<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NORTHERN TRUST CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
Notice and Proxy Statement
Annual Meeting of Stockholders
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 16, 1996
The annual meeting of stockholders of Northern Trust Corporation will be
held on Tuesday, April 16, 1996, at 10:30 a.m., Chicago time, at the office of
the Corporation, northwest corner of LaSalle and Monroe Streets, Chicago, for
the following purposes:
(1) to elect fourteen Directors to hold office until the next annual
meeting of stockholders and until their successors shall have been
elected and qualified; and
(2) to transact such other business as may properly come before the
meeting.
Only stockholders of record on the books of the Corporation at 5 p.m.,
Chicago time, on February 26, 1996, will be entitled to vote at the meeting.
PETER L. ROSSITER
Secretary
March 11, 1996
IMPORTANT--PLEASE MAIL YOUR PROXY PROMPTLY
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION
AT THE MEETING, YOU ARE URGED TO SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. YOU
MAY NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND
THE MEETING.
<PAGE>
[LOGO--NORTHERN TRUST CORPORATION]
50 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60675
MARCH 11, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Northern Trust Corporation (the "Corporation") of proxies
for use at the annual meeting of stockholders of the Corporation to be held
April 16, 1996, at 10:30 a.m., Chicago time, at the office of the Corporation,
northwest corner of LaSalle and Monroe Streets, Chicago. The Corporation is a
bank holding company whose principal subsidiary is The Northern Trust Company
(the "Bank").
Any stockholder giving a proxy will have the right to revoke it at any time
prior to the voting thereof. All shares represented by effective proxies will
be voted at the meeting, or at any adjournment thereof, in accordance with the
instructions reflected in the proxies. Absent any voting instructions to the
contrary, shares will be voted FOR the election of the fourteen nominees for
Director.
This Proxy Statement and the enclosed proxy, along with the Corporation's
1995 Annual Report, including financial statements, are being mailed on or
about March 11, 1996, to each stockholder of record as of February 26, 1996.
As of February 26, 1996, the record date for the annual meeting, the
Corporation had outstanding and entitled to vote 56,860,230 shares of common
stock, par value $1.66 2/3 per share (the "Common Stock"), exclusive of 119,349
shares held by the Corporation as treasury stock, which will not be voted.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the inspectors of election appointed for the meeting and will determine whether
or not a quorum is present. A majority of the outstanding shares of Common
Stock will constitute a quorum at the annual meeting. Abstentions will be
counted as present for purposes of determining the existence of a quorum and
for purposes of determining whether a proposal has been approved.
ELECTION OF DIRECTORS
Fourteen Directors are to be elected at the annual meeting of stockholders.
It is intended that, absent any voting instructions to the contrary, shares
represented by the enclosed proxy will be voted for the election of all
nominees listed below. All Directors will be elected to serve until the next
annual meeting and until their successors shall have been elected and
qualified. In the event, however, that any such nominee shall be unable to
serve, which is not now contemplated, the proxy holders may or may not vote for
a substitute nominee.
The proxy provides instructions for voting for all Director nominees or for
withholding authority to vote for one or more Director nominees. Stockholders
have cumulative voting rights in the election of Directors. Accordingly, each
stockholder is entitled to as many votes as shall equal the number of his
shares of Common Stock multiplied by the number of Directors to be elected. It
is expected that the proxy holders will divide these cumulative votes equally
among all Director nominees for whom authority to vote has not been withheld,
unless the stockholder chooses to allocate his votes otherwise and so indicates
on the proxy. Notwithstanding the foregoing, the proxy holders reserve the
right, exercisable in their sole discretion, to vote proxies cumulatively so as
to elect all or as many as possible of such Director nominees depending upon
circumstances at the meeting. Whether or not any shares are voted cumulatively,
the fourteen persons receiving the highest number of votes cast will be elected
as Directors.
1
<PAGE>
INFORMATION ABOUT NOMINEES
The following information with respect to nominees for election to the Board
of Directors of the Corporation at the 1996 annual meeting of stockholders is
as of December 31, 1995.
Nominee, Age
and
Year Became
Director of Principal Occupation and Other Information
Corporation -------------------------
or Bank
- --------------
PRESIDENT, CHICAGO STATE UNIVERSITY since 1990;
[PHOTO HERE] Associate Provost and Associate Vice President for
Academic Affairs, University of Minnesota, from
1988 to 1990 (Educational institutions).
Dr. Cross is a director of the Student Loan Market-
ing Association.
DOLORES E. CROSS
Age 58 1994
DEAN AND EDWARD EAGLE BROWN DISTINGUISHED SERVICE
[PHOTO HERE] PROFESSOR OF FINANCE, GRADUATE SCHOOL OF BUSINESS,
UNIVERSITY OF CHICAGO since July, 1993, Edward
Eagle Brown Professor of Finance from 1989 to July,
1993 and member of the Faculty since 1966
(Educational institution).
Mr. Hamada is a director of A. M. Castle & Co. and
the Chicago Board of Trade.
ROBERT S. HAMADA
Age 58 1988
PRESIDENT since October, 1995 AND CHIEF OPERATING
[PHOTO HERE] OFFICER since June, 1995 of the CORPORATION AND THE
BANK, Vice Chairman from January, 1994 to June,
1995, Senior Executive Vice President from
November, 1992 through December, 1993, and
Executive Vice President of the Bank from April,
1987 to November, 1992 and of the Corporation from
April, 1990 to November, 1992.
BARRY G. HASTINGS
Age 48 1994
PARTNER, MAYER, BROWN & PLATT since January, 1967
[PHOTO HERE] (Law firm).
Mr. Helman is a director of The Horsham
Corporation, Brambles USA, Inc. and Alberta Natural
Gas Company Ltd. and a Governor of the Chicago
Stock Exchange.
ROBERT A. HELMAN
Age 61 1986
2
<PAGE>
Nominee, Age
and
Year Became
Director of Principal Occupation and Other Information
Corporation
or Bank
- --------------- MANAGING PARTNER, KEL ENTERPRISES L.P. since 1982
[PHOTO HERE] (Holding and investment partnership).
Mr. Kelly is a director of Bayerische Motoren Werke (BMW)
A.G., Deere & Company, Nalco Chemical Company, Snap-on
Incorporated and Tejas Gas Corporation.
ARTHUR L. KELLY
Age 58 1988
[PHOTO HERE] GENERAL DIRECTOR, LYRIC OPERA OF CHICAGO since January,
1981 (Opera company).
ARDIS KRAINIK
Age 66 1985
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BURLINGTON
[PHOTO HERE] NORTHERN SANTA FE CORPORATION since September, 1995,
President and Chief Executive Officer, Santa Fe Pacific
Corporation from July, 1987 to September, 1995, and
Chairman from May, 1988 to September, 1995
(Transportation companies).
