<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
MCI COMMUNICATIONS CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MCI COMMUNICATIONS CORPORATION
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $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 (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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO OF MCI APPEARS HERE]
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
TIME:
MONDAY, APRIL 17, 1995
AT 12:00 p.m.
PLACE:
NORTH CAROLINA BAR CENTER
8000 WESTON PARKWAY
CARY, NORTH CAROLINA
MCI COMMUNICATIONS CORPORATION
<PAGE>
[LETTERHEAD OF MCI APPEARS HERE]
March 10, 1995
Dear Stockholder:
This year's annual meeting of stockholders will be held at the North Carolina
Bar Center, 8000 Weston Parkway, Cary, North Carolina, on Monday, April 17,
1995, at 12:00 p.m. (E.D.T.). You are cordially invited 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 directors and the approval of the board's selection of
independent accountants. Regardless of the number of shares you own, it is
important that you carefully consider and vote on these matters and such other
business as may come before the meeting.
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.
Very truly yours,
/s/ Bert C. Roberts, Jr.
Bert C. Roberts, Jr.
Chairman of the Board of Directors
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of MCI COMMUNICATIONS CORPORATION will be
held at the North Carolina Bar Center, 8000 Weston Parkway, Cary, North
Carolina, on Monday, April 17, 1995, at 12:00 p.m. (E.D.T.), for the following
purposes:
(1) election of four directors by the holders of Common Stock, each to
serve for a term of three years;
(2) election of two Class A directors by the holders of Class A Common
Stock, each to serve for a term of one year;
(3) approval of the appointment by the board of directors of Price
Waterhouse LLP as independent accountants for the year ending December 31,
1995; 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 February 17, 1995,
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 7000
Weston Parkway, Cary, North Carolina, for a period of ten days prior to the
meeting.
Dated: March 10, 1995
By order of the board of directors,
/s/ C. Bolton-Smith, Jr.
C. Bolton-Smith, Jr.
Secretary
<PAGE>
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, April 17, 1995, at 12:00 p.m. (E.D.T.), at the North Carolina Bar
Center, 8000 Weston Parkway, Cary, North Carolina, or at any adjournment
thereof, for the purposes set forth in the Notice of Annual Meeting of
Stockholders. The Company's 1994 Annual Report, which contains MCI's financial
statements for the year ended December 31, 1994, this Proxy Statement and a
form of proxy are being mailed on or about March 10, 1995, to stockholders of
record at the close of business on February 17, 1995, the record date for the
meeting.
The cost of soliciting proxies, which will be borne by the Company, consists
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 proxy.
RECORD DATE, VOTING RIGHTS AND VOTING PROCEDURE
Only stockholders of record at the close of business on February 17, 1995,
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 ("Common Stock"); and Class A
Common Stock, par value $.10 per share ("Class A Common Stock"). On the record
date, there were 544,745,597 shares of Common Stock and 135,998,932 shares of
Class A Common Stock outstanding and entitled to vote at the annual meeting.
Unless otherwise noted, the term director(s), when used in this Proxy
Statement, shall include the Class A directors.
Holders of Common Stock will vote as a class on the election of directors.
Holders of Class A Common Stock will vote as a class on the election of the
Class A directors. The holders of Common Stock and Class A Common Stock vote as
a single class with regard to all other matters to be acted upon at the annual
meeting.
In 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 by such stockholder's class
(four directors by the holders of Common Stock and two Class A directors by the
holders of Class A Common Stock at this meeting). Each stockholder may cast the
whole number of votes so computed for one candidate, or may
<PAGE>
distribute them among the candidates, as such stockholder chooses. 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 a proposal to be voted upon at the meeting requires the
affirmative vote of a majority of the shares present in person or by proxy at
the meeting and entitled to be cast. An abstention from voting will be
tabulated as a vote withheld in the election of directors and will have no
influence on the voting results. In addition, an abstention from voting on a
proposal voted upon at the meeting will have the same effect as votes cast
against such proposal. An abstention will be included in computing the number
of shares present for purposes of determining the presence of a quorum at the
meeting.
Brokers holding shares in street name for beneficial owners must vote those
shares according to instructions, if any, they receive from the owners. Under
applicable rules, if instructions are not received, brokers do have authority
to vote the shares in their discretion on certain matters, in this case, on the
election of directors and the approval of the appointment of the Company's
independent accountants. Therefore, failure of stockholders to provide
instructions to their brokers will not prevent votes from being cast by the
broker in its discretion with respect to the election of directors or the
approval of the appointment of the Company's independent accountants.
