================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
[x] Filed by the Registrant
[_] 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 Rule 14a-11(c) or Rule 14a-12
THE BEAR STEARNS COMPANIES INC.
- --------------------------------------------------------------------------------
(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), or 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:
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[_] 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: $
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<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
To Our Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders, which will be held on Monday, October 28, 1996, at 5:00 P.M., New
York City time, in the Bear Stearns Auditorium, 245 Park Avenue, 5th Floor, New
York, New York.
At the meeting we will be reporting to you on your Company's current
operations and outlook. Stockholders will elect directors of the Company and
transact such other items of business as are listed in the Notice of Annual
Meeting and more fully described in the Proxy Statement which follows. The
Company's Board of Directors and management hope that many of you will be able
to attend the meeting in person.
The formal Notice of Annual Meeting and the Proxy Statement follow. It
is important that your shares be represented and voted at the meeting,
regardless of the size of your holdings. Accordingly, please mark, sign and date
the enclosed Proxy and return it promptly in the enclosed envelope to ensure
that your shares will be represented. If you do attend the Annual Meeting, you
may withdraw your Proxy should you wish to vote in person.
Sincerely yours,
Alan C. Greenberg
Chairman of the Board
September 27, 1996
<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 28, 1996
To the Stockholders of
THE BEAR STEARNS COMPANIES INC.:
The Annual Meeting of Stockholders of The Bear Stearns Companies Inc.,
a Delaware corporation (the "Company"), will be held on Monday, October 28,
1996, at 5:00 P.M., New York City time, in the Bear Stearns Auditorium, 245 Park
Avenue, 5th Floor, New York, New York, for the following purposes:
1. To elect thirty-nine directors to serve until the next Annual
Meeting of Stockholders or until their successors are duly elected and
qualified.
2. To approve the fiscal year 1997 performance goals under, and an
amendment to, The Bear Stearns Companies Inc. Management Compensation Plan.
3. To approve amendments to The Bear Stearns Companies Inc. Capital
Accumulation Plan for Senior Managing Directors.
4. To approve The Bear Stearns Companies Inc. Performance Compensation
Plan.
5. To transact such other business as may properly be brought before
the meeting and any adjournments or postponements thereof.
Holders of record of Common Stock of the Company, par value $1.00 per
share, at the close of business on September 17, 1996, will be entitled to
notice of, and to vote on, all matters presented at the meeting and at any
adjournments or postponements thereof.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
September 27, 1996
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1996
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being furnished to the holders of common
stock of The Bear Stearns Companies Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the 1996 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held in the Bear Stearns Auditorium, 245 Park
Avenue, 5th Floor, New York, New York, on Monday, October 28, 1996, at 5:00
P.M., New York City time, and at any adjournments or postponements thereof.
These proxy materials are being mailed on or about September 27, 1996, to
holders of record on September 17, 1996, of the Company's Common Stock, par
value $1.00 per share ("Common Stock").
A proxy may be revoked by a stockholder prior to its exercise in any of
three ways: by written notice to the Secretary of the Company; by submission of
another proxy bearing a later date; or by voting in person at the Annual
Meeting. Revocation by notice to the Secretary of the Company or by submission
of a later proxy will not affect a vote on any matter which is taken prior to
the receipt of the notice or later proxy by the Company. The mere presence at
the Annual Meeting of the stockholder appointing the proxy will not revoke the
appointment. If not revoked, the proxy will be voted at the Annual Meeting in
accordance with the instructions indicated on the proxy by the stockholder. If
no instructions are indicated, the proxy will be voted FOR the slate of
directors described herein; FOR the approval of the fiscal year 1997 performance
goals under, and an amendment to, The Bear Stearns Companies Inc. Management
Compensation Plan (as amended and restated as of July 1, 1994) (the "Management
Compensation Plan") as described herein; FOR the approval of amendments to The
Bear Stearns Companies Inc. Capital Accumulation Plan for Senior Managing
Directors (the "Capital Accumulation Plan") as described herein; FOR the
approval of The Bear Stearns Companies Inc. Performance Compensation Plan (the
"Performance Compensation Plan") as described herein; and, as to any other
matter of business that may be brought before the Annual Meeting, in accordance
with the judgment of the person or persons voting on the matter.
The Company has adopted a policy of encouraging stockholder
participation in corporate governance by ensuring the confidentiality of
stockholder votes. The Company has designated an independent third party, Chase
Mellon Shareholder Services, which is the Company's transfer agent, to receive
and to tabulate stockholder proxy votes. The manner in which any stockholder
votes on any particular issue will be kept confidential and will not be
disclosed to the Company or any of its officers or employees except (i) where
disclosure is required by applicable law, (ii) where disclosure of a vote of a
stockholder is expressly requested by such stockholder, or (iii) where the
Company concludes in good faith that a bona fide dispute exists as to the
authenticity of one or more proxies, ballots or votes, or as to the accuracy of
any tabulation of such proxies, ballots or votes. However, aggregate vote totals
may be disclosed to the Company from time to time and publicly announced at the
Annual Meeting. The policy of ensuring confidentiality of stockholder votes will
also apply to shares of Common Stock held in customer accounts at the Company's
subsidiary, Bear, Stearns Securities Corp. Holders of Common Stock whose shares
are held in such accounts will be requested to give instructions with respect to
the manner in which their shares are to be voted to Automatic Data Processing,
Inc., which has been directed not to disclose such instructions to the Company.
<PAGE>
This mail solicitation is being made by the Company. All expenses of
the Company in connection with this solicitation will be borne by the Company.
Directors, officers and other employees of the Company also may solicit proxies,
without additional compensation, by telephone, in person or otherwise. The
Company also will request that brokerage firms, nominees, custodians, and
fiduciaries forward proxy materials to the beneficial owners of shares held of
record by such persons and will reimburse such persons and the Company's
transfer agent for reasonable out-of-pocket expenses incurred by them in
forwarding such materials.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 21, 1985. The Company succeeded to the business of Bear, Stearns & Co., a
New York limited partnership (the "Partnership"), on October 29, 1985. As used
in this Proxy Statement, all references to "Bear Stearns" and "BSSC" are to
Bear, Stearns & Co. Inc., and Bear, Stearns Securities Corp., respectively, the
principal subsidiaries of the Company.
VOTING SECURITIES
Holders of record of Common Stock at the close of business on September
17, 1996 are entitled to notice of, and to vote at, the Annual Meeting and at
any adjournments or postponements thereof. Each outstanding share of Common
Stock entitles the holder thereof to one vote. Shares of Common Stock
represented by CAP Units (as hereinafter defined) credited pursuant to the
Capital Accumulation Plan are not outstanding and are not entitled to vote at
the Annual Meeting.
On September 17, 1996, 117,219,791 shares of Common Stock were
outstanding. The presence in person or by proxy at the Annual Meeting of the
holders of a majority of such shares shall constitute a quorum.
Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of a plurality of the votes cast by holders of shares of Common
Stock is required for the election of directors. The affirmative vote of a
majority of the shares of Common Stock represented at the meeting and entitled
to vote on each matter is required for the approval of the fiscal year 1997
performance goals under, and an amendment to, the Management Compensation Plan,
the approval of amendments to the Capital Accumulation Plan and the approval of
the Performance Compensation Plan. An abstention with respect to any proposal
will be counted as present for purposes of determining the existence of a quorum
but will have the practical effect of a negative vote as to that proposal.
Brokers (other than Bear Stearns and BSSC) that do not receive a stockholder's
instructions are entitled to vote on the election of directors. The New York
Stock Exchange (the "NYSE") determines whether brokers that do not receive
instructions will be entitled to vote on the other proposals contained in this
Proxy Statement. Under the rules of the NYSE, if Bear Stearns and BSSC do not
receive a stockholder's instructions, and other brokers are entitled to vote on
a proposal, Bear Stearns and BSSC are also entitled to vote such shares, but
only in the same proportion as the shares represented by all votes cast pursuant
to Bear Stearns and BSSC stockholders' instructions with respect to such
proposal. In the event of a broker non-vote with respect to any proposal coming
before the meeting due to the absence of authorization by the beneficial owner
to vote on that issue, the proxy will be counted as present for the purpose of
determining the existence of a quorum, but will not be deemed present and
entitled to vote on that proposal for the purpose of determining the total
number of shares of which a majority is required for adoption, having the
practical effect of reducing the number of affirmative votes required to achieve
a majority vote for such matter by reducing the total number of shares from
which a majority is calculated.
2
<PAGE>
The following table sets forth certain information furnished to the
Company regarding each person or group of persons known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock as of
September 3, 1996:
Percentage of
Name and address of Number of shares Outstanding
Beneficial Owner of Common Stock Common Stock
- ---------------- --------------- ------------
Pacific Financial Research Inc.(1) 7,602,628 6.47%
9601 Wilshire Boulevard
Suite 800
Beverly Hills, CA 90210
- ----------------
(1) Pacific Financial Research Inc. beneficially owns such shares as a
result of its serving as investment adviser to various companies
registered under Section 8 of the Investment Company Act of 1940.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following information with respect to the outstanding shares of
Common Stock beneficially owned by each director of the Company, each nominee
for director of the Company, each executive officer named in the Summary
Compensation Table under "Executive Compensation" and all directors, nominees
and executive officers of the Company as a group, is furnished as of September
3, 1996. Also set forth below as of such date is certain information with
respect to the number of shares of Common Stock represented by CAP Units
credited to the accounts of such persons pursuant to the Capital Accumulation
Plan (notwithstanding that shares underlying CAP Units generally are not deemed
to be beneficially owned for this purpose because the named persons have neither
the present ability to direct the vote nor the ability to dispose of such shares
and will not have such rights within the next 60 days).
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT PERCENT OF OUTSTANDING
AND NATURE COMMON STOCK COMMON STOCK COMMON STOCK
OF BENEFICIAL BENEFICIALLY REPRESENTED AND CAP UNITS
NAME AND ADDRESS (1) OWNERSHIP (2)(3) OWNED BY CAP UNITS COMBINED
-------------------- ---------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
E. Garrett Bewkes III.............. 52,872 (4) -- (4)
Denis A. Bovin..................... 1,274 (4) 392,708 (4)
James E. Cayne (5)................. 3,634,150 3.09% 1,767,936 3.77%
Peter D. Cherasia.................. 51,872 (4) 297,474 (4)
Ralph R. Cioffi.................... 402 (4) 147,318 (4)
Barry J. Cohen..................... 127,012 (4) 184,917 (4)
Wendy L. de Monchaux............... -- (4) 229,055 (4)
Grace J. Fippinger................. 4,384 (4) -- (4)
Bruce E. Geismar (6)............... 100,609 (4) 141,267 (4)
Carl D. Glickman (7)............... 338,948 (4) -- (4)
Thomas R. Green.................... 55,802 (4) -- (4)
Alan C. Greenberg.................. 845,000 (4) 924,266 1.23%
Donald J. Harrington............... 231 (4) -- (4)
Richard Harriton(3)................ 188,718 (4) 189,372 (4)
Daniel L. Keating (8).............. 167,369 (4) 131,792 (4)
John W. Kluge...................... 33,501 (4) -- (4)
Mark E. Lehman (9)................. 78,191 (4) 152,244 (4)
David A. Liebowitz................. 24,758 (4) 772,070 (4)
Bruce M. Lisman.................... 175,714 (4) 213,413 (4)
Roland N. Livney................... 1,866 (4) 231,844 (4)
Michael Minikes (10)............... 411,468 (4) 512,724 (4)
William J. Montgoris............... 281,671 (4) 226,282 (4)
Donald R. Mullen Jr................ 25,730 (4) 337,612 (4)
Frank T. Nickell................... 28,940 (4) -- (4)
Craig M. Overlander................ 13,134 (4) 327,665 (4)
Stephen E. Raphael................. 1,954 (4) 127,163 (4)
E. John Rosenwald Jr. (3)(11)...... 437,332 (4) 9,764 (4)
Lewis A. Sachs..................... 2,161 (4) 226,732 (4)
Richard Sachs ..................... -- (4) -- (4)
Frederic V. Salerno................ 346 (4) -- (4)
Alan D. Schwartz................... 1,026,132 (4) 1,085,973 1.47%
David M. Solomon................... 139 (4) 238,401 (4)
Warren J. Spector (12)............. 149,139 (4) 1,986,796 1.49%
Robert M. Steinberg (13)........... 1,362,420 1.16% 277,043 1.14%
Michael L. Tarnopol (14)........... 868,422 (4) 643,952 1.05%
Vincent Tese....................... -- (4) -- (4)
Michael J. Urfirer ................ -- (4) 363,054 (4)
Fred Wilpon........................ 1,157 (4) -- (4)
Uzi Zucker......................... 380,452 (4) 57,153 (4)
All directors, nominees and
executive officers as a
group (43 individuals)........... 11,506,649 9.78% 12,305,009 16.60%
</TABLE>
(Footnotes on following page)
4
<PAGE>
______________
(1) The address in each case is 245 Park Avenue, New York, New York 10167.
