NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON MAY 14, 1997
J.P. Morgan & Co. Incorporated
60 Wall Street, New York, NY 10260-0060
JPMorgan The Annual Meeting of Stockholders of J.P. Morgan &
Co. Incorporated ("Morgan") will be held in Morgan
Hall West, 46th Floor, 60 Wall Street, New York, New
York, on Wednesday, May 14, 1997 at 11:00 a.m., for
the following purposes:
(1) To elect fourteen Directors to hold office until
the next annual meeting of stockholders and until
their respective successors shall have been elected
and qualified;
(2) To consider and vote upon a proposal to approve
the designation of the independent accounting firm of
Price Waterhouse LLP to perform certain auditing
functions for Morgan and its consolidated
subsidiaries for the year 1997;
(3) To consider and vote upon a stockholder-proposed
resolution set forth under "Stockholder Proposal
Relating to Cumulative Voting" in the Proxy
Statement;
(4) To consider and vote upon a stockholder-proposed
resolution set forth under "Stockholder Proposal
Relating to Director Term Limits" in the Proxy
Statement; and
(5) To act upon such other matters as may properly
come before such meeting or any adjournment thereof.
Stockholders of record at the close of business on
March 14, 1997 will be entitled to vote at the
meeting and at any adjournment thereof.
Dated: March 24, 1997 Rachel F. Robbins
Secretary
YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN
THE PROXY SUBMITTED HEREWITH IN THE RETURN ENVELOPE
PROVIDED FOR YOUR USE. THE GIVING OF SUCH PROXY WILL
NOT AFFECT YOUR RIGHT TO REVOKE SUCH PROXY OR TO VOTE
IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE
MEETING.
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PROXY STATEMENT
This statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
J.P. Morgan & Co. Incorporated ("Morgan") to be used
in voting at the Annual Meeting of Stockholders of
Morgan to be held on May 14, 1997 and at any
adjournment thereof.
Stockholders whose names appeared of record on the
books of Morgan at the close of business on March 14,
1997 will be entitled to vote at the meeting and at
any adjournment thereof. On the record date for the
meeting there were 181,998,937 shares of Common Stock
of Morgan outstanding and entitled to vote. Each
share of Common Stock is entitled to one vote. Proxy
material is being mailed to stockholders of record
commencing March 24, 1997.
1 ELECTION OF DIRECTORS
Fourteen Directors of Morgan are to be elected at the
annual meeting to serve until the next annual meeting
of stockholders and until their respective successors
shall have been elected and qualified. Unless
authority to vote for one or more Directors is
withheld, it is intended that shares represented by
Proxies in the accompanying form will be voted for
the election of the persons listed below or, if any
such person shall unexpectedly become unable or
unwilling to accept nomination or election, for the
election of such other person as the Board of
Directors may recommend in his or her place. All of
the persons listed below are Directors of Morgan now
in office and are nominees for re-election. All
nominees are currently Directors of Morgan Guaranty
Trust Company of New York (the "Bank").
The name, age, principal occupation, business
directorships and significant affiliations of an
educational, charitable or civic nature of each
nominee, are set forth below.
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DOUGLAS A. WARNER III Director since 1990. Age 50.
[PHOTO]
Chairman of the Board of Morgan and the Bank (since January 1995) and President
of Morgan and the Bank (since January 1990). Member of the Executive Committees
of Morgan and the Bank (Chairman since January 1995). Director of Anheuser-Busch
Companies, Inc. and General Electric Company. Member of The Bankers Roundtable
and The Business Roundtable. Vice Chairman of The Business Council. Trustee of
Pierpont Morgan Library and Cold Spring Harbor Laboratory. Vice Chairman of
Board of Managers and Board of Overseers of Memorial Sloan-Kettering Cancer
Center. Member of Board of Counselors of Bechtel Group, Inc.
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RILEY P. BECHTEL Director since 1995. Age 45.
[PHOTO]
Chairman (since January 1996), Chief Executive Officer (since June 1990) and
Director (since August 1987) of Bechtel Group, Inc. (engineering and
construction). Member of the Committee on Management Development and Executive
Compensation of Morgan. Trustee of Thacher School. Member of American Society of
Corporate Executives, The Business Council, The Business Roundtable and The
Trilateral Commission. Member of Advisory Council of Stanford University
Graduate School of Business and Dean's Advisory Council of Stanford University
School of Law. Director of Jason Foundation for Education.
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MARTIN FELDSTEIN Director since 1993. Age 57.
[PHOTO]
President and Chief Executive Officer of National Bureau of Economic Research,
Inc. (private, non-profit research organization) and Professor of Economics at
Harvard University (since 1969). Member of the Audit Committee of Morgan and the
Examining Committee and the Committee on Employment Policies and Benefits of the
Bank. Director of TRW Inc. and American International Group, Inc. Member of
Council on Foreign Relations, The Trilateral Commission, American Academy of
Arts and Sciences, American Philosophical Society and Corporation of
Massachusetts General Hospital.
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HANNA H. GRAY Director since 1976. Age 66.
[PHOTO]
President Emeritus and Harry Pratt Judson Distinguished Service Professor of
History of The University of Chicago (since July 1993). Dr. Gray was President
of The University of Chicago from July 1978 to July 1993. Chairman of the
Committee on Trust Matters and member of the Committee on Director Nominations
and Board Affairs of Morgan. Director of Ameritech Corp., Atlantic Richfield
Company and Cummins Engine Co., Inc. Trustee of Andrew W. Mellon Foundation,
Bryn Mawr College and Howard Hughes Medical Institute. Member of Council on
Foreign Relations, American Academy of Arts and Sciences and American
Philosophical Society. Regent of The Smithsonian Institution.
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JAMES R. HOUGHTON Director since 1982. Age 60.
[PHOTO]
Retired Chairman of the Board of Corning Incorporated. Mr. Houghton was Chairman
and Chief Executive Officer of Corning Incorporated from April 1983 to April
1996. Chairman of the Committee on Management Development and Executive
Compensation of Morgan. Member of the Executive Committees of Morgan and the
Bank. Director of Corning Incorporated, Exxon Corporation and Metropolitan Life
Insurance Company. Trustee of Corning Incorporated Foundation, Corning Museum of
Glass, Metropolitan Museum of Art and Pierpont Morgan Library. Member of the
Harvard Corporation.
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JAMES L. KETELSEN Director since 1977. Age 66.
[PHOTO]
Retired Chairman and Chief Executive Officer of Tenneco Inc. (diversified
industrial). Mr. Ketelsen was Chairman of the Board of Tenneco Inc. from July
1978 to May 1992 and Chief Executive Officer from July 1978 to January 1992.
Chairman of the Audit Committee and member of the Committee on Trust Matters of
Morgan and Chairman of the Examining Committee of the Bank. Director of GTE
Corporation and Sara Lee Corporation. Trustee of Northwestern University.
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JOHN A. KROL Director since 1997. Age 60.
[PHOTO]
Chief Executive Officer (since December 1995), President (since October 1995)
and Director of E.I. du Pont de Nemours and Company (global chemical and
energy). Mr. Krol was Vice Chairman of DuPont from March 1992 until October 1995
and Senior Vice President of DuPont Fibers from 1990 until 1992. Member of the
Audit Committee of Morgan and the Examining Committee of the Bank. Director of
Mead Corporation, National Association of Manufacturers, Delaware Art Museum and
Wilmington 2000. Member of the Board of Trustees of Tufts University, University
of Delaware and Corporate Liaison Board of American Chemical Society. Member of
The Business Roundtable, The Business Council, Executive Committees of Delaware
Business Roundtable and Business/Public Education Council. Trustee of Hagley
Museum and U.S. Council for International Business.
