SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by a Party Other than the Registrant X
Definitive Proxy Statement X
Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Name of Registrant as Specified in Its Charter: Merck & Company,
Inc.
Name of Person(s) Filing Proxy Statement: Thomas J. Kelly
Payment of Filing Fee:
X $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(a)(3)
Filing date: March 28, 1994
<PAGE>
PROXY STATEMENT
SOLICITATION IN OPPOSITION TO MANAGEMENT'S NOMINEES
FOR THE BOARD OF DIRECTORS OF
MERCK & CO.
Thomas J. Kelly March 28, 1994
1301 S. Delaware Avenue
Philadelphia PA 19147
Tel. (215) 952-1999
Fax (215) 952-0250
Merck's annual shareholders meeting is on April 26, 1994. I
am running for the board of directors in opposition to the
incumbent board, and ask that you cumulate your votes on my behalf.
This proxy statement is being released to shareholders on or about
March 28th.
I BELIEVE EXECUTIVE COMPENSATION AT MERCK NEEDS REFORM.
Here is a summary of Merck executive compensation in the past
three years:
<TABLE>
<CAPTION>
Salary & Stock
Name Title Year Bonus LTIP Pay(1) Options(2)
<S> <C> <C> <C> <C> <C>
Roy Vagelos CEO, Pres. 1993 $2,240,625 $1,303,200 300
1992 $2,525,000 680,000
1991 $2,352,083 $ 992,400 180,300
Edward M. Exec. VP 1993 $1,055,000 $ 401,700 110,300
Scolnick 1992 $1,190,000
1991 $ 997,500 $ 285,200 36,000
Francis H. Exec. VP 1993 $1,055,000 $ 400,000 110,000
Spiegel, Jr. 1992 $1,190,000 54,000
1991 $1,067,500 $ 263,300 54,300
Jerry T. Exec. VP 1993 $1,011,876 $ 322,000 110,000
Jackson 1992 $1,036,250 54,000
1991 $ 895,000 $ 186,000 54,300
John L. Exec. VP 1993 $1,041,589 $ 282,300 110,300
Zabriskie 1992 $1,036,250 54,000
1991 $ 895,000 54,300
Richard J. Sr. VP 1993 departed
Markham 1992 $1,023,750 54,000
1991 $ 796,250 54,300
Judy C. Lewent Sr. V.P. 1993 $ 585,250 60,300
1992 $ 632,500 31,500
1991 $ 512,500 31,800
<FN>
(1) Long Term Incentive Pay: see Merck's 1994 proxy statement for more
information.
(2) Number of shares.
</TABLE>
<PAGE>
I especially question the grant of options for 500,000 shares
to Dr. Vagelos in 1992. Those options are not exercisable until
long after he retires from the company (he reaches the Company's
mandatory retirement age in 1994; the options are not exercisable
until July 1997). Options are usually granted to encourage an
executive to take actions while he or she is in office to push the
stock price up, thereby benefitting both shareholders at large and
the option holder. Dr. Vagelos stands to profit enormously from
the conduct of his successors: if the stock price rises 10% per
year, those options will be worth $40.8 million. On top of that he
will receive various retirement benefits.
Further information on executive compensation is provided in
Merck's 1993 and 1994 proxy statements, incorporated herein by
reference.
THE OUTCOME OF THE HEALTH CARE REFORM DEBATE FOR MERCK
Our company is laboring hard to convince Congress to block the
Administration's plan to cut and regulate drug prices.
In my view, Merck cannot be a credible player in the debate
over health care reform if its executive compensation levels
continue. I believe Merck's executive pay levels make it hard to
convince policy-makers that Merck is pursuing high profits in order
to fund research and development rather than to benefit Merck
executives. Electing me to the Board will be a statement by Merck
shareholders that they are willing to police executive compensation
on their own.
In 1993, Congress made clear its concern over high executive
compensation levels: it amended the Internal Revenue Code to make
it much harder for public companies to deduct compensation in
excess of one million dollars per year as a business expense.With
limited exceptions, companies can only get a tax deduction for
compensation in excess of $1 million per year if those payments are
based on objective performance criteria approved by shareholders.
See IRC section 162(m). I pledge to shareholders that I will work
hard to avoid their company having to pay taxes on executive pay.
