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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
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The McGraw-Hill Companies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO OF ADDRESS
McGRAW HILL LOGO
March 25, 1999
DEAR SHAREHOLDER:
On behalf of the Board of Directors and management, we cordially invite you to
the Annual Meeting of Shareholders to be held Wednesday, April 28, 1999, at 11
A.M., at the principal executive offices of the Corporation, 1221 Avenue of the
Americas, New York, New York 10020. In the pages that follow you will find the
Notice of Meeting and Proxy Statement describing the formal business to be
transacted at this Meeting. Please read them carefully.
At the Annual Meeting, there will be a report to shareholders regarding the
operations of The McGraw-Hill Companies, Inc. In addition, time will be made
available for shareholders to discuss the formal business items as well as to
ask other questions about The McGraw-Hill Companies' operations.
It is important that your shares be voted at the Meeting in accordance with your
preference whether or not you plan to attend in person. We urge you to specify
your choices on the matters presented by filling in the appropriate boxes on the
enclosed Proxy Card. Please sign, date and return the Proxy Card in the prepaid
envelope provided. Your cooperation in promptly returning the Proxy Card will
save your Corporation additional solicitation costs and is appreciated. If you
do attend the meeting and wish to vote in person, you may withdraw your Proxy at
that time.
Sincerely,
/s/ Joseph L. Dionne
JOSEPH L. DIONNE
Chairman of the Board
/s/ Harold W. McGraw III
HAROLD W. MCGRAW III
President and Chief Executive Officer
<PAGE> 3
LOGO OF ADDRESS
McGRAW HILL LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1999
To the Shareholders of The McGraw-Hill Companies, Inc.:
The Annual Meeting of Shareholders of The McGraw-Hill Companies, Inc. (the
"Corporation") will be held at the principal executive offices of the
Corporation, 1221 Avenue of the Americas, New York, New York 10020, Wednesday,
April 28, 1999, at 11 A.M., for the purpose of considering and voting upon the
following:
1. Election of three directors;
2. Ratification of the appointment of independent auditors for 1999; and
3. Such other business as may properly come before the Meeting or any
adjournment thereof.
Information relating to the above matters is set forth in the accompanying Proxy
Statement.
In accordance with the By-Laws and resolutions of the Board of Directors, only
shareholders of record at the close of business on March 18, 1999 shall be
entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
SCOTT L. BENNETT
Senior Vice President, Associate General
Counsel and Secretary
New York, New York
March 25, 1999
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Please sign and return the enclosed proxy in the envelope provided.
No postage is necessary if mailed in the United States.
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<PAGE> 4
THE MCGRAW-HILL COMPANIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1999
PROXY STATEMENT
To the Shareholders of The McGraw-Hill Companies, Inc.:
This statement is furnished in connection with the solicitation of proxies by
the Board of Directors of The McGraw-Hill Companies, Inc. (the "Corporation")
for use at the Annual Meeting of Shareholders to be held at 11 A.M. on April 28,
1999, at the principal executive offices of the Corporation, 1221 Avenue of the
Americas, New York, New York 10020, and at any adjournment thereof. A Notice of
Meeting is attached hereto and a form of proxy is enclosed.
THE PROXY
The persons named as proxies were selected by the Board of Directors of the
Corporation and are officers of the Corporation.
When the proxies in the enclosed form are properly executed and returned, the
shares they represent will be voted at the Meeting. If a shareholder
participates in the Dividend Reinvestment Plan, any proxy given by such
shareholder will also govern the voting of all shares held for the shareholder's
account under the Dividend Reinvestment Plan, unless contrary instructions are
received. Any shareholder giving a proxy has the power to revoke it at any time
before it is voted at the Meeting by filing with the Secretary of the
Corporation an instrument revoking it or by filing a duly executed proxy bearing
a later date.
The cost of soliciting proxies will be borne by the Corporation. The Corporation
will request banks and brokers to solicit their customers who have a beneficial
interest in the Corporation's shares registered in the names of nominees and
will reimburse such banks and brokers for their reasonable out-of-pocket
expenses of such solicitations. In addition, officers and full-time employees of
the Corporation may solicit proxies by telephone, telegraph or personal
interview. The Corporation has retained Kissel-Blake Inc. to assist in the
solicitation of proxies. It is estimated the Corporation will pay Kissel-Blake a
fee of $18,000 for these services.
These proxy materials are being mailed to shareholders of the Corporation
commencing on March 25, 1999. A copy of the 1998 Annual Report to Shareholders
was mailed to shareholders on March 16, 1999.
VOTING SECURITIES
The outstanding securities of the Corporation on March 18, 1999 were 197,751,646
shares of Common Stock, par value $1 per share, and 1,362 shares of $1.20
Convertible Preference Stock, par value $10 per share. Each share of Common
Stock and $1.20 Convertible Preference Stock is entitled to one vote at the
Meeting. On January 27, 1999, the Board of Directors of the Corporation approved
a 2-for-1 split of the Corporation's Common Stock which became effective on
March 8, 1999. Accordingly, the outstanding shares of Common Stock reported have
been adjusted to reflect this 2-for-1 split.
VOTING PROCEDURES
Under the New York Business Corporation Law (the "BCL") and the Corporation's
Restated Certificate of Incorporation, the presence, in person or by proxy, of
the holders of a majority of the outstanding shares of Common Stock and $1.20
Convertible Preference Stock is necessary to constitute a quorum of shareholders
to take action at this Annual Meeting. For these purposes, shares which are
present, or represented by a proxy, at the Meeting will be counted for quorum
purposes regardless of whether the holder of the shares or proxy fails to vote
on any particular matter or whether a broker with discretionary authority fails
to exercise its discretionary voting authority with respect to any particular
matter. Once a quorum of the shareholders is established, under the BCL and the
Corporation's Restated Certificate of Incorporation, (A) the directors standing
for election as set forth on page 3 must be elected by a plurality of the votes
cast (Proposal One) and (B) the affirmative vote of a majority of the votes cast
is required to ratify the appointment of the auditors as described on page 19
(Proposal Two). For voting purposes (as opposed to for purposes of establishing
a quorum) abstentions and broker non-votes will not be counted in determining
whether any item has been approved.
Votes at the Meeting will be tabulated by two inspectors of election appointed
by the Board of Directors.
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1. ELECTION OF THREE DIRECTORS
Under the Corporation's Restated Certificate of Incorporation, there are three
classes of directors which are to be as equal in number as possible. Four
directors, Vartan Gregorian, John T. Hartley, James H. Ross and Sidney Taurel,
were elected in 1997 for three-year terms expiring at the 2000 Annual Meeting.
None of these four incumbent directors is standing for re-election at this
Meeting.
Five directors, Pedro Aspe, George B. Harvey, Richard H. Jenrette, Robert P.
McGraw and Lois Dickson Rice, were elected in 1998 for three-year terms expiring
at the 2001 Annual Meeting. Mr. Jenrette, a director of the Corporation since
1993, will be retiring from the Board after this Meeting, pursuant to the Board
of Directors' long-standing retirement age policy. None of the other four
incumbent directors is standing for re-election at this Meeting.
Four directors, Joseph L. Dionne, Linda Koch Lorimer, Harold W. McGraw III and
Alva O. Way, were elected in 1996 for three-year terms expiring at the 1999
Annual Meeting. Mr. Way, a director of the Corporation since 1983, will be
retiring from the Board after this Meeting, pursuant to the Board of Directors'
long-standing retirement age policy. Accordingly, Ms. Lorimer and Messrs. Dionne
and Harold W. McGraw III are to be elected at this Meeting for three-year terms
expiring at the 2002 Annual Meeting.
Harold W. McGraw, Jr., a director of the Corporation from 1954 to 1988, Chairman
of the Board from 1976 to 1988, and Chief Executive Officer of the Corporation
from 1975 to 1983, retired from the Board after the 1988 Annual Meeting pursuant
to the Board's retirement age policy. However, in recognition of Mr. McGraw's
past service and contributions to the Corporation and to assure his continued
close association with the Board and the Corporation, the Board of Directors
several years ago elected Mr. McGraw permanently to the position of Chairman
Emeritus.
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THE BOARD OF DIRECTORS' RECOMMENDATION
Unless otherwise specified by the shareholder, the Board of Directors intends
the accompanying proxy to be voted FOR the election of the named three nominees
as directors.
The Board of Directors does not contemplate that any nominee will be unable or
unwilling to serve as a director. However, if that should occur, the individuals
named as the proxies reserve the right to substitute another person as may be
selected by the Board of Directors when voting at the Annual Meeting.
Following is information about each of the three nominees for director who are
being proposed for election at this Annual Meeting and about each of the eight
incumbent directors.
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NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING AT THE 2002 ANNUAL MEETING
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PHOTO OF JOSEPH L. DIONNE JOSEPH L. DIONNE, age 65, has been non-executive Chairman of
the Board of the Corporation since July 1998. Mr. Dionne was
Chairman of the Board from April 1988 through June 1998 and
Chief Executive Officer of the Corporation from April 1988
until April 1998. He was President and Chief Executive
Officer of the Corporation from 1983 to April 1988. Mr.
