Notice of Annual Meeting
of Stockholders
Wednesday, April 14, 1999
11:00 A.M.
================================================================================
J.P. Morgan & Co. Incorporated
Morgan Hall West
46th Floor, 60 Wall Street
New York, New York
March 11, 1999
To our stockholders:
We are pleased to invite you to attend our 1999 annual
meeting of stockholders to:
o Elect 17 directors,
o Approve the appointment of PricewaterhouseCoopers LLP as
independent accountants for 1999,
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
26, 1999, 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 or
electronically through the Internet. 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
JP Morgan
<PAGE>
Proxy statement table of contents
- --------------------------------------------------------------------------------
Information about the annual meeting and voting ........ 1
Item 1: Election of directors .......................... 2
Biographies of our Board nominees .............. 3
Committees of the Board of Morgan .............. 8
Committees of the Board of the Bank ............ 8
Director compensation .......................... 9
Our executive officers ......................... 10
Stock ownership of management .................. 11
Stock ownership of certain beneficial owners ... 12
Compensation committee report on executive .....
compensation ................................. 12
Summary compensation table ..................... 16
Stock options .................................. 17
Long-Term Incentive Plan awards ................ 17
Stock performance graphs ....................... 18
Retirement benefits ............................ 19
Transactions with directors and officers ....... 20
Item 2: Approval of PricewaterhouseCoopers LLP as
independent accountants ........................ 20
Item 3: Stockholder proposal relating to prior
government service ............................. 21
Item 4: Stockholder proposal relating to cumulative
voting ....................................... 21
Item 5: Stockholder proposal relating to efficient
use of capital and financial stabilization ..... 23
Item 6: Other matters .................................. 24
Section 16(a) beneficial ownership reporting
compliance ................................... 24
Proxy solicitation ............................. 25
Stockholder proposals .......................... 25
<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 1999 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 11, 1999, 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 26, 1999, are entitled
to vote. As of this record date, there were 177,204,028
shares of Morgan common stock outstanding. We are also
sending the Morgan 1998 Annual Report, which includes our
financial statements, along with this proxy statement.
Date, time, and Date: Wednesday, April 14, 1999
place of meeting Time: 11:00 a.m.
Place: Morgan Hall West, 46th Floor
60 Wall Street, New York, New York
Voting your proxy Each share of Morgan common stock that you own entitles you
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 or electronically through the
Internet. Instructions are included on your proxy card. If
your shares are held in "street name," you should contact
your broker, bank, or other nominee to determine whether you
will be able to vote by telephone or electronically.
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 17 nominees for director (as
described on page 2),
o "FOR" the approval of PricewaterhouseCoopers LLP as
independent accountants for 1999 (as described on page 20),
and
o "AGAINST" each of the three stockholder proposals to be
presented (as described on pages 21 to 24).
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.
Revoking your o You may send in another signed proxy card with a later date
proxy or a later telephone or Internet vote,
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.
1
<PAGE>
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 26, 1999, 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 is necessary to hold a valid meeting. A majority of
requirement 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.
Vote necessary Item 1: Election of directors
to approve
proposals * Directors are elected by a plurality vote of shares 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 independent accountants
* Approval requires the affirmative vote of a 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 proposals
* Same as for Item 2.
------------------------------------------------------------
* 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.
Item 1: Election of directors
============================================================
Our Board of Directors has nominated 17 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.
2
<PAGE>
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").
During 1998 there were eight meetings of the Board of
Directors of Morgan. Each director attended at least 75
percent of the meetings of the Board and committees of which
he or she was a member.
Biographies of our Board nominees
- --------------------------------------------------------------------------------
Douglas A. Warner III
[Graphic Omitted] Director since 1990, Age 52
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.,
General Electric Company, and The New York Clearing House
Association. Member of the Board of Counselors of Bechtel
Group, Inc. Chairman of the Board of Managers and the Board
of Overseers of Memorial Sloan-Kettering Cancer Center.
Trustee of Pierpont Morgan Library. Member of The Business
Roundtable and The Business Council.
- --------------------------------------------------------------------------------
Paul A. Allaire
[Graphic Omitted] Director since 1997, Age 60
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.
- --------------------------------------------------------------------------------
Riley P. Bechtel
[Graphic Omitted] Director since 1995, Age 46
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 and the Committee on Fiduciary Matters of
Morgan. Director of Fremont Group, L.L.C., Fremont
Investors, Inc., and Sequoia Ventures Inc. Member of
American Society of Corporate Executives, The Business
Council, The Business Roundtable, The Trilateral Commission,
The National Petroleum Council, The Conservation Fund
Corporate Council, and Indian School of Business Governing
Board. Member of Dean's Advisory Council of Stanford
University School of Law. Director of Jason Foundation for
Education.