When executive compensation is challenged, the standard answer
of corporate executives and their allies is that high pay helps the
company attract and retain the best talent. However, I believe
that talented executives are willing to work for less than Merck is
now paying. The current Board justifies Merck's pay levels by
pointing to what competitors pay, but remember that legislators and
consumers have no more sympathy for enormous executive pay at our
competitors than at Merck. Also, compare Merck's executive pay in
1992 with some other pharmaceutical companies:
Average Salary and Bonus For Top 5 Execs in 1992: (3)
(FOOTNOTE 3: This is not an exhaustive listing of all drug companies. It is
based on these companies' 1993 proxy statements, which contain more
complete information about executive compensation at each company
and which are available from the SEC and from Disclosure, Inc.
Duties of the top 5 executives obviously vary from company to
company. This survey does not include other forms of compensation,
such as stock options and various benefit programs. More current
data will become available as each company releases its 1994 proxy
statement.)
Company Amount
A. L. Laboratories $ 410,681.40
Abbott Laboratories 925,096.60
Allergan, Inc. 519,524.40
American Cyanamid Co. 789,034.80
Bristol-Myers Squibb Company 1,126,810.20
Eli Lilly & Co. 1,022,540.40
Genentech, Inc. 456,400.00
Johnson & Johnson 992,261.00
K V Pharmaceutical Co. 212,695.00
Marion Merrell Dow, Inc. 903,633.20
MERCK & CO., INC. *1,395,500.00
Pfizer, Inc. 847,200.00
Rhone-Poulenc Rorer, Inc. 613,368.60
Schering Plough Corp. 1,056,100.00
Upjohn Co. 740,091.00
Warner Lambert, Co. 869,716.80
THE NEED FOR A MORE INDEPENDENT PERSPECTIVE ON THE BOARD
I question interlocking directorates when it comes to
executive compensation. Merck's Compensation Committee has
included director Ruben Mettler, who is the former CEO of TRW, Inc.
and still a TRW director. Merck's Dr. Vagelos sat on TRW's Board
between 1987 and March 1, 1993. Both men have served together on
Merck's Board since 1984.
Since Mettler stepped down as TRW's CEO in 1988, TRW has paid
him hundreds of thousands under a series of consulting contracts.
Mettler's latest 3-year consulting contract was approved while
Vagelos was on TRW's Compensation Committee.
Mettler was on Merck's Compensation Committee in 1992 when it
approved the stock option grant of 500,000 shares to Vagelos.
Vagelos was a non-voting member of that Committee until the day
before it voted for this option grant.
I certainly do not accuse Mettler and Vagelos of any
conspiracy; I simply think Merck's Compensation Committee needs
members who view management compensation from a more independent
perspective.
After I announced my candidacy and sent letters to
shareholders questioning Mettler's role on the Compensation
Committee, Merck announced that Compensation Committee members
Mettler and Ross would not run for reelection to its Board this
year.
The remaining Compensation Committee members have been H.
Brewster Atwater, Jr. (CEO, General Mills, Inc.), Lawrence Bossidy
(CEO Allied Signal, Inc. and former Vice-Chair of General
Electric), and William G. Bowen (President, Mellon Foundation).
Bossidy is standing for reelection this year.
If we shareholders continue to have a Compensation Committee
composed primarily of top corporate executives (current or
retired), I believe executive compensation levels will continue at
their same high levels.
WHO IS THOMAS J. KELLY?
Organizations Positions Held Dates Held
Sheet Metal Workers President/Business
Local 19 ("SMW") Manager 1979-present
Philadelphia Zoning
Board of Adjustment Chairman 1992-present
Philadelphia Parking
Authority Board Member 1982-90
SMW Health & Welfare Fund Trustee 1979-present
SMW Pension Fund Trustee 1979-present
SMW Annuity Fund Trustee 1979-present
SMW Joint Apprenticeship Fund Trustee 1979-present
SMW Unemployment Benefit Fund Trustee 1982-present
Philadelphia AFL-CIO Vice-President 1985-present
Mechanical Trades Council
of Philadelphia Vice-President 1979-present
New Jersey Council of
Sheet Metal Workers President 1989-present
Pennsylvania Council of Sheet
Metal Workers President 1990-present
Philadelphia Building &
Construction Trades
Council Vice-President 1982-present
Stabilization Agreement
for National Sheet Metal
Industry Trustee 1986-92
SMW owns 300 shares of Merck common stock, and has owned Merck
stock for more than 3 years.