At the meeting, votes will be tabulated by inspectors of election appointed
by the Chairman of the Company's board of directors. The Company's by-laws
provide that a majority of the votes entitled to be cast by the holders of all
shares of the Company's capital stock issued and outstanding and entitled to
vote, present in person or by proxy, shall constitute a quorum at a meeting of
the stockholders.
Each proxy returned to the Company will be voted in accordance with the
instructions the holder of record indicates on the proxy form. If no
instructions are provided, proxies will be voted as follows: proxies for Common
Stock will be voted FOR the election as directors of the four nominees and FOR
the approval of the appointment of Price Waterhouse LLP as independent
accountants for the year ending December 31, 1995; proxies for the Class A
Common Stock will be voted FOR the election as Class A directors of the two
nominees and FOR the approval of the appointment of Price Waterhouse LLP as
independent accountants for the year ending December 31, 1995; and proxies for
shares held in the Company's employee stock ownership and 401(k) plans will be
voted by the trustee in the same percentages as those proxies received by the
trustee which gave instructions for voting. Your vote will be held in
confidence when required by applicable law. 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 nominee 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 sixteen, as determined by the board of directors from
time to time. Mr. Richard T. Liebhaber retired from the board in December 1994
and Mr. C. B. Rogers, Jr. resigned from the board in February 1995. As a
result, the board of directors currently consists of 12 members, divided into
four classes: two classes of three directors each, one class of four directors
and one class of two Class A directors. The holders of the Company's Common
Stock elected all current directors, except Mr. Taylor, who was elected by the
board at its September
2
<PAGE>
1994 meeting. The by-laws also provide that directors elected by the holders of
Common Stock shall be elected for three-year terms and that one class of such
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 1998.
British Telecommunications plc ("BT"), the holder of all outstanding shares
of Class A Common Stock elected the Class A directors on September 30, 1994,
the date BT acquired all outstanding shares of Class A Common Stock. BT has the
right to elect one additional Class A director, but has to date chosen not to
do so. The Class A directors are to be elected for a one-year term at each
annual meeting.
The table below sets forth certain information as of December 31, 1994, with
respect to the six candidates for election as directors at this annual meeting
and the remaining six 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 1995 and who are
Nominees for Terms Expiring in 1998
Michael H. Bader (65)(A)......................... 1968 401,874(2)
Member of the law firm of Haley Bader & Potts
P.L.C.; 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 (66)(A)........................ 1988 34,000(3)
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, Mediamune
Inc., Fusion System Inc., InfoVest Inc. 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. (52)(C)..................... 1985 1,396,340(4)
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 (64)(B)....................... 1980 30,990(5)
President and Chief Executive Officer of
Strategic Enterprises, Inc., a management
consulting firm, since 1986; a director of
Medtrac, Inc. and Laser Technologies, Inc.
Class A Directors Whose Terms Expire Annually and
Who are Candidates for Election
Michael L. Hepher (51)........................... 1994 0
Group Managing Director of BT and a member of its
board of directors since 1991; a director of
Grand Metropolitan plc; formerly Chairman and
Managing Director of Lloyds Abbey Life plc.
Alfred T. Mockett (46)........................... 1994 0
Managing Director, Global Communications, BT,
since 1994; other executive positions within BT
since 1991; Managing Director of Memorex Telex NV
prior to 1991.
Directors Whose Terms Expire in 1996
Judith Areen (50)(A)(C).......................... 1992 20,000(6)
Executive Vice President for Law Center Affairs
and Dean of the Law Center, Georgetown
University, since 1989; Professor of Law, Law
Center, Georgetown University, since 1976.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
DIRECTOR OWNERSHIP OF
NAME, AGE AND PRINCIPAL OCCUPATION SINCE COMMON STOCK (1)
- ---------------------------------- -------- -----------------
<S> <C> <C>
Gerald H. Taylor (53)............................ 1994 553,377(7)
President and Chief Operating Officer of MCI
since July 1994; President and Chief
Operating Officer of MCI Telecommunications
Corporation ("MCIT") since April 1994;
Executive Vice President and Group Executive of
MCIT from 1993 to April 1994; Executive Vice
President of MCIT from 1990 to 1993.
Judith Whittaker (56)(B)......................... 1985 36,000(8)
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.
Directors Whose Terms Expire in 1997
Clifford L. Alexander, Jr. (61)(A)(C)............ 1982 50,000(9)
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 (68)(B)......................... 1988 30,000(10)
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.
John R. Worthington (64)......................... 1968 641,389(11)
General Counsel of MCI since 1971; Senior Vice
President of MCI since 1979.