3
<PAGE>
- --------------------------------------------------------------------------------
Lawrence A. Bossidy
[Graphic Omitted] Director since 1998, Age 64
Chairman of the Board (since January 1992) and Chief
Executive Officer (since July 1991) and Director of
AlliedSignal Inc. (diversified manufacturing). Member of the
Committee on Employment Policies and Benefits of the Bank.
Director of Merck & Co., Inc. and Champion International
Corporation. Member of The Business Council and The
Business Roundtable.
- --------------------------------------------------------------------------------
Martin Feldstein
[Graphic Omitted] Director since 1993, Age 59
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., American International Group, Inc., and
Columbia-HCA, 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.
- --------------------------------------------------------------------------------
Ellen V. Futter
[Graphic Omitted] Director since 1997, Age 49
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
Consolidated Edison, Inc. Member of Council on Foreign
Relations and Advisory Board of the Yale School of
Management. Partner in New York City Partnership.
- --------------------------------------------------------------------------------
Hanna H. Gray
[Graphic Omitted] Director since 1976, Age 68
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. 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.
4
<PAGE>
- --------------------------------------------------------------------------------
Walter A. Gubert
[Graphic Omitted] Director since 1998, Age 51
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.
- --------------------------------------------------------------------------------
James R. Houghton
[Graphic Omitted] Director since 1982, Age 62
Chairman Emeritus 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. Chairman of Metropolitan Museum of
Art. Trustee of Corning Museum of Glass and Pierpont Morgan
Library. Member of The Business Council and Harvard
Corporation.
- --------------------------------------------------------------------------------
James L. Ketelsen
[Graphic Omitted] Director since 1977, Age 68
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.
- --------------------------------------------------------------------------------
John A. Krol
[Graphic Omitted] Director since 1997, Age 62
Retired Chairman of the Board of E.I. du Pont de Nemours and
Company (global chemical and energy). Mr. Krol was Chairman
of the Board from October 1997 to January 1999 and Chief
Executive Officer of DuPont from December 1995 to February
1998, President from October 1995 to October 1997, and Vice
Chairman from March 1992 to October 1995. 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, Armstrong World
Industries, Inc., Milliken Corporation, Delaware Art Museum,
and Catalyst. Member of Board of Trustees of Tufts
University and University of Delaware. Member of The
Business Council. Trustee of Hagley Museum and U.S. Council
for International Business.
5
<PAGE>
- --------------------------------------------------------------------------------
Roberto G. Mendoza
[Graphic Omitted] Director since 1990, Age 53
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., Reuters Group PLC, and Vitro S.A.
- --------------------------------------------------------------------------------
Michael E. Patterson
[Graphic Omitted] Director since 1995, Age 56
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., Euroclear
Clearance System Public Limited Company, The Clearing House
Interbank Payments Company L.L.C., and Oversight Partner I
LLC. Chairman of Financial Services Council. Trustee of
Columbia University.
- --------------------------------------------------------------------------------
Lee R. Raymond
[Graphic Omitted] Director since 1987, Age 60
Chairman of the Board and Chief Executive Officer (since
April 1993), President (since February 1996), 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.
- --------------------------------------------------------------------------------
Richard D. Simmons
[Graphic Omitted] Director since 1990, Age 64
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.
6
<PAGE>
- --------------------------------------------------------------------------------
Kurt F. Viermetz
[Graphic Omitted] Director since 1990, Age 59
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. Member of Board of Grosvenor Estate
Holdings. 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.
- --------------------------------------------------------------------------------
Douglas C. Yearley
[Graphic Omitted] Director since 1993, Age 63
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, Lockheed Martin
Corporation, and Southern Peru Copper Corporation. Director
of National Mining Association, Copper Development
Association, and International Copper Association. Member 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 (Chairman), Paul A. Allaire, Martin
Feldstein, Ellen V. Futter, John A. Krol
This committee, which met seven times during 1998, 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 Morgan the designation each
year of independent accountants.
Committee on James R. Houghton (Chairman), Riley P. Bechtel, Lee R.
Management Raymond, Douglas C. Yearley
Development and
Executive This committee, which met six times during 1998, is
Compensation responsible for advising the Board, in consultation with
senior management, on the development of key executives and
recommending or approving their compensation, including the
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 Lee R. Raymond (Chairman), Hanna H. Gray, John A. Krol,
Director Douglas C. Yearley
Nominations and
Board Affairs This committee, which met twice during 1998, is responsible
for making recommendations to the Board with respect to the
qualifications and nominations of directors, directors'
functions, committees, compensation and 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 Hanna H. Gray (Chairman), Paul A. Allaire, Riley P. Bechtel,
Fiduciary Matters James L. Ketelsen, Richard D. Simmons
This committee, which met twice during 1998, 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.
Committees of the Board of the Bank
============================================================
Examining Committee James L. Ketelsen (Chairman), Paul A. Allaire, Martin
Feldstein, Ellen V. Futter, John A. Krol
This committee, which met seven times during 1998, is
responsible for examinations of the Bank in accordance with
New York State banking law.
