<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
MCI COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MCI COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 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:
- --------------------------------------------------------------------------------
(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:/1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
/1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
(LOGO)
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
TIME:
MONDAY, MAY 23, 1994
AT 10:00 A.M.
PLACE:
THE CONCERT HALL
THE JOHN F. KENNEDY CENTER
FOR THE PERFORMING ARTS
WASHINGTON, D.C.
MCI COMMUNICATIONS CORPORATION
<PAGE> 3
(LOGO) MCI COMMUNICATIONS
CORPORATION
1801 Pennsylvania Avenue, NW Bert C. Roberts, Jr.
Washington, DC 20006 Chairman and
Chief Executive Officer
April 14, 1994
DEAR STOCKHOLDER:
This year's annual meeting of stockholders will be held in The Concert Hall
at The John F. Kennedy Center for the Performing Arts, Washington, D.C., on
Monday, May 23, 1994, at 10:00 a.m. (E.D.T.). You are cordially invited and
encouraged to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
covering the formal business to be conducted at the meeting, follow this letter.
At the annual meeting, the formal business for the stockholders will
consist of the election of four directors, the proposed approval of the
reservation of additional shares of Common Stock to be issued under the employee
stock purchase plan and the proposed approval of the board's selection of
independent accountants. Regardless of the number of shares you own, your
careful consideration of and vote on these matters and such other business that
may come before the stockholders is important.
In order to ensure that your shares will be voted at the meeting, please
complete, date and sign the accompanying proxy card and return it in the
enclosed envelope, which requires no postage if mailed in the United States.
In addition to conducting the formal business at the annual meeting, we
also will review MCI's activities over the past year and its plans for the
future. I sincerely hope you will be able to join us.
Very truly yours,
/s/ BERT C. ROBERTS, JR.
BERT C. ROBERTS, JR.
Chairman of the Board of Directors
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of MCI COMMUNICATIONS CORPORATION (the
"Company") will be held in The Concert Hall at The John F. Kennedy Center for
the Performing Arts, Washington, D.C., on Monday, May 23, 1994, at 10:00 a.m.
(E.D.T.), for the following purposes:
(1) election of four directors, each to serve for a term of three
years;
(2) approval of the reservation of 20,000,000 additional shares of
Common Stock to be issued under the employee stock purchase plan;
(3) approval of the appointment by the board of directors of Price
Waterhouse as independent accountants for the year to end December 31,
1994; and
(4) transaction of such other business as may properly come before the
meeting and any adjournment thereof.
Only stockholders of record at the close of business on March 25, 1994, are
entitled to notice of and to vote at the meeting or any adjournment thereof. A
complete list of stockholders entitled to vote will be kept at the Company's
offices at 1801 Pennsylvania Avenue, N.W., Washington, D.C., for a period of ten
days prior to the meeting.
Dated: April 14, 1994
By order of the board of directors,
/s/ C. BOLTON-SMITH, JR.
C. BOLTON-SMITH, JR.
Secretary
<PAGE> 5
MCI COMMUNICATIONS CORPORATION
1801 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006
PROXY STATEMENT
PROXY SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of MCI COMMUNICATIONS CORPORATION ("MCI" or
the "Company") for use at the annual meeting of stockholders to be held on
Monday, May 23, 1994, at 10:00 a.m., in The Concert Hall at the John F. Kennedy
Center for the Performing Arts, Washington, D.C., or at any adjournment thereof,
for the purposes set forth in the foregoing Notice of Annual Meeting of
Stockholders. The Company's 1993 Annual Report, which contains MCI's financial
statements for the year ended December 31, 1993, this proxy statement and a form
of proxy are being mailed on or about April 14, 1994, to stockholders of record
at the close of business on March 25, 1994, the record date for the meeting.
The cost of soliciting proxies will be borne by the Company and will
consist of expenses of printing, postage and handling, including the expenses of
brokerage houses, custodians, nominees and fiduciaries in forwarding documents
to beneficial owners. Solicitation may also be made by the Company's officers,
directors or regular employees personally or by telephone. The firm of Georgeson
& Co. Inc., New York, New York, has been retained to assist in the solicitation
of proxies for the annual meeting at an estimated fee of $18,000 plus direct
out-of-pocket expenses.
REVOCABILITY OF PROXY
Execution of a proxy will not affect your right to attend the annual
meeting and to vote in person. You may revoke your proxy any time before it is
voted, either by giving another proxy bearing a later date, by notifying the
Secretary of the Company in writing of your revocation or by attending and
voting in person at the annual meeting. Attendance at the annual meeting will
not in and of itself constitute a revocation of a prior proxy.
RECORD DATE, VOTING RIGHTS AND VOTING PROCEDURE
Only stockholders of record at the close of business on March 25, 1994, are
entitled to notice of and to vote at the annual meeting or any adjournment
thereof. On the record date, the Company had two outstanding classes of capital
stock, Common Stock, par value $.10 per share, and Series D Convertible
Preferred Stock (the "Preferred Stock"), par value $.10 per share. On the record
date, there were 542,787,422 shares of Common Stock outstanding and entitled to
vote at the annual meeting. For the purposes of this meeting, the Preferred
Stock has no voting rights.
The holders of Common Stock vote as a single class with regard to all
matters to be acted upon at the annual meeting. At this meeting, it is planned
that stockholders will vote on the following matters: (1) the election of
directors; (2) approval of the reservation of additional shares for issuance
under the employee stock purchase plan ("Proposal 1"); and (3) approval of the
appointment of the Company's independent auditors ("Proposal 2"). With regard to
Proposals 1 and 2 (the "Proposals"), each stockholder, other than any
stockholder owning in excess of 10% of the outstanding shares of capital stock,
may cast one vote for each share of Common Stock entitled to be voted. Any
holder who owns in excess of 10% of the outstanding shares of capital stock will
be entitled to only one hundredth (1/100) of a vote for each share in excess of
10%, and will, under any circumstances, be entitled to cast a maximum aggregate
of 15% of all votes entitled to be cast on each proposal.
In voting upon the election of directors, voting is cumulative. This means
that each stockholder has the right to cast as many votes in the aggregate as
equals the number of votes to which that stockholder is entitled on other
matters multiplied by the number of directors to be elected (four at this
meeting). Each stockholder
<PAGE> 6
may cast the whole number of votes so computed for one candidate, or may
distribute them among the candidates, as he or she chooses. The voting
restrictions upon substantial stockholders described above also apply to the
votes which may be cast in cumulative voting for directors.
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Approval of each of the Proposals requires the
affirmative vote of a majority of the votes cast, either in person or by proxy,
for that Proposal. An abstention from voting will be tabulated as a vote
withheld in the election of directors and in voting on each of the Proposals. An
abstention will be included in computing the number of shares present for
purposes of determining the presence of a quorum for the meeting.
Brokers holding shares in street name for beneficial owners must vote those
shares according to specific instructions they receive from the owners. Under
applicable rules, if specific instructions are not received, however, brokers
have the authority to vote the shares in their discretion on certain matters.
Absent specific instructions from the beneficial owners in the case of a matter
on which brokers may not vote the shares in their discretion, the brokers may
not vote the shares. Brokers that do not receive instructions from stockholders
may vote, in their discretion, on both the election of directors and the
Proposals being voted on at this meeting. Therefore, failure of stockholders to
provide instructions will not prevent votes from being cast by the broker in its
discretion.