Dionne was President and Chief Operating Officer of the
Corporation from 1981 to 1983. He was Executive Vice
President, Operations, of the Corporation from 1979 to 1981
and President of McGraw-Hill Information Systems Company
from 1977 to 1979. He is a director of The Equitable
Companies Incorporated, The Equitable Life Assurance Society
of the United States, the Harris Corporation, Ryder Systems,
Inc. and a Trustee of Hofstra University. Mr. Dionne has
served as a director of the Corporation since 1981 and is
Chairman of the Executive Committee. (a)
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PHOTO OF LINDA KOCH LORIMER LINDA KOCH LORIMER, age 47, has been Vice President and
Secretary of Yale University since 1995, having returned to
Yale as Secretary of the University in 1993. She was
President of Randolph-Macon Woman's College from 1987 to
1993 and was Associate Provost of Yale University from 1983
to 1987. She is a director of Sprint Corporation. Ms.
Lorimer also serves on the Board of Governors of the Center
for Creative Leadership and is a director of Yale-New Haven
Hospital. Ms. Lorimer has served as a director of the
Corporation since 1994 and is a member of the Compensation
and Nominating and Corporate Governance Committees.
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PHOTO OF HAROLD W. McGRAW HAROLD W. MCGRAW III, age 50, has been President and Chief
III Executive Officer of the Corporation since April 1998. Prior
to that, Mr. McGraw had been President and Chief Operating
Officer of the Corporation since 1993. He was Executive Vice
President, Operations, of the Corporation from 1989 to 1993.
Prior to that he was President of the McGraw-Hill Financial
Services Company, President of the McGraw-Hill Publications
Company, Publisher of McGraw-Hill's Aviation Week & Space
Technology magazine and Vice President, Corporate Planning.
Before joining the Corporation in 1980, he held several
financial positions at the GTE Corporation. He is a Trustee
of Hartley House (a New York City community settlement
house). Mr. McGraw has served as a director of the
Corporation since 1987 and is a member of the Executive
Committee. (a)(b)
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DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING
PHOTO OF VARTAN GREGORIAN VARTAN GREGORIAN, age 64, has been since July 1997 the
President of Carnegie Corporation of New York, a private
philanthropic and grant-making institution. Prior to that he
was President of Brown University and a Professor of History
at Brown University from 1989 to 1997. He was President and
Chief Executive Officer of the New York Public Library from
1981 to 1989. Prior to 1981, Dr. Gregorian taught and held
administrative posts at several American universities. Dr.
Gregorian is a director of the Institute for Advanced Study,
the J. Paul Getty Trust and the Museum of Modern Art (New
York). He has served on the boards of many non-profit
organizations and foundations. Currently he is President
Emeritus of the New York Public Library and Brown
University. He was appointed by President Bush to be a
member of the Fulbright Commission. He is also a member of
the American Philosophical Society and a Fellow of the
American Academy of Arts and Sciences. Dr. Gregorian has
served as a director of the Corporation since 1990 and is a
member of the Audit, Compensation and Nominating and
Corporate Governance Committees.
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PHOTO OF JOHN T. HARTLEY JOHN T. HARTLEY, age 69, is Chairman of the Executive
Committee of the Board of Directors and a director of the
Harris Corporation, a supplier of information, communication
and semiconductor systems, products and services to
government and commercial markets worldwide. He was Chairman
of the Board and Chief Executive Officer of the Harris
Corporation from 1987 to 1995. Mr. Hartley was elected
President and Chief Operating Officer of the Harris
Corporation in 1982, Chief Executive Officer in 1986 and
Chairman of the Board in 1987. Mr. Hartley is a director of
The Equitable Companies Incorporated and The Equitable Life
Assurance Society of the United States and formerly the
Chairman of the National Association of Manufacturers. He
was a member of President Reagan's and President Bush's
National Security Telecommunications Advisory Committee and
is a past Chairman of the Defense Policy Advisory Committee
on Trade. Mr. Hartley is also Chairman of the Board of
Trustees of the Florida Institute of Technology. Mr. Hartley
has served as a director of the Corporation since 1989 and
is Chairman of the Compensation Committee and is a member of
the Audit, Executive and Nominating and Corporate Governance
Committees.
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PHOTO OF JAMES H. ROSS JAMES H. ROSS, age 60, has been since 1996 Chairman of The
Littlewoods Organisation, a private company in Great Britain
operating in the retail, home shopping and leisure
businesses. Mr. Ross has also been appointed Chairman
designate of National Grid plc, a public UK Company with
interests in electricity transmission and telecommunications
in England, Wales, the United States, Brazil and Argentina.
Mr. Ross was Chief Executive and Deputy Chairman of Cable &
Wireless plc, an international provider of
telecommunications services, between 1992 and 1995. He was a
Managing Director of British Petroleum plc, which engages in
all phases of the petroleum business, from 1991 to 1992, and
Chairman and Chief Executive Officer of BP America Inc., a
subsidiary of British Petroleum plc, from 1988 to 1991. He
was Chief Executive Officer and Managing Director of BP Oil
International Limited from 1986 to 1988. Prior to that, he
was General Manager of Corporate Planning for British
Petroleum plc from 1982 through 1985. Mr. Ross is a director
of Groupe Schneider and Datacard Inc. He is a trustee of the
Cleveland Orchestra. Mr. Ross has served as a director of
the Corporation since 1989 and is Chairman of the Financial
Policy Committee and is a member of the Executive and
Nominating and Corporate Governance Committees.
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PHOTO OF SIDNEY TAUREL SIDNEY TAUREL, age 50, has been Chairman, President and Chief Executive Officer of Eli Lilly and
Company, a pharmaceutical company, since January 1999. Mr. Taurel was President and Chief
Executive Officer of Eli Lilly and Company from July 1998 through December 1998. Prior to that,
Mr. Taurel was President and Chief Operating Officer of Eli Lilly and Company since 1996. He was
elected a director of Eli Lilly and Company in 1991. Mr. Taurel joined Eli Lilly and Company in
1971 and has held management positions in the company's operations in Brazil and Europe. He
served as President of Eli Lilly International Corporation from 1986 until 1991, as Executive
Vice President of the Pharmaceutical Division from 1991 until 1993 and as Executive Vice
President of Eli Lilly and Company from 1993 until his appointment in 1996 as President and
Chief Operating Officer. Mr. Taurel is Chairman of the Board of Directors of the Pharmaceutical
Research and Manufacturers of America. He also serves on the Board of ITT Industries, Inc. Mr.
Taurel is a member of the Board of Overseers of the Columbia Business School and is a Trustee of
the Indianapolis Museum of Art. Mr. Taurel has served as a director of the Corporation since
1996 and is a member of the Compensation and Nominating and Corporate Governance Committees.
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DIRECTORS WHOSE TERMS EXPIRE AT THE 2001 ANNUAL MEETING
PHOTO OF PEDRO ASPE PEDRO ASPE, age 49, has been Chairman of the Board of Vector Casa de Bolsa, S.A. de C.V.
("Vector"), an investment banking firm in Mexico providing financial services to corporations,
financial institutions and individual investors, since 1996. Vector is a subsidiary of Pulsar
International, S.A. de C.V., an industrial and financial company headquartered in Mexico. He has
also been since 1996 Managing Director and a partner of Protego, a newly formed investment
banking unit of Vector aimed at attracting capital and technology to Mexico. Dr. Aspe has been
since 1995 a professor at the Instituto Technologico Autonomo de Mexico, located in Mexico City.
Dr. Aspe has held a number of positions with the Mexican government and was most recently the
Secretary of Finance and Public Credit of Mexico from 1988 through 1994. Dr. Aspe is a director
of Seguros Comercial America (Mexico) and on the Advisory Board of Marvin & Palmer. Dr. Aspe is
also a member of the Advisory Board of Stanford University's Institute of International Studies.
Dr. Aspe has served as a director of the Corporation since 1996 and is a member of the Audit and
Financial Policy Committees.
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PHOTO OF GEORGE B. HARVEY GEORGE B. HARVEY, age 67, was Chairman, President and Chief Executive Officer of Pitney Bowes
Inc., a manufacturer of office equipment and business supplies and provider of financial
services, from 1983 through 1996. Mr. Harvey was President and Chief Operating Officer of Pitney
Bowes from 1981 to 1983. He is a director of Merrill Lynch, Pfizer, Inc. and Massachusetts
Mutual Life Insurance Co. Mr. Harvey has served as a director of the Corporation since 1985 and
is Chairman of the Audit Committee and is a member of the Executive, Financial Policy and
Nominating and Corporate Governance Committees.
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PHOTO OF ROBERT P. McGRAW ROBERT P. MCGRAW, age 44, is currently President of Averdale International LLC, an international
investment company. Prior to that, Mr. McGraw was Executive Vice President of the Professional
Publishing Group of the Corporation from 1989 to August 1998. He was Executive Vice President of
the Healthcare Group from 1987 to 1989, and Group Vice President of that same group from 1985 to
1987. Prior to that he served in several key positions in the Health Professions Division: as
General Manager from 1983 to 1985; as Editorial Director from 1982 to 1983; and as Editor from
1979 to 1982. He joined the Corporation in 1976 as a sales representative for McGraw-Hill Higher
Education, formerly known as the College Division. Mr. McGraw has served as a director of the
Corporation since 1995 and is a member of the Financial Policy Committee. (b)
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PHOTO OF LOIS DICKSON RICE LOIS DICKSON RICE, age 66, has been a guest scholar since 1991 in the Economics Study Program at
the Brookings Institution, a research and education organization. Prior to that she had been for
more than five years Senior Vice President, Government Affairs, and a director of Control Data
Corporation, which applies technology to specialized computer, information and management needs.