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ROBERTO G. MENDOZA Director since 1990. Age 51.
[PHOTO]
Vice Chairman of the Board of Morgan and the Bank (since January 1990) and
member of the Executive Committees of Morgan and the Bank. Director of Consorcio
de Alimentos Fabril-Pacifico, S.A., Mid Ocean Reinsurance Company Ltd. and
Travelers/Aetna Property Casualty Corp.
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MICHAEL E. PATTERSON Director since 1995. Age 55.
[PHOTO]
Vice Chairman of the Board of Morgan and the Bank (since December 1995) and
member of the Executive Committees of Morgan and the Bank. Mr. Patterson was
Chief Administrative Officer of Morgan and the Bank from November 1994 to
December 1995 and Executive Vice President and General Counsel of Morgan and the
Bank from March 1987 to November 1994. Director of Euroclear Clearance System
S.C. and Euroclear Clearance System Public Limited Company. Trustee of Columbia
University.
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LEE R. RAYMOND Director since 1987. Age 58.
[PHOTO]
Chairman of the Board and Chief Executive Officer (since April 1993) and
Director of Exxon Corporation. Mr. Raymond was President of Exxon Corporation
from January 1987 to April 1993. Chairman of the Committee on Director
Nominations and Board Affairs and member of the Committee on Management
Development and Executive Compensation of Morgan. Chairman of American Petroleum
Institute. Director of United Negro College Fund. Trustee of Southern Methodist
University and Wisconsin Alumni Research Foundation. Member of The Business
Council, The Business Roundtable, Council on Foreign Relations, Emergency
Committee for American Trade, National Petroleum Council, The Trilateral
Commission and The University of Wisconsin Foundation.
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RICHARD D. SIMMONS Director since 1990. Age 62.
[PHOTO]
Retired President of The Washington Post Company and International Herald
Tribune. Mr. Simmons was President of International Herald Tribune from April
1989 to April 1996 and President of The Washington Post Company from September
1981 to May 1991. Member of the Committee on Trust Matters of Morgan and
Chairman of the Committee on Employment Policies and Benefits of the Bank.
Director of Union Pacific Corporation, The Washington Post Company and Yankee
Publishing, Inc. Member of General Electric Investment Corporation Equity
Advisory Board and council member of White Burkett Miller Center of Public
Affairs at The University of Virginia.
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KURT F. VIERMETZ(1) Director since 1990. Age 57.
[PHOTO]
Vice Chairman of the Board of Morgan and the Bank (since January 1990) and
member of the Executive Committees of Morgan and the Bank. Mr. Viermetz was
Treasurer of the Bank from March 1986 to February 1990. Member of Supervisory
Board of Hoechst AG and VEBA AG. Chairman of the Board of Munich American
Reinsurance Company and Munich Management Corporation. Member of International
Advisory Board of Metro Holding AG, Zug/Switzerland. Chairman of New York Stock
Exchange International Capital Markets Advisory Committee. Member of Federal
Reserve Bank of New York International Capital Markets Advisory Committee.
Director of New York Philharmonic Society. Trustee of The Johns Hopkins
University's American Institute for Contemporary German Studies. Member of Board
of the American Council on Germany, New York.
1. Mr. Viermetz plans to retire later this year as Vice Chairman of Morgan, but
will continue as a member of its Board of Directors.
4
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DENNIS WEATHERSTONE Director since 1979. Age 66.
[PHOTO]
Mr. Weatherstone was Chairman of the Board of Morgan and the Bank from January
1990 to January 1995 and Chairman of the Executive Committees of Morgan from
February 1991 to January 1995 and the Bank from January 1991 to January 1995.
Member of the Executive Committees of Morgan and the Bank and the Committee on
Employment Policies and Benefits of the Bank. Member of International Council.
Director of General Motors Corporation and Merck & Co., Inc. Director of L'Air
Liquide. Director of Institute for International Economics. Independent member
of Board of Banking Supervision of the Bank of England. Graduate member of The
Business Council. Trustee of Alfred P. Sloan Foundation. Member of Economic Club
of New York. President and Trustee of The Royal College of Surgeons Foundation,
New York.
- --------------------------------------------------------------------------------
DOUGLAS C. YEARLEY Director since 1993. Age 61.
[PHOTO]
Chairman of the Board and Chief Executive Officer (since May 1989), President
(since November 1991) and Director of Phelps Dodge Corporation. Mr. Yearley was
President of Phelps Dodge Industries from 1988 until 1990 and Executive Vice
President of Phelps Dodge Corporation from 1987 until 1989. Member of the Audit
Committee and the Committee on Director Nominations and Board Affairs of Morgan
and the Examining Committee of the Bank. Director of USX Corporation and
Lockheed Martin Corporation. Chairman of International Copper Association and
National Mining Association. Vice Chairman of American Mining Congress. Director
of Copper Development Association. Member of Policy Committee of The Business
Roundtable and The Business Council. Director of Phoenix Symphony. Trustee of
Phoenix Art Museum.
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Included among the Committees of the Board of Directors of Morgan are an Audit
Committee, the members of which are Messrs. Ketelsen (Chairman), Feldstein, Krol
and Yearley, a Committee on Management Development and Executive Compensation,
the members of which are Messrs. Houghton (Chairman), Bechtel and Raymond, a
Committee on Director Nominations and Board Affairs, the members of which are
Mr. Raymond (Chairman), Dr. Gray and Mr. Yearley, and a Committee on Trust
Matters, the members of which are Dr. Gray (Chairman) and Messrs. Ketelsen and
Simmons.
The Audit Committee, which met seven times during 1996, is responsible for
overseeing the financial reporting process and the effectiveness of internal
controls of Morgan and its consolidated subsidiaries, including the Bank, and
for recommending to the Board of Directors of Morgan the designation for each
year of independent accountants to examine the financial statements of Morgan
and its consolidated subsidiaries.
The Committee on Management Development and Executive Compensation, which met
five times during 1996, is responsible for (1) consultation with senior
management of Morgan and the Bank and reporting to the appropriate Board
regarding development of qualified replacements to succeed key executives of
Morgan and the Bank; (2) reviewing and approving all awards and options granted
under Morgan's incentive and stock plans except that awards and
5
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options granted to employees who are also Directors are approved by a committee
composed of all non-employee Directors; (3) administration (or supervising the
administration) of such plans; and (4) review of policies of Morgan and certain
of its subsidiaries, including the Bank, with respect to officers' compensation.
The Committee on Director Nominations and Board Affairs, which met three times
during 1996, is responsible for making recommendations to the Board of Directors
with respect to the qualifications and nominations of Directors, Directors'
functions, committees, compensation and retirement and other matters affecting
Directors. In determining its recommendations to Morgan's Board, the Committee
on Director Nominations and Board Affairs will consider nominees recommended by
stockholders. Such stockholder recommendations should be made in writing,
addressed to the Committee, attention of the Secretary of J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, New York 10260-0060.
The Committee on Trust Matters, which met twice during 1996, is responsible for
reviewing the general conduct of the business of the departments and affiliates
of Morgan and the Bank engaged in investing and administering assets held for
others in trust and investment management accounts.
Included among the Committees of the Board of Directors of the Bank are an
Examining Committee, the members of which are Messrs. Ketelsen (Chairman),
Feldstein, Krol and Yearley, and a Committee on Employment Policies and
Benefits, the members of which are Messrs. Simmons (Chairman), Feldstein and
Weatherstone.
The Examining Committee, which met seven times during 1996, is responsible for
examinations of the Bank in accordance with New York State banking law.