At the meeting, votes will be tabulated by inspectors of election appointed
by the Chairman of the Company's board of directors. The by-laws of the Company
provide that a majority of the votes entitled to be cast by the holders of all
shares of capital stock of the Company issued and outstanding and entitled to
vote, present in person or by proxy, shall constitute a quorum at a meeting of
the stockholders.
Each signed and dated proxy returned to the Company will be voted in
accordance with the instructions you indicate on the proxy form. If you give no
instructions, the proxy will be voted FOR the election as directors of the four
management nominees, FOR the approval of the reservation of additional shares to
be issued under the employee stock purchase plan and FOR the approval of the
appointment of Price Waterhouse as independent accountants. Unless you instruct
otherwise, the persons named as proxies may distribute cumulative votes
unequally among those nominees for whom you have indicated the shares are to be
voted.
The Company knows of no reason why any of the nominees for election as a
director would be unable to serve. Nevertheless, should one or more nominees
become unable to serve, all proxies, except where a contrary instruction has
been given, will be voted in accordance with the best judgment of the persons
named as proxies. The board of directors knows of no matter, other than those
discussed in this proxy statement, to be presented at the annual meeting. If,
however, any other matter properly comes before the meeting or any adjournment
thereof, all proxies will be voted on such matters by the named proxies in
accordance with their best judgment.
ELECTION OF DIRECTORS
The Company's by-laws provide that the number of directors shall not be
less than three nor more than fifteen, as determined by the board of directors
from time to time. The board of directors, which currently consists of eleven
members, is divided into three classes: one class of three directors and two
classes of four directors. The Company's stockholders elected all current
directors, except Mr. Liebhaber, who was elected by the board at its June 1992
meeting. The by-laws also provide that directors shall be elected for three-year
terms and that one class of directors shall be elected at each annual meeting of
stockholders. At this annual meeting, the class of directors whose terms then
expire are to be elected for terms expiring at the annual meeting in 1997.
Upon consummation of the transaction between the Company and British
Telecommunications plc ("BT"), approved by stockholders on March 11, 1994, the
board of directors will be expanded by three directors and BT will have the
right to elect all three of these additional directors. The consummation of the
transaction, however, is subject to certain conditions, including regulatory
approval in both the United States and Europe.
2
<PAGE> 7
The table below sets forth certain information as of December 31, 1993,
with respect to the four candidates for election as directors at this annual
meeting and the remaining seven directors of the Company whose terms do not
expire this year.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
DIRECTOR OWNERSHIP OF
NAME, AGE AND PRINCIPAL OCCUPATION SINCE COMMON STOCK (1)
- ---------------------------------------------------------- -------- -------------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 1994 AND WHO ARE NOMINEES
FOR TERMS EXPIRING IN 1997
Clifford L. Alexander, Jr. (60)(A)(C)..................... 1982 40,000(2)
President of Alexander & Associates, Inc., management
consultants, since 1981; a director of Dreyfus 3rd
Century Fund, Dreyfus General Family of Funds, Equitable
Resources, Inc., Mutual of America Life Insurance Company,
Dun & Bradstreet Corporation and a member of the Board of
Governors of the American Stock Exchange.
Richard M. Jones (67)(B).................................. 1988 20,000
Chairman and Chief Executive Officer of Guaranty Federal
Savings Bank from 1989 to 1991; a director of Applied
Power Inc., Illinois Tool Works Inc., Baker-Fentress &
Company and Guaranty Federal Savings Bank.
Richard T. Liebhaber (58)................................. 1992 507,594(3)
Chief Strategy and Technology Officer of MCI since 1992;
Executive Vice President and Group Executive of MCI from
1990 to 1992; Executive Vice President of MCI from 1986 to
1990.
John R. Worthington (63).................................. 1968 611,397(4)
General Counsel of MCI since 1971; Senior Vice President
of MCI since 1979.
DIRECTORS WHOSE TERMS EXPIRE IN 1995
Michael H. Bader (64)(B).................................. 1968 394,874(5)
Member of the law firm of Haley, Bader & Potts; Chairman
of radio stations WGLL and WCBG from 1983 to 1993;
Chairman of radio station WTHU from 1988 to 1993; Vice
President of Bach 'n Roll Radio of Brandon, Inc. since
1989.
Gordon S. Macklin (65)(B)................................. 1988 24,000(6)
Chairman of White River Corporation, a financial services
company, since 1993; Chairman of Hambrecht & Quist, a
venture capital and investment banking company, from 1987
to 1992; a director of Fund American Enterprises Holdings,
Inc., Martin Marietta Corporation and director or managing
general partner, as the case may be, of several of the
investment companies in the Franklin and Templeton Groups
of Funds.
Bert C. Roberts, Jr. (51)(C).............................. 1985 1,073,524(7)
Chairman of the Board of MCI since 1992; Chief Executive
Officer of MCI since 1991; President and Chief Operating
Officer of MCI from 1985 to 1992.
Richard B. Sayford (63)(B)(C)............................. 1980 20,990(8)
President and Chief Executive Officer of Strategic
Enterprises, Inc., a management consulting firm, since
1986; a director of Princeton Diagnostic Laboratories of
America, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 1996
Judith Areen (49)(A)...................................... 1992 10,000(9)
Executive Vice President for Law Center Affairs and Dean
of the Law Center, Georgetown University, since 1989;
Co-director, Joint Degree Program in Public Health and
Law, Law Center, Georgetown University, from 1987 to 1989;
Professor of Law, Law Center, Georgetown University, since
1976.
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
DIRECTOR OWNERSHIP OF
NAME, AGE AND PRINCIPAL OCCUPATION SINCE COMMON STOCK (1)
- ---------------------------------------------------------- -------- -------------------
<S> <C> <C>
C. B. Rogers, Jr. (64)(A)(C).............................. 1988 58,000
Chairman and Chief Executive Officer of Equifax Inc., an
information services firm, since 1992; President and
Chief Executive Officer of Equifax Inc., from 1989 to
1992; President and Chief Operating Officer of Equifax
Inc., from 1987 to 1989; a director of Equifax Inc.,
Sears, Roebuck & Company, Briggs & Stratton Corporation
and Dean Witter, Discover & Company.
Judith Whittaker (55)(A).................................. 1985 26,000
Vice President -- Legal of Hallmark Cards, Incorporated, a
greeting card and gift manufacturing company, since
1992; Associate General Counsel of Hallmark Cards,
Incorporated, for more than five years prior thereto; Vice
President and General Counsel of Univision Holdings, Inc.,
a subsidiary of Hallmark Cards, Incorporated, from 1988 to
1992; a director of Harmon Industries, Inc.
</TABLE>
- ---------------
(A) Member of the Audit Committee.
(B) Member of the Compensation Committee.
(C) Member of the Nominating Committee.
(1) All quantities of Common Stock have been adjusted to reflect the
2-for-1 stock dividend issued in July 1993. Unless otherwise noted, each person
has sole voting power and sole investment power with respect to the securities
reported, except with respect to shares of Common Stock allocated to accounts
under the Company's Employee Stock Ownership Plan ("ESOP"), which includes a
Retirement Savings Plan, with respect to which shares such person has sole
voting power only. Where indicated, the data also include shares which each
person had the right to acquire upon exercise of stock options within sixty days
of December 31, 1993, and grants of restricted stock awards. As of December 31,
1993, no individual officer or director beneficially owned more than 1% of the
outstanding shares of Common Stock.
(2) Mr. Alexander shares voting and investment power with respect to all
shares.