</TABLE>
- --------
(A) Member of the Audit Committee.
(B) Member of the Compensation Committee.
(C) Member of the Nominating Committee.
(1) 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 401(k) Plan, with respect to
which shares such person has sole voting power only. Where indicated, the data
also includes shares which each person had the right to acquire upon exercise
of stock options within sixty days of December 31, 1994, and also shares
covered by awards of restricted stock. As of December 31, 1994, no individual
officer or director beneficially owned more than 1% of the outstanding shares
of the Company's capital stock.
(2) Includes 10,000 shares of Common Stock Mr. Bader has the right to acquire
pursuant to the exercise of stock options. Mr. Bader shares voting and
investment power with respect to all shares other than those which he has the
right to acquire pursuant to the exercise of such stock options. 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 Common Stock held
by such Fund.
(3) Includes 10,000 shares of Common Stock Mr. Macklin has the right to
acquire pursuant to the exercise of stock options. Does not include 3,200
shares of Common Stock owned solely by Mr. Macklin's wife, in which shares he
disclaims beneficial ownership.
(4) Includes 45,185 shares of Common Stock allocated to Mr. Roberts' ESOP
account, 878,200 shares of Common Stock he has the right to acquire pursuant to
the exercise of stock options, 201,736 shares of Common Stock covered by
restricted stock awards and 112,500 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 Mr. Roberts' wife as custodian for the benefit
of their minor children, in which shares Mr. Roberts disclaims beneficial
ownership.
4
<PAGE>
(5) Includes 10,000 shares of Common Stock Mr. Sayford has the right to
acquire pursuant to the exercise of stock options. Does not include 800 shares
of Common Stock owned solely by Mr. Sayford's wife, in which shares he
disclaims beneficial ownership.
(6) Includes 16,000 shares of Common Stock Ms. Areen has the right to acquire
pursuant to the exercise of stock options.
(7) Includes 30,513 shares of Common Stock allocated to Mr. Taylor's ESOP
account, 345,394 shares of Common Stock he has the right to acquire pursuant to
the exercise of stock options and 150,000 shares of Common Stock covered by
restricted stock awards.
(8) Includes 10,000 shares of Common Stock Ms. Whittaker has the right to
acquire pursuant to the exercise of stock options.
(9) Includes 10,000 shares of Common Stock Mr. Alexander has the right to
acquire pursuant to the exercise of stock options. Mr. Alexander shares voting
and investment power with respect to all shares other than those which he has
the right to acquire pursuant to the exercise of such stock options.
(10) Includes 10,000 shares of Common Stock Mr. Jones has the right to
acquire pursuant to the exercise of stock options.
(11) Includes 29,959 shares of Common Stock allocated to Mr. Worthington's
ESOP account and 325,510 shares of Common Stock he has the right to acquire
pursuant to the exercise of stock options. Does not include 147,890 shares of
Common Stock owned solely by Mr. Worthington's wife, in which shares he
disclaims beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MCI, since its inception, has retained the law firm of Haley, Bader & Potts
P.L.C., 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, 1994, totaled
approximately $188,000. It is anticipated that the Company will pay Haley Bader
& Potts P.L.C. an amount in excess of $60,000 in 1995 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 share ownership of the Chief Executive Officer, Bert C. Roberts, Jr., and
of Gerald H. Taylor and of all other directors is set forth in the table
appearing elsewhere in this Proxy Statement under the caption "Election of
Directors." The following table sets forth the number of shares beneficially
owned by each of the other three executive officers named in the compensation
tables set forth elsewhere in this Proxy Statement and by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME, AGE AND PRINCIPAL OCCUPATION BENEFICIALLY OWNED(1)
- ---------------------------------- ---------------------
<S> <C>
Timothy F. Price (41)................................... 207,073(2)
Executive Vice President of MCIT and Group President of
Communications Services Group since 1994; President,
Business Markets for MCIT from 1993 to 1994; President
of MCI Business Services for MCIT from 1992 to 1993;
Senior Vice President of MCIT from 1990 to 1992; a Vice
President of MCIT from 1984 to 1990.
Daniel E. Crawford (55)................................. 383,203(3)
Executive Vice President of MCI Global Access
Corporation since 1994; Chief Operating Officer of
AVANTEL S.A. de C.V. ("AVANTEL") since 1994 (4);
President of Network Services Division from 1990 to
1994; President of MCIT Southwest Division from 1989 to
1990.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME, AGE AND PRINCIPAL OCCUPATION BENEFICIALLY OWNED(1)
- ---------------------------------- ---------------------
<S> <C>
Douglas L. Maine (46)................................... 275,161(5)
Executive Vice President of MCI since 1994; Chief
Financial Officer of MCI since 1992; President of MCIT
Southern Division from 1990 to 1992; Senior Vice
President of MCI from 1988 to 1994.