The Committee on Employment Policies and Benefits, which met twice in 1996, is
responsible for reviewing the Bank's Retirement, Profit Sharing, and Long-Term
Disability Plans, Morgan's overseas benefit plans, non-officer salary and other
benefits and employee relations and affirmative action programs.
During 1996 there were ten meetings of the Board of Directors of Morgan. Each
Director of Morgan attended 75% or more of the aggregate number of meetings held
during 1996 of the Morgan Board of Directors and the Morgan committees of which
such Director was a member.
6
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STOCK
OWNERSHIP OF
MANAGEMENT
The following table includes as of March 14, 1997,
all Morgan stock-based holdings of each Director,
each executive officer named in the Summary
Compensation Table appearing on page 14, and all
Directors and executive officers as a group, based
upon information obtained from such persons. A list
of current executive officers of Morgan is attached
as Exhibit A hereto. Each individual beneficially
owns less than 1% of Morgan Common Stock. Each person
has sole investment and voting power with respect to
the shares set forth under the "Stock" column unless
otherwise noted:
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NAME OF INDIVIDUAL OR GROUP STOCK(1) TOTAL(2)
- --------------------------------------------------------------------------------
Douglas A. Warner III .............................. 435,369(3) 1,056,354
Roberto G. Mendoza ................................. 334,325 823,121
Kurt F. Viermetz ................................... 367,552 587,425
Michael E. Patterson ............................... 258,939(4) 412,605
John A. Mayer Jr ................................... 199,007 336,016
Riley P. Bechtel ................................... 500 809
Martin Feldstein ................................... 1,000 2,149
Hanna H. Gray ...................................... 800 2,210
James R. Houghton .................................. 1,000 2,410
James L. Ketelsen .................................. 7,800 9,210
John A. Krol ....................................... 500 500
Lee R. Raymond ..................................... 500 9,236
Richard D. Simmons ................................. 1,000 2,410
Dennis Weatherstone ................................ 729,614(5) 931,805
Douglas C. Yearley ................................. 1,000(6) 2,274
All Directors and Executive Officers as a Group .... 2,660,506(7) 4,711,432
- --------------------------------------------------------------------------------
(1) Includes shares of Morgan Common Stock beneficially owned, directly or
indirectly. The column also includes the following shares of Common Stock which
the individual(s) had the right to acquire within 60 days of March 14, 1997
through the exercise of options: Mr. Warner -- 392,723 shares; Mr. Mendoza --
253,334 shares; Mr. Viermetz -- 253,334 shares; Mr. Patterson -- 254,222 shares;
Mr. Mayer -- 185,254; Mr. Weatherstone -- 551,501 shares; all directors and
executive officers as a group -- 2,203,141.
(2) Includes total stock-based holdings, including securities included in the
"Stock" column (as described in footnote 1), plus non-voting interests,
including restricted stock, deferred compensation accounted for as units of
Morgan Common Stock, stock options that will not become exercisable within 60
days, awards of share credits under the Director Stock Plan (1992) described on
page 8 and directors' fees deferred as units of Morgan Common Stock under the
Deferred Compensation Plan for Directors' Fees described on page 8.
(3) Includes 6,000 shares owned by his spouse and 240 shares held in custodial
accounts for his children. Mr. Warner disclaims beneficial ownership of such
shares.
(4) Includes 4,717 shares held in trust for family members. Mr. Patterson
disclaims beneficial ownership of all but 1,600 of such shares.
(5) Includes 161 shares owned by his son. Mr. Weatherstone disclaims beneficial
ownership of such shares.
(6) Includes 1,000 shares held in trust for family members.
(7) As a group, beneficially owns 1.46% of Morgan Common Stock.
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DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR
COMPENSATION
Each Director who is not an officer of Morgan or the
Bank receives an annual retainer of $30,000 and a
single meeting attendance fee of $1,200 for meetings
of the Boards of Morgan and the Bank. Such Directors
also receive annual retainers for service on
committees of the Boards in amounts of $20,000 for
the Chairmen and $12,500 for the members of the Audit
Committee and the Committee on Management Development
and Executive Compensation and $10,000 for the
Chairmen and $7,500 for the members of the other
committees. The members of the Audit Committee also
serve on the Bank's Examining Committee but receive
no additional retainer for such service. In addition,
Directors are entitled to reimbursement for travel
expenses for meetings of the Boards and committees
thereof.
Under a Director Stock Plan (1992), as amended,
Directors who are not officers of Morgan or the Bank
receive annually an award of share credits for 400
shares of Morgan Common Stock for their service
during the preceding year, which award is pro rated
in the case of any Director who was not a Director
for all of the preceding year. After termination of
service as a Director, all awards are paid in shares
of stock to the Director, or, in the case of death,
to the Director's designated beneficiary or estate.
Such payment includes additional shares credited
annually with respect to the dividends that would
have been paid during the year had the share credits
been issued as shares of stock.
Directors who are not officers of Morgan or the Bank
may defer compensation for services rendered as Board
members or as members of Board committees pursuant to
the Deferred Compensation Plan for Directors' Fees
adopted by the Boards of Morgan and the Bank in 1973
and last amended in 1991. The Plan permits Directors
to make separate deferral elections with respect to
their annual retainer and their meeting fees.
Participating Directors may elect under the Plan to
direct Morgan or the Bank to credit deferred amounts
to (i) a Deferred Cash Account, (ii) a Deferred Stock
Value Account or (iii) a combination of both. The
Plan provides that amounts deferred to the Deferred
Cash Account are credited with interest equivalents.
Amounts deferred to the Deferred Stock Value Account
are treated as "Units Based on Stock Value" and are
credited with dividend equivalents. Participating
Directors are entitled to receive cash distribution
of the balance in their accounts in full or in annual
installments (not to exceed 15 years) after
termination of service as a Director.
Retired Directors are eligible to serve as members of
the Bank's Directors Advisory Council. Members of the
Council receive an annual retainer of $30,000.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
ROLE OF THE
COMMITTEE
AND THE BOARD
The Committee on Management Development and Executive
Compensation, composed entirely of independent
outside directors ("Outside Directors"), is
responsible for determining and administering
Morgan's executive compensation policies for its
senior management within guidelines and plans
approved by the Board of Directors. William S. Lee
was a member of the Committee until his death in
July, 1996. Riley P. Bechtel became a member of the
Committee in January, 1997. The Committee's
recommendations regarding officers who are Directors
are subject to the approval of the full board of
Outside Directors (with officer directors not
participating).
COMPENSATION
PHILOSOPHY
Morgan's executive compensation program is designed
to attract, reward, and retain highly qualified
executives and to encourage the achievement of
business objectives, including superior corporate
performance. The program seeks:
o To foster a performance-oriented environment,
where variable compensation is based upon
corporate and business group as well as
individual performance as measured by achievement
of short-term and long-term objectives, taking
into account economic conditions and competitive
compensation levels.
o To enhance management's focus on maximizing
long-term stockholder value through a strong
emphasis on stock-based compensation.
o To increase the variable portion of total
compensation (both cash and stock) as an
individual's level of responsibility increases.
This further aligns the interests of senior
management and stockholders.
o To promote a cohesive, team-oriented ethic among
members of senior management in order to maintain
the competitive advantage of efficiently
integrating diverse global business capabilities.
COMPONENTS OF
EXECUTIVE
COMPENSATION
PROGRAM
Total compensation for Morgan's senior management is
composed of base salary, profit sharing, annual
incentive compensation (of which a substantial
portion is awarded in the form of restricted stock)
and stock option awards.