Mr. Krebs is a director of Burlington Northern Santa Fe
Corporation, Phelps Dodge Corporation, Santa Fe Energy
Resources, Inc., Santa Fe Pacific Pipelines, Inc., Santa
Fe Pacific Gold Corporation, Burlington Northern Inc. and
Burlington Northern Railroad Company.
ROBERT D. KREBS
Age 53 1989
CHAIRMAN since November, 1993, AND CHIEF EXECUTIVE OFFI-
[PHOTO HERE] CER since July, 1988, MOLEX INCORPORATED (Manufacturer of
electrical/electronic interconnecting products and sys-
tems).
Mr. Krehbiel is a director of Molex Incorporated,
Tellabs, Inc. and Nalco Chemical Company.
FREDERICK A. KREHBIEL
Age 54 1988
3
<PAGE>
Nominee, Age
and
Year Became
Director of Principal Occupation and Other Information
Corporation
or Bank
- --------------- RETIRED VICE CHAIRMAN, CENTEL CORPORATION since May, 1987
[PHOTO HERE] (Telecommunications company).
Mr. Mitchell is a director of The Interlake Corporation,
Peoples Energy Corporation and The Sherwin-Williams Co.
WILLIAM G. MITCHELL
Age 64 1975
CHAIRMAN since July, 1994, CHIEF EXECUTIVE OFFICER since
[PHOTO HERE] April, 1994, AND PRESIDENT since 1990, NALCO CHEMICAL
COMPANY; Chief Operating Officer from 1992 to 1994
(Manufacturer of specialized service chemicals).
Mr. Mooney is a director of Nalco Chemical Company,
Morton International, Inc. and the Chemical
Manufacturers' Association.
EDWARD J. MOONEY
Age 54 --
CHAIRMAN since October, 1995 AND CHIEF EXECUTIVE OFFICER
[PHOTO HERE] since June, 1995 of the CORPORATION AND THE BANK,
President from January, 1994 to October, 1995, Chief
Operating Officer from January, 1994 to June, 1995,
Senior Executive Vice President from November, 1992
through December, 1993 and Executive Vice President of
the Bank from April, 1987 to November, 1992 and of the
Corporation from April, 1989 to November, 1992.
WILLIAM A. OSBORN
Age 48 1994
CHAIRMAN OF THE EXECUTIVE COMMITTEE, ILLINOIS TOOL WORKS
[PHOTO HERE] INC. since January, 1982 (Manufacturer and marketer of
engineered components and industrial systems and
consumables).
Mr. Smith is a director of Illinois Tool Works Inc. and
W. W. Grainger, Inc. and is a trustee of The Northwestern
Mutual Life Insurance Company.
HAROLD B. SMITH
Age 62 1974
4
<PAGE>
Nominee, Age
and
Year Became
Director of
Corporation Principal Occupation and Other Information
or Bank
- ---------------
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE
[PHOTO HERE] QUAKER OATS COMPANY since November, 1995, Chairman and
Chief Executive Officer from January, 1993 to November,
1995, Chairman, President and Chief Executive Officer
from November, 1990 through December, 1992 (Worldwide
manufacturer and marketer of beverages and grain-based
products).
Mr. Smithburg is a director of The Quaker Oats Company,
Abbott Laboratories, Corning Incorporated and Prime
Capital Corp.
WILLIAM D. SMITHBURG
Age 57 1981
RETIRED PRESIDENT, COMMONWEALTH EDISON COMPANY since
[PHOTO HERE] December, 1992; President from September, 1987 to
December, 1992 (Company engaged in production,
distribution and sale of electric energy).
Mr. Thomas is a director of R. R. Donnelley & Sons Com-
pany and MYR Group Inc.
BIDE L. THOMAS
Age 60 1984
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Common Stock for
each Director and Director nominee, each executive officer named in the Summary
Compensation Table elsewhere in this Proxy Statement and all Directors and
executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
COMMON STOCK(/1/)
OWNED AS OF
DECEMBER 31, 1995
-----------------------
NO. OF PERCENT
NAME SHARES OF CLASS
- -------------------------------------------------------------------------------
<S> <C> <C>
Dolores E. Cross.................................. 644 *
David W. Fox...................................... 311,505(/2/) *
Robert S. Hamada.................................. 1,950 *
Barry G. Hastings................................. 160,931(/2/) *
Robert A. Helman.................................. 1,650 *
Arthur L. Kelly................................... 8,250(/3/) *
Ardis Krainik..................................... 1,650 *
Robert D. Krebs................................... 1,650 *
Frederick A. Krehbiel............................. 10,250 *
James J. Mitchell................................. 85,473(/2/) *
William G. Mitchell............................... 3,450 *
Edward J. Mooney.................................. -- (/3/) -- (/3/)
William A. Osborn................................. 138,097(/2/) *
Sheila A. Penrose................................. 30,590(/2/) *
Perry R. Pero..................................... 153,850(/2/) *
Harold B. Smith................................... 3,631,655(/4/) 6.52%
William D. Smithburg.............................. 1,650 *
Bide L. Thomas.................................... 1,950 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP... 4,986,660(2) 8.96%
</TABLE>
- --------------------------------------------------------------------------------
* Less than one percent of the outstanding Common Stock.
(1) The information contained in this table is furnished to the Corporation
by the individuals named in the table and reflects the Securities and
Exchange Commission's definition of beneficial ownership. The nature of
beneficial ownership for shares shown in this table is sole voting and/or
sole investment power, except as set forth below.
(2) Includes shares issuable pursuant to stock options exercisable within
60 days after December 31, 1995, as follows: Mr. Fox, 97,985 shares; Mr.
Hastings, 62,788 shares; Mr. James J. Mitchell, 20,750 shares; Mr. Osborn,
64,875 shares; Ms. Penrose, 21,000 shares; Mr. Pero, 57,100 shares; and all
Directors and executive officers as a group, 569,858 shares.
(3) As of February 26, 1996, the record date for the annual meeting, Mr.
Kelly and Mr. Mooney beneficially owned 10,850 and 300 shares of Common
Stock, respectively.
(4) See note 2 on page 7.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table includes information concerning Common Stock ownership of
stockholders who were the beneficial owners of more than 5% of the outstanding
shares of the Common Stock on December 31, 1995.
<TABLE>
<CAPTION>
COMMON STOCK(/1/)
HELD AS OF
DECEMBER 31, 1995
-----------------------
NO. OF PERCENT
NAME AND ADDRESS SHARES OF CLASS
---------------------------------------------------- --------- --------
<S> <C> <C>
Harold B. Smith..................................... 3,631,655(/2/) 6.52%
3600 West Lake Avenue, Glenview, Illinois 60025-
5811
NationsBank, N.A. (South)........................... 3,978,721(/3/) 7.15%
600 Peachtree St., N.E., Suite 700, Atlanta, Geor-
gia 30308
</TABLE>
- --------------------------------------------------------------------------------
(1) The information contained in this table is furnished to the Corporation
by the persons named in the table and reflects the Securities and Exchange
Commission's definition of beneficial ownership. The nature of beneficial
ownership of the holdings shown in this table is set forth in notes 2 and 3
which follow.
