<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] No fee required
[_] 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:
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[_] 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--NORTHERN TRUST CORPORATION]
50 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60675
MARCH 16, 1998
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 on April 21, 1998, 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").
This Proxy Statement and the enclosed proxy, along with the Corporation's
1997 Annual Report, including financial statements, are being mailed on or
about March 16, 1998, to each stockholder of record as of March 2, 1998.
As of March 2, 1998, the record date for the annual meeting, the Corporation
had outstanding and entitled to vote 111,548,394 shares of common stock, par
value $1.66 2/3 per share (the "Common Stock"), exclusive of 2,412,368 shares
held by the Corporation as treasury stock, which will not be voted.
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.
Votes cast in person or by proxy at the annual meeting will be tabulated by
the inspectors of election appointed for the meeting and will determine the
presence or absence of a quorum. The presence, either in person or by proxy,
of the holders of a majority of the outstanding shares of Common Stock will
constitute a quorum at the annual meeting. Proxies marked to "withhold
authority" are counted for purposes of determining the presence or absence of
a quorum, but will have no effect on the election of Directors because
Directors are elected by a plurality of votes cast. Since the only proposal
scheduled for consideration at the annual meeting is the election of
Directors, it is not anticipated that there will be any abstentions or broker
non-votes.
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, who include all of the fourteen Directors elected last
year. 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
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
1
<PAGE>
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.
INFORMATION ABOUT NOMINEES
The following information with respect to nominees for election to the Board
of Directors of the Corporation at the 1998 annual meeting of stockholders is
as of December 31, 1997, except where otherwise noted.
Nominee, Age
at March 16,
1998 and
Year Became
Director of Principal Occupation and Other Information
Corporation ------------------------------------------
or Bank
- --------------
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, ABBOTT
LABORATORIES since 1990 (Global diversified health
care products and services company).
Mr. Burnham is currently a director of Abbott
Laboratories, NCR Corporation and Sara Lee
Corporation.
[PHOTO]
DUANE L. BURNHAM
Age 56 1997
PRESIDENT, GE FUND since October, 1997 (Corporate
foundation with education, arts and public policy
programs); President, Chicago State University from
[PHOTO] 1990 to September, 1997 (Educational institution).
DOLORES E. CROSS
Age 60 1994
2
<PAGE>
Nominee, Age
at March 16,
1998 and
Year Became
Director of Principal Occupation and Other Information
Corporation ------------------------------------------
or Bank
- --------------- VICE PRESIDENT, HENRY CROWN AND COMPANY since 1984
(Company with diversified manufacturing operations, real
estate and securities).
Ms. Crown is currently a director of Baxter International
Inc. and Illinois Tool Works Inc. and a trustee of Yale
University and Rush-Presbyterian-St. Luke's Medical
Center in Chicago.
[PHOTO]
SUSAN CROWN
Age 39 1997
DEAN AND EDWARD EAGLE BROWN DISTINGUISHED SERVICE
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
[PHOTO] Chicago Board of Trade.
ROBERT S. HAMADA
Age 60 1988
PRESIDENT since October, 1995 AND CHIEF OPERATING OFFICER
since June, 1995 of the CORPORATION AND THE BANK, Vice
Chairman from January, 1994 to June, 1995, and Senior
Executive Vice President from November, 1992 through
December, 1993.
[PHOTO]
BARRY G. HASTINGS
Age 50 1994
PARTNER, MAYER, BROWN & PLATT since 1967 (Law firm).
Mr. Helman is a director of Zenith Electronics
Corporation and Brambles USA, Inc. and a Governor of the
Chicago Stock Exchange.
[PHOTO]
ROBERT A. HELMAN
Age 64 1986
3
<PAGE>
Nominee, Age
at March 16,
1998
Year Became
Director of Principal Occupation and Other Information
Corporation ------------------------------------------
or Bank
- --------------- MANAGING PARTNER, KEL ENTERPRISES L.P. since 1982
(Holding and investment partnership).
Mr. Kelly is a director of Bayerische Motoren Werke (BMW)
A.G., Deere & Company, Nalco Chemical Company, Snap-on
Incorporated, Tejas Gas Corporation and Thyssen Industrie
A.G.
[PHOTO]
ARTHUR L. KELLY
Age 60 1988
CHAIRMAN since November, 1993, AND CHIEF EXECUTIVE OFFI-
CER since July, 1988, MOLEX INCORPORATED (Manufacturer of
electrical/electronic interconnecting products and sys-
tems).
Mr. Krehbiel is a director of Molex Incorporated,
[PHOTO] Tellabs, Inc., Nalco Chemical Company and DeVry Inc.
FREDERICK A. KREHBIEL
Age 56 1988
RETIRED VICE CHAIRMAN, CENTEL CORPORATION since 1987
(Telecommunications company).
Mr. Mitchell is a director of The Interlake Corporation,
[PHOTO] Peoples Energy Corporation and The Sherwin-Williams Co.
WILLIAM G. MITCHELL
Age 67 1975
CHAIRMAN since July, 1994, CHIEF EXECUTIVE OFFICER since
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, FMC
Corporation and Morton International, Inc.