All executive officers and directors as a group. (6).... 5,179,874(7)
</TABLE>
- --------
(1) 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 ESOP, which
includes a 401(k) Plan, with respect to which shares such person has sole
voting power only. Where indicated, the data also includes shares which each
person had the right to acquire upon exercise of stock options within sixty
days of December 31, 1994, and also shares covered by awards of restricted
stock.
(2) Includes 8,890 shares of Common Stock allocated to Mr. Price's ESOP
account, 94,840 shares of Common Stock he has the right to acquire pursuant to
the exercise of stock options and 100,000 shares of Common Stock covered by
restricted stock awards.
(3) Includes 6,068 shares of Common Stock allocated to Mr. Crawford's ESOP
account, 322,550 shares of Common Stock he has the right to acquire pursuant to
the exercise of stock options and 40,000 shares of Common Stock covered by
restricted stock awards. Does not include 2,240 shares of Common Stock owned
solely by Mr. Crawford's wife and 10 shares of Common Stock held by his wife as
custodian for the benefit of a minor child, in all of which shares he disclaims
beneficial ownership.
(4) AVANTEL is a business venture in Mexico formed by the Company and Grupo
Financiero Banamex Accival S.A. de C.V. MCI Global Access Corporation is the
MCI subsidiary which is the stockholder of the Company's shares of AVANTEL.
(5) Includes 15,414 shares of Common Stock allocated to Mr. Maine's ESOP
account, 226,490 shares of Common Stock he has the right to acquire pursuant to
the exercise of stock options and 20,000 shares of Common Stock covered by
restricted stock awards.
(6) This group includes the Company's executive officers, as such term is
defined in Rule 3b-7 of the Securities Exchange Act of 1934, and its directors,
a total of 22 persons.
(7) Includes 173,130 shares of Common Stock allocated to officers' accounts
under the ESOP, 2,995,353 shares of Common Stock that officers and directors
have the right to acquire pursuant to the exercise of stock options and 731,736
shares granted to officers pursuant to restricted stock awards. Officers and
directors have shared voting and investment power with respect to 431,874 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 capital stock outstanding as of December
31, 1994, based solely on the statements on Schedules 13G and 13D received by
the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Mellon Bank Corporation 28,798,000 shares(1) 5.3%
One Mellon Bank Center
Pittsburgh, Pennsylvania
Class A British Telecommunications plc 135,998,932 shares(2) 100%
Common Stock 81 Newgate Street
London U.K.
</TABLE>
- --------
(1) Mellon Bank Corporation has (i) sole voting power with respect to
5,193,000 of these shares, (ii) shared voting power with respect to 174,000 of
these shares, (iii) sole investment power with respect to 5,485,000 of these
shares and (iv) shared investment power with respect to 3,394,000 of these
shares.
(2) BT has sole voting and investment power with respect to all these shares.
6
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon review of Forms 3, 4 and 5 (and amendments thereto)
furnished to the Company during or in respect of the fiscal year ended December
31, 1994, the Company is not aware of any directors or executive officers who
have not timely filed reports required by Section 16(a) of the Securities
Exchange Act of 1934 during or in respect of such fiscal year, except for Fred
Briggs, an executive officer, who inadvertently omitted a stock holding on his
initial Form 3 and subsequently reported it on his Form 5.
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 and incentive compensation of the Chief Executive
Officer ("CEO") and the Chief Operating Officer ("COO"), review of the
Company's executive compensation and administering the Company's Stock Option
Plans, Executive Incentive Compensation Plan ("EICP") 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 and
the Board of Directors' Deferred Compensation Plan. The Nominating Committee
will consider recommendations by stockholders for nominees for election as
directors at the 1996 annual meeting submitted by November 10, 1995.
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, 1994, the board of directors had ten
regular meetings and one special meeting. 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 1994, directors of the Company who were not officers were entitled to
receive a retainer of $2,250 per month and an additional $1,500 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. In addition, the Chairmen of the Audit and
Compensation Committees received an additional retainer of $300 per month, and
each member 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 for each such meeting attended. Directors
also were reimbursed for actual out-of-pocket travel expenses incurred in
connection with attendance at board and/or committee meetings. Retainers and
travel expense reimbursements for the Class A directors are paid to BT.