(2) Nature of beneficial ownership is sole voting and investment power,
except as indicated in subsequent notes. Includes an aggregate of
15,908 shares of Common Stock owned by directors, nominees and
executive officers through The Bear Stearns Companies Inc. Employee
Stock Ownership Plans (the "ESOPs"). Shares owned by the ESOPs that are
allocated to employees' accounts are voted on a "pass through" basis by
the employees to whose accounts such shares are allocated. Shares not
allocated to employees' accounts, and allocated shares for which voting
directions have not been received, are voted by the trustee of the
ESOPs in proportion to the manner in which allocated shares are
directed to be voted by the employees.
(3) Does not include shares underlying CAP Units credited under the Capital
Accumulation Plan, except for 7,420 and 12,332 shares expected to be
distributed to Messrs. Harriton and Rosenwald, respectively, in
September 1996 or October 1996.
(4) Less than one percent.
(5) Does not include 33,261 shares of Common Stock owned by Mr. Cayne's
wife, as to which shares Mr. Cayne disclaims beneficial ownership. Does
not include 223,099 shares of Common Stock held by trusts established
for Mr. Cayne's children, as to which shares Mr. Cayne disclaims
beneficial ownership. Does not include 6,953 shares of Common Stock
owned by a child of Mr. Cayne, as to which shares Mr. Cayne disclaims
beneficial ownership.
(6) Does not include 901 shares of Common Stock owned by a child of Mr.
Geismar, as to which shares Mr. Geismar disclaims beneficial ownership.
Mr. Geismar also has a short position of 14,497 shares of Common Stock.
(7) Does not include 2,961 shares of Common Stock owned by Mr. Glickman's
wife, as to which shares Mr. Glickman disclaims beneficial ownership.
(8) Includes 1,867 shares of Common Stock held by Mr. Keating as custodian
for his children.
(9) Does not include 28,221 shares of Common Stock held in a trust
established for Mr. Lehman's wife, as to which shares Mr. Lehman
disclaims beneficial ownership.
(10) Does not include 1,540 shares of Common Stock owned by Mr. Minikes'
wife, as to which shares Mr. Minikes disclaims beneficial ownership.
(11) Does not include 924 shares of Common Stock owned by Mr. Rosenwald's
wife, as to which shares Mr. Rosenwald disclaims beneficial ownership.
(12) Does not include 525 shares of Common Stock owned by Mr. Spector's
wife, as to which shares Mr. Spector disclaims beneficial ownership.
(13) Does not include 67,042 shares of Common Stock held by a trust
established for Mr. Steinberg's children with respect to which Mr.
Steinberg's wife acts as trustee and as to which shares Mr. Steinberg
disclaims beneficial ownership. Includes 10 shares of Common Stock
owned by a child of Mr. Steinberg.
(14) Does not include 32,500 shares of Common Stock held in a charitable
foundation for which Mr. Tarnopol acts as trustee and as to which
shares Mr. Tarnopol disclaims beneficial ownership.
5
<PAGE>
I. ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends the election of each of the
nominees set forth below as a director of the Company to serve until the next
Annual Meeting of Stockholders or until his or her successor is duly elected and
qualified. Each nominee is currently a director of the Company except Messrs.
Cioffi, R. Sachs and Urfirer.
Each nominee who is elected or re-elected to the Board of Directors will hold
office until the next Annual Meeting of Stockholders, in accordance with the
By-laws of the Company. Should any nominee become unable or unwilling to accept
nomination or election, it is intended that the persons named in the enclosed
proxy will vote the shares that they represent for the election of a substitute
nominee designated by the Board of Directors, unless the Board of Directors
reduces the number of directors. At present, it is anticipated that each nominee
will be a candidate.
The affirmative vote of a plurality of the votes cast by holders of shares of
Common Stock is required for the election of directors.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1996 AND DIRECTORSHIPS HELD THE COMPANY
- ---- ------ ---------------------- -----------
<S> <C> <C> <C>
E. Garrett Bewkes III.............. 45 Partner, GarMark Advisors, L.L.C. 1989
Director, Saks Holdings Inc.
Denis A. Bovin..................... 48 Senior Managing Director of Bear 1992
Stearns
James E. Cayne..................... 62 President and Chief Executive Officer 1985
of the Company and Bear Stearns,
member of the Executive Committee
(as hereinafter defined) and Chairman
of the Management and Compensation
Committee (as hereinafter defined)
Peter D. Cherasia.................. 37 Senior Managing Director of Bear 1993
Stearns
Ralph R. Cioffi.................... 40 Senior Managing Director of Bear Nominee
Stearns
Barry J. Cohen..................... 44 Senior Managing Director of Bear 1995
Stearns
Wendy L. de Monchaux............... 36 Senior Managing Director of Bear 1995
Stearns
Grace J. Fippinger................. 68 Director, member Corporate 1985
Governance Committee, member
Executive Committee, Pfizer Inc.
Bruce E. Geismar................... 50 Senior Managing Director of Bear 1995
Stearns
6
<PAGE>
<CAPTION>
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1996 AND DIRECTORSHIPS HELD THE COMPANY
- ---- ------ ---------------------- -----------
<S> <C> <C> <C>
Carl D. Glickman................... 70 Private Investor; In the United States, 1985
Director, Andal Corporation,
Continental Health Affiliates, Inc.,
Franklin Holdings, Inc., Infutech,
Inc., Lexington Corporate Properties,
Inc. and Office Max Inc.; In Israel,
Director, Alliance Tire Company
(1992) Ltd. and The Jerusalem
Economic Corporation Ltd.
Thomas R. Green.................... 62 Attorney in Private Practice 1991
Alan C. Greenberg.................. 69 Chairman of the Board of the 1985
Company and Bear Stearns and
Chairman of the Executive Committee
Donald J. Harrington............... 50 President, St. Johns University; 1993
Director, The Reserve Fund, Reserve
Institutional Trust, Reserve Tax-
Exempt Trust, Reserve New York
Tax-Exempt Trust and Reserve Special
Portfolios Trust
Richard Harriton................... 61 Senior Managing Director of Bear 1989
Stearns and member of the
Management and Compensation
Committee
Daniel L. Keating.................. 46 Senior Managing Director of Bear 1992
Stearns
John W. Kluge...................... 81 Chairman and President of 1985
Metromedia Company; Director,
Conair Corporation, Metromedia
International Group Inc., Metromedia
Steakhouses Company, L.P.,
Occidental Petroleum Corp. and
WorldCom, Inc.
Mark E. Lehman..................... 45 Executive Vice President of the 1995
Company and Bear Stearns and
member of the Executive Committee
David A. Liebowitz................. 37 Senior Managing Director of Bear 1992
Stearns
Bruce M. Lisman.................... 49 Senior Managing Director of Bear 1991
Stearns and member of the
Management and Compensation
Committee
Roland N. Livney................... 35 Senior Managing Director of Bear 1995
Stearns
7
<PAGE>
<CAPTION>
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1996 AND DIRECTORSHIPS HELD THE COMPANY
- ---- ------ ---------------------- -----------
<S> <C> <C> <C>
Michael Minikes.................... 53 Treasurer of the Company and Bear 1989
Stearns; Director, Depository Trust
Company; Chairman of the Board,
International Depository and Clearing,
Inc.; Trustee, The Milestone Funds
William J. Montgoris............... 49 Chief Operating Officer and Chief 1989
Financial Officer of the Company and
Bear Stearns and member of the
Management and Compensation
Committee
Donald R. Mullen Jr................ 38 Senior Managing Director of Bear 1993
Stearns and member of the
Management and Compensation
Committee
Frank T. Nickell................... 49 President, Kelso & Company; 1993
Director, American Standard Inc.,
Earle M. Jorgensen Company and
Peebles Inc.
Craig M. Overlander................ 36 Senior Managing Director of Bear 1994
Stearns
Stephen E. Raphael................. 51 Senior Managing Director of Bear 1994
Stearns
E. John Rosenwald Jr............... 66 Vice Chairman of the Board of the 1985
Company and Senior Managing
Director of Bear Stearns; Director,
Frequency Electronics, Inc. and
Hasbro, Inc.
Lewis A. Sachs..................... 33 Senior Managing Director of Bear 1995
Stearns
Richard Sachs...................... 36 Senior Managing Director of Bear Nominee
Stearns
Frederic V. Salerno................ 53 Vice Chairman of the Board and 1992
Director of NYNEX Corp.; Director,
Avnet, Inc., Orange & Rockland
Utilities, Inc. and Viacom, Inc.
Alan D. Schwartz................... 46 Executive Vice President of the 1987
Company and Bear Stearns and
member of the Executive Committee
and the Management and
Compensation Committee; Director,
Daka International, Inc.
8
<PAGE>
<CAPTION>
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1996 AND DIRECTORSHIPS HELD THE COMPANY
- ---- ------ ---------------------- -----------
<S> <C> <C> <C>
David M. Solomon................... 34 Senior Managing Director of Bear 1995
Stearns
Warren J. Spector.................. 38 Executive Vice President of the 1990
Company and Bear Stearns and
member of the Executive Committee
and the Management and
Compensation Committee
Robert M. Steinberg................ 51 Senior Managing Director of Bear 1985
Stearns and member of the
Management and Compensation
Committee
Michael L. Tarnopol................ 60 Vice Chairman of the Board of the 1985
Company and Senior Managing
Director of Bear Stearns; Director,
The Leslie Fay Companies, Inc. and
Planet Hollywood International, Inc.;
Trustee, National Realty Trust
Vincent Tese....................... 53 Chairman, Wireless Cable 1994
International Inc.; Director, Quintel
Entertainment Inc.
Michael J. Urfirer................. 37 Senior Managing Director of Bear Nominee
Stearns
Fred Wilpon........................ 60 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Chairman of
the Board of Directors of Pathogenesis
Corp.; President and Chief Executive
Officer of the New York Mets
Uzi Zucker......................... 60 Senior Managing Director of Bear 1985
Stearns; In the United States, Director
of Carnival Cruise Lines, Inc. and
Conair Corporation; In Israel,
Chairman of the Board of Alliance
Tire Company (1992) Ltd.; and
Director of The Jerusalem Economic
Corporation Ltd., Industrial Buildings
Corp. Ltd., Tnuport Ltd. and Mivnat
Ltd.