BASE SALARY
Base salaries for Morgan's senior management are
determined by evaluating the responsibilities
associated with the position held and an individual's
overall level of experience. However, in keeping with
Morgan's emphasis on variable rather than fixed
compensation, base salaries represent a relatively
low percentage of total compensation for these
individuals.
PROFIT SHARING
Members of senior management generally have been
eligible for a firm-wide profit sharing program,
under which full-time employees receive an annual
award equal to a percentage of base salary. The
percentage, which applies only to the first $100,000
of base salary for each individual, is determined
annually by the Board of Directors, based on its
assessment of Morgan's overall performance for the
year. Beginning with the 1997 performance year, in
order to consolidate variable pay into the incentive
compensation program, managing directors of Morgan,
including members of senior management, and certain
other officers of Morgan will no longer be eligible
for the profit sharing program.
INCENTIVE
COMPENSATION
In keeping with its philosophy of increasing, as an
officer's level of responsibility increases, the
portion of total compensation that depends upon
individual and Morgan performance, Morgan's executive
compensation program is heavily weighted toward
incentive compensation.
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To establish and maintain a common focus and shared
goals among Morgan's senior management, an incentive
compensation pool for a small number of senior
officers is determined at year end by the Committee,
based on its assessment of Morgan's performance as
measured by various quantitative and qualitative
factors. The primary quantitative factors reviewed by
the Committee include such financial performance
measures as net income (after provision for dividends
payable to stockholders) and return on average common
stockholders' equity, both as absolute measures and
relative to previous years. Qualitative factors
evaluated by the Committee include Morgan's
performance in relation to industry performance,
progress toward achievement of Morgan's short-term
and long-term business goals, the quality of Morgan's
earnings, and the overall business and economic
environment. In making its determination, the
Committee also reviews competitive compensation
levels.
Each participant in the annual incentive compensation
pool is allocated a share in the pool, as determined
by the Committee, taking into account each
participant's level of management responsibility and
contribution. Actual incentive compensation awards
generated by the pool may be adjusted up or down
under special circumstances, to reflect individual or
business unit performance. As discussed further
below, a substantial portion of these awards is
granted in the form of restricted stock.
STOCK-BASED
COMPENSATION
AND STOCK
OWNERSHIP
The Committee believes that stock ownership enhances
individuals' focus on maximizing long-term
stockholder value. Accordingly, senior officers are
strongly encouraged to develop significant equity
positions in Morgan. Morgan's executive compensation
programs are designed to facilitate stock ownership
and to ensure that, as an individual's level of
responsibility increases, financial rewards depend
significantly on Morgan's overall performance.
RESTRICTED STOCK
Each year, a substantial proportion of incentive
compensation for senior management is awarded in the
form of restricted stock, issued at fair market value
on the date of grant and subject to five-year
vesting. Since the value of restricted stock awards
will ultimately depend on the market value of Morgan
Common Stock, the Committee believes these awards
will serve as an ongoing incentive to preserve and
increase stockholder value.
For 1996, members of senior management received 45%
(50% in the case of the Chairman) of their total
incentive compensation awards in the form of
restricted stock. This percentage is the same as in
1995, evidencing the Committee's continued commitment
to fostering significant senior management stock
ownership.
STOCK OPTIONS
Morgan's executive compensation program also includes
stock option awards, which are intended to provide
additional incentive to increase stockholder value.
All such awards are granted with an exercise price at
or above 100% of the fair market value of Morgan
stock on the date of grant and generally become
exercisable over three years. Because Morgan stock
option awards provide value only in the event of
share price appreciation, the Committee believes
stock options represent an important component of a
well-balanced incentive program. Individual award
levels are based upon a subjective evaluation of each
individual's overall past and expected future
contribution; therefore, no specific formula is used
to determine option awards for any employee. Morgan
has generally granted stock option awards to members
of senior management in January of each year.
Beginning in 1997, most stock option awards will be
granted in mid-year. As a result, other than the
special long-term award granted to Mr. Warner, as
described below, and a special long-term award
granted to Mr.
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<PAGE>
Mendoza (the material terms of which are described
under "Option Grants in Last Fiscal Year"), stock
option awards will not be granted to senior
management until mid-1997.
CORPORATE
PERFORMANCE
AND CEO
COMPENSATION
The Committee believes that J.P. Morgan continues to
enhance its position as a leading global financial
intermediary and meet the challenges of an
increasingly competitive environment. Net income
increased 21% in 1996 to $1.574 billion from $1.296
billion in 1995. Results were strong across the range
of the firm's diversified global activities, with
notable growth in the volume of business done for
clients. Return on equity rose to 14.9% from 13.6% in
the prior year.
In his second year as Chairman and Chief Executive
Officer of Morgan, Mr. Warner continued his strong
leadership of the firm. Since assuming his current
roles in January 1995, and in his capacity as
President beginning in January 1990, Mr. Warner has
guided the company to expand client relationships, in
order to reap greater value from the firm's
investment in its range of sophisticated financial
capabilities, to strengthen its core competencies and
to continue careful management of costs and risks.
In recognition of his excellent individual
performance and the strong results of the firm, Mr.
Warner's total annual compensation for 1996 was
increased 39.0% to $5,858,500, including a restricted
stock award with a grant date value of $2,625,000.
This total does not include a special long-term award
of restricted stock with a grant date value of
$2,937,813, which is discussed below. Both the annual
and special restricted stock awards are included
under long-term awards in the Summary Compensation
Table. Mr. Warner was allocated the largest share in
the incentive compensation pool for senior officers
for 1996, and the percentage of annual incentive
compensation that he received in the form of
restricted stock--50%--was the highest in the firm.
In setting Mr. Warner's compensation, the Committee
also takes into account the compensation levels of
chief executive officers of Morgan's peer companies
and the compensation of other senior officers of
Morgan.
With the approval of the full board of Outside
Directors, the Committee granted Mr. Warner a special
long-term award of stock options and restricted
stock, with several objectives: to link his
compensation over time more significantly to the
performance of the firm, through an interest in the
performance of Morgan's stock that is comparable to
those of chief executives at peer companies, and to
provide a strong incentive for Mr. Warner to continue
to commit his outstanding leadership skills to
Morgan.
The special stock option grant was for 300,000
restricted share credits with an exercise price of
$104.92 per share. This stock option award may be
exercised for restricted share credits during a
4-year period commencing on the sixth anniversary of
the grant date, and such share credits, except for a
distribution of sufficient shares to pay the exercise
price, will generally vest on the tenth anniversary
of the grant date (with pro rata vesting upon death
or disability prior to such date), subject to Mr.
Warner's continued employment with Morgan. The
special restricted stock grant was for 35,000
restricted share credits which will generally vest on
the 10th anniversary of the grant date (with pro rata
vesting upon death or disability prior to such date),
subject to Mr. Warner's continued employment with
Morgan.
11
<PAGE>
TAX DEDUCTIBILITY
OF EXECUTIVE
COMPENSATION
Section 162(m) of the Internal Revenue Code limits
the tax deductibility of compensation in excess of $1
million paid to certain members of senior management,
unless the payments are made under plans which
satisfy the technical requirements of the statute
(and regulations). While the Committee currently
intends to pursue a strategy of maximizing
deductibility of senior management compensation by
making awards under the 1995 Executive Officer
Performance Plan and 1995 Stock Incentive Plan (both
of which meet the requirements of Section 162(m) and
were approved by stockholders during 1995), it also
believes it is important to maintain the flexibility
to take actions it considers to be in the best
interest of Morgan and its stockholders, which may be
based on considerations in addition to Section
162(m).