WHAT I WILL DO AS DIRECTOR
I will be the shareholders' watchdog, no one else's. A
corporate director is a fiduciary, and having considerable
experience as a fiduciary, I understand a fiduciary's obligations
of loyalty. SMW does not represent or seek to represent any Merck
employees, but does object to Merck building non-union. Because
Merck employs over 35,000 people, including about 7300 who bargain
collectively, I believe my familiarity with labor relations would
be useful on the Board.
If elected, I not only plan to pursue the executive
compensation issues discussed above, but also will support a return
to annual election of all directors (declassifying the Board). A
shareholder has made such a proposal this year: read the company's
proxy statement for more on this issue.
To show my personal commitment to annual election of
directors, I pledge to resign after only one year and run again,
rather than take advantage of a multi-year term of office.
THE BOARD OF DIRECTORS ELECTION
The Board says it plans to have 12 seats. Four of those seats
are up for election this year. The current Board's nominees are:
For a term expiring in 1996:
1. Martin J. Wygod (CEO, Medco Containment Services)
Mr. Wygod received $62,407,561 in connection with Merck's
acquisition of Medco in November 1993. His employment contract
provides for a base salary of $800,000 annually. It also provides
him all his salary through December 1997 if he quits for cause or
is terminated for any reason other than a criminal conviction. For
further information, read page 17 of Merck's proxy statement
(incorporated herein by reference). Wygod is seeking election as
a Merck director for the first time.
For terms expiring in 1997:
1. Lawrence A. Bossidy (CEO, Allied Signal, Inc.)
2. William N. Kelley (CEO, Univ. of Penn. Medical Center)
3. Charles E. Exley, Jr. (retired CEO, NCR Corp.)
It is not yet known which of these seats I will seek. Merck's
proxy statement contains further information on the biographies and
compensation of the Board's nominees, which I incorporate by
reference.
SHAREHOLDER PROPOSALS AND OTHER BUSINESS AT THE 1994 MEETING
Merck and its shareholders have made proposals for
consideration at this meeting. These proposals are discussed in
Merck's proxy statement (incorporated herein by reference).
Shareholders who give me their proxy can vote on these proposals as
they wish, but I recommend a vote for all proposals (numbered
according to the proxy card):
2. Ratification of appointment of independent public accountants
3. Proposal to amend Executive Incentive Plan
4. Proposal to adopt the Merck Deferral Program
5. Proposal to amend 1991 Incentive Stock Plan
6. Proposal to return to annual election of all directors
7. Proposal to limit executive compensation to 25 times the
compensation of the average Merck employee
We will vote unmarked cards for these proposals. Management
has urged a vote against proposals 6 and 7. I know of no other
business to be presented at the meeting, but if other matters do
properly come before the meeting, the enclosed proxy card will be
voted in accordance with the best judgment of the persons named on
the card (myself and Bruce Endy, an attorney with Spear, Wildman,
Borish, Endy, Browning & Spear, 260 Broad Street #1500,
Philadelphia PA 19102, which represents me and SMW; his firm's
pension plan owns 200 shares of Merck common stock).
INFORMATION ABOUT SHAREHOLDER VOTING
1. REVOCATION RIGHTS: IF YOU HAVE ALREADY VOTED ON
MANAGEMENT'S CARD, IT IS NOT TOO LATE TO CHANGE YOUR VOTE
Any person giving a proxy has the power to revoke it simply by
signing and dating a new proxy card and submitting it prior to
votes being tallied at the annual meeting. A proxy may also be
revoked by giving written notice of revocation to the Secretary of
the Company.
2. YOUR VOTING RIGHTS; CUMULATIVE VOTING FOR DIRECTORS
The holders of common stock are entitled to one vote per share
except that in the election of directors, each share carries as
many votes as there are vacancies on the board: in other words,
because there are 4 directors to be elected this year, each of your
shares carries 4 votes in the directors election. You can cast all
these votes for a single nominee or spread your votes among as many
of the candidates as you see fit. A candidate can be elected by
receiving the cumulated votes of 20% of the shares voted plus one.
If you sign the enclosed proxy card, your votes will be cumulated
for my candidacy unless you instruct otherwise.