[PHOTO]
EDWARD J. MOONEY
Age 56 1996
4
<PAGE>
Nominee, Age
at March 16,
1998 and
Year Became
Director of
Corporation Principal Occupation and Other Information
or Bank ------------------------------------------
- ---------------
CHAIRMAN since October, 1995 AND CHIEF EXECUTIVE OFFICER
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, and
Senior Executive Vice President from November, 1992
[PHOTO] through December, 1993.
WILLIAM A. OSBORN
Age 50 1994
CHAIRMAN OF THE EXECUTIVE COMMITTEE, ILLINOIS TOOL WORKS
INC. since 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.
[PHOTO]
HAROLD B. SMITH
Age 64 1974
RETIRED CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
THE QUAKER OATS COMPANY since October, 1997 and, from
1981 until that date, Chief Executive Officer (Worldwide
manufacturer and marketer of beverages and grain-based
products).
Mr. Smithburg is a director of Abbott Laboratories,
[PHOTO] Corning Incorporated and Prime Capital Corp.
WILLIAM D. SMITHBURG
Age 59 1981
RETIRED PRESIDENT, COMMONWEALTH EDISON COMPANY since
December, 1992 (Company engaged in production,
distribution and sale of electric energy).
Mr. Thomas is a director of R. R. Donnelley & Sons Com-
[PHOTO] pany and MYR Group Inc.
BIDE L. THOMAS
Age 62 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
JANUARY 2, 1998
-----------------------
NO. OF PERCENT
NAME SHARES OF CLASS
- ---------------------------------------------------
<S> <C> <C>
Duane L. Burnham........ 1,000(/2/) *
Dolores E. Cross........ 1,600(/2/) *
Susan Crown............. 2,000 *
Robert S. Hamada........ 4,700 *
Barry G. Hastings....... 413,590(/3/) *
Robert A. Helman........ 3,600(/2/) *
Arthur L. Kelly......... 31,100(/2/) *
Frederick A. Krehbiel... 21,300 *
William G. Mitchell..... 7,700 *
Edward J. Mooney........ 1,400 *
William A. Osborn....... 413,972(/3/) *
Sheila A. Penrose....... 130,494(/3/) *
Perry R. Pero........... 377,442(/3/) *
Harold B. Smith......... 7,161,336(/4/) 6.42%
William D. Smithburg.... 3,600(/2/) *
Mark Stevens............ 190,014(/3/) *
Bide L. Thomas.......... 4,200(/2/) *
ALL DIRECTORS AND EXECU-
TIVE OFFICERS AS A
GROUP.................. 9,616,749(/3/) 8.63%
</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. Except as noted
below, the nature of beneficial ownership for shares shown in this table is
sole voting and/or investment power (including shares as to which spouses
and minor children of the individuals covered by this table have such
power).
(2) In addition to owning shares as set forth in this table, the following
non-employee Directors hold stock units under the Northern Trust Corporation
1997 Deferred Compensation Plan for Non-Employee Directors (the "1997
Deferred Compensation Plan"), which includes amounts deferred under certain
prior deferred compensation plans: Mr. Burnham, 1,126 stock units; Dr.
Cross, 2,878 stock units; Mr. Helman, 1,101 stock units; Mr. Kelly, 500
stock units; Mr. Smithburg, 20,037 stock units; and Mr. Thomas, 6,328 stock
units.
(3) Includes shares issuable pursuant to stock options exercisable within
60 days after January 2, 1998, as follows: Mr. Hastings, 172,450 shares; Mr.
Osborn, 170,000 shares; Ms. Penrose, 78,000 shares; Mr. Pero, 123,500
shares; Mr. Stevens, 111,000 shares; and all Directors and executive
officers as a group, 1,084,756 shares.
(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 January 2, 1998.
<TABLE>
<CAPTION>
COMMON STOCK(/1/)
HELD AS OF
JANUARY 2, 1998
-----------------------
NO. OF PERCENT
NAME AND ADDRESS SHARES OF CLASS
------------------------------------------------------ --------- --------
<S> <C> <C>
Harold B. Smith....................................... 7,161,336(/2/) 6.42%
3600 West Lake Avenue, Glenview, Illinois 60025-5811
U.S. Trust Corporation................................ 7,436,102(/3/) 6.67%
114 West 47th Street, New York, New York 10036
</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 4,466,016
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 2,582,028
shares or 2.32% of the outstanding Common Stock. With respect to 73,840
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 28,652 shares or .03% of the
outstanding Common Stock held in a trust, and shared voting and investment
power over 10,800 shares or .01% of the outstanding Common Stock as co-
trustee of four additional trusts.
(3) U.S. Trust Corporation holds 7,436,102 shares or 6.67% of the
outstanding Common Stock, including 7,229,399 shares or 6.49% of the
outstanding Common Stock held by U.S. Trust Company of California, N.A., a
wholly owned subsidiary of U.S. Trust Corporation, in its capacity as
Trustee of the Northern Trust Employee Stock Ownership Plan ("ESOP"). U.S.