(3) Includes 10,686 shares of Common Stock allocated to Mr. Liebhaber's
account under the ESOP, 369,855 shares of Common Stock he has the right to
acquire pursuant to the exercise of stock options and 60,000 shares of Common
Stock granted pursuant to restricted stock awards.
(4) Includes 29,278 shares of Common Stock allocated to Mr. Worthington's
account under the ESOP and 301,930 shares of Common Stock he has the right to
acquire pursuant to the exercise of stock options. Does not include 151,790
shares of Common Stock owned solely by Mr. Worthington's wife, in which shares
he disclaims beneficial ownership.
(5) Mr. Bader shares voting and investment power with respect to all
shares. Mr. Bader is one of seven trustees for the William G. McGowan Charitable
Fund, Inc.; he does not, however, have voting or investment power over any of
the Company's Common Stock held by the fund.
(6) Does not include 3,200 shares of Common Stock owned solely by Mr.
Macklin's wife, in which shares he disclaims beneficial ownership.
(7) Includes 44,569 shares of Common Stock allocated to Mr. Roberts'
account under the ESOP, 705,000 shares of Common Stock he has the right to
acquire pursuant to the exercise of stock options, 161,736 shares of Common
Stock granted pursuant to restricted stock awards and 108,000 shares of Common
Stock owned by a limited partnership in which Mr. Roberts is a general partner.
Does not include 24,000 shares of Common Stock held by his wife as custodian for
the benefit of their minor children and 12,000 shares held by his son, in all of
which shares Mr. Roberts disclaims beneficial ownership.
(8) Does not include 800 shares of Common Stock owned solely by Mr.
Sayford's wife, in which shares he disclaims beneficial ownership.
(9) Includes 6,000 shares of Common Stock Ms. Areen has the right to
acquire pursuant to the exercise of stock options.
4
<PAGE> 9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MCI, since its inception, has retained the law firm of Haley, Bader &
Potts, in which firm director Michael H. Bader is a partner, as special counsel
for communications law matters. Legal fees and expenses paid by the Company to
this law firm for the year ended December 31, 1993, totaled approximately
$170,000. It is anticipated that the Company will pay Haley, Bader & Potts an
amount in excess of $60,000 in 1994 in respect of services rendered and to be
rendered to the Company and its subsidiaries during that year.
MCI has retained the management consulting firm of Alexander & Associates,
Inc., of which company director Clifford L. Alexander, Jr. is President, for the
purpose of obtaining consulting services related to minority employment matters.
The Company paid $75,000 for fees and expenses to this consulting firm for the
year ended December 31, 1993. It is anticipated that the Company will pay
Alexander & Associates, Inc., an amount in excess of $60,000 in 1994 in respect
of services rendered and to be rendered to the Company and its subsidiaries
during that year.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the number of shares beneficially owned by
each of the named officers and by all executive officers and directors as a
group. The share ownership of the Chief Executive Officer, Bert C. Roberts, Jr.,
and of Richard T. Liebhaber and all other directors is set forth in the table
appearing under the caption "Election of Directors", elsewhere in this proxy
statement.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME, AGE AND PRINCIPAL OCCUPATION BENEFICIALLY OWNED (1)
- ------------------------------------------------------------------------ ----------------------
<S> <C>
Gerald H. Taylor (52)................................................... 446,457(2)
President and Chief Operating Officer of MCI Telecommunications
Corporation ("MCIT") since 1994; Executive Vice President and Group
Executive of MCIT from 1993 to 1994; Executive Vice President of MCIT
since 1990; Senior Vice President of MCIT for more than 5 years prior
thereto.
Eugene Eidenberg (54)................................................... 384,326(3)
Executive Vice President and Group Executive of MCI since 1993;
Executive Vice President of MCI since 1989; President of Macrovision
Corporation, a video technology company, from 1987 to 1989.
Daniel E. Crawford (54)................................................. 347,680(4)
Executive Vice President of MCIT since 1990; President of MCI Southwest
Division from 1989 to 1990.
All executive officers and directors as a group. (5).................... 5,161,650(6)
</TABLE>
- ------------
(1) Includes shares which each person had the right to acquire upon
exercise of stock options within sixty days of December 31, 1993, and grants of
restricted stock.
(2) Includes 29,976 shares of Common Stock allocated to Mr. Taylor's
account under the ESOP, 272,984 shares of Common Stock he has the right to
acquire pursuant to the exercise of stock options and 125,000 shares of Common
Stock granted pursuant to restricted stock awards.
(3) Includes 1,972 shares of Common Stock allocated to Mr. Eidenberg's
account under the ESOP, 319,300 shares of Common Stock he has the right to
acquire pursuant to the exercise of stock options and 60,000 shares of Common
Stock granted pursuant to restricted stock awards.
(4) Includes 5,595 shares of Common Stock allocated to Mr. Crawford's
account under the ESOP, 284,550 shares of Common Stock he has the right to
acquire pursuant to the exercise of stock options and 40,000 shares of Common
Stock granted pursuant to restricted stock awards. Does not include 2,240 shares
of Common Stock owned solely by Mr. Crawford's wife, in which shares he
disclaims beneficial ownership.
5
<PAGE> 10
(5) This group includes the Company's executive officers, as such term is
defined in Rule 3b-7 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and its directors, a total of 21 persons.
(6) Includes 144,947 shares of Common Stock allocated to officers' accounts
under the ESOP, 3,108,391 shares of Common Stock that officers and directors
have the right to acquire pursuant to the exercise of stock options and 661,736
shares granted to officers pursuant to restricted stock awards. Officers and
directors have shared voting and investment power with respect to 434,874 of
these shares of Common Stock.
The following table sets forth the number of shares beneficially owned by
holders of 5% or more of the Company's Common Stock outstanding as of December
31, 1993, based solely on the statements on Schedule 13G received by the
Company.
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
NAME AND ADDRESS CLASS OF COMMON STOCK OWNED
--------------------------------------------------- ---------------------------
<S> <C>
Mellon Bank Corporation............................ 28,798,000 shares or 5.33%
One Mellon Bank Center
Pittsburgh, Pennsylvania
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 (and amendments to all such
forms) furnished to the Company during its most recent fiscal year, the Company
is not aware of any director or executive officer who has not filed on a timely
basis, as disclosed in such Forms, reports required by Section 16(a) of the
Exchange Act during the most recent fiscal year.
BOARD OF DIRECTORS' COMMITTEES, MEETINGS AND FEES
To assist the board of directors in managing the Company's business and
affairs, the Company's board has constituted from among its members a number of
committees, including an Audit Committee, a Compensation Committee and a
Nominating Committee. The functions of the Audit Committee include review, with
the independent accountants and the internal auditors, of the audit plan and
results of their audits, review of any significant consulting services provided
by the independent accountants, consideration of the range of audit and
non-audit fees and review of the adequacy of the Company's system of internal
accounting controls. The functions of the Compensation Committee include
determining the salary of the Chief Executive Officer and administering the
Company's Stock Option Plan, Executive Incentive Compensation Plan and 1990
Stock Purchase Plan. The Nominating Committee considers potential nominees for
election to the board of directors and administers the 1988 Directors' Stock
Option Plan. The Nominating Committee will consider recommendations by
stockholders for nominees for election as directors at the 1995 annual meeting
submitted by December 7, 1994. Recommendations should be sent to the Company's
Secretary at the Company's headquarters, identifying the nominee by name and
providing pertinent information concerning the nominee's background, experience
and qualifications.