Committee on Richard D. Simmons (Chairman), Lawrence A. Bossidy, Martin
Employment Policies Feldstein, Ellen V. Futter
and Benefits
This committee, which met three times during 1998, is
responsible for reviewing the Bank's Retirement, Profit
Sharing, and Long-Term Disability Plans, employee benefit
plans, employee relations and affirmative action programs,
and diversity initiatives.
8
<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 Directors' services as Board or committee members. The plan permits
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 members of the Bank's Directors Advisory Council. Members of
Advisory Council the council receive an annual retainer of $30,000.
9
<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 52
Chairman of the Boards and President of Morgan and the Bank.
See "Election of directors" on page 3.
Walter A. Gubert Age 51
Vice Chairman of the Boards of Morgan and the Bank. See
"Election of directors" on page 5.
Roberto G. Mendoza Age 53
Vice Chairman of the Boards of Morgan and the Bank. See
"Election of directors" on page 6.
Michael E. Patterson Age 56
Vice Chairman of the Boards of Morgan and the Bank. See
"Election of directors" on page 6.
Peter D. Hancock Age 40
Chairman of the Capital Committee and the Risk Management
Committee of Morgan since January 1999 and Managing Director
of Morgan since February 1999; Vice Chairman of the Board of
Directors of J.P. Morgan Securities Inc. since June 1996;
member of the Board of Directors of J.P. Morgan Securities
Inc. since May 1995; Managing Director of J.P. Morgan
Securities Inc. from April 1995 to June 1996 and of the Bank
from January 1990 to April 1995.
Thomas B. Ketchum Age 48
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 59
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 48
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; member of
the Board of Directors of J.P. Morgan Securities Inc. since
April 1986; 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 45
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.
10
<PAGE>
Stock ownership of management
============================================================
The following table shows, as of February 26, 1999, 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 percent 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 ........ 416,400(3) 1,210,468
Walter A. Gubert ............. 153,630(4) 657,734
Roberto G. Mendoza ........... 371,508 975,917
Michael E. Patterson ......... 253,236(5) 477,055
Thomas B. Ketchum ............ 109,600(6) 525,032
Paul A. Allaire .............. 5,000 5,373
Riley P. Bechtel ............. 500 1,767
Lawrence A. Bossidy .......... 5,000 5,139
Martin Feldstein ............. 1,000 3,165
Ellen V. Futter .............. 500(7) 873
Hanna H. Gray ................ 800 3,243
James R. Houghton ............ 1,000 3,443
James L. Ketelsen ............ 7,800 10,243
John A. Krol ................. 2,000 3,267
Lee R. Raymond ............... 500 11,959
Richard D. Simmons ........... 1,000 3,443
Kurt F. Viermetz ............. 475,950 552,872
Douglas C. Yearley ........... 1,000(8) 3,298
All directors and executive
officers as a group ........ 2,235,774(9) 5,648,952
------------------------------------------------------------
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 26, 1999, through the exercise of options: Mr.
Warner, 357,086 shares; Mr. Gubert, 148,000 shares; Mr.
Mendoza, 290,000 shares; Mr. Patterson, 241,695 shares; Mr.
Ketchum, 83,646 shares; Mr. Viermetz, 280,000 shares; all
directors and executive officers as a group, 1,797,320
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 of February 26, 1999, awards of share credits under
the Director Stock Plan (1992) described on page 9, and
directors' fees deferred as units of common stock under the
Deferred Compensation Plan for Directors' Fees described on
page 9.
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 5,377 shares owned jointly with spouse, with whom
investment and voting power is shared.
5 Includes 4,717 shares held in trust for family members. Mr.
Patterson disclaims beneficial ownership of all but 1,600 of
these shares.
6 Includes 575 shares held in trust for his children. Mr.
Ketchum disclaims beneficial ownership of these shares.
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 1.26 percent of Morgan's common
stock.
11
<PAGE>
Stock ownership of certain beneficial owners
============================================================
We have been notified by Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), World Financial
Center, North Tower, 250 Vesey Street, New York, New York
10281, that as of December 31, 1998 they are the beneficial
owners (as defined by rules of the Securities and Exchange
Commission (SEC)) of 13,555,521 shares of our common stock,
representing 7.8% of our outstanding shares. According to
the Schedule 13G filed by them 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, Merrill Lynch
disclaims beneficial ownership of these shares. Merrill
Lynch, a broker-dealer and the sponsor of various unit
investment trusts which invest 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 the Compensation, composed entirely of independent outside
Board directors ("Outside Directors"), is responsible for
determining and ensuring appropriate administration of
Morgan's executive compensation policies for its senior
management within guidelines and plans approved by the Board
of Directors. 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 and effective
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 The compensation program 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), stock option awards and special long-term
performance awards.