Trust Company of California, N.A. has no voting and investment power with
respect to the 5,429,168 ESOP shares allocated to participant accounts and
has shared voting and investment power with respect to the 1,800,231
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 (together, "Undirected Shares") will be voted by the Trustee in the
same proportion that the allocated shares were voted, unless inconsistent
with the Trustee's fiduciary responsibility. Under the ESOP, participants
are "named fiduciaries" to the extent of their authority to direct the
voting of shares allocated to their accounts and their proportionate share
of Undirected Shares.
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 15,579,276 shares or 13.98% 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 4,157,139 shares or 3.73% of the outstanding Common Stock, and they
share voting power with respect to 9,209,723 shares or 8.26% of the
outstanding Common Stock. They have sole investment power with respect to
2,714,954 shares or 2.44% of the outstanding Common Stock, and they share
investment power with respect to 9,843,929 shares or 8.83% 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
4,196,679 shares or 3.76% 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 4,126 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 Audit Committee, a Business Risk Committee, a Business Strategy Committee,
a Compensation and Benefits Committee, a Corporate Governance Committee and an
Executive Committee.
Current members of the Audit Committee are Arthur L. Kelly, Chairman, Duane
L. Burnham, Robert S. Hamada, William G. Mitchell and Bide L. Thomas. During
1997, 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 Compensation and Benefits Committee are William D.
Smithburg, Chairman, Duane L. Burnham, Arthur L. Kelly, Edward J. Mooney,
Harold B. Smith and Bide L. Thomas. During 1997, the Committee met on five
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 Corporate Governance Committee are Frederick A.
Krehbiel, Chairman, Duane L. Burnham, Dolores E. Cross, Harold B. Smith and
William D. Smithburg. During 1997, 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 seven regular and three special meetings called
upon short notice during 1997. All persons who were Directors during 1997
attended at least 75% of these meetings and meetings of Committees on which
they served, except for Mr. Krehbiel, who was not able to attend the special
meetings.
The Executive Committee meets as required between meetings of the Board of
Directors and may exercise the powers of the Board in the management of the
business and affairs of the Corporation when the Board is not in session,
subject to limitations imposed by law and the By-Laws of the Corporation. The
Business Strategy Committee reviews the policies, strategies and performance
of the various business units of the Corporation. The Business Risk Committee
reviews the risks inherent in the extension of credit, managing assets and
liabilities, providing fiduciary investment services and other related
matters.
COMPENSATION OF DIRECTORS
Effective as of January 1, 1997, compensation of non-employee Directors of
the Corporation consists of an annual retainer fee of $35,000 with the
Chairmen of the Corporation's Audit, Business Risk, Business Strategy,
Compensation and Benefits, and Corporate Governance Committees each receiving
an additional annual retainer fee of $5,000. All non-employee Directors
receive a fee of $1,000 for each Board Committee meeting attended and are
eligible to receive a per diem fee of $1,000 when required to perform specific
services on behalf of the Corporation. For such services in 1997, the
Corporation paid $11,000. Each non-employee Director also received or will
receive a grant of 500 shares of Common Stock on the date of each annual
meeting of stockholders in the years 1997, 1998 and 1999 under the Northern
Trust Corporation 1997 Stock Plan for Non-Employee Directors (the "1997
Director Stock Plan") adopted in February, 1997.
8
<PAGE>
Under the 1997 Deferred Compensation Plan adopted in February, 1997, non-
employee Directors may elect to defer the payment of their annual retainer,
cash fees and annual stock grants under the 1997 Director Stock Plan until
termination of services as a Director of the Corporation. Amounts deferred are
paid into a stock unit account and converted into stock units representing
shares of Common Stock, with the value of each stock unit based upon the mean
of the high and low sale prices on the last trading day of the calendar
quarter for which the cash compensation would have been paid. Deferred stock
is converted into units on a share-for-share basis. Dividend equivalents on
the stock units are paid quarterly to a cash account and accrue interest at an
interest rate determined from time to time by the Compensation and Benefits
Committee. Distribution of amounts in the stock unit and cash accounts will be
made in cash in a single lump sum payment or in up to ten annual installments
at the election of the Director, except that stock units representing deferred
stock under the 1997 Director Stock Plan will be distributed only in stock.
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 1997. 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 1997 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.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Based solely upon a review of reports on Forms 3, 4 and 5 and amendments
thereto filed pursuant to Section 16 of the Securities Exchange Act of 1934,
as amended, and written representations from certain Directors and executive
officers that no Forms 5 were required to be filed by them, the Corporation
believes that during 1997 all filing requirements applicable to its Directors,
executive officers and greater than ten percent beneficial owners were
complied with, except that Mr. Kelly inadvertently failed to report on Form 4
the acquisition of an indirect beneficial ownership in shares held by a family
trust at the time he became a co-trustee. The transaction was subsequently
reported.
9
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Compensation and Benefits Committee (the "Committee"), which is
comprised entirely of non-employee Directors, is responsible for overseeing
the Corporation's executive compensation program. Each year the Committee
reviews the components of the Corporation's executive compensation program,
comparing compensation levels to a peer group of financial services
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 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 named in
the Summary Compensation Table. 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.