Effective July 1, 1994, the Company's board adopted a deferred compensation
plan which allows non-employee directors to elect to defer monthly retainer and
meeting fees that would otherwise be paid to them. The Company may invest
deferred amounts in mutual funds in accordance with the director's preference.
When the elected deferral period expires, the director receives the deferred
amount adjusted for investment performance. At this time only two directors
have made deferral elections.
In 1989, the Company's stockholders 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 automatically granted, upon election to the board, 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
7
<PAGE>
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, any
unexercised portion of the grant is canceled, and a new option for 40,000
shares is automatically 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, 1994, options to purchase 800,000 shares of Common Stock
have been granted pursuant to the Directors' Plan, which options have an
average per share exercise price of $17.3781. During the year ended December
31, 1994, no options were exercised by participating directors.
RUMUNERATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL -----------------------
COMPENSATION RESTRICTED SECURITIES
---------------- OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION (1) AWARD(S) (2) OPTIONS COMPENSATION (3)
POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------ ---- ------- -------- --------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bert C. Roberts, Jr.......... 1994 850,000 900,000 69,460 896,000 180,000 $49,011
Chairman and 1993 800,000 900,000 459,869 2,059,500 180,000 41,534
Chief Executive Officer 1992 725,000 800,000 22,180 1,342,000 160,000 44,686
Gerald H. Taylor............. 1994 457,885 500,000 12,387 560,000 112,000 36,480
President and 1993 307,800 220,175 106,883 2,874,187 90,000 31,056
Chief Operating Officer 1992 275,000 188,675 3,685 335,500 70,000 32,292
Timothy F. Price............. 1994 330,385 270,250 6,181 560,000 110,000 21,991
Group President of the 1993 245,000 130,000 0 1,753,187 51,000 16,703
Communications Services 1992 200,019 81,150 0 167,750 49,000 20,705
Group of MCIT
Daniel E. Crawford........... 1994 285,000 157,775 8,574 0 70,000 32,396
Executive Vice President of 1993 259,500 185,875 38,787 514,875 70,000 26,790
MCI Global Access Corporation 1992 235,000 188,675 2,991 335,500 70,000 29,676
Douglas L. Maine............. 1994 245,000 182,000 4,132 0 67,000 25,320
Executive Vice President and 1993 226,000 124,675 14,927 235,625 51,000 18,689
Chief Financial Officer 1992 218,000 102,000 0 346,500 51,000 22,516
</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) Values indicated above are based on the market price on date of grant. As
of December 31, 1994, these executive officers held the following restricted
shares in the aggregate, valued as indicated based on the market price on
December 31, 1994: Mr. Roberts, 201,736 shares, valued at $3,691,065; Mr.
Taylor, 150,000 shares, valued at $2,741,250; Mr. Price, 100,000 shares, valued
at $1,827,500; Mr. Crawford, 40,000 shares, valued at $731,000; and Mr. Maine,
20,000 shares, valued at $365,500. Dividends on the restricted shares are held
by the Company until the restrictions are removed.
(3) Consists of the following: (1) contributions by the Company to the
executives' accounts under the MCI ESOP and 401(k); and (2) all 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) $19,806 and (2)
$29,205; Mr. Taylor (1) $19,806 and (2) $16,674; Mr. Price (1) $18,498 and (2)
$3,493; Mr. Crawford (1) $19,526 and (2) $12,870; and Mr. Maine (1) $19,588 and
(2) $5,732.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS EMPLOYEES OR BASE APPRECIATION FOR OPTION TERM (2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------------------------------
NAME (#) (3) YEAR ($/SH) (4) DATE (5) 0% ($) (6) 5% ($) 10% ($)
- ---- ---------- ---------- ---------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bert C. Roberts, Jr..... 180,000 0.847% 26.8750 02/01/04 $ 0 $ 3,042,288 $ 7,709,778
Gerald H. Taylor........ 92,000 0.433% 26.8750 02/01/04 0 1,554,947 3,940,553
20,000 0.094% 23.3750 05/23/04 0 294,012 745,074
Timothy F. Price........ 70,000 0.329% 26.8750 02/01/04 0 1,183,112 2,998,247
20,000 0.094% 23.3750 05/23/04 0 294,012 745,074
20,000 0.094% 18.8750 12/07/04 0 237,410 601,640
Daniel E. Crawford...... 70,000 0.329% 26.8750 02/01/04 0 1,183,112 2,998,247
Douglas L. Maine........ 51,000 0.240% 26.8750 02/01/04 0 861,982 2,184,437
16,000 0.075% 23.3750 05/23/04 0 235,210 596,059
-----------------------------------------------------------------------------------------
All Optionees (7)....... 22,238,717 100.00% 26.4007 various 0 357,387,627 905,695,269
All Stockholders........ N/A N/A N/A N/A 0 7,849,751,060 (8) 19,892,724,598 (8)
</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
SEC 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
unknown. 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
$29.93 and $47.66, respectively, as of December 31, 2004.
