Notice of Annual Meeting of Stockholders
Wednesday, April 8, 1998
11:00 A.M.
J.P. Morgan & Co. Incorporated
Morgan Hall West
46th Floor, 60 Wall Street
New York, New York
March 9, 1998
JP Morgan To our stockholders:
We are pleased to invite you to attend our 1998 annual
meeting of stockholders to:
o Elect seventeen directors,
o Approve the appointment of Price Waterhouse LLP as
independent accountants for 1998,
o Act on three stockholder proposals to be presented, and
o Conduct other business properly brought before the
meeting.
Stockholders of record at the close of business on February
27, 1998 may vote at the meeting.
Your vote is important. Whether or not you plan to attend
the meeting, please sign, date and return the enclosed proxy
card in the envelope provided. If you are a registered
stockholder, you may also vote by telephone. Instructions
are included on your proxy card. You may change your vote by
sending in a signed proxy card with a later date or by
attending the meeting and voting in person.
Rachel F. Robbins
Secretary
<PAGE>
Proxy statement table of contents
Page
Information about the annual meeting and voting.......... 1
Item 1: Election of directors............................ 3
Biographies of our Board nominees................ 3
Committees of the Board of Morgan................ 8
Committees of the Board of the Bank.............. 9
Director compensation............................ 10
Our executive officers........................... 11
Stock ownership of management.................... 12
Stock ownership of certain beneficial owners..... 13
Compensation committee report on executive
compensation................................... 13
Summary compensation table....................... 16
Stock options.................................... 18
Stock performance graphs......................... 19
Retirement benefits.............................. 20
Transactions with directors and officers......... 21
Item 2: Approval of Price Waterhouse LLP as
independent accountants.......................... 21
Item 3: Stockholder proposal relating to
lending criteria................................. 22
Item 4: Stockholder proposal relating to political
contributions.................................... 24
Item 5: Stockholder proposal relating to
cumulative voting................................ 25
Item 6: Other matters.................................... 27
Section 16(a) beneficial ownership
reporting compliance........................... 27
Proxy solicitation............................... 27
Stockholder proposals............................ 27
i
<PAGE>
Information about the annual meeting and voting
The Board of Directors of J.P. Morgan & Co. Incorporated
(which we refer to in this proxy statement as "Morgan") is
soliciting your proxy to vote at our 1998 annual meeting of
stockholders (or at any adjournment of the meeting). This
proxy statement summarizes the information you need to know
to vote at the meeting.
We began mailing this proxy statement and the enclosed proxy
card on or about March 9, 1998 to all stockholders entitled
to vote. Stockholders who owned Morgan common stock, our
only class of voting stock, at the close of business on the
record date, February 27, 1998, are entitled to vote. As of
this record date, there were 177,618,171 shares of Morgan
common stock outstanding. We are also sending the Morgan
1997 Annual Report, which includes our financial statements,
along with this proxy statement.
Date, time Date: Wednesday, April 8, 1998
and place of Time: 11:00 a.m.
meeting Place: Morgan Hall West
46th Floor, 60 Wall Street
New York, New York
Voting your Each share of Morgan common stock that you own entitles you
proxy to one vote. The proxy card indicates the number of shares
that you own.
Whether or not you plan to attend the annual meeting, we
urge you to complete, sign and date the enclosed proxy card
and return it promptly in the envelope provided. Returning
the proxy card will not affect your right to attend the
meeting and vote. If you are a registered stockholder, you
may also vote by telephone. Instructions are included on
your proxy card.
If you properly fill in your proxy card and send it to us in
time to vote, your "proxy" (one of the individuals named on
your proxy card) will vote your shares as you have directed.
If you sign the proxy card but do not make specific choices,
your proxy will vote your shares as recommended by the Board
as follows:
o "FOR" the election of all seventeen nominees for
director (as described on page 3),
o "FOR" the approval of Price Waterhouse LLP as
independent accountants for 1998 (as described on page
21), and
o "AGAINST" each of the three stockholder proposals to be
presented (as described on pages 22 to 26).
If any other matter is presented at the meeting, your proxy
will vote in accordance with his or her best judgment. At
the time this proxy statement went to press, we knew of no
matters needing to be acted on at the meeting except for
those discussed in this proxy statement.
1
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Revoking your o You may send in another signed proxy card with a later
proxy date,
o You may notify our Secretary in writing before the
meeting that you have revoked your proxy, or o You may
vote in person at the meeting.
Voting in person If you plan to attend the meeting and vote in person, we
will give you a ballot when you arrive. However, if your
shares are held in the name of your broker, bank or other
nominee, you must bring an account statement or letter from
the nominee indicating that you are the beneficial owner of
the shares on February 27, 1998, the record date for voting.
Appointing your If you want to give your proxy to someone other than the
own proxy individuals named as proxies on the proxy card, you may do
so by crossing out the names of those individuals and
inserting the name of the individual you are authorizing to
vote. Either you or that authorized individual must present
the proxy card at the meeting.
Quorum A quorum of stockholders is necessary to hold a valid
requirement meeting. A majority of the shares entitled to vote in person
or by proxy at the meeting constitutes a quorum. Abstentions
and broker "non-votes" are counted as present for
establishing a quorum. A broker non-vote occurs on an item
when a broker is not permitted to vote on that item absent
instruction from the beneficial owner of the shares and no
instruction is given.
Item Vote necessary*
---- ---------------
Vote necessary Item 1: Election of Directors are elected by a
to approve directors plurality vote of shares
proposals present at the meeting,
meaning that the director
nominee with the most
affirmative votes for a
particular slot is elected
for that slot. Only the
number of votes "for" and
"against" affect the
outcome. Abstentions have
no effect on the vote.
Item 2: Approval of Approval requires the
independent affirmative vote of a
accountants majority of the shares
present at the meeting in
person or by proxy.
Abstentions are counted and
have the effect of a vote
"against."
Items 3-5: Stockholder Same as for Item 2.
proposals
* Under New York Stock Exchange rules, if your broker holds
your shares in its name, the broker is permitted to vote
your shares on Items 1 and 2 even if it does not receive
voting instructions from you. Your broker may not vote your
shares on Items 3-5 absent instructions from you. Without
your voting instructions, a broker non-vote will occur on
Items 3-5 but will have no effect on the vote.
Confidentiality Proxies, ballots and voting tabulations identifying
of voting stockholders are kept confidential and will not be available
to anyone except as actually necessary to meet legal
requirements.