During the year ended December 31, 1993, the board of directors had ten
regular and two special meetings. The Audit Committee met twice, the
Compensation Committee met four times and the Nominating Committee met once.
Each of the Company's directors attended at least 75% of the total of (1) the
number of meetings of the board of directors and (2) the number of meetings held
by all committees of the board on which such director served during the period
for which such director was a member of such committee(s).
During 1993, directors of the Company who were not officers were paid a
retainer of $2,000 per month and an additional $1,000 for each meeting of the
board of directors which they attended and for each committee meeting they
attended that was not held on a day on which a meeting of the board of directors
was held. Effective March 1994, these amounts were increased. The retainer
amount will be $2,250 per month and $1,500 will be paid for each meeting of the
board of directors or of a committee of the board of directors that is held on a
day other than a day the board of directors meets. In addition, the Chairmen of
the Audit and
6
<PAGE> 11
Compensation Committees received an additional retainer of $300 per month, and
members of the Audit and Compensation Committees who attended an Audit or
Compensation Committee meeting on the same day a board of directors meeting was
held were paid an additional $700. Directors also were reimbursed for actual
out-of-pocket travel expenses incurred in connection with attendance at board
and/or committee meetings.
In 1989, the stockholders of the Company approved the 1988 Directors' Stock
Option Plan (the "Directors' Plan") and reserved 1,000,000 shares of Common
Stock for issuance pursuant to such Plan. Under the Directors' Plan, each
non-employee director is granted a five-year option to purchase 40,000 shares of
Common Stock at the closing price of the Common Stock on the date of grant.
Options are exercisable after the first anniversary of the date of grant in
cumulative installments of up to 25% for each year outstanding. The option price
is payable upon exercise of the option either in cash, by the surrender of
shares of Common Stock having a fair market value on the date of receipt by the
Company equal to the option price or by such other means as the Nominating
Committee may prescribe. Payment of the option price by surrender of shares may
be made only once every 90 days. The Directors' Plan provides for automatic
grants of similar options to all new non-employee directors elected to the
board. Upon the fifth anniversary of the date of grant of options, the
unexercised portion of the grant is canceled, and a new option for 40,000 shares
automatically is granted.
Neither the board of directors nor the Nominating Committee has authority
to change the number of shares granted to directors, change the pricing formula
or vesting schedule or selectively determine which of the non-employee directors
shall receive options pursuant to the Directors' Plan.
Options are transferable only by will or under the laws of descent and
distribution. With certain exceptions, each option may be exercised only by the
optionee and only if the optionee is a director of the Company.
As of December 31, 1993, options to purchase 680,000 shares of Common Stock
have been granted pursuant to the Directors' Plan, which options have an average
per share exercise price of $23.0965. During the year ended December 31, 1993,
participating directors as a group exercised options to purchase 84,000 shares
of Common Stock and realized $1,228,500 from the exercise of options granted
under the Directors' Plan.
7
<PAGE> 12
REMUNERATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION OTHER ANNUAL STOCK UNDERLYING ALL OTHER
---------------------- COMPENSATION(1) AWARD(S)(2) OPTIONS COMPENSATION(3)
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) ($) (#) ($)
- ------------------------------ ---- ---------- --------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bert C. Roberts, Jr........... 1993 $800,000 $900,000 $ 459,869 $2,059,500 180,000 $37,037
Chairman and Chief Executive 1992 725,000 800,000 22,180 1,342,000 160,000 63,826
Officer 1991 600,000 650,000 280,000
Richard T. Liebhaber.......... 1993 385,000 272,350 52,366 560,500 92,000 40,052
Chief Strategy and Technology 1992 370,000 253,400 11,694 671,000 92,000 48,041
Officer 1991 345,000 240,925 180,000
Gerald H. Taylor(4)........... 1993 307,800 220,175 106,883 2,874,187 90,000 26,559
President and Chief 1992 275,000 188,675 3,685 335,500 70,000 30,306
Operating Officer of MCI 1991 255,000 179,400 121,000
Telecommunications
Eugene Eidenberg.............. 1993 270,000 202,775 30,533 1,401,250 70,000 27,924
Executive Vice President 1992 260,000 188,675 5,767 167,750 70,000 43,601
and Group Executive 1991 250,000 179,400 140,000
Daniel E. Crawford............ 1993 259,500 185,875 38,787 514,875 70,000 22,293
Executive Vice President 1992 235,000 188,675 2,991 335,500 70,000 32,851
of MCI Telecommunications 1991 224,615 179,400 112,500
</TABLE>
- ---------------
(1) Represents taxes paid on behalf of the executive as the result of the
purchase of an annuity to discharge the Supplemental Pension Plan's obligation
to the executive. These amounts reduce dollar for dollar the actual amount of
pension to be paid to the executive upon retirement.
(2) Net value based on the market price on the date of award. Executive
officers held the following restricted shares, with net value as indicated based
on the market price on December 31, 1993: Mr. Roberts, 161,736 shares, valued at
$4,552,868; Mr. Liebhaber, 60,000 shares, valued at $1,689,000; Mr. Taylor,
125,000 shares, valued at $3,518,750; Mr. Eidenberg, 60,000 shares, valued at
$1,689,000; and Mr. Crawford, 40,000 shares, valued at $1,126,000. Dividends on
the restricted shares are held by the Company until the restrictions are removed
and are not included in the valuations. When the restrictions are removed, the
Company will pay such dividends to the recipient.
(3) Consists of the following: (1) contributions by the Company to the
executives' accounts under the MCI Communications Corporation Retirement Savings
Plan (401(k)); and (2) all whole life premiums paid by the Company for executive
life insurance during the year. The values of the two components for each
executive officer are: Mr. Roberts (1) $8,994 and (2) $28,043; Mr. Liebhaber (1)
$8,994 and (2) $31,058; Mr. Taylor (1) $8,994 and (2) $17,565; Mr. Eidenberg (1)
$8,994 and (2) $18,930; and Mr. Crawford (1) $8,994 and (2) $13,299.
(4) Mr. Taylor was named to his current position as of April 8, 1994.
During 1993, Mr. Taylor served as Executive Vice President and Group Executive
of MCI Telecommunications.
8
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION ------------------------------------------------
NAME (#)(3) YEAR ($/SH) DATE(4) 0% ($)(5) 5% ($) 10% ($)
- --------------------- ---------- ----------- -------- ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bert C. Roberts,
Jr................. 180,000 0.984% $20.9375 01/26/03 $ 0 $ 2,369,970 $ 6,006,150
Richard T.
Liebhaber.......... 92,000 0.503% 20.9375 01/26/03 0 1,211,318 3,069,810
Gerald H. Taylor..... 70,000 0.382% 20.9375 01/26/03 0 921,655 2,335,725
20,000 0.109% 28.0000 09/28/03 0 122,080 526,100
Eugene Eidenberg..... 70,000 0.382% 20.9375 01/26/03 0 921,655 2,335,725
Daniel E. Crawford... 70,000 0.382% 20.9375 01/26/03 0 921,655 2,335,725
-------------------------------------------------------------------------------------------------------
All Optionees(6)..... 18,300,700 100.00% 21.1027 various 0 242,891,906 615,512,459
All Stockholders..... N/A N/A N/A N/A 0 24,883,175,565(7) 39,622,091,974(7)
</TABLE>
- ------------
(1) The Company did not grant any stock appreciation rights during the
last, or any prior, fiscal year.