The Committee also reviews the share ownership levels of executives,
evaluating their current and potential holdings of the Corporation's Common
Stock. The Committee presently believes that formal ownership requirements for
executive officers are not necessary, since these officers have existing and
potential equity holdings that are significant as a multiple of base salaries.
The Corporation's executive compensation program is designed to compensate
executives at market competitive levels and to ensure the retention of
executive talent. It links short-term and longer-term financial rewards to the
Corporation's success, making a significant portion of the executives' rewards
variable and dependent on corporate or business unit performance. Rewards to
executives should increase when performance goals are achieved and surpassed,
and correspondingly decrease if goals are not achieved. The Corporation's
executive compensation program places emphasis on equity incentives in order
to closely align the executives' interests with those of the stockholders. The
program is designed to reflect these compensation principles and has the
following components: 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.
BASE SALARIES--Base salaries are generally determined by evaluating the
responsibilities of the current position and the individual's experience,
performance, career progress and potential development. A review is also made
of the competitive marketplace for executive talent, including a comparison to
base salaries for comparable positions at other financial services companies.
The Committee generally determines annual salary adjustments, within the
context of the Corporation's overall salary policy, by evaluating the
performance of each executive officer and any changes in the executive's
responsibilities.
Adjustments in 1997 to the base salaries of the executive officers named in
the Summary Compensation Table, including Mr. Osborn, reflect the factors
referred to above. The Committee targeted the base salaries of these executive
officers at approximately the median of salaries for similar positions in most
of the companies used for comparison purposes.
ANNUAL INCENTIVE CASH AWARDS--During 1997 the executive officers named in
the Summary Compensation Table were eligible for annual incentive cash awards
under one of two plans. Messrs. Osborn, Hastings, and Pero participated in the
1997 Management Performance Plan; Mr. Stevens and Ms. Penrose participated in
the 1997 Annual Performance Plan. The amount available under the 1997
Management Performance Plan is determined by a formula and is directly related
to the achievement of a corporate net income goal. At the beginning of the
1997 Plan year, the Committee approved the
10
<PAGE>
corporate net income goal and the individual target awards expressed as a
percentage of salary. Under the 1997 Annual Performance Plan, the potential
amount available for individuals is based on the achievement of a corporate
net income goal and business unit earnings goals set in a similar fashion at
the beginning of the year. In addition, developments during 1997 led the
Committee to conclude that some of the cash incentive awards to participants
in these Plans should be increased above the amounts otherwise available in
order to reflect changes in competitive compensation levels.
Following completion of the 1997 Plan year, the Committee approved
individual award payments for participants in the 1997 Management Performance
Plan based on a comparison of actual achievement with the corporate net income
goal, an evaluation of individual performance, and the competitive
considerations described above. Individual awards to participants in the 1997
Annual Performance Plan were based on an evaluation of each executive's
performance as well as competitive considerations. Incentive awards under both
the 1997 Management Performance Plan and 1997 Annual Performance Plan were
paid in cash.
Mr. Osborn's 1997 cash incentive award of $1,000,000 was based on the
factors described above, including the fact that the Corporation achieved
record earnings in 1997 and surpassed the Management Performance Plan's
corporate net income goal.
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 "1992 Plan"). For each year's
award, the Committee's practice has been to set 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 corporate return-on-equity performance goals for the
period and performance share target awards for the participants. Awards made
in 1997 for the 1997-1999 performance period provide for the crediting of a
percentage of the target shares ranging from 50% if a minimum goal is met to
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 number of
performance shares 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 if the performance goals are
subsequently achieved), the performance shares are forfeited.
Following the completion of each three-year performance period, the
Committee determines the extent to which performance goals for that
performance period have been achieved and authorizes the crediting of the
appropriate number of performance shares to the participants' accounts.
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 vesting period plus
interest at an assumed rate on those dividends. If the executive leaves the
Corporation prior to this 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, 1997 the Committee, applying the factors described above, set a
performance share target award of 25,000 shares for the 1997-1999 performance
period for Mr. Osborn and established return-on-equity performance goals. Mr.
Osborn's target share award represents approximately 8.4% of the total of
296,000 performance shares awarded in 1997 for the 1997-1999 performance
period.
STOCK OPTIONS--Stock option grants to executive officers are determined
generally on an annual basis under the provisions of the 1992 Plan. 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 expire ten years
after the date of the grant.
11
<PAGE>
This approach is designed to motivate the executive to contribute to the
creation of stockholder value over the long term.
In approving individual awards, the Committee considers multiple-of-salary
guidelines, incorporating both a current and projected option value to the
recipient, and competitive compensation data. Awards are made within the
context of providing an appropriate mix of cash and equity incentives and also
take into consideration individual performance factors. The Committee also
considers the number of performance shares and stock options previously
granted to the individual.
In September, 1997, the Committee applied the factors described above and
granted to Mr. Osborn an option to purchase 75,000 shares at an exercise price
of $56.625. This represents approximately 6.4% of the total options to
purchase 1,178,500 shares that were granted in 1997. Mr. Osborn currently
holds options to purchase a total of 305,000 shares.
RESTRICTED STOCK AWARDS--On September 16, 1997 the Committee approved
restricted stock awards of 20,000 shares each to Mr. Stevens and Ms. Penrose.