</TABLE>
9
<PAGE>
Except as indicated below, each of the executive officers of the
Company, and each of the directors or director nominees of the Company who is
also a Senior Managing Director of Bear Stearns, has been a Senior Managing
Director of Bear Stearns for more than the past five years.
Mr. Bewkes has been a partner of GarMark Advisors, L.L.C. since
November 1995 Prior thereto, Mr. Bewkes was a member of the Management Committee
of Investcorp International Inc. from March 1994 to November 1995 and was a
Senior Managing Director and Vice Chairman of Investment Banking Division of
Bear Stearns from October 1990 to March 1994.
Mr. Bovin has been a Senior Managing Director of Bear Stearns and has
been involved in the management of Bear Stearns' Investment Banking Division
since February 1992. Mr. Bovin is Vice Chairman of the Investment Banking
Division of Bear Stearns and a member of its Investment Banking Policy
Committee. Prior to joining Bear Stearns, Mr. Bovin was employed by Salomon
Brothers Inc and was a Managing Director from 1981 until February 1992.
Mr. Cayne has been Chief Executive Officer of the Company and Bear
Stearns since July 1993. Mr. Cayne has been President of the Company for more
than the past five years.
Mr. Cherasia has been a member of the Financial Analytics and
Structural Transactions Group of Bear Stearns for more than the past five years
and currently is the head of such department.
Mr. Cioffi has been a member of Bear Stearns' Fixed Income Sales
Department for more than the past five years. Mr. Cioffi is involved in the
management of Bear Stearns' Fixed Income Sales Department.
Mr. Cohen has been co-head of Bear Stearns' Risk Arbitrage Department
for more than the past five years.
Ms. de Monchaux has been managing Bear Stearns' Derivatives Department
since February 1993 and its Fixed Income Finance Department since September
1995. Prior to joining Bear Stearns, Ms. de Monchaux was Senior Vice President
in charge of the Global Derivative Products Group at Banque Indosuez from April
1990 to June 1992.
Ms. Fippinger currently serves as a director (and has for more than the
past five years) and a member of the Executive Committee and Corporate
Governance Committee of Pfizer Inc.
Mr. Geismar has been in charge of Bear Stearns' Operations Department
for more than the past five years.
Mr. Glickman has been a private investor for more than the past five
years.
Mr. Green has been an attorney in private practice for more than the
past five years. Mr. Green has also been the president and a director of
National States Insurance Company and National Real Estate Management
Corporation for more than the past five years.
Mr. Greenberg has been Chairman of the Board of the Company for more
than the past five years. Mr. Greenberg was Chief Executive Officer of the
Company and Bear Stearns from the Company's inception until July 1993.
Father Harrington has been the President of St. Johns University for
more than the past five years.
10
<PAGE>
Mr. Harriton has been in charge of the Company's correspondent clearing
services (through BSSC) for more than the past five years. Mr. Harriton has been
President of BSSC since its inception.
Mr. Keating has been responsible for Bear Stearns' Municipal Bond
Department and Public Finance Department for more than the past five years.
Mr. Kluge has been Chairman and President of Metromedia Company for
more than the past five years.
Mr. Lehman became an Executive Vice President of the Company in
September 1995. Prior thereto, Mr. Lehman was Senior Vice President - General
Counsel of Bear Stearns for more than five years. Mr. Lehman is General Counsel
of the Company and Bear Stearns.
Mr. Liebowitz has directed Bear Stearns' Convertible Securities Group
for more than the past five years.
Mr. Lisman is head of the Institutional Equity Group of Bear Stearns
and has been head or co-head of such Group for more than the past five years.
Mr. Livney has been a member of Bear Stearns' Fixed Income Sales
Department for more than the past five years. Mr. Livney is involved in the
management of Bear Stearns' Fixed Income Sales Department.
Mr. Minikes has been Treasurer of the Company and Bear Stearns for more
than the past five years.
Mr. Montgoris has been Chief Operating Officer of the Company and Bear
Stearns since August 1993. Mr. Montgoris has been Chief Financial Officer of the
Company and Bear Stearns for more than the past five years.
Mr. Mullen is currently the head of Bear Stearns' High Yield Department
and was the co-head thereof from January 1991 until May 1995. Mr. Mullen is a
member of Bear Stearns' Investment Banking Policy Committee.
Mr. Nickell has been President of Kelso & Company, a privately held
merchant banking firm, for more than the past five years.
Mr. Overlander has been a member of Bear Stearns' Fixed Income Sales
Department for more than the past five years. Mr. Overlander is currently the
head of Bear Stearns' Fixed Income Sales Department.
Mr. Raphael has been a member of Bear Stearns' Private Client Services
Department for more than the past five years.
Mr. Rosenwald has been the senior investment banker in Bear Stearns'
Investment Banking Division for more than the past five years. Mr. Rosenwald has
been Vice Chairman of the Board of Directors for more than the past five years.
Mr. Lewis Sachs has been involved in Bear Stearns' Fixed Income Capital
Markets Department for more than the past five years. Mr. Sachs is responsible
for Bear Stearns' Fixed Income Capital Markets, Corporate Bond Trading and High
Grade Research Groups. Mr. Sachs is also a member of Bear Stearns' Investment
Banking Policy Committee.
Mr. Richard Sachs has been a member of Bear Stearns' Private Client
Services Department since April 1995. Prior thereto, Mr. Sachs was involved in
the Private Investment Department of Salomon Brothers for more than five years.
11
<PAGE>
Mr. Salerno has been the Vice Chairman of the Board of NYNEX Corp. for
more than the past five years.
Mr. Schwartz has been an Executive Vice President of the Company for
more than the past five years. Mr. Schwartz is responsible for all of the
investment banking activities of Bear Stearns.
Mr. Solomon has been involved in the management of Bear Stearns'
Investment Banking Division since November 1995. Prior thereto, Mr. Solomon was
involved in the management of Bear Stearns' High Yield Department from January
1991 to October 1995. Mr. Solomon is also a member of Bear Stearns' Investment
Banking Policy Committee. Mr. Solomon has been a Senior Managing Director of
Bear Stearns since September 1992 and was a Managing Director of Bear Stearns
from January 1991 to September 1992.
Mr. Spector became an Executive Vice President of the Company in
November 1992. Prior thereto, Mr. Spector was involved in the management of Bear
Stearns' Mortgage Department for more than five years. Mr. Spector is
responsible for all fixed income activities of Bear Stearns.
Mr. Steinberg has been co-head of Bear Stearns' Risk Arbitrage
Department for more than the past five years. Mr. Steinberg has been Chairman of
the Credit Policy Committee of Bear Stearns since October 1992.
Mr. Tarnopol became a Vice Chairman of the Board of Directors on July
1, 1996. Prior thereto, Mr. Tarnopol was an Executive Vice President of the
Company for more than five years. Mr. Tarnopol is Chairman of the Investment
Banking Division of Bear Stearns and a member of its Investment Banking Policy
Committee.
Mr. Tese has been Chairman of Wireless Cable International Inc. (a
wireless cable company) since April 1995. Mr. Tese was Chairman of Cross Country
Wireless Inc. (a wireless cable company) from October 1994 to July 1995 and was
a corporate officer of the general partner of Cross Country Wireless Inc.'s
predecessors, Cross Country Wireless Cable - I, L.P. and Cross Country Wireless
Cable West, L.P., from 1990 until October 1994. Mr. Tese was the Director of
Economic Development for the State of New York from June 1987 to December 1994.
Mr. Tese is also currently Chairman of the Audit Committee of the Board of
Directors of the Company.
Mr. Urfirer has been a member of Bear Stearns' Investment Banking
Division since February 1994. Prior to joining Bear Stearns, Mr. Urfirer was a
Managing Director at CS First Boston from January 1993 to January 1994 and was a
Director at CS First Boston from July 1991 to January 1993.
Mr. Wilpon has been Chairman of the Board of Directors of Sterling
Equities, Inc., a privately held entity, and certain affiliates thereof, which
are primarily real estate development/owner management companies, for more than
the past five years. Mr. Wilpon has also been President and Chief Executive
Officer of the New York Mets baseball team for more than the past five years.
Mr. Wilpon has also been Chairman of the Board of Directors of Pathogenesis
Corp., a publicly held pharmaceutical company, since May 4, 1995.
Mr. Zucker has been a member of Bear Stearns' Investment Banking
Division for more than the past five years.
There is no family relationship among any of the directors or executive
officers of the Company.
All directors hold office until the next Annual Meeting of Stockholders
or until their successors have been duly elected and qualified. Officers serve
at the discretion of the Board of Directors.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held five meetings (exclusive of committee
meetings) during the preceding fiscal year. In addition, the Board of Directors
has established four committees whose functions and current members are noted
below. Each current director, except Messrs. Keating, Kluge, Rosenwald, L.
Sachs, Schwartz and
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<PAGE>
Wilpon attended 75% or more of the aggregate number of meetings of the Board of
Directors and committees on which he or she served which were held during such
period.
Executive Committee. The Executive Committee of the Board of Directors
(the "Executive Committee") consists of Messrs. Cayne, Greenberg (Chairman),
Lehman (since September 1995), Schwartz and Spector, who also constitute five of
the six members of the Board of Directors of Bear Stearns. The Executive
Committee also included Vincent J. Mattone until his resignation in September
1995, John C. Sites Jr. until his resignation in July 1995 and Mr. Tarnopol
until his resignation in June 1996. It meets once each week and more frequently
as required and held 55 meetings during the preceding fiscal year. The Executive
Committee has the authority between meetings of the Board of Directors to take
all actions with respect to the management of the Company's business which
require action of the Board of Directors, except with respect to certain matters
that by law and the provisions of the Certificate of Incorporation must be
approved by the entire Board of Directors.
Audit Committee. The Audit Committee of the Board of Directors (the
"Audit Committee") consists of Ms. Fippinger (since October 1995) and Messrs.
Bewkes, Green, Salerno, Tese (Chairman) and Wilpon. Each of the foregoing is a
director who is not employed by the Company or affiliated with management. This
Committee is responsible for reviewing and helping to ensure the integrity of
the Company's financial statements. Among other matters, the Audit Committee
reviews the Company's expenditures, reviews the Company's internal accounting
controls and financial statements, reviews with the Company's independent
accountants the scope of their audit, their report and their recommendations,
and recommends the selection of the Company's independent accountants. The Audit
Committee held five meetings during the preceding fiscal year.
Compensation Committee. The Compensation Committee of the Board of
Directors (the "Compensation Committee") consists of Messrs. Glickman
(Chairman), Harrington (since October 1995), Kluge (since October 1995), Nickell
and Tese (since October 1995). Each of the foregoing is a director who is not
employed by the Company or affiliated with management. The Compensation
Committee establishes the compensation policies used in determining the
compensation of all executive officers and other Senior Managing Directors,
including members of the Board of Directors who are employees of the Company
("employee directors"). The Compensation Committee administers the Management
Compensation Plan pursuant to which the salary and bonus compensation of the
members of the Executive Committee is determined. See "Executive Compensation
Compensation Committee Report." The Compensation Committee will also administer
the Performance Compensation Plan. The Compensation Committee also approves the
salary and bonus compensation of the employee directors and the other executive
officers based upon recommendations by the Executive Committee and the
Management and Compensation Committee of the Board of Directors (the "Management
and Compensation Committee") applying criteria established by the Compensation
Committee. The Compensation Committee also administers The Bear Stearns
Companies Inc. 1985 Stock Option Plan for Senior Managing Directors (the "Stock
Option Plan") and certain aspects of the Capital Accumulation Plan. The
Compensation Committee held nine meetings during the preceding fiscal year.