3. WARNING TO EMPLOYEE-SHAREHOLDERS
The attached proxy card will not serve as a voting instruction
card for the shares held for any shares you own through the
Employee Savings and Security Plan, Employee Stock Purchase and
Savings Plan, Hubbard Farms, Inc. Employee Savings Plan or Medco
401K Savings Plan. Instead, participants in these plans will
receive separate voting instruction cards covering these shares
from plan trustees. If these voting instruction cards are not
returned, your shares in the plan will not be voted (except for the
Medco plan, under which the plan trustee votes uninstructed shares
in the same manner as it votes the majority of shares for which
instructions are received).
The trustees of such plans are not allowed to disclose to the
Company how you vote.
4. OTHER VOTING INFORMATION
Only stockholders of record at the close of business of March
8, 1994 are entitled to vote at the meeting. If you participate in
the Automatic Dividend Reinvestment and Cash Repayment Plan, the
enclosed proxy card covers the shares in that account for that
plan, as well as shares registered in the plan participant's name.
A majority of the votes cast by holders of common stock is required
for approval of the shareholder proposals. Abstentions and broker
non-votes are not counted as votes cast on any matter to which they
relate.
YOU NEED TO REQUEST A TICKET TO ATTEND THE SHAREHOLDERS MEETING
The meeting will be on Tuesday, April 26, 1994, at 2pm at
Raritan Valley Community College in North Branch, New Jersey.
Admission to the meeting will be by ticket only, which must be
requested from Merck, as explained in Merck's proxy statement.
SOLICITATION
I will solicit proxies personally, and be assisted solely by
SMW members and staff (who will receive no additional compensation
for this effort) and by paid consultant Mark Atkinson. If elected,
I will not seek reimbursement from the company of expenses in
running for office. The cost of the solicitation will be borne
solely by SMW and I. We expect to spend about $20,000 on these
efforts (we have spent about $2000 to date). We expect to solicit
proxies through the mail, telephone and/or personal interviews. We
will also request brokers, custodians and other nominees to forward
solicitation materials to beneficial owners of common stock, and we
will reimburse them for their reasonable out-of-pocket expenses.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
For this information please refer to the Company's proxy
statement, incorporated herein by reference.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1995
Stockholders who wish to have proposals included in the
company's proxy materials for a vote at the next shareholders
meeting must make sure they are received by the Company by November
16, 1994.
GETTING IN TOUCH WITH ME
Correspondence can be faxed to me at (215) 952-0250. For more
information, call me at (215) 952-1999.
Thank you for your consideration.
Sincerely,
Thomas J. Kelly
PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD TODAY IN THE
ENVELOPE PROVIDED.
<PAGE>
PROXY SOLICITED IN OPPOSITION TO BOARD'S NOMINEES
BY THOMAS J. KELLY
* * * * * * * * * *
<PAGE>
PROXY/VOTING INSTRUCTION CARD
Annual Meeting of Merck & Co. -- April 26, 1994
PLEASE FILL OUT BELOW, DATE, SIGN AND RETURN PROMPTLY USING
THE ENVELOPE PROVIDED
The undersigned hereby appoints Thomas J. Kelly and Bruce
Endy as proxies, each with full power of substitution, and hereby
authorizes them to vote as designated all of the undersigned's
Merck & Co. stock at the annual stockholders meeting on April 26,
1994, and at any adjournments. This card also provides voting
instructions for shares held in the in the dividend reinvestment
plan. Any prior proxy or voting instruction is hereby revoked.
The undersigned acknowledges receipt of Mr. Kelly's proxy
statement.
This card when properly executed will be voted in the manner
directed herein by the undersigned. If no specification is made,
it will be voted FOR Mr. Kelly's election and FOR all proposals
below.
Mr. Kelly recommends a vote FOR his election to the board
of directors and FOR all proposals. If any other matters
properly come before the meeting, this proxy will be voted in
accordance with the proxyholders' best judgment.
1. ELECTION OF DIRECTORS:
FOR nominee Thomas J. Kelly [ ]
WITHHOLD AUTHORITY to vote for Thomas J. Kelly [ ]
2. Ratification of appointment of accountants
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to amend Executive Incentive Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to adopt the Merck Deferral Program for executives
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Proposal to amend 1991 incentive stock plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. Stockholder proposal for annual election of all directors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. Stockholder proposal to limit executive compensation
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Signature(s) _______________________________________
Dated: ______________________, 1994
Please sign exactly as name appears on registered shares. When
signing as an authorized corporate officer, attorney, executor,
administrators, trustee or guardian, give full title as such.