(2) The potential realizable value uses the hypothetical rates imposed by
the Securities and Exchange Commission and is not intended to forecast future
appreciation, if any, of the Company's stock price. The Company did not use an
alternative formula for this valuation, as the Company is not aware of any
formula which will determine with reasonable accuracy a present value based on
future unknown or volatile factors. In fact, the Company disavows the ability of
this or any other valuation model to predict or estimate the Company's future
stock price or to place a reasonably accurate present value on the options
because all models depend on assumptions about the stock's future price
movement, which is simply unknowable. Also note that the value indicated is a
net amount, since the aggregate exercise price has been deducted from the final
appreciated value and that 5% and 10% appreciation would result in per share
prices of approximately $46.00 and $73.25, respectively, as of January 26, 2003.
(3) Grants become exercisable to the extent of one-third of the shares
covered thereby on each of the first, second and third anniversary of the grant.
Vesting may be accelerated upon a reorganization event or upon a tender offer
for 30% or more of the Company's voting stock by a third party in accordance
with plan provisions.
(4) All options granted in 1993 expire ten years from the date of grant.
(5) Unless the stock price increases, which will benefit all stockholders
commensurately, an optionee will realize no gain.
(6) As of December 31, 1993, this group consisted of 3,800 employees.
(7) Values were calculated using the total shares outstanding as of
December 31, 1993 (540,738,761 shares) and using a base price of $28.250.
9
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($) (1)
ON EXERCISE VALUE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bert C. Roberts, Jr............. 0 $ 0 497,600/382,400 $14,057,200/$10,802,800
Richard T. Liebhaber............ 131,225 2,571,491 247,935/214,840 7,004,164/ 6,069,230
Gerald H. Taylor................ 50,056 1,004,698 185,644/158,040 5,244,443/ 4,464,630
Eugene Eidenberg................ 50,000 953,125 225,500/164,500 6,370,375/ 4,647,125
Daniel E. Crawford.............. 28,000 461,500 200,184/155,066 5,655,198/ 4,380,615
</TABLE>
- ------------
(1) Options are "in-the-money" if, on December 31, 1993, the market price
of the Common Stock ($28.250) exceeded the exercise price of such options. The
value of such options is calculated by determining the difference between the
aggregate market price of the Common Stock covered by the options on December
31, 1993, and the aggregate exercise price of such options.
PENSION PLANS
The Company sponsors a tax-qualified defined benefit plan ("Qualified
Plan") and a supplemental non-qualified defined benefit plan ("Supplemental
Plan" and, collectively, "Pension Plans"). The Qualified Plan covers all
employees, including executive officers, who work at least 1,000 hours in a
year. The Supplemental Plan covers only the Company's key executives, including
the executive officers, who work at least 1,000 hours in a year. No employee
contributions are required for participation in the Pension Plans. Retirement
benefits are based upon the employee's compensation during his employment with
the Company or a participating subsidiary.
Compensation used to calculate benefits includes bonuses but does not
include compensation related to fringe benefits, stock options or restricted
stock. During 1993, compensation for the purposes of calculating pension
benefits for the Qualified Plan was limited by Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended (the "Code") to $235,840. The
Supplemental Plan pays the incremental benefit attributable to that part of the
employee's compensation which exceeds the IRS plan limitations for each year.
Employees are fully vested after five years of service or upon reaching age
65 while employed by the Company or a participating subsidiary. There is no
partial vesting. Normal retirement is age 65, but an employee may elect to
receive an actuarially-reduced pension at age 55 with five years of service to
the Company. In addition, the Supplemental Plan permits the Company to grant
additional service and additional pension amounts to selected executives. To
date, grants of additional service have been made to five retired individuals.
For employees employed after January 1, 1989, the Pension Plans provide a
normal retirement benefit for each year of credited service equal to 1% of the
compensation earned by the employee during that year up to the Social Security
"covered compensation" level ($22,800 for 1993) plus an additional 1.5% of
compensation earned over that level. However, employees employed on or before
January 1, 1993, were credited with an updated past service benefit which
provides a benefit of 1% of the employee's average annual compensation (for
years the 1990, 1991 and 1992) up to $21,000 and 1.5% of such compensation over
$21,000 for such years multiplied by the employee's years and months of service
through December 31, 1992. Benefits payable from tax qualified plans are further
limited by Section 415 of the Code; in 1993, the annual maximum benefit from the
Qualified Plan was limited to $115,641. When the pension formula results in an
executive's earning a benefit above the current limit, the Supplemental Plan
pays the incremental portion above such limit.
As of December 31, 1993, Messrs. Roberts, Liebhaber, Taylor, Eidenberg and
Crawford, upon normal retirement, would be entitled to approximate annual
retirement benefits from both Pension Plans of approximately $634,542, $133,471,
$241,043, $121,087 and $134,537, respectively.
10
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION POLICIES AND OBJECTIVES
The Compensation Committee establishes the base salary for the Chief
Executive Officer ("CEO") and administers the Company's Stock Option Plan and
the Executive Incentive Compensation Plan ("EICP"). The Committee also
periodically reviews the compensation arrangements of the Company's other
executive officers and adjusts their compensation as it deems advisable. The
base salaries and incentive compensation of the Company's executives, other than
the CEO are established by the CEO with the assistance of the Company's human
resources staff and are reviewed annually by the Compensation Committee. The
Compensation Committee consists solely of non-employee directors who are not
eligible to participate in the compensation plans which they administer.
The Compensation Committee's executive compensation objectives are (1) to
ensure competitive levels of compensation that enable the Company to attract,
retain and motivate executives of outstanding ability and character to lead the
Company successfully in its highly competitive industry characterized by rapid
technological change, innovation and significant capital investment
requirements; (2) to relate a meaningful portion of compensation to the
achievement of improved earnings growth and other business objectives through
the EICP; and (3) to provide stock-based long term incentives that directly link
the compensation of executives to stock appreciation. The Compensation Committee
accomplishes these objectives by periodically reviewing with independent
compensation consultants surveys of executive compensation and by establishing
the annual EICP's incentive reserve fund and performance objectives. Through
annual grants of options and, at times, grants of restricted stock, the
Compensation Committee aligns the financial interests of the executives with
those of the Company's stockholders.
EXECUTIVE OFFICER COMPENSATION AND COMPANY PERFORMANCE
The Company has standard salary ranges for all positions, including all
executive positions below the CEO. These salary ranges were developed by the
Company's human resources staff from different surveys conducted by compensation
consultants using competitive market data from both within and outside of the
telecommunications industry. Companies chosen for consideration which are
outside the telecommunications industry generally are those similar to MCI in
size, based on revenue. The companies within the telecommunications industry are
those that comprise the Company's peer group, for the purpose of constructing
the performance graph, for which such data are available. (See the section of
this Proxy Statement entitled, "Five-Year Performance Comparison," below.)
Salary ranges are targeted to be at approximately the median of the survey data
for companies of similar size and complexity. An executive's salary within these
salary ranges depends upon the executive's experience and capabilities, the
level of responsibility of the executive's position and the executive's unique
talents and strengths. The CEO annually reviews each executive officer's salary
and performance. In this review, the CEO considers individual contribution,
attainment of individual and business unit performance objectives (which are
based on the Company's business plan and differ for each individual executive
and each business unit) and level within the salary range; however, there is no
specific weighting of these criteria. The CEO also uses salary increase
guidelines established by the Company to formulate the annual merit increase.