The Committee on Management Development and Executive
Compensation
James R. Houghton, Chairman
Riley P. Bechtel
Lee R. Raymond
12
<PAGE>
STOCK
PERFORMANCE
GRAPHS
The following graphs show changes over the past five- and ten-year periods in
the value of $100 invested in: (1) Morgan's Common Stock; (2) the Standard &
Poor's 500 Index; (3) Standard & Poor's Financial Index and (4) companies which
comprised the Dow Jones Industrial Average as of December 31, 1996 (of which
Morgan is one).
J.P. MORGAN COMPARISONS OF FIVE YEAR TOTAL STOCKHOLDER RETURN
[The following table represents a chart in the printed piece.]
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
J.P. Morgan 100.0 99.4 108.6 92.0 137.3 173.4
S&P 500 100.0 107.6 118.4 120.0 165.0 202.7
S&P Financial 100.0 123.3 136.9 132.2 203.4 274.7
DJ Industrial 100.0 107.4 125.6 132.0 180.6 232.6
J.P. MORGAN COMPARISONS OF TEN YEAR TOTAL STOCKHOLDER RETURN
[The following table represents a chart in the printed piece.]
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan 100.0 90.8 91.1 119.8 127.0 203.6 202.4 221.1 187.3 279.5 353.0
S&P 500 100.0 105.2 122.5 161.2 156.2 203.6 219.1 241.1 244.3 335.8 412.8
S&P Financial 100.0 83.2 98.3 130.4 102.5 154.3 190.2 211.2 203.9 313.7 423.8
DJ Industrial 100.0 105.5 122.5 161.9 161.0 200.0 214.8 251.2 263.9 361.1 465.2
</TABLE>
The year-end values of each investment shown in the preceding graphs are based
on share price appreciation plus dividends, with the dividends reinvested as of
the last business day of the month during which such dividends were ex-dividend.
The calculations exclude trading commissions and taxes. Total stockholder
returns from each investment, whether measured in dollars or percentages, can be
calculated from the year-end investment values shown beneath each graph.
13
<PAGE>
SUMMARY
COMPENSATION
TABLE
The following table sets forth, for the years ending December 31, 1996, 1995,
and 1994, the annual and long-term compensation paid or accrued for those years
by Morgan to the Chief Executive Officer and the four most highly compensated
executive officers of Morgan.
<TABLE>
===============================================================================================================
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ ----------------------
AWARDS
----------------------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK STOCK ALL OTHER
NAME AND SALARY COMPENSATION AWARD OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) BONUS ($)(1) ($)(2) ($)(3)(4) (# SHARES)(5) ($)(6)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III 1996 $600,000 $2,633,500 $ 0 $5,562,813 300,000 $30,651
Chairman 1995 591,667 1,815,800 0 1,808,700 75,000 27,110
1994 500,000 1,449,600 0 1,763,200 90,000 22,056
Roberto G. Mendoza 1996 425,000 2,208,500 351,253 3,772,531 200,000 18,496
Vice Chairman 1995 425,000 1,678,300 0 1,367,400 40,000 14,234
1994 425,000 1,353,400 0 1,645,700 75,000 15,703
Kurt F. Viermetz 1996 425,000 2,208,500 0 1,800,000 0 8,500
Vice Chairman 1995 425,000 1,678,300 0 1,367,400 40,000 7,000
1994 425,000 1,353,400 0 1,645,700 75,000 7,000
Michael E. Patterson 1996 397,917 1,851,000 0 1,507,500 0 10,673
Vice Chairman 1995 371,250 1,162,000 0 945,000 40,000 7,000
1994 330,000 947,400 0 769,400 60,000 7,000
John A. Mayer Jr. 1996 327,500 1,576,000 0 1,282,500 0 54,712
Chief Financial Officer 1995 300,000 1,200,800 0 976,700 30,000 46,513
1994 300,000 1,143,300 0 929,700 50,000 39,086
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the cash portion of awards under the Bank's profit sharing program.
(2) Mr. Mendoza deferred his 1996 annual bonus into Morgan Common Stock
equivalents; the amount reported in this column represents the difference
between the fair market value of Morgan Common Stock and the conversion price
for such deferrals on the date such deferral was credited to his account. Note
that annual bonus deferral elections are made substantially prior to the time
when the conversion price is determinable. Furthermore, the conversion price for
stock-based deferrals is determined based upon a predetermined formula and could
be either higher or lower than the fair market value of Morgan Common Stock on
the actual date such deferrals are credited.
(3) The amounts reported in this column represent the fair market value of
restricted stock units awarded at 100% of the fair market value of Morgan Common
Stock on the grant date ((Special awards (described below) - $83.9375) 1996 --
$103.438, 1995 -- $75.625 and 1994 -- $60.50) without diminution in value
attributable to the restrictions on such stock. Annual dividend equivalents are
paid in cash or are converted into additional share credits in accordance with
the terms of the awards and the provisions of the plan(s) under which they were
granted. Except for the special long-term awards granted to Messrs. Warner and
Mendoza, Restricted Stock awards generally become vested five years after the
date of grant thereof or, in the case of death, become immediately vested in
full. The amounts reported in this column for 1996 include special long-term
awards granted to Messrs. Warner and Mendoza of 35,000 and 23,500 restricted
stock units respectively. The value of these special long-term awards as
reported in this column for Messrs. Warner and Mendoza are $2,937,813 and
$1,972,531 respectively. The special long-term awards granted to Messrs. Warner
and Mendoza will generally vest 10 years after the grant thereof, with pro rata
vesting upon death or disability prior to such date. Generally, a committee
composed of all non-employee Directors may accelerate vesting of Restricted
Stock in its sole discretion.
(4) The named officers had non-vested Restricted Stock award balances
outstanding as of January 15, 1997 of 197,555 shares ($19,433,812), 165,899
shares ($16,297,001), 142,399 shares ($14,002,814), 77,470 shares ($7,647,690)
and 85,516 shares ($8,420,571) for Messrs. Warner, Mendoza, Viermetz, Patterson
and Mayer respectively. Dollar values are based on (i) the closing price of
Morgan Common Stock on December 31, 1996 ($97.625) for shares which were
outstanding on such date and (ii) the average of the high and low prices of
Morgan Common Stock on January 15, 1997 ($103.438) for shares awarded as of such
date.
(5) The amounts reported in this column for 1996 represent special long-term
awards granted to Messrs. Warner and Mendoza of 300,000 and 200,000 options
14
<PAGE>
respectively (see "Option Grants in Last Fiscal Year" for a description of the
material terms of these special long-term awards). Beginning in 1997, most stock
option awards will be granted in the middle of each calendar year, instead of in
January. As a result, other than the special long-term awards granted to Messrs.
Warner and Mendoza, stock option awards will not be granted to senior management
until mid-1997.
(6) Includes (i) contributions to the Bank's deferred profit sharing plan of
$8,500, $7,000, and $7,000 for 1996, 1995 and 1994, respectively, for Messrs.
Warner, Mendoza, Viermetz, Patterson, and Mayer and (ii) interest exceeding 120%
of the applicable federal rate deemed to have accrued on deferrals under
Morgan's incentive compensation plans (based on termination and distribution at
the earliest date permissible under the plans although no such interest will be
accrued assuming employment until normal retirement age) of $22,151, $20,110 and
$15,056 for Mr. Warner for 1996, 1995 and 1994, respectively; $9,996, $7,234 and
$8,703 for Mr. Mendoza for 1996, 1995 and 1994, respectively; $2,173 for Mr.
Patterson for 1996; and $46,212, $39,513 and $32,086 for Mr. Mayer for 1996,
1995 and 1994, respectively.