Management and Compensation Committee. The Management and Compensation
Committee consists of Messrs. Cayne (Chairman), Harriton (since September 1995),
Lisman (since September 1995), Montgoris, Mullen, Schwartz, Spector and
Steinberg, and also included Mr. Sites until his resignation in July 1995. The
Management and Compensation Committee considers and acts upon matters involving
the day-to-day business and affairs of the Company and its subsidiaries and,
where appropriate, recommends action to the Board of Directors or other
committees of the Board of Directors with respect to those matters not in the
ordinary course of business and affairs of the Company, in either case without
in any way limiting or impairing the existing power or authority of the
executive officers of the Company. In connection therewith, the Management and
Compensation Committee approves compensation amounts for employees of the
Company and its subsidiaries below the level of Senior Managing Director, and
recommends to the Compensation Committee and/or the Executive Committee
compensation amounts for Senior Managing Directors of Bear Stearns other than
participants in the Management Compensation Plan. The Management and
Compensation Committee also administers certain aspects of the Capital
Accumulation Plan. The Management and Compensation Committee meets once a week
and more frequently as required and held 61 meetings during the preceding fiscal
year.
The Board of Directors does not have a nominating committee.
13
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
OVERVIEW
The Compensation Committee establishes the compensation policies
applicable to all executive officers and other Senior Managing Directors. The
salary and bonus compensation of the members of the Executive Committee is
determined by the operation of the Management Compensation Plan which the
Compensation Committee has adopted and administers. Stockholders previously have
approved the performance goals contained in the Management Compensation Plan.
The fiscal year 1996 salaries and bonuses of employee directors and other
executive officers, to the extent not determined by the Management Compensation
Plan, were approved by the Compensation Committee based upon recommendations by
the Executive Committee and the Management and Compensation Committee, which
committees based their recommendations on criteria established by the
Compensation Committee.
COMPENSATION POLICIES
From the time of the Company's initial public offering after succession
on October 29, 1985 to the business of the Partnership, compensation for senior
executives of the Company has been strongly influenced by the principle that the
compensation of senior executives should be structured to directly link the
executives' financial reward to Company performance. Thus, senior executives
would both share in the success of the Company as a whole and be adversely
affected by poor Company performance, thereby aligning their interests with the
interests of the Company's stockholders. The Management Compensation Plan, which
has been in effect in various forms since the Company's initial public offering,
is designed to implement the foregoing philosophy. The salary and bonus
compensation of the Chief Executive Officer and other members of the Executive
Committee is determined by the Management Compensation Plan. The Management
Compensation Plan provides each participant with a base salary of $200,000 per
annum and a share of a bonus fund determined on the basis of the Company's
Adjusted Annual Pre-Tax Return on Equity ("ROE," as defined below).
The Company's compensation practice with respect to executive officers
who are not members of the Executive Committee and other Senior Managing
Directors has been designed to link individual compensation with performance.
Accordingly, the base salary of executive officers and most other Senior
Managing Directors has been limited to $200,000 per annum, with the
preponderance of total compensation being in the form of a bonus determined on
the basis of the following criteria: (a) the overall annual performance of the
Company; (b) the performance of any business unit or units in which the employee
participates; (c) the need to maintain compensation levels comparable to those
of competing financial services companies, including those in the Peer Group (as
defined below); and (d) the individual performance of the employee in question
from the viewpoints of (i) managerial responsibilities, (ii) direct production
of revenue, (iii) development and maintenance of the Company's franchise, (iv)
controlling costs, and (v) promoting cooperation within and between business
units.
The Compensation Committee also considers the relationship of the
Company's total compensation expense to the Company's total revenues, net of
interest expense, in evaluating the overall reasonableness of the compensation
of employee directors and other executive officers.
In order to formalize this policy for certain executive officers and in
an effort to meet the requirements for deductibility by the Company under
Section 162(m) of the Internal Revenue Code, the Compensation Committee has
adopted the Performance Compensation Plan to be effective commencing in fiscal
year 1997, subject to approval of stockholders at the 1996 Annual Meeting. Under
the Performance Compensation Plan, certain executive officers of the Company
(other than the voting members of the Executive Committee) designated by the
Compensation Committee would receive a base salary of $200,000 per annum and a
share of a performance-based bonus fund. The Performance Compensation Plan is
described in detail below under "Approval of the Performance Compensation Plan."
The Compensation Committee believes that the establishment of the
Capital Accumulation Plan during fiscal year 1991 represented an important
additional step in the Company's goal to further strengthen the
14
<PAGE>
alignment of management and stockholder interests, by increasing employee
ownership of the Company's Common Stock. During fiscal year 1996, over 95% of
the more than 260 Senior Managing Directors participated in the Capital
Accumulation Plan, and all employee directors and executive officers of the
Company participated.
The Compensation Committee views the Company's compensation policies as
having substantially contributed to the Company's historical operating
performance, which has been characterized by consistently high levels of pre-tax
return on common equity (see comparison in the chart below to the average
pre-tax return on common equity of the Company's peers (the "Peer Group"),
consisting of Merrill Lynch & Co., Inc., Morgan Stanley Group Inc., Paine Webber
Group Inc. and Salomon Inc). The following chart compares the Company's pre-tax
return on common equity to the Peer Group for the five twelve-month periods
ended June 30 shown below:
PRE-TAX RETURN ON EQUITY
THE BEAR STEARNS COMPANIES INC. V. PEER GROUP AVERAGE
[GRAPHIC MATERIAL (1) OMITTED]
June 30,
----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
The Bear Stearns Companies Inc. 47.7% 48.8% 38.7% 21.6% 43.5%
Peer Group 35.1% 33.4% 26.9% 9.8% 37.5%
15
<PAGE>
MANAGEMENT COMPENSATION PLAN
The Compensation Committee administers the Management Compensation
Plan, which provides that each member of the Executive Committee will receive a
base salary of $200,000 per annum and share in a bonus fund determined on the
basis of the Company's ROE. The ROE for fiscal year 1996 was 45.5%, resulting in
a bonus fund of $73,203,000. If the Company's fiscal year 1996 ROE had not
exceeded 2%, the compensation of the members of the Executive Committee would
have been limited to their salaries of $200,000 per annum. For information with
respect to the members of the Executive Committee, see "Election of Directors -
Board and Committee Meetings - Executive Committee."
"ROE" is defined generally in the Management Compensation Plan as the
number expressed as a percentage determined by dividing (a) Adjusted Annual
Pre-Tax Income (as defined below) by (b) Consolidated Common Stockholders'
Equity as of the last day of the immediately preceding fiscal year. "Adjusted
Annual Pre-Tax Income" of the Company is defined generally in the Management
Compensation Plan as consolidated income before income taxes, after deducting
the base salaries of participants in the Management Compensation Plan and
dividends on preferred stock, but before deducting any bonus payments under the
Management Compensation Plan and any adjustments relating to the Capital
Accumulation Plan. Adjusted Annual Pre-Tax Income for purposes of this Plan may
be decreased, but not increased, at the sole discretion of the Compensation
Committee as appropriate to carry out the purpose of the Management Compensation
Plan.
The share of the bonus fund to be allocated to each member of the
Executive Committee was determined in September 1995 by the Compensation
Committee upon the recommendation of the Executive Committee, which based such
recommendation on the same criteria established by the Compensation Committee
for determining the total compensation of Senior Managing Directors who are not
members of the Executive Committee for fiscal year 1995.
The Management Compensation Plan is based on the proposition that ROE
is an appropriate measure upon which to base the compensation of the members of
the Executive Committee. Although the short-term performance of the Common Stock
will tend to fluctuate based on factors beyond the control of management, the
Compensation Committee believes that over the long term, the performance of the
Common Stock will reflect the Company's operating performance as reflected in
its ROE.
The Management Compensation Plan's short-term focus on annual pre-tax
profitability is counterbalanced by the long-term focus resulting from the
substantial ownership of Common Stock and CAP Units by the members of the
Executive Committee and other senior executives as described in the paragraph
"Equity Ownership and Capital Accumulation Plan" below.
The Compensation Committee has concluded that the Management
Compensation Plan has served the Company well, has provided appropriate
incentives to senior management of the Company, and is a fair and reasonable
method upon which to base the compensation of the members of the Executive
Committee.
Section 162(m) of the Internal Revenue Code limits deductibility for
federal income tax purposes of compensation in excess of $1 million paid to
individual executive officers named in the Summary Compensation Table per
taxable year unless certain exceptions, including compensation based on
performance goals, are satisfied. The Management Compensation Plan for both
fiscal year 1996 and fiscal year 1997 (subject to shareholder approval of the
performance goals applicable to such year, as described in "Approval of the
Fiscal Year 1997 Performance Goals Under, and an Amendment to, the Management
Compensation Plan") have been established in an effort to comply with the
performance-based exception to limits on deductibility of executive officer
compensation.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The total compensation of Mr. Cayne, the Company's CEO, along with
other members of the Executive Committee, is determined in all material respects
by the Management Compensation Plan. Pursuant to the terms of the Management
Compensation Plan, for fiscal year 1996 Mr. Cayne received a base salary of
$200,000 and
16
<PAGE>
shared in a bonus fund based on the Company's fiscal year 1996 ROE. Mr. Cayne's
share of the fiscal year 1996 bonus fund (as well as that of the other members
of the Executive Committee) was determined by the Compensation Committee in
September 1995, based on the recommendation of the Executive Committee as to how
the bonus fund should be allocated among the members of the Executive Committee.
The Executive Committee's recommendations were based on the same criteria
established by the Compensation Committee for determining the total compensation
of Senior Managing Directors who were not members of the Executive Committee for
fiscal year 1995.
The Company's fiscal 1996 financial performance was substantially
higher than in fiscal year 1995. Under the terms of the Management Compensation
Plan and reflecting the shares of the bonus fund allocated to Mr. Cayne, the
total salary and bonus compensation of Mr. Cayne increased by 128.4% from fiscal
1995.
Of the total fiscal year 1996 compensation of Mr. Cayne, approximately
47.8% was deferred under the Capital Accumulation Plan, with the result that the
ultimate realization of a substantial portion of Mr. Cayne's benefit from his
current compensation will depend on the future performance of the Company and
its Common Stock.
EQUITY OWNERSHIP AND CAPITAL ACCUMULATION PLAN
A focus on long-term performance and growth and a direct alignment of
employee and stockholder interests results from the substantial ownership of
Common Stock and equivalents (including CAP Units) by senior executives of the
Company. As shown under "Security Ownership of Management," the five current
members of the Executive Committee beneficially own approximately 8.12% of the
Common Stock and equivalents outstanding while all directors, nominees and
executive officers as a group beneficially own approximately 16.60% of the
outstanding Common Stock and equivalents, as of September 3, 1996.
The Capital Accumulation Plan has been and will continue to be a major
contributor to equity ownership by senior executives. During fiscal year 1996,
over 95% of the more than 260 Senior Managing Directors of Bear Stearns
(including all employee directors and executive officers of the Company)
participated in the Capital Accumulation Plan. For fiscal years 1994, 1995 and
1996 participants in the Capital Accumulation Plan have deferred a total of
approximately $332,100,000 in compensation. Furthermore, for fiscal year 1996,
45.5% of the salary and bonus compensation (including amounts deferred pursuant
to the Capital Accumulation Plan) of the current members of the Executive
Committee was deferred in the Capital Accumulation Plan while 40.1% of such
compensation was deferred by all executive officers and employee directors as a
group. These deferrals were, or will be, credited to participants' accounts in
the form of CAP Units which entitle the participants to share in the pre-tax
income of the Company and eventually to receive shares of Common Stock of the
Company. The Capital Accumulation Plan is described in detail below under
"Approval of Amendments to the Capital Accumulation Plan."