The Company periodically examines the competitiveness of both the salary
increase guidelines and the salary ranges in light of industry information. The
CEO then considers the extent to which the increase guidelines should be
adjusted in light of corporate performance and prospects. The Compensation
Committee reviews, but does not approve, the CEO's decisions regarding executive
officers' salaries.
The purpose of the EICP is to encourage consistent, annual growth in
earnings by creating a motivational environment in which compensation is
contingent upon the level of the Company's operating income and to reward
executives for performance after the Company's annual financial performance is
known. All executive officers, including the CEO, participate in the EICP. At
the beginning of the fiscal year, the Compensation Committee establishes the
incentive compensation reserve, a percentage of operating income which will be
used to fund the EICP awards at year end. The percentage allocated is based on
the annual business plan. The Compensation Committee, in its discretion, at any
time during or after such year, may adjust the dollar
11
<PAGE> 16
amount of the reserve for extraordinary events such as non-recurring charges or
credits. As provided by the EICP, target awards are established for executives
based on competitive norms and the position of the executive in the Company.
Target awards represent a specified percent of the midpoint of the executive's
salary range and are designed to provide a level of total cash compensation,
including salary, between the 50th and 75th percentiles for similar companies,
including those in the Company's peer group, if performance goals are achieved.
After fiscal year end, actual awards are made based on the achievement of
corporate operating income objectives and, for executives in revenue-generating
units, revenue growth and income contribution performance objectives relative to
the Company's business plan. Then, such awards are adjusted for individual
performance. Such objectives were met for 1993. All awards are contingent upon
the amount of reserved funds used to pay the awards. Because this fund is a
percentage of actual operating income, the dollar amount of the fund varies
according to actual corporate performance. Each executive's target award is
reduced or increased according to the availability of funds in the incentive
reserve, thereby directly linking the executive's award with actual corporate
performance. The award then may be adjusted further in consideration of
individual contribution and performance.
On February 2, 1994, the Compensation Committee adopted certain changes to
the EICP to be effective for awards for the calendar year 1994. These changes
were made to enable certain business units to relate more closely awards to the
individual executive's performance and to business unit performance.
Under the EICP, as amended, the CEO will establish Target Incentive Awards
for all participants, except himself. Prior to the end of February each year,
the senior management of the business units may then establish and weight
performance criteria for the executives in their respective business units. The
performance criteria will be based on the executive's individual performance
objectives and the business unit's objectives, based on the Company's business
plan for the coming year. At the election of the CEO, executives who comprise
the most senior level of management may be evaluated either based on their
business unit performance or overall corporate performance, or a combination
thereof. The CEO will be responsible for establishing the performance criteria
for these individuals.
The Compensation Committee also contemplated proposed changes to the EICP
that it considered in connection with the Omnibus Budget Reconciliation Act of
1993 (the "Revenue Act"), which denies a tax deduction for certain executive
compensation in excess of $1 million per year paid by publicly traded
corporations to the chief executive officer and the four other most highly
compensated officers. At this time, only the deduction for portions of Mr.
Roberts' compensation is affected by these limitations. The Compensation
Committee notes that the regulations under the Revenue Act have only been
proposed at this time and has determined it appropriate to delay further
consideration of any such changes to its compensation arrangements until final
regulations have been adopted.
The Company has a long history of encouraging employee ownership of the
Company's Common Stock. In the belief that employees who have a proprietary
interest in the Company will focus on its long term success and on building
stockholder wealth, the Compensation Committee uses the Company's stock option
plan as a basis to create a foundation for the long term growth of the Company
and increased stockholder value by providing executives and key employees with
an opportunity to obtain and build a meaningful stake in the Company's future.
At the beginning of each fiscal year, the Compensation Committee grants stock
options to all executives and key employees who, in its judgment, have and are
in a position to continue to impact postively the Company's profitability. The
focus of the option awards is to encourage outstanding future performance over a
longer term than the EICP. Therefore, options become exercisable based on
continued employment with the Company and generally remain exercisable for a
period of ten years. To provide the desired level of motivation by potential
stock ownership, the number of stock options granted to Company executives is
targeted to be above average in comparison to executives in similar companies,
including those in the Company's peer group. The number of options granted to a
particular executive is not determined by a particular formula; however, the
Company has a targeted number of awards for each grade level of management.
After the fiscal year end, the executive's individual performance is reviewed
and the targeted award is adjusted for individual performance ranked against
other executives at the same grade level in the
12
<PAGE> 17
same organization or business unit. The Committee also considered the amount and
terms of the options and restricted stock awarded in prior years to each
executive in making its determination of awards for this year. Stock options
have been granted to key employees at all levels of the Company. The ultimate
value of the options, if any, depends on the extent to which the Company's
Common Stock appreciates in market value.
After consideration of recommendations by the CEO (not including
recommendations for grants for the CEO), the Compensation Committee may award
shares of restricted stock to a limited number of key executives. This component
of the Stock Option Plan not only fosters the same goals as the option program
but, in addition, is designed to retain and motivate the key executives
constituting the core of the Company's management team. Grants are made based on
the Compensation Committee's assessment of the executive's expected future
contributions and strategic importance to the Company, as well as the
individual's past performance. Restrictions on shares are removed beginning
three years and ending five years after the date of the grant, provided the
executive remains employed by the Company. If the executive's employment
terminates before the lapse of the restrictions, any remaining restricted shares
are forfeited.
OTHER EXECUTIVE COMPENSATION PLANS
The Company sponsors other employee benefit plans for both executives and
non-management employees. The Company also has a Supplemental Retirement Plan
and an executive life insurance program for executives. The Compensation
Committee neither administers nor makes any determinations with respect to any
such plan or program, with the exception of the Employee Stock Purchase Plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND COMPANY PERFORMANCE
The CEO and Chairman of the Board, Bert C. Roberts, Jr., is eligible to
participate in the same executive compensation plans as the other senior
executives; however, the Compensation Committee evaluates and establishes his
compensation with special consideration and attention.
The Compensation Committee conducts an annual evaluation of the
competitiveness of Mr. Roberts' total compensation relative to the compensation
of the CEOs of other similar-sized companies in the telecommunications industry
as well as other industries. The Committee considers compensation data available
for the companies in the Company's peer group, as well as data available from
other similar-sized companies not in the peer group because it considers the
market for Mr. Roberts' skills and strengths much broader than the
telecommunications industry. As part of this evaluation, the Compensation
Committee requests an independent compensation consultant to perform a market
analysis of compensation levels and to furnish other information as needed. The
CEO's salary is targeted to be approximately at the median of companies of
similar size, complexity, and performance. Based on the Committee's judgment of
corporate performance objectives relative to the Company's 1992 business plan,
Mr. Roberts' individual performance, information supplied by the consultant, the
expected challenges for Mr. Roberts in the coming year, and other individual
performance factors that the Compensation Committee in its discretion deemed
relevant at that time, the Compensation Committee established Mr. Roberts'
salary for the new fiscal year. The Committee noted that in 1992, MCI met or
exceeded its corporate performance objectives including: growth in earnings per
share, increase in the per share price of its Common Stock, and maintenance of
market share and operating margin. In its review, the Committee did not assign
relative weights to the factors used to determine Mr. Roberts' salary.