15
<PAGE>
STOCK OPTIONS
The following tables show, for the Chief Executive Officer and the four most
highly compensated executive officers of Morgan, information relating to stock
options awarded by Morgan. The first table shows, along with certain additional
information, the estimated grant date present value of stock options granted in
respect of the last fiscal year. These values are calculated pursuant to the
proxy rules of the Securities and Exchange Commission (the "SEC") and are
calculated under the Black-Scholes model for pricing options. The actual pre-tax
gain, if any, realized upon the exercise of stock options will depend upon the
excess, if any, of the market price of Morgan Common Stock over the exercise
price per share of the stock option at the time such stock option is exercised.
The second table shows certain information relating to stock options exercised
during the previous fiscal year and stock options outstanding as of December 31,
1996 or awarded in respect of the 1996 fiscal year. Morgan does not grant any
Stock Appreciation Rights.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
=======================================================================================
Individual Grants
- ---------------------------------------------------------------------------------------
<CAPTION>
% OF
TOTAL ESTIMATED
OPTIONS EXERCISE OR GRANT DATE
OPTIONS GRANTED TO BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) EMPLOYEES (2)($/SH) DATE VALUE (3)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Douglas A. Warner III........ 300,000(1) 46.47% $104.92 10/14/06 $4,401,000
Roberto G. Mendoza........... 200,000(1) 30.98 104.92 10/14/06 2,934,000
Kurt F. Viermetz............. 0 0.00 N/A N/A N/A
Michael E. Patterson......... 0 0.00 N/A N/A N/A
John A. Mayer Jr............. 0 0.00 N/A N/A N/A
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Special long-term awards of options granted at 125% fair market value on the
grant date, October 14, 1996. The special long-term awards of options may be
converted by the optionee to restricted share credits during a 4-year period
commencing on the sixth anniversary of the grant date and, except for the
distribution of sufficient shares to pay the exercise price, generally vest on
the tenth anniversary of the grant date, subject to the optionee's continued
employment with Morgan.
(2) Beginning in 1997, most stock option awards will be granted in the middle of
each calendar year, instead of in January. As a result, other than the special
long-term awards granted to Messrs. Warner and Mendoza, stock option awards will
not be granted to senior management until mid-1997. Assuming a total of 5.15
million options are granted by mid-1997, the special long-term awards to Messrs.
Warner and Mendoza would represent 5.83% and 3.88%, respectively, of total
employee option grants.
(3) Valued using the Black-Scholes option pricing model. The assumptions used
for the variables in the model were: 18.5% volatility; a 10-year risk-free rate
of 6.76%, compounded annually; a 3.86% dividend yield; and a 10-year option
term.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
AGGREGATE OPTION EXERCISES UNEXERCISED OPTIONS AT FY-END
-------------------------- -----------------------------
VALUE OF SECURITIES UNDERLYING
SHARES NUMBER (#) IN-THE-MONEY OPTIONS ($)
ACQUIRED -------------------------------------------------------
ON EXERCISE VALUE UNEXER- UNEXER-
NAME (#) REALIZED ($) EXERCISABLE CISABLE EXERCISABLE CISABLE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III...... 27,097 $1,224,432 322,723 420,000 $13,023,937 $3,455,625
Roberto G. Mendoza......... 0 0 202,500 277,500 6,845,000 2,359,375
Kurt F. Viermetz........... 125,546 5,442,409 202,500 77,500 6,845,000 2,359,375
Michael E. Patterson....... 0 0 210,888 70,000 9,756,571 2,072,500
John A. Mayer Jr........... 15,784 649,281 167,607 55,000 6,897,399 1,650,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
RETIREMENT
BENEFITS
Pursuant to the Bank's Retirement Plan for United States employees and, in
certain cases, the Bank's Benefit Equalization Plan, annual benefits are payable
upon retirement to employees of Morgan and the Bank and participating
subsidiaries. The amounts shown in the following table are those currently
payable under the Retirement Plan (and, where applicable, the Bank's Benefit
Equalization Plan) upon retirement in January 1997 at age 65 of a participating
employee who has elected to receive his or her pension under a straight-life
annuity option.
================================================================================
HIGHEST AVERAGE ANNUAL SALARY OVER ESTIMATED ANNUAL RETIREMENT BENEFITS (1) FOR
THREE CONSECUTIVE YEARS OF SERVICE REPRESENTATIVE YEARS OF CREDITED SERVICE
- --------------------------------------------------------------------------------
15 Years 20 Years 25 Years 30 Years
- --------------------------------------------------------------------------------
$ 50,000 ....................... $12,900 $17,200 $21,500 $25,800
100,000 ....................... 27,150 36,200 45,250 54,300
150,000 ....................... 41,400 55,200 69,000 82,800
200,000 ....................... 51,890 70,457 89,025 107,593
300,000 ....................... 72,789 100,857 128,925 156,993
500,000 ....................... 114,589 161,657 208,722 255,793
- --------------------------------------------------------------------------------
(1) The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
limits the amount of annual benefits which may be payable under a Federal income
tax qualified plan, such as the Bank's Retirement Plan. As permitted by ERISA,
the Bank's Benefit Equalization Plan provides for the payment (out of the
general funds of the Bank) of supplemental pension benefits to participants in
the Bank's Retirement Plan to the extent such participants' benefits under the
Retirement Plan are reduced by reason of the ERISA limitations. The extent of
any reduction will vary in individual cases according to circumstances existing
at the time retirement benefit payments commence.
The Bank's Retirement Plan for United States employees provides retirement
benefits for eligible employees (regular employees with six months continuous
service who have attained age 21). Annual benefits payable upon retirement are
computed under a formula which is based on the employee's average annual salary
for the three highest-paid consecutive years within the final ten years prior to
termination of employment. Since February 1, 1993 there has been a $150,000
limit on all future annual salary amounts used in determining retirement
benefits under the Retirement Plan, the Benefit Equalization Plan and the
International Pension Plan described below. The current annual remuneration
covered by the Retirement Plan, taking into account the amendments described
above, is $150,000 for all of the individuals named in the Summary Compensation
Table on page 14 and the credited years of service for such individuals are as
follows: Mr. Warner, 28 years; Mr. Mendoza, 28 years; Mr. Viermetz, 12 years;
Mr. Patterson, 9 years; and Mr. Mayer, 30 years. Including benefits accrued
prior to the February 1, 1993 effective date of the amendments, the estimated
annual benefits for the individuals named in the Summary Compensation Table,
assuming retirement at age 65, are as follows: Mr. Warner $217,632; Mr. Mendoza
$199,549; Mr. Viermetz $89,205; Mr. Patterson $71,059 and Mr. Mayer $155,311. As
part of an agreement with Mr. Patterson, he will receive an additional seven
years of credited service which will provide a supplemental retirement benefit
of $42,960 paid from the Benefit Equalization Plan. Mr. Viermetz has 20 years
credited service under the Bank's Pension Plan for Employees in Germany and
under that plan is entitled to receive a retirement benefit in the annual amount
of DM 87,230 upon retirement at or after age 65.
Morgan's International Pension Plan, of which Mr. Viermetz is a member by virtue
of prior overseas service, provides additional retirement benefits to certain
employees assigned outside their home countries, based on the employee's average
17
<PAGE>
annual salary for the three highest-paid consecutive years within the final ten
years of credited service preceding retirement. The International Pension Plan
benefit is paid in a lump sum and is determined by multiplying such average
salary by the employee's years of credited service and a lump sum accrual rate
factor based on the employee's age and deducting an amount equal to the total of
all other retirement benefits payable under other Morgan plans and government
sponsored pension benefits worldwide. As of December 31, 1996 Mr. Viermetz would
have been entitled to receive a lump sum retirement benefit of approximately
$1.9 million under the International Pension Plan.