(2) Harold B. Smith serves as co-fiduciary and shares voting and investment
power with various family members and the Bank with respect to 2,233,008
shares or 4.01% of the outstanding Common Stock. As co-trustee with the Bank
and two individuals he shares voting and investment power for 1,291,614
shares or 2.32% of the outstanding Common Stock. With respect to 38,570
shares or .07% of the outstanding Common Stock, he serves as co-fiduciary
and shares voting and investment power with other family members. Mr. Smith
also has sole voting and investment power over 13,776 shares or .02% of the
outstanding Common Stock held in a trust, and shared voting and investment
power over 54,537 shares or .10% of the outstanding Common Stock as co-
trustee of three additional trusts.
(3) NationsBank, N.A. (South) holds 3,978,721 shares or 7.15% of the
outstanding Common Stock, including 3,948,700 shares or 7.09% of the
outstanding Common Stock in its capacity as Trustee of the Northern Trust
Employee Stock Ownership Plan ("ESOP"). NationsBank, N.A. (South) has no
voting and investment power with respect to the 2,373,340 ESOP shares
allocated to participant accounts and has shared voting and investment power
with respect to the 1,575,360 unallocated ESOP shares. Participants in the
ESOP are entitled to direct the Trustee as to the voting of shares allocated
to their accounts under the ESOP. Unallocated shares and allocated shares
for which no direction is received will be voted by the Trustee in the same
proportion that the allocated shares were voted, unless inconsistent with
the Trustee's fiduciary responsibility.
The Bank and its affiliates individually act as sole or co-fiduciary with
respect to trusts and other fiduciary accounts which own, hold or control
through intermediaries in the aggregate 8,464,101 shares or 15.21% of the
outstanding Common Stock over which the Bank and its affiliates have, directly
or indirectly, sole or shared voting power and/or sole or shared investment
power. No single trust or other fiduciary account holds a beneficial interest
in excess of 5%. The Bank and its affiliates have sole voting power with
respect to 1,813,639 shares or 3.26% of the outstanding Common Stock, and they
share voting power with respect to 5,773,352 shares or 10.37% of the
outstanding Common Stock. They have sole investment power with respect to
1,178,405 shares or 2.12% of the outstanding Common Stock, and they share
investment power with respect to 5,225,456 shares or 9.39% of the outstanding
Common Stock.
In addition, the Bank, as Trustee of The Northern Trust Company Thrift-
Incentive Plan, holds in the Northern Trust Common Stock Fund of that Plan
2,401,422 shares or 4.31% of the outstanding Common Stock. The Bank has no
voting or investment power with respect to these shares since sole voting and
investment power for the shares is held by the 3,804 Northern Trust Common
Stock Fund participants who are employees of the Corporation or its
subsidiaries.
7
<PAGE>
INFORMATION ABOUT THE BOARD AND COMMITTEES
COMMITTEES
The Corporation's Board of Directors presently has six standing committees:
an Executive Committee, a Compensation and Benefits Committee, an Audit
Committee, a Nominating Committee, a Corporate and Institutional Services
Committee and a Personal Financial Services Committee. The Bank's Board of
Directors also has an Executive Committee, an Audit Committee, a Corporate and
Institutional Services Committee and a Personal Financial Services Committee.
Current members of the Compensation and Benefits Committee are William D.
Smithburg, Chairman, Arthur L. Kelly, Frederick A. Krehbiel, Harold B. Smith
and Bide L. Thomas. During 1995, the Committee met on six occasions to review
and make recommendations to the full Board of Directors with respect to the
following matters: compensation policy, including executive compensation policy
and compensation levels, benefit plans and programs, incentive plans and
payments thereunder and management development and succession planning.
Current members of the Audit Committee are Robert D. Krebs, Chairman, Robert
S. Hamada, Arthur L. Kelly and William G. Mitchell. During 1995, the Committee
met on four occasions to review and make recommendations to the full Board of
Directors with respect to the following matters: examinations by regulatory
authorities, internal audit procedures, internal controls, compliance with laws
and regulations, engagement of independent public accountants and matters
having a material effect upon the Corporation's financial operations. (See
"Independent Public Accountants," below.)
Current members of the Nominating Committee are Frederick A. Krehbiel,
Chairman, Ardis Krainik, Robert D. Krebs, Harold B. Smith and William D.
Smithburg. During 1995, the Committee met on two occasions to review and make
recommendations to the full Board of Directors with respect to the evaluation
of candidates for nomination to the Board of Directors and the structure and
membership of Board committees. The Committee will consider recommendations
from the stockholders of the Corporation, submitted in writing to the Secretary
of the Corporation, regarding potential nominees for election as Directors.
The Board of Directors held 12 regular and three special meetings during
1995. All persons who were Directors during 1995 attended at least 75% of
these meetings and meetings of Committees on which they served, except for Ms.
Krainik, Mr. Krehbiel and Mr. Mitchell.
The Executive Committee meets as required between meetings of the Board of
Directors and exercises the powers of the Board in the management of the
business and affairs of the Corporation as may be delegated by the Board,
subject to limitations imposed by law and the By-Laws of the Corporation. The
Corporate and Institutional Services Committee and the Personal Financial
Services Committee review the policies, strategies and performance of these
business units.
COMPENSATION OF DIRECTORS
Compensation of non-employee Directors of the Corporation and the Bank
consists of an annual retainer fee of $22,000, with the Chairmen of the
Corporation's Compensation and Benefits, Audit, and Nominating Committees and
the Bank's Corporate and Institutional Services and Personal Financial Services
Committees each receiving an additional annual retainer fee of $4,000. All non-
employee Directors receive a fee of $1,000 for each Board and Committee meeting
attended. Non-employee Directors are also eligible to receive a per diem fee of
$1,000 when required to perform specific services on behalf of the Corporation.
No payments were made for such services in 1995.
Directors may elect to defer payment of the cash portion of their retainer or
their attendance fees which, if deferred, accrue earnings at an interest rate
determined from time to time by the
8
<PAGE>
Compensation and Benefits Committee. After a Director ceases to be a Director
of the Corporation and the Bank, the amount accrued to his or her account is
payable to the Director in a lump sum or in quarterly installments according to
a formula.