(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) The exercise price of the options is equal to the fair market value of
the underlying stock on the date of grant.
(5) All options granted in 1994 expire ten years from the date of grant.
(6) Unless the stock price increases, which will benefit all stockholders
commensurately, an optionee will realize no gain.
(7) As of December 31, 1994, this group consisted of 4,195 employees.
(8) Values were calculated using the total shares outstanding (including
Class A Common Stock which is convertible into Common Stock) as of December 31,
1994 (679,273,376 shares) and using a base price of $18.375.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT FY-END
ACQUIRED OPTIONS AT FY-END (#) ($) (1)
ON EXERCISE VALUE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bert C. Roberts, Jr. ... 0 0 705,000/355,000 $3,480,600/$139,400
Gerald H. Taylor........ 11,450 153,144 268,134/196,100 1,341,983/ 60,988
Timothy F. Price........ 35,000 346,090 42,330/160,830 245,520/ 36,316
Daniel E. Crawford...... 32,000 553,750 252,550/140,700 1,182,559/ 60,988
Douglas L. Maine........ 0 0 175,490/118,510 846,129/ 44,434
</TABLE>
- --------
(1) Options are "in-the-money" if, on December 31, 1994, the market price of
the Common Stock ($18.375) 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, 1994 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,
together with the Qualified Plan, the "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 1994, 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 $150,000. The Supplemental Plan pays
the incremental benefit attributable to that part of the employee's
compensation which exceeds the Code limitations in any plan year.
Employees are fully vested upon the earlier of 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 or after age 55 with five
years of service to the Company or a participating subsidiary. In addition, the
Supplemental Plan permits the Company to grant additional service and
additional pension amounts to selected employees. To date, grants of additional
service have been made to five retired officers.
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 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 the years 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 service through December 31, 1992. For employees
employed on or after January 1, 1994, the Pension Plans provide a future
service benefit for each subsequent year of credited service equal to a flat
1.8% of the employee's eligible compensation. Benefits payable from tax
qualified plans are further limited by Code section 415; in 1994, the annual
maximum benefit from the Qualified Plan was limited to $118,800. 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, 1994, Messrs. Roberts, Taylor, Price, Crawford and Maine,
upon normal retirement, would be entitled to approximate annual retirement
benefits from the Pension Plans of approximately $754,424; $304,212; $267,445;
$155,077 and $206,507, respectively.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION POLICIES AND OBJECTIVES
The Compensation Committee of the board of directors evaluates and sets the
base salary and incentive compensation for the CEO and the COO, and administers
the Company's Stock Option Plans and the EICP. At the beginning of 1994, Bert
C. Roberts, Jr. served as both the CEO and COO. Since Gerald H. Taylor was
appointed COO mid-year, the Compensation Committee did not determine or approve
his 1994 salary; rather, it was determined by the CEO in accordance with the
Company's standard procedures for executive salaries described below. Mr.
Taylor's salary for 1995 has been determined by the Compensation Committee. The
Compensation Committee reviews, but does not evaluate, determine or approve,
the compensation of the Company's other executives, which are determined by the
CEO and/or COO with the assistance of the Company's human resources staff.
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 tie a meaningful portion of compensation to the
achievement of improved long term stockholder value and other business
objectives through the EICP; and (3) to provide stock-based long term
incentives that directly link the compensation of executives to appreciation in
the Common Stock. The Compensation Committee accomplishes these objectives by
periodically reviewing surveys of executive compensation and by establishing an
annual EICP. Through annual grants of options and, at times, awards of
restricted stock, the Compensation Committee attempts to align 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 executive positions below the
level of CEO and COO. These salary ranges are developed by the Company's human
resources staff from surveys conducted by compensation consultants using
competitive market data from similarly sized companies in the
telecommunications industry, as well as other industries. This group of
companies includes all companies that comprise the Company's peer group used in
constructing the Company's performance graph. (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
executive's unique talents and strengths and the individual's contribution to
the Company. The CEO and/or the COO annually review each executive's salary and
performance. In this review, the CEO and/or the COO consider individual
contribution, attainment of individual and business unit performance objectives
and level within the salary range; however, there is no specific weight given
to each criteria. The CEO and/or the COO also use 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 and corporate
performance. The Compensation Committee reviews, but does not approve, the
decisions regarding executives' salaries.