- --------------------------------------------------------------------------------
TRANSACTIONS
WITH DIRECTORS
AND OFFICERS
Some of Morgan's Directors and executive officers and their associates,
including affiliates, and organizations of which some of Morgan's Directors are
officers or trustees, have had transactions in the ordinary course of business
with Morgan and subsidiaries of Morgan, including the Bank. Such transactions
have included borrowings (all of which were on substantially the same terms,
including interest rates, and collateral, if any, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than normal risk of collectibility or present other unfavorable factors),
deposits, purchases of commercial paper issued by Morgan or one of its
subsidiaries, purchases of government, municipal and certain other securities,
and investment banking, financial advisory, and other financial services and
market transactions.
In the ordinary course of business Morgan and its subsidiaries, including the
Bank, use the products or services of a number of organizations with which
Directors of Morgan are affiliated as officers, including Corning Incorporated
and Exxon Corporation. It is expected that Morgan and the Bank will in the
future have transactions with organizations with which Directors of Morgan are
affiliated as officers or directors.
2 APPROVAL OF INDEPENDENT ACCOUNTANTS
For the year 1997 the Board of Directors of Morgan has designated the firm of
Price Waterhouse LLP to examine the financial statements of Morgan and its
consolidated subsidiaries, including the Bank, and to assist the Examining
Committee of the Bank in making its Directors' examination in accordance with
applicable laws and regulations. This designation is in accordance with the
recommendation of the Audit Committee of Morgan. The Board of Directors is
submitting the designation to the stockholders for approval. Price Waterhouse
LLP served as Morgan's principal independent accounting firm for the year
1996. Total audit fees to independent accounting firms in 1996 amounted to
approximately $11.7 million.
Representatives of Price Waterhouse LLP are expected to be present at the
annual meeting with the opportunity to make a statement if they desire to do
so and to be available to respond to appropriate questions.
The affirmative vote of a majority of the shares of Common Stock of Morgan
represented and voting at the annual meeting is required for approval of the
foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING PROPOSAL.
18
<PAGE>
3 STOCKHOLDER PROPOSAL RELATING TO CUMULATIVE VOTING
Mr. John J. Gilbert, 29 East 64th Street, New York, New York 10021-7043, who
owns 320 shares of Common Stock of Morgan, has indicated that he will
introduce the following resolution at the meeting:
"RESOLVED: That the stockholders of J.P. Morgan & Co., Inc., assembled in
annual meeting in person and by proxy, hereby request the Board of
Directors to take the steps necessary to provide for cumulative voting in
the election of directors, which means each stockholder shall be entitled
to as many votes as shall equal the number of shares he or she owns
multiplied by the number of directors to be elected, and he or she may cast
all of such votes for a single candidate, or any two or more of them as he
or she may see fit."
In support of the foregoing resolution, the proponent states:
"Continued very strong support along the lines we suggest were shown at the
last annual meeting when 25.56%, an increase over the previous year, 2,360
owners of 37,447,670 shares, were cast in favor of this proposal. The vote
against included 2,957 unmarked proxies.
"A California law provides that all state pension holdings and state
college funds, invested in shares must be voted in favor of cumulative
voting proposals, showing increasing recognition of the importance of this
democratic means of electing directors.
"The National Bank Act provides for cumulative voting. In many cases
companies get around it by forming holding companies without cumulative
voting. Banking authorities have the right to question the capability of
directors to be on banking boards. In many cases authorities come in after
and say the director or directors were not qualified. We were delighted to
see the SEC has finally taken action to prevent bad directors from being on
boards of public companies. The SEC should have hearings to prevent such
persons becoming directors before they harm investors.
"We think cumulative voting is the answer to find new directors for various
committees. Some recommendations have been made to carry out the CERES 10
points. The 11th should be, in our opinion, having cumulative voting and
ending staggered boards. When Alaska became a state it took away cumulative
voting over our objections. The Valdez oil spill might have been prevented
if environmental directors were elected through cumulative voting. The huge
derivative losses might have also been prevented with cumulative voting.
"Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Ingersoll-Rand also having cumulative
voting won two awards. FORTUNE magazine ranked it second in its industry as
`America's Most Admired Corporations' and the WALL STREET TRANSCRIPT noted
`on almost any criteria used to evaluate management, Ingersoll-Rand
excels.' In 1994 and 1995 they raised their dividend.
"Lockheed-Martin, as well as VWR Corporation, now have a provision that if
anyone has 40% or more of the shares cumulative voting applies, it applies
at the latter company.
19
<PAGE>
"In 1995 American Premier adopted cumulative voting. Alleghany Power System
tried to take away cumulative voting, as well as put in a stagger system,
and stockholders defeated it, showing stockholders are interested in their
rights.
"If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain."
The affirmative vote of a majority of the shares of Common Stock of Morgan
represented and voting at the annual meeting is required for approval of the
foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE PROPOSAL.
Cumulative voting permits relatively small groups of stockholders to elect
directors to represent their particular interests or points of view. The
Board of Directors believes there should never be any question as to whether
each Director is acting for the benefit of all of the stockholders rather
than as a representative of any special group. For this reason, the Board of
Directors believes that the institution of cumulative voting in the election
of Directors would be contrary to the best interests of Morgan's stockholders
as a whole.
4 STOCKHOLDER PROPOSAL RELATING TO DIRECTOR TERM LIMITS
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who owns 50 shares of Common Stock of
Morgan, has indicated that she will introduce the following resolution at the
meeting:
"RESOLVED: That the stockholders of J.P. Morgan recommend that the Board
take the necessary steps so that future outside directors shall not serve
for more than six years."
In support of the foregoing resolution, the proponent states:
"REASONS: The President of the U.S.A. has a term limit, so do Governors of
many states.
"Newer directors may bring in fresh outlooks and different approaches with
benefits to all shareholders.
"No director should be able to feel that his or her directorship is until
retirement.
"If you AGREE, please mark your proxy FOR this resolution."
The affirmative vote of a majority of the shares of Common Stock of Morgan
represented and voting at the annual meeting is required for approval of the
foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE PROPOSAL.
The Board of Directors believes that the familiarity with Morgan's operations
acquired over a substantial period of service as a director enhances the
individual's ability to contribute to the deliberations of the Board and
provides a continuity to those deliberations which is beneficial to
stockholders.
20
<PAGE>
5 OTHER MATTERS
The Board of Directors of Morgan does not know of any matters which may be
presented at the meeting other than those specifically set forth in the
Notice of Annual Meeting. If other matters come before the meeting or any
adjournment thereof, the persons named in the accompanying form of proxy and
acting thereunder will vote in accordance with their best judgment with
respect to such matters.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires Morgan's executive officers, Directors
and persons who own more than ten percent of a registered class of Morgan's
equity securities ("Reporting Persons") to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC and the New York Stock
Exchange (the "NYSE"). These Reporting Persons are required by SEC regulation
to furnish Morgan with copies of all Forms 3, 4 and 5 that they file with the
SEC and NYSE.
Based solely on Morgan's review of the copies of the Forms it has received
and written representations from certain Reporting Persons, Morgan believes
that all of its Reporting Persons complied with all filing requirements
applicable to them with respect to transactions during fiscal year 1996.
Dennis Weatherstone made a late filing in 1996 reporting a contribution of
shares to a charitable organization for the fiscal year 1995.