2
<PAGE>
Item 1: Election of directors
Our Board of Directors has nominated seventeen directors for
election at the annual meeting. Each nominee is currently
serving as one of our directors. If you reelect them, they
will hold office until the next annual meeting or until
their successors have been elected.
Your proxy will vote for each of the nominees unless you
specifically withhold authority to vote for a particular
nominee.
If any nominee is unable to serve, your proxy may vote for
another nominee proposed by the Board or the Board may
reduce the number of directors to be elected.
All nominees are currently also directors of Morgan Guaranty
Trust Company of New York (which we refer to in this proxy
statement as the "Bank").
Dennis Weatherstone, who has served as a director since
1979, will not stand for reelection at the annual meeting.
During 1997 there were nine meetings of the Board of
Directors of Morgan. Each director attended at least 75% of
the meetings of the Board and committees of which he or she
was a member.
Biographies of our Board nominees
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Douglas A. Warner III Director since 1990. Age 51.
Chairman of the Boards of Morgan and the Bank (since January
1995) and President of Morgan and the Bank (since January
1990). Chairman of the Executive Committees of Morgan and
the Bank. Director of Anheuser-Busch Companies, Inc. and
General Electric Company. Member of the Board of Counselors
of Bechtel Group, Inc. Chairman of the Board of Managers of
Memorial Sloan-Kettering Cancer Center. Trustee of Pierpont
Morgan Library. Director of The Bankers Roundtable. Member
of The Business Roundtable. Vice Chairman of The Business
Council.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Paul A. Allaire Director since 1997. Age 59.
Chairman of the Board and Chief Executive Officer (since
1991) and Director of Xerox Corporation (office equipment).
Member of the Audit Committee and the Committee on Fiduciary
Matters of Morgan and the Examining Committee of the Bank.
Director of Sara Lee Corporation, SmithKline Beecham p.l.c.
and Lucent Technologies. Member of the Boards of Council on
Competitiveness, Council on Foreign Relations, New York City
Ballet, Ford Foundation and Catalyst. Member of The Business
Council, The Business Roundtable and National Academy of
Engineering. Trustee of Worcester Polytechnic Institute and
Carnegie-Mellon University.
3
<PAGE>
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Riley P. Bechtel Director since 1995. Age 45.
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. Director of Fremont Group, L.L.C.,
Fremont Investors, Inc. and Sequoia Ventures, Inc. Trustee
of Thacher School. Member of American Society of Corporate
Executives, The Business Council, The Business Roundtable,
The Trilateral Commission and The National Petroleum
Council. 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.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Lawrence A. Bossidy Director since 1998. Age 63.
Chairman of the Board (since January 1992) and Chief
Executive Officer (since July 1991) and Director of
AlliedSignal Inc. (diversified manufacturing). Director of
Merck & Co., Inc. Member of The Business Council and The
Business Roundtable.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Martin Feldstein Director since 1993. Age 58.
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.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Ellen V. Futter Director since 1997. Age 48.
President and Trustee of American Museum of Natural History
(since November 1993). Ms. Futter served as President of
Barnard College from May 1981 through September 1993. Member
of the Audit Committee of Morgan and the Examining Committee
and the Committee on Employment Policies and Benefits of the
Bank. Director of Bristol-Myers Squibb Company and Phi Beta
Kappa Associates. Trustee of Consolidated Edison Company of
New York, Inc. Member of Council on Foreign Relations and
Advisory Board of the Yale School of Management. Partner in
the New York City Partnership.
4
<PAGE>
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Hanna H. Gray Director since 1976. Age 67.
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 Fiduciary 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, Harvard University 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.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Walter A. Gubert Director since 1998. Age 50.
Vice Chairman of the Boards of Morgan and the Bank and
member of the Executive Committees of Morgan and the Bank
(since March 1998). Mr. Gubert was Managing Director of the
Bank from September 1989 to February 1998; Chairman of the
Bank's European Management Committee from June 1993 to
December 1997 and Senior Regional Executive for Europe from
March 1995 to December 1997.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] James R. Houghton Director since 1982. Age 61.
Retired Chairman of the Board of Corning Incorporated. Mr.
Houghton was Chairman of the Board 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 Museum of Glass,
Metropolitan Museum of Art and Pierpont Morgan Library.
Member of The Business Council and Harvard Corporation.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] James L. Ketelsen Director since 1977. Age 67.
Retired Chairman of the Board 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 Fiduciary Matters of Morgan and Chairman of the
Examining Committee of the Bank. Director of GTE Corporation
and Sara Lee Corporation. Trustee of Northwestern
University.
5
<PAGE>
- --------------------------------------------------------------------------------
[PHOTO OMITTED] John A. Krol Director since 1997. Age 61.
Chairman of the Board (since October 1997) and Director of
E.I. du Pont de Nemours and Company (global chemical and
energy). Mr. Krol was Chief Executive Officer of DuPont from
December 1995 to February 1998, President from October 1995
to October 1997, Vice Chairman of DuPont from March 1992 to
October 1995 and Senior Vice President of DuPont Fibers from
1990 until 1992. Member of the Audit Committee and Committee
on Director Nominations and Board Affairs of Morgan and the
Examining Committee of the Bank. Director of Mead
Corporation, National Association of Manufacturers, Delaware
Art Museum and Catalyst. Member of Board of Trustees of
Tufts University, University of Delaware and Corporate
Liaison Board of American Chemical Society. Member of The
Business Council. Trustee of Hagley Museum and U.S. Council
for International Business.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Roberto G. Mendoza Director since 1990. Age 52.
Vice Chairman of the Boards 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.,
Travelers/Aetna Property Casualty Corp. and Reuters Group
PLC.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Michael E. Patterson Director since 1995. Age 55.
Vice Chairman of the Boards 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.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Lee R. Raymond Director since 1987. Age 59.
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.
Director of American Petroleum Institute and 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.
6
<PAGE>
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Richard D. Simmons Director since 1990. Age 63.
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 Fiduciary
Matters of Morgan and Chairman of the Committee on
Employment Policies and Benefits of the Bank. Director of
Union Pacific Corporation and The Washington Post Company.
Member of General Electric Investment Corporation Equity
Advisory Board, Advisory Board of Directorship and council
member of White Burkett Miller Center of Public Affairs at
The University of Virginia.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Kurt F. Viermetz Director since 1990. Age 58.