The purpose of the EICP is to encourage consistent growth in stockholder
value by creating a motivational environment in which compensation is
contingent upon the performance of the Company, the business unit, if
applicable, and the individual's performance. All executive officers
participate in the EICP.
At the beginning of the 1994 fiscal year, the Compensation Committee
established an annual EICP. As provided by the EICP, target awards were
established for each executive based on competitive norms and the position
level of the executive. Target awards represent a specified percent of the
midpoint of the executive's
11
<PAGE>
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.
In 1994, in order to more closely tie the executive's incentive award with such
executive's performance objectives for the year, the EICP provided the business
units with more discretion in determining the individual performance
measurements for each executive in the particular business unit and the
resulting awards. Prior to the end of February 1994, the senior management of
the business units established and weighted performance criteria for the
executives in their respective business units. The performance criteria were
based on each executive's individual performance objectives and either the
business unit's objectives or on the Company's business plan. The performance
criteria for the senior management of the business units were established by
the COO and CEO and were based on the Company's business plan with
consideration for individual contribution.
The Compensation Committee also considered proposed changes to the EICP to
comport with the requirements of the Omnibus Budget Reconciliation Act of 1993
(the "Revenue Act"), which, unless certain proposed requirements are met,
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
Mr. Roberts' compensation is affected by these limitations. The enabling
regulations under the Revenue Act are in proposal form and may change in 1995.
The Compensation Committee has reviewed various executive compensation
proposals in response to these proposed regulations but has deferred any final
decisions until final regulations are 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 executives and key employees who are recommended by management as
being in a position to continue positively impacting the Company's
profitability. Option awards are focused 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
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 based on the grade level of the
executive and adjusted for individual performance. 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 same
organization or business unit. Stock options have been granted to key employees
at all levels of the Company's management. The Compensation 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. 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 who constitute the core of the Company's management team. Grants are
made based on the management's assessment of the executive's expected future
contributions and strategic importance to the Company, as well as past
performance. Restrictions on shares are generally removed ratably on the third,
fourth and fifth anniversary of 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.
12
<PAGE>
OTHER EXECUTIVE COMPENSATION PLANS
The Company sponsors other employee benefit plans for both executives and
non-management employees. In addition to the Supplemental Plan relating to
retirement benefits, the Company has 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 CHIEF OPERATING OFFICER AND
COMPANY PERFORMANCE
The CEO and Chairman of the Board, Bert C. Roberts, Jr., is eligible to
participate in the same incentive compensation plan as the other senior
executives; however, the EICP gives the Compensation Committee sole discretion
to evaluate and establish his compensation with special consideration and
attention. The Compensation Committee also uses its discretion in establishing
Mr. Roberts' salary for the year. Mr. Gerald H. Taylor served as COO from July
1994, and the Compensation Committee determined his incentive compensation for
the year with a recommendation from the CEO.
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 Compensation 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 a review of corporate
performance relative to the Company's business plan, Mr. Roberts' individual
performance, information supplied by the consultant, the expected challenges
for Mr. Roberts in the coming year and other factors that the Compensation
Committee in its discretion may deem relevant at that time, the Compensation
Committee establishes Mr. Roberts' salary for the new fiscal year.
Under the EICP, the Compensation Committee periodically develops special
criteria for determining Mr. Roberts' annual incentive compensation award. The
1994 guidelines were: (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
Compensation Committee does not assign specific weights to these factors, but
rather reviews them in the context of Mr. Roberts' accomplishments and the
Company's performance relative to its business plan for the year.
In its evaluation, the Compensation Committee considered the award under the
EICP to Mr. Roberts' relative to the awards proposed to be paid to other
executives. The Compensation Committee also took into account its perceptions
concerning the business environment, competition and the Company's particular
challenges in the prior fiscal year.
Based on these factors, in February 1995, the Compensation Committee awarded
Mr. Roberts an incentive bonus of $900,000 for 1994. The Compensation Committee
based this award on the fact that MCI's earnings per share increased 27% from
$1.04 in 1993 to $1.32 in 1994; that the Company's revenues increased nearly
12% from $11.9 billion in 1993 to $13.3 billion in 1994; that the Company
maintained its operating margin in 1994, excluding unusual charges to operating
earnings; and that MCI's global presence was expanded significantly, most
notably through MCI's consummation of its strategic global alliance with BT and
through its alliance with AVANTEL.
