the example. X
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS TO
THE BANK OF NEW YORK AS TRUSTEE UNDER
MAY THE MAY DEPARTMENT STORES COMPANY PROFIT SHARING PLAN
By signing this card, I appoint the Trustee to vote all shares of
common stock of The May Department Stores Company represented by
units credited to my account in the May Common Stock Fund of the
Profit Sharing Plan and all shares of ESOP Preference Shares of
the Company credited to my account in the ESOP Preference Fund in
the Profit Sharing Plan, all as of January 31, 1995 (the latest
practicable Valuation Date), at the May 19, 1995 annual meeting
of shareowners, and at any adjournment of the meeting, on all
subjects that may properly come before the meeting, subject to
the directions on the other side of this card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL
LISTED DIRECTOR NOMINEES, FOR PROPOSALS (b) and (c) AND AGAINST
PROPOSALS (d) AND (e) LISTED ON THE OTHER SIDE OF THIS CARD. If
no directions are given, and this signed card is returned, I
understand that the Trustee will vote in accordance with
recommendations of the board of directors and in its discretion
on any other matter that may properly come before the meeting.
If this card is not received by the Trustee on or before May 12,
1995, the Trustee will vote my shares in the same proportion as
the other shares held by the Trustee are voted pursuant to
instructions received from other participants in the Profit
Sharing Plan.
The nominees for the board of directors are David C. Farrell,
Helene L. Kaplan, Edward H. Meyer and Murray L. Weidenbaum.
Please sign on the reverse side of this card and return it
promptly to the address shown on the right in the enclosed return
envelope.
THE MAY DEPARTMENT STORES COMPANY
P.O. BOX 11002
NEW YORK, N.Y. 10203-0002
<PAGE>
APPENDIX
1. On pages 2 and 3 of the proxy statement, the space to
the left of each director's biography contains a
photograph of the respective director.
2. The back cover of the proxy statement and the letter to
shareowners contains a map with directions to the
Adam's Mark Hotel.