12
<PAGE>
Base salary Base salaries for Morgan's senior management are determined
by evaluating the responsibilities associated with the
position held, an individual's overall level of experience
and competitive practice. 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.
Performance plan In July 1998, the Board of Directors adopted the 1998
awards Performance Plan of J.P. Morgan & Co. Incorporated and
Affiliated Companies (the "1998 Performance Plan"). The 1998
Performance Plan was adopted in order to underscore the
firm's determined drive for superior performance. Awards
will be earned in January 2001 based on the achievement of
firm-wide performance goals including significantly improved
risk-adjusted returns, earnings growth, and expense
management. Awards granted to senior management provide for
a potential payout to each recipient of 1 to 2 times the
recipient's average incentive compensation for 1998-2000,
provided the performance targets are achieved.
Stock-based The committee believes that stock ownership enhances
compensation and individuals' focus on maximizing long-term stockholder
stock ownership 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.
13
<PAGE>
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 1998, 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 has been unchanged since 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 1998 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.
Corporate In 1998, net income declined to $963 million, or 34%, after
performance and charges taken during the year related to expense management
CEO compensation initiatives. Return on equity was 8.6% on the same basis,
compared with 13.4% in 1997. The turbulence in global
financial markets, notably in the August to October period,
negatively affected Morgan's results, particularly in
emerging markets and credit-related activities. Other
important business activities, however, produced stronger
results than in 1997, including fixed income in the
developed markets, equities, investment banking, and asset
management, including the private client business. Revenues
from client-focused activities overall grew 6%. Expenses
excluding special charges rose 2%.
Despite the difficult environment, Morgan continued to make
progress on key strategic initiatives: growth of its
investment banking, equities, and asset management
capabilities and profits; strategic redirection of its
credit business; and improvement in productivity. At the
same time, the firm managed unprecedented levels of market
volatility, continued to serve its clients throughout the
markets crisis, generated substantial though lower levels of
revenue from markets activities, and maintained its strong
capital position. The committee balanced these
accomplishments against the decline in earnings and return
on capital.
Mr. Warner, since becoming Chairman and Chief Executive
Officer in January 1995, has provided strong leadership to
Morgan, sharpened its strategic focus, strengthened the
long-term earnings potential of the firm by developing
capabilities geared to the evolving critical needs of the
firm's clients, and tightened cost discipline. During 1998,
a particularly challenging year, he both ensured the firm's
adjustment to difficult conditions and held it to a clear
strategic course.
14
<PAGE>
Reflecting the decline in Morgan's 1998 earnings, Mr.
Warner's total annual compensation for the year decreased
43.4% to $3,050,000, including a restricted stock award with
a grant date value of $1,175,000. 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 1998, 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 125,000 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 1998"). In addition,
Mr. Warner was granted an award under the 1998 Performance
Plan and the 1995 Executive Officer Performance Plan that
has the potential in 2001 to provide a payment of 1 to 2
times his average incentive compensation for 1998-2000,
provided Morgan attains a siginificant improvement in
performance as a result of the achievement of the specified
performance objectives. (See "Long-Term Incentive Plan
awards" for more information.) 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 $1 million paid
compensation to certain members of senior management, unless the payments
are made under plans which satisfy the technical
requirements of the statute (and regulations). While the
committee currently intends to pursue a strategy of
maximizing deductibility of senior management compensation
by making awards under the 1995 Executive Officer
Performance Plan and 1995 Stock Incentive Plan (both of
which meet the requirements of Section 162(m) and were
approved by stockholders during 1995), it also believes it
is important to maintain the flexibility to take actions it
considers to be in the best interest of Morgan and its
stockholders, which may be based on considerations in
addition to Section 162(m).
The Committee on Management Development and Executive
Compensation
James R. Houghton, Chairman
Riley P. Bechtel
Lee R. Raymond
Douglas C. Yearley
15
<PAGE>
Summary compensation table
============================================================
The table below shows, for the years ending December 31,
1998, 1997, and 1996, the annual and long-term compensation
that we paid or accrued for those years to our Chief
Executive Officer and four most highly compensated executive
officers.
------------------------------------------------------------
<TABLE>
<CAPTION>
Annual compensation Long-term compensation awards
------------------------------------ -----------------------------
Securities
Other annual Restricted underlying All other
Name and compensation stock award stock options compensation
principal position Year Salary ($) Bonus ($)(1) ($)(2) ($)(3)(4) (# shares)(5) ($)(6)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III 1998 $700,000 $1,175,000 $0 $1,175,000 125,000 $18,721
Chairman 1997 691,667 2,350,000 0 2,350,000 80,000 18,624
1996 600,000 2,633,500 0 5,562,813 300,000 30,651
Walter A. Gubert* 1998 400,000 1,100,000 0 900,000 75,000 33,117
Vice Chairman
Roberto G. Mendoza 1998 450,000 1,100,000 0 900,000 75,000 9,034
Vice Chairman 1997 447,917 2,117,500 0 1,732,500 50,000 8,582
1996 425,000 2,208,500 351,253 3,772,531 200,000 18,496
Michael E. Patterson 1998 450,000 825,000 0 675,000 45,000 1,794
Vice Chairman 1997 445,833 1,650,000 0 1,350,000 40,000 1,553
1996 397,917 1,851,000 0 1,507,500 0 10,673
Thomas B. Ketchum* 1998 400,000 962,500 0 787,500 60,000 28,056
Chief Administrative
Officer
</TABLE>
------------------------------------------------------------
* Not an executive officer of Morgan in 1996 or 1997.