Under the Corporation's Restricted Stock Plan for non-employee Directors, on
December 20, 1991, each non-employee Director was granted 750 shares of Common
Stock (as adjusted for a subsequent stock split) which were distributable at
the rate of 150 shares per year commencing December, 1991 and ending December,
1995. The Director could vote and receive dividends on all the shares granted
but could not dispose of such shares until after the shares had been
distributed. If a Director ceased to serve as director, shares granted but not
yet distributed were forfeited. Newly elected non-employee Directors
participated in the Plan on the same terms, except that the number of shares
granted to each equalled 150 times the number of distribution dates remaining.
The Corporation's Board of Directors expects to consider the adoption of a new
or modified restricted stock plan in 1996 as part of its periodic review of
director compensation.
MANAGEMENT TRANSACTIONS AND INDEBTEDNESS
Directors and executive officers of the Corporation, as well as members of
their immediate families and their associates, were customers of and had
transactions with the Corporation and its subsidiaries in the ordinary course
of business during 1995. These transactions included loans; purchases, sales
and placements of investment securities and other financial instruments;
fiduciary transactions; deposits; and other purchase, sale and finance
transactions. It is anticipated that similar transactions may occur in the
ordinary course of business in the future. All credit transactions were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons and
did not involve more than the normal risk of collectibility or present other
unfavorable features. Transactions in 1995 involving the purchase or sale of
products and services did not result in payments that were material to the
gross revenues of either the Corporation or the company with which a director
or executive officer was associated. Mr. Helman, a director of the Corporation,
is a partner in the law firm of Mayer Brown & Platt, which renders legal
services to the Corporation and its subsidiaries.
9
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Corporation links executives' short-term and longer-term financial
rewards to the Corporation's performance and return to stockholders.
Accordingly, the Corporation's compensation program makes a significant portion
of the executives' rewards variable, dependent on performance. Rewards to
executives should increase when performance goals are achieved and surpassed,
and correspondingly decrease if goals are not achieved. The Corporation's
program relies significantly on equity incentives in order to align the
executives' interests closely with those of the stockholders. The components of
the Corporation's executive compensation program are designed to reflect these
reward principles in each of the following: base salary, annual incentive cash
award, performance shares and stock options. The Corporation also has made
specific awards of restricted stock from time to time.
Each year the Compensation and Benefits Committee (the "Committee") reviews
the components of the Corporation's executive compensation program, comparing
compensation levels to a peer group of financial service organizations that
represent the Corporation's competition for executive talent. The Committee
considers recommendations from the Corporation's Human Resources Department
which works closely with outside consultants. The organizations selected for
comparison purposes generally have one or more of the following
characteristics: superior financial performance; lines of business similar to
those of the Corporation; significant operations in the Corporation's principal
geographic areas; and size, either overall or in particular lines of business,
comparable to that of the Corporation. The Keefe, Bruyette & Woods 50 Bank
Index, which is used in the Five-Year Cumulative Total Return table presented
elsewhere in this Proxy Statement, includes all of the organizations in the
peer group used for compensation comparison purposes.
The Committee reviews and approves the compensation of the Corporation's most
highly compensated executives, including the executive officers whose
compensation is detailed in this Proxy Statement. For other executives the
Committee reviews overall compensation policies and payment levels. In
reviewing the compensation of executives other than the Chief Executive
Officer, the Committee takes the Chief Executive Officer's counsel and
recommendations into account.
BASE SALARIES--Base salaries are generally determined by evaluating the
responsibilities of the position and the individual's experience, performance,
career progress and development. A review is also made of the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions at other banking and financial services companies.
The Committee generally determines annual salary adjustments, within the
context of the Corporation's overall salary budget, by evaluating the
performance of each executive officer and any changes in the executive's
responsibilities. During 1995, however, no adjustments were made to the base
salaries of the executives named in the Summary Compensation Table, although
the salaries of some of these executives had been adjusted during 1994. The
Committee accepted management's recommendation that no 1995 salary adjustments
be made for the named executive officers and certain other highly compensated
executives in order to demonstrate this group's commitment to the Corporation's
1995 expense management initiatives. 1996 adjustments to the base salaries of
these executives reflect the factors referred to above, and with respect to Mr.
Osborn and Mr. Hastings, their promotions, in October, 1995, to Chairman and
Chief Executive Officer, and President and Chief Operating Officer,
respectively.
ANNUAL INCENTIVE CASH AWARDS--During 1995 the executive officers named in the
Summary Compensation Table were eligible for annual incentive cash awards under
one of two plans. Messrs. Fox, Osborn, Hastings, and Pero participated in the
Management Performance Plan; Ms. Penrose and Mr. Mitchell participated in the
Annual Performance Plan. The amount available under the
10
<PAGE>
Management Performance Plan is tied by a formula directly to the achievement
of a corporate net income goal. At the beginning of the Plan year the
Committee reviewed and recommended to the Board the corporate net income
objective and the individual target awards expressed as a percentage of
salary. Following completion of the Plan year, the Committee approved
individual award payments based on a comparison of actual achievement with the
corporate net income objective and an evaluation of individual performance.
Under the Annual Performance Plan, annual incentive cash awards for each
individual are determined on a discretionary basis from a pool of funds for
that individual's business unit. The aggregate amount available for business
unit pools is based on the achievement of a corporate net income goal and
business unit earnings goals set at the beginning of the year. Individual
awards are based on an evaluation of each executive's performance. Awards
under both the Management Performance Plan and Annual Performance Plan were
paid in cash.
Mr. Osborn's 1995 Management Performance Plan Award of $251,000 recognized
that the Corporation achieved record earnings and surpassed the Plan's net
income objective. Mr. Fox's award of $324,000 was based on the same factors,
but also recognized that he did not serve for the full year because of his
retirement on September 29, 1995.
Section 162(m) of the Internal Revenue Code provides that compensation in
excess of $1,000,000 per year paid to the chief executive officer and the four
other most highly compensated executive officers employed at year-end, other
than compensation meeting the technical definition in the Code for
"performance based compensation" or otherwise exempt from the provisions of
Section 162(m), will not be deductible by a corporation for federal income tax
purposes. The Corporation provided in 1995 Management Performance Plan that
any portion of an executive's incentive award which would not be deductible by
the Corporation after taking into account all other compensation paid to the
executive will be deferred and paid to the executive, with interest, in the
calendar year following retirement or other termination of employment. All
compensation paid in 1995 to the executive officers named in Summary
Compensation Table, however, was deductible without regard to this provision.
The Committee will continue to review the deductibility of compensation under
Section 162(m), with the goal of assuring that compensation paid is deductible
by the Corporation to the extent that this can be accomplished in a manner
that provides adequate incentives and allows the Corporation to attract and
retain qualified executives.