The expense of the Board of Directors' proxy solicitation will be borne by
Morgan. In addition to the use of the mails, proxies may be solicited by
personal interview or by telephone. Banks, brokerage houses and other
institutions, nominees and fiduciaries will be requested to forward the
soliciting material to beneficial owners and to obtain authorization for the
execution of proxies; and, if they in turn so request, Morgan will reimburse
such banks, brokerage houses and other institutions, nominees and fiduciaries
for their expenses in forwarding such material. Directors, officers and
regular employees of Morgan or the Bank may also solicit proxies without
additional remuneration therefor. Morrow & Co., Inc., New York, New York, has
been retained to aid in the solicitation of proxies for a fee of $8,500 plus
out-of-pocket expenses.
Stockholders are urged to sign the accompanying form of proxy, solicited on
behalf of the Board of Directors of Morgan, and return it at once in the
envelope provided for that purpose. Proxies will be voted in accordance with
the stockholders' directions. If no directions are given, proxies will be
voted for the election of the nominees for Directors set forth in this Proxy
Statement, for the approval of the independent accountants recommended by the
Board of Directors, and against the stockholder-proposed resolutions relating
to cumulative voting and director term limits. The proxy does not affect the
right to vote in person at the meeting and may be revoked at any time before
it is voted. A stockholder who wishes to give a proxy to someone other than
the proxies designated by the Board of Directors may strike out the names
appearing on the enclosed form of proxy, insert the name of some other
person, sign the form and transmit it to that person for use at the meeting.
A plurality of the votes of the shares of Common Stock represented at the
annual meeting in person or by proxy is required for the election of
Directors. Accordingly, abstentions and broker non-votes will not affect the
21
<PAGE>
outcome of elections. The affirmative vote of the majority of the shares of
Common Stock represented at the annual meeting in person or by proxy and
entitled to vote is required for all other matters. Abstentions for such
items will be counted as voting in respect of such item and therefore will
have the effect of a negative vote. However, proxies returned by brokers as
"non-votes" for any item as to which brokers may not vote without
instructions from the beneficial owners will not be counted as voting in
respect of such item.
Proxies, ballots and voting tabulations identifying stockholders are secret
and will not be available to anyone, except as actually necessary to meet
legal requirements.
- --------------------------------------------------------------------------------
STOCKHOLDER
PROPOSALS
Proposals of stockholders intended to be presented at the 1998 annual meeting
of stockholders of Morgan must be received by Morgan not later than November
25, 1997 in order to be included in the proxy statement and form of proxy
relating to such annual meeting.
Dated: March 24, 1997 Rachel F. Robbins
Secretary
22
<PAGE>
EXHIBIT A
EXECUTIVE OFFICERS OF MORGAN
The following individuals are the current executive officers of Morgan. The
Chairman of the Board, President, Chairman of the Executive Committee, and Vice
Chairmen of the Board of Morgan are elected annually by the Board of Directors
to serve until the next annual election of officers and until their respective
successors have been elected and have qualified. All other executive officers
are elected annually and hold office at the pleasure of the Board of Directors.
<TABLE>
===================================================================================================================================
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
Douglas A. Warner III...........50.........Chairman of the Board and President of Morgan and the Bank. See "Election
of Directors" on page 2.
Roberto G. Mendoza..............51.........Vice Chairman of the Board of Morgan and the Bank. See "Election of Directors" on page 3.
Michael E. Patterson............55.........Vice Chairman of the Board of Morgan and the Bank. See "Election of Directors" on page 4.
Kurt F. Viermetz................57.........Vice Chairman of the Board of Morgan and the Bank. See "Election of Directors" on page 4.
John A. Mayer Jr................57.........Chief Financial Officer of Morgan and the Bank since June 1995; Managing
Director of Morgan from January 1990 and of the Bank from February
1989 to June 1995.
Rachel F. Robbins...............46.........General Counsel and Secretary of Morgan since February 1996 and Managing Director,
General Counsel and Secretary of the Bank since March 1997; Managing Director of Morgan
and of J.P. Morgan Securities Inc. since January 1988; General Counsel and Secretary of
J.P. Morgan Securities Inc. since January 1986; Deputy General Counsel of Morgan from
July 1992 to February 1996.
David H. Sidwell................43.........Managing Director and Controller of Morgan and the Bank since December 1994; Senior
Vice President and Controller of Morgan and the Bank from April 1994 to December 1994;
Senior Vice President of the Bank from February 1989 to April 1994.
Stephen G. Thieke...............50.........Managing Director and Head of Corporate Risk Management of Morgan since March 1996;
Chairman, Market Risk Committee of Morgan since June 1993 and Chairman of the Board of
J.P. Morgan Securities Inc. since November 1993 and from April 1991 to October 1992;
Managing Director of Morgan from March 1991 to June 1993; President of J.P. Morgan
Securities Inc. from October 1990 to November 1993; Vice Chairman of the Board of J.P.
Morgan Securities Inc. from February 1990 to April 1991 and from October 1992 to
November 1993.
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</TABLE>
A-1
<PAGE>
[LOGO]
Printed on recycled paper.
<PAGE>
P
R
O
X
Y
J.P. MORGAN & CO. INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 14, 1997
The undersigned hereby constitutes and appoints E. Deane Leonard, Edward F.
Murphy and Rachel F. Robbins, and each of them, the true and lawful agents and
proxies of the undersigned with full power of substitution in each, to represent
the undersigned at the Annual Meeting of Stockholders of J.P. MORGAN & CO.
INCORPORATED to be held in Morgan Hall West, 46th floor, 60 Wall Street, New
York, New York, on Wednesday, May 14, 1997, at 11 a.m., and at any adjournment
of said meeting, and to vote, as directed on the reverse side of this card, on
all specified matters coming before said meeting, and in their discretion, upon
such other matters not specified as may come before said meeting.
Election of Directors, Nominees:
Douglas A. Warner III, Riley P. Bechtel, Martin Feldstein, Hanna H. Gray, James
R. Houghton, James L. Ketelsen, John A. Krol, Roberto G. Mendoza, Michael E.
Patterson, Lee R. Raymond, Richard D. Simmons, Kurt F. Viermetz, Dennis
Weatherstone and Douglas C. Yearley.
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 PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD TO J.P. MORGAN & CO. INCORPORATED,
C/O FIRST CHICAGO TRUST COMPANY, P.O. BOX 8212, EDISON, NJ 08818-9079.
------------------
SEE REVERSE
SIDE
------------------
<PAGE>
/ X / PLEASE MARK YOUR 0123
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
================================================================================
THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2 IF NO CHOICE IS SPECIFIED.
- --------------------------------------------------------------------------------
1. Election of
Directors.
(see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
/ / FOR / / WITHHELD
2. Approval of independent accountants.
/ / FOR / / AGAINST / / ABSTAIN
================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 3 AND 4.
================================================================================
THIS PROXY WILL BE VOTED "AGAINST" ITEMS 3 AND 4 IF NO CHOICE IS SPECIFIED.
- --------------------------------------------------------------------------------
3. Stockholder proposal relating to cumulative voting.
/ / FOR / / AGAINST / / ABSTAIN
4. Stockholder proposal relating to director term limits.
/ / FOR / / AGAINST / / ABSTAIN
================================================================================
SIGNATURE(S) ______________________________________________ DATE ______________
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
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.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
J.P. Morgan & Co. Incorporated
Annual Meeting
of
Stockholders
Wednesday, May 14, 1997
11:00 a.m.
J.P. Morgan & Co. Incorporated
Morgan Hall West
60 Wall Street
New York, N.Y. 10260-0060
IMPORTANT NOTICE
--------------------------
IT IS IMPORTANT THAT YOU VOTE, SIGN AND
RETURN THE ABOVE PROXY AS SOON AS POSSIBLE.