These awards, which will vest over a period ending in January, 2004, were made
in recognition of the significant business management and corporate leadership
responsibilities of these individuals and are designed to provide an incentive
to these key executive officers to remain with the Corporation. These shares
will be distributed to the recipients, together with the dividends paid on the
shares plus interest at an assumed rate on those dividends, as they vest.
DEDUCTIBILITY--Section 162(m) of the Internal Revenue Code (the "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. In 1997, Section 162(m) affected
only a portion of the cash compensation shown in the Summary Compensation
Table; all other compensation paid in 1997 to the named executive officers was
deductible.
The Committee considered restructuring the 1997 Management Performance Plan
to meet the requirements of Section 162(m), but concluded that the necessary
changes would remove important flexibility in determining cash incentives for
the executives participating in it. The stockholders approved at the 1997
annual meeting of stockholders amendments to the 1992 Plan designed to ensure
that stock option awards continue to qualify, and performance share awards
made in 1997 and thereafter qualify, as performance based compensation under
Section 162(m). The Committee will continue to review the deductibility of
compensation under Section 162(m) and will implement steps to assure the
deductibility of compensation where the Committee concludes that the actual
benefits for the Corporation of deductibility in particular circumstances
outweigh the potential sacrifice of flexibility and effectiveness involved in
qualifying particular compensation programs under Section 162(m).
* * * * *
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 1997 the group of five
executive officers named 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
Duane L. Burnham
Arthur L. Kelly
Edward J. Mooney
Harold B. Smith
Bide L. Thomas
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the years 1995
through 1997 with respect to the Corporation's Chief Executive Officer and the
four other most highly compensated executive officers during 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -----------------------------------------
AWARDS
(SECURITIES
RESTRICTED UNDERLYING PAYOUTS
NAME AND TOTAL OF STOCK OPTIONS (LONG-TERM ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) SALARY & BONUS AWARDS(2) GRANTED) INCENTIVE PLAN)(3) COMPENSATION(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Osborn 1997 $622,500 $1,000,000 $1,622,500 75,000 $665,388 $102,913
Chairman and 1996 $600,000 $ 400,000 $1,000,000 60,000 $697,567 $ 66,352
Chief Executive Officer 1995 $410,000 $ 251,000 $ 661,000 50,000 $456,563 $ 65,525
Barry G. Hastings 1997 $493,750 $ 625,000 $1,118,750 50,000 $665,388 $ 81,628
President and 1996 $475,000 $ 300,000 $ 775,000 44,000 $697,567 $ 52,529
Chief Operating Officer 1995 $385,000 $ 236,000 $ 621,000 40,000 $456,563 $ 61,530
Mark Stevens 1997 $368,750 $ 375,000 $ 743,750 $1,132,500 30,000 $332,694 $ 60,963
President--Personal 1996 $347,000 $ 250,000 $ 597,000 26,000 $261,587 $ 93,374
Financial Services 1995 $314,000 $ 186,000 $ 500,000 24,000 $171,211 $ 34,483
Perry R. Pero 1997 $351,250 $ 350,000 $ 701,250 25,000 $665,388 $ 58,070
Senior Executive 1996 $336,250 $ 200,000 $ 536,250 24,000 $697,567 $ 37,185
Vice President 1995 $325,000 $ 183,000 $ 508,000 22,000 $456,563 $ 51,941
Sheila A. Penrose 1997 $345,000 $ 350,000 $ 695,000 $1,132,500 30,000 $110,898 $ 57,036
President--Corporate 1996 $322,500 $ 200,000 $ 522,500 26,000 $ 0 $ 35,664
and Institutional 1995 $300,000 $ 150,000 $ 450,000 24,000 $ 0 $ 47,945
Services
</TABLE>
- --------------------------------------------------------------------------------
(1) This column reflects amounts awarded under the 1997 Management
Performance Plan for Mr. Osborn, Mr. Hastings and Mr. Pero, amounts awarded
under the 1997 Annual Performance Plan for Mr. Stevens and Ms. Penrose, and
the additional amounts described in "--Compensation and Benefits Committee
Report--Annual Incentive Cash Awards."
(2) This column shows the market value of restricted stock awards based on
a price of $56.625 per share, the mean of the high and low sale prices of the
Common Stock as reported by The Nasdaq Stock Market on September 16, 1997,
the effective date of the grant. The restrictions on these stock awards lapse
beginning December 15, 2001, and the stock becomes fully vested and
distributed over a period ending in January, 2004. The total number of
restricted stock awards for the named executive officers and their aggregate
market value as of December 31, 1997 were: Mr. Osborn, 50,000 shares valued
at $3,528,125; Mr. Hastings, 50,000 shares valued at $3,528,125; Mr. Stevens,
20,000 shares valued at $1,411,250; and Ms. Penrose, 20,000 shares valued at
$1,411,250. These values are based on a price of $70.5625 per share, the mean
of the high and low sale prices of the Common Stock as reported by The Nasdaq
Stock Market on December 31, 1997. The restrictions on the stock awards to
Messrs. Osborn and Hastings, granted on January 3, 1994, lapse beginning
December 15, 1998 for Mr. Osborn and beginning January 15, 1999 for Mr.