She has held various positions with the College Board, an educational association, and from 1971
through 1981 served as one of its Vice Presidents. Mrs. Rice is a director of Fleet Financial
Group, International Multifoods, Unum Corporation and the HSB Group. Mrs. Rice is a Trustee of
the Harry Frank Guggenheim Foundation and Reading Is Fundamental. She is a member of the
President's Foreign Intelligence Advisory Board and a director of the Public Agenda Foundation.
Mrs. Rice has served as a director of the Corporation since 1988 and is a member of the Audit
and Compensation Committees.
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(a) Mr. Harold W. McGraw III became the Corporation's Chief Executive Officer
effective April 29, 1998. Mr. Joseph L. Dionne, who retired as of July 1, 1998,
has continued to serve as non-executive Chairman of the Board of Directors.
(b) Harold W. McGraw III and Robert P. McGraw are brothers and the sons of
Harold W. McGraw, Jr.
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INFORMATION AS TO COMMITTEES, ATTENDANCE
AND FEES OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors has standing Audit, Compensation and
Nominating and Corporate Governance Committees.
The Audit Committee is comprised of Ms. Lois Dickson Rice and Messrs. Pedro
Aspe, Vartan Gregorian, John T. Hartley and George B. Harvey. During 1998 the
Audit Committee held three meetings. The functions performed by the Audit
Committee include: (a) reviewing and approving the scope and coverage of the
Corporation's annual audit and the division of duties between the Corporation's
independent auditors and internal auditors; (b) discussing any significant
difficulties encountered or significant findings made during the annual audit;
(c) reviewing and approving the annual audit, financial statements and
management letters following completion of the Corporation's annual audit; (d)
reviewing with the Corporation's independent auditors and the Corporation's
management the accounting systems, financial controls and procedures used by the
Corporation; (e) reviewing and approving the scope of the duties of the internal
audit function; (f) reviewing and approving, from time to time, with the
Corporation's senior management the Corporation's Code of Business Ethics to
determine compliance with such Code; (g) reviewing and approving the annual
audit budget and actual fees paid to the Corporation's independent auditors; and
(h) recommending to the Board of Directors each year the firm of independent
auditors to be retained for the following year.
The Compensation Committee is comprised of Ms. Lois Dickson Rice and Linda Koch
Lorimer and Messrs. Vartan Gregorian, John T. Hartley and Sidney Taurel. During
1998 the Compensation Committee held five meetings. The functions performed by
the Compensation Committee include: (a) establishing and approving the
compensation to be paid to members of the Corporation's senior management; (b)
administering the Corporation's executive incentive plans; (c) administering the
Corporation's stock incentive plans; and (d) authorizing and approving special
compensation arrangements for senior management.
The Nominating and Corporate Governance Committee is comprised of Ms. Linda Koch
Lorimer and Messrs. Vartan Gregorian, John T. Hartley, George B. Harvey, James
H. Ross, Sidney Taurel and Alva O. Way. During 1998 the Nominating and Corporate
Governance Committee held three meetings. The functions performed by the
Committee include: (a) recommending to the Board of Directors the slate of
nominees for election as directors at each Annual Meeting or for election by the
Board of Directors on an interim basis; (b) recommending to the Board of
Directors individuals to fill vacancies on it; (c) evaluating, on a continuing
basis, possible candidates to serve on the Board of Directors; (d) recommending
to the Board of Directors appropriate compensation to be paid to the directors;
(e) administering the Director Deferred Stock Ownership Plan; (f) determining
whether any relationship exists between an outside director and the Corporation
that might affect the status of the director as independent; and (g) making
recommendations, from time to time, to the Board of Directors as to matters of
corporate governance and periodically monitoring the Board's performance. The
Nominating and Corporate Governance Committee is willing to consider
recommendations of nominees by a shareholder if the shareholder submits the
nomination in compliance with the advance notice, informational and other
requirements set forth in the Corporation's By-Laws. Shareholders should direct
such recommendations of nominees to the Nominating and Corporate Governance
Committee, c/o the Secretary of the Corporation at 1221 Avenue of the Americas,
New York, New York 10020. The Corporation's By-Laws also contain detailed
procedures, including time limitations, which a shareholder must comply with in
order to introduce an item of business at a meeting of shareholders.
In addition to the above mentioned three committees, the Corporation's Board of
Directors has an Executive Committee and a Financial Policy Committee.
The Board of Directors of the Corporation held a total of eight meetings during
1998. All directors attended at least 75% of (1) all meetings of the Board of
Directors and (2) all meetings of all board committees on which they served. The
overall attendance record for all directors as a group during 1998 was 98.3%.
The Corporation provides a competitive director compensation program in order to
attract and retain highly qualified individuals with a broad range of
experience. In order to closely align the outside directors' compensation with
the financial interests of shareholders, approximately 50% (or a greater
percentage should a director so elect) of each outside director's total annual
compensation is paid in shares of the Corporation's Common Stock pursuant to the
Director Deferred Stock Ownership Plan.
For 1998, outside directors of the Corporation received an annual cash retainer
of $17,000, a cash fee of $1,200 for each board meeting which they attended, and
a cash fee of $1,000 for each meeting of the Audit, Compensation, Executive,
Financial Policy and Nomi-
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<PAGE> 11
nating and Corporate Governance Committees which they attended.
Additionally, under the Director Deferred Stock Ownership Plan, each outside
director received a deferred share credit equal to the average cash compensation
paid to all outside directors during the calendar year. For 1998, this credit
was $34,980. These deferred share credits are payable in shares of the
Corporation's Common Stock following a director's termination of Board
membership. Further, pursuant to the Director Deferred Stock Ownership Plan, the
Corporation has written agreements with Ms. Linda Koch Lorimer and Messrs. Pedro
Aspe and George B. Harvey in which they have elected to receive all of their
annual cash retainer and board and committee meeting fees payable in deferred
shares of the Corporation's Common Stock in lieu of the cash payments otherwise
due and payable to them.
Pursuant to the Director Deferred Compensation Plan, the Corporation currently
has written agreements with Ms. Lois Dickson Rice and Messrs. Vartan Gregorian,
John T. Hartley and Alva O. Way, respectively, to defer payment to them of all
or a portion of their annual cash retainer and board and committee meeting fees
which would otherwise be due and payable to them in connection with their
service on the Board of Directors. Interest on the deferred cash amount is to be
based on the monthly equivalent of a corporate bond index for the preceding year
plus 2% (up to a maximum of 150% of the bond index), except that with respect to
agreements to defer entered into prior to December 3, 1986, interest will be
payable at the average of a corporate bond index for the previous five calendar
years plus an additional amount currently estimated at 6%.
Further, pursuant to the Directors Retirement Plan, annual retirement and
disability benefits are to be paid to each covered, non-employee director of the
Corporation upon retirement at or after age 65 or in the event of disability in
an amount equal to 10% of the then annual retainer fee for each year of service
on the Board, provided that the director shall have been a Board member for at
least five years. However, this Plan was amended in 1996 to provide that current
Board members shall not accrue any additional benefits under the Plan after June
30, 1996 and any future new Board members after such date shall not participate
in the Plan.
The Corporation entered into an agreement with Mr. Joseph L. Dionne in
connection with his continued service as non-executive Chairman of the
Corporation's Board of Directors for the period July 1, 1998 through December
31, 1999. With respect to such services, the Corporation agreed to pay Mr.
Dionne an annual fee of $350,000. Mr. Dionne will not be paid other
compensation, such as the annual retainer and meeting and committee attendance
fees, normally paid to outside directors.
Inside directors, who are employees of the Corporation, do not receive any fees
for serving on the Board or for attending meetings of board committees.
Mr. Robert P. McGraw resigned as Executive Vice President of the Professional
Publishing Group of the Corporation, effective September 30, 1998. Mr. Robert
McGraw received a severance/transition assistance payment of $175,000; a payment
of $244,874 pursuant to the 1996 Key Executive Short-Term Incentive Compensation
Plan; and 13,458 shares (on a post-split basis) of Common Stock pursuant to the
1993 Key Employee Stock Incentive Plan. Vesting was accelerated with respect to
options for 13,000 shares (on a post-split basis) of Common Stock. The payments
pursuant to the 1996 Key Executive Short-Term Incentive Compensation Plan and
1993 Key Employee Stock Incentive Plan were made by the Corporation to Mr.
Robert McGraw as a participant of said Plans in accordance with the terms
thereof.