Mr. Viermetz was Vice Chairman of the Boards of Morgan and
the Bank from January 1990 to January 1998. Member of
Supervisory Board of Hoechst AG and VEBA AG. 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.
- --------------------------------------------------------------------------------
[PHOTO OMITTED] Douglas C. Yearley Director since 1993. Age 62.
Chairman of the Board and Chief Executive Officer (since May
1989) 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 Committee on
Management Development and Executive Compensation and the
Committee on Director Nominations and Board Affairs of
Morgan. Director of USX Corporation and Lockheed Martin
Corporation. Chairman of National Mining Association.
Director of Copper Development Association and International
Copper Association. Member of Policy Committee of The
Business Roundtable and The Business Council. Director of
Phoenix Symphony.
7
<PAGE>
Committees of the Board of Morgan Audit Committee
James L. Ketelsen This committee, which met six times during 1997, is
(Chairman) responsible for overseeing the financial reporting process
Paul A. Allaire and the effectiveness of internal controls of Morgan and its
Martin Feldstein consolidated subsidiaries, including the Bank, and for
Ellen V. Futter recommending to the Board of Morgan the designation each
John A. Krol year of independent accountants.
Committee on Management Development and Executive
Compensation
James R. Houghton This committee, which met four times during 1997, is
(Chairman) responsible for advising the Board, in consultation with
Riley P. Bechtel senior management, on the development of key executives and
Lee R. Raymond recommending or approving their compensation, including the
Douglas C. Yearley following: (1) evaluating, on a periodic basis, the
performance of senior officers and succession planning for
key executives, including the Chairman, and making
recommendations to the Board; (2) supervising the
administration of our incentive and stock plans; (3)
reviewing and approving all awards and options granted under
our incentive and stock plans and making recommendations to
the Board with respect to awards and options for certain
members of senior management and (4) reviewing officer
compensation policies.
Committee on Director Nominations and Board Affairs
Lee R. Raymond This committee, which met three times during 1997, is
(Chairman) responsible for making recommendations to the Board with
Hanna H. Gray respect to the qualifications and nominations of directors,
John A. Krol directors' functions, committees, compensation and
Douglas C. Yearley retirement and other matters affecting directors. In
determining its recommendations, this committee will
consider nominees recommended by stockholders. Stockholder
recommendations should be made in writing, addressed to this
committee, attention of the Secretary of J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, New York 10260-0060.
Committee on Fiduciary Matters
Hanna H. Gray This committee (formerly the Committee on Trust Matters),
(Chairman) which met twice during 1997, is responsible for reviewing
Paul A. Allaire the general conduct of the business of the departments and
James L. Ketelsen affiliates of Morgan and the Bank engaged in investing and
Richard D. Simmons administering assets held for others in trust and investment
management accounts.
8
<PAGE>
Committees of the Board of the Bank
Examining Committee
James L. Ketelsen This committee, which met six times during 1997, is
(Chairman) responsible for examinations of the Bank in accordance with
Paul A. Allaire New York State banking law.
Martin Feldstein
Ellen V. Futter
John A. Krol
Committee on Employment Policies and Benefits
Richard D. Simmons This committee, which met twice in 1997, is responsible for
(Chairman) reviewing the Bank's Retirement, Profit Sharing, and
Martin Feldstein Long-Term Disability Plans, Morgan's overseas benefit plans,
Ellen V. Futter non-officer salary and other benefits and employee relations
Dennis Weatherstone and affirmative action programs.
9
<PAGE>
Director compensation
We provide the following compensation to our directors for
their services as directors.
Annual fees o Each non-employee director receives an annual retainer
of $30,000 and an attendance fee of $1,200 for each
meeting of the Board of Morgan and the Bank attended.
o We also pay our non-employee directors for serving on
committees of the Boards: an annual retainer of $20,000
for the Chairman and $12,500 for the members of the
Audit Committee and the Committee on Management
Development and Executive Compensation, and $10,000 for
the Chairman 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 this service.
o We also reimburse directors for travel expenses to
meetings of the Boards and committees.
Director Stock Under a Director Stock Plan (1992), as amended, non-employee
Plan directors receive an annual award of share credits for 500
shares of Morgan common stock for their service during the
preceding year. This award is pro rated where a director did
not serve 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 their
designated beneficiary or estate. This award is credited
annually with dividend equivalents.
Deferred Under our Deferred Compensation Plan for Directors' Fees,
Compensation non-employee directors may defer their compensation for
Plan for services as Board or committee members. The plan permits
Directors' Fees directors to make separate deferral elections as 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 a cash account, a stock
account or a combination of both. The plan provides that
amounts deferred to the cash account are credited annually
with interest earned. Amounts deferred to the stock account
are credited annually with dividend equivalents.
Participating directors are entitled to receive a cash
distribution of the balance in their accounts in full or in
up to fifteen annual installments after termination of
service as a director.
The Bank's Retired non-employee directors are eligible to serve as
Directors Advisory members of the Bank's Directors Advisory Council.
Council Members of the council receive an annual retainer of
$30,000.
10
<PAGE>
Our executive officers
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.
Douglas A. Warner III Age 51.
Chairman of the Boards and President of Morgan and the Bank.
See "Election of Directors" on page 3.
Walter A. Gubert Age 50.
Vice Chairman of the Boards of Morgan and the Bank.
See "Election of Directors" on page 5.
Roberto G. Mendoza Age 52.
Vice Chairman of the Boards of Morgan and the Bank.
See "Election of Directors" on page 6.
Michael E. Patterson Age 55.
Vice Chairman of the Boards of Morgan and the Bank.
See "Election of Directors" on page 6.
Thomas B. Ketchum Age 47.
Chief Administrative Officer of Morgan since January 1998;
member of the Board of Directors of J.P. Morgan Securities
Inc. since October 1995; Managing Director of Morgan since
August 1992 and of J.P. Morgan Securities Inc. since July
1994.
John A. Mayer Jr. Age 58.
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 Age 47.
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 Age 44.
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 Age 51.
Managing Director and Head of Corporate Risk Management of
Morgan since March 1996; Chairman, Market Risk Committee of
Morgan since June 1993; 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.
11
<PAGE>
Stock ownership of management
The following table shows, as of February 27, 1998, the
Morgan stock-based holdings of each director, each executive
officer named in the Summary Compensation Table appearing on
page 16, and all directors and executive officers as a
group, based on information provided by these individuals.