Like other executives, Mr. Roberts' incentive compensation award is paid
from the annual EICP fund. Under the EICP, the Compensation Committee
periodically develops special criteria for determining Mr. Roberts' annual
incentive compensation award. The current guidelines are: (1) overall leadership
of the Company; (2) development of future strategies for the Company; (3)
implementation of strategic plans; and (4) financial measures reflecting
continued increases in stockholder value. The Committee does not assign specific
weights to these factors, but rather reviews them in the context of Mr. Roberts'
leadership and the Company's performance relative to its business plan and the
factors and events which impacted the Company during the year. The recent
changes in the EICP discussed above will not affect the method by which Mr.
Roberts' incentive compensation is determined.
13
<PAGE> 18
In its evaluation, the Compensation Committee also considered the dollar
value of the total incentive compensation reserve and the amount of Mr. Roberts'
award relative to the awards proposed to be paid to other executives. The
Compensation Committee also took account of its perceptions concerning the
business environment, competition and the Company's particular challenges in the
prior fiscal year.
Based on these factors, in February 1994, the Compensation Committee
awarded Mr. Roberts an incentive bonus of $900,000 for 1993. The Compensation
Committee based this award on Mr. Roberts' skills, strengths, performance and
other factors, such as the fact that MCI's earnings per share increased 17.1%
from $1.11 in 1992 (adjusted for a stock split in July 1993) to $1.30 in 1993
(the Compensation Committee determined that the special one-time charge to
earnings should not be reflected in the calculation of any of the incentive
awards payable from the EICP); that the Common Stock price increased 42.6% in
1993 from $19.81 on December 31, 1992, to $28.25 on December 31, 1993, as
compared with 7.1% growth in the Standard & Poor's 500 Stock Index; that the
Company's revenues increased 12.3%, from $10.6 billion in 1992 to $11.9 billion
in 1993; that the Company maintained its operating margin in 1993, excluding a
non-recurring special charge to earnings; and that MCI's global presence was
expanded significantly, most notably through MCI's strategic global alliance
with British Telecommunications plc.
In preparation for making any decision regarding the grant of stock options
and restricted stock, the Compensation Committee evaluates Mr. Roberts'
performance relative to the guidelines described above, the Company's
achievements during the year (discussed above), the awards made to him in prior
years, his critical leadership role in the Company's future success and notes
the degree to which other companies have linked their CEO's long term
compensation to stockholder return. In conducting such evaluation, the Committee
did not assign relative weights to the factors it considered. The Committee also
uses subjective criteria it deems relevant in its reasonable business
discretion, such as their opinions about the business environment and the
particular challenges for the Company as well as the potential market for Mr.
Roberts' services, to determine the award for a particular year. In addition,
the Compensation Committee considers its intent to use the Stock Option Plan as
a means to align the financial interest of the CEO with that of the Company's
stockholders.
Gordon S. Macklin, Chairman
Richard M. Jones
Richard B. Sayford
Michael H. Bader
Members of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1993, no member of the Compensation Committee of the Company's board
of directors was a current or former officer or employee of the Company or any
of its subsidiaries. Michael H. Bader, a member of the Compensation Committee,
is a partner in the law firm of Haley, Bader & Potts, which firm performed legal
services for the Company during the year ended December 31, 1993. Legal fees and
expenses paid by the Company to Haley, Bader & Potts for the year ended December
31, 1993, totaled approximately $170,000. It is anticipated that the Company
will pay Haley, Bader & Potts an amount in excess of $60,000 in 1994 in respect
of services rendered and to be rendered to the Company and its subsidiaries
during that year.
14
<PAGE> 19
FIVE-YEAR PERFORMANCE COMPARISON
The Securities and Exchange Commission ("SEC") requires that the Company
include in this proxy statement a line-graph presentation comparing the
Company's cumulative, five-year stockholder returns on an indexed basis with the
Standard & Poor's 500 Stock Index and either a nationally-recognized industry
standard index or an index of peer companies selected by the Company. In the
absence of any nationally-recognized industry standard index, the Company has
selected a peer group generally consisting of the major providers of
telecommunications services. The members of the peer group are the following:
American Telephone & Telegraph Company, Sprint Corporation, NYNEX Corporation,
Bell Atlantic Corporation, BellSouth Corporation, Ameritech Corporation,
Southwestern Bell Corporation, US West, Inc., Pacific Telesis Group, and GTE
Corporation. For the purpose of calculating the peer group average, the returns
of each company have been weighted according to its stock market capitalization.
In accordance with SEC rules, the measurements are indexed to a value of $100 at
December 31, 1988, and assume that all dividends are reinvested.
MCI COMMUNICATIONS CORPORATION
FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN
FOR MCI, PEER GROUP AND S&P 500
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) MCI S&P 500 PEER GROUP
<S> <C> <C> <C>
Q4 1988 100.00 100.00 100.00
Q1 1989 126.52 107.09 110.59
Q2 159.67 116.54 126.65
Q3 198.90 129.02 147.62
Q4 194.48 131.69 160.42
Q1 1990 162.43 127.72 147.28
Q2 185.30 135.76 145.88
Q3 139.40 117.10 132.36
Q4 87.07 127.59 138.05
Q1 1991 113.69 146.13 144.33
Q2 124.98 145.80 143.15
Q3 126.09 153.59 146.65
Q4 134.66 166.47 157.41
Q1 1992 146.91 162.27 146.86
Q2 143.23 165.35 158.07
Q3 156.61 170.56 170.14
Q4 176.91 179.15 182.82
Q1 1993 198.69 186.97 202.74
Q2 256.96 187.89 215.19
Q3 246.91 192.74 223.50
Q4 252.76 197.21 209.57
</TABLE>
15
<PAGE> 20
APPROVAL OF THE RESERVATION OF ADDITIONAL SHARES TO BE ISSUED
UNDER THE 1990 STOCK PURCHASE PLAN
In 1989, the board of directors adopted and the stockholders approved in
1990, a stock purchase plan for the Company and participating subsidiaries (the
"1990 Stock Purchase Plan") and authorized a maximum of 25,000,000 shares of the
Company's Common Stock to be issued under the 1990 Stock Purchase Plan. As of
December 31, 1993, 5,554,588 of the allocated shares had not yet been issued. In
February 1994, the board of directors approved, subject to stockholder approval,
an amendment to the 1990 Stock Purchase Plan that reserved an additional
20,000,000 shares of Common Stock for issuance under the 1990 Stock Purchase
Plan. The board of directors continues to believe that the opportunity to
acquire Common Stock serves as an incentive to improve the job performance of
MCI's employees and facilitates MCI's efforts to secure and retain valuable
employees. Following is a brief summary of the 1990 Stock Purchase Plan.
Under the 1990 Stock Purchase Plan, eligible employees of the Company and
any subsidiary which adopts the 1990 Stock Purchase Plan with the Company's
consent may purchase shares of Common Stock through one or more offers made on
behalf of the Company by the Compensation Committee of the board of directors.
All employees (including officers) of the Company or any such subsidiary who
have been employed at least three months are eligible to participate in
offerings under the 1990 Stock Purchase Plan. Holders of 5% or more of the
voting power of MCI's outstanding capital stock and directors who are not
otherwise employed by the Company are ineligible to participate in such
offerings. As of December 31, 1993, all active employees of the Company and its
eligible subsidiaries were eligible to participate in the 1990 Stock Purchase
Plan, provided they meet the 3-month continuous service requirement for
participation. As of February 2, 1994, approximately 42,000 employees were
eligible to participate in the plan. Over the years, approximately 60% of
eligible employees have participated in the 1990 Stock Purchase Plan.