Hastings, and the stock becomes fully vested and distributed over a period
ending in January, 2003. All of these stock awards are subject to earlier
vesting in the event of a change in control of the Corporation, as defined in
the 1992 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, adjusted
by an interest factor, and distributed in cash to participants in accordance
with the vesting schedules described above.
(3) 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 interest factor.
(4) The "All Other Compensation" category reflects contributions on behalf
of the named executive officers to the Thrift-Incentive Plan and the
Supplemental Thrift-Incentive Plan (collectively, "TIP") and allocations on
behalf of the named executive officers under The Northern Trust Employee
Stock Ownership Plan and the Supplemental Employee Stock Ownership Plan
(collectively, "ESOP"), all of which are defined contribution plans. For each
of the following executive officers, the 1997 TIP and ESOP amounts (in that
order) were: Mr. Osborn, $24,900 and $78,013; Mr. Hastings, $19,750 and
$61,878; Mr. Stevens, $14,750 and $46,213; Mr. Pero, $14,050 and $44,020; and
Ms. Penrose, $13,800 and $43,236. 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.
13
<PAGE>
EMPLOYMENT SECURITY AGREEMENTS
Messrs. Osborn, Hastings, Stevens and Pero 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 1997 to the executive officers named in the Summary
Compensation Table. Using 0%, 5% and 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% ($92.24
SECURITIES OPTIONS STOCK 10% ($146.87
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>
William
A.
Osborn 75,000 6.4% $56.625 9/16/07 0 $2,671,125 $6,768,375
Barry G.
Hastings 50,000 4.2% $56.625 9/16/07 0 $1,780,750 $4,512,250
Mark
Stevens 30,000 2.5% $56.625 9/16/07 0 $1,068,450 $2,707,350
Perry R.
Pero 25,000 2.1% $56.625 9/16/07 0 $ 890,375 $2,256,125
Sheila
A.
Penrose 30,000 2.5% $56.625 9/16/07 0 $1,068,450 $2,707,350
</TABLE>
- -------------------------------------------------------------------------------
(1) All options to the named executive officers were granted on September
16, 1997 and first become exercisable September 16, 1999. In the event of a
change in control of the Corporation, as defined in the 1992 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 after ten years, using as a base the $56.625 mean of the
high and low sale prices of Common Stock as reported by The Nasdaq Stock
Market on September 16, 1997, would be $0 for 0% appreciation, approximately
$4 billion for 5% appreciation and approximately $10 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 1997, 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
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END(3) AT FISCAL YEAR-END(3)(4)
ANNUALIZED ------------------------- -------------------------
SHARES ACQUIRED VALUE VALUE SINCE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE REALIZED(1) GRANT DATE(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William A. Osborn 24,750 $ 978,140 $100,740 170,000 135,000 $8,846,186 $3,269,063
Barry G. Hastings 23,126 $ 854,698 $ 88,702 172,450 94,000 $9,120,226 $2,327,625
Mark Stevens 34,000 $1,473,290 $155,375 111,000 56,000 $5,861,644 $1,381,750
Perry R. Pero 17,700 $ 740,449 $ 76,131 123,500 49,000 $6,552,655 $1,237,938
Sheila A. Penrose 4,000 $ 138,583 $ 21,370 78,000 56,000 $3,961,541 $1,381,750
</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 the
date of grant and the date of exercise.
(3) Amounts represent options granted since 1988 to Mr. Stevens; since
1989 to Messrs. Osborn, Hastings and Pero; and since 1990 to Ms. Penrose.
(4) Calculated on a pre-tax basis using the spread between the option
exercise price and $70.5625 which was the mean of the high and low sale
prices of the Common Stock as reported by The Nasdaq Stock Market on
December 31, 1997.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table sets forth the Performance Share target awards made under
the 1992 Plan to the named executive officers during 1997 for the 1997-1999
performance period.
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNIT MATURATION
NAME RIGHTS(1) OR PAYOUT(2)
- --------------------------------------------------
<S> <C> <C>
William A. Osborn 25,000 shares 6 years
Barry G. Hastings 18,000 shares 6 years
Mark Stevens 15,000 shares 6 years
Perry R. Pero 15,000 shares 6 years
Sheila A. Penrose 15,000 shares 6 years
</TABLE>
- --------------------------------------------------------------------------------
(1) Awarded by the Compensation and Benefits Committee with established
return-on-equity goals for the 1997-1999 performance period.