Each individual beneficially owns less than 1% of our common
stock. Except as described in the footnotes to the table,
each person has sole investment and voting power over the
shares shown in the "Stock" column of the table.
============================================================
Name of individual or group Stock(1) Total(2)
------------------------------------------------------------
Douglas A. Warner III................ 417,161(3) 1,116,189
Roberto G. Mendoza................... 347,940 891,343
Kurt F. Viermetz..................... 433,408 569,501
Michael E. Patterson................. 260,488(4) 454,221
Walter A. Gubert..................... 135,624(5) 573,748
John A. Mayer Jr..................... 195,680(6) 368,719
Paul A. Allaire...................... 5,000 5,000
Riley P. Bechtel..................... 500 1,229
Lawrence A. Bossidy.................. 5,000 5,000
Martin Feldstein..................... 1,000 2,598
Ellen V. Futter...................... 500(7) 500
Hanna H. Gray........................ 800 2,667
James R. Houghton.................... 1,000 2,867
James L. Ketelsen.................... 7,800 9,667
John A. Krol......................... 950 1,132
Lee R. Raymond....................... 500 10,503
Richard D. Simmons................... 1,000 2,867
Dennis Weatherstone.................. 740,104 880,705
Douglas C. Yearley................... 1,000(8) 2,727
All directors and executive
officers as a group................. 3,016,767(9) 5,995,396
------------------------------------------------------------
(1) Includes shares of our common stock beneficially owned,
directly or indirectly. The number of shares in the column
also includes the following shares of common stock which the
individual(s) had the right to acquire within 60 days of
February 27, 1998 through the exercise of options: Mr.
Warner, 366,155 shares; Mr. Mendoza, 266,667 shares; Mr.
Viermetz, 266,667 shares; Mr. Patterson, 253,555 shares; Mr.
Gubert, 130,000 shares; Mr. Mayer, 182,332 shares; Mr.
Weatherstone, 529,694 shares; all directors and executive
officers as a group, 2,417,780 shares.
(2) Shows 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 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 10 and directors' fees
deferred as units of common stock under the Deferred
Compensation Plan for Directors' Fees described on page 10.
(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 these shares.
(4) Includes 4,717 shares held in trust for family members.
Mr. Patterson disclaims beneficial ownership of all but
1,600 of these shares.
(5) Includes 5,377 shares owned jointly with spouse, with
whom investment and voting power is shared.
(6) Includes 500 shares held in trust for family members.
(7) Shares owned jointly with spouse, with whom investment
and voting power is shared.
(8) Shares held in trust for family members.
(9) As a group, beneficially own 1.70% of Morgan's common
stock.
12
<PAGE>
Stock ownership of certain beneficial owners
We have been notified by the persons in the following table
that they are the beneficial owners (as defined by rules of
the Securities and Exchange Commission (SEC)) of more than
five percent of our common stock as of December 31, 1997.
According to the Schedule 13G filed by each owner with the
SEC, these shares were acquired in the ordinary course of
business, were not acquired for the purpose of, and do not
have the effect of, changing or influencing control over us
and were not acquired in connection with or as a party to
any transaction having such purpose or effect. In addition,
both persons disclaim beneficial ownership of these shares.
============================================================
Number Percent of
of shares outstanding
Name and address of beneficially shares
beneficial owner owned owned
------------------------------------------------------------
The Capital Group Companies, 10,412,010 5.9%
Inc.(1)
333 South Hope Street
Los Angeles, California 90071
Merrill Lynch, Pierce, Fenner 12,399,558 7.0
& Smith Incorporated (2)
World Financial Center,
North Tower
250 Vesey Street
New York, New York 10281
------------------------------------------------------------
(1) The Capital Group Companies, Inc., the parent company of
six investment management companies, has sole investment
power over these shares and has the power to vote 568,030 of
them. One of its subsidiaries, Capital Research and
Management Company, held 9,715,000 of these shares or 5.5%
of our outstanding shares as a result of acting as an
investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of
1940.
(2) Merrill Lynch, Pierce, Fenner & Smith Incorporated, a
broker-dealer and the sponsor of various unit investment
trusts which invests in equity securities, including our
stock, has shared voting and investment power over these
shares.
Compensation committee report on executive compensation
Role of the The Committee on Management Development and Executive
committee and Compensation, composed entirely of independent outside
the Board 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.
Douglas C. Yearley became a member of the committee in
October 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 Morgan's executive compensation program is designed to
philosophy 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.
13
<PAGE>
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 Total compensation for Morgan's senior management is
executive composed of base salary, annual incentive compensation (of
compensation which a substantial portion is awarded in the form of
program 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.
Incentive In keeping with its philosophy of increasing, as an
compensation 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.
To establish and maintain a common focus and shared goals
among Morgan's most senior management, incentive
compensation for this group 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 a threshold return 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 and trends.
Each participant in this incentive compensation arrangement
is allocated a specified number of shares out of a pool of
shares managed by the committee. The committee also
determines the value of each share based upon its
qualitative and quantitative assessment of Morgan's
performance and competitive compensation levels and trends.
Actual incentive compensation awards may be further 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.
14
<PAGE>
Stock-based The committee believes that stock ownership enhances
compensation individuals' focus on maximizing long-term stockholder
and stock value. Accordingly, senior officers are strongly encouraged
ownership 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 1997, 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 and 1996, 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 1997 stock
option awards to senior management were granted with an
exercise price equal to the fair market value of Morgan
stock on the date of grant and become exercisable over five
years on a pro rata basis. 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
generally grants stock option awards to members of senior
management in July of each year. (Prior to 1997, stock
option awards were generally granted in January.)
Corporate J.P. Morgan's net income declined 7% in 1997 to $1.465
performance billion, mainly because fourth quarter results were down,
and CEO and return on equity was 13.4% compared with 14.9% in 1996.
compensation Morgan continued to make good progress toward strategic
goals in important areas of its global business, however,
with revenue and market share gains in investment banking
and growth in asset management. Revenues from client-focused
activities continued to grow, while investments to build
business capability and capacity contributed to increased
expenses. The committee believes that J.P. Morgan is
successfully pursuing strategic growth and strengthening its
position as a leading global financial institution in a
highly competitive environment.