Since shares for the Capital Accumulation Plan are purchased from
existing stockholders and not from the Company, employee stock ownership is
increased without substantial dilution to earnings per share or book value per
common share. Consistent with the Company's goal of avoiding compensation plans
which cause significant dilution of existing stockholders, the Company does not
use stock options as a significant component of employee compensation and has
granted no stock options since August 1989.
Compensation Committee
Carl D. Glickman, Chairman
Donald J. Harrington
John W. Kluge
Frank T. Nickell
Vincent Tese
o o o
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COMPENSATION TABLES AND OTHER INFORMATION
The following table set forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company (other than the CEO) for the three fiscal years ended June 30, 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term
Compensation
Awards
Annual Compensation -------
Fiscal ------------------- Restricted Stock All Other
Name and Principal Position Year Salary Bonus Awards(1)(2) Compensation(2)(3)
- --------------------------- ---- ------ ----- -------------- ------------------
<S> <C> <C> <C> <C> <C>
James E. Cayne............... 1996 $200,000 $8,972,750 $8,413,250 $2,773,337
CEO and President 1995 200,000 4,030,066 3,470,827 1,303,122
1994 200,000 7,465,620 6,906,380 1,075,670
Alan C. Greenberg............ 1996 200,000 13,039,500 4,346,500 1,454,701
Chairman of the Board 1995 200,000 5,627,980 1,872,913 679,659
1994 200,000 10,781,310 3,590,690 580,739
Alan D. Schwartz............. 1996 200,000 6,693,666 6,117,334 1,617,099
Executive Vice President 1995 200,000 2,332,229 1,772,990 778,533
1994 200,000 3,948,870 3,382,130 689,714
Warren J. Spector............ 1996 200,000 4,194,750 12,276,250 2,859,826
Executive Vice President 1995 200,000 3,725,976 3,166,737 1,374,499
1994 200,000 6,834,000 6,284,000 1,121,083
Michael L. Tarnopol.......... 1996 200,000 4,805,375 1,598,625 1,142,954
Vice Chairman of the Board(4) 1995 200,000 2,663,100 884,620 586,513
1994 200,000 5,500,560 1,830,440 526,276
</TABLE>
For each of the above-named officers, compensation information is
provided for the full fiscal years during which he served as an executive
officer of the Company.
(1) Represents amounts deferred pursuant to the Capital Accumulation Plan.
See "Approval of Amendments to the Capital Accumulation Plan." In
accordance with the Capital Accumulation Plan, all amounts are
immediately vested but, generally, are not payable for a minimum of
five years. For the fiscal year ended June 30, 1996, the following
number of CAP Units were credited to such persons' Capital Accumulation
Accounts as a result of their fiscal year 1996 deferrals: Mr. Cayne -
382,185; Mr. Greenberg - 197,447; Mr. Schwartz - 277,890; Mr. Spector -
557,669; and Mr. Tarnopol - 72,620.
(2) As of June 30, 1996, the value and number of the aggregate CAP Units
held by such persons (based on the closing price of the Common Stock on
the Consolidated Transaction Reporting System on such date) was: Mr.
Cayne - $41,767,506 (1,767,936 units); Mr. Greenberg - $21,835,792
(924,266 units); Mr. Schwartz - $25,656,134 (1,085,973 units); Mr.
Spector - $46,938,077 (1,986,796 units); and Mr. Tarnopol - $15,213,375
(643,952 units).
18
<PAGE>
(3) Includes preferential earnings in the form of CAP Units credited
pursuant to the Capital Accumulation Plan. For a description of the
Capital Accumulation Plan, see "Approval of Amendments to the Capital
Accumulation Plan." For fiscal year 1994, includes preferential
earnings in the form of Earnings Units credited pursuant to the
Performance Unit Plan for Senior Managing Directors. The Performance
Unit Plan was adopted effective as of January 1, 1993 following the
termination of the Capital Accumulation Plan in respect of Plan Years
1991 and 1992 in order to compensate participants in the Capital
Accumulation Plan (in the form of "Earnings Units" representing shares
of Common Stock) for certain adverse consequences resulting from such
termination by approximating the economics of the Capital Accumulation
Plan in respect of shares of Common Stock distributed from the Capital
Accumulation Plan. The Performance Unit Plan terminated effective June
30, 1994, and shares of Common Stock issued thereunder were distributed
to participants in October 1994.
(4) Until June 30, 1996, Mr. Tarnopol was an Executive Vice President of
the Company.
19
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the performance of an
investment in the Company's Common Stock for the last five fiscal years with
that of the S&P 500 Index, the S&P Financial Miscellaneous Index and the
Company's peers (consisting of Merrill Lynch & Co., Inc., Morgan Stanley Group
Inc., Paine Webber Group Inc. and Salomon Inc). The graph assumes the value of
the investment in the Company's Common Stock and each index was $100 on June 30,
1991 and that all dividends were reinvested. There can be no assurance that
future stock performance will correlate with past stock performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC MATERIAL (2) OMITTED]
Assumes $100 invested on June 30, 1991
in the Company's Common Stock, S&P 500 Index,
S&P Financial Miscellaneous Index and Peer Group Index
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
The Bear Stearns Companies Inc. 100 139 215 176 240 286
S & P 500 Index 100 110 121 120 147 181
S & P Financial Miscellaneous Index 100 118 167 161 196 255
Peer Group 100 127 190 171 238 296
20
<PAGE>
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives an annual
retainer of $25,000, plus $800 for each meeting of the Board of Directors
attended, and reasonable expenses relating to attendance at such meetings.
Directors who are members of the Audit Committee and directors who are members
of the Compensation Committee receive additional compensation at the rate of
$1,500 for each meeting of the Audit Committee or Compensation Committee
attended, with the exception of telephone conference meetings (where a quorum
consists of directors attending via telephone conference call) as to which the
compensation paid for participation is $200.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company, in the ordinary course of business, has extended credit to
certain of its directors, officers and employees in connection with their
purchase of securities. Such extensions of credit have been made on
substantially the same terms, including interest rates and collateral
requirements, as those prevailing at the time for comparable transactions with
non-affiliated persons, and did not involve more than the normal risk of
collectability or have other unfavorable features present. To the extent
officers and employees of the Company and members of their immediate families
wish to purchase securities in brokerage transactions, they ordinarily are
required to do so through Bear Stearns, which offers them a discount from its
standard commission rates in connection therewith which could be substantial
depending on various factors, including the size of the transaction. Bear
Stearns also, from time to time and in the ordinary course of its business, has
entered into transactions involving the purchase or sale of securities and
commercial paper (including different forms of repurchase transactions) from or
to directors, officers and employees of the Company and members of their
immediate families, as principal. Such purchases and sales of securities or
commercial paper on a principal basis were effected on substantially the same
terms as similar transactions with unaffiliated third parties.
The Company, from time to time, has made loans to its officers and
other employees against commissions and other compensation which would otherwise
be payable to them in the ordinary course of business. Interest is generally
charged by the Company on such loans at the same rate of interest charged by
Bear Stearns on loans to purchase securities. The Company currently requires
that any such loan in excess of $7,500 made to officers and other employees
against commissions or other compensation be approved by the affirmative vote of
a majority of the members of the Management and Compensation Committee (with any
interested member abstaining). During the fiscal year ended June 30, 1996, the
maximum aggregate amount of loans against commissions and other compensation at
month-end was approximately $3,337,373.
Other than as described in this Proxy Statement, no director or
executive officer of the Company was indebted to the Company during the last
fiscal year for any amount in excess of $60,000.
Bear Stearns acted as the exclusive financial advisor for Cross Country
Wireless Inc., ("Cross Country") in connection with the sale of Cross Country to
Pacific Telesis Group in July 1995, for which Bear Stearns received fees
aggregating $1 million. Prior to the sale, Vincent Tese was Chairman of Cross
Country and Mr. Tese and his family were the owners of approximately 20% of its
outstanding common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Glickman, Harrington, Kluge, Nickell and Tese, none of whom is or has been an
officer or employee of the Company. There were no "Compensation Committee
Interlocks" during fiscal year 1996.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and any persons who own more than
ten percent of the Company's Common Stock, to file reports of initial ownership
of the Company's Common Stock and subsequent changes in that ownership with the
Securities and Exchange Commission and furnish the Company with copies of all
forms they file pursuant to Section 16(a). Based solely upon a review of the
copies of the forms furnished to the Company, or written representations from
certain reporting persons that no Forms 5 were required, the Company believes
that during the 1996 fiscal year all Section 16(a) filing requirements were
complied with, except that a family trust of which Roland N. Livney is a trustee
filed late its initial report of ownership.
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II. APPROVAL OF THE FISCAL YEAR 1997 PERFORMANCE GOALS UNDER,
AND AN AMENDMENT TO, THE MANAGEMENT COMPENSATION PLAN
The Board of Directors proposes that the stockholders approve the
fiscal year 1997 performance goals under, and an amendment to, the Management
Compensation Plan. The performance goals and the amendment are being submitted
to stockholders in an effort to meet the requirements for deductibility by the
Company under Section 162(m) of the Internal Revenue Code. (See "Executive
Compensation-Compensation Committee Report-Management Compensation Plan" for a
discussion of Section 162(m) of the Internal Revenue Code). If stockholder
approval of the fiscal year 1997 performance goals under the Management
Compensation Plan is not obtained, no payment in respect of the bonus fund will
be made under the Management Compensation Plan.
On July 25, 1994, the Compensation Committee adopted the Management
Compensation Plan, which is effective July 1, 1994, subject to annual approval
of the performance goals contained therein by stockholders at the Company's
Annual Meeting.
FISCAL YEAR 1997 PERFORMANCE GOALS
The salary and bonus compensation of the CEO and other members of the
Executive Committee is determined by the Management Compensation Plan in fiscal
year 1996 and thereafter. Under the Management Compensation Plan, each of the
members of the Executive Committee will receive a base salary of $200,000 per
annum and share in a bonus fund established pursuant to the Management
Compensation Plan.
On September 10, 1996, the Compensation Committee established a new
formula for computing the bonus fund for fiscal 1997, subject to stockholder
approval at the Company's Annual Meeting. The formula establishes a bonus fund
based on a sliding scale linked to the Company achieving various levels of ROE.
If the Company's fiscal year 1997 ROE does not exceed 2%, the compensation of
the members of the Executive Committee will be limited to their salaries of
$200,000 per annum. The bonus fund will range up to a maximum of 7.258% of
Adjusted Annual Pre-Tax Income, if the Company's fiscal year 1997 ROE exceeds
30%. In fiscal year 1996, the bonus fund ranged up to a maximum of 8.6% of
Adjusted Annual Pre-Tax Income when the Company's fiscal year 1996 ROE exceeded
30%.
The definitions of "ROE" and "Adjusted Annual Pre-Tax Income" under the
Management Compensation Plan are described under "Executive Compensation -
Compensation Committee Report - Management Compensation Plan."