INDEMNIFICATION
Each of the directors and certain of the executive officers have entered into an
indemnification agreement with the Corporation pursuant to which each director
and executive officer shall be indemnified against judgments, fines, amounts
paid in settlement and reasonable expenses, including attorneys' fees actually
and necessarily incurred in any action or proceeding, whether civil or criminal,
or any appeal therein, to the fullest extent permitted by the applicable
provisions of the New York Business Corporation Law. Such indemnification will
be reduced to the extent that a director or executive officer is effectively
indemnified by directors' and officers' liability insurance maintained by the
Corporation. The Corporation has for many years carried directors' and officers'
liability insurance coverage. The Corporation's current insurance coverage was
purchased for the three-year period beginning December 31, 1998 and extending
through December 31, 2001, for a three year aggregate premium of approximately
$1,708,000. The Corporation has purchased this insurance coverage from National
Union Fire Insurance Company of Pittsburgh, PA.; Federal Insurance Company; and
Great American Insurance Companies. This coverage, subject to a number of
standard exceptions and certain deductibles, indemnifies the directors and
officers of the Corporation and its subsidiaries, whether elected or appointed,
for liabilities or losses incurred in the performance of their duties up to an
aggregate sum of $65,000,000. No sums have been paid under this coverage to the
Corporation or any directors or officers nor have any claims for reimbursement
been made under this policy.
8
<PAGE> 12
BENEFICIAL OWNERSHIP OF THE CORPORATION'S COMMON STOCK (A),(B)
The following table indicates the beneficial ownership of the Corporation's
Common Stock as of February 5, 1999, by (1) each of the directors and nominees;
(2) the chief executive officers and the other four most highly compensated
executive officers; and (3) all directors, nominees and executive officers of
the Corporation as a group, based upon information supplied by each of the
directors, nominees and officers:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sole Voting Total Director
Power and Shared Voting Right to Acquire Number Deferred
Sole Power and Shares within 60 of Shares Percent of Stock
Investment Shared Invest- Days by Exercise Beneficially Common Ownership
Name of Beneficial Owner Power ment Power of Options Owned Stock(a) Plan(c)
<S> <C> <C> <C> <C> <C> <C>
Pedro Aspe 3,096 3,096 (d) 5,305
Robert J. Bahash 156,508 235,300 391,808 (d)
Joseph L. Dionne(e),(f) 524,010 54,996 648,660 1,227,666 (d)
Vartan Gregorian 1,834 1,834 (d) 2,739
John T. Hartley 4,960 4,960 (d) 2,739
George B. Harvey 3,947 3,947 (d) 4,987
Richard H. Jenrette 960 960 (d) 2,739
Linda Koch Lorimer 2,708 2,708 (d) 3,162
Barbara B. Maddock 31,520 29,000 60,520 (d)
Harold W. McGraw III 378,330 385,500 763,830 (d)
Robert P. McGraw 78,042 78,042 (d) 171
John D. Negroponte 7,536 8,000 15,536 (d)
Lois Dickson Rice 1,760 1,760 (d) 2,739
James H. Ross 3,100 3,100 (d) 2,739
Sidney Taurel 2,000 2,000 (d) 3,280
Kenneth M. Vittor 39,498 26,038 65,536 (d)
Alva O. Way(g) 0 0 (d) 2,739
All Directors and Executive Officers of
the Corporation as a group (a total
of 22 persons, including those named
above)(h)(i) 1,326,211 54,996 1,402,760 2,783,967 1.4 % 33,339
</TABLE>
(a) On January 27, 1999, the Board of Directors of the Corporation approved a
2-for-1 split of the Corporation's Common Stock which became effective on March
8, 1999. The beneficial ownership of the Corporation's Common Stock which is
reported in this table and accompanying footnotes has been adjusted to reflect
this 2-for-1 split. The number of shares of Common Stock outstanding on February
5, 1999 (excluding treasury shares) was 197,529,642. The percent of Common Stock
is based on such number of shares and is rounded off to the nearest one percent.
(b) To the Corporation's knowledge, no person is the beneficial owner of more
than 5% of the Corporation's Common Stock, other than (i) FMR, having a
principal place of business at 82 Devonshire Street, Boston, Massachusetts 02109
("FMR"), (ii) Delaware Management Company, Inc., having a principal place of
business at 2005 Market Street, Philadelphia, Pennsylvania 19103 ("Delaware
Management"), and (iii) Putnam Investments, Inc., having a principal place of
business at One Office Square, Boston, Massachusetts 02109 ("Putnam"), all of
which are registered investment advisors, and which in that capacity through
themselves or operating subsidiaries, manage client accounts. On February 17,
1999, FMR advised the Corporation by furnishing the Corporation with its
Schedule 13G filed with the Securities and Exchange Commission that, as of
December 31, 1998, it beneficially owned in the aggregate 10,226,170 shares or
approximately 5.2% of the outstanding Common Stock of the Corporation. On
February 5, 1999, Delaware Management advised the Corporation by furnishing the
Corporation with its Schedule 13G filed with the Securities and Exchange
Commission that, as of December 31, 1998, it beneficially owned in the aggregate
11,458,490 shares or approximately 5.8% of the outstanding Common Stock of the
Corporation. On February 18, 1999, Putnam advised the Corporation by furnishing
the Corporation with its Schedule 13G filed with the Securities and Exchange
Commission that, as of December 31, 1998, it beneficially owned in the aggregate
12,010,132 shares or approximately 6.1% of the outstanding Common Stock of the
Corporation. Each of FMR, Delaware Management and Putnam have certified in their
respective Schedule 13G filings that the Corporation's Common Stock was acquired
in the ordinary course of business and was not acquired for the purpose of
changing or influencing control of the Corporation.
(c) This amount represents the number of shares of the Corporation's Common
Stock which have been credited to a bookkeeping account maintained for each
non-employee director of the Corporation pursuant to the Director Deferred Stock
Ownership Plan. This Plan is further described on page 8.
(d) Less than 1%.
(e) Joan F. Dionne, the wife of Joseph L. Dionne, is the beneficial owner of
22,392 shares of Common Stock. These shares have not been included in the above
table.
(f) Mr. Dionne has made gifts aggregating 54,996 shares of Common Stock to a
private charitable foundation. These shares have been included in the above
table. On February 23, 1999, Mr. Dionne exchanged 178,948 shares of Common Stock
included in the above table for an interest in a broad-based equity fund.
9
<PAGE> 13
(g) On July 6, 1998, Mr. Way transferred 4,960 shares of Common Stock to a
charitable foundation. These shares have not been included in the above table.
(h) Spouses and children of some members of this group may own other shares in
which the members of this group disclaim any beneficial interest and which are
not included in the above table.
(i) Harold W. McGraw, Jr., Chairman Emeritus of the Corporation, is the
beneficial owner of 4,840,550 shares of Common Stock, of which 72,190 are held
in Mr. McGraw's name and 4,770,360 are held in the name of the Harold W. McGraw
Jr. Trust. These shares represent approximately 2.5% of the Corporation's issued
and outstanding Common Stock. In addition, Anne P. McGraw, the wife of Harold W.
McGraw, Jr., is the beneficial owner of 160,000 shares of Common Stock. None of
these shares has been included in the above table.
10
<PAGE> 14
INFORMATION AS TO EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of the
Corporation's chief executive officers and each of the other four most highly
compensated executive officers (the "Named Officers") for services rendered in
all capacities to the Corporation in 1996, 1997 and 1998:
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ---------------------- ALL
Awards Payouts OTHER
------ ------- COMPEN-
Name Other SATION
and Annual Restricted Securities Long-Term
Principal Compen- Stock Underlying Incentive
Position Year Salary Bonus sation(a) Awards(b) Options(c) Payouts(d)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harold W. McGraw III 1998 $ 712,000 $ 759,562 $42,158 0 134,400 $1,620,019 $133,418(h)
President & Chief 1997 666,000 710,409 45,328 0 52,000 1,216,307 110,278
Executive Officer 1996 616,000 512,820 41,989 0 55,600 792,239 93,335
Joseph L. Dionne(e) 1998 $ 517,500 $ 651,240 $68,989(f) 0 269,908(g) $5,085,431(d) $230,749(h)
Chairman 1997 1,035,000 1,288,016 75,116 0 453,000(g) 2,039,779 220,065
1996 935,000 908,119 69,714 0 95,200 1,326,456 197,145
Robert J. Bahash 1998 $ 505,000 $ 468,079 $26,893 0 57,752(g) $1,051,854 $ 93,228(h)
Executive Vice 1997 447,000 437,072 29,785 0 32,000 844,735 75,157
President, Chief 1996 417,000 318,223 28,660 0 36,000 555,393 66,365
Financial Officer
John D. Negroponte 1998 $ 375,000 $ 284,918 $ 3,234 0 -- -- $ 2,978(h)
Executive Vice 1997 125,000 -- -- 0 16,000(i) --(i) --
President, 1996 -- -- -- 0 -- -- --
Global Markets
Kenneth M. Vittor 1998 $ 320,000 $ 244,215 $11,847 0 39,330(g) $ 417,806 $ 51,490(h)
Executive Vice President 1997 300,000 268,291 10,536 0 12,000 192,874 41,289
and General Counsel 1996 275,000 152,625 7,308 0 12,000 88,460 33,350
Barbara B. Maddock 1998 $ 292,500 $ 207,583 $ 9,874 0 23,200 $ 342,790 $ 38,441(h)
Executive Vice 1997 244,000 173,513 10,194 0 12,000 275,994 33,491
President, 1996 228,000 126,540 9,314 0 10,000 179,024 29,449
Organizational
Effectiveness
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents dividend equivalents paid on outstanding Long-Term Restricted
Performance Share and Restricted Stock Awards.