As Chairman and Chief Executive Officer since January 1995,
and earlier as President, Mr. Warner has demonstrated
consistently strong leadership. He has spearheaded Morgan's
effort to expand client relationships and develop core
competencies in order to realize greater value from the
firm's investment in its range of financial capabilities.
Importantly, he has sharpened the firm's strategic
15
<PAGE>
focus, actively reallocating resources to expand business
activities that hold the greatest potential for generating
strong returns and to ensure that Morgan remains a global
leader in financial services.
Reflecting the decline in Morgan's 1997 earnings, Mr.
Warner's total annual compensation for the year decreased
8.0% to $5,391,667, including a restricted stock award with
a grant date value of $2,350,000. The annual restricted
stock award is included under long-term awards in the
Summary Compensation Table. Mr. Warner was allocated the
largest number of shares in the incentive compensation
arrangement for senior officers for 1997, and the percentage
of annual incentive compensation that he received in the
form of restricted stock - 50% - was the highest in the
firm. Mr. Warner was also awarded 80,000 stock options with
an exercise price equal to 100% of the fair market value of
Morgan stock on the grant date (the material terms of which
are described under "Option Grants in 1997"). 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.
Tax deductibility Section 162(m) of the Internal Revenue Code limits the tax
of executive deductibility of compensation in excess of $1 million paid
compensation to certain members of senior management, unless the payments
are made under plans which satisfy the technical
requirements of the statute (and regulations). While the
committee currently intends to pursue a strategy of
maximizing deductibility of senior management compensation
by making awards under the 1995 Executive Officer
Performance Plan and 1995 Stock Incentive Plan (both of
which meet the requirements of Section 162(m) and were
approved by stockholders during 1995), it also believes it
is important to maintain the flexibility to take actions it
considers to be in the best interest of Morgan and its
stockholders, which may be based on considerations in
addition to Section 162(m).
The Committee on Management Development and Executive
Compensation
James R. Houghton, Chairman
Riley P. Bechtel
Lee R. Raymond
Douglas C. Yearley
Summary compensation table
The table on the following page shows, for the years ending
December 31, 1997, 1996, and 1995, the annual and long-term
compensation that we paid or accrued for those years to our
Chief Executive Officer and four most highly compensated
executive officers.
16
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================
Annual compensation Long-term compensation
--------------------------------------- ----------------------
awards
----------------------
Securities
Restricted underlying
Other annual stock stock All other
Name and Salary compensation award options compensation
principal position Year ($) Bonus($)(1) ($)(2) ($)(3)(4) (#shares)(5) ($)(6)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III 1997 $691,667 $2,350,000 $ 0 $2,350,000 80,000 $18,624
Chairman 1996 600,000 2,633,500 0 5,562,813 300,000 30,651
1995 591,667 1,815,800 0 1,808,700 75,000 27,110
Roberto G. Mendoza 1997 447,917 2,117,500 0 1,732,500 50,000 8,582
Vice Chairman 1996 425,000 2,208,500 351,253 3,772,531 200,000 18,496
1995 425,000 1,678,300 0 1,367,400 40,000 14,234
Kurt F. Viermetz 1997 447,917 1,952,500 0 1,597,500 0 0
Vice Chairman (7) 1996 425,000 2,208,500 0 1,800,000 0 8,500
1995 425,000 1,678,300 0 1,367,400 40,000 7,000
Michael E. Patterson 1997 445,833 1,650,000 0 1,350,000 40,000 1,553
Vice Chairman 1996 397,917 1,851,000 0 1,507,500 0 10,673
1995 371,250 1,162,000 0 945,000 40,000 7,000
John A. Mayer Jr 1997 394,167 1,402,500 0 1,147,500 35,000 24,668
Chief Financial 1996 327,500 1,576,000 0 1,282,500 0 54,712
Officer 1995 300,000 1,200,800 0 976,700 30,000 46,513
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts for 1995 and 1996 include the cash portion
of awards under the Bank's profit sharing program.
(2) Mr. Mendoza deferred his 1996 annual bonus into common
stock equivalents; the amount reported in this column
represents the difference between the fair market value of
our 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 our
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 our common stock on the grant date.
This fair market value was: $83.9375 in the case of the
special awards described below, $101.469 for 1997 awards,
$103.438 for 1996 awards, and $75.625 for 1995 awards. This
value is not discounted for restrictions on the stock units.
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 under
which each award was granted. Except for the special
long-term awards granted to Messrs. Warner and Mendoza in
1996, restricted stock awards generally become vested five
years after the date of grant or, in the case of death,
become immediately vested in full. The amounts reported in
this column for 1996 include special long-term awards of
35,000 restricted stock units granted to Mr. Warner and
23,500 restricted stock units granted to Mr. Mendoza. The
value of these special long-term awards shown in this column
are $2,937,813 for Mr. Warner and $1,972,531 for Mr.
Mendoza. The special long-term awards granted to Messrs.
Warner and Mendoza will generally vest 10 years after their
grant, 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 the following non-vested
restricted stock award balances, in aggregate, outstanding
as of January 22, 1998: Mr. Warner, 184,596 shares
($20,572,109); Mr. Mendoza, 149,961 shares ($16,732,111);
Mr. Viermetz, 122,760 shares ($13,676,921); Mr. Patterson,
75,340 shares ($8,352,270); and Mr. Mayer, 77,828 shares
($8,655,886). Dollar values are based on (i) the closing
price of our common stock on December 31, 1997 ($112.875)
for shares which were outstanding on that date and (ii) the
average of the high and low prices of our common stock on
January 22, 1998 ($101.469) for shares awarded as of that
date.
(5) The amounts reported in this column for 1996 represent
special long-term awards granted to Mr. Warner of 300,000
options and to Mr. Mendoza of 200,000 options.
(6) Includes (i) the following contributions to the Bank's
deferred profit sharing plan: $8,500 in 1996 and $7,000 in
1995, for each of the named executive officers and (ii)
interest exceeding 120% of the applicable federal rate
deemed to have accrued on deferrals under our 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 $18,624, $22,151 and $20,110 for
Mr. Warner for 1997, 1996 and 1995, respectively; $8,582,
$9,996 and $7,234 for Mr. Mendoza for 1997, 1996 and 1995,
respectively; $1,553 and $2,173 for Mr. Patterson for 1997
and 1996, respectively; and $24,668, $46,212 and $39,513 for
Mr. Mayer for 1997, 1996 and 1995, respectively.