One impact of the change in the formula for calculating the bonus fund
in fiscal year 1997 from that in effect for fiscal year 1996 is that the Company
must generate more Adjusted Annual Pre-Tax Income in fiscal year 1997 than in
the previous year in order to produce the same bonus fund as in fiscal year
1996. However, if the Company generates the same level of ROE in fiscal year
1997 as it did in fiscal year 1996, the bonus fund would increase in fiscal year
1997 over the bonus fund in fiscal year 1996. In addition to the adjustments
made at all levels of Adjusted Annual Pre-Tax Income, the formula for
calculating the bonus fund in fiscal year 1997 was revised to further reduce the
bonus fund at lower levels of ROE. The change in the formula also reflects a
reduction in the aggregate size of the bonus fund due to the resignation of one
member of the Executive Committee.
The share of the bonus fund to be allocated to each member of the
Executive Committee is determined by the Compensation Committee. The
Compensation Committee may allocate up to 100% of the entire bonus fund in any
fiscal year. The determination of each participant's share of the fund is made
not later than 90 days after the beginning of each fiscal year. The Management
Compensation Plan may be amended by the Compensation Committee provided that no
such action may retroactively impair or otherwise adversely affect the rights of
any person prior to the date of such action.
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PROPOSED AMENDMENT
On September 10, 1996, the Compensation Committee adopted an amendment
to the Management Compensation Plan, subject to stockholder approval at the 1996
Annual Meeting, which increased the maximum share of the bonus fund that may be
allocated to any one participant in any fiscal year from 25% to 30%. The
principal reason for this amendment is a reduction in the size of the Executive
Committee.
The following table reflects the amounts that would have been paid for
the fiscal year ended June 30, 1996 if the fiscal year 1997 formula for
computing the bonus fund under the Management Compensation Plan had been in
effect for such year:
MANAGEMENT COMPENSATION PLAN (1)
NAME AND POSITION DOLLAR VALUE ($)(2)
----------------- -------------------
James E. Cayne, CEO and President...................... 15,996,502
Alan C. Greenberg,
Chairman of the Board................................ 15,996,502
Warren J. Spector,
Executive Vice President............................. 15,154,630
Michael L. Tarnopol
Vice Chairman of the Board (3)....................... 0
Alan D. Schwartz
Executive Vice President............................. 11,787,138
Executive Group........................................ 61,460,390
Non-Executive Director Group........................... 0
Other Employee Group(4)................................ 0
- -------------------------
(1) This calculation (i) utilizes the fiscal year 1996 Adjusted Annual
Pre-Tax Income and the Consolidated Common Stockholders' Equity as of
June 30, 1996 and (ii) assumes the percentage of the bonus fund
allocated to each member of the Executive Committee was the same as
under the Management Compensation Plan in effect for fiscal year 1996,
as adjusted for the resignation from the Executive Committee of Mr.
Tarnopol.
(2) Includes amounts that would have been deferred pursuant to the Capital
Accumulation Plan. See "Summary Compensation Table."
(3) Effective June 30, 1996, Mr. Tarnopol resigned as Executive Vice
President of the Company and pursuant to the Management Compensation
Plan will not participate in the bonus fund in fiscal year 1997.
(4) Excluding those employees included in the categories entitled
"Executive Group" and "Non-executive Director Group."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PERFORMANCE STANDARDS CONTAINED IN, AND AN AMENDMENT TO, THE MANAGEMENT
COMPENSATION PLAN.
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III. APPROVAL OF AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN
The Board of Directors recommends approval of the amendments to the
Capital Accumulation Plan.
GENERAL
The Capital Accumulation Plan was adopted initially by the Board of
Directors and approved by stockholders as of September 6, 1990. The Capital
Accumulation Plan was amended thereafter on a number of occasions by the
Compensation Committee, both with and without stockholder approval, as required.
The last amendment to the Capital Accumulation Plan, prior to the proposed
amendments being considered at the Annual Meeting, was adopted effective July 1,
1995 and approved by stockholders on October 30, 1995, as reflected in the
Exhibits to the Company's Annual Report on Form 10-K for fiscal year 1995.
Under the Capital Accumulation Plan, all Senior Managing Directors of
Bear Stearns (including employee directors and executive officers of the
Company) are eligible to participate on an elective basis. Participants in the
Capital Accumulation Plan are entitled to defer a portion of their compensation
earned during each fiscal year. Participants are generally required to commit to
defer a portion of their compensation during each of the three fiscal years
following their initial election to participate in the Capital Accumulation
Plan. Thereafter, whenever the Compensation Committee allows a new group of
Senior Managing Directors to participate in the Capital Accumulation Plan for
three years, this has the effect of extending the duration of the Capital
Accumulation Plan, thereby permitting existing participants to defer
compensation for an additional fiscal year or years.
There are approximately 260 Senior Managing Directors, (including
employee directors and executive officers of the Company) who are eligible to
participate in the Capital Accumulation Plan. Participants in any fiscal year
will generally be required to defer the following percentages of that portion of
their total compensation for such fiscal year (after deducting any amounts
deferred under other plans sponsored by the Company) which exceeds $200,000 (or
the then prevailing annual base salary of Senior Managing Directors):
25% of the first ................................ $ 300,000
30% of the next ................................ 500,000
40% of the next ................................ 1,000,000
50% of compensation exceeding..................... 2,000,000
In lieu of the foregoing amounts, Senior Managing Directors over the
age of 55 may elect to defer only 25% of their aggregate compensation in excess
of $200,000 and all participants may elect to defer all or any portion of their
compensation in excess of $200,000 in addition to the minimum amount set forth
in the table above ("Additional Deferral Amounts"), subject, in the case of
Additional Deferral Amounts to the approval of the Management and Compensation
Committee, or in the case of persons subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Reporting
Persons"), to the approval of the Compensation Committee.
Participants' compensation will be deferred for a period (a "Deferral
Period") of five years after the end of the fiscal year for which it was
otherwise payable, which period may be extended or reduced under certain
circumstances, including the financial hardship of the participant. Participants
over the age of 55 may elect a shorter deferral period. A participant's
compensation deferred pursuant to the Capital Accumulation Plan will be credited
to such participant's deferred compensation account (the "Capital Accumulation
Account") in the form of units ("CAP Units"). The number of CAP Units to be so
credited generally will be determined by dividing the amount of each
participant's compensation deferred in respect of such fiscal year by the
average cost per share of Common Stock acquired for purposes of the Capital
Accumulation Plan.
Each CAP Unit credited to a participant's Capital Accumulation Account
will entitle the participant to receive, on an annual basis, a Net Earnings
Adjustment generally equal to the Company's pre-tax earnings per share (as
determined in accordance with the Capital Accumulation Plan) for such fiscal
year divided by the
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average cost per share of Common Stock acquired by the Company for purposes of
the Capital Accumulation Plan, less an adjustment for changes in the Company's
book value per share of the Common Stock during such year resulting from
increases or decreases in the Company's retained earnings attributable to net
income or loss, after deducting dividends declared with respect to any capital
stock of the Company, during such year. The Net Earnings Adjustment generally
will be credited to participants' Capital Accumulation Accounts on an annual
basis in the form of a number of additional CAP Units.
Notwithstanding the foregoing, the aggregate number of CAP Units that
may be credited pursuant to the Capital Accumulation Plan in respect of any
fiscal year may not exceed the number of Available Shares (as defined in the
Capital Accumulation Plan) acquired for the Capital Accumulation Plan with
respect to such fiscal year. If, because of this limitation, the Company is not
able to credit CAP Units in respect of all compensation deferred for any fiscal
year, or to make any required Net Earnings Adjustments in full, then the amount
of compensation for which no CAP Units were awarded will be credited instead to
an interest-bearing "cash balance account" maintained for each participant. In
subsequent fiscal years, to the extent the Company acquires shares of Common
Stock for the Capital Accumulation Plan, it will credit at the end of each
fiscal quarter a number of CAP Units corresponding to such shares first to
participants having positive cash balances before making any other credits of
CAP Units in respect of that year. The price at which CAP Units will be so
credited in respect of deferred cash balances will be the average cost per share
of the corresponding shares of Common Stock acquired by the Company during such
fiscal quarter.
Upon the termination of a participant's Deferral Period under the
Capital Accumulation Plan, the participant will be entitled to receive from the
Company a number of freely transferable shares of Common Stock equal to the
number of CAP Units then credited to his Capital Accumulation Account plus cash
in the amount, if any, of his cash balance account at the end of such period. If
a participant dies, the participant's estate (or the designated beneficiary)
will receive the number of shares of Common Stock corresponding to the CAP Units
then credited to such participant's account as of the first day of the fiscal
year following the date of death plus cash in the amount, if any, of the
participant's cash balance account. If a participant's employment is terminated
for any reason prior to the end of the Deferral Period (other than by reason of
death), the Management and Compensation Committee or, in the case of a Reporting
Person, the Compensation Committee (the "Appropriate Committee") has the
discretion, among other things, to accelerate the distribution of CAP Units in
the form of shares of Common Stock for all Plan Years, plus cash in the amount,
if any, of his cash balance account, and/or void any deferral elections for
which CAP Units have not yet been credited and distribute cash in lieu of shares
with respect thereto.
The maximum number of CAP Units that may be credited to all Capital
Accumulation Plan participants' Capital Accumulation Accounts under the Capital
Accumulation Plan for any Plan Year shall not exceed the equivalent number of
shares of Common Stock equal to the sum of 15% of the outstanding shares of
Common Stock (as defined in the Capital Accumulation Plan) as of the last day of
such Plan Year (the "Base Shares") and the number, if any, by which the sum of
the Base Shares in all prior fiscal years beginning on or after July 1, 1993
exceeds the number of shares credited to participants' Capital Accumulation
Accounts under the Capital Accumulation Plan in all such prior fiscal years.
The Company reserves the right to terminate the entire Capital
Accumulation Plan or any portion of the Plan representing a particular fiscal
year's deferred compensation at any time in its sole discretion. The Capital
Accumulation Plan also provides for acceleration of deferrals in the event of
certain defined events constituting a "change in control" of the Company. In the
event of a "change of control" the Capital Accumulation Plan will be deemed to
be terminated immediately and shares of Common Stock will be issued within 60
days thereafter. The Capital Accumulation Plan may be amended by the
Compensation Committee provided that no such action shall retroactively impair
or otherwise adversely affect the rights of any person prior to the date of any
action.
A participant may not assign, pledge or otherwise transfer his interest
in his Capital Accumulation Account except by designating a beneficiary who
shall be entitled to receive any amounts payable under the Capital Accumulation
Plan upon the participant's death. The Company is not required to establish a
special or separate fund or otherwise segregate any assets to assure any
payments under the Capital Accumulation Plan and
26
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has no obligation to invest all or any portion of the participants' Capital
Accumulation Accounts in Common Stock. The Capital Accumulation Plan provides
that the rights of each participant shall be no greater than the rights of a
general unsecured creditor of the Company.
PROPOSED AMENDMENTS
I. The following amendments to the Capital Accumulation Plan were approved by
the Compensation Committee, effective January 18, 1996, subject to stockholder
approval at the 1996 Annual Meeting. These amendments are filed as an Exhibit to
the Company's Quarterly Report on Form 10-Q for the period ended December 31,
1995.