(1) The 1996 amount includes 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
percent 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, $106.844 for 1998
awards, $101.469 for 1997 awards, and $103.438 for 1996
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. Upon a Change in Control, as
defined in the 1995 Stock Incentive Plan (and the
predecessor plans), restricted stock awards will become
immediately vested (unless the committee administering the
plan determines otherwise).
(4) The named officers had the following non-vested restricted
stock award balances, in aggregate, outstanding as of
January 20, 1999: Mr. Warner, 146,156 shares ($15,375,192);
Mr. Gubert, 99,256 shares ($10,443,132); Mr. Mendoza,
112,886 shares ($11,875,191); Mr. Patterson, 59,972 shares
($6,312,119); and Mr. Ketchum, 87,273 shares ($9,182,250).
Dollar values are based on (i) the closing price of our
common stock on December 31, 1998, ($105.063) for stock
awards which were outstanding on that date and (ii) the
average of the high and low prices of our common stock on
January 20, 1999, ($106.844) for stock awards granted 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) contributions of $8,500 in 1996 to the Bank's
deferred profit sharing plan for Messrs. Warner, Mendoza,
and Patterson and (ii) interest exceeding 120 percent 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 $18,721, $18,624,
and $22,151 for Mr. Warner for 1998, 1997, and 1996,
respectively; $33,117 for Mr. Gubert for 1998; $9,034,
$8,582, and $9,996 for Mr. Mendoza for 1998, 1997, and 1996,
respectively; $1,794, $1,553, and $2,173 for Mr. Patterson
for 1998, 1997, and 1996, respectively; and $28,056 for Mr.
Ketchum for 1998.
16
<PAGE>
Stock options
============================================================
The following tables show information on stock options that
we have awarded to our Chief Executive Officer and four most
highly compensated executive officers. The first table
shows, along with some additional information, the estimated
grant date present value of stock options granted in 1998.
These values are calculated pursuant to the proxy rules of
the SEC and are calculated under the Black-Scholes model for
pricing options. The actual pretax gain realized upon the
exercise of stock options will depend upon the excess of the
market price of our common stock over the exercise price per
share of the stock option at the time the option is
exercised. The second table shows select information
relating to stock options exercised during 1998 and stock
options outstanding as of December 31, 1998. We do not grant
any stock appreciation rights.
Option grants in 1998
------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of total Exercise or Estimated grant
Options options granted base price Expiration date present
Name granted(#)(1) to employees ($/Sh) date value($)(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III 125,000 2.36% $130.938 7/15/08 $4,363,750
Walter A. Gubert 75,000 1.41 130.938 7/15/08 2,618,250
Roberto G. Mendoza 75,000 1.41 130.938 7/15/08 2,618,250
Michael E. Patterson 45,000 0.85 130.938 7/15/08 1,570,950
Thomas B. Ketchum 60,000 1.13 130.938 7/15/08 2,094,600
</TABLE>
------------------------------------------------------------
(1) Options vest as to one-fifth of the shares covered by the
option on each of the first, second, third, fourth, and
fifth anniversaries of the grant date. Upon a Change in
Control, as defined in the 1995 Stock Incentive Plan, the
options will become immediately vested (unless the committee
administering the plan determines otherwise).
(2) Valued using the Black-Scholes option pricing model. The
assumptions used for the variables in the model were: 19.3%
volatility; a 10-year risk-free rate of 5.57%, compounded
annually; a 2.90% dividend yield; and a 10-year option term.
Aggregated option exercises in 1998 and year-end option
values
------------------------------------------------------------
<TABLE>
<CAPTION>
Aggregated option exercises Unexercised options at year-end
----------------------------------- ---------------------------------------------------------
Value of securities underlying
Number (#) in-the-money options ($)
Shares acquired -------------------------- ------------------------------
Name on exercise (#) Value realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Douglas A. Warner III 50,069 $5,149,261 332,086 514,000 $12,863,779 $1,296,672
Walter A. Gubert 0 0 138,000 317,000 5,429,068 4,641,573
Roberto G. Mendoza 0 0 276,667 328,333 11,004,396 761,000
Michael E. Patterson 33,193 3,186,288 228,362 90,333 10,367,554 413,740
Thomas B. Ketchum 38,326 3,065,146 73,646 298,000 2,373,845 4,641,573
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Long-Term Incentive Plan awards
------------------------------------------------------------
The following table shows the long-term incentive awards to
our Chief Executive Officer and four most highly compensated
executive officers. Any actual payout will be a multiple, up
to the maximum set forth below, of each executive's average
annual incentive compensation award for 1998 through 2000
and accordingly the value of the long-term incentive awards
is not determinable at this time.