(7) Retired effective January 1, 1998.
17
<PAGE>
Stock options
The following tables show information on stock options that
we have awarded to our Chief Executive Officer and four most
highly compensated executive officers. The first table
shows, along with some additional information, the estimated
grant date present value of stock options granted in 1997.
These values are calculated pursuant to the proxy rules of
the SEC and are calculated under the Black-Scholes model for
pricing options. The actual pretax gain realized upon the
exercise of stock options will depend upon the excess of the
market price of our common stock over the exercise price per
share of the stock option at the time the option is
exercised. The second table shows select information
relating to stock options exercised during 1997 and stock
options outstanding as of December 31, 1997. We do not grant
any stock appreciation rights.
Option grants in 1997
<TABLE>
<CAPTION>
================================================================================
% of
Total Exercise Estimated
Options options or base Expir- grant date
granted granted to price ation present
Name (#)(1) employees ($/Sh) date value($)(2)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Douglas A. Warner III.... 80,000 1.70% $107.938 7/13/07 $2,162,400
Roberto G. Mendoza....... 50,000 1.60 107.938 7/13/07 1,351,500
Kurt F. Viermetz......... 0 0.00 N/A N/A N/A
Michael E. Patterson..... 40,000 0.85 107.938 7/13/07 1,081,200
John A. Mayer Jr......... 35,000 0.74 107.938 7/13/07 946,050
--------------------------------------------------------------------------------
</TABLE>
(1) Options vest as to one-fifth of the shares covered by
the option on each of the first, second, third, fourth and
fifth anniversaries of the grant date.
(2) Valued using the Black-Scholes option pricing model. The
assumptions used for the variables in the model were: 16.7%
volatility; a 10-year risk-free rate of 6.38%, compounded
annually; a 3.26% dividend yield; and a 10-year option term.
Aggregated option exercises in 1997 and year-end option
values
<TABLE>
<CAPTION>
=========================================================================================
Aggregated
option exercises Unexercised options at year-end
--------------------- -------------------------------------------
Value of securities
Shares underlying in-the-
acquired Number(#) money options($)
on -------------------------------------------
exercise Value Exer- Unexer- Exer- Unexer-
Name (#) realized($) cisable cisable cisable($) cisable($)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III.. 51,568 $3,576,344 341,155 430,000 $17,682,835 $5,087,419
Roberto G. Mendoza..... 0 0 253,334 276,666 12,427,327 3,116,484
Kurt F. Viermetz....... 0 0 253,334 26,666 12,427,327 1,020,809
Michael E. Patterson... 14,000 807,625 240,222 66,666 14,102,543 1,259,541
John A. Mayer Jr....... 30,275 1,975,294 172,332 55,000 8,972,072 974,516
-----------------------------------------------------------------------------------------
</TABLE>
18
<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) our
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, 1997 (of which Morgan is one).
Comparisons of five-year total stockholder return
[The following table was depicted as a line graph in the
printed material]
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
J.P. Morgan 100.0 109.3 92.6 138.1 174.4 208.5
S&P 500 100.0 110.1 111.5 153.4 188.6 251.5
S&P Financial 100.0 111.1 107.1 165.0 223.0 330.3
DJ Industrial 100.0 117.0 122.8 168.2 216.9 270.9
Comparisons of ten-year total stockholder return
[The following table was depicted as a line graph in the
printed material]
<TABLE>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan 100.0 100.4 131.9 139.9 224.3 222.9 243.6 206.4 307.9 388.8 464.8
S&P 500 100.0 116.6 153.4 148.7 193.9 208.6 229.6 232.6 320.0 393.4 524.6
S&P Financial 100.0 118.4 157.1 123.4 185.9 229.3 254.8 245.7 378.4 511.4 757.3
DJ Industrial 100.0 116.2 153.7 152.8 189.9 203.9 238.6 250.5 343.1 442.3 552.4
</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.
19
<PAGE>
Retirement benefits
Under 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 1998 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 three
consecutive
years of Estimated annual retirement benefits(1)
service for 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....... 50,900 69,450 88,000 106,550
------------------------------------------------------------
(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 10 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 16. The credited years of service for such
individuals are as follows: Mr. Warner, 29 years; Mr.
Mendoza, 29 years; Mr. Patterson, 10 years and Mr. Mayer, 31
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 $199,496; 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.
Morgan's International Pension Plan provides additional
retirement benefits to certain employees assigned outside
their home countries, based on the employee's average annual
salary for the three highest-paid consecutive years within
the final 10 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
20
<PAGE>
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.
Mr. Viermetz, who retired effective January 1, 1998, will
receive $60,303 annually under the Retirement Plan based on
his 100% Joint and Survivorship with Reversion election. He
also has 20 years credited service under the Bank's Pension
Plan for Employees in Germany and under that plan will
receive a retirement benefit of DM 87,230 annually. Mr.
Viermetz also received a lump sum retirement benefit of
approximately $1.75 million under the International Pension
Plan, of which Mr. Viermetz was a member by virtue of prior
overseas service.
------------------------------------------------------------
Transactions with directors and officers
In the ordinary course of our business we engage in
transactions with some of our directors and executive
officers and their associates, or with organizations of
which some of our directors are officers or trustees. These
transactions are on an arm's length basis and cover a broad
range of our business activities, such as loans, deposits,
purchases of our commercial paper, purchases of securities
issued by others, and investment banking, financial
advisory, and other financial services and market
transactions.
In the ordinary course of our business, we use the products
or services of or have other transactions with a number of
organizations of which our directors are officers, including
AlliedSignal Inc., Corning Incorporated, E.I. duPont de
Nemours and Company, Exxon Corporation, Phelps Dodge
Corporation and Xerox Corporation.
Item 2: Approval of Price Waterhouse LLP as independent
accountants
We are proposing to appoint Price Waterhouse LLP as our
independent accounting firm for 1998 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 as required by law. The Audit Committee has
recommended to the Board the appointment of Price Waterhouse
LLP.
We are submitting this selection to you for your approval.
Price Waterhouse LLP served as our principal independent
accounting firm in 1997. Audit fees to independent
accounting firms in 1997 totaled approximately $11.3
million.
Representatives of Price Waterhouse LLP will be at the
annual meeting to answer your questions.
The Board of Directors recommends a vote FOR this proposal.