(b) The number and value of Restricted Performance Share holdings (adjusted to
give effect to the 2-for-1 stock split effective March 8, 1999) at year end was
as follows:
------------------------------------------------------------
<TABLE>
<CAPTION>
1998
---------------------------
Unearned
Restricted
Performance Value (at
Shares $50.9375)*
- -------------------------------------------------------------
<S> <C> <C>
H. W. McGraw III 54,336 $2,767,740
J. L. Dionne 88,448 $4,505,320
R. J. Bahash 34,478 $1,756,223
J. D. Negroponte 4,146 $ 211,187
K. M. Vittor 15,188 $ 773,639
B. B. Maddock 13,066 $ 665,549
- -------------------------------------------------------------
</TABLE>
* Based on the closing price of The McGraw-Hill Companies Common Stock on
December 31, 1998 of $50.9375 (adjusted to give effect to the 2-for-1 stock
split effective March 8, 1999).
Dividend equivalent payments equal to the dividend paid on the Corporation's
Common Stock were paid in cash on Restricted Performance Shares in 1998.
(c) The shares reported in this column have been adjusted to give effect to the
2-for-1 stock split effective March 8, 1999.
(d) The 1998 payment amount is based on a fair market value of $54.3594 for the
Corporation's Common Stock on February 2, 1999 (adjusted to give effect to the
2-for-1 stock split effective March 8, 1999). The amount reported for Mr. Dionne
represents payments earned under the 1996, 1997 and 1998 awards. In accordance
with the terms and conditions of the long-term incentive awards, the 1997 and
1998 awards were prorated to reflect Mr. Dionne's July 1, 1998 retirement and
they were paid in early 1999, concurrently with the 1996 award.
(e) Mr. Dionne was Chief Executive Officer until April 29, 1998. He retired on
July 1, 1998.
(f) Mr. Dionne received an additional $175,000 from July 1 through December 31,
1998 in connection with his services as non-executive Chairman of the
Corporation.
(g) Includes Restoration Stock Options. The Compensation Committee approved a
stock option enhancement in 1997 called a Restoration Stock Option ("RSO"). If
shares of the Corporation's Common Stock are delivered in payment of the
exercise price of a stock option (as opposed to the use of cash or "cashless
exercises"), an RSO will be granted equal to the number of shares used to
exercise the stock option. The expiration date of these RSO grants (which are
made pursuant to the 1993 Key Employee Stock Incentive Plan) remains the last
day the underlying grant is exercisable. Additionally, if shares are withheld to
satisfy the tax obligation on the realized gain, the RSO will include shares
equal to the number of shares withheld for taxes. RSO grants are non-qualified,
and are first exercisable six months after the date of grant at the market value
at the date of grant of the RSO. Only one RSO will be granted for each original
stock option granted. In the event of a change in control of the Corporation,
all options become fully vested.
(h) For 1998, the dollar value reported in this column includes the following
items:
------------------------------------------------------------
<TABLE>
<CAPTION>
1998
Above Market Contribution
Interest on to Defined
Deferred Contribution
Compensation Plans Total
- -----------------------------------------------------------------
<S> <C> <C> <C>
H. W. McGraw III -- $133,418 $133,418
J. L. Dionne $45,808 $184,941 $230,749
R. J. Bahash $ 5,441 $ 87,787 $ 93,228
J. D. Negroponte -- $ 2,978 $ 2,978
K. M. Vittor -- $ 51,490 $ 51,490
B. B. Maddock -- $ 38,441 $ 38,441
- -----------------------------------------------------------------
</TABLE>
(i) Mr. Negroponte was employed by the Corporation in September 1997. His
initial stock option award was intended to cover the 1997 through 1998 period.
Additionally, based on Mr. Negroponte's September 1997 employment, he did not
participate in the 1996 Long-Term Incentive Award that was awarded in January
1996 and matured on December 31, 1998.
11
<PAGE> 15
OPTION GRANTS IN 1998
The following table sets forth all grants of stock options made during 1998
(adjusted to give effect to the 2-for-1 stock split effective March 8, 1999)
pursuant to the 1993 Key Employee Stock Incentive Plan to the Named Officers in
the Summary Compensation Table:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term(a)
---------------------------------------------------------------- -------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration
Name Type Granted 1998 Price Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. W. McGraw III Annual 74,400(b) 1.95% $36.1875 01/01/2008 $ 1,693,203 $ 4,290,912
Supplemental 60,000(b) 1.57% $38.0625 04/28/2008 $ 1,436,238 $ 3,639,708
J. L. Dionne Annual 200,000(b) 5.23% $36.1875 01/01/2008 $ 4,551,620 $ 11,534,710
Restoration 34,528(c) 0.90% $38.7032 01/01/2006 $ 638,077 $ 1,528,209
Restoration 35,380(c) 0.92% $38.7032 01/01/2007 $ 755,009 $ 1,859,396
R. J. Bahash Annual 37,000(b) 0.97% $36.1875 01/01/2008 $ 842,050 $ 2,133,921
Supplemental 4,000(b) 0.10% $40.5313 06/30/2008 $ 101,960 $ 258,385
Restoration 16,752(c) 0.44% $45.2657 12/04/1999 $ 37,943 $ 75,803
J. D. Negroponte N/A N/A N/A
K. M. Vittor Annual 16,000(b) 0.42% $36.1875 01/01/2008 $ 364,130 $ 922,777
Restoration 1,310(c) 0.03% $38.5000 12/08/1998 $ 2,522 $ 5,044
Restoration 2,560(c) 0.07% $39.2657 01/03/2003 $ 27,776 $ 61,563
Restoration 1,926(c) 0.05% $44.3438 12/04/1999 $ 4,266 $ 8,542
Restoration 2,276(c) 0.06% $44.3438 01/01/2001 $ 10,344 $ 21,170
Restoration 2,924(c) 0.08% $44.3438 01/01/2002 $ 20,439 $ 42,924
Restoration 2,554(c) 0.07% $44.3438 01/02/2004 $ 31,287 $ 69,137
Restoration 3,812(c) 0.10% $44.3438 01/02/2005 $ 57,485 $ 130,428
Restoration 5,968(c) 0.16% $44.3438 01/01/2006 $ 107,752 $ 251,074
B. B. Maddock Annual 14,000(b) 0.37% $36.1875 01/01/2008 $ 318,613 $ 807,430
Supplemental 9,200(b) 0.24% $40.5313 06/30/2008 $ 234,507 $ 594,286
All Shareholders N/A N/A N/A N/A N/A $4,699,680,977(d) $11,909,919,429(d)
All Optionees N/A 3,825,148 100% $37.7362(e) (e) $ 85,025,457 $ 214,232,172
Optionees' Gain as %
of All Shareholders'
Gain N/A N/A N/A N/A N/A 1.81% 1.80%
</TABLE>
- --------------------------------------------------------------------------------
(a) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission for the
option term and therefore are not intended to and may not accurately forecast
possible future appreciation, if any, of the Corporation's Common Stock price.
(b) The annual and supplemental awards, which were granted pursuant to the 1993
Key Employee Stock Incentive Plan, were for non-qualified stock options and
provide that one-half of the option vests on the first anniversary of the grant,
and the remaining one-half vests on the second anniversary of the grant. In the
event of a change in control of the Corporation, the option becomes fully
vested.
(c) The Compensation Committee approved a new stock option enhancement in 1997
called a Restoration Stock Option ("RSO"). If shares of the Corporation's Common
Stock are delivered in payment of the exercise price of a stock option (as
opposed to the use of cash or "cashless exercises"), an RSO will be granted
equal to the number of shares used to exercise the stock option. The expiration
date of these RSO grants (which are made pursuant to the 1993 Key Employee Stock
Incentive Plan) remains the last day the underlying grant is exercisable.
Additionally, if shares are withheld to satisfy the tax obligation on the
realized gain, the RSO will include shares equal to the number of shares
withheld for taxes. RSO grants are non-qualified, and are first exercisable six
months after the date of grant at the market value at the date of grant of the
RSO. Only one RSO will be granted for each original stock option granted. In the
event of a change in control of the Corporation, all options become fully
vested.
(d) The amount shown represents the hypothetical return to all shareholders of
the Corporation's Common Stock (adjusted to give effect to the 2-for-1 stock
split effective March 8, 1999) assuming that all the shareholders purchased the
Corporation's Common Stock at the close of business on January 2, 1998 at a
purchase price of $37.7362, the average price for all optionees (adjusted to
give effect to the 2-for-1 stock split effective March 8, 1999), and that all
shareholders hold the Common Stock continuously for a ten-year period. The
number of outstanding shares of Common Stock on January 2, 1998 was 198,030,974
(adjusted to give effect to the 2-for-1 stock split effective March 8, 1999).
The hypothetical return presented is not intended as a projection of the future
performance of the Corporation's Common Stock, but rather is provided for
illustrative purposes only.
(e) Expiration dates range from December 8, 1999 through September 30, 2008.
$37.7362 represents the average exercise price of the grants to all optionees
(adjusted to give effect to the 2-for-1 stock split effective March 8, 1999).
All grants were made at the fair market value of the Corporation's Common Stock
at the time of the grant.