- --------------------------------------------------------------------------------
Estimated future
payout - multiple of
average incentive
compensation
Name Performance period for 1998-2000
- --------------------------------------------------------------------------------
Douglas A. Warner III 1/1/98 to 12/31/00 2.0 x
Walter A. Gubert 1/1/98 to 12/31/00 2.0 x
Roberto G. Mendoza 1/1/98 to 12/31/00 2.0 x
Michael E. Patterson 1/1/98 to 12/31/00 2.0 x
Thomas B. Ketchum 1/1/98 to 12/31/00 2.0 x
- --------------------------------------------------------------------------------
17
<PAGE>
The awards will be earned in 2001 based on the achievement
of firm-wide performance goals (including significantly
improved risk-adjusted returns, earnings growth, and expense
management). Each executive's participation is comprised of
two components: one consisting of a portion of the
executive's 1998 award under the 1995 Executive Officer
Performance Plan and the other granted under the 1998
Performance Plan.
Stock performance graphs
============================================================
The following graphs show changes over the past five- and
10-year periods in the value of $100 invested in: (1) our
common stock; (2) 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, 1998 (of
which Morgan is one).
Comparisons of five-year total stockholder return
in dollars
------------------------------------------------------------
[The following information was depicted as a line graph in the printed material]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
J.P. Morgan 100.0 84.7 126.4 159.6 190.8 184.1
S&P 500 100.0 101.3 139.4 171.4 228.5 293.8
S&P Financial 100.0 96.4 148.5 200.7 297.2 331.1
DJ Industrial 100.0 105.0 143.8 185.4 231.6 273.6
Comparisons of 10-year total stockholder return
in dollars
------------------------------------------------------------
[The following information was depicted as a line graph in the printed material]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.P. Morgan 100.0 131.4 139.3 223.4 222.1 242.6 205.6 306.7 387.3 463.0 446.6
S&P 500 100.0 131.6 127.5 166.3 179.0 197.0 199.6 274.5 337.5 450.1 578.7
S&P Financial 100.0 132.7 104.3 157.0 193.7 215.3 207.5 319.7 432.0 639.8 712.9
DJ Industrial 100.0 132.2 131.5 163.4 175.5 205.3 215.6 295.2 380.6 475.4 561.7
</TABLE>
18
<PAGE>
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.
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
December 1998 at age 65 of a participating employee who has
elected to receive his or her pension under a straight-life
annuity option.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Highest average annual salary over Estimated annual retirement benefits (1) for representative years
three consecutive years of service of credited service
- -------------------------------------------------------------------------------------------------------------
15 years 20 years 25 years 30 years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 50,000 ................................ $12,765 $17,020 $21,275 $ 25,530
100,000 ................................ 27,015 36,020 45,025 54,030
150,000 ................................ 41,265 55,020 68,775 82,530
200,000 ................................ 49,847 66,296 84,078 101,850
</TABLE>
------------------------------------------------------------
(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, 30 years; Mr.
Gubert, 17 years; Mr. Mendoza, 30 years; Mr. Patterson, 11
years; and Mr. Ketchum, 24 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,
$217,578; Mr. Gubert, $93,875; Mr. Mendoza, $199,496; Mr.
Patterson, $70,932; and Mr. Ketchum, $99,632. 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.
19
<PAGE>
Morgan's International Pension Plan, of which Mr. Gubert is
a member by virtue of prior overseas services, 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 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, 1998, Mr. Gubert would have been entitled to
receive a lump sum retirement benefit of approximately
$783,071 under the International Pension Plan.
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 PricewaterhouseCoopers LLP as
independent accountants
============================================================
We are proposing to appoint PricewaterhouseCoopers LLP
("PwC") as our independent accounting firm for 1999 to
examine the financial statements of Morgan and its
consolidated subsidiaries, including the Bank, and to assist
the Examining Committee of the Bank in performing its
directors' examination as required by law. The Audit
Committee has recommended to the Board the appointment of
PwC.
We are submitting this selection to you for your approval.
PwC served as our principal independent accounting firm in
1998. Audit fees to PwC in 1998 totaled approximately $10.5
million.
Representatives of PwC will be at the annual meeting to
answer your questions.
The Board of Directors recommends a vote FOR this proposal.