(2) Shares are subject to the achievement of corporate performance goals
over a three-year performance period and a subsequent three-year vesting
period. A percentage of the target shares, ranging from 50% if the minimum
goal is met to 100% if the higher goal is met, will be credited and then
distributed once the vesting restrictions are satisfied. No shares will be
distributed if the minimum performance goal is not met. In the event of a
change in control of the Corporation, as defined in the 1992 Plan, all
shares credited to participants' accounts and related cash balances become
immediately distributable to participants; target award shares for
performance periods currently in progress will be credited on a pro-rata
basis of actual full months lapsed to plan period and become distributable
to participants. See "--Compensation and Benefits Committee Report--
Performance Shares," above for a further description of the terms of the
1992 Plan.
15
<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
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 250,000................ $ 90,000 $120,000 $ 132,500 $ 145,000 $ 157,500
500,000................ 180,000 240,000 265,000 290,000 315,000
750,000................ 270,000 360,000 397,500 435,000 472,500
1,000,000................ 360,000 480,000 530,000 580,000 630,000
1,250,000................ 450,000 600,000 662,500 725,000 787,500
1,500,000................ 540,000 720,000 795,000 870,000 945,000
1,750,000................ 630,000 840,000 927,500 1,015,000 1,102,500
2,000,000................ 720,000 960,000 1,060,000 1,160,000 1,260,000
</TABLE>
Compensation covered by the Pension Plan includes salaries, before tax
deposits made by a participant to the TIP, 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 the executive officers named in the Summary
Compensation Table are as follows: William A. Osborn--27 years, Barry G.
Hastings--23 years, Mark Stevens--18 years, Perry R. Pero--33 years, and
Sheila Penrose--20 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 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
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.
Sheila A. Penrose, President--Corporate and Institutional Services of the
Corporation, is a director of Nalco Chemical Company, whose Chairman, Chief
Executive Officer and President, Edward J. Mooney, is a Director of the
Corporation and a member of the Compensation and Benefits Committee.
16
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG NORTHERN TRUST CORPORATION COMMON STOCK, S&P 500 INDEX AND
KEEFE, BRUYETTE & WOODS (KBW) 50 BANK INDEX
(TOTAL RETURN ASSUMES $100 INVESTED ON
JANUARY 1, 1993 WITH REINVESTMENT OF DIVIDENDS)
<TABLE>
<CAPTION>
NORTHERN TRUST S&P 500 KBW 50 Bank
-------------- --------- -----------
<S> <C> <C> <C>
1992 100 100 100
1993 96 110 106
1994 87 111 100
1995 143 153 160
1996 188 189 227
1997 368 251 332
</TABLE>
For the five-year period ended December 31, 1997, the Corporation's total
return to stockholders was 268% compared with 151% for the S&P 500 Index and
232% for the KBW 50 Bank Index. During the same period, the Corporation's
Common Stock market capitalization increased $5,548,900,000 or 250% from
$2,218,900,000 to $7,767,800,000, reflecting both an increase in the stock
price and a greater number of shares outstanding. The Corporation's net income
increased in 1997 for the tenth consecutive year and increased 107% over the
last five years, from $149.5 million in 1992 to $309.4 million in 1997. In
terms of total return to stockholders for the fiscal year ended December 31,
1997, the Corporation ranked third out of the fifty banking institutions
comprising the KBW 50 Bank Index.
17
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Corporation's independent public
accountants during 1997. 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 1998, 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 21, 1998, and will be given an opportunity to make
any comments they wish and to respond to any questions raised at the meeting.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the annual meeting in
1999 must be received by the Corporation on or before November 11, 1998, to be
eligible 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 $12,500, 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.
ROSE A. ELLIS
Secretary
March 16, 1998
18
<PAGE>
________________________________________________________________________________
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 1998
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 21, 1998, 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. 0
1. ELECTION OF 14 DIRECTORS. NOMINEES: DUANE L. BURNHAM, DOLORES E. CROSS,
SUSAN CROWN, ROBERT S. HAMADA, BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L.
KELLY, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY, WILLIAM
A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For All
For Withheld Except
All All As Noted
0 0 0
_____________________________________________________________________________
(EXCEPT NOMINEE(S) WRITTEN ABOVE.)
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 here-
in. 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 DE-
TERMINE AT THEIR SOLE DISCRETION.
Dated _______________________________________________________ ,1998
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 entity by authorized person.
- --------------------------------------------------------------------------------
| Please detach here |
[LOGO OF NORTHERN TRUST CORPORATION]
NORTHERN TRUST CORPORATION
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 1998
VOTING DIRECTION SOLICITED BY THE TRUSTEE OF THE NORTHERN TRUST EMPLOYEE
STOCK OWNERSHIP PLAN
The undersigned hereby directs U.S. Trust Company of California, N.A., Trustee
of the Northern Trust Employee Stock Ownership Plan ("ESOP"), to vote at the
annual meeting of stockholders of Northern Trust Corporation on April 21, 1998,
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
- --------------------------------------------------------------------------------
NOTICE TO PARTICIPANTS IN THE NORTHERN TRUST EMPLOYEE STOCK OWNERSHIP PLAN
Dear Plan Participant:
Enclosed with this notice is a Proxy Statement of the Northern Trust
Corporation (the "Corporation"), describing the annual meeting of
stockholders to be held on April 21, 1998. The annual meeting of
stockholders will be for the purpose of electing fourteen directors.
Directors and officers of the Corporation will be present at the annual
meeting to respond to any questions that the stockholders may have regarding
the business to be transacted. The Proxy Statement has been prepared by the
Board of Directors of the Corporation, in connection with the business to be
transacted at the annual meeting.