PERFORMANCE SHARES--Performance share awards to executive officers are
determined generally on an annual basis under the performance share provisions
of the Amended 1992 Incentive Stock Plan (the "Plan"). For each year's award,
there is a three-year performance period followed by a three-year vesting
period. The three-year performance period is intended to reflect a longer term
strategic business focus and the three-year vesting period is designed to
encourage the executives to remain with the Corporation. The Committee, at the
beginning of the performance period, establishes return-on-equity corporate
performance goals for the period and performance share target awards for the
Plan's participants. The awards provide for the crediting of 50% of the shares
awarded if a minimum goal is met and 100% if a higher goal is met for the
relevant performance period. Individual performance share target awards are
based on multiple-of-salary guidelines and competitive compensation data. The
Committee also considers the amount of long-term performance share awards and
stock options previously granted to the individual. If the executive leaves
the Corporation prior to the completion of the performance period for reasons
other than death, disability or retirement (in which cases the award amounts
are prorated), the performance shares are forfeited. Following the completion
of each three-year performance period, the Committee determines what level of
return-on-equity for that performance period has been achieved and authorizes
the crediting of the appropriate number of performance shares to the
participants' accounts if the minimum goal has been met. Typically the shares
are distributed to the participant on the third anniversary following the date
on which the shares were credited to the participant's account, together with
cash in an amount equal to the dividends declared on that number of shares
during the three-year period plus interest at an assumed rate on those
dividends. If the executive leaves the Corporation prior to this
11
<PAGE>
distribution date for reasons other than death, disability or retirement, the
performance shares and related cash balance are forfeited. In cases of death,
disability or retirement during the three-year vesting period, the performance
shares and related cash balance become distributable.
In February, 1995, the Committee applied the factors described above and set
performance share target awards of 12,000 and 15,000 shares for the 1995-1997
performance period for Mr. Osborn and Mr. Fox, respectively. Upon the
retirement of Mr. Fox on September 29, 1995, and per the provisions of the
performance share award agreement, the award was reduced for pro-ration of
service to 3,750 shares. Mr. Osborn's target share award represents
approximately 7.6% of the total of 157,500 target shares awarded for the 1995-
1997 performance period.
STOCK OPTIONS--Stock option grants to executive officers are determined
generally on an annual basis under the provisions of the Plan. Individual stock
option awards are based on multiples of salary guidelines, incorporating both a
current and projected option value to the recipient, and competitive
compensation data. The Committee also considers the amount of long-term
performance share awards and stock options previously granted to the
individual.
Option grants are designed to align the interests of executives with those of
the stockholders. Stock options are granted with an exercise price equal to the
market price of the Common Stock on the date of grant and may be exercised over
ten years. This approach is designed to motivate the executive to contribute to
the creation of stockholder value over the long term.
In September, 1995, the Committee applied the factors described above and
granted to Mr. Osborn an option to purchase 25,000 shares with an exercise
price of $47.00. This constituted 4% of the options on 629,800 shares granted
in 1995. Mr. Osborn now holds options to purchase a total of 104,875 shares.
* * * * *
Through the programs described above, a significant portion of the
Corporation's executive compensation is linked directly to individual and
corporate performance and stock price appreciation. In 1995 the group of six
executives listed in the Summary Compensation Table received over half of their
compensation in the aggregate (consisting of the dollar amounts shown in the
Table and value realized on stock options exercised) in the form of
performance-based variable elements. The Committee intends to continue the
policy of linking executive compensation to corporate performance and returns
to stockholders.
This report is submitted on behalf of the members of the Committee:
William D. Smithburg, Chairman
Arthur L. Kelly
Frederick A. Krehbiel
Harold B. Smith
Bide L. Thomas
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the years 1993
through 1995 with respect to David W. Fox and William A. Osborn, each of whom
served as the Corporation's chief executive officer during 1995, and certain
other executive officers who received the highest annual compensation during
1995.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- -----------------------------------------
AWARDS
(SECURITIES
NAME AND RESTRICTED UNDERLYING PAYOUTS
PRINCIPAL POSITION TOTAL OF STOCK OPTIONS (LONG-TERM ALL OTHER
(AT DECEMBER 31, 1995) YEAR SALARY BONUS(1) SALARY & BONUS AWARDS(2) GRANTED) INCENTIVE PLAN)(3) COMPENSATION(4)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Fox(5) 1995 $487,500 $324,000 $ 811,500 0 $2,828,468 $77,911
1994 $645,000 $370,617 $1,015,617 40,000 $ 0 $78,516
1993 $616,250 $414,982 $1,031,232 37,500 $ 631,901 $83,262
William A. Osborn 1995 $410,000 $251,000 $ 661,000 25,000 $ 456,563 $65,525
Chairman and 1994 $410,000 $225,000 $ 635,000 $987,500 15,000 $ 0 $49,909
Chief Executive Officer 1993 $335,000 $190,884 $ 525,884 12,000 $ 379,141 $45,262
Barry G. Hastings 1995 $385,000 $236,000 $ 621,000 20,000 $ 456,563 $61,530
President and 1994 $385,000 $215,000 $ 600,000 $987,500 15,000 $ 0 $46,866
Chief Operating Officer 1993 $345,000 $196,582 $ 541,582 12,000 $ 379,141 $46,613
Perry R. Pero 1995 $325,000 $183,000 $ 508,000 11,000 $ 456,563 $51,941
Senior Executive 1994 $322,500 $163,000 $ 485,500 10,000 $ 0 $39,258
Vice President 1993 $315,000 $194,488 $ 509,488 10,000 $ 379,141 $42,560
Sheila A. Penrose 1995 $300,000 $150,000 $ 450,000 12,000 $ 0 $47,945
Executive Vice 1994 $237,500 $ 86,000 $ 323,500 8,000 $ 0 $28,911
President 1993 $206,667 $ 75,000 $ 281,667 6,000 $ 0 $20,245
James J. Mitchell 1995 $315,000 $130,000 $ 445,000 10,000 $ 456,563 $50,342
Executive Vice 1994 $286,333 $ 80,000 $ 366,333 8,000 $ 0 $34,856
President 1993 $270,000 $110,400 $ 380,400 8,000 $ 379,141 $30,584
</TABLE>
- --------------------------------------------------------------------------------
(1) Award amounts under the Management Performance Plan for Mr. Fox, Mr.
Osborn, Mr. Hastings and Mr. Pero; amounts under the Annual Performance Plan
for Ms. Penrose and Mr. Mitchell. In the event of a change in control of the
Corporation, as defined in each Plan, award amounts would be payable as
follows: under the Management Performance Plan, discretionary awards
consistent with the Plan would be paid as soon as practicable; under the
Annual Performance Plan, available Plan award funding would be calculated as
if business unit and corporate earnings targets had been achieved and
discretionary awards would be paid as soon as practicable.