1. Disability/Termination of Employment.
-------------------------------------
Section 6.2(c) of the Capital Accumulation Plan had provided
that upon termination of employment by a participant, other than by reason of
death or disability, the participant remained subject to the Capital
Accumulation Plan but, in lieu of a Net Earnings Adjustment, received credits to
his or her Capital Accumulation Account based upon the dividends paid on the
shares represented by Cap Units, less the Cost of Carry (essentially an interest
factor based on the Federal Funds Rate in a Fiscal Year as applied to the
deferred tax benefit). Although the Appropriate Committee has the right to
accelerate the termination of a participant's interest in the Capital
Accumulation Plan and cause the distribution of Common Stock represented by Cap
Units, any such action is discretionary with the Appropriate Committee. If
termination of employment resulted from disability, however, the participant's
participation in the Capital Accumulation Plan had automatically terminated as
of the end of the Fiscal Year and there was no provision that would have
permitted the disabled participant to continue to defer the receipt of Common
Stock and receive adjustments based on dividends rather than net earnings. In
order to treat a participant who becomes disabled in the same manner as a
participant whose employment terminated other than by reason of disability,
Section 6.2(b) of the Capital Accumulation Plan relating to disability was
eliminated and a disabled participant is now treated the same as any other
participant whose employment is terminated.
2. Definition of "Disability".
---------------------------
Since the definition of "Disability" had included an employee
who may be temporarily disabled, thereby resulting in the applicability of the
termination provisions of the Capital Accumulation Plan notwithstanding possible
continued employment, the definition was amended to limit "Disability" to
permanent disability. As a result, a temporarily disabled participant would
continue to be treated as any other participant so long as employment continues.
3. Personal Leave of Absence.
--------------------------
The Capital Accumulation Plan had contained no provision
dealing with a Personal Leave of Absence and, as a result, the Capital
Accumulation Plan generally would have provided full benefits to such a
participant. In order to permit the Appropriate Committee to provide different
benefits to a participant on leave of absence, comparable to those applicable to
a participant whose employment has terminated but who has remained subject to
the Capital Accumulation Plan, a new paragraph was added to the termination
section as well as a definition of "Personal Leave of Absence".
II. The Compensation Committee amended the definition of "Enrollment Period"
effective February 7, 1996, subject to stockholder approval at the 1996 Annual
Meeting, to extend the enrollment period for individuals who become "Eligible
Employees" after December 31st of a Plan Year to the period commencing on the
date such individual becomes an Eligible Employee and ending on the earliest of
(a) the 30th day thereafter, (b) March 31st of the Plan Year in the case of an
individual who was an employee prior to becoming an Eligible Employee or (c) the
end of the Plan year. This amendment is filed as an Exhibit to the Company's
Quarterly Report on form 10-Q for the period ended December 31, 1995.
27
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III. On August 15, 1996, the Securities and Exchange Commission adopted certain
amendments to Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
relating to "short-swing profits". As a result of the changes in the Rule, the
Compensation Committee has approved the following technical amendments to the
Capital Accumulation Plan effective September 10, 1996, subject to stockholder
approval at the 1996 Annual Meeting.
1. One of the alternative methods of exempting a grant of
securities under new Rule 16b-3 is approval by a Committee composed solely of
two or more "Non-Employee Directors". This new term replaces the former
requirement that the Committee members be "disinterested". Therefore, the
definition of "Board Committee" was amended to change the reference from
"disinterested" to "Non-Employee Directors" within the meaning of Rule 16b-3.
2. Since new Rule 16b-3 no longer requires a six-month holding
period for grants of securities, various provisions of the Capital Accumulation
Plan have been amended to eliminate the need for a minimum holding period.
Further, to the extent a six-month holding period could be an alternate basis
for an exemption under certain circumstances, Section 6.5 of the Capital
Accumulation Plan has been amended to clarify the fact that the holding period
runs from the time shares of Common Stock are credited to the Capital
Accumulation Account of a participant.
The foregoing amendments would have provided no benefits to
participants if they had been in effect for the entire fiscal year 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN.
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IV. APPROVAL OF THE PERFORMANCE COMPENSATION PLAN
The Board of Directors proposes that the stockholders approve the
Performance Compensation Plan, a copy of which is attached to this Proxy
Statement as Exhibit A. Stockholders are encouraged to review the Performance
Compensation Plan carefully. Any description in this Proxy Statement of the
Performance Compensation Plan is qualified in its entirety by a reference to
Exhibit A.
On September 10, 1996, the Compensation Committee adopted the
Performance Compensation Plan, subject to approval by stockholders at the 1996
Annual Meeting. The Performance Compensation Plan is being submitted to
stockholders in an effort to meet the requirements for deductibility by the
Company under Section 162(m) of the Internal Revenue Code. (See "Executive
Compensation-Compensation Committee Report-Management Compensation Plan" for a
discussion of Section 162(m) of the Internal Revenue Code). If stockholder
approval of the Performance Compensation Plan is not obtained, no payments in
respect of the bonus fund will be made under the Performance Compensation Plan.
The Performance Compensation Plan will be effective as of July 1, 1996
and will be applicable for five full fiscal years of the Company ending June 30,
2001. All of the Company's executive officers, including the current 13
executive officers, (other than the voting members of the Company's Executive
Committee) are eligible to participate in the Performance Compensation Plan. The
total compensation of those executive officers of the Company designated by the
Compensation Committee within 90 days of the beginning of each fiscal year (the
"Designated Executives") will be determined in all material respects by the
Performance Compensation Plan. Under the Performance Compensation Plan, each of
the Designated Executives will receive a base salary of $200,000 per annum, and
share in a performance-based bonus fund. For each fiscal year commencing with
fiscal year 1997, the formula for calculating the bonus fund will be determined
in writing by the Compensation Committee, not later than 90 days after the
beginning of each fiscal year, based upon one or more of the following criteria,
individually or in combination, adjusted in such manner as the Compensation
Committee shall determine (which adjustments, if any, shall be set forth in
writing not later than 90 days after the beginning of each fiscal year): (a)
pre-tax or after-tax return on equity; (b) earnings per share; (c) pre-tax or
after-tax net income; (d) business unit or departmental pre-tax or after-tax
income; (e) book value per share; (f) market price per share; (g) relative
performance to peer group companies; (h) expense management; and (i) total
return to stockholders.
The share of the bonus fund to be allocated to each Designated
Executive in any fiscal year will be determined by the Compensation Committee
not later than 90 days after the beginning of each fiscal year. The Compensation
Committee may allocate up to 100% of the entire bonus fund in any fiscal year.
The Compensation Committee, in its sole discretion, may reduce the amount of the
bonus of any participant. The maximum bonus that may be allocated to a
participant in any fiscal year is $12 million. The Performance Compensation Plan
may be amended by the Compensation Committee provided that no such action may
retroactively impair or otherwise adversely affect the rights of any Designated
Executive prior to the date of such action.
Since amounts payable under the Performance Compensation Plan will be
based on future performance and will be subject to the right of the Compensation
Committee to reduce the amount of the bonus of any participant, such amounts are
not determinable at the present time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PERFORMANCE COMPENSATION PLAN.
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INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as the
Company's independent auditors to conduct the audit of the Company's books and
records for the fiscal year ended June 30, 1997. Deloitte & Touche LLP also
served as the Company's independent auditors for the previous fiscal year.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting to respond to questions and to make a statement should they so
desire.
OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of
any business other than that described above that will be presented at the
Annual Meeting. If any other business should come before the Annual Meeting, it
is intended that the persons named in the enclosed proxy will have discretionary
authority to vote the shares which they represent.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
In accordance with rules promulgated by the Securities and Exchange
Commission, any stockholder who wishes to submit a proposal for inclusion in the
proxy material to be distributed by the Company in connection with the 1997
Annual Meeting must do so no later than May 31, 1997.
In addition, in accordance with Article VI, Section 2 of the
Certificate of Incorporation, in order to be properly brought before the 1997
Annual Meeting, a matter must have been (i) specified in a written notice of
such meeting (or any supplement thereto) given to stockholders by or at the
direction of the Board of Directors (which would be accomplished if a
stockholder proposal were received by the Secretary of the Company as set forth
in the preceding paragraph), (ii) brought before such meeting at the direction
of the Board of Directors or the Chairman of the meeting, or (iii) specified in
a written notice given by or on behalf of a stockholder of record on the record
date for such meeting or a duly authorized proxy for such stockholder, which
conforms to the requirements of Article VI, Section 2 of the Certificate of
Incorporation and is delivered personally to, or mailed to and received by, the
Secretary of the Company at the address below not less than 10 days prior to the
first anniversary of the date of the notice accompanying this Proxy Statement;
provided, however, that such notice need not be given more than 75 days prior to
the 1997 Annual Meeting.
REPORTS
The Company will furnish without charge to each person whose proxy is
being solicited, upon the written request of any such person, a copy of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, as
filed with the Securities and Exchange Commission, including the financial
statements and schedules thereto. Requests for copies of such Annual Report on
Form 10-K should be directed to the Corporate Communications Department of the
Company at the address below.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
The Bear Stearns Companies Inc.
245 Park Avenue
New York, New York 10167
September 27, 1996
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EXHIBIT A
THE BEAR STEARNS COMPANIES INC.
PERFORMANCE COMPENSATION PLAN
(EFFECTIVE AS OF JULY 1, 1996)
Section 1. Purpose. The purposes of The Bear Stearns Companies Inc.
Performance Compensation Plan (the "Plan") are (i) to compensate executive
officers (other than voting members of the Executive Committee (the "Executive
Committee") of the Board of Directors (the "Board")) of The Bear Stearns
Companies Inc. (the "Company") on an individual basis for significant
contributions to the Company and its subsidiaries and (ii) to stimulate the
efforts of such executive officers by giving them a direct interest in the
performance of the Company.
Section 2. Term. The Plan shall be effective as of July 1, 1996 (the
"Effective Date"), and shall be applicable for the five (5) full fiscal years of
the Company ending June 30, 2001, unless earlier terminated by the Company
pursuant to Section 9.
Section 3. Coverage. For purposes of the Plan, the term "Participant"
shall include for each fiscal year each executive officer so designated by the
Compensation Committee within 90 days following the first day of such fiscal
year. As used herein, the term "Company" includes both the Company and its
subsidiaries, unless the context otherwise requires, and the term "executive
officer" shall mean those individuals so designated by the Board from time to
time (other than voting members of the Executive Committee).
Section 4. Base Salary.
4.1. Each Participant shall receive a salary of $200,000 per
annum ("Base Salary"). The Base Salary of the Participants may be increased from
time to time by the Compensation Committee of the Board (the "Compensation
Committee") by amendment of the Plan pursuant to Section 9.
4.2. Notwithstanding the provisions of Section 4.1 above, in the event
a Participant is not an executive officer for an entire fiscal year, his Base
Salary for such fiscal year shall be computed by multiplying such Base Salary as
computed under Section 4.1 by a fraction, the numerator of which is the number
of days in such fiscal year during which such Participant was an executive
officer and the denominator of which is the number of days in the fiscal year.
Any Base Salary shall be in addition to any base salary payable with respect to
periods during the fiscal year in which a Participant was not an executive
officer.
Section 5. Annual Bonus Pool.
5.1. For each fiscal year of the Company, each Participant shall be
entitled to receive an award of a bonus (the "Bonus"), payable from an annual
bonus fund (the "Annual Bonus Pool") in an amount not to exceed the amount
provided for in Section 6. A Bonus under the Plan shall be the sole bonus
payable with respect to a fiscal year to each Participant ("Full Year
Participant") who was an executive officer on the date that proportionate shares
of the Annual Bonus Pool for such fiscal year were determined by the
Compensation Committee and who remains an executive officer at all times
thereafter during such fiscal year. For each fiscal year, each Participant who
was not a Full Year Participant shall be entitled to such a Bonus, if any, for
the portion of such fiscal year not covered by the Plan, determined in
accordance with the procedures applicable to employees who are not executive
officers, in addition to the Bonus, if any, payable pursuant to the Plan.