12
<PAGE> 16
AGGREGATE OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
The following table sets forth information with respect to options exercised by
each of the Named Officers during 1998 and the number and value of unexercised
options as of December 31, 1998, adjusted to give effect to the 2-for-1 stock
split effective March 8, 1999:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
December 31, 1998 at December 31, 1998(a)
Shares Acquired Value --------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. W. McGraw III 9,600 $ 310,950 322,300 160,400 $10,883,427 $2,601,750
J. L. Dionne 121,848 $1,874,545 648,660 0 $10,711,522 $ 0
R. J. Bahash 36,800 $1,077,726 200,800 73,752 $ 6,819,385 $1,132,390
J. D. Negroponte 0 $ 0 8,000 8,000 $ 158,250 $ 158,250
K. M. Vittor 37,652 $ 969,113 12,038 41,460 $ 300,307 $ 533,064
B. B. Maddock 0 $ 0 34,400 29,200 $ 1,083,532 $ 470,988
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on the closing price of the Corporation's Common Stock on December 31,
1998 of $50.9375, adjusted to give effect to the 2-for-1 stock split effective
March 8, 1999, as reported on the New York Stock Exchange Composite Transactions
Tape.
LONG-TERM INCENTIVE PLAN AWARDS IN 1998
The following table sets forth information concerning long-term incentive awards
granted during 1998 to the Named Officers pursuant to the 1993 Key Employee
Stock Incentive Plan, adjusted to give effect to the 2-for-1 stock split
effective March 8, 1999:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Estimated Future Payout
Under Non-Stock Price-Based Plans
---------------------------------
Number of Performance Period Threshold Target Maximum
Restricted Until Number of Number of Number of
Name Performance Shares(a) Maturation or Payout Shares Shares Shares
---- --------------------- -------------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
H. W. McGraw III 14,032 shares 3 Years 2,806 14,032 21,048
J. L. Dionne 22,108 shares 3 Years(b) 4,422 22,108 33,162
R. J. Bahash 8,842 shares 3 Years 1,768 8,842 13,263
J. D. Negroponte 4,146 shares 3 Years 829 4,146 6,219
K. M. Vittor 4,146 shares 3 Years 829 4,146 6,219
B. B. Maddock 4,048 shares 3 Years 810 4,048 6,072
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Restricted Performance Share Awards pursuant to the 1993 Key Employee Stock
Incentive Plan with payment in the Corporation's Common Stock based upon the
degree of achievement of a three-year cumulative compound earnings per share
growth goal ("the EPS goal") maturing on December 31, 2000. The awards do not
provide for interim payments (other than the payment of dividend equivalents).
The threshold amount will be earned at the achievement of 60% of the EPS goal,
the target amount will be earned at the achievement of 100% of the EPS goal and
the maximum award amount will be earned at the achievement of 120% or more of
the EPS goal. The Awards will be forfeited if the achievement is less than 60%
of the EPS goal. The Restricted Performance Shares are entitled to dividend
equivalent payments and voting rights comparable to the Corporation's Common
Stock based upon the target number of shares awarded.
In the event of a change in control of the Corporation, all of the financial
goals are deemed to have been satisfied, and the recipient will receive the
target amount no later than the normal maturity date of the award.
(b) As a result of Mr. Dionne's retirement, on July 1, 1998, this award shall be
prorated and payable in 1999, subject to the achievement of the performance goal
through December 31, 1998.
13
<PAGE> 17
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly percentage change in the
cumulative total shareholder return on the Corporation's Common Stock with the
cumulative total return of the S&P Composite 500 Stock Index and the cumulative
total return for a group of peer companies for the five-year period commencing
on January 1, 1994 and ending on December 31, 1998.
SHAREHOLDER RETURN PERFORMANCE GRAPH
FIVE YEAR CUMULATIVE TOTAL RETURN
(YEAR ENDING DECEMBER 31, 1998)
[SHAREHOLDER RETURN PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
THE MCGRAW-
HILL COMPANIES S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
1993 100 100 100
1994 102 101 93
1995 137 139 119
1996 150 171 140
1997 247 229 214
1998 346 294 223
</TABLE>
Assumes $100 Invested on December 31, 1993 in The McGraw-Hill Companies Common
Stock, S&P 500 Index and Peer Group Index
(a) Total return assumes reinvestment of dividends.
(b) Companies comprising the Peer Group: Dow Jones & Company, Inc., The Dun &
Bradstreet Corporation, Gannett Co., Inc., Houghton Mifflin Company,
Knight-Ridder Inc., Meredith Corporation, The New York Times Company, The
Times Mirror Company, and Tribune Company. One of the members of the Peer
Group, The Dun & Bradstreet Corporation ("D&B"), spun-off two subsidiaries
in November 1996, as a result of which shareholders of the original D&B
("Old D&B") became holders of shares in reorganized D&B ("New D&B") and in
each of the spun-off subsidiaries (the "Spin-Offs"). In calculating the
total shareholder return for D&B, the shares of the Spin-Offs received by
the Old D&B shareholders were deemed to be reinvested in shares of New D&B.
In June 1998, the New D&B further separated into two public companies, the
New D&B and R.H. Donnelley, through a tax-free dividend. The Peer Group
results reflect total shareholder returns for the New D&B, including a $3
per share cash equivalent distribution for R.H. Donnelley reinvested in the
New D&B.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
INTRODUCTION
The McGraw-Hill Companies' executive compensation program (the "Program") is
administered by the Compensation Committee of the Board of Directors (the
"Committee") which is composed of the individuals listed below who are
independent non-employee directors of the Corporation. The Committee has sole
responsibility for all compensation matters with respect to the Corporation's
senior management. The Committee regularly reports to the Board of Directors on
its activities and decisions and meets in executive session with all
non-employee directors at year end to review the CEO's performance and
compensation.
PHILOSOPHY
The Program has been designed to enable the Corporation to attract, motivate and
retain senior management by providing a fully competitive total
14
<PAGE> 18
compensation opportunity based on performance. The Program consists of three key
elements: (1) base salaries; (2) annual incentive opportunities which are
payable for the achievement of annual financial performance goals established by
the Committee; and (3) long-term stock-based incentive opportunities consisting
of annual grants of restricted performance shares, which are payable for the
achievement of three-year financial performance goals established by the
Committee, and annual stock option grants. The stock-based incentive
opportunities are intended to align the interests of senior management with
those of the Corporation's shareholders. A new compensation structure for
administration of these three elements was implemented in 1998 covering
executive positions. In place of job-driven target incentive awards or grant
guidelines expressed as percentages of salary or salary range midpoints, more
flexible annual and long-term incentive opportunity ranges have been adopted.
The new structure permits greater differentiation in total compensation
opportunity based on assessments of individual performance, contributions,
assignments and future potential. The Corporation's executive compensation
program continues to be structured so that at higher management levels a larger
portion of annual compensation is variable, based on company performance, and a
larger portion of total compensation is composed of stock-based compensation.
The Committee's policy with respect to the tax deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code is to qualify
such compensation for deductibility where practicable. In this regard, the 1996
Key Executive Short-Term Incentive Compensation Plan and the 1993 Key Employee
Stock Incentive Plan have been approved by the Corporation's shareholders
pursuant to the requirements of Section 162(m) of the Internal Revenue Code.
Therefore, the awards earned under these plans will qualify for tax deduction by
the Corporation when paid.
Following is a discussion of each of the elements of the Program and a
description of the specific decisions and actions taken by the Committee with
respect to 1998 compensation for the CEO.
PROGRAM COMPETITIVENESS
Each element of the Program is intended to be fully competitive with comparable
elements of competitor companies in the publishing, information and media
industry. Base salaries are determined within the framework of position
responsibility, individual performance and the external marketplace. Competitive
market data are derived annually using a third-party consultant survey of the
publishing, information and media industry, which includes reported data from
companies in the peer group index of the Shareholder Return Performance Graph
(the "Peer Group").
The annual incentive award opportunities are established by the Committee based
on recommendations developed by an independent compensation consulting firm
selected by the Committee. These recommended incentive opportunities are
competitive with median levels of incentive opportunities using available
incentive opportunity data for the competitor companies included in the Peer
Group and incentive opportunity data from a third-party media industry
compensation survey of other publishing, information and media companies.
The long-term incentive grant guidelines provide competitive long-term
compensation opportunities in the form of restricted performance share and stock
option grants. The grant guidelines for these awards are derived from general
industry long-term incentive grant data and are adjusted by an independent
compensation consultant to reflect median long-term incentive grant practices of
publishing, information and media industry companies including those in the Peer
Group.
ANNUAL SALARY AND INCENTIVE COMPENSATION
Annual compensation for senior management consists of base salary and the annual
incentive awards earned under the Key Executive Short-Term Incentive
Compensation Plan. Base salary increases for senior executives other than the
CEO are recommended annually by Mr. McGraw and are reviewed and approved by the
Committee.
Target awards established under the Key Executive Short-Term Incentive
Compensation Plan are established as a dollar amount for each executive at the
beginning of the year. The maximum payment opportunity is set at 200% of the
annual target award. Payment of the annual incentive awards for Mr. McGraw and
executives named in the Summary Compensation Table is based on the Corporation's
performance in relation to minimum, target and maximum diluted earnings per
share goals which are approved by the Committee at the beginning of the plan
year.