(2) The total number of restricted stock awards and their aggregate market
value as of December 31, 1995 were: Mr. Osborn, 25,000 shares valued at
$1,392,188; and Mr. Hastings, 25,000 shares valued at $1,392,188, based on
$55.6875 per share, the mean of the high and low sale prices of the Common
Stock as reported by The Nasdaq Stock Market on December 29, 1995. The
restrictions on these stock awards, granted on January 3, 1994, lapse
beginning four years after the date of grant, and the stock becomes fully
vested nine years after the date of grant, subject to earlier vesting in the
event of a change in control of the Corporation, as defined in the Plan, or
earlier prorated vesting upon a participant's death, normal retirement or
disability, or as otherwise determined by the Compensation and Benefits
Committee. Dividends are paid on restricted stock awards, as adjusted by an
interest factor, and distributed to participants in accordance with the
vesting schedule described above.
(3) For 1995, the amount shown for Mr. Fox represents the awards for the
1989-1991, 1990-1992, 1991-1993, and 1992-1994 performance periods, the
latter three of which were accelerated for distribution upon his retirement
in 1995. The respective values of the amounts shown for all named executive
officers were determined by multiplying the total number of shares awarded by
the mean of the high and low sale prices of the Common Stock as reported by
The Nasdaq Stock Market on the dates of distribution and adding dividend
equivalents and an assumed interest factor.
(4) The "All Other Compensation" category is comprised of contributions on
behalf of the named executive officers to the Thrift-Incentive Plan ("TIP")
and allocations on behalf of the named executive officers under the Northern
Trust Employee Stock Ownership Plan ("ESOP"), both of which are defined
contribution plans. For each of the following executives, the 1995 TIP and
ESOP amounts (in that order) were: Mr. Fox, $24,375 and $53,536; Mr. Osborn,
$20,500 and $45,025; Mr. Hastings, $19,250 and $42,280; Mr. Pero, $16,250 and
$35,691; Ms. Penrose, $15,000 and $32,945; and Mr. Mitchell, $15,750 and
$34,592. In the event of a change in control of the Corporation, participants
become fully vested in all benefits payable under the ESOP and all benefits
payable under the TIP that are in excess of applicable Internal Revenue Code
limits.
(5) Mr. Fox retired on September 29, 1995, at which time he held the
position of Chairman. Prior to July 1, 1995, Mr. Fox was Chairman and Chief
Executive Officer of the Corporation.
13
<PAGE>
EMPLOYMENT SECURITY AGREEMENTS
Messrs. Osborn, Hastings, Pero, and Mitchell and Ms. Penrose are parties to
employment security agreements that provide lump sum cash payments equivalent
to three years' salary and bonus (and payment of a pro rata bonus for the year
of termination, as well as continuation of medical, dental, life insurance and
similar benefits for three years) upon the termination of employment either by
the Corporation without good cause or by the executive with good reason, as
defined in the agreements, within two years after a change in control of the
Corporation, as defined in the agreements. The agreements also provide that the
Corporation will reimburse the executives for any excise tax imposed on
payments under the agreements as well as taxes imposed on such reimbursement
amounts.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to the stock
options granted during the last fiscal year to the executive officers named in
the Summary Compensation Table. Using a range of 0% to 10% in assumed rates of
stock price appreciation (compounded annually) for the option term of ten
years, the table also shows the potential realizable pre-tax value of the stock
options. These assumed rates are used for illustrative purposes only, and are
not intended to represent or predict future increases in the price of the
Corporation's Common Stock.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM OF 10 YEARS
INDIVIDUAL GRANTS (2)
-------------------------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL 5% ($76.56
SECURITIES OPTIONS STOCK 10% ($121.91
UNDERLYING GRANTED TO PRICE STOCK PRICE
OPTIONS EMPLOYEES EXERCISE EXPIRATION AFTER AFTER
NAME GRANTED (1) IN FISCAL YEAR PRICE DATE 0% 10 YEARS) 10 YEARS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
David W.
Fox 0 -- -- -- -- -- --
William
A.
Osborn 25,000 4.0% $47.00 09/19/05 $ 0 $739,000 $1,872,750
Barry G.
Hastings 20,000 3.2% $47.00 09/19/05 $ 0 $591,200 $1,498,200
Perry R.
Pero 11,000 1.7% $47.00 09/19/05 $ 0 $325,160 $ 824,010
Sheila
A.
Penrose 12,000 1.9% $47.00 09/19/05 $ 0 $354,720 $ 898,920
James J.
Mitchell 10,000 1.6% $47.00 09/19/05 $ 0 $295,600 $ 749,100
</TABLE>
- --------------------------------------------------------------------------------
(1) All options to the named executive officers were granted on September
19, 1995 and first become exercisable September 19, 1997. In the event of a
change in control of the Corporation, as defined in the Plan, all
outstanding stock options become fully vested and exercisable.
(2) No gain to the optionees is possible without an increase in the stock
price, which will benefit all stockholders commensurately. The pre-tax gain
to all stockholders, using as a base the $47.00 mean of the high and low
sale prices of Common Stock as reported by The Nasdaq Stock Market on
September 19, 1995, would be $0 for 0% appreciation, approximately $1.6
billion for 5% appreciation and approximately $4.2 billion for 10%
appreciation.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of shares for which stock options
were exercised during 1995, the actual as well as annualized pre-tax value
realized, the number of shares for which options were outstanding and the pre-
tax value of those options as of year-end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(4)
ANNUALIZED ---------------------------- ----------------------------
SHARES ACQUIRED VALUE VALUE SINCE EXERCISABLE(3) UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
NAME ON EXERCISE REALIZED(1) GRANT DATE(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
David W. Fox 40,015 $916,476 $197,174 97,985 40,000 $1,840,636 $720,000
William A. Osborn 3,700 $ 98,923 $ 10,459 64,875 40,000 $1,916,350 $487,188
Barry G. Hastings 5,000 $132,430 $ 14,001 62,788 35,000 $1,776,244 $443,750
Perry R. Pero 6,276 $166,226 $ 17,575 57,100 21,000 $1,678,618 $275,562
Sheila A. Penrose 0 $ 0 $ 0 21,000 20,000 $ 458,937 $248,250
James J. Mitchell 7,287 $192,093 $ 20,309 20,750 18,000 $ 386,578 $230,875
</TABLE>
- --------------------------------------------------------------------------------
(1) Calculated on a pre-tax basis using the spread between the option
exercise price and the mean of the high and low sale prices as reported by
The Nasdaq Stock Market on the date of exercise.
(2) Amount of pre-tax value realized annualized over period between date
of grant and exercise.
(3) Amounts represent options granted since 1991 to Mr. Fox and Mr.
Mitchell, since 1990 to Ms. Penrose, since 1987 to Mr. Hastings, and since
1986 to Mr. Osborn and Mr. Pero.