The Compensation Committee may amend or modify the 1990 Stock Purchase
Plan, but may not make any change which does not comply with the requirements of
Section 423(b) of the Code or with regulations promulgated under Section 16(b)
of the Exchange Act.
Eligible employees are entitled to purchase shares of Common Stock (subject
to the maximum limitations set forth in the 1990 Stock Purchase Plan) through
biweekly payroll deductions of up to the maximum percentage set by the board of
directors at the beginning of each offer, which percentage may not exceed 15% of
eligible compensation. Purchases are made monthly. The purchase price for such
shares of Common Stock shall be equal to the lesser of (a) 85% of the fair
market value of a share of Common Stock on the date of grant of the option (the
"Base Option Price") and (b) 85% of the fair market value of a share of Common
Stock on the date of purchase. In the event that an offer has a term of more
than fifteen months, the initial Base Option Price is subject to an increase, on
the date which falls at the midpoint of the term of the offer, to 85% of the
average of the fair market value of a share of Common Stock during the period of
twenty trading days ending one month prior to the date of revaluation.
Options under the 1990 Stock Purchase Plan are not transferable other than
by will or under the laws of descent and distribution. An employee may request
that shares purchased by him be delivered to him during an offer and may at any
time and for any reason withdraw from further participation in an offer and
receive the number of shares of Common Stock previously purchased pursuant to
the offer. In the event of retirement, death or termination of employment, the
number of shares of Common Stock previously purchased pursuant to the offer will
be delivered to the employee or the employee's representative.
The 1990 Stock Purchase Plan is not subject to the requirements of the
Employee Retirement Income Security Act of 1974, but is intended to qualify as
an "employee stock purchase plan," as defined in Section 423 of the Code. Under
such a plan, an employee must report as compensation in the year of disposition
of shares purchased under the Plan (or at death) the lesser of (a) the excess of
the fair market value at the time of disposition (or death) over the purchase
price and (b) the excess of the fair market value of the shares at the time the
option was granted over the initial Base Option Price. Any excess of appreciated
value is considered a capital gain. In order to qualify for capital gains tax
treatment, the employee must hold the stock to a date that is more than two
years from the date of option grant and one year from the date of purchase. If
these holding requirements are met, the Company is not entitled to any deduction
for tax purposes. On the
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<PAGE> 21
other hand, if the employee does not meet the holding period requirements, the
employee realizes at the time of disposition ordinary income to the extent of
the difference between the price paid for the shares and fair market value on
the purchase date, irrespective of the price at which the employee disposes of
the shares, and an amount equal to such ordinary income is deductible by MCI.
The 1990 Stock Purchase Plan and all rights of participating employees
pursuant to the 1990 Stock Purchase Plan terminate (a) on the day that all
shares then subject to the 1990 Stock Purchase Plan have been purchased, or (b)
at any time, at the discretion of the Compensation Committee.
Amounts received by MCI upon the purchase of shares of its Common Stock
pursuant to the 1990 Stock Purchase Plan will be used for general corporate
purposes.
No current directors who are not executive officers will receive any
benefit as a result of this proposed amendment. The benefits that will be
received as a result of this amendment by the current executive officers and by
all eligible employees are not currently determinable.
VOTING ON THE PROPOSAL
Approval of the reservation of additional shares under the 1990 Stock
Purchase Plan requires the affirmative vote of a majority of the shares present
at the meeting, either in person or by proxy, and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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<PAGE> 22
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Company's board of directors, subject to stockholder approval, has
selected Price Waterhouse to serve as independent accountants for the Company's
fiscal year to end December 31, 1994.
A representative of Price Waterhouse is expected to be present at the
annual meeting. The representative will be given an opportunity to make a
statement if he so desires and is expected to be available to respond to
appropriate questions.
VOTING ON THE APPOINTMENT
The approval of the appointment of Price Waterhouse as independent
accountants requires the affirmative vote of a majority of the shares present at
the meeting, either in person or by proxy, and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Proposals submitted by stockholders for presentation at the 1995 annual
meeting must be received by the Company no later than December 7, 1994, for
inclusion, if appropriate, in the Company's proxy statement and form of proxy
relating to that meeting.
By order of the board of directors,
/s/ C. BOLTON-SMITH, JR.
C. BOLTON-SMITH, JR.
Secretary
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<PAGE> 23
(MCI LOGO)
PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MCI
COMMUNICATIONS CORPORATION FOR THE ANNUAL MEETING
TO BE HELD MAY 23, 1994
Michael H. Bader, Bert C. Roberts, Jr., and Richard B. Sayford, or any of them
with full power of substitution, are hereby authorized to represent and to
vote, as designated below, all of the undersigned's shares of Common Stock at
the annual meeting of stockholders of MCI COMMUNICATIONS CORPORATION to be held
on May 23, 1994 at 10:00 a.m., in The Concert Hall, at The John F. Kennedy
Center for the Performing Arts, Washington, D.C., and at any adjournment
thereof, in the election of directors, upon the proposals set forth on the
reverse side and described in the Proxy Statement, and in their discretion with
respect to such other matters as may properly be brought before the meeting or
any adjournment thereof.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the board of directors' recommendations. The above named
proxies cannot vote your shares unless you sign and return this proxy.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES FOR DIRECTORS SET FORTH IN PROPOSAL NO. 1, FOR PROPOSALS NO. 2 AND
3, AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER MATTERS AS
MAY PROPERLY BE BROUGHT BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENT
THEREOF.
(CONTINUED ON REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE> 24
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NOS. 1, 2 AND 3.
1. ELECTION OF DIRECTORS
FOR WITHHELD
/ / / /
NOMINEES: Clifford L. Alexander, Jr., Richard M. Jones, Richard T. Liebhaber,
John R. Worthington
FOR ALL NOMINEES LISTED, except vote withheld from the following nominee(s):
- -------------------------------------------------------------------------------
2. Approval of the reservation of Common Stock for the Company's Employee
Stock Purchase Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of the Company's appointment of independent accountants.
FOR AGAINST ABSTAIN
/ / / / / /
The signer revokes all proxies heretofore given by the signer to vote at said
meeting or any adjournment thereof. The signer hereby acknowledges receipt of
the notice of the annual meeting and proxy statement. NOTE: Please sign
exactly as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such.
Dated: --------------------------------, 1994
- ---------------------------------------------
(Signature)
- ---------------------------------------------
(Signature if held jointly)
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT
WILL RECORD YOUR VOTES.
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
MCI COMMUNICATIONS CORPORATION
Investor Relations
1801 Pennsylvania Avenue, NW Toll-free: 800-765-2115
Washington, DC 20006 Fax: 202-887-2967
Dear Investor,
In order to serve you better and to highlight MCI's technology, we have
installed a new, automated information service. By calling 800-765-2115, you
now may:
request corporate documents, such as annual and quarterly reports, to be
sent by mail;
request corporate documents to be sent by fax, using MCI's Fax Reply
service;
speak with an MCI Investor Relations representative; or
ask to be transferred to a representative of Mellon Securities, our
transfer agent, for questions regarding change of address, dividend
payments or other issues relating to stock certificates.
Alternatively, you can contact us by electronic mail at "MCI Investor
Relations" (MCI Mail ID: 640-5834) or on the Internet at 640- 5834 at
mcimail.com.
We believe these enhancements will facilitate our efforts to be more responsive
to your needs.
Sincerely,
/s/ CONNIE WEAVER
- -----------------
Connie Weaver
Vice President
Investor Relations