5.2. For each fiscal year, the formula for calculating the Annual Bonus
Pool shall be determined by the Compensation Committee in writing, by resolution
of the Compensation Committee or other appropriate action, not later than 90
days after the commencement of such fiscal year. Such formula shall be based
upon one or more of the following criteria, individually or in combination,
adjusted in such manner as the Compensation
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<PAGE>
Committee shall determine: (a) pre-tax or after-tax return on equity; (b)
earnings per share; (c) pre-tax or after-tax net income; (d) business unit or
departmental pre-tax or after-tax income; (e) book value per share; (f) market
price per share; (g) relative performance to peer group companies; (h) expense
management; and (i) total return to stockholders.
5.3. As a condition to the right of a Participant to receive any Bonus
under this Plan, the Compensation Committee shall first be required to certify
in writing, by resolution of the Compensation Committee or other appropriate
action, that the Bonus has been accurately determined in accordance with the
provisions of this Plan.
5.4. The Compensation Committee shall have the right to reduce the
Bonus of any Participant in its sole discretion at any time and for any reason
prior to the certification of the Bonus otherwise payable to such Participant
pursuant to Section 5.3 hereof.
Section 6. Allocations.
6.1. Prior to the commencement of each fiscal year, or not later than
90 days after the commencement of each fiscal year, the Compensation Committee
shall determine in writing, by resolution of the Compensation Committee or other
appropriate action, each Participant's proportionate share of the Annual Bonus
Pool for such fiscal year, which shall not exceed in respect of any Participant
the amount of $12,000,000 and shall not exceed 100% of the Annual Bonus Pool in
the aggregate.
6.2. Notwithstanding anything in Section 6.1 to the contrary, any
Participant who ceases to be an executive officer for any reason prior to the
end of such fiscal year shall be entitled to a Bonus computed as follows: A
Bonus first shall be computed as if such Participant had been an executive
officer for the full fiscal year, and such Bonus then shall be multiplied by a
fraction the numerator of which shall be the number of days in the fiscal year
through the date the Participant ceased to be an executive officer and the
denominator of which shall be the number of days in the fiscal year; provided,
however, that if the application of the preceding clause would cause the total
Bonuses payable under the Plan to exceed the Annual Bonus Pool, the Bonuses
payable to each Participant shall be reduced pro rata, so that the total of all
Bonuses shall equal the Annual Bonus Pool. If a Participant ceases to be an
executive officer after the end of the fiscal year in respect of which such
Bonus is payable, the amounts thereof nonetheless shall be payable to him or his
estate, as the case may be.
6.3. Except as hereinafter provided, Bonuses for a fiscal year shall be
payable as soon as practicable following the certification thereof by the
Compensation Committee for such fiscal year. In its discretion, the Compensation
Committee may authorize, prior to the final determination of Participants'
Bonuses for such fiscal year, payments on account of Bonuses payable hereunder
to one or more Participants entitled to such Bonuses, (a) during the last month
of such fiscal year, in an amount not exceeding 95% of the aggregate amount that
would be payable to such Participant or Participants hereunder as determined by
the Controller or Chief Accounting Officer of the Company (so long as he is not
a Participant) on the basis of his good faith estimate, (b) during the last ten
calendar days of such fiscal year or after the end of such fiscal year, in an
amount not to exceed 98% of the aggregate amount that would be payable to such
Participant or Participants hereunder as determined by the Controller or Chief
Accounting Officer of the Company (so long as he is not a Participant) on the
basis of his good faith estimate, and (c) at any time during such fiscal year or
after the end of such fiscal year to a Participant who ceases to be an executive
officer for any reason prior to the end of such fiscal year. Within the
limitations set forth in the preceding sentence, the Compensation Committee may
authorize one or more such "on account" payments, but the aggregate amount of
any such on account payments shall not exceed the aggregate amount permitted to
be paid pursuant to the Plan with respect to the same fiscal year. In connection
with any such "on account" payments, the Compensation Committee shall require an
undertaking or other assurance by or on behalf of the Participant receiving such
payment to repay the Company the amount, if any, by which such "on account"
payment exceeds the actual amount determined to be due to such person under the
Plan in respect of such fiscal
A-2
<PAGE>
year. Any "on account" payments received prior to the end of a fiscal year shall
be discounted to reasonably reflect the time value of money from the date of
payment to the date 30 days after the end of the fiscal year.
6.4. The Compensation Committee may determine that payment of a portion
of the Bonuses shall be deferred, the periods of such deferrals and any
interest, not to exceed a reasonable rate, to be paid in respect of deferred
payments. The Compensation Committee may also define such other conditions of
payments of Bonuses as it may deem desirable in carrying out the purposes of the
Plan.
6.5. In any fiscal year, any balance in the Annual Bonus Pool for any
reason, including the limitation contained in Section 6.1, the forfeiture of a
Bonus under Section 6.2, the reduction of a Bonus under Section 5.4, or
otherwise, shall not be distributed to other Participants and shall not be
carried forward or be available for distribution as Bonuses under the Plan in a
future year or years.
Section 7. Administration and Interpretation. The Plan shall be
administered by the Compensation Committee, which shall have the sole authority
to interpret and to make rules and regulations for the administration of the
Plan. The Compensation Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan in the manner and to the extent the
Compensation Committee deems necessary or desirable to carry it into effect. Any
decision of the Compensation Committee in the interpretation and administration
of the Plan, as described herein, shall lie within its sole and absolute
discretion and shall be final, conclusive and binding on all parties concerned.
No member of the Compensation Committee and no officer of the Company shall be
liable for anything done or omitted to be done by him or her, by any other
member of the Compensation Committee or by any officer of the Company in
connection with the performance of duties under the Plan, except for his or her
own willful misconduct or as expressly provided by statute. The Compensation
Committee may request advice or assistance or employ such persons (including,
without limitation, legal counsel and accountants) as it deems necessary for the
proper administration of the Plan.
Section 8. Administrative Expenses. Any expense incurred in the
administration of the Plan shall be borne by the Company out of its general
funds and not charged against the Annual Bonus Fund, except insofar as such
expenses shall be taken into account in determining the components of the Annual
Bonus Pool hereunder.
Section 9. Amendment or Termination. The Compensation Committee of the
Company may from time to time amend the Plan in any respect or terminate the
Plan in whole or in part, provided that no such action shall retroactively
impair or otherwise adversely affect the rights of any Participant to benefits
under the Plan which have accrued prior to the date of such action.
Section 10. No Assignment. The rights hereunder, including without
limitation rights to receive a Base Salary or Bonus, shall not be sold,
assigned, transferred, encumbered or hypothecated by an employee of the Company
(except by testamentary disposition or intestate succession), and, during the
lifetime of any recipient, any payment of Base Salary or a Bonus shall be
payable only to such recipient.
Section 11. The Company. For purposes of this Plan, the "Company" shall
include the successors and assigns of the Company, and this Plan shall be
binding on any corporation or other person with which the Company is merged or
consolidated, or which acquires substantially all of the assets of the Company,
or which otherwise succeeds to its business.
Section 12. Stockholder Approval. This Plan shall be subject to
approval by the affirmative vote of a majority of the shares cast in a separate
vote of the stockholders of the Company at the 1996 Annual Meeting of
Stockholders, and such stockholder approval shall be a condition to the right of
a Participant to receive any Bonus hereunder.
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<PAGE>
THE BEAR STEARNS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS -
OCTOBER 28, 1996 AT 5:00 P.M.
The undersigned stockholder of The Bear Stearns Companies Inc. (the
"Company") hereby appoints Alan C. Greenberg, James E. Cayne and E. John
Rosenwald Jr., and each of them, as attorneys and proxies, each with power of
substitution and revocation, to represent the undersigned at the Annual Meeting
of Stockholders of the Company to be held on October 28, 1996, and at any
adjournments or postponements thereof, with authority to vote all shares of
Common Stock of the Company held or owned by the undersigned on September 17,
1996 in accordance with the directions indicated herein.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2, 3, 4 AND PURSUANT TO ITEM 5.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
Please Mark
your votes [X]
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED
HEREIN, "FOR" APPROVAL OF THE FISCAL YEAR 1997 PERFORMANCE GOALS UNDER, AND AN
AMENDMENT TO, THE MANAGEMENT COMPENSATION PLAN, "FOR" APPROVAL OF AMENDMENTS TO
THE CAPITAL ACCUMULATION PLAN AND "FOR" APPROVAL OF THE PERFORMANCE COMPENSATION
PLAN.
Item 1.--ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
Nominees for Director:
<S> <C> <C> <C> <C>
E. Garrett Bewkes III Richard Harriton E. John Rosenwald Jr.
Denis A. Bovin Daniel L. Keating Lewis A. Sachs
James E. Cayne John W. Kluge Richard Sachs
Peter D. Cherasia Mark E. Lehman Frederic V. Salerno FOR all
Ralph R. Cioffi David A. Liebowitz Alan D. Schwartz nominees listed WITHHOLD
Barry J. Cohen Bruce M. Lisman David M. Solomon at left (except AUTHORITY
Wendy L. de Monchaux Roland N. Livney Warren J. Spector as marked to vote for all
Grace J. Fippinger Michael Minikes Robert M. Steinberg to the contrary nominees
Bruce E. Geismar William J. Montgoris Michael L. Tarnopol at left) listed at left
Carl D. Glickman Donald R. Mullen Jr. Vincent Tese
Thomas R. Green Frank T. Nickell Michael J. Urfirer [ ] [ ]
Alan C. Greenberg Craig M. Overlander Fred Wilpon
Donald J. Harrington Stephen E. Raphael Uzi Zucker
</TABLE>
(INSTRUCTION: To withhold authority to vote for an individual nominee named
above, strike a line through that nominee's name)
FOR AGAINST ABSTAIN
Item 2.--APPROVAL OF
THE FISCAL YEAR
1997 PERFORMANCE
GOALS UNDER, AND
AN AMENDMENT TO,
THE MANAGEMENT
COMPENSATION PLAN: [ ] [ ] [ ]
Item 3.--APPROVAL OF
AMENDMENTS TO
THE CAPITAL
ACCUMULATION PLAN: [ ] [ ] [ ]
Item 4.--APPROVAL OF THE
PERFORMANCE
COMPENSATION
PLAN: [ ] [ ] [ ]
Item 5.--In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any
adjournments or postponements thereof.
Signature(s):____________________________________ Date __________________, 1996
(Please date and sign exactly as name appears hereon. When signing as attorney,
administrator, trustee, custodian or guardian, give full title as such. Where
more than one owner, all should sign. Proxies executed by a partnership or
corporation should be signed in the full partnership or corporate name by a
partner or authorized officer.)
<PAGE>
APPENDIX
--------
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(Pursuant to Item 304(a) of Regulation S-T)
GRAPHIC MATERIAL (1) -
In the paper-format version of this Proxy Statement, a line-graph,
titled "PRE-TAX RETURN ON EQUITY - The Bear Stearns Companies Inc. v. Peer
Group Average", appears in the section "EXECUTIVE COMPENSATION - COMPENSATION
COMMITTEE REPORT - Compensation Policies". The sixth paragraph of this
section describes the graph and the composition of the "Peer Group" used in
the graph. The same data presented in the graph is presented in a chart that
appears in both the paper-format and EDGAR versions of this Proxy Statement
at the same point as the forementioned graph.
GRAPHIC MATERIAL (2) -
In the paper-format version of this Proxy Statement, a line-graph,
titled "COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN", appears in the
section "PERFORMANCE GRAPH". The first paragraph of this section describes
the graph and the composition of the "Peer Group" used in the graph. The same
data presented in the graph is presented in a chart that appears in both the
paper-format and EDGAR versions of this Proxy Statement at the same point as
the forementioned graph.