(4) Calculated on a pre-tax basis using the spread between the option
exercise price and $55.6875, which was the mean of the high and low sale
prices of the Common Stock as reported by The Nasdaq Stock Market on
December 29, 1995.
15
<PAGE>
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
The following table sets forth the Long-Term Incentive Plan (Performance
Shares) target awards made to the named executive officers during 1995.
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURATION
NAME RIGHTS(1) OR PAYOUT(2)
------------------------------------------
<S> <C> <C>
David W. Fox(3) 15,000 shares 6 years
William A.
Osborn 12,000 shares 6 years
Barry G. Has-
tings 10,000 shares 6 years
Perry R. Pero 8,000 shares 6 years
Sheila A.
Penrose 6,000 shares 6 years
James J. Mitch-
ell 6,000 shares 6 years
</TABLE>
----------------------------------------------
(1) Awarded by the Compensation and
Benefits Committee with established return-
on-equity goals for the 1995-1997
performance period.
(2) Shares are subject to performance
goals over a three-year performance period
followed by a three-year vesting period.
Either one-half or the full number of
shares awarded will be distributed if the
minimum or target performance goal, respec-
tively, is met and the vesting restrictions
are satisfied; no shares will be distrib-
uted if the minimum performance goal is not
met. In the event of a change in control of
the Corporation, as defined in the Plan,
all shares credited to participants' ac-
counts and related cash balances become
distributable to participants; target award
shares for performance periods currently in
progress will be credited on a pro-rata ba-
sis of actual full months lapsed to plan
period and become distributable to partici-
pants. See "Compensation and Benefits Com-
mittee Report--Performance Shares," above
for a description of the terms of the Plan.
(3) The original award of 15,000 shares
to Mr. Fox was reduced to 3,750 shares per
the proration formula in the award agree-
ment upon his retirement on September 29,
1995. Under the Plan, these shares will not
be subject to an additional three-year per-
formance period.
16
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG NORTHERN TRUST CORPORATION COMMON STOCK, S&P 500 INDEX AND
KEEFE, BRUYETTE & WOODS 50 BANK INDEX
(TOTAL RETURN ASSUMES $100 INVESTED ON
JANUARY 1, 1991 WITH REINVESTMENT OF DIVIDENDS)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Northern Trust S&P 500 Index KBW Index
-------------- ------------- ---------
<S> <C> <C> <C>
1990 $100 $100 $100
1991 173 130 158
1992 222 140 202
1993 213 155 213
1994 193 157 202
1995 316 215 324
</TABLE>
For the five-year period ended December 31, 1995, the Corporation's total
return to stockholders was 216% compared with 115% for the S&P 500 Index and
224% for the KBW 50 Bank Index. During the same period, the Corporation's
Common Stock market capitalization increased $2,115,900,000 or 211% from
$1,001,300,000 to $3,117,200,000, reflecting both an increase in the stock
price and a greater number of shares outstanding. The Corporation's net income
increased in 1995 for the eighth consecutive year, from $115.4 million in 1990
to $220.0 million in 1995, or an increase of 91% from 1990 to 1995. In terms of
total return to stockholders for the fiscal year ended December 31, 1995, the
Corporation ranked 15th out of the 50 banking institutions comprising the KBW
50 Bank Index.
17
<PAGE>
PENSION PLAN TABLE
The table below sets forth the estimated annual benefits payable upon
retirement at age 65 under the Bank's Pension Plan (including amounts payable
under the Bank's Supplemental Pension Plan) to persons in the remuneration and
service classifications specified.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
AVERAGE COMPENSATION -----------------------------------------------------
IN 5 HIGHEST YEARS 15 20 25 30 35 40
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 250,000.............. $ 90,000 $120,000 $132,500 $145,000 $157,500 $170,000
350,000.............. 126,000 168,000 185,500 203,000 220,500 238,000
450,000.............. 162,000 216,000 238,500 261,000 283,500 306,000
550,000.............. 198,000 264,000 291,500 319,000 346,500 374,000
650,000.............. 234,000 312,000 344,500 377,000 409,500 442,000
750,000.............. 270,000 360,000 397,500 435,000 472,500 510,000
850,000.............. 306,000 408,000 450,500 493,000 535,500 578,000
950,000.............. 342,000 456,000 503,500 551,000 598,500 646,000
1,050,000.............. 378,000 504,000 556,500 609,000 661,500 714,000
1,150,000.............. 414,000 552,000 609,500 667,000 724,500 782,000
1,250,000.............. 450,000 600,000 662,500 725,000 787,500 850,000
</TABLE>
Compensation covered by the Pension Plan includes salaries, before tax
deposits made by a participant to the Thrift-Incentive Plan, shift differential
pay, overtime pay and awards under the Management or Annual Performance Plan
(or predecessor plans), as applicable. The average covered compensation for the
highest five consecutive years is used in the pension calculation.
Credited years of service for individuals listed in the Summary Compensation
Table are as follows: David W. Fox-40 years, William A. Osborn-25 years, Barry
G. Hastings-21 years, Perry R. Pero-31 years, Sheila A. Penrose-18 years and
James J. Mitchell-31 years.
The above pension payments, which are shown as if paid in the form of a
straight life annuity, will be reduced by .39% of the average Social Security
taxable wage base for the individual ("Social Security Covered Compensation
Offset"), which varies by year of birth, for each year of service up to 35
years. For participants hired after 1988 the percentage is .50%. In the event
of a change in control of the Corporation, as defined in the Supplemental
Pension Plan, participants become fully vested in all benefits payable under
the Supplemental Pension Plan.
The Bank's Pension Plan and Supplemental Pension Plan were recently amended
to change the formula used to calculate retirement benefits beginning January
1, 1996. The new formula will generally result in lower retirement benefits,
due principally to a change to a uniform accrual rate (1.8% per year of
credited service), a cap on credited service (at 35 years), adoption of a
uniform Social Security Covered Compensation Offset (.50%) and the elimination
of special subsidies applicable to surviving spouse benefits and early
retirement benefits. However, all participants employed on December 31, 1995
will be allowed to continue accruing benefits under the prior Plans, as set
forth in the Pension Plan table above, through December 31, 2000. At
termination or retirement they will be entitled to receive the greater of the
minimum benefit accrued through December 31, 2000 (or termination date if
earlier) or the benefit calculated under the new formula.
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation and Benefits Committee is an officer,
employee or former employee of the Corporation or any of its subsidiaries.
Members of the Committee, as well as members of their immediate families and
their associates, may have loans and other transactions with the Corporation
and its subsidiaries. All credit transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated persons and did not involve
more than the normal risk of collectibility or present other unfavorable terms.