DIRECTIONS TO THE TRUSTEE
Only U.S. Trust Company of California, N.A., as trustee (the "Trustee") of
the Northern Trust Employee Stock Ownership Plan (the "ESOP"), can vote the
shares of the Corporation stock ("Shares") held by the ESOP. However, under
the terms of the ESOP, you, as a participant in the ESOP, are entitled to
instruct the Trustee how the Shares allocated to your account under the ESOP
are to be voted. Unallocated Shares and allocated Shares for which no
direction is received (together, "Undirected Shares") will be voted by the
Trustee in the same proportion that the allocated Shares were voted, unless
inconsistent with the Trustee's fiduciary responsibility. Thus, through your
instructions, you will be exercising power and control as a named fiduciary
of the ESOP not only over the Shares allocated to your account, but also
with respect to the Undirected Shares.
Enclosed with this notice is a confidential voting instruction card which
is provided to you for the purpose of instructing the Trustee how to vote
the Shares concerning the election of directors, which is described in the
enclosed Proxy Statement. Your interest in this matter is very important.
Please take the time to complete the instruction card and return it in the
enclosed envelope provided to you. The Trustee will vote your Shares in
accordance with the instructions you provide on the voting instruction card
received by the Trustee on or before April 17, 1998, unless the Trustee
determines such instructions are contrary to the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
CONFIDENTIALITY AND INSTRUCTIONS
How you vote will not be revealed, directly or indirectly, to any officer,
to any other employee, or any director of the Corporation or to anyone else,
except as otherwise required by law. You should, therefore, feel completely
free to instruct the Trustee to vote Shares in the manner you think best.
VOTING DEADLINE
Because of the time required to tabulate voting instructions from
participants before the annual meeting, the Trustee must establish a cut-off
date for receiving your instruction card. The cut-off date established by
the Trustee is 5:00 P.M. Eastern Time April 17, 1998. The Trustee cannot
insure that instruction cards received after the cut-off date will be
tabulated. Therefore, it is important that you act promptly and return your
instruction card on or before April 17, 1998, in the envelope provided for
your convenience. If the Trustee does not receive timely instructions from
you, the Trustee will vote your Shares in proportion to the voting
instructions received from all ESOP participants.
If you are a direct stockholder of Northern Trust Corporation, you will
receive under separate cover, proxy solicitation materials, including a
proxy card. This card CANNOT be used to direct the voting of Shares held by
the ESOP.
FURTHER INFORMATION
If you have questions regarding the information provided to you, you may
contact the Trustee at the following toll-free number between 11:00 A.M. and
7:00 P.M. Eastern Time, Monday through Friday at 1-800-535-3093.
Your ability to instruct the Trustee how to vote your ESOP Shares is an
important part of your rights as an ESOP participant. Please consider the
enclosed material carefully and then furnish your voting instructions
promptly.
March 16, 1998
U.S. Trust Company of California, N.A.
as Trustee of the
NORTHERN TRUST
EMPLOYEE STOCK OWNERSHIP PLAN
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. 0
1. ELECTION OF 14 DIRECTORS. NOMINEES: DUANE L. BURNHAM, DOLORES E. CROSS,
SUSAN CROWN, ROBERT S. HAMADA, BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L.
KELLY, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY, WILLIAM
A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
_____________________________________________________________________________
(EXCEPT NOMINEE(S) WRITTEN ABOVE.)
For All Withheld All For All Except
As Noted
0 0 0
In its sole discretion, the Trustee is authorized to vote as it shall deter-
mine 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 Direc-
tors, date and sign below, and mail this card in the envelope provided.
Unallocated shares and allocated shares for which no direction is received
(together, Undirected Shares) will be voted by the Trustee in the same propor-
tion that the allocated shares were voted, unless inconsistent with the Trust-
ee's fiduciary responsibility. Under the ESOP, Participants are "named fiduci-
aries" to the extent of their authority to direct the voting of shares allo-
cated to their accounts and their proportionate share of Undirected Shares.
Dated _______________________________________________________ , 1998
Signature(s) __________________________________________________________________
_______________________________________________________________________________
DIRECTION TO U.S. TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE OF THE NORTH-
ERN TRUST EMPLOYEE STOCK OWNERSHIP PLAN, TO VOTE ALL SHARES FOR WHICH I AM EN-
TITLED 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.
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| Please detach here |
[LOGO OF NORTHERN TRUST CORPORATION]
NORTHERN TRUST CORPORATION
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 1998
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 21, 1998, 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. 0
1. ELECTION OF 14 DIRECTORS. NOMINEES: DUANE L. BURNHAM, DOLORES E. CROSS,
SUSAN CROWN, ROBERT S. HAMADA, BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR
L. KELLY, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For All
For Withheld Except
All All As Noted
0 0 0
_____________________________________________________________________________
(EXCEPT NOMINEE(S) WRITTEN ABOVE.)
In its sole discretion, the Trustee is authorized to vote as it shall deter-
mine 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 _______________________________________________________ , 1998
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.
- --------------------------------------------------------------------------------
| Please detach here |
[LOGO OF NORTHERN TRUST CORPORATION]
NORTHERN TRUST CORPORATION
________________________________________________________________________________