21
<PAGE>
Item 3: Stockholder proposal relating to lending criteria
Sisters of St. Dominic of Caldwell, N.J., 52 Old Swartswood
Station Road, Newton, New Jersey 07860-9337, which owns 100
shares of common stock of Morgan, Sisters of Charity of the
Incarnate Word, P.O. Box 230969, 6510 Lawndale, Houston,
Texas 77223-0969, which owns 1,000 shares of common stock of
Morgan, Society of Oblate Fathers for Missions among the
Poor, 8818 Cameron Street, Silver Spring, Maryland
20910-4113, which owns 900 shares of common stock of Morgan,
School Sisters of Notre Dame Cooperative Investment Fund,
336 East Ripa Ave., St. Louis, Missouri 63125, which owns 54
shares of common stock of Morgan, Benedictine Sisters, 3120
W. Ashby, San Antonio, Texas 78228, which owns 365 shares of
common stock of Morgan, Maryknoll Fathers and Brothers, P.O.
Box 306, Maryknoll, New York 10545-0306, which owns 900
shares of common stock of Morgan, Mercy Consolidated Asset
Management Program, 20 Washington Square North, New York,
New York 10011, which owns 100 shares of common stock of
Morgan, Franciscan Friars - St. Benedict the Moor Friary,
146 Danforth Avenue, Paterson, New Jersey 07501-3204, which
owns 8,000 shares of common stock of Morgan, and Maryknoll
Sisters of St. Dominic, Inc., P.O. Box 311, Maryknoll, New
York 10545-0311, which owns 200 shares of common stock of
Morgan, have indicated that they will introduce the
following resolution at the meeting:
"WHEREAS according to the Inter-American Development
Bank (1997) real wages declined in Latin America by
over 30% between 1980 and 1989 as a result of the debt
crisis, and they have not risen significantly since
1989 when Latin America began to return to the
international capital markets;
"WHEREAS unemployment in Latin America has risen by
over 2 percentage points since 1989, bringing it close
to its 1984 peak during the height of the debt crisis;
`The poorest 20 percent of the overall population
receives only 3 percent of total income, while at the
other extreme the wealthiest 20 percent holds 60
percent.' (IDB) This distribution of income in Latin
America is poorer than all other parts of the world
except Africa;
"WHEREAS according to the 1995 UNCTAD World Trade and
Development Report, `in Latin America, the increase in
capital flows has been used for private
consumption.......Furthermore, much of the flow of FDI
(foreign debt investment) to the latter region (Latin
America) involved the purchase of existing assets
through privatization and debt-equity swaps, rather
than through investment in new capacity.' This pattern
continues to the present with capital inflows financing
deficits in the balance of trade and debt service
(balance on current account) but there is relatively
little new capital investment as a percentage of gross
domestic product;
"WHEREAS we believe investments in emerging markets can
contribute to a heavy burden on poor people when these
regions become unstable;
22
<PAGE>
"WHEREAS we believe that productive and ecologically
sustainable investments must be encouraged. These will
require a more educated work force, and therefore
government spending must be geared to education
paralleling the industrial development of these
industries that are competitive technologically with
those countries already producing tradable goods in the
international markets;
"WHEREAS we believe that the present
exchange-rate-based stabilization has constrained
growth in Latin America, making the process of
development slow and difficult. Therefore, either debt
service needs to be mitigated or new capital investment
increased;
"RESOLVED that the shareholders request the Board of
Directors develop policy, criteria and means of
oversight to insure that the Corporation's operations
and/or services in less developed countries and
emerging markets contribute to the sustainable
development for the population as a whole and report
annually to shareholders on the progress."
In support of the foregoing resolution, the proponents
state:
"We believe that the Corporation must make an
evaluation of its contribution to world development
each year to show how it is supporting the development
of a sustainable world economic system. This report
would include the types and amounts of investments that
the Corporation has facilitated and the types and
amount of loans that it has closed with the resulting
benefit to the less developed country. This benefit
analysis should be made in the light of the annual
reports of such organizations as the World Bank, the
Inter-American Development Bank and the UN Conference
on Trade and Development (UNCTAD)."
The Board of Directors recommends a vote AGAINST this
proposal.
We understand the seriousness of the issues raised by
proponents and respect the depth of their commitment to
improving conditions for the poor in developing nations. We
share the belief that productive investment is required for
sustainable economic growth that benefits the population as
a whole. As a leading financial firm in emerging markets,
J.P. Morgan assists governments and business enterprises in
obtaining access to international capital and deals in a
wide range of financial instruments. A sound national
economic policy framework remains the most important
condition for stable economic growth, and J.P. Morgan also
strives to provide responsible advice in this regard to
governmental clients who seek our counsel. The contributions
we make in responsibly fulfilling our basic business roles
help to advance the proponents' goals and make the requested
report unnecessary.
23
<PAGE>
Item 4: Stockholder proposal relating to political
contributions
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 shareholders recommend that the
Board direct management that within five days after
approval by the shareholders of this proposal, the
management shall publish in newspapers of general
circulation in the cities of New York, Washington,
D.C., Detroit, Chicago, San Francisco, Los Angeles,
Dallas, Houston and Miami, and in the Wall Street
Journal and U.S.A. Today, a detailed statement of each
contribution made by the Company, either directly or
indirectly, within the immediately preceding fiscal
year, in respect of a political campaign, political
party, referendum or citizens' initiative, or attempts
to influence legislation, specifying the date and
amount of each such contribution, and the person or
organization to whom the contribution was made.
Subsequent to this initial disclosure, the management
shall cause like data to be included in each succeeding
report to shareholders. And if no such disbursements
were made, to have that fact publicized in the same
manner."
In support of the foregoing resolution, the proponent
states:
"REASONS: This proposal, if adopted, would require the
management to advise the shareholders how many
corporate dollars are being spent for political
purposes and to specify what political causes the
management seeks to promote with those funds. It is
therefore no more than a requirement that the
shareholders be given a more detailed accounting of
these special purpose expenditures that they now
receive. These political contributions are made with
dollars that belong to the shareholders as a group and
they are entitled to know how they are being spent.
"If you AGREE, please mark your proxy FOR this
resolution."
The Board of Directors recommends a vote AGAINST this
proposal.
A similar resolution was presented in 1976 and was rejected
by approximately 98% of the votes cast.
The foregoing proposal appears to be directed at
contributions for political purposes and political causes.