18
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP were the Corporation's independent public accountants
during 1995. The appointment of auditors is approved annually by the Board of
Directors. The decision of the Board of Directors is based on the
recommendation of the Audit Committee. In making its recommendation, the Audit
Committee reviews both the audit scope and estimated fees for professional
services for the coming year. For the year 1996, the Board of Directors has
authorized the engagement of Arthur Andersen LLP as its auditors.
Representatives of Arthur Andersen LLP will be present at the annual meeting
of stockholders on April 16, 1996, and will be given an opportunity to make any
comments they wish and will be available to respond to any questions raised at
the meeting.
STOCKHOLDERS' PROPOSALS
Any stockholder proposal intended to be presented at the annual meeting in
1997 must be received by the Corporation on or before November 12, 1996, for
inclusion in the Corporation's Proxy Statement and form of proxy relating to
that meeting.
GENERAL
The cost of soliciting proxies will be borne by the Corporation. In addition
to solicitation by mail, officers and regular employees of the Corporation,
without receiving additional compensation therefor, may solicit proxies by
telephone or telegraph or in person. Kissel-Blake Inc. has been retained to aid
in the solicitation of proxies for a fee of $11,500, plus out-of-pocket
expenses.
As of the date of this Proxy Statement, the Board of Directors knows of no
matters to be brought before the meeting other than the election of Directors.
If, however, further business is presented by others, the proxy holders will
act in accordance with their best judgment.
By order of the Board of Directors.
PETER L. ROSSITER
Secretary
March 11, 1996
19
<PAGE>
- --------------------------------------------------------------------------------
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 1996
VOTING DIRECTION SOLICITED BY THE TRUSTEE OF THE THRIFT-INCENTIVE PLAN
The undersigned hereby directs The Northern Trust Company, Trustee of the
Thrift-Incentive Plan, to vote at the annual meeting of stockholders of
Northern Trust Corporation on April 16, 1996, or any adjournment of such
meeting, all shares of Common Stock for which the undersigned is entitled to
give voting direction in the election of Directors, as more fully described in
the Proxy Statement for the meeting in the manner specified, and on any other
business properly coming before the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE IN THE ELECTION OF DIRECTORS
BY MARKING THE APPROPRIATE SPACE. SEE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE>
NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF 14 DIRECTORS. NOMINEES: DOLORES E. CROSS, ROBERT S. HAMADA,
BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L. KELLY, ARDIS KRAINIK, ROBERT
D. KREBS, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For Withhold For All
[_] [_] [_]
(Except Nominee(s) written below)
---------------------------------
In its sole discretion, the Trustee is authorized to vote as it shall
determine on such other matters as may properly come before the meeting.
Listed on this card are the number of shares of Common Stock which you are
entitled to vote. You may direct the Trustee of the Thrift-Incentive Plan to
vote all of the shares for which you are entitled to direct the voting at the
annual meeting. Please express your choice in the election of Directors, date
and sign below, and mail this card in the envelope provided.
Dated __________________________________________________________ ,1996
Signature(s) ___________________________________________________________________
- --------------------------------------------------------------------------------
DIRECTION TO THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE THRIFT-INCENTIVE
PLAN, TO VOTE MY SHARE PARTICIPATION.
Please sign exactly as name appears hereon. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such.
<PAGE>
- -------------------------------------------------------------------------------
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 1996
VOTING DIRECTION SOLICITED BY THE TRUSTEE OF THE NORTHERN TRUST EMPLOYEE STOCK
OWNERSHIP PLAN
The undersigned hereby directs NationsBank, N.A. (South), Trustee of the
Northern Trust Employee Stock Ownership Plan ("ESOP"), to vote at the annual
meeting of stockholders of Northern Trust Corporation on April 16, 1996, or any
adjournment of such meeting, all shares of Common Stock that have been
allocated to the account of the undersigned in the election of Directors, as
more fully described in the Proxy Statement for the meeting in the manner
specified, and on any other business properly coming before the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE IN THE ELECTION OF DIRECTORS
BY MARKING THE APPROPRIATE SPACE. SEE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -------------------------------------------------------------------------------
<PAGE>
NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF 14 DIRECTORS. NOMINEES: DOLORES E. CROSS, ROBERT S. HAMADA,
BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L. KELLY, ARDIS KRAINIK, ROBERT
D. KREBS, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For Withhold For All
[_] [_] [_]
(Except Nominee(s) written below)
---------------------------------
In its sole discretion, the Trustee is authorized to vote as it shall
determine on such other matters as may properly come before the meeting.
Listed on this card are the number of shares of Common Stock allocated to
your account. You may direct the Trustee of the ESOP to vote all such shares at
the annual meeting. Please express your choice in the election of Directors,
date and sign below, and mail this card in the envelope provided.
Unallocated shares and shares for which no direction is received will be
voted by the Trustee in the same proportion that the allocated shares were
voted, unless inconsistent with the Trustee's fiduciary responsibility.
Dated __________________________________________________________ ,1996
Signature(s) ___________________________________________________________________
- --------------------------------------------------------------------------------
DIRECTION TO NATIONSBANK, N.A. (SOUTH), AS TRUSTEE OF THE NORTHERN TRUST EM-
PLOYEE STOCK OWNERSHIP PLAN, TO VOTE ALL SHARES FOR WHICH I AM ENTITLED TO GIVE
VOTING DIRECTION.
Please sign exactly as name appears hereon. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such.
<PAGE>
- -------------------------------------------------------------------------------
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 1996
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Frederick A. Krehbiel, William G. Mitchell
and William D. Smithburg, or any of them, with the power of substitution,
attorneys and proxies for the undersigned to vote at the annual meeting of
stockholders of Northern Trust Corporation on April 16, 1996, or any
adjournment of such meeting, all shares of Common Stock which the undersigned
is entitled to vote in the election of Directors, as more fully described in
the Proxy Statement for the meeting in the manner specified, and on any other
business properly coming before the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE IN THE ELECTION OF DIRECTORS
BY MARKING THE APPROPRIATE SPACE, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY
SPACE IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF
DIRECTORS. THE ABOVE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN, DATE AND
RETURN THIS CARD.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -------------------------------------------------------------------------------
<PAGE>
NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF 14 DIRECTORS. NOMINEES: DOLORES E. CROSS, ROBERT S. HAMADA,
BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L. KELLY, ARDIS KRAINIK, ROBERT
D. KREBS, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For [_] Withhold [_] For All [_]
(Except Nominee(s) written below)
--------------------------------
In their sole discretion, the Proxies are authorized to vote as they shall
determine on such other matters as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES FOR DIRECTOR, CUMULATIVELY FOR SOME IF THE ABOVE PROXIES SHALL SO
DETERMINE AT THEIR SOLE DISCRETION.
Dated __________________________________________________________ ,1996
Signature(s) ___________________________________________________________________
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation or partnership, sign in name of en-
tity by authorized person.