20
<PAGE>
Item 3: Stockholder proposal relating to prior government
service
------------------------------------------------------------
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 assembled in
Annual Meeting in person and by proxy hereby request the
Board of Directors to have the Company furnish the
stockholders each year with a list of people employed by the
Corporation with the rank of Vice President or above, or as
a consultant, or as a lobbyist, or as legal counsel or
investment banker or director, who, in the previous five
years have served in any governmental capacity, whether
Federal, City or State, or as a staff member of any
CONGRESSIONAL COMMITTEE or regulatory agency, and to
disclose to the stockholders whether such person was engaged
in any matter which had a direct bearing on the business of
the Corporation and/or its subsidiaries, provided that
information directly affecting the competitive position of
the Corporation may be omitted."
In support of the foregoing resolution, the proponent
states:
"REASONS: Full disclosure on these matters is essential at
J.P. Morgan because of its many dealings with Federal and
State agencies, and because of pending issues forthcoming in
Congress and/or State and Regulatory Agencies.
"If you AGREE, please mark your proxy FOR this resolution."
The Board of Directors recommends a vote AGAINST this
proposal.
Morgan selects its employees, directors, and other
professionals retained as consultants, lobbyists, counsel,
and investment bankers on the basis of their professional
ability, expertise, and integrity.
Morgan has specific policies and practices to assure the
absence of conflicts of interest. Furthermore, numerous
federal, state, and local laws and regulations provide
safeguards to preclude such conflicts and to prohibit
improper use of influence.
To comply with this proposal would be costly and would
confer no appreciable benefit to stockholders.
Item 4: Stockholder proposal relating to cumulative voting
============================================================
Mr. John J. Gilbert, 29 East 64th Street, New York, New York
10021-7043, who owns 100 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 300 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."
21
<PAGE>
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 25.4%, an increase
over the previous year, 1,964 owners of 32,922,030 shares,
were cast in favor of this proposal. The vote against
included 2,080,339 unmarked proxies.
"California law requires that unless stockholders have voted
not to have cumulative voting they will have it. Ohio has
the same provision.
"The National Bank Act provides for cumulative voting.
Companies get around it by forming holding companies without
cumulative voting. Banking and other authorities should
question the capability of directors to be on 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
more hearings to prevent such persons becoming directors
before they harm investors.
"The recent banking failures throughout the world shows the
importance of cumulative voting and to get better directors
on the board.
"Many successful corporations have cumulative voting.
Pennzoil defeated Texaco in that famous case. Texaco's
recent problems might have been prevented with cumulative
voting, getting directors on the board to prevent such
things. Ingersoll-Rand having cumulative voting, won two
awards.
"Another good example is Union Pacific, having troubles with
freight shipments which were backed up for months. Merger
with Southern Pacific is excuse. Two years ago, Union
Pacific took away cumulative voting.
"Lockheed-Martin, as well as VWR Corporation have a
provision that if anyone has 40% or more of the shares
cumulative voting applies.
"In 1995 American Premier adopted cumulative voting.
Alleghany Power System tried to take away cumulative voting
and stockholders defeated it, showing stockholders are
interested in their rights. Very successful Hewlett Packard
has cumulative voting.
"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 1998, 1997, 1996,
1995, 1994, 1993, 1992, 1991, 1984, 1979, and 1978. When
last proposed in 1998, 72.75% 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.
22
<PAGE>
Item 5: Stockholder proposal relating to efficient use of
capital and financial stabilization
============================================================
Sisters of St. Dominic of Caldwell, N.J., 52 Old Swartswood
Station Road, Newton, New Jersey 07860, 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; 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, 530 Bandera Road, San Antonio, Texas 78240, which
owns 465 shares of common stock of Morgan; Sisters of the
Incarnate Word and Blessed Sacrament, 2930 South Alameda,
Corpus Christi, Texas 78404, which owns at least $2,000 in
value of common shares of Morgan; The Redemptorists/Denver
Province, 2130 East 14th Avenue, Denver, Colorado 80206,
which owns 2,500 shares of common stock of Morgan; Sisters
of Saint Dominic of Blauvelt, New York, 496 Western Highway,
Blauvelt, New York 10913-2097, which owns 800 shares of
common stock of Morgan; Sisters of Mercy of Connecticut,
Inc., 249 Steele Road, West Hartford, Connecticut 06117,
which owns 1,500 shares of common stock of Morgan; Sisters
of Mercy of St. Louis, Missouri, 2039 North Geyer Road, St.