Federal and state laws limit corporate involvement in
political campaigns and define the scope of permissible
corporate participation in political affairs. Employees may
contribute their own funds to candidates or to political
action committees. Like many other major corporations,
Morgan maintains a political action committee which is
administered in strict compliance with federal and state
laws. The committee follows procedures to assure that
contributions from employees are entirely voluntary. As
required by applicable federal and state election laws,
information about political contributions made by the
committee is publicly available. Adoption of the resolution
is therefore unnecessary.
24
<PAGE>
Item 5: 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,
and Mrs. Margaret R. Gilbert, 29 East 64th Street, New York,
New York 10021-7043, who, together with Mr. John J. Gilbert,
acts for 400 shares as co-trustee under a will, have
indicated that they 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 strong support along the lines we suggest
were shown at the last annual meeting when 20.71%,
2,470 owners of 28,138,404 shares, were cast in favor
of this proposal. The vote against included 2,716
unmarked proxies.
"California law still requires that unless stockholders
have voted not to have cumulative voting they will have
it. Ohio also has the same provision.
"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.
"Many successful corporations have cumulative voting.
Example, Pennzoil defeated Texaco in that famous case.
Texaco's recent problems might have also been prevented
with cumulative voting, getting directors on the board
to prevent such things. 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 does apply at the
latter company.
"In 1995 American Premier adopted cumulative voting.
Alleghany Power System tried to take away cumulative
voting, as well as put in a stagger system of electing
directors, and stockholders defeated it, showing
stockholders are interested in their rights. Also,
Hewlett Packard, a very successful company, has
cumulative voting.
25
<PAGE>
"If you agree, please mark your proxy for this
resolution; otherwise it is automatically cast against
it, unless you have marked to abstain."
The Board of Directors recommends a vote AGAINST this
proposal.
Similar resolutions were presented in 1997, 1996, 1995,
1994, 1993, 1992, 1991, 1984, 1979 and 1978. When last
proposed in 1997, 79.29% of those votes cast were against
the 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.
26
<PAGE>
Item 6: Other matters
We do not know of any matters to be acted upon at the
meeting other than those discussed in this proxy statement.
If any other matter is presented, the individuals named as
proxies will vote on the matter in his or her best judgment.
Section 16(a) Section 16(a) of the 1934 Act requires our executive
beneficial officers and directors and any other persons who own more
ownership than 10 percent of our common stock ("Reporting Persons") to
reporting file reports of ownership and changes in ownership on Forms
compliance 3, 4 and 5 with the SEC and the New York Stock Exchange
(NYSE). These Reporting Persons are required by SEC
regulation to furnish us with copies of all Forms 3, 4 and 5
that they file with the SEC and NYSE.
Based solely on our review of copies of these forms
furnished to us and written representations from Reporting
Persons, we believe that all of our Reporting Persons
complied with these filing requirements for transactions
during fiscal year 1997, except for John A. Krol, who filed
his Form 4 reporting his initial investment in Morgan stock
three days late.
Proxy We are soliciting this proxy on behalf of our Board of
solicitation Directors and will bear the solicitation expenses. We are
making this solicitation by mail but we may also solicit by
telephone or in person. We have hired Morrow & Co. for a fee
of $10,500, plus out-of-pocket expenses, to assist in the
solicitation. We will reimburse banks, brokerage houses, and
other institutions, nominees and fiduciaries, if they
request, for their expenses in forwarding proxy materials to
beneficial owners.
Stockholder If you want to submit proposals for possible inclusion in
proposals our proxy statement for the 1999 annual meeting of
stockholders, you must ensure that your proposal is received
by us on or before November 11, 1998.
March 9, 1998 Rachel F. Robbins
Secretary
27
<PAGE>
Printed on recycled paper.
<PAGE>
J.P. Morgan & Co. Incorporated
Proxy solicited on behalf of the Board of Directors of the Company for
Annual Meeting of Stockholders, April 8, 1998
The undersigned hereby constitutes and appoints Francis J. Morison, Edward
F. Murphy and Rachel F. Robbins, and each of them, the true and lawful
P agents and proxies of the undersigned with full power of substitution in
R each, to represent the undersigned at the Annual Meeting of Stockholders of
O J.P. MORGAN & CO. INCORPORATED to be held in Morgan Hall West, 46th floor,
X 60 Wall Street, New York, New York, on Wednesday, April 8, 1998, at 11
Y 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:
1. Douglas A. Warner III, 2. Paul A. Allaire, 3. Riley P. Bechtel, 4.
Lawrence A. Bossidy, 5. Martin Feldstein, 6. Ellen V. Futter, 7. Hanna H.
Gray, 8. Walter A. Gubert, 9. James R. Houghton, 10. James L. Ketelsen, 11.
John A. Krol, 12. Roberto G. Mendoza, 13. Michael E. Patterson, 14. Lee R.
Raymond, 15. Richard D. Simmons, 16. Kurt F. Viermetz and 17. 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
-----------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
You may vote the shares held in this account by telephone. Voting by
telephone will eliminate the need to mail voted proxy card(s) representing
shares held in this account. To vote by phone please follow the steps
below:
1) Have your proxy card and social security number available.
2) Be ready to enter the PIN number indicated on the reverse side of
the card.
3) Using a touch-tone telephone, dial 1-800-OK2-VOTE
(1-800-652-8683) 24 hours a day.
The telephone voting system preserves the confidentiality of your vote and
will confirm your voting instructions with you during the call. You may
also change your selections on any or all of the proposals to be voted.
YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING.
<PAGE>
Please mark your
X 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.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Approval
Directors. of independent
(see reverse) accountants.
For, except vote withheld from the following nominee(s):
_________________________________________________________
- --------------------------------------------------------------------------------
The Board of Directors
recommends a vote "AGAINST"
Items 3 - 5.
- --------------------------------------------------------------------------------
This proxy will be voted "AGAINST" Items 3 - 5 if no choice is specified.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Stockholder proposal relating to lending criteria.
4. Stockholder proposal relating to political contributions.
5. Stockholder proposal relating to cumulative voting.
- --------------------------------------------------------------------------------
SIGNATURE(S)__________________________________________________ DATE_____________
The signer hereby revokes all proxies previously given by the signer to vote at
this meeting or any adjournment of the meeting.
NOTE: Please sign exactly as your name appears on this proxy card. 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, April 8, 1998
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.