LONG-TERM INCENTIVE COMPENSATION
The long-term incentive compensation program for senior management consists of
two types of annual stock awards: restricted performance shares and stock
options. Restricted performance share awards are established for each executive
and granted annually on or before April 1. The awards vest at the end of a
three-year award cycle within a range of 20% to 150% of the shares awarded based
on the achievement of mini-
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mum, target and maximum cumulative compound diluted earnings per share growth
goals which are established by the Committee at the beginning of the award
cycle. These restricted performance share awards are subject to forfeiture if
the minimum performance goal is not attained, or if a participant's employment
is terminated for certain reasons before the shares become vested. During the
award cycle, participants receive dividends on and have the right to vote the
awarded shares.
The second component of the long-term incentive compensation program consists of
stock options which provide participants with the right to purchase shares of
The McGraw-Hill Companies Common Stock at its market value on the date of grant.
These grants are established for each executive on or before April 1. Each stock
option grant becomes exercisable in two equal annual installments commencing one
year after grant, and each grant has a ten-year maximum term.
1998 CEO COMPENSATION
Joseph L. Dionne's base salary of $1,035,000 continued to be paid until his
retirement on July 1, 1998.
Mr. Dionne's 1998 target annual incentive award opportunity of $800,000 was
prorated to $400,000 to reflect his July 1, 1998 retirement. For purposes of
determining the incentive compensation payments for all participants measured on
the diluted Earnings Per Share goal for the 1998 cycle of the Key Executive
Short-Term Incentive Compensation Plan and the 1996, 1997 and 1998 Long-Term
Restricted Performance Share Awards under the Key Employee Stock Incentive Plan,
the Committee adjusted the reported diluted 1998 Earnings Per Share to exclude
the impact of the three one-time items reported in the third quarter of 1998 (a
gain on the sale of a building, an extraordinary loss on the early
extinguishment of debt from a tender offer, and a charge at CEC of a write down
of assets). The exclusion of the loss and of the charge were made pursuant to
the definition of Earnings Per Share under the terms of the Awards, and the
exclusion of the gain was made pursuant to the discretion of the Committee as
provided in the Awards. Based on the Corporation's adjusted diluted Earnings Per
Share for 1998, as measured against the diluted Earnings Per Share performance
goal established by the Committee at the beginning of 1998, Mr. Dionne's earned
1998 incentive payment was $651,240, representing 162.81% of his prorated 1998
target opportunity.
Mr. Dionne's 1996, 1997 and 1998 Long-Term Restricted Performance Share Awards
were prorated in accordance with Plan terms to reflect his July 1, 1998
retirement. These prorated award opportunities were measured against the
cumulative compound adjusted diluted Earnings Per Share growth for the years
1996 through 1998 for the 1996 Award, for the years 1997 through 1998 for the
1997 Award, and for 1998 for the 1998 Award. Based on the adjusted growth as
measured against the diluted Earnings Per Share performance goals established by
the Committee for each of the outstanding awards, Mr. Dionne received a payout
of 93,552 shares (adjusted to give effect to the 2-for-1 stock split effective
March 8, 1999), representing 150% of his total prorated target opportunity for
these awards. The dollar value of the 93,552 shares (adjusted to reflect the
2-for-1 stock split effective March 8, 1999) is shown in the Long-Term Incentive
Plan Payout Column of the Summary Compensation Table.
Additionally, in January 1998, based on the Committee's review of Mr. Dionne's
1997 performance, 1998 challenges and his on-going role as non-executive
Chairman of the Board through December 31, 1999, the Committee awarded Mr.
Dionne a 1998 stock option grant of 200,000 shares (adjusted to give effect to
the 2-for-1 stock split effective March 8, 1999). In accordance with Plan terms,
this grant became fully exercisable upon his retirement on July 1, 1998.
Harold McGraw III was awarded a salary increase of $69,000 to $735,000,
effective May 1, 1998, to reflect his promotion to Chief Executive Officer.
Additionally, Mr. McGraw received an increase to his 1998 target annual
incentive award opportunity in recognition of his promotion. This resulted in a
prorated target opportunity of $466,533. Based on the Corporation's adjusted
diluted Earnings Per Share for 1998, as measured against the diluted Earnings
Per Share performance goal established by the Committee at the beginning of the
year, Mr. McGraw's earned 1998 incentive payment was $759,562, representing
162.81% of his prorated 1998 target opportunity.
In January 1998, stock-based long-term incentive awards (adjusted to give effect
to the 2-for-1 stock split effective March 8, 1999) were granted. Mr. McGraw
received an award of 12,882 restricted performance shares (adjusted to give
effect to the 2-for-1 stock split effective March 8, 1999) which will mature on
December 31, 2000, subject to the achievement of the Committee-approved diluted
Earnings Per Share performance goal established for this award, and he received
74,400 stock option shares (adjusted to reflect the 2-for-1 stock split
effective March 8, 1999). In recognition of his promotion to Chief Executive
Officer, Mr. McGraw received an additional restricted performance share award
for 1,150 shares (adjusted to give effect to the 2-for-1 stock split effective
March 8, 1999) which has the same maturity date and performance goals as the
January 1998 grant. The Committee also granted Mr. McGraw a supplemental stock
option grant for 60,000 shares (adjusted to give
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effect to the 2-for-1 stock split effective March 8, 1999). These awards are
disclosed in the Long-Term Incentive Plan Awards Table and the Option Grants
Table.
In early 1999, the Committee reviewed and approved the degree of achievement and
award payout to Mr. McGraw for the 1996 Long-Term Restricted Performance Share
Award which matured on December 31, 1998. The adjusted cumulative compound
diluted Earnings Per Share growth for the three-year award cycle exceeded the
maximum 150% payment goal established by the Committee for this Award. As a
result, Mr. McGraw received a share payout of 29,802 shares (adjusted to give
effect to the 2-for-1 stock split effective March 8, 1999) representing 150% of
his target award. The dollar value of Mr. McGraw's 1996 Long-Term Restricted
Performance Share Award payout is shown in the Long-Term Incentive Plan Payout
Column of the Summary Compensation Table.
CLOSING STATEMENT
The Committee believes that the caliber and motivation of the Corporation's key
employees and the quality of their leadership makes a significant difference in
the long-term performance of the Corporation. The Committee further believes
that compensation should vary with the Corporation's financial performance so
that executives are well rewarded when performance meets or exceeds standards
established by the Committee, and there should be downside risks to compensation
when performance does not meet these standards.
In its view, the Committee believes that The McGraw-Hill Companies' executive
compensation program is meeting the goals contained in the Program's philosophy.
The foregoing report has been furnished on behalf of the Board of Directors by
the members of its Compensation Committee
John T. Hartley (Chairman)
Vartan Gregorian
Linda Koch Lorimer
Lois Dickson Rice
Sidney Taurel
DEFINED BENEFIT RETIREMENT PLANS
The officers named in the Summary Compensation Table are entitled to retirement
benefits under three defined benefit plans maintained by the Corporation: the
Employee Retirement Plan ("ERP"), the Employee Retirement Plan Supplement ("ERP
Supplement") and the Senior Executive Supplemental Death, Disability and
Retirement Benefits Plan (the "Supplemental Benefits Plan"), except that Ms.
Maddock and Messrs. Negroponte and Vittor participate in ERP and ERP Supplement
and do not participate in the Supplemental Benefits Plan. Under the Supplemental
Benefits Plan, a participant is entitled to receive upon normal retirement at
age 65, an annual retirement benefit equal to 55% of the participant's highest
rate of annual base salary and highest target opportunity under the 1996
Key-Executive Short-Term Incentive Compensation Plan during the 36-month period
before retirement, reduced by the participant's annual retirement benefits under
ERP and ERP Supplement, the annual annuity value of a hypothetical savings
account, the participant's annual retirement benefit under pension plans of any
previous employers and the participant's annual Social Security retirement
benefit.
ERP provides participants with retirement benefits based upon career
compensation. These benefits are subject to limitation under certain provisions
of the Internal Revenue Code. Prior to July 1, 1986, ERP required participants
to make contributions to said Plan. Subsequent to July 1, 1986, ERP was amended
so that the Corporation is to make all of the required contributions to the Plan
and participants are no longer required to make contributions thereto. In
addition, effective as of January 1, 1989, the benefit formula for service after
December 31, 1988 was amended to be 1.4% of each year's earnings for
participants age 45 with five years of continuous service as of June 30, 1986
and whose age and service totalled at least sixty, and 1.0% of each year's
earnings for other participants, and the vesting schedule of ERP was amended to
provide that participants are 100% vested after completion of five years of
continuous service with the Corporation. Under ERP Supplement, participants are
provided with retirement benefits which would have been provided under ERP
except for the limitations imposed by the Internal Revenue Code.