Louis, Missouri 63131-3399, which owns 100 shares of common
stock of Morgan; Adrian Dominican Sisters, 1257 East Siena
Heights Drive, Adrian, Michigan 49221-1793, which owns
30,624 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 700 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 recent financial crises in less economically
developed countries (LDCs) have been exacerbated if not
triggered by short-term capital flows and the large amount
of foreign portfolio investment relative to their small
equity markets;
"WHEREAS our corporation's balance sheet has been adversely
affected by the debt crisis of the 1980's as well as the
more recent crises culminating in the current East Asian
melt-down, and therefore we believe that our Corporation
should take steps that encourage the LDCs to develop better
policies to minimize these cyclic financial crises;
"WHEREAS we believe that the economic development of LDCs is
often hampered by a lack of internal investment by their own
nationals, by poor regulation of financial intermediaries
and by the inefficient use of capital through corruption and
the lack of transparency in transactions, with the result of
a lack of indigenous business development required for
stability;
"WHEREAS UNCTAD maintains that in Latin America much of the
increase in capital flows in the 1990s has been used for
private consumption rather than investment for development,
and much of these capital in-flows have been short term: for
Mexico that short-term foreign debt increased to 16% of GDP
by the time of the 1994 crisis;
"WHEREAS economic crises have played havoc with small and
medium sized businesses in the LDCs because the high
interest rates imposed by the IMF arrangements have dried up
the small amount of business credit for these domestic firms
and have resulted in massive bankruptcies and unemployment;
"WHEREAS in order to stem these flows while maintaining
domestic interest rates low enough to prevent massive
bankruptcies in the present East Asia crisis, the MIT
economist Paul Krugman has taken the radical step to suggest
that exchange controls be used;
23
<PAGE>
"WHEREAS we believe that our corporation can set policies
which both serve the long-term interests of our corporation
in the LDCs and foster their balanced economic growth;
"WHEREAS one goal should be to perform due diligence and
lend to creditworthy borrowers and provide services only to
businesses with good business practices;
"WHEREAS we also believe that controls on short-term capital
flows could diminish the extent of these recurring crises
and thus provide for more stable development, reducing our
corporation's losses on loans and diminished profits on
services during crises; an example of such controls would be
some variation of those imposed by Chile which required a
portion of all short term funds to be deposited with the
central bank for a period of up to one-year.
"RESOLVED that, in order to diminish the effects on the
corporation's balance sheet of the cyclical financial crises
of less developed countries, the Board of Directors develop
a policy for its lending and services to, and operations in,
LDCs to actively encourage the efficient use of capital and
financial stabilization, including the corporation's
encouragement, support of and continued services to LDCs
that institute short-term capital controls."
The Board of Directors recommends a vote AGAINST this
proposal.
We appreciate the seriousness of the issues raised by the
proponents and recognize that widely varying views on the
value of short-term capital controls have become the subject
of debate during the past year. While the efficient use of
capital and stable financial conditions in less economically
developed nations are clearly desirable, there is little
evidence that the imposition of capital controls is a
reliable means of achieving them. Our firm works diligently
to help governmental and corporate clients obtain access to
capital, to help investors find opportunities that meet
their risk and return objectives, and to provide responsible
advice to all who seek our financial counsel. We have risk
management policies and procedures to manage our own
engagement and exposures. While markets in 1998 were
exceptionally volatile, our risk management processes worked
effectively. We do not believe that the proposed policy
would provide benefits for stockholders or for governmental
clients.
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 1998.
24
<PAGE>
Proxy solicitation We are soliciting this proxy on behalf of our Board of
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 a proposal for possible inclusion in
proposals our proxy statement for the 2000 annual meeting of
stockholders, you must ensure that your proposal is received
by us on or before November 12, 1999.
If you intend to present a proposal at our 2000 annual
meeting and do not request timely inclusion of the proposal
in our proxy statement, then we must receive notice of such
proposal no later than January 26, 2000. If we do not
receive notice by that date, no discussion of your proposal
is required to be included in our 2000 proxy statement and
we may use our discretionary authority to vote on the
proposal if you do present it at our annual meeting.
March 11, 1999
Rachel F. Robbins
Secretary
25
<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 14, 1999
The undersigned hereby constitutes and appoints Francis J. Morison, Martha
J. Gallo 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 14, 1999, 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:
01. Douglas A. Warner III, 02. Paul A. Allaire, 03. Riley P. Bechtel, 04.
Lawrence A. Bossidy, 05. Martin Feldstein, 06. Ellen V. Futter, 07. Hanna
H. Gray, 08. Walter A. Gubert, 09. 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, a division
of EquiServe, P.O. Box 8212, Edison, NJ 08818-9079.
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
You may also vote the shares held in this account by telephone or
electronically through the Internet. Voting by telephone or via the
Internet will eliminate the need to mail voted proxy card(s) representing
shares held in this account. To vote please follow the steps below:
o Have your proxy card and social security number available.
o Be ready to enter the PIN number indicated on the reverse side of the
card just below the perforation.
To vote using the telephone:
o Using a touch-tone telephone, dial 1-800-OK2-VOTE (1-800-652-8683) 24
hours a day 7 days a week.
To vote using the Internet:
o Log on to the Internet and go to the website
http://www.vote-by-net.com.
Both voting systems preserve the confidentiality of your vote and will
confirm your voting instructions with you. 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 prior
government service.
4. Stockholder proposal relating to cumulative
voting.
5. Stockholder proposal relating to efficient
use of capital and financial stabilization.
- --------------------------------------------------------------------------------
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 14, 1999
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.