During 1994, Mr. Taylor served as COO, for approximately six months.
Therefore, in determining his 1994 incentive award, the Compensation Committee
relied on Mr. Roberts' recommendation and other appropriate financial measures
comprised of the following: an increase in operating cash flow from $1.98
13
<PAGE>
billion in 1993 to $2.36 billion in 1994, an increase in operating income from
$1.27 billion in 1993 to $1.46 billion in 1994, and an increase in revenue from
$11.9 billion in 1993 to $13.3 billion in 1994. Neither the Compensation
Committee nor Mr. Roberts assigned any specific weight to these factors, but
rather used their discretion and evaluated these factors in the context of the
Company's performance relative to its business plan for the year and the
challenges facing Mr. Taylor in 1994. Based on these factors, the Compensation
Committee awarded Mr. Taylor an incentive award of $500,000 for 1994.
In preparation for making any decision regarding the grant of stock options
and restricted stock, the Compensation Committee evaluated Mr. Roberts' and Mr.
Taylor's performances relative to the guidelines described above, the Company's
achievements during the year (discussed above), the awards made to them in
prior years, their differing yet critical leadership roles in the Company's
future success and noted the degree to which other companies have linked their
CEO's and COO's long term compensation to stockholder return. The Compensation
Committee also used subjective criteria it deemed relevant in its reasonable
business discretion, such as its opinions about the business environment and
the particular challenges for the Company as well as the potential market for
Mr. Roberts' and Mr. Taylor's services, to determine the award for a particular
year. In addition, the Compensation Committee considers the use of the Stock
Option Plan as a means to align the financial interest of the CEO and COO with
that of the Company's stockholders.
Richard M. Jones
Richard B. Sayford
Judith Whittaker
Members of the Compensation
Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, 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
from January through April of 1994, is a partner in the law firm of Haley,
Bader & Potts P.L.C., which firm performed legal services for the Company
during the year ended December 31, 1994. Legal fees and expenses paid by the
Company to Haley, Bader & Potts P.L.C. for the year ended December 31, 1994,
exceeded $60,000.
14
<PAGE>
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: AT&T Corp., Sprint Corporation, NYNEX Corporation, Bell Atlantic
Corporation, BellSouth Corporation, Ameritech Corporation, SBC Communications,
Inc., 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,
1989, and assume that all dividends are reinvested.
[INSERT PERFORMANCE GRAPH HERE]
15
<PAGE>
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Company's board of directors, subject to stockholder approval, has
selected Price Waterhouse LLP to serve as independent accountants for the
Company's fiscal year ending December 31, 1995.
A representative of Price Waterhouse LLP 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 LLP as independent
accountants requires the affirmative vote of a majority of votes entitled to be
cast by those present in person or represented by proxy at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Proposals submitted by stockholders for presentation at the 1996 annual
meeting must be received by the Company no later than November 10, 1995 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
16
<PAGE>
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
ELECTION OF DIRECTORS, NOMINEES: MICHAEL H. BADER, GORDON S. MACKLIN, BERT
C. ROBERTS, JR., RICHARD B. SAYFORD
FOR ALL NOMINEES LISTED, except vote withheld from
the following nominee(s):
FOR WITHHELD
_____________________________________________________
[_] [_]
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 ___________________________, 1995
________________________________________
(Signature)
+ ________________________________________
+
+ ________________________________________
+ (Signature if held jointly)
++++++++
*PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PLEASE SIGN, DATE, AND RETURN
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES* THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
<PAGE>
MCI
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MCI
COMMUNICATIONS CORPORATION FOR THE ANNUAL MEETING
TO BE HELD APRIL 17, 1995
Clifford L. Alexander, Jr., Gerald H. Taylor, and John A. Worthington, or any
of them with full power of substitution, are hereby authorized to represent and
to vote, as designated on the reverse side, all of the undersigned's shares of
Common Stock at the annual meeting of stockholders of MCI COMMUNICATIONS
CORPORATION to be held on April 17, 1995 at 12:00 p.m. at the North Carolina Bar
Center, 8000 Weston Parkway, Cary, North Carolina, 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 PROPOSAL NO. 2 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. FOR SHARES
HELD IN THE COMPANY'S ESOP AND 401(K) PLANS, IF NO DIRECTION IS MADE, THE
TRUSTEE WILL VOTE SHARES PURSUANT TO THE TERMS OF THE TRUST AGREEMENT.
(Continued on reverse side)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