The following table sets forth the annual benefits under ERP, ERP Supplement and
the Supplemental Benefits Plan (computed based on a straight life annuity)
payable upon retirement at age 65 to each of the Named Officers based upon the
Corporation's contributions and the executive's 1998 compensation (salary and
1998 target opportunity under the Key-Executive Short-Term Incentive
Compensation Plan for purposes of the Supplemental Benefits Plan), which are not
subject to any deduction for Social Security benefits:
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<PAGE> 21
ANNUAL RETIREMENT BENEFIT FROM
CORPORATE CONTRIBUTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ERP and Supplemental
Name ERP Supplement Benefits Plan Total
---- -------------- ------------- -----
<S> <C> <C> <C>
Harold W. McGraw III $234,000 $171,000 $405,000
Joseph L. Dionne $285,000 $544,000 $829,000
Robert J. Bahash $147,000 $141,000 $288,000
John D. Negroponte $ 27,000 $ 0 $ 27,000
Kenneth M. Vittor $ 95,000 $ 0 $ 95,000
Barbara B. Maddock $ 75,000 $ 0 $ 75,000
</TABLE>
- --------------------------------------------------------------------------------
Pursuant to the Supplemental Benefits Plan, in the event of involuntary
termination of employment without cause or resignation of employment by the
employee for good reason within two years after a change of control of the
Corporation, or resignation by the employee for any reason during the 30 day
period following the first anniversary of such change of control, participants
shall receive a lump sum payment actuarially equivalent to the monthly
retirement benefit they would have received based upon from 44% to 55% of their
final monthly earnings and target opportunity under the 1996 Key-Executive
Short-Term Incentive Compensation Plan, depending upon their age at the date of
termination. The Supplemental Benefits Plan is administered by the Compensation
Committee of the Board of Directors, which Committee approves participants who
are recommended by the Corporation's Chief Executive Officer.
SENIOR EXECUTIVE SEVERANCE PLAN
The Senior Executive Severance Plan provides that if the employment of a
participating senior executive of the Corporation is involuntarily terminated
without cause or the executive resigns for good reason, the executive shall
receive a minimum severance payment of 12 months base salary and a maximum
severance payment of 24 months base salary, the actual amount of severance to be
based upon 1.6 multiplied by the number of years of continuous service with the
Corporation. In addition, each participant shall continue to participate in the
Corporation's retirement, life, medical and other insurance benefit plans and
programs during the period the participant receives severance payments, or in
lieu thereof, each participant shall receive an additional cash payment equal to
10% of the severance amount. The receipt of payments by participants pursuant to
the Senior Executive Severance Plan is in lieu of receiving benefits pursuant to
the Corporation's regular separation allowance plan, which plan is applicable to
all full-time employees of the Corporation. The Plan was amended to provide that
benefits will be payable to participants who voluntarily terminate their
employment within a 30 day period one year after a change in control of the
Corporation has occurred. The Senior Executive Severance Plan is administered by
the Compensation Committee of the Board of Directors, which Committee approves
participants who are recommended by the Corporation's Chief Executive Officer.
Messrs. McGraw and Bahash participate in the Senior Executive Severance Plan.
Mr. Vittor and Ms. Maddock are eligible to participate in the Senior Executive
Severance Plan, and Mr. Negroponte has not yet met the service requirement for
eligibility to participate in the Plan.
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<PAGE> 22
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
During the year ended December 31, 1998, Ernst & Young LLP audited the
consolidated financial statements of the Corporation and its subsidiaries.
The Board of Directors, after receiving a favorable recommendation from the
Audit Committee, has again selected Ernst & Young LLP to serve as the
Corporation's independent auditors for 1999. Although not required to do so, the
Board is submitting the selection of this firm for ratification by the
Corporation's shareholders to ascertain their views. Ernst & Young LLP has
advised the Corporation that it has no direct, nor any material indirect,
financial interest in the Corporation or any of its subsidiaries. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if the representative desires
to do so, and such representative will be available to respond to appropriate
questions.
The following resolution will be offered by the Board of Directors at the Annual
Meeting:
RESOLVED: That the selection by the Board of Directors of Ernst & Young LLP
as independent auditors for this Corporation and its subsidiaries for 1999
be, and hereby is, ratified and approved.
THE BOARD OF DIRECTORS' RECOMMENDATION
Your Board recommends that you vote FOR this resolution. Unless otherwise
specified by the shareholder, the Board intends the accompanying proxy to be
voted for this resolution.
3. OTHER MATTERS
The Board of Directors knows of no other matters which may properly be brought
before the Annual Meeting. However, if other matters should properly come before
the Meeting, it is the intention of those named in the solicited proxy to vote
such proxy in accordance with their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's
directors, executive officers, and persons who own more than 10% of a registered
class of the Corporation's equity securities, to file with the Securities and
Exchange Commission and the New York Stock Exchange reports on Forms 3, 4 and 5
concerning their ownership of the Common Stock and other equity securities of
the Corporation.
Based solely on the Corporation's review of copies of such reports and written
representations that no other reports were required, the Corporation believes
that all of its directors and executive officers filed all of said reports on a
timely basis during 1998, except for Barbara B. Maddock and Pedro Aspe, each of
whom inadvertently filed one late report on Form 4 disclosing one transaction.
DEADLINES FOR SUBMISSION OF SHAREHOLDER PROPOSALS
There are two different deadlines for the submission of shareholder proposals.
Shareholder proposals which are being submitted for inclusion in the
Corporation's proxy statement and form of proxy for the 2000 Annual Meeting of
Shareholders must be received by the Corporation at its principal executive
offices, 1221 Avenue of the Americas, New York, New York 10020, on or before
November 25, 1999. Such proposals when submitted must be in full compliance with
applicable laws, including Rule 14a-8 of the Securities Exchange Act of 1934.
Under the Corporation's By-Laws, shareholder proposals which are being submitted
other than for inclusion in the Corporation's proxy statement and form of proxy
for the 2000 Annual Meeting of Shareholders must be received by the Corporation
at its principal executive offices, 1221 Avenue of the Americas, New York, New
York 10020 no earlier than December 30, 1999 and no later than January 29, 2000.
Such proposals when submitted must be in full compliance with applicable law and
the Corporation's By-Laws.
By Order of the Board of Directors
Scott L. Bennett
Senior Vice President,
Associate General Counsel and Secretary
New York, New York
March 25, 1999
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<PAGE> 23
THE MCGRAW-HILL COMPANIES, INC.
PROXY/VOTING INSTRUCTION CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Scott L. Bennett and Kenneth M. Vittor, and each of
them, proxies with full power of substitution, to vote the shares of stock of
The McGraw-Hill Companies, Inc., which the undersigned is entitled to vote, at
the Annual Meeting of Shareholders of said Corporation to be held at the
principal executive offices of the Corporation, 1221 Avenue of the Americas, New
York, N.Y. 10020 on Wednesday, April 28, 1999, at 11 A.M., and any adjournment
thereof.
THE MCGRAW-HILL COMPANIES EMPLOYEES. If you are a current or former employee of
the Corporation, this card also provides voting instructions for shares held in
The Savings Incentive Plan of The McGraw-Hill Companies, Inc. and its
Subsidiaries, The Employee Retirement Account Plan of The McGraw-Hill Companies,
Inc. and its Subsidiaries, The Savings Incentive Plan of Standard & Poor's, The
Employee Retirement Account Plan of Standard & Poor's, and The Employees'
Investment Plan of McGraw-Hill Broadcasting Company, Inc. If you are a
participant in any of these plans and have shares of Common Stock of the
Corporation allocated to your account under these plans, The Northern Trust
Company, the Trustee of each of these plans (the "Trustee"), is hereby
instructed to vote all the shares of Common Stock of The McGraw-Hill Companies,
Inc. which are credited to the undersigned's account as of March 18, 1999, at
the Annual Meeting of Shareholders to be held on April 28, 1999, and any
adjournment thereof, on the items set forth on the reverse hereof and, in the
Trustee's discretion, upon such other business as may properly come before the
Meeting. Voting rights will be exercised by the Trustee as directed, provided
instructions are received by April 21, 1999.
THE MATTERS TO BE VOTED UPON AND THE INSTRUCTIONS ARE SET FORTH ON THE REVERSE
SIDE. PLEASE VOTE, SIGN AND RETURN PROMPTLY.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
x FOLD AND DETACH HERE x
<PAGE> 24
THIS PROXY/VOTING INSTRUCTION CARD WILL
BE VOTED AS DIRECTED BY THE
SHAREHOLDER(S). If not otherwise Please mark
specified, the proxy/voting instruction your votes [X]
card will be voted FOR the Election of like this
Directors and FOR Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS YOU
VOTE FOR PROPOSALS 1 AND 2:
1. Election of the following FOR ALL WITHHOLD
nominees as directors for NOMINEE(S) except as set AUTHORITY
three-year terms expiring at forth below FOR ALL
the 2002 Annual Meeting: [ ] NOMINEES
[ ]
Joseph L. Dionne, Linda Koch
Lorimer, and Harold W. McGraw
III
INSTRUCTION: To withhold
authority to vote for any
individual nominee(s) write
that nominee(s) name below.
_______________________________
2. Ratification of the FOR AGAINST ABSTAIN
appointment of independent [ ] [ ] [ ]
auditors for 1999.
And, in their discretion, in the transaction of such other business as may
properly come before the Meeting.
Signature(s)_________________________________________ Date___________________
NOTE: Please sign exactly as your name appears on this card and return the card
in the enclosed envelope.
- --------------------------------------------------------------------------------
x FOLD AND DETACH HERE x
